[Federal Register Volume 67, Number 250 (Monday, December 30, 2002)]
[Notices]
[Pages 79664-79668]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32914]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-25875; File No. 812-12914]


ReliaStar Life Insurance Company of New York, et al.

December 23, 2002.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application for an order pursuant to Section 6(c) of 
the Investment Company Act of 1940 (the ``Act'') granting exemption 
from Sections 2(a)(32) and 27(i)(2)(A) of the Act and Rule 22c-1 
thereunder.

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Applicants: ReliaStar Life Insurance Company of New York (``RLNY''), 
Separate Account NY-B of ReliaStar Life Insurance Company of New York 
(the ``Account'') and Directed Services, Inc. (``DSI'') (together, the 
``Applicants'').

Summary of the Application: Applicants seek an order of the Commission, 
pursuant to Section 6(c) of the Act, exempting them from Sections 
2(a)(32) and 27(i)(2)(A) of the Act and Rule 22c-1 thereunder, to the 
extent necessary to permit the recapture of certain credits applied to 
premium payments made in consideration of certain deferred variable 
annuity contracts, described herein, that RLNY plans to issue (the 
``Contracts''). Applicants also hereby apply for an order of the 
Commission, pursuant to Section 6(c) of the Act, exempting (1) variable 
annuity separate accounts that RLNY or its successors in interest may 
establish in the Future (``Future Accounts''), and (2) principal 
underwriters for such Future Accounts under common control with RLNY or 
its successors in interest now or in the future (``Future 
Underwriters''), from Sections 2(a)(32) and 27(i)(2)(A) of the Act and 
Rule 22c-1 thereunder, to the extent necessary to permit the recapture 
of certain credits applied to premium payments made in consideration of 
variable annuity contracts issued in the Future by RLNY or its 
successors in interest through a Future Account that are substantially 
similar in all material respects to the Contracts (``Future 
Contracts'').

[[Page 79665]]


Filing Date: The Application was filed on December 20, 2002.

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 January 20, 2003, and should be accompanied 
by proof of service on the Applicant 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. Applicant, c/o Linda Senker, 
Esq., Golden American Life Insurance Company, 1475 Dunwoody Drive, West 
Chester, Pennsylvania 19380.

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

SUPPLEMENTARY INFORMATION: Following is a summary of the Application. 
The Application is available for a fee from the Commission's Public 
Reference Branch, 450 Fifth Street, NW., Washington, DC 20549-0102 
(tel. (202) 942-8090).

