[Federal Register Volume 67, Number 71 (Friday, April 12, 2002)]
[Notices]
[Pages 18046-18051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-8931]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-25511; File No. 812-12670]


Midland National Life Insurance Company, et. al.

April 5, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').

[[Page 18047]]


ACTION: Notice of an application for an order pursuant to section 6(c) 
of the Investment Company Act of 1940, as amended (the ``Act'') 
granting exemptions from the provisions of sections 2(a)(32), 22(c) and 
27(i)(2)(A) of the Act and Rule 22c-1 thereunder.

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    Applicants: Midland National Life Insurance Company (``Midland''), 
Midland National Life Separate Account C (the ``Midland Account''), and 
Sammons Securities Company, LLC (``Sammons Securities'') (all 
collectively, the ``Applicants'').

SUMMARY OF APPLICATION: The Applicants hereby apply for an order of the 
Commission exempting them with respect to variable annuity contracts 
described herein (the ``Contracts'') and other variable annuity 
contracts that are substantially similar in all material respects to 
the contracts described herein, that Midland may issue in the future 
(``Future Contracts''), and any other separate accounts of Midland and 
its successors in interest (``Future Accounts'') that support Future 
Contracts, and certain National Association of Securities Dealers, Inc. 
(``NASD'') member broker-dealers which in the future, may act as 
principal underwriter of such contracts (``Future Underwriters''), from 
the provisions of sections 2(a)(32), 22(c), and 27(i)(2)(A) of the Act 
and Rule 22c-1 thereunder, pursuant to section 6(c) of the Act, to the 
extent necessary to permit the recapture of a bonus credit (previously 
applied to premium payments) where the contract owner (``Owner'') 
exercises his or her ``free look'' right.

FILING DATE: The application was filed on October 23, 2001, and amended 
and restated on January 18, 2002 and March 15, 2002. An amendment 
substantially conforming to this notice will be filed during the 
pendency of the notice period.

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 the Applicants with a copy of the request, 
personally or by mail. Hearing requests must be received by the 
Commission by 5:30 p.m. on April 30, 2002, 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 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 Jack L. Briggs, 
Esq. Midland National Life Insurance Company, One Midland Plaza, Sioux 
Falls, SD 57193. Copy to Frederick R. Bellamy, Esq. Sutherland Asbill & 
Brennan LLP, 1275 Pennsylvania Avenue, NW, Washington, DC 20004.

FOR FURTHER INFORMATION CONTACT: Mark A. Cowan, Senior Counsel, or 
William Kotapish, Assistant Director, Office of Insurance Products, 
Division of Investment Management, at (202) 942-0670.

SUPPLEMENTARY INFORMATION: Following is a summary of the Application. 
The complete Application is available for a fee from the Commission's 
Public Reference Branch, 450 5th Street NW, Washington, DC 20549, (202) 
942-8090.

