# Appendix — SEC v. Variable Annuity Life Ins. Co. of America > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386409_0133%3A11 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1959 - **Citation:** 359 U.S. 65 ## Text oe ie PAGE * APPENDIX ‘Ry . —- INvoLvED; guictiineini provisions i ae ‘Securities Act of 1933 ...... Rip eraeearass aes 7 ‘ii “Investment. Company Act of 1940........ eve owe iii MeCarran-Ferguson BME oc ecu akices eee | _ APPENDIX B: Legislation which would ‘have authorized sale of Variable Annuities to Public coe t ee ee bee eeneees 67 57 APPENDIX. A ” Pertinent Provisions of Statutes: _ SECURITIES ACT OF 1933 AS AMENDED ~ . AN ACT. tera. To provide full “and fair disclosure. of the character, of securities sold in interstate and foreign commerce and _through the mails, and to prevent frauds in the sale : thereof, and for other purposes. co | Be it enacted by-the Senate and Hosise of Representa- ‘tives of the United States of “America in Congress as-. sembled, — oe eget oY * * . *. * See. 2:1 When deed i in this title, ne Se the conte at other- Wise requires— |, - ‘ (1) the’ term “security”? means ary note, stock, treasury stock, bond, debenture, evidence of indebted- ness, ¢ertificate-of interest ‘or participation in any — profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transfer- able. share, investment contract, voting-trust certifi- “eate, certificate of deposit for a security,, fractional - undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a “‘security,’’ or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to : subseribe to or purchase, any of the foregoing. ,- * *« * * «* ‘48 Stat. 74, as dmended, 15 U. S. C. 77b(1). re “See. 3. (a)? Except as. Snveindtier expressly provided, the provisions of this title shall not apply to any of the fol- lowing claason of securities : * * ee * See. 3. (a)(8)° “Any: insurance or Seiki iaaik poliey ¢ or annuity contract or optional - -annuity contract, issued by a corporation subject to the supervision of the instance commissioner, bank commissioner, or any agency or officer. performing like functions, of any State or Territory of the United States or the District of Columbia; ee ee ee See. a. (a)? ‘Unless a registration statement is in effect as toa security, it shall be unlaw ful for any. person, di- ~ reetly or indirectly— (1) to make use of any means or inetraments of transportation or communication in interstate com-~ merte or of the mails to. sell such security through the use or medinm of any prospectus or otherwise ; “or. (2): to carry or cause to be carried. through the mails or in ‘interstate commerce, by any means or in-. struments of transportation, any such security for the - purpose of sale or for delivery after sale. (b) It shall he unlawful for any person, directly or in- - directly — PI iN (1) . to make use. of any. means or instruments of transportation. or communication in interstate com- - merce or of the mails to carry or transmit any pros- pectus relating to any security with respect to which a. - registration statement has been filed under this title, ~/ unless such prospectus meets the requirements of sec- tion 10; or : 748 Stat. 76: & nyc 77¢(a) (8). *48 Stat. 77; as amended ; 15 U.S. C., Supp: I, 77e. he P 09 (2) to carry or to cause to be carried through the mails or in interstate commerce any such security for the purpose. of sale‘or for delivery after sale, unless’ accompanied or preceded by a prospectus that meets the requirements of sub -section (a) of. section 10. (c) It shall be anlawfal for any person, directly or in-°- directly, to make use of any means or instruments of trans- ‘portation or ‘communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or . medium of any prospectus or otherwise. any security; un- less a -registration statement has been filed as to such security, or while the registration statement is the subject ‘of a refusal order or stop order or (prior to the effective date of the registration statement) any: public proceeding or examination under section 8.. | 4 “INVESTMENT COMPANY ACT OF 1940 ‘AN ACT | Sree ney To provide for the registration and regulation of invest- ment companies and investment advisers, and for other purposes. = «=s(i(‘<‘é w:C;C*C. | | Be it enacted by the Senate and House OF eipisionta twes of the United States of America’in Congress as- sembled, Re See. 1. (a)! Upon the eo of facts qi igen by the. record and reports of the Securities and Exchange Com- Mission made pursuant to section 30 of the Pyblice Utility Holding Company Act of. 1935, and facts otherwise dis- ‘closed and ascertained, it is hereby found that invest- | ment companies are affected with a national public in- -gerest in that, among other things— ) “54 Stat. 789; U. S. C. 80a-1. 