Most insurance would be exempt from oversight by the proposed Consumer Financial Protection Agency under legislation the Treasury Department sent to Congress last week.
However, investment advisors currently regulated only by state securities regulators would be subject to CFPA regulation, according to industry officials.
The bill would exempt people engaged in the “business of insurance” from the proposed agency’s authority, except for credit, mortgage and title insurance.
The bill also says that the CFPA would oversee “financial advisers” who provide “financial and other related advisory services,” officials at the National Association of Insurance and Financial Advisers and the Association for Advanced Life Underwriting say.
“It is not clear what this term covers and how it differs from ‘investment advisers,’ and therefore NAIFA will be seeking clarity on that term,” says a NAIFA spokesman.
The bill specifically states the CFPA would not have authority over persons regulated by the SEC–thus exempting broker-dealer registered representatives, NAIFA says. It also specifically excludes from coverage investment advisors subject to oversight by the SEC, the group says.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, wants to move legislation creating the agency through his unit by the end of July.
Legislative action on other parts of the Obama administration’s plan for reforming regulation of the financial services industry will be delayed until fall, Frank said.
The bill as submitted to Congress is different than that initially envisioned by the administration. Originally, top officials had said the bill would cover annuities. However, after intense lobbying by the industry, the administration backed off.
No Insurance In Consumer Agency Bill
Most insurance would be exempt from oversight by the proposed Consumer Financial Protection Agency under legislation submitted to Congress June 30 by the Treasury Department.
At the same time, officials of the Association for Advanced Life Underwriting said that one “question/concern” about the proposed legislation is what the implications for AALU members could be of the apparent coverage of “financial advisors” by the new agency.
Sarah Spear, AALU director of policy and public affairs, said “The term financial product means any product related to a financial activity, and the term financial activity explicitly excludes insurance.”
But AALU’s analysis is based only on a “cursory review” of the more than 100-page legislation, she said.
Under the legislation as submitted to Congress, “the business of insurance” would be exempt from oversight by the new agency except for credit insurance, mortgage insurance or title insurance.
A spokesman for the American Council of Life Insurers said that the ACLI is “still examining the language.”
“We fully agree with Treasury that consumers deserve strong protection,” said the spokesman, Steve Brostoff, in a statement. But ACLI belives that annuties “represent a poor fit for the proposed CFPA,” he said.
The proposed bill would split off consumer protection of financial products from existing federal agencies and shift it to an independent agency.
The agency would have five members, four from the public nominated by the president and confirmed by the Senate. Its mandate would be to “promote transparency, simplicity, fairness, accountability and access in the market for consumer financial products and services,” according to the legislation.