June 23, 2010– In a surprise move, the U.S. Senate sent the House a financial reform amendment that would keep indexed annuities under state regulation.

The amendment to the reform bill, HR 4173, is unusual because it was not part of either the Senate or House versions of the overall bill that the conference committee has been reconciling. In another twist, Sen. Tom Harkin, D-Iowa, had to rely on Republican backing to pass the bill on Tuesday night over his Democratic colleagues’ objections, according to media reports.

The amendment is a reaction to the Securities & Exchange Commission’s Rule 151A, which claims federal oversight on indexed annuities. That rule is on hold because of a lawsuit brought by American Equity. A federal district court sent the rule back to the SEC because of procedural missteps brought out by the lawsuit. The SEC’s response is still pending. Harkin’s amendment would nullify Rule 151A.

Harkin’s amendment faces an uncertain fate in the House’s hands because it had not been part of the earlier bill process. Some say Rep. Barney Frank, D-Mass., might not be a natural supporter of the amendment, but he did blast the SEC for passing Rule 151A during the last days of the Bush administration.

Steve welcomes comment at smorelli@insurancenewsnet.com