| One of the goals of this Act is to align state and federal | law. The United States Supreme Court ruled that a variable | annuity is a security in SEC v. Variable Annuity Life | Insurance Company of America, 359 U.S. 65 (1959). More | recently, it has been confirmed that variable insurance | products are "covered securities" as defined in the National | Securities Markets Improvement Act of 1996 (NSMIA) and in | the Securities Litigation Uniform Standards Act of 1998 | (SLUSA), see Lander v. Hartford Life Annuity Ins., 251 F.3d | 101 (2d Cir. 2001). |
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| When variable products are included in the definition of | security and exempted from registration, state securities | administrators can bring enforcement actions concerning | variable insurance sales practices. This approach toward | functional regulation is supported by the National | Association of Securities Dealers as evidenced by a February | 2001 letter from Mary Schapiro, President of Regulatory | Policy & Oversight: "Based on our experience, we have found | that variable products' sales-related problems parallel | those of mutual funds and other securities . . . Because of | the substantial similarities between variable contracts and | other securities products, we believe it is incongruous for | agents and sales practices involved in variable annuities | not to be covered by state securities laws." |
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| State securities regulators support the functional | regulation of agents because: 1) insurance companies are not | affected since state securities regulators are preempted | from requiring the registration of variable products; 2) the | vast majority of broker-dealer subsidiaries of insurance | companies are already registered to sell securities in most | states; and 3) the vast majority of agents are already | dually licensed to sell insurance and securities in most | states. |
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| | Section 102(28)(C) includes the exclusion in RUSA from the | 1956 definition of security for "an interest in a contributory or | noncontributory pension or welfare plan subject to the Employee | Retirement Income Security Act of 1974." |
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| | The first clause in Section 102(28)(D) is derived from the | leading case of SEC v. W.J. Howey Co., 328 U.S. 293 (1946), which | has been widely followed by federal and state courts. The second | clause in Section 102(28)(D) is based, in part, on the leading | case of SEC v. Glenn W. Turner Enter., Inc., 474 F.2d 476, 482 | n.7 (9th Cir. 1973), cert. denied, 419 U.S. 900 (1974). |
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| | The courts have divided over the interpretation of the "common | enterprise" element of an investment contract. The courts |
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