Jackson National Life Insurance Company, et al., 19150-19155 [2011-8081]
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19150
Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices
been developed to accommodate this
statutory deadline. In the interest of
expedition, in light of the 120-day
decision schedule, the Commission may
request the Postal Service or other
participants to submit information or
memoranda of law on any appropriate
issue. As required by the Commission
rules, if any motions are filed, responses
are due 7 days after any such motion is
filed. See 39 CFR 3001.21.
It is ordered:
1. The Postal Service shall file the
administrative record regarding this
appeal no later than April 12, 2011.
2. Any responsive pleading by the
Postal Service to this Notice is due no
later than April 12, 2011.
3. The procedural schedule listed
below is hereby adopted.
4. Pursuant to 39 U.S.C. 505,
Cassandra L. Hicks is designated officer
of the Commission (Public
Representative) to represent the
interests of the general public.
5. The Secretary shall arrange for
publication of this Notice and Order in
the Federal Register.
PROCEDURAL SCHEDULE
March 28, 2011 ...................................................
April 12, 2011 ......................................................
April 12, 2011 ......................................................
April 25, 2011 ......................................................
May 2, 2011 ........................................................
May 23, 2011 ......................................................
June 7, 2011 .......................................................
June 14, 2011 .....................................................
July 26, 2011 .......................................................
By the Commission.
Shoshana M. Grove,
Secretary.
Account, the ‘‘Separate Accounts,’’ and
individually as made appropriate by the
context, a ‘‘Separate Account’’) and
Jackson National Life Distributors LLC
(‘‘Distributor,’’ and collectively with the
Insurance Companies and the Separate
Accounts, ‘‘Applicants’’).
[FR Doc. 2011–8102 Filed 4–5–11; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
Jackson National Life Insurance
Company, et al.
March 31, 2011.
The Securities and Exchange
Commission (‘‘Commission’’)
ACTION: Notice of application for an
order under Section 6(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) granting exemptions from the
provisions of Sections 2(a)(32), 22(c)
and 27(i)(2)(A) of the Act and Rule 22c–
1 thereunder to permit the recapture of
contract enhancement endorsement
credits applied to purchase payments
made under certain deferred variable
annuity contracts.
AGENCY:
Jackson National Life
Insurance Company (‘‘Jackson’’), Jackson
National Separate Account—I (the ‘‘JNL
Separate Account’’), Jackson National
Life Insurance Company of New York
(‘‘JNLNY’’) and collectively with
Jackson, the ‘‘Insurance Companies,’’
and individually as made appropriate
by the context, an ‘‘Insurance
Company’’), JNLNY Separate Account I
(the ‘‘JNLNY Separate Account,’’
collectively with the JNL Separate
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Applicants
seek an order under Section 6(c) of the
Act to exempt certain transactions from
the provisions of Sections 2(a)(32),
22(c), and 27(i)(2)(A) of the Act and
Rule 22c–1 thereunder, to the extent
necessary to permit the recapture, under
specified circumstances, of certain
credits under the 6% Contract
Enhancements Endorsement (the ‘‘6%
Contract Enhancement’’) when those
credits have been applied to purchase
payments made (a) Under the deferred
variable annuity contracts more
particularly described in this notice that
Jackson has issued through the JNL
Separate Account (the ‘‘Perspective
Contracts’’); (b) under other contracts
that Jackson has issued through the JNL
Separate Account (the ‘‘JNL Contracts’’);
(c) under the contracts that JNLNY has
issued through the JNLNY Separate
Account (the ‘‘JNLNY Contracts’’); (d)
under the Perspective Contracts as they
may be subsequently updated; and (e)
under other contracts that the Insurance
Companies may issue in the future with
the 6% Contract Enhancement (‘‘Future
Contracts,’’ and together with the other
contracts referred to in this paragraph,
the ‘‘Contracts’’), either through their
existing separate accounts or future
separate accounts (‘‘Other Accounts’’).
Applicants also request that the order
SUMMARY OF APPLICATION:
[Release No. IC–29621; File No. 812–13841]
APPLICANTS:
Filing of Appeal.
Deadline for the Postal Service to file the administrative record in this appeal.
Deadline for the Postal Service to file any responsive pleading.
Deadline for notices to intervene (see 39 CFR 3001.111(b)).
Deadline for Petitioner’s Form 61 or initial brief in support of petition (see 39 CFR 3001.115(a)
and (b)).
Deadline for answering brief in support of Postal Service (see 39 CFR 3001.115(c)).
Deadline for reply briefs in response to answering briefs (see 39 CFR 3001.115(d)).
Deadline for motions by any party requesting oral argument; the Commission will schedule
oral argument only when it is a necessary addition to the written filings (see 39 CFR
3001.116).
Expiration of the Commission’s 120-day decisional schedule (see 39 U.S.C. 404(d)(5)).
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being sought extend to any other
Financial Industry Regulatory Authority
(‘‘FINRA’’) member broker-dealer
controlling or controlled by, or under
common control with, Jackson, whether
existing or created in the future, that
serves as distributor or principal
underwriter for the Contracts
(‘‘Affiliated Broker-Dealers’’) and any
successors in interest to the Applicants.
FILING DATE: The application was filed
on November 8, 2010, and amended on
March 29, 2011.
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
p.m. on April 22, 2011, 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 Secretary of
the Commission.
ADDRESSES: Secretary, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–1090.
Applicants: c/o Jackson National Life
Insurance Company, 1 Corporate Way,
Lansing, Michigan 48951, Attn: Frank J.
Julian, Esq.
FOR FURTHER INFORMATION CONTACT:
Ellen J. Sazzman, Senior Counsel, at
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(202) 551–6762, or Harry Eisenstein,
Senior Special Counsel, at (202) 551–
6795, Office of Insurance Products,
Division of Investment Management.
SUPPLEMENTARY INFORMATION: The
following is a summary of the
Application. The complete Application
may be obtained via the Commission’s
Web site by searching for the file
number, or an applicant using the
Company name box at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. Jackson is a stock life insurance
company organized under the laws of
the state of Michigan. Jackson is
admitted to conduct life insurance and
annuity business in the District of
Columbia and all states except New
York. Jackson is ultimately a wholly
owned subsidiary of Prudential plc
(London, England).
2. JNLNY is a stock life insurance
company organized under the laws of
the state of New York. JNLNY is
admitted to conduct life insurance and
annuity business in Delaware,
Michigan, and New York. JNLNY is
ultimately a wholly-owned subsidiary of
Prudential plc (London, England).
3. The JNL Separate Account was
established by Jackson pursuant to the
provisions of Michigan law and the
authority granted under a resolution of
Jackson’s Board of Directors. The JNLNY
Separate Account was established by
JNLNY pursuant to the provisions of
New York law and the authority granted
under a resolution of JNLNY’s Board of
Directors. Jackson and JNLNY are the
depositors of their respective Separate
Accounts. Each of the Separate
Accounts meets the definition of a
‘‘separate account’’ under the federal
securities laws and each is registered
with the Commission as a unit
investment trust under the Act (File
Nos. 811–8664 and 811–8401,
respectively). JNL Separate Account and
JNLNY Separate Account will fund,
respectively, the variable benefits
available under the JNL Contracts and
the JNLNY Contracts.
