[Federal Register Volume 65, Number 1 (Monday, January 3, 2000)]
[Notices]
[Pages 149-153]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-34015]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-24221; File No. 812-11824]
Nationwide Life Insurance Company, et al.
December 23, 1999.
AGENCY: The Securities and Exchange Commission (the ``Commission'').
ACTION: Notice of Application for an order pursuant to Section 6(c) of
the Investment Company Act of 1940 (the ``1940 Act'') granting
exemptions from the provisions of Sections 2(a)(32), 22(c), and
27(i)(2)(A) of the 1940 Act and Rule 22c-1 thereunder to permit the
recapture of credits applied to purchase payments made under certain
variable annuity contracts.
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SUMMARY OF APPLICATION: Applicants seek an order under Section 6(c) of
the 1940 Act to the extent necessary to permit, under specified
circumstances, the recapture of credits applied to contributions made
under the contracts (the ``Contracts'') that Nationwide will issue
through the Separate Accounts, as well as other contracts that
Nationwide may issue in the future through Future Separate Accounts
that are substantially similar in all material respects to the
Contracts (the ``Future Contracts''). Applicants also request that the
order being sought extend to any other National Association of
Securities Dealers, Inc. (``NASD'') member broker-dealer controlling or
controlled by, or under common control with, Nationwide that may in the
future serve as general distributor-principal underwriter of variable
annuity contracts substantially similar in all material respects to
those offered by the Separate Accounts.
APPLICANTS: Nationwide Life Insurance Company (``NLIC''), Nationwide
Life and Annuity Insurance Company (``NLAIC'') (NLIC and NLAIC shall be
collectively referred to as ``Nationwide''), Nationwide Variable
Account--9 and Nationwide Fidelity Advisor Variable Account
(collectively, the ``Separate Accounts'') and any current or future
separate accounts of Nationwide (``Future Separate Accounts'') that may
in the future offer variable annuity contracts substantially similar in
all material respects to the contracts and supported by the Separate
Accounts, Nationwide Advisory Services, Inc. (``NAS''), Fidelity
Investment Institutional Services Company, Inc. (``FIISC''), and any
other NASD member broker-dealer controlling or controlled by, or under
common control with, Nationwide that may in the future serve as general
distributor-principal underwriter of variable annuity contracts
substantially similar in all material respects to those offered by the
Separate Accounts (collectively ``Applicants'').
FILING DATE: The Application was filed on October 6, 1999, and amended
and restated on December 23, 1999.
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 Secretary of the
Commission and serving Applicants with a copy of the request,
personally or by mail. Hearing requests should be received by the
Commission by 5:30 p.m. on January 17, 1999, 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 writer's interest, the reason for the request, and the
issue contested. Persons may request notification of a hearing by
writing to the Secretary of the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, NW, Washington, DC 20549-0609. Applicants, c/o Nationwide Life
Insurance Company, One Nationwide Plaza 01-09-V3, Columbus, Ohio 43215,
Attn: Heather Harker, Esq.
FOR FURTHER INFORMATION CONTACT: Jane G. Heinrichs, Senior Counsel, at
(202) 942-0699, or Susan M. Olson, Branch Chief, at (202) 942-0672,
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, 450 Fifth Street, NW, Washington,
DC 20549-0102 (telephone (202) 942-8090).
Applicants' Representations
1. NLIC and NLAIC are stock life insurance companies organized
under Ohio law. NLIC is licensed to do business in all fifty states,
the District of Columbia and Puerto Rico. NLAIC is licensed to do
business in 47 states. NLIC is a wholly owned subsidiary of Nationwide
Financial Services, Inc., a holding company. NLAIC is a wholly owned
subsidiary of NLIC.
2. Nationwide Variable Account-9 was established on May 21, 1997
and Nationwide Fidelity Advisor Variable Account was established on
July 22, 1994. The Separate Accounts are segregated asset accounts of
NLIC established under Ohio law for the purpose of funding variable
annuity contracts. Any income, gains or losses, realized or unrealized,
from assets allocated to the Separate Accounts, are in accordance with
the respective Separate Accounts' contracts, credited to or charged
against the Separate Accounts without regard to other income, gains or
losses of Nationwide. The Separate Accounts are registered with the
Commission as unit investment trusts under the 1940 Act.\1\ The
Separate Accounts fund variable annuity contracts which are registered
with the Commission under the Securities Act of 1933 on Forms N-4.\2\
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\1\ File No. 811-8666.
