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< UPDATE DEC 2009 > There has been a positive development in Rule 151(A) – it now appears that if the Rule ever becomes effective it will be no sooner than mid-2012 and could be much later or not at all.
The Coalition Plaintiffs (BHC is one of six) and the SEC asked the Court to accept the following compromise: the SEC will agree to a two-year delay in the effective date for Rule 151(A), with the two-year clock commencing upon publication of the reissued or retained Rule in the Federal Register. In the meantime, the SEC has started the Section 2(b) analyses mandated by the Court in their Remand Order.
There are several possible outcomes:
- The Court could rule independently of the SEC Petition, including nullifying the Rule, allowing the current Effective Date to stand or anything in between. The expectation is for the Court to accept the terms of the Petition.
- The SEC could withdraw the Rule at any time prior to or after completing their analyses required by Section 2(b) of the SEC Act.
- The SEC could modify the Rule, open a new comments period and then publish a new Rule, a restatement of the current Rule or the same Rule in the Federal Register.
- The Congress could pass a Statute that would declare that fixed index-linked annuities are not securities. There is currently House and Senate bills pending that would affect this outcome.
While the “dark cloud” of Rule 151(A) continues to hover over our collective heads, it appears the Rule will not become effective earlier than mid-2012 if ever. In the meantime, fixed index-linked annuities are a safe money alternative where retirement-minded Americans can find safety and security. Of course, we do not expect FINRA and member Broker-Dealer firms to acknowledge these recent developments and stop their negative campaign against fixed index-linked annuities.
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The Court has rendered an opinion on the SEC’s Rule 151(A) and the insurance industry has prevailed as the Rule was remanded to the SEC for further justification. While the victory is narrower than desired, it does force the SEC to provide additional justification to the Court before 151(A) can become effective. The SEC has several options at this point including:
- appealing the Court’s decision to the U.S. Supreme Court in hopes they will hear the case and render a different opinion;
- withdraw the Rule and move on to more important items like curbing the abuse of rogue brokers and brokerage firms;
- address the flaws pointed out by the Appeals Court and resubmit in hopes of getting a favorable opinion;
- submit to the Appeal Court sufficient justification why the panel of judges erred and ask them to reconsider;
- attempt to craft a settlement with the petitioners for a watered-down Rule 151(A).
Logically, you would conclude that the SEC fought the best fight they could but lost and will now move on to more important matter…but we’re dealing with a Federal Government Agency during an era of expanding government, so anything could happen. Also, you would assume the SEC would take note that both the houses of the U.S. Congress are considering Bills that would negate Rule 151(A) even if it is eventually accepted by the courts. As events unfold, we will keep you updated on the collective thinking of the experts. Here is the final paragraph from the Court’s ruling:
Having determined that the SEC’s § 2(b) analysis is
lacking, we conclude that this matter should be remanded to the
SEC to address the deficiencies with its § 2(b) analysis. See
Chamber of Commerce, 412 F.3d at 145 (citing Fox Television
Stations, Inc. v. FCC, 280 F.3d 1027, 1048-49 (D.C. Cir. 2002)).
It is obvious that the SEC believes imposing a federal
framework on FIAs would be superior to the existing patchwork
of state insurance laws. Indeed, after a more thorough review of
the existing state law regime, the Commission may decide
ultimately that Rule 151A will promote competition, efficiency,
and capital formation. Nevertheless, the Commission must
either complete an analysis sufficient to satisfy its obligations
under § 2(b), or explain why that section does not govern this
rulemaking. Accordingly, we grant the petitions and remand for
further reconsideration consistent with this opinion.
The Press Release found below announces that BHC Marketing and others have filed a lawsuit against the SEC to stop the implementation of Rule 151A. If adopted 151A means that a fixed index-linked annuities will become securities and regulated by FINRA and the SEC.
BHC Marketing Ltd. and one other IMO, along with four insurance companies, are petitioners to this lawsuit because we believe it is not in the best interest of the public, insurance industry or insurance agents that index annuities become securities. Please know that the coalition, of which BHC is a part, will fight fiercely on your behalf to reign in the SEC which we believe has exceeded its authority. We will keep you posted on the progress.
Click Here for Full Story
May 2009 - The Coalition and SEC presented Rule 151(A) oral arguments to U.S. Court of Appeals on May 8. Read Review of Proceedings >>
March 2009 - The SEC's Annuity Grab - Mary Schapiro should stop the SEC's latest lunge for power. View Full Article >> (New Window)
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