A temporary order will let the investment advisor and broker-dealer units of a large financial services company proceed with normal operations.[@@]
The units, part of American International Group Inc., New York, received the temporary order from the U.S. Securities and Exchange Commission Dec. 8.
The SEC published the order today in the Federal Register.
Some of the 15 AIG units that applied for relief are AIG Annuity Life Insurance Corp., AIG SunAmerica Life Assurance Company, American General Life Insurance Company, American International Life Assurance Company of New York, the U.S. Life Insurance Company in the City of New York, and the Variable Annuity Life Insurance Company.
One of the companies, Brazos Capital Management L.P., is a majority-owned subsidiary of AIG.
The AIG units have asked the SEC for help because of financial instruments that a sister company in the risk-management business sold to PNC Financial Services Group Inc., Pittsburgh, in 2001.
The SEC says the instruments helped PNC improve its earnings in ways that violated securities laws. AIG agreed to a settlement to resolve the matter without admitting or denying any of the SEC’s allegations, according to a summary of AIG’s application for permanent relief that appears in the Federal Register notice.
The settlement includes an injunction that, in theory, could prevent any AIG affiliate from acting as an investment advisor or selling securities, according to the notice.
Section 9(a)(2) of the Investment Company Act of 1940 forbids affiliates of parties to SEC injunctions from staying in the securities business.
But Section 9(c) of the same act lets the SEC grant exemptions if the affiliates can show that granting them exemptions would not be against the interest of investors or against the interests of the general public.
The AIG investment advisor and broker-dealer units told the SEC that they, their officers, their directors and their employees were not involved in the PNC matter.
The units also argue that barring them from the securities industry would cause severe harm to their operations and employees and that barring the investment advisor units from advising investment funds could hurt the funds and their shareholders.
“The commission has considered the matter and finds that applicants have made the necessary showing to justify granting a temporary exemption,” the SEC says in a statement discussing its decision to grant a temporary exemption.
The SEC is still reviewing the AIG units’ application for a permanent order, the SEC says.
The SEC has posted the temporary order and the notice for the application for a permanent order on the Web at http://a257.g.akamaitech.net/7/257/2422/06jun20041800/edocket.access.gpo.gov/2004/pdf/04-27311.pdf