MINUTES OF MEETING
ASSEMBLY COMMITTEE ON COMMERCE
Sixty-seventh Session
June 16, 1993
The Assembly Committee on Commerce was called to order by Chairman Gene T. Porter at 3:45, on Wednesday, June 16, 1993, in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda, Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Mr. Gene T. Porter, Chairman
Mr. Morse Arberry, Jr., Vice Chairman
Ms. Kathy M. Augustine
Mr. Rick C. Bennett
Mr. John Bonaventura
Mr. Dean A. Heller
Mr. David E. Humke
Ms. Erin Kenny
Ms. Myrna T. Williams
COMMITTEE MEMBERS ABSENT:
Mr. Val Z. Garner
Ms. Chris Giunchigliani
Mr. Richard Perkins
Mr. Scott Scherer
GUEST LEGISLATORS PRESENT:
Assemblyman Louis A. Toomin, District 15; Assemblyman Sandra J. Tiffany, District 21.
STAFF MEMBERS PRESENT:
Mr. Paul Mouritsen, Senior Staff Analyst, Legislative Counsel Bureau
OTHERS PRESENT:
Mr. John Pappageorge, Clark County; Officer Ken Wellington, Las Vegas Metropolitan Police Department; Mr. Jim Foreman, Code Compliance Manager, Clark County; Mr. Doug Dickerson, City Manager, Las Vegas; Ms. Lisa Foster, City of Sparks; Ms. Anita Laruy, City of North Las Vegas; Mr. Terry Collison, Investigator, Nevada Division of Investigation; Ms. Mary Santina, Retail Association of Nevada; Mr. David Williams, President, Aervoe Pacific Company; Mr. Robert Hills, Anti-graffiti Program Coordinator, National Paint & Coatings Association; Ms. Lucille Lusk, Nevada Coalition of Concerned Citizens; Ms. Kay Mandel, Assistant Executive Officer, Nevada State Contractors Board; Ms. Margi Green, State Contractors Board; Mr. John Sande, Nevada Bankers Association; Mr. David B. Bianchi, Northern Nevada Association of Life Underwriters and Nevada State Association of Life Underwriters; Mr. James Wadhams, Nevada Independent Insurance Agents; Mr. Fred Hillerby, Professional Insurance Agents of California and Nevada; Ms. Teresa Rankin, Insurance Commissioner; Mr. Scott Walshaw, Commissioner of Financial Institutions; Mr. David L. Troescher, President-elect, Nevada State Association of Life Underwriters (See also Exhibit B attached hereto).
AB 615 Makes various changes related to placing graffiti on or otherwise defacing property.
Assemblyman Louis A. Toomin, District 15, testified. He advised Nevada had no law pertaining to graffiti and said Nevada's property damage statutes did not truly address the issue of graffiti.
Mr. John Popageorge, Clark County, testified. He said Clark County supported AB 615.
Officer Ken Wellington, Las Vegas Metropolitan Police Department, testified. He advised he had been an officer with the department for 16 1/2 years and was currently assigned to the Southern Nevada gang task force. He said he supported both AB 615 and AB 605 but had one concern about AB 605 which had to do with the provision regarding population.
Officer Wellington advised there were four types of graffiti: slogans, "curse words...and so forth," gang graffiti, and tagger graffiti. He indicated tagger graffiti was the most recent type of graffiti. He stated gang graffiti was used primarily to mark "turfs" and was used in inner-city areas. He explained tagger graffiti was used for fun and said, "The harder it is to clean up, the higher it is, the more they put up, the better off they are."
Mr. Jim Foreman, Code Compliance Manager, Clark County, testified. He stated the county supported AB 615. He advised there were many state, county and city laws concerning graffiti but there was little data regarding what those laws did and did not do. He contended if the problem of graffiti was addressed at an early stage, the deterrents contained in AB 615 could be effective.
Mr. Perkins asked if Mr. Foreman believed an owner of property on which graffiti was placed would be able to comply with the requirement of AB 615 that he remove that graffiti within 15 days after it was discovered. Mr. Foreman indicated he would prefer a longer period of time in which to remove graffiti be provided but said Clark County could work with the provision it be removed within 15 days. He advised he presently had 15 individuals who abated graffiti for the county and who did a good job of doing so. He advised graffiti had decreased in Clark County as a result of recent law enforcement action but said there might be times when the Clark County Parks Department would be unable to comply with the requirement to remove graffiti within 15 days after it was discovered.