Applicants' Representations

    1. RLNY is a stock life insurance company originally incorporated 
under the laws of New York (originally incorporated under the name 
Morris Plan Insurance Society) on June 11, 1917. RLNY is engaged in the 
business of writing life insurance and annuities, both individual and 
group, and is authorized to do business in all 50 states. RLNY is a 
wholly-owned subsidiary of Security-Connecticut Life Insurance Company, 
which is a wholly-owned subsidiary of ReliaStar Life Insurance Company. 
RLNY is ultimately controlled by ING Groep N.V., a global financial 
services holding company with approximately $624 billion in assets as 
of December 31, 2001. As of December 31, 2001, RLNY had assets of 
approximately $83.1 million. For purposes of the Act, RLNY is the 
depositor and sponsor of the Account as those terms have been 
interpreted by the Commission with respect to variable annuity separate 
accounts.
    2. First Golden American Life Insurance Company of New York 
(``First Golden'') established the Account as a segregated investment 
account under New York law on June 13, 1996. Effective April 1, 2002, 
First Golden was merged into RLNY, an affiliated company of First 
Golden, and Separate Account NY-B became a separate account of RLNY as 
a result of the merger. Under New York law, the assets of the Account 
attributable to the Contracts and any other variable annuity contracts 
through which interests in the Account are issued are owned by the 
Account's depositor but are held separately from all other assets of 
the depositor, for the benefit of the owners of, and the persons 
entitled to payment under, Contracts issued through the Account. 
Consequently, such assets are not chargeable with liabilities arising 
out of any other business that the Account's depositor may conduct. 
Income, gains and losses, realized or unrealized, from each subaccount 
of the Account, are credited to or charged against that subaccount 
without regard to any other income, gains or losses of the Account's 
depositor. The Account is a ``separate account'' as defined by Rule 0-
1(e) under the Act, and is registered with the Commission as a unit 
investment trust.
    3. The Account currently is divided into a number of subaccounts. 
Each subaccount invests exclusively in shares representing an interest 
in a separate corresponding investment portfolio of one of several 
series-type open-end management investment companies. The assets of the 
Account support one or more varieties of variable annuity contacts, 
including the Contracts. The Account is registered with the Commission 
as a unit investment trust, and interests in the Account to be offered 
through the Contracts have been registered under the 1933 Act on Form 
N-4.
    4. DSI is a wholly owned subsidiary of Equitable of Iowa. It serves 
as the principal underwriter of a number of RLNY and Golden American 
Life Insurance Company separate accounts registered as unit investment 
trusts under the Act, including the Account, and is the distributor of 
variable annuity contracts issued through such separate accounts, 
including the Contracts. DSI is registered as a broker-dealer under the 
Securities Exchange Act of 1934 and is a member of the National 
Association of Securities Dealers, Inc. (the ``NASD'').
    5. The Contracts are deferred combination variable and fixed 
annuity contracts that RLNY may issue to individuals or groups on a 
``non-qualified'' basis or in connection with employee benefit plans 
that receive favorable federal income tax treatment under Sections 401, 
403(b), 408, 408A or 457 of the Internal Revenue Code of 1986, as 
amended (the ``Code'').
    6. The Contracts make available a number of subaccounts of the 
Account to which owners may allocate net premium payments and 
associated bonus credits (described below) and to which owners may 
transfer contract value. The Contracts also offer fixed-interest 
allocation options under which RLNY credits guaranteed rates of 
interest for various periods. Transfers of contract value among and 
between the subaccounts and, subject to certain restrictions, among and 
between the subaccounts and the fixed-interest options, may be made at 
any time. The Contracts offer a variety of annuity payment options to 
owners. In the event of an owner's (or, in certain circumstances, an 
annuitant's) death prior to the annuity commencement date, 
beneficiaries may elect to receive death benefits in the form of one of 
the annuity payment options instead of a lump sum. In general, the 
Contracts offer all of the features typically found in variable annuity 
contracts today.
    7. The Contracts generally may only be purchased with a minimum 
initial premium of $15,000 ($1,500 for certain employee benefit plans) 
under Option Package I and $5,000 ($1,500 for certain employee benefit 
plans) for Option Packages II and III. RLNY may deduct a premium tax 
charge from premium payments in certain states, but otherwise deducts a 
charge for premium taxes upon surrender or annuitization of the 
Contract or upon the payment of a death benefit, depending upon the 
jurisdiction. The Contracts provide for an annual administrative charge 
of $30 that RLNY deducts on each Contract Anniversary and upon a full 
surrender of a Contract, a daily administrative charge deducted from 
the assets of the Account at an annual rate of 0.15% of the Account's 
average daily net assets and a daily mortality and expense risk charge 
deducted from the assets of the Account at annual rates of 0.90% for 
Option Package I, 1.10% for Option Package II, and 1.25% for Option 
Package III, of the Account's average daily net assets. The Contracts 
also provide for a charge of $25 for each transfer of contract value in 
excess of 12 transfers per contract year. RLNY currently anticipates 
waiving this charge for the foreseeable future. Lastly, the Contracts 
have a surrender charge in the form of a contingent deferred sales 
charge.
    8. The contingent deferred sales charge (``CDSC'') is equal to the

[[Page 79666]]

percentage of each premium payment surrendered or withdrawn. The CDSC 
is separately calculated and applied to each premium payment at any 
time that the payment (or part of the payment) is surrendered or 
withdrawn. The CDSC applicable to each premium payment diminishes as 
the payment ages. The schedule is as follows:

------------------------------------------------------------------------
                                                                Charge
     Number of full years since payment of each premium       (percent)
------------------------------------------------------------------------
Less than 1................................................          6.0
2..........................................................          6.0
3..........................................................          6.0
4..........................................................          5.0
5..........................................................          4.0
6..........................................................          3.0
7+.........................................................          0.0
------------------------------------------------------------------------

    9. No CDSC applies to contract value representing an annual free 
withdrawal amount or to contract value in excess of aggregate premium 
payments (less prior withdrawals of premium payments) (``earnings''). 
The CDSC is calculated using the assumption that premium payments are 
withdrawn on a first-in, first-out basis. The CDSC also is calculated 
using the assumption that contract value is withdrawn in the following 
order: (1) The annual free withdrawal amount for that contract year, 
(2) premium payments, and (3) earnings. The annual free withdrawal 
amount is 10% of contract value, measured at the time of withdrawal, 
less any prior withdrawals made in that contract year. Under Option 
Package III, any unused percentage of the 10% free withdrawal amount 
from a contract year may carry forward into successive contract years, 
based on the percentage remaining after the last withdrawal in a 
contract year. However, under Option Package III, the accumulated free 
withdrawal amount may not exceed 30% of contract value.
    10. If an owner dies before the annuity start date, the Contracts 
provide, under most circumstances, for a death benefit payable to a 
beneficiary, computed as of the date RLNY receives written notice and 
due proof of death. The death benefit payable to the beneficiary 
depends on whether the owner selected Option Package I, II or III. Each 
option package provides a death benefit upon the death of the owner 
which death benefit is based upon the highest amount payable under the 
separate death benefit options available under that option package. The 
death benefit options available under the option packages include:
    (1) The Standard Death Benefit which equals return of premium, less 
credits applied since or within 12 months prior to death, reduced pro 
rata for withdrawals;
    (2) The contract value on the claim date, less credits applied 
since or within 12 months prior to death;
    (3) The Annual Ratchet death benefit which equals the maximum 
contract value on each contract anniversary occurring on or prior to 
attainment of age 90, adjusted for new premiums and credits and reduced 
pro rata for withdrawals, less credits applied since or within 12 
months prior to death; and
    (4) Return of premium.
    Under Option Package I, the death benefit payable is the greater of 
(1), (2) and (3). Under Option Package II, the death benefit payable is 
the greatest of (1), (2), (3) and (4). Under Option Package III, the 
death benefit payable is the greatest of (1), (2), (3) and (4).
    11. RLNY intends to offer a bonus credit provision under the 
Contracts. At the time of application, an owner may elect the bonus 
credit provision. Under the bonus credit provision, RLNY credits 
contract value in the subaccounts and the fixed-interest allocations 
with an amount that is a percentage of the premium payment. The bonus 
credit applies upon issuance of the Contract and is based upon premium 
payments received within the first contract year (``first year premium 
payments''). RLNY allocates the bonus credit among the subaccounts and 
fixed-interest allocations the owner selects in proportion to the 
premium payment in each investment option. The bonus credit equals 4% 
of the first year premium payments. RLNY reserves the right to increase 
or decrease the amount of the bonus credit or discontinue the bonus 
credit provision in the future. The annual charge assessed for the 
premium credit rider (as a percentage of contract value) is 0.50%. The 
charge is payable for the first seven contract years. The charge is 
deducted from the contract value in the subaccounts and is also 
deducted from amounts in fixed interest allocations by crediting a 
lower interest rate.
    12. Under the bonus credit provision, RLNY recaptures or retains 
the credited amount in the event that the owner exercises his or her 
cancellation right during the ``free look'' period. RLNY recaptures 
bonus credits applied after or within twelve months of the date as of 
which a death benefit is computed. RLNY also will recapture part or all 
of the credited amount upon surrender or withdrawal. The portion of the 
credit deducted is based on the percentage of first year premium 
withdrawn and the contract year of surrender or withdrawal. The amount 
recaptured is calculated separately and applied to each premium payment 
at any time that the payment (or part of the payment) is surrendered or 
withdrawn. The recapture percentage applicable to each premium payment 
is level for the first two contract years and diminishes to zero after 
the seventh contract year. The schedule is as follows:

------------------------------------------------------------------------
                                                           Percentage of
                                                          premium credit
                                                             forfeited
                                                             (based on
        Contract year of surrender or withdrawal           percentage of
                                                            first year
                                                              premium
                                                            withdrawn)
------------------------------------------------------------------------
Years 1-2...............................................             100
Years 3-4...............................................              75
Years 5-6...............................................              50
Year 7..................................................              25
Years 8+................................................               0
------------------------------------------------------------------------

    13. No recapture percentage applies to contract value representing 
the annual free withdrawal amount or to contract value representing 
earnings. Because of the recapture provisions discussed above, the 
value of a credit only ``vests'' or belongs irrevocably to the owner as 
the recapture period for the credit expires. As to bonus credits 
resulting from premiums paid before the ``free look'' period ends, no 
part of the credit vests for the owner until the expiration of the 
``free look'' period. After the expiration of the ``free look'' period, 
all bonus credits vest in full over the 7 year period after RLNY grants 
them. Under the bonus credit provision, RLNY credits amounts to an 
owner's contract value either by ``purchasing'' accumulation units of 
an appropriate subaccount or adding to the owner's fixed interest 
allocation option values.
    14. With regard to variable contract value, several consequences 
flow from the foregoing. First, increases in the value of accumulation 
units representing bonus credits accrue to the owner immediately, but 
the initial value of such units only belongs to the owner when, or to 
the extent that, each vests. Second, decreases in the value of 
accumulation units representing bonus credits do not diminish the 
dollar amount of contract value subject to recapture. Therefore, 
additional accumulation units must become subject to recapture as their 
value decreases. Stated differently, the proportionate share of any 
owner's variable contract value (or the owner's interest in the 
Account) that RLNY can ``recapture'' increases as variable contract 
value (or the owner's interest in the Account) decreases. This dilutes 
somewhat the owner's interest in the Account vis-a-vis RLNY and other 
owners, and in his or her variable

[[Page 79667]]

contract value vis-a-vis RLNY. Lastly, because it is not 
administratively feasible to track the unvested value of bonus credits 
in the Account, RLNY deducts the daily mortality and expense risk 
charge and the daily administrative charge from the entire net asset 
value of the Account. As a result, the daily mortality and expense risk 
charge and the daily administrative charge paid by any owner is greater 
than that which he or she would pay without the bonus credit.
    15. Applicants respectfully request that the Commission issue an 
order pursuant to Section 6(c) of the Act, exempting them from the 
provisions of Sections 2(a)(32) and 27(i)(2)(A) of the Act and Rule 
22c-1 thereunder, to the extent necessary to permit the recapture of 
certain credits applied to premium payments made in consideration of 
the Contracts.

