[Federal Register Volume 84, Number 145 (Monday, July 29, 2019)]
[Notices]
[Pages 36636-36641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15975]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33566; File No. 812-14911]


The Guardian Insurance & Annuity Company, Inc., et al.

July 23, 2019.
AGENCY: Securities and Exchange Commission (``Commission'')

ACTION: Notice.

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    Notice of application for an order approving the substitution of 
certain securities pursuant to section 26(c) of the Investment Company 
Act of 1940, as amended (the ``1940 Act'') and an order of exemption 
pursuant to section 17(b) of the Act from section 17(a) of the 1940 
Act.

APPLICANTS: The Guardian Insurance & Annuity Company, Inc., 
(``Guardian''), The Guardian Separate Account Q, and The Guardian 
Separate Account R (collectively, the ``Separate Accounts'' and 
together with Guardian, the ``Section 26 Applicants''); and the Section 
26 Applicants, Guardian Variable Products Trust (the ``Trust''), and 
Park Avenue Institutional Advisers LLC (``Park Avenue'') (collectively, 
the ``Section 17 Applicants''). All applicants to this Application may 
also be collectively referred to herein as the ``Applicants.''

SUMMARY OF APPLICATION: Section 26 Applicants seek an order pursuant to 
section 26(c) of the 1940 Act, approving the substitution of shares 
issued by certain investment portfolios of registered investment 
companies (the ``Existing Portfolios'') for shares of certain 
investment portfolios of the Trust (the ``Replacement Portfolios''), 
held by the Separate Accounts under certain variable annuity contracts 
(the ``Contracts''). The Section 17 Applicants seek an order pursuant 
to section 17(b) of the Act exempting them from section 17(a) of the 
Act to the extent necessary to permit them to engage in certain in-kind 
transactions.

FILING DATE: The application was filed on June 1, 2018 and was amended 
on November 5, 2018 and April 1, 2019.

HEARING OR NOTIFICATION OF HEARING: An order granting the requested 
relief 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 should be received by the 
Commission by 5:30 p.m. on August 19, 2019 and should be accompanied by 
proof of service on the Applicants in the form of an affidavit or, for 
lawyers, a certificate of service. Pursuant to rule 0-5 under the 1940 
Act, hearing requests should state the nature of the writer's interest, 
any facts bearing upon the desirability of a hearing on the matter, 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 
Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street 
NE, Washington, DC 20549-1090. Applicants: Richard T. Potter, Senior 
Vice President, Counsel and Assistant Corporate Secretary, The Guardian 
Insurance & Annuity Company, Inc., 7 Hanover Square, New York, New York 
10004; Stephen E. Roth, Esq. and Cynthia R. Beyea, Esq., Eversheds 
Sutherland (US) LLP, 700 Sixth Street NW, Suite 700, Washington, DC 
20001-3980.

FOR FURTHER INFORMATION CONTACT: Jill Corrigan, Senior Counsel, at 
(202) 551-8929, or Aaron Gilbride, Branch Chief at (202) 551-6906 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website by searching for the file number, or for an 
Applicant using the Company name box, at http://www.sec.gov.search/search.htm, or by calling (202) 551-8090.

Applicants' Representations

    1. Guardian is a Delaware stock life insurance company licensed to 
conduct insurance business in the District of Columbia and all fifty 
states of the United States. Guardian is wholly-owned by The Guardian 
Life Insurance Company of America (``Guardian Life''), a mutual life 
insurance company.
    2. Each Separate Account meets the definition of ``separate 
account,'' as defined in section 2(a)(37) of the 1940 Act and rule 0-
1(e) thereunder. The Separate Accounts are registered with the 
Commission under the 1940 Act as unit investment trusts. The assets of 
the Separate Accounts support the Contracts and interests in the 
Separate Accounts offered through such Contracts. Guardian is the legal 
owner of the assets in the Separate Accounts. The Separate Accounts are 
segmented into subaccounts, and each subaccount invests in an 
underlying registered open-end management investment company or series 
thereof.
    3. The Contracts are each registered under the Securities Act of 
1933, as amended (the ``1933 Act'') on Form N-4. Each Contract has 
particular fees, charges, and investment options, as described in the 
Contracts' respective prospectuses.
    4. The Contracts are individual flexible or single premium deferred 
variable annuity contracts. As set forth in the prospectuses for the 
Contracts, each Contract provides that Guardian reserves the right to 
substitute shares of the funds in which the Separate Accounts invest 
for shares of any funds

