A conference panel on financial services legislation will deal with two big insurance issues next week: the powers of a proposed federal insurance office and the standard of care agents would have to use in selling investment products.
At the same time, officials of the House Ways and Means Committee confirmed that imposition of a bank tax would not be used to help fill a $20 billion budget gap over 10 years that the Congressional Budget Office says the new bill would create.
The committee is now working on legislation that would file the budget gap the CBO said would be created by the legislation.
The CBO projected that the bill would increase budget deficits by $12.9 billion over the next 5 years, and $19.7 billion over the next 10 years.
A provision implementing the proposed bank tax, which would be levied over financial services firms with assets over $50 billion, “is not currently under consideration [in any tax measure raising funds] to pay for the financial services regulatory reform bill.” a spokesman for the Ways and Means Committee said.
The conference panel held its organizational meeting Thursday and later released a document saying in a statement that it would deal with Title V, which would create an Office of National Insurance, on Tuesday.
A later, more complete schedule made available to lobbyists said Title 9, which deals with the standard of care agents would be required to use in selling investment products, among other issues, will be taken up Thursday.
The conferees plan to hold 3 sessions next week and 3 more the next week, and they plan to work Saturday, June 26, to ensure that a final bill is on the desk of President Obama by Independence Day.
The bill is H. R. 4173.
The base text that conferees will be using as they reconcile the two bills would be the Senate version, which would create an Office of National Insurance and would give the Treasury Department strong authority to preempt state law in negotiating bilateral trade agreements with foreign countries.
The House bill effectively gives state regulators a veto authority over foreign trade agreements negotiated by the Treasury Department and even allows courts and the Congress to pay a role in the process.
State legislators and the National Association of Insurance Commissioners have written several letters to conferees supporting the weaker House version, which would create a Federal Insurance Office with limited subpoena power to secure industry and company information.
But 9 insurance associations, including the American Council of Life Insurers, asked in a letter to conferees that the current Senate language on the preemptive authority of the ONI be retained.
“Enabling the U.S. to engage in and conclude international agreements with foreign nations on prudential insurance measures ensures uniform and equitable treatment for foreign and domestic insurers and reinsurers alike, fosters innovation and growth in U.S. markets and promotes job creation,” the letter said.
The fiduciary standard issue is important to life insurance agents.
Currently, the standard is that the recommended financial product must be suitable for the investor. Under the House bill, that would rise to a fiduciary standard.
The Senate bill calls for the Securities and Exchange Commission to study the issue and propose to Congress what should be done to address “regulatory gaps and overlaps in existing rules.”
For agents, a key is that the base text for deliberations on the legislation would be the Senate version, which supports the industry provision.
But both the Obama administration and Mary Schapiro, chairman of the SEC, said they support the fiduciary standard. The Senate bill does not provide that authority.
“The key thing from our perspective is that if Congress wants us to study the issue again, that’s fine. But at the end of that study we need the authority to go ahead and take action,” Schapiro said. “[The legislation] doesn’t give us that authority. That’s the real flaw from our perspective. There is not a grant of authority when the study is done to go beyond our existing authority in respect to rule writing.”