[Federal Register Volume 59, Number 247 (Tuesday, December 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31731]
[[Page Unknown]]
[Federal Register: December 27, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20786; File No. 812-9136]
Investment Company Act of 1940, SunAmerica Inc., et al.
December 20, 1994.
AGENCY: Securities and Exchange Commission (the ``SEC'' or the
``Commission'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``1940 Act'').
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APPLICANTS: SunAmerica Inc., Anchor National Life Insurance Company
(``Anchor National''), Variable Separate Account (``Separate Account'')
and SunAmerica Capital Services, Inc. (collectively, ``Applicants'').
RELEVANT 1940 ACT SECTIONS: Order requested under Section 6(c) of the
1940 Act granting an exemption from Section 22(d) thereof.
SUMMARY OF APPLICATION: Applicants seek an order to the extent
necessary to permit Anchor National or any other insurance company
controlling, controlled by, or under common control with, Anchor
National (collectively, ``Affiliated Insurers'') to waive, in certain
circumstances, the contingent deferred sales load that otherwise would
be imposed on certain individual and group flexible payment deferred
variable annuity contracts (``Contracts'') issued and to be issued by
Anchor National or the other Affiliated Insurers.
FILING DATE: The application was filed initially on August 2, 1994; an
amended application was filed on November 15, 1994.
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 this application by writing to the
Secretary of the SEC and serving the Applicants with a copy of the
request, personally or by mail. Hearing requests must be received by
the SEC by 5:30 p.m. on January 17, 1995, and should be accompanied by
proof of service on the 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
issue contested. Persons may request notification of a hearing by
writing to the Secretary of the SEC.
ADDRESS: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants, c/o Routier, Mackey and Johnson, P.C., 1700 K
Street, N.W., Suite 1003, Washington, D.C. 20006.
FOR FURTHER INFORMATION CONTACT: Patrice M. Pitts, Attorney, 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
Public Reference Branch of the SEC.
Applicants' Representations
1. Anchor National, a stock life insurance company organized under
the laws of the State of California, is an indirect wholly-owned
subsidiary of SunAmerica Inc., a financial services company.
2. Anchor National established the Separate Account on June 25,
1981, to fund variable annuity contracts. The Separate Account is
registered under the 1940 Act as a unit investment trust.
3. SunAmerica Capital Services, Inc. (``SEC''), the principal
underwriter for certain of the existing Contracts, is a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of
the National Association of Securities Dealers, Inc. SCS also is an
indirect wholly-owned subsidiary of SunAmerica Inc.
4. The Contracts are or will be issued by Anchor National or other
Affiliated Insurers and offered through the Separate Account or any
other separate account (as defined in Section 2(a)(37) of the 1940 Act)
of the issuing Affiliated Insurer that is registered as an investment
company under the 1940 Act (collectively, ``Eligible Account(s)''). The
Contracts will provide for accumulation of contract values and payment
of benefits on a variable basis. Fixed accumulation and/or payment
options also may be available under the Contracts. (In the case of
group Contracts, the term ``Contract,'' as used herein, will include a
certificate issued to a participant in the group; the term ``Contract
owner'' will include such a participant.)
5. Various fees and charges may be deducted from contract values or
the assets of an Eligible Account to pay for expenses incurred in
connection with administering and selling the Contract and for assuming
certain risks thereunder. All such charges will be permitted either
pursuant to rules adopted under the 1940 Act or by order of the
Commission, and will be fully disclosed in the prospectuses for the
Contracts.
6. A contingent deferred sales charge (``CDSC'') may be imposed
upon certain withdrawals from the Contracts. The CDSC may vary in
amount, according to a schedule contained in the applicable Contract
and described in its prospectus, depending upon the contribution year
of the purchase payment being withdrawn. Purchase payments withdrawn
after a specified period of time will not be subject to the CDSC and
may be withdrawn free of such charge. The applicable Contracts
prescribe the circumstances in which the CDSC may be reduced or waived,
including in connection with the ``Confinement Waiver benefit''
described below.
7. Under a Contract to which the ``Confinement Waiver benefit''
applies, the CDSC will be waived upon the Contract owner's request for
full or partial surrender of the Contract value prior to the annuity
date. This ``Confinement Waiver benefit'' will be available if:
The Contract owner is confined to an eligible nursing home
and/or hospital for at least 60 consecutive days while the Contract is
in force;
A surrender or partial withdrawal request and adequate
proof of confinement are received by the Affiliated Insurer either
while the Contract owner is confined or within 90 days of the Contract
owner's discharge from the nursing home or hospital; and
Confinement in the nursing home and/or hospital is
prescribed by a physician and is medically necessary.
8. The ``Confinement Waiver benefit'' may not be exercised before
the expiration of 90 days from the date the Contract is issued.
9. A new 60 day confinement period must be satisfied each time the
Contract owner becomes newly confined (whether for the same unrelated
causes), if services by an eligible nursing home and/or hospital have
not been provided for a period of at least six months. A new 60 day
confinement need not be satisfied, however, if services for related
causes were provided within six months of current receipt of services.
10. Anchor National and SunAmerica Inc. have determined that the
``Confinement Waiver benefit'' is a desirable feature, and beneficial
to variable annuity contract owners. Accordingly, they wish to have the
flexibility to incorporate such a feature in both existing and new
Contracts, in jurisdictions where permitted.
11. In jurisdictions where permitted, Affiliated Insurers will make
the ``Confinement Waiver benefit'' available to all new owners of
affected Contracts. The Affiliated Insurers reserve the right not to
make the ``Confinement Waiver benefit'' available to certain of their
existing Contracts. Alternatively, an Affiliated Insurer may make the
``Confinement Waiver benefit'' available to existing Contracts subject
to the satisfaction of eligibility requirements uniformly applied to
owners of such Contracts--e.g., the making of an additional purchase
payment under the Contract within a specified period of time, and in a
prescribed amount (which may vary depending on whether the Contract is
held in connection with a tax-qualified plan).
Applicants' Legal Analysis
1. Pursuant to Section 6(c) of the 1940 Act, the Commission may, by
order upon application, conditionally or unconditionally exempt any
person, security, or transaction, or any class or classes of persons,
securities or transactions, from any provision or provisions of the
1940 Act or from any rule or regulation thereunder, if and to the
extent that such exemption is necessary or appropriate in the public
interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the 1940 Act.
Pursuant to Section 6(c), the Applicants request that the Commission
issue an order to provide the exemptive relief set forth below.
2. Applicants submit that granting the requested relief not only to
variable annuity contracts issued by Anchor National and funded in the
Separate Account, but also to variable annuity contracts funded in
other separate accounts that Anchor National has or may establish, will
eliminate the necessity for filing multiple applications for relief
under circumstances where no new issues would be presented by the
subsequent applications. Similar reasoning applies to extending the
relief to apply to Contracts issued by other Affiliated Insurers as
well.
3. Section 22(d) of the 1940 Act provides that no registered
investment company shall sell any redeemable security issued by it to
any person except either to or through a principal underwriter for
distribution, or at a current public offering price described in the
prospectus. Applicants recognize that the proposed waiver of the
withdrawal charge in connection with the ``Confinement Waiver benefit''
described above could be viewed as causing the Contracts to be sold at
other than a uniform offering price.
4. Under certain prescribed conditions, Rule 22d-1 under the 1940
Act provides an exemption from Section 22(d) to the extent necessary to
permit the sale of redeemable securities issued by a registered
investment company at prices that reflect scheduled variations in, or
elimination of, the sales load to particular classes of investors or
transactions. However, to the extent that it has been interpreted by
the Commission as granting relief only for scheduled variations in
front-end sales loads--not deferred sales loads such as the CDSC--Rule
22d-1 is not directly applicable to Applicants' proposed waiver of the
withdrawal charge in connection with the ``Confinement Waiver
benefit.'' Applicants nevertheless submit that by adopting Rule 22d-1,
the Commission has decided that variations in front-end sales loads
should be permitted universally, subject to the standards embodied in
that Rule, and that similar considerations should apply with at least
the same force for the requested variation in deferred sales charges.
5. Rule 22d-2 under the 1940 Act exempts registered variable
annuity accounts, their principal underwriters, dealers and sponsoring
insurance companies from Section 22(d) to the extent necessary to
permit variations in the sales load or in any administrative charge or
other deductions from the purchase payments, provided that any such
variations reflect differences in costs or services, are not unfairly
discriminatory, and are adequately described in the prospectus.
Applicants do not represent that the ``Confinement Waiver benefit''
reflects differences in sales costs or services, however, and for that
reason do not rely on Rule 22d-2 for the requested relief, even
assuming that Rule 22d-2 does apply to deferred sales loads.
6. Applicants note that while Rule 6c-8 under the 1940 Act permits
variable annuity separate accounts to impose a deferred sales charge,
it neither imposes any conditions on the ability of an investment
company to provide for variations in the deferred sales charges nor
provides an exemption from Section 22(d).
7. Applicants submit that the proposed waiver is consistent with
the policies of Section 22(d) and the rules promulgated thereunder. One
of the purposes of Section 22(d) is to prevent an investment company
from discriminating among investors by charging different prices to
different investors. Applicants represent that because the
``Confinement Waiver benefit'' will be available prospectively to any
new Contract owner who becomes confined to a hospital or nursing home
for 60 days or more (as is described more fully above), the benefit
will not unfairly discriminate among Contract owners in jurisdictions
where it is permitted by state law. Applicants further represent that
the benefit advantages Contract owners by permitting them to surrender
their Contracts without imposition of the withdrawal charge, upon the
occurrence of the contingency described above, and that the benefit
will not result in dilution of the interests of any other Contract
owner. Applicants also represent that waiving the withdrawal charge
under such circumstances will not result in the occurrence of any of
the abuses that Section 22(d) of the Act is designed to prevent.
8. Applicants represent that the ``Confinement Waiver benefit,'' if
offered in connection with a particular Contract, would comply with the
substantive provisions set forth in Rule 22d-1 under the 1940 Act. More
specifically represent that the ``Confinement Waiver benefit'' will be:
uniformly available to all Contract owners who are eligible therefor;
and adequately described in the applicable prospectus for the Contracts
(or supplements thereto) before being made available to Contract
owners. If the ``Confinement Waiver benefit'' is made available to
existing Contracts, the Affiliated Insurers will inform owners of the
relevant Contracts of the availability of the benefit by transmitting a
copy of the endorsement or rider for attachment to their Contracts (as
well as by supplementing the prospectus for such Contracts), as soon as
is reasonably practicable. If the ``Confinement Waiver benefit'' is
made available to existing Contracts subject to the satisfaction of
eligibility requirements, the Affiliated Insurers will inform the
owners of the relevant Contracts of the availability of the benefit and
the relevant requirements by transmitting a current prospectus or
supplement thereto that adequately describes the benefit and the
requirements.
Conclusion
For the reasons stated above, Applicants submit that the exemptive
relief requested above 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 1940 Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-31731 Filed 12-23-94; 8:45 am]
BILLING CODE 8010-01-M
