New Securities Legislation Seeks to Reverse SEC Annuities Rule

Rep. Gregory Meeks, D-N.Y., has introduced the Meeks-Price Bill, H.R. 2733, otherwise known as the “Indexed Annuities and Insurance Products Classification Act of 2009”  in the U.S. House of Representatives that would overturn a controversial new U.S. Securities and Exchange Commission (“SEC”) rule.  The agency’s rule 151A classified fixed indexed annuities as securities and subjecting them to federal regulation.

The new bill co-sponsored by Congressman Tom Price (R-GA) on the Republican side, seeks to reverse the SEC’s recent controversial decision to reclassify most fixed indexed annuities as securities and place them under the agency’s jurisdiction.

After the bill’s introduction on the congressional floor on June 4, 2009, the House referred it to the Committee on Financial Services for debate and deliberation.  The other bill’s co-sponsors are Peter Welch (D-VT), Marcia Fudge (D-OH), Emanuel Cleaver (D-MO), Leonard Boswell (D-IA), W. Lacy Clay (D-MO), Chaka Fattah (D-PA), Charlie Wilson (D-OH), Earl Pomeroy (D-ND), Steve Driehaus (D-OH), Ron Kind (D-WI), Ron Paul (R-TX), Pete Sessions (R-TX), Steven LaTourette (R-OH), Tom Latham (R-IA), Jim Sensenbrenner (R-WI), John Kline (R-MN), Kevin Brady (R-TX), Michael McCaul (R-TX), Lynn Jenkins (R-KS), Michele Bachmann (R-MN), and John Culberson (R-TX).

In a letter to the bill’s sponsor, the National Association of Insurance Commissioners (“NAIC”) conveyed its support for the legislation and the sponsors’ efforts to preserve state regulatory authority over these products so that “consumers continue to benefit from the vital consumer protections provided by state insurance regulators.” Indexed annuities are financial products that guarantee investors a minimum rate of return, while allowing additional profits depending upon the performance of a basket of securities. Since a minimum return is guaranteed, the risk of investment is borne by the company selling the annuity — not the investor.

“Indexed annuities are insurance products that should be regulated by insurance regulators who can ensure the solvency of the companies selling them and monitor the individuals involved in their marketing and sale,” said Roger Sevigny, NAIC President and New Hampshire Insurance Commissioner. “This legislation attests to the importance and advantage of returning the regulatory oversight of indexed annuities to the states.”

Formed in 1871, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and five U.S. territories.

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