[Congressional Record Volume 152, Number 118 (Wednesday, September 20, 2006)]
[House]
[Pages H6786-H6793]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          MILITARY PERSONNEL FINANCIAL SERVICES PROTECTION ACT

  Mr. DAVIS of Kentucky. Mr. Speaker, I move to suspend the rules and 
pass the Senate bill (S. 418) to protect members of the Armed Forces 
from unscrupulous practices regarding sales of insurance, financial, 
and investment products.
  The Clerk read as follows:

                                 S. 418

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. 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; administrative coordination.
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.

     SEC. 2. 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;

[[Page H6787]]

       (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.

     SEC. 3. 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).

     SEC. 4. 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 
     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).

     SEC. 5. 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 dependent 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 dependent 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.''.

     SEC. 6. 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.''.

     SEC. 7. 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.--
       ``(A) In general.--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

[[Page H6788]]

     and persons associated with investment advisers.
       ``(B) 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.--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) 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.

     SEC. 8. 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.

     SEC. 9. REQUIRED DEVELOPMENT OF MILITARY PERSONNEL PROTECTION 
                   STANDARDS REGARDING INSURANCE SALES; 
                   ADMINISTRATIVE COORDINATION.

       (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.
       (c) 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.

     SEC. 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 dependent 
     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.

     SEC. 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.

     SEC. 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

[[Page H6789]]

     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.

     SEC. 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.--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 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.

     SEC. 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.

  The SPEAKER pro tempore (Mr. Bonner). Pursuant to the rule, the 
gentleman from Kentucky (Mr. Davis) and the gentleman from Georgia (Mr. 
Scott) each will control 20 minutes.
  The Chair recognizes the gentleman from Kentucky.


                             General Leave

  Mr. DAVIS of Kentucky. Mr. Speaker, I ask unanimous consent that all 
Members may have 5 legislative days within which to revise and extend 
their remarks on this legislation and insert extraneous material 
thereon.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Kentucky?
  There was no objection.
  Mr. DAVIS of Kentucky. Mr. Speaker, I yield myself such time as I may 
consume but first would like to recognize the distinguished chairman of 
the Financial Services Committee, Mr. Oxley of Ohio.
  Mr. OXLEY. Mr. Speaker, I rise in support of S. 418, the Military 
Personnel Financial Services Protection Act, which protects the men and 
women serving in our Nation's military from deceptive financial 
practices and unsuitable financial products.
  I want to pay a particular tribute to the sponsor of the House 
legislation that came through the Financial Services Committee. This 
bill that we have before us is almost identical to the bill that passed 
out of our committee. Mr. Davis, a veteran and West Point graduate, led 
the way in protecting our military men and women on this issue early 
last year. Early last year he secured a bipartisan voice vote in 
committee and a resounding 405-2 bipartisan victory in the House.
  Congratulations also go to former Congressman Max Burns of Georgia 
who led the charge protecting our military personnel in the 108th 
Congress.

                              {time}  1615

  We are pleased with giving the Senate credit for their bill number if 
we get to enact the protections for our military as envisioned by Mr. 
Davis and Max Burns.
  Mr. Speaker, since the tragic day of September 11, 2001, our country 
has been at war with terrorism around the world. In the prosecution of 
that war, our armed services have performed heroically. Many have made 
the ultimate sacrifice for the cause of freedom, and all have worried 
about the safety and security of their loved ones as they leave to 
serve our country.
  Unfortunately, there are a few bad actors in the financial services 
industry who have been taking financial advantage of our soldiers. 
These unscrupulous companies and their sales teams infiltrate our 
military installations and use aggressive, misleading, and often 
illegal sales tactics to sell high-cost products of dubious value that 
are unsuitable for any investor, and are particularly unsuitable for 
most military personnel.
  The Pentagon has issued directives intended to prevent these abuses. 
But with the ongoing confusion over regulatory jurisdiction, the lack 
of communication among government agencies, and the lack of sufficient 
investor protection standards for certain financial products, it is 
clear that our military personnel can never be adequately protected 
unless Congress enacts this bill.
  The Davis bill bans bad financial products and coercive sales 
practices on military bases, including obscure and high-cost 
``contractual plans.'' It clarifies the regulatory jurisdiction on 
military installations within the U.S. and abroad, adds appropriate 
consumer protections and disclosures for financial products sold on 
military bases, and ensures proper reporting systems between our 
military and the financial regulators to catch bad actors before they 
can do more harm.
  It also makes the process of selecting a financial adviser more 
transparent for all investors by providing online access to background 
information on broker-dealers, including disciplinary actions. This 
last provision was taken from legislation introduced by the gentleman 
from Arizona (Mr. Shadegg) that passed the House in April 2005.
  The overwhelmingly bipartisan support for this bill within Congress 
and the military is the result of strong leadership by the gentleman 
from Kentucky (Mr. Davis) as well as former Member Max Burns, as well 
as the chairman of the Subcommittee on Capital Markets, Mr. Baker, who 
led our committee's investigation into abusive practices and bad 
products, Congressman Jim Ryun and Congressman Steve Israel. Mr. Ryun 
and Mr. Israel worked closely together on the reporting requirements of 
this bill, and the gentlewoman from Florida (Ms. Ginny Brown-Waite) for 
ensuring appropriate SEC review of broker-dealer sales practices on 
military installations.
  Their hard work and passion for protecting our military personnel is 
well reflected on this legislation. I urge my colleagues in the full 
House to vote ``yes'' on S. 418.
  Mr. DAVIS of Kentucky. Mr. Speaker, I reserve the balance of my time.

