[Federal Register Volume 60, Number 12 (Thursday, January 19, 1995)]
[Notices]
[Pages 3898-3899]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1288]



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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20836; File No. 812-9282]


ITT Hartford Life and Annuity 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: ITT Hartford Life and Annuity Insurance Company (``ITT 
Hartford''), ITT Hartford Life and Annuity Insurance Company Separate 
Account Three (``ILA Separate Account Three''), ITT Hartford Life and 
Annuity Insurance Company Separate Account Two (``ILA Separate Account 
Two''), ITT Hartford Life and Annuity Insurance Company/Putnam Capital 
Management Trust Separate Account Two (``ILA/PCM Separate Account 
Two''), ITT Hartford Life and Annuity Insurance Company Separate 
Account One (``ILA Separate Account One'') (ILA Separate Account Three, 
ILA Separate Account Two, ILA/PCM Separate Account Two and ILA Separate 
Account one 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 
ITT Hartford of a mortality and expense risk charge from the assets of 
the Separate Accounts funding individual and group variable annuity 
contracts issued by ITT Hartford and underwritten by HSD (the 
``Contracts''). The order would apply to future separate accounts of 
ITT Hartford 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, 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 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. Housing 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, DC 20549. Applicants, c/o Rodney J. Vessels, 
Counsel, ITT Hartford Life and Annuity Insurance Company, 200 Hopmeadow 
Street, Simsbury, CT 06089.

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. ITT Hartford is a stock life insurance company domiciled in 
Wisconsin.
    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. ITT Hartford and each of the Separate Accounts filed 
applications previously, and orders were issued granting the requested 
exemptions from Sections 26(a)(2)(C) and 27(c)(2) of the 

[[Page 3899]]
1940 Act.\1\ HESCO, the designated principle 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) ITT Hartford Life and Annuity Insurance Company, Investment 
Company Act Release Nos. 20463 (notice) (Aug. 9, 1994) and 20539 
(order) (Sept. 8, 1994);
    (b) ITT Life Insurance Company, Investment Company Act Release 
Nos. 19443 (notice) (Apr. 39, 1993) and 19495 (order) (May 26, 
1993);
    (c) ITT Hartford Life and Annuity Insurance Company, Investment 
Company Act Release Nos. 20205 (notice) (Apr. 8, 1994), and 20279 
(order) (May 5, 1994); and
    (d) ITT Hartford Life and Annuity Insurance Company, Investment 
Company Act Release Nos. 20219 (notice) (Apr. 14, 1994) and 20289 
(order) (May 11, 1994), which amended a prior order for exemptive 
relief, Investment Company Act Release Nos. 19331 (notice) (Mar. 15, 
1993) and 19401 (order) (Apr. 13, 1993).
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    4. Applicants reaffirm all facts, representations and undertakings 
contained in the applications for exemptive reef 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. ITT Hartford 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 .90% of the charge is attributable to 
mortality risks and .35% 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, ITT Hartford will 
bear the loss. Conversely, if the charge proves more than sufficient to 
meet actual expenses, the excess will be surplus to ITT Hartford and 
will be available for any proper corporate purpose. ITT Hartford 
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 ITT Hartford, and 
the payment to ITT Hartford, 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 ITT Hartford 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. ITT Hartford 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. ITT Hartford has concluded that there is a 
reasonable likelihood that the Separate Accounts' distribution 
financing arrangement will benefit the Separate Accounts and Contract 
owners. ITT Hartford 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 and 
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.

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. 95-1288 Filed 1-18-95; 8:45 am]
BILLING CODE 8010-01-M