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Fixed Indexed Annuities might have been saved from Securities & Exchange Commission (SEC) regulation when the United States Congress accepted the Harkin Amendment in the "Restoring American Financial Stability Act of 2010." These complex insurance instruments had been the source of controversy when the SEC attempted to grant itself regulatory jurisdiction on December 17, 2008 under Rule 151a. Whenever, there are economic problems, government bureaucrats are quick to attempt to acquire more territory to increase the size of their fiefdom.All agree that annuities are complex financial instruments, the difference of opinion rests in whether the states should continue to regulate these as "insurance" instruments or the SEC should regulate these as "security" instruments. Oftentimes, monumental economic collapses, like the Great Depression, have led to a reassessment of how the system could be run more efficiently. Government regulation of financial companies has become an issue for many citizens.Recent Financial Adjustments May Have Caused More Harm Than GoodAlong with the November 12, 1999 repeal of the Glass-Steagall Act of 1933 and the extremely liberal lending practices of Fannie Mae and Freddie Mac, there were a number of governmental actions that added to the recent economic meltdown. When the SEC adopted rule 151a on December 17, 2008, they argued that because fixed indexed annuities were so complex and the value of these annuities was linked to securities, consumers needed added protection for these "securities." The SEC acted as if this action was meant to better protect consumers after the subprime mortgage crisis.One of the worst characteristics of government bureaucracies is their tendency to acquire more-and-more power in their hands, when left unchecked. SEC Commissioner Troy Paredes (who was the only dissenting vote against adopting rule 151a on December 17, 2008) warned that Supreme Court law defined fixed, indexed annuities as insurance products, not securities. He stated, "... our jurisdiction is limited; and thus our authority to act is circumscribed." He warned of the slippery slope - once the SEC disregarded the law on one product, it was more likely to ignore the law on other insurance products.D.C. Court of Appeals Vacates Rule 151aOn July 12, 2010, the United States District Court of Appeals for the District of Columbia had determined that the SEC does not have the authority to regulate fixed indexed annuities, therefore, they "order that Rule 151a be vacated."Harkin Amendment to Nullify Rule 151aSenator Harkin argued that the D.C. Court of Appeals was in the process of vacating Rule 151a, therefore the nullification of this rule should be included in the Financial Regulatory Reform Bill. The Harkin Amendment confirmed that fixed indexed annuities are insurance products that should continue to be regulated by the states, not the SEC. The House-Senate Conference Committee voted to approve the Harkin Amendment on June 22, 2010. When the Harkin Amendment officially becomes law it will be great news for the annuity industry."Restoring American Financial Stability Act of 2010"Government bureaucrats hate taking responsibility for anything. Unfortunately, when economic catastrophes occur, they try to take advantage of problems in order to grant themselves even more power and authority. They argue that they failed because they didn't have "enough power."A true democracy demands that citizens hold their government accountable. Common sense, rationality, and legal precedents must rule unless there is a compelling reason why they should be changed. The SEC never offered a compelling reason for adopting Rule 151a. Citizens must continue to keep their pressure on their representatives so that annuities will remain safely out of the SEC's claws.
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