Mr. Perkins asked, "Do you know what your turn-around time is right now, on average?" Mr. Foreman replied the average turn-around time (to remove graffiti after its discovery) for block walls in residential neighborhoods, was between two and four weeks, but he indicated that time period was being reduced daily.
Mr. Foreman apprised the cost of his program for graffiti removal was $100,000. He speculated the cost of removing graffiti from both commercial property and private property in Las Vegas would be nearly $1 million. He declared the cost of removing graffiti in Los Angeles was "in the millions and millions."
Mr. Doug Dickerson, City Manager, Las Vegas, testified. He stated the city of Las Vegas supported both AB 605 and AB 615. He advised the city had had an anti-graffiti program since 1989, the purpose of which was to paint over all graffiti which was within the city limits and accessible from a public right-of-way within 72 hours. He said the city had established a hot-line and attempted to develop a public awareness program. He advised the cost to the city to start its anti-graffiti program was approximately $150,000, which included $60,000 for two full time staff members who did nothing but paint over graffiti, approximately $60,000 for a vehicle and painting equipment and $30,000 for paint and supplies. He stated in the years subsequent to the program's commencement, staffing levels had remained the same, but the cost for paint used in the program had increased to $35,000 because more work was being done to paint over graffiti.
Mr. Dickerson explained during the past year, the city's response time in removing graffiti had increased because of an increase in the amount of graffiti; he said it sometimes took between five and six working days to respond to reports of graffiti. He indicated during one period when very heavy graffiti was being done, the city's response time was three weeks.
Mr. Dickerson advised the city received 3,000 telephone calls per year (reporting graffiti) and painted over graffiti at approximately 2,000 sites per year, using approximately 2,000 gallons of paint and expending 5,000 man-hours to do so. He explained Las Vegas' Parks and Leisure Activities Department's anti-graffiti efforts extended only to painting over graffiti. He declared the department was not an enforcement agency.
He stated Las Vegas' current codes and ordinances did not provide the stiff penalties needed to keep graffiti offenders from continuing to vandalize both public and private property. He said efforts to prevent graffiti should be focused on making it an illegal and punishable crime.
Mr. Arberry asked if the city had caught anyone in the act of spraying graffiti. Mr. Dickerson replied the city offered a reward of $250 for information (about individuals who sprayed graffiti) and had given only one such reward in four years. Officer Wellington interjected in the previous six months, he had arrested only four people for spraying graffiti and had ticketed approximately twelve people for spraying graffiti. He explained Las Vegas Metropolitan Police Department encountered problems in apprehending individuals who sprayed graffiti because those individuals engaged in that activity under cover of darkness and also, because those individuals had begun carrying weapons and witnesses to their acts were intimidated.
Mrs. Williams asked Officer Wellington if he envisioned any difficulty in enforcing those provisions of AB 615 dealing with the sale of aerosol containers of paint. Officer Wellington responded those who sprayed graffiti were not purchasing paint but were stealing it. He advised AB 615 would deter such theft by requiring businesses to lock up aerosol containers of paint.
Ms. Lisa Foster, City of Sparks, testified. She said the city supported AB 615. She declared, "I don't think there needs to be a state fund and a city fund and a county fund because when the person's arrested, they're either going to be in an incorporated city or the unincorporated area, and I think it would get very complex all these different assessment going to different places." She indicated what she had just expressed was her only concern about AB 615.
Ms. Foster advised the City of Sparks had a graffiti abatement program. She stated the city did not have many problems with graffiti and spent approximately $3,000 per year (on graffiti abatement). She suggested AB 615 would help eliminate some problems which the city experienced with graffiti but indicated the city had just begun to experience those problems.
Ms. Anita Laruy, City of North Las Vegas, testified. She stated the city supported both AB 615 and AB 605. She advised the city had had a graffiti removal program for approximately three years and said AB 615 and AB 605 could only strengthen that program.
