Illinois’s attorney general pressed on with its appeal and was granted a review by the Illinois Supreme Court, which in a unanimous decision on Thursday upheld the Appellate Court’s earlier ruling and reiterated that under Illinois law, fixed-indexed annuities are not securities. The Supreme Court’s decision was based on two basic points: The Securities Act itself does not allow for the regulation of fixed-indexed annuities as securities and, because fixed annuities are already regulated as insurance, it would be “incongruous” to also regulate them as securities.
The Supreme Court also rejected the state’s argument that even if the annuities were not securities, Van Dyke committed fraud in recommending them as an investment advisor, and agreed with the Appellate Court that the secretary’s finding of fraud was unsupported by the evidence.
“The Illinois decision is an important outlier for the country,” Heinrich said. “Our association was actively involved in this case from its outset, and we are thrilled that our work, in partnership with our outside legal counsel, has resulted in a significant win for the industry.”
NAFA formed a working group to battle the secretary’s decision in 2013, got the Appellate Court’s ruling published to set legal precedent and retained counsel to file an amicus brief in the case.
“It was critical to explain how regulating these annuities as securities would make Illinois the only state in the country to do so, potentially driving much of this $4 billion annual business out of the state,” NAFA’s outside counsel King Poor of Quarles & Brady said.
Nationwide, 2018 fixed annuities sales beat the previous 2016 record by roughly $15 billion, according to LIMRA.
Indexed and fixed-rate-deferred annuities contributed to much of that growth. Indexed annuities shattered their previous annual record, set in 2016, by $9 billion to hit $69.6 billion for the year. Sales of fixed-rate deferred annuities increased $10 billion over 2017 to total $44.2 billion, a volume not seen since the financial crisis.