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WASHINGTON, DC, January 16, 2009 – A
coalition of insurance companies and independent marketing organizations has
filed suit in federal court to overturn Rule 151A, the newly published rule
by the Securities and Exchange Commission that classifies indexed annuities
as securities.
The suit was filed in the U.S. Court of Appeals for the
District of Columbia Circuit, the court that typically hears cases about
new agency regulations. It is the court that invalidated the SEC’s hedge
fund registration rule and twice rejected the Commission’s mutual fund
governance rule. The petitioners are represented by Eugene Scalia of Gibson
Dunn & Crutcher LLP, which handled the mutual fund governance
litigation against the SEC.
Indexed annuities are annuities that offer minimum guaranteed
values and credit interest based on the performance of a market index such
as the S&P 500. Because the purchaser is guaranteed the return of his
or her principal with interest, subject to any surrender charges, indexed
annuities are considered safer than securities products, which expose
principal to market fluctuations.
Rule 151A was published in the Federal Register on January 16,
2009 and suit was filed the same day. The petitioners’ lawyer, Eugene
Scalia, commented: “The securities laws say explicitly that annuities are
to be regulated by the States, not the SEC. Unfortunately, the Commission
engaged in a flawed rulemaking process whose result is a rule that
conflicts with Congress’s intent and with two Supreme Court decisions.”
Jim Poolman, spokesperson for the Coalition for Indexed
Products and former North Dakota Insurance Commissioner, noted that the SEC
has decided to regulate indexed annuities at a time when the Commission has
other pressing priorities. “It is unfortunate that the SEC seeks to
duplicate state efforts to regulate indexed products when at the same time
it has come under heavy criticism for failing to adequately meet its core
mandate of overseeing the securities industry,” he said.
In adopting the rule, the Commission retreated from initial
suggestions that there were significant abuses in the sale of indexed
annuities, and said that “the presence or absence of sales practice abuses
is irrelevant” to its decision to adopt the rule. The regulation was
appropriate, it said, “without regard to whether there is a single
documented incident of abuse.” The Commission conceded that the rule might
cost insurance companies $100 million in the first year alone, but declined
to give “comprehensive consideration” to whether existing state regulation
was sufficient to protect consumers. The National Association of Insurance
Commissioners and state insurance legislators opposed the rule.
In a letter to SEC Chairman Chris Cox, 19 members of Congress
warned that the rule would "reduce product availability and consumer
choice" and "effectively [place] the cost of the regulation
squarely on the shoulders of consumers." Coalition spokesman Jim
Poolman added: “It is ironic that indexed annuities have fared so much
better during the recent financial crisis than securities products, and yet
the SEC now wants to regulate indexed annuities, even though nobody lost a
dime on indexed annuities as a result of the market meltdown.”
The petitioners in the case are: American Equity Investment
Life Insurance Company, BHC Marketing, Midland National Life Insurance
Company, National Western Life Insurance Company, OM Financial Life
Insurance Company, and Tucker Advisory Group.
A Press Kit providing background on fixed indexed annuities
and this litigation is attached for reference.
Contact at American Equity Investment Life Holding Company:
Wendy L. Carlson, 515-457-1824
CEO and President
Debra J. Richardson 515-273-3551
Chief Administrative Officer and Executive Vice President
Julie L. LaFollette, 515-273-3602
Director of Investor Relations
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