The Securities and Exchange Commission has revoked two no-action letters that had allowed an insurance company to sell insurance securities through broker/dealers without having to register as a B/D. M Financial Holdings, based in Portland, Ore., had been allowed to pay commissions to registered representatives at affiliated firms and receive compensation from the overall premium revenues produced through transactions. But in a May 8 letter, the SEC’s Division of Market Regulation stated that M Financial had changed its business strategy since it was given two no-action letters, one in 1987 and another in 1988. David Harris, partner at Dechert in Washington, D.C. and an attorney representing M Financial, declined to comment.
The previous no-action protection had allowed M Financial to partner with B/D registered representatives to jointly publicize insurance products and provide the B/Ds with clerical services. The SEC letter did not specify what had changed about M Financial’s business strategy and an M Financial communication director and compliance officer were not prepared to comment by press time. The SEC letter did, however, state that a Sept. 28, 1995 no-action letter it wrote to First of America Brokerage Service, based in Tampa, Fla., describes the SEC’s current take on how networking arrangements should be designed between insurance companies, their affiliates and B/Ds. An SEC spokesman declined to comment beyond the letter.