State reg of sec
Which of the following entities are NOT defined as states under the USA? Canadian municipalities Puerto Rico The District of Columbia The U.S. Virgin Islands Guam I only III only I and V only I, II, IV, and V only
A The definition of a state includes any state, territory, or possession of the U.S. Although the USA grants an exemption for Canadian broker-dealers to transact business with their existing customers who are in the U.S. temporarily, Canadian municipalities are not considered states under the USA.
Under the Uniform Securities Act, in order for an issuer to be eligible to use registration by coordination, the issuer must also register with the SEC under: The Investment Company Act of 1940 The Securities Act of 1933 The Securities Exchange Act of 1934 The Investment Advisers Act of 1940
B The Securities Act of 1933 regulates the federal registration of newly issued securities. Under the Uniform Securities Act, in order to register a security using registration by coordination, the security must also be registered with the SEC under the Securities Act of 1933.
According to the Uniform Securities Act, all the following transactions would be considered exempt, EXCEPT: A transaction that is executed by a bona fide pledge that is not intended to evade the USA A nonissuer transaction of a security that is regularly quoted on the OTC Bulletin Board A nonissuer transaction of a security that is quoted on Nasdaq A transaction executed by a guardian appointed by a state court
B A nonissuer transaction of a security that is regularly quoted on the OTC Bulletin Board would not qualify as an exempt transaction. The OTCBB does not have specific listing criteria, whereas national exchanges such as the NYSE and Nasdaq have minimum standards to which issuers must adhere. All the other choices are specifically defined under the USA as exempt transactions.
Which of the following statements is/are TRUE of exempt securities under the Uniform Securities Act? Any security exempt under the Uniform Securities Act is also exempt under federal regulations. Any security exempt under federal regulations is also exempt under the Uniform Securities Act. If state rules regarding an exemption are more restrictive than federal rules, then state rules would govern. Federal regulations always supersede state rules. I and III only II and IV only III only I, II, and IV only
C A security can be exempt under federal law but not state law, and vice versa. When the rules overlap, the most restrictive rule applies.
Under the Uniform Securities Act, the sale of limited partnership interests to a bank is exempt from: The antifraud provisions The registration requirements The filing requirement for advertisements I only II only II and III only I, II, and III
C Any sale of securities to an institution (e.g., a bank) is considered an exempt transaction under the USA. This exempts the securities from registration and any related advertising from being filed with the Administrator. However, no person, security, or transaction is exempt from the antifraud provisions of the Uniform Securities Act
A company issued $50 million of common stock in a private placement under Regulation D. In order to sell the stock initially in any state, the Administrator requires the filing of: Form D A Consent to Service of Process A Notice Filing All of the above
D All choices are required to be filed with the Administrator, since the securities are federal covered and subject to notice filing, and Form D for private placements registered under Regulation D.
NASAA and the SEC recognize which of the following locations as a state? Puerto Rico The U.S. Virgin Islands Washington D.C All of the above
D All of the municipalities listed above are North American Securities Administrators Association (NASAA) members. The SEC and NASAA recognize the authority of each of the locations to regulate securities transactions within its boundaries.
Which of the following elements are required for an investment contract to be considered a security? An investment of money An expectation of profits A common enterprise Efforts made by a third party I and II only I, II, and III only I, II, and IV only I, II, III, and IV
D The test of whether an investment meets the definition of a security was established by a Supreme Court case (referred to as the Howey Test). All of the four choices listed are required parts of the test.
Under the Uniform Securities Act, what information would NOT need to be disclosed when filing a registration by qualification? A statement analyzing the issuer's profit margin over the last three years compared to the profit margins of its primary competitors The capitalization and long-term debt of the issuer and any significant subsidiary The general character and location of the issuer's business and a statement of the general competitive conditions within the industry or business in which it operates The estimated cash proceeds to be received by the issuer from the offering
A An analysis of the issuer's profit margin as compared to its competitors would not be required. All other items listed would be required when filing a registration by qualification.
According to the USA, which of the following securities are exempt from registration? Bonds issued by a government-regulated common carrier Common stock of a Canadian mining company Common stock of a financial subsidiary of an insurance company An offering by a UIT that invests in the stocks of banks and savings and loan associations
A Exempt securities include those that are issued by a U.S. federal, state, or local government, a railroad, a common carrier, a public utility, or a holding company that is subject to specified regulations. Insurance companies may also issue securities that are exempt from registration, but their subsidiaries may not. Bank securities are also exempt; however, an offering of an investment company (e.g., a UIT) that invests in bank securities must be registered.
