[Federal Register Volume 86, Number 69 (Tuesday, April 13, 2021)]
[Notices]
[Pages 19299-19303]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07488]



[[Page 19299]]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34242; File No. 812-15101]


The Ohio National Life Insurance Company, et al.

April 7, 2021.
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 ``Act'') and an order of exemption 
pursuant to section 17(b) of the Act from section 17(a) of the Act.

Applicants: The Ohio National Life Insurance Company (``Ohio 
National'') and National Security Life and Annuity Company (``National 
Security'' and collectively with Ohio National, the ``Insurance Company 
Applicants''); their respective separate accounts, Ohio National 
Variable Account A, Ohio National Variable Account B, Ohio National 
Variable Account D and National Security Variable Account N 
(collectively, the ``Separate Accounts,'' and together with the 
Insurance Company Applicants, the ``Section 26 Applicants''); the 
Section 26 Applicants, Ohio National Fund, Inc. (``ON Fund'') and Ohio 
National Investments, Inc. (``ONII'') (collectively the ``Section 17 
Applicants'' or the ''Applicants'').

Summary of Application: The Section 26 Applicants seek an order 
pursuant to section 26(c) of the Act, approving the substitution of 
shares issued by certain investment portfolios of registered investment 
companies (the ``Existing Portfolios'') for the shares of certain 
investment portfolios of registered investment companies (the 
``Replacement Portfolios''), held by the Separate Accounts as 
investment options for certain variable annuity contracts (the 
``Contracts'') issued by Ohio National and National Security (the 
``Substitutions''). 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 in connection with the Substitutions (``In-Kind 
Transactions'').

Filing Dates: The application was filed on February 27, 2020 and 
amended on June 26, 2020, November 20, 2020, January 29, 2021, April 1, 
2021, and April 2, 2021.

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 emailing the Commission's 
Secretary at [email protected] and serving 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 May 3, 2021 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 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 emailing the Commission's Secretary.

ADDRESSES: The Commission: [email protected]. Applicants: 
Kimberly A. Plante, Esq., Vice President and Counsel, The Ohio National 
Life Insurance Company, [email protected].

FOR FURTHER INFORMATION CONTACT: Asaf Barouk, Attorney-Advisor at (202) 
551-4029 or David Nicolardi, Branch Chief at (202) 551-6825 (Chief 
Counsel's Office, Division of Investment Management).

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. Ohio National is a stock life insurance company. Ohio National 
offers individual annuities and previously offered variable annuities. 
National Security is a stock life insurance company. National Security 
previously offered variable annuities and variable universal life 
insurance. Ohio National is the depositor and sponsor of Ohio National 
Variable Account A, Ohio National Variable Account B and Ohio National 
Variable Account D. National Security is the depositor and sponsor of 
National Security Variable Account N.
    2. Each Separate Account meets the definition of ``separate 
account,'' as defined in section 2(a)(37) of the Act. The Separate 
Accounts are registered with the Commission under the Act as unit 
investment trusts. The Separate Accounts are segmented into 
subaccounts, and each subaccount invests in an underlying registered 
open-end management investment company or series thereof, such as each 
of the Existing Portfolios.
    3. The Contracts are single and flexible premium deferred 
individual variable annuity contracts (the ``Individual Contracts'') 
and flexible premium deferred group variable annuity contracts (the 
``Group Contracts''). Each Contract is registered under the Securities 
Act of 1933, as amended (the ``1933 Act''). The application sets forth 
the registration statement file numbers for the Contracts and the 
Separate Accounts.
    4. By the terms of the Contracts and subject to certain 
restrictions (and as set forth in the prospectuses for the Contracts), 
Contract owners (each, a ``Contract owner,'' and collectively, 
``Contract owners'') may allocate some or all of their Contract values 
to the subaccounts that are available as investment options under their 
respective Contracts, as well as any available fixed rate options. A 
Contract owner may transfer Contract value among any available 
subaccounts during the accumulation period, as well as during the 
annuitization period if the Contract owner elected a variable annuity 
payout option.
    5. As disclosed in the Contracts' prospectuses, Ohio National and 
National Security impose or reserve the right to impose certain 
limitations on transfers among subaccounts. Currently, Ohio National 
and National Security do not impose fees on transfers or expressly 
limit the number or frequency of transfers among subaccounts. Also, 
Ohio National and National Security impose or may impose limits on the 
total number of subaccounts to which a Contract owner may allocate 
Contract value.
    6. Certain Individual Contracts made available guaranteed death 
benefit riders (each, a ``Death Benefit Rider,'' and collectively the 
``Death Benefit Riders'') and guaranteed living benefit riders (each, a 
``Living Benefit Rider,'' and collectively, the ``Living Benefit 
Riders''). The terms of certain Death Benefit Riders and certain Living 
Benefit Riders include investment restrictions that limit the available 
investment options to identified categories consisting of a specified 
selection of investment options. A Contract owner with a Death Benefit 
Rider or Living Benefit Rider that has investment restrictions may 
transfer Contract value by reallocating all of his or her Contract 
value within the parameters of the investment restrictions.
    7. Applicants state that, as set forth in the prospectuses for the 
Contracts, each

