Short title

This Act may be cited as the

Military Personnel Financial Services Protection Act

Congressional findings

Congress finds the following: (1)Our military personnel perform great sacrifices in protecting our Nation in the War on Terror and promoting democracy abroad. (2)Our brave men and women in uniform deserve to be offered first-rate financial products in order to provide for their families and to save and invest for retirement. (3)Our military personnel are being offered high-cost securities and life insurance products by some financial services companies engaging in abusive and misleading sales practices. (4)One securities product being offered to our service members, the contractual plan, has largely disappeared from the civilian market since the 1980s, due to its excessive sales charges. A 50 percent sales commission is assessed against the first year of contributions, even though the average commission on other securities products such as mutual funds is less than 6 percent on each sale. (5)The excessive sales charges of the contractual plan makes it susceptible to abusive and misleading sales practices. (6)Certain life insurance products being offered to our service members are being improperly marketed as investment products. These products provide very low death benefits for very high premiums that are front-loaded in the first few years, making them completely inappropriate for most military personnel. (7)Regulation of these securities and life insurance products and their sale on military bases has been clearly inadequate and requires Congressional legislation to address.

Prohibition on future sales of periodic payment plans

(a)

Amendment

Section 27 of the Investment Company Act of 1940 (15 U.S.C. 80a–27) is amended by adding at the end the following new subsection:

(j)

Termination of sales

(1)

Termination

Effective 30 days after the date of enactment of the Military Personnel Financial Services Protection Act, it shall be unlawful, subject to subsection (i)— (A)for any registered investment company to issue any periodic payment plan certificate; or (B)for such company, or any depositor of or underwriter for any such company, or any other person, to sell such a certificate. (2)

No invalidation of existing certificates

Paragraph (1) shall not be construed to alter, invalidate, or otherwise affect any rights or obligations, including rights of redemption, under any periodic payment plan certificate issued and sold before 30 days after such date of enactment.

(b)

Technical amendment

Section 27(i)(2)(B) of the Investment Company Act of 1940 (15 U.S.C. 80a–27(i)(2)(B)) is amended by striking section 26(e) each place that term appears and inserting section 26(f). (c)

Report on refunds, sales practices, and revenues from periodic payment plans

Not later than 6 months after the date of enactment of this Act, the Securities and Exchange Commission shall submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate, a report describing— (1)any measures taken by a broker or dealer registered with the Securities and Exchange Commission pursuant to section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) to voluntarily refund payments made by military service members on any periodic payment plan certificate, and the amounts of such refunds; (2)after such consultation with the Secretary of Defense, as the Commission considers appropriate, the sales practices of such brokers or dealers on military installations over the past 5 years and any legislative or regulatory recommendations to improve such practices; and (3)the revenues generated by such brokers or dealers in the sales of periodic payment plan certificates over the past 5 years and what products such brokers or dealers market to replace the revenue generated from the sales of periodic payment plan certificates prohibited under subsection (a).

Method of maintaining broker and dealer registration, disciplinary, and other data

Section 15A(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3(i)) is amended to read as follows:

(i)

Obligation to maintain registration, disciplinary, and other data

(1)

Maintenance of system to respond to inquiries

A registered securities association shall— (A)establish and maintain a system for collecting and retaining registration information; (B)establish and maintain a toll-free telephone listing, and a readily accessible electronic or other process, to receive and promptly respond to inquiries regarding— (i)registration information on its members and their associated persons; and (ii)registration information on the members and their associated persons of any registered national securities exchange that uses the system described in subparagraph (A) for the registration of its members and their associated persons; and (C)adopt rules governing the process for making inquiries and the type, scope, and presentation of information to be provided in response to such inquiries in consultation with any registered national securities exchange providing information pursuant to subparagraph (B)(ii). (2)

Recovery of costs

A registered securities association may charge persons making inquiries described in paragraph (1)(B), other than individual investors, reasonable fees for responses to such inquiries. (3)

Process for disputed information

Each registered securities association shall adopt rules establishing an administrative process for disputing the accuracy of information provided in response to inquiries under this subsection in consultation with any registered national securities exchange providing information pursuant to paragraph (1)(B)(ii). (4)

Limitation on liability

A registered securities association, or an exchange reporting information to such an association, shall not have any liability to any person for any actions taken or omitted in good faith under this subsection. (5)

Definition

For purposes of this subsection, the term registration information means the information reported in connection with the registration or licensing of brokers and dealers and their associated persons, including disciplinary actions, regulatory, judicial, and arbitration proceedings, and other information required by law, or exchange or association rule, and the source and status of such information.

