Minnesota Life Insurance Company, et al.; Notice of Application, 75581-75585 [2013-29625]
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Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / Notices
to collect essential information from
individuals, including technical and
language skills, and availability for
Peace Corps service. The Peace Corps
will be changing its application process
to better match applicants to programs
based on their skills and interests. Due
to this change in the way applicants are
processed and an overall agency effort
to reduce the burden on applicants by
only asking the most essential
questions, the agency is developing a
new application.
Title: Peace Corps Volunteer
Application.
OMB Control Number: 0420-pending.
Type of Review: New.
Affected Public: General public.
Respondents’ Obligation To Reply:
Voluntary.
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Burden to the Public
a. Estimated number of respondents:
20,000.
b. Estimated average burden per
response: 1 hour.
c. Frequency of response: one time.
d. Annual reporting burden: 20,000.
e. Number of applications received
electronically (99%): 19,800.
f. Number of applications received in
hard copy (1%): 200.
General Description of Collection: The
Volunteer Application is used by Peace
Corps in its assessment of an
individual’s qualifications to serve as a
Peace Corps Volunteer. It is the
document of record for an individual’s
decision to apply for Peace Corps
service.
Request for Comment: Peace Corps
invites comments on whether the
proposed collections of information are
necessary for proper performance of the
functions of the Peace Corps, including
whether the information will have
practical use; the accuracy of the
agency’s estimate of the burden of the
proposed collection of information,
including the validity of the information
to be collected; and, ways to minimize
the burden of the collection of
information on those who are to
respond, including through the use of
automated collection techniques, when
appropriate, and other forms of
information technology.
This notice issued in Washington, DC,
on December 6, 2013.
Dated: December 12, 2013.
Denora Miller,
FOIA/Privacy Act Officer, Management.
[FR Doc. 2013–29661 Filed 12–11–13; 8:45 am]
BILLING CODE 6051–01–P
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to external review (45 CFR 800.503) is
also December 13, 2013.
OFFICE OF PERSONNEL
MANAGEMENT
Patient Protection and Affordable Care
Act; Establishment of the Multi-State
Plan Program for the Affordable
Insurance Exchanges; Announcement
Office of Personnel
Management (OPM).
ACTION: Notice of effective date.
AGENCY:
This document announces the
effective date of a regulatory provision
published in the Federal Register by
OPM on March 11, 2013 (78 FR 15559),
entitled ‘‘Patient Protection and
Affordable Care Act; Establishment of
the Multi-State Plan Program for the
Affordable Insurance Exchanges.’’
DATES: The effective date of OPM’s
regulatory provision relating to external
review (45 CFR 800.503) is December
13, 2013.
FOR FURTHER INFORMATION CONTACT:
Padma Shah by telephone at (202) 606–
2128, by FAX at (202) 606–0033, or by
email at mspp@opm.gov.
SUPPLEMENTARY INFORMATION: In the
final rule published on March 11, 2013,
OPM provided notice that the regulatory
provision relating to external review (45
CFR 800.503) will take effect on the
effective date of a technical amendment
to regulations implementing section
2719 of the Public Health Service (PHS)
Act, which apply to all nongrandfathered group health plans and
health insurance issuers, including
plans in the Multi-State Plan Program.
On November 13, 2013, the Departments
of Treasury, Labor, and Health and
Human Services (‘‘the Departments’’)
jointly published ‘‘Final Rules under the
Paul Wellstone and Pete Domenici
Mental Health Parity and Addiction
Equity Act of 2008; Technical
Amendment to External Review for
Multi-State Plan Program’’ (78 FR
68240). This final rule retains
provisions the Departments proposed on
March 21, 2013 (78 FR 17313),
implementing a technical amendment to
regulations for section 2719 of the PHS
Act. This final rule specifies that MultiState Plan coverage will be subject to
standards established for the Federal
external review process under section
2719(b)(2) of the PHS Act and paragraph
(d) of the internal claims and appeals
and external review regulations.
Additionally, the Departments’ final
rule corrects a typographical error in the
March 21, 2013 proposed rule. The
effective date of the Departments’
technical amendment is December 13,
2013, and accordingly, this document
advises the public that the effective date
of OPM’s regulatory provision relating
SUMMARY:
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75581
U.S. Office of Personnel Management.
Katherine Archuleta,
Director.
[FR Doc. 2013–29702 Filed 12–11–13; 8:45 am]
BILLING CODE 6325–64–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–30821; File No. 812–14158]
Minnesota Life Insurance Company, et
al.; Notice of Application
December 6, 2013.
The Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order pursuant to Section 6(c) of the
Investment Company Act of 1940, as
amended (the ‘‘1940 Act’’ or ‘‘Act’’),
granting exemptions from the provisions
of Sections 2(a)(32) and 27(i)(2)(A) of
the Act and rule 22c–1 under the Act.
APPLICANTS: Minnesota Life Insurance
Company (‘‘Minnesota Life’’ or
‘‘Insurance Company’’), Variable
Annuity Account (‘‘Separate Account’’),
and Securian Financial Services, Inc.
(‘‘SFS’’) (collectively, ‘‘Applicants’’).
SUMMARY: Summary of Application:
Applicants seek an order amending an
existing order pursuant to Section 6(c)
of the 1940 Act, exempting them from
the provisions of Sections 2(a)(32) and
27(i)(2)(A) of the 1940 Act and rule 22c1 under the Act to the extent necessary
to permit Applicants, under specified
circumstances, to recapture certain
bonuses (‘‘Credit Enhancements’’)
applied to cumulative net purchase
payments under certain deferred
variable annuity contracts issued by the
Insurance Company.
DATES: Filing Date: The application was
filed on May 23, 2013, and an amended
and restated application was filed on
August 9, 2013.
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 the
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 December 27, 2013, and
should be accompanied by proof of
service on the Applicants in the form of
an affidavit or, for lawyers, a certificate
of service. Hearing requests should state
the nature of the requester’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
AGENCY:
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notified of a hearing may request
notification by writing to the Secretary
of the Commission.
ADDRESSES: Secretary, SEC, 100 F Street
NE., Washington, D.C. 20549–1090.
Applicants, c/o Daniel P. Preiner,
Counsel, Minnesota Life Insurance
Company, 400 Robert Street North, St.
Paul, Minnesota 55101.
FOR FURTHER INFORMATION CONTACT:
Alberto H. Zapata, Senior Counsel, or
Joyce M. Pickholz, Branch Chief,
Insured Investments Office, Division of
Investment Management, at (202) 551–
6795.
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 for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm, or by
calling (202) 551–8090.
SUPPLEMENTARY INFORMATION:
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Applicants’ Representations
1. Applicants seek the exemptions
needed to recapture Credit
Enhancements applied to cumulative
net purchase payments that reach
certain aggregate amounts in accordance
with the formula described below made
under: (i) New series (e.g., B Series and
L Series) of new deferred variable
annuity contracts, including data pages,
riders and endorsements as described
below (the ‘‘New Contracts’’) and (ii)
any deferred variable annuity contracts,
including data pages, riders and
endorsements, substantially similar in
all material respects to the New
Contracts that Minnesota Life may issue
in the future (‘‘Future Contracts’’) (New
Contracts and Future Contracts referred
to collectively as the ‘‘Contracts’’).
Applicants request that the relief under
the order extend to any other separate
accounts of Minnesota Life and their
successors in interest that support the
Contracts (‘‘Future Accounts’’) and any
Financial Industry Regulatory Authority
(‘‘FINRA’’) member broker-dealers
controlling, controlled by, or under
common control with any Applicant,
whether existing or created in the
future, that in the future, may act as
principal underwriter for the Contracts
(‘‘Future Underwriters’’).
2. In 2007 and 2008, the Commission
issued orders granting exemptions that
permit, under certain circumstances, the
recapture of certain Credit
Enhancements (collectively, the
‘‘Existing Orders’’).1 Applicants wish to
1 See Investment Company Act Release Nos.
27960 (Aug. 30, 2007) (notice) and 27979 (Sept. 25,
2007) (order); Investment Company Act Release
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leave the Existing Orders intact, thus
allowing them to continue to recapture
Credit Enhancements under the
contracts described in those orders
(collectively, the ‘‘Prior Contracts’’).
3. The Existing Orders encompassed
relief for future contracts substantially
similar in all material respects to the
Prior Contracts. Applicants state that the
New Contracts differ from the Prior
Contracts in the following respects: (1)
The contract charges are slightly higher
in some series and slightly lower in
other series in the New Contracts; (2)
the schedule of deferred sales charge is
shorter in the L Series of the New
Contracts; (3) the New Contracts offer
different optional death benefit riders;
(4) the New Contracts offer different
optional guaranteed lifetime withdrawal
benefit riders; and (5) the New Contracts
do not offer the same fixed-interest
allocation options. Although Credit
Enhancement and recapture in the New
Contracts will be administered in a
manner that is substantially similar in
all material respects to that of the Prior
Contracts contemplated by the 2008
Order.