[[Page 36637]]

already held or to be held in the future by the Separate Accounts.\1\
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    \1\ Certain Contracts make or made available guaranteed living 
benefit riders (each, a ``Living Benefit Rider'' and collectively, 
the ``Living Benefit Riders''). The terms of certain Living Benefit 
Riders include investment restrictions that limit the available 
investment options to identified allocation models consisting of a 
specified selection of investment options. A Contract owner with a 
Living Benefit Rider that has investment restrictions may transfer 
Contract value by reallocating all of his Contract value to a 
different allocation model under the rider or, depending on the 
terms of the rider, by reallocating his Contract value within the 
parameters of the allocation model.
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    5. Guardian, on behalf of itself and the Separate Accounts, 
proposes to exercise its contractual right to substitute shares of the 
Existing Portfolios for shares of the Replacement Portfolios 
(``Substitutions''), as shown in the table below:
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    \2\ On October 18, 2018, Massachusetts Mutual Life Insurance 
Company, an indirect corporate parent of OppenheimerFunds, Inc. and 
certain of its subsidiaries, announced that it has entered into an 
agreement whereby Invesco Ltd. will acquire OppenheimerFunds, Inc. 
(the ``Transaction''). In connection with the Transaction, a proxy 
statement has been submitted to shareholders of the Oppenheimer Main 
Street Small Cap Fund/VA (Service Shares) and the Oppenheimer Global 
Strategic Income Fund/VA (Service Shares) (the ``Target Funds''). 
See AIM Variable Insurance Funds (Invesco Variable Insurance Funds), 
Definitive Materials (497) (Feb. 19, 2019) (File No. 333-229243). 
The proxy statement requests shareholder approval to reorganize (i) 
the Oppenheimer Main Street Small Cap Fund/VA (Service Shares) into 
the Invesco Oppenheimer V.I. Main Street[supreg] Small Cap Fund 
(Series II) and (ii) the Oppenheimer Global Strategic Income Fund/VA 
(Service Shares) into the Invesco Oppenheimer V.I. Global Strategic 
Income Fund (Series II). As described in the proxy statement, each 
of the Invesco funds referenced above (the ``Acquiring Funds'') is 
``a newly organized shell fund created to acquire the assets and 
assume the accrued liabilities of the corresponding [Target Fund],'' 
and no funds other than the Target Funds would be acquired by the 
Acquiring Funds as part of the Transaction. In that regard, each 
Acquiring Fund does not currently have any operating or performance 
history, and would be a continuation of its Target Fund within a 
different fund complex once it commences operations. Each Acquiring 
Fund has the same investment objectives and substantially similar 
principal investment strategies and risks as its Target Fund. The 
fee structure (including management and Rule 12b-1 fees) of each 
Acquiring Fund is identical to its Target Fund. As disclosed in the 
proxy statement and the Acquiring Funds' current prospectuses as of 
the date of this Application, the net expense ratio of the Invesco 
Oppenheimer V.I. Main Street[supreg] Small Cap Fund (Series II) is 
identical to the Oppenheimer Main Street Small Cap Fund/VA (Service 
Shares), and the net expense ratio of the Invesco Oppenheimer V.I. 
Global Strategic Income Fund (Series II) is 0.02% lower than the net 
expense ratio of the Oppenheimer Global Strategic Income Fund/VA 
(Service Shares). The same portfolio management team that manages 
each Target Fund will manage the corresponding Acquired Fund. The 
Acquiring Funds will not commence operations unless and until the 
reorganizations occur, and when the Acquiring Funds do commence 
operations, they would continue the historical performance 
information of their Target Funds. In light of each Acquiring Fund 
being a continuation of its Target Fund, if the reorganizations are 
approved and occur prior to the Substitutions, the Applicants intend 
to rely on the requested order of approval to substitute the 
Acquiring Funds as if they were Existing Funds under Substitution 
Nos. 6 and 12, and such substitutions would be performed in 
accordance with the policies and procedures and conditions set forth 
in this Application. As of the date of the Application, shareholders 
of the Target Funds had yet to vote on the reorganizations.
    \3\ Id.

