I was thinking about this...and it actually does make sense to have this rule as it was called against Iowa.
A punt returner could just do all sorts of crazy stuff under the shoulder to get defenders to hold up before he returns it. Then if that became popular enough they'd just tackle players regardless of how they signaled.
The one way I would defend Iowa fans saying it's a bad call...is if they called it becuase his arms were above his shoulders. His arm motion is 99.9% below the shoulders and there's the one freeze frame where his arms are about even with shoulders. If it was all about that (it wasn't) then that would have been a terrible call. They said he can't make the motions below the shoulders though, and he obviously was, and it appears that is the rule for a valid reason.