[Federal Register Volume 60, Number 12 (Thursday, January 19, 1995)]
[Notices]
[Pages 3895-3897]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1287]



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SECURITIES AND EXCHANGE COMMISSION
[Rel No. IC-20835; File No. 812-9278]


Hartford Life Insurance Company, et al.

January 12, 1995.
AGENCY: Securities and Exchange Commission (the ``Commission'').

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

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APPLICANTS: Hartford Life Insurance Company (``Hartford Life''), 
Hartford Life Insurance Company Separate Account Three (``HL Separate 
Account Three''), Hartford Life Insurance Company Separate Account Two 
(``HL Separate Account Two''), Hartford Life Insurance Company/Putnam 
Capital Management Trust Separate Account (``PCM Separate Account''), 
Hartford Life Insurance Company DC Variable Account-I (``Separate 
Account DC-I'') (HL Separate Account Three, HL Separate Account two, 
PCM Separate Account, and Separate Account DC-I referred to 
collectively as the ``Separate Accounts''), and Hartford Securities 
Distributors, Inc. (``HSD``).

RELEVANT 1940 ACT SECTIONS: Order Requested Under Section 6(c) 
exempting Applicants from Sections 26(a)(2)(C) and 27(c)(2) of the 1940 
Act.

SUMMARY OF APPLICATION: Applicants seek an order permitting payment to 
Hartford Life of a mortality and expense risk charge from the assets of 
the Separate Accounts funding individual and group variable annuity 
contracts issued by Hartford Life and underwritten by HSD (the 
``Contracts''). The order would apply to future separate accounts of 
Hartford Life issuing contracts that are materially similar to the 
Contracts, and would permit applicants to substitute HSD for Hartford 
Equity Sales Company (``HESCO'') as the principal underwriter of the 
Contracts.

FILING DATE: The application was filed on October 12, 1994, and amended 
on November 14, 1994, December 22, 1994, and January 5, 1995.

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 the application by writing to the 
Secretary of the Commission and serving the Applicants with a copy of 
the request, either personally or by mail. Hearing requests must be 
received by the Commission by 5:30 p.m. on February 6, 1995, and should 
be accompanied by proof of service on the Applicants in the form of an 
affidavit or, for lawyers, by certificate of service. Hearing requests 
should state the nature of the interest, the reason for the request, 
and the issues contested. Persons may request notification of the date 
of a hearing by writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 5th 
Street NW., Washington, D.C. 20549. Applicants, c/o Rodney J. Vessels, 
Counsel, Hartford Life Insurance Company, 200 Hopmeadow Street, 
Simsbury, CT 06089.


[[Page 3896]]

FOR FURTHER INFORMATION CONTACT: Joseph G. Mari, Senior Special 
Counsel, or Wendy F. Friedlander, Deputy Chief, 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. Hartford Life is a stock life insurance company originally 
incorporated under Massachusetts law and redomiciled in Connecticut.
    2. HSD will register as a broker-dealer under the Securities 
Exchange Act of 1934 and will apply to become a member of the National 
Association of Securities Dealers, Inc. (``NASD'').
    3. Hartford Life and each of the Separate Accounts filed 
applications previously, and others were issued granting the requested 
exemptions from Sections 26(a)(2)(C) and 27(c)(2) of the 1940 Act.\1\ 
HESCO, the designated principal underwriter for the Contracts, was an 
applicant in the previous applications for exemptive relief from 
Sections 26(a)(2)(C) and 27(c)(2). This application seeks relief to 
permit Applicants to substitute HSD for HESCO as the designated 
principal underwriter for the Contracts, which would allow HESCO to 
continue as broker-dealer engaged in distribution functions with 
respect to HESCO's own registered representatives, and would permit HSD 
to serve as principal underwriter and distributor with respect to 
entering into sales agreements with independent broker-dealers.

