A federal appeals court has granted a two-year stay on a controversial rule that would have required insurance companies to register their indexed annuity products with the U.S. Securities and Exchange Commission (SEC) as regulated securities.

The SEC voted a year ago to oversee the growing $120 billion equity-indexed annuities market. The new rules would have applied to indexed annuities issued on or after Jan. 12, 2011.

“The Commission has determined to consent to a two-year stay of Rule 151A’s effective date to run from the date of publication of a reissued or retained Rule 151A in the Federal Register,” the SEC wrote in its brief to the court. “Staying the effective date, as petitioner OM Financial Life Insurance Co. initially requested, would address the petitioners’ concerns regarding the rule’s current January 2011 effective date.”

The lawsuit, filed by six companies that include West Des Moines-based American Equity Investment Life Insurance Co., had asked the U.S. Court of Appeals for the District of Columbia Circuit to overturn Rule 151A, which would require the SEC registration. The SEC has said the rule is needed to clarify the status of these products, which have seen dramatic sales growth and an increase in the use of abusive tactics to sell the products to seniors.

Other petitioners in the case are BHC Marketing, Midland National Life Insurance Co., National Western Life Insurance Co., OM Financial Life Insurance Co. and Tucker Advisory Group.

Indexed annuities offer minimum guaranteed values and credit interest based on the performance of a market index such as the Standard & Poor’s 500. Though SEC officials contend that the market risk associated with these products makes them more like mutual funds than insurance contracts, the petitioners in the case say indexed annuities are safer than securities because they guarantee a minimum return.