General Securities Sales Supervisor (Series10) Practice Exam

Which of the following is defined as a "security" under the Securities Act of 1933?

1. Deferred single premium annuity

2. Debenture

3. Whole life policy

4. Both II and III

The correct answer is: Whole life policy

The correct answer identifies a "security" as specified under the Securities Act of 1933. A whole life policy, while considered an insurance product, is typically not classified as a security under the Act. However, the Act encompasses a range of investment instruments and financial products, which can include various forms of annuities, particularly if they exhibit characteristics of investment contracts. The clarification arises when examining the other options. A deferred single premium annuity can be classified as a security because it involves an investment component where the purchaser makes a single premium payment and then receives returns based on the performance of investments held by the insurance company. Similarly, a debenture, which is a type of debt security, is defined as a security since it represents a loan made by the investor to the borrower, typically a corporation, and is secured only by the borrower's general creditworthiness. Therefore, both the debenture and the deferred single premium annuity would correctly fall under the definition of a security within the context of the Securities Act of 1933.