WASHINGTON BUREAU — Requiring insurance agents to act solely in the interest of their customers when selling securities products would be “counter to serving the investing public’s needs,” a representative of the American Council of Life Insurers testified at a House hearing today.
“Such a concept is also at odds with the historical practices regarding securities distribution in which a broker-dealer enters into a contractual arrangement with a securities issuer to offer such securities for sale,” Bruce Maisel, general counsel of Thrivent Financial for Lutherans, Minneapolis, said at a House Financial Services Committee hearing.
The committee spent part of the hearing talking about the Investor Protection Act bill draft.
Rep. Paul Kanjorski, D-Pa., the author of the bill, hopes to apply consistent standards to sellers of similar types of investment products.
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Another provision would give the U.S. Securities and Exchange Commission the authority to adopt rules that limit or bar the inclusion of mandatory arbitration clauses in securities contracts.
That provision drew fire at the hearing from Republicans. Rep. Spencer Bachus, R-Ala., the highest-ranking Republican member on the panel, said the provision ”could substantially increase dispute-resolution costs for investors and compliance costs for firms.”
The provision also would double the agency’s budget over the next 5 years, Bachus said.
Kanjorski, chairman of the Financial Services Committee’s capital markets subcommittee, said the bill would enhance the SEC’s “firepower,” then added that doing that and providing more money “are simply not enough.”
As a result, he said, “the draft bill calls for an independent, comprehensive study of the entire regulatory structure that oversees the securities industry by a high-caliber body with expertise in organizational change that will identify further improvements to the implementation of our securities laws.”
In his testimony on behalf of the ACLI, Washington, Maisel argued that the goal of harmonizing the standard of conduct for broker-dealers and investment advisors who provide personalized securities advice must be tailored “to reflect and preserve the various types of relationships that exist between a broker-dealer or investment adviser and the retail investor.”
By doing so, he said, “investor choice will also be preserved.”