WASHINGTON BUREAU — Supporters of state regulation of equity indexed annuities have renewed efforts to get a provision into H.R. 4173 that would bar the U.S. Securities and Exchange Commission from regulating the product.
Supporters’ efforts surfaced when the Consumer Federation of America, Washington, and Fund Democracy, Oxford, Miss., wrote a letter objecting to the initiative to members of the H.R. 4173 conference committee.
The conference committee began working today on reconciling the House version of the bill and the Senate version.
Committee leaders hope to complete work on the bill in time for President Obama to sign it before July 2, when Congress is set to leave for the Independence Day recess.
In January 2009, the SEC tried to get jurisdiction over EIAs by publishing Rule 151A, a regulation would classify EIAs as securities.
A panel of the U.S. Court of Appeals for the D.C. Circuit ruled in July 2009 that the agency had authority to regulate EIAs, but it blocked the SEC from doing so pending a study by the agency of the potential impact such a rule would have on capital formation and competition.
An issuer of EIAs, Old Mutual Insurance Company, Baltimore, has asked the panel to set aside its decision and bar the SEC from regulating EIAs. A decision on that appeal is pending.
The new conference committee effort follows a May 20 decision, made during debate on H.R. 4173 on the Senate floor, to block a vote on a proposed amendment that would have let state insurance regulators keep oversight over EIAs.
The CFA and Fund Democracy say in their latest letter that, “Exempting equity-indexed annuities from securities regulation would set a dangerous precedent and encourage the development of additional hybrid products designed specifically to evade a more rigorous form of regulation.”
Moreover, the groups say, adding the provision to the final bill despite the fact that the provision is not included in either the House or Senate version of the bill “would be a gross violation of the integrity of the legislative process.”
“We urge you to protect investors and the legislative process by preventing the equity-indexed annuities provision from being added to the conference report,” the groups say.
The CFA says its funding comes from grants and from state and local consumer organizations.
Fund Democracy says it has no paid staffers and gets its funding from public contributions.
According to several sources, Sen. Tom Harkin, D-Iowa, chief sponsor of the amendment, is leading the effort to persuade members of the conference committee to consider adding the provision to the final bill.
The issue could come up today as the conference committee seeking to reconcile differing versions of the legislation starts its work.
The issue could also come up Wednesday, or when the conference committee deals with Title IX, investor protection and regulatory improvements.
A spokesman for Harkin did not respond to requests for comment. Kim O’Brien, executive director of the National Association of Fixed Annuities, Milwaukee, which is leading the fight to stop the SEC from regulating EIAs, also declined to comment.
In asking the Senate to reject SEC oversight, Harkin said he has been been trying to get his amendment to say that the SEC does not have jurisdiction over insurance instruments such as EIAs and is concerned about the possibility that the SEC could try to claim jurisdiction over other products, such as whole life insurance policies.
Under the rules of the Senate, Harkin needed unanimous consent to get the full Senate to vote on the amendment. Sen. Daniel Akaka, D-Hawaii, objected and indicated that others also oppose the amendment. Akaka said deceptive sales practices had affected consumers in Hawaii.