Asset allocation models-are they investment companies

[Guest Smokin]

A major insurance company takes the position that the use of an asset allocation model in a 403(b) plan triggers SEC scrutiny because the asset allocation model is a investment company (ie mutual fund) for SEC purposes. Does anybody know of any backup for this position. The asset allocation model consists of 5 model portfolios

[MSN]

Smokin-

Based on several No Action Letters issued by SEC in the late 80's and early 90's, the asset allocation models would not be considered investment companies if they met the criteria set forth in those letters. The SEC has since stopped issuing letters on this topic since they believe the criteria already provided to be sufficient guidance for us to make an informed decision.

I'd suggest looking at Rule 3(a)-4 of the Investment Company Act and using that as a starting point for determining if your models are an investment company. Nobody on here could give you an absolute answer since the facts will be unique for each provider.

Mark

[Guest Smokin]

Mark

Thanks for the tip. We're not sure either. But one issue seems to be automatic rebalancing which makes the arrangement look a bit like a fund of funds. But if the funds that are part of the portfolio are offered anyway and there is no charge for picking the portfolio, its not clear to us that a sale occurred. It does seem that the portfolio could be seen as a securityl