[Federal Register Volume 66, Number 239 (Wednesday, December 12, 2001)]
[Notices]
[Pages 64313-64318]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-30649]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-25310; File No. 812-12628]


Jackson National Life Insurance Company, et al.; Notice of 
Application

December 5, 2001.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application for an order under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') granting exemptions from 
the

[[Page 64314]]

provisions of sections 2(a)(32) and 27(i)(2)(A) of the Act and rule 
22c-1 thereunder to permit the recapture of contract enhancements 
applied to purchase payments made under certain flexible premium, 
deferred variable annuity contracts.

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    Applicants: Jackson National Life Insurance Company (``Jackson 
National''), Jackson National Separate Account--I (the ``JNL Separate 
Account''), Jackson National Life Insurance Company of New York (``JNL 
New York,'' and collectively with Jackson National, the ``Insurance 
Companies''), JNLNY Separate Account I (the ``JNLNY Separate Account,'' 
and collectively with JNL Separate Account, the ``Separate Accounts''), 
and Jackson National Life Distributors, Inc. (``Distributor,'' 
collectively with the Insurance Companies and Separate Accounts, 
``Applicants'').
    Summary of Application: Applicants seek an order under section 6(c) 
of the Act to the extent necessary to permit the recapture, under 
specified circumstances, of certain contract enhancements applied to 
purchase payments made under the flexible premium, deferred variable 
annuity contract described herein that Jackson National will issue 
through the JNL Separate Account (the ``JNL Contract'') and that JNL 
New York will issue through the JNLNY Separate Account (the ``JNLNY 
Contract,'' and collectively with the JNL Contract, the 
``Contract(s)''), as well as other contracts that the Insurance 
Companies may issue in the future through their existing or future 
separate accounts (``Other Accounts'') that are substantially similar 
in all material respects to the Contracts (``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, Jackson National, whether existing or created in the future, that 
serves as distributor or principal underwriter for the Contracts or 
Future Contracts (``Affiliated Broker-Dealers''), and any successors in 
interest to the Applicants.
    Filing Date: The Application was filed on September 4, 2001 and 
amended on October 9, 2001.
    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, in 
person or by mail. Hearing requests should be received by the 
Commission by 5:30 p.m. on December 27, 2001, and should be accompanied 
by proof of service on the 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 issues contested. Persons who wish to be notified of a hearing may 
request notification 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 Susan Rhee, 
Esq., Jackson National Life Insurance Company, 1 Corporate Way, 
Lansing, Michigan 48951; copies to W. Randolph Thompson, Esq., Jorden 
Burt LLP, 1025 Thomas Jefferson Street, NW, Suite 400 East, Washington, 
DC 20007-0805.

FOR FURTHER INFORMATION CONTACT: Harry Eisenstein, Senior Counsel, at 
(202) 942-0552, or Keith E. Carpenter, Branch Chief, at (202) 942-0679, 
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 
SEC's Public Reference Branch, 450 Fifth Street, NW, Washington, DC 
20549-0102 ((202) 942-8090).

