[Federal Register Volume 67, Number 113 (Wednesday, June 12, 2002)]
[Notices]
[Pages 40346-40350]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14716]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-25605; File No. 812-12734]


Ameritas Variable Life Insurance Company, et al.

June 5, 2002.
AGENCY: The Securities and Exchange Commission (``SEC'' or 
``Commission'').

ACTION: Notice of an application for an order under Section 6(c) of the 
Investment Company Act of 1940 (the ``Act'' or ``1940 Act'') granting 
exemptions from the provisions of Sections 2(a)(32) and 27(i)(2)(A) of 
the Act and Rule 22c-1 thereunder to permit the recapture, under 
specified circumstances, of certain credits applied to purchase 
payments made under certain variable annuity contracts (the 
``Application'').

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Applicants: Ameritas Variable Life Insurance Company (``Ameritas''), 
First Ameritas Life Insurance Corp. of New York (``First Ameritas'') 
(Ameritas and First Ameritas shall collectively be referred to as 
``Ameritas/First Ameritas''), Ameritas Variable Life Insurance Company 
Separate Account VA-2 (the ``Ameritas Separate Account''), First 
Ameritas Variable Annuity Separate Account (the ``First Ameritas 
Separate Account,'' collectively with the Ameritas Separate Account, 
the ``Separate Accounts''), and Ameritas Investment Corp. (``AIC'' or 
``BROKER'') (collectively, ``Applicants'').
SUMMARY OF APPLICATION: Applicants seek an order to permit the 
recapture, under specified circumstances, of certain credits applied to 
purchase payments made under certain variable annuity contracts issued 
by the Separate Accounts (the ``Contracts''), as well as other variable 
annuity contracts that Ameritas/First Ameritas may issue in the future 
through 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, Ameritas/First Ameritas whether existing or 
created in the future, that serves as distributor or principal 
underwriter for the Contracts or Future Contracts (``Affiliated Broker-
Dealers'').

FILING DATE: The Application was filed on December 19, 2001, amended 
and restated on April 1, 2002, and May 8, 2002, and amended on June 3, 
2002.

Hearing or Notification of Hearing: An order granting the Application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
Applicants with a copy of the request, in person or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on June 28, 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 who wish to be 
notified of a hearing may request notification by writing to the 
Secretary of the SEC.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549-0609. Applicants, c/o Ameritas 
Variable Life Insurance Company, 5900 O Street, Lincoln, NE 68510, 
Attn: Gregory C. Sernett, Esq.; copies to W. Randolph Thompson, Jorden 
Burt LLP, 1025 Thomas Jefferson Street, NW., Suite 400 East, 
Washington, DC 20007-5208.

FOR FURTHER INFORMATION CONTACT: Zandra Bailes, Senior Counsel, or 
Lorna MacLeod, Branch Chief, Office of Insurance Products, Division of 
Investment Management, at (202) 942-0670.

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 (tel. (202) 942-8090).

Applicants' Representations

    1. Ameritas is a stock life insurance company organized under the 
insurance laws of Nebraska in 1983. Ameritas is an indirect majority-
owned subsidiary of Ameritas Acacia Mutual Holding Company, the 
ultimate parent company of Ameritas Life Insurance Corp. (``Ameritas 
Life''), Nebraska's first insurance company--in business since 1887, 
and Acacia Life Insurance Company, a District of Columbia domiciled 
company chartered by an Act of the United States Congress in 1869. In 
1996, Ameritas Life Insurance Corp. entered into a joint venture with 
AmerUs Life Insurance Company (a merger of Central Life Assurance 
Company founded in 1896 and American Mutual Life Insurance Company 
founded in 1897). Both Ameritas Life and AmerUs now guarantee the 
obligations of Ameritas through an agreement forming AMAL Corporation, 
a holding company that owns the common stock of Ameritas.
    2. First Ameritas is a stock life insurance company organized under 
the insurance laws of New York in 1993. First Ameritas is a wholly 
owned subsidiary of Ameritas Life.
    3. The Ameritas Separate Account was established as a separate 
asset account of Ameritas under Nebraska law on May 28, 1987. The First 
Ameritas Separate Account was established as a separate investment 
account of First Ameritas under New York law on March 21, 2000. The 
Separate Accounts were established 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 Ameritas or First Ameritas, respectively. The Separate 
Accounts are registered with the Commission as unit investment trusts 
under the 1940 Act.
    4. AIC is the principal underwriter of the Contracts. AIC 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 Contracts are sold by