60 oe ” a : (1) the securities issued by such companies, which _ constitute a substantial part of all securities publicly _ offered, are distributed, purchased, paid for, ex- changed, transferred, redeemed, and: repurchased by use of the mails and means and instrumentalities of interstate commerce, and-in the case of the numerous companies which issue redeemable securities, this pro- cess of distribution and redemption i 18 continuous ; : (2): the principal’ activities of such companies. _ investing, reinvesting, and-: trading in securities—are - eonducted by use of the mails and means and instru- mentalities “of interstate commerce, including the: facilities of national securities exchanges, and con-_ stitute a substantial part: of all transactions effected 7 in the securities markets of the Nation}: (3) such companies enstomarily caved and: trade: in securities issued. by, and*may dominate nat eanskeal or otherwise affect the policies and management of, companies engaged in business _in interstate com- merce ; : as (4) such companies are ‘media for the investment in the national. economy of a substantial part of the ‘national savings and:may have a vital effect upon the *. flow of such savings into the capital markets; and ; (5) the activities. of such companies, extending over many States, their use of the. instrumentalities of interstate commerce and the wide. geographic dis- tribution. of their security holders, make difficult, if not impossible, effective State regulation of such com- panies in the interest of investors. : "b).” Upon the basis of facts disclosed by the record and reports of the Securities and Exchange Commission. side pursuant to sectiol 30 of the Public Utility Hold- ing Company Act of. 1935, and facts otherwise disclosed and ascertained, it is hereby declared that the national public interest and the interest: of investors are adversely. -_affeeted—- : | ae (1) ‘when investors ibid pay for,. exchange, receive dividends upon, vote, refrain frome voting, - sell, or surrender securities issued by investment com- panies. without adequate, : accurate, and explicit in- _ formation, fairly. presented, concerning the. char- _ acter of such securities and the circumstances, poli- cies, and financial responsibility of such companies 3 and their management ; | (2) when investment companies are organized, operated, managed, or their portfolio securities are selected, in the interest of directors,. officers, invest- ment advisers, depositors, or other affiliated pérsons thereof, in the interest of underwriters, brokers, or dealers, in the interest of special classes of their se- curity holders, or in the interest of other investment companies or persons engaged in other lines of busi- ness, rather than in the interest of all Classes of such _ companies’ security. holders ; "+ (3). When investment companies ‘issue. securities containing inequitable or discriminatory provisions, or fail to protect the preferences and privileges of the holders of their outstanding securities ; 3 (4) when sthe control of investment companies is’ unduly concentrated through pyramiding or inequit- ’ able methods of control, or is inequitably distributed, or when investment companies are managed by ir-. _ responsible. insite \ 62 (5) when icaatecat companies, in keeping their - accounts, in maintaining reserves, and in computing their earnings and the asset value of their outstand- - ing securities, employ unsound or misleading methods, or are not see to >, adequate independent seru- tiny; —- ar ie . - (6) when investment companies are reorganized, '. become inactive, or change the character of their busi- ness, or when the control or management thereof is: transferred, without the.consent of their security holders ; (7) when investment companies ‘by excessive ‘bor- rowing and the issuance of excessive amounts of senior securities increase unduly the speculative char- acter of their junior securities; or pee st (8) when investment companies igupaie _— adequate assets or reserves. 