HB 1665 -- SECURITIES REGULATION

SPONSOR:  Hanaway

COMMITTEE ACTION:  Voted "do pass" by the Committee on Financial
Services by a vote of 11 to 8.

This bill changes the definition of "security" as used in the
laws regulating securities so that the sale of variable annuities
will be regulated by the Secretary of State.  Under current law,
the sale is regulated by the Department of Insurance.

FISCAL NOTE:  Estimated Income on General Revenue Fund of $24,500
in FY 2005, FY 2006, and FY 2007.  No impact on Other State Funds
in FY 2005, FY 2006, and FY 2007.

PROPONENTS:  Supporters say that the bill closes a gap in the
enforcement of laws regulating the sale of variable annuities.
Unlike fixed annuities, variable annuities can lose value over
time, because they are usually linked to a mutual fund or other
kind of equity investment.  Because of that, federal law
classifies them as a security.  The sale of variable annuities is
now regulated by the Department of Insurance, not the securities
regulation office within the Office of Secretary of State.  The
biggest problem with the selling of these investment products is
that the agent may not be capable of determining the client's
specific investment needs.  The department does not require
suitability for these types of investments as part of the
insurance agent's training.  When complaints are made in this
area, they go to the department.  The Secretary of State's office
can better enforce the regulation of variable annuities and do so
without adding staff.

Testifying for the bill were Speaker Hanaway; Office of Secretary
of State; Steamboat Financial Group; and Financial Planners
Association.

OPPONENTS:  Those who oppose the bill say that it adds a fourth
layer of bureaucracy onto the already heavily regulated sale of
variable annuities.  This industry is already subject to anti-
fraud provisions of the federal securities law and regulated by
the Security and Exchange Commission; brokers who sell mutual
funds are regulated by the National Association of Security
Dealers; and the sale of all annuities is regulated by the
Department of Insurance.  A fourth layer of regulation will
confuse consumers, insurers, and the regulators themselves.  No
one has reported a problem in this area or a pattern of adverse
conduct that needs to be stopped.  There is no need for a change
in the regulation of this industry.  The bill would create an
aberrant regulatory structure in Missouri that would differ from
almost every other state.  Non-uniform patterns of regulation add
unnecessary expenses and burdens that are disruptive to the
business of insurance in Missouri.

Testifying against the bill were American Council of Life
Insurers; Missouri Association of Insurance and Financial
Advisors; Kansas City Life Insurance; General American; MetLife;
and Prudential Financial.

Richard Smreker, Senior Legislative Analyst

Missouri House of Representatives
92nd General Assembly, 2nd Regular Session
Last Updated September 23, 2004 at 11:16 am