4. The assets of each Separate
Account legally belong to the Insurance
Company of which it is a segregated
asset account and the obligations under
the Contracts are obligations of that
Insurance Company. However the
Contract assets in the Separate Accounts
are not chargeable with liabilities
arising out of any other business the
Insurance Companies may conduct. All
of the income, gains, and losses
resulting from these assets are credited
to or charged against the Contracts and
not against any other contracts the
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Insurance Companies may issue. The
registration statements relating to the
offering of the Perspective Contracts
were filed under the Securities Act of
1933 (the ‘‘1933 Act’’) (File No. 333–
70472 (‘‘Perspective II Contracts’’) and
File No. 333–119656 (‘‘Perspective L
Contracts’’)).
5. The Distributor is a wholly owned
subsidiary of Jackson and serves as the
distributor of the Contracts. The
Distributor is registered with the
Commission as a broker-dealer under
the Securities Exchange Act of 1934 (the
‘‘1934 Act’’) and is a member of FINRA.
The Distributor enters into selling group
agreements with affiliated and
unaffiliated broker-dealers. The
Contracts are sold by licensed insurance
agents, where the Contracts may be
lawfully sold, who are registered
representatives of broker-dealers that are
registered under the 1934 Act and are
members of FINRA.
6. The Perspective Contracts
(Perspective II Contracts and
Perspective L Contracts) are the only
Contracts that will rely immediately on
the relief requested. However,
Applicants represent that the JNL
Contracts, the JNLNY Contracts, the
Perspective Contracts as they may be
subsequently updated, and the Future
Contracts (the ‘‘Contracts’’) are or will be
substantially similar in all material
respects to the Perspective Contracts.
7. The Perspective Contracts require a
minimum initial premium payment of
$5,000 or $10,000 under most
circumstances depending on the
contract ($2,000 for a qualified plan
contract). Subsequent payments may be
made at any time during the
accumulation phase. Each subsequent
payment must be at least $500 ($50
under an automatic payment plan).
Prior approval of the Insurance
Company is required for aggregate
premium payments of over $1,000,000.
8. The Perspective Contracts permit
owners to accumulate contract values
on a fixed basis through allocations to
one of six fixed accounts (the ‘‘Fixed
Accounts’’). Fixed Account allocation
and transfer restrictions initially will be
imposed in connection with the subject
6% Contract Enhancement during the
first seven contract years. In addition, if
the optional Jackson Select Guaranteed
Minimum Withdrawal Benefit
(‘‘GMWB’’) or the optional Jackson
Select with Joint Option Guaranteed
Minimum Withdrawal Benefit
(‘‘GMWB’’) is elected in the JNL
Contracts, automatic transfers of an
owner’s contract value may be allocated
to a fixed account designated for these
guaranteed minimum withdrawal
benefits (‘‘GMWB Fixed Account’’).
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19151
9. The Perspective Contracts also
permit owners to accumulate contract
values on a variable basis, through
allocations to one or more of the subaccounts, also referred to as investment
divisions, of the Separate Accounts (the
‘‘Investment Divisions,’’ collectively
with the Fixed Account and the GMWB
Fixed Account, the ‘‘Allocation
Options’’). Under the Perspective
Contracts, ninety-nine Investment
Divisions currently are expected to be
offered but additional Investment
Divisions may be offered in the future
and some could be eliminated or
combined with other Investment
Divisions in the future. Similarly, future
Perspective Contracts may offer
additional or different Investment
Divisions. Each Investment Division
will invest in shares of a corresponding
series (‘‘Series’’) of JNL Series Trust
(‘‘Trust’’) or JNL Variable Fund LLC
(‘‘Fund’’) (collectively the ‘‘Trust and
Fund’’). The Trust and Fund are openend management investment companies
registered under the Act and their
shares are registered under the 1933
Act.
10. Transfers among the Investment
Divisions are permitted. Certain
transfers to, from and among the Fixed
Account Options are also permitted
during the Perspective Contracts’
accumulation phase, but are subject to
certain adjustments and limitations.
11. If the owner dies during the
accumulation phase of the Perspective
Contracts, the beneficiary named by the
owner is paid a death benefit by the
Insurance Company. The Perspective
Contracts’ base death benefit, which
applies unless an optional death benefit
has been elected, is a payment to the
beneficiary of the greater of: (i) Contract
value on the date the Insurance
Company receives proof of death and
completed claim forms from the
beneficiary or (ii) the total premiums
paid under the Perspective Contract
minus any prior withdrawals (including
any withdrawal charges, recapture
charges or other charges or adjustments
applicable to such withdrawals).
12. The owner may be offered
optional death benefit endorsements
that can change the death benefit paid
to the beneficiary. The optional death
benefit endorsements, in general,
provide that withdrawals (including any
withdrawal charges, recapture charges
and other charges or adjustments to
such withdrawal) will reduce the
benefit base that determines the amount
of the death benefit. The Perspective
Contracts may also offer various GMWB
optional endorsements.
13. The Perspective Contracts offer
fixed and variable versions of the
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following four types of annuity payment
or ‘‘income payment’’: life income, joint
and survivor, life annuity with at least
120 or 240 monthly payments
guaranteed to be paid (although not
guaranteed as to amount if variable),
and income for a specified period of 5
to 30 years. The Insurance Companies
may also offer other income payment
options.
14. Perspective Contracts currently
offer contract enhancement
endorsements (‘‘Contract
Enhancement(s)’’), all of which are
optional although Future Contracts may
have Contract Enhancements which are
not optional. The Contract
Enhancements provide for Jackson to
add from its general account assets an
additional amount to the owner’s
contract value upon receipt of the initial
premium payment, and for each
subsequent premium payment received
within the first seven contract years
(five for the 2% Contract Enhancement).
The Contract Enhancements that may be
elected at issue currently vary in
amount between 2% and 5%. The
Contract Enhancement percentages that
are credited in each case also vary,
depending upon the applicable
percentage and contract year in which
the premium payment is received. The
Contract Enhancements offered under
the Perspective Contracts may vary
depending upon the design of the
contract, the date of issue of a contract
or the distribution channel. The 6%
Contract Enhancement would not be
available if the 20% Additional Free
Withdrawal endorsement is elected and
vice versa. Also if a Contract
Enhancement is elected, allocations and
transfers to the Fixed Account Options
currently will be restricted, as fully
described in the prospectus. The
restrictions apply during the first seven
contract years (five contract years for the
2% Contract Enhancement). These
restrictions will also apply to the 6%
Contract Enhancement.
15. Following is the table for the
existing 5% Contract Enhancement that
shows the variation in the percentages
based upon the year of receipt of the
applicable premium payment. This table
shows how existing 5% Contract
Enhancements are structured and how
the 6% Contract Enhancement will be
structured.
5% CONTRACT ENHANCEMENT
[In percent]
Contract year premium is received
0–1
Contract Enhancement Percentage of the Premium
Payment .......................................................................
16. Applicants are proposing to add a
6% Contract Enhancement to the
1–2
2–3
3–4
4–5
5–6
6–7
7+
5.00
4.50
3.75
3.00
2.25
1.75
1.00
0
Perspective Contracts that is modeled
on the above 5% structure, as follows:
6% CONTRACT ENHANCEMENT
[In percent]
Contract year premium is received
0–1
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Contract Enhancement Percentage of the Premium
Payment .......................................................................