Filing depositories for investment advisers

(a)

Investment advisers

Section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–4) is amended— (1)by striking Every investment and inserting the following:

(a)

In general

Every investment

; and

(2)by adding at the end the following:

(b)

Filing depositories

The Commission may, by rule, require an investment adviser— (1)to file with the Commission any fee, application, report, or notice required to be filed by this title or the rules issued under this title through any entity designated by the Commission for that purpose; and (2)to pay the reasonable costs associated with such filing and the establishment and maintenance of the systems required by subsection (c). (c)

Access to disciplinary and other information

(1)

Maintenance of system to respond to inquiries

The Commission shall require the entity designated by the Commission under subsection (b)(1) to establish and maintain a toll-free telephone listing, or a readily accessible electronic or other process, to receive and promptly respond to inquiries regarding registration information (including disciplinary actions, regulatory, judicial, and arbitration proceedings, and other information required by law or rule to be reported) involving investment advisers and persons associated with investment advisers. (2)

Recovery of costs

An entity designated by the Commission under subsection (b)(1) may charge persons making inquiries, other than individual investors, reasonable fees for responses to inquiries described in paragraph (1). (3)

Limitation on liability

An entity designated by the Commission under subsection (b)(1) shall not have any liability to any person for any actions taken or omitted in good faith under this subsection.

(b)

Conforming amendments

(1)Section 203A of the Investment Advisers Act of 1940 (15 U.S.C. 80b–3a) is amended— (A)by striking subsection (d); and (B)by redesignating subsection (e) as subsection (d). (2)Section 306 of the National Securities Markets Improvement Act of 1996 (15 U.S.C. 80b–10, note) is repealed.

State insurance jurisdiction on military installations

(a)

Clarification of jurisdiction

Any law, regulation, or order of a State with respect to regulating the business of insurance shall apply to insurance activities conducted on Federal land or facilities in the United States and abroad, including military installations, except to the extent that such law, regulation, or order— (1)directly conflicts with any applicable Federal law, regulation, or authorized directive; or (2)would not apply if such activity were conducted on State land. (b)

Primary State jurisdiction

To the extent that multiple State laws would otherwise apply pursuant to subsection (a) to an insurance activity of an individual or entity on Federal land or facilities, the State having the primary duty to regulate such activity and the laws of which shall apply to such activity in the case of a conflict shall be— (1)the State within which the Federal land or facility is located; or (2)if the Federal land or facility is located outside of the United States, the State in which— (A)in the case of an individual engaged in the business of insurance, such individual has been issued a resident license; or (B)in the case of an entity engaged in the business of insurance, such entity is domiciled.

Required development of military personnel protection standards regarding insurance sales

(a)

State standards

Congress intends that— (1)the States collectively work with the Secretary of Defense to ensure implementation of appropriate standards to protect members of the Armed Forces from dishonest and predatory insurance sales practices while on a military installation of the United States (including installations located outside of the United States); and (2)each State identify its role in promoting the standards described in paragraph (1) in a uniform manner, not later than 12 months after the date of enactment of this Act. (b)

State report

It is the sense of Congress that the NAIC should, after consultation with the Secretary of Defense and, not later than 12 months after the date of enactment of this Act, conduct a study to determine the extent to which the States have met the requirement of subsection (a), and report the results of such study to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate.

Required disclosures regarding life insurance

(a)

Requirement

Except as provided in subsection (d), no insurer or producer may sell or solicit, in person, any life insurance product to any member of the Armed Forces on a military installation of the United States, unless a disclosure in accordance with this section is provided to such member before the sale of such insurance. (b)

Disclosure

A disclosure in accordance with this section is a written disclosure that— (1)states that subsidized life insurance may be available to the member of the Armed Forces from the Federal Government; (2)states that the United States Government has in no way sanctioned, recommended, or encouraged the sale of the product being offered; (3)is made in plain and readily understandable language and in a type font at least as large as the font used for the majority of the policy; and (4)with respect to a sale or solicitation on Federal land or facilities located outside of the United States by an individual or entity engaged in the business of insurance, except to the extent otherwise specifically provided by the laws of such State in reference to this Act, lists the address and phone number where consumer complaints are received by the State insurance commissioner for the State in which the individual has been issued a resident license or the entity is domiciled, as applicable. (c)