------------------------------------------------------------------------
  Substitution No.       Existing portfolio       Replacement portfolio
------------------------------------------------------------------------
1...................  Fidelity VIP Contrafund   Guardian Large Cap
                       Portfolio (Service        Disciplined Growth VIP
                       Class 2).                 Fund.
2...................  AB Large Cap Growth       Guardian Large Cap
                       Portfolio (Class B).      Disciplined Growth VIP
                                                 Fund.
3...................  Franklin Rising           Guardian Diversified
                       Dividends VIP Fund        Research VIP Fund.
                       (Class 2).
4...................  BlackRock Capital         Guardian Large Cap
                       Appreciation V.I. Fund    Fundamental Growth VIP
                       (Class III).              Fund.
5...................  Invesco V.I. Small Cap    Guardian Small Cap Core
                       Equity Fund (Series II).  VIP Fund.
6...................  Oppenheimer Main Street   Guardian Small Cap Core
                       Small Cap Fund/VA         VIP Fund.
                       (Service Shares) \2\.
7...................  MFS[supreg] Utilities     Guardian Global
                       Series (Service Class).   Utilities VIP Fund.
8...................  Franklin U.S. Government  Guardian U.S. Government
                       Securities VIP Fund       Securities VIP Fund.
                       (Class 2).
9...................  Invesco V.I. Government   Guardian U.S. Government
                       Securities Fund (Series   Securities VIP Fund.
                       II).
10..................  PIMCO Total Return        Guardian Total Return
                       Portfolio (Advisor        Bond VIP Fund.
                       Class).
11..................  Western Asset Core Plus   Guardian Total Return
                       VIT Portfolio (Class      Bond VIP Fund.
                       II).
12..................  Oppenheimer Global        Guardian Multi-Sector
                       Strategic Income Fund/    Bond VIP Fund.
                       VA (Service Shares) \3\.
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    6. The Replacement Portfolios are series of the Trust, a Delaware 
statutory trust registered as an open-end management investment company 
under the 1940 Act (File No. 811-23148) and whose shares are registered 
under the 1933 Act (File No. 333-210205). The Replacement Portfolios 
that have begun operations are currently available (or, in the case of 
the New Replacement Portfolios) \4\ only as investment allocation 
options under variable insurance contracts issued by Guardian.
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    \4\ The Replacement Portfolio that have begun operations are: 
Guardian Large Cap Disciplined Growth VIP Fund; Guardian Diversified 
Research VIP Fund; Guardian Large Cap Fundamental Growth VIP Fund; 
Guardian Small Cap Core VIP Fund; Guardian Global Utilities VIP 
Fund; Guardian U.S. Government Securities VIP Fund; Guardian Total 
Return Bond VIP Fund; Guardian Multi-Sector Bond VIP Fund. The New 
Replacement Portfolios are: Guardian Small Cap Core VIP Fund; 
Guardian Global Utilities VIP Fund; Guardian Multi-Sector Bond VIP 
Fund; Guardian Total Return Bond VIP Fund; and Guardian U.S. 
Government Securities VIP Fund.
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    7. Park Avenue, an indirect wholly-owned subsidiary of Guardian 
Life, serves as the investment adviser of each Replacement Portfolio. 
Park Avenue is a Delaware limited liability company that is registered 
as an investment adviser under the Investment Advisers Act of 1940. 
Each Replacement Portfolio is sub-advised by a registered investment 
adviser that is unaffiliated with Applicants, the Trust, or Park 
Avenue.

