Document ID: SEC-2010-1599-0001
Agency: sec
Document Type: Rule
Title: Indexed Annuities
Posted Date: 2010-10-20T04:00Z

[Federal Register: October 20, 2010 (Volume 75, Number 202)]
[Rules and Regulations]               
[Page 64642-64643]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20oc10-5]                         

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 230

[Release No. 33-9152; File No. S7-14-08]
RIN 3235-AK16

 
Indexed Annuities

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; withdrawal; request for comment on Paperwork 
Reduction Act burden estimate.

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SUMMARY: We are withdrawing rule 151A under the Securities Act of 1933, 
which defines the terms ``annuity contract'' and ``optional annuity 
contract'' under the Act. On July 12, 2010, the United States Court of 
Appeals for the District of Columbia Circuit issued an order vacating 
the rule.

DATES: 17 CFR 230.151A (Rule 151A), published at 74 FR 3175 (January 
16, 2009) and effective on January 12, 2011, is withdrawn as of October 
20, 2010.

FOR FURTHER INFORMATION CONTACT: Michael L. Kosoff, Senior Counsel, 
Office of Insurance Products, Division of Investment Management, at 
(202) 551-6795, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-8629.

SUPPLEMENTARY INFORMATION: On January 8, 2009, the Commission issued a 
release adopting rule 151A under the Securities Act of 1933.\1\ Rule 
151A defines the terms ``annuity contract'' and ``optional annuity 
contract'' under the Securities Act. The rule was intended to clarify 
the status under the Federal securities laws of indexed annuities, 
under which payments to the purchaser are dependent on the performance 
of a securities index. On July 12, 2010, the United States Court of 
Appeals for the District of Columbia Circuit issued an order vacating 
rule 151A in American Equity Investment Life Insurance Company, et al. 
v. Securities and Exchange Commission, No. 09-1021 (D.C. Cir.). 
Accordingly, the Commission hereby withdraws rule 151A, which was 
published at 74 FR 3175 (Jan. 16, 2009).
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    \1\ 15 U.S.C. 77a et seq.; Securities Act Release No. 8996 (Jan. 
8, 2009) [74 FR 3138 (Jan. 16, 2009)].
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Paperwork Reduction Act

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995,\2\ the Commission is soliciting comment on changes to a 
collection of information necessitated by the Court order vacating rule 
151A. The Commission is submitting this existing collection of 
information to the Office of Management and Budget for change and 
approval.
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    \2\ 44 U.S.C. 3501 et seq.
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    The burdens associated with rule 151A are currently approved under 
the ``collection of information'' requirements for Form S-1 under the 
Securities Act of 1933 (``Form S-1'' (OMB Control No. 3235-0065)). This 
form sets forth the disclosure requirements for registration statements 
that are prepared by eligible issuers. The Commission previously 
estimated that there would be an annual increase of 400 responses on 
Form S-1. In connection with this increase in expected responses, the 
Commission increased the estimated burden for Form S-1 by 60,000 hours 
of internal staff time and $72 million of external professional costs.
    Since the Commission's adoption of rule 151A, the Commission has 
adopted changes to the information required by Form S-1, which have 
further increased the total hours and cost burden associated with the 
400 additional responses that we estimated would result from the 
adoption of rule 151A by approximately 1,600 hours and $1,920,000.\3\
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    \3\ These changes in the burden estimates are the result of the 
adoption of rules enhancing information provided in connection with 
proxy solicitations and in other reports filed with the Commission. 
Securities Act Release No. 9089 (Dec. 16, 2009) [74 FR 68334 (Dec. 
23, 2009)]. That rulemaking assigned an incremental burden increase 
of 16 hours per response on Form S-1. We estimated that 25% of that 
burden would be carried by the company internally and that 75% of 
the burden would by carried by outside professionals retained by the 
company at an average cost of $400 per hour. Accordingly, we 
estimated an incremental internal burden increase of 4 (25% of 16) 
hours and an incremental external cost increase of $4800 (75% of 16 
= 12 and 12 x $400 = $4800) for each response, including the 400 
additional responses that we had expected as a result of rule 151A. 
Thus, the rulemaking assigned an additional burden for the 400 
responses of 1600 (400 x 4) hours and $1,920,000 (400 x $4800). In 
addition, another rulemaking following the adoption of rule 151A 
also resulted in a change in the burden estimate for Form S-1. 
Securities Release No. 33-8995 (Dec. 31, 2008) [74 FR 2158 (Jan. 14, 
2009)]. However, that rulemaking modified reporting requirements for 
oil and gas companies and did not affect the estimated burden for 
the additional 400 filers under rule 151A.
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    As a result of the Court order, the Commission no longer expects 
that there will be an annual increase of 400 responses on Form S-1, and 
believes that the estimate of the corresponding burdens for Form S-1 
should be decreased by the amount of the burden associated with those 
400 responses. Accordingly, the Commission estimates that the Court 
order will have the effect of decreasing the estimated burden for Form 
S-1 by 61,600 hours of internal staff time (60,000 plus 1,600) and 
$73,920,000 for external professional costs ($72,000,000 plus 
$1,920,000).
    The information collection requirements related to Form S-1 are 
mandatory. There is no mandatory retention period for the information 
disclosed, and the information disclosed is made publicly available on 
the EDGAR filing system. An agency may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless it displays a currently valid OMB control number.
    We request comment on the accuracy of the Commission's estimate of 
the change in the burden for Form S-1. Persons wishing to submit 
comments on the collection of information requirements should direct 
them to the Office of Management and Budget, Attention Desk Officer for 
the Securities and Exchange Commission, Office of Information and 
Regulatory Affairs, Washington, DC 20503 and should send a copy to 
Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 
F Street, NE., Washington, DC 20549-1090, with reference to File No. 
S7-14-08. Requests for materials submitted to OMB by the Commission 
with regard to this collection of information should be in writing, 
refer to File No. S7-14-08, and be submitted to the Securities and 
Exchange Commission, Office of Investor Education and Advocacy, 100 F 
Street, NE., Washington, DC 20549-0213. OMB is required to make a 
decision concerning the collection of information between 30 and 60 
days after publication of this release. Consequently, a comment to OMB 
is best assured of having its full effect if OMB receives it within 30 
days after publication.

