[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