[[Page 36638]]

    8. The Section 26 Applicants state that the proposed Substitutions 
are part of a strategic business goal of Guardian to improve the 
administrative efficiency and cost-effectiveness of the Contracts, as 
well as to make the Contracts more attractive to Contract owners. The 
Section 26 Applicants note that the proposed Substitutions are intended 
to improve portfolio manager selection \5\ and simplify fund lineups 
while reducing costs and maintaining a menu of investment options that 
would offer a similar diversity of investment options after the 
proposed Substitutions as is currently available under the Contracts. 
The Section 26 Applicants believe that the Replacement Portfolios have 
investment objectives, principal investment strategies, and principal 
risks, as described in their prospectuses, which are substantially 
similar to the corresponding Existing Portfolios, making those 
Replacement Portfolios appropriate candidates as substitutes. 
Information for each Existing Portfolio and Replacement Portfolio, 
including investment objectives, principal investment strategies, 
principal risks, and comparative performance history, can be found in 
the application.
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    \5\ The Trust and Park Avenue may rely on an order from the 
Commission that permits Park Avenue, subject to certain conditions, 
including approval of the Trust's board of directors but without the 
approval of shareholders, to select certain wholly-owned and non-
affiliated investment sub-advisers to manage all or a portion of the 
assets of each portfolio of the Trust pursuant to an investment sub-
advisory agreement with Park Avenue, and to materially amend sub-
advisory agreements with Park Avenue. See Guardian Variable Products 
Trust and Park Avenue Institutional Advisers LLC, Investment Company 
Act Release Nos. 32420 (Jan. 9, 2017) (notice) and 32468 (Feb. 6, 
2017) (the ``Manager of Managers Order''). After the Substitution 
Date (defined below), Park Avenue will not change a Replacement 
Portfolio's sub-adviser, add a new sub-adviser, or otherwise rely on 
the Manager of Managers Order or any replacement order from the 
Commission with respect to any Replacement Portfolio without first 
obtaining shareholder approval of the change in sub-adviser, the new 
sub-adviser, or the Replacement Portfolio's ability to rely on the 
Manager of Managers Order or any replacement order from the 
Commission, at a shareholder meeting, the record date for which will 
be after the proposed Substitution has been effected.
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    9. The Section 26 Applicants state that for all the proposed 
Substitutions, the net annual operating expenses of the Replacement 
Portfolio will not exceed, on an annualized basis, the net annual 
operating expenses of any corresponding Existing Portfolio for the last 
fiscal year preceding the date of the application (the ``Expense 
Cap''). The Section 26 Applicants will cause Park Avenue, as the 
investment adviser of each Replacement Portfolio, to enter into a 
written contract with the Replacement Portfolio under which the net 
annual operating expenses of the Replacement Portfolio will not exceed 
the Expense Cap. The Expense Cap for each proposed Substitution will 
remain in place for a period of two years following the implementation 
of the proposed Substitution (the ``Substitution Date''), except that 
for those proposed Substitutions for which the sum of the current 
management fee and rule 12b-1 fees of the Replacement Portfolio is 
greater than that of the corresponding Existing Portfolio, the Expense 
Cap for that proposed Substitution will extend for the life of the 
affected Contracts following the Substitution Date. Any amounts waived 
or reimbursed by Park Avenue pursuant to any Expense Cap will not be 
subject to Park Avenue's recoupment rights.
    10. The Section 26 Applicants represent that as of the Substitution 
Date, the Separate Accounts will redeem shares of the Existing 
Portfolios for cash and/or in-kind. Redemption requests and purchase 
orders will be placed simultaneously so that Contract values will 
remain fully invested at all times.
    11. Each Substitution will be effected at the relative net asset 
values of the respective shares of the Replacement Portfolios in 
