[Federal Register Volume 59, Number 247 (Tuesday, December 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31731]


[[Page Unknown]]

[Federal Register: December 27, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20786; File No. 812-9136]

 

Investment Company Act of 1940, SunAmerica Inc., et al.

December 20, 1994.
AGENCY: Securities and Exchange Commission (the ``SEC'' or the 
``Commission'').

ACTION: Notice of Application for Exemption under the Investment 
Company Act of 1940 (the ``1940 Act'').

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APPLICANTS: SunAmerica Inc., Anchor National Life Insurance Company 
(``Anchor National''), Variable Separate Account (``Separate Account'') 
and SunAmerica Capital Services, Inc. (collectively, ``Applicants'').

RELEVANT 1940 ACT SECTIONS: Order requested under Section 6(c) of the 
1940 Act granting an exemption from Section 22(d) thereof.

SUMMARY OF APPLICATION: Applicants seek an order to the extent 
necessary to permit Anchor National or any other insurance company 
controlling, controlled by, or under common control with, Anchor 
National (collectively, ``Affiliated Insurers'') to waive, in certain 
circumstances, the contingent deferred sales load that otherwise would 
be imposed on certain individual and group flexible payment deferred 
variable annuity contracts (``Contracts'') issued and to be issued by 
Anchor National or the other Affiliated Insurers.

FILING DATE: The application was filed initially on August 2, 1994; an 
amended application was filed on November 15, 1994.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing on this application by writing to the 
Secretary of the SEC and serving the Applicants with a copy of the 
request, personally or by mail. Hearing requests must be received by 
the SEC by 5:30 p.m. on January 17, 1995, and should be accompanied by 
proof of service on the Applicants in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the writer's interest, the reason for the request, and the 
issue contested. Persons may request notification of a hearing by 
writing to the Secretary of the SEC.

ADDRESS: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants, c/o Routier, Mackey and Johnson, P.C., 1700 K 
Street, N.W., Suite 1003, Washington, D.C. 20006.

FOR FURTHER INFORMATION CONTACT: Patrice M. Pitts, Attorney, at (202) 
942-0670, Office of Insurance Products, Division of Investment 
Management.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application is available for a fee from the 
Public Reference Branch of the SEC.