[[Page 19300]]

Contract provides that Ohio National or National Security, as 
applicable, reserves the right to substitute shares of the funds in 
which the Separate Accounts invest for shares of any funds already held 
or to be held in the future by the Separate Accounts.
    8. Ohio National and National Security, each on its own behalf and 
on behalf of its Separate Accounts, proposes to exercise its 
contractual right to substitute shares of certain underlying funds 
currently available under the Contracts for shares of different 
underlying funds. The Section 26 Applicants propose to substitute 
shares of the Existing Portfolios that are held in subaccounts of their 
respective Separate Accounts for shares of the corresponding 
Replacement Portfolios below. All shares of the Existing Portfolios 
utilized as investment allocation options under the Contracts will be 
replaced through the proposed Substitutions. Additional information for 
each Existing Portfolio and the corresponding Replacement Portfolio, 
including investment objectives, principal investment strategies, 
principal risks, and performance, as well as the fees and expenses of 
each Existing Portfolio and its corresponding Replacement Portfolio, 
can be found in the application.

------------------------------------------------------------------------
        Sub No.            Existing portfolio     Replacement portfolio
------------------------------------------------------------------------
1.....................  AB VPS Dynamic Asset     AB VPS Global Risk
                         Allocation Portfolio     Allocation-Moderate
                         (Class B).               Portfolio (Class
                                                  B).\1\
2.....................  PIMCO Global             AB VPS Global Risk
                         Diversified Allocation   Allocation-Moderate
                         Portfolio                Portfolio (Class B).
                         (Administrative Share
                         Class).
3.....................  Federated Hermes         ON iShares Managed Risk
                         Managed Volatility       Balanced Portfolio.\2\
                         Fund II (Primary
                         Shares and Service
                         Shares).
4.....................  Janus Henderson VIT      ON Janus Henderson U.S.
                         U.S. Low Volatility      Low Volatility
                         Portfolio (Service       Portfolio.
                         Shares).
5.....................  Morgan Stanley VIF Core  ON Federated Core Plus
                         Plus Fixed Income        Bond Portfolio.
                         Portfolio (Class II).
6.....................  PIMCO Total Return       ON Federated Core Plus
                         Portfolio                Bond Portfolio.
                         (Administrative Share
                         Class).
------------------------------------------------------------------------

