II 

Calendar No. 518 

109TH CONGRESS 

2D SESSION S. 418 

[Report No. 109–282] 

To protect members of the Armed Forces from unscrupulous practices 

regarding sales of insurance, financial, and investment products. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 17, 2005 

Mr. ENZI (for himself, Mrs. CLINTON, Mr. HAGEL, Mr. SCHUMER, Mr. KENNEDY, Mr. BINGAMAN, Mr. WYDEN, Mr. DURBIN, Mr. BUNNING, Mr. 

NELSON of Florida, Mr. REED, and Mr. DODD) introduced the following 

bill; which was read twice and referred to the Committee on Banking, 

Housing, and Urban Affairs 

JULY 13, 2006 

Reported by Mr. SHELBY, with an amendment 

[Strike out all after the enacting clause and insert the part printed in italic] 

A BILL 

To protect members of the Armed Forces from unscrupulous 

practices regarding sales of insurance, financial, and investment products. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


ccoleman on PROD1PC71 with BILLS
2 

•S 418 RS

1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Military Personnel Fi3 nancial Services Protection Act’’. 

4 SEC. 2. CONGRESSIONAL FINDINGS. 

5 Congress finds the following: 

6 (1) Our military personnel perform great sac7 rifices in protecting our Nation in the War on Ter8 ror and promoting democracy abroad. 

9 (2) Our brave men and women in uniform de10 serve to be offered first-rate financial products in 

11 order to provide for their families and to save and 

12 invest for retirement. 

13 (3) Our military personnel are being offered 

14 high-cost securities and life insurance products by 

15 some financial services companies engaging in abu16 sive and misleading sales practices. 

17 (4) One securities product being offered to our 

18 service members, the contractual plan, has largely 

19 disappeared from the civilian market since the 

20 1980s, due to its excessive sales charges. A 50 per21 cent sales commission is assessed against the first 

22 year of contributions, even though the average com23 mission on other securities products such as mutual 

24 funds is less than 6 percent on each sale. 


ccoleman on PROD1PC71 with BILLS
3 

•S 418 RS

1 (5) The excessive sales charges of the contrac2 tual plan makes it susceptible to abusive and mis3 leading sales practices. 

4 (6) Certain life insurance products being of5 fered to our service members are being improperly 

6 marketed as investment products. These products 

7 provide very low death benefits for very high pre8 miums that are front-loaded in the first few years, 

9 making them completely inappropriate for most mili10 tary personnel. 

11 (7) Regulation of these securities and life insur12 ance products and their sale on military bases has 

13 been clearly inadequate and requires Congressional 

14 legislation to address. 

15 SEC. 3. PROHIBITION ON FUTURE SALES OF PERIODIC PAY16 MENT PLANS. 

17 (a) AMENDMENT.—Section 27 of the Investment 

18 Company Act of 1940 (15 U.S.C. 80a–27) is amended by 

19 adding at the end the following new subsection: 

20 ‘‘(j) TERMINATION OF SALES.— 

21 ‘‘(1) TERMINATION.—Effective 30 days after 

22 the date of enactment of the Military Personnel Fi23 nancial Services Protection Act, it shall be unlawful, 

24 subject to subsection (i)— 


ccoleman on PROD1PC71 with BILLS
4 

•S 418 RS

1 ‘‘(A) for any registered investment com2 pany to issue any periodic payment plan certifi3 cate; or 

4 ‘‘(B) for such company, or any depositor of 

5 or underwriter for any such company, or any 

6 other person, to sell such a certificate. 

7 ‘‘(2) NO INVALIDATION OF EXISTING CERTIFI8 CATES.—Paragraph (1) shall not be construed to 

9 alter, invalidate, or otherwise affect any rights or ob10 ligations, including rights of redemption, under any 

11 periodic payment plan certificate issued and sold be12 fore 30 days after such date of enactment.’’. 

13 (b) TECHNICAL AMENDMENT.—Section 27(i)(2)(B) 

14 of the Investment Company Act of 1940 (15 U.S.C. 80a– 

15 27(i)(2)(B)) is amended by striking ‘‘section 26(e)’’ each 

16 place that term appears and inserting ‘‘section 26(f)’’. 

17 (c) REPORT ON REFUNDS, SALES PRACTICES, AND

18 REVENUES FROM PERIODIC PAYMENT PLANS.—Not later 

19 than 6 months after the date of enactment of this Act, 

20 the Securities and Exchange Commission shall submit to 

21 the Committee on Financial Services of the House of Rep22 resentatives and the Committee on Banking, Housing, and 

23 Urban Affairs of the Senate, a report describing— 

24 (1) any measures taken by a broker or dealer 

25 registered with the Securities and Exchange ComVerDate Aug 31 2005 02:18 Jul 14, 2006 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6401 E:\BILLS\S418.RS S418

ccoleman on PROD1PC71 with BILLS
5 

•S 418 RS

1 mission pursuant to section 15(b) of the Securities 

2 Exchange Act of 1934 (15 U.S.C. 78o(b)) to volun3 tarily refund payments made by military service 

4 members on any periodic payment plan certificate, 

5 and the amounts of such refunds; 

6 (2) after such consultation with the Secretary 

7 of Defense, as the Commission considers appro8 priate, the sales practices of such brokers or dealers 

9 on military installations over the past 5 years and 

10 any legislative or regulatory recommendations to im11 prove such practices; and 

12 (3) the revenues generated by such brokers or 

13 dealers in the sales of periodic payment plan certifi14 cates over the past 5 years and what products such 

15 brokers or dealers market to replace the revenue 

16 generated from the sales of periodic payment plan 

17 certificates prohibited under subsection (a). 

18 SEC. 4. METHOD OF MAINTAINING BROKER AND DEALER 

19 REGISTRATION, DISCIPLINARY, AND OTHER 

20 DATA. 

21 Section 15A(i) of the Securities Exchange Act of 

22 1934 (15 U.S.C. 78o–3(i)) is amended to read as follows: 

23 ‘‘(i) OBLIGATION TO MAINTAIN REGISTRATION, DIS24 CIPLINARY, AND OTHER DATA.— 


ccoleman on PROD1PC71 with BILLS
6 

•S 418 RS

1 ‘‘(1) MAINTENANCE OF SYSTEM TO RESPOND

2 TO INQUIRIES.—A registered securities association 

3 shall— 

4 ‘‘(A) establish and maintain a system for 

5 collecting and retaining registration informa6 tion; 

7 ‘‘(B) establish and maintain a toll-free 

8 telephone listing, and a readily accessible elec9 tronic or other process, to receive and promptly 

10 respond to inquiries regarding— 

11 ‘‘(i) registration information on its 

12 members and their associated persons; and 

13 ‘‘(ii) registration information on the 

14 members and their associated persons of 

15 any registered national securities exchange 

16 that uses the system described in subpara17 graph (A) for the registration of its mem18 bers and their associated persons; and 

19 ‘‘(C) adopt rules governing the process for 

20 making inquiries and the type, scope, and pres21 entation of information to be provided in re22 sponse to such inquiries in consultation with 

23 any registered national securities exchange pro24 viding information pursuant to subparagraph 

25 (B)(ii). 


ccoleman on PROD1PC71 with BILLS
7 

•S 418 RS

1 ‘‘(2) RECOVERY OF COSTS.—A registered secu2 rities association may charge persons making inquir3 ies described in paragraph (1)(B), other than indi4 vidual investors, reasonable fees for responses to 

5 such inquiries. 

