WASHINGTON BUREAU — Members of the H.R. 4173 financial services bill conference committee today began formal efforts to reconcile the House and Senate versions of the bill.

The committee started with an organizational session. A series of 6 substantive sessions is set to begin next week.

Democratic leaders in Congress hope to have a combined version of the bill ready for House floor action by June 29. They hope the Senate will debate the bill briefly, then approve it and send it to the White House before Independence Day.

Conferees will be deciding whether life insurance agents must abide by a fiduciary standard when selling products classified as investment products or whether they can continue to use the suitability standard.

A Treasury Department undersecretary said the administration wants a broad fiduciary standard rule in the final bill.

A fiduciary standard would require agents and broker-dealers to sell products to customers without having conflicts of interest.

The current suitability standard requires only that they verify that the products sold to consumers suit the needs of those consumers.

“The House passed bill includes significantly improved language on the standard of care issue, but it doesn’t go far enough in advancing our understanding on how the suitability standard governing broker-dealers and their registered representatives is applied and enforced relative to the fiduciary duty governing investment advisers,” says Thomas Currey, president of the National Association of Insurance and Investment Advisors, Falls Church, Va.

NAIFA prefers the Senate version, which calls for further study of the issue, Currey says.

Insurance companies are trying to fight provisions that could limit the ability of the holding companies and subsidiaries of depository institutions from engaging in “proprietary trading,” or trading in securities on their own behalf.

Life insurers want to make sure the provisions do not end up applying to life insurers.

“The life insurance industry and the banking industry are fundamentally distinct,” Frank Keating, president of the American Council of Life Insurers, Washington, says in a statement.

“We provide different types of services and focus on different time frames,” and unlike banks, life insurers must plan and manage risk for claims that may not arise for 30 or 40 years,” Keating says.

“Life insurers use sophisticated tools to manage those risks and these tools have proven to be effective and financially sound over the course of many decades,” Keating says. “We hope the House-Senate conferees will reexamine the consequences of denying life insurers the use of highly reliable risk management tools.”

The National Conference of State Legislators, Denver, and the National Conference of Insurance Legislators, Troy, N.Y., are keenly interested in efforts to set up an Office of National Insurance or a Federal Insurance Office at the Treasury Department.

The Senate version would give the officer more authority to preempt state laws that conflict with bilateral trade agreements with other countries.

Insurers tend to prefer the stronger Senate version of the office; the NCSL and NCOIL prefer the weaker office in the House version.

The NCSL and NCOIL are asking for conferees to ensure that state banking, securities and insurance regulators can participate in a proposed Financial Stability Oversight Council.

The House version of the financial services bill already allows for state regulator participation.

“If the goal of a council is to identify financial risk, it seems insufficient to omit state regulators–who typically are the first to recognize emerging risk–from the Council,” NCOIL and NCSL have written in a letter about the council provisions.

Both the House and Senate versions of the bill contain similar reinsurance and surplus lines provisions. Those provisions would put the domiciliary state in charge of regulating and taxing the reinsurers or surplus lines providers. That language is likely to emerge intact from the conference.

The Senate and the House versions also contain major changes in the laws governing the credit rating agencies. The Senate has proposed more sweeping changes than the House has.