Chapter 9: legal considerations III. Claims G. Assets that are not General Assets, Special Deposits and Letters of Credit


What administrative systems are in place to match daily the value of the Separate Account to each Variable Product?



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What administrative systems are in place to match daily the value of the Separate Account to each Variable Product?

  • Are the systems adequate and working properly?

  • Who owns the systems? Does TIC own the systems, or does it license the systems or contract with a third party vendor to provide the systems?

  • What regulatory or receiver actions might require disclosure to owners of Variable and other SEC Registered Products and/or the SEC under 1933 Act or 1940 Act?

    • The initiation of a receivership would likely, in and of itself, require filings with SEC and disclosures to owners of Variable and other SEC Registered Products.

    • Any efforts to “sell” the Variable and other SEC Registered Products to another carrier could involve, at a minimum, obtaining a “no action” letter from SEC staff that addresses registration requirements.

  • What, if any, restrictions on contract rights under Variable and Other SEC Registered Products might be imposed by a receivership court to the extent it is determined advisable?

    • Unless supported by Exempt SAs, Variable Products (or the unitized interest in the Separate Account) constitute “redeemable securities” under the 1940 Act. Section 22(e) of the 1940 Act provides that the issuer of a redeemable security registered under the 1940 Act may not suspend the right of redemption and must pay redemption proceeds within seven days. There is no clear legal guidance about whether a court with jurisdiction of TIC (i.e., the insurance company issuer of Variable Products) could order any temporary or partial restrictions (e.g., a temporary moratorium, or a temporary limitation on partial withdrawals or surrenders). A receiver should contact the SEC staff prior to seeking any order from the receivership court restricting withdrawals funded from a 1940 Act registered separate account. This includes partial withdrawals, full surrenders, death benefits, 1035 exchanges and similar transactions.

    • Suspending acceptance of premiums under Variable and other SEC Registered Products raises disclosure issues under the federal securities laws, that is whether the insurer had adequately disclosed previously to those considering purchasing the contract that it had reserved the right to take that action in the future.




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