Assemblyman Toomin gave further testimony. He said portions of the laws of all "the graffiti capitals of this country" had been included in AB 615 and indicated AB 615 probably would need to be revised. He contended a major aspect of addressing the graffiti problem was apprehending individuals who made graffiti and advised AB 615 would establish a reward fund from which rewards in amounts as large as $5,000 could be paid "to catch a perpetrator." He explained AB 615 would require an individual caught making graffiti to pay an assessment of $250 in addition to any fine imposed on him and that assessment would be used to maintain the reward fund.
Mr. Terry Collison, Investigator, Nevada Division of Investigation, testified. He said he was currently assigned to a federal gang task force in Reno. He expressed support for both AB 615 and AB 605 but requested the population figures contained in those bills be eliminated because gang activity and graffiti were being encountered in such places as Yerington, Fernley, Hawthorne and Elko. He advised some violence was being experienced from "taggers" who were from the Los Angeles area.
Ms. Mary Santina, Retail Association of Nevada, testified. She advised the association opposed AB 615 as it was written but was willing to work with Assemblyman Toomin to develop passable legislation.
Mr. David Williams, President, Aervoe Pacific Company (Aervoe), testified. He advised Aervoe was the largest manufacturer of spray paints and coatings in Nevada and said any legislation affecting spray paint was of primary concern to Aervoe. He explained he was concerned most about "the lockup aspect" of the proposed legislation. He declared based on past history, when paint products were locked up, paint product retail sales declined by nearly 40 percent while spray graffiti was not reduced.
Mr. Williams said he was personally involved in efforts to reduce graffiti in Oakland, California, in 1986, and in San Jose, California, in 1988. He explained in Oakland, the graffiti problem involved "taggers" and Oakland instituted a program which asked such individuals to participate in an artistic contest, awarded cash prizes to winners of the contest and donated a sum of money equal to those cash prizes to clean up (graffiti) in Oakland. He said Oakland's program lasted nearly two years and was exceptionally effective. He declared when the program was discontinued in 1988, tagger graffiti increased dramatically. He advised in 1988, the city of San Jose, California, introduced a program to combat gang member graffiti and appointed a special graffiti task force leader "which embodied the police, the juvenile court system and the court system to not only apprehend these people but assign them specific cleanup and fines." He contended San Jose's program worked very effectively for a period of three years.
Mr. Williams suggested graffiti was a social problem and contended if emphasis was placed on making producers of graffiti pay for their crimes, graffiti would be reduced. He proposed addressing the problem of graffiti would impose a cost on society and require a community decision to make consequences to those producing graffiti a priority. He declared retailers were not instruments of social change.
Mr. Williams read portions of a newspaper article which appeared in the Los Angeles Times on June 3, 1993, and which concerned efforts by the city of Anaheim to eliminate graffiti.
Mr. Williams advised theft was not always the means by which spray paint products were obtained. He suggested if stealing spray paint was made attractive, it would "become just that, an attractive nuisance."
Mr. Williams suggested by modifying the legislation proposed by AB 615, Nevada could send to its citizens and to the nation the message that abuse of public and private property by graffiti would not be tolerated.
Mr. Robert Hills, Anti-graffiti Program Coordinator, National Paint & Coatings Association, testified by reading from prepared text (Exhibit C).
Mr. Hills expanded on portions of his written testimony. He suggested community service sentencing reduced pressure on the juvenile justice system. He stated imposing limitations on possession of graffiti tools gave police officers an additional weapon (with which to fight graffiti). He contended citizen rewards gave "an empowerment to the citizens whose property and neighborhoods are being offended by graffiti," called attention to the crime of producing graffiti and involved the media. He proposed suspension of or delay of driving privileges was a penalty which would impose a low cost on taxpayers but have a considerable impact on vandals. He indicated spray paint was not the only tool of the graffiti vandal and in many places not the vandal's primary tool. He advised the most current type of graffiti tool was the etching tool, used to put "tags" and gang symbols on windows. He said another tool, used primarily in the western United States, was called "mean streak" and was a marker, the marks from which were nearly impossible to remove from glass and other materials.
Mrs. Williams asked if Mr. Hill testified Las Vegas had a "lockup" ordinance. Mr. Hill replied affirmatively.