6 ‘‘(3) PROCESS FOR DISPUTED INFORMATION.— 

7 Each registered securities association shall adopt 

8 rules establishing an administrative process for dis9 puting the accuracy of information provided in re10 sponse to inquiries under this subsection in consulta11 tion with any registered national securities exchange 

12 providing information pursuant to paragraph 

13 (1)(B)(ii). 

14 ‘‘(4) LIMITATION ON LIABILITY.—A registered 

15 securities association, or an exchange reporting in16 formation to such an association, shall not have any 

17 liability to any person for any actions taken or omit18 ted in good faith under this subsection. 

19 ‘‘(5) DEFINITION.—For purposes of this sub20 section, the term ‘registration information’ means 

21 the information reported in connection with the reg22 istration or licensing of brokers and dealers and 

23 their associated persons, including disciplinary ac24 tions, regulatory, judicial, and arbitration pro25 ceedings, and other information required by law, or 


ccoleman on PROD1PC71 with BILLS
8 

•S 418 RS

1 exchange or association rule, and the source and sta2 tus of such information.’’. 

3 SEC. 5. FILING DEPOSITORIES FOR INVESTMENT ADVIS4 ERS. 

5 (a) INVESTMENT ADVISERS.—Section 204 of the In6 vestment Advisers Act of 1940 (15 U.S.C. 80b–4) is 

7 amended— 

8 (1) by striking ‘‘Every investment’’ and insert9 ing the following: 

10 ‘‘(a) IN GENERAL.—Every investment’’; and 

11 (2) by adding at the end the following: 

12 ‘‘(b) FILING DEPOSITORIES.—The Commission may, 

13 by rule, require an investment adviser— 

14 ‘‘(1) to file with the Commission any fee, appli15 cation, report, or notice required to be filed by this 

16 title or the rules issued under this title through any 

17 entity designated by the Commission for that pur18 pose; and 

19 ‘‘(2) to pay the reasonable costs associated with 

20 such filing and the establishment and maintenance 

21 of the systems required by subsection (c). 

22 ‘‘(c) ACCESS TO DISCIPLINARY AND OTHER INFOR23 MATION.— 

24 ‘‘(1) MAINTENANCE OF SYSTEM TO RESPOND

25 TO INQUIRIES.—The Commission shall require the 


ccoleman on PROD1PC71 with BILLS
9 

•S 418 RS

1 entity designated by the Commission under sub2 section (b)(1) to establish and maintain a toll-free 

3 telephone listing, or a readily accessible electronic or 

4 other process, to receive and promptly respond to in5 quiries regarding registration information (including 

6 disciplinary actions, regulatory, judicial, and arbitra7 tion proceedings, and other information required by 

8 law or rule to be reported) involving investment ad9 visers and persons associated with investment advis10 ers. 

11 ‘‘(2) RECOVERY OF COSTS.—An entity des12 ignated by the Commission under subsection (b)(1) 

13 may charge persons making inquiries, other than in14 dividual investors, reasonable fees for responses to 

15 inquiries described in paragraph (1). 

16 ‘‘(3) LIMITATION ON LIABILITY.—An entity 

17 designated by the Commission under subsection 

18 (b)(1) shall not have any liability to any person for 

19 any actions taken or omitted in good faith under 

20 this subsection.’’. 

21 (b) CONFORMING AMENDMENTS.— 

22 (1) Section 203A of the Investment Advisers 

23 Act of 1940 (15 U.S.C. 80b–3a) is amended— 

24 (A) by striking subsection (d); and 


ccoleman on PROD1PC71 with BILLS
10 

•S 418 RS

1 (B) by redesignating subsection (e) as sub2 section (d). 

3 (2) Section 306 of the National Securities Mar4 kets Improvement Act of 1996 (15 U.S.C. 80b–10, 

5 note) is repealed. 

6 SEC. 6. STATE INSURANCE JURISDICTION ON MILITARY IN7 STALLATIONS. 

8 (a) CLARIFICATION OF JURISDICTION.—Any law, 

9 regulation, or order of a State with respect to regulating 

10 the business of insurance shall apply to insurance activi11 ties conducted on Federal land or facilities in the United 

12 States and abroad, including military installations, except 

13 to the extent that such law, regulation, or order— 

14 (1) directly conflicts with any applicable Fed15 eral law, regulation, or authorized directive; or 

16 (2) would not apply if such activity were con17 ducted on State land. 

18 (b) PRIMARY STATE JURISDICTION.—To the extent 

19 that multiple State laws would otherwise apply pursuant 

20 to subsection (a) to an insurance activity of an individual 

21 or entity on Federal land or facilities, the State having 

22 the primary duty to regulate such activity and the laws 

23 of which shall apply to such activity in the case of a con24 flict shall be— 


ccoleman on PROD1PC71 with BILLS
11 

•S 418 RS

1 (1) the State within which the Federal land or 

2 facility is located; or 

3 (2) if the Federal land or facility is located out4 side of the United States, the State in which— 

5 (A) in the case of an individual engaged in 

6 the business of insurance, such individual has 

7 been issued a resident license; or 

8 (B) in the case of an entity engaged in the 

9 business of insurance, such entity is domiciled. 

10 SEC. 7. REQUIRED DEVELOPMENT OF MILITARY PER11 SONNEL PROTECTION STANDARDS REGARD12 ING INSURANCE SALES. 

13 (a) STATE STANDARDS.—Congress intends that— 

14 (1) the States collectively work with the Sec15 retary of Defense to ensure implementation of ap16 propriate standards to protect members of the 

17 Armed Forces from dishonest and predatory insur18 ance sales practices while on a military installation 

19 of the United States (including installations located 

20 outside of the United States); and 

21 (2) each State identify its role in promoting the 

22 standards described in paragraph (1) in a uniform 

23 manner, not later than 12 months after the date of 

24 enactment of this Act. 


ccoleman on PROD1PC71 with BILLS
12 

•S 418 RS

1 (b) STATE REPORT.—It is the sense of Congress that 

2 the NAIC should, after consultation with the Secretary of 

3 Defense and, not later than 12 months after the date of 

4 enactment of this Act, conduct a study to determine the 

5 extent to which the States have met the requirement of 

6 subsection (a), and report the results of such study to the 

7 Committee on Financial Services of the House of Rep8 resentatives and the Committee on Banking, Housing, and 

9 Urban Affairs of the Senate. 

10 SEC. 8. REQUIRED DISCLOSURES REGARDING LIFE INSUR11 ANCE. 

12 (a) REQUIREMENT.—Except as provided in sub13 section (d), no insurer or producer may sell or solicit, in 

14 person, any life insurance product to any member of the 

15 Armed Forces on a military installation of the United 

16 States, unless a disclosure in accordance with this section 

17 is provided to such member before the sale of such insur18 ance. 

