SEC Sanctions Insurance Company For Variable Contract Pricing Violations

The Securities and Exchange Commission (the "SEC") recently charged a life insurance company with violating the pricing requirements under Rule 22c-1 of the Investment Company Act of 1940 in respect of purchase and redemption orders for variable insurance contracts, and the underlying mutual fund investment options.¹ Under Rule 22c-1, the price at which an order is executed must be based on the net asset value ("NAV") of the security that is next computed after receipt of the order. According to the SEC order instituting a settled administrative proceeding against the company, from October 1995 through September 2011, the company's mail-processing practices caused purchase and redemption orders received through regular U.S. mail to be purposefully delayed before reaching the company's processing center, resulting in the current day's transaction requests being assigned the next business day's price.