Enforcement

If it is determined by a State or Federal agency, or in a final court proceeding, that any individual or entity has intentionally failed to provide a disclosure required by this section, such individual or entity shall be prohibited from further engaging in the business of insurance with respect to employees of the Federal Government on Federal land, except— (1)with respect to existing policies; and (2)to the extent required by the Federal Government pursuant to previous commitments. (d)

Exceptions

(1)

Federal and State insurance activity

This section shall not apply to insurance activities— (A)specifically contracted by or through the Federal Government or any State government; or (B)specifically exempted from the applicability of this Act by a Federal or State law, regulation, or order that specifically refers to this paragraph. (2)

Uniform State standards

If a majority of the States have adopted, in materially identical form, a standard setting forth the disclosures required under this section that apply to insurance solicitations and sales to military personnel on military installations of the United States, after the expiration of the 2-year period beginning on the date of such majority adoption, such standard shall apply in lieu of the requirements of this section to all insurance solicitations and sales to military personnel on military installations, with respect to such States, to the extent that such standards do not directly conflict with any applicable authorized Federal regulation or directive. (3)

Materially identical form

For purposes of this subsection, standards adopted by more than one State shall be considered to have materially identical form to the extent that such standards require or prohibit identical conduct with respect to the same activity, notwithstanding that the standards may differ with respect to conduct required or prohibited with respect to other activities.

Improving life insurance product standards

(a)

In general

It is the sense of Congress that the NAIC should, after consultation with the Secretary of Defense, and not later than 12 months after the date of enactment of this Act, conduct a study and submit a report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate on ways of improving the quality of and sale of life insurance products sold by insurers and producers on military installations of the United States, which may include limiting sales authority to companies and producers that are certified as meeting appropriate best practices procedures or creating standards for products specifically designed for members of the Armed Forces regardless of the sales location. (b)

Conditional GAO report

If the NAIC does not submit the report as described in subsection (a), the Comptroller General of the United States shall study any proposals that have been made to improve the quality and sale of life insurance products sold by insurers and producers on military installations of the United States and report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate on such proposals not later than 6 months after the expiration of the period referred to in subsection (a).

10.

Required reporting of disciplined insurance agents

(a)

Reporting by insurers

After the expiration of the 2-year period beginning on the date of enactment of this Act, no insurer may enter into or renew a contractual relationship with a producer that solicits or sells life insurance on military installations of the United States, unless the insurer has implemented a system to report, to the State insurance commissioner of the State of the domicile of the insurer and the State of residence of the insurance producer, disciplinary actions taken against the producer with respect to the producer’s sales or solicitation of insurance on a military installation of the United States, as follows: (1)Any disciplinary action taken by any government entity that the insurer knows has been taken. (2)Any significant disciplinary action taken by the insurer. (b)

Reporting by States

It is the sense of Congress that, not later than 2 years after the date of enactment of this Act, the States should collectively implement a system to— (1)receive reports of disciplinary actions taken against insurance producers by insurers or government entities with respect to the producers’ sale or solicitation of insurance on a military installation; and (2)disseminate such information to all other States and to the Secretary of Defense.

11.

Reporting barred persons selling insurance or securities

(a)

Establishment

The Secretary of Defense shall maintain a list of the name, address, and other appropriate information of persons engaged in the business of securities or insurance that have been barred, banned, or otherwise limited in any manner that is not generally applicable to all such type of persons, from any or all military installations of the United States. (b)

Notice and access

The Secretary of Defense shall ensure that— (1)the appropriate Federal and State agencies responsible for securities and insurance regulation are promptly notified upon the inclusion in or removal from the list required by subsection (a) of a person under such agencies’ jurisdiction; and (2)the list is kept current and easily accessible— (A)for use by such agencies; and (B)for purposes of enforcing or considering any such bar, ban, or limitation by the appropriate Federal personnel, including commanders of military installations. (c)

Regulations

(1)

In general

The Secretary of Defense shall issue regulations in accordance with this subsection to provide for the establishment and maintenance of the list required by this section, including appropriate due process considerations. (2)

Timing

(A)