[[Page H6790]]

  Mr. SCOTT of Georgia. Mr. Speaker, I yield myself such time as I may 
consume.
  First, let me extend my deep appreciation and thanks to our 
distinguished chairman, Chairman Oxley of Ohio. As many of us know, 
Chairman Oxley will be leaving us and I want to take this opportunity 
to recognize what an outstanding chairman you have been to our 
Committee on Financial Services. It has been a pleasure serving with 
you, and you have been an outstanding chairman.
  It is also a pleasure to stand here as I represent our ranking 
member, the gentleman from Massachusetts (Mr. Frank), who has provided 
outstanding leadership on our Financial Services Committee, and has led 
the way for this to be a strong bipartisan effort, to Mr. Davis of 
Kentucky. Certainly it is a pleasure to work with you on this measure.
  I think this is a very important bill because of the timeliness of 
it, especially with so many of our military men and women in harm's way 
overseas, especially in Iraq and Afghanistan, that we put forward a 
measure designed to help protect their financial security.
  Senate 418, the Military Personnel Financial Services Protection Act, 
the measure before us today, will address some serious problems of 
predatory lending and financial abuse targeted at our military men and 
women.
  In 2004, the New York Times ran a series of very good stories which 
detailed misleading sales practices of financial products to members of 
the military. A few unscrupulous agents had made misleading pitches to 
captive audiences by posing as counselors on veterans benefits, and 
they solicited soldiers while on duty.
  This issue is important to me, as it is to all of us in this 
Congress, but especially to me and those of us from Georgia, because so 
many of these reported scams occurred at Fort Benning in my State of 
Georgia.
  So I joined with my colleagues on the Financial Services Committee 
and we held hearings to investigate these predatory and abusive lending 
practices, and then we went to work on finding legislative remedies.
  This legislation that we worked on is very similar to Senate 418. Our 
legislation was passed by a large majority in the House, but was not 
brought up for action on the Senate floor until recently. What we have 
before us as Senate 418 represents the final bipartisan and bicameral 
product in addressing these important issues. This is indeed the work 
of the House and the Senate.
  What S. 418 will do, it will ban all future sales of periodic payment 
plans. It will require greater regulation of insurance sales on 
military bases. It will require the Department of Defense to create a 
registry of agents who are prohibited from selling financial policies 
on bases, and it will expand investor access to registration 
information for brokers, for dealers and advisers.
  I would like to give just a little more detail about a few of the 
protections afforded our military personnel in this measure. Senate 418 
will give State insurance regulators jurisdiction over insurance sales 
on Federal facilities and bases within the United States as well as 
abroad. Many of the abuses that occurred on bases continued because of 
confusion about regulatory jurisdiction, and especially at overseas 
bases. This bill resolves that. This provision clears up that concern.
  Also my colleague, the gentleman from New York (Mr. Israel), authored 
a provision contained in section 13 of this measure. This provision 
requires the Secretary of Defense to notify the appropriate State 
regulators when an insurance agent or financial adviser is added or 
deleted from a registry of agents or advisers banned from military 
bases. This provision will prevent unscrupulous sales agents from 
moving to other jurisdictions to avoid detection.
  Further, insurance companies could not sell or solicit policies to 
military personnel on a base without first providing clear written 
notice that federally subsidized life insurance is available through 
the Federal Government, and that the sale of the private plan is not 
sanctioned or recommended by the government.
  To ensure our servicemembers are capable of addressing their 
