[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'