CSBS Task Force to Address Review of Nation’s Financial Regulatory System
As policy makers begin to debate the regulatory structure for the nation’s financial institutions, the Conference of State Bank Supervisors (CSBS) has formed a special task force to create principles for any regulatory system crafted by the US Congress. While Congress emphasizes stability of major financial institutions, the CSBS is focused on economic development, consumer protection and community stabilization in our states, according to Sarah Bloom Raskin, Maryland’s Commissioner of Financial Regulation who will chair the CSBS Regulatory Restructuring Task Force. Congress announced it will be undertaking major changes in the regulatory architecture governing the nation’s financial system in the coming months.
According to CSBS, its members tend to focus on financial services, economic development, and consumer protection as they impact Main Street in various home states, and not only on Wall Street. Therefore, CSBS sees its states’ voices as critical to this debate, which will shape America’s banking practices for decades. The task force will craft principles based on its members’ supervision of community, regional and international banking activities in their states. It will put forth guiding principles highlighting regulatory ideals from their perspective. Specifically, the regulatory system should, among its many other functions, foster community and regional banks, which provide relationship lending and fuel local economic development. The task force is expected to issue its principles in December. The CSBS is the nationwide organization for state banking, representing bank regulators of the 50 states, the District of Columbia, Guam, Puerto Rico and the Virgin Islands, and approximately 6,100 state-chartered financial institutions.
NASAA Outlines Core Principles for Regulatory Reform in Financial Services
The North American Securities Administrators Association (NASAA) in mid-November released five core principles to help guide the ongoing policy debate over the changes to strengthen the nation’s financial services regulatory structure. Financial services regulation must be improved to better protect investors, markets and the economy as a whole, said NASAA president and Colorado Securities Commissioner Fred Joseph. To serve these interests, Congress and the administration, working together with federal and state regulators, as well as self-regulatory organizations, should take steps to ensure that the new approach is strong, comprehensive, collaborative and efficient, said Joseph.
NASAA said policymakers can achieve these objectives by applying five core principles of regulatory reform.
- Preserve the system of state/federal collaboration while streamlining where possible.
- Close regulatory gaps by subjecting all financial products and markets to regulation.
- Strengthen standards of conduct, and use “principles” to complement rules, not replace them.
- Improve oversight through better risk assessment and interagency communication.
- Toughen enforcement and shore up private remedies.
NASAA is committed to working with the incoming Congress and Administration as the new financial services regulatory structure unfolds, according to Joseph, adding that NASAA will continue to advocate its position that any change to this structure should not come at the expense of Main Street investor protection, which state securities regulators have provided for nearly 100 years.
NASAA is the oldest international organization devoted to investor protection. Its membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the US Virgin Islands, Canada and Mexico.
NAIC Disappointed with Anti-Consumer Ruling
The National Association of Insurance Commissioners (NAIC), of which DISB is a member, expressed disappointment with the US Securities and Exchange Commission’s (SEC) adoption of Rule 151A on December 17. The move challenges state insurance regulatory oversight. According to NAIC vice president and Iowa Insurance Commissioner Susan Voss, the organization is extremely disappointed by the SEC decision. "State insurance commissioners have taken active steps to protect consumers of equity-indexed annuities — and will continue to do so," she said.
Equity-indexed annuities, as a form of fixed annuities, are currently regulated by state insurance departments. State laws subject the products, the companies and producers selling these products to state insurance regulatory oversight. With adoption of the proposed rule, it is anticipated the SEC could begin regulating indexed annuity products as securities after a two-year transition period. The NAIC said it was “very dismayed the SEC chose to ignore thousands of comment letters opposing this rule." As insurance products, equity-indexed annuities are subject to extensive and ongoing regulatory initiatives taken by insurance regulators and numerous state insurance laws, according to Voss. The states have a demonstrated record of consumer protection, and the NAIC does not believe “this rule is in the best interest of insurance consumers.”
DISB Reminds Auction Rate Securities Investors to Contact Firms About Buyback Offers
State securities regulators continue efforts to provide relief to investors who have had funds frozen in the auction rate securities (ARS) market. DISB recently reminded ARS investors of their redemption opportunities, which were reached as part of the settlements between securities regulators and several prominent Wall Street firms. While some repurchases have been made, many more are to come in the months ahead. Investors should be aware that the offers to repurchase their ARSs will not be available indefinitely. DISB urged investors with questions about the repurchase program to contact the firm from which they originally purchased their auction rate securities.
Those firms and their ARS hotlines are: Bank of America (866) 638-4183, Citi (866) 720-4802, Deutsche Bank (866) 926-1437, Goldman Sachs (888) 350-2857, JP Morgan (866) 450-8470, Merrill Lynch (888)706-1381, Morgan Stanley (800) 566-2273, UBS (800) 253-1974 and Wachovia (866)283-7943.
