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American Equity Investment Life Insurance Company, et al. v. Securities and Exchange Commission

United States Court of Appeals for the District of Columbia Circuit
613 F.3d 166 (2010)


Facts

A fixed annuity is a contract, issued by a life-insurance company, through which a purchaser makes a series of payments to the insurer in exchange for a series of periodic payments received at agreed-upon future dates. The insurer guarantees that the purchaser will earn a minimum rate of return. These fixed annuity contracts are covered by state insurance law and exempt from federal securities law. A fixed-index annuity (FIA) combines the benefits of fixed annuities with the increased earning potential of a security. An FIA’s guaranteed minimum rate of return is based on the performance of a securities index. Section 3(a)(8) of the Securities Act of 1933 (1933 Act) exempts annuity contracts from regulation under the 1933 Act. However, Rule 151A, issued under the 1933 Act, excludes FIAs from the § 3(a)(8) exemption. The Securities and Exchange Commission (SEC) (defendant) promulgated Rule 151A, in part, because the SEC reasoned that purchasers of FIAs needed the protections of federal securities regulation, because FIAs, unlike fixed annuities, expose purchasers to risk. The SEC further justified Rule 151A by stating that the rule would promote efficiency, competition, and capital formation. American Equity Investment Life Insurance Company, et al. (plaintiffs) sought review of Rule 151A.

Rule of Law

Issue

Holding and Reasoning (Sentelle, C.J.)

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