S.D. Admin. R. 20:06:07:03

Current through Register Vol. 51, page 67, December 16, 2024

Section 20:06:07:03 - Separate accounts

A domestic company issuing variable contracts shall establish one or more separate accounts pursuant to SDCL 58-28 subject to the following requirements:

(1) Investments shall be made as follows:

(a) Amounts allocated to any separate account and the accumulation on that account may be invested and reinvested without regard to any requirements or limitations prescribed by SDCL 58-27 governing the investments of life insurance companies. However, to the extent that the company's reserve liability with regard to benefits guaranteed as to dollar amount and duration and funds guaranteed as to principal amount or stated rate of interest is maintained in a separate account, a portion of the assets of that separate account at least equal to the reserve liability shall be invested, unless the director otherwise approves, in accordance with SDCL 58-27 governing the investments of life insurance companies. The investments in such a separate account or accounts may not be taken into account in applying the investment limitations applicable to the investments of the company;

(b) With respect to 75 percent of the market value of the total assets in a separate account, a company may not purchase or otherwise acquire the securities of any issuer, other than securities issued or guaranteed as to principal or interest by the United States, if immediately after the purchase or acquisition the market value of the investment, together with prior investments of the separate account in that security taken at market, would exceed 10 percent of the market value of the assets of the separate account. The director may waive this limitation if, in the director's opinion, the waiver will not render the operation of the separate account hazardous to the public or the policyholders in this state;

(c) A company, whether for its separate accounts or otherwise, may not invest in the voting securities of a single issuer in an amount in excess of ten percent of the total issued and outstanding voting securities of the issuer. This does not apply to securities held in separate accounts, the voting rights in which are exercisable only in accordance with instructions from persons having interests in the accounts;

(d) The limitations provided in subsections (b) and (c) of this subdivision do not apply to the investment of a separate account in the securities of an investment company registered under the Investment Company Act of 1940, provided that the investments of the investment company comply in substance with subsections (b) and (c) of this subdivision;

(2) Unless otherwise approved by the director, assets allocated to a separate account shall be valued at their market value on the date of valuation, or if there is no readily available market, as provided under the terms of the contract, the rules, or other written agreement applicable to the separate account. The portion of the assets of the separate account equal to the company's reserve liability with regard to the benefits and funds referred to in subsection (a) of subdivision (1) of this section, if any, shall be valued in accordance with SDCL 58-28-21;

(3) If and to the extent so provided under the applicable contracts, that portion of the assets of a separate account equal to the reserves and other contract liabilities of the account are not chargeable with liabilities arising out of any other business the company may conduct;

(4) Notwithstanding any other provisions of law, a company may do the following:

(a) With respect to a separate account registered with the Securities and Exchange Commission as a unit investment trust, exercise voting rights in connection with any securities of a regulated investment company registered under the Investment Company Act of 1940 and held in the separate accounts in accordance with instructions from persons having interests in the accounts ratably as determined by the company; or

(b) With respect to a separate account registered with the Securities and Exchange Commission as a management investment company, establish for the account a committee, board, or other body, the members of which may or may not be otherwise affiliated with the company and may be elected to membership by the vote of persons having interests in the account ratably as determined by the company. The committee, board, or other body may have the power, exercisable alone or in conjunction with others, to manage the separate account and the investment of its assets. A company, committee, board, or other body may make such provisions for the separate account as it considers appropriate to facilitate compliance with requirements of federal or state law if the director approves such provisions as not hazardous to the public or the company's policyholders in this state;

(5) A sale, exchange, or other transfer of assets may not be made by a company between any of its separate accounts or between any other investment account and one or more of its separate accounts unless, in case of a transfer into a separate account, the transfer is made solely to establish the account or to support the operation of the contracts of the separate account to which the transfer is made, and unless the transfer, whether into or from a separate account, is made as follows:

(a) By a transfer of cash; or

(b) By a transfer of securities having a valuation which could be readily determined in the marketplace, provided the transfer of securities is approved by the director.

The director may authorize other transfers among the accounts if, in the director's opinion, such transfers would not be inequitable;

(6) The company shall maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities for the account, except as otherwise approved by the director;

(7) Rules under any provision of SDCL title 58 or any regulation applicable to the officers and directors of insurance companies concerning conflicts of interest also apply to members of any separate account's committee, board, or other similar body. An officer or director of a company or any member of the committee, board, or body of a separate account may not receive directly or indirectly a commission or any other compensation for the purchase or sale of assets of the separate account.

S.D. Admin. R. 20:06:07:03

4 SDR 6, effective 8/9/1977; 12 SDR 117, effective 1/19/1986; 12 SDR 151, 12 SDR 155, effective 7/1/1986.

General Authority: SDCL 58-28-31.

Law Implemented: SDCL 58-28-31.