7 is hereby. déclared that the policy and purposes of ‘his title, in accordance with which the provisions of this title - shall be interpreted, are to mitigate and, so far as is. feasible, to eliminate. the conditions enumerated in. this “section which adversely affect the national publie interest | and the interest of investors. ; : + 0\ e096 See. 2. (a) (17)5 -“Tnsurance Company’’ means a com- pany ,which is organized as an insurance company, whose ~ primary and predominant business activity is the writing of insurance or the reinsuring of. risks underwritten by ‘insurance companies, and which is subject to supervision by the insurance commissioner’ or a similar official or agency of a State; or any receiver or similar official or “34 Stat. 793; U. Ss. C. 80a- 2(a) (17) Ces any liquidating agent for such : a company, i in his capacity. ass such. : ee | | Sec. 2 (a)(21)* . “‘Tssuer’? means every person who is- sues Or proposes to issue any security, or has outstanding " any security which it has issued. * * * #o # ‘See. 3. (a)? When used in this title, “Investment com- pany ’’ means any issuer which— _ ) . (1) ‘is or holds itself out as being engaged pri- | marily, or proposes to engage. primarily, in the busi- ness of investing, PORIveRTne, or trading in secur ‘ities ; | | (2) is engaged ¢ or proposes to engage in the busi- ness of issuing face-amount certificates of the install- 7 ment type, or has been engaged in such business. and has any: such certificate outstanding ; or (3) is engaged or proposes to engage in the busi- ness of investing, reinvesting, owning, holding, or .trading in securities, and owns or proposes to acquire . investment. securities having a value exceeding 40 per © ~ eentum of-the value of such issuer’s -total assets (ex-_ clusive of Government securities and cash: items) on ae unconsolidated basis. 7 See * ‘# \ | Sec. 3: (c)* Notwithstanding subsections (a) and (b), “none of the following persons is’an investment’ company’ within the meaning of this title: Bate on: Any bank or insurance company * eee ag ge ee -©54 Stat. 793: 15 U. S. C. 80a-2( 54 Stat. 797: 15 U.S. C. 80a-3( * 54 Stat. 798; 15 U.S. C. 80a-3( (a) (21). a). iB c e Sec. 7. (a)® No investment company organized or other- wise created under the laws of the United States or of a © - State and having a board of directors, unless registered under section 8, shall directly or. indirectly— | (1) offer for sale,’sell, or deliver after sale, by — the use of the mails or any means or’instrumentality of interstate commerce, any security or any interést — in a security, whether the issuer of such security is such investment. company or another person; or offer for sale, sell, or deliver after sale any such security | or interest, having reason to, believe that such security _ or interest will be made the ‘subject of a public offer- ing by use of the mails or any means or instrumen- ‘tality of interstate commerce ;- | : (2) purchase, redeem, retire, or otherwise acquire : or attempt to acquire, by use of. the. mails or any . means or instrumentality. of intefstate commerce, any security or any interest in a. security, whether the ‘issuer of such. security is such investment company or another person ; | (3) ‘control any investment company which does any of the acts enumerated in paragrapye (1) and ‘ _(2)5 . (4) engage in any business in interstate com-— “merce; or a (5) control any company which i is aaa in any ; business i in 1 interstate commerce. ew en a : ie oe) Sec. 8. (a)! Any investment company organized or: otherwise created under the laws of the United States or of . a State may-register for the purposes of this Aitle by filing with the ( Jommission a notification of registration, in such * 54 Stat. 802; 15 U. s. c. Ba-7(a). : "54 