The oral arguments on Rule 151A

By Roccy Defrancesco

The Wealth Preservation Institute

This past week, I had the opportunity to read a transcript of the oral arguments by the attorneys representing the SEC, the petitioners hoping to stop Rule 151A from implementation and from the judges presiding over the case.

If you've never had a chance to see oral arguments in a case, or if you've never had a chance to read a transcript, they can be very interesting if they're on a subject matter that affects your business. I know that every insurance agent and most security licensed professionals are watching what's going on with 151A and I guarantee you will find the reading of the transcript interesting on multiple levels.

For what reasons should you read this oral argument from the United States Court of Appeals for the District of Columbia on American Equity Investment Life Insurance Company vs. the SEC? I'll give you three:
    1. Rule 151A is the most industry-changing legislation that has come down since I got into the business over 10 years ago. If it goes through, it will alter the industry unlike any other legislation in recent memory.

    2. If you consider yourself a professional advisor, you owe it to yourself to read this transcript.

    3. If Rule 151A goes through, it will force insurance agents to obtain a security license of some kind. Many think a Series 6 will be required; others think a new license just to sell FIAs will be required.
My opinion after reading the transcript

My opinion after reading the transcript is that Rule 151A will be vacated. I think the SEC will then either try again with a narrower and less oppressive rule, or they will back off and work with the state insurance departments to come up with an official testing procedure or something similar to make sure insurance agents are doing the best they can to understand the products they are selling and provide full disclosure to clients when selling FIAs.

I think you should read this transcript so you can form your own opinion about what you think the court may do. Why? Because some IMOs out there are trying to scare insurance agents into getting securities licensed with their IMO so agents can "get ready" for 151A. I do not like this approach as a way to entice/coerce insurance agents to get licensed with a marketing entity.

As proposed, Rule 151A is not set to go into effect until January 1, 2011. That's a long way away, and there is no reason to panic even if 151A ultimately does go into effect.

However, many agents may read the transcript and come to the same conclusion that I have, which is that Rule 151A will not go into effect. That may allow some agents to table discussions about moving to another IMO and table the idea of going out and obtaining a Series 6 or other securities license.

Download the transcript

There are two versions of the transcript you can download. An un-altered/un-editorialized version or a highlighted version where I noted the parts I think are the most interesting and included a running commentary. The commentary is partially from me with the perspective of a lawyer who has insight on how to read an oral argument transcript and partially as an opinionated "expert" in our field.

To download either version, please click on the following link:

After you read the transcript from the United States Court of Appeals for the District of Columbia on American Equity Investment Life Insurance Company vs. the SEC, let me know your thoughts in the forum below.

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