financial needs, we must first provide them with adequate compensation. 
At the same time, we must help our soldiers exercise financial 
responsibility. It is necessary that military personnel have financial 
literacy, something that I have worked very hard on since my first day 
arriving in Congress. These individuals can face financial questions 
from Internet-based sales, from sales off base, and from being faced 
with decisions in the civilian world. As we know, predatory sales 
practices are not limited to the base.
  Our military folks have enough to worry about. They constantly live 
in a life-and-death situation. They certainly do not need these added 
financial insecurity pressures that are placed upon them by predatory 
lenders and financial abusers.
  Mr. Speaker, I reserve the balance of my time.
  Mr. DAVIS of Kentucky. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I want to commend the work of the gentleman from Georgia 
on this important issue which affects so many of our men and women in 
uniform.
  I rise today in support of S. 418, the Military Personnel Financial 
Services Protection Act. First, let me thank Senators Enzi and Clinton 
for sponsoring the Senate companion to my bill, H.R. 458, which passed 
the House last year by a vote of 405-2.
  This important legislation will protect our troops from certain 
insurance and investment products, and in particular, the contractual 
plan.
  Contractual plans have virtually disappeared from the civilian market 
due to excessive sales charges, but sales persist among servicemembers 
and their families, who are often new to managing finances and unaware 
that there are alternative or more cost-effective opportunities out 
there. The hallmark of the deceptively expensive plans are front-loaded 
commission fees of up to 50 percent. S. 418 prohibits the sales of 
these predatory investment products.
  Unfortunately, there are some bad actors still out there in the 
insurance and securities industry that have been taking advantage of 
military personnel by marketing these questionable products.
  Mr. Speaker, I understand firsthand the sales tactics used by these 
companies on our soldiers. As a young officer in the Army, a group of 
salesmen showed up on my post and convinced me and my fellow soldiers 
to purchase a contractual plan. I fell for the sales pitch for this 
contractual plan because the company made it appear as though they were 
part of the Armed Forces family, and the salesman, a respected military 
veteran, was somebody I thought I could trust because of his record in 
the military. That trust was betrayed simply because of our ignorance.
  What we discovered as time went by was that there were tremendous 
other options out there; and that many, many service personnel were 
losing tens of thousands of dollars that could have gone directly into 
investment products that were available in the commercial world.
  I invested what was a lot of money to me at the time, not because I 
was a financial expert, I was a combat arms officer, but because a 
retired servicemember was working as a salesman and was pushing a 
product with the referral of other veterans. It was not until I got out 
of the Army and into the business world that I discovered how 
uncompetitive these products were when compared to other investment 
opportunities. However, it was too late. My wife and I lost nearly half 
our life savings on this so-called investment.
  S. 418 also addresses the sale of life insurance to servicemembers. 
The bill requires life insurance companies to provide written 
disclosures that, among other disclosures, state that subsidized life 
insurance is available through the Servicemembers' Group Life Insurance 
Program and fully disclose the terms of the agreement and any savings 
feature of the product. The disclosure must be in plain and readily 
understandable language and in a normal type font.
  Additionally, I would like to state I am disappointed that the Senate 
removed the qualifying words ``in person'' from the requirements 
provision of section 10 on disclosures regarding life insurance 
products. I have concerns that this could prevent certain well-
respected life insurance companies from

[[Page H6791]]