conformity with section 22(c) of the 1940 Act and rule 22c-1 thereunder 
without the imposition of any transfer or similar charges by the 
Section 26 Applicants. The Substitutions will be effected without 
change in the amount or value of any Contracts held by affected 
Contract owners.\6\
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    \6\ The Section 26 Applicants state that, because the 
Substitutions will occur at relative net asset value, and the fees 
and charges under the Contracts will not change as a result of the 
Substitutions, the benefits offered by the guarantees under the 
Contracts will be the same immediately before and after the 
Substitutions. The Section 26 Applicants also state that what effect 
the Substitutions may have on the value of the benefits offered by 
the Contract guarantees would depend, among other things, on the 
relative future performance of the Existing Portfolios and 
Replacement Portfolios, which Applicants cannot predict. 
Nevertheless, the Section 26 Applicants note that at the time of the 
Substitutions, the Contracts will offer a comparable variety of 
investment options with as broad a range of risk/return 
characteristics.
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    12. Contract owners will not incur any fees or charges as a result 
of the proposed Substitutions. The obligations of the Section 26 
Applicants, and the rights of the affected Contract owners, under the 
Contracts of affected Contract owners will not be altered in any way. 
Guardian and/or its affiliates (other than the Trust) will pay all 
expenses and transaction costs of the Substitutions, including legal 
and accounting expenses, any applicable brokerage expenses and other 
fees and expenses. No fees or charges will be assessed to the affected 
Contract owners to effect the Substitutions. The proposed Substitutions 
will not cause the Contract fees and charges currently being paid by 
Contract owners to be greater after the proposed Substitution than 
before the proposed Substitution. In addition, the Substitutions will 
in no way alter the tax treatment of affected Contract owners in 
connection with their Contracts, and no tax liability will arise for 
Contract owners as a result of the Substitutions.
    13. From the date of the Pre-Substitution Notice (defined below) 
through 30 days following the Substitution Date, subject to the terms 
of certain Living Benefit Riders, Contract owners may make at least one 
transfer of Contract value from the subaccount investing in an Existing 
Portfolio (before the Substitution) or the Replacement Portfolio (after 
the Substitution) to any other available subaccount under the Contract 
without charge and without imposing any transfer limitations. Further, 
on the Substitution Date, Contract values attributable to investments 
in each Existing Portfolio will be transferred to the corresponding 
Replacement Portfolio without charge and without being subject to any 
transfer limitations. Moreover, except with respect to market timing 
policies and procedures and the terms of the Living Benefit Riders, 
Guardian will not exercise any rights reserved under the Contracts to 
impose restrictions on transfers between the subaccounts under the 
Contracts for a period beginning at least 30 days, including 
limitations on the future number of transfers, before the Substitution 
Date through at least 30 days following the Substitution Date.
    14. At least 30 days prior to the Substitution Date, Contract 
owners will be notified via prospectus supplements that the Section 26 
Applicants received or expect to receive Commission approval of the 
applicable proposed Substitutions and of the anticipated Substitution 
Date (the ``Pre-Substitution Notice''). Pre-Substitution Notices sent 
to Contract owners will be filed with the Commission pursuant to rule 
497 under the 1933 Act. The Pre-Substitution Notice will advise 
Contract owners that from the date of the Pre-Substitution Notice 
through the date 30 days after the Substitutions, subject to the terms 
of certain Living Benefit Riders, Contract owners may make at least one 
transfer of Contract value from the subaccounts investing in the 
Existing Portfolios (before the Substitutions) or the Replacement 
Portfolios (after the Substitutions) to any other available subaccount 
without charge and without