    9. ON Fund and ONII have received an exemptive order from the 
Commission (File No. 812-12288) (the ``Manager of Managers Order'') 
that provides an exemption from section 15(a) of the Act with respect 
to ON Fund's sub-advisory agreements. The Manager of Managers Order 
permits ONII, subject to certain conditions, including the approval of 
ON Fund's Board of Directors, but without the approval of shareholders, 
to hire unaffiliated sub-advisers, and to modify any existing or future 
sub-advisory agreement with, unaffiliated sub-advisers. The Manager of 
Managers Order applies to each of the ON Replacement Portfolios, and ON 
Fund's registration statement discloses and explains the substance and 
effect of the Manager of Managers Order.
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    \1\ The Replacement Portfolio for Substitutions 1-2 is a series 
of AB Variable Products Series Fund, Inc. (``AB VPS Fund''), a 
Maryland corporation. AB VPS Fund is registered with the Commission 
as an open-end management investment company under the Act, and its 
shares are registered under the 1933 Act. The AB VPS Global Risk 
Allocation-Moderate Portfolio (Class B) is one of the Replacement 
Portfolios. AllianceBernstein L.P. (``AllianceBernstein'') is a 
master limited partnership organized under the State of Delaware and 
is a registered investment adviser. AllianceBernstein serves as the 
investment adviser for the AB VPS Global Risk Allocation-Moderate 
Portfolio.
    \2\ The Replacement Portfolios listed in the table above for 
Substitutions 3-6 are all a series of ON Fund (``ON Replacement 
Portfolios''). ON Fund is a Maryland corporation that is registered 
with the Commission as an open-end management investment company 
under the Act. Shares of ON Fund are registered under the 1933 Act. 
Except for the ON Federated Core Plus Bond Portfolio, which began 
operations on May 1, 2020, the other ON Replacement Portfolios will 
not begin operations until the proposed Substitutions are performed. 
ONII is an Ohio corporation and registered investment adviser. ONII 
serves as the investment adviser for ON Fund, including each of the 
ON Replacement Portfolios.
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    10. The Insurance Company Applicants state the proposed 
Substitutions are part of an ongoing effort to make the Contracts more 
attractive to existing Contract owners and to make the Contracts more 
efficient to administer. The Insurance Company Applicants represent 
that the proposed Substitutions involve replacing an Existing Portfolio 
with a Replacement Portfolio with substantially similar investment 
objective(s), principal investment strategies and principal risks. The 
Insurance Company Applicants further state that the proposed 
Substitutions are designed to provide Contract owners with an 
opportunity to continue their investment in a similar investment option 
without interruption and without any cost to them.
    11. For the Substitution 3-6 Replacement Portfolios, after the 
Substitution Date, ONII 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 such 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.
    12. The Section 26 Applicants represent that at least 30 days prior 
to the Substitution Date, they will deliver to all affected Contract 
owners prospectus supplements filed with the Commission or other 
supplemental disclosure documents that describe the proposed 
Substitutions (collectively, the ``Supplements''). The Section 26 
Applicants represent that each Supplement will:
     Provide Contract owners notice of the respective Insurance 
Company Applicant's intent to take the necessary actions, including 
seeking the order requested by this Application, to substitute shares 
of the Existing Portfolios as described herein on the Substitution 
Date;
     Advise Contract owners that for at least thirty (30) days 
before the Substitution Date, they are permitted to make at least one 
transfer of Contract value from each subaccount investing in an 
Existing Portfolio (``Existing Portfolio Subaccount'') to any other 
available investment option offered under their Contract, without any 
transfer charge (and without the transfer being counted as a transfer 
for purposes of transfer charges that would otherwise be applicable 
under the terms of the Contracts);
     Instruct Contract owners how to submit transfer requests 
in light of the proposed Substitutions;
     Advise Contract owners that any Contract value remaining 
in an Existing Portfolio Subaccount on the Substitution Date will be 
transferred to a subaccount investing in the

[[Page 19301]]