17. Jackson will allocate the 6%
Contract Enhancement to the Fixed
Accounts and/or Investment Divisions
in the same proportion as the premium
payment allocation. The 6% Contract
Enhancement is available only to
owners 87 years old and younger. There
is an asset-based charge for the 6%
Contract Enhancement. The asset-based
charges for the 6% Contract
Enhancement applies only for the first
seven contract years, as opposed to
seven years from the date of the
premium payment, and is 0.832%,
based on the average daily net asset
value of the allocations to the
Investment Divisions. A charge equal to
the asset-based charge will also be
assessed against any amounts contract
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1–2
2–3
3–4
4–5
5–6
6–7
7+
6.00
5.50
4.75
4.00
3.25
2.50
1.25
0
owners have allocated to the Fixed
Accounts, through a reduction in the
annual credited rate of interest resulting
in a lower annual credited interest rate
that would apply to the Fixed Account
if the Contract Enhancement had not
been elected.
18. Jackson will recapture all or a
declining portion of the 6% Contract
Enhancement by imposing a recapture
charge whenever an owner: (i) Makes a
total withdrawal within the recapture
charge period up to seven years after a
premium payment, or a partial
withdrawal of corresponding premiums
within the recapture charge period in
excess of those permitted under the
Perspective Contracts’ free withdrawal
provisions, unless the withdrawal is
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made for certain health-related
emergencies specified in the Perspective
Contracts; (ii) elects to receive payments
under an income payment option within
the recapture charge period; or (iii)
returns the Perspective Contract during
the free-look period.
19. The amount of the 6% Contract
Enhancement recapture charge varies
depending on the corresponding
declining amount of the Contract
Enhancement based on the contract year
when the premium payment being
withdrawn was received and when the
charge is imposed based on the
Completed Years since the receipt of the
related premium, as follows:
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6% CONTRACT ENHANCEMENT RECAPTURE CHARGE
[In percent]
Completed years since
receipt of premium
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0–1 ...................................
1–2 ...................................
2–3 ...................................
3–4 ...................................
4–5 ...................................
5–6 ...................................
6–7 ...................................
7+ .....................................
Contract year premium is received
0–1
1–2
5.00
4.75
4.00
3.75
3.00
2.25
1.25
0.00
4.75
4.25
3.75
3.00
2.00
1.25
0.00
0.00
20. A ‘‘Completed Year’’ is the
succeeding twelve months from the date
on which the Insurance Companies
receive a premium payment. Completed
Years specifies the years from the date
of receipt of the premium and does not
refer to contract years. If the premium
receipt date is on the issue date of the
Contract, then Completed Year 0–1 does
not include the first contract
anniversary. The first contract
anniversary begins Completed Year 1–2
and each successive Completed Year
begins with the contract anniversary of
the preceding contract year and ends the
day before the next contract
anniversary. If the premium receipt date
is other than the issue date or a
subsequent contract anniversary, there
is no correlation of the contract
anniversary date and Completed Years.
For example, if the issue date is January
15, 2010 and a premium payment is
received on February 28, 2010 then,
although the first contract anniversary is
January 15, 2011, the end of Completed
Year 0–1 for that premium payment
would be February 27, 2011, and
February 28, 2011 begins Completed
Year 1–2. The first contract year
(contract year 0–1) starts on the issue
date and extends to, but does not
include, the first contract anniversary.
Subsequent contract years start on an
anniversary date and extend to, but do
not include, the next anniversary date.
21. The recapture charge percentage
will be applied to the corresponding
premium reflected in the amount
withdrawn or the amount applied to
income payments that remain subject to
a recapture charge. Earnings are
withdrawn first without charge and the
oldest purchase payments are
withdrawn first. The amount recaptured
will be taken from the Investment
Divisions and the Fixed Account in the
proportion their respective values bear
to the contract value. The dollar amount
recaptured will never exceed the dollar
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2–3
3–4
4.00
3.60
3.00
2.25
1.25
0.00
0.00
0.00
4–5
3.75
3.00
2.25
1.25
0.00
0.00
0.00
0.00
amount of the 6% Contract
Enhancement added to the Perspective
Contract. Recapture charges will be
applied upon electing to commence
income payments, even in a situation
where the withdrawal charge is waived.
22. Jackson does not assess the
recapture charge on any payments paid
out as: Death benefits; withdrawals of
earnings; withdrawals taken under the
free withdrawal provision, which allows
for free withdrawals (where a
withdrawal is taken that exceeds the
free withdrawal amount, the recapture
charge is imposed only on the excess
amount above the free withdrawal
amount); withdrawals necessary to
satisfy the required minimum
distribution of the Internal Revenue
Code (if the withdrawal requested
exceeds the required minimum
distribution, the recapture charge will
not be waived on the required minimum
distribution); if permitted by the
owner’s state, withdrawals of up to
$250,000 from the JNL Separate
Account, the Fixed Account or the
GMWB Fixed Account in connection
with the owner’s terminal illness or if
the owner needs extended hospital or
nursing home care as provided in the
Perspective Contract; or if permitted by
the owner’s state, withdrawals of up to
25% (12.5% for each of two joint
owners) of contract value from the JNL
Separate Account, the Fixed Account or
the GMWB Fixed Account in
connection with certain serious medical
conditions specified in the Perspective
Contract.
23. The contract value will reflect any
gains or losses attributable to the 6%
Contract Enhancement described above.
The 6% Contract Enhancement and any
gains or losses attributable to the 6%
Contract Enhancement will be
considered earnings under the
Perspective Contracts for tax purposes
and for purposes of calculating the free
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5–6
2.50
2.25
1.25
0.00
0.00
0.00
0.00
0.00
6–7
2.00
1.25
0.00
0.00
0.00
0.00
0.00
0.00
7+
0.75
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
withdrawal amounts and the Earnings
Protection Benefit.
24. The Perspective Contracts have a
‘‘free-look’’ period of ten days after the
owner receives the Perspective Contract
(or any longer period required by state
law). Contract value (or premiums paid,
as may be required by state law), less
the full amount of any Contract
Enhancement(s) is returned upon
exercise of free look rights by an owner.
Therefore, 100% of the 6% Contract
Enhancement will be recaptured under
all circumstances if an owner returns
the Perspective Contract during the freelook period, but any gain or loss on
investments of the 6% Contract
Enhancement would be retained by the
owner. The dollar amount recaptured
will never exceed the dollar amount of
the 6% Contract Enhancement added to
the Perspective Contract. A withdrawal
charge will not be assessed upon
exercise of free look rights.
25. In addition to the 6% Contract
Enhancement charge and 6% Contract
Enhancement recapture charge, the
Perspective Contracts may have a
mortality and expense risk charge, an
administration charge, a contract
maintenance charge, a charge for the
Earnings Protection Benefit, an optional
GMWB charge, a fee for the five-year
withdrawal charge period, an optional
death benefit charge, a transfer fee for
transfers in excess of 15 in a contract
year, a commutation fee that applies
only upon withdrawals from income
payments for a fixed period, and a
withdrawal charge that applies to total
withdrawals, partial withdrawals in
excess of amounts permitted to be
withdrawn under the Perspective
Contract’s free withdrawal provision
and on the income date (the date
income payments commence) if the
income date is within a year of the date
the Perspective Contract was issued.
26. The withdrawal charges shown in
the table below apply to Perspective II
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Contracts with and without the five-year
withdrawal charge option and the
Perspective L Contracts. The amount of
the withdrawal charge depends upon
when the charge is imposed based on
Withdrawal Charge (as a percentage of premium payments).
Completed Years Since Receipt of Premium ...........................................................
Withdrawal Charge (Base Withdrawal Charge Schedule for Offerings Under File No.