Applicants' Representations

    1. Jackson National is a stock life insurance company organized 
under the laws of the state of Michigan in June 1961. Its legal 
domicile and principal business address is 1 Corporate Way, Lansing, 
Michigan 48951. Jackson National is admitted to conduct life insurance 
and annuity business in the District of Columbia and all states except 
New York. Jackson National is ultimately a wholly-owned subsidiary of 
Prudential plc (London, England).
    2. JNL New York is a stock life insurance company organized under 
the laws of the state of New York in July 1995. Its legal domicile and 
principal address is 2900 Westchester Avenue, Purchase, New York 10577. 
JNL New York is admitted to conduct life insurance and annuity business 
in Delaware, Michigan and New York. JNL New York is ultimately a 
wholly-owned subsidiary of Prudential plc (London, England).
    3. The JNL Separate Account was established by Jackson National on 
June 14, 1993, pursuant to the provisions of Michigan law and the 
authority granted under a resolution of Jackson National's Board of 
Directors. The JNLNY Separate Account was established by JNL New York 
on September 12, 1997, pursuant to the provisions of New York law and 
the authority granted under a resolution of JNL New York's Board of 
Directors. Jackson National and JNL New York each is the depositors of 
its respective Separate Account. Each of the Separate Accounts meets 
the definition of a ``separate account'' under the federal securities 
laws and each is registered with the Commission as a unit investment 
trust under the Act (File Nos. 811-08664 and 811-08401, respectively). 
JNL Separate Account and JNLNY Separate Account will fund, 
respectively, the variable benefits available under the JNL Contracts 
and the JNLNY Contracts. The offering of the Contracts will be 
registered under the Securities Act of 1933 (the ``1933 Act'').
    4. The Distributor is a wholly-owned subsidiary of Jackson National 
and serves as the distributor of the Contracts. The Distributor is 
registered with the Commission as a broker-dealer under the Securities 
Exchange Act of 1934 (the ``1934 Act'') and is a member of the NASD. 
The Distributor enters into selling group agreements with affiliated 
and unaffiliated broker-dealers. The Contracts are sold by licensed 
insurance agents, where the Contracts may be lawfully sold, who are 
registered representatives of broker-dealers which are registered under 
the 1934 Act and are members of the NASD.
    5. The Contracts require a minimum initial premium payment of 
$5,000 under most circumstances ($2,000 for a qualified plan contract). 
Subsequent payments may be made at any time during the accumulation 
phase. Each subsequent payment must be at least $500 ($50 under an 
automatic payment plan). Prior approval by the relevant Insurance 
Company is required for aggregate premium payments of over $1,000,000.
    6. The JNL Contracts permit owners to accumulate contract values on 
a fixed basis through allocations to one of seven fixed accounts (the 
``Fixed Accounts''), including four ``Guaranteed Fixed Accounts'' which 
offer guaranteed crediting rates for specified periods of time 
(currently, 1, 3, 5, or 7 years), two ``DCA Fixed Accounts'' (used in 
connection with dollar cost averaging transfers, one of which, the DCA+ 
Fixed Account, from time to time offers special crediting rates) and an 
``Indexed Fixed Option'' (with a minimum guaranteed return and 
additional possible returns based on the performance of the S&P 500 
Index).
    7. The JNLNY Contracts permit owners to accumulate contract values 
on a fixed basis through allocations to one of four fixed accounts, 
including

[[Page 64315]]

