SEC Eying Effects Of Heightened Competitiveness In VA Market

Further, "decreasing revenues often result in cost-cutting measures, sometimes at the expense of a firms legal compliance program."

A lot of companies are "out there" trying to do the right thing, he allowed, noting that the SEC staff does see this.

"However, in these increasingly competitive times, it is a challenge to keep doing the right thing when an aggressive competition engages in conduct that may be on or over the line."

His message: "I think that it is imperative that participants in this industry not let a competitive environment spur a race to the bottom. And I can assure you that, one way or another, those crossing the line come to the attention of regulators."

Later, Roye broadened his message to include insurance agents.

"While most insurance agents are law-abiding professionals," he said, "a growing number are becoming involved with fraudulent schemes involving promissory notes, pay phone and ATM scams, and viatical settlements." Investor losses in some of these activities have totaled more than $2 billion in the past five years, he said.

To curb these schemes, the SEC has taken some formal actions, and state securities regulators have recently taken enforcement actions against more than 1,100 insurance agents, Roye indicated.

The variable products industry cant afford to be tarnished in this manner, he insisted.

"I encourage each of your companies to seek the high ground when it comes to product design and features, fee levels, the marketing and sales of your products, and the training of those selling your products.

"Maintaining high standards in these areas will result in recognized value for your customers, maintain their trust, and minimize your companys litigation and enforcement risks."

In other remarks, Roye recounted numerous VA issues that are "high on our radar screen." These include: the increase in variable contract exchanges; the rise of VA asset retention programs; the increasing requests to substitute one underlying variable product fund for another; the growth in unbundled VA product filings; and more. (See www.sec.gov/news/speech/spch501.htm for details.)

Reproduced from National Underwriter Life & Health/Financial Services Edition, July 13, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Copyright 2001 by The National Underwriter Company. All rights reserved. Contact Webmaster