Legal Analysis

    1. Section 6(c) of the Act authorizes the Commission to exempt any 
person, security, or transaction or any class of persons, securities, 
or transactions from any provision or provisions of the Act and/or any 
rule under it 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.
    2. Subsection (i) of Section 27 provides that Section 27 does not 
apply to any registered separate account supporting variable annuity 
contracts, or to the sponsoring insurance company and principal 
underwriter of such account, except as provided in paragraph (2) of 
subsection (i). Paragraph (2) provides that it shall be unlawful for a 
registered separate account or sponsoring insurance company to sell a 
variable annuity contract supported by the separate account unless the 
``* * * contract is a redeemable security; and * * * [t]he insurance 
company complies with Section 26(e) * * *'' RLNY, of course, complies 
with Section 26(e). Section 2(a)(32) defines a ``redeemable security'' 
as any security, other than short-term, paper, under the terms of which 
the holder, upon presentation to the issuer, is entitled to receive 
approximately his proportionate share of the issuer's current net 
assets, or the cash equivalent thereof.
    3. Applicants submit that the recapture of bonus credits would not, 
at any time, deprive an owner of his or her proportionate share of the 
current net assets of an Account. Until the appropriate recapture 
period expires, RLNY retains the right to and interest in each owner's 
contract value representing the dollar amount of any unvested bonus 
credits. Therefore, if RLNY recaptures any bonus credit or part of a 
bonus credit in the circumstances described above, it would merely be 
retrieving its own assets. RLNY would grant bonus credits out of its 
general account assets and the amount of the credits (although not the 
earnings on such amounts) would remain RLNY's until such amounts vest 
with the owner. Thus, to the extent that RLNY may grant and recapture 
bonus credits in connection with variable contract value, it would not, 
at either time, deprive any owner of his or her then proportionate 
share of the Account's assets. It is the nature of the bonus recapture 
provisions as they apply to variable contract value that an owner would 
obtain a benefit from a bonus credit in a rising market because any 
earnings on the bonus credit amount would vest with him or her 
immediately. Over time this would, of course, cause the owner's share 
of both the Contract's variable contract value and the Account's net 
assets to be greater on a relative basis than it would have been 
without the bonus credit. Conversely, in a falling market an owner 
would suffer a detriment from a bonus credit because losses on the 
bonus credit amount also would ``vest'' with him or her immediately. As 
explained above, over time this would cause the owner's share of both 
the Contract's variable contract value and the Account's net assets to 
decrease on a relative basis.
    4. Applicants do not believe that the dynamics of RLNY's proposed 
bonus credit provisions would violate Sections 2(a)(32) or 27(i)(2)(A) 
of the Act. To begin with, Section 2(a)(32) defines a redeemable 
security as one ``under the terms of which the holder, upon 
presentation to the issuer, is entitled to receive approximately his 
proportionate share of the issuer's current net asset value. Taken 
together, these two sections of the Act do not require that the holder 
receive the exact proportionate share that his or her security 
represented at a prior time. Therefore, the fact that the proposed 
bonus credit provisions have a dynamic element that may cause the 
relative ownership positions of RLNY and a Contract owner to shift due 
to Account performance and the vesting schedule of such credits, would 
not cause the provisions to conflict with Sections 2(a)(32) or 
27(i)(2)(A). Nonetheless, in order to avoid any uncertainty as to full 
compliance with the Act, Applicants seek exemptions from these two 
sections.
    5. 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. Rule 22c-1 thereunder imposes 
requirements with respect to both the amount payable on redemption of a 
redeemable security and the time as of which such amount is calculated. 
Specifically, Rule 22c-1, in pertinent part, 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.
    6. RLNY's granting of a bonus credit would have the result of 
increasing an owner's contract value in a way that could be viewed as 
the purchase of an interest in the Account at a price below net asset 
value. Similarly, RLNY's recapture of any bonus credit could be viewed 
as the redemption of such an interest at a price above net asset value. 
If such is the case, then the bonus credit provisions could be viewed 
as conflicting with Rule 22c-1 under the Act. Applicants contend, 
however, that the bonus credits do not violate Rule 22c-1 under the 
Act. The bonus credit provisions do not give rise to either of the 
evils that Rule 22c-1 was designed to address. The Rule was intended to 
eliminate or reduce, as far as was reasonably practicable, the dilution 
of the value of outstanding redeemable securities of registered 
investment companies through their sale at a price below net asset 
value or their redemption at a price above net asset value, or other 
unfair results, including speculative trading practices.
    7. The evils prompting the adoption of Rule 22c-1 were primarily 
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 permitted 
certain 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 shares. The proposed bonus credit provisions 
pose no such threat of dilution. An owner's

