The Harkin Amendment requires the SEC to treat indexed products as exempt securities if they meet specified conditions. However, the SEC has not stated whether or how it will police satisfaction of the conditions, nor has it announced whether it believes that the status test under the statutory exemption for insurance products remains the same or whether the SEC will continue to view the statutory exemption as an exclusion from all provisions of the federal securities laws.

The SEC’s own filing requirements, however, might force its hand. For instance, a life company, filing a registration statement for a new indexed product, seeking to withdraw a current registration statement for an existing indexed product, or amending a registration statement for a variable product to add an unregistered indexed investment option, could require the SEC to take a position as to the applicability of the Amendment and/or the satisfaction of its conditions for each filing.

In such a situation, the SEC could follow one of at least three approaches:

  • Conduct its own review of an indexed product’s eligibility for exemption under the Amendment, which could entangle the SEC in the interpretation of state insurance law;  
  • Accept, without further action, the filer’s implicit representation that the indexed product satisfies the conditions for reliance on the Amendment’s exemption, and, in doing so, yield at least principal jurisdiction over indexed products to state insurance regulators; or  
  • Adopt a middle stance, such as requiring an opinion of counsel to be filed concluding that the indexed product satisfies the conditions for reliance on the Amendment’s exemption. The SEC has followed this last approach in the past regarding the status of fixed benefit investment options where the life insurance company retained the latitude to modify the interest rate in excess of the guaranteed minimum rate.  

Questions raised by the Amendment are set out and analyzed at, under the Indexed Annuity and Insurance Products Task Force. The background and history are also available there.