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June 13, 2007, the Governor of Oregon signed a new bill that adds
variable annuities to the definition of security under the Oregon
Securities Act. The law becomes effective on January 1, 2008. While
variable annuities have long been treated as securities under federal
securities laws, classification as a security under the Oregon Securities
Act will likely make it easier for state regulators and private litigants
to bring claims against the insurance companies that develop and market
these products and the networks of brokers, dealers and agents that
sell them for the following reasons:
• Lower burden of proof – The Oregon Securities Act
is generally considered to require a lower burden of proof on plaintiff's
claims compared to federal securities laws or state common-law claims.
• Increased supervisory duties – The Oregon Securities
Act requires a broader analysis of the suitability of a variable
annuity product for an investor.
• Longer statute of limitations – The Oregon Securities
Act provides a longer statute of limitations for investors to bring
claims compared to federal securities laws.
• Attorney fees – The Oregon Securities Act permits
plaintiffs to recover attorney fees, which are not currently permitted
under the federal securities laws.
This new law does not change how variable annuities are regulated
under the Oregon Insurance Code. However, as a security, the Oregon
Securities Division may require notice filings or charge fees in
connection with the sale of variable annuity products.
For additional questions, please contact the Insurance Regulatory
Group and the Securities Group at Schwabe, Williamson & Wyatt.
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