333–70472) (Perspective II) .........................................................................................
Withdrawal Charge if Five-Year Period is elected (Optional Five-Year Withdrawal
Charge Schedule for Offerings Under File No. 333–70472) (Perspective II) ..............
Withdrawal Charge (Base Withdrawal Charge Schedule for Offerings Under File No.
333–119656) (Perspective L Series) ...........................................................................
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27. Jackson does not assess the
withdrawal charge on any payments
paid out as: Death benefits; election to
begin income payments after the first
contract year under JNL Contracts;
cancellation of the Contract upon
exercise of free look rights by an owner;
withdrawals of earnings; withdrawals
taken under the free withdrawal
provision, which allows for free
withdrawals up to 10% of remaining
premium, less earnings (where a
withdrawal is taken that exceeds the
free withdrawal amount, the withdrawal
charge is imposed only on the excess
amount above the free withdrawal
amount); withdrawals necessary to
satisfy the required minimum
distribution of the Internal Revenue
Code (if the withdrawal requested
exceeds the required minimum
distribution, the withdrawal charge will
not be waived on the required minimum
distribution); if permitted by the
owner’s state, withdrawals of up to
$250,000 from the Investment Divisions,
Fixed Account or GMWB Fixed Account
available under the Perspective
Contracts in connection with the
terminal illness of the owner of a
Contract, or in connection with
extended hospital or nursing home care
for the owner (this withdrawal charge
waiver is not available under JNLNY
Contracts); and if permitted by the
owner’s state, withdrawals of up to 25%
(12.5% each for two joint owners) of
contract value from the Investment
Divisions, Fixed Account or GMWB
Fixed Account available under the
Perspective Contracts in connection
with certain serious medical conditions
specified in the Contract.
Applicants’ Legal Analysis
1. Applicants state that Section 6(c) of
the 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 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
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16:52 Apr 05, 2011
Jkt 223001
the Completed Years since the receipt of
the related premium, as follows:
0–1
1–2
2–3
3–4
4–5
5–6
6–7
7+
8.5%
7.5%
6.5%
5.5%
5%
4%
2%
0%
8%
7%
6%
4%
2%
0%
0%
0%
8%
7.5%
6.5%
5.5%
0%
0%
0%
0%
investors and the purposes fairly
intended by the policy and provisions of
the Act. Applicants request that the
Commission, pursuant to Section 6(c) of
the Act, grant the exemptions requested
below with respect to the Contracts and
any Future Contracts funded by the
Separate Accounts or Other Accounts
that are issued by the Insurance
Companies and underwritten or
distributed by the Distributor or
Affiliated Broker-Dealers. Applicants
undertake that the Contracts will be
substantially similar in all material
respects to the Perspective Contracts
described in the Application.
Applicants believe that the requested
exemptions 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 Act.
2. Applicants state that Section 27 of
the Act regulates and imposes certain
restrictions on the sales of periodic
payment plan certificates issued by any
registered investment company.
Subsection (i) of Section 27 of the 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
proportionate share of the issuer’s
current net assets, or the cash equivalent
thereof.
3. Applicants submit that the
recapture of the 6% Contract
Enhancement in the circumstances set
forth in the Application would not
deprive an owner of his or her
proportionate share of the issuer’s
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
current net assets. A Contract owner’s
interest in the amount of the 6%
Contract Enhancement allocated to his
or her contract value upon the Insurance
Companies’ receipt of a premium
payment is not fully vested until seven
complete years following a premium
payment. Until or unless the amount of
any 6% Contract Enhancement is
vested, the Insurance Companies retain
the right and interest in the 6% Contract
Enhancement amount, although not in
the earnings attributable to that amount.
Applicants urge that when one of the
Insurance Companies recaptures the 6%
Contract Enhancement, it is simply
retrieving its own assets, and because a
Contract owner’s interest in the Contract
Enhancement is not vested, the Contract
owner has not been deprived of a
proportionate share of the Separate
Account’s assets, i.e., a share of the
Separate Account’s assets proportionate
to the Contract owner’s contract value.
4. In addition, Applicants represent
that it would be particularly unfair to
allow a Contract owner exercising the
free-look privilege to retain the 6%
Contract Enhancement amount under a
Contract that has been returned for a
refund after a period of only a few days.
If the Insurance Companies could not
recapture the Contract Enhancement,
individuals could purchase a Contract
with no intention of retaining it and
simply return it for a quick profit.
Furthermore, Applicants state that the
recapture of the 6% Contract
Enhancement relating to withdrawals
and to income payments within the first
seven contract years is designed to
protect the Insurance Companies against
Contract owners not holding the
Contract for a sufficient time period.
This recapture of the Contract
Enhancement within the first seven
contract years provides the Insurance
Companies with sufficient time to
recover the cost of the Contract
Enhancement and to avoid the financial
detriment that would result from a
shorter recapture period.
5. Applicants represent that it is not
administratively feasible to track the
Contract Enhancement amount in the
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Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices
Separate Accounts after the 6% Contract
Enhancement is applied. Accordingly,
the asset-based charges applicable to the
Separate Accounts will be assessed
against the entire amounts held in the
Separate Accounts, including any 6%
Contract Enhancement amounts. As a
result, the aggregate asset-based charges
assessed will be higher than those that
would be charged if the Contract
owner’s contract value did not include
any Contract Enhancement.
6. Applicants submit that the
provisions for recapture of any Contract
Enhancement under the Contracts do
not violate Sections 2(a)(32) and
27(i)(2)(A) of the Act. Sections 26(e) and
27(i) were added to the Act to
implement the purposes of the National
Securities Markets Improvement Act of
1996 and Congressional intent. The
application of a 6% Contract
Enhancement to premium payments
made under the Contracts should not
raise any questions as to compliance by
the Insurance Companies with the
provisions of Section 27(i). However, to
avoid any uncertainty as to full
compliance with the Act, Applicants
request an order granting an exemption
from Sections 2(a)(32) and 27(i)(2)(A), to
the extent deemed necessary, to permit
the recapture of the 6% Contract
Enhancement under the circumstances
described in the Application, without
the loss of relief from Section 27
provided by Section 27(i).
7. Applicants state that Section 22(c)
of the 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 under the Act 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.
8. Applicants state that it is possible
that someone might view the Insurance
Companies’ recapture of the 6%
Contract Enhancement as resulting in
the redemption of redeemable securities
for a price other than one based on the
current net asset value of the Separate
Accounts. Applicants contend,
VerDate Mar<15>2010
16:52 Apr 05, 2011
Jkt 223001
however, that the recapture of the 6%
Contract Enhancement does not violate
Rule 22c–1. The recapture of some or all
of the 6% Contract Enhancement does
not involve either of the evils that
Section 22(c) and Rule 22c–1 were
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
repurchase at a price above it, and (ii)
other unfair results, including
speculative trading practices. To effect a
recapture of a 6% Contract
Enhancement, the Insurance Companies
will redeem interests in a Contract
owner’s contract value at a price
determined on the basis of the current
net asset value of the Separate
Accounts. The amount recaptured will
be less than or equal to the amount of
the Contract Enhancement that the
Insurance Companies paid out of their
general account assets. Although
Contract owners will be entitled to
retain any investment gains attributable
to the 6% Contract Enhancement and to
bear any investment losses attributable
to the 6% Contract Enhancement, the
amount of such gains or losses will be
determined on the basis of the current
net asset values of the Separate
Accounts. Thus, no dilution will occur
upon the recapture of the Contract
Enhancement. 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 6% Contract
Enhancement. Because neither of the
harms that Rule 22c–1 was meant to
address is found in the recapture of the
Contract Enhancement, Applicants
assert that Rule 22c–1 should not apply
to the 6% Contract Enhancement.