four ``Guaranteed Fixed Accounts'' which offer guaranteed crediting 
rates for specified periods of time (currently, 1, 3, 5, or 7 years).
    8. The Contracts also permit owners to accumulate contract values 
on a variable basis, through allocations to one or more of the 
investment divisions of the Separate Accounts (the ``Investment 
Divisions,'' collectively with the Fixed Accounts, the ``Allocation 
Options''). There are currently 34 (33 for JNLNY contracts) Investment 
Divisions expected to be offered under the Contracts, but additional 
Investment Divisions may be offered in the future and some of those 
listed could be eliminated or combined with other Investment Divisions 
in the future. Similarly, Future Contracts may offer additional or 
different Investment Divisions.
    9. Transfers among the Investment Divisions are permitted. The 
first 15 transfers in a contract year are free; subsequent transfers 
cost $25. Certain transfers to, from and among the Fixed Accounts are 
also permitted during the Contracts' accumulation phase, but are 
subject to certain adjustments and limitations. Dollar cost averaging 
and rebalancing transfers are offered at no charge and do not count 
against the 15 free transfers permitted each year.
    10. The Contracts offer certain optional endorsements that relate 
to withdrawals: (i) An endorsement that expands the percentage of 
premiums (that remain subject to a withdrawal charge) that may be 
withdrawn in a contract year with no withdrawal charge imposed from 10% 
to 20%; and (ii) an endorsement that reduces the withdrawal charges 
applicable under the Contract and shortens the period for which 
withdrawal charges are imposed from seven years to five years.
    11. If one of the optional Contract Enhancement endorsements is 
elected, each time an owner makes a premium payment during the first 
contract year, Jackson National will add an additional amount to the 
owner's contract value (a ``Contract Enhancement''). All Contract 
Enhancements are paid from Jackson National's general account assets. 
The Contract Enhancement is equal to 2%, 3%, or 4% of the premium 
payment. A Contract Owner can choose only one of the Contract 
Enhancement endorsements. The 2% Contract Enhancement is offered only 
if the owner elects the optional five year withdrawal charge 
endorsement or the 20% additional free withdrawal endorsement. An owner 
may not elect the 3% or 4% Contract Enhancements if one of those two 
other optional endorsements is elected. The Insurance Companies will 
allocate the Contract Enhancement to the Guaranteed Accounts and/or 
Investment Divisions in the same proportion as the premium payment 
allocation. The Contract Enhancement is not credited to any premiums 
received after the first contract year.
    12. There is an asset-based charge for each of the Contract 
Enhancements. The 2% Contract Enhancement has a 0.40% charge that 
applies for five years. The asset-based charges for the other Contract 
Enhancements apply for seven years and are 0.425% and 0.57%, 
respectively, for the 3% and 4% Contract Enhancements. These charges 
will also be assessed against any amounts you have allocated to the 
guaranteed accounts, resulting in a credited interest rate of 0.40%, 
0.425%, and 0.57% for the 2%, 3%, and 4% contract enhancements, 
respectively, less than the annual credited interest rate that would 
apply to the guaranteed account if the contract enhancement had not 
been elected. However, the interest rate will never go below 3%.
    13. The Insurance Companies will recapture all or a portion of any 
Contract Enhancements by imposing a recapture charge whenever an owner: 
(i) Makes a withdrawal of corresponding premium within the recapture 
charge period (five years after a first year payment in the case of the 
2% Contract Enhancement and seven years after a first year payment in 
the case of the other Contract Enhancements) in excess of those 
permitted under the Contracts' free withdrawal provisions (including 
free withdrawals permitted by a 20% additional free withdrawal 
endorsement), unless the withdrawal is made for certain health-related 
emergencies specified in the Contracts (not all of which are available 
in the JNLNY contracts); (ii) elects to receive payments under an 
income option within the recapture charge period; or (iii) returns the 
Contract during the free look period.
    14. The amount of the recapture charge varies, depending upon which 
Contract Enhancement is elected and when the charge is imposed, as 
follows:

                                                          Contract Enhancement Recapture Charge
                                                    [As a percentage of first year premium payments]
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                                                                      0          1          2          3          4          5          6          7+
            Completed years since receipt of premium              (percent)  (percent)  (percent)  (percent)  (percent)  (percent)  (percent)  (percent)
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Recapture Charge (2% Credit)....................................          2          2       1.25       1.25        0.5          0          0          0
Recapture Charge (3% Credit)....................................          3          3          2          2          2          1          1          0
Recapture Charge (4% Credit)....................................          4          4        2.5        2.5        2.5       1.25       1.25          0
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    15. The recapture charge percentage will be applied to the 
corresponding premium reflected in the amount withdrawn or the amount 
applied to income payments that remains subject to a withdrawal charge. 
The amount recaptured will be taken from the Investment Divisions and 
the Guaranteed Accounts in the same proportion as the withdrawal 
charge.
    16. Recapture charges will be waived upon death, but will be 
applied upon electing to commence income payments, even in a situation 
where the withdrawal charge is waived. Partial withdrawals will be 
deemed to remove premium payments on a first-in-first-out basis (the 
order that entails payment of the lowest withdrawal and recapture 
charges).
    17. The Insurance Companies do not assess the recapture charge on 
any payments paid out as: death benefits; withdrawals necessary to 
satisfy the minimum distribution requirements of the Internal Revenue 
Code; if permitted by the owner's state, withdrawals of up to $250,000 
from the Separate Account or from the Fixed Accounts other than the 
Indexed Fixed Option in connection with the owner's terminal illness or 
if the owner needs extended hospital or nursing home care as provided 
in the Contract; or if permitted by the owner's state, withdrawals of 
up to 25% of contract value (12.5% for each of two joint owners) in 
connection with certain serious medical conditions specified in the 
Contract.
    18. The contract value will reflect any gains or losses 
attributable to a Contract Enhancement described above. Contract 
Enhancements, and any gains or losses attributable to a Contract 
Enhancement, distributed under the Contracts will be

