Voya 2014 Annual Report Download - page 73

Marketing and Sales
State insurance regulators are becoming more active in adopting and enforcing suitability standards with
respect to sales of fixed, indexed and variable annuities. In particular, the NAIC has adopted a revised Suitability
in Annuity Transactions Model Regulation (“SAT”), which will, if enacted by the states, place new
responsibilities upon issuing insurance companies with respect to the suitability of annuity sales, including
responsibilities for training agents. Several states have already enacted laws based on the SAT.
Securities Regulation Affecting Insurance Operations
Certain of our insurance subsidiaries sell variable life insurance and variable annuities that are registered
with and regulated by the SEC as securities under the Securities Act of 1933, as amended (the “Securities Act”).
These products are issued through separate accounts that are registered as investment companies under the
Investment Company Act, and are regulated by state law. Each separate account is generally divided into sub-
accounts, each of which invests in an underlying mutual fund which is itself a registered investment company
under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Our mutual funds,
and in certain states, our variable life insurance and variable annuity products, are subject to filing and other
requirements under state securities laws. Federal and state securities laws and regulations are primarily intended
to protect investors and generally grant broad rulemaking and enforcement powers to regulatory agencies.
Federal Initiatives Affecting Insurance Operations
The U.S. federal government generally does not directly regulate the insurance business. However, the
Dodd-Frank Act established the Federal Stability Oversight Council (“FSOC”), which is authorized to designate
non-bank financial companies as systemically significant and accordingly subject such companies (Designated
Financial Companies”) to regulation and supervision by the Board of Governors of the Federal Reserve System
(“FRB”) if the FSOC determines that material financial distress at the company or the scope of the company’s
activities could pose a threat to the financial stability of the U.S. In April 2012, FSOC adopted final rules for
evaluating whether a non-bank financial company should be designated as systemically significant. As of
December 31, 2014, FSOC has designated four non-bank financial companies as systemically significant.
Insurance company subsidiaries of Designated Financial Companies would remain subject to liquidation and
rehabilitation proceedings under state law, although the FSOC is authorized to direct that such proceedings be
commenced against the insurer under state law. Designated Financial Companies are also required to prepare and
file annually with the FRB and the Federal Deposit Insurance Office resolution plans, so-called “living wills,”
that must demonstrate how the Designated Financial Company, and its material business lines and subsidiaries,
could be resolved in a rapid and orderly manner in the event of material financial distress or failure. Designated
Financial Companies are permitted, in some circumstances, to submit abbreviated versions of such plans. Dodd-
Frank requires the FRB to establish for Designated Financial Companies and certain bank holding companies
stricter requirements and limitations relating to risk-based capital, leverage and liquidity. In February 2014, the
FRB approved final rules for bank holding companies with $50 billion (and in some cases, $10 billion) or more
in total consolidated assets and certain foreign banking organizations that implement certain of these and other
prudential standards. The final rules incorporate a number of enhanced prudential standards that had previously
been finalized and were in effect for U.S. bank holding companies, including minimum leverage and risk-based
capital requirements, requirements to submit annual capital plans to the FRB demonstrating the ability to satisfy
the required capital ratios under baseline and stressed conditions, and stress-testing requirements. The final rules
do not apply to Designated Financial Companies. However, Dodd-Frank authorizes the FRB to tailor its
application of enhanced prudential standards to different companies on an individual basis or by category, and
the FRB has indicated that it intends to assess the business model, capital structure and risk profile of Designated
Financial Companies to determine how enhanced prudential standards should apply to them, and, if appropriate,
to tailor the application of these standards for Designated Financial Companies by order or regulation. The FRB
has stated that it expects to take into account the differences among bank holding companies and Designated
Financial Companies, including insurance companies, when applying the enhanced prudential standards required
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