Which of the following statements is TRUE concerning a federal covered security? The Administrator may require the issuer to pay a filing fee The Administrator may subject the issuer to a state review The Administrator may not require the issuer to file a consent to service of process The Administrator may not bring enforcement action if fraud is involved
A The Uniform Securities Act sets limits on the powers of the Administrator concerning federal covered securities. The Administrator may require: the payment of a filing fee, the filing of a consent to service of process, the filing of certain documentation filed with the SEC. The Administrator may bring enforcement action if fraud or deceit is used in the sale of a security. The Administrator may not subject the issuer to a state review. This occurs when a state has the authority to allow or disallow a security to be offered in a state and is sometimes referred to as a merit review.
Which of the following nonissuer transactions would be exempt from registration under the Uniform Securities Act? The issuer is operating an Internet business and has not had a profit since going public The issuer is operating as a blank-check company that is investing in profitable companies The issuer is operating as a blind-pool company that is investing in companies that have been in business for at least two years The issuer is operating a company whose primary business is to engage in mergers and acquisitions
A Under the USA, a nonissuer transaction may be exempt from registration if the issuer is engaged in business, whether or not the company is profitable. The USA specifically states that this exemption is not available if the issuer operates a blank-check, blind-pool, or shell company whose primary business plan is to engage in a merger or business combination. The answer here is not suggesting that a transaction in a security of an unprofitable company is exempt from registration; however, the other choices are definitely not considered exempt transactions.
Which of the following securities is NOT considered exempt under the Uniform Securities Act? Securities issued by an automobile company Securities issued by a Canadian Province Savings and loan association securities Railroad trust certificates
A Under the Uniform Securities Act, any security issued by Canada or a Canadian Province, or savings and loan association, or any railroad company is considered an exempt security. There is an exemption under the Act for common carriers but an automobile company does not qualify for this exemption
Under Regulation D of the Securities Act of 1933, accredited investors include: Accountants Insurance companies Any senior officer of a publicly traded company Individuals with a net worth of one million dollars or more I and II only II and IV only III only I, III, and IV only
B No single profession is specified in the definition of an accredited investor. Senior officers are included if they are senior officers of the issuer. Institutional investors, such as insurance companies, are specified in the regulation. A person with annual income of $200,000, or net worth of $1 million, is also considered accredited
There are a number of securities transactions that are exempt from registration under the Uniform Securities Act and the Securities Act of 1933. An example of a federal exempt transaction is: U.S. Treasury securities Municipal securities Reg. D Railroad equipment trusts
C All, except Reg. D, are examples of exempt securities. Reg. D provides an exemption from registration for securities sold in a private placement, a nonpublic offering. Because sales are limited to accredited investors and a limited number of nonaccredited investors, the offering is exempt from registration with the SEC.
Which of the following choices would NOT meet the definition of an exempt transaction? A transaction by a trustee involved in a bankruptcy An unsolicited nonissuer transaction with a retail investor Transactions between an issuer and retail investors A transaction executed by a bona fide pledgee
C Any transactions by trustees involved in a bankruptcy--sheriffs, marshals, guardians, and other fiduciaries are considered exempt transactions. Unsolicited nonissuer transactions whether with retail or institutional investors and transactions executed by a bona fide pledgee are also considered exempt transactions. However, transactions between issuers and retail investors are not exempt from registration. A transaction between an issuer and underwriter would be an exempt transaction.
According to the Uniform Securities Act, which of the following securities are exempt from registration? Stock issued by a FINRA member firm Debentures issued by a Canadian bank Stock issued by a state-regulated railroad company Preferred stock sold to investors in the same state in which the firm is incorporated
C Common carriers, such as railroads and shipping companies, are exempt from registration under the Uniform Securities Act. While securities issued in the same state in which the firm is incorporated may be exempt from the Securities Act of 1933, they are usually required to register with the state. Agencies of the Canadian government and domestic U.S. banks are also exempt from registration, but securities issued by Canadian banks receive no such exemption
According to the Uniform Securities Act, which of the following statements best describes what it means for a security to be registered? The securities and issuer have received Administrator approval The information filed with the Administrator has been reviewed by the government and deemed both accurate and acceptable The security may be legally offered or sold in the state The company's financial condition and business practices are considered sound
C The Administrator does not rule on the accuracy or adequacy of any filing, nor does the government offer decisions on the investment merit or financial condition of an issuer. Essentially, when regulators grant a registration, it allows for the lawful offering and sale of securities within their jurisdiction.