Applicants' Representations

    1. Midland is a stock life insurance company. Midland was organized 
in 1906, in South Dakota, as a mutual life insurance company at that 
time named The Dakota Mutual Life Insurance Company. It was 
reincorporated as a stock life insurance company in 1909. The name 
Midland was adopted in 1925. Midland was redomesticated to Iowa in 
1999. It is licensed to do business in the District of Columbia, Puerto 
Rico, and in all states except New York. Midland is a subsidiary of 
Sammons Enterprises, Inc. which has controlling or substantial stock 
interests in a large number of other companies engaged in the areas of 
insurance, corporate services, and industrial distribution.
    2. Under the terms of the Contracts, the assets of the Midland 
Account equal to the reserves and other contract liabilities with 
respect to the Midland Account are not chargeable with liabilities 
arising out of any other business which the sponsoring company may 
conduct (except to the extent that assets in the Midland Account exceed 
the reserves and liabilities of the Midland Account). The Midland 
Account is comprised of investment divisions established to receive and 
invest net premium payments under the Contracts (the ``Investment 
Divisions'') and other annuity contracts. The income, gains and losses, 
realized or unrealized, from the assets allocated to each Investment 
Division will be credited to or charged against that Investment 
Division without regard to other income, gains or losses of any other 
Investment Division. The Midland Account meets the definition of a 
``separate account'' in Rule 0-1(e) under the Act.
    3. The Board of Directors of Midland established the Midland 
Account under the insurance laws of the State of South Dakota in March 
1991. The Midland Account is now governed by Iowa law. The Midland 
Account is registered under the Act as a unit investment trust (File 
No. 811-07772). The assets of the Midland Account support certain 
flexible premium variable annuity contracts, and interests in the 
Midland Account offered through such contracts have been registered 
under the Securities Act of 1933 (``1933 Act'') on two Form N-4 
Registration Statements (File Nos. 33-64016 and 333-71800).
    4. Sammons Securities, an affiliate of Midland, is the principal 
underwriter of the Contracts. Sammons Securities is registered with the 
Commission as a broker-dealer under the Securities Exchange Act of 1934 
and is a member of the NASD.
    5. Each Investment Division will invest exclusively in a designated 
series of shares, representing an interest in a particular portfolio of 
one or more designated management investment companies of the series 
type (``Funds''). Midland reserves the right to designate the shares of 
another portfolio of the Funds or of other management investment 
companies (``Other Funds'') as the exclusive investment vehicle for 
each new Investment Division that may be created in the future. Subject 
to Commission approval under section 26(c) of the Act, Applicants also 
reserve the right to substitute the shares of another portfolio of the 
Funds or of Other Funds for the portfolio previously designated as the 
exclusive investment vehicle for each Investment Division.
    6. The Contracts are flexible premium variable annuity contracts 
issued by Midland through the Midland Account. Midland currently 
intends to market the Contract under the name ``Variable Annuity III.'' 
The Contracts provide for the accumulation of values on a variable 
basis, fixed basis, or both during the accumulation period, and may 
provide settlement or annuity payment plans on a variable basis, fixed 
basis, or both. The Contracts may be purchased on a non-qualified tax 
basis. The Contracts may also be purchased and used in connection with 
plans qualifying for favorable federal income tax treatment.
    7. The Owner determines in the application or transmittal form for 
a Contract how the net premium payments will be allocated among the 
Investment Divisions of the Midland Account, the Fixed Account and any 
available dollar cost averaging options of the Fixed Account (the 
``Fixed

[[Page 18048]]

Account Options''). The Owner generally may allocate premium payments 
to each Investment Division and to each Fixed Account Option. The 
Accumulation Value will vary with the investment performance of the 
Investment Divisions selected, and the Owner bears the entire risk for 
amounts allocated to the Investment Divisions.
    8. An Owner may return his or her Contract for a refund. This is 
called the ``Free Look Right.'' The Free Look Right allows an Owner 10 
days (or longer if required by state law) to return his or her 
Contract. Midland will generally return the Accumulation Value minus 
any premium bonus credit to the Owner, but may return the full premium 
payment (not including the bonus credit), if greater and required by 
state law. Midland will generally pay the refund within 7 days after it 
receives a written notification of cancellation and the returned 
Contract. The Contract will then be considered void.
    9. An Owner may transfer Accumulation Value. Transfers out of an 
Investment Division generally must be for at least $200, or the entire 
value of the Investment Division. Free transfers may be limited to 
twelve per contract year and a $15 charge per transfer may then apply 
for any additional transfers.
    10. The Owner may surrender the Contract or make a partial 
surrender from the Accumulation Value until the maturity date. If an 
Owner surrenders a Contract or takes a partial surrender, Midland may 
deduct a surrender charge to compensate it for expenses relating to 
sales, including commissions to registered representatives and other 
promotional expenses. An Owner is permitted to withdraw 10% of net 
premiums (premiums minus surrenders) once each Contract Year free of a 
surrender charge. The following chart shows the surrender charges that 
apply to the Contracts:

------------------------------------------------------------------------
                                                       Surrender charge
                                                       (as a percentage
     Number of years since premium payment date           of premium
                                                          withdrawn)
------------------------------------------------------------------------
1...................................................                   7
2...................................................                   7
3...................................................                   6
4...................................................                   5
5...................................................                   4
6...................................................                   3
7...................................................                   2
8 or more...........................................                   0
------------------------------------------------------------------------

