The SEC Says It Is Striving For Flexibility In Reviewing Substitution Applications
The Securities and Exchange Commission staff is trying to be flexible and to ease the regulatory burdens involved in substitution application, a top SEC official said.
Speaking before the annual regulatory affairs conference of the National Association for Variable Annuities, Paul F. Roye said that the SEC staff is required under the Investment Company Act to examine each substitution application to assure the protection of variable contract owners.
However, the SECs director of investment management added, the staff has eased the regulatory burden of substitution applications in some circumstances.
Specifically, Roye said, during the past year the SEC granted two no-action letters to insurance companies facing the liquidation of an unaffiliated fund, and who wanted to invest the proceed in a money market fund on behalf of contract owners who had not given alternative instructions.
Roye said the staff considered several factors in making these decisions. In particular, he said, the staff noted that there was no affiliation between the insurance company and the liquidating fund.
This suggested, he said, that the transaction was not intended to enrich the insurance company to the detriment of contract owners.