Senators are continuing to try to add language to S. 3217, the Restoring Financial Stability Act bill, that could affect matters such as insurer contributions to bailout efforts and the responsibilities of broker-dealers.
Senate leaders hope to have work on the bill completed by May 14, according to insurance industry policy specialists.
Fiduciary Standard Of Care
Sen. Daniel Akaka, D-Hawaii, and Sen. Robert Menendez, D-N.J., filed Senate Amendment 3889, which would set standard of care rules for brokers, dealers and investment advisors.
If adopted, the amendment would put the original version of Section 913 back in of S. 3217. It would require broker-dealers to use the same fiduciary standard rules that now apply to investment advisors when selling investments.
Under current rules, investment advisors must put customer interests first, without having any conflicts of interest.
Broker-dealers, including insurance producers who are representatives of broker-dealers, have followed a suitability standard, which required only that they verify that products sold to customers suit the needs of the consumers.
Insurance producer groups have argued that traditional life insurance agents who have contracts to sell products from only one company, or a small group of companies, would find meeting a strict fiduciary standard difficult or impossible, because they would not be able to offer customers products from companies off their vendor lists.
S.A. 3889 states that “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 standard of care that would be imposed by the amendment.
Sen. Arlen Specter, D-Pa., also has proposed a fiduciary standard amendment, S.A. 3806. Specter wants the fiduciary standard to apply to broker-dealers that serve all investors, not simply broker-dealers that serve retail investors. Specter’s amendment would impose criminal penalties for willful violations of the broker-dealer standard of care. More discussion of the fiduciary standard is available at S. 3217: Fiduciary Standard In Play.
The Senate voted Wednesday to adopt S.A. 3827, an amendment offered by Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking, Housing and Urban Affairs Committee, and Sen. Richard Shelby, R-Ala. A section of the Dodd-Shelby amendment has removed an S. 3217 provision that could have required financial institutions with more than $50 billion in assets to help contribute to a $50 billion financial institution “resolution” fund before the fund was needed.
S.A. 3827 would limit insurers’ exposure to assessments but would not eliminate it, according to Blain Rethmeier, a spokesman for the American Insurance Association, Washington.
S.A. 3838, a bipartisan amendment introduced Wednesday, would exempt insurers from having to help cover the cost of handling crises at large, non-insurance financial services companies.