corresponding Replacement Portfolio (``Replacement Portfolio 
Subaccount''), and that the Substitutions will take place at relative 
net asset value;
     Inform Contract owners that for at least 30 days following 
the Substitution Date, they will be permitted to make at least one 
transfer of Contract value from each Replacement Portfolio Subaccount 
to any other available investment option offered under their Contract, 
without any transfer charge (and without the transfer being counted as 
a transfer for purposes of transfer charges that would otherwise be 
applicable under the terms of the Contracts); and
     Inform Contract owners that, except as described in the 
market timing/short-term trading provisions of the relevant prospectus 
or limitations imposed by Death Benefit Riders or Living Benefit Riders 
with investment restrictions, the Insurance Company Applicants will not 
exercise any right they may have under the Contracts to impose 
restrictions on transfers between the subaccounts under the Contracts, 
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.
    13. At least 30 days prior to the Substitution Date, the Section 26 
Applicants will also deliver to affected Contract owners a prospectus 
for each applicable Replacement Portfolio.
    14. Within five business days after the Substitution Date, the 
Insurance Company Applicants will send Contract owners a written 
confirmation of the completed proposed Substitutions in accordance with 
rule 10b-10 under the Securities Exchange Act of 1934. The confirmation 
statement will include or be accompanied by a statement that reiterates 
the free transfer rights disclosed in the Supplements. The confirmation 
will also reflect the Contract owners' Contract values before and after 
the Substitution(s).
    15. Each Substitution will take place at the applicable Existing 
and Replacement Portfolios' relative per share net asset values 
determined on the Substitution Date in accordance with section 22 of 
the Act and rule 22c-1 thereunder. Accordingly, the Insurance Company 
Applicants assert that the proposed Substitutions will have no negative 
financial impact on any Contract owner. Each proposed Substitution will 
be effected by having each Existing Portfolio Subaccount redeem its 
Existing Portfolio shares in cash and/or in-kind on the Substitution 
Date at net asset value per share and purchase shares of the 
appropriate Replacement Portfolio at net asset value per share 
calculated on the same date.\3\
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    \3\ The process for accomplishing the transfer of assets from 
each Existing Portfolio to its corresponding Replacement Portfolio 
will be determined on a case-by-case basis. In some cases, it is 
expected that the Substitutions will be effected by redeeming shares 
of an Existing Portfolio for cash and using the cash to purchase 
shares of the Replacement Portfolio. In other cases, it is expected 
that the Substitutions will be effected by redeeming the shares of 
an Existing Portfolio in-kind; those assets will then be contributed 
in-kind to the corresponding Replacement Portfolio to purchase 
shares of that Portfolio.
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    16. The Insurance Company Applicants or an affiliate will pay all 
expenses and transaction costs reasonably related to the proposed 
Substitutions, including all legal, accounting, and brokerage expenses 
relating to the proposed Substitutions, the below described disclosure 
documents, and this Application. No costs of the proposed Substitutions 
will be borne directly or indirectly by Contract owners. Contract 
owners will not incur any fees or charges as a result of the proposed 
Substitutions, nor will their rights or the obligations of the 
Insurance Company Applicants under the Contracts be altered in any way.
    17. The proposed Substitutions will not cause the fees and charges 
under the Contracts currently being paid by Contract owners to be 
greater after the proposed Substitutions than before the proposed 
Substitutions. The charges for optional death benefit and living 
benefit riders may change from time to time in accordance the 
applicable rider and as disclosed in the applicable prospectus and any 
such changes would be unrelated to the proposed Substitutions.
    18. With respect to Substitutions 1 and 2, for a period of two (2) 
years following the Substitution Date and for those Contracts with 
assets allocated to the applicable Existing Portfolio on the 
Substitution Date, the Insurance Company Applicants will make a 
corresponding reduction in Separate Account (or subaccount) expenses, 
no later than the last business day of each fiscal quarter, to Contract 
owners whose subaccount invests in the applicable Replacement Portfolio 
to the extent that the applicable Replacement Portfolio's annual net 
operating expenses for such period exceeds, on an annualized basis, the 
annual net operating expenses of the corresponding Existing Portfolio 
for fiscal year 2019.
    19. With respect to Substitutions 3-6, ONII will enter into a 
written contract with the applicable Replacement Portfolio whereby 
during the two years following the Substitution Date the annual net 
operating expenses of the applicable Replacement Portfolio will not 
exceed the annual net operating expenses of the Existing Portfolio for 
the fiscal year ended December 31, 2019.

Legal Analysis--Section 26(c) of the Act

    1. The Section 26 Applicants request that the Commission issue an 
order pursuant to section 26(c) of the Act approving the proposed 
Substitutions. Section 26(c) of the Act makes it unlawful for any 
depositor or trustee of a registered unit investment trust holding the 
security of a single issuer to substitute another security for such 
security unless the Commission approves the substitution. Section 26(c) 
requires the Commission to issue an order approving a substitution if 
the evidence establishes that it is consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of the Act.
    2. The Section 26 Applicants assert that the Substitutions are in 
furtherance of the exercise, by the Insurance Company Applicants, of 
rights reserved under the Contracts and disclosed in prospectuses 
relating thereto. Furthermore, they state the terms and conditions of 
the Substitutions are consistent with the principles and purposes of 
section 26(c) and do not entail any of the abuses that section 26(c) is 
designed to prevent. The Section 26 Applicants assert that proposed 
Substitutions will not result in the type of costly forced redemption 
that section 26(c) was intended to guard against and are consistent 
with the protection of investors and the purposes fairly intended by 
the Act.

Legal Analysis--Section 17 of the Act

    3. The Section 17 Applicants request that the Commission issue an 
order pursuant to section 17(b) of the Act exempting them from the 
provisions of section 17(a) of the Act to the extent necessary to 
permit them to carry out the In-Kind Transactions.
    4. Section 17(a)(1) of the Act, in relevant part, prohibits any 
affiliated person of a registered investment company, or any affiliated 
person of such a person, acting as principal, from knowingly selling 
any security or other property to that company. Section 17(a)(2) of the 
Act generally prohibits the same persons, acting as principals, from 
knowingly purchasing any security or other property from the registered 
investment company.
    5. Section 17(b) of the Act provides that the Commission may, upon 
application, issue an order exempting any proposed transaction from the 
provisions of section 17(a) if evidence establishes that: (1) The terms 
of the proposed transaction, including the

