among the Fund's equity holdings. See 1987 Prospectus at 35; 1986 Prospectus at 35; 1985 Prospectus at 8. In another publication describing the Balanced Fund, however, defendants classified convertibles as debt. See ABA Members Retirement Program, How Your Investment Options Let You Tailor Your Retirement Program to Your Own Financial Goals 4 (May 1985) (hereinafter "1985 Brochure"). Plaintiffs vaguely allege that defendants' inconsistent classification of convertibles somehow misled investors in the Balanced Fund. Contrary to plaintiffs' assertion, this court finds nothing misleading about defendants' disclosures concerning the convertibles in the Balanced Fund's portfolio. While they may have appeared to vacillate when describing convertibles, defendants were in fact accurately portraying the dual nature of convertible securities, which feature both a debt component and an equity conversion privilege.
Plaintiffs also complain that defendants misinformed investors about the objectives underlying the Balanced Fund's debt investments. Based on the depiction of the Balanced Fund's objectives in the ABA Plan's 1985 prospectus, plaintiffs believed that the Balanced Fund's debt holdings would serve the sole purpose of increasing the Fund's current income. See 1985 Prospectus at 32. Following the stock market crash, in a May 1988 letter to DeBruyne, Cofone indicated that the primary objective of the Balanced Fund's bond investments was capital appreciation rather than income production. According to plaintiffs, Cofone's letter marked the first time that defendants had disclosed their aggressive bond investment policy. In making this allegation, plaintiffs conveniently ignore the 1986 and 1987 prospectuses. In those documents, Equitable Life clearly stated that the Balanced Fund would seek to achieve long-term capital growth by investments in longer-term fixed income securities. See 1987 Prospectus at 23; 1986 Prospectus at 24. Thus, long before the stock market crash, defendants informed ABA Plan participants that the bonds held by the Balanced Fund would serve mainly as a means of achieving capital growth.
Finally, plaintiffs contend that defendants made misrepresentations about the Balanced Fund's volatility. In the ABA Plan's 1985 and 1986 prospectuses, Equitable Life described the Balanced Fund as the least volatile of the ABA Plan's three equity funds. See 1986 Prospectus at 16; 1985 Prospectus at 7. Plaintiffs take issue with this characterization. Based on his analysis of the equity funds' performance from 1980 to 1986, Hanan has concluded that the Balanced Fund regularly demonstrated a higher level of volatility than either the Growth Equity Fund or the Standard & Poor's 500 Stock Index ("S & P 500"). Nonetheless, even assuming the accuracy of Hanan's analysis, defendants' published depiction of the Balanced Fund's volatility did not amount to a material misrepresentation. Equitable Life repeatedly tempered its representations concerning the Balanced Fund by warning investors that the Fund offered no guarantee of a particular level of volatility. Noting the Balanced Fund's changing portfolio mix, Equitable Life downplayed the usefulness of comparisons between the volatility rates of the Balanced Fund and the S & P 500. See 1987 Prospectus at 35; 1986 Prospectus at 35; 1985 Prospectus at 8. Moreover, in the ABA Plan's 1987 prospectus, Equitable Life expressly admonished investors that the degree of the Balanced Fund's volatility could vary depending on market conditions. See 1987 Prospectus at 16. Finally, and most importantly, throughout the period of plaintiffs' participation in the Balanced Fund, Equitable Life continually cautioned that it could not assure the equity funds' success in achieving any of their objectives. See 1987 Prospectus at 17, 21; 1986 Prospectus at 21; 1985 Prospectus at 30; see also 1985 Brochure at 4 ("The Balanced Fund carries no guarantees."). Consequently, although defendants indicated that they would strive to minimize the Balanced Fund's volatility, they also explicitly warned that they might not succeed in their efforts. Having received this admonition on several occasions, plaintiffs cannot now claim that defendants misled them about the Balanced Fund's potential susceptibility to market swings.
Despite their allegations of numerous misrepresentations regarding the Balanced Fund, plaintiffs cannot sustain their claims under the federal securities laws in light of the disclosures made in the ABA Plan's prospectuses. As those documents clearly revealed, defendants actively managed the Balanced Fund in such a manner that the Fund's equity investments often exceeded the Fund's debt investments by a significant margin. In the 1985 prospectus, Equitable Life reported an average investment of 80 percent of the Balanced Fund's assets in equity securities (including convertibles). See 1985 Prospectus at 8; see also ABA Members Retirement Program, Insider's Update (Dec. 1985); ABA Members Retirement Program, Insider's Update (Aug. 1985). Furthermore, the 1986 and 1987 prospectuses disclosed that the proportion of the Balanced Fund's assets invested in equity (including convertibles) had ranged from 43 percent to 94 percent. See 1987 Prospectus at 35; 1986 Prospectus at 35. In addition, a July 1987 publication informed ABA Plan participants that defendants had invested 69.5 percent of the Balanced Fund's assets in stocks as of June 30, 1987. See ABA Members Retirement Program, Insider's Update (July 1987). By publishing all of this information before the stock market crash, defendants adequately forewarned investors that the Balanced Fund could maintain sizable investments in common stock and other equity securities. Moreover, during their depositions, both DeBruyne and Carlyle admitted reading and understanding the published warnings that the Balanced Fund offered no assurance of attaining its objectives and no income guarantee. Deposition of Dean Peter DeBruyne, March 31, 1989, at 118, 206; Deposition of Evelyn Carlyle, March 22, 1989, at 235, 316. Fully aware that participation in the Balanced Fund entailed some risk, plaintiffs could have withdrawn their money from the Fund at any time prior to the stock market crash. Instead, they elected to remain participants in the Balanced Fund, apparently hoping to profit from the stock market's upward surge in 1986 and early 1987. Now, in the aftermath of the stock market crash, plaintiffs seek to make defendants the scapegoats for plaintiffs' own unfortunate investment decision. Considering the disclosures that defendants made to ABA Plan participants from 1985 through 1987, plaintiffs cannot plausibly claim ignorance of the risk involved in their investment.
III. New York Insurance Law Claim
In Count VI of their complaint, plaintiffs allege that defendants violated section 4226 of the New York Insurance Law. Under this statutory provision, an insurer who is authorized to make annuity contracts in New York cannot issue any publications "misrepresenting the terms, benefits or advantages of any of its policies or contracts." N.Y. Ins. Law § 4226(a)(1) (McKinney 1985). Plaintiffs claim that defendants published various misrepresentations about the terms of the annuity contract governing the investment options under the ABA Plan. In the course of analyzing plaintiffs' securities claims, however, this court has already rejected all of plaintiffs' allegations that defendants made material misrepresentations to ABA Plan participants. Consequently, plaintiffs lack any foundation for their claim under the New York Insurance Law.
For the foregoing reasons, the court grants defendants' motion for summary judgment on all six counts of plaintiffs' complaint.
IT IS SO ORDERED.
Dated: September 6, 1989
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