19 (b) DISCLOSURE.—A disclosure in accordance with 

20 this section is a written disclosure that— 

21 (1) states that subsidized life insurance may be 

22 available to the member of the Armed Forces from 

23 the Federal Government; 


ccoleman on PROD1PC71 with BILLS
13 

•S 418 RS

1 (2) states that the United States Government 

2 has in no way sanctioned, recommended, or encour3 aged the sale of the product being offered; 

4 (3) is made in plain and readily understandable 

5 language and in a type font at least as large as the 

6 font used for the majority of the policy; and 

7 (4) with respect to a sale or solicitation on Fed8 eral land or facilities located outside of the United 

9 States by an individual or entity engaged in the 

10 business of insurance, except to the extent otherwise 

11 specifically provided by the laws of such State in ref12 erence to this Act, lists the address and phone num13 ber where consumer complaints are received by the 

14 State insurance commissioner for the State in which 

15 the individual has been issued a resident license or 

16 the entity is domiciled, as applicable. 

17 (c) ENFORCEMENT.—If it is determined by a State 

18 or Federal agency, or in a final court proceeding, that any 

19 individual or entity has intentionally failed to provide a 

20 disclosure required by this section, such individual or enti21 ty shall be prohibited from further engaging in the busi22 ness of insurance with respect to employees of the Federal 

23 Government on Federal land, except— 

24 (1) with respect to existing policies; and 


ccoleman on PROD1PC71 with BILLS
14 

•S 418 RS

1 (2) to the extent required by the Federal Gov2 ernment pursuant to previous commitments. 

3 (d) EXCEPTIONS.— 

4 (1) FEDERAL AND STATE INSURANCE ACTIV5 ITY.—This section shall not apply to insurance ac6 tivities— 

7 (A) specifically contracted by or through 

8 the Federal Government or any State govern9 ment; or 

10 (B) specifically exempted from the applica11 bility of this Act by a Federal or State law, reg12 ulation, or order that specifically refers to this 

13 paragraph. 

14 (2) UNIFORM STATE STANDARDS.—If a major15 ity of the States have adopted, in materially iden16 tical form, a standard setting forth the disclosures 

17 required under this section that apply to insurance 

18 solicitations and sales to military personnel on mili19 tary installations of the United States, after the ex20 piration of the 2-year period beginning on the date 

21 of such majority adoption, such standard shall apply 

22 in lieu of the requirements of this section to all in23 surance solicitations and sales to military personnel 

24 on military installations, with respect to such States, 

25 to the extent that such standards do not directly 


ccoleman on PROD1PC71 with BILLS
15 

•S 418 RS

1 conflict with any applicable authorized Federal regu2 lation or directive. 

3 (3) MATERIALLY IDENTICAL FORM.—For pur4 poses of this subsection, standards adopted by more 

5 than one State shall be considered to have materially 

6 identical form to the extent that such standards re7 quire or prohibit identical conduct with respect to 

8 the same activity, notwithstanding that the stand9 ards may differ with respect to conduct required or 

10 prohibited with respect to other activities. 

11 SEC. 9. IMPROVING LIFE INSURANCE PRODUCT STAND12 ARDS. 

13 (a) IN GENERAL.—It is the sense of Congress that 

14 the NAIC should, after consultation with the Secretary of 

15 Defense, and not later than 12 months after the date of 

16 enactment of this Act, conduct a study and submit a re17 port to the Committee on Financial Services of the House 

18 of Representatives and the Committee on Banking, Hous19 ing, and Urban Affairs of the Senate on ways of improving 

20 the quality of and sale of life insurance products sold by 

21 insurers and producers on military installations of the 

22 United States, which may include limiting sales authority 

23 to companies and producers that are certified as meeting 

24 appropriate best practices procedures or creating standVerDate Aug 31 2005 02:18 Jul 14, 2006 Jkt 049200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6401 E:\BILLS\S418.RS S418

ccoleman on PROD1PC71 with BILLS
16 

•S 418 RS

1 ards for products specifically designed for members of the 

2 Armed Forces regardless of the sales location. 

3 (b) CONDITIONAL GAO REPORT.—If the NAIC does 

4 not submit the report as described in subsection (a), the 

5 Comptroller General of the United States shall study any 

6 proposals that have been made to improve the quality and 

7 sale of life insurance products sold by insurers and pro8 ducers on military installations of the United States and 

9 report to the Committee on Financial Services of the 

10 House of Representatives and the Committee on Banking, 

11 Housing, and Urban Affairs of the Senate on such pro12 posals not later than 6 months after the expiration of the 

13 period referred to in subsection (a). 

14 SEC. 10. REQUIRED REPORTING OF DISCIPLINED INSUR15 ANCE AGENTS. 

16 (a) REPORTING BY INSURERS.—After the expiration 

17 of the 2-year period beginning on the date of enactment 

18 of this Act, no insurer may enter into or renew a contrac19 tual relationship with a producer that solicits or sells life 

20 insurance on military installations of the United States, 

21 unless the insurer has implemented a system to report, 

22 to the State insurance commissioner of the State of the 

23 domicile of the insurer and the State of residence of the 

24 insurance producer, disciplinary actions taken against the 

25 producer with respect to the producer’s sales or solicitaVerDate Aug 31 2005 02:18 Jul 14, 2006 Jkt 049200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6401 E:\BILLS\S418.RS S418

ccoleman on PROD1PC71 with BILLS
17 

•S 418 RS

1 tion of insurance on a military installation of the United 

2 States, as follows: 

3 (1) Any disciplinary action taken by any gov4 ernment entity that the insurer knows has been 

5 taken. 

6 (2) Any significant disciplinary action taken by 

7 the insurer. 

