[Federal Register Volume 59, Number 248 (Wednesday, December 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31889]
[Federal Register: December 28, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20790; No. 812-9174]
The Travelers Insurance Company, et al.
December 21, 1994.
Agency: Securities and Exchange Commission (``SEC'' or ``Commission'').
Action: Notice of Application for an Order under the Investment Company
Act of 1940 (``1940 Act'').
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Applicants: The Travelers Insurance Company (``Travelers''); The
Travelers Growth and Income Stock Account for Variable Annuities
(``Account GIS''), The Travelers Quality Bond Account for Variable
Annuities (``Account QB''), The Travelers Money Market Account for
Variable Annuities (``Account MM''), The Travelers Timed Growth and
Income Stock Account for Variable Annuities (``Account TGIS''), The
Travelers Timed Short-Term Bond Account for Variable Annuities
(``Account TSTB''), The Travelers Timed Aggressive Stock Account for
Variable Annuities (``Account TAS''), The Travelers Timed Bond Account
for Variable Annuities (``Account TB''), The Travelers Fund U for
Variable Annuities (``Fund U''), The Travelers Fund BD for Variable
Annuities, The Travelers Fund UL for Variable Life Insurance (``Fund
BD'') (collectively, ``Separate Accounts''); Copeland Financial
Services, Inc (``Copeland'')(together with Travelers and the Separate
Accounts, ``Original Applicants''); and Travelers Equities Sales, Inc.
(``TESI'').
Relevant 1940 Act Section: Order requested under Section 6(c) to amend
existing orders granting exemptions from the provisions of 2(a)(32),
11, 12(b), 14(a), 15(a), 16(a), 17(d), 17(f), 22(c), 22(d), 22(e),
26(a)(2), 27(a)(2), 27(a)(4), 27(c)(1), 27(c)(2), 27(d), 32(a)(2), and
Rules 17d-1, 17f-2, 22c-1, 12b-1, 6e-3(T)(b)(12), 6e-3(T)(b)(13) and
6e-3(T)(c)(2) thereunder.
Summary of Application: Applicants seek an order that would amend
existing orders to specify that TESI acts as principal underwriter with
respect to certain variable annuity and variable life insurance
contracts (``Contracts'') issued by Travelers and to grant TESI
exemptive relief in accordance with the relief previously granted to
Travelers in its capacity as principal underwriter of the Contracts.
Filing Date: The application was filed on August 18, 1994, and amended
and restated on December 5, 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 by writing to the Commission's Secretary
and serving Applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on January 16, 1995, and should be accompanied by proof of service
on Applicants in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
requestor's interest, the reason for the request, and the issues
contested. Persons may request notification of a hearing by writing to
the Secretary of the Commission.
Addresses: Secretary, Securities and Exchange Commission, 450 5th
Street, NW., Washington, DC 20549. Applicant(s), c/o Ernest J. Wright,
Esq., General Counsel, Life and Annuities Division, The Travelers
Insurance Company, Financial Services Legal Division, 6 SHS, One Tower
Square, Hartford, Connecticut 06183.
For Further Information Contact: Yvonne M. Hunold, Senior Counsel, 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
Commission's Public Reference Branch.
Applicants' Representations
1. Travelers is a stock life insurance company engaged primarily in
a life insurance and annuity business in all states and certain other
jurisdictions. Travelers, an indirect wholly owned subsidiary of The
Travelers Inc., a publicly-held company, is a broker-dealer registered
under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. (``NASD'').
2. The Separate Accounts, all of which are registered under the
1940 Act, were established by Travelers to fund certain variable
annuity and variable life insurance contracts (``Contracts''). Variable
annuity Contracts are funded through Accounts GIS, QB, MM, TGIS, TSB,
TAS, and TB, each a managed separate account, and through Funds U and
BD, each a unit investment trust. Fund UL, a unit investment trust,
funds certain flexible premium variable life insurance Contracts.
Travelers, the principal underwriter of the Contracts, provides all
administrative services relative to the Separate Accounts and the
Contracts pursuant to Distribution and Management Agreements
(``Agreements'') between it and the Separate Accounts.