4. Minnesota Life is a stock life
insurance company organized under the
laws of Minnesota. Minnesota Life is
authorized to sell insurance and
annuities in all states (except New
York), and the District of Columbia.
Minnesota Life is the depositor and
sponsor for the Separate Account, as
those terms have been interpreted by the
Commission with respect to variable
annuity separate accounts. Minnesota
Life may establish one or more
additional Future Accounts for which it
will serve as depositor.
5. The Separate Account is a
segregated investment account under
Minnesota law. The Separate Account is
a ‘‘separate account’’ as defined by
Section 2(a)(37) of the 1940 Act and is
registered with the Commission as a
unit investment trust (File No. 811–
4294). A registration statement for
interests in the Separate Account
offered through the New Contracts has
been filed with the Commission under
the Securities Act of 1933, as amended,
on Form N–4, File No. 333–189593.
6. The Separate Account is divided
into a number of sub-accounts. Each
sub-account invests exclusively in
shares representing an interest in a
separate corresponding investment
portfolio of one of several series-type,
open-end management investment
companies. The assets of the Separate
Account support one or more varieties
of variable annuity contracts, including
Nos. 28321 (Jun. 26, 2008) (notice) and 28334 (Jul.
22, 2008) (order) (the ‘‘2008 Order’’).
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the Prior Contracts and the New
Contracts, among others. Minnesota Life
may issue Future Contracts through the
Separate Account. Minnesota Life also
may issue Contracts through Future
Accounts.
7. Securian Financial Services, Inc.
(‘‘SFS’’) is registered as a broker-dealer
under the Securities Exchange Act of
1934 and is a member of FINRA. SFS
serves as the principal underwriter of
the Separate Account and may act as
principal underwriter for Future
Accounts for Minnesota Life and
distributor for Future Contracts. Future
Underwriters also may act as principal
underwriter for Future Accounts and as
distributor for any of the Contracts.
8. The New Contracts are deferred
combination variable and fixed annuity
contracts that Minnesota Life may issue
to individuals on a ‘‘non-qualified’’
basis or in connection with certain types
of retirement plans that receive
favorable federal income tax treatment
under the Internal Revenue Code of
1986, as amended. The New Contracts
also make available a number of subaccounts of the Separate Account to
which a contract owner may allocate net
purchase payments and associated
Credit Enhancement(s), as described
below.
9. A contract owner’s initial purchase
payment must be at least $10,000
(unless a lower qualified plan limitation
applies). Thereafter, a contract owner
may choose the amount and frequency
of purchase payments, except that the
minimum subsequent purchase
payment is $500 ($100 for automatic
payment plans). A contract owner may
make transfers of contract value among
and between the sub-account options at
any time. Applicants have reserved the
right to impose a $10 charge for each
transfer when transfer requests exceed
12 in a single contract year, but are not
currently imposing the charge.
10. The New Contracts offer a contract
owner a variety of annuity payment
options. The contract owner may
annuitize at any time. If a deferred sales
charge (‘‘DSC’’) would otherwise apply
to New Contract withdrawals at the time
of annuitization, the DSC will be waived
for amounts applied to provide annuity
payments.
11. The New Contracts provide for an
annual administrative charge of $50 that
Minnesota Life deducts from the New
Contract’s accumulation value on each
contract anniversary and upon a full
surrender of a New Contract if the
greater of: (a) Contract value or (b)
purchase payments less withdrawals, is
less than $50,000. For the B Series of the
New Contracts, a daily mortality and
expense risk charge for the base New
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Contract is deducted from the assets of
the Separate Account at an annual rate
equal to 1.15% of average account
value, which is lower than the Prior
Contracts contemplated by the 2008
Order. For the L Series of the New
Contracts, a daily mortality and expense
risk charge for the base New Contract is
deducted from the assets of the Separate
Account at an annual rate equal to
1.55% of average account value, which
is higher than the Prior Contracts
contemplated by the 2008 Order. For
each series of the New Contracts, a daily
administrative charge for the base New
Contract is deducted from the assets of
the Separate Account at an annual rate
equal to 0.15% of average account
0–1
(percent)
Contract years since payment
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B Series Deferred Sales Charge ...................
L Series Deferred Sales Charge ....................
The DSC does not apply in any
circumstances under which Credit
Enhancements will be recaptured.
