House members today agreed by a voice vote to keep the Financial Industry Regulatory Authority from regulating investment advisors that are associated with broker-dealers.

House Financial Services Committee Chairman Barney Frank, D-Mass., and Rep. Steve Cohen, D-Tenn., introduced the amendment to H.R. 4173, the 1,279-page Wall Street Reform and Consumer Protection Act of 2009 bill. The amendment would “strike language that would permit FINRA to regulate investment [advisors] that are associated with broker-dealers,” according to a summary posted on the House Rules Committee website.

Frank created the package to serve as a vehicle for getting many major financial services bills, including a systemic risk regulation overhaul, an overhaul of derivatives market regulation, consumer protection measures, a measure restricting executive compensation, and a measure that would create a Federal Insurance Office, through the House quickly.

House members agreed Wednesday to let the financial services package come up on the floor, and action heated up Thursday. House leaders to wrap up work on the package today.

Lawmakers voted 240-182 Thursday to approve a manager’s amendment, offered by Frank, that would make many changes in the bill. Many of the changes would require federal financial services agencies, such as the Federal Reserve Board and a proposed Financial Services Risk Oversight Council, to coordinate their activities with the Federal Insurance Office when they are dealing with insurance companies.

The amendment also would change the systemic risk section of H.R. 4173 to provide that federal regulators would have to follow state law when “resolving” a troubled, state-regulated insurer.

A provision on page 126 of the amendment PDF would require states to adopt annuity suitability standards that are at least as strict as those given in the Suitability in Annuity Transactions Model Regulation that was created by the National Association of Insurance Commissioners, Kansas City, Mo.

The amendment also includes many references to investment advisors.

During floor debate, House members talked mainly about provisions that would affect banks, the housing market and general economic conditions.

Lawmakers also spent some time debating provisions that would expose the major rating agencies, or “Nationally Recognized Statistical Rating Organizations,” to increased legal liability.

Rep. Kevin McCarthy, R-Calif., said exposing the rating agencies to the threat of more lawsuits would discourage companies from getting into the ratings business, and that it would not do much to improve the quality of ratings.

“Litigating an industry to death does not solve any problems,” McCarthy said.

Rep. Mary Jo Kilroy, D-Ohio, said the rating agencies need to be held to better account.

A few years ago, “they bragged that they could rate anything, even a cow,” Kilroy said.

Frank said the liability provision is needed because of the reality that the rating agencies are paid by the companies they rate, rather than by the consumers of the ratings.

Lawmakers voted 172-257 to reject an amendment offered by Rep. Peter Sessions, R-Texas, that would have eliminated a provision making it easier for private parties to sue NRSROs over bad ratings.

In related news, Democrats on the House Financial Services Committee have posted a comparison of the current version of H.R. 4173 and a Republican alternative. Democrats find fault with much of the Republican alternative, but they note that the Federal Insurance Office section of the Republican alternative is identical to the FIO section in the current version of the bill.

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For the latest coverage on this bill, please see Houses Passes Financial Package 223-202.