Midland currently will partially waive the surrender charge if an Owner 
withdraws money under the Terminal Illness or Charitable Remainder 
Trust riders.
    11. Midland offers a Charitable Remainder Trust benefit which 
provides for a potential increase in the free surrender amount. Under 
this benefit, the free surrender amount is the greater of: (a) the 
Owner's Accumulation Value minus net premiums at the close of the prior 
business day; or (b) 10% of the Owner's net premiums at the time of the 
partial surrender. This benefit is only available if the Owner is a 
charitable remainder trust. There is no charge for this benefit.
    12. Under the Contracts, Midland will pay a death benefit under 
certain circumstances. Midland's death benefit equals the greatest of: 
(a) The Accumulation Value; (b) 100% of the total net premium payments, 
or (c) if elected, the guaranteed minimum death benefit. The guaranteed 
minimum death benefit equals the greater of total premiums paid minus 
any surrenders accumulated at 7% per annum (limited to an additional 
100% of premiums minus surrenders) or the Accumulation Value. Future 
Contracts may provide different death benefits. The Accumulation Value 
for purposes of the death benefit is calculated on the date Midland 
receives the later of due proof of death or the election form of how 
the death benefit is to be paid, or 90 days after receipt of due proof 
of death.
    13. If an Owner elects the Bonus Credit Rider under the Contracts, 
then Midland will add a 4% bonus credit to each premium payment made 
during the first contract year. Midland will assess a daily charge 
during the first 7 contract years against the Owner's Accumulation 
Value in the Midland Account as a charge for the optional bonus credit 
rider. The current charge for this rider is at an annual rate of 0.60% 
of the Separate Account accumulation value. The guaranteed maximum 
level of this charge is 0.70% annually.
    14. On the maturity date the Owner may take the surrender value in 
one lump sum or convert the surrender value into an annuity. The Owner 
may elect or change an annuity payment option up until thirty days 
before the maturity date. The first annuity payment will be made within 
one month after the maturity date. The Owner generally may change the 
maturity date, subject to limits specified in the prospectus.
    15. The amount of each annuity payment under the annuity payment 
plans will depend on the sex (if allowed) and age of the annuitant (or 
annuitants) at the time the first payment is due and the payment 
option.
    16. Midland may offer Owners dollar cost averaging programs, where 
Midland will automatically transfer money from one investment option 
into any of the other Investment Divisions; a portfolio rebalancing 
program, where Midland will automatically rebalance, on a quarterly, 
semi-annual or annual basis, the amounts in an Owner's Investment 
Divisions according to his or her desired asset allocation; a fixed 
account earnings sweep program, where Midland will transfer, on a 
monthly or quarterly basis, Fixed Account interest earnings to one or 
more of the Investment Divisions; and a systematic withdrawal option, 
where an Owner may receive regular payments from his or her Contract, 
subject to certain limitations; or other programs.
    17. Midland deducts various fees and charges from the Contracts or 
the Midland Account, which currently include a daily mortality and 
expense risk fee; an annual maintenance fee (which may be waived if the 
Owner's net premium exceeds a certain level); premium taxes; surrender 
charges (contingent deferred sales loads); and fees for optional 
benefits or riders.

Applicants' Legal Analysis

    1. Applicants respectfully request that the Commission, pursuant to 
section 6(c) of the Act, grant the exemptions set forth below to permit 
the Applicants to recapture the bonus credit applied to premium 
payments when the Owner exercises his or her free look right.
    2. Section 6(c) authorizes the Commission, by order upon 
application, to conditionally or unconditionally grant an exemption 
from any provision, rule or regulation of the 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 contract and provisions of the Act. Because the 
provisions described below may be inconsistent with a recapture of a 
bonus credit, Applicants request exemptions for the Contracts described 
herein, and for Future Contracts, from sections 2(a)(32), 22(c) and 
27(i)(2)(a) of the Act, and Rule 22c-1 thereunder, pursuant to Section 
6(c), to the extent necessary to recapture the bonus credit applied to 
a premium payment in the instance described above. Applicants do not 
agree or concede that the proposed recapture would violate any 
provision of the Act or rules thereunder. Applicants seek exemptions 
therefrom in order to avoid any questions concerning the Contracts' 
compliance with the Act and rules thereunder.
    3. For the reasons discussed below, Applicants assert that the 
recapture of the bonus credit in the circumstances

