WASHINGTON–Insurance industry trade groups are voicing support for the version of financial services reform legislation introduced Monday by Senate Banking Committee Chairman Chris Dodd, D-Conn.
Industry representatives voiced strong support for a provision in the Dodd bill that called for a study by the Securities and Exchange Commission of whether investment advisers and broker-dealers should be held to a fiduciary standard when selling investment products.
Consumer groups, however, railed against Dodd’s decision to remove language contained in an earlier version of his reform legislation imposing a blanket fiduciary standard for investment product sales.
But officials of the Consumer Federation of America did say they supported provisions in the bill strengthening government regulation of ratings agencies.
On another issue, the American Council of Life Insurers was critical of Dodd’s decision to include life insurers amongst the financial services groups that will be forced to contribute in advance to a fund that will be used to resolve troubled large financial firms.
The bill would require all financial services companies with assets of $50 billion or more to help prefund a resolution authority that will be run by the Federal Deposit Insurance Corporation. The authority will be used to liquidate large financial firms deemed to pose a systemic risk to the U.S. financial system.
ACLI President Frank Keating called the provision a “significant concern.”
He said life insurers already are subject to a state-based, post-event assessment and “represent a poor fit for a new resolution fund.”
In addition, Keating cited a recent report conducted for the ACLI by Promontory Financial Group LLC, Washington, which concluded “that a pre-funded resolution plan would drain tens of billions of dollars out of the financial system, as our nation is still experiencing a liquidity crunch.”
Among other things, Keating said, the plan “also could create incentives for lenders to extend credit to financially-shaky enterprises under the belief that if an enterprise fails, the authority would bail it out.”
But, other provisions of the bill represent “sound public policy proposals,” Keating said.