13. Subject to state availability, a
contract owner may elect to purchase an
optional living benefit rider. There are
currently eight different Guaranteed
Lifetime Withdrawal Benefit optional
riders available (the ‘‘GLWB Riders’’),
however, a contract owner may only
elect a single living benefit on a New
Contract. In the future, Minnesota Life
may offer other living benefit riders as
options under the Contracts.
14. Minnesota Life will deduct a
maximum annual charge ranging from
0.25% to 2.25% (current charges range
from 0.45% to 1.50%) of the greater of
the contract value or benefit base (as
described in the applicable GLWB
Rider) depending on which GLWB Rider
is elected. One quarter of the GLWB
Rider charge will be taken three months
after the GLWB Rider effective date and
at the end of every three months
thereafter. The charge does not apply
after annuitization.
15. If a contract owner dies before the
annuity start date, the New Contract
provides for a death benefit payable to
a beneficiary computed as described in
the Application. In the future,
Minnesota Life may offer other optional
death benefit riders as options under the
Contracts.
16. For the Highest Anniversary Value
II Death Benefit, the Premier II Death
Benefit, and the MyPath Highest
Anniversary Death Benefit, Minnesota
Life will deduct a maximum annual
charge ranging from 0.30% to 1.00% of
the death benefit amount, depending on
which optional death benefit option is
elected, if any. For the Estate
Enhancement Benefit II, Minnesota Life
will deduct a daily charge from the
assets of the Separate Account at a
maximum annual charge ranging from
0.25% to 0.40% of average account
value.
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1–2
(percent)
8.0
8.0
2–3
(percent)
8.0
8.0
7.0
7.0
3–4
(percent)
4–5
(percent)
6.0
6.0
17. The Contract provides three
standard annuity options: a life annuity,
a life annuity with a period certain, or
a joint and last survivor annuity.
Minnesota Life may make other options
available on request.
18. Minnesota Life will credit the
contract value allocated to the subaccounts and the fixed-interest accounts
with a Credit Enhancement when total
cumulative net purchase payments
reach the aggregate levels set forth in the
following table:
Cumulative net purchase
payments
$250,000–$499,999.99 .............
$500,000–$749,999.99 .............
$750,000–$999,999.99 .............
$1,000,000 or more ..................
Credit enhancement
percentage
0.25%
0.50%
0.75%
1.00%
19. The term ‘‘cumulative net
purchase payments’’ means the total of
all purchase payments applied to the
contract less any amounts previously
withdrawn from contract value. Similar
to the Prior Contracts contemplated by
the 2008 Order, the amount of the Credit
Enhancement to be credited will be
calculated as follows: (a) Cumulative net
purchase payments; multiplied by (b)
the applicable Credit Enhancement
percentage from the table above; minus
(c) any Credit Enhancements previously
applied to contract value.
20. Minnesota Life will allocate the
Credit Enhancement for the applicable
purchase payment among the subaccounts and fixed interest accounts the
contract owner selects in accordance
with a contract owner’s current
purchase payment allocation
instructions. As disclosed in the
prospectus for the New Contracts,
Minnesota Life reserves the right to
increase or decrease the amount of the
Credit Enhancement or discontinue the
Credit Enhancement in the future. In
such case, Minnesota Life would seek
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value. The New Contracts have a DSC
which is applicable on surrender and
withdrawal of accumulation values.
Credit Enhancements are not recaptured
upon surrender or withdrawal. A charge
may also be assessed depending on the
type of optional benefit elected, if any.
12. The New Contracts offer a
standard DSC schedule as follows:
6.0
0
5–6
(percent)
5.0
0
6–7
(percent)
4.0
0
7–8
(percent)
3.0
0
8+
0
0
any additional exemptive relief to the
extent required.
21. Minnesota Life intends to
recapture or retain the Credit
Enhancements only in the following
circumstances. First, Minnesota Life
recaptures or retains 100% of the Credit
Enhancements in the event that the
contract owner exercises his or her
cancellation right during the ‘‘free look’’
period. Second, Minnesota Life
recaptures all of the Credit
Enhancements added to the Contract
within 12 months prior to the date any
amounts are paid out as a death benefit.
Any Credit Enhancement added to the
Contract more than 12 months prior to
the date any amount is paid out as a
death benefit would not be recaptured.
Third, Minnesota Life will recapture all
of the Credit Enhancements added to
the Contract within 12 months prior to
the annuitization date of the Contract.
Any Credit Enhancement added to the
Contract more than 12 months prior to
the date of annuitization would not be
recaptured. (If only a partial
annuitization were elected, a pro rata
portion of the Credit Enhancements
added to the Contract within 12 months
of the annuitization date would be
recaptured.)
