[Federal Register Volume 60, Number 178 (Thursday, September 14, 1995)]
[Notices]
[Pages 47792-47794]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22849]



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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21343; No. 812-9594]


Hartford Life Insurance Company, et al.

September 8, 1995.
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: Hartford Life Insurance Company (``Hartford``), Hartford 
Life Insurance Company-ICMG Secular Trust Separate Account (``Separate 
Account''), and Hartford Equity Sales Company, Inc. (``HESCO'').

RELEVANT 1940 ACT SECTIONS: Order requested under Section 6(c) of the 
1940 Act granting exemptions from the provisions of Sections 
26(a)(2)(C) and 27(c)(2) of the 1940 Act.

SUMMARY OF APPLICATION: Applicants seek an order to permit the 
deduction of a mortality and expense risk charge from the assets of the 
Separate Account or any other separate account (``Other Accounts'') 
established by Hartford to support certain group flexible premium 
deferred annuity contracts and individual certificates thereunder 
(``Contracts'') as well as other variable annuity contracts that are 
substantially similar in all material respects to the Contracts 
(``Future Contracts''). In addition, Applicants propose that the order 
extend the same exemptions granted to HESCO to any other broker-dealer 
that may in the future serve as principal underwriter for the Contracts 
or Future Contracts. Any such broker-dealer will be registered under 
the Securities Exchange Act of 1934 as a broker-dealer and will be a 
member of the National Association of Securities Dealers, Inc. 
(``NASD'').


[[Page 47793]]

FILING DATE: The application was filed on May 11, 1995, and amended on 
August 10, 1995 and September 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 by writing to the SEC's Secretary and 
serving Applicants with a copy of the request, personally or by mail. 
Hearing requests should be received by the SEC by 5:30 p.m. on 
September 27, 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 requester'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 SEC.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 5th 
Street NW., Washington, DC 20549. Applicants, Scott K. Richardson, 
Esq., ITT Hartford Life Insurance Companies, 200 Hopmeadow Street, 
Simsbury, CT 06070.

FOR FURTHER INFORMATION CONTACT:
Pamela K. Ellis, Senior Counsel, or Wendy Finck Friedlander, Deputy 
Chief, both at (202) 942-0670, Office of Insurance Products (Division 
of Investment Management).

SUPPLEMENTARY INFORMATION: Following is a summary of the application; 
the complete application is available for a fee from the SEC's Public 
Reference Branch.

Applicants' Representations

    1. Hartford, a stock life insurance company, is organized in 
Connecticut and licensed to do business in all states of the United 
States and in the District of Columbia.
    2. The Separate Account is a separate account established by 
Hartford to fund the Contracts. The Separate Account is registered with 
the Commission as a unit investment trust under the 1940 Act, and 
interests in the Contracts are registered as securities under the 
Securities Act of 1933.
    3. Hartford has established for each investment option offered 
under the Contract a Separate Account subaccount (``Subaccount''), 
which will invest solely in a specific corresponding portfolio of 
certain designated investment companies (``Funds''). The Funds will be 
registered under the 1940 Act as open-end management investment 
companies. Each portfolio of the Funds will have separate investment 
objectives and policies.
    4. HESCO will serve as the principal underwriter of the Contracts. 
HESCO, a wholly-owned subsidiary of Hartford, is registered under the 
1934 Act as a broker-dealer and is a member of the NASD.
    5. The Contracts are tax-deferred individually allocated group 
flexible premium deferred annuity contracts, and are offered to 
employee-participants of nonqualified deferred compensation and 
supplemental executive retirement plans. The Contacts may be purchased 
with an initial premium payment of $1,000. The minimum subsequent 
premium payment for the Contracts is $1000 (certain plans may permit 
smaller initial and subsequent periodic premium payments). Net premium 
payments may be allocated to one or more of the Separate Account 
Subaccounts that have been established to support the Contracts.
    6. The Contracts provide for a series of annuity payments beginning 
on the annuity date. The Contract owner may select from several annuity 
payout options.
    7. The Contracts provide for a death benefit if the annuitant dies 
during the accumulation period or prior to the annuitant or Contract 
owner attaining age 85. The death benefit is the greater of: (1) the 
Contract value as determined on the date of receipt of due proof of 
death by Hartford; or (2) 100% of all premium payments made by the 
Contract owner under the Contract reduced by the amount of any partial 
withdrawals.
    8. Certain charges and fees are assessed under the Contracts. 
Hartford will deduct an administration charge from a Contract owner's 
account value to reimburse it for expenses relating to the 
administration and maintenance of the Contract and for administration 
of the Separate Account. The Contract provides for an administrative 
expense charge of $2.50 to be deducted from account value on the 
commencement date of the Contract and monthly thereafter. The deduction 
will be made pro rata according to the value in each Subaccount under a 
Contract.
    9. Applicants represent that the administration charge will not 
increase during the life of the Contracts. In addition, Applicants 
represent that these charges are at cost with no anticipation of 
profit.
    10. A maximum front-end sales charge of 4.6% of premium payments, 
will be imposed for expenses related to the sales and distribution of 
the Contracts. Applicants state that the front-end sales charge will 
not increase during the life of the Contracts.
    11. Hartford proposes to deduct a daily mortality and expense risk 
charge. Hartford represents that this charge is equal to an effective 
annual rate of .65% of the net asset value of the Separate Account, and 
that it will not increase. Of this amount, approximately .45% is for 
mortality risks and .20% is for expense risks.
    12. Hartford assumes the mortality risk that the life expectancy of 
the annuitant will be greater than that assumed in the guaranteed 
annuity purchase rates, thus requiring Hartford to pay out more in 
annuity income than it had planned. In addition, Hartford is 
contractually obligated to provide a death benefit prior to the annuity 
date. Thus, Hartford assumes the risk that the owner may die at a time 
when the amount of the death benefit payable exceeds the then net 
surrender value of the Contracts. The expense risk assumed by Hartford 
is that the contract administration charge will be insufficient to 
cover the cost of administering the Contracts.
    13. In the event the mortality and expense risk charges are more 
than sufficient to cover Hartford's costs and expenses, any excess will 
be a profit to Hartford.
    14. Should the owner live in a jurisdiction that levies a premium 
tax, Hartford will pay the taxes when due. Hartford represents that 
state premium taxes may range up to 4.0% of premium payments and are 
subject to change. Hartford will deduct premium taxes when they are 
paid.
    15. In addition Hartford will deduct a current charge of .43% of 
each premium payment for the federal tax cost resulting from Section 
848 of the Internal Revenue Code. This charge may be increased or 
decreased to reflect changes in federal tax laws.