Procedural and Other Matters

    Section 553 of the Administrative Procedure Act provides that when 
an agency for good cause finds that notice and public comment 
procedures are impracticable, unnecessary, or contrary to the public 
interest, the agency may issue a rule without providing notice and an 
opportunity for public comment.\4\ The Commission has determined that 
there is good cause for making today's withdrawal of rule 151A final 
without prior proposal and

[[Page 64643]]

opportunity for comment. Because of the Court order vacating rule 151A, 
the Commission's action to withdraw the rule is ministerial in nature. 
Accordingly, the Commission for good cause finds that a notice and 
comment period is unnecessary.\5\
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    \4\ 5 U.S.C. 553(b)(B).
    \5\ This finding also satisfies the requirements of 5 U.S.C. 
808(2) (if a Federal agency finds that notice and public comment are 
``impracticable, unnecessary or contrary to the public interest,'' a 
rule ``shall take effect at such time as the Federal agency 
promulgating the rule determines''), allowing the withdrawal to 
become effective notwithstanding the requirement of 5 U.S.C. 801. No 
analysis is required under the Regulatory Flexibility Act. See 5 
U.S.C. 601(2) (for purposes of Regulatory Flexibility Act analysis, 
the term ``rule'' means any rule for which the agency publishes a 
general notice of proposed rulemaking).
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    The Administrative Procedure Act also generally requires that an 
agency publish an adopted rule in the Federal Register 30 days before 
it becomes effective.\6\ This requirement, however, does not apply if 
the agency finds good cause for making this action to withdraw rule 
151A effective sooner. For the reason discussed above, the Commission 
finds that there is good cause to make withdrawal of the rule effective 
immediately.
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    \6\ See 5 U.S.C. 553(d).
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    The Commission considers the costs and benefits of its rules and 
regulations. As discussed above, rule 151A was vacated by the Court and 
the action the Commission takes today merely implements the Court's 
decision. Our action to withdraw the rule is ministerial and therefore 
will have no separate economic effect.

Conclusion

    Therefore, for the reasons set out in the preamble, 17 CFR 230.151A 
(rule 151A), published at 74 FR 3175 (January 16, 2009) and effective 
on January 12, 2011, is withdrawn.

    By the Commission.

    Dated: October 14, 2010.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-26347 Filed 10-19-10; 8:45 am]
BILLING CODE 8011-01-P