IDS Life Insurance Company, et al., Notice of Application, 54532-54536 [E6-15298]
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54532
Federal Register / Vol. 71, No. 179 / Friday, September 15, 2006 / Notices
‘‘applicable percentage’’ (currently 85
percent) of the annual rate of interest
determined by the Secretary of the
Treasury on amounts invested
conservatively in long-term investment
grade corporate bonds for the month
preceding the beginning of the plan year
for which premiums are being paid (the
‘‘premium payment year’’). Thus, the
required interest rate to be used in
determining variable-rate premiums for
premium payment years beginning in
September 2006 is 5.19 percent (i.e., 85
percent of the 6.11 percent composite
corporate bond rate for August 2006 as
determined by the Treasury).
The following table lists the required
interest rates to be used in determining
variable-rate premiums for premium
payment years beginning between
October 2005 and September 2006.
For premium payment years
beginning in:
The required
interest rate is:
October 2005 ........................
November 2005 ....................
December 2005 ....................
January 2006 ........................
February 2006 ......................
March 2006 ...........................
April 2006 .............................
May 2006 ..............................
June 2006 .............................
July 2006 ..............................
August 2006 .........................
September 2006 ...................
4.62
4.83
4.91
4.86
4.80
4.87
5.01
5.25
5.35
5.36
5.36
5.19
Multiemployer Plan Valuations
Following Mass Withdrawal
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The PBGC’s regulation on Duties of
Plan Sponsor Following Mass
Withdrawal (29 CFR part 4281)
prescribes the use of interest
assumptions under the PBGC’s
regulation on Allocation of Assets in
Single-Employer Plans (29 CFR part
4044). The interest assumptions
applicable to valuation dates in October
2006 under part 4044 are contained in
an amendment to part 4044 published
elsewhere in today’s Federal Register.
Tables showing the assumptions
applicable to prior periods are codified
in appendix B to 29 CFR part 4044.
Issued in Washington, DC, on this 11th day
of September 2006.
Vincent K. Snowbarger,
Interim Director, Pension Benefit Guaranty
Corporation.
[FR Doc. E6–15313 Filed 9–14–06; 8:45 am]
BILLING CODE 7709–01–P
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SECURITIES AND EXCHANGE
COMMISSION
Proposed Collections; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of Filings and
Information Services, Washington, DC
20549.
Extensions: Schedule 14D–1F; OMB Control
No. 3235–0376; SEC File No. 270–338;
Schedule 14D–9F; OMB Control No.
3235–0382; SEC File No. 270–339
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collections of information
summarized below. The Commission
plans to submit these existing
collections of information to the Office
of Management and Budget for
approval.
Schedule 14D–1F (17 CFR 240.14d–
102) may be used by any person making
a cash tender or exchange offer for
securities of any issuer incorporated or
organized under the laws of Canada or
any Canadian province or territory that
is a foreign private issuer, where less
than 40% of the outstanding class of
such issuer’s securities that is the
subject of the offer is held by U.S.
holders. Schedule 14D–1F is designed
to facilitate cross-border transactions in
securities of Canadian issuers. The
information required to be filed with the
Commission is intended to permit
verification of compliance with the
securities law requirements and assures
the public availability of such
information. Schedule 14D–1F takes
approximately 2 hours per response to
prepare and is filed by 5 respondents
annually for a total reporting burden of
10 hours.
Schedule 14D–9F (17 CFR 240.14d–
103) is used by any issuer incorporated
or organized under the laws of Canada
or any Canadian province or territory
that is a foreign private issuer, or by any
director or officer of such issuer, where
the issuer is the subject of a cash tender
or exchange offer for a class of securities
filed on Schedule 14D–1F. The
information required to be filed with the
Commission is intended to permit
verification of compliance with the
securities law requirements and assures
the public availability of such
information. Schedule 14D–9F takes
approximately 2 hours per response to
prepare and is filed by 5 respondents
annually for a total reporting burden of
10 hours.
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Written comments are invited on: (a)
Whether these proposed collections of
information are necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden imposed by the
collections of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Please direct your written comments
to R. Corey Booth, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Shirley
Martinson, 6432 General Green Way,
Alexandria, Virginia 22312; or send an
e-mail to: PRA_Mailbox@sec.gov.
Dated: September 6, 2006.
Nancy M. Morris,
Secretary.
[FR Doc. E6–15319 Filed 9–14–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–27478; File No. 812–13022]
IDS Life Insurance Company, et al.,
Notice of Application
September 8, 2006.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order pursuant to Section 6(c) of the
Investment Company Act of 1940, as
amended (‘‘1940 Act’’) granting
exemptions from the provisions of
Sections 2(a)(32), 22(c) and 27(i)(2)(A)
of the 1940 Act and Rule 22c–1
thereunder.
AGENCY:
Applicants: IDS Life Insurance
Company (‘‘IDS Life’’), IDS Life
Insurance Company of New York (‘‘IDS
Life of New York’’), American
Enterprise Life Insurance Company
(‘‘American Enterprise Life’’), American
Centurion Life Assurance Company
(‘‘American Centurion Life’’) (each, an
‘‘Insurance Company’’ and collectively,
the ‘‘Insurance Companies’’),
Ameriprise Financial Services, Inc.1
(‘‘Ameriprise Financial Services’’), IDS
1 Formerly American Express Financial Advisors
Inc.
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Federal Register / Vol. 71, No. 179 / Friday, September 15, 2006 / Notices
Life Variable Account 10 (‘‘IDS Life
Account’’), IDS Life of New York
Variable Annuity Account (‘‘IDS Life of
New York Account’’), American
Enterprise Variable Annuity Account
(‘‘American Enterprise Life Account’’)
and ACL Variable Annuity Account 2
(‘‘American Centurion Life Account’’)
(each, an ‘‘Account’’ and collectively,
the ‘‘Accounts’’) (collectively, the
‘‘Applicants’’).
Summary of Application: Applicants
seek an order (‘‘2006 Order’’) to amend
Existing Orders (described below) to
grant exemptions from the provisions of
Sections 2(a)(32), 22(c) and 27(i)(2)(A)
of the 1940 Act and Rule 22c–1
thereunder to the extent necessary to
permit Applicants to recapture certain
credits applied to purchase payments
made under: (i) Certain additional new
or enhanced deferred variable annuity
contracts (including certain data pages
and endorsements) that the Insurance
Companies propose to issue through the
Accounts (‘‘2006 Contracts’’); and; (ii)
certain additional, amended contracts
(including certain data pages and
endorsements) that the Insurance
Companies may in the future issue
through the Accounts or any future
accounts (‘‘2006 Future Accounts’’) that
are substantially similar in all material
respects to the 2006 Contracts described
in the Application for 2006 Order
(‘‘2006 Future Contracts’’ and, together
with the 2006 Contracts, the ‘‘2006 New
Contracts’’). Applicants also request that
the 2006 Order being sought extend to
the ‘‘Affiliated Broker-Dealers,’’ as
defined in the applications for the
Existing Orders (described below)
(‘‘Prior Applications’’) and to any
successors in interest to Applicants.2
Filing Date: The application was filed
on May 15, 2006 and amended and
restated on August 21, 2006.
