SECURITIES AND EXCHANGE COMMISSION
Release Nos. 33-8028; 34-44981; IC-25244; Registration No. 333-62662
October 25, 2001
Statements Concerning the Order Declaring Effective the Registration Statement of The American Life Separate Account 5 of The American Life Insurance Company of New York
AGENCY: Securities and Exchange Commission ("Commission").
Statement of Chairman Pitt and Commissioner Unger:
The only question posed by the request to declare effective the registration statement of The American Separate Account 5 of The American Life Insurance Company of New York is whether to permit this transaction to go forward under Section 8(a) of the Securities Act of 1933 ("Securities Act"). While the issues Commissioner Hunt raises in his dissenting statement to the Commission's action are certainly highly pertinent considerations, there are others that necessarily go into the Commission's decision to declare this registration statement effective. These include: (1) the extent to which the registration statement meets the disclosure requirements of the Securities Act and the issuer has complied with our disclosure suggestions, (2) whether the procedural posture is the most appropriate for plenary consideration of the issues implicated, (3) whether, in light of the enactment of the Electronic Signatures in Global and National Commerce Act1 after the Commission's most recent interpretive release on the use of electronic media for delivery,2 it would be fair to the issuer to stop its transaction without full consideration of the legal and economic consequences of Commission intervention, (4) the extent of the disclosure the issuer will give to potential investors about the novel issues raised by the registration statement, and (5) whether full-scale consideration of these issues was the wisest use of the Commission's resources at this time. Weighing those factors, the Commission decided to declare the registration statement effective.
We do not share Commissioner Hunt's view as to the implications of today's action. No one should read the Commission's order as predetermining the outcome in any other circumstance, nor should anyone confuse the Commission's eagerness to consider in an orderly way the issues raised by this filing with a view by the Commission as to the appropriate outcome of any such review.
Statement of Commissioner Hunt in dissent:
Today, the Commission has accelerated the registration statement of The American Separate Account 5 of The American Life Insurance Company of New York ("American Life"). I have dissented from that decision.
Under Section 8(a) of the Securities Act of 1933, the Commission may accelerate the effective date of a registration statement if acceleration is consistent with the public interest and the protection of investors. I believe American Life's failure to commit to provide notice to investors that a prospectus, proxy statement, or confirmation has been posted in an investor's personal file located on American Life's Web site is inconsistent with the protection of investors.
In October of 1995, the Commission issued an interpretive release regarding the use of electronic media.3 In that release, the Commission recognized that the federal securities statutes, generally, do not prescribe the medium to be used for providing information to investors. The Commission also recognized that delivery implies that investors have some sort of notice that information exists and has been provided to them as required by the federal securities laws. That release reads, in pertinent part, as follows:
"When an issuer delivers a paper document through the postal mail, the investor will most likely be made aware that new information exists that the investor might have to take some action within a certain period of time. . . . If an electronic document itself is provided - for example, on computer disk, CD-ROM, audiotape, videotape, or e-mail - that communication itself should generally be sufficient notice. If the document is provided on an Internet Web site, however, separate notice would be necessary to satisfy the delivery requirements unless the issuer can otherwise evidence that delivery to the investor has been satisfied or the document is not required to be delivered under the federal securities laws."4 [Emphasis added.]
This has been the Commission's interpretation for the past six years. Today, the Commission has accelerated a registration statement which, albeit limited to the particular circumstances and facts of this offering, in my judgment is inconsistent with our prior interpretation. I believe Congress, through its enactment of the federal securities laws, provided certain rights to investors and placed certain obligations on issuers and broker dealers. I do not believe that, at this time and even in this unique offering, investors should be forced to waive those rights or that the issuer should be allowed to shift those obligations.
I understand that all regulations have costs and that American Life is passing some of the lower costs of this electronic-only offering on to investors. The cost of providing notice through electronic mail, however, is extremely low and provides significant protection to investors.
I am specifically concerned with investors' protection when a transaction is posted to an investor's account or when there is a material change to American Life's prospectus. Unlike using a credit card over the Internet where a consumer's liability for loss resulting from fraudulent activity is generally limited to $50, 5 American Life's variable annuity contract prospectus states that investors bear the full risk of loss of any unauthorized transactions made on their behalf. Accordingly, failure to continuously check one's personal file could result in significant losses to investors from fraudulent transactions. Material changes in the terms of the contract and failure to notice such changes could also adversely affect an investor's investment.
I believe the elimination of the "notice" requirement to American Life investors is not consistent with the protection of investors. I am pleased, however, that my colleagues have limited this decision only to the particular circumstances applicable here and that the Commission is reviewing whether any of our previous pronouncements on electronic delivery should be modified. If the Commission after its review decides to expand this decision, I hope it will do so only after seeking public comment.