\2\ File No. 333-28995 for Nationwide Variable Account-9 and
File No. 33-89560 for Nationwide Fidelity Advisor Variable Account.
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3. NAS and FIISC serve as general distributor-principal underwriter
for Nationwide Variable Account-9 and Nationwide Fidelity Advisor
Variable Account, respectively. Both entities are registered broker/
dealers under the Securities Exchange Act of 1934.
4. The Contracts are sold to individuals as: (i) Non-qualified
contracts which are governed for tax purposes by Section 72 of the
Internal Revenue Code (the ``Code''); (ii) individual retirement
annuities (IRAs), Roth IRAs, SEP IRAs or Simple IRAs which are governed
by Section 408 of the Code; (iii) Tax Sheltered Annuities which are
governed by Section 403(b) of the Code; or (iv) Investment-Only
Contracts, sold to qualified plans governed by Section 401(a) of the
Code.
5. The Contracts issued in conjunction with the Separate Accounts
are identical in every material respect, except in the array of
underlying mutual funds which comprise the variable investment options
under the Contracts. Nationwide Variable Account-9 is currently divided
into 41 sub-accounts; Nationwide Fidelity Advisor Variable Account is
divided into 14 sub-accounts. The Contracts are combination fixed and
variable contracts; investment allocations that
[[Page 150]]
are not directed to the sub-accounts may by directed to a fixed account
supported by the Nationwide general account. In addition, investment
allocations may be directed to one or more Guaranteed Term Options
which are supported by a non-unitized separate account, effectively
functioning as a segmented portion of the Nationwide general account.
6. The Contracts are flexible purchase payment contracts, meaning
that additional purchase payments after the first may be made by
Contract owners. Generally, the Contracts may be purchased with an
initial purchase payment of $15,000; subsequent purchase payments of at
least $1,000 may also be made. The Contracts assess a mortality and
expense risk charge of 0.95%. In addition, the Contracts assess a
contingent deferred sales charge (``CDSC'') of 7% of invested purchase
payments in the first two years after the purchase payment is made.
Thereafter, the CDSC declines by 1% each year until the eighth Contract
year when the CDSC is eliminated. During each Contract year beginning
with the first, the Contracts allow the Contract owner to withdraw 10%
of all purchase payments without a CDSC. In addition, the CDSC is
waived under a variety of other circumstances: upon the death of the
annuitant; upon annuitization of the Contract (more than two years
after the issue date of the Contract); whenever distributions from the
Contract are necessary in order to meet minimum distribution
requirements under the Internal Revenue Code; and, under an age-based
``free-withdrawal'' program, allowing Contract owners to make
systematic withdrawals of certain Contract value percentages at
specified ages without a CDSC.
7. A death benefit will be paid to a named beneficiary should the
annuitant die before the annuity payment period has commenced. After
two years from the date the Contract was issued, a Contract owner may
elect to begin receiving annuity payments. The Contracts also provide
features such as asset Rebalancing, dollar cost averaging and
systematic withdrawals.
8. The basic Contract features may be modified or augmented by a
number of ``rider options.'' The rider options permit Contract owners
to elect certain Contract features or benefits that fit their
particular needs. Generally, the election of a particular rider option
will result in higher explicit expenses for Nationwide or an increased
risk that charges associated with the Contract will be inadequate in
relation to expenses. Thus, most of the rider options, once elected,
result in an increase in the basic mortality and expense risk charge
(0.95%). Rider options must be chosen at the time of application. Such
rider options include: (1) A reduced purchase payment option; (2) a
five-year CDSC option; (3) an additional withdrawal without charge and
disability waiver option; (4) a 10 year and disability waiver; (5) a
hardship waiver; (6) a one-year step up death benefit; (7) a 5%
enhanced death benefit; and (8) a guaranteed minimum income benefit.
