Sen. Daniel Akaka (D-Hawaii) has acted to keep an indexed annuity amendment that would override SEC Rule 151A from coming up for a vote on the Senate floor.
Sen. Thomas Harkin (D-Iowa) introduced the amendment, S.A. 3920, together with a bipartisan group of colleagues that included Sen. Charles Grassley (R-Iowa), as well as Sens. Earl Benjamin Nelson (D-Neb.), Michael Johanns (R-Neb.) and Patrick Leahy (D-Vt). Harkin and colleagues have been trying to add the amendment to S.A. 3937, a substitute version of S. 3217, the Restoring American Financial Stability Act. Harkin and other S.A. 3920 supporters needed unanimous consent from members of the Senate to have the amendment come up for consideration.
Sen. Akaka was the only member of the Senate to speak out against approving S.A. 3920, but observers say they think a number of Republicans also oppose the amendment.
“I'm not alone in my opposition to the amendment,” Akaka said on the Senate floor, according to press reports. Sen. Akaka noted that groups opposing the amendment include the AARP, the Consumer Confederation of America, and the North American Securities Administrators Association.
“The Harkin Amendment would overturn the SEC rule, which is designed to provide disclosure, suitability, and sales practice protections afforded by state and federal securities laws,” AARP wrote in a letter to the Senate. “If this amendment is adopted, the industry will be encouraged to develop hybrid products in the future specifically designed to evade a regulatory regime designed to protect consumers.”
In a May 14 letter to the Senate, NASAA and CFA said regulating equity-indexed annuities as securities “is long overdue and vitally important to our nation’s investors.”
Sen. Harkin’s amendment “would prevent indexed annuities investors from benefiting from strong protections from federal securities laws,” Sen. Akaka said, adding that some consumers in Hawaii have been hurt when they bought state-regulated FIAs.
“Deceptive sales practices have been found to be used in these products,” Sen. Akaka said. “An individual in Hawaii pushed equity index annuities to collect high commissions at the expense of senior investors. Those investors least able to effectively evaluate financial products need these federal protections, without question. And they've been suffering.”
Sen. Harkin pointed out that Congress has intentionally left insurance regulation up to the states. “If the SEC is able to grab a hold of this kind of an instrument, what’s to keep them from saying, well, now we’re going to take over whole life insurance policies too?” Sen. Harkin asked. “Because we’ve had problems with whole life insurance policies too, you know, folks. That’s why insurance commissioners keep track of this. They crack down. They change their policies, they change their rules and regulations to cover these kinds of happenings. So unless we’re to the point of saying we’re going to federalize all insurance in America, if we’re there, well, okay. I’d like to see that vote happen here."