[Federal Register Volume 60, Number 12 (Thursday, January 19, 1995)]
[Notices]
[Pages 3897-3898]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1286]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20837; File No. 812-9284]
Hartford Life and Accident Insurance Company, et al.
January 12, 1995.
AGENCY: Securities and Exchange Commission (``the Commission'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (``1940 Act'').
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APPLICANTS: Hartford Life and Accident Insurance Company (``Hartford
Life and Accident''), Hartford Life and Accident Insurance Company
Separate Account One (``HLA Separate Account One'') and Hartford Life
and Accident Insurance Company/Putnam Capital Management Separate
Account One (``HLA/PCM Separate Account One'') (HLA Separate Account
One and HLA/PCM Separate Account One referred to collectively as the
``Separate Accounts''), and Hartford Securities Distributors, Inc.
(``HSD'').
RELEVANT 1940 ACT SECTIONS: Order requested under Section 6(c)
exempting Applicants from Sections 26(a)(2)(C) and 27(c)(2) of the 1940
Act.
SUMMARY OF APPLICATION: Applicants seek an order permitting payment to
Hartford Life and Accident of a mortality and expense risk charge from
the assets of the Separate Accounts funding individual and group
variable annuity contracts issued by Hartford Life and Accident and
underwritten by HSD (the ``Contracts''). The order would apply to
future separate accounts of Hartford Life and Accident issuing
contracts that are materially similar to the Contracts, and would
permit applicants to substitute HSD for Hartford Equity Sales Company
(``HESCO'') as the principal underwriter of the Contracts.
FILING DATE: The application was filed on October 12, 1994, an amended
on November 14, 1994, December 22, 1994, and January 5, 1995.
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 on the application by writing to the
Secretary of the Commission and serving the Applicants with a copy of
the request, either personally or by mail. Hearing requests must be
received by the Commission by 5:30 p.m. on February 6, 1995, and should
be accompanied by proof of service on the Applicants in the form of an
affidavit or, for lawyers, by certificate of service. Hearing requests
should state the nature of the interest, the reason for the request,
and the issues contested. Persons may request notification of the date
of a hearing by writing to the Secretary of the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 5th
Street, N.W., Washington, D.C. 20549. Applicants, c/o Rodney J.
Vessels, Counsel, Hartford Life and Accident Insurance Company, 200
Hopmeadow Street, Simsbury, CT 06089.
FOR FURTHER INFORMATION CONTACT:
Joseph G. Mari, Senior Special Counsel, or Wendy F. Friedlander, Deputy
Chief, at (202) 942-0670, Office of Insurance Products (Division of
Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application is available for a fee from the
Commission's Public Reference Branch.
Applicants' Representations
1. Hartford Life and Accident is a stock life insurance company
licensed to do business in all states except New York and the District
of Columbia.
2. HSD will register as a broker-dealer under the Securities
Exchange Act of 1934 and will apply to become a member of the National
Association of Securities Dealers, Inc. (``NASD'').
3. Hartford Life and Accident and each of the Separate Accounts
filed applications previously, and orders were issued granting the
requested exemptions from Sections 26(a)(2)(C) and 27(c)(2) of the 1940
Act.\1\ HESCO, the designated principal underwriter for the Contracts,
was an applicant in the previous applications for exemptive relief from
Sections 26(a)(2)(C) and 27(c)(2). This application seeks relief to
permit Applicants to substitute HSD for HESCO as the designated
principal underwriter for the Contracts, which would allow HESCO to
continue as broker-dealer engaged in distribution functions with
respect to HESCO's own registered representatives, and would permit HSD
to serve as principal underwriter and distributor with respect to
entering into sales agreements with independent broker-dealers.
\1\Orders granting exemptive relief were issued as follows:
(a) Hartford Life and Accident Insurance Company, Investment
Company Act Release Nos. 18738 (notice) (May 29, 1992) and 18812
(order) (June 25, 1992); and
(b) Hartford Life and Accident Insurance Company, Investment
Company Act Release Nos. 18737 (notice) (May 29, 1992) and 18811
(order) (June 25, 1992).