9. Nationwide intends to offer an additional rider option under the
Contracts which, if elected at the time of application, will result in
the crediting of a 3% bonus (the ``Credit'') on all purchase payments
made during the first twelve months of the Contract. The Credit on the
Contract owner's remitted purchase payments will be funded from the
Nationwide general account and will be credited proportionately among
the investment options chosen by the Contract owner. No extra amount
will be credited to purchase payments made after the first twelve
months of the Contract. For this rider option, an annualized fee of
0.45% of the daily net assets of the variable account will be deducted
for the first seven Contract years. The option of either electing the
extra Credit or not, allows prospective purchasers to choose between
two different Separate Account charge structures over the first seven
years of the Contract years. The option of either electing the extra
Credit or not, allows prospective purchasers to choose between two
different Separate Account charge structures over the first seven years
of the Contract. If the Credit is elected, total Separate Account
charges under the Contract will be an annualized rate of 1.40% of the
daily net assets of the Separate Account for the first seven years of
the Contract, assuming no other rider options are elected. If the
Credit is not elected, total Separate Account charges will be an
annualized rate of 0.95% of the daily net assets of the Separate
Account for the first seven years of the Contract, once again assuming
that no other rider options are elected. Under such circumstances, the
decision to elect or decline the extra Credit option will depend
primarily on whether the prospective purchaser believes it is more
advantageous to have (a) a 1.40% Separate Account charge for first
seven years of the Contract, plus the Credit, or (b) a 0.95% Separate
Account charge for the first seven years of the Contract, without the
Credit. Applicants state that it can be mathematically demonstrated
that electing the Credit will yield a greater accumulated Contract
value at the end of seven years when the underlying investment options
produce a gross annualized return of greater than 7.75%. In other
words, a gross annualized return of 7.755 on assets, assuming a 0.95%
Separate Account charge deduction and no Credit, will produce the same
accumulated Contract value at the end of seven years as a 7.75% gross
annualized return, with a 1.40% Separate Account charge deduction plus
the Credit. These figures assume no additional purchase payments are
made after the first twelve months.
The following tables demonstrate hypothetical rates of return for
Contracts with the extra credit option (1.40% total asset charges) and
Contracts without the extra Credit option (0.95% total asset charges).
the figures are based upon: (a) A $100,000 initial purchase payment
with no additional purchase payments; (b) the deduction of Separate
Account charges of an annualized rate of 0.95% (base Contract) and
1.40% (Contract with the Credit option) of the daily net asset value;
and (c) an assumed annual rate of return before charges of 5.0%, 7.75%
and 10.0% for all years for a period of 10 years.
5.00% Rate of Return
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Contract
Base with extra
contract credit
(0.95% rider
Contract year total (1.40%
asset total
charges) asset
charges)
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1............................................... $104,050 $106,708
2............................................... 108,264 110,549
3............................................... 112,649 114,529
4............................................... 117,211 118,652
5............................................... 121,958 122,924
6............................................... 126,897 127,349
7............................................... 132,037 131,934
8............................................... 137,384 137,277
9............................................... 142,948 142,837
10.............................................. 148,738 148,622
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7.75% Rate of Return
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Contract
Base with extra
contract credit
(0.95% rider
Contract year total (1.40%
asset total
charges) asset
charges)
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1............................................... $106,080 $109,541
2............................................... 114,062 116,496
3............................................... 121,819 123,894
4............................................... 130,102 131,761
5............................................... 138,949 140,128
6............................................... 148,398 149,026
7............................................... 158,489 158,489
8............................................... 169,266 169,266
9............................................... 180,776 180,777
10.............................................. 193,069 193,069
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[[Page 151]]
10.00% Rate of Return
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Contract
Base with extra
contract credit
(0.95% rider
Contract year total (1.40%
asset total
charges) asset
charges)
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1............................................... $109,050 $111,858
2............................................... 118,919 121,478
3............................................... 129,681 131,925
4............................................... 141,417 143,270
5............................................... 154,216 155,592
6............................................... 168,172 168,973
7............................................... 183,392 183,504
8............................................... 199,989 200,111
9............................................... 218,088 218,221
10.............................................. 237,825 237,970
------------------------------------------------------------------------
Applicants state that, to the extent permitted, tables similar to
the table above may be shown in the prospectus and supplemental sales
literature solely for the purpose of illustrating the breakpoint and
the operation of the Contract.