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 by writing to the Secretary of
the Commission and serving Applicants
with a copy of the request, personally or
by mail. Hearing requests should be
received by the Commission by 5:30 on
October 3, 2006 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 who wish to be notified of a
2 Successors in interest is defined as any entity or
entities that result from a reorganization, a merger,
a change in control or a change in the type of
business organization.
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hearing may request notification by
writing to the Secretary of the
Commission.
Secretary, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549. Applicants,
Mary Ellyn Minenko, Vice President
and Group Counsel, American Express
Financial Advisors Inc., 50607 AXP
Financial Center, Minneapolis, MN
55474.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Mark A. Cowan, Senior Counsel, or
Zandra Y. Bailes, Branch Chief, Office of
Insurance Products, Division of
Investment Management, at (202) 551–
6795.
The
following is a summary of the
application. The complete application is
available for a fee from the Public
Reference Branch of the Commission,
100 F Street, NE., Washington, DC
20549 (202–551–8090).
SUPPLEMENTARY INFORMATION:
Applicant’s Representations
1. On January 19, 2000, the
Commission issued an order pursuant to
Section 6(c) of the 1940 Act exempting
certain transactions of Applicants from
the provisions of Sections 2(a)(32), 22(c)
and 27(i)(2)(A) of the 1940 Act and Rule
22c–1 thereunder (‘‘January 2000
Order’’).3 The January 2000 Order
specifically permits the recapture, under
specified circumstances, of certain
Credits 4 applied to the initial or
subsequent additional payments
(‘‘Purchase Payments’’) made under the
contracts (‘‘2000 Contracts’’) or future
contracts (‘‘2000 Future Contracts’’) as
defined in the application for the
January 2000 Order.5 Specifically, the
January 2000 Order permits the
recapture of Credits: (a) If the owner
returns a contract for a refund during
the free look period; (b) if the Credits
were applied within twelve months
preceding the date of death that results
3 IDS Life Insurance Company, et al., Investment
Company Act Release No. 24257 (Jan. 19, 2000)
(File No. 812–11818).
4 Contracts Covered by Existing Orders (defined
below) issued by IDS Life and IDS Life of New York
offer Credits of up to 3% of Purchase Payments
received (limited to Purchase Payments received in
the first contract year under certain contracts
covered by Existing Orders) depending on the
surrender charge schedule selected and the amount
of the initial purchase payment. Contracts Covered
by Existing Orders issued by American Enterprise
Life offer Credits of up to 6% of the net current
payment (current Purchase Payment less the
amount of partial withdrawals that exceed all prior
Purchase Payments). The percentage amount of the
Credit could change for enhanced versions of the
Contracts Covered by Existing Orders.
5 IDS Life Insurance Company, et al., Investment
Company Act Release No. 24220 (Dec. 23, 1999)
(File No. 812–11818).
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54533
in a lump sum death benefit; or (c) if the
Credits were applied within twelve
months preceding a request for a
surrender or withdrawal due to one of
the following Contingent Events: (i)
Confinement to a nursing home or
hospital; (ii) terminal illness; (iii)
disability; or (iv) unemployment.
2. On February 20, 2004, the
Commission issued an amended order
exempting certain additional
transactions of Applicants from the
provisions of Sections 2(a)(32), 22(c)
and 27(i)(2)(A) of the 1940 Act and Rule
22c–1 thereunder (‘‘February 2004
Order’’ 6 and, together with the January
2000 Order, the ‘‘Existing Orders’’). The
February 2004 Order specifically
permits the recapture, under specified
circumstances, of certain Credits
applied to Purchase Payments under the
amended contracts (‘‘2004 Contracts’’)
or future amended contracts (‘‘2004
Future Contracts’’) as defined in the
application for the February 2004
Order 7 (the 2000 Contracts, 2004
Contracts, 2000 Future Contracts and
2004 Future Contracts are collectively
the ‘‘Contracts Covered by Existing
Orders’’ and the 2000 Future Contracts
and 2004 Future Contracts are
collectively the ‘‘Future Contracts
Covered by Existing Orders’’).
Specifically, the February 2004 Order
permits the recapture of Credits under
the same circumstances and under the
additional circumstance of the owner’s
full or partial settlement under an
annuity payout plan.
3. Applicants seek this 2006 Order to
grant exemptions from the provisions of
Sections 2(a)(32), 22(c) and 27(i)(2)(A)
of the 1940 Act and Rule 22c–1
thereunder to the extent necessary to
permit Applicants to recapture certain
Credits applied to Purchase Payments
made under the 2006 Contracts. IDS Life
and IDS Life of New York offer two new
2006 Contracts under which Credits will
be available, RiverSource Retirement
Advisor 4 AdvantageSM Variable
Annuity (‘‘RAVA 4 Advantage’’) and
RiverSource Retirement Advisor 4
SelectSM Variable Annuity (‘‘RAVA 4
Select’’). RAVA 4 Advantage and RAVA
4 Select currently permit the recapture
of Credits under the circumstances
described in the Prior Applications. IDS
Life and IDS Life of New York propose
to recapture Credits applied within
twelve months preceding the date of
death that results in any death benefit
under those 2006 Contracts in addition
6 IDS Life Insurance Company, et al., Investment
Company Act Release No. 26354 (Feb. 20, 2004)
(File No. 812–13022).
7 IDS Life Insurance Company, et al., Investment
Company Act Release No. 26338 (Jan. 22, 2004)
(File No. 812–13022).
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Federal Register / Vol. 71, No. 179 / Friday, September 15, 2006 / Notices
to recapturing Credits under the same
circumstances described in the Prior
Applications. American Enterprise Life
currently offers two contracts that
constitute Contracts Covered by Existing
Orders, Wells Fargo Advantage Builder
Select Variable Annuity (‘‘Wells Fargo
Select’’) and RiverSource Signature One
SelectSM Variable Annuity (‘‘Signature
One Select’’). Wells Fargo Select and
Signature One Select currently permit
the recapture of Credits under the same
circumstances described in the Prior
Applications. American Enterprise Life
proposes to recapture Credits applied
within twelve months preceding the
date of death that results in any death
benefit payment as a 2006 Contract
enhancement to Wells Fargo Select and
Signature One Select.
