Voya 2013 Annual Report Download - page 65

cannot predict whether any such recommendations will be made or their effect on our business, results
of operations, cash flows or financial condition.
• The Dodd-Frank Act creates a new framework for regulating over-the-counter (“OTC”) derivatives,
which may increase the costs of hedging and other permitted derivatives trading activity undertaken by
us. Under the new regulatory regime and subject to certain exceptions, certain standardized OTC
derivatives must be cleared through a centralized clearinghouse and executed on a centralized exchange
commencing in 2013. It establishes new regulatory authority for the SEC and the CFTC over
derivatives and parties to derivative transactions including “swap dealers,” “security-based swap
dealers,” “major swap participants,” “major security-based swap participants” as well as end users of
derivatives. In addition to mandatory central clearing of certain derivatives, such market participants
may be subject to significant regulatory requirements including registration, reporting and
recordkeeping, capital and margin and trade execution requirements. However, the transition to central
clearing and the new regulatory regime governing derivatives presents potentially significant business
and operational risk for us which could materially and adversely impact both the cost and our ability to
effectively hedge various risks, including equity and interest rate market risk features within many of
our insurance and annuity products.
• The CFTC and SEC jointly adopted final rules, which (subject to certain exceptions) became effective
on October 12, 2012, to further define the terms “swap” and “security-based swap,” which clarify that
certain products (i) issued by entities subject to supervision by the insurance commissioner (or similar
official or agency) of any state or by the United States or an agency or instrumentality thereof (the
“Provider Test”) and (ii) regulated as insurance or otherwise enumerated by rule are excluded from the
definition of a “swap” and “security-based swap.” In addition, any insurance contracts which might
otherwise be included within the definition of “swap” or “security-based swap” which were issued on
or before the effective date of the rules will be grandfathered and thereby excluded from the
definitions, as long as the issuer satisfies the Provider Test. However, the rulemaking does not extend
the exemption to certain products issued by insurance companies including GICs, synthetic GICs,
funding agreements, structured settlements and deposit administration contracts which the CFTC and
SEC determined should be considered in a facts and circumstances analysis. As a result, there remains
some uncertainty regarding the applicability of the definitions of “swap” and “security-based swap” to
some products offered by us. We do not believe our products come within the definition of “swap” or
“security-based swap.” However, if any products issued by us meet the criteria for either definition
they would be subject to regulation under the Dodd-Frank Act, including clearing of certain
standardized transactions through a centralized clearinghouse, execution of certain standardized trades
on a centralized exchange and related reporting requirements. The legislation also requires the SEC and
CFTC to conduct a study to determine whether stable value contracts fall within the definition of swap
contracts, and if so, to determine whether an exemption to their regulation is appropriate. The SEC and
CFTC are considering the study in light of the adoption of the rules described above. Stable value
contracts are exempt from the legislation’s swap provisions, pending the effective date of any such
regulatory action.
• The Dodd-Frank Act established FIO within the Treasury Department to be headed by a director
appointed by the Secretary of the Treasury. See “—Insurance Regulation—Federal Initiatives
Affecting Insurance Operations” above.
• The Dodd-Frank Act established the Consumer Financial Protection Bureau (the “CFPB”) as an
independent agency within the Federal Reserve to regulate consumer financial products and services
offered primarily for personal, family or household purposes, with rule-making and enforcement
authority over unfair, deceptive or abusive acts and practices. However, the legislation does not give
the CFPB jurisdiction over insurance products or services, or over persons regulated by a state
insurance regulator, subject to exceptions for certain non-insurance consumer financial products or
services. In addition, broker-dealers and investment advisers are not subject to the CFPB’s jurisdiction
when acting in their registered capacity. Employee benefit plans and other retirement products are
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