[Federal Register Volume 60, Number 206 (Wednesday, October 25, 1995)]
[Notices]
[Pages 54749-54750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26382]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21423; International Series Release No. 871; 812-9804]
Sun Life Assurance Company of Canada and Sun Canada Financial Co.
October 17, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: Sun Life Assurance Company of Canada (``Sun Life'') and Sun
Canada Financial Co. (``SCF'')
RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act
that would exempt finance subsidiaries of Sun Life from subparagraph
(b)(3)(i) of rule 3a-5 under the Act so as to permit such finance
subsidiaries to rely on the exemptive provisions of rule 3a-5 under the
Act.
SUMMARY OF APPLICATION: Applicants request an order that would permit
SCF and future wholly-owned finance subsidiaries of Sun Life (``Future
Subsidiaries'') to sell preferred stock and debt instruments to finance
the business operations of their parent company, Sun Life, and certain
subsidiaries of Sun Life.
FILING DATES: The application was filed on October 6, 1995 and amended
on October 17, 1995.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on November 7,
1995, and should be accompanied by proof of service on applicants, in
the form of an affidavit or, for lawyers, a certificate of service.
Hearing requests should state the nature of the writer's interest, the
reason for the request, and the issues contested. Persons may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 5th Street NW., Washington, DC 20549.
Applicants: One Sun Life Executive Park, Wellesley Hills, Massachusetts
02181.
FOR FURTHER INFORMATION CONTACT:
Sarah A. Buescher, Staff Attorney, at (202) 942-0573, or C. David
Messman, Branch Chief, at (202) 942-0564 (Division of Investment
Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch.
Applicant's Representations
1. SCF is a Delaware corporation and a finance subsidiary of Sun
Life. All of SCF's outstanding shares are owned by Sun Life. Sun Life
is a Canadian mutual life insurance company and together with its
subsidiaries (the ``Company'') is the largest Canadian life insurance
company, based on total consolidated assets under management. The
Company's insurance products include individual and group life, health,
and disability insurance, annuities, and pensions. The Company also
operates in the investment management, banking, trust, and reinsurance
businesses. Sun Life owns all of the outstanding stock of Sun Life
Assurance Company of Canada (U.S.) (``Sun Life (U.S.)''), a stock life
insurance company incorporated in Delaware that issues life insurance
policies and individual and group annuities. Sun Life (U.S.) formed a
wholly-owned subsidiary, Sun Life Insurance and Annuity Company of New
York, that issues annuities and group life and long-term disability
insurance in the state of New York. Sun Life (U.S.) has other wholly-
owned subsidiaries, including an insurance company and a federally
chartered savings bank.
2. SCF was organized to finance Sun Life's business operations,
that may include the business operations of Sun Life's subsidiaries.
SCF's primary function would be to raise funds through the issuance and
offer of its non-voting preferred stock or debt instruments, and to
lend all or substantially all (at least 85%) of the proceeds of such
offerings to Sun Life or its subsidiaries. The remainder of the
proceeds would be invested or held in government securities and other
securities permitted by rule 3a-5(a)(6).
3. SCF presently intends to raise funds through a private placement
of debt securities (``Notes'') that would be eligible for resale under
rule 144A under the Securities Act of 1933 (``Rule 144A Offering''). It
is anticipated that the Notes would be sold in a private placement to
three investment banks and reoffered by them to qualified institutional
buyers in reliance on rule 144A and to institutional accredited
investors within the meaning of rule 501 under the Securities Act.
Proceeds of the Rule 144A Offering would be used to purchase surplus
notes issued by Sun Life (U.S.).\1\ Proceeds to Sun Life (U.S.) from
that purchase would simultaneously be used to pay off existing Sun Life
(U.S.) surplus notes that are currently held by Sun Life. When the
contemplated transaction is completed, substantially all of the
proceeds from SCF's sale of its Notes would be transferred to Sun Life
for use in the Company's business operations, and SCF would hold, in
addition to government securities and other securities permitted by
rule 3a-5(a)(6), surplus notes of Sun Life (U.S.).
\1\Surplus notes are a form of debt security permitted by state
insurance laws.
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4. The Notes would be direct unsecured obligations of SCF that
would be subordinated in right of payment to all present and future
indebtedness and liabilities of SCF. The Notes would be guaranteed, on
a subordinated basis, by Sun Life. SCF may issue a different type of
debt security, or may issue non-voting preferred stock in the future.
SCF also may lend funds to or hold the securities of a U.S. bank
subsidiary of Sun Life or other subsidiaries excepted from the
definition of investment company by section 3(c)(3) of the Act. SCF
would limit its financing activities to those that, but for the status
of certain of Sun Life's subsidiaries, conform to the requirements of
rule 3a-5.
Applicants' Legal Analysis
1. Applicants request an exemption pursuant to section 6(c) from
rule 3a-5(b)(3)(i) so as to allow SCF and Future Subsidiaries to rely
on the exemptive provisions of rule 3a-5 under the Act.
[[Page 54750]]
Rule 3a-5 under the Act provides an exemption from the definition of
investment company for a company organized primarily to finance the
business operations of its parent company or other subsidiaries of its
parent company and where any purchaser of such finance subsidiary's
debt instruments ultimately looks to such parent for repayment and not
to the finance subsidiary.
2. Applicants may not rely on the safe harbor provided by rule 3a-5
because Sun Life (U.S.) and other insurance subsidiaries of Sun Life
may not be considered a ``company controlled by the parent company'' as
defined in rule 3a-5. Under rule 3a-5(b)(3)(i), a ``company controlled
by a parent company'' is defined as any corporation, partnership, or
joint venture that is not considered an investment company under
section 3(a) or that is excepted or exempted by order from the
definition of investment company by section 3(b) or by the rules or
regulations under section 3(a). SCF's lending to Sun Life complies with
rule 3a-5 because under rule 3a-6, a foreign insurance company is
exempted from the definition of ``investment company'' under the Act.
SCF's lending to Sun Life (U.S.) however, does not comply with rule 3a-
5 because Sun Life (U.S.) is excepted from the definition of investment
company under section 3(c)(3) of the Act.
3. The adopting release of rule 3a-5 stated that relief similar to
that granted under rule 3a-5 may be appropriate for a finance
subsidiary of a parent company that derives its non-investment company
status from section 3(c) of the Act.\2\ The release stated, however,
that such requests should be examined on a case-by-case basis.
According to the adopting release, the concern was that a company may
be considered a non-investment company for the purposes of the Act
under section 3(c) of the Act and still be engaged primarily in
investment company activities.
\2\ See, Exemption From the Definition of Investment Company for
Certain Finance Subsidiaries of United States and Foreign Private
Issuers, Investment Company Act Release No. 14275 (Dec. 14, 1984).
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4. Applicants represent that SCF would not engage in a general
program of investment, nor would SCF be used to finance such a program.
SCF's primary purpose is to provide an alternate vehicle to finance the
non-investment company business operations of Sun Life, including those
of Sun Life's non-investment company subsidiaries.
5. Section 6(c) provides that the SEC may exempt any person or
transaction from any provision of the Act or any rule thereunder to the
extent that such exemption is necessary or appropriate in the public
interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act.
Applicants submit that the exemptive relief requested meets the
requirements of section 6(c).
Applicants' Condition
Applicants agree that any order granting the requested relief shall
be subject to the condition that SCF, or any other wholly-owned finance
subsidiary of Sun Life rely on the order, will comply with all
provisions of rule 3a-5 under the Act, except that the term ``company
controlled by the parent company'' will include subsidiaries of Sun
Life that do not meet the requirements of rule 3a-5(b)(3)(i) solely
because they are excluded from the definition of investment company by
section 3(c)(3) of the Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-26382 Filed 10-24-95; 8:45 am]
BILLING CODE 8010-01-M