[[Page 19302]]

consideration to be paid or received, are reasonable and fair and do 
not involve overreaching on the part of any person concerned; (2) the 
proposed transaction is consistent with the policy of each registered 
investment company concerned, as recited in its registration statement 
and reports filed under the Act; and (3) the proposed transaction is 
consistent with the general purposes of the Act.
    6. Currently, the Insurance Company Applicants, through their 
Separate Accounts, own more than 25% of the shares of each Existing 
Portfolio and each corresponding Replacement Portfolio involved in 
Substitutions 3-5, and therefore may be deemed to be a control person 
of such Existing Portfolio and each corresponding Replacement 
Portfolio. In addition, ONII, as the investment manager of each 
Replacement Portfolio in Substitutions 3-6, may be deemed to be a 
control person thereof. Because the Insurance Company Applicants and 
ONII are under common control, entities that they control likewise may 
be deemed to be under common control, and thus affiliated persons of 
each other, notwithstanding the fact that the Contract owners may be 
considered the beneficial owners of those shares held in the Separate 
Accounts.
    7. Each Existing Portfolio and the corresponding Replacement 
Portfolio also may be deemed to be affiliated persons of affiliated 
persons. Regardless of whether the Insurance Company Applicants can be 
considered to control an applicable Existing Portfolio and the 
corresponding Replacement Portfolio, the Insurance Company Applicants 
may be deemed to be affiliated persons thereof because they, through 
their Separate Accounts, own of record 5% or more of the outstanding 
shares of such Portfolios. In addition, the Insurance Company 
Applicants may be deemed affiliated persons of each applicable 
Replacement Portfolio because their affiliate, ONII, may be deemed to 
control each applicable Replacement Portfolio by virtue of serving as 
its investment adviser. As a result of these relationships, an 
applicable Existing Portfolio may be deemed to be an affiliated person 
of an affiliated person (the Insurance Company Applicants or the 
Separate Accounts) of each corresponding Replacement Portfolio, and 
vice versa.
    8. The proposed In-Kind Transactions with respect to Substitutions 
3-6, therefore, could be seen as the indirect purchase of shares of the 
applicable Replacement Portfolios with portfolio securities of the 
corresponding Existing Portfolios and conversely the indirect sale of 
portfolio securities of the applicable Existing Portfolios for shares 
of the corresponding Replacement Portfolios. The proposed In-Kind 
Transactions with respect to Substitutions 3-6 also could be 
categorized as a purchase of shares of the applicable Replacement 
Portfolios by the corresponding Existing Portfolios, acting as 
principal, and a sale of portfolio securities by the applicable 
Existing Portfolios, acting as principal, to the corresponding 
Replacement Portfolios. In addition, the proposed In-Kind Transactions 
with respect to Substitutions 3-6 could be viewed as a purchase of 
securities from the applicable Existing Portfolios and a sale of 
securities to the corresponding Replacement Portfolios by the Insurance 
Company Applicants (or the Separate Accounts), acting as principal. If 
characterized in this manner, the proposed In-Kind Transactions with 
respect to Substitutions 3-6 may be deemed to contravene section 17(a) 
due to the affiliated status of these entities.
    9. The Section 17 Applicants maintain that the terms of the 
proposed In-Kind Transactions are reasonable and fair and do not 
involve overreaching on the part of any person concerned because: (1) 
The proposed In-Kind Transactions will not adversely affect or dilute 
the interests of Contract owners; and (2) the proposed In-Kind 
Transactions will comply with the conditions set forth in rule 17a-7 
under the Act, other than the requirement relating to cash 
consideration, as described in the Application. Even though the 
proposed In-Kind Transactions will not comply with the cash 
consideration requirement of paragraph (a) of rule 17a-7, the terms of 
the proposed In-Kind Transactions will offer to the applicable Existing 
Portfolios and corresponding Replacement Portfolios the same degree of 
protection from overreaching that rule 17a-7 generally provides in 
connection with the purchase and sale of securities under that rule in 
the ordinary course of business. In particular, the Section 17 
Applicants cannot effect the proposed In-Kind Transactions at a price 
that is disadvantageous to either the applicable Existing Portfolio or 
corresponding Replacement Portfolio, and the proposed In-Kind 
Transactions will not occur absent an exemptive order from the 
Commission.
    10. The Section 17 Applicants further maintain that the proposed 
redemption of shares of the applicable Existing Portfolios are, or will 
be, consistent with all relevant policies of the applicable Existing 
Portfolios and corresponding Replacement Portfolios, as recited in 
their respective registration statements and reports filed under the 
Act.
    11. Finally, the Section 17 Applicants assert that the proposed In-
Kind Transactions, as described herein, are consistent with the general 
purposes of the 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 the Insurance 
Company Applicants determine that: (a) The Contracts allow the 
substitution of shares of registered open-end investment companies in 
the manner contemplated by the Application; (b) the Substitutions can 
be consummated as described in the Application under applicable 
insurance laws; and (c) 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. The Insurance Company Applicants or their affiliates 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 
Contract owners to effect the Substitutions.
    3. The Substitutions will be effected at the relative net asset 
values of the respective shares in conformity with section 22(c) of the 
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.
    4. 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 affected Contract owners as a result of the 
Substitutions.
    5. The rights or obligations of the Section 26 Applicants under the 
Contracts of affected Contract owners will not be altered in any way. 
The Substitutions will not adversely affect any riders under the 
Contracts since each Replacement Portfolio will be an allowable 
investment option for use with such riders as of the Substitution Date.
    6. Affected Contract owners will be permitted to make at least one 
transfer of Contract value from each Existing Portfolio Subaccount 
(before the