continuing to do business the way they have for many years, which 
enables the issuing of insurance in a timely manner to servicemembers 
who are often about to be deployed or go into combat.
  I plan to continue monitoring the status of this issue, and I will 
pursue legislative options in the future should my concern manifest 
itself.
  Regulation of these types of insurance and investment products on 
military bases has clearly been inadequate to this point. The situation 
required congressional action to address the situation and protect our 
servicemembers.
  I applaud my colleagues in the Senate for moving forward with S. 418, 
and I appreciate the leadership of the House for bringing it to the 
floor for a vote.
  I would encourage the Department of Defense to continue with its 
efforts to improve financial literacy of our troops. I cannot emphasize 
strongly enough how I agree with my colleague from Georgia on the 
importance of teaching our young soldiers, sailors, airmen and marines 
about the opportunities that they have and the benefits they can accrue 
from taking wise counsel and go for sure and certain return on their 
investment while they are serving this Nation.
  However, we as a Congress cannot allow these abusive sales practices 
to continue. We must not ask the men and women of our armed services to 
make sacrifices for our security without doing all we can to protect 
their financial futures. They are laying their lives on the line and 
putting their families under tremendous stresses and pressures right 
now. The last thing we must permit to take place is predatory sales 
practices upon these soldiers while they are getting ready to deploy 
and weigh these serious life decisions without proper information. 
Working together, we will solve this problem.
  Thank you again to Senators Enzi and Clinton for sponsoring the 
Senate version of my bill, H.R. 458, and to Chairman Baker and Chairman 
Oxley for their diligent examination of this issue in the House 
Financial Services Committee.
  I also want to emphasize that this has truly been a bipartisan effort 
working together on a compromise that never weakened the provisions but 
actually made a stronger bill in the long run, particularly with the 
House version that came out last year.
  I thank the ranking member, Mr. Frank, and Chairman Oxley for their 
leadership and the example they set for every committee in the House of 
Representatives on working together in a bipartisan manner to craft 
legislation that benefits the American people.
  The gentleman from Georgia (Mr. Scott), the gentleman from New York 
(Mr. Israel), the gentleman from Kansas (Mr. Ryun), the gentleman from 
Pennyslvania (Mr. Fitzpatrick), and the gentlewoman from Florida (Ms. 
Ginny Brown-Waite) have all been integral to this dialogue to offer key 
provisions and key counsel to strengthen this bill.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SCOTT of Georgia. Mr. Speaker, I yield 4 minutes to the 
distinguished gentleman who has long championed the military, and on 
this issue has been at the forefront in providing great leadership on 
this issue, protecting our military from financial abuses, and that is 
the gentleman from North Dakota (Mr. Pomeroy).

                              {time}  1630

  Mr. POMEROY. Mr. Speaker, I thank my friend for yielding.
  In a prior life I used to be a State insurance commissioner, and I 
want to tell you how completely disgusted I am that there are still 
companies and agents that would prey upon the young men and women that 
are serving our country, in many instances young soldiers preparing for 
deployment to Iraq. Seizing this incredibly sensitive and exposed 
period in their lives, they use every trick in the book to load them up 
with coverages that are inappropriately priced, may well be ill-matched 
to the financial needs of the soldier, and they do it all for one lousy 
reason, personal profiteering, profiteering on those who would 
literally put their lives on the line to protect our freedoms. That is 
about as low as you can get.
  And I very much appreciate the debate that we have had here. 
Congressman Davis, you related your own story about how, as a young 
soldier, you had some respected veteran peddling a product from a 
company that just fills the sales materials with flags and banners. 
This is just so wrong.
  Frankly, I am disappointed that the State insurance commissioners 
have allowed this to go as far as they have. Maybe there was some 
confusion about what their regulatory enforcements could be relative to 
proximity to Air Force or Army bases. I don't understand. I believe 
more could have been done at the State regulatory level, and I hope 
this represents a good swift kick in the behind to any enforcement 
official looking at predatory lending practices.
  This is a clear bipartisan statement from Congress that we don't 
countenance this at all, and we want to crack heads on anybody engaged 
in this kind of activity.
  I also want us to note there is more to do. Both sides of the aisle 
have so well expressed our need for financial literacy. Let me just 
give you exhibit A in terms of why we need it so badly. Right outside 
the base gates, payday loans, predatory lending shops, not addressed in 
this bill, unfortunately, and still a matter we need to look at because 
soldiers, often young, trying to make it on pretty skinny checks, fall 
prey to these predatory lending practices of the payday lenders.
  And I want to send a signal to this industry: We see what you are 
doing. We hate it, and we are going to try to figure out how we address 
those payday loan practices, the predatory lending practices. Surely 
any reputable lender, any major bank that would engage in a surcharge 
lending practice for the subprime market of military bases is wrong. We 
will not accept this surcharge on the subprime market of young 
soldiers, and we intend to expose and we intend to further and fully 
discuss these practices. So if you don't want to see your names in the 
paper relative to ripping off our soldiers, quit those payday loan 
practices. We are coming after you next. Agents, insurance companies, 
we are getting you with this legislation, but the subprime market is 
coming next. Don't make any mistake about it.
  I thank the sponsors of this legislation.
  Mr. DAVIS of Kentucky. Mr. Speaker, I yield myself such time as I may 
consume.
  I want to echo some comments that were made by Mr. Pomeroy. Our title 
II language of the original House bill directly addressed the predatory 
lending issue, and we were disappointed, many of us, that that language 
was removed from the Senate version. However, I believe that there will 
be good news in the defense authorization. We have worked very 
tirelessly over the past couple of weeks, and I am serving as a 
conferee on the joint House/Senate committee, and I believe that we are 
going to have some very strong language to begin to address this issue, 
to control the fees and the percentage rates and ultimately to dissuade 
our young soldiers, sailors, and airmen from participating in these 
processes that take advantage of them financially.
  One thing that I would like to point out is an aspect of my own story 
and the nature of this behind the bill. I remember experiencing the 
invitation to the steak dinner at a meeting hall where many soldiers 
came out to hear a presentation about how much money they could 
possibly make by joining these programs, and the importance of 
insurance and how that was going to help, and how one salesperson asked 
my wife if she would feel safe on the amount of insurance that she had 
from the servicemen's group life program at that time. She even won a 
$50 lucky drawing during that. And it wasn't until several years later 
that we realized that we had based our trust on a false premise and had 
purchased a product that we didn't need.
  One of the great things in America is the equalizing capability of 
the American people, that every person has a say with votes, that we 
can pursue goals and opportunities, and as the old saying goes, ``What 
goes around comes around.'' I remember sitting as a new Member in the 
House of Representative when the then CEO of that very company was 
sitting across from my desk