However, to avoid any uncertainty as to
full compliance with Rule 22c–1,
Applicants request an order granting an
exemption from the provisions of Rule
22c–1 to the extent deemed necessary to
permit them to recapture the Contract
Enhancement under the Contracts.
9. Applicants also submit that
extending the requested relief to
encompass Future Contracts and Other
Accounts is appropriate in the public
interest because it promotes
competitiveness in the variable annuity
market by eliminating the need to file
redundant exemptive applications prior
to introducing new variable annuity
contracts. Applicants assert that
investors would receive no benefit or
additional protection by requiring
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Frm 00127
Fmt 4703
Sfmt 4703
19155
Applicants to repeatedly seek exemptive
relief that would present no issues
under the Act not already addressed in
the Application.
10. Applicants submit, for the reasons
stated herein, that their exemptive
request meets the standards set out in
Section 6(c) of the Act, namely, that the
exemptions requested 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 Act and that,
therefore, the Commission should grant
the requested order.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–8081 Filed 4–5–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64166; File No. SR–FINRA–
2010–035]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment No. 1, Relating to
Amendments to the Discovery Guide
and Rules 12506 and 12508 of the
Code of Arbitration Procedure for
Customer Disputes
April 1, 2011.
I. Introduction
On July 12, 2010, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Exchange Act’’ or ‘‘Act’’) 1 and
Rule 19b–4 thereunder,2 a proposed rule
change to amend the Discovery Guide,
which includes Document Production
Lists, and to make conforming changes
to Rules 12506 and 12508 of the Code
of Arbitration Procedure for Customer
Disputes (‘‘Customer Code’’). The
proposed rule change was published for
comment in the Federal Register on
August 3, 2010.3 The Commission
received 55 comment letters on the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Exchange Act Release No. 62584 (July 28,
2010), 75 FR 45685 (August 3, 2010).
2 17
E:\FR\FM\06APN1.SGM
06APN1
]]>Agencies
[Federal Register Volume 76, Number 66 (Wednesday, April 6, 2011)]
[Notices]
[Pages 19150-19155]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8081]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-29621; File No. 812-13841]
Jackson National Life Insurance Company, et al.
March 31, 2011.
AGENCY: The Securities and Exchange Commission (``Commission'')
ACTION: Notice of application for an order under Section 6(c) of the
Investment Company Act of 1940 (the ``Act'') granting exemptions from
the provisions of Sections 2(a)(32), 22(c) and 27(i)(2)(A) of the Act
and Rule 22c-1 thereunder to permit the recapture of contract
enhancement endorsement credits applied to purchase payments made under
certain deferred variable annuity contracts.
-----------------------------------------------------------------------
Applicants: Jackson National Life Insurance Company (``Jackson''),
Jackson National Separate Account--I (the ``JNL Separate Account''),
Jackson National Life Insurance Company of New York (``JNLNY'') and
collectively with Jackson, the ``Insurance Companies,'' and
individually as made appropriate by the context, an ``Insurance
Company''), JNLNY Separate Account I (the ``JNLNY Separate Account,''
collectively with the JNL Separate Account, the ``Separate Accounts,''
and individually as made appropriate by the context, a ``Separate
Account'') and Jackson National Life Distributors LLC (``Distributor,''
and collectively with the Insurance Companies and the Separate
Accounts, ``Applicants'').
Summary of Application: Applicants seek an order under Section 6(c) of
the Act to exempt certain transactions from the provisions of Sections
2(a)(32), 22(c), and 27(i)(2)(A) of the Act and Rule 22c-1 thereunder,
to the extent necessary to permit the recapture, under specified
circumstances, of certain credits under the 6% Contract Enhancements
Endorsement (the ``6% Contract Enhancement'') when those credits have
been applied to purchase payments made (a) Under the deferred variable
annuity contracts more particularly described in this notice that
Jackson has issued through the JNL Separate Account (the ``Perspective
Contracts''); (b) under other contracts that Jackson has issued through
the JNL Separate Account (the ``JNL Contracts''); (c) under the
contracts that JNLNY has issued through the JNLNY Separate Account (the
``JNLNY Contracts''); (d) under the Perspective Contracts as they may
be subsequently updated; and (e) under other contracts that the
Insurance Companies may issue in the future with the 6% Contract
Enhancement (``Future Contracts,'' and together with the other
contracts referred to in this paragraph, the ``Contracts''), either
through their existing separate accounts or future separate accounts
(``Other Accounts''). Applicants also request that the order being
sought extend to any other Financial Industry Regulatory Authority
(``FINRA'') member broker-dealer controlling or controlled by, or under
common control with, Jackson, whether existing or created in the
future, that serves as distributor or principal underwriter for the
Contracts (``Affiliated Broker-Dealers'') and any successors in
interest to the Applicants.
Filing Date: The application was filed on November 8, 2010, and amended
on March 29, 2011.
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 p.m. on April 22, 2011, 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 Secretary of the Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090. Applicants: c/o Jackson National Life
Insurance Company, 1 Corporate Way, Lansing, Michigan 48951, Attn:
Frank J. Julian, Esq.
FOR FURTHER INFORMATION CONTACT: Ellen J. Sazzman, Senior Counsel, at
[[Page 19151]]
(202) 551-6762, or Harry Eisenstein, Senior Special Counsel, at (202)
551-6795, Office of Insurance Products, Division of Investment
Management.
SUPPLEMENTARY INFORMATION: The following is a summary of the
Application. The complete Application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box at https://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. Jackson is a stock life insurance company organized under the
laws of the state of Michigan. Jackson is admitted to conduct life
insurance and annuity business in the District of Columbia and all
states except New York. Jackson is ultimately a wholly owned subsidiary
of Prudential plc (London, England).
2. JNLNY is a stock life insurance company organized under the laws
of the state of New York. JNLNY is admitted to conduct life insurance
and annuity business in Delaware, Michigan, and New York. JNLNY is
ultimately a wholly-owned subsidiary of Prudential plc (London,
England).
3. The JNL Separate Account was established by Jackson pursuant to
the provisions of Michigan law and the authority granted under a
resolution of Jackson's Board of Directors. The JNLNY Separate Account
was established by JNLNY pursuant to the provisions of New York law and
the authority granted under a resolution of JNLNY's Board of Directors.
Jackson and JNLNY are the depositors of their respective Separate
Accounts. Each of the Separate Accounts meets the definition of a
``separate account'' under the federal securities laws and each is
registered with the Commission as a unit investment trust under the Act
(File Nos. 811-8664 and 811-8401, respectively). JNL Separate Account
and JNLNY Separate Account will fund, respectively, the variable
benefits available under the JNL Contracts and the JNLNY Contracts.
4. The assets of each Separate Account legally belong to the
Insurance Company of which it is a segregated asset account and the
obligations under the Contracts are obligations of that Insurance
Company. However the Contract assets in the Separate Accounts are not
chargeable with liabilities arising out of any other business the
Insurance Companies may conduct. All of the income, gains, and losses
resulting from these assets are credited to or charged against the
Contracts and not against any other contracts the Insurance Companies
may issue. The registration statements relating to the offering of the
Perspective Contracts were filed under the Securities Act of 1933 (the
``1933 Act'') (File No. 333-70472 (``Perspective II Contracts'') and
File No. 333-119656 (``Perspective L Contracts'')).
