The fixed indexed annuity community is understandably ecstatic at the regulatory developments that have occurred within the past month, particularly in light of how many sleepless nights that same community suffered since the SEC proposed its ill-fated Rule 151A back in the summer of 2008.
The SEC's dreams of regulating FIAs as securities were dealt a double-fisted knockout in July when, first, on July 12, a federal appeals court vacated Rule 151A, and then on July 21, President Obama signed H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act bill into law. The first blow, where the Court issued a ruling siding with petitioners that the SEC failed to properly consider the effect of the rule upon implementation and therefore vacated it, put the SEC's hopes of regulating FIAs on life support. The second blow then pulled the plug, as the Harkin Amendment (as in Senator Tom Harkin of FIA stronghold state Iowa) in H.R. 4173 classified that FIAs would be governed by the standards developed by the National Association of Insurance Commissioners (NAIC) as state-regulated insurance products.
With the president poised to sign the bill into law the next day, the SEC gave up its hopes of regulating FIAs on July 20 when it announced it would not pursue 151A any further.
Chalk one up for the exceptional efforts of an industry united in a cause against a misguided idea. So what does the victory mean moving forward? To gain some perspective on that, I invited Kim O'Brien, executive director of the National Association for Fixed Annuities (NAFA), an industry association that played an active role in helping to defeat 151A, to write about the impact of 151A's demise on producers. She has helpful information about provisions in the Harkin Amendment that mandate required training (by Jan. 1, 2011) for all producers who wish to sell fixed annuities (including FIAs). Various groups within the industry are working on how to address this requirement and provide the product-specific training. You can bet suitability will remain center stage in the marketing and issuance of fixed annuities for the foreseeable future.
Even the July 22-23 severe flooding in NAFA's home city of Milwaukee couldn't prevent O'Brien from providing the article in the nick of time for our deadline. Please give it a read.