After the end of the first seven Contract years, the 0.45% charge
for the rider option will no longer be assessed and the Credit will be
fully vested. Nationwide intends to administer the removal of the 0.45%
rider option charge by decreasing the number of units and increasing
the unit value of the sub-accounts in which the Contract owner was
invested at the end of the seventh contract year. The process will be
accomplished through the replacement of that class of units
corresponding to the aggregate Separate Account charges which include
the 0.4% rider option charge, with another class of units associated
with aggregate Separate Account charges minus the 0.45% rider option
charge. The later class of units will have a greater individual unit
value than the former, therefore, a reduction in the number of units is
necessary to ensure that Contract values will remain unaffected by this
process. Although this is not the only method of accomplishing the
elimination of the 0.45% rider option charge, Nationwide intends to use
the method to minimize the different unit values that must be tracked
and administered. Other than the change in unit values and number of
units, the removal of the 0.45% charge of the Credit will be entirely
transparent to the Contract owner, except that the Credit will at that
time be fully vested, and on-going charges against the assets of the
variable account will be reduced by an annualized rate of 0.45% of the
daily net assets of the variable account.
During the first seven years of the Contract, the Credit will be
fully vested except during the contractual free look period and when
certain surrenders of Contract value are made. If the free look
privilege is exercised, Nationwide will recapture the Credit. Earnings
on the Credit, however, will be retained by the Contract owner.
After the free look period and before the end of the seventh
Contract year, certain withdrawals from Contract value will subject the
Credit to recapture. During the first seven Contract years only, if an
amount withdrawn is subject to a CDSC, then a portion of the Credit may
be recaptured. No recapture will take place after the seventh Contract
year. The Credit will not be subject to recapture if a free withdrawal
(not subject to the CDSC) is being made. For purposes of calculating
the CDSC surrenders are considered to first come from the oldest
purchase payment made to the Contract, then the next oldest purchase
payment and so forth. Earnings to the Contract are not subject to CDSC.
Thus, if the Contract owner withdraws 13% of purchase payments made
within the first Contract year, 3% of the Credit will be recaptured by
Nationwide, since the Contract owner may withdraw 10% of purchase
payments without a CDSC. This means that the percentage of the Credit
to be recaptured will be determined by the percentage of total purchase
payments reflected in the amount surrendered that is subject to CDSC.
The recaptured amount will be taken proportionately from each
investment option as allocated at the time of the withdrawal. No
recapture of the Credit will take place if the Contract is annunitized
(annuitization is not permitted during the first two Contract years),
if a death benefit becomes payable, if distributions are required in
order to meet minimum distributions requirements under the Code, if
free withdrawals are being taken pursuant to an aged-based systematic
withdrawal program, or in connections with any other type of withdrawal
not otherwise subject to a CDSC. As indicated previously, after the end
of the seventh Contract year, the Credit will be fully vested without
limitation and the 0.45% charge associated with the Credit will be
eliminated.
Applicants seek exemption pursuant to Section 6(c) from Sections
2(a)(32), 22(c) and 27(i)(2)(A) of the 1940 Act and Rule 22c-1
thereunder to the extent necessary to permit Nationwide to issue
contracts from the Separate Accounts and any Future Separate Accounts
that provide for (i) the recapture of the Credit when the Contract
owner returns the Contract during the free-look period; and (ii) the
recapture of a portion of the Credit (as described above) when the
Contract owner withdraws any amounts subject to CDSC during the first
seven years from the date the Contract is issued.
Applicants' Legal Analysis
1. Section 6(c) of the 1940 Act authorizes the Commission to exempt
any person, security or transaction, or any class or classes of
persons, securities or transactions from the provisions of the Act and
the rules promulgated thereunder if and to the extent that such
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 Act. Applicants request
that the Commission, pursuant to Section 6(c) of the 1940 Act, grant
the exemptions outlined above with respect to the Contracts and any
Future Contracts underwritten or distributed by NAS, FIISC, or any
other NASD member broker-dealer controlling or controlled by, or under
common control with, Nationwide. Applicants represent that any such
Future Contracts funded by the Separate Accounts or Future Separate
Accounts will be substantially similar in all material respects to the
Contracts described herein. Applicants believe 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.
2. Applicants represent that the 0.45% charge associated with the
rider option providing the Credit is consistent with the requirements
of Section 26(e)(A)(2) of the 1940 Act. Section 26(e)(A)(2) provides
that it is unlawful for registered separate accounts or sponsoring
insurance companies to sell any variable insurance contract ``unless
the fees and charges deducted under the contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected
to be incurred, and the risks assumed by the insurance company.''