8 (b) REPORTING BY STATES.—It is the sense of Con9 gress that, not later than 2 years after the date of enact10 ment of this Act, the States should collectively implement 

11 a system to— 

12 (1) receive reports of disciplinary actions taken 

13 against insurance producers by insurers or govern14 ment entities with respect to the producers’ sale or 

15 solicitation of insurance on a military installation; 

16 and 

17 (2) disseminate such information to all other 

18 States and to the Secretary of Defense. 

19 SEC. 11. REPORTING BARRED PERSONS SELLING INSUR20 ANCE OR SECURITIES. 

21 (a) ESTABLISHMENT.—The Secretary of Defense 

22 shall maintain a list of the name, address, and other ap23 propriate information of persons engaged in the business 

24 of securities or insurance that have been barred, banned, 

25 or otherwise limited in any manner that is not generally 


ccoleman on PROD1PC71 with BILLS
18 

•S 418 RS

1 applicable to all such type of persons, from any or all mili2 tary installations of the United States. 

3 (b) NOTICE AND ACCESS.—The Secretary of Defense 

4 shall ensure that— 

5 (1) the appropriate Federal and State agencies 

6 responsible for securities and insurance regulation 

7 are promptly notified upon the inclusion in or re8 moval from the list required by subsection (a) of a 

9 person under such agencies’ jurisdiction; and 

10 (2) the list is kept current and easily acces11 sible— 

12 (A) for use by such agencies; and 

13 (B) for purposes of enforcing or consid14 ering any such bar, ban, or limitation by the 

15 appropriate Federal personnel, including com16 manders of military installations. 

17 (c) REGULATIONS.— 

18 (1) IN GENERAL.—The Secretary of Defense 

19 shall issue regulations in accordance with this sub20 section to provide for the establishment and mainte21 nance of the list required by this section, including 

22 appropriate due process considerations. 

23 (2) TIMING.— 

24 (A) PROPOSED REGULATIONS.—Not later 

25 than the expiration of the 60-day period beginVerDate Aug 31 2005 02:18 Jul 14, 2006 Jkt 049200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6401 E:\BILLS\S418.RS S418

ccoleman on PROD1PC71 with BILLS
19 

•S 418 RS

1 ning on the date of enactment of this Act, the 

2 Secretary of Defense shall prepare and submit 

3 to the appropriate Committees a copy of the 

4 regulations under this subsection that are pro5 posed to be published for comment. The Sec6 retary may not publish such regulations for 

7 comment in the Federal Register until the expi8 ration of the 15-day period beginning on the 

9 date of such submission to the appropriate 

10 Committees. 

11 (B) FINAL REGULATIONS.—Not later than 

12 90 days after the date of enactment of this Act, 

13 the Secretary of Defense shall submit to the ap14 propriate Committees a copy of the regulations 

15 under this section to be published in final form. 

16 (C) EFFECTIVE DATE.—Such regulations 

17 shall become effective upon the expiration of the 

18 30-day period beginning on the date of such 

19 submission to the appropriate Committees. 

20 (d) DEFINITION.—For purposes of this section, the 

21 term ‘‘appropriate Committees’’ means— 

22 (1) the Committee on Financial Services and 

23 the Committee on Armed Services of the House of 

24 Representatives; and 


ccoleman on PROD1PC71 with BILLS
20 

•S 418 RS

1 (2) the Committee on Banking, Housing, and 

2 Urban Affairs and the Committee on Armed Serv3 ices of the Senate. 

4 SEC. 12. SENSE OF CONGRESS. 

5 It is the sense of the Congress that the Federal and 

6 State agencies responsible for insurance and securities 

7 regulation should provide advice to the appropriate Fed8 eral entities to consider— 

9 (1) significantly increasing the life insurance 

10 coverage made available through the Federal Gov11 ernment to members of the Armed Forces; 

12 (2) implementing appropriate procedures to en13 courage members of the Armed Forces to improve 

14 their financial literacy objectives; and 

15 (3) improving the benefits and matching con16 tributions provided under the Federal Thrift Savings 

17 Plan (established under section 8437 of title 5, 

18 United States Code) to members of the Armed 

19 Forces. 

20 SEC. 13. DEFINITIONS. 

21 For purposes of this Act, the following definitions 

22 shall apply: 

23 (1) ENTITY.—The term ‘‘entity’’ includes insur24 ers. 


ccoleman on PROD1PC71 with BILLS
21 

•S 418 RS

1 (2) INDIVIDUAL.—The term ‘‘individual’’ in2 cludes insurance agents and producers. 

3 (3) NAIC.—The term ‘‘NAIC’’ means the Na4 tional Association of Insurance Commissioners. 

5 (4) STATE INSURANCE COMMISSIONER.—The 

6 term ‘‘State insurance commissioner’’ means, with 

7 respect to a State, the officer, agency, or other enti8 ty of the State that has primary regulatory authority 

9 over the business of insurance and over any person 

10 engaged in the business of insurance, to the extent 

11 of such business activities, in such State. 

12 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

13 (a) SHORT TITLE.—This Act may be cited as the 

14 ‘‘Military Personnel Financial Services Protection Act’’. 

15 (b) TABLE OF CONTENTS.—The table of contents for 

16 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. 


ccoleman on PROD1PC71 with BILLS
22 

•S 418 RS

1 SEC. 2. CONGRESSIONAL FINDINGS. 

2 Congress finds that— 

3 (1) members of the Armed Forces perform great 

4 sacrifices in protecting our Nation in the War on 

5 Terror; 

6 (2) the brave men and women in uniform deserve 

7 to be offered first-rate financial products in order to 

8 provide for their families and to save and invest for 

9 retirement; 

10 (3) members of the Armed Forces are being of11 fered high-cost securities and life insurance products 

12 by some financial services companies engaging in 

13 abusive and misleading sales practices; 

14 (4) one securities product offered to service mem15 bers, known as the ‘‘mutual fund contractual plan’’, 

16 largely disappeared from the civilian market in the 

17 1980s, due to excessive sales charges; 

18 (5) with respect to a mutual fund contractual 

19 plan, a 50 percent sales commission is assessed 

20 against the first year of contributions, despite an av21 erage commission on other securities products of less 

22 than 6 percent on each sale; 

23 (6) excessive sales charges allow abusive and mis24 leading sales practices in connection with mutual 

25 fund contractual plan; 


ccoleman on PROD1PC71 with BILLS
23 

•S 418 RS

1 (7) certain life insurance products being offered 

2 to members of the Armed Forces are improperly mar3 keted as investment products, providing minimal 

4 death benefits in exchange for excessive premiums that 

5 are front-loaded in the first few years, making them 

6 entirely inappropriate for most military personnel; 

7 and 

8 (8) the need for regulation of the marketing and 

9 sale of securities and life insurance products on mili10 tary bases necessitates Congressional action. 

11 SEC. 3. DEFINITIONS. 

12 For purposes of this Act, the following definitions shall 

13 apply: 

14 (1) LIFE INSURANCE PRODUCT.— 

15 (A) IN GENERAL.—The term ‘‘life insurance 

16 product’’ means any product, including indi17 vidual and group life insurance, funding agree18 ments, and annuities, that provides insurance 

19 for which the probabilities of the duration of 

20 human life or the rate of mortality are an ele21 ment or condition of insurance. 