22. Investment gains attributable to
the Credit Enhancement will not be
recaptured. Since Minnesota Life does
not recapture the investment gain/loss
attributable to the Credit Enhancement,
only the dollar amount of the Credit
Enhancement added to the Contract is
recaptured in the circumstances
described in the application.
23. Finally, because it is not
administratively feasible to track the
Credit Enhancements in the Separate
Account which may still be subject to
recapture, Minnesota Life deducts the
daily mortality and expense risk charge
from the entire net asset value of the
Separate Account. As a result, the daily
mortality and expense risk charge, and
any optional benefit charges paid by any
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contract owner may be greater than that
which he or she would pay without the
Credit Enhancement.
Applicants’ Legal Analysis
1. Applicants request that the
Commission, pursuant to Section 6(c) of
the 1940 Act, grant the exemptions set
forth below to permit Applicants to
recapture Credit Enhancements
previously applied to purchase
payments under the New Contracts: (1)
In the event a contract owner exercises
his or her right to cancellation/‘‘free
look’’ under the New Contract; (2) if the
Credit Enhancements were added to the
Contract within 12 months prior to the
date any amounts are paid out as a
death benefit; and (3) if the Credit
Enhancements were added to the
Contract within 12 months prior to the
date of annuitization or partial
annuitization of the Contract.
2. 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 under the Act, 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.
3. Appellants submit that the Credit
Enhancement recapture is not a sales
load. Rather, it is a recapture of a Credit
Enhancement previously applied to a
contract owner’s purchase payments.
Minnesota Life provides the Credit
Enhancement from its general account
on a guaranteed basis. The Contracts are
designed to be long-term investment
vehicles. If a contract owner withdraws
his or her money during the free look
period, if a death benefit is owed shortly
after Credit Enhancements are applied,
or if the Contract is annuitized before
this anticipated period, Minnesota Life
must recapture the Credit Enhancement
subject to recapture in order to avoid a
loss.
4. Applicants submit that the
proposed recapture of the Credit
Enhancement would not violate Section
2(a)(32) or 27(i)(2)(A) of the 1940 Act or
rule 22c–1 under the Act. Minnesota
Life would grant Credit Enhancements
out of its general account assets.
Applicants submit if Minnesota Life
recaptures any Credit Enhancements or
part of a Credit Enhancement in the
circumstances described above, it would
merely be retrieving its own assets.
5. Applicants further submit that the
operation of the proposed Credit
Enhancements would not violate
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Section 2(a)(32) or 27(i)(2)(A) of the
1940 Act because the recapture of Credit
Enhancements would not, at any time,
deprive a contract owner of his or her
proportionate share of the current net
assets of the Separate Account.
6. Applicant’s assert that rule 22c–1
was intended to eliminate or reduce, as
far as was reasonably practicable: (1)
The dilution of the value of outstanding
redeemable securities of registered
investment companies through their
sale at a price below net asset value or
their redemption at a price above net
asset value; or (2) other unfair results,
including speculative trading practices.
Applicants submit that the industry and
regulatory concerns prompting the
adoption of rule 22c–1 were primarily
the result of backward pricing, the
practice of basing the price of a mutual
fund share on the net asset value per
share determined as of the close of the
market on the previous day. Applicants
submit that the Credit Enhancements do
not give rise to either of the two
concerns that rule 22c–1 was designed
to address. First, Applicants contend
that the proposed Credit Enhancements
pose no such threat of dilution. A
contract owner’s interest in his or her
contract value or in the Separate
Account would always be offered at a
price based on net asset value next
calculated after receipt of the request.
Second, Applicants submit that
speculative trading practices calculated
to take advantage of backward pricing
will not occur as a result of Minnesota
Life’s recapture of the Credit
Enhancement. Variable annuities are
designed for long-term investment, and
by their nature, do not lend themselves
to the kind of speculative short-term
trading that rule 22c–1 was designed to
prevent. More importantly, the Credit
Enhancement recapture simply does not
create the opportunity for speculative
trading.
7. Applicants assert that the Credit
Enhancement is generally beneficial to a
contract owner. The recapture tempers
this benefit somewhat, but unless: (1)
The contract owner exercises his or her
right to cancel the contract during the
‘‘free look’’ period, or (2) Minnesota Life
applies Credit Enhancements and pays
a death benefit during the same 12month period, or (3) Minnesota Life
applies Credit Enhancements and a
contract owner annuitizes during the
same 12-month period, the contract
owner retains the ability to avoid the
Credit Enhancement recapture.
