Tuesday, January 20, 2009

Rule 151A – Go Away!

On Friday, the SEC’s new Rule 151A was published in the Federal Register. This is the rule that will make index annuities subject to securities legislation effective January 2011.

A coalition of insurance companies and independent marketing organizations, the Coalition for Indexed Products, promptly filed suit, seeking to overturn Rule 151A in federal court. Insurance Insight Group hopes the lawsuit is successful and the court strikes down Rule 151A.

Index annuity products provide much stronger guarantees of principal than securities products. At a time when investors in securities have lost trillions of dollars of their wealth, index annuity policyholders have lost nothing.

The SEC’s initial rationale for proposing Rule 151A was that there was, in the SEC’s view, rampant abuse in the sale of index annuities. It is hard to give this assertion any credibility when you consider that gaping regulatory failures in the securities markets are plainly evident to the general public. It seems to us that the SEC has misallocated its resources, attacking a class of insurance products that pose no risk all the while ignoring other areas with rampant abuses.

Index annuities are popular with retirees and people planning for retirement because they provide safety of principal with the possibility of higher interest crediting over time than traditional fixed interest rate savings vehicles. There is little doubt that Rule 151A would dramatically decrease the number of insurance agents selling index annuities, limiting the availability of these popular retirement products to consumers building a retirement strategy.

In September, then presidential candidate John McCain said that SEC Chairman Christopher Cox had “betrayed the public’s trust,” and “If I were president today, I would fire him.” While Mr. Cox’s term of office has ended, we hope that the federal court “fires” Mr. Cox’s misguided Rule 151A. It would be in the public’s best interest for Rule 151A to go away.

Share your thoughts by clicking on the “Add Comment” link below.

2 comments:

PHIL WASSERMAN said...

Here is the legal brief filed against 151 a
http://sec515a.philliproyfinancialservices.com

scotthoff said...

Brokers looking to to prepare for future regulations should consider affiliating with a Broker Dealer with a background in life insurance.

Marketers of fixed annuities might consider establishing a relationship with a wholesale broker dealer.