Skip to Content

Illinois Supreme Court Nails Down Status in Big Market: Indexed Annuities Are Not Securities
July 11, 2019
In Van Dyke v. White, the Illinois Supreme Court has held that fixed indexed annuities are not securities under Illinois law.

The decision is significant because it:

  • reverses a decision of the Illinois securities department that indexed annuities were securities in an agent disciplinary proceeding; and
  • establishes legal certainty on this point for sales in Illinois, which is said to be the third-largest state retirement market.

Illinois securities law defines “security” to include a “face amount certificate,” and defines “face amount certificate” to include “any form of annuity contract (other than an annuity contract issued by a life insurance company authorized to transact business in this State).” The Illinois Securities Department agreed that the fixed indexed annuities in the case were not securities under this provision.

However, the Illinois Securities Department found the fixed indexed annuities to constitute “investment contracts” under the Illinois definition of “security.” The department argued that the provision was “patterned after” the definition of “security” in the Securities Act of 1933 and, therefore, had to be construed along the lines of the U.S. Supreme Court decisions that found variable annuities to be investment contracts and a U.S. court of appeals decision that, in effect, found the SEC could reasonably determine fixed indexed annuities to be investment contracts.

In Van Dyke, the Illinois Supreme Court ruled against the Illinois Securities Department based, in short, on the ground that the specific definition of “face amount certificate” took precedence over the “general descriptive designation” of “investment contract.”

Carlton Fields filed an amicus brief on behalf of the American Council of Life Insurers urging the Van Dyke court to hold that fixed indexed annuities were not securities under Illinois law. For additional information about the lower court rulings in this and a related case, see “Illinois Courts: Fixed Indexed Annuities Are Not Securities,” Expect Focus – Life Insurance, Vol. III (Oct. 2016).
Related Practices
Life, Annuity, and Retirement Litigation Financial Services Regulatory
Related Industries
Life, Annuity, and Retirement Solutions Securities & Investment Companies
©2024 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.