This section contains the nature of the case and procedural background.

D arranges viatical settlement transactions and performs certain post-transaction administrative services. D sells fractional interests in insurance policies to retail investors, who may pay as little as $650 and buy as little as 3% of the benefits of a policy. D uses some 500 commissioned 'licensees,' mostly independent financial planners. D's net compensation is roughly 10% of the purchase price after payment of referral and other fees. In 1994 D accounted for more than half of the industry's estimated annual revenues of $300 million. The SEC (P) contends that the fractional interests marketed by D are securities and that D violated the Securities Act of 1933 and the Securities Exchange Act of 1934 by selling them without first complying with the registration and other requirements of those Acts. The court preliminarily enjoined D from making further sales. D argues that (1) viatical settlements are exempt from the securities laws because they are insurance contracts and (2) the fractional interests sold by D are not in any event securities within the meaning of the 1933 and 1934 Acts. The court ruled for P and D appealed.

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