Ms. Lucille Lusk, Nevada Coalition of Concerned Citizens, testified. She said the coalition considered the penalties provided by AB 615 to be highly desirable as applied to makers of graffiti but was concerned about those penalties if they were to apply to an individual who merely possessed a paint container. She stated the coalition was also concerned about those penalties relating to driver's license suspensions and did not see a direct and rational connection (between such penalties and the crime of making graffiti). She advised the coalition preferred those penalty provisions of AB 615 relating to community service, particularly if such community service was applied to abatement of graffiti, thereby creating a rational connection between the penalty and the misbehavior it penalized.
She contended the coalition did not object to including in Nevada law provisions which would make possessing aerosol paint cans in certain specified public places or on private property without the property owner's permission a criminal offense. She referred to the provision of AB 615 contained on page 4, in lines 8 and 9, and indicated the coalition was concerned about provisions of that kind. She suggested there were many valid reasons for a minor to possess a paint can. She said the coalition supported many of the provisions of AB 615 but would appreciate it if the legislature would avoid making simple possession of a paint can a criminal offense. Ms. Lusk also expressed concern about the provision of AB 615 which would make it unlawful for an individual other than a minor's parent or legal guardian to sell, give or in any manner, provide an aerosol container of paint to a minor.
Chairman Porter closed the hearing on AB 615.
AB 605 Regulates sale of aerosol containers of paint in larger cities and makes various changes related to placing graffiti on and otherwise defacing property.
Assemblyman Kathy M. Augustine, District 12, left her chair in the committee and testified by reading from prepared text (Exhibit D). She indicated the reward for apprehension and conviction of offenders (to which she referred in her testimony) would be in a sum of up to $500.
Ms. Augustine provided a copy of a newspaper article concerning proposed attempts to be made in Las Vegas to end gang graffiti (Exhibit E) and also provided a copy of a Clark County ordinance containing provisions concerned with storage of and display of graffiti implements by merchants (Exhibit F). She advised the Clark County ordinance applied to cities which were not encompassed by the provisions of AB 605.
Ms. Augustine advised the purpose of the city population cap set forth in AB 605 was to preclude AB 605 having a major impact on small retailers in rural counties of Nevada.
Chairman Porter closed the hearing on AB 605.
AB 597 Requires state contractors' board to maintain record and provide information concerning certain complaints, disciplinary action and lawsuits regarding contractors licensed by board.
Assemblyman Sandra J. Tiffany, District 21, testified. She advised AB 597 was a public information bill. She explained the purpose of AB 597 was to make "existing complaint and investigation tracking system information" (concerning complaints about contractors) available to the public. She stated the contractors board presently had a system through which it maintained information regarding contractor licensing and regarding investigation of complaints. She advised the information regarding contractor licensing was readily available to the public but the information concerning investigation tracking was not available to the public.
Ms. Tiffany said although the contractors board believed providing information to the public concerning complaints about contractors to be a good idea, it had certain concerns about doing so. She stated the board wished information about a complaint provided to the public only after the complaint was investigated by the board and resolved. Ms. Tiffany said she felt such a requirement was restrictive. She advised she did believe information should be provided to the public only about those complaints determined to be valid. She stated the board also wished to limit the number of requests for information in any given month, but she contended the public should have unlimited access to information.
Ms. Tiffany said the data processing cost to enable the board to provide information to the public would be approximately $7,800 and provided a document in which information concerning such cost was contained (Exhibit G). She explained that cost would include the cost of providing the ability to search for information by using various factors, such as an address or the name of a subdivision, a community or a project. She indicated the data processing system would also be changed to provide information in English rather than in code to enable members of the public to read reports generated by the system.
Ms. Tiffany advised the contractors board was concerned about liability (which might arise from its providing information to the public) and pointed out a disclaimer statement was contained in Exhibit G.
Ms. Tiffany said proposed amendments to AB 597 were set forth on the last page of Exhibit G. She maintained the proposed amendments would both remove all references to lawsuits from AB 597 and eliminate the provision for obtaining information by telephone. She advised the proposed amendments would provide that certain kinds of information be made available and explained search criteria would have to be added to the existing data processing system in order to provide that information. She said in order to address concerns about data processing costs, the effective date of AB 597 would be delayed until January 1, 1994. She indicated the proposed amendments included a provision that a report concerning the effectiveness of the program provided by AB 597 be given to the legislature.
Ms. Kenny asked who would determine the validity of complaints. Ms. Tiffany replied the state contractors board presently had procedures in place to determine the validity of complaints and she felt comfortable with the board's making that determination.