[[Page H6792]]

wanting us to not bring H.R. 458, the Military Personnel Financial 
Services Protection Act, to the floor. And having lived that, and 
knowing the concern of the other Members on the committee, we are very 
pleased to take this first step as we are addressing many steps in 
protecting our servicemembers and also enhancing their financial 
literacy.
  With that, I want to commend both sides for having worked together. I 
thank the gentleman from Georgia especially for his long-time interest 
in this. And I want to say a special note to outgoing Financial 
Services Committee Chairman Mike Oxley. I believe that he has set a 
stellar example of leadership in his tenure. He has been a mentor to me 
and other members of the committee. What he has shown is that we can 
work in a spirit of comity and comedy, that we can have fun as we deal 
with very, very serious issues. He always kept the vision, the end 
goal, in sight that we were working toward to keep things in 
perspective so that when the pressures of the time or the fatigue of 
the long days might move emotions in a different direction, he was 
always there to keep us pointed towards that end goal as we run that 
race to have good financial services legislation like this bill that we 
have today.
  Mr. Speaker, I yield back the balance of my time
  Mr. SCOTT of Georgia. Mr. Speaker, I yield myself such time as I may 
consume.
  I just want to extend my feelings of great appreciation to Mr. Davis 
from Kentucky, the distinguished gentleman, who has truly provided the 
leadership on this bill. And you could tell from his eloquent 
statements earlier of his own experience in this issue that really 
clearly points to why we need this bill.
  And I thank you, and it has been a pleasure working with you on this, 
Mr. Davis.
  I again want to echo when he said about the chairman. I am very 
fortunate on this committee to have two mentors, Democrat and 
Republican. And as a Democrat, I am not ashamed to say one of my 
mentors is a Republican, and that is Oxley. Chairman Oxley. I call him 
``Oxley.'' On top of everything else, he is a great baseball man. And, 
of course, with Ranking Member Frank, it gives a great balance to the 
bipartisanship on that committee, which I think enables us to deal with 
ticklish matters like this very appropriately.
  As far as the payday situation is concerned, we will visit that 
another day. There is no question about that. We want to make sure that 
we get the good apples out of the way of the bad apples and move 
forward. But this bill here clearly gives us a very important 
statement. And it is with this statement that we are saying to these 
predators, keep your grubby hands off of our soldiers. We have got 18- 
and 19-year-old kids who are just getting out of high school, many of 
them, and there these predators are, waiting on them at a time when 
they are faced with such life-and-death issues as going into harm's 
way, all of those pressures. It is not right. It is not fair. And this 
is why we are moving on this very important legislation, so that we can 
protect our fighting men and women against unscrupulous investment 
sales.
  I urge the House to move to pass this important bipartisan measure 
today.
  Mr. SPRATT. Mr. Speaker, I rise in support of this bill, to defend 
those who defend us. Our young men and women in uniform should not be 
prey to unscrupulous types who take advantage of their inexperience, in 
ways that they pay for, and for years thereafter.
  Our service members are focused on the mission at hand: defending our 
nation. In their enthusiasm, and on the eve of their deployments, they 
should not be subjected to unscrupulous agents who exploit their fears 
of family members not being provided for, should they be killed or 
wounded in the line of the duty. They should not be exposed to brokers 
making promises of big returns on investments, while extracting 
exorbitant fees up front.
  We have worked hard to improve the benefits that our government 
provides for our troops and their families. We have increased the death 
gratuity dramatically. We have increased life insurance coverage.
  But we can do better.
  We can ban the sale of periodic payment plan certificates.
  We can clarify the law by making it known that the states have a duty 
to regulate sales conducted on military bases.
  We can ensure that our young men and women in uniform are educated 
about the benefits the government provides for them and their families, 