Applicants' Representations

    1. Anchor National, a stock life insurance company organized under 
the laws of the State of California, is an indirect wholly-owned 
subsidiary of SunAmerica Inc., a financial services company.
    2. Anchor National established the Separate Account on June 25, 
1981, to fund variable annuity contracts. The Separate Account is 
registered under the 1940 Act as a unit investment trust.
    3. SunAmerica Capital Services, Inc. (``SEC''), the principal 
underwriter for certain of the existing Contracts, is a broker-dealer 
registered under the Securities Exchange Act of 1934 and a member of 
the National Association of Securities Dealers, Inc. SCS also is an 
indirect wholly-owned subsidiary of SunAmerica Inc.
    4. The Contracts are or will be issued by Anchor National or other 
Affiliated Insurers and offered through the Separate Account or any 
other separate account (as defined in Section 2(a)(37) of the 1940 Act) 
of the issuing Affiliated Insurer that is registered as an investment 
company under the 1940 Act (collectively, ``Eligible Account(s)''). The 
Contracts will provide for accumulation of contract values and payment 
of benefits on a variable basis. Fixed accumulation and/or payment 
options also may be available under the Contracts. (In the case of 
group Contracts, the term ``Contract,'' as used herein, will include a 
certificate issued to a participant in the group; the term ``Contract 
owner'' will include such a participant.)
    5. Various fees and charges may be deducted from contract values or 
the assets of an Eligible Account to pay for expenses incurred in 
connection with administering and selling the Contract and for assuming 
certain risks thereunder. All such charges will be permitted either 
pursuant to rules adopted under the 1940 Act or by order of the 
Commission, and will be fully disclosed in the prospectuses for the 
Contracts.
    6. A contingent deferred sales charge (``CDSC'') may be imposed 
upon certain withdrawals from the Contracts. The CDSC may vary in 
amount, according to a schedule contained in the applicable Contract 
and described in its prospectus, depending upon the contribution year 
of the purchase payment being withdrawn. Purchase payments withdrawn 
after a specified period of time will not be subject to the CDSC and 
may be withdrawn free of such charge. The applicable Contracts 
prescribe the circumstances in which the CDSC may be reduced or waived, 
including in connection with the ``Confinement Waiver benefit'' 
described below.
    7. Under a Contract to which the ``Confinement Waiver benefit'' 
applies, the CDSC will be waived upon the Contract owner's request for 
full or partial surrender of the Contract value prior to the annuity 
date. This ``Confinement Waiver benefit'' will be available if:
     The Contract owner is confined to an eligible nursing home 
and/or hospital for at least 60 consecutive days while the Contract is 
in force;
     A surrender or partial withdrawal request and adequate 
proof of confinement are received by the Affiliated Insurer either 
while the Contract owner is confined or within 90 days of the Contract 
owner's discharge from the nursing home or hospital; and
     Confinement in the nursing home and/or hospital is 
prescribed by a physician and is medically necessary.
    8. The ``Confinement Waiver benefit'' may not be exercised before 
the expiration of 90 days from the date the Contract is issued.
    9. A new 60 day confinement period must be satisfied each time the 
Contract owner becomes newly confined (whether for the same unrelated 
causes), if services by an eligible nursing home and/or hospital have 
not been provided for a period of at least six months. A new 60 day 
confinement need not be satisfied, however, if services for related 
causes were provided within six months of current receipt of services.
    10. Anchor National and SunAmerica Inc. have determined that the 
``Confinement Waiver benefit'' is a desirable feature, and beneficial 
to variable annuity contract owners. Accordingly, they wish to have the 
flexibility to incorporate such a feature in both existing and new 
Contracts, in jurisdictions where permitted.
    11. In jurisdictions where permitted, Affiliated Insurers will make 
the ``Confinement Waiver benefit'' available to all new owners of 
affected Contracts. The Affiliated Insurers reserve the right not to 
make the ``Confinement Waiver benefit'' available to certain of their 
existing Contracts. Alternatively, an Affiliated Insurer may make the 
``Confinement Waiver benefit'' available to existing Contracts subject 
to the satisfaction of eligibility requirements uniformly applied to 
owners of such Contracts--e.g., the making of an additional purchase 
payment under the Contract within a specified period of time, and in a 
prescribed amount (which may vary depending on whether the Contract is 
held in connection with a tax-qualified plan).