[[Page 36639]]

imposing any transfer limitations. Among other information, the Pre-
Substitution Notice will inform affected Contract owners that, except 
with respect to market timing policies and procedures and limitations 
imposed by Living Benefit Riders, Guardian will not exercise any rights 
reserved under the Contracts to impose additional restrictions on 
transfers out of a Replacement Portfolio subaccount from the date of 
the Pre-Substitution Notice, including limitations on the future number 
of transfers, until at least 30 days after the Substitution Date. 
Additionally, all affected Contract owners will be sent prospectuses of 
the applicable Replacement Portfolios at least 30 days before the 
Substitution Date.
    15. In addition to the Supplements distributed to the Contract 
owners, within five business days after the Substitution Date, Contract 
owners whose assets are allocated to a Replacement Portfolio as part of 
the proposed Substitutions will be sent a written notice (each, a 
``Confirmation'') informing them that the Substitutions were carried 
out as previously notified. The Confirmation also will restate the 
information set forth in the Pre-Substitution Notice. The Confirmation 
will also reflect the values of the Contract owner's positions in the 
Existing Portfolio before the Substitution and the Replacement 
Portfolio after the Substitution.

Legal Analysis

    1. The Section 26 Applicants request that the Commission issue an 
order pursuant to section 26(c) of the 1940 Act approving the proposed 
Substitutions. Section 26(c) prohibits any depositor or trustee of a 
unit investment trust that invests exclusively in the securities of a 
single issuer from substituting the securities of another issuer 
without the approval of the Commission. Section 26(c) provides that 
such approval shall be granted by order from the Commission if the 
evidence establishes that the substitution is consistent with the 
protection of investors and the purposes of the Act.
    2. The Section 26 Applicants submit that the Substitutions meet the 
standards set forth in section 26(c) and that, if implemented, the 
Substitutions would not raise any of the concerns that Congress 
intended to address when the 1940 Act was amended to include this 
provision. The Section 26 Applicants state that each Substitution 
protects the Contract owners who have Contract value allocated to an 
Existing Portfolio by providing Replacement Portfolios with 
substantially similar investment objectives, strategies, and risks, and 
providing Contract owners with investment options that have net annual 
operating expenses that will not exceed the Expense Cap.
    3. Guardian has reserved the right under the Contracts to 
substitute shares of another underlying fund for one of the current 
funds offered as an investment option under the Contracts. The 
Contracts and the Contracts' prospectuses disclose this right.
    4. The Section 26 Applicants submit that the ultimate effect of the 
proposed Substitutions will be to simplify the investment line-ups that 
are available to Contract owners while reducing expenses and continuing 
to provide Contract owners with a wide array of investment options. The 
Section 26 Applicants state that the proposed Substitutions will not 
reduce in any manner the nature or quality of the available investment 
options and the proposed Substitutions also will permit Guardian to 
present information to its Contract owners in a simpler and more 
concise manner. The Section 26 Applicants also state it is anticipated 
that after the proposed Substitutions, Contract owners will be provided 
with disclosure documents that contain a simpler presentation of the 
available investment options under the Contracts. The Section 26 
Applicants also assert that the proposed Substitutions are not of the 
type that section 26 was designed to prevent because they will not 
result in costly forced redemption, nor will they affect other aspects 
of the Contracts. In addition, the proposed Substitutions will not 
adversely affect any features or riders under the Contracts. 
Accordingly, no Contract owner will involuntarily lose his or her 
features or riders as a result of any proposed Substitution. Moreover, 
Applicants will offer Contract owners the opportunity to transfer 
amounts out of the affected subaccounts without any cost or other 
penalty (other than those necessary to implement policies and 
procedures designed to detect and deter disruptive transfers and other 
``market timing'' activities and administer the terms of the Living 
Benefit Riders) that may otherwise have been imposed for a period 
beginning on the date of the Pre-Substitution Notice (which supplement 
will be delivered to the Contract owners at least 30 days before the 
Substitution Date) and ending no earlier than 30 days after the 
Substitution Date. The proposed Substitutions are also unlike the type 
of substitution that section 26(c) was designed to prevent in that the 
Substitutions have no impact on other aspects of the Contracts.
    5. The Section 17 Applicants request an order under section 17(b) 
exempting them from the provisions of section 17(a) to the extent 
necessary to permit the Section 17 Applicants to carry out some or all 
of the proposed Substitutions. The Section 17 Applicants state that 
because the proposed Substitutions may be effected, in whole or in 
part, by means of in-kind redemptions and purchases, the proposed 
Substitutions may be deemed to involve one or more purchases or sales 
of securities or property between affiliated persons.
    6. Section 17(a)(1) of the 1940 Act, in relevant part, prohibits 
any affiliated person of a registered investment company, or any 
affiliated person of such person, acting as principal, from knowingly 
selling any security or other property to that company. Section 
17(a)(2) of the 1940 Act generally prohibits the persons described 
above, acting as principals, from knowingly purchasing any security or 
other property from the registered investment company.
    7. The Section 17 Applicants state that the proposed transactions 
may involve a transfer of portfolio securities by the Existing 
Portfolios to the Separate Accounts. Immediately thereafter, the 
Separate Accounts would purchase shares of the Replacement Portfolios 
with the portfolio securities received from the Existing Portfolios. 
Accordingly, the Section 17 Applicants provide that to the extent that 
Guardian, the Separate Accounts, the Trust, Park Avenue, or the 
Replacement Portfolios, are deemed to be affiliated persons of one 
another under section 2(a)(3) or section 2(a)(9) of the 1940 Act, it is 
conceivable that this aspect of the proposed Substitutions could be 
viewed as being prohibited by section 17(a). Accordingly, the Section 
17 Applicants have determined to seek relief from section 17(a).
    8. The Section 17 Applicants submit that the terms of the proposed 
in-kind purchases of shares of the Replacement Portfolios by the 
Separate Accounts, including the consideration to be paid and received, 
as described in the Application, are reasonable and fair and do not 
involve overreaching on the part of any person concerned. The Section 
17 Applicants submit that the terms of the proposed in-kind 
transactions, including the consideration to be paid by each Existing 
Portfolio and received by each Replacement Portfolio involved, are 
reasonable, fair and do not involve overreaching principally because 
the transactions will conform with all but one of the conditions 
enumerated in rule 17a-7 under the 1940 Act.

