WASHINGTON BUREAU – Sen. Daniel Akaka acted today to keep an indexed annuity amendment from coming up for a vote on the Senate floor.
Sen. Thomas Harkin, D-Iowa, introduced the amendment, S.A. 3920, together with a bipartisan group of colleagues that included Sen. Charles Grassley, R-Iowa, as well as Sens. Earl Benjamin Nelson, D-Neb.; Michael Johanns, R-Neb.; and Patrick Leahy, D-Vt.
The amendment would bar the U.S. Securities and Exchange Commission from implementing Rule 151A and regulating indexed annuities as securities starting in January 2011.
Harkin and colleagues have been trying to add the amendment to S.A. 3937, a substitute version of S. 3217, the Restoring American Financial Stability Act.
For the latest S. 3217 coverage, please see S. 3217: Senate Passes Cloture Motion.
The insurers that sell the annuities and the producers who sell them say the products offer a fixed minimum rate of return and therefore should be regulated as insurance products.
SEC officials and financial planning groups say the annuities are complicated, look like securities to consumers, and ought to be regulated using the same rules that apply to securities.
Insurers and industry groups have been fighting Rule 151A in court. They also have organized “fly-ins” and other efforts to try to persuade members of Congress to change or eliminate Rule 151A.
Harkin and other S.A. 3920 supporters needed unanimous consent from members of the Senate to have the amendment come up for consideration today.
Congressional staffers believe the Senate will vote to limit debate on S.A. 3739 and S. 3217 this afternoon, then hold a final vote Friday. If a cloture motion wins this afternoon, supporters are unlikely to be able to attach S.A. 3920 to S.A. 3217, staffers say.
Akaka, D-Hawaii, appears to be the only member of the Senate to speak out against approving S.A. 3920, but observers say they think a number of Republicans also oppose the amendment.
“I’m not alone in my opposition to the amendment,” Akaka said today on the Senate floor.
Akaka noted that groups opposing the amendment include the AARP, Washington; the Consumer Confederation of America, Washington; and the North American Securities Administrators Association, Washington.
Harkin’s amendment “would prevent indexed annuities investors from benefiting from strong protections from federal securities laws,” Akaka said, adding that some consumers in Hawaii have been hurt when they bought state-regulated EIAs.
“Deceptive sales practices have been found to be used in these products,” Akaka said. “An individual in Hawaii pushed equity index annuities to collect high commissions at the expense of senior investors. Those investors least able to effectively evaluate financial products need these federal protections, without question. And they’ve been suffering.”
Harkin pointed out that Congress has intentionally left insurance regulation up to the states.
“If the SEC is able to grab a hold of this kind of an instrument, what’s to keep them from saying, well, now we’re going to take over whole life insurance policies too?” Harkin asked. “Because we’ve had problems with whole life insurance policies too, you know, folks. That’s why insurance commissioners keep track of this. They crack down. They change their policies, they change their rules and regulations to cover these kinds of happenings. So unless we’re to the point of saying we’re going to federalize all insurance in America, if we’re there, well, okay. I’d like to see that vote happen here.”