[[Page 40347]]

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. AIC enters 
into selling group agreements with affiliated and unaffiliated broker-
dealers. AIC is a wholly-owned subsidiary of AMAL Corporation and an 
affiliate of Ameritas and First Ameritas.
    5. The Contracts may be purchased with an initial premium payment 
of $25,000. Subsequent premium payments of at least $1,000 ($50 per 
month if through electronic funds transfer) may also be made. The 
Contracts may assess annual contract fees, currently $0; contract fees 
are waived if the contract value is at least $50,000. The Medley 
Contract assesses an annual mortality and expense risk charge of 0.60% 
and an annual administrative expense fee of 0.15% of assets allocated 
to the Ameritas Separate Account. The Accent Contract assesses an 
annual mortality and expense risk charge of 0.80% and an annual 
administrative expense fee of 0.15% of assets allocated to the First 
Ameritas Separate Account. (Hereinafter mortality and expense risk 
charge plus the administrative expense fee for each product will be 
collectively referred to as the ``basic charges'' for the Contracts.)
    6. Owners of Medley Contracts may allocate their purchase payments 
among 40 investment options--39 Subaccounts of the Ameritas Separate 
Account or an Ameritas fixed account option. Owners of Accent Contracts 
may allocate their purchase payments among 31 investment options--30 
Subaccounts in the First Ameritas Separate Account or a First Ameritas 
fixed account option. Each Ameritas Subaccount will invest in shares of 
a corresponding portfolio of The Alger American Fund; American Century 
Variable Portfolios, Inc.; Calvert Variable Series, Inc. Ameritas 
Portfolios; Calvert Variable Series, Inc. Calvert Social Portfolios; 
Variable Insurance Products: Service Class 2; INVESCO Variable 
Investment Funds, Inc.; MFS Variable Insurance Trust; The Universal 
Institutional Funds, Inc.; Salomon Brothers Variable Series Funds Inc.; 
Summit Mutual Funds, Inc., Summit Pinnacle Series; and Third Avenue 
Variable Series Trust. Each First Ameritas Subaccount will invest in 
shares of a corresponding portfolio of The Alger American Fund; Calvert 
Variable Series, Inc. Ameritas Portfolios; Calvert Variable Series, 
Inc. Calvert Social Portfolios; Variable Insurance Products: Service 
Class 2; MFS Variable Insurance Trust; and The Universal Institutional 
Funds, Inc.
    7. Ameritas/First Ameritas may in the future decide to create 
additional Subaccounts to invest in any additional underlying funds as 
may now or in the future be available. Ameritas/First Ameritas also may 
decide to combine or eliminate Subaccounts or transfer assets to and 
from Subaccounts.
    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 Ameritas/First Ameritas 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 increased charges over and above the basic 
charges (0.75% for Medley Contracts and 0.95% for Accent Contracts).
    9. Rider options must be chosen at the time of application. 
Available rider options for Medley Contracts include: a minimum initial 
premium option; a seven-year or five-year CDSC option; two ``free'' 
withdrawal options; a one-year step up death benefit; a 5% enhanced 
death benefit; and a greater of one-year step-up or 5% enhanced death 
benefit.
    10. For an additional annual Contract fee, currently $36, and an 
annual charge of 0.25%, a Contract may be purchased for a minimum 
initial premium of at least $2,000. (Both charges are waived when 
account value is at least $50,000.) Optional CDSC periods of seven and 
five years may be selected at annual percentage fees deducted monthly, 
of 0.30% and 0.45%, respectively. ``Free'' withdrawal options include 
one that (for an annual charge of 0.05%) permits up to 10% of account 
value to be withdrawn annually and another that (for an annual charge 
of 0.20%) permits up to the greater of a stated percentage of account 
value, or earnings, to be withdrawn annually, where the stated 
percentage of account value is 15% in the first contract year, 30% in 
the second contract year and 45% in the third and subsequent contract 
years. Guaranteed minimum death benefit options (one-year ``periodic 
step-up,'' ``5% roll-up,'' and ``greater of'' features) are available 
at annual rates of 0.25%, 0.35%, and 0.37% respectively.
    11. For Accent Contracts, the only rider option available is a one-
year ``periodic step-up'' minimum death benefit at a current annual 
rate of 0.25% of Separate Account assets.
    12. Ameritas/First Ameritas intend to offer an additional rider 
option under the Contracts which, if elected at the time of 
application, will result in the crediting of a 4% 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 Ameritas or First Ameritas 
general account and will be credited proportionately among the 
investment options chosen by the Contract owner. In contract years two 
through nine, Ameritas/First Ameritas will credit a lesser bonus 
amount. The amount of the Credit in years two through nine will be 
equal to 4% multiplied by a linearly decreasing ratio over the nine-
year surrender charge period. The following schedule illustrates the 
decreasing bonus amount credited on premiums paid in years two through 
nine.

