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Companion Bills Would End Sales of Abusive Products on Military Bases

The House of Representatives passed the Military Personnel Financial Services Protection Act on a 392-to-2 vote. A Senate bill has been introduced that mirrors H.R. 5011. Senators Richard Shelby (R-AL) and Paul Sarbanes (D-MD) have asked the Government Accountability Office to conduct a study on the marketing and sale of financial services products at U.S. military facilities. They have also asked the SEC to review its jurisdiction over the sales practices and investment products at issue, and followed up with a second request that the SEC investigate whether certain of the reported sales practices were illegal.

The bills respond to reports that soldiers on some military bases were encouraged to purchase contractual plan mutual funds, a product that Rep. Max Burns (R-GA) characterized as an obscure product that disappeared from the civilian market more than two decades ago. The funds charge a 50% commission on the buyer's first year of contributions. Burns, an Army veteran, introduced the legislation to ban the sale of the products and to ensure full regulation of all life insurance and other financial products sold on military bases. The Senate bill was introduced by Hillary Clinton (D-NY) and Mike Enzi (R-WY).

The bills would amend Investment Company Act section 27 to terminate any future sales of the contractual plan mutual funds by registered investment companies. Under an amendment offered by Rep. Michael Oxley (R-OH), the House bill would also amend 1934 Act section 15A relating to recordkeeping about broker-dealer registration and disciplinary information. Oxley's amendment also amends Investment Advisers Act section 204 relating to the information submitted to filing depositories.

H.R. 5011 would also require the maintenance of a list of insurance agents and financial advisers that have been banned from doing business on U.S. military bases. Military installations would be notified of any changes to the list.

The GAO report will address the regulatory oversight associated with the marketing and sale of financial products to service members on U.S. installations and to compare the oversight and consumer protections with that available to the
general public. Shelby and Sarbanes also asked the GAO to assess the accessibility that military personnel have to a range of financial products on U.S. military bases and the quality of those products.