    \1\Orders granting exemptive relief were issued as follows:
    (a) Hartford Life Insurance Company, Investment Company Act 
Release Nos. 20462 (notice) (Aug. 9, 1994) and 20538 (order) (Sept. 
8, 1994);
    (b) Hartford Life Insurance Company, Investment Company Act 
Release Nos. 20207 (notice) (Apr. 8, 1994) and 20281 (order) (May 5, 
1994), which amended a prior order for exemptive relief, Investment 
Company Act Release Nos. 15284 (notice) (Sept. 2, 1986) and 15353 
(order) (Oct. 9, 1986). Five subaccounts of HL Separate Account Two 
were separate accounts for Hartford Variable Annuity Company 
(``HVA'') before being transferred to HL Separate Account Two. 
Before that transfer, the five HVA separate accounts were granted an 
exemption from Sections 26(a)(2)(C) and 27(c)(2), Hartford Variable 
Annuity Life Insurance Company, Investment Company Act Release Nos. 
12028 (notice) (Nov. 9, 1981) and 12065 (order) (December 1, 1981).
    (c) Hartford Life Insurance Company, Investment Company Act 
Release Nos. 20223 (notice) (Apr. 15, 1994) and 20292 (order) (May 
12, 1994), which amended a prior order for exemptive relief, 
Investment Company Act Release Nos. 16092 (notice) (Oct. 28, 1987) 
and 16149 (order) (Nov. 27, 1987).
    (d) Separate Account DC-I was a separate account of HVA before 
it merged with Hartford Life. Before the merger with Hartford Life, 
Separate Account DC-I was granted an exemption from Sections 
26(a)(2)(C) and 27(c)(2)1, Hartford Variable Annuity Life Insurance 
Company, Investment Company Act Release Nos. 12028 (notice) (Nov. 9, 
1981) and 12065 (order) (Dec. 1, 1981).
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    4. Applicants reaffirm all facts, representations and undertakings 
contained in the applications for exemptive relief referenced in 
footnote 1 above, and incorporate those applications herein by 
reference. To the extent that there have been any material changes in 
those facts, representations or undertakings, the changes have been 
disclosed herein. Except for the replacement of the principal 
underwriter, there are no material changes in the Separate Accounts or 
the Contracts as described in the previous applications.
    5. The contingent deferred sales charge, annual maintenance fee and 
annual asset charge for providing mortality and expense risk guarantees 
are fully described in the applications for exemptive relief which were 
previously granted.
    6. Hartford Life will make a daily charge at the rate of 1.25% 
annually from each Contract held in the Separate Accounts for providing 
mortality and expense guarantees with respect to the Contracts. 
Applicants estimate that between .85% and .90% of the charge is 
attributable to mortality risks and between .35% and .40% of the charge 
is attributable to expense risks.
    7. The mortality and expense risk charge will not be increased. If 
the charge is insufficient to cover the actual costs, Hartford Life 
will bear the loss. Conversely, if the charge proves more than 
sufficient to meet actual expenses, the excess will be surplus to 
Hartford Life and will be available for any proper corporate purpose. 
Hartford Life expects a reasonable profit from the mortality and 
expense risk charge.

Applicants' Legal Analysis and Representations

    1. Applicants request an exemption from Sections 26(a)(2)(C) and 
27(c)(2) of the 1940 Act to the extent necessary to permit the 
deduction of a mortality and expense risk charge from the Separate 
Accounts.
    2. Sections 26(a)(2)(C) and 27(c)(2), in pertinent part, prohibit a 
registered unit investment trust and any depositor thereof or 
underwriter therefor from selling periodic payment plan certificates 
unless the proceeds of all payments (other than sales loads) are 
deposited with a qualified bank as trustee or custodian and held under 
arrangements which prohibit any payment to the depositor or principal 
underwriter except a fee, not exceeding such reasonable amount as the 
Commission may prescribe, for performing bookkeeping and other 
administrative services of a character normally performed by the bank 
itself.
    3. Applicants request that the Commission enter an Order that 
applies to the Separate Accounts and to future separate accounts 
issuing contracts that are materially similar to the Contracts 
exempting them from the provisions of Sections 26(a)(2)(C) and 27(c)(2) 
to the extent necessary to permit the deduction by Hartford Life, and 
the payment to Hartford Life, of the fee for providing the mortality 
and expense undertakings (deducted on a daily basis).
    4. Applicants represent that:
    (a) The mortality and expense risk charge is reasonable in relation 
to the risks assumed by Hartford Life under the Contracts;
    (b) The mortality and expense risk charge is within the range of 
industry practice for comparable annuity contracts as determined by a 
survey of comparable contracts issued by a large number of other 
insurance companies. Hartford Life will undertake to maintain and make 
available to the Commission upon request a memorandum outlining the 
methodology and the contracts of other insurance companies underlying 
this representation;
    (c) There is the likelihood that the proceeds from explicit sales 
loads will be insufficient to cover the expected costs of distributing 
the Contracts. Any shortfall will be covered from the assets of the 
general account, which may include profit from the mortality and 
expense risk charge. Hartford Life has concluded that there is a 
reasonable likelihood that the Separate Accounts' distribution 
financing arrangement will benefit the Separate Accounts and Contract 
owners. Hartford Life will maintain and make available to the 
Commission upon request a memorandum setting forth the basis for this 
representation;
    (d) The Separate Accounts will invest only in open-end management 
companies which have undertaken to have a board of directors, a 
majority of whom are not interested persons of the open-end management 
company, formulate and approve any plan under Rule 12b-1 to finance 
distribution expenses; and
    (e) Future variable annuity contracts for which class relief is 
sought will be materially similar to the existing Contracts covered by 
this application.

[[Page 3897]]


Conclusion

    Applicants assert that for the reasons and upon the facts set forth 
above, the requested exemptions from Sections 26(a)(2)(C) and 27(c)(2) 
of the 1940 Act are 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. 95-1287 Filed 1-18-95; 8:45 am]
BILLING CODE 8010-01-M'