------------------------------------------------------------------------
                                                               Reduced
                Year                         Formula            bonus
                                                              (percent)
------------------------------------------------------------------------
2...................................  4% x \8/9\...........         3.56
3...................................  4% x \7/9\...........         3.11
4...................................  4% x \6/9\...........         2.67
5...................................  4% x \5/9\...........         2.22
6...................................  4% x \4/9\...........         1.78
7...................................  4% x \3/9\...........         1.33
8...................................  4% x \2/9\...........          .89
9...................................  4% x \1/9\...........          .44
------------------------------------------------------------------------

    13. For the above rider option, an annualized fee of 0.42% of the 
daily net assets of the Separate Account (or of the fixed account if 
elected) will be deducted monthly for the first nine contract years. 
The option of either electing the Credit or not (an election that can 
only be made prior to issuance of the Contract), allows prospective 
purchasers to choose between two different Separate Account charge 
structures over the first nine contract years. If the Credit is 
elected, total Separate Account charges under the Contracts, as an 
annual percentage of the average daily net assets of the respective 
Separate Accounts for the first nine contract years and assuming no 
other rider options are elected, will be 1.17% for the Medley Contract 
and 1.37% for the Accent Contracts. If the Credit is not elected, total 
Separate Account charges for Medley and Accent Contracts will be 0.75% 
and 0.95% respectively for all contract years (assuming no other rider 
options are elected). If the owner expects to surrender the Contract in 
the first seven contract years, the Credit should not be elected, 
because in that event he or she will receive a benefit from the Credit 
that is smaller than the charges paid for it. An owner who holds the 
Contract for

[[Page 40348]]

at least seven years will always benefit from having elected the 
Credit.
    14. The Contract has a ``free look'' period which will vary 
according to state law but will be at least ten days. Depending on the 
laws of the state in which the Contract is issued, the amount of the 
refund will be equal to (i) the value of the Contract, (ii) the 
purchase payment(s), or (iii) the greater of the previous two values. 
The Credit (as augmented by any earnings on the Credit or as diminished 
by any investment losses on the Credit) will not be part of the amount 
an owner will receive if the free look provision is exercised. Unless 
the law requires that the full amount of the purchase payment(s) be 
refunded, the owner bears the investment risk from the time of purchase 
until he or she returns the Contract. The refund amount may be more or 
less than the purchase payment(s) the owner made (except in states 
requiring return of premiums).
    15. The Contracts have a contingent deferred sales charge 
(``CDSC'') that applies to: partial withdrawals within nine years of a 
premium payment; surrender within nine years of a premium payment; 
annuitization within two years of a premium payment; or annuitization 
pursuant to an income option with no life contingency within nine years 
of a premium payment.
    16. The Contracts assess a CDSC of 8% of invested premium payments 
in the first three years after the premium is paid. Thereafter, the 
CDSC declines to 7% in years four and five, to 6%, 5%, 4%, and 2% for 
years six through nine, respectively, and is 0% for years ten or more.
    17. If a Credit has been elected, a portion of the Credit, as 
augmented by earnings or diminished by any investment losses (the 
``Credit Value''), will be subject to recapture upon an exercise of 
free look rights and all withdrawals and annuitizations from the 
``Account Value'' (the sum of the values in the Separate Account 
variable investment options and the fixed account), during the first 
seven years of the Contracts. The amount of the Credit Value withdrawn 
is the total withdrawn from the Account Value times the ratio of the 
Credit Value to the Account Value. During the free look period and 
before the end of the seventh contract year, portions of the Credit 
Value withdrawn will be recaptured according to the following formula: 
CVR = [CV/(AV)] * S * Y, where: CVR = Credit Value Recaptured, CV= 
Credit Value immediately before the withdrawal, AV = Account Value 
immediately before the withdrawal, S = Excess of the amount withdrawn 
over any amount permitted to be withdrawn with no CDSC (pursuant to an 
optional rider), Y = (10-contract year of surrender)/9. For withdrawals 
in contract years one through four (1-4) of the Accent Contracts, 
factor Y would be capped at no more than 0.60 (in order to comply with 
New York law).
    18. The effect of the above formula (for the contracts other than 
Accent Contracts in their first 4 contract years) is that the portion 
of the withdrawn Credit Value to be recaptured during the first seven 
years will be reduced during each of the first seven contract years. In 
the first Contract year, one hundred percent (100%) of the Credit Value 
will be recaptured. In each of years two through seven, the portion of 
the withdrawn Credit Value that is recaptured will be reduced by one-
ninth. No recapture will take place after the seventh Contract year. 
The effect of the formula for the Accent Contracts is that the portion 
of the withdrawn Credit Value to be recaptured will remain level during 
the first four Contract years (when Y will always be 0.60) and then 
will be reduced by one-ninth during each of Contract years 5-7.
    19. Applicants state that the total dollar amount of the surrender 
charge plus recapture of the Credit Value will not exceed that 
percentage of premium stated below during the first seven years after a 
premium payment:

------------------------------------------------------------------------
                                                               Maximum
             Age (in years) of premium payment                percentage
                                                              of premium
------------------------------------------------------------------------
1..........................................................         12.5
2..........................................................         11.1
3..........................................................         10.2
4..........................................................         10.0
5..........................................................          9.0
6..........................................................          8.0
7..........................................................          7.0
------------------------------------------------------------------------

    20. The Credit Value will not be subject to recapture on the amount 
contained in a free withdrawal (not subject to the CDSC). Such free 
withdrawals would only be permitted if the owner had elected an 
optional free withdrawal rider prior to issuance of the Contract. 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.
    21. The Credit Value recaptured will be taken proportionately from 
each investment option as allocated at the time of the withdrawal. No 
recapture of the Credit Value will take place: if the Contract is 
annuitized and applied to a life contingent income option (assuming no 
premiums paid for two years prior to annuitization), if a death benefit 
becomes payable, or if distributions are required in order to meet 
minimum distributions requirements under the Code.
    22. After the end of the seventh Contract year, the Credit will not 
be subject to recapture and, after the ninth year, the 0.42% charge 
associated with the Credit will be eliminated.
    23. If the Contract owner elects the Credit option and later makes 
a full surrender of the Contract, electing the Credit option will be to 
the Contract owner's benefit only if the Contract is not surrendered 
during the first seven contract years. If the Contract is surrendered 
during the first seven contract years, the Contract Owner will receive 
less than if the Credit option had not been elected. After seven 
contract years, and during Contract years 1-3 for the Accent Contracts, 
both the Account Value and the Surrender Value received upon full 
surrender of the Contract will be greater if the Credit option is 
elected, than if it had not been elected.
    24. The seven-year or five-year CDSC option is not available if the 
Contract owner elects the Credit option.
    25. Applicants seek exemptions pursuant to Section 6(c) from 
Sections 2(a)(32) and 27(i)(2)(A) of the Act and Rule 22-1 thereunder 
to the extent deemed necessary to permit Ameritas/First Ameritas to 
recapture part or all of the Credits and earnings on the Credits, as 
described above, in the following instances: (i) when an owner 
exercises the Contract's free look provision; and (ii) when an owner 
makes a partial withdrawal or a surrender in the first seven Contract 
years.

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 issue 
an order pursuant to Section 6(c) of the Act granting the exemptions 
requested below with respect to the Contracts and any Future Contracts 
funded by the Accounts or Other Accounts that are issued by Ameritas/
First Ameritas and underwritten or distributed by the BROKER or 
Affiliated Broker-Dealers. Applicants undertake that Future Contracts 
will be substantially similar in all material respects to the 
Contracts. Applicants believe that the requested

[[Page 40349]]

