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SEC Form N-6

SEC Form N-6
InvestingLaws and RegulationsSECSec and Regulatory Bodies

What Is SEC Form N-6?

SEC Form N-6 is a form that certain trust accounts must file with the Securities and Exchange Commission (SEC). The SEC is a regulatory agency that assists with helping prevent fraud and different forms of deception involving the financial markets. The SEC monitors the activities and recordkeeping of publicly-exchanged companies the United States. SEC Form N-6 assists investors with gaining access to pertinent information about investing in a variable life insurance contract, which has an investment component within it and can change in value.

Understanding SEC Form N-6

SEC Form N-6 is a document that must be presented by separate accounts, which are unit investment trusts (UITs) that offer variable life insurance contracts. A unit investment trust is a U.S. financial company that purchases or holds a group of securities, for example, stocks or insurance contracts. A UIT is like a mutual fund since they represent a basket of investments wherein investors pool their funds. A UIT makes these investments accessible to investors as redeemable units.

Variable Life Insurance Contracts

Variable life insurance is a permanent life insurance policy that contains a sub-account, which gives an additional investment component. The cash value of the policy is invested in the market, like a mutual fund. Accordingly, the policy's payout amounts depend on the performance of the underlying investments within the policy. All in all, variable insurance policies pay more money when the investments are performing great and pay out less money when the investments perform inadequately.

Variable life insurance policies have greater volatility or fluctuations in value, and in this manner, more risk associated with them. It's hence that the SEC mandates Form N-6 to assist investors with understanding the terms, conditions, and risks associated with these policies.

SEC Filings

SEC Form N-6 is just one illustration of what is known as a SEC filing. These filings are official statements or documents, which could include things like periodic reports, registration statements, and documents involving risk disclosures. In the United States, the federal government requires these documents to be filed and accessible to potential investors in the interest of full disclosure. Investors survey these documents as a method for evaluating the company's history, to survey its current financial wellbeing, and likewise to try and forecast the company's stock performance in the near future.

Parts of SEC Form N-6

SEC Form N-6 consists of three main parts.

Part A

Part An of this filing, the prospectus, must contain obviously written information about the investment that the average investor, who might not have a specific background in finance or law, can understand. It ought to give a balanced disclosure of the positive and negative parts of variable life insurance contracts.

Different things included in Part An are as per the following:

  • Outline of the contract, the investment, and costs.
  • Expense table, including ongoing fees, annual fees, and transaction charges.
  • General description of the registrant or the insurance company.
  • Premiums, which are the monthly payments required by the investor that would need to be paid to the insurance company. This will include the due dates and amounts.
  • The standard death benefit under the contract must be depicted, including the way that the benefit is calculated and for when the insurance is in effect.
  • Surrender or withdrawal policies, like the terms and charges for early withdrawals
  • Loans that can be taken out on the policy need to be unveiled with regards to whether a loan is accessible, any limitations, and the interest rate charged.
  • Investment risks associated with the contract and any different investments.
  • Insurance company risks to the investor, which includes a disclosure that payouts for the policy are at risk in the event that the company endures financially.
  • Financial statements of the insurance company.
  • Conflicts of interest, which could include disclosing that investment professionals could get compensated compensation for selling these policies to investors.
  • Charges and legal proceedings.

Like different filings, this document ought to comply to the guidelines in Securities Act Rule 421(d), known as the Plain English Rule, which directs that the wording ought to be clear, concise, and effectively understandable.

Part B

Part B contains the statement of additional information (SAI), which might be of interest to certain investors. A couple of the things situated in Part B include:

  • Financial statements, on the off chance that not listed before
  • Non-principal risks include any risks not included in the prospectus.
  • Services that the registrant has purchased and expenses paid to outsiders for those services. Additionally, any service agreements that the insurance company has with different entities must be listed.
  • Premium information not unveiled in the prospectus would be listed here, like any limitations on prepayments
  • Underwriters, which are investment firms, must be listed with their address and any affiliations with the insurance company.

Part C

Finally, Part C contains information about the company and those involved in the insurance offering. A portion of the information in Part C includes the following:

  • Exhibits, which could include any contracts the insurance company has entered into and the company's certificate of incorporation. Likewise, the board of directors resolution, which lays out the company, would be displayed.
  • Listing of the directors and officers with their names, business addresses, and their position at the company.
  • Indemnification, which would list any liability insurance for the company and its members.
  • Signatures for the SEC filing.

Companies that meet the specific criteria must complete and file SEC Form N-6, which is a document that is required by the Investment Company Act of 1940 and the Securities Act of 1933. To fulfill SEC filing obligations, the SEC Form N-6 must be completed and submitted in electronic format on the SEC website. The SEC makes the information contained in these filings accessible to the public.

Features

  • Since variable life insurance policies have greater volatility, and consequently, more risk associated with them, the SEC mandates Form N-6.
  • SEC Form N-6 is a document that must be presented by separate accounts, which are unit investment trusts (UITs) that offer variable life insurance contracts.
  • SEC Form N-6 assists investors with understanding the terms, conditions, and risks associated with these policies.