22 (B) INCLUDED INSURANCE.—The term ‘‘life 

23 insurance product’’ includes the granting of— 

24 (i) endowment benefits; 


ccoleman on PROD1PC71 with BILLS
24 

•S 418 RS

1 (ii) additional benefits in the event of 

2 death by accident or accidental means; 

3 (iii) disability income benefits; 

4 (iv) additional disability benefits that 

5 operate to safeguard the contract from lapse 

6 or to provide a special surrender value, or 

7 special benefit in the event of total and per8 manent disability; 

9 (v) benefits that provide payment or 

10 reimbursement for long-term home health 

11 care, or long-term care in a nursing home 

12 or other related facility; 

13 (vi) burial insurance; and 

14 (vii) optional modes of settlement or 

15 proceeds of life insurance. 

16 (C) EXCLUSIONS.—Such term does not in17 clude workers compensation insurance, medical 

18 indemnity health insurance, or property and 

19 casualty insurance. 

20 (2) NAIC.—The term ‘‘NAIC’’ means the Na21 tional Association of Insurance Commissioners (or 

22 any successor thereto). 


ccoleman on PROD1PC71 with BILLS
25 

•S 418 RS

1 SEC. 4. PROHIBITION ON FUTURE SALES OF PERIODIC PAY2 MENT PLANS. 

3 (a) AMENDMENT.—Section 27 of the Investment Com4 pany Act of 1940 (15 U.S.C. 80a–27) is amended by adding 

5 at the end the following new subsection: 

6 ‘‘(j) TERMINATION OF SALES.— 

7 ‘‘(1) TERMINATION.—Effective 30 days after the 

8 date of enactment of the Military Personnel Financial 

9 Services Protection Act, it shall be unlawful, subject 

10 to subsection (i)— 

11 ‘‘(A) for any registered investment company 

12 to issue any periodic payment plan certificate; 

13 or 

14 ‘‘(B) for such company, or any depositor of 

15 or underwriter for any such company, or any 

16 other person, to sell such a certificate. 

17 ‘‘(2) NO INVALIDATION OF EXISTING CERTIFI18 CATES.—Paragraph (1) shall not be construed to 

19 alter, invalidate, or otherwise affect any rights or ob20 ligations, including rights of redemption, under any 

21 periodic payment plan certificate issued and sold be22 fore 30 days after such date of enactment.’’. 

23 (b) TECHNICAL AMENDMENT.—Section 27(i)(2)(B) of 

24 the Investment Company Act of 1940 (15 U.S.C. 80a– 

25 27(i)(2)(B)) is amended by striking ‘‘section 26(e)’’ each 

26 place that term appears and inserting ‘‘section 26(f)’’. 


ccoleman on PROD1PC71 with BILLS
26 

•S 418 RS

1 (c) REPORT ON REFUNDS, SALES PRACTICES, AND

2 REVENUES FROM PERIODIC PAYMENT PLANS.—Not later 

3 than 6 months after the date of enactment of this Act, the 

4 Securities and Exchange Commission shall submit to the 

5 Committee on Financial Services of the House of Represent6 atives and the Committee on Banking, Housing, and Urban 

7 Affairs of the Senate, a report describing— 

8 (1) any measures taken by a broker or dealer 

9 registered with the Securities and Exchange Commis10 sion pursuant to section 15(b) of the Securities Ex11 change Act of 1934 (15 U.S.C. 78o(b)) to voluntarily 

12 refund payments made by military service members 

13 on any periodic payment plan certificate, and the 

14 amounts of such refunds; 

15 (2) after such consultation with the Secretary of 

16 Defense, as the Commission considers appropriate, the 

17 sales practices of such brokers or dealers on military 

18 installations over the 5 years preceding the date of 

19 submission of the report and any legislative or regu20 latory recommendations to improve such practices; 

21 and 

22 (3) the revenues generated by such brokers or 

23 dealers in the sales of periodic payment plan certifi24 cates over the 5 years preceding the date of submis25 sion of the report, and the products marketed by such 


ccoleman on PROD1PC71 with BILLS
27 

•S 418 RS

1 brokers or dealers to replace the revenue generated 

2 from the sales of periodic payment plan certificates 

3 prohibited under subsection (a). 

4 SEC. 5. REQUIRED DISCLOSURES REGARDING OFFERS OR 

5 SALES OF SECURITIES ON MILITARY INSTAL6 LATIONS. 

7 Section 15A(b) of the Securities Exchange Act of 1934 

8 (15 U.S.C. 78o-3(b)) is amended by inserting immediately 

9 after paragraph (13) the following: 

10 ‘‘(14) The rules of the association include provi11 sions governing the sales, or offers of sales, of securi12 ties on the premises of any military installation to 

13 any member of the Armed Forces or a dependant 

14 thereof, which rules require— 

15 ‘‘(A) the broker or dealer performing broker16 age services to clearly and conspicuously disclose 

17 to potential investors— 

18 ‘‘(i) that the securities offered are not 

19 being offered or provided by the broker or 

20 dealer on behalf of the Federal Government, 

21 and that its offer is not sanctioned, rec22 ommended, or encouraged by the Federal 

23 Government; and 

24 ‘‘(ii) the identity of the registered 

25 broker-dealer offering the securities; 


ccoleman on PROD1PC71 with BILLS
28 

•S 418 RS

1 ‘‘(B) such broker or dealer to perform an 

2 appropriate suitability determination, including 

3 consideration of costs and knowledge about secu4 rities, prior to making a recommendation of a 

5 security to a member of the Armed Forces or a 

6 dependant thereof; and 

7 ‘‘(C) that no person receive any referral fee 

8 or incentive compensation in connection with a 

9 sale or offer of sale of securities, unless such per10 son is an associated person of a registered broker 

11 or dealer and is qualified pursuant to the rules 

12 of a self-regulatory organization.’’. 

