Wednesday, May 25, 2005
Contact: Spence Jackson, (573)751-1378
Blunt Continues Efforts to Close Consumer Protection Gap in Variable Annuity Sales
JEFFERSON CITY - Gov. Matt Blunt today announced that he has instructed Missouri Department of Insurance Director Dale Finke to convene a public advisory forum on June 21 to gather information concerning consumer protection in the sale of variable annuities.
Blunt, Missouri’s past secretary of state, helped draft legislation in 2003, which sought to eliminate the exclusion of variable annuities from the state law definition of securities, allowing for enforcement of consumer protection standards by the secretary of state and the Department of Insurance.
Neither that bill nor an identical one filed in 2004 has made it through the Missouri General Assembly in part because of aggressive lobbying efforts on the part of insurance companies that have been able to sell inappropriate investments to Missourians with little or no state oversight.
Variable annuities are hybrid products with both insurance and investment components. They are securities under federal law, so the Securities Exchange Commission (SEC), along with Missouri Department of Insurance, regulates the issuance of the contracts. The conduct of those who sell variable annuities are federally regulated by the National Association of Securities Dealers (NASD), under authority granted by the SEC.
However, variable annuities are specifically excluded from the definition of a security under Missouri law, leaving state enforcement of consumer protection solely with the Department of Insurance. The Secretary of State Robin Carnahan provides Missouri’s consumer protection in most investment sales.
"I have asked Director Finke to work with Secretary Carnahan and her office this summer to plug this gap in consumer protection," Blunt said. "This advisory forum will help the state find a solution to this problem and put in place the proper investor protection Missouri citizens deserve."
As secretary of state, Blunt led the successful effort to enact the most comprehensive reform of Missouri’s securities laws since the 1960’s. This law gave the secretary of state’s office expanded power to impose discipline on securities broker-dealers and agents who engage in dishonest or unethical practices in the insurance business. This overhaul also brought state regulation into the information age with new provisions dealing with e-mail messages and electronic records and tougher penalties to combat Enron-like scandals.