The Expanding Jurisdiction of the Securities and Exchange Commission: Variable Annuities and Bank Collective Investment Funds

The Securities and Exchange Commission is presently attempting to assert jurisdiction over certain aspects of two industries traditionally exempt from federal securities regulation-insurance and banking. The SEC claims that two recently developed investment vehicles-variable annuities in the insurance field and pooled funds of managing agency accounts in the banking field-are virtually the same as mutual funds, which are subject to SEC regulation under the Investment Company Act of 1940. (A mutual fund is essentially a fund (usually in corporate form), the participants’ contributions to which are collectively invested in a portfolio of securities, each participation representing a pro rata interest therein.) The SEC also asserts that participations in these new investment vehicles are “securities” as that term is defined in the Securities Act of 1933, and thus should be registered under that act. In a related move, the SEC has taken the position that pension funds created under the Self-Employed Individuals’ Tax Retirement Act of 1962 (popularly known as “H.R. IO”), when pooled by banks for collective investment purposes, are also “securities” subject to registration under the Securities Act, although the SEC has hesitantly conceded that these funds are exempted from the Investment Company Act. This comment will examine the validity of these claims and explore possible solutions to the controversies which they have engendered.