Applicants submit that as any earnings
on Credit Enhancements applied would
not be subject to recapture and thus
would be immediately available to a
contract owner. Applicants submit that
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the Credit Enhancement recapture does
not diminish the overall value of the
Credit Enhancement.
8. Applicants assert that recapture
provision is necessary for Minnesota
Life to offer the Credit Enhancement
and prevent anti-selection—the risk that
a contract owner would make
significant purchase payments into the
Contract solely to receive a quick profit
from the Credit Enhancements and then
withdraw his or her money. Applicants
submit it would be unfair to Minnesota
Life to permit a contract owner to keep
his or her Credit Enhancement upon his
or her exercise of the Contract’s ‘‘free
look’’ provision. Applicants submit it
would also be unfair to Minnesota Life
to permit a contract owner to keep his
or her Credit Enhancements paid shortly
before death benefits are paid or the
contract is annuitized. Applicants
further submit that because no
additional DSC applies upon payment
of a death benefit, a death shortly after
the award of Credit Enhancements
would afford a contract owner or a
beneficiary a similar profit at Minnesota
Life’s expense. Finally, because no
additional DSC applies on
annuitization, if a contract owner
annuitizes his or her contract shortly
after the award of the Credit
Enhancement, such event would afford
a contract owner a similar profit at
Minnesota Life’s expense.
9. Applicants state that the
Commission’s authority under Section
6(c) of the 1940 Act to grant exemptions
from various provisions of the 1940 Act
and rules under that Act is broad
enough to permit orders of exemption
that cover classes of unidentified
persons. Applicants request an order of
the Commission that would exempt
them, Minnesota Life’s successors in
interest, Future Accounts and Future
Underwriters from the provisions of
Sections 2(a)(32) and 27(i)(2)(A) of the
1940 Act and rule 22c–1 under the Act
with respect to the Contracts.
Applicants submit that the exemption of
these classes of persons is 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 because
all of the potential members of the class
could obtain the foregoing exemptions
for themselves on the same basis as
Applicants, but only at a cost to each of
them that is not justified by any public
policy purpose. As discussed in the
application, the requested exemptions
would only extend to persons that in all
material respects are the same as
Applicants.
10. Applicants represent that any
Future Contracts will be substantially
E:\FR\FM\12DEN1.SGM
12DEN1
Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / Notices
similar in all material respects to the
New Contracts, but particularly with
respect to the Credit Enhancements and
recapture of Credit Enhancements and
that each factual statement and
representation about the Credit
Enhancement feature will be equally
true of any Future Contracts. Applicants
also represent that each material
representation made by them about the
Separate Account and SFS will be
equally true of Future Accounts and
Future Underwriters, to the extent that
such representations relate to the issues
discussed in this Application. In
particular, each Future Underwriter will
be registered as a broker-dealer under
the Securities Exchange Act of 1934 and
be a member of FINRA.
11. Based upon the foregoing,
Applicants submit that recapture of the
proposed Credit Enhancement involves
none of the abuses to which provisions
of the 1940 Act and rules thereunder are
directed. The contract owner will
always retain the investment experience
attributable to the Credit Enhancement
and will retain the principal amount in
all cases except under the circumstances
described in the Application. Further,
Applicants assert that Minnesota Life
should be able to recapture such Credit
Enhancement to limit potential losses
associated with such Credit
Enhancements.
Conclusions
For the reasons set forth in the
Application, the Applicants assert that
the provisions for recapture of Credit
Enhancements under the Contracts do
not violate Section 2(a)(32) and
27(i)(2)(A) of the Act and rule 22c–1
under the Act and that the requested
relief is consistent with the standards
set forth in Section 6(c) of the Act.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013–29625 Filed 12–11–13; 8:45 am]
maindgalligan on DSK5TPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71024; File No. SR–BYX–
2013–039]
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing of a
Proposed Rule Change in Connection
With the Proposed Business
Combination Involving BATS Global
Markets, Inc. and Direct Edge Holdings
LLC
December 6, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
25, 2013, BATS Y-Exchange, Inc. (the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange filed a proposed rule
change (the ‘‘Proposed Rule Change’’) in
connection with the proposed business
combination (the ‘‘Combination’’), as
described in more detail below,
involving its parent company, BATS
Global Markets, Inc. and Direct Edge
Holdings LLC (‘‘DE Holdings’’), the
indirect parent company of EDGX
Exchange, Inc. (‘‘EDGX’’) and EDGA
Exchange, Inc. (‘‘EDGA’’), each a
national securities exchange registered
with the Commission.