[[Page 18049]]

described herein is necessary or appropriate in the public interest and 
consistent with the protection of investors and purposes fairly 
intended by the policy and provisions of the Act.
    4. Section 27(i) provides that Section 27 does not apply to any 
registered separate account funding variable insurance contracts, nor 
to the sponsoring insurance company and principal underwriter of such 
account, except as provided for in Section 27(i)(2)(A). Section 
27(i)(2)(A) of the Act, in pertinent part, makes it unlawful for any 
registered separate account funding variable insurance contracts, or 
for the sponsoring insurance company of such account, to sell any such 
contract unless such contract is a redeemable security.
    5. Section 2(a)(32) of the Act defines ``redeemable security'' as 
any security under the terms of which the holder, upon its presentation 
to the issuer, is entitled to receive approximately his proportionate 
share of the issuer's current net assets, or the cash equivalent 
thereof.
    6. To the extent that the bonus credit recapture might be seen as a 
discount from the net asset value, or might be viewed as resulting in 
the payment to an Owner of less than the proportionate share of the 
issuer's net assets, the bonus credit recapture would trigger the need 
for relief absent some exemption from the Act. Rule 6c-8 provides, in 
relevant part, that a registered separate account, and any depositor of 
such account, shall be exempt from sections 2(a)(32), 22(c), 27(c)(1), 
27(c)(2) and 27(d) of the Act and Rule 22c-1 thereunder to the extent 
necessary to permit them to impose a deferred sales load on any 
variable annuity contract participating in such account. However, the 
bonus credit recapture is not a sales load, but a recapture of a bonus 
credit Midland previously applied to an Owner's premium payments. 
Midland provides the bonus credits from its general account on a 
guaranteed basis. The Contracts are designed to be long-term investment 
vehicles. In undertaking this financial obligation, Midland 
contemplates that an Owner will retain a Contract over an extended 
period, consistent with the long-term nature of the Contracts. Midland 
designed its product so that it would recover its costs (including the 
bonus credit) over an anticipated duration while a Contract is in 
force. If an Owner withdraws his or her money from the Contract before 
this anticipated period, Midland must recapture the bonus credit in 
order to avoid a loss.
    7. Applicants submit that the recapture of a bonus credit does not 
violate section 2(a)(32) of the Act. The Applicants submit that the 
bonus recapture provision in the Contracts does not deprive the Owner 
of his or her proportionate share of the issuer's current net assets. 
An Owner's right to the bonus credit will vest after the free-look 
period has expired. Until that time, Midland retains the right and 
interest in the dollar amount of any unvested bonus credit amount. 
Thus, when Midland recaptures a bonus credit, it is only retrieving its 
own assets, and because an Owner's interest in the bonus credit is not 
vested, such Owner would not be deprived of a proportionate share of 
the Midland Account's assets (the issuer's current net assets) in 
violation of Section 2(a)(32). Therefore, such recapture does not 
reduce the amount of the Midland Account's current net assets an Owner 
would otherwise be entitled to receive. However, to avoid uncertainty 
as to full compliance with the Act, the Applicants request an exemption 
from the provisions of Sections (2)(a)(32) and 27(i)(2)(A) to the 
extent deemed necessary to permit them to recapture the bonus credit 
under the Contracts and Future Contracts.
    8. Section 22(c) of the Act states that the Commission may 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 
ends as contemplated by Section 22(a). Rule 22c-1, promulgated under 
section 22(c) of the Act, in pertinent part, prohibits a registered 
investment company issuing a redeemable security (and a person 
designated in such issuer's prospectus as authorized to consummate 
transactions in such security, and a principal underwriter of, or 
dealer in, any such security) from selling, redeeming, or repurchasing 
any such security except at a price based on the current net asset 
value of such security.
    9. As a result of a 4% bonus credit, an Owner who made a $10,000 
initial premium payment could be viewed as having an Accumulation Value 
of $10,400 before any earnings accrued. Midland's addition of the bonus 
credit might arguably be viewed as resulting in an Owner purchasing a 
redeemable security for a price below the current net asset value. 
Further, by recapturing the bonus credit, Midland might arguably be 
redeeming a redeemable security for a price other than one based on the 
current net asset value of the Midland Account. The Applicants contend 
that these are not correct interpretations or applications of these 
statutory and regulatory provisions. The Applicants contend that the 
bonus credit does not violate Section 22(c) and Rule 22c-1.
    10. An Owner's interest in his or her Accumulation Value or in the 
Midland Account would always be offered at a price based on the net 
asset value next calculated after receipt of the order. The granting of 
a bonus credit does not reflect a reduction of that price. Instead, 
Midland will purchase with its own general account assets an interest 
in the Midland Account equal to the bonus credit. Because the bonus 
credit will be paid out of Midland's assets, not the Midland Account's 
assets, no dilution will occur as a result of the credit.
    11. The recapture of the bonus credit does not involve either of 
the evils that the Commission intended to eliminate or reduce with Rule 
22c-1. The Commission's stated purposes in adopting Rule 22c-1 were to 
avoid or minimize (a) dilution of the interests of other security 
holders and (b) speculative trading practices that are unfair to such 
holders. These evils were the result of backward pricing, the practice 
of basing the price of a mutual fund share on the net asset value per 
share determined as of the close of the market on the previous day. 
Backward pricing allowed investors to take advantage of increases or 
decreases in net asset value that were not yet reflected in the price, 
and thereby the values of outstanding mutual fund shares were diluted.
    12. The proposed recapture of the bonus credit does not pose such 
threat of dilution. The bonus credit recapture will not alter an 
Owner's net asset value. Midland will determine an Owner's surrender 
value under a Contract in accordance with Rule 22c-1 on a basis next 
computed after receipt of an Owner's request for surrender (likewise, 
the calculation of death benefits and annuity payment amounts will be 
in full compliance with the forward pricing requirement of Rule 22c-1). 
The amount recaptured will equal the amount of the bonus credit that 
Midland paid out of its general account assets. The Applicants 
represent that it is not administratively feasible to track the bonus 
credit in the Midland Account after Midland applies the credit. As a 
result, the asset-based charges applicable to the Midland Account will 
be assessed against the entire amount held in the Midland Account, 
including the bonus credit amount, during the time the bonus credit has 
not vested (during the ``free look'' period). Applicants state that 
during the free look period, the aggregate asset-based charges assessed

