This updates our December 22, 2008 blog, and other related postings.

In December 2008, the U.S. Securities and Exchange Commission (the “SEC”) adopted Rule 151A (the “Rule”) classifying equity-indexed annuities (“EIAs”) as securities, and subjecting them to federal regulation effective 2011.  The Rule has been hotly debated, as some believe that EIAs are adequately regulated by states and that federal regulation would only result in additional costs in registering and selling the products.  Now, two years after the SEC’s adoption of the Rule, Congress has approved an amendment (the “Amendment”) to H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act bill, which preserves state regulation of EIAs.

The Amendment retains state insurance department oversight of EIAs provided that: (1) the EIAs comply with nonforfeiture laws; (2) they are issued by companies domiciled in states which have adopted  suitability standards that at least meet the requirements set forth in the NAIC Suitability in Annuity Transactions Model Regulation; and (3) the issuing companies implement nationwide suitability standards in the states in which they conduct business that at least meet the requirements set forth in the NAIC Suitability in Annuity Transactions Model Regulation.

H.R. 4173 has been approved by the House and Senate and has been sent to President Obama for signature.