[[Page 36640]]

    9. The proposed transactions will take place at relative net asset 
value in conformity with the requirements of section 22(c) of the 1940 
Act and rule 22c-1 thereunder without the imposition of any transfer or 
similar charges by the Applicants. The Substitutions will be effected 
without change in the amount or value of any Contract held by the 
affected Contract owners. The Substitutions will in no way alter the 
tax treatment of affected Contract owners in connection with their 
Contracts, and no tax liability will arise for Contract owners as a 
result of the Substitutions. The fees and charges under the Contracts 
will not increase because of the Substitutions. Even though Guardian, 
the Separate Accounts, the Trust, Park Avenue, and the Replacement 
Portfolios may not rely on rule 17a-7, the Section 17 Applicants 
believe that the rule's conditions outline the type of safeguards that 
result in transactions that are fair and reasonable to registered 
investment company participants and preclude overreaching in connection 
with an investment company by its affiliated persons.
    10. The Section 17 Applicants also submit that the proposed in-kind 
purchases by the Separate Accounts are consistent with the policies of 
the Trust and the Replacement Portfolios, as provided in the Trust's 
current registration statement and reports filed under the 1940 Act. 
Finally, the Section 17 Applicants submit that the proposed 
Substitutions are consistent with the general purposes of the 1940 Act.