Proposed regulations

Not later than the expiration of the 60-day period beginning on the date of enactment of this Act, the Secretary of Defense shall prepare and submit to the appropriate Committees a copy of the regulations under this subsection that are proposed to be published for comment. The Secretary may not publish such regulations for comment in the Federal Register until the expiration of the 15-day period beginning on the date of such submission to the appropriate Committees. (B)

Final regulations

Not later than 90 days after the date of enactment of this Act, the Secretary of Defense shall submit to the appropriate Committees a copy of the regulations under this section to be published in final form. (C)

Effective date

Such regulations shall become effective upon the expiration of the 30-day period beginning on the date of such submission to the appropriate Committees. (d)

Definition

For purposes of this section, the term appropriate Committees means— (1)the Committee on Financial Services and the Committee on Armed Services of the House of Representatives; and (2)the Committee on Banking, Housing, and Urban Affairs and the Committee on Armed Services of the Senate.

12.

Sense of Congress

It is the sense of the Congress that the Federal and State agencies responsible for insurance and securities regulation should provide advice to the appropriate Federal entities to consider— (1)significantly increasing the life insurance coverage made available through the Federal Government to members of the Armed Forces; (2)implementing appropriate procedures to encourage members of the Armed Forces to improve their financial literacy objectives; and (3)improving the benefits and matching contributions provided under the Federal Thrift Savings Plan (established under section 8437 of title 5, United States Code) to members of the Armed Forces.

13.

Definitions

For purposes of this Act, the following definitions shall apply: (1)

Entity

The term entity includes insurers. (2)

Individual

The term individual includes insurance agents and producers. (3)

NAIC

The term NAIC means the National Association of Insurance Commissioners. (4)

State insurance commissioner

The term State insurance commissioner means, with respect to a State, the officer, agency, or other entity of the State that has primary regulatory authority over the business of insurance and over any person engaged in the business of insurance, to the extent of such business activities, in such State.

Short title; table of contents

(a)

Short title

This Act may be cited as the

Military Personnel Financial Services Protection Act

. (b)

Table of contents

The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Congressional findings.

Sec. 3. Definitions.

Sec. 4. Prohibition on future sales of periodic payment plans.

Sec. 5. Required disclosures regarding offers or sales of securities on military installations.

Sec. 6. Method of maintaining broker and dealer registration, disciplinary, and other data.

Sec. 7. Filing depositories for investment advisers.

Sec. 8. State insurance and securities jurisdiction on military installations.

Sec. 9. Required development of military personnel protection standards regarding insurance sales.

Sec. 10. Required disclosures regarding life insurance products.

Sec. 11. Improving life insurance product standards.

Sec. 12. Required reporting of disciplinary actions.

Sec. 13. Reporting barred persons selling insurance or securities.

Sec. 14. Study and reports by Inspector General of the Department of Defense.

Congressional findings

Congress finds that— (1)members of the Armed Forces perform great sacrifices in protecting our Nation in the War on Terror; (2)the brave men and women in uniform deserve to be offered first-rate financial products in order to provide for their families and to save and invest for retirement; (3)members of the Armed Forces are being offered high-cost securities and life insurance products by some financial services companies engaging in abusive and misleading sales practices; (4)one securities product offered to service members, known as the mutual fund contractual plan, largely disappeared from the civilian market in the 1980s, due to excessive sales charges; (5)with respect to a mutual fund contractual plan, a 50 percent sales commission is assessed against the first year of contributions, despite an average commission on other securities products of less than 6 percent on each sale; (6)excessive sales charges allow abusive and misleading sales practices in connection with mutual fund contractual plan; (7)certain life insurance products being offered to members of the Armed Forces are improperly marketed as investment products, providing minimal death benefits in exchange for excessive premiums that are front-loaded in the first few years, making them entirely inappropriate for most military personnel; and (8)the need for regulation of the marketing and sale of securities and life insurance products on military bases necessitates Congressional action.

Definitions

For purposes of this Act, the following definitions shall apply: (1)

Life insurance product

(A)

In general

The term life insurance product means any product, including individual and group life insurance, funding agreements, and annuities, that provides insurance for which the probabilities of the duration of human life or the rate of mortality are an element or condition of insurance. (B)

Included insurance

The term life insurance product includes the granting of— (i)endowment benefits; (ii)additional benefits in the event of death by accident or accidental means; (iii)disability income benefits; (iv)additional disability benefits that operate to safeguard the contract from lapse or to provide a special surrender value, or special benefit in the event of total and permanent disability; (v)benefits that provide payment or reimbursement for long-term home health care, or long-term care in a nursing home or other related facility; (vi)burial insurance; and (vii)optional modes of settlement or proceeds of life insurance. (C)

Exclusions

Such term does not include workers compensation insurance, medical indemnity health insurance, or property and casualty insurance. (2)

NAIC

The term NAIC means the National Association of Insurance Commissioners (or any successor thereto).