Stat. 803; a Af form as the: Cotnminsion’ shall by rules ‘and regulations prescribe as. necessary or appropriate in the public in-. terest or for the protection of investors. An investment company shall be deemed to be registered upon receipt by the Commission of such notification of registration. * *+* * * * 3 See. 27. (a)" It shall be unlawful for any registered in- vestment company issuing periodic payment plan certifi- éates, or for any depositor of or underwriter for such com- de to sell any such certificate if—- es (1) the sales load on such certificate exceeds 9 per centum of the total payments to be made thereon ;, (2) more than one-half of any of the first iver | monthly payments rage or wcorit equiyalent, is de: , ducted for sales load ; hae | McCARRAN. FERGUSON ACR. Be it enacted by the Senate ‘and House of Representa-. tives of the United States of America im Congress as- sembled.» That the Congress hereby declares that the con- tinued regulation and taxation by the several States of the busiiness of insurance is in the public interest, and that:silence on the part of the: Congress shall not’ be con- — strued to impose any barrier to the regulation or taxation of such business by the several States. See. 2. (a)? The business of insurance, and every per- - son engaged therein, shall be subject to the laws,of the several States’ which relate to the regulation or taxation of such business. ee (b) “No Act of Congress shall be construed to eval i date, impair, or supersede any law enacted by any State tae — 54: Stat. 829; 15 U. S. C. 80a-27(a) (1) and 15 U.S. C ia-27(a) (2). "59 Stat. 33, as amended; 15 U.S. C. §§ 1011-1015. | 66 ‘ e for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act ‘specifically relates to the business of insurance: | Provided, That after June 30, 1948, the Act of July: 2, 1890, as amiended, known as the Sherman Act, and the Act of October 15, 1914,.as amended, known as the Clay- - ton Act, and the Act of September ‘26, 1914, known as the - Federal Trade- Commission Act, as amended, shall be ay plicable to the business of insurance to the’ extent that such business is not regulated by State law. } See. 3.. (a) Until June 30, 1948, the . Act of Jaly 2, 1890, as. aménded, known as-the Sherman Act, and the Act of Oetober 15, 1914, as amended, known as the Clay- ton Act, and the Act of’ September 26, 1914, known as the. ’ Federal Trade Commission Act, as amended, and. the Act of June 19, 1936, known as the Robinson- Patman Anti- _. diserimination Act, shall not apply tothe business of in- surance or to acts in the conduct thereof. (b) Nothing contained in this Act shall render the said Sherman Act inapplicable to any agreement to ee ‘eott, coerce, or intimidate, or ‘act of boycott, coercion, or, intimidation. ; 3 See. 4. Nothing contained - in this ‘Act sil be con- - strued to affect in any manner the application to the business of insurance of the Act of July 5, 1935, as amend- ed, known as the ‘National ‘Labor Relations Act, or the ‘Act of June 25, 1938, as ‘amended, known as the Fair Labor Standards Act of 1938, or the Act of. June 5,°1920, ~~ known as the Merchant Marine Act, 1920. See. 5.° As used in this Act, the term “State” includes the several States, Alaska, Hawaii, Puerto Rico, Guam, and the Distriet of Columbia. os ?| 2 SS: _ APPENDIX B> Legislation Which Would Have Authorized Sale of : __ Variable Annuities to Public y State Year ; Mee , Disposition Connecticut _ 4957, House’ 1427—to incorporate Joint Hearing March 21, 1957. . oat the Equity- Life Insurance Referred by House Joint Resolu- Company. tion 170 to Legislative Council for s ; a. study. OO PE Maryland . 1955 _ House 597—to incorporate No action. -- the Variable Life -Income Corporation of Maryland. House _ 730—to provide for .