Under the Uniform Securities Act, an institutional investor: Has a minimum of $1.5 million invested in securities Has a minimum of $100 million under management Is designated by rule or order of the Administrator Is any financial institution
C Under Sec. 201(c) of the USA, an institutional investor is designated by rule or order of the Administrator.
Which of the following transactions requires the registration of securities according to the Uniform Securities Act? An unsolicited transaction of an exchange-traded stock where the customer normally purchases only investment-grade bonds An offer to sell out-of-state municipal bonds to a bank An agent of a broker-dealer selling a private placement to five retail investors A purchase of securities offered for sale in an out-of-state newspaper
D Although an offer to sell securities appearing in a newspaper published outside a state is not considered an offer in that state, securities sold in a state are subject to registration. Choice (a) may not be suitable for the investor, but an unsolicited transaction in the secondary market is an exempt transaction. A private placement to a maximum of 10 retail investors within a state is also an exempt transaction
Last year, your firm recommended an IPO to a customer. He was given a red herring at the time of the recommendation and gave you an indication of interest for an $8,000 investment. When the issue became effective, you completed the sale, but his final prospectus was lost in the mail. Over the past year, the stock has steadily declined in value. Two weeks ago, the customer called you and said he wants his money back because you sold him a new issue without benefit of a prospectus. His request is currently under review by your legal department. In the newspaper this morning, you see the customer's obituary. How will this matter be disposed of? The request will be canceled since the customer has passed away The request will continue to be processed since a cause of action survives the death of the person making the claim The request will be denied since there is no one to pay in this cause of action The request will be forwarded to the state Administrator for disposition
B Under the provisions of the Uniform Securities Act, every cause of action survives the death of any person who might have been a plaintiff or defendant.
An agent solicits the purchase of MPH, Inc, a nonexempt, unregistered security. The agent requests the client sign a document, acknowledging the security's status. The document also includes an exculpatory provision absolving the agent and the broker-dealer from any liability or wrongdoing. The waiver the client signed is: Acceptable Acceptable with the Administrator's approval Null and void Subject to civil liability and criminal penalty
C Agents must not solicit nonexempt, unregistered securities nor should they request a client sign documents absolving the agent or broker-dealer from wrongdoing. Such statements are sometimes called exculpatory clauses and are prohibited. These documents would be null and void under the Uniform Securities Act.
Which of the following choices is not considered a security? A variable annuity set up as a retirement plan Call options on a gold futures contract American Depositary Receipts A Treasury bond futures contract
D Under the Uniform Securitiess Act, futures contracts are not securities. However, options on commodity futures contracts are considered securities. Variable products (annuities and life insurance policies) and ADRs are also defined as securities.
According to federal law, which of the following would best describe what happens when a security is federal covered? The issuer must register the security with the SEC only The Administrator has a diminished authority to review the security during an offering in the state The security is considered AAA-rated The security becomes a suitable pension plan investment
A Federal covered securities are registered with, and regulated by, the SEC. A state Administrator does not have authority over any offering documents related to federal covered securities. Remember, federal covered securities are subject to business risk and are not automatically considered safe or investment-grade.
Which of the following securities may have their registration denied or revoked by the Administrator? Securities issued by a nonprofit organization Municipal bonds Stock issued by a bank that is chartered in a different state U.S. Treasury bonds
A Generally, states are not permitted to revoke an exemption that has been granted under the Securities Act of 1933. However, nonprofit securities (choice a), exchange-listed securities, and investment contracts for employee-benefits plans may be denied registration by the state Administrator.
Under the USA, which of the following characteristics is required for a banker's acceptance to be exempt from registration? Maturities of no more than nine months Issued by a blue-chip company Rated in the highest category by at least three ratings companies Minimum denominations of $100,000 or more
A Short-term, corporate, fixed-income securities such as commercial paper and a banker's acceptance may qualify as an exempt security. The maximum maturity is nine months. The minimum denomination is $50,000 and it must be rated in one of the three highest rating categories by a nationally recognized statistical rating organization.
