House, Senate Agree to Retain State Oversight of EIAs

Reps. Bachus and Garrett say states have regulated EIAs appropriately

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  • Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
  • Code of Ethics Rule The Code of Ethics Rule, found in Rule 204A-1, uses severe consequences for violation to help ensure investment advisors will do the right thing.  
House conferees agreed Thursday, June 24, with the Senate in passing the amendment offered by Senator Tom Harkin's (D-Iowa) which retained state regulation of equity-indexed annuities (EIAs).

House Financial Services Chairman Barney Frank (D-Massachusetts) voted against the Harkin amendment, stating that dual oversight of equity-indexed annuities by the Securities and Exchange Commission (SEC) and the states was the best way to go.

However, Rep. Spencer Bachus (R-Alabama) ranking minority member on the House Financial Services Committee, said that over the last two years the "states did an excellent job of regulating the insurance industry." Regulating EIAs as securities, Bachus argued, would "lead to other insurance policies being classified as securities," like whole life policies. He questioned whether it was wise to put yet another product under the SEC's oversight when the agency is "struggling."

Rep. Scott Garrett (R-New Jersey) concurred with Bachus, stating that the "record shows that the states have regulated these [EIA] products appropriately."

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