Upon completion of the Combination
(the ‘‘Closing’’), BATS Global Markets,
Inc. and DE Holdings will each become
intermediate holding companies, held
under a single new holding company.
The new holding company, currently
named ‘‘BATS Global Markets Holdings,
Inc.,’’ will at that time change its name
to ‘‘BATS Global Markets, Inc.’’ In
addition, the current parent company of
the Exchange, BATS Global Markets,
Inc., will at that time change its name
to ‘‘BATS Global Markets Holdings,
Inc.’’
For ease of reference, this Proposed
Rule Change will refer to the current
parent company of the Exchange as
‘‘Current BGM’’ when referring to the
entity prior to the Closing, and as ‘‘BGM
Holdings’’ when referring to that entity
after the Closing. The entity that will
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
16:45 Dec 11, 2013
Jkt 232001
PO 00000
Frm 00043
Fmt 4703
become the new top-level holding
company that will, after Closing, own
BGM Holdings and DE Holdings, will be
referred to as ‘‘New BGM.’’
To effectuate the Combination, the
Exchange seeks to obtain the
Commission’s approval of (i) resolutions
of Current BGM’s board of directors (the
‘‘Resolutions’’) making certain
determinations regarding New BGM and
the impact of the Combination on the
Exchange; (ii) the proposed Amended
and Restated Certificate of Incorporation
of New BGM (the ‘‘New BGM Charter’’);
(iii) the proposed Amended and
Restated Bylaws of New BGM (the ‘‘New
BGM Bylaws’’); (iv) the proposed
amendments to Current BGM’s Second
Amended and Restated Certificate of
Incorporation (the ‘‘Current BGM
Charter,’’ and after such amendments,
the ‘‘BGM Holdings Charter’’); (v) the
proposed amendments to the Amended
and Restated Bylaws of Current BGM
(the ‘‘Current BGM Bylaws,’’ and after
such amendments, the ‘‘BGM Holdings
Bylaws’’); (vi) the proposed
amendments to the By-Laws of the
Exchange (the ‘‘Exchange Bylaws’’); (vii)
the proposed amendments to Exchange
Rule 2.3 to reflect the affiliation
between the Exchange and two
additional registered national securities
exchanges; (viii) the proposed
amendments to Exchange Rule 2.12 to
reflect the affiliation between the
Exchange and the routing broker for
EDGA and EDGX; and (ix) the indirect
acquisition by an affiliate of the
Exchange of a Member 3 of the Exchange
and the resulting affiliation between the
Exchange and the Member of the
Exchange, as required under Exchange
Rule 2.10.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
3 The term ‘‘Member’’ is defined in Exchange
Rule 1.5(n) as any registered broker or dealer that
has been admitted to membership in the Exchange.
1 15
VerDate Mar<15>2010
75585
Sfmt 4703
E:\FR\FM\12DEN1.SGM
12DEN1
Agencies
[Federal Register Volume 78, Number 239 (Thursday, December 12, 2013)]
[Notices]
[Pages 75581-75585]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29625]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-30821; File No. 812-14158]
Minnesota Life Insurance Company, et al.; Notice of Application
December 6, 2013.
AGENCY: The Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order pursuant to Section 6(c) of
the Investment Company Act of 1940, as amended (the ``1940 Act'' or
``Act''), granting exemptions from the provisions of Sections 2(a)(32)
and 27(i)(2)(A) of the Act and rule 22c-1 under the Act.
Applicants: Minnesota Life Insurance Company (``Minnesota Life'' or
``Insurance Company''), Variable Annuity Account (``Separate
Account''), and Securian Financial Services, Inc. (``SFS'')
(collectively, ``Applicants'').
SUMMARY: Summary of Application: Applicants seek an order amending an
existing order pursuant to Section 6(c) of the 1940 Act, exempting them
from the provisions of Sections 2(a)(32) and 27(i)(2)(A) of the 1940
Act and rule 22c-1 under the Act to the extent necessary to permit
Applicants, under specified circumstances, to recapture certain bonuses
(``Credit Enhancements'') applied to cumulative net purchase payments
under certain deferred variable annuity contracts issued by the
Insurance Company.
DATES: Filing Date: The application was filed on May 23, 2013, and an
amended and restated application was filed on August 9, 2013.
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 the 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 December 27, 2013, and should be accompanied
by proof of service on the Applicants in the form of an affidavit or,
for lawyers, a certificate of service. Hearing requests should state
the nature of the requester's interest, the reason for the request, and
the issues contested. Persons who wish to be
[[Page 75582]]
notified of a hearing may request notification by writing to the
Secretary of the Commission.