The Uniform Securities Act prohibits: Soliciting orders for unregistered nonexempt securities Maintaining discretionary accounts Charging extraordinary commissions on certain transactions All of the above
A Soliciting orders for unregistered, nonexempt securities is prohibited by the Uniform Securities Act. The Act permits broker-dealers to maintain discretionary accounts for customers and to charge fees for services performed in customer accounts.
Under the USA, which of the following choices has/have status as a legal person? A corporation A deceased person A mentally ill adult All of the above
A The USA has a broad definition of the word person. Natural persons (individuals) and legal persons (partnerships and corporations) are included in this definition. Minor children, incompetent adults, and deceased persons are not considered persons under the USA.
Which of the following statements is/are TRUE regarding the registration of securities under the Uniform Securities Act? A security is considered registered for one year from the effective date of its registration statement. Once the registration statement is declared effective by the Administrator, the security is considered to be registered as long as the issuer files quarterly and annual financial statements. If the registration statement for a security is declared effective by the Administrator of one state, it is also effective in any state in which an identical registration statement has been filed. The filing of a registration statement may be done by a person other than the issuer. II only I and IV only I, III, and IV only II, III, and IV only
B A registration statement is effective for one year from its effective date. A registration statement may be filed by the issuer, a registered broker-dealer, or any other person on whose behalf the offering is to be made. The other statements are not true.
Which of the following transactions meets the definition of an exempt transaction under the Uniform Securities Act? An issuer transaction of a security filed under the Securities Exchange Act A nonissuer transaction of a security filed under the Investment Company Act An isolated issuer transaction Any sale of a security for which a registration statement has been filed with both the Administrator and the Securities and Exchange Commission
B Any nonissuer transaction of a security registered under the Securities Exchange Act, Investment Company Act, or an isolated nonissuer transaction would be considered exempt transactions. Any offer, but not sale, of a security filed with both the Administrator and SEC would be considered an exempt transaction.
An agent misrepresents the risks associated with U.S. Treasury bills, notes, and bonds. Under the Uniform Securities Act, which of the following statements would BEST describe the consequences? This is viewed as unethical There are potential civil liabilities and the client may sue for damages U.S. Treasuries are subject to federal jurisdiction and, therefore, any liabilities incurred because of the misrepresentation of risk would be handled through federal courts and the SEC, not through states under the Uniform Securities Act Since these are exempt securities and not subject to credit risk, there is no potential misrepresentation of risk
B Misrepresenting the investment risks of a security could lead to civil liabilities, as clients have the right to sue to recover their losses. U.S. Treasury bills, bonds, and notes are securities and the fact that they are exempt securities is irrelevant if misrepresentations are made. Choice (a) is a true statement; however, it is fraudulent rather than unethical.
A mutual fund is planning to issue 10 million Class B shares. Five hundred thousand shares will be offered in the state of Rhode Island. Under the Uniform Securities Act, the Administrator of Rhode Island will require the fund to: Register the shares in Rhode Island Include a prospectus with its registration Pay a registration fee Sign a Consent to Service of Process I and II only III and IV only I, II, and III only I, II, III, and IV
B Mutual funds are federal covered securities and, therefore, a state may not require registration or regulate any offering document. Except for securities that are listed on one of the exchanges (such as the NYSE or Nasdaq), the state may charge a registration fee even though the securities are not registered. The state may also require issuers to file a notice of sale and sign a Consent to Service of Process
TechTOT, a non-Nasdaq small-cap company, is traded over-the-counter by a limited number of market makers. Its stock is considered by the Administrator to be a(n): Exempt security, subject to registration by qualification Nonexempt security, subject to registration by coordination Federal covered security, subject to registration by notification Federal covered security, subject to notice filing
B TechTOT is a nonexempt security, since it is not exempt under the Uniform Securities Act. Therefore, it is subject to registration by coordination with the state Administrator and the SEC because it trades on an interstate basis. The stock is not federal covered since that term applies only to exchange- or Nasdaq-listed securities and securities issued by an investment company.
