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July 20, 2010 at 08:00 PM
The Dodd-Frank Wall Street Reform and Consumer Protection Act could end up increasing the popularity of family offices and equity-linked insurance products that don’t use separate accounts.
President Obama is expected to sign the Dodd-Frank act bill, H.R. 4173, Wednesday.
The act will require hedge fund advisors who manage more than $150 million in assets to register with the U.S. Securities and Exchange Commission, but Section 409 will let the family offices that manage the affairs of wealthy families, and the advisors of those offices, do business without registering with the SEC.
The provision calls for the SEC define the term family office.
Another provision of the act, Section 989J, which is best known for classifying indexed annuities as state-regulated insurance products, also could hold some appeal for advisors who want to work with wealthy clients without registering with the SEC.
The final language of the provision, which was added by Sen. Tom Harkin, D-Iowa, does not specifically use the term “indexed annuity.” Instead, the provision applies to “any insurance or endowment policy or annuity contract or optional annuity contract” that meets the requirements listed in Section 989J.
Here is the final text of Section 989J, which states that products eligible for 989J treatment must satisfy the nonforfeiture standards developed by the National Association of Insurance Commissioners, Kansas City, Mo.:
SEC. 989J. FURTHER PROMOTING THE ADOPTION OF THE NAIC MODEL REGULATIONS THAT ENHANCE PROTECTION OF SENIORS AND OTHER CONSUMERS.
(a) In General- The Commission shall treat as exempt securities described under section 3(a)(8) of the Securities Act of 1933 (15 U.S.C. 77c(a)(8)) any insurance or endowment policy or annuity contract or optional annuity contract–
(1) the value of which does not vary according to the performance of a separate account;