Applicants' Legal Analysis

    1. Pursuant to Section 6(c) of the 1940 Act, the Commission may, by 
order upon application, conditionally or unconditionally exempt any 
person, security, or transaction, or any class or classes of persons, 
securities or transactions, from any provision or provisions of the 
1940 Act or from any rule or regulation thereunder, if and to the 
extent that such exemption is necessary or appropriate in the public 
interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the 1940 Act. 
Pursuant to Section 6(c), the Applicants request that the Commission 
issue an order to provide the exemptive relief set forth below.
    2. Applicants submit that granting the requested relief not only to 
variable annuity contracts issued by Anchor National and funded in the 
Separate Account, but also to variable annuity contracts funded in 
other separate accounts that Anchor National has or may establish, will 
eliminate the necessity for filing multiple applications for relief 
under circumstances where no new issues would be presented by the 
subsequent applications. Similar reasoning applies to extending the 
relief to apply to Contracts issued by other Affiliated Insurers as 
well.
    3. Section 22(d) of the 1940 Act provides that no registered 
investment company shall sell any redeemable security issued by it to 
any person except either to or through a principal underwriter for 
distribution, or at a current public offering price described in the 
prospectus. Applicants recognize that the proposed waiver of the 
withdrawal charge in connection with the ``Confinement Waiver benefit'' 
described above could be viewed as causing the Contracts to be sold at 
other than a uniform offering price.
    4. Under certain prescribed conditions, Rule 22d-1 under the 1940 
Act provides an exemption from Section 22(d) to the extent necessary to 
permit the sale of redeemable securities issued by a registered 
investment company at prices that reflect scheduled variations in, or 
elimination of, the sales load to particular classes of investors or 
transactions. However, to the extent that it has been interpreted by 
the Commission as granting relief only for scheduled variations in 
front-end sales loads--not deferred sales loads such as the CDSC--Rule 
22d-1 is not directly applicable to Applicants' proposed waiver of the 
withdrawal charge in connection with the ``Confinement Waiver 
benefit.'' Applicants nevertheless submit that by adopting Rule 22d-1, 
the Commission has decided that variations in front-end sales loads 
should be permitted universally, subject to the standards embodied in 
that Rule, and that similar considerations should apply with at least 
the same force for the requested variation in deferred sales charges.
    5. Rule 22d-2 under the 1940 Act exempts registered variable 
annuity accounts, their principal underwriters, dealers and sponsoring 
insurance companies from Section 22(d) to the extent necessary to 
permit variations in the sales load or in any administrative charge or 
other deductions from the purchase payments, provided that any such 
variations reflect differences in costs or services, are not unfairly 
discriminatory, and are adequately described in the prospectus. 
Applicants do not represent that the ``Confinement Waiver benefit'' 
reflects differences in sales costs or services, however, and for that 
reason do not rely on Rule 22d-2 for the requested relief, even 
assuming that Rule 22d-2 does apply to deferred sales loads.
    6. Applicants note that while Rule 6c-8 under the 1940 Act permits 
variable annuity separate accounts to impose a deferred sales charge, 
it neither imposes any conditions on the ability of an investment 
company to provide for variations in the deferred sales charges nor 
provides an exemption from Section 22(d).
    7. Applicants submit that the proposed waiver is consistent with 
the policies of Section 22(d) and the rules promulgated thereunder. One 
of the purposes of Section 22(d) is to prevent an investment company 
from discriminating among investors by charging different prices to 
different investors. Applicants represent that because the 
``Confinement Waiver benefit'' will be available prospectively to any 
new Contract owner who becomes confined to a hospital or nursing home 
for 60 days or more (as is described more fully above), the benefit 
will not unfairly discriminate among Contract owners in jurisdictions 
where it is permitted by state law. Applicants further represent that 
the benefit advantages Contract owners by permitting them to surrender 
their Contracts without imposition of the withdrawal charge, upon the 
occurrence of the contingency described above, and that the benefit 
will not result in dilution of the interests of any other Contract 
owner. Applicants also represent that waiving the withdrawal charge 
under such circumstances will not result in the occurrence of any of 
the abuses that Section 22(d) of the Act is designed to prevent.
    8. Applicants represent that the ``Confinement Waiver benefit,'' if 
offered in connection with a particular Contract, would comply with the 
substantive provisions set forth in Rule 22d-1 under the 1940 Act. More 
specifically represent that the ``Confinement Waiver benefit'' will be: 
uniformly available to all Contract owners who are eligible therefor; 
and adequately described in the applicable prospectus for the Contracts 
(or supplements thereto) before being made available to Contract 
owners. If the ``Confinement Waiver benefit'' is made available to 
existing Contracts, the Affiliated Insurers will inform owners of the 
relevant Contracts of the availability of the benefit by transmitting a 
copy of the endorsement or rider for attachment to their Contracts (as 
well as by supplementing the prospectus for such Contracts), as soon as 
is reasonably practicable. If the ``Confinement Waiver benefit'' is 
made available to existing Contracts subject to the satisfaction of 
eligibility requirements, the Affiliated Insurers will inform the 
owners of the relevant Contracts of the availability of the benefit and 
the relevant requirements by transmitting a current prospectus or 
supplement thereto that adequately describes the benefit and the 
requirements.

Conclusion

    For the reasons stated above, Applicants submit that the exemptive 
relief requested above is necessary or appropriate in the public 
interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the 1940 Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-31731 Filed 12-23-94; 8:45 am]
BILLING CODE 8010-01-M