Mr. Perkins asked if there were complaints pending against a contractor which had not been resolved, how it could be determined whether those complaints were valid or were invalid. Ms. Tiffany responded a remark could be entered in the text field of a report concerning such an unresolved complaint indicating the complaint was "still open and unresolved" and said the report need not specify the subject of the complaint. Mr. Perkins expressed concern about there being a report which would reflect complaints against a contractor when such complaints might be invalid and unsubstantiated. Discussion ensued between Ms. Tiffany and Mr. Perkins.
Mr. Perkins asked if Ms. Tiffany had been able to resolve the fiscal concern regarding AB 597. Ms. Tiffany replied the fiscal problem was difficult to resolve and declared if she was to ask the contractors board whether or not the board had the money (necessary to implement the provisions of AB 597), the board would say it did not have the money. She contended the necessary money was available.
Ms. Kay Mandel, Assistant Executive Officer, Nevada State Contractors Board, testified. She said she had been with the board for a number of years. She advised in the past, the board provided information concerning complaints over the telephone, and she indicated that information frequently concerned complaints about swimming pool contractors. She explained swimming pool salesmen used information concerning the number of complaints about a swimming pool contractor as a selling point and contended it was unfair for them to do so because some such contractors might build 300 swimming pools per year and others might build only five swimming pools per year. Ms. Mandel maintained it was unfair to contractors to provide information concerning complaints against them, either by telephone or by computer, until such time as those complaints were proved valid.
Ms. Margi Green, State Contractors Board, testified. Ms. Green said she had not had an opportunity to review in detail the amendments to AB 597 proposed by Ms. Tiffany and she was uncertain what those proposed amendments contained.
Ms. Green advised the board had budgeted funds for computer programming costs of approximately $16,000 for the first year (covered by the budget), which sum was intended for a licensing program, and of $7,600 for the second year. She said she believed in order to provide an additional change to its computer programming system, the board, again, would have to take its budget before the Ways and Means Committee; she contended it was not feasible for the board to do so.
Ms. Green referred to a document pertaining to the providing of public access to information (Exhibit H). She said Exhibit H did not set forth how information was to be provided but she believed the board should be allowed to determine the manner in which it provided information. Ms. Green said no states provided information concerning complaints about contractors in a manner which met Ms. Tiffany's specifications. She enumerated several states and said those states did not supply information concerning complaints about contractors based upon location. She advised at the present time, anyone could come to the board's office and review the board's file concerning a particular contractor, including any complaints contained therein, with the exception of any information contained in that file which was confidential under the law.
Chairman Porter asked if Ms. Green had shown Exhibit H to Ms. Tiffany. Ms. Green replied she had.
Chairman Porter closed the hearing on AB 597.
AB 756 Authorizes licensure of banks by commissioner of financial institutions to sell annuities.
Mr. John Sande, Nevada Bankers Association, testified, after first introducing Mr. David Olsen, general counsel, City Bank - Nevada. Mr. Sande said AB 756 attempted to eliminate confusion regarding the sale of annuities by banks. He stated in 1989, the Office of the Comptroller of the Currency (OCC) ruled national banks, in states with laws similar to those of Nevada, could sell annuity products. He explained the legal basis for that ruling was that annuities were not insurances products. He advised the OCC regulated national banks but did not regulate state banks. He submitted a document entitled "Legislative History" (Exhibit I) which he indicated would provide some background information concerning what had occurred regarding the sale of annuities by banks.
Mr. Sande advised an opinion had been sought from the Attorney General. He stated the Attorney General agreed with the OCC that annuities were not insurance products and advised annuities could be sold by banks in Nevada if it were not for the fact Nevada had a statute which said banks could not act as agents for insurance companies. He contended because insurance companies were the only entities presently offering annuities for sale, "...we are precluded under this interpretation, from selling directly to the public."
Mr. Sande advised the intent of AB 756 was to confirm annuities were not insurance products and to allow banks to sell annuities directly to the public. He stated AB 756 provided the Commissioner of Financial Institutions would regulate Nevada's state banks in their sales of annuities.