13 SEC. 6. METHOD OF MAINTAINING BROKER AND DEALER 

14 REGISTRATION, DISCIPLINARY, AND OTHER 

15 DATA. 

16 Section 15A(i) of the Securities Exchange Act of 1934 

17 (15 U.S.C. 78o–3(i)) is amended to read as follows: 

18 ‘‘(i) OBLIGATION TO MAINTAIN REGISTRATION, DIS19 CIPLINARY, AND OTHER DATA.— 

20 ‘‘(1) MAINTENANCE OF SYSTEM TO RESPOND TO

21 INQUIRIES.—A registered securities association 

22 shall— 

23 ‘‘(A) establish and maintain a system for 

24 collecting and retaining registration informa25 tion; 


ccoleman on PROD1PC71 with BILLS
29 

•S 418 RS

1 ‘‘(B) establish and maintain a toll-free tele2 phone listing, and a readily accessible electronic 

3 or other process, to receive and promptly respond 

4 to inquiries regarding— 

5 ‘‘(i) registration information on its 

6 members and their associated persons; and 

7 ‘‘(ii) registration information on the 

8 members and their associated persons of 

9 any registered national securities exchange 

10 that uses the system described in subpara11 graph (A) for the registration of its mem12 bers and their associated persons; and 

13 ‘‘(C) adopt rules governing the process for 

14 making inquiries and the type, scope, and pres15 entation of information to be provided in re16 sponse to such inquiries in consultation with 

17 any registered national securities exchange pro18 viding information pursuant to subparagraph 

19 (B)(ii). 

20 ‘‘(2) RECOVERY OF COSTS.—A registered securi21 ties association may charge persons making inquiries 

22 described in paragraph (1)(B), other than individual 

23 investors, reasonable fees for responses to such inquir24 ies. 


ccoleman on PROD1PC71 with BILLS
30 

•S 418 RS

1 ‘‘(3) PROCESS FOR DISPUTED INFORMATION.— 

2 Each registered securities association shall adopt 

3 rules establishing an administrative process for dis4 puting the accuracy of information provided in re5 sponse to inquiries under this subsection in consulta6 tion with any registered national securities exchange 

7 providing information pursuant to paragraph 

8 (1)(B)(ii). 

9 ‘‘(4) LIMITATION ON LIABILITY.—A registered se10 curities association, or an exchange reporting infor11 mation to such an association, shall not have any li12 ability to any person for any actions taken or omitted 

13 in good faith under this subsection. 

14 ‘‘(5) DEFINITION.—For purposes of this sub15 section, the term ‘registration information’ means the 

16 information reported in connection with the registra17 tion or licensing of brokers and dealers and their as18 sociated persons, including disciplinary actions, regu19 latory, judicial, and arbitration proceedings, and 

20 other information required by law, or exchange or as21 sociation rule, and the source and status of such in22 formation.’’. 


ccoleman on PROD1PC71 with BILLS
31 

•S 418 RS

1 SEC. 7. FILING DEPOSITORIES FOR INVESTMENT ADVISERS. 

2 (a) INVESTMENT ADVISERS.—Section 204 of the In3 vestment Advisers Act of 1940 (15 U.S.C. 80b–4) is amend4 ed— 

5 (1) by striking ‘‘Every investment’’ and insert6 ing the following: 

7 ‘‘(a) IN GENERAL.—Every investment’’; and 

8 (2) by adding at the end the following: 

9 ‘‘(b) FILING DEPOSITORIES.—The Commission may, 

10 by rule, require an investment adviser— 

11 ‘‘(1) to file with the Commission any fee, appli12 cation, report, or notice required to be filed by this 

13 title or the rules issued under this title through any 

14 entity designated by the Commission for that purpose; 

15 and 

16 ‘‘(2) to pay the reasonable costs associated with 

17 such filing and the establishment and maintenance of 

18 the systems required by subsection (c). 

19 ‘‘(c) ACCESS TO DISCIPLINARY AND OTHER INFORMA20 TION.— 

21 ‘‘(1) MAINTENANCE OF SYSTEM TO RESPOND TO

22 INQUIRIES.— 

23 ‘‘(A) IN GENERAL.—The Commission shall 

24 require the entity designated by the Commission 

25 under subsection (b)(1) to establish and main26 tain a toll-free telephone listing, or a readily acVerDate Aug 31 2005 02:18 Jul 14, 2006 Jkt 049200 PO 00000 Frm 00031 Fmt 6652 Sfmt 6203 E:\BILLS\S418.RS S418

ccoleman on PROD1PC71 with BILLS
32 

•S 418 RS

1 cessible electronic or other process, to receive and 

2 promptly respond to inquiries regarding reg3 istration information (including disciplinary ac4 tions, regulatory, judicial, and arbitration pro5 ceedings, and other information required by law 

6 or rule to be reported) involving investment ad7 visers and persons associated with investment 

8 advisers. 

9 ‘‘(B) APPLICABILITY.—This subsection shall 

10 apply to any investment adviser (and the per11 sons associated with that adviser), whether the 

12 investment adviser is registered with the Com13 mission under section 203 or regulated solely by 

14 a State, as described in section 203A. 

15 ‘‘(2) RECOVERY OF COSTS.—An entity des16 ignated by the Commission under subsection (b)(1) 

17 may charge persons making inquiries, other than in18 dividual investors, reasonable fees for responses to in19 quiries described in paragraph (1). 

20 ‘‘(3) LIMITATION ON LIABILITY.—An entity des21 ignated by the Commission under subsection (b)(1) 

22 shall not have any liability to any person for any ac23 tions taken or omitted in good faith under this sub24 section.’’. 

25 (b) CONFORMING AMENDMENTS.— 


ccoleman on PROD1PC71 with BILLS
33 

•S 418 RS

1 (1) INVESTMENT ADVISERS ACT OF 1940.—Sec2 tion 203A of the Investment Advisers Act of 1940 (15 

3 U.S.C. 80b–3a) is amended— 

4 (A) by striking subsection (d); and 

5 (B) by redesignating subsection (e) as sub6 section (d). 

7 (2) NATIONAL SECURITIES MARKETS IMPROVE8 MENT ACT OF 1996.—Section 306 of the National Se9 curities Markets Improvement Act of 1996 (15 U.S.C. 

10 80b–10, note) is repealed. 

11 SEC. 8. STATE INSURANCE AND SECURITIES JURISDICTION 

12 ON MILITARY INSTALLATIONS. 

13 (a) CLARIFICATION OF JURISDICTION.—Any provision 

14 of law, regulation, or order of a State with respect to regu15 lating the business of insurance or securities shall apply 

16 to insurance or securities activities conducted on Federal 

17 land or facilities in the United States and abroad, includ18 ing military installations, except to the extent that such 

19 law, regulation, or order— 

20 (1) directly conflicts with any applicable Federal 

21 law, regulation, or authorized directive; or 

22 (2) would not apply if such activity were con23 ducted on State land. 