ADDRESSES: Secretary, SEC, 100 F Street NE., Washington, D.C. 20549-
1090. Applicants, c/o Daniel P. Preiner, Counsel, Minnesota Life
Insurance Company, 400 Robert Street North, St. Paul, Minnesota 55101.
FOR FURTHER INFORMATION CONTACT: Alberto H. Zapata, Senior Counsel, or
Joyce M. Pickholz, Branch Chief, Insured Investments Office, Division
of Investment Management, at (202) 551-6795.
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 for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1. Applicants seek the exemptions needed to recapture Credit
Enhancements applied to cumulative net purchase payments that reach
certain aggregate amounts in accordance with the formula described
below made under: (i) New series (e.g., B Series and L Series) of new
deferred variable annuity contracts, including data pages, riders and
endorsements as described below (the ``New Contracts'') and (ii) any
deferred variable annuity contracts, including data pages, riders and
endorsements, substantially similar in all material respects to the New
Contracts that Minnesota Life may issue in the future (``Future
Contracts'') (New Contracts and Future Contracts referred to
collectively as the ``Contracts''). Applicants request that the relief
under the order extend to any other separate accounts of Minnesota Life
and their successors in interest that support the Contracts (``Future
Accounts'') and any Financial Industry Regulatory Authority (``FINRA'')
member broker-dealers controlling, controlled by, or under common
control with any Applicant, whether existing or created in the future,
that in the future, may act as principal underwriter for the Contracts
(``Future Underwriters'').
2. In 2007 and 2008, the Commission issued orders granting
exemptions that permit, under certain circumstances, the recapture of
certain Credit Enhancements (collectively, the ``Existing Orders'').\1\
Applicants wish to leave the Existing Orders intact, thus allowing them
to continue to recapture Credit Enhancements under the contracts
described in those orders (collectively, the ``Prior Contracts'').
---------------------------------------------------------------------------
\1\ See Investment Company Act Release Nos. 27960 (Aug. 30,
2007) (notice) and 27979 (Sept. 25, 2007) (order); Investment
Company Act Release Nos. 28321 (Jun. 26, 2008) (notice) and 28334
(Jul. 22, 2008) (order) (the ``2008 Order'').
---------------------------------------------------------------------------
3. The Existing Orders encompassed relief for future contracts
substantially similar in all material respects to the Prior Contracts.
Applicants state that the New Contracts differ from the Prior Contracts
in the following respects: (1) The contract charges are slightly higher
in some series and slightly lower in other series in the New Contracts;
(2) the schedule of deferred sales charge is shorter in the L Series of
the New Contracts; (3) the New Contracts offer different optional death
benefit riders; (4) the New Contracts offer different optional
guaranteed lifetime withdrawal benefit riders; and (5) the New
Contracts do not offer the same fixed-interest allocation options.
Although Credit Enhancement and recapture in the New Contracts will be
administered in a manner that is substantially similar in all material
respects to that of the Prior Contracts contemplated by the 2008 Order.
4. Minnesota Life is a stock life insurance company organized under
the laws of Minnesota. Minnesota Life is authorized to sell insurance
and annuities in all states (except New York), and the District of
Columbia. Minnesota Life is the depositor and sponsor for the Separate
Account, as those terms have been interpreted by the Commission with
respect to variable annuity separate accounts. Minnesota Life may
establish one or more additional Future Accounts for which it will
serve as depositor.
5. The Separate Account is a segregated investment account under
Minnesota law. The Separate Account is a ``separate account'' as
defined by Section 2(a)(37) of the 1940 Act and is registered with the
Commission as a unit investment trust (File No. 811-4294). A
registration statement for interests in the Separate Account offered
through the New Contracts has been filed with the Commission under the
Securities Act of 1933, as amended, on Form N-4, File No. 333-189593.
6. The Separate Account is divided into a number of sub-accounts.
Each sub-account invests exclusively in shares representing an interest
in a separate corresponding investment portfolio of one of several
series-type, open-end management investment companies. The assets of
the Separate Account support one or more varieties of variable annuity
contracts, including the Prior Contracts and the New Contracts, among
others. Minnesota Life may issue Future Contracts through the Separate
Account. Minnesota Life also may issue Contracts through Future
Accounts.
7. Securian Financial Services, Inc. (``SFS'') is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a member
of FINRA. SFS serves as the principal underwriter of the Separate
Account and may act as principal underwriter for Future Accounts for
Minnesota Life and distributor for