Under an underwriting agreement, the syndicate will be given warrants as part of its compensation package. The warrants can be exercised anytime in the next two years. Under the Uniform Securities Act, which TWO of the following statements are TRUE regarding the issuer of this stock? The issuer must register the stock or distribute it under an exemption before the warrants can be issued. The issuer may distribute the warrants when the registration statement for the stock is filed. The issuer is subject to state reporting requirements until the warrants expire. The issuer is subject to state reporting requirements only until the stock distribution is completed. I and II I and III II and III II and IV
B The Uniform Securities Act states that there is always an offer of the stock called for by the conversion privilege of the warrants; therefore, the stock must be registered or sold under an exemption before the warrants are issued. As long as the conversion privilege is in effect, the offer is being made and the issuer is subject to state reporting requirements
Registration by coordination would most likely be used by which one of the following issuers? Mutual funds An initial public offering Nasdaq securities Intrastate offerings
B Under normal circumstances, the method of registration most often used by the new issuers of securities is registration by coordination. Mutual funds are federal covered securities. All listed securities, such as Nasdaq securities, are also federal covered and, therefore, exempt from registration with the states. Intrastate offerings are commonly registered by qualification.
Acme Insurance Company is considering raising capital by issuing bonds. Under the Securities Act of 1933, the bonds would be considered: Exempt from Registration Subject to registration with the SEC Exempt from prospectus requirements Exempt from the antifraud provisions
B Under the Securities Act of 1933, securities issued by insurance companies are subject to registration with the SEC and prospectus delivery requirements. They are, however, exempt from registration with the state Administrator. No securities are exempt from the antifraud provisions of the 1933 Act.
According to the Securities Act of 1933, which of the following descriptions would meet the definition of a security? A contract for the future delivery of 35,000 pounds of pork bellies An options contract for the future delivery of 50,000 pounds of copper Ownership interest in an endowment life insurance policy, with a cash value of $75,000 An unsecured promissory note issued by a corporation, maturing in 270 days or less A money-market mutual fund I and III only I, II, and III only II, IV, and V only I, II, III, and IV
C Although futures contracts are not securities, options on futures are defined as securities. Choice (I) is a futures contract. Choice (II) is an option on a futures contract. Insurance products are not securities unless the contract described is variable (variable life, variable annuities). An unsecured promissory note issued by a corporation that matures in 270 days or less is exempt from registration, but it is defined as a security. Money-market mutual funds are highly liquid, very safe investments that can be converted into cash, but these instruments are also securities
Under the Uniform Securities Act, which of the following choices is a nonexempt transaction? Selling U.S. federal agency securities to a bank Selling U.S. Treasury bills to a mutual fund Selling unregistered nonexempt securities Selling unregistered exempt securities on an unsolicited basis
C The only nonexempt transaction in this question is selling unregistered, nonexempt securities. This would actually be a violation of the Uniform Securities Act
Under the USA, which of the following transactions would NOT be considered exempt? An offer to an investment company A transaction by an executor of an estate An unsolicited issuer transaction effected through a registered broker-dealer A transaction by a trustee that is involved in a bankruptcy proceeding
C Under the Uniform Securities Act, any offer to an investment company or other institutional investor, a transaction by an executor of an estate, or a trustee involved in a bankruptcy, would be defined as an exempt transaction. An unsolicited nonissuer transaction may qualify as an exempted transaction
A U.S. computer manufacturer repurchased one million shares of its outstanding common stock between January 2000 and September 2001. The company will be required to take which of the following actions if it intends to distribute these shares in the form of a stock dividend? The shares must be registered with the SEC The distribution of shares qualifies as a private placement offering under Regulation D No special action is required by the company The company must register new shares of common stock, since the repurchased shares have been cancelled and are no longer valid for reissue
C When a company repurchases shares in the secondary market, it is called treasury stock. SEC registration of securities does not expire, provided the company remains current on its filings. The distribution of treasury stock to existing shareholders does not require the shares to be registered again with the SEC, since the stock dividend would not constitute the issuance of new shares.
According to the Uniform Securities Act, all of the following are considered securities, EXCEPT: Preorganization certificates Prime bank notes Voting trust certificates Endowment policies
D Endowment policies are insurance products and are not considered securities. The Uniform Securities Act often refers to various unregistered securities with odd names that promise unrealistic returns and have been the subject of enforcement actions by the Administrator, such as preorganization certificates and whiskey warehouse receipts.