Mr. David B. Bianchi, Northern Nevada Association of Life Underwriters and Nevada State Association of Life Underwriters, testified in opposition to AB 756. He advised there had been a tremendous amount of litigation concerning the sale of annuities by banks and said the issue of such sale was currently pending before the United States Court of Appeals. He stated it made sense (for the legislature) to wait to address the issue until it had been determined on the federal level. He said the associations recommended the legislature not act on AB 756 "...until these other issues have been settled."
Mr. James Wadhams, Nevada Independent Insurance Agents (NIIA), testified in opposition to AB 756. He submitted a group of copies of letters in opposition to AB 756 (Exhibit J). He said NIIA believed the issue (addressed by AB 756) would be resolved through pending litigation.
Mr. Wadhams suggested there were problems concerning the manner in which AB 756 was drafted. He contended there was no logical reason to have the Commissioner of Financial Institutions regulate the sale of annuities. He indicated AB 756 reflected annuities were identified in NRS 688 which, he said, "...is part of the Insurance Commissioner's jurisdiction." He proposed there were serious consumer protection issues concerning AB 756 which involved the education, experience and qualification of individuals who would be permitted to sell annuities.
Mr. Wadhams declared NIIA opposed AB 756 and suggested no action be taken on AB 756 until the issue of sale of annuities by banks was resolved by the courts.
Chairman Porter asked the nature of the action pending before the courts. Mr. Wadhams responded the litigation pending before the courts involved "...a small bank exemption." He advised in 1916, a law was passed which allowed banks in communities of under 5,000 people to be authorized to sell insurance products; he said that law remained in effect at this time. He indicated it was now being proposed banks sell annuities throughout the state of Nevada; he contended such a proposition was not Congress' intention when, in 1916, it passed the law he had mentioned.
Chairman Porter asked Mr. David P. Olson, Citibank-Nevada, to come forward and asked Mr. Olson to give his interpretation of the ongoing litigation concerning sale of annuities by banks. Mr. Olson said the litigation discussed by Mr. Sande involved an action commenced in Texas and initiated by insurance trade groups which were challenging a ruling by the OCC which approved sale of annuities by banks. He explained, "...because with that regulatory authority, national banks were able, by virtue of federal law, to override all of the state laws and go out and underwrite annuities." He indicated the insurance trade groups to which he referred lost the litigation commenced in Texas at both the district court and the appellate court levels. He advised the litigation was subsequently transferred to the appellate court in Washington, D.C., and said he believed the insurance trade groups also lost the litigation at that level.
Mr. Olson suggested the litigation being discussed was meaningless because nearly every state in the United States, other than Nevada, permitted banks to sell annuities. He contended that litigation was merely an attempt to prevent banks from doing that which they were already doing.
Mr. Fred Hillerby, Professional Insurance Agents of California and Nevada, testified. He said lines 15 and 16, on page 1, of AB 756 defined annuities as insurance products. He stated it was the public policy of the state of Nevada to protect consumers by ensuring those who sold insurance to consumers were licensed and regulated to do so. He suggested except for the fact banks were licensed, such consumer protection was missing from the provisions of AB 756. He contended banking and insurance were two separate businesses. He declared based on public policy, the organization he represented opposed AB 756.
Ms. Augustine asked Mr. Hillerby if he did not think banks were more highly regulated than insurance companies. Mr. Hillerby responded he did not think so. He clarified he had been discussing regulation of agents rather than regulation of companies.
Ms. Teresa Rankin, Insurance Commissioner, testified. She provided a copy of a document entitled "Legislative Report" (Exhibit K).
Ms. Rankin said the Department of Insurance was concerned about AB 756 because it provided for regulation (of sale of annuities by banks) by the Commissioner of Financial Institutions. She advised the department regulated agents who sold insurance and established such agents had the appropriate information and knowledge to enable them to do. She indicated AB 756 set no standards for those who would sell annuities. Ms. Rankin explained pursuant to the Life and Health Guaranty Fund Act, if "an annuity company or life company" failed, its liabilities would be paid from the guaranty fund and those payments would be credited against the general fund of the state of Nevada. She said, "...not only is the consumer at risk, but should one insurance company be the product sold by these agents, there could be, if you will, a run on the bank or an oversale similar to what we had in Executive Life or some of the other products, and you could in fact have a failure that then could, through the guaranty fund, come back against the state general fund." She declared there were legitimate solvency concerns which were not addressed by AB 756.