Because the Credit associated with the rider option will be funded from
the Nationwide general account, the Credit creates an expense for
Nationwide. In addition, the risk of not recovering that expense is
substantial in light of the fact that under several different
contingencies, the Credit will be fully or partially vested long before
the charge for the Credit is discontinued at the end of the seventh
Contract year. Accordingly, Applicants represent that the 0.45% charge
associated with the rider, in addition to the basic mortality and
expense risk charge of 0.95%, is reasonable and therefore consistent
with the
[[Page 152]]
requirements of section 26(e)(2)(A) of the 1940 Act. A similar
representation will be made in the registration statements for the
Contracts, as required under section 26(e)(2)(A). Applicants also
submit that the risk of not recovering the expense associated with the
rider option is substantially diminished if the Contract value,
including the Credit, is not surrendered or otherwise distributed prior
to the end of the seventh Contract year. Thus, the elimination of the
0.45% rider option charge is entirely warranted and will benefit
Contract owners.
3. Applicants represent that it is not administratively feasible to
track the Credit amount in the Separate Accounts after the Credit is
applied. Accordingly, the asset-based charges applicable (when the
rider option providing the Credit is elected) to the Separate Account
will be assessed against the entire amounts held in the Separate
Accounts, even during those periods when the Credit is not completely
vested. Accordingly, the aggregate asset based charges assessed against
a Contract owner's Separate Account value will be higher than those
that would have been charged if the Contract owner's Separate Account
value did not include the Credit and the Contract provided for no rider
option charge of 0.45%.
4. Subsection (i) of Section 27 provides that Section 27 does not
apply to any registered separate account funding variable insurance
contracts, or to the sponsoring insurance company and principal
underwriter of such account, except as provided in paragraph (2) of the
subsection. Paragraph (2) provides that it shall be unlawful for any
registered separate account funding variable insurance contracts or a
sponsoring insurance company of such account to sell a contract funded
by the registered separate account unless, among other things, such
contract is a redeemable security. Section 2(a)(32) defines
``redeemable security'' as any security, other than short-term paper,
under the terms of which the holder, upon presentation to the issuer,
is entitled to receive approximately his or her proportionate share of
the issuer's current net assets, or the cash equivalent thereof.
5. Applicants submit that recapturing the Credit will not deprive
an owner of his or her proportionate share of the Separate Accounts'
current net assets. Applicants state that an owner's interest in the
amount of the Credit allocated to his or her annuity account value is
subject to the vesting provisions of the Contracts. Until or unless the
Credit is vested, Nationwide retains a right and interest in the
Credit, although not in any earnings attributable to the Credit.
Contractual provisions allowing Nationwide to recapture the Credit (a)
upon the exercise of free look privileges, and (b) during the first
seven contract years for any amount distributed subject to CDSC, merely
allow Nationwide to recover its own assets. Applicants assert that
since amounts subject to recapture are not vested, the Contract owner
is not deprived of his or her proportionate share of Separate Account
assets.
6. In addition, with respect to Credit recapture upon the exercise
of the free-look privilege, Applicants state that it would be unfair to
allow a Contract owner to retain the amount credited. Applicants state
that if Nationwide could not recapture the Credit upon return of the
Contract, individuals could purchase a Contract with the intention of
retaining the credited amount for an unjustified profit at the expense
of Nationwide.
7. Applicants assert that the Credit will be attractive to and in
the interest of investors because it will permit owners to have 103% of
contributions made during the first twelve months invested in selected
investment options from the date the contribution is received. Also,
any earnings attributable to the Credit will be retained by the
Contract owner in addition to the principal amount of the Credit,
provided the contingencies described herein are satisfied. Further,
Applicants believe that the optional Credit rider will be particularly
attractive to and in the interest of long-term investors due to the
elimination of the charge associated with the Credit rider after the
seventh Contract year. Applicants assert that the elimination of the
charge associated with the Credit will allow prospective purchasers to
assess the value of the optional Credit rider, and elect or decline it,
based on their particular circumstances, preferences and expectations.
8. Applicants submit that the provisions for recapture of the
Credit under the Contracts do not violate Section 2(a)(32) and
27(i)(2)(A) of the 1940 Act. Nevertheless, to avoid any possible
uncertainties, Applicants request an exemption from those Sections, to
the extent deemed necessary, to permit the recapture of any Credit
under the circumstances described herein with respect to the Contracts
and any Future Contracts issued in conjunction with the Separate
Accounts or any Future Separate Accounts without loss of the relief
provided by Section 27(i).
