H.R. 4173: Senate Conferees Back Indexed Annuity Proposal
June 24, 2010 by Arthur D. Postal
WASHINGTON BUREAU — The lawmakers who are representing the Senate in H.R. 4173 conference committee proceedings moved Tuesday to offer the Senate an amendment that would keep most indexed annuities state-regulated.
House negotiators could respond at any time today to the Senate offer.
The indexed annuity jurisdiction amendment was sponsored by Sen. Tom Harkin, D-Iowa.
Senate conference committee representatives voted 8-4 to approve the amendment.
The amendment states that indexed annuities should be regulated by the states, if the issuers are domiciled in states that have adopted the indexed annuity model regulations recently developed by the National Association of Insurance Commissioners, Kansas City, Mo., or if the issuer has agreed to apply the NAIC standards to all of its indexed annuity sales.
The amendment would have no effect on the legal status of the indexed annuity products not subject to the NAIC model rules.
“This is an insurance product,” Harkin told Senate conferees. “It always has been and still is today. The Security and Exchange Commission’s got a lot of other things to do other than regulate what is now an insurance market.”
He also defended the instruments as an appropriate investment. “No one has lost their money — period,” Harkin said.
Sen. Jack Reed, D-R.I., chairman of the securities subcommittee of the Senate Banking, Housing and Urban Affairs Committee, opposed the reclassification.
The SEC has been trying to gain jurisdiction over indexed annuities by implementing Rule 151A, a regulation the SEC published in January 2009.
Insurers have sued to block enforcement of the regulation.
A panel of judges at the U.S. Court of Appeals for the D.C. Circuit has ruled that the SEC has authority to regulate indexed annuities as securities, but the panel also has ruled that the SEC should conduct a study to determine whether Rule 151A supports capital formation, efficiency and competition.
Harkin said the court panel had ruled that the SEC had no jurisdiction over indexed annuities.
Reed contended during the debate that Harkin’s amendment misinterpreted the decision. “The Harkin amendment would effectively trump the court’s decision,” Reed said.
Reed also charged that “there have been repeated abuses of this product,” and that Harkin’s amendment could not be inserted in the bill at this point because it was not contained in the bills passed by the House or the Senate.
“This is a major amendment of securities law without any hearings or debate,” Reed said. “I don’t think this is the proper place to make such a change.”