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4. Applicants reaffirm all facts, representations and undertakings
contained in the applications for exemptive relief referenced in
footnote 1 above, and incorporate those applications herein by
reference. To the extent that there have been any material changes in
those facts, representations or undertakings, the changes have been
disclosed herein. Except for the replacement of the principal
underwriter, there are no material changes in the Separate Accounts or
the Contracts as described in the previous applications.
5. The contingent deferred sales charge, annual maintenance fee and
annual asset charge for providing mortality and expense risk guarantees
are fully described in the applications for exemptive relief which were
previously granted.
6. Hartford Life and Accident will make a daily charge at the rate
of 1.25% annually from each Contract held in the Separate Accounts for
providing mortality and expense guarantees with respect to the
Contracts, of which .90% of the charge is attributable to mortality
risks and .35% of the charge is attributable to expense risks.
7. The mortality and expense risk charge will not be increased. If
the charge is insufficient to cover the actual costs, Hartford Life and
Accident will bear the loss. Conversely, if the charge proves more than
sufficient to meet actual expenses, the excess will be surplus to
Hartford Life and Accident and will be available for any proper
corporate purpose. Hartford Life and Accident expects a reasonable
profit from the mortality and expense risk charge.
Applicants' Legal Analysis and Representations
1. Applicants request an exemption from Sections 26(a)(2)(C) and
27(c)(2) of the 1940 Act to the extent necessary to permit the
deduction of a mortality and expense risk charge from the Separate
Accounts.
2. Sections 26(a)(2)(C) and 27(c)(2), in pertinent part, prohibit a
registered unit investment trust and any depositor thereof or
underwriter therefor from
[[Page 3898]]
selling periodic payment plan certificates unless the proceeds of all
payments (other than sales loads) are deposited with a qualified bank
as trustee or custodian and held under arrangements which prohibit any
payment to the depositor or principal underwriter except a fee, not
exceeding such reasonable amount as the Commission may prescribe, for
performing bookkeeping and other administrative services of a character
normally performed by the bank itself.
3. Applicants request that the Commission enter an Order that
applies to the Separate Accounts and to future separate accounts
issuing contracts that are materially similar to the Contracts
exempting them from the provisions of Sections 26(a)(2)(C) and 27(c)(2)
to the extent necessary to permit the deduction by Hartford Life and
Accident, and the payment to Hartford Life and Accident, of the fee for
providing the mortality and expense undertakings (deducted on a daily
basis).
4. Applicants represent that:
(a) The mortality and expense risk charge is reasonable in relation
to the risks assumed by Hartford Life and Accident under the Contracts;
(b) The mortality and expense risk charge is within the range of
industry practice for comparable annuity contracts as determined by a
survey of comparable contracts issued by a large number of other
insurance companies. Hartford Life and Accident will undertake to
maintain and make available to the Commission upon request a memorandum
outlining the methodology and the contracts of other insurance
companies underlying this representation;
(c) There is the likelihood that the proceeds from explicit sales
loads will be insufficient to cover the expected costs of distributing
the Contracts. Any shortfall will be covered from the assets of the
general account, which may include profit from the mortality and
expense risk charge. Hartford Life and Accident has concluded that
there is a reasonable likelihood that the Separate Accounts'
distribution financing arrangement will benefit the Separate Accounts
and Contract owners. Hartford Life and Accident will maintain and make
available to the Commission upon request a memorandum setting forth the
basis for this representation;
(d) The Separate Accounts will invest only in open-end management
companies which have undertaken to have a board of directors, a
majority of whom are not interested persons of the open-end management
company, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses; and
(e) Future variable annuity contracts for which class relief is
sought will be materially similar to the existing Contracts covered by
this application.
Conclusion
Applicants assert that for the reasons and upon the facts set forth
above, the requested exemptions from Sections 26(a)(2)(C) and 27(c)(2)
of the 1940 Act 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 1940 Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-1286 Filed 1-18-95; 8:45 am]
BILLING CODE 8010-01-M