and that they receive clear and comprehensible information about the 
federally subsidized life insurance available to them.
  We can require registration of agents and a registry for complaints 
about agents so that our service members can see who has had complaints 
and disciplinary actions.
  And Congress can monitor these practices better.
  This bill does these things. And while it does not go as far as some 
of us in the House would like, I believe it is a good place to start. 
It enables us to stop some of the most damaging practices against those 
who defend our
  I urge support of this bill.
  Mr. SHADEGG. Mr. Speaker, today we are considering S. 418, the 
Military Personnel Financial Services Protection Act. At a time when so 
many of our brave men and women are deployed across the world defending 
our freedom, this bill is a small step to ensure that our military 
personnel to not fall victim to deceptive financial practices at home.
  Furthermore, Mr. Speaker, this bill includes provisions that reach 
beyond just our military personnel to protect all investors. I would 
like to thank the Chairmen of the Financial Services and Banking 
Committees for including language from H.R. 1077, the Realtime Investor 
Protection Act, which I authored and which passed as a stand alone bill 
last year.
  This language will require the National Association of Securities 
Dealers (NASD) to make its database of complaints against brokers 
publicly available on a secure Internet site. This is extraordinarily 
simple and extraordinarily efficient. The result will be more informed 
investors with greater trust in the markets.
  Although the NASD already maintains this database, BrokerCheck, the 
organization is prohibited from making it available online. The current 
system requires potential investors to submit a request for broker/
dealer information via telephone or e-mail The investor must then wait 
for a response. In today's high tech world, this procedure is outdated 
and highly inefficient.
  BrokerCheck is an invaluable tool for investors, through which they 
can learn about the professional background, business practices, and 
conduct of NSD-registered firms and brokers, free of charge. 
Specifically, an investor can discover: Whether or not their broker has 
a criminal record; whether or not they have been subject to a 
regulatory action by the Securities Exchange Commission (SEC); and, 
whether or not they had customer complaints filed against them.
  This bill will bring investor protection up to speed with investing 
technologies. Interestingly, of the 4.4 million requests NASD received 
through BrokerCheck for information in 2004, 99 percent were through 
the Internet e-mail request system, only 1 percent were by telephone. 
Clearly, investors prefer using the Internet to request information.
  I encourage my colleagues to support this bill to protect military 
personnel, and the public at large, by prohibiting abusive practices 
and encouraging investor education.
  Ms. BORDALLO. Mr. Speaker, I rise today in support of S. 418, a bill 
that speaks to an issue that has been of concern to Congress for 
several years now. I believe that the time has come to stop talking 
about unscrupulous practices that unfairly target U.S. servicemen and 
women and to act to end them. This bill serves that end.
  This bill addresses the issue of deceitful insurance schemes that 
take advantage of U.S. service men and women by pitching important 
investment and insurance programs while hiding within them antiquated 
fee schemes. For those who offer important financial and life planning 
programs to hide within such plans unfair, this bill removes the 
ability to hide expansive and outdated fee schedules that bilk 
vulnerable, young service men and women.
  S. 418 protects the financial interests of those who serve. I urge my 
colleagues to support this legislation and to support our men and women 
in uniform and their families.
  Mr. SCOTT of Georgia. Mr. Speaker, I yield back the balance of my 
time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Kentucky (Mr. Davis) that the House suspend the rules 
and pass the Senate bill, S. 418.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of 
those present have voted in the affirmative.
  Mr. DAVIS of Kentucky. Mr. Speaker, on that I demand the yeas and 
nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this question will 
be postponed.

[[Page H6793]]



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