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Senate Banking Committee Chair Introduces Discussion Draft of the “Restoring American Financial Stability Act of 2009”
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NAIFA GovWatch

Senate Banking Committee Chair Introduces Discussion Draft of the “Restoring American Financial Stability Act of 2009”

The Bill Seeks to Identify and Address Risks to the Stability of the U.S. Financial System; Key Provisions of Draft Apply to the Insurance Industry, Agents and Financial Advisors; Reflects Obama Administration Policy Priorities

Issue:The Role of the Agent in Financial Services Regulatory Reform

Date: November 10, 2009

Action Taken: The Chairman of the Senate Banking Committee, Chris Dodd (D-CT) released a discussion draft of major financial services overhaul legislation. The draft proposal seeks to address and fix many of the perceived delicacies in the U.S. financial services industry. To some degree it mirrors the Obama Administration’s proposals first developed by the House Financial Services Committee. Similarities in the Senate draft include provisions designed to bring investment advisers and broker-dealers (and their registered representatives) under a harmonized fiduciary standard of care, create a Consumer Financial Product Agency and establish an Office of National Insurance. View a summary of the proposal here.

Impact on NAIFA Members: The Senate Banking Committee draft—if adopted into law—would have huge ramifications for NAIFA members and the way agents and advisors interact with clients or potential clients. Any agent or financial advisor licensed as a registered representative because of the sale of variable life insurance, annuities or mutual funds would be confronted with major changes in how they do business. Changes covering disclosures to clients or potential clients of conflicts of interest, commission compensation, and harmonized examinations for investment advisers, broker-dealers and registered representatives are among the key proposals.

Substance of the Senate Draft: At great effort by NAIFA members and Washington staff, NAIFA backed many positive changes in the House version of this legislation. From first reading of the Senate draft, considerable challenges appear to lie ahead if the bill is to reflect the realities of the market place in which agents and advisors work with their clients. However, NAIFA policy makers have not fully digested the substance of this 1,136 page bill. Stay tuned for further reports.

Next Steps: The timetable for the Senate Banking Committee to begin working on this legislation has not been set. The provisions relating to the solvency of large banking institutions and reorganization of federal regulatory agencies overseeing banking and other large financial institutions is an extremely high priority for Congress and the Obama Administration.  The expectation is that the mark-up process in the Senate banking Committee will begin soon.

The Senate will be in recess for the Veterans Day Holiday from November 11 though November 15.

NAIFA Staff Contact:  Jill Edwards, Assistant Vice President – Federal Government Relations, at jilledwards@naifa.org.

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