Senators Demand Changes in Fiscal Advice to Soldiers

NEW YORK -- The Pentagon on Thursday was criticized by members of the Senate Banking Committee for failing for years to work with federal and state financial regulators to prevent deceptive sales of unsuitable insurance and investment products to members of the armed forces, The New York Times reported.

The criticism came at a hearing held by the Senate Committee on Banking, Housing and Urban Affairs to review an extensive new report, released Thursday by the General Accountability Office, on the flawed financial products sold to military consumers and the questionable techniques being used to sell them.

John M. Molino, the deputy under secretary of defense for military community and family policy, acknowledged that the Defense Department had not done enough to prevent improper or deceptive sales pitches, despite numerous Pentagon studies showing that action was needed. But Molino said the Pentagon was now providing better financial training to the troops, working more closely with regulators, and developing stronger policies. He also noted that Congress itself has sometimes responded to insurance industry pressure by limiting the Pentagon's ability to tighten its sales rules.

Richard J. Hillman, managing director of the GAO unit on financial markets and community investment, called on Congress to ensure that insurance products sold to military consumers comply with state laws; to abolish a form of high-cost mutual fund sold almost exclusively to military consumers; to clarify that state insurance and federal securities regulators have jurisdiction over sales on military bases; and to direct the Defense Department to work more cooperatively with state and federal regulators. He also recommended that the Pentagon and state regulators work to determine what insurance products are suitable for sale to military consumers and to prevent unsuitable products from being sold.

But the single most important step that needs to be taken, he said under questioning would be for the Defense Department to work more closely with civilian regulator.

-- NYSSCPA.org News Staff

Posted on 11/18/05