17B:28-9. Investment of assets; eligibility; definition

17B:28-9. Investment of assets; eligibility; definition.

a. The assets held in a separate account, or any part thereof, may be invested in:

(i) Common stock or shares of any investment company specified in the contract or contracts participating in such separate account, and registered under the Investment Company Act of 1940, whether or not such stock or shares satisfy the dividend or earnings history requirements now or hereafter contained in the provisions of this title that regulate investments by domestic insurers; provided that at the time of the first purchase of such stock or shares of any such investment company, the insurer which maintains such account, or a subsidiary or affiliate of such insurer, shall be the investment manager or investment adviser of such investment company and, as long as such insurer which maintains such account, or any subsidiary or affiliate of such insurer, shall continue as such investment manager or investment adviser, the investments acquired by such investment company shall be such as would be eligible for investment of separate account assets by domestic insurers under the provisions of this section excluding this paragraph (i);

(ii) Other investments made eligible for investment by domestic insurers by the provisions of this title that regulate investments by domestic insurers, except for investments made eligible by the provision of chapter 20 of this title which permits a domestic insurer to make loans or investments not otherwise expressly qualified or permitted up to 5% of total admitted assets, as such provision may be amended from time to time, or any similar or superseding provision corresponding in substance thereto;

(iii) Investments authorized, specifically or by classes or otherwise, by the commissioner as appropriate to the nature and purpose of such separate account; and

(iv) Investments not otherwise eligible under the preceding clauses of this subsection, provided that at the time of making any such investment, and immediately after giving effect thereto, the aggregate cost of all investments held in such separate account pursuant to this paragraph (iv) shall not exceed 5% of the aggregate market value of the assets held in such separate account;

provided that (A) any common stock or shares, other than common stock or shares referred to in paragraph (i) of this subsection issued by an open-end investment company, shall be (1) common stock or shares which are listed or admitted to trading on a securities exchange in the United States of America or Canada, or (2) common stock or shares which are included on the National Association of Securities Dealers' national price listings of "over-the-counter" securities, or (3) other common stock or shares which the commissioner shall have determined are publicly held and traded and as to which market quotations shall be available; (B) the quantitative investment limitations now or hereafter contained in this title regulating investments by domestic insurers shall not be applicable to investments for separate account, subject to the qualification that the provision contained in this title limiting the percentage of voting stock of any one corporation that may be purchased or acquired by a domestic insurer, as such provision may be amended from time to time, or any similar or superseding provision corresponding in substance thereto, shall apply (subject to the provisions of N.J.S.17B:20-3 as such provisions may be amended from time to time, or any similar or superseding provisions corresponding in substance thereto), with respect to the aggregate of the voting stock of any one corporation held in all accounts of such insurer, except for all such stock that may be voted at the direction of a person or persons, other than such insurer or any subsidiary or affiliate of such insurer; and provided further that, subject to the next succeeding paragraph of this subsection, no domestic insurer shall purchase for any separate account any security (other than common stock or shares referred to in paragraph (i) of this subsection issued by an open-end investment company) of any corporation, if after such purchase more than 10% of the market value of the assets of such separate account would be invested in the securities of such corporation.

(v) Notwithstanding the foregoing provisions of this section or any other provision of law, a domestic insurer may invest the assets, or any part thereof, held in a separate account established and maintained solely for one or more group contracts in any investment or investments authorized by the contract or contracts participating in such account, subject only to subparagraph (B) of paragraph (iv) of this subsection relating to the percentage of voting stock of any one corporation that may be purchased or acquired. For the purpose of this paragraph, a group contract shall not include, (1) a contract which provides benefits to individuals based upon the investment results of such an account unless such contract implements a plan (a) which covers at least 100 individuals at the time of execution of such contract and (b) under which, if the crediting to such an account of the contributions made by any individual would affect his benefits under the plan, no portion of his contributions in excess of 50% is so credited, unless he is offered an alternative to having such portion so credited or, (2) except with the consent of the commissioner, a contract the holder of which is an association of individuals or the representative thereof.

Except as otherwise provided in this subsection, the investments held in the separate accounts of any domestic insurer shall be disregarded in determining whether the other investments of such insurer comply with the provisions of this title that regulate investments by domestic insurers as such provisions may be amended from time to time, or any similar or superseding provisions corresponding in substance thereto.

b. Notwithstanding any other provision of law, a domestic insurer may, with respect to any separate account or any portion thereof

(i) Exercise any voting rights of any stock or shares in accordance with instructions from the person or persons specified in, or designated pursuant to, the contract or contracts participating in such account, or

(ii) Establish a committee for such account, the members of which may be directors or officers or other employees of such insurer, or persons having no such relationship to such insurer, or any combination thereof, who may be elected to such membership by the vote of the persons having the beneficial interests in such account ratably according to their respective interests in such account or in such other manner as the insurer shall deem appropriate. Such committee may have the power, which may be exercisable alone or in conjunction with others, or which may be delegated to such insurer or any other person, as investment manager or investment adviser, to authorize purchases and sales of investments for such account and to take such other action with respect to account investments as it shall deem appropriate, provided that as long as such insurer or any subsidiary or affiliate of such insurer shall be the investment manager or investment adviser of such account, the investments of such account shall be eligible under the provisions of subsection a. of this section. Such insurer may establish such a committee for only a portion of a separate account, and its members may be similarly elected. Any such committee for only a portion of a separate account may be given the further power to require the subdivision of such account into two accounts so that the portion with respect to which such committee shall be acting shall constitute a separate account. If such committee shall so require, the insurer shall segregate from the account being so subdivided a portion of the assets held with respect to the reserve liabilities of such account. Such portion shall be in the same proportion to the total of such asset as the reserve liability for the portion of the account with respect to which such committee is acting bears to the total reserve liability of such account; and notwithstanding any other provision of law, the assets so segregated shall be transferred to a separate account with respect to which such committee shall act.

c. The investments held in a separate account and the liabilities chargeable against it shall at all times be clearly identifiable and distinguishable from the other investments and liabilities of the insurer. To the extent provided in the applicable contract or contracts, assets held in a separate account shall not be chargeable with liabilities arising out of any other business of the corporation.

No sale, transfer or exchange of investments may be made between a separate account and any other investment account of the insurer, except with the prior consent of the commissioner, and no investments held in a separate account, other than an account of the kind described in paragraph (v) of subsection a. of this section, shall be pledged or transferred as collateral for a loan.

d. The term "Investment Company Act of 1940" as used in this section shall mean an act of Congress approved August 22, 1940 entitled "Investment Company Act of 1940" as amended from time to time, or any similar statute enacted in substitution therefor.

L.1971, c.144; amended 1977, c.37, s.7; 1989,c.267,s.5.