Prohibition on future sales of periodic payment plans

(a)

Amendment

Section 27 of the Investment Company Act of 1940 (15 U.S.C. 80a–27) is amended by adding at the end the following new subsection:

(j)

Termination of sales

(1)

Termination

No invalidation of existing certificates

(b)

Technical amendment

Section 27(i)(2)(B) of the Investment Company Act of 1940 (15 U.S.C. 80a–27(i)(2)(B)) is amended by striking section 26(e) each place that term appears and inserting section 26(f). (c)

Report on refunds, sales practices, and revenues from periodic payment plans

Not later than 6 months after the date of enactment of this Act, the Securities and Exchange Commission shall submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate, a report describing— (1)any measures taken by a broker or dealer registered with the Securities and Exchange Commission pursuant to section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) to voluntarily refund payments made by military service members on any periodic payment plan certificate, and the amounts of such refunds; (2)after such consultation with the Secretary of Defense, as the Commission considers appropriate, the sales practices of such brokers or dealers on military installations over the 5 years preceding the date of submission of the report and any legislative or regulatory recommendations to improve such practices; and (3)the revenues generated by such brokers or dealers in the sales of periodic payment plan certificates over the 5 years preceding the date of submission of the report, and the products marketed by such brokers or dealers to replace the revenue generated from the sales of periodic payment plan certificates prohibited under subsection (a).

Required disclosures regarding offers or sales of securities on military installations

Section 15A(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3(b)) is amended by inserting immediately after paragraph (13) the following:

(14)The rules of the association include provisions governing the sales, or offers of sales, of securities on the premises of any military installation to any member of the Armed Forces or a dependant thereof, which rules require— (A)the broker or dealer performing brokerage services to clearly and conspicuously disclose to potential investors— (i)that the securities offered are not being offered or provided by the broker or dealer on behalf of the Federal Government, and that its offer is not sanctioned, recommended, or encouraged by the Federal Government; and (ii)the identity of the registered broker-dealer offering the securities; (B)such broker or dealer to perform an appropriate suitability determination, including consideration of costs and knowledge about securities, prior to making a recommendation of a security to a member of the Armed Forces or a dependant thereof; and (C)that no person receive any referral fee or incentive compensation in connection with a sale or offer of sale of securities, unless such person is an associated person of a registered broker or dealer and is qualified pursuant to the rules of a self-regulatory organization.

Method of maintaining broker and dealer registration, disciplinary, and other data

Section 15A(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3(i)) is amended to read as follows:

(i)

Obligation to maintain registration, disciplinary, and other data

(1)

Maintenance of system to respond to inquiries

Recovery of costs

A registered securities association may charge persons making inquiries described in paragraph (1)(B), other than individual investors, reasonable fees for responses to such inquiries. (3)

Process for disputed information

Limitation on liability

Definition

Filing depositories for investment advisers

(a)

Investment advisers

Section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–4) is amended— (1)by striking Every investment and inserting the following:

(a)

In general

Every investment

; and

(2)by adding at the end the following:

(b)

Filing depositories

Access to disciplinary and other information

(1)

Maintenance of system to respond to inquiries

(A)

In general

Applicability

This subsection shall apply to any investment adviser (and the persons associated with that adviser), whether the investment adviser is registered with the Commission under section 203 or regulated solely by a State, as described in section 203A. (2)

Recovery of costs

Limitation on liability

An entity designated by the Commission under subsection (b)(1) shall not have any liability to any person for any actions taken or omitted in good faith under this subsection.

(b)

Conforming amendments

(1)

Investment advisers act of 1940

Section 203A of the Investment Advisers Act of 1940 (15 U.S.C. 80b–3a) is amended— (A)by striking subsection (d); and (B)by redesignating subsection (e) as subsection (d). (2)

National securities markets improvement act of 1996

Section 306 of the National Securities Markets Improvement Act of 1996 (15 U.S.C. 80b–10, note) is repealed.

