New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on February 21, 2002, representing the position of the New York State Insurance Department.

Re: Shelf Registration and N.Y. Ins. Law § 1204 (McKinney 2000)

Questions Presented:

1. Is the prospectus filed by an authorized foreign life insurer with the Securities and Exchange Commission ("SEC") for a shelf offering subject to N.Y. Ins. Law § 1204(c) (McKinney 2000)?

2. Is a post-effective amendment to the registration statement filed by an authorized foreign life insurer with the Securities and Exchange Commission ("SEC") for a shelf offering subject to N.Y. Ins. Law § 1204(c) (McKinney 2000)?

3. Is a supplemental prospectus filed by an authorized foreign life insurer with the Securities and Exchange Commission ("SEC") for a shelf offering subject to N.Y. Ins. Law § 1204(c) (McKinney 2000)?

Conclusions:

1. In accordance with N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2(a)(3) (1995), the filing and approval requirements in N.Y. Ins. Law § 1204(c) (McKinney 2000) are not applicable to the prospectus. However, the company must comply with N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2(c) (1995).

2. In accordance with N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2(a)(3) (1995), the filing and approval requirements in N.Y. Ins. Law § 1204(c) (McKinney 2000) are not applicable to the post-effective amendment to the registration statement. However, the company must comply with N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2(c) (1995).

3. In accordance with N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2(a)(3) (1995), the filing and approval requirements in N.Y. Ins. Law § 1204(c) (McKinney 2000) are not applicable to a prospectus supplement. However, the company must comply with N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2(c) (1995).

Facts:

A foreign life insurer licensed in New York (the "Company") proposes to issue unsecured debt (the "Securities") pursuant to a shelf registration to be filed with the United States Securities and Exchange Commission ("SEC") on Form S-3. The Securities may be offered in New York State. The Company may issue and sell Securities weekly.

Shelf registrations are governed by 17 C.F. R. § 230.415 (2002) (Rule 415). In the case of primary offerings of debt securities by a company eligible to use Form S-3, the company may register only the amount of securities it reasonably expects to offer and sell within two years of the initial effectiveness date of the registration statement. Once an amount of securities is registered under the shelf registration statement, the Company may issue and sell such securities from time to time as often as it wishes.

The Securities will be issued pursuant to a registration statement (the "Registration Statement") that will be filed by the Company with the SEC under the Securities Act of 1933 and 17 C.F. R. § 230.415 (2002) (Rule 415) and declared effective by the SEC. The Registration Statement will contain a prospectus (the "Prospectus"). As required by SEC rules, the Company plans to file a prospectus supplement ("a Prospectus Supplement") with the SEC under 17 C.F. R. § 230.424 (2002) (Rule 424) that will contain the final terms for each weekly or periodic offering of securities under the shelf registration. The Prospectus Supplement will set forth the terms of the security such as offering price, interest rate, maturity date and redemption terms. Unlike the Registration Statement, the Prospectus Supplement need not be declared effective by the SEC and may even be submitted to the SEC at the time it is released for circulation. This method of supplementing the Registration Statement is separate and distinct from an amendment of the effective registration statement (a "Post-Effective Amendment"), which must be filed with the SEC and be declared effective before the Company can begin using the amended prospectus. In the proposed shelf offering there is no requirement to file Post-Effective Amendments to reflect the terms of each offering of securities. Instead the Company can price and offer its securities very quickly, without any need for SEC clearance of the Prospectus Supplement setting forth the pricing terms.

Analysis:

N.Y. Ins. Law § 1204(c) (McKinney 2000) provides in pertinent part:

No person, firm, association or corporation shall in this state issue, circulate or distribute any advertisement, circular, letter or other public announcement in connection with the sale or proposed sale to the public in this state of any securities of any insurer unless a copy of such announcement has been filed with the superintendent and approved by him. The Superintendent may approve any such announcement if, after such examination or investigation as he sees fit, he finds it is not false, misleading or likely to deceive the public.

N.Y. Ins. Law § 1204(f)(2) (McKinney 2000) provides:

The superintendent may by order or regulation exempt any other security or class thereof from all or part of this section on such terms and conditions as he deems appropriate upon a finding that his application thereto is not necessary to protect the public.

N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2 (1995) (Reg. 44) describes certain securities and transactions that are exempted from the application of N.Y. Ins. Law § 1204(c) (McKinney 2000) because its application to them is not necessary for the protection of the public. Included as paragraph (3) is:

The offer of, or proposal to sell, any security of an insurer, including an "insurer" as defined by [section 1204(c)] of the New York Insurance Law, for which a registration statement has been filed under the Securities Act of 1933, and the sale of such security.

N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2(c) (1995) (Reg. 44) provides:

Within 30 days following the commencement of any exempt offering by an insurer, such insurer shall file with the superintendent, for information purposes, a copy of the principal prospectus or similar offering circular, if any, used for purposes of the offering.

The company’s shelf registration will be made pursuant to a registration statement filed under the Securities Act of 1933 and 17 C.F. R. § 230.415 (2002) (Rule 415). The registration statement contains the Prospectus. After a shelf registration statement becomes effective, it will be updated by either the filing of a post-effective amendment to the registration statement or a prospectus supplement. The SEC distinguishes between fundamental and material changes to a prospectus. If a change will result in a major and substantial change to information contained in the registration statement, it is considered fundamental and must be effected by the filing of a post-effective amendment to the registration statement.

On the other hand, a registrant using a shelf-registration statement for a series of debt offers can use a prospectus supplement to reflect changes in interest rates, redemption, prices and maturities for each periodic offering. Although it does not represent a fundamental change in the information set forth in the registration statement, when all other details remain the same, the information in the prospectus supplement is material to any investor in the securities. 1B H. S. Bloomenthal, Going Public and the Public Corporation, § 9.13 (2000). The importance of the prospectus supplement was described by H.S. Bloomenthal & S. Wolff, Securities and Federal Corporate Law 33 (2d ed. 2001):

Base prospectuses today, particularly those used for unallocated delayed shelf registration statements, tend to describe in the broadest of terms the many different types of securities and offerings that might be done off the shelf. Thus, in offerings off the shelf, the key offering disclosure is usually filed in the Rule 424 prospectus supplement.

Moreover, if a base prospectus (which was part of the registration statement originally filed) contains information which by the time of a shelf offering is substantially outdated, the registrant may file a post-effective amendment containing a revised prospectus or may use an extensive prospectus supplement containing updated information. Keller, Registration Statements Under the Securities Act of 1933, 1271 PLI/Corp 735 (2001).

In view of the above, it is the opinion of this Office that, for the purpose of complying with N.Y. Comp. Codes R. & Regs. tit. 11, § 7.2(c) (1995), the prospectus supplement is the principal prospectus used for each periodic offering and, as such, must be filed with the Superintendent.

For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.