II 110th CONGRESS 2d Session S. 2794 IN THE SENATE OF THE UNITED STATES April 1 (legislative day, March 13), 2008 Mr. Kohl (for himself and Mr. Vitter) introduced the following bill; which was read twice and referred to the Committee on the Judiciary A BILL To protect older Americans from misleading and fraudulent marketing practices, with the goal of increasing retirement security.

1.

Short title

This Act may be cited as the Senior Investor Protection Act of 2008.

2.

Findings

Congress finds that— (1)many seniors are targeted by salespersons and advisers using misleading certifications and professional designations; (2)many certifications and professional designations used by salespersons and advisers represent limited training or expertise, and may in fact be of no value with respect to advising seniors on financial and estate planning matters, and far too often, such designations are obtained simply by attending a weekend seminar and passing an open book, multiple choice test; (3)many seniors have lost their life savings because salespersons and advisers holding a misleading designation have steered them toward products that were unsuitable for them, given their retirement needs and life expectancies; (4)seniors have a right to clearly know whether they are working with a qualified adviser who understands the products and is working in their best interest or a self-interested salesperson or adviser advocating particular products; and (5)many existing State laws and enforcement measures addressing the use of certifications, professional designations, and suitability standards in selling financial products to seniors are inadequate to protect senior investors from salespersons and advisers using such designations.

3.

Grants to States for enhanced protection of seniors from being mislead by false designations

(a)

Definitions

As used in this Act— (1)the term misleading designation— (A)means the use of a purported certification, professional designation, or other credential, that indicates or implies that a salesperson or adviser has special certification or training in advising or servicing seniors; and (B)does not include any legitimate certification, professional designation, license, or other credential, if— (i)it has been offered by an academic institution having regional accreditation; or (ii)it meets the standards for certifications, licenses, and professional designations outlined by the North American Securities Administrators Association (in this Act referred to as the NASAA) Model Rule on the Use of Senior-Specific Certifications and Professional Designations, or it was issued by or obtained from any State; (2)the term financial product means securities, insurance products (including insurance products which pay a return, whether fixed or variable), and bank and loan products; (3)the term misleading or fraudulent marketing means the use of a misleading designation in selling or advising a senior in the sale of a financial product; (4)the term senior means any individual who has attained the age of 62 or older; and (5)the term State means each of the 50 States, the District of Columbia, and the unincorporated territories of Puerto Rico and the U.S. Virgin Islands. (b)

Grant program

The Attorney General of the United States (in this section referred to as the Attorney General)— (1)shall establish a program in accordance with this section to provide grants to States— (A)to investigate and prosecute misleading and fraudulent marketing practices; or (B)to develop educational materials and training aimed at reducing misleading and fraudulent marketing of financial products toward seniors; and (2)may establish such performance objectives, reporting requirements, and application procedures for States and State agencies receiving grants under this section as the Attorney General determines are necessary to carry out and assess the effectiveness of the program under this section. (c)

Use of grant amounts

A grant under this section may be used (including through subgrants) by the State or the appropriate State agency designated by the State— (1)to fund additional staff to identify, investigate, and prosecute cases involving misleading or fraudulent marketing of financial products to seniors; (2)to fund technology, equipment, and training for regulators, prosecutors, and law enforcement in order to identify salespersons and advisers who target seniors through the use of misleading designations; (3)to fund technology, equipment, and training for prosecutors to increase the successful prosecution of those targeting seniors with the use of misleading designations; (4)to provide educational materials and training to regulators on the appropriateness of the use of designations by salespersons and advisers of financial products; (5)to provide educational materials and training to seniors to increase their awareness and understanding of designations; (6)to develop comprehensive plans to combat misleading or fraudulent marketing of financial products to seniors; and (7)to enhance provisions of State law that could offer additional protection for seniors against misleading or fraudulent marketing of financial products. (d)

Grant requirements

(1)

Maximum

The amount of a grant under this section may not exceed $500,000 per fiscal year per State, if all requirements of paragraphs (2), (3), (4), and (5) are met. Such amount shall be limited to $100,000 per fiscal year per State in any case in which the State meets the requirements of— (A)paragraphs (2) and (3), but not each of paragraphs (4) and (5); or (B)paragraphs (4) and (5), but not each of paragraphs (2) and (3). (2)

Standard designation rules for securities

A State shall have adopted rules on the appropriate use of designations in the offer or sale of securities or investment advice, which shall, to the extent practicable, conform to the minimum requirements of the NASAA Model Rule on the Use of Senior-Specific Certifications and Professional Designations, as in effect on the date of enactment of this Act, or any successor thereto, as determined by the Attorney General. (3)

Suitability rules for securities

A State shall have adopted standard rules on the suitability requirements in the sale of securities, which shall, to the extent practicable, conform to the minimum requirements on suitability imposed by self-regulatory organization rules under the securities laws (as defined in section 3 of the Securities Exchange Act of 1934), as determined by the Attorney General. (4)

Standard designation rules for insurance products

(A)

In general

A State shall have adopted standard rules on the appropriate use of designations in the sale of insurance products, which shall, to the extent practicable, conform to the minimum requirements of the NASAA Model Rule on the Use of Senior-Specific Certifications and Professional Designations, as in effect on the date of enactment of this Act, or any successor thereto, as determined by the Attorney General. (B)

Sense of congress

It is the sense of the Congress that the National Association of Insurance Commissioners (in this section referred to as the NAIC) should work in conjunction with NASAA in establishing a single set of regulations regarding the use of certifications and designations with which all insurance agents and financial advisers should comply. (5)

Suitability rules for insurance products

A State shall have adopted suitability standards for the sale of annuity products, under which, at a minimum (as determined by the Attorney General)— (A)insurers shall be responsible and liable for ensuring that sales of their annuity products meet their suitability requirements; (B)insurers shall have an obligation to ensure that the prospective senior purchaser has sufficient information for making an informed decision about a purchase of an annuity product; (C)the prospective senior purchaser shall be informed of the total fees, costs, and commissions associated with establishing the annuity transaction, as well as the total fees, costs, commissions, and penalties associated with the termination of the transaction or agreement; and (D)insurers and their agents are prohibited from recommending the sale of an annuity product to a senior, if the agent fails to obtain sufficient information in order to satisfy the insurer and the agent that the transaction is suitable for the senior. (e)

Application

To be eligible for a grant under this section, the State or appropriate State agency shall submit to the Attorney General a proposal to use the grant money to protect seniors from misleading or fraudulent marketing techniques in the offer and sale of financial products, which application shall— (1)identify the scope of the problem; (2)describe how the proposed program will help to protect seniors from misleading or fraudulent marketing in the sale of financial products, including, at a minimum— (A)by proactively identifying senior victims of misleading and fraudulent marketing in the offer and sale of financial products; (B)how the proposed program can assist in the investigation and prosecution of those using misleading or fraudulent marketing in the offer and sale of financial products to seniors; and (C)how the proposed program can help discourage and reduce future cases of misleading or fraudulent marketing in the offer and sale of financial products to seniors; and (3)describe how the proposed program is to be integrated with other existing State efforts. (f)

Length of participation

A State receiving a grant under this section shall be provided assistance funds for a period of 3 years, after which the State may reapply for additional funding. (g)

Authorization of appropriations

There are authorized to be appropriated to carry out this section $8,000,000 for each of the fiscal years 2009 through 2013.