Oral argument was held on May 8, 2009, before the D.C. Court of Appeals in the litigation involving Rule 151A, which would regulate registration under the Securities Act of 1933 for the offering of certain types of fixed index annuities.

Two sets of plaintiffs urged the court to vacate Rule 151A: a coalition of life insurance companies and distribution firms (Coalition), and the National Association of Insurance Commissioners and the National Conference of Insurance Legislators. The SEC defended the Rule.

The oral arguments, as well as the briefs filed by the parties and friends of the court, set out a number of legal and policy arguments. These arguments relate, among other things, to the application of U.S. Supreme Court precedents regarding the scope, allocation and assumption of “investment risk.” Some observers, however, predict that the decision will turn principally on the SEC’s authority to adopt Rule 151A, rather than the application of substantive precedents.

There’s no word when the court might announce its decision. The Coalition had originally asked for an expedited briefing schedule, given the work required to comply with the Rule if it survives, which would include registering, with the SEC, index annuities as securities and distribution firms as broker-dealers. The court granted a briefing schedule that was more expedited than the one requested, suggesting the Court might decide the case sooner rather than later. Although the court has not acted on the Coalition’s request that the court extend the Rule’s compliance date, the losing party at the Court of Appeals level may well petition the U.S. Supreme Court to review the case, and Supreme Court review probably would extend the compliance date for the Rule.