24 (b) PRIMARY STATE JURISDICTION.—To the extent 

25 that multiple State laws would otherwise apply pursuant 


ccoleman on PROD1PC71 with BILLS
34 

•S 418 RS

1 to subsection (a) to an insurance or securities activity of 

2 an individual or entity on Federal land or facilities, the 

3 State having the primary duty to regulate such activity and 

4 the laws of which shall apply to such activity in the case 

5 of a conflict shall be— 

6 (1) the State within which the Federal land or 

7 facility is located; or 

8 (2) if the Federal land or facility is located out9 side of the United States, the State in which— 

10 (A) in the case of an individual engaged in 

11 the business of insurance, such individual has 

12 been issued a resident license; 

13 (B) in the case of an entity engaged in the 

14 business of insurance, such entity is domiciled; 

15 (C) in the case of an individual engaged in 

16 the offer or sale (or both) of securities, such indi17 vidual is registered or required to be registered 

18 to do business or the person solicited by such in19 dividual resides; or 

20 (D) in the case of an entity engaged in the 

21 offer or sale (or both) of securities, such entity is 

22 registered or is required to be registered to do 

23 business or the person solicited by such entity re24 sides. 


ccoleman on PROD1PC71 with BILLS
35 

•S 418 RS

1 SEC. 9. REQUIRED DEVELOPMENT OF MILITARY PER2 SONNEL PROTECTION STANDARDS REGARD3 ING INSURANCE SALES; ADMINISTRATIVE CO4 ORDINATION. 

5 (a) STATE STANDARDS.—Congress intends that— 

6 (1) the States collectively work with the Sec7 retary of Defense to ensure implementation of appro8 priate standards to protect members of the Armed 

9 Forces from dishonest and predatory insurance sales 

10 practices while on a military installation of the 

11 United States (including installations located outside 

12 of the United States); and 

13 (2) each State identify its role in promoting the 

14 standards described in paragraph (1) in a uniform 

15 manner, not later than 12 months after the date of 

16 enactment of this Act. 

17 (b) STATE REPORT.—It is the sense of Congress that 

18 the NAIC should, after consultation with the Secretary of 

19 Defense and, not later than 12 months after the date of en20 actment of this Act, conduct a study to determine the extent 

21 to which the States have met the requirement of subsection 

22 (a), and report the results of such study to the Committee 

23 on Financial Services of the House of Representatives and 

24 the Committee on Banking, Housing, and Urban Affairs 

25 of the Senate. 


ccoleman on PROD1PC71 with BILLS
36 

•S 418 RS

1 (c) ADMINISTRATIVE COORDINATION; SENSE OF CON2 GRESS.—It is the sense of the Congress that senior rep3 resentatives of the Secretary of Defense, the Securities and 

4 Exchange Commission, and the NAIC should meet not less 

5 frequently than twice a year to coordinate their activities 

6 to implement this Act and monitor the enforcement of rel7 evant regulations relating to the sale of financial products 

8 on military installations of the United States. 

9 SEC. 10. REQUIRED DISCLOSURES REGARDING LIFE INSUR10 ANCE PRODUCTS. 

11 (a) REQUIREMENT.—Except as provided in subsection 

12 (e), no person may sell, or offer for sale, any life insurance 

13 product to any member of the Armed Forces or a dependant 

14 thereof on a military installation of the United States, un15 less a disclosure in accordance with this section is provided 

16 to such member or dependent at the time of the sale or offer. 

17 (b) DISCLOSURE.—A disclosure in accordance with 

18 this section is a written disclosure that— 

19 (1) states that subsidized life insurance is avail20 able to the member of the Armed Forces from the Fed21 eral Government under the Servicemembers’ Group 

22 Life Insurance program (also referred to as ‘‘SGLI’’), 

23 under subchapter III of chapter 19 of title 38, United 

24 States Code; 


ccoleman on PROD1PC71 with BILLS
37 

•S 418 RS

1 (2) states the amount of insurance coverage 

2 available under the SGLI program, together with the 

3 costs to the member of the Armed Forces for such cov4 erage; 

5 (3) states that the life insurance product that is 

6 the subject of the disclosure is not offered or provided 

7 by the Federal Government, and that the Federal 

8 Government has in no way sanctioned, recommended, 

9 or encouraged the sale of the life insurance product 

10 being offered; 

11 (4) fully discloses any terms and circumstances 

12 under which amounts accumulated in a savings fund 

13 or savings feature under the life insurance product 

14 that is the subject of the disclosure may be diverted 

15 to pay, or reduced to offset, premiums due for con16 tinuation of coverage under such product; 

17 (5) states that no person has received any refer18 ral fee or incentive compensation in connection with 

19 the offer or sale of the life insurance product, unless 

20 such person is a licensed agent of the person engaged 

21 in the business of insurance that is issuing such prod22 uct; 

23 (6) is made in plain and readily understandable 

24 language and in a type font at least as large as the 

25 font used for the majority of the solicitation material 


ccoleman on PROD1PC71 with BILLS
38 

•S 418 RS

1 used with respect to or relating to the life insurance 

2 product; and 

3 (7) with respect to a sale or solicitation on Fed4 eral land or facilities located outside of the United 

5 States, lists the address and phone number at which 

6 consumer complaints are received by the State insur7 ance commissioner for the State having the primary 

8 jurisdiction and duty to regulate the sale of such life 

9 insurance products pursuant to section 8. 

10 (c) VOIDABILITY.—The sale of a life insurance product 

11 in violation of this section shall be voidable from its incep12 tion, at the sole option of the member of the Armed Forces, 

13 or dependent thereof, as applicable, to whom the product 

14 was sold. 

15 (d) ENFORCEMENT.—If it is determined by a Federal 

16 or State agency, or in a final court proceeding, that any 

17 person has intentionally violated, or willfully disregarded 

18 the provisions of, this section, in addition to any other pen19 alty under applicable Federal or State law, such person 

20 shall be prohibited from further engaging in the business 

21 of insurance with respect to employees of the Federal Gov22 ernment on Federal land, except— 

23 (1) with respect to existing policies; and 

24 (2) to the extent required by the Federal Govern25 ment pursuant to previous commitments. 


ccoleman on PROD1PC71 with BILLS
39 

•S 418 RS

1 (e) EXCEPTIONS.—This section shall not apply to any 

2 life insurance product specifically contracted by or through 

3 the Federal Government. 