5. The Distributor is a wholly owned subsidiary of Jackson and
serves as the distributor of the Contracts. The Distributor is
registered with the Commission as a broker-dealer under the Securities
Exchange Act of 1934 (the ``1934 Act'') and is a member of FINRA. The
Distributor enters into selling group agreements with affiliated and
unaffiliated broker-dealers. The Contracts are sold by licensed
insurance agents, where the Contracts may be lawfully sold, who are
registered representatives of broker-dealers that are registered under
the 1934 Act and are members of FINRA.
6. The Perspective Contracts (Perspective II Contracts and
Perspective L Contracts) are the only Contracts that will rely
immediately on the relief requested. However, Applicants represent that
the JNL Contracts, the JNLNY Contracts, the Perspective Contracts as
they may be subsequently updated, and the Future Contracts (the
``Contracts'') are or will be substantially similar in all material
respects to the Perspective Contracts.
7. The Perspective Contracts require a minimum initial premium
payment of $5,000 or $10,000 under most circumstances depending on the
contract ($2,000 for a qualified plan contract). Subsequent payments
may be made at any time during the accumulation phase. Each subsequent
payment must be at least $500 ($50 under an automatic payment plan).
Prior approval of the Insurance Company is required for aggregate
premium payments of over $1,000,000.
8. The Perspective Contracts permit owners to accumulate contract
values on a fixed basis through allocations to one of six fixed
accounts (the ``Fixed Accounts''). Fixed Account allocation and
transfer restrictions initially will be imposed in connection with the
subject 6% Contract Enhancement during the first seven contract years.
In addition, if the optional Jackson Select Guaranteed Minimum
Withdrawal Benefit (``GMWB'') or the optional Jackson Select with Joint
Option Guaranteed Minimum Withdrawal Benefit (``GMWB'') is elected in
the JNL Contracts, automatic transfers of an owner's contract value may
be allocated to a fixed account designated for these guaranteed minimum
withdrawal benefits (``GMWB Fixed Account'').
9. The Perspective Contracts also permit owners to accumulate
contract values on a variable basis, through allocations to one or more
of the sub-accounts, also referred to as investment divisions, of the
Separate Accounts (the ``Investment Divisions,'' collectively with the
Fixed Account and the GMWB Fixed Account, the ``Allocation Options'').
Under the Perspective Contracts, ninety-nine Investment Divisions
currently are expected to be offered but additional Investment
Divisions may be offered in the future and some could be eliminated or
combined with other Investment Divisions in the future. Similarly,
future Perspective Contracts may offer additional or different
Investment Divisions. Each Investment Division will invest in shares of
a corresponding series (``Series'') of JNL Series Trust (``Trust'') or
JNL Variable Fund LLC (``Fund'') (collectively the ``Trust and Fund'').
The Trust and Fund are open-end management investment companies
registered under the Act and their shares are registered under the 1933
Act.
10. Transfers among the Investment Divisions are permitted. Certain
transfers to, from and among the Fixed Account Options are also
permitted during the Perspective Contracts' accumulation phase, but are
subject to certain adjustments and limitations.
11. If the owner dies during the accumulation phase of the
Perspective Contracts, the beneficiary named by the owner is paid a
death benefit by the Insurance Company. The Perspective Contracts' base
death benefit, which applies unless an optional death benefit has been
elected, is a payment to the beneficiary of the greater of: (i)
Contract value on the date the Insurance Company receives proof of
death and completed claim forms from the beneficiary or (ii) the total
premiums paid under the Perspective Contract minus any prior
withdrawals (including any withdrawal charges, recapture charges or
other charges or adjustments applicable to such withdrawals).
12. The owner may be offered optional death benefit endorsements
that can change the death benefit paid to the beneficiary. The optional
death benefit endorsements, in general, provide that withdrawals
(including any withdrawal charges, recapture charges and other charges
or adjustments to such withdrawal) will reduce the benefit base that
determines the amount of the death benefit. The Perspective Contracts
may also offer various GMWB optional endorsements.
13. The Perspective Contracts offer fixed and variable versions of
the
[[Page 19152]]
following four types of annuity payment or ``income payment'': life
income, joint and survivor, life annuity with at least 120 or 240
monthly payments guaranteed to be paid (although not guaranteed as to
amount if variable), and income for a specified period of 5 to 30
years. The Insurance Companies may also offer other income payment
options.
14. Perspective Contracts currently offer contract enhancement
endorsements (``Contract Enhancement(s)''), all of which are optional
although Future Contracts may have Contract Enhancements which are not
optional. The Contract Enhancements provide for Jackson to add from its
general account assets an additional amount to the owner's contract
value upon receipt of the initial premium payment, and for each
subsequent premium payment received within the first seven contract
years (five for the 2% Contract Enhancement). The Contract Enhancements
that may be elected at issue currently vary in amount between 2% and
5%. The Contract Enhancement percentages that are credited in each case
also vary, depending upon the applicable percentage and contract year
in which the premium payment is received. The Contract Enhancements
offered under the Perspective Contracts may vary depending upon the
design of the contract, the date of issue of a contract or the
distribution channel. The 6% Contract Enhancement would not be
available if the 20% Additional Free Withdrawal endorsement is elected
and vice versa. Also if a Contract Enhancement is elected, allocations
and transfers to the Fixed Account Options currently will be
restricted, as fully described in the prospectus. The restrictions
apply during the first seven contract years (five contract years for
the 2% Contract Enhancement). These restrictions will also apply to the
6% Contract Enhancement.
15. Following is the table for the existing 5% Contract Enhancement
that shows the variation in the percentages based upon the year of
receipt of the applicable premium payment. This table shows how
existing 5% Contract Enhancements are structured and how the 6%
Contract Enhancement will be structured.
5% Contract Enhancement
[In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Contract year premium is received
---------------------------------------------------------------------------------------
0-1 1-2 2-3 3-4 4-5 5-6 6-7 7+
--------------------------------------------------------------------------------------------------------------------------------------------------------
Contract Enhancement Percentage of the Premium Payment.......... 5.00 4.50 3.75 3.00 2.25 1.75 1.00 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
16. Applicants are proposing to add a 6% Contract Enhancement to
the Perspective Contracts that is modeled on the above 5% structure, as
follows:
6% Contract Enhancement
[In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Contract year premium is received
---------------------------------------------------------------------------------------
0-1 1-2 2-3 3-4 4-5 5-6 6-7 7+
--------------------------------------------------------------------------------------------------------------------------------------------------------
Contract Enhancement Percentage of the Premium Payment.......... 6.00 5.50 4.75 4.00 3.25 2.50 1.25 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
17. Jackson will allocate the 6% Contract Enhancement to the Fixed
Accounts and/or Investment Divisions in the same proportion as the
premium payment allocation. The 6% Contract Enhancement is available
only to owners 87 years old and younger. There is an asset-based charge
for the 6% Contract Enhancement. The asset-based charges for the 6%
Contract Enhancement applies only for the first seven contract years,
as opposed to seven years from the date of the premium payment, and is
0.832%, based on the average daily net asset value of the allocations
to the Investment Divisions. A charge equal to the asset-based charge
will also be assessed against any amounts contract owners have
allocated to the Fixed Accounts, through a reduction in the annual
credited rate of interest resulting in a lower annual credited interest
rate that would apply to the Fixed Account if the Contract Enhancement
had not been elected.