State insurance and securities jurisdiction on military installations

(a)

Clarification of jurisdiction

Any provision of law, regulation, or order of a State with respect to regulating the business of insurance or securities shall apply to insurance or securities activities conducted on Federal land or facilities in the United States and abroad, including military installations, except to the extent that such law, regulation, or order— (1)directly conflicts with any applicable Federal law, regulation, or authorized directive; or (2)would not apply if such activity were conducted on State land. (b)

Primary State jurisdiction

To the extent that multiple State laws would otherwise apply pursuant to subsection (a) to an insurance or securities activity of an individual or entity on Federal land or facilities, the State having the primary duty to regulate such activity and the laws of which shall apply to such activity in the case of a conflict shall be— (1)the State within which the Federal land or facility is located; or (2)if the Federal land or facility is located outside of the United States, the State in which— (A)in the case of an individual engaged in the business of insurance, such individual has been issued a resident license; (B)in the case of an entity engaged in the business of insurance, such entity is domiciled; (C)in the case of an individual engaged in the offer or sale (or both) of securities, such individual is registered or required to be registered to do business or the person solicited by such individual resides; or (D)in the case of an entity engaged in the offer or sale (or both) of securities, such entity is registered or is required to be registered to do business or the person solicited by such entity resides.

Required development of military personnel protection standards regarding insurance sales; administrative coordination

(a)

State standards

State report

Administrative coordination; sense of congress

It is the sense of the Congress that senior representatives of the Secretary of Defense, the Securities and Exchange Commission, and the NAIC should meet not less frequently than twice a year to coordinate their activities to implement this Act and monitor the enforcement of relevant regulations relating to the sale of financial products on military installations of the United States.

10.

Required disclosures regarding life insurance products

(a)

Requirement

Except as provided in subsection (e), no person may sell, or offer for sale, any life insurance product to any member of the Armed Forces or a dependant thereof on a military installation of the United States, unless a disclosure in accordance with this section is provided to such member or dependent at the time of the sale or offer. (b)

Disclosure

A disclosure in accordance with this section is a written disclosure that— (1)states that subsidized life insurance is available to the member of the Armed Forces from the Federal Government under the Servicemembers' Group Life Insurance program (also referred to as SGLI), under subchapter III of chapter 19 of title 38, United States Code; (2)states the amount of insurance coverage available under the SGLI program, together with the costs to the member of the Armed Forces for such coverage; (3)states that the life insurance product that is the subject of the disclosure is not offered or provided by the Federal Government, and that the Federal Government has in no way sanctioned, recommended, or encouraged the sale of the life insurance product being offered; (4)fully discloses any terms and circumstances under which amounts accumulated in a savings fund or savings feature under the life insurance product that is the subject of the disclosure may be diverted to pay, or reduced to offset, premiums due for continuation of coverage under such product; (5)states that no person has received any referral fee or incentive compensation in connection with the offer or sale of the life insurance product, unless such person is a licensed agent of the person engaged in the business of insurance that is issuing such product; (6)is made in plain and readily understandable language and in a type font at least as large as the font used for the majority of the solicitation material used with respect to or relating to the life insurance product; and (7)with respect to a sale or solicitation on Federal land or facilities located outside of the United States, lists the address and phone number at which consumer complaints are received by the State insurance commissioner for the State having the primary jurisdiction and duty to regulate the sale of such life insurance products pursuant to section 8. (c)

Voidability

The sale of a life insurance product in violation of this section shall be voidable from its inception, at the sole option of the member of the Armed Forces, or dependent thereof, as applicable, to whom the product was sold. (d)

Enforcement

If it is determined by a Federal or State agency, or in a final court proceeding, that any person has intentionally violated, or willfully disregarded the provisions of, this section, in addition to any other penalty under applicable Federal or State law, such person shall be prohibited from further engaging in the business of insurance with respect to employees of the Federal Government on Federal land, except— (1)with respect to existing policies; and (2)to the extent required by the Federal Government pursuant to previous commitments. (e)

Exceptions

This section shall not apply to any life insurance product specifically contracted by or through the Federal Government.

11.