3. TESI, a member of NASD, and Copeland are registered investment
advisers under the Investment Advisers Act of 1940. Copeland offers
market timing services to owners of certain Travelers' variable annuity
contracts. Copeland has not been, nor will it be, a participant in the
principal underwriter functions involving the Separate Accounts or the
Contracts. Copeland and TESI are indirect wholly-owned subsidiaries of
Travelers and, as such, affiliates of Travelers and of each other.
4. Applicants have obtained the following exemptive orders
(``Existing Orders'') in connection with the issuance and distribution
of the Contracts: Travelers and Account GIS (formerly, The Travelers
Fund for Variable Annuities), Release Nos. IC-5185 (Dec. 6, 1967)
(Notice), and IC-5212 (Dec. 29, 1967) (Order) (File No. 812-2191);\1\
Travelers and Account GIS, Release Nos. IC-5724 (June 27, 1969)
(Notice), and IC-5753 (July 28, 1969) (Order) (File No. 812-2495);
Travelers, Account GIS and Account QB (formerly The Travelers Fund A-1
for Variable Annuities), Release Nos. IC-9054 (Nov. 25, 1975) (Notice),
and IC-9096 (Dec. 24, 1975) (Order) (File No. 812-3811); Travelers,
Account GIS and Account QB, Release Nos. IC-10701 (May 16, 1979)
(Notice), and IC-10739 (June 18, 1979) (Order) (File No. 812-4437);
Travelers and Account MM (formerly The Travelers Fund MM for Variable
Annuities), Release Nos. IC-12736 (Oct. 14, 1982) (Notice), and IC-
12796 (Nov. 9, 1982) (Order) (File No. 812-5149); Travelers, Account
GIS, Account QB, Account MM and Fund U, Release Nos. IC-13130 (Mar. 31,
1983) (Notice), (File No. 812-5329); Travelers, Account MM and Fund U,
Release Nos. IC-13470 (Aug. 30, 1983) (Notice), and IC-13532 (Sept. 26,
1983) (Order) (File No. 812-5577); Travelers and Fund UL, Release Nos.
IC-15748 (May 20, 1987) (Notice), and IC-15814 (June 17, 1987) (Order)
(File No. 812-6623); Travelers, and Accounts TGIS and TSB (each
formerly, The Travelers Timed Growth Stock Account for Variable
Annuities), Release Nos. IC-15947 (Aug. 21, 1987) (Notice) and IC-15983
(Sept. 17, 1987) (Order) (File No. 812-6671); Travelers, Accounts TGIS,
TSB, TAS, and TB, TESI and Copeland, Release No. IC-17299 (Jan. 9,
1990) (Notice) and IC-17335 (Feb. 7, 1990) (Order) (File No. 812-7218);
and Travelers and Fund BD, TRelease Nos. IC-20274 (May 3, 1994)
(Notice) and IC-20334 (June 2, 1994) (Order) (File No. 812-8782).
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\1\The Order also granted temporary exemptions under Section
6(c) from the net asset and shareholder requirements of Sections
14(a), 15(a), and 32(a) of the 1940 Act because Account GIS could
have neither tax sheltered assets nor shareholders until after
registration and sale of the contracts to be funded by the separate
account. The shareholder and net asset requirements have been met
and the temporary exemptive relief is no longer required.
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In summary, the Existing Orders approve, among other things: (a)
deduction of specified charges under the Contracts; (b) exemptions from
various operational requirements of the 1940 Act; (c) certain
transactions and the deduction of certain charges relating to market
timing services; and (d) treatment of a premium waiver in a flexible
premium variable life insurance policy to be considered as ``incidental
insurance benefit'' for purposes of Rule 6e-3(T) under the 1940 Act.
5. Management of Travelers and of TESI have determined that it no
longer remains useful or practical to maintain travelers' registration
as a broker-dealer for the following reasons. Travelers' vast insurance
operations makes it burdensome to update its broker-dealer
registration. TESI, a registered broker-dealer, is capable of
performing as the principal underwriter and has, in fact, become the
principal underwriter for new variable products developed by Travelers
and its affiliate insurance companies. Travelers, however, is the
principal underwriter for existing products. Thus, the potential for
inconsistency in distribution of Travelers' variable products business
is created by the use of TESI and Travelers as principal underwriters
for new and existing Travelers variable insurance products,
respectively. If TESI became principal underwriter for all new and
existing Travelers products, Travelers would be able to deregister as a
broker-dealer.