4 SEC. 11. IMPROVING LIFE INSURANCE PRODUCT STAND5 ARDS. 

6 (a) IN GENERAL.—It is the sense of Congress that the 

7 NAIC should, after consultation with the Secretary of De8 fense, and not later than 6 months after the date of enact9 ment of this Act, conduct a study and submit a report to 

10 the Committee on Banking, Housing, and Urban Affairs 

11 of the Senate and the Committee on Financial Services of 

12 the House of Representatives on— 

13 (1) ways of improving the quality of and sale of 

14 life insurance products sold on military installations 

15 of the United States, which may include— 

16 (A) limiting such sales authority to persons 

17 that are certified as meeting appropriate best 

18 practices procedures; and 

19 (B) creating standards for products specifi20 cally designed to meet the particular needs of 

21 members of the Armed Forces, regardless of the 

22 sales location; and 

23 (2) the extent to which life insurance products 

24 marketed to members of the Armed Forces comply 

25 with otherwise applicable provisions of State law. 


ccoleman on PROD1PC71 with BILLS
40 

•S 418 RS

1 (b) CONDITIONAL GAO REPORT.—If the NAIC does 

2 not submit the report as described in subsection (a), the 

3 Comptroller General of the United States shall— 

4 (1) study any proposals that have been made to 

5 improve the quality of and sale of life insurance prod6 ucts sold on military installations of the United 

7 States; and 

8 (2) not later than 6 months after the expiration 

9 of the period referred to in subsection (a), submit a 

10 report on such proposals to the Committee on Bank11 ing, Housing, and Urban Affairs of the Senate and 

12 the Committee on Financial Services of the House of 

13 Representatives. 

14 SEC. 12. REQUIRED REPORTING OF DISCIPLINARY AC15 TIONS. 

16 (a) REPORTING BY INSURERS.—Beginning 1 year 

17 after the date of enactment of this Act, no insurer may enter 

18 into or renew a contractual relationship with any other per19 son that sells or solicits the sale of any life insurance prod20 uct on any military installation of the United States, unless 

21 the insurer has implemented a system to report to the State 

22 insurance commissioner of the State of domicile of the in23 surer and the State of residence of that other person— 

24 (1) any disciplinary action taken by any Fed25 eral or State government entity with respect to sales 


ccoleman on PROD1PC71 with BILLS
41 

•S 418 RS

1 or solicitations of life insurance products on a mili2 tary installation that the insurer knows, or in the ex3 ercise of due diligence should have known, to have 

4 been taken; and 

5 (2) any significant disciplinary action taken by 

6 the insurer with respect to sales or solicitations of life 

7 insurance products on a military installation of the 

8 United States. 

9 (b) REPORTING BY STATES.—It is the sense of Con10 gress that, not later than 1 year after the date of enactment 

11 of this Act, the States should collectively implement a sys12 tem to— 

13 (1) receive reports of disciplinary actions taken 

14 against persons that sell or solicit the sale of any life 

15 insurance product on any military installation of the 

16 United States by insurers or Federal or State govern17 ment entities with respect to such sales or solicita18 tions; and 

19 (2) disseminate such information to all other 

20 States and to the Secretary of Defense. 

21 (c) DEFINITION.—As used in this section, the term ‘‘in22 surer’’ means a person engaged in the business of insurance. 


ccoleman on PROD1PC71 with BILLS
42 

•S 418 RS

1 SEC. 13. REPORTING BARRED PERSONS SELLING INSUR2 ANCE OR SECURITIES. 

3 (a) ESTABLISHMENT.—The Secretary of Defense shall 

4 maintain a list of the name, address, and other appropriate 

5 information relating to persons engaged in the business of 

6 securities or insurance that have been barred or otherwise 

7 limited in any manner that is not generally applicable to 

8 all such type of persons, from any or all military installa9 tions of the United States, or that have engaged in any 

10 transaction that is prohibited by this Act. 

11 (b) NOTICE AND ACCESS.—The Secretary of Defense 

12 shall ensure that— 

13 (1) the appropriate Federal and State agencies 

14 responsible for securities and insurance regulation are 

15 promptly notified upon the inclusion in or removal 

16 from the list required by subsection (a) of a person 

17 under the jurisdiction of one or more of such agencies; 

18 and 

19 (2) the list is kept current and easily acces20 sible— 

21 (A) for use by such agencies; and 

22 (B) for purposes of enforcing or considering 

23 any such bar or limitation by the appropriate 

24 Federal personnel, including commanders of 

25 military installations. 

26 (c) REGULATIONS.— 


ccoleman on PROD1PC71 with BILLS
43 

•S 418 RS

1 (1) IN GENERAL.—The Secretary of Defense shall 

2 issue regulations in accordance with this subsection to 

3 provide for the establishment and maintenance of the 

4 list required by this section, including appropriate 

5 due process considerations. 

6 (2) TIMING.— 

7 (A) PROPOSED REGULATIONS.—Not later 

8 than the expiration of the 60-day period begin9 ning on the date of enactment of this Act, the 

10 Secretary of Defense shall prepare and submit to 

11 the appropriate Committees of Congress a copy 

12 of the regulations required by this subsection that 

13 are proposed to be published for comment. The 

14 Secretary may not publish such regulations for 

15 comment in the Federal Register until the expi16 ration of the 15-day period beginning on the 

17 date of such submission to the appropriate Com18 mittees of Congress. 

19 (B) FINAL REGULATIONS.—Not later than 

20 90 days after the date of enactment of this Act, 

21 the Secretary of Defense shall submit to the ap22 propriate Committees of Congress a copy of the 

23 regulations under this section to be published in 

24 final form. 


ccoleman on PROD1PC71 with BILLS
44 

•S 418 RS

1 (C) EFFECTIVE DATE.—Final regulations 

2 under this paragraph shall become effective 30 

3 days after the date of their submission to the ap4 propriate Committees of Congress under sub5 paragraph (B). 

6 (d) DEFINITION.—For purposes of this section, the 

7 term ‘‘appropriate Committees of Congress’’ means— 

8 (1) the Committee on Financial Services and the 

9 Committee on Armed Services of the House of Rep10 resentatives; and 

11 (2) the Committee on Banking, Housing, and 

12 Urban Affairs and the Committee on Armed Services 

13 of the Senate. 

14 SEC. 14. STUDY AND REPORTS BY INSPECTOR GENERAL OF 

15 THE DEPARTMENT OF DEFENSE. 

16 (a) STUDY.—The Inspector General of the Department 

17 of Defense shall conduct a study on the impact of Depart18 ment of Defense Instruction 1344.07 (as in effect on the date 

19 of enactment of this Act) and the reforms included in this 

20 Act on the quality and suitability of sales of securities and 

21 insurance products marketed or otherwise offered to mem22 bers of the Armed Forces. 

23 (b) REPORTS.—Not later than 12 months after the date 

24 of enactment of this Act, the Inspector General of the De25 partment of Defense shall submit an initial report on the 


ccoleman on PROD1PC71 with BILLS
45 

•S 418 RS

1 results of the study conducted under subsection (a) to the 

2 Committee on Banking, Housing, and Urban Affairs of the 

3 Senate and the Committee on Financial Services of the 

4 House of Representatives, and shall submit followup reports 

5 to those committees on December 31, 2008 and December 

6 31, 2010. 


ccoleman on PROD1PC71 with BILLS
Calendar No. 518 

109TH CONGRESS 

2D SESSION S. 418 

[Report No. 109

–282] 

A BILL 

To protect members of the Armed Forces from unfinancial, and investment products. scrupulous practices regarding sales of insurance, 

JULY 13, 2006 

Reported with an amendment 


ccoleman on PROD1PC71 with BILLS