- Passed House. . , the establishment and opera- Died in Senate Committee. tion by Life Insurance Cor- - porations of a variable con- _ tract account, etc. « ‘Massachusetts 1956 House - 1560—to authorize J oint Hearing February 6, 1956. . olife insurance companies to No transcript was made. Referred ‘ : establish variable contract to Special Commission for study. accounts, etc. by House 2716. - 2 Special Commission‘ held -public | hearings on April 30 and May 1, - - ll 1957 to consider House 1560. No * _ transcrip -of these hearings was : made but the Special Commission issued its ers ‘covering :these hearings on December 2, 1957: as - - Massachusetts. Senate Document’ 556 of: 1958. In this report the - Commission recommended further study, looking toward. affirmative legislation authorizing the issuance of annuities based upon some por- tion of equity investment. _ The Special: Commission held an- ., Other public hearing on May 28, os 1958 to discuss, among other things, . - variable annuities. Speakers were ° requested to confine their reniarks to developments ori the subject. _ since the. ring approximately one year before. No _ transcript was made. The Special Commis- . : sion issued its. report dated July, ’ ye i ge 1958 as Senate’ ment: 815. The J; Special Commission reported, with- Diet out recommendation,-a° variable an- . vA - muity bill as Appendix B to its wie : F report (S. 815). | . ys ; Fs : : . . ey 3 : 17 a a a _ State . New Hampshire | bh New Jersey, New York NOTE: 4 1956 1957 (1958 © 1954 1955 1957 1955 *—to 68 Bill - Senate 815 App. B—to au- thorize life insurance com- panies to establish variable annuity accounts. 7 Senate 69—to authorize life insurance companies to es- tablish variable contract ac- | counts. cart ; Assembly: 305, 306, 307. Assembly 450, 451, °452. Assembly 11, 12, 13. Assembly 330, 331, 332. s Assembly 1323 (Senate 2681) —to incorporate Variable An- nuity Corporation of Amer- ica. len Senate 1352 (Assembly 1657) incorporate ariable Life Income Corporation of ' America. _ Assembly. 4044—to incorpo- rate Variable Life Income Corporation of America. Senate 332 (House 737)— providing for the formation . of corporations for the pur- pose of issuing variable -an- nuity contracts. oF Disposition pa Referred to Special Commission for study by Senate 842. ‘This bill was the subject of a pub-. lic hearing by. the ‘ Massachusetts Joint Insurance Committee on Sep- tember 29, 1958. No transcript of. this hearing is available. . ; Killed, in Senate on March 24, 1955 after hearing before ‘the Senate Committee on. Banks and Insur- ‘ance. — ag Public hearing before the: Assembly Committee on Business Affairs May 13, 1955. Transcript available. . Died in Assembly ‘Committee. Public’-hearing before the Senate Committee on Business “ Affairs June 22, 1956. Transcript available. .Passed, Assembly; died in Senate - Committee, alors _ Passed Assembly ; died tin Senate Committee. : : wah Public hearing on May 2, 1958 be- fore the Assembly Committee on Business Affairs. Transcript avail-. able. Passed Assembly ; in’ Senate Com- mittee. eras Passed both houses. Vetoed by Governor Dewey. : Passed in Assembly. Bill died in Senate Committee: — en Died in Assembly Committee. Died in Committee. “| The table appearing above summarizes only those bills which would have authorized life insurance companies, or new companies known as life insurance companies, to sell ‘variable annuities” to. the public. It does - not include pension plans, which are not insurance, and. do not and could not qualify under general insurance laws, such as: 69 1. The College’ Retirement Equities Fund (CREF), sold only to college professors: By special legislation CREF was authorized to do business by the State of B nar York subject to regulation and control of its Insurance.Commissioner under four provisions of the State’s general insurance laws (An Act to Incorporate College Retirement Equities Fund“for the benefit of the teaching profession, N. Y. Laws 1952, C. 124) ; or 2. Three biils passed by the Wisconsin Legislature in 1957 which incorporated the “variable annuity”. principle into the retirement _. systems for state employees, state teachers and. the teachers of Milwaukee on much the same basis as CREF, Wisconsin Laws 1957, Chs. 322, 381, 423; or , ‘ 3. Two ‘bills introduced in the Massachusetts legislature (Si 341 and S. 815 (both of 1958)) which are essentially “variable 44 annuity” bills’ but limited to group business. 7 o., / — \ --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386409_0133%3A11. Public record. Not legal advice.