Which of the following is not a security as defined by the USA? A certificate of interest in a profit-sharing agreement A certificate of interest in a mining title A preorganization certificate A futures contract in precious metals
D Futures and commodity contracts are not securities. However, the Uniform Securities Act includes some seemingly odd instruments as securities, such as interests in mining or drilling titles and preorganization certificates.
Under the Uniform Securities Act, which of the following actions is NOT exempt from state registration? The sale of securities by a sheriff An isolated nonissuer transaction Transactions in exchange-listed securities A Rule 147 offering
D Rule 147 covers intrastate offerings that are exempt from federal or SEC registration, but may be subject to state qualification. A transaction by a fiduciary such as an executor, sheriff, marshal, guardian, trustee in bankruptcy, and isolated nonissuer transactions are exempt under the Uniform Securities Act (USA). Any security listed on the New York Stock Exchange and securities listed on any other recognized national or regional exchanges are exempt from state registration.
An initial public offering (IPO) is being sold in one state only and is not being submitted for registration with the SEC under the Securities Act of 1933. According to the provisions of the Uniform Securities Act, what method of registration would be used for this offering? Notification Coordination Subordination Qualification
D The notification and coordination methods of state registration may only be used when the issuer also files a federal registration statement under the Securities Act of 1933. The qualification method of registration may be used in any state for any issuer that is not seeking federal registration.
Which of the following choices would be considered a person under the USA? A customer A broker-dealer An estate An issuer I and II only I and III only I, II, and III only I, II, III, and IV
D Under the USA, a person is defined as a legal entity, which would include individuals (natural persons) and business entities such as corporations, broker-dealers, partnerships, and investment advisers.
Under the Uniform Securities Act, registration by coordination becomes effective: If no stop order is in effect At the same time that the SEC registration becomes effective provided the registration statement has been filed with the Administrator for at least 10 days Provided a prospectus has been filed with the Administrator I and II only I and III only II and III only I, II, and III
D When a security is in registration with the SEC under the Securities Act of 1933, that registration can be coordinated with the Administrator for state registration. A registration under coordination will automatically become effective at the same time the federal registration becomes effective, provided that no stop order is in effect, the registration statement has been on file with the Administrator for at least 10 days, and a statement of the minimum and maximum proposed offering prices and underwriting discounts has been on file for two business days. A prospectus meeting the requirements of the Securities Act of 1933 must also be filed with the Administrator.
If a company registers its offering with a state Administrator using coordination, it would also file a registration statement under which federal act? The Securities Act of 1933 The Securities Exchange Act of 1934 The Investment Company Act of 1940 None of the above, since it would be an exempt transaction
A Under the Uniform Securities Act, registration by coordination is generally used for initial public offerings (IPOs). New issues, including IPOs, are required to register with the SEC under the Securities Act of 1933
According to the Uniform Securities Act, which of the following statements is NOT TRUE concerning private placements? The offer may not be made to more than 10 persons in that state during any 12-month period The offer may not be made to more than 35 persons in that state during any 12-month period The offer may be made to any number of institutional investors during any 12-month period Commissions may not be paid if the buyers are noninstitutional customers
B Under the Uniform Securities Act, any transaction involving no more than 10 persons (there is no limit on institutional accounts) is considered an exempt transaction known as a private placement, if the following conditions are met. The seller believes that all the noninstitutional buyers are purchasing for investment purposes only. No commission or other remuneration is paid for soliciting noninstitutional buyers. Choice (b) refers to a condition for private placements under Regulation D of the Securities Act of 1933.
Which of the following would most likely be registered with the state Administrator? A municipal revenue bond A mutual fund An NYSE-listed company's common stock A distribution of an interest in a mining or real estate venture
D Interests in mining or real estate ventures are examples of partnership offerings. General and limited partnerships are often registered with the Administrator in the state in which they are offered. Municipal bonds are not subject to registration requirements since they are categorized as exempt securities under the Uniform Securities Act. Also, mutual fund shares and securities listed on the NYSE are federal covered securities, since these issues are only required to be registered with the SEC.
Which of the following life insurance policies is considered a security under the Securities Act of 1933? Universal life Term life Whole life Variable life
D Of the choices listed, only variable life insurance policies carry investment risk and are considered securities. Traditional life insurance policies provide a stated rate of return and the policyholders do not assume the investment risk.
