Is “Investor Protection Act” For Life Insurance In Trouble With Congress?

By Lisa Olsen Posted in Life Insurance News



Investor Protection Act Of 2009

In July, the Treasury Department released the proposed Investor Protection Act of 2009 to take steps to protect private investors. According to officials, the financial regulatory system in the United States needed “new regulatory tools to protect the common investor.”  Although it has been reported, some in congress feel the government “needs to be careful as it should not interfere too much with the U.S. financial system.”

The Act permits the Security and Exchange Commission (SEC) to request documents, perform arbitrary and periodical examination, and risk assessments to people, and/or documents when they feel it is necessary.

The Investor Protection Act develops the regulatory authority of the SEC in a number of areas: requires broker-dealer and investment advisers to act solely in the “best interest of retail clients,” prohibit sales practices and conflicts of interest.  The Act also enhances the SEC’s enforcement powers by: expanding the extent of actions for the aiding and abetting those who violate and/or violations.

How Congress Views The Investor Protection Act

The early drafts of  the “Act” has been changed/amended numerous times since it was introduced. While in review, several changes have been made to certain provisions such as the provision relating to “plain vanilla products.” These products would have been required to be offered with other financial products.

It has been reported that a “manager’s amendment” to the Act has been offered by Rep. Barney Frank. Frank suggested revisions to the “language” of the Act.

It has also been reported that members of the Association for Advanced Life Underwriting (AALU) strongly oppose a “one-size-fits-all fiduciary standard for investments advisors and broker-dealers. But for now, Chairman Frank has postponed any “marking up” of the draft until later this month at the request of other representatives on his Committee.

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