[[Page 64316]]

considered earnings under the Contract for tax purposes and for 
purposes of calculating free withdrawal amounts.
    19. The JNL Contracts have a ``free look'' period of ten (twenty 
for JNLNY Contracts) days after the owner receives the Contract (or any 
longer period required by state law). Contract value is returned upon 
exercise of free look rights by an owner unless state law requires the 
return of premiums paid. The Contract Enhancement recapture charge 
reduces the amount returned.
    20. The Separate Accounts consist of sub-accounts, each of which 
will be available under the Separate Accounts. The sub-accounts are 
referred to as ``Investment Divisions.'' The Separate Accounts 
currently consist of the 34 (33 for JNLNY Contracts) Investment 
Divisions, and each will invest in Shares of a corresponding series 
(``Series'') of JNL Series Trust (``Trust'') or JNL Variable Fund LLC. 
Not all Investment Divisions may be available.
    21. In addition to the Contract Enhancement charges and the 
Contract Enhancement recapture charges, the JNL Contracts have the 
following charges: mortality and expense risk charge of 1.00% (1.25% in 
the case of the JNLNY Contracts) (as an annual percentage of average 
daily account value); administration charge of 0.15% (as an annual 
percentage of average daily account value); contract maintenance charge 
of $35 per year ($30 per year in the case of the JNLNY Contracts) 
(waived if contract value is $50,000 or more at the time the charge is 
imposed); Earnings Protection Benefit charge of 0.30% (as an annual 
percentage of daily account value--only applies if related optional 
endorsement is elected); 20% additional free withdrawal benefit charge 
of 0.30% (as an annual percentage of daily account value--only applies 
if related optional endorsement is elected); five-year withdrawal 
charge period charge of 0.30% (as an annual percentage of daily account 
value--only applies if related optional endorsement is elected); 
optional death benefit charge of either 0.15% or 0.25% (as an annual 
percentage of daily account value--only applies if related optional 
endorsement is elected) depending upon which (if any) optional death 
benefit endorsement is elected; transfer fee of $25 for each transfer 
in excess of 15 in a contract year (for purposes of which dollar cost 
averaging and rebalancing transfers are excluded); commutation fee that 
applies only upon withdrawals from income payments for a fixed period, 
measured by the difference in values paid upon such a withdrawal due to 
using a discount rate of 1% greater than the assumed investment rate 
used in computing the amounts of income payments; and a withdrawal 
charge that applies to total withdrawals, partial withdrawals in excess 
of amounts permitted to be withdrawn under the Contract's free 
withdrawal provisions (or the 20% additional free withdrawal 
endorsement) and on the income date (the date income payments commence) 
if the income date is within a year of the date the Contract was 
issued.
    22. The withdrawal charge for the JNL Contracts varies, depending 
upon the contribution year of the premium withdrawn as follows:

                                                                    Withdrawal Charge
                                                          [As a percentage of premium payments]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      0          1          2          3          4          5          6          7+
            Completed years since receipt of premium              (percent)  (percent)  (percent)  (percent)  (percent)  (percent)  (percent)  (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Withdrawal Charge...............................................        8.5          8          7          6          5          4          2          0
Withdrawal Charge if Five-Year Period is elected................          8          7          6          4          2          0          0          0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    23. The withdrawal charge is waived upon withdrawals to satisfy the 
minimum distribution requirements of the Internal Revenue Code and, to 
the extent permitted by state law, the withdrawal fee is waived in 
connection with withdrawals of: (i) Up to $250,000 from the Investment 
Divisions or the Guaranteed Fixed Accounts of the Contracts in 
connection with the terminal illness of the owner of a Contract, or in 
connection with extended hospital or nursing home care for the owner; 
and (ii) up to 25% (12.5% each for two joint owners) of contract value 
(excluding values allocated to the Indexed Fixed Option) in connection 
with certain serious medical conditions specified in the Contract.
    24. The JNLNY Contracts are identical to the JNL Contracts in the 
operation of Contract Enhancements, Contract Enhancement charges and 
Contract Enhancement recapture charges.
    25. The withdrawal charges of the JNLNY Contracts are as follows:

