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U.S. Supreme Court

SEC v. Variable Annuity Life Ins. Co., 359 U.S. 65 (1959)

Securities and Exchange Commission v.

Variable Annuity Life Insurance Co. of America

No. 290

Argued January 15, 19, 1959

Decided March 23, 1959*

359 U.S. 65


Respondent corporations, calling themselves "life insurance" companies and submitting to regulation by the insurance commissioners of the District of Columbia and several States, offer for sale in interstate commerce so-called "variable annuity" contracts, which have some of the features of conventional life insurance and annuity contracts but which entitle the purchasers not to a specified definite amount per annum, but only to fluctuating amounts based upon pro rata participations in respondents' investment portfolios and the gains and losses thereon.

Held: such "variable annuity" contracts are "securities" which must be registered with the Securities and Exchange Commission under the Securities Act of 1933, and the issuers are subject to regulation under the Investment Company Act of 1940, since such contracts are not "insurance" policies or "annuity" contracts, and respondents are not "insurance" companies or engaged in the "business of insurance," within the meaning of the exemption provisions of those Acts or the McCarran-Ferguson Act. Pp. 359 U. S. 66-73.

(a) While the States have traditionally regulated the business of insurance, their characterization of particular contracts is not conclusive, since the construction of the exemption provisions of the Federal Acts presents federal questions. Pp. 359 U. S. 68-69.

(b) the issuer of a "variable annuity" contract that has no element of fixed return does not assume any investment risk, which is inherent in the concepts of "insurance" and "annuity." Pp. 359 U. S. 71-73.

103 U.S.App.D.C. 197, 257 F.2d 201, reversed.

Page 359 U. S. 66

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