In settlements reached with state and federal securities regulators, 11 firms have agreed in principle to repurchase more than $50 billion of auction rate securities. In consideration of the settlements, securities regulators agreed to terminate investigations into the marketing and sale of ARS to individual investors. The investigations were part of an ongoing state-led effort to address problems in connection with the offer and sale of ARSs.
DISB Reviewing Consumer Group’s “Fair” Rating of its Website
DISB said recently it is reviewing the “fair” rating its website received from a national consumer group on how it delivers information. The Consumer Federation of America recently rated each state’s insurance department website, finding considerable differences among each regarding information on auto and home insurance provided to consumers, such as rates and practices of individual companies. Twelve states received “good ratings; the District of Columbia was one of 15 to get a rating of “fair” as did Maryland, Pennsylvania and Virginia; and18 states received the worst grade of “inadequate.”
According to DISB Commissioner Thomas E. Hampton, consumer Web sites should be subject to improvements. DISB takes reviews seriously and appreciates feedback from various sources to assist the consumers of the District of Columbia. He stated that DISB will not only look at the insurance information on the website but also the information the agency provides for securities and banking consumers. Only six states were rated “excellent,” according to the study for displaying complete, up-to-date information that is easy for consumers to use. The study found that users of these sites “could easily find current price, complaint and solvency information to make well-informed decisions and could find key information on how to get the best claim settlements as well,” key factors in how the grades were disseminated.
Health Insurance Awareness Month Wraps Up
DISB wrapped up its annual observance of Health Insurance Awareness Month with a new Facebook page that attracted 15 fans. The new page garnered public interest with 68 page-views in a 72-hour cycle since its launch November 7. In November, DISB provided information on choosing the best health options, the available plans in the market, reviewing annual coverage during open enrollment, and health insurance’s frequently asked questions. Members of the community are free to become a fan of DISB’s page.
Renting Homes During Inauguration may Reduce Homeowners Coverage
DISB warned District residents wanting to cash in on the inauguration festivities by renting their homes, that they may not have full insurance coverage. The agency is seeking information from the insurance companies that underwrite homeowners’ insurance on how they will adjudicate any claims emerging from rentals during the inauguration. Some insurance companies may deny claims if the insureds do not notify the insurance companies of risk changes in advance. DISB issued the warning in light of the number of residents seeking to take advantage of the estimated three-to-four million visitors heading to the District for the historic inauguration of President-elect Barack Obama for the weekend of January 17 to January 20, when he will be inaugurated. Recently, DC Mayor Adrian Fenty temporarily suspended business licensing sanctions on homeowners who want to rent to visitors during that time. DISB urged residents to contact their insurance providers to find out what coverage may be allowed with renters in the home.
For more information, residents should call DISB at (202) 727-8000.
Lenders to Seek Better RESPA Rules in 2009
Disappointed with the Department of Housing and Urban Development’s final Real Estate Settlement Procedures Act (RESPA) regulations, mortgage industry participants said they will try working with consumer groups and the Obama administration next year to get a better rule, according to published reports from Inside Regulatory Strategies. Use of both a streamlined good faith estimate and an expanded HUD-1 settlement statement under the new rule will not be required until January 1, 2010. But some provisions will become effective as early as January 2009. Certain industry trade associations said they will use the 12-month period to work with the new administration, regulators, Congress and other stakeholders to get more meaningful RESPA reform that might supercede the final rule issued by HUD November 12. Lender groups were particularly irate at seeing very little change in the GFE form, which had been trimmed down from four to three pages of disclosures of key loan terms and estimated associated costs.
AARP Suspends Sales of UHC-administered fixed-benefit plans
AARP, the advocacy group for older Americans, announced recently that it voluntarily suspended sales of several AARP-branded fixed benefit indemnity plans administered by United Healthcare, pending the completion of a comprehensive review of issues raised by Sen. Charles Grassley (R-Iowa), ranking member in the Senate’s Committee on Finance. The AARP plans came under scrutiny early November when Grassley sent a letter to AARP CEO Bill Novelli demanding answers to dozens of questions about the plans, which cover up to 1 million policyholders nationwide. He said the sales tactics used to sell the products of AARP, the largest membership group for people age 50 and older, could mislead people into believing they have better coverage than they do.
AARP sells the plans, backed by UnitedHealth Group, mainly among people ages 50 to 64. Such plans are dubbed “limited benefit” policies because they set specific limits on how much the plan will pay per day, year or procedure rather than paying a percentage of total costs, as more traditional coverage provides. Such policies are a small but growing segment as they appeal to people on tighter budgets as the premiums are generally lower than more traditional insurance. However, the plans cap what insurers pay toward medical care and have no cap on how much policyholders may owe. AARP also sells other insurance products, including a major medical plan similar to those offered by employers, supplemental Medicare insurance and Medicare drug benefit plans. None of those were part of Grassley’s inquiry.