WASHINGTON – Tensions ran high during a general session at the Regulatory Affairs Conference here, sponsored by the National Association for Variable Annuities.

At issue was the question of whether state securities commissions should assume regulatory oversight of the sale of variable annuities. Currently, VAs are regulated by state insurance departments, the Securities and Exchange Commission and the National Association of Securities Dealers.

The North American Securities Administrators Association is proposing that state securities commissions also have the option of regulating the sale of variable annuities and variable life insurance. Product registration would remain the purview of state insurance commissioners and the SEC.

State securities departments already oversee the sale of mutual funds, argued David Brant, chair of the Variable Annuities Project Group at the NASAA, which is sponsoring the move. Brant, also securities commissioner of Kansas, said he saw 23 consumer complaints regarding VA sales brought to his department last year.

Part of the problem, he explained, is that even agents whose state securities license is revoked can continue to sell VAs. Allowing the state securities department to have a hand in regulation adds more safety valves for consumers and little additional cost, he said.

"We suggest it’s not a new fee or a new burden because most of these agents are already registered with the state securities commission," Brant said.

The idea is to share regulatory efforts, not duplicate them, he continued. The NASD supported the NASAA letter on the basis that variable products should receive the same regulatory attention as mutual funds and securities, which are overseen by both the NASD and state securities departments.

However, many within the industry feel that the existing regulatory structure is adequate to protect investors. "By and large, we don’t see any regulatory gap," said David Gates, VP at BMA, explaining that one of three regulators is always able to handle cases.

"The gap is if the NASD does not have the staff to deal with the problem," Brant countered. "They do not have the resources to handle everything."

If that were the case, Gates suggested that the NASD staff should be bolstered, rather than adding a new regulatory for variable products.

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