9. Section 22(c) of the 1940 Act authorizes the Commission to make
rules and regulations applicable to registered investment companies and
to principal underwriters of, and dealers in, the redeemable securities
of any registered investment company, whether or not members of any
securities association, to the same extent, covering the same subject
matter, and for the accomplishment of the same ends as are prescribed
in Section 22(a) in respect of the rules which may be made by a
registered securities association governing its members. Rule 22c-1
thereunder prohibits a registered investment company issuing any
redeemable security, a person designated in such issuer's prospectus as
authorized to consummate transactions in any such security, and a
principal underwriter of, or dealer in, such security, from selling,
redeeming, or repurchasing any such security except at a price based on
the current net asset value of such security which is next computed
after receipt of a tender of such security for redemption or of an
order to purchase or sell such security.
10. It could be argued that Nationwide's recapture of the Credit
constitutes a redemption of securities for a price other than the
current net asset value of the Separate Accounts. Applicants contend,
however, that recapture of the Credits does not violate Section 22(c)
and Rule 22c-1. Applicants argue that such recapture does not involve
either of the evils or harmful events that Rule 22c-1 was intended to
eliminate or reduce, namely: (1) The dilution of the value of
outstanding redeemable securities of registered investment companies
through their sale at a price below net asset value or their redemption
or repurchase at a price above it; and (2) other unfair results
including speculative trading practices. To recapture any Credit,
Nationwide will redeem Contract owners' interests in the Separate
Accounts at a price determined on the basis of current net asset value
of the respective Separate Accounts.
Nationwide will only recapture amounts credited when withdrawals
are taken subject to a CDSC and when the contractual Free Look right is
exercised. The percentage of the Credit recaptured will be determined
by the ratio of the amount withdrawn (subject to a CDSC and the
contractual Free Look) to the sum of all purchase payments. If, for
example, the amount withdrawn (subject to CDSC) equals 50% of purchase
payments, 50% of the Credit will be recaptured. Nationwide will not
recapture Credits for amounts
[[Page 153]]
withdrawn under the Contract due to the following: withdrawals taken in
order to meet minimum distribution requirements under the Code;
annuitization; payment of a death benefit; free-withdrawals taken as
allowed under the contract; or any other type of withdrawal not subject
to a CDSC. In no event will the amount recaptured equal more than the
amount of the Credit that Nationwide paid out of its general account.
Although Contract owners will be entitled to retain any investment gain
attributable to the Credit the amount of such gain will be determined
on the basis of the current net asset value of the respective Separate
Account.
Thus, no dilution will occur upon the recapture of the Credit.
Applicants also submit that the second harm that Rule 22c-1 was
designed to address, namely, speculative trading practices calculated
to take advantage of backward pricing, will not occur as a result of
the recapture of the Credit. To avoid any uncertainty as to full
compliance with the 1940 Act, Applicants request an exemption from the
provisions of Section 22(c) and Rule 22c-1 to the extent deemed
necessary to permit them to recapture the Credit under the Contracts
and any Future Contracts (that are substantially similar in all
material respects to the Contracts described herein) issued in
conjunction with the Separate Accounts or any Future Separate Accounts.
Section 6(c) of the Act provides: The Commission, by rules and
regulations upon its own motion, or by Order upon application, may
conditionally or unconditionally exempt any person, security, or
transactions, or any class or classes of persons, securities, or
transactions, from any provision or provisions of this title or of any
rule or regulation thereunder, if and to the extent that such 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 this title.
Applicants assert that their request for an Order is appropriate in
the public interest. Applicants state that such an Order would promote
competitiveness in the variable annuity market by eliminating the need
to file redundant exemptive applications, thereby reducing
administrative expenses and maximizing the efficient use of Applicants'
resources. Applicants argue that investors would not receive any
benefit or additional protection by requiring Applicants to repeatedly
seek exemptive relief that would present no issue under the 1940 Act
that has not already been addressed in their amended Application
described herein. Applicants assert that having them file additional
applications would impair their ability to effectively take advantage
of business opportunities as they arise. Further Applicants state that
if they were required repeatedly to seek exemptive relief with respect
to the same issues addressed in the amended Application described
herein, investors would not receive any benefit or additional
protection thereby.
Conclusion
Applicants assert, based on the grounds summarized above, that
their exemptive request meets the standards set out in Section 6(c) of
the 1940 Act, namely, that the exemptions requested are 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 Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-34015 Filed 12-30-99 8:45 am]
BILLING CODE 8010-01-M