                                                                    Withdrawal Charge
                                                          [As a percentage of premium payments]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      1          2          3          4          5          6          7          8+
              Contribution Year of Premium Payment                (percent)  (percent)  (percent)  (percent)  (percent)  (percent)  (percent)  (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Withdrawal Charge...............................................          7          6          5          4          3          2          1          0
Withdrawal Charge if Five-Year Period is elected................        6.5          5          3          2          1          0          0          0
--------------------------------------------------------------------------------------------------------------------------------------------------------

Applicants' Legal Analysis

    1. Section 6(c) of the 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 Act grant the exemptions requested 
below with respect to the Contracts and any Future Contracts funded by 
the Separate Accounts or Other Accounts that are issued by the 
Insurance Companies and underwritten or distributed by the Distributor 
or Affiliated Broker-Dealers. Applicants undertake that Future

[[Page 64317]]

Contracts funded by the Separate Accounts or Other Accounts, in the 
future, will be substantially similar in all material respects to the 
Contracts. 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 Act.
    2. Subsection (i) of section 27 of the Act 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 such a separate account or sponsoring insurance company to sell a 
contract funded by the registered separate account unless 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 the which the holder, upon presentation to the issuer, is 
entitled to receive approximately his proportionate share of the 
issuer's current net assets, or the cash equivalent thereof.
    3. Applicants submit that the recapture of the Contract Enhancement 
in the circumstances set forth in this Application would not deprive an 
owner of his or her proportionate share of the issuer's current net 
assets. A Contract owner's interest in the amount of the Contract 
Enhancement allocated to his or her Contract value upon receipt of a 
premium payment is not fully vested until five or seven complete years 
following a premium. Until or unless the amount of any Contract 
Enhancement is vested, the Insurance Companies retain the right and 
interest in the Contract Enhancement amount, although not in the 
earnings attributable to that amount. Thus, Applicants urge that when 
the Insurance Companies recapture any Contract Enhancement they are 
simply retrieving their own assets, and because a Contract owner's 
interest in the Contract Enhancement is not vested, the Contract owner 
has not been deprived of a proportionate share of the Separate 
Account's assets, i.e., a share of the Separate Account's assets 
proportionate to the Contract owner's contract value.
    4. In addition, Applicants state that it would be patently unfair 
to allow a Contract owner exercising the free-look privilege to retain 
the Contract Enhancement amount under a Contract that has been returned 
for a refund after a period of only a few days. If the Insurance 
Companies could not recapture the Contract Enhancement, Applicants 
claim that individuals could purchase a Contract with no intention of 
retaining it and simply return it for a quick profit. Furthermore, 
Applicants state that the recapture of the Contract Enhancement 
relating to withdrawals or receiving income payments within the first 
five or seven years of a premium contribution is designed to protect 
the Insurance Companies against Contract owners not holding the 
Contract for a sufficient time period. According to Applicants, it 
would provide the Insurance Companies with insufficient time to recover 
the cost of the Contract Enhancement, to its financial detriment.
    5. Applicants represent that it is not administratively feasible to 
track the Contract Enhancement amount in the Separate Accounts after 
the Contract Enhancement(s) is applied. Accordingly, the asset-based 
charges applicable to the Separate Accounts will be assessed against 
the entire amounts held in the Separate Accounts, including any 
Contract Enhancement amounts. As a result, the aggregate asset-based 
charges assessed will be higher than those that would be charged if the 
Contract owner's Contract value did not include any Contract 
Enhancement. The Insurance Companies nonetheless represent that the 
