March 4, 2021
In a recent statement, the SEC set forth its position that the substitution by an insurance company of registered open-end investment companies used as investment options for variable life insurance policies or variable annuity contracts will not provide a basis for enforcement action under Sections 26(c) and 17(b) of the 1940 Act so long as the terms and conditions of the proposed substitution are substantially similar to those approved by a prior order for substitution obtained by the insurance company since January 1, 2004 (Statement). The insurance company should submit correspondence with any such proposed substitution that:
1. Indicates that the substitution is of the type discussed in the Statement;
2. Identifies the prior order with terms and conditions substantially similar to those in the substitution;
3. Confirms that the substitution is consistent with the terms and conditions of such prior order; and
4. Explains why each existing fund and corresponding replacement fund are substantially similar, including a comparison of the investment objectives, strategies and risks of each existing fund and its corresponding replacement fund.
Any insurance company seeking to rely on the Statement, if it has not already received such a prior order since January 1, 2004, must apply for one (including, e.g., an insurance company that has not received such a prior order but has acquired an insurance company that has received such a prior order still must apply for its own order).
The Statement is available at: Please Click Here
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The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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