Applicants' Conditions

    The Section 26 Applicants agree that any order granting the 
requested relief will be subject to the following conditions:
    1. The Substitutions will not be effected unless Guardian 
determines that: (i) The Contracts allow the substitution of shares of 
registered open-end investment companies in the manner contemplated by 
the application; (ii) the Substitutions can be consummated as described 
in the application under applicable insurance laws; and (iii) any 
regulatory requirements in each jurisdiction where the Contracts are 
qualified for sale have been complied with to the extent necessary to 
complete the Substitutions.
    2. After the Substitution Date, Park Avenue will not change a 
Replacement Portfolio's sub-adviser, add a new sub-adviser, or 
otherwise rely on the Manager of Managers Order or any replacement 
order from the Commission with respect to any Replacement Portfolio 
without first obtaining shareholder approval of the change in sub-
adviser, the new sub-adviser, or the Replacement Portfolio's ability to 
rely on the Manager of Managers Order, or any replacement order from 
the Commission, at a shareholder meeting, the record date for which 
shall be after the proposed Substitution has been effected.
    3. Guardian or an affiliate thereof (other than the Trust) will pay 
all expenses and transaction costs of the Substitutions, including 
legal and accounting expenses, any applicable brokerage expenses and 
other fees and expenses. No fees or charges will be assessed to the 
affected Contract owners to effect the Substitutions. The proposed 
Substitutions will not cause the Contract fees and charges currently 
being paid by Contract owners to be greater after the proposed 
Substitution than before the proposed Substitution.
    4. The Substitutions will be effected at the relative net asset 
values of the respective shares of the Replacement Portfolios in 
conformity with section 22(c) of the 1940 Act and rule 22c-1 thereunder 
without the imposition of any transfer or similar charges by the 
Applicants. The Substitutions will be effected without change in the 
amount or value of any Contracts held by affected Contract owners.
    5. The Substitutions will in no way alter the tax treatment of 
affected Contract owners in connection with their Contracts, and no tax 
liability will arise for Contract owners as a result of the 
Substitutions.
    6. The obligations of the Section 26 Applicants and the rights of 
the affected Contract owners, under the Contracts of affected Contract 
owners will not be altered in any way.
    7. Affected Contract owners will be permitted to transfer Contract 
value from the subaccount investing in the Existing Portfolio (before 
the Substitution Date) or the Replacement Portfolio (after the 
Substitution Date) to any other available investment option under the 
Contract without charge for a period beginning at least 30 days before 
the Substitution Date through at least 30 days following the 
Substitution Date. Contract owners with Living Benefit Riders, as 
applicable, may transfer Contract value from the subaccounts investing 
in the Existing Portfolios (before the Substitutions) or the 
Replacement Portfolios (after the Substitutions) to any other available 
investment option available under their respective riders without 
charge and without imposing any transfer limitations. Except as 
described in any market timing/short-term trading provisions of the 
relevant prospectus, the Applicants will not exercise any rights 
reserved under the Contracts to impose restrictions on transfers 
between the subaccounts under the Contracts, transfers, including 
limitations on the future number of transfers, for a period beginning 
at least 30 days before the Substitution Date through at least 30 days 
following the Substitution Date.
    8. All affected Contract owners will be notified via the Pre-
Substitution Notice, at least 30 days before the Substitution Date, 
about: (i) The intended Substitution of Existing Portfolios with the 
Replacement Portfolios; (ii) the intended Substitution Date; and (iii) 
information with respect to transfers as set forth in Condition 7 
above. In addition, the Section 26 Applicants will also deliver to 
affected Contract owners, at least 30 days before the Substitution 
Date, a prospectus for each applicable Replacement Portfolio.
    9. The Section 26 Applicants will deliver to each affected Contract 
owner within five business days of the Substitution Date a written 
confirmation which will include: (i) A confirmation that the 
Substitutions were carried out as previously notified; (ii) a 
restatement of the information set forth in the Pre-Substitution 
Notice; and (iii) values of the Contract owner's positions in the 
Existing Portfolio before the Substitution and the Replacement 
Portfolio after the Substitution.
    10. Guardian will cause Park Avenue, as the investment adviser of 
each Replacement Portfolio, to enter into a written contract with the 
Replacement Portfolio whereby, for the applicable time period, the net 
annual operating expenses of the Replacement Portfolio will not exceed, 
on an annualized basis, the net annual operating expense of any 
corresponding Existing Portfolio for the last fiscal year preceding the 
date of this Application. The written contract will remain in place for 
a period of two years following the Substitution Date, except that for 
those proposed Substitutions for which the sum of the current 
management fee and rule 12b-1 Fee of the Replacement Portfolio is 
greater than that of the corresponding Existing Portfolio, the written 
agreement will extend for the life of the affected Contracts following 
the Substitution Date. Park Avenue will reimburse expenses to the 
extent necessary under each written agreement on the last business day 
of each month. Any amounts waived or reimbursed by Park Avenue pursuant 
to this condition will not be subject to recoupment rights. In 
addition, the Section 26 Applicants will not increase the Contract fees 
and charges that would otherwise be assessed under the terms of the

[[Page 36641]]

Contracts for affected Contract owners for a period of at least two 
years following the Substitution Date.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-15975 Filed 7-26-19; 8:45 am]
BILLING CODE 8011-01-P