Ms. Rankin stated she believed the court cases (discussed by previous witnesses) had not been fairly represented to the committee. She referred to a case concerned with variable annuities and advised those who sold variable annuities were doubly regulated through "NASD" as they were regulated both by its securities division and its insurance department. She suggested if annuities were to be viewed as investment products, the legislature should consider the standards of both those entities. She declared regulation by the Commissioner of Financial Institutions was not appropriate when the sale of an insurance product was involved.
Mr. Scott Walshaw, Commissioner of Financial Institutions, testified. He referred to a request made to the Attorney General for an opinion on the issue of whether or not state-chartered banks could sell annuities and for clarification of whether or not annuities were considered insurance products under the law of Nevada. He said he understood the Attorney General's opinion held annuities were not insurance products and state-chartered banks would not be prohibited from selling annuities provided they were licensed to do so. He said it appeared no one was licensed to sell annuities in Nevada "...unless they go through the Insurance Commissioner's office." He stated he believed the purpose of AB 756, in part, was to clarify how the sale of annuities was to be licensed. He contended pursuant to requirements of AB 756, he would be using the same standards to license state banks to sell annuities as those standards used by the Comptroller of the Currency to allow nationally-chartered banks to sell products similar to annuities.
Chairman Porter asked if a nationally-chartered bank could sell annuities at this time. Mr. Walshaw replied as far as the Comptroller of Currency was concerned, nationally-chartered banks could do so, but there had been considerable litigation on that issue. He said his present understanding was nationally-chartered banks were not prohibited from selling annuities in those states in which licensing and all other matters concerned with such sales had been addressed.
Ms. Rankin gave further testimony. She explained a conflict regarding sale of annuities by banks existed between the decision of the Comptroller of the Currency as a banking regulator and the McCarran-Ferguson Act "...that says if it is the business of insurance, as defined in a series of cases by the U.S. Supreme Court, then as the business of insurance it can be regulated as insurance and the Comptroller has to stay out." She advised the conflict arose from the fact the Comptroller advised national banks those banks could sell annuities while the insurance departments of various states maintained their states had deemed annuities to be the business of insurance. She maintained the opinion of the Attorney General of Nevada held annuities were defined in NRS 688 as insurance. Ms. Rankin said in a recent New York court case, the Supreme Court held the definition "business of insurance" could not be used to "circumvent other federal laws under the supremacy clause."
Mr. Rankin provided a copy of the opinion of the Attorney General to which she and other witnesses had referred (Exhibit L).
Mr. David L. Troescher, President-elect, Nevada State Association of Life Underwriters, testified. He provided a group of "Legislative Reports" (Exhibit M) and indicated the Legislative Report designated "FLR 93-10" provided background information which might be helpful to the committee.
Mr. Troescher said one of his concerns about AB 756 related to consumer protection. He indicated he had no substantial problem with banks marketing annuities but rather had a problem with the prospect of any bank teller, regardless of his education or experience, "...giving this kind of investment advice and getting a free ride to do that." He declared those presently involved in selling annuities were required to be licensed and to acquire continuing education. He contended significant amounts of money were involved in annuities.
Mr. Troescher indicated Ms. Rankin had raised concerns about insolvency and about regulation. He advised at present, if an insurance company responsible for annuities became insolvent, there was a system of recourse in place for consumers. He asked, rhetorically, "But if they bought this through a teller at the bank, who are they going to sue? The bank? Are they going to sue the teller for the advice?" He declared the issue in question was one of accountability and contended AB 756 did not address that issue well.
Chairman Porter closed the hearing on AB 756.
Chairman Porter called for a motion to approve the minutes of the Commerce Committee for those meetings held on March 29th, April 5th, April 12th, April 14th, April 19th, April 21st, April 26th, May 3rd, May 5th, May 10th, May 14th and May 17th, 1993.
ASSEMBLYMAN BENNETT MOVED TO APPROVED THE MINUTES.
ASSEMBLYMAN WILLIAMS SECONDED THE MOTION.
THE MOTION WAS CARRIED UNANIMOUSLY BY ALL THOSE PRESENT.
There being no further business to come before the committee, Chairman Porter adjourned the meeting.
RESPECTFULLY SUBMITTED,
_______________________
SARA J. KAUFMAN
COMMITTEE SECRETARY
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Assembly Committee on Commerce
June 16, 1993
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