The U.S. Court of Appeals for the District of Columbia Circuit (the “Court”) issued an order vacating Rule 151A under the Securities Act of 1933 (the “1933 Act”). Rule 151A was designed to require registration under the 1933 Act of certain indexed annuity contracts.
As discussed in more detail in the July 28, 2009 Alert, the Court had previously ruled that the SEC failed to properly consider the effect of Rule 151A upon efficiency, competition and capital formation and therefore had remanded the matter to the SEC to address the shortcomings in its rulemaking. In response to a petition for rehearing, on June 12, 2010, the Court determined to vacate the rule rather than continue the remand to the SEC. In its order, the Court noted that the SEC has stated that it is likely to reissue the rule, but the SEC also acknowledged that it is in the midst of analyzing the effect of the rule upon the law of each state. The Court reasoned that the SEC cannot know whether that analysis will support reissuing Rule 151A until the analysis has been completed. The Court also stated that the decision to vacate would not be destructive of the agency’s regulatory program because the rule has not gone into effect and, until such time as it does, the regulations supplied by state law will remain in place.The Court did not address a related legislative development, which is the inclusion of the Harkin Amendment (Section 989G) in the conference report for the pending financial services reform legislation. The Harkin Amendment is designed to prevent the SEC from requiring registration of indexed annuities meeting certain state law requirements.