[[Page 18050]]

against an Owner's Accumulation Value will be higher than those that 
would be charged if the Owner's Accumulation Value did not include the 
bonus credit, but the increment will obviously be only a small 
percentage of the credit amount. On the other hand, an Owner will 
retain the investment benefit from the bonus credit. Although an Owner 
will retain any investment gain attributable to the bonus credit, 
Midland will determine the amount of such gain on the basis of the 
current net asset value of the Investment Division. Thus, no dilution 
will occur upon the recapture of the bonus credit.
    13. Further, Applicants submit that the other harm that Rule 22c-1 
was designed to address (speculative trading practices calculated to 
take advantage of backward pricing) will not occur as a result of 
Midland's recapture of the bonus credit. Variable annuities are 
designed for long-term investment, and by their nature, do not lend 
themselves to the kind of speculative short-term trading that Rule 22c-
1 was designed to prevent. More to the point, the credit recapture 
simply does not create the opportunity for speculative trading.
    14. Rule 22c-1 and Section 22(c) should have no application to the 
bonus credit, as neither of the harms that Rule 22c-1 was designed to 
address are present in the recapture of the bonus credit. However, to 
avoid uncertainty as to full compliance with the Act, the 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 bonus 
credit under the Contracts and Future Contracts.
    15. The Applicants submit that the Commission should grant the 
exemptions requested in this Application, even if the bonus credit 
described herein arguably conflicts with sections 2(a)(32), 22(c), or 
27(i)(2)(A) of the Act or Rule 22c-1 thereunder. The bonus credit 
provisions are generally very favorable and very beneficial to Owners. 
The recapture provisions temper this benefit somewhat, but only if an 
Owner withdraws his or her money under the circumstance described 
herein. While there would be a small downside in a declining market 
where an Owner would bear any losses attributable to the bonus credit, 
it is the converse of the benefits an Owner would receive on the bonus 
credit in a rising market. As any earnings on a bonus credit applied 
would vest immediately with an Owner, likewise any losses on the bonus 
credit would also vest immediately with an Owner. The bonus credit 
recapture provision does not diminish the overall value of the bonus 
credit.
    16. Midland's recapture of the bonus credit is designed to prevent 
anti-selection against it. The risk of anti-selection would be that an 
Owner could make significant premium payments into the Contract solely 
in order to receive a quick profit from the credit. By recapturing a 
bonus credit, Midland protects itself against the risk that an Owner 
will make such large premium payments, receive a bonus credit, and then 
withdraw his or her money from the Contract under the free look 
provision. Midland generally protects itself from this kind of anti-
selection, and recovers its costs in situations where an Owner 
withdraws his or her money early in the life of a Contract, by imposing 
a surrender charge of up to 7%. However, where an Owner withdraws his 
money pursuant to a ``free-look'' provision, Midland does not apply 
this charge. Midland is only seeking to recapture the bonus credit in 
this circumstance where it does not apply the surrender charge.
    17. Midland contends that it would be inherently unfair to allow an 
Owner exercising the free-look privilege in a Contract to retain the 
bonus credit when returning the Contract for a refund after a period of 
only a few days (usually 10 or less). If Midland could not recapture 
the bonus credit, individuals might purchase a Contract with no 
intention of retaining it, and simply return it for a quick profit. By 
recapturing the bonus credit, Midland can and must prevent such 
individuals from doing so.