[[Page 79668]]

interest in his or her contract value or in the Account would always be 
offered under the Contracts at a price determined on the basis of net 
asset value. The granting of a bonus credit does not reflect a 
reduction of that price. Instead, RLNY will purchase with its own money 
on behalf of the owner, an interest in the Account equal to the bonus 
credit. Because any bonus credit will be paid from RLNY's general 
account and not from the assets of the Account, no dilution will occur 
as a result of the credit. Likewise, because RLNY will use general 
account assets to increase an owner's total contract value, no dilution 
will occur from such an increase.
    8. Recaptures of bonus credits result in a redemption of RLNY's 
interest in an owner's contract value or in the Account at a price 
determined on the basis of the Account's current net asset value and 
not at an inflated price. Moreover, the amount recaptured will always 
equal the amount that RLNY paid from its general account for the 
credits. Similarly, although owners are entitled to retain any 
investment gains attributable to the bonus credits, the amount of such 
gains would always be computed at a price determined on the basis of 
net asset value. Because neither of the harms that Rule 22c-1 was 
intended to address arise in connection with the proposed bonus credit 
provisions, the provisions do not conflict with the Rule. Nonetheless, 
in order to avoid any uncertainty as to hill compliance with the Act, 
Applicants seek exemptions from Rule 22c-1.
    9. The bonus credit recapture provisions are necessary for RLNY to 
offer the bonus credits. It would be unfair to RLNYto permit owners to 
keep their bonus credits upon their exercise of the Contracts' ``free 
look'' provision. Because no CDSC applies to the exercise of the ``free 
look'' provision, the owner could obtain a quick profit in the amount 
of the bonus credit at RLNY's expense by exercising that right. 
Similarly, the owner could take advantage of the bonus credit by taking 
withdrawals within the recapture period, because the cost of providing 
the bonus credit is recouped through charges imposed over a period of 
years. Likewise, because no additional CDSC applies upon death of an 
owner (or annuitant), a death shortly after the award of bonus credits 
would afford an owner or a beneficiary a similar profit at RLNY's 
expense. In the event of such profits to owners or beneficiaries, RLNY 
could not recover the cost of granting the bonus credits. This is 
because RLNY intends to recoup the costs of providing the bonus credits 
through the charges under the Contract, particularly the daily 
mortality and expense risk charge and the daily administrative charge. 
If the profits described above are permitted, certain owners could take 
advantage of them, reducing the base from which the daily charges are 
deducted and greatly increasing the amount of bonus credits that RLNY 
must provide. Therefore, the recapture provisions are a price of 
offering the bonus credits. RLNY simply cannot offer the proposed bonus 
credits without the ability to recapture those credits in the limited 
circumstances described herein.
    10. Applicants state that the Commission's authority under Section 
6(c) of the Act to grant exemptions from various provisions of the Act 
and rules thereunder is broad enough to permit orders of exemption that 
cover classes of unidentified persons. Applicants request an order of 
the Commission that would exempt them, RLNY's successors in interest, 
Future Accounts and Future Underwriters from the provisions of Sections 
2(a)(32) and 27(i)(2)(A) of the Act and Rule 22c-1 thereunder. The 
exemption of these classes of persons is 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 
because all of the potential members of the class could obtain the 
foregoing exemptions for themselves on the same basis as the 
Applicants, but only at a cost to each of them that is not justified by 
any public policy purpose. As discussed below, the requested exemptions 
would only extend to persons that in all material respects are the same 
as the Applicants.
    11. Applicants represent that Future Contracts will be 
substantially similar in all material respects to the Contracts and 
that each factual statement and representation about the bonus credit 
provisions of the Contracts will be equally true of Future Contracts. 
Applicants also represent that each material representation made by 
them about the Account and DSI will be equally true of Future Accounts 
and Future Underwriters, to the extent that such representations relate 
to the issues discussed in this application. In particular, each Future 
Underwriter will be registered as a broker-dealer under the Securities 
Exchange Act of 1934 and be a NASD member.

Conclusion

    Applicants request that the Commission issue an order pursuant to 
Section 6(c) of the Act exempting them as well as Future Accounts and 
Future Underwriters from the provisions of Sections 2(a)(32) and 
27(i)(2)(A) of the Act and Rule 22c-1 thereunder, to the extent 
necessary to permit the recapture of certain credits applied to 
purchase payments made in consideration of the Contracts. Applicants 
submit that, for all the reasons stated above, 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.

    For the Commission by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-32914 Filed 12-27-02; 8:45 am]
BILLING CODE 8010-01-P