Prudential Insurance Company v. Securities and Exchange Commission

326 F.2d 383 (1964)

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Prudential Insurance Company v. Securities and Exchange Commission

United States Court of Appeals for the Third Circuit
326 F.2d 383 (1964)

CS

Facts

Prudential Insurance Company (Prudential) (defendant) proposed to sell variable-annuity contracts involving fixed monthly purchase payments over a multiyear period that would be invested in a portfolio of securities (investment fund). Each purchaser would be credited monthly with units representing the purchaser’s proportionate interest in the investment fund and would later receive monthly cash annuity payments based on the value of the units. The Securities and Exchange Commission (SEC) (plaintiff) issued an order requiring the investment fund to register as an investment company under the Investment Company Act of 1940 (Company Act). Prudential appealed the SEC’s order to the United States Court of Appeals for the Third Circuit, contending that because Prudential, as an insurance company, was specifically exempt from being an investment company by § 3(c)(3) of the Company Act, the investment fund should also be exempt. Prudential argued that the primary regulation of insurance companies at the state level was the basis for this exemption. Prudential further argued that because both banks and the common trust funds of banks were also exempt from investment-company status by § 3(c)(3), the investment funds of insurance companies should be as well.

Rule of Law

Issue

Holding and Reasoning (Staley, J.)

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