The U.S. Court of Appeals for the District of Columbia Circuit opined, on July 21, 2009, that it was not unreasonable for the SEC to adopt Rule 151A designating indexed annuities as securities, but that the SEC failed to meet its obligation to consider the Rule’s effect on efficiency, competition, and capital formation. The Court of Appeals remanded the matter to the SEC to address its obligation.

While the Petitioners “lost” on the reasonableness of Rule 151A, the SEC “lost” on Rule 151A’s effect. The SEC has a number of options on how to proceed. It can drop the Rule, try to persuade the Court of Appeals that the SEC is not required to consider the Rule’s effect, proceed with the consideration of the Rule’s effect, change and re-propose the Rule, or ask the U.S. Supreme Court to review the Court of Appeals’ decision.

The Petitioners and the SEC have until September 4, 2009 to seek a rehearing of the three-judge panel or a hearing of the full Court of Appeals.

Meanwhile, members of the National Association for Fixed Annuities continue to press for legislation to overturn Rule 151A. Bills have been introduced in both the House and Senate, and each bill has more than one sponsor.

Though Rule 151A remains in flux, two companies – Eagle Life Insurance Company, an affiliate of American Equity Investment Life Insurance Company, and Nationwide Life Insurance Company – recently have filed Form S-1 registration statements for indexed annuities with the SEC.