Contracts' fees and charges, in the aggregate, are reasonable in 
relation to service rendered, the expenses expected to be incurred, and 
the risks assumed by the Insurance Companies.
    6. Applicants represent that the Contract Enhancement will be 
attractive to and in the interest of investors because it will permit 
owners to put 102%, 103% or 104% of their first-year premium payments 
to work for them in the Investment Divisions and Guaranteed Accounts. 
In addition, the owner will retain any earnings attributable to the 
Contract Enhancements recaptured, as well as the principal of the 
Contract Enhancement amount once vested.
    7. Applicants submit that the provisions for recapture of any 
Contract Enhancement under the Contracts do not violate sections 
2(a)(32) and 27(i)(2)(A) of the Act. Applicants assert that the 
application of a Contract Enhancement to premium payments made under 
the Contracts should not raise any questions as to compliance by the 
Insurance Companies with the provisions of section 27(i). However, to 
avoid any uncertainty as to full compliance with the Act, Applicants 
request an exemption from section 2(a)(32) and 27(i)(2)(A), to the 
extent deemed necessary, to permit the recapture of any Contract 
Enhancement under the circumstances described in the Application, 
without the loss of relief from section 27 provided by section 27(i).
    8. Section 22(c) of the 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 to accomplish the same purposes as 
contemplated by section 22(a). Rule 22c-1 under the Act 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.
    9. It is possible that someone might view the Insurance Companies' 
recapture of the Contract Enhancements as resulting in the redemption 
of redeemable securities for a price other than one based on the 
current net asset value of the Separate Accounts. Applicants contend, 
however, that the recapture of the Contract Enhancement does not 
violate Rule 22c-1. The recapture of some or all of the Contract 
Enhancement does not involve either of the evils that Rule 22c-1 was 
intended to eliminate or reduce as far as reasonably practicable, 
namely: (i) The dilution of the value of outstanding redeemable 
securities of registered investment companies through their sale at a 
price below net asset value or repurchase at a price above it, and (ii) 
other unfair results, including speculative trading practices. To 
effect a recapture of a Contract Enhancement, the Insurance Companies 
will redeem interests in a Contract owner's Contract value at a price 
determined on the basis of the current net asset value of the Separate 
Accounts. The amount recaptured will be less than or equal to the 
amount of the Contract Enhancement that the Insurance Companies paid 
out of its general account assets. Although Contract owners will be 
entitled to retain any investment gains attributable to the Contract 
Enhancement and to bear any investment losses attributable to the 
Contract Enhancement, the amount of such gains or losses will be 
determined on the basis of the current net asset values of the Separate 
Accounts. Thus, no dilution will occur upon the

[[Page 64318]]

recapture of the Contract Enhancement. 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 Contract 
Enhancement. Applicants assert that, because neither of the harms that 
Rule 22c-1 was meant to address is found in the recapture of the 
Contract Enhancement, Rule 22c-1 should not apply to any Contract 
Enhancement. However, to avoid any uncertainty as to full compliance 
with Rule 22c-1, Applicants request an exemption from the provisions of 
Rule 22c-1 to the extent deemed necessary to permit them to recapture 
the Contract Enhancement under the Contracts.
    10. Applicants submit that extending the requested relief to 
encompass Future Contracts and Other Accounts is appropriate in the 
public interest because it promotes competitiveness in the variable 
annuity market by eliminating the need to file redundant exemptive 
applications prior to introducing new variable annuity contracts. 
Investors would receive no benefit or additional protection by 
requiring Applicants to repeatedly seek exemptive relief that would 
present no issues under the Act not already addressed in this 
Application.
    Applicants further submit, for the reasons stated herein, that 
their exemptive request meets the standards set out in section 6(c) of 
the 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 and that, therefore, the Commission should grant 
the requested order.
    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-30649 Filed 12-11-01; 8:45 am]
BILLING CODE 8010-01-P