[[Page 19303]]

Substitution Date) or each Replacement Portfolio Subaccount (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. Except as described in any market timing/short-term 
trading provisions of the relevant prospectus or limitations imposed by 
Death Benefit Riders or Living Benefit Riders with investment 
restrictions, the Insurance Company Applicants will not exercise any 
right they may have under the Contracts to impose restrictions on 
transfers between the subaccounts under the Contracts, 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.
    7. All affected Contract owners will be notified, at least 30 days 
before the Substitution Date about: (a) The intended substitution of 
the Existing Portfolios with the Replacement Portfolios; (b) the 
intended Substitution Date; and (c) information with respect to 
transfers as set forth in Condition 6 above. In addition, the Insurance 
Company Applicants will deliver to all affected Contract owners, at 
least 30 days before the Substitution Date, a prospectus for each 
applicable Replacement Portfolio.
    8. The Insurance Company Applicants will deliver to each affected 
Contract owner within five (5) business days of the Substitution Date a 
written confirmation which will include: (a) A confirmation that the 
Substitutions were carried out as previously notified; (b) a 
restatement of the information set forth in the Supplements; and (c) 
before and after account values.
    9. With respect to Substitutions 1 and 2, for a period of two (2) 
years following the Substitution Date and for those Contracts with 
assets allocated to the applicable Existing Portfolio on the 
Substitution Date, the Insurance Company Applicants will make a 
corresponding reduction in Separate Account (or subaccount) expenses, 
no later than the last business day of each fiscal quarter, to Contract 
owners whose subaccount invests in the applicable Replacement Portfolio 
to the extent that the applicable Replacement Portfolio's annual net 
operating expenses for such period exceeds, on an annualized basis, the 
annual net operating expenses of the corresponding Existing Portfolio 
for fiscal year 2019.
    The Section 26 Applicants further agree that separate account 
charges or expenses (e.g., mortality and expense risk and account 
expense charges) of any subaccounts investing in the Substitution 1 and 
2 Replacement Portfolios for any applicable Contract owner on the 
Substitution Date will not be increased at any time during the two year 
period following the Substitution Date.
    10. In addition, with respect to Substitutions 3-6, ONII will enter 
into a written contract with the applicable Replacement Portfolio 
whereby during the two years following the Substitution Date the annual 
net operating expenses of the applicable Replacement Portfolio will not 
exceed the annual net operating expenses of the Existing Portfolio for 
the fiscal year ended December 31, 2019.
    The Section 26 Applicants further agree that separate account 
charges or expenses (e.g., mortality and expense risk account expenses 
charges) of any subaccounts investing in the Substitution 3-6 
Replacement Portfolios for any applicable Contract owner on the 
Substitution Date will not be increased at any time during the two year 
period following the Substitution Date.
    11. The Substitution 3-6 Replacement Portfolios will not rely on 
the Manager of Managers Order unless such action is approved by a 
majority of the applicable Replacement Portfolio's outstanding voting 
securities, as defined in the Act, at a meeting whose record date is 
after the applicable Substitution has been effected.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07488 Filed 4-12-21; 8:45 am]
BILLING CODE 8011-01-P