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 Credit in the 
circumstances set forth in the Application would not deprive an owner 
of his or her proportionate share of the issuer's current net assets. 
Applicants state that an owner's interest in the Credit allocated to 
his or her annuity account during the first seven years is not entirely 
vested until after the seventh year. Subsequent credits (in years eight 
and nine) vest immediately. Unless and until any Credit amount is 
vested, Applicants submit that Ameritas/First Ameritas retains the 
right and interest in the Credit. Applicants argue that when Ameritas/
First Ameritas recaptures any Credit, it is merely retrieving its own 
assets, and the owner has not been deprived of a proportionate share of 
the applicable Separate Account's assets because his or her interest in 
the Credit amount has not vested.
    4. In addition, Applicants state that permitting an owner to retain 
a Credit under a Contract upon the exercise of the free look provision 
would not only be unfair, but would also encourage individuals to 
purchase a Contract with no intention of keeping it, and return it for 
a quick profit. Furthermore, the recapture of the Credit within the 
first seven Contract years is designed to provide Ameritas/First 
Ameritas with a measure of protection against a Contract owner 
surrendering or making a partial withdrawal shortly after a Credit is 
made thereby leaving Ameritas/First Ameritas insufficient time to 
recover the cost of the Credit. The Credit Value recaptured will be 
reduced by one-ninth over the first seven years of the Contract unless 
the Contract at issue is an Accent Contract where in the first four 
Contract years, factor Y, as explained above, will be capped at 0.60 to 
comply with New York law.
    5. Applicants represent that it is not administratively feasible to 
track the Credit in the Separate Accounts once it has been declared. 
Accordingly, the asset-based charges applicable to the Separate 
Accounts will be assessed against the entire amount held in the 
Separate Account, including the Credit, during the free look period and 
the recapture periods. As a result, during such periods, the aggregate 
asset-based charges assessed against an owner's Contract value will be 
higher than if no Credit had been added. Ameritas/First Ameritas 
nonetheless represent that the Contract's fees and charges, in the 
aggregate, are reasonable within the meaning of Section 26(f) of the 
1940 Act.
    6. Applicants submit that the provisions for recapture of any 
Credit under the Contracts do not violate Sections 2(a)(32) and 
27(i)(2)(A) of the Act. Applicants believe that a contrary conclusion 
would be inconsistent with a stated purpose of the National Securities 
Markets Improvement Act of 1996 (``NSMIA''), which was to amend the Act 
to ``provide more effective and less burdensome regulation.'' Sections 
26(f) and 27(i) were added to the Act to implement the purposes of 
NSMIA and Congressional intent. Applicants state that the application 
of Credits under the Contracts should not raise any questions about 
Ameritas/First Ameritas's compliance 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 Credit under the circumstances described in the Application, 
without the loss of the relief from Section 27 provided by Section 
27(i).
    7. 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.
    8. It is possible that someone might view Ameritas/First Ameritas's 
recapture of the Credit as resulting in the redemption of redeemable 
securities for a price other than one based on the current net asset 
value of the Account. Applicants believe, however, that the recapture 
of the Credit does not violate Rule 22c-1. Applicants argue that the 
recapture of all or part of the Credit 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. 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, thereby diluting the values of outstanding mutual fund 
shares. Applicants submit that the proposed recapture of the Credit 
does not pose such a threat of dilution. To effect a recapture of a 
Credit, Ameritas/First Ameritas will redeem interests in a Contract at 
a price determined on the basis of the current accumulation unit 
value(s) of the Subaccount(s) to which the owner's Contract value is 
allocated. The amount recaptured will approximate the amount of the 
Credits that Ameritas/First Ameritas paid out of its general account 
assets reduced over the seven year surrender period, as augmented or 
reduced by investment results. 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. Because neither of 
the harms that Rule 22c-1 was meant to address is found in the 
recapture of the Credit, Rule 22c-1 should not apply to any Credit. 
However, to avoid any uncertainty as to full compliance with the Act, 
Applicants request an exemption from the provisions of Rule 22c-1 to 
the

[[Page 40350]]

extent deemed necessary to permit them to recapture the Credit under 
the Contracts.

Conclusion

    Applicants submit 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 Act that 
has not already been addressed in the Application. Applicants submit 
that having them file additional applications would impair their 
ability to 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 
Application, investors would not receive any benefit or additional 
protection thereby.
    Applicants further submit, for the reasons stated herein, that 
their exemptive requests meet 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 1940 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. 02-14716 Filed 6-11-02; 8:45 am]
BILLING CODE 8010-01-P