Applicants' Legal Analysis

    1. 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.
    2. Sections 26(a)(2)(C) and 27(c)(2) of the 1940 Act, in relevant 
part, prohibit a registered unit investment trust, its depositor or 
principal underwriter, from selling periodic payment plan certificates 
unless the proceeds of all payments, other than sales loads, are 
deposited with a qualified bank and held under arrangements which 
prohibit 

[[Page 47794]]
any payment to the depositor or principal underwriter except a 
reasonable fee, as the Commission may prescribe, for performing 
bookkeeping and other administrative duties normally performed by the 
bank itself.
    3. Applicants request exemptions from Sections 26(a)(2)(C) and 
27(c)(2) of the 1940 Act to the extent necessary to permit the 
deduction from the net assets of the Separate Account and the Other 
Accounts in connection with the Contracts and Future Contracts of the 
.65% charge for the assumption of mortality and expense risks. In 
addition, Applicants request that the order extend the same exemptions 
granted to HESCO to any other broker-dealer that may in the future 
serve as principal underwriter for the Contracts or Future Contracts.
    4. Applicants assert that the terms of the relief requested with 
respect to any Future Contracts funded by the Separate Account or Other 
Accounts are consistent with the standards enumerated in Section 6(c) 
of the 1940 Act. Without the requested relief, Applicants would have to 
request and obtain exemptive relief for each new Other Account it 
establishes to fund any Future Contract, as well as for each Future 
Broker-Dealer that distributes the Contract or Future Contracts. 
Applicants submit that any such additional request for exemption would 
present no issues under the 1940 Act that have not already been 
addressed in this application, and that investors would not receive any 
benefit or additional protections thereby.
    Applicants submit that the requested relief is appropriate in the 
public interest because it would promote competitiveness in the 
variable annuity contract market by eliminating the need for Applicants 
to file redundant exemptive applications, thereby reducing their 
administrative expenses and maximizing the efficient use of their 
resources. The delay and expense involved in having repeatedly to seek 
exemptive relief would reduce Applicants' ability effectively to take 
advantage of business opportunities as they arise.
    Applicants further submit that the requested relief is consistent 
with the purposes of the 1940 Act and the protection of investors for 
the same reasons. Applicants thus assert that the requested exemptions 
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.
    5. Applicants represent that the .65% per annum mortality and 
expense risk charge is within the range of industry practice for 
comparable annuity contracts. This representation is based upon an 
analysis of publicly available information about similar industry 
products, taking into consideration such factors as the current charge 
levels and benefits provided, the existence of expense charge 
guarantees, and guaranteed annuity rates. Hartford will maintain at its 
principal offices, available to the Commission, a memorandum setting 
forth in detail the products analyzed in the course of, and the 
methodology and results of, Applicants' comparative review. In 
addition, Applicants will keep, and make available to the Commission, a 
memorandum setting forth the basis for the same representations with 
respect to the Future Contracts offered by the Separate Account or 
Other Accounts.
    6. Hartford has concluded that there is a reasonable likelihood 
that the Separate Accounts and Other Accounts' proposed distribution 
financing arrangements will benefit the Separate Accounts and their 
investors. Hartford represents that it will maintain and make available 
to the Commission upon request a memorandum setting forth the basis of 
such conclusion.
    7. The Separate Accounts and Other Account will be invested only in 
management investment companies that undertake, in the event the 
company should adopt a plan for financing distribution expenses 
pursuant to Rule 12b-1 under the 1940 Act, to have such plan formulated 
and approved by the company's board members, the majority of whom are 
not ``interested persons'' of the management investment company within 
the meaning of Section 2(a)(19) of the 1940 Act.

Conclusion

    For the reasons set forth above, Applicants represent that the 
exemptions requested are 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. 95-22849 Filed 9-12-95; 8:45 am]
BILLING CODE 8010-01-M