AD Banker Comprehensive Practice Exam

The correct choice indicates that neither statement is accurate in the context of what an insurer may purchase for its separate account. In general, separate accounts are typically utilized by insurers to invest in a range of assets while ensuring they remain distinct from other company assets and liabilities.

Insurers must be cautious regarding concentration limits, particularly concerning the amount they can invest in any single issuer. Purchasing more than 10% of the total issued and outstanding voting securities of any single issuer is generally restricted to avoid over-concentration risks and potential conflicts of interest. This means that insurers are limited to ensure they maintain a diversified investment portfolio, minimizing the vulnerability to losses that may occur due to adverse events related to any one issuer.

Similarly, while insurers may have relationships with subsidiaries, investments in the securities of a subsidiary could pose regulatory and financial risks depending on the circumstances. This also contributes to the idea that making such investments would not fall within the common practices allowed for separate accounts.

Thus, the rationale behind selecting that neither choice is correct is rooted in regulatory guidelines and prudent investment practices that insurance companies are bound to follow to protect policyholders' interests and maintain sound financial stability.