18. Jackson will recapture all or a declining portion of the 6%
Contract Enhancement by imposing a recapture charge whenever an owner:
(i) Makes a total withdrawal within the recapture charge period up to
seven years after a premium payment, or a partial withdrawal of
corresponding premiums within the recapture charge period in excess of
those permitted under the Perspective Contracts' free withdrawal
provisions, unless the withdrawal is made for certain health-related
emergencies specified in the Perspective Contracts; (ii) elects to
receive payments under an income payment option within the recapture
charge period; or (iii) returns the Perspective Contract during the
free-look period.
19. The amount of the 6% Contract Enhancement recapture charge
varies depending on the corresponding declining amount of the Contract
Enhancement based on the contract year when the premium payment being
withdrawn was received and when the charge is imposed based on the
Completed Years since the receipt of the related premium, as follows:
[[Page 19153]]
6% Contract Enhancement Recapture Charge
[In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Contract year premium is received
Completed years since receipt of premium -------------------------------------------------------------------------------------------------------
0-1 1-2 2-3 3-4 4-5 5-6 6-7 7+
--------------------------------------------------------------------------------------------------------------------------------------------------------
0-1............................................. 5.00 4.75 4.00 3.75 2.50 2.00 0.75 0.00
1-2............................................. 4.75 4.25 3.60 3.00 2.25 1.25 0.00 0.00
2-3............................................. 4.00 3.75 3.00 2.25 1.25 0.00 0.00 0.00
3-4............................................. 3.75 3.00 2.25 1.25 0.00 0.00 0.00 0.00
4-5............................................. 3.00 2.00 1.25 0.00 0.00 0.00 0.00 0.00
5-6............................................. 2.25 1.25 0.00 0.00 0.00 0.00 0.00 0.00
6-7............................................. 1.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00
7+.............................................. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
20. A ``Completed Year'' is the succeeding twelve months from the
date on which the Insurance Companies receive a premium payment.
Completed Years specifies the years from the date of receipt of the
premium and does not refer to contract years. If the premium receipt
date is on the issue date of the Contract, then Completed Year 0-1 does
not include the first contract anniversary. The first contract
anniversary begins Completed Year 1-2 and each successive Completed
Year begins with the contract anniversary of the preceding contract
year and ends the day before the next contract anniversary. If the
premium receipt date is other than the issue date or a subsequent
contract anniversary, there is no correlation of the contract
anniversary date and Completed Years. For example, if the issue date is
January 15, 2010 and a premium payment is received on February 28, 2010
then, although the first contract anniversary is January 15, 2011, the
end of Completed Year 0-1 for that premium payment would be February
27, 2011, and February 28, 2011 begins Completed Year 1-2. The first
contract year (contract year 0-1) starts on the issue date and extends
to, but does not include, the first contract anniversary. Subsequent
contract years start on an anniversary date and extend to, but do not
include, the next anniversary date.
21. The recapture charge percentage will be applied to the
corresponding premium reflected in the amount withdrawn or the amount
applied to income payments that remain subject to a recapture charge.
Earnings are withdrawn first without charge and the oldest purchase
payments are withdrawn first. The amount recaptured will be taken from
the Investment Divisions and the Fixed Account in the proportion their
respective values bear to the contract value. The dollar amount
recaptured will never exceed the dollar amount of the 6% Contract
Enhancement added to the Perspective Contract. Recapture charges will
be applied upon electing to commence income payments, even in a
situation where the withdrawal charge is waived.
22. Jackson does not assess the recapture charge on any payments
paid out as: Death benefits; withdrawals of earnings; withdrawals taken
under the free withdrawal provision, which allows for free withdrawals
(where a withdrawal is taken that exceeds the free withdrawal amount,
the recapture charge is imposed only on the excess amount above the
free withdrawal amount); withdrawals necessary to satisfy the required
minimum distribution of the Internal Revenue Code (if the withdrawal
requested exceeds the required minimum distribution, the recapture
charge will not be waived on the required minimum distribution); if
permitted by the owner's state, withdrawals of up to $250,000 from the
JNL Separate Account, the Fixed Account or the GMWB Fixed Account in
connection with the owner's terminal illness or if the owner needs
extended hospital or nursing home care as provided in the Perspective
Contract; or if permitted by the owner's state, withdrawals of up to
25% (12.5% for each of two joint owners) of contract value from the JNL
Separate Account, the Fixed Account or the GMWB Fixed Account in
connection with certain serious medical conditions specified in the
Perspective Contract.
23. The contract value will reflect any gains or losses
attributable to the 6% Contract Enhancement described above. The 6%
Contract Enhancement and any gains or losses attributable to the 6%
Contract Enhancement will be considered earnings under the Perspective
Contracts for tax purposes and for purposes of calculating the free
withdrawal amounts and the Earnings Protection Benefit.
24. The Perspective Contracts have a ``free-look'' period of ten
days after the owner receives the Perspective Contract (or any longer
period required by state law). Contract value (or premiums paid, as may
be required by state law), less the full amount of any Contract
Enhancement(s) is returned upon exercise of free look rights by an
owner. Therefore, 100% of the 6% Contract Enhancement will be
recaptured under all circumstances if an owner returns the Perspective
Contract during the free-look period, but any gain or loss on
investments of the 6% Contract Enhancement would be retained by the
owner. The dollar amount recaptured will never exceed the dollar amount
of the 6% Contract Enhancement added to the Perspective Contract. A
withdrawal charge will not be assessed upon exercise of free look
rights.
25. In addition to the 6% Contract Enhancement charge and 6%
Contract Enhancement recapture charge, the Perspective Contracts may
have a mortality and expense risk charge, an administration charge, a
contract maintenance charge, a charge for the Earnings Protection
Benefit, an optional GMWB charge, a fee for the five-year withdrawal
charge period, an optional death benefit charge, a transfer fee for
transfers in excess of 15 in a contract year, a commutation fee that
applies only upon withdrawals from income payments for a fixed period,
and a withdrawal charge that applies to total withdrawals, partial
withdrawals in excess of amounts permitted to be withdrawn under the
Perspective Contract's free withdrawal provision and on the income date
(the date income payments commence) if the income date is within a year
of the date the Perspective Contract was issued.
26. The withdrawal charges shown in the table below apply to
Perspective II
[[Page 19154]]
Contracts with and without the five-year withdrawal charge option and
the Perspective L Contracts. The amount of the withdrawal charge
depends upon when the charge is imposed based on the Completed Years
since the receipt of the related premium, as follows:
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Withdrawal Charge (as a percentage of premium payments).
Completed Years Since Receipt of Premium............ 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7+
Withdrawal Charge (Base Withdrawal Charge Schedule for 8.5% 7.5% 6.5% 5.5% 5% 4% 2% 0%
Offerings Under File No. 333-70472) (Perspective II)...
Withdrawal Charge if Five-Year Period is elected 8% 7% 6% 4% 2% 0% 0% 0%
(Optional Five-Year Withdrawal Charge Schedule for
Offerings Under File No. 333-70472) (Perspective II)...
Withdrawal Charge (Base Withdrawal Charge Schedule for 8% 7.5% 6.5% 5.5% 0% 0% 0% 0%
Offerings Under File No. 333-119656) (Perspective L
Series)................................................
