Missouri Bill Gives Securities Regulator
Authority Over Variable Products
Missouri legislators are considering a bill that would put variable products under the purview of both insurance and securities regulators, a move that is being opposed by insurers and agents.
In the past, similar legislation has been introduced in Kansas but has not been successful.
Currently, insurance regulators have exclusive right to regulate variable products at the state level in 48 jurisdictions, according to the American Council of Life Insurers, Washington.
The Missouri bill, H.B. 1665, was voted out of the House Financial Services committee on April 2 in an 11-8 vote and now will be addressed by the full House. It currently has the support of Governor Bob Holden, Secretary of State Matt Blunt and Speaker of the House Catherine Hanaway.
In a statement on the issue, Blunts office said the bill is needed because currently there is an exclusion from state enforcement of investor protection laws. Rather than have the state insurance department develop standards, Blunt says it would be more efficient to use current staff and expertise at the securities division.
During a hearing on the issue, Carl Wilkerson, ACLI vice president and chief counsel-securities litigation, was among those who testified before legislators.
Wilkerson says variable products already are regulated by the Securities and Exchange Commission, the National Association of Securities Dealers and state insurance departments. The bill, he continues, would create the potential for conflicting regulation and create unnecessary compliance costs.
There were no instances that were raised during the hearing that would suggest there is a need for additional regulation, he says.
But Randy McConnell, a spokesman for the Missouri insurance department, cites 3 recent examples in which variable annuities were sold to elderly clients who “will not see the light of day” when they would be eligible to take surrenders without penalty. In those 3 cases, a total of $300,000 was returned to those consumers, he says.
The bill would give the Secretary of State jurisdiction over the suitability of insurance while the insurance department would retain authority over products and agent oversight, he explains.
If the Secretary of State had jurisdiction to act on suitability matters, McConnell continues, then the insurance department could work with it and take action under its authority over agent licensing.
Lorie Smith, executive director with the Missouri Association of Insurance and Financial Advisors, Jefferson City, Mo., says a MAIFA representative testified that an agent currently has to show a broker-dealer that a product is suitable and that the bill would create an extra layer of regulation.
She notes, however, that MAIFA, the state chapter of the National Association of Insurance and Financial Advisors, has members who are on both sides of the issue.
A meeting with Hanaway and industry representatives is expected soon.
Reproduced from National Underwriter Edition, April 9, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.