6. Management to Travelers has proposed, and TESI management has
agreed, that TESI replace Travelers as principal underwriter for
existing Travelers' insurance products. Accordingly, new Distribution
and Management Agreements between Travelers, TESI and Accounts GIS, QB,
MM, TGIS, TSB, TAS and TB were approved by the Board of Managers of the
Separate Accounts, specifying TESI as principal underwriter in
connection with these variable annuity contracts. Approval of the new
Agreements by the Board of Managers has eliminated the need for
Contractowner approval. Similar new Distribution and Management
Agreements have been or will be entered into between Travelers, TESI
and Funds U, UL and BD. The new Agreements will become effective upon
granting of exemptive relief herein. The proposed transactions will not
result in change in the terms of the existing Contracts or in the
operation of the Separate Accounts funding such Contracts. Upon receipt
of the exemptive relief requested, Travelers will begin to discontinue
its activities and registration as a broker-dealer, and TESI will
become a party to all the Agreements and the principal underwriter for
the Contracts.
Applicants' Legal Analysis
1. Applicants request that the Commission issue an order under
Section 6(c) of the Investment Company Act of 1940 (``1940 Act'')
amending existing orders that granted exemptions from Sections
2(a)(32), 11, 12(b) 14(a), 15(a), 16(a), 17(d), 17(f), 22(c), 22(d),
22(e), 26(a)(2), 27(a)(2), 27(a)(4), 27(c)(1), 27(c)(2), 27(d),
32(a)(2), and Rules 17d-1, 17f-2, 22c-1, 12b-1, 6e-3(T)(b)(12), 6e-
3(T)(b)(13) and 6e-3(T)(c)(2) thereunder, to: (a) add TESI as a party
to the exemptive relief granted in the Existing Orders (if TESI was not
a party to the Existing Order); (b) specify that TESI acts as principal
underwriter of the Contracts described in the Existing Orders; and (c)
deem each Existing Order to provide exemptive relief to TESI in
accordance with the relief previously granted to Travelers in its
capacity as principal underwriter of the Contracts.
2. Section 6(c) of the 1940 Act authorizes the Commission, by order
upon application, to conditionally or unconditionally grant an
exemption from any provision, rule or regulation of the 1940 Act to the
extent that the 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.
3. The Existing Orders provide for a variety of circumstances where
special treatment of Contract payments and Separate Account assets is
authorized. Contracts grant to Contract owners, in nearly all
situations, certain rights and obligations predicated upon the
applicable Existing Orders. The continued effective administration of
any Contract issued pursuant to the terms of the Existing Orders
requires the continuance of the Existing Orders. Accordingly, the legal
and factual basis and justification for the initial granting of such
Existing Orders continues during the existence of such Contracts.
4. Applicants incorporate by reference the legal analysis included
in the applications for the Existing Orders to serve as a basis for the
request that the exemptive relief should continue to be granted under
the various statutory provisions in connection with the exemptions now
requested. Applicants represent that all of the facts asserted in the
applications of the Existing Orders remain true and accurate in all
materials respects to the extent that such facts are relevant to any
relief on which Applicants continue to rely. Applicants further
represent that they will continue to comply with any conditions set
forth in those applications in connection with the exemptions now
requested to the extent that Applicants continue to rely on such relief
granted in those applications.
Applicants also state in support of this application that the
change in the principal underwriter will have no effect on Contract
owners or in the terms of any Contracts or on the operation of the
Separate Accounts, but will eliminate the duplicative cost of
continuing to register both TESI and Travelers as broker-dealers and
will simplify such registration process in that the remaining broker-
dealer will be an entity that does not conduct vast other operations,
as does Travelers, making it easier to maintain and keep such
registration updated.
Conclusion
Applicants submit that, for the reasons and upon the facts set
forth above, the exemptive relief requested under Section 6(c) of the
1940 Act is necessary and 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. 94-31889 Filed 12-27-94; 8:45 am]
BILLDING CODE 8010-01-M