----------------------------------------------------------------------------------------------------------------
27. Jackson does not assess the withdrawal charge on any payments
paid out as: Death benefits; election to begin income payments after
the first contract year under JNL Contracts; cancellation of the
Contract upon exercise of free look rights by an owner; withdrawals of
earnings; withdrawals taken under the free withdrawal provision, which
allows for free withdrawals up to 10% of remaining premium, less
earnings (where a withdrawal is taken that exceeds the free withdrawal
amount, the withdrawal charge is imposed only on the excess amount
above the free withdrawal amount); withdrawals necessary to satisfy the
required minimum distribution of the Internal Revenue Code (if the
withdrawal requested exceeds the required minimum distribution, the
withdrawal charge will not be waived on the required minimum
distribution); if permitted by the owner's state, withdrawals of up to
$250,000 from the Investment Divisions, Fixed Account or GMWB Fixed
Account available under the Perspective Contracts in connection with
the terminal illness of the owner of a Contract, or in connection with
extended hospital or nursing home care for the owner (this withdrawal
charge waiver is not available under JNLNY Contracts); and if permitted
by the owner's state, withdrawals of up to 25% (12.5% each for two
joint owners) of contract value from the Investment Divisions, Fixed
Account or GMWB Fixed Account available under the Perspective Contracts
in connection with certain serious medical conditions specified in the
Contract.
Applicants' Legal Analysis
1. Applicants state that Section 6(c) of the 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 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 Act. Applicants request
that the Commission, pursuant to Section 6(c) of the Act, grant the
exemptions requested below with respect to the Contracts and any Future
Contracts funded by the Separate Accounts or Other Accounts that are
issued by the Insurance Companies and underwritten or distributed by
the Distributor or Affiliated Broker-Dealers. Applicants undertake that
the Contracts will be substantially similar in all material respects to
the Perspective Contracts described in the Application. Applicants
believe that the requested exemptions 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 Act.
2. Applicants state that Section 27 of the Act regulates and
imposes certain restrictions on the sales of periodic payment plan
certificates issued by any registered investment company. Subsection
(i) of Section 27 of the 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 proportionate share of the issuer's current net
assets, or the cash equivalent thereof.
3. Applicants submit that the recapture of the 6% Contract
Enhancement in the circumstances set forth in the Application would not
deprive an owner of his or her proportionate share of the issuer's
current net assets. A Contract owner's interest in the amount of the 6%
Contract Enhancement allocated to his or her contract value upon the
Insurance Companies' receipt of a premium payment is not fully vested
until seven complete years following a premium payment. Until or unless
the amount of any 6% Contract Enhancement is vested, the Insurance
Companies retain the right and interest in the 6% Contract Enhancement
amount, although not in the earnings attributable to that amount.
Applicants urge that when one of the Insurance Companies recaptures the
6% Contract Enhancement, it is simply retrieving its own assets, and
because a Contract owner's interest in the Contract Enhancement is not
vested, the Contract owner has not been deprived of a proportionate
share of the Separate Account's assets, i.e., a share of the Separate
Account's assets proportionate to the Contract owner's contract value.
4. In addition, Applicants represent that it would be particularly
unfair to allow a Contract owner exercising the free-look privilege to
retain the 6% Contract Enhancement amount under a Contract that has
been returned for a refund after a period of only a few days. If the
Insurance Companies could not recapture the Contract Enhancement,
individuals could purchase a Contract with no intention of retaining it
and simply return it for a quick profit. Furthermore, Applicants state
that the recapture of the 6% Contract Enhancement relating to
withdrawals and to income payments within the first seven contract
years is designed to protect the Insurance Companies against Contract
owners not holding the Contract for a sufficient time period. This
recapture of the Contract Enhancement within the first seven contract
years provides the Insurance Companies with sufficient time to recover
the cost of the Contract Enhancement and to avoid the financial
detriment that would result from a shorter recapture period.
5. Applicants represent that it is not administratively feasible to
track the Contract Enhancement amount in the
[[Page 19155]]
Separate Accounts after the 6% Contract Enhancement is applied.
Accordingly, the asset-based charges applicable to the Separate
Accounts will be assessed against the entire amounts held in the
Separate Accounts, including any 6% Contract Enhancement amounts. As a
result, the aggregate asset-based charges assessed will be higher than
those that would be charged if the Contract owner's contract value did
not include any Contract Enhancement.
6. Applicants submit that the provisions for recapture of any
Contract Enhancement under the Contracts do not violate Sections
2(a)(32) and 27(i)(2)(A) of the Act. Sections 26(e) and 27(i) were
added to the Act to implement the purposes of the National Securities
Markets Improvement Act of 1996 and Congressional intent. The
application of a 6% Contract Enhancement to premium payments made under
the Contracts should not raise any questions as to compliance by the
Insurance Companies with the provisions of Section 27(i). However, to
avoid any uncertainty as to full compliance with the Act, Applicants
request an order granting an exemption from Sections 2(a)(32) and
27(i)(2)(A), to the extent deemed necessary, to permit the recapture of
the 6% Contract Enhancement under the circumstances described in the
Application, without the loss of relief from Section 27 provided by
Section 27(i).
7. Applicants state that Section 22(c) of the 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 under the Act 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.
8. Applicants state that it is possible that someone might view the
Insurance Companies' recapture of the 6% Contract Enhancement as
resulting in the redemption of redeemable securities for a price other
than one based on the current net asset value of the Separate Accounts.
Applicants contend, however, that the recapture of the 6% Contract
Enhancement does not violate Rule 22c-1. The recapture of some or all
of the 6% Contract Enhancement does not involve either of the evils
that Section 22(c) and Rule 22c-1 were 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 repurchase at a
price above it, and (ii) other unfair results, including speculative
trading practices. To effect a recapture of a 6% Contract Enhancement,
the Insurance Companies will redeem interests in a Contract owner's
contract value at a price determined on the basis of the current net
asset value of the Separate Accounts. The amount recaptured will be
less than or equal to the amount of the Contract Enhancement that the
Insurance Companies paid out of their general account assets. Although
Contract owners will be entitled to retain any investment gains
attributable to the 6% Contract Enhancement and to bear any investment
losses attributable to the 6% Contract Enhancement, the amount of such
gains or losses will be determined on the basis of the current net
asset values of the Separate Accounts. Thus, no dilution will occur
upon the recapture of the Contract Enhancement. 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 6% Contract
Enhancement. Because neither of the harms that Rule 22c-1 was meant to
address is found in the recapture of the Contract Enhancement,
Applicants assert that Rule 22c-1 should not apply to the 6% Contract
Enhancement. However, to avoid any uncertainty as to full compliance
with Rule 22c-1, Applicants request an order granting an exemption from
the provisions of Rule 22c-1 to the extent deemed necessary to permit
them to recapture the Contract Enhancement under the Contracts.
9. Applicants also submit that extending the requested relief to
encompass Future Contracts and Other Accounts is appropriate in the
public interest because it promotes competitiveness in the variable
annuity market by eliminating the need to file redundant exemptive
applications prior to introducing new variable annuity contracts.
Applicants assert that investors would receive no benefit or additional
protection by requiring Applicants to repeatedly seek exemptive relief
that would present no issues under the Act not already addressed in the
Application.
10. Applicants submit, for the reasons stated herein, that their
exemptive request meets the standards set out in Section 6(c) of the
Act, namely, that the exemptions requested 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 Act and
that, therefore, the Commission should grant the requested order.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8081 Filed 4-5-11; 8:45 am]
BILLING CODE 8011-01-P
