Congress should help the regulators who oversee insurance-investment product hybrids get access to more criminal information and other regulatory information.[@@]
Richard Hillman, financial markets director at the U.S. General Accountability Office, makes that argument in a letter to Rep. Michael Oxley, R-Ohio, chairman of the U.S. House Financial Services Committee, about the state of financial services regulatory agency information sharing.
“Information sharing among regulators serves as a key defense against fraud and market abuses,” Hillman writes in the letter. “However, our system of financial regulation is fragmented and, in many cases, isolated among numerous federal and state financial regulators overseeing the securities, insurance and banking industries.”
In the letter, Hillman gives 3 recommendations for improving regulation of hybrid products such as variable annuities, equity-indexed annuities and viatical settlements.
1. Give insurance regulators more consistent access to the nationwide criminal history data maintained by the Federal Bureau of Investigation.
2. Improve vehicles for sharing regulatory enforcement data, to keep rogues from migrating from one industry to another.
3. Improve regulatory oversight structures.
Hillman notes that only 16 state insurance departments have the authority to check the nationwide criminal history data maintained by the Federal Bureau of Investigation and that many financial services regulatory agencies have no regular, systematic vehicles for sharing information with other agencies.
Moreover, oversight is so divided that consumers often have a hard time figuring out where to turn for help, Hillman writes.
Some of the barriers against sharing information involve technology, but regulators say worries about confidentiality are more important, Hillman writes.
Some regulators told GAO researchers that they were especially nervous about sharing information that is not substantiated or pertains to an ongoing investigation.
The National Association of Insurance Commissioners, Kansas City, Mo., represents state insurance regulators, but some banking and securities regulators say they are leery of NAIC’s status as a nonregulatory entity.
The GAO has posted a copy of the report at http://www.gao.gov/new.items/d04882r.pdf