Members of the conference committee responsible for reconciling the House and Senate versions of H.R. 4173 have been looking at the indexed annuity jurisdiction issue.
Sen. Tom Harkin, D-Iowa, asked members of the conference committee to add an amendment to Title IX of the financial services bill that would classify fixed indexed annuities as insurance products — if the FIA products are sold by insurers domiciled in states that have adopted the model regulations recently developed by the National Association of Insurance Commissioners, Kansas City, Mo., or if the insurer selling an FIA product has agreed to apply the NAIC standards to all of its FIA sales.
The amendment would have no affect on the legal status of the FIA products not subject to the NAIC model rules.
The U.S. Securities and Exchange Commission has been trying implement Rule 151A, a regulation that would classify FIA products as securities and state that the SEC has the authority to share jurisdiction over the products with state insurance regulators.
Several large FIA issuers are based in Iowa.
When H.R. 4173 was on the Senate floor, Harkin tried to add an amendment defining FIA products as insurance products to the Senate version of the bill. Harkin needed the unanimous consent of the Senate to add the amendment, and Sen. Daniel Akaka, D-Hawaii, objected to the amendment, saying some residents of Hawaii had been hurt when they bought FIA products.
Harkin has tried to overcome colleagues’ objections by modifying his proposed amendment to add the requirement that FIA products regulated as insurance products be subject to NAIC standards.
In the past, some FIA buyers faced problems getting cash out, but the new NAIC rules have fixed those problems, Harkin said.
Letting the SEC take over supervision of FIA products simply because some products have had problems is a bad idea, Harkin said. “We had problems with securities, too, but we’re not doing away with the Securities and Exchange Commission,” he said.
Sen. Jack Reed, D-R.I., chairman of the securities, insurance and investment subcommittee at the Senate Banking, Housing and Urban Affairs Committee, said an FIA product is a hybrid product that ought to be regulated by the SEC as well as by state insurance regulators.
Passing the Harkin amendment could encourage companies to try to get around SEC oversight by creating new types of hybrid products, Reed said.
Some products and insurance companies, such as American International Group Inc., New York (NYSE:AIG), have to do with insurance and with “lots of other things,” and “those a lot of other things should be regulated, if they’re securities, by the SEC,” Reed said.
Sen. Christopher Dodd, D-Conn., who was presiding over the conference committee session, asked the committee to defer further discussion of the Harkin amendment, and the committee agreed to accept that suggestion without putting it to a vote.
In other H.R. 4173 conference committee news, the committee agreed Thursday by a voice vote to accept a suggestion by Sen. Robert Corker, R-Tenn., that, when the Federal Reserve Board uses a proposed expansion of authority to set capital requirements affecting non-bank financial institutions, the board ought to consult with the non-bank institutions’ prudential regulators.
C-SPAN is posting video recordings of the conference committee sessions on its website, at http://www.c-span.org.