Conclusion

    1. For the reasons discussed above, the Applicants submit that the 
bonus credit involves none of the abuses to which provisions of the Act 
and the rules thereunder are directed. The Owner will always retain the 
investment experience attributable to the bonus credit, and will retain 
the principal amount in all cases except under the single circumstance 
described herein. Further, Midland should be able to recapture such 
bonus credit to protect itself from investors wishing to use the 
Contract as a vehicle for a quick profit at Midland's expense, and to 
enable Midland to limit potential losses associated with such bonus 
credit.
    2. Accordingly, Applicants request exemptions from sections 
2(a)(32), 22(c), and 27(i)(2)(A) of the Act and Rule 22c-1 thereunder, 
to the extent necessary to permit the Applicants to recapture the bonus 
credit applied to a premium payment in the circumstance described 
above. For the reasons set forth above, Applicants believe 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 Act, and 
consistent with and supported by Commission precedent.
    3. Applicants seek relief herein not only for themselves with 
respect to the support of the Contracts, but also with respect to 
Future Accounts or Future Contracts described herein. Applicants 
represent that the terms of the relief requested with respect to any 
Contracts or Future Contracts funded by the Midland Account or Future 
Accounts are consistent with the standards set forth in section 6(c) of 
the Act and Commission precedent. The Commission has previously granted 
class relief (from certain specified provisions of the Act for separate 
accounts that support variable annuity contracts) that is materially 
similar to the relief described in this Application.
    4. In addition, Applicants seek relief herein with respect to 
Future Underwriters (i.e., a class consisting of NASD member broker-
dealers which may also act as principal underwriter of the Contracts 
and Future Contracts). The Commission has regularly granted relief to 
``future underwriters'' that are not named, and are not affiliates of 
the Applicants. Applicants represent that the terms of the relief 
requested with respect to any Future Underwriters are consistent with 
the standards set forth in section 6(c) of the Act and Commission 
precedent.
    5. Applicants state that, without the requested class relief, 
exemptive relief for any Future Account, Future Contract, or Future 
Underwriter would have to be requested and obtained separately. 
Applicants assert that these additional requests for exemptive relief 
would present no issues under the Act not already addressed herein. 
Applicants state that if the Applicants were to repeatedly seek 
exemptive relief with respect to the same issues addressed herein, 
investors would not receive additional protection or benefit, and 
investors and the Applicants could be disadvantaged by increased costs 
from preparing such additional requests for relief. Applicants argue 
that the requested class relief is appropriate in the public interest 
because the relief will promote competitiveness in the variable annuity 
market by eliminating the need for Midland to file redundant exemptive 
applications, thereby reducing administrative expenses and maximizing 
efficient use of resources. Elimination of the delay and the expense of 
repeatedly seeking exemptive relief would, Applicants

[[Page 18051]]

opine, enhance Applicants' ability to effectively take advantage of 
business opportunities as such opportunities arise. Applicants submit, 
for all the reasons stated herein, that their request for class 
exemptions 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, and that an order of 
the Commission including such class relief, should, therefore, be 
granted. Any entity that currently intends to rely on the requested 
exemptive order is named as an applicant. Any entity that relies upon 
the requested order in the future will comply with the terms and 
conditions contained in this Application.
    6. Applicants represent that the requested exemptions are necessary 
and appropriate in the public interest and consistent with 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.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-8931 Filed 4-11-02; 8:45 am]
BILLING CODE 8010-01-P