Improving life insurance product standards

(a)

In general

It is the sense of Congress that the NAIC should, after consultation with the Secretary of Defense, and not later than 6 months after the date of enactment of this Act, conduct a study and submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on— (1)ways of improving the quality of and sale of life insurance products sold on military installations of the United States, which may include— (A)limiting such sales authority to persons that are certified as meeting appropriate best practices procedures; and (B)creating standards for products specifically designed to meet the particular needs of members of the Armed Forces, regardless of the sales location; and (2)the extent to which life insurance products marketed to members of the Armed Forces comply with otherwise applicable provisions of State law. (b)

Conditional GAO report

If the NAIC does not submit the report as described in subsection (a), the Comptroller General of the United States shall— (1)study any proposals that have been made to improve the quality of and sale of life insurance products sold on military installations of the United States; and (2)not later than 6 months after the expiration of the period referred to in subsection (a), submit a report on such proposals to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives.

12.

Required reporting of disciplinary actions

(a)

Reporting by insurers

Beginning 1 year after the date of enactment of this Act, no insurer may enter into or renew a contractual relationship with any other person that sells or solicits the sale of any life insurance product on any military installation of the United States, unless the insurer has implemented a system to report to the State insurance commissioner of the State of domicile of the insurer and the State of residence of that other person— (1)any disciplinary action taken by any Federal or State government entity with respect to sales or solicitations of life insurance products on a military installation that the insurer knows, or in the exercise of due diligence should have known, to have been taken; and (2)any significant disciplinary action taken by the insurer with respect to sales or solicitations of life insurance products on a military installation of the United States. (b)

Reporting by States

It is the sense of Congress that, not later than 1 year after the date of enactment of this Act, the States should collectively implement a system to— (1)receive reports of disciplinary actions taken against persons that sell or solicit the sale of any life insurance product on any military installation of the United States by insurers or Federal or State government entities with respect to such sales or solicitations; and (2)disseminate such information to all other States and to the Secretary of Defense. (c)

Definition

As used in this section, the term insurer means a person engaged in the business of insurance.

13.

Reporting barred persons selling insurance or securities

(a)

Establishment

The Secretary of Defense shall maintain a list of the name, address, and other appropriate information relating to persons engaged in the business of securities or insurance that have been barred or otherwise limited in any manner that is not generally applicable to all such type of persons, from any or all military installations of the United States, or that have engaged in any transaction that is prohibited by this Act. (b)

Notice and access

The Secretary of Defense shall ensure that— (1)the appropriate Federal and State agencies responsible for securities and insurance regulation are promptly notified upon the inclusion in or removal from the list required by subsection (a) of a person under the jurisdiction of one or more of such agencies; and (2)the list is kept current and easily accessible— (A)for use by such agencies; and (B)for purposes of enforcing or considering any such bar or limitation by the appropriate Federal personnel, including commanders of military installations. (c)

Regulations

(1)

In general

Timing

(A)

Proposed regulations

Not later than the expiration of the 60-day period beginning on the date of enactment of this Act, the Secretary of Defense shall prepare and submit to the appropriate Committees of Congress a copy of the regulations required by this subsection that are proposed to be published for comment. The Secretary may not publish such regulations for comment in the Federal Register until the expiration of the 15-day period beginning on the date of such submission to the appropriate Committees of Congress. (B)

Final regulations

Not later than 90 days after the date of enactment of this Act, the Secretary of Defense shall submit to the appropriate Committees of Congress a copy of the regulations under this section to be published in final form. (C)

Effective date

Final regulations under this paragraph shall become effective 30 days after the date of their submission to the appropriate Committees of Congress under subparagraph (B). (d)

Definition

For purposes of this section, the term appropriate Committees of Congress means— (1)the Committee on Financial Services and the Committee on Armed Services of the House of Representatives; and (2)the Committee on Banking, Housing, and Urban Affairs and the Committee on Armed Services of the Senate.

14.

Study and reports by Inspector General of the Department of Defense

(a)

Study

The Inspector General of the Department of Defense shall conduct a study on the impact of Department of Defense Instruction 1344.07 (as in effect on the date of enactment of this Act) and the reforms included in this Act on the quality and suitability of sales of securities and insurance products marketed or otherwise offered to members of the Armed Forces. (b)

Reports

Not later than 12 months after the date of enactment of this Act, the Inspector General of the Department of Defense shall submit an initial report on the results of the study conducted under subsection (a) to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives, and shall submit followup reports to those committees on December 31, 2008 and December 31, 2010.

July 13, 2006

Reported with an amendment