Document: 387 U.S. 202 87 S.Ct. 1557 18 L.Ed.2d 673 SECURITIES AND EXCHANGE COMMISSION, Petitioner,v.UNITED BENEFIT LIFE INSURANCE COMPANY. No. 428. Argued April 10, 1967. Decided May 22, [Syllabus from pages 202-203 intentionally omitted] ThurgoodMarshall, Sol. Gen., for petitioner. Daniel J. McCauley, Jr., Philadelphia, Pa., respondent. Mr. Justice HARLAN delivered the opinion of Court. 1 This action was initiated by Securities and Exchange Commission to enjoin respondent (United) offering its 'Flexible Fund Annuity' contract without undertaking registration required § 5 Act,1 compel United register Fund' itself as an 'investment company' pursuant 8 Investment Company Act 1940.2 2 The is a deferred, or optional, annuity plan having characteristics somewhat similar those variable annuities this Court held, in S.E.C. v. Variable Annuity Life Insurance Co., 359 65, 79 618, 3 640 (VALIC), be subject Act. Like annuity, it recent effort meet challenge inflation allowing purchaser reap benefits professional investment program while at same time gaining security insurance annuity.3 There are, however, significant differences between claimed that these suffice bring within 'optional contract' exemption 3(a)(8) Act4 'insurance 3(c)(3) Act, 54 Stat. 798, 15 U.S.C. 80a—3(c)(3). agrees pay fixed monthly premium number years before specified maturity date. That less deduction expenses (the net premium), placed account which maintains separately other funds, Nebraska law. Neb.Rev.Stat. 44—310.06 (1963 Cum.Supp). undertakes invest with object producing capital gains well interest return, major part fund invested common stocks. purchasers, all times maturity, entitled his proportionate share total may withdraw interest. also alternative cash value measured percentage premiums gradually increases 50% sum first year 100% after 10 years. Other feature, conventional contracts, are incorporated United's plan.5 4 At elect receive policy, either guarantee, whichever larger. He choose convert into life under conditions contract. These relate future dollars available so dollar received will vary maturity. However, guarantee is, because conversion system, certain amount fixed-amount payment After policyholder has no further Fund.' cash, converted fixed-payment case been transferred general reserves company, mingled, on equal terms per value, interests holders deferred annuities. 6 Because termination SEC contended portion dealt pre-maturity period separable 'security,' meaning It agreed provisions dealing operation were purely provisions, thus beyond purview SEC. District held substantial gave entire character insurance. Appeals Columbia Circuit affirmed. 123 U.S.App.D.C. 305, F.2d 619. court rejected 'the SEC's basic premise should fragmented risk during only considered.' Considering whole, found, had urged, Court's decision VALIC, supra, controlling. But read hold 'that company must bear associated * order qualify products 'insurance." U.S.App.D.C., 308, F.2d, 622. payments included element period, concluded met test. importance issue, need clarifying implications VALIC decision, we granted certiorari, 385 918, 228, 17 142. We now reverse reasons given below. 7 First, do not agree characterized entirety. Two entirely distinct promises their separated point time. In selling any type, decide what allowed each paid maturity.6 making calculation analyze expected mortality, interest, administration. outcome shown table second problem face determine where stipulated essential both cover produce sufficient support promised benefits.7 fixing necessary mortality experience subordinate factor planning expense rates expected. some shifting insurer, but pooling risks among policyholders. words, insurer acting, role savings institution, state regulation adjusted role.8 direct fund9 target meet. 9 completely reverses accumulation period. Instead promising serve agency allow experience. obligated more than guaranteed minimum substantially contract.10 reflect available, opposed planned benefits. split funding—that treating would investing remainder11—or setting low enough being able through insignificant. latter course seems have pursued.12 cannot said integrate post-maturity benefit scheme. could easily attach option otherwise provided single payment. And offered independently Fund.'13 therefore conclude assess whether falls class exempted Congress requirements and, if not, constitutes 'security' 48 74, 77b. 11 examined difficult classification ones presented us VALIC. continued fluctuate fortunes 3(a) exemption. A operative one law, majority 'insurance' Federal Acts federal question,' U.S., 69, S.Ct., 621, concept involves risk-taking company.' Id., 71, argument existence adequate basis position taken four dissenting Justices) conclusively reason 'securities' involve considerations present insurance.' Prudential Co. S.E.C., Cir., 326 383, 388. implied made explicit two concurring Justices,14 considered congressional declaration there then form 'investment' known (including 'annuity contracts') did very squarely sort problems (was) devised deal with, were, many details, even relevant.' 75, 624 (opinion Brennan, J.). considering turned solely absence there, think viewed too narrowly. 12 Approaching contract, light, little difficulty concluding does fall s arrangements require special modifications appeal usual stability prospect 'growth' sound management.15 based reduces holder, assumption create provision definition. Helvering Le Gierse, 312 531, 542, 61 646, 650, 85 L.Ed. 996. difference degree insured recognized. 13 find equally clear constitute As C. M. Joiner Leasing Corp., 320 344, 352—353, 64 120, 124, 88 88, 'The test instrument commerce offer, distribution, economic inducements out prospect. enforcement act such inappropriate promoters' judged they represented be.' Contracts offer important competition mutual see Johnson, Insurance, Investment, Both?, Geo.L.J. 641, pitched consumer growth professionally managed investment. eminently fair afforded advantages disclosure inure 'At level Uniform makes view great blue sky administrators effect securities *.' Loss, Regulation 499. Given purposes contracts nonexempt public conformity 5. 14 courts below exempt, reach question 1940. sole business issuance securities, company. clear, main exempt Moreover, substantive go Thus activities one. See Comment, Mich.L.Rev. 1374; Note, Sales: Aftermath 1959 Wash.U.L.Q. 206. An investigation relationship business, possible conflicts regulation, proper resolution. requested remand consideration complexity, deem wisest course. judgment reversed remanded proceedings consistent opinion. 16 ordered. Reversed remanded. 77, 77e. 803, 80a—8. sales brochure describes featuring 'a method modernized keep pace today's living chance country's economy.' 'combines new time-tested lifetime guarantees income maturity.' 76, 77c(a)(8) exempts 'Any endowment policy optional issued corporation supervision commissioner, bank officer performing like functions, State Territory States Columbia.' For example refund death Deferred periods varying duration chosen, turn date Standard incontestability clauses assignment issue 640, ancillary features standard contracts. them determinative. 73, n. 15, 623. Anui ties indeed purchased premium, singlepremium controls plans. 655; Mehr & Osler, Modern 79—102 (3d ed. 1961). return-of-premium can term arrangements. Huebner Black, 518—524 (5th 1958). 6, 673. compares values annuities: Respondent's Flexible Years Paid 1........... 1,200. 300 5........... 6,000. 3,461 5,460 10........... 12,000. 10,374 12,504 20........... 24,000. 21,774 30,792 30........... 36,000. 33,174 54,828 40........... 48,000. 44,574 87,156 O'Brien, Static Dollars? Dynamic WhyNo t Have Both!, Apr. 25, 1960 Dealers' Digest (Mutual Supplement) 56. Cf. Spellacy American Ins. Assn., 144 Conn. 346, 131 A.2d 834. record shows set analyzing performance stocks half 20th century adjusting become operable prior conditions. Advisers Fund, Inc., fund, sells shares installment simultaneously affiliated proceeds redemption applied purchase rates. Brennan Stewart joined written primary advertisement headed 'New Opportunity Financial Growth.' aid kit displays emphasizing possibility return management investing.

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