4. The respective Accounts will fund
the variable benefits available under the
2006 Contracts. Units of interest in the
Accounts under the 2006 Contracts they
fund will be registered under the
Securities Act of 1933. The Insurance
Companies may issue 2006 Future
Contracts through the Accounts. The
Insurance Companies also may issue
2006 Future Contracts through Future
Accounts. That portion of the respective
assets of the Accounts that is equal to
the reserves and other 2006 Contract
liabilities with respect to the Accounts
is not chargeable with liabilities arising
out of any other business of the
Insurance Companies. Any income,
gains or losses, realized or unrealized,
from assets allocated to the Accounts
are, in accordance with the 2006
Contracts of the respective Accounts,
credited to or charged against the
Accounts, without regard to other
income, gains or losses of the Insurance
Companies. The same will be true of
any Future Account of the Insurance
Companies.
5. The 2006 Contracts reflect certain
differences from the Contracts Covered
by Existing Orders. However, these
differences have no impact on the
Credits applied or potentially
recaptured under the 2006 Contracts.
For this reason, Applicants believe that
the 2006 Contracts are substantially
similar in all material respects relevant
to the Existing Orders such that they
constitute Future Contracts Covered by
Existing Orders. Nevertheless, in view
of certain differences from the Contracts
Covered by Existing Orders and in light
of Applicants’ request to extend the
relief under the Existing Orders to the
recapture of Credits applied within
twelve months preceding the date of
death that results in any death benefit
payment, Applicants filed the
application for a 2006 Order. To avoid
any uncertainty regarding the
availability of such relief with respect to
the recapture of Credits under the 2006
Contracts under the same circumstances
described in Prior Applications and
under the one additional circumstance
described in the application for a 2006
Order, Applicants note the following
differences between the Contracts
Covered by Existing Orders and the
2006 Contracts:
a. Recapture of Credits
Under the Contracts Covered by
Existing Orders, the Insurance
Companies allocate Credits up to a total
of 6% to the owner’s account when they
receive Purchase Payments. The
Insurance Companies currently are
permitted to recapture Credits from an
owner under the following
circumstances: (i) Any Credits applied if
the owner returns a Contract Covered by
Existing Orders for a refund during the
free look period; (ii) Credits applied
within twelve months preceding the
date of death that results in a lump sum
death benefit; (iii) Credits applied
within twelve months preceding a
request for a surrender or withdrawal
due to the following Contingent Events:
Confinement of the owner, owner’s
spouse or annuitant, as applicable, to a
Earlier generations of RAVA
4 advantage
(percent)
Earlier generations of RAVA
4 select
(percent)
0.95
0.75
0.55
1.20
1.00
0.75
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Nonqualified Annuities ....................
Qualified Annuities ..........................
Band 3 Annuities (described below)
8 Under the Existing Orders, the Insurance
Companies also have the authority to recapture
Credits from an owner under the disability or
unemployment Contingent Events.
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b. Investment Funds
The 2006 Contracts will add
subaccounts to their respective
Accounts that will invest in some
Investment Funds (as defined in the
Prior Applications) not currently offered
under the Contracts Covered by Existing
Orders. The Insurance Companies, at a
later date, may decide to substitute the
Investment Funds in which the
subaccounts invest. The Insurance
Companies also may create additional
subaccounts to invest in any additional
Investment Funds as may now or in the
future be available. The Insurance
Companies, from time to time, also may
combine or eliminate subaccounts, or
transfer assets to and from subaccounts.
Similarly, 2006 Future Contracts may
offer additional or different
subaccounts.
c. Mortality and Expense Risk Fees
The mortality and expense risk fees
for RAVA 4 Advantage and RAVA 4
Select are higher than the fees for the
earlier generations of RAVA 4
Advantage and RAVA 4 Select which
are Contracts Covered by Existing
Orders. The mortality and expense risk
fees are as follows:
RAVA 4 advantage
RAVA 4 select
1.05% .............................................
0.85% .............................................
No separate fee: 1.05% for nonqualified annuities and 0.85% for
qualified annuities.
1.30%.
1.10%.
No separate fee: 1.30% for nonqualified annuities and 1.10% for
qualified annuities.
9 IDS Life, IDS Life of New York and American
Enterprise Life do not assess surrender or
withdrawal charges (contingent deferred sales
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nursing home or hospital and terminal
illness; 8 and (iv) the owner’s full or
partial settlement of the Contract
Covered by Existing Orders under an
annuity payout plan. The amount the
Insurance Companies pay under these
circumstances will always equal or
exceed the surrender or withdrawal
value. Under the 2006 Contracts, the
Insurance Companies intend to
recapture Credits up to a total of 6%
under the same circumstances described
above for the Contracts Covered by
Existing Orders and propose to
recapture Credits applied within twelve
months preceding the date of death that
results in a death benefit payment of
any kind.9
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charges) on death benefits available under the
Contracts Covered by the 2006 Contracts.
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d. Band 3 Annuities
Some of the earlier generations of
RAVA 4 Advantage and RAVA 4 Select
offer Band 3 annuities which are
available to current or retired employees
of Ameriprise Financial and their
spouses; current or retired Ameriprise
Financial advisors and their spouses; or
individuals who, with the approval of
IDS Life or IDS Life of New York, as
applicable, invest an initial purchase
payment of $1,000,000 or more. Under
RAVA 4 Advantage and RAVA 4 Select,
Band 3 annuities will be available to
current or retired employees of
Ameriprise Financial and their spouses
or domestic partners; current or retired
Ameriprise Financial advisors and their
spouses or domestic partners; or
individuals who, with the approval of
IDS Life or IDS Life of New York, as
applicable, invest an initial purchase
payment of $1,000,000 or more.
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e. Living Benefits
Both the Contracts Covered by
Existing Orders and the 2006 Contracts
offer a number of optional living benefit
riders that owners can purchase for an
additional fee. The Contracts Covered
by Existing Orders issued by American
Enterprise Life offer three different
optional guaranteed income benefit
(‘‘Income Benefit’’) riders. The Income
Benefit riders guarantee minimum
income regardless of the volatility
inherent in the Investment Funds. The
Contracts Covered by Existing Orders
also offer an optional guaranteed
accumulation benefit (‘‘Accumulation
Benefit’’) rider. The Accumulation
Benefit rider may provide a one-time
adjustment to the contract value at the
end of the specified waiting period on
the benefit date. The Contracts Covered
by Existing Orders also offer an optional
guaranteed minimum withdrawal
benefit (‘‘Withdrawal Benefit’’) rider.
The Withdrawal Benefit initially gives
the owner the right to take limited
partial withdrawals in each contract
year that over time will total an amount
equal to Purchase Payments plus any
Credits.
In addition to the same optional living
benefit riders described above, the 2006
Contracts introduce a new optional
guaranteed minimum withdrawal
benefit for life (‘‘Withdrawal Benefit for
Life’’) rider. The Withdrawal Benefit for
Life guarantees that the owner will be
able to withdraw up to a certain amount
each year from the 2006 Contract,
regardless of investment performance,
before the annuity payouts begin, until
the owner has recovered, at a minimum,
all Purchase Payments plus any Credits.
Under certain limited circumstances
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defined in the rider, the owner has the
right to take a specified amount of
partial withdrawals in each contract
year until death, even if the contract
value is zero. The Insurance Companies
reserve the right to add new or
enhanced living benefits to the
Contracts Covered by Existing Orders
and/or 2006 New Contracts.
f. Asset Allocation Programs
Both the Contracts Covered by
Existing Orders and the 2006 Contracts
offer asset allocation programs. Owners
are required to participate in these asset
allocation programs if they elect one of
the optional living benefits riders
described above. In this case, there is no
separate charge for the asset allocation
program. Owners may choose to
participate in the standalone asset
allocation program if they do not elect
a living benefit. Under the Contracts
Covered by Existing Orders issued by
American Enterprise Life, there is no
charge for this standalone asset
allocation program. With respect to the
Contracts Covered by Existing Orders
issued by IDS Life and IDS Life of New
York, owners may purchase the optional
standalone asset allocation rider for an
additional fee. The current fee is 0.10%
(not to exceed 0.20%) as a percentage of
contract value charged annually. Under
the 2006 Contracts issued by IDS Life
and IDS Life of New York, the
standalone asset allocation program is
available at no additional charge.
g. Annuity Payout Plans
Both the Contracts Covered by
Existing Orders and the 2006 Contracts
offer a number of annuity payout plans
with payouts available under a fixed or
variable basis or a combination of both.
These annuity payout plans include the
following: (A) Life annuity—no refund;
(B) life annuity with five, ten, 15 years
or 20 years certain; (C) life annuity—
installment refund; (D) joint and last
survivor life annuity—(i) no refund; or
(ii) with 20 years certain; and (E)
payouts for a specified period. The
Insurance Companies also may agree to
other payout arrangements. The 2006
Contracts introduce an additional
annuity payout plan available in
connection with the Withdrawal Benefit
for Life. This payout plan is available on
a fixed basis only.
6. Applicants submit that their
request for an order that applies to the
Accounts or any Future Accounts, in
connection with the issuance of 2006
Contracts described herein and 2006
Future Contracts that are substantially
similar in all material respects to the
2006 Contracts and underwritten or
distributed by IDS Life, Ameriprise
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54535
Financial Services or Affiliated BrokerDealers is appropriate in the public
interest for the same reasons as those
given in support of the Existing Orders.
Applicants’ Legal Analysis
1. Section 6(c) of the 1940 Act
authorizes the Commission to exempt
any person, security or transaction, or
any class or classes of persons,
securities or transactions from the
provisions of the 1940 Act and the rules
promulgated 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.
2. Applicants request that the
Commission issue an order pursuant to
Section 6(c) of the 1940 Act, granting
exemptions from the provisions of
Sections 2(a)(32), 22(c) and 27(i)(2)(A)
of the 1940 Act and Rule 22c–1
thereunder, to the extent necessary to
permit Applicants to recapture Credits
under the 2006 Contracts under the
same circumstances covered by the
Existing Orders and also to recapture
Credits applied within twelve months
preceding the date of death that results
in any death benefit payment.
3. Applicants submit that the
provisions for recapture of any Credit
applied within twelve months
preceding the date of death that results
in any death benefit payment under the
2006 New Contracts does not, and will
not, violate Sections 2(a)(32) and
27(i)(2)(A) of the 1940 Act. Subsection
(i) of Section 27 of the 1940 Act
provides that Section 27 does not apply
to any registered separate account
funding variable insurance contracts, or
to the sponsoring insurance company
and principal underwriter of such
account, except as provided in
paragraph (2) of the subsection.
Paragraph (2) provides that it shall be
unlawful for such a separate account or
sponsoring insurance company to sell a
contract funded by the registered
separate account unless such contract is
a redeemable security. Section 2(a)(32)
defines ‘‘redeemable security’’ as any
security, other than short-term paper,
under the terms of which the holder,
upon presentation to the issuer, is
entitled to receive approximately his or
her proportionate share of the issuer’s
current net assets, or the cash equivalent
thereof.
4. Applicants assert that the recapture
of the Credit amount in the
circumstances set forth in the
application for 2006 Order would not
deprive an owner of his or her
proportionate share of the issuer’s
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54536
Federal Register / Vol. 71, No. 179 / Friday, September 15, 2006 / Notices
current net assets. An owner’s interest
in the Credit amounts allocated to his or
her 2006 New Contract within twelve
months preceding the date of death is
not vested. Applicants argue that until
the right to recapture has expired and
any Credit amount is vested, the
Insurance Companies retain the right
and interest in the Credit amount,
although not in the earnings attributable
to that amount. Therefore, when the
Insurance Companies recapture any
Credit, they are merely retrieving their
own assets, and the owner has not been
deprived of a proportionate share of the
applicable Account’s assets because his
or her interest in the Credit amount has
not vested.
5. Applicants submit that the
recapture of Credit amounts within
twelve months preceding the date of
death is designed to provide the
Insurance Companies with a measure of
protection against anti-selection. The
anti-selection risk is that an owner can
collect a Credit shortly before death
thereby leaving the Insurance
Companies little time to recover the cost
of the Credit. As noted earlier, the
amounts recaptured equal the Credits
provided by the Insurance Companies
from their general account assets, and
any gain would remain a part of the
owner’s contract value.
6. Section 22(c) of the 1940 Act
authorizes the Commission to make
rules and regulations applicable to
registered investment companies and to
principal underwriters of, and dealers
in, the redeemable securities of any
registered investment company to
accomplish the same purposes as
contemplated by Section 22(a). Rule
22c–1 thereunder prohibits a registered
investment company issuing any
redeemable security, a person
designated in such issuer’s prospectus
as authorized to consummate
transactions in any such security, and a
principal underwriter of, or dealer in,
such security, from selling, redeeming,
or repurchasing any such security
except at a price based on the current
net asset value of such security which
is next computed after receipt of a
tender of such security for redemption
or of an order to purchase or sell such
security.
7. The Insurance Companies’
recapture of the Credit might arguably
be viewed as resulting in the
redemption of redeemable securities for
a price other than one based on the
current net asset value of the Accounts.
Applicants contend, however, that the
recapture of the Credit does not violate
Section 22(c) and Rule 22c–1. The
recapture of the Credit does not involve
either of the evils that Rule 22c–1 was
VerDate Aug<31>2005
14:51 Sep 14, 2006
Jkt 208001
intended to eliminate or reduce as far as
reasonably practicable, namely: (i) The
dilution of the value of outstanding
redeemable securities of registered
investment companies through their
sale at a price below net asset value or
redemption or repurchase at a price
above it, and (ii) other unfair results,
including speculative trading practices.
8. Applicants assert that the proposed
recapture of the Credit does not pose
such a threat of dilution. To effect a
recapture of a Credit, the Insurance
Companies will redeem interests in an
owner’s account at a price determined
on the basis of the current net asset
value of that account. The amount
recaptured will equal the amount of the
Credit that the Insurance Companies
paid out of their general account assets.
Although the owner will be entitled to
retain any investment gain attributable
to the Credit, the amount of that gain
will be determined on the basis of the
current net asset value of the Account.
Therefore, no dilution will occur upon
the recapture of the Credit. Applicants
also submit that the second harm that
Rule 22c–1 was designed to address,
namely speculative trading practices
calculated to take advantage of
backward pricing, will not occur as a
result of the recapture of the Credit.
9. For the foregoing reasons,
Applicants submit that the provisions
for recapture of any Credit applied
within twelve months preceding the
date of death that results in any death
benefit payment under the 2006 New
Contracts does not and will not violate
Sections 2(a)(32), 22(c) and 27(i)(2)(A)
of the 1940 Act and Rule 22c–1
thereunder, and that the requested relief
therefrom is consistent with the
exemptive relief provided under the
Existing Orders.
Conclusion
Applicants submit, based on the
grounds summarized above, that their
exemptive requests meet the standards
set out in Section 6(c) of the 1940 Act,
namely, that the exemptions requested
are 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, and that,
therefore, an amended order should be
granted.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6–15298 Filed 9–14–06; 8:45 am]
BILLING CODE 8010–01–P
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SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Pub. L. 94–409, that the
Securities and Exchange Commission
will hold the following meetings during
the week of September 18, 2006:
An Open Meeting will be held on
Wednesday, September 20, 2006 at 10 a.m. in
the Auditorium, Room LL–002 and Closed
Meetings will be held on Wednesday,
September 20, 2006 at 11 a.m., Thursday,
September 21, 2006 at 2 p.m. and Friday,
September 22, 2006 at 2:30 p.m.
Commissioners, Counsels to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meetings. Certain
staff members who have an interest in
the matters may also be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), (8), (9)(B) and
(10) and 17 CFR 200.402(a)(3), (5), (7),
(8), (9)(ii), and (10) permit consideration
of the scheduled matters at the Closed
Meetings.
Commissioner Nazareth, as duty
officer, voted to consider the items
listed for the closed meetings in closed
session.
The subject matter of the Open
Meeting scheduled for Wednesday,
September 20, 2006 will be:
The Commission will hear oral argument
on an appeal by The Rockies Fund, Inc., a
closed-end investment company, and its
directors Stephen Calandrella, Charles
Powell, and Clifford Thygesen (collectively
‘‘Respondents’’). The matter is on remand to
the Commission from the United States Court
of Appeals for the District of Columbia
Circuit.
The Court of Appeals affirmed the
Commission’s findings that Respondents
violated antifraud provisions of the
Securities Exchange Act of 1934 by filing
quarterly and annual reports containing
material misrepresentations between June 30,
1994 and December 31, 1995; that the Fund
violated provisions of the Exchange Act and
Calandrella, Powell, and Thygesen aided and
abetted and were a cause of reporting
violations by filing reports that were not in
compliance with Generally Accepted
Accounting Principles and that contained
material misrepresentations. The Court of
Appeals directed the Commission on remand
to reconsider the sanctions in light of its
determination to vacate some of the
violations found by the Commission.
Among the issues likely to be argued
are:
1. Whether it is in the public interest
to prohibit Calandrella, Powell, or
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[Federal Register Volume 71, Number 179 (Friday, September 15, 2006)]
[Notices]
[Pages 54532-54536]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-15298]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-27478; File No. 812-13022]
IDS Life Insurance Company, et al., Notice of Application
September 8, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order pursuant to Section 6(c)
of the Investment Company Act of 1940, as amended (``1940 Act'')
granting exemptions from the provisions of Sections 2(a)(32), 22(c) and
27(i)(2)(A) of the 1940 Act and Rule 22c-1 thereunder.
-----------------------------------------------------------------------
Applicants: IDS Life Insurance Company (``IDS Life''), IDS Life
Insurance Company of New York (``IDS Life of New York''), American
Enterprise Life Insurance Company (``American Enterprise Life''),
American Centurion Life Assurance Company (``American Centurion Life'')
(each, an ``Insurance Company'' and collectively, the ``Insurance
Companies''), Ameriprise Financial Services, Inc.\1\ (``Ameriprise
Financial Services''), IDS
[[Page 54533]]
Life Variable Account 10 (``IDS Life Account''), IDS Life of New York
Variable Annuity Account (``IDS Life of New York Account''), American
Enterprise Variable Annuity Account (``American Enterprise Life
Account'') and ACL Variable Annuity Account 2 (``American Centurion
Life Account'') (each, an ``Account'' and collectively, the
``Accounts'') (collectively, the ``Applicants'').
---------------------------------------------------------------------------
\1\ Formerly American Express Financial Advisors Inc.
---------------------------------------------------------------------------
Summary of Application: Applicants seek an order (``2006 Order'')
to amend Existing Orders (described below) to grant exemptions from the
provisions of Sections 2(a)(32), 22(c) and 27(i)(2)(A) of the 1940 Act
and Rule 22c-1 thereunder to the extent necessary to permit Applicants
to recapture certain credits applied to purchase payments made under:
(i) Certain additional new or enhanced deferred variable annuity
contracts (including certain data pages and endorsements) that the
Insurance Companies propose to issue through the Accounts (``2006
Contracts''); and; (ii) certain additional, amended contracts
(including certain data pages and endorsements) that the Insurance
Companies may in the future issue through the Accounts or any future
accounts (``2006 Future Accounts'') that are substantially similar in
all material respects to the 2006 Contracts described in the
Application for 2006 Order (``2006 Future Contracts'' and, together
with the 2006 Contracts, the ``2006 New Contracts''). Applicants also
request that the 2006 Order being sought extend to the ``Affiliated
Broker-Dealers,'' as defined in the applications for the Existing
Orders (described below) (``Prior Applications'') and to any successors
in interest to Applicants.\2\
---------------------------------------------------------------------------
\2\ Successors in interest is defined as any entity or entities
that result from a reorganization, a merger, a change in control or
a change in the type of business organization.
---------------------------------------------------------------------------
Filing Date: The application was filed on May 15, 2006 and amended
and restated on August 21, 2006.
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 by writing to the Secretary of
the Commission and serving Applicants with a copy of the request,
personally or by mail. Hearing requests should be received by the
Commission by 5:30 on October 3, 2006 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 who wish to be notified of a hearing may
request notification by writing to the Secretary of the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549. Applicants, Mary Ellyn Minenko, Vice
President and Group Counsel, American Express Financial Advisors Inc.,
50607 AXP Financial Center, Minneapolis, MN 55474.
FOR FURTHER INFORMATION CONTACT: Mark A. Cowan, Senior Counsel, or
Zandra Y. Bailes, Branch Chief, Office of Insurance Products, Division
of Investment Management, at (202) 551-6795.
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 Commission, 100 F Street, NE.,
Washington, DC 20549 (202-551-8090).
Applicant's Representations
1. On January 19, 2000, the Commission issued an order pursuant to
Section 6(c) of the 1940 Act exempting certain transactions of
Applicants from the provisions of Sections 2(a)(32), 22(c) and
27(i)(2)(A) of the 1940 Act and Rule 22c-1 thereunder (``January 2000
Order'').\3\ The January 2000 Order specifically permits the recapture,
under specified circumstances, of certain Credits \4\ applied to the
initial or subsequent additional payments (``Purchase Payments'') made
under the contracts (``2000 Contracts'') or future contracts (``2000
Future Contracts'') as defined in the application for the January 2000
Order.\5\ Specifically, the January 2000 Order permits the recapture of
Credits: (a) If the owner returns a contract for a refund during the
free look period; (b) if the Credits were applied within twelve months
preceding the date of death that results in a lump sum death benefit;
or (c) if the Credits were applied within twelve months preceding a
request for a surrender or withdrawal due to one of the following
Contingent Events: (i) Confinement to a nursing home or hospital; (ii)
terminal illness; (iii) disability; or (iv) unemployment.
---------------------------------------------------------------------------
\3\ IDS Life Insurance Company, et al., Investment Company Act
Release No. 24257 (Jan. 19, 2000) (File No. 812-11818).
\4\ Contracts Covered by Existing Orders (defined below) issued
by IDS Life and IDS Life of New York offer Credits of up to 3% of
Purchase Payments received (limited to Purchase Payments received in
the first contract year under certain contracts covered by Existing
Orders) depending on the surrender charge schedule selected and the
amount of the initial purchase payment. Contracts Covered by
Existing Orders issued by American Enterprise Life offer Credits of
up to 6% of the net current payment (current Purchase Payment less
the amount of partial withdrawals that exceed all prior Purchase
Payments). The percentage amount of the Credit could change for
enhanced versions of the Contracts Covered by Existing Orders.
\5\ IDS Life Insurance Company, et al., Investment Company Act
Release No. 24220 (Dec. 23, 1999) (File No. 812-11818).
---------------------------------------------------------------------------
2. On February 20, 2004, the Commission issued an amended order
exempting certain additional transactions of Applicants from the
provisions of Sections 2(a)(32), 22(c) and 27(i)(2)(A) of the 1940 Act
and Rule 22c-1 thereunder (``February 2004 Order'' \6\ and, together
with the January 2000 Order, the ``Existing Orders''). The February
2004 Order specifically permits the recapture, under specified
circumstances, of certain Credits applied to Purchase Payments under
the amended contracts (``2004 Contracts'') or future amended contracts
(``2004 Future Contracts'') as defined in the application for the
February 2004 Order \7\ (the 2000 Contracts, 2004 Contracts, 2000
Future Contracts and 2004 Future Contracts are collectively the
``Contracts Covered by Existing Orders'' and the 2000 Future Contracts
and 2004 Future Contracts are collectively the ``Future Contracts
Covered by Existing Orders''). Specifically, the February 2004 Order
permits the recapture of Credits under the same circumstances and under
the additional circumstance of the owner's full or partial settlement
under an annuity payout plan.
---------------------------------------------------------------------------
\6\ IDS Life Insurance Company, et al., Investment Company Act
Release No. 26354 (Feb. 20, 2004) (File No. 812-13022).
\7\ IDS Life Insurance Company, et al., Investment Company Act
Release No. 26338 (Jan. 22, 2004) (File No. 812-13022).
---------------------------------------------------------------------------
3. Applicants seek this 2006 Order to grant exemptions from the
provisions of Sections 2(a)(32), 22(c) and 27(i)(2)(A) of the 1940 Act
and Rule 22c-1 thereunder to the extent necessary to permit Applicants
to recapture certain Credits applied to Purchase Payments made under
the 2006 Contracts. IDS Life and IDS Life of New York offer two new
2006 Contracts under which Credits will be available, RiverSource
Retirement Advisor 4 AdvantageSM Variable Annuity (``RAVA 4
Advantage'') and RiverSource Retirement Advisor 4 SelectSM
Variable Annuity (``RAVA 4 Select''). RAVA 4 Advantage and RAVA 4
Select currently permit the recapture of Credits under the
circumstances described in the Prior Applications. IDS Life and IDS
Life of New York propose to recapture Credits applied within twelve
months preceding the date of death that results in any death benefit
under those 2006 Contracts in addition
[[Page 54534]]
to recapturing Credits under the same circumstances described in the
Prior Applications. American Enterprise Life currently offers two
contracts that constitute Contracts Covered by Existing Orders, Wells
Fargo Advantage[supreg] Builder Select Variable Annuity (``Wells Fargo
Select'') and RiverSource Signature One SelectSM Variable
Annuity (``Signature One Select''). Wells Fargo Select and Signature
One Select currently permit the recapture of Credits under the same
circumstances described in the Prior Applications. American Enterprise
Life proposes to recapture Credits applied within twelve months
preceding the date of death that results in any death benefit payment
as a 2006 Contract enhancement to Wells Fargo Select and Signature One
Select.
4. The respective Accounts will fund the variable benefits
available under the 2006 Contracts. Units of interest in the Accounts
under the 2006 Contracts they fund will be registered under the
Securities Act of 1933. The Insurance Companies may issue 2006 Future
Contracts through the Accounts. The Insurance Companies also may issue
2006 Future Contracts through Future Accounts. That portion of the
respective assets of the Accounts that is equal to the reserves and
other 2006 Contract liabilities with respect to the Accounts is not
chargeable with liabilities arising out of any other business of the
Insurance Companies. Any income, gains or losses, realized or
unrealized, from assets allocated to the Accounts are, in accordance
with the 2006 Contracts of the respective Accounts, credited to or
charged against the Accounts, without regard to other income, gains or
losses of the Insurance Companies. The same will be true of any Future
Account of the Insurance Companies.
5. The 2006 Contracts reflect certain differences from the
Contracts Covered by Existing Orders. However, these differences have
no impact on the Credits applied or potentially recaptured under the
2006 Contracts. For this reason, Applicants believe that the 2006
Contracts are substantially similar in all material respects relevant
to the Existing Orders such that they constitute Future Contracts
Covered by Existing Orders. Nevertheless, in view of certain
differences from the Contracts Covered by Existing Orders and in light
of Applicants' request to extend the relief under the Existing Orders
to the recapture of Credits applied within twelve months preceding the
date of death that results in any death benefit payment, Applicants
filed the application for a 2006 Order. To avoid any uncertainty
regarding the availability of such relief with respect to the recapture
of Credits under the 2006 Contracts under the same circumstances
described in Prior Applications and under the one additional
circumstance described in the application for a 2006 Order, Applicants
note the following differences between the Contracts Covered by
Existing Orders and the 2006 Contracts:
a. Recapture of Credits
Under the Contracts Covered by Existing Orders, the Insurance
Companies allocate Credits up to a total of 6% to the owner's account
when they receive Purchase Payments. The Insurance Companies currently
are permitted to recapture Credits from an owner under the following
circumstances: (i) Any Credits applied if the owner returns a Contract
Covered by Existing Orders for a refund during the free look period;
(ii) Credits applied within twelve months preceding the date of death
that results in a lump sum death benefit; (iii) Credits applied within
twelve months preceding a request for a surrender or withdrawal due to
the following Contingent Events: Confinement of the owner, owner's
spouse or annuitant, as applicable, to a nursing home or hospital and
terminal illness; \8\ and (iv) the owner's full or partial settlement
of the Contract Covered by Existing Orders under an annuity payout
plan. The amount the Insurance Companies pay under these circumstances
will always equal or exceed the surrender or withdrawal value. Under
the 2006 Contracts, the Insurance Companies intend to recapture Credits
up to a total of 6% under the same circumstances described above for
the Contracts Covered by Existing Orders and propose to recapture
Credits applied within twelve months preceding the date of death that
results in a death benefit payment of any kind.\9\
---------------------------------------------------------------------------
\8\ Under the Existing Orders, the Insurance Companies also have
the authority to recapture Credits from an owner under the
disability or unemployment Contingent Events.
\9\ IDS Life, IDS Life of New York and American Enterprise Life
do not assess surrender or withdrawal charges (contingent deferred
sales charges) on death benefits available under the Contracts
Covered by the 2006 Contracts.
---------------------------------------------------------------------------
b. Investment Funds
The 2006 Contracts will add subaccounts to their respective
Accounts that will invest in some Investment Funds (as defined in the
Prior Applications) not currently offered under the Contracts Covered
by Existing Orders. The Insurance Companies, at a later date, may
decide to substitute the Investment Funds in which the subaccounts
invest. The Insurance Companies also may create additional subaccounts
to invest in any additional Investment Funds as may now or in the
future be available. The Insurance Companies, from time to time, also
may combine or eliminate subaccounts, or transfer assets to and from
subaccounts. Similarly, 2006 Future Contracts may offer additional or
different subaccounts.
c. Mortality and Expense Risk Fees
The mortality and expense risk fees for RAVA 4 Advantage and RAVA 4
Select are higher than the fees for the earlier generations of RAVA 4
Advantage and RAVA 4 Select which are Contracts Covered by Existing
Orders. The mortality and expense risk fees are as follows:
----------------------------------------------------------------------------------------------------------------
Earlier
generations of Earlier
RAVA 4 generations of RAVA 4 advantage RAVA 4 select
advantage RAVA 4 select
(percent) (percent)
----------------------------------------------------------------------------------------------------------------
Nonqualified Annuities............ 0.95 1.20 1.05%................ 1.30%.
Qualified Annuities............... 0.75 1.00 0.85%................ 1.10%.
Band 3 Annuities (described below) 0.55 0.75 No separate fee: No separate fee:
1.05% for 1.30% for
nonqualified nonqualified
annuities and 0.85% annuities and 1.10%
for qualified for qualified
annuities. annuities.
----------------------------------------------------------------------------------------------------------------
[[Page 54535]]
d. Band 3 Annuities
Some of the earlier generations of RAVA 4 Advantage and RAVA 4
Select offer Band 3 annuities which are available to current or retired
employees of Ameriprise Financial and their spouses; current or retired
Ameriprise Financial advisors and their spouses; or individuals who,
with the approval of IDS Life or IDS Life of New York, as applicable,
invest an initial purchase payment of $1,000,000 or more. Under RAVA 4
Advantage and RAVA 4 Select, Band 3 annuities will be available to
current or retired employees of Ameriprise Financial and their spouses
or domestic partners; current or retired Ameriprise Financial advisors
and their spouses or domestic partners; or individuals who, with the
approval of IDS Life or IDS Life of New York, as applicable, invest an
initial purchase payment of $1,000,000 or more.
e. Living Benefits
Both the Contracts Covered by Existing Orders and the 2006
Contracts offer a number of optional living benefit riders that owners
can purchase for an additional fee. The Contracts Covered by Existing
Orders issued by American Enterprise Life offer three different
optional guaranteed income benefit (``Income Benefit'') riders. The
Income Benefit riders guarantee minimum income regardless of the
volatility inherent in the Investment Funds. The Contracts Covered by
Existing Orders also offer an optional guaranteed accumulation benefit
(``Accumulation Benefit'') rider. The Accumulation Benefit rider may
provide a one-time adjustment to the contract value at the end of the
specified waiting period on the benefit date. The Contracts Covered by
Existing Orders also offer an optional guaranteed minimum withdrawal
benefit (``Withdrawal Benefit'') rider. The Withdrawal Benefit
initially gives the owner the right to take limited partial withdrawals
in each contract year that over time will total an amount equal to
Purchase Payments plus any Credits.
In addition to the same optional living benefit riders described
above, the 2006 Contracts introduce a new optional guaranteed minimum
withdrawal benefit for life (``Withdrawal Benefit for Life'') rider.
The Withdrawal Benefit for Life guarantees that the owner will be able
to withdraw up to a certain amount each year from the 2006 Contract,
regardless of investment performance, before the annuity payouts begin,
until the owner has recovered, at a minimum, all Purchase Payments plus
any Credits. Under certain limited circumstances defined in the rider,
the owner has the right to take a specified amount of partial
withdrawals in each contract year until death, even if the contract
value is zero. The Insurance Companies reserve the right to add new or
enhanced living benefits to the Contracts Covered by Existing Orders
and/or 2006 New Contracts.
f. Asset Allocation Programs
Both the Contracts Covered by Existing Orders and the 2006
Contracts offer asset allocation programs. Owners are required to
participate in these asset allocation programs if they elect one of the
optional living benefits riders described above. In this case, there is
no separate charge for the asset allocation program. Owners may choose
to participate in the standalone asset allocation program if they do
not elect a living benefit. Under the Contracts Covered by Existing
Orders issued by American Enterprise Life, there is no charge for this
standalone asset allocation program. With respect to the Contracts
Covered by Existing Orders issued by IDS Life and IDS Life of New York,
owners may purchase the optional standalone asset allocation rider for
an additional fee. The current fee is 0.10% (not to exceed 0.20%) as a
percentage of contract value charged annually. Under the 2006 Contracts
issued by IDS Life and IDS Life of New York, the standalone asset
allocation program is available at no additional charge.
g. Annuity Payout Plans
Both the Contracts Covered by Existing Orders and the 2006
Contracts offer a number of annuity payout plans with payouts available
under a fixed or variable basis or a combination of both. These annuity
payout plans include the following: (A) Life annuity--no refund; (B)
life annuity with five, ten, 15 years or 20 years certain; (C) life
annuity--installment refund; (D) joint and last survivor life annuity--
(i) no refund; or (ii) with 20 years certain; and (E) payouts for a
specified period. The Insurance Companies also may agree to other
payout arrangements. The 2006 Contracts introduce an additional annuity
payout plan available in connection with the Withdrawal Benefit for
Life. This payout plan is available on a fixed basis only.
6. Applicants submit that their request for an order that applies
to the Accounts or any Future Accounts, in connection with the issuance
of 2006 Contracts described herein and 2006 Future Contracts that are
substantially similar in all material respects to the 2006 Contracts
and underwritten or distributed by IDS Life, Ameriprise Financial
Services or Affiliated Broker-Dealers is appropriate in the public
interest for the same reasons as those given in support of the Existing
Orders.
Applicants' Legal Analysis
1. Section 6(c) of the 1940 Act authorizes the Commission to exempt
any person, security or transaction, or any class or classes of
persons, securities or transactions from the provisions of the 1940 Act
and the rules promulgated 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.
2. Applicants request that the Commission issue an order pursuant
to Section 6(c) of the 1940 Act, granting exemptions from the
provisions of Sections 2(a)(32), 22(c) and 27(i)(2)(A) of the 1940 Act
and Rule 22c-1 thereunder, to the extent necessary to permit Applicants
to recapture Credits under the 2006 Contracts under the same
circumstances covered by the Existing Orders and also to recapture
Credits applied within twelve months preceding the date of death that
results in any death benefit payment.
3. Applicants submit that the provisions for recapture of any
Credit applied within twelve months preceding the date of death that
results in any death benefit payment under the 2006 New Contracts does
not, and will not, violate Sections 2(a)(32) and 27(i)(2)(A) of the
1940 Act. Subsection (i) of Section 27 of the 1940 Act provides that
Section 27 does not apply to any registered separate account funding
variable insurance contracts, or to the sponsoring insurance company
and principal underwriter of such account, except as provided in
paragraph (2) of the subsection. Paragraph (2) provides that it shall
be unlawful for such a separate account or sponsoring insurance company
to sell a contract funded by the registered separate account unless
such contract is a redeemable security. Section 2(a)(32) defines
``redeemable security'' as any security, other than short-term paper,
under the terms of which the holder, upon presentation to the issuer,
is entitled to receive approximately his or her proportionate share of
the issuer's current net assets, or the cash equivalent thereof.
4. Applicants assert that the recapture of the Credit amount in the
circumstances set forth in the application for 2006 Order would not
deprive an owner of his or her proportionate share of the issuer's
[[Page 54536]]
current net assets. An owner's interest in the Credit amounts allocated
to his or her 2006 New Contract within twelve months preceding the date
of death is not vested. Applicants argue that until the right to
recapture has expired and any Credit amount is vested, the Insurance
Companies retain the right and interest in the Credit amount, although
not in the earnings attributable to that amount. Therefore, when the
Insurance Companies recapture any Credit, they are merely retrieving
their own assets, and the owner has not been deprived of a
proportionate share of the applicable Account's assets because his or
her interest in the Credit amount has not vested.
5. Applicants submit that the recapture of Credit amounts within
twelve months preceding the date of death is designed to provide the
Insurance Companies with a measure of protection against anti-
selection. The anti-selection risk is that an owner can collect a
Credit shortly before death thereby leaving the Insurance Companies
little time to recover the cost of the Credit. As noted earlier, the
amounts recaptured equal the Credits provided by the Insurance
Companies from their general account assets, and any gain would remain
a part of the owner's contract value.
6. Section 22(c) of the 1940 Act authorizes the Commission to make
rules and regulations applicable to registered investment companies and
to principal underwriters of, and dealers in, the redeemable securities
of any registered investment company to accomplish the same purposes as
contemplated by Section 22(a). Rule 22c-1 thereunder prohibits a
registered investment company issuing any redeemable security, a person
designated in such issuer's prospectus as authorized to consummate
transactions in any such security, and a principal underwriter of, or
dealer in, such security, from selling, redeeming, or repurchasing any
such security except at a price based on the current net asset value of
such security which is next computed after receipt of a tender of such
security for redemption or of an order to purchase or sell such
security.
7. The Insurance Companies' recapture of the Credit might arguably
be viewed as resulting in the redemption of redeemable securities for a
price other than one based on the current net asset value of the
Accounts. Applicants contend, however, that the recapture of the Credit
does not violate Section 22(c) and Rule 22c-1. The recapture of the
Credit does not involve either of the evils that Rule 22c-1 was
intended to eliminate or reduce as far as reasonably practicable,
namely: (i) The dilution of the value of outstanding redeemable
securities of registered investment companies through their sale at a
price below net asset value or redemption or repurchase at a price
above it, and (ii) other unfair results, including speculative trading
practices.
8. Applicants assert that the proposed recapture of the Credit does
not pose such a threat of dilution. To effect a recapture of a Credit,
the Insurance Companies will redeem interests in an owner's account at
a price determined on the basis of the current net asset value of that
account. The amount recaptured will equal the amount of the Credit that
the Insurance Companies paid out of their general account assets.
Although the owner will be entitled to retain any investment gain
attributable to the Credit, the amount of that gain will be determined
on the basis of the current net asset value of the Account. Therefore,
no dilution will occur upon the recapture of the Credit. Applicants
also submit that the second harm that Rule 22c-1 was designed to
address, namely speculative trading practices calculated to take
advantage of backward pricing, will not occur as a result of the
recapture of the Credit.
9. For the foregoing reasons, Applicants submit that the provisions
for recapture of any Credit applied within twelve months preceding the
date of death that results in any death benefit payment under the 2006
New Contracts does not and will not violate Sections 2(a)(32), 22(c)
and 27(i)(2)(A) of the 1940 Act and Rule 22c-1 thereunder, and that the
requested relief therefrom is consistent with the exemptive relief
provided under the Existing Orders.
Conclusion
Applicants submit, based on the grounds summarized above, that
their exemptive requests meet the standards set out in Section 6(c) of
the 1940 Act, namely, that the exemptions requested are 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, and that, therefore, an amended order should be
granted.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-15298 Filed 9-14-06; 8:45 am]
BILLING CODE 8010-01-P
