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November 01, 2009 at 07:00 PM
Insurance agents won a safe harbor on the sale of their limited array of investment products last Wednesday in legislation being marked up by the House Financial Services Committee that is designed to reduce the number of standards used in sales of securities.
The provision modifies language proposed in a manager’s amendment to the Investor Protection Act, H.R. 3817.
Rep. Barney Frank, D-Mass., chairman of the committee, said the amendment was one of 30 to the legislation that the panel would consider. He said it was likely that work on the bill would not be completed until Nov. 3.
The legislation is one of a number of bills being processed by the committee as part of an effort by Congress and the Obama administration to reform regulation of the U.S. financial services industry.
The ‘safe harbor’ amendment, proposed by Rep. Dan Maffei, D-NY., was passed by voice vote.
Specifically, the provision says, “The sale of only proprietary or other limited range of products by a broker or dealer shall not, in and of itself, be considered a violation” of the fiduciary standard that will govern sales of securities products by the Securities and Exchange Commission going forward.
According to an industry official, the amendment clarifies that broker-dealers and their reps offering a limited basket of products, will not violate the fiduciary standard for that reason. The official asked that his name not be used pending approval of his comments by superiors.
According to the official, the amendment “improves upon the language” in the revised manager’s amendment that would require that B-Ds and their reps disclose and receive a customer acknowledgement or consent that they understand that they are only being offered the limited basket of investment products.
The new language is likely to ease the concern of the National Association of Insurance and Financial Advisors.
NAIFA officials had voiced concern earlier about the revisions to the legislation that had been proposed by its chief sponsor, Rep. Paul Kanjorski, D-Pa., chairman of the Capital Markets Subcommittee of the House Financial Services Committee.
NAIFA’s concern with the prior language was that it would not provide adequate protection for those agents who offer a limited basket of products to clients.
