The cloture vote failed in the Senate on Wednesday, May 19, as Democrats did not garner enough votes to finish debate on Senator Christopher Dodd’s (D-Connecticut) financial services reform bill, S. 3217, the Restoring American Financial Stability Act. The cloture vote will be taken up on Thursday, and if it is approved, further debate on current amendments will be limited to 30 hours and a halt would be placed on the introduction of new amendments.
None of the amendments involving fiduciary duty have been debated on the Senate floor. Washington observers say that it is possible that fiduciary amendments could be added to the manager’s amendment, which is being crafted by Dodd and Senator Richard Shelby of Alabama, ranking GOP member on the Senate Banking Committee.
The American Association of Retired Persons (AARP) joined May 19 the North American Securities Administrators Association (NASAA) and the Consumer Federation of America (CFA) in opposing the Harkin/Johanns/Leahy amendment (S 3920) to Dodd’s bill, which the groups say would deprive investors in indexed annuities of the strong protections afforded by our nation’s securities laws. The amendment, the groups say, “seeks to reverse the SEC’s Rule 151A, which would subject indexed annuities to regulation as securities. Adopted by the SEC in 2008, the rule was later challenged by the insurance lobby. Although the U.S. Court of Appeals for the District of Columbia Circuit upheld the legal foundation for Rule 151A, the SEC has agreed to delay the rule’s effective date to 2013.”
“The Harkin Amendment would overturn the SEC rule, which is designed to provide disclosure, suitability, and sales practice protections afforded by state and federal securities laws,” AARP wrote in a letter to the Senate. “If this amendment is adopted, the industry will be encouraged to develop hybrid products in the future specifically designed to evade a regulatory regime designed to protect consumers.”
In a May 14 letter to the Senate, NASAA and CFA said regulating equity-indexed annuities as securities “is long overdue and vitally important to our nation’s investors.”