HOLDING COMPANY BEST PRACTICES
The following risks are identified and best practices are recommended by the GSIWG to address Matrix Item #39—Investment managers/advisors who hold
proxies in a company/group for mutual funds may have more than 10% control. This may trigger Form A and may require more monitoring.
Category Trouble/Risk Comments
Market RISK: An investor with a large percentage of Holding Company stock may be entitled to divest significant shares,
Disruption therefore driving the stock price down. This may lead investor’s and policyholder’s confidence levels to decrease.
This may also lead to ratings downgrades (if in combination with other issues).
BEST PRACTICES: Upon request for an exemption from change in control, the regulator should notify the
insurer to obtain documentation of the board of directors “no objection” to one investor holding a material amount
of stock. Some Holding Company structures have a limitation on percentage of stock ownership allowed for
The regulator should obtain a statement from the investor as to its investment buying and selling policy.
The Ability to RISK: An investor with a large percentage of Holding Company stock may inherently have the ability to influence
Influence management and policy.
Policy Decisions BEST PRACTICES: Upon reviewing the exemption from change in control, the regulator should inquire not only
about the ability of the investor to obtain a board seat, but even being a “non voting observer” on the board.
Holding Company board controls should be firmly in place to assure that “influencing policy and management
decisions” cannot occur.
Board member internal controls should be reviewed upon exam.
The Financial RISK: The risks mentioned above, both Reputational and Operational, can lead to financial risks.
Holding BEST PRACTICES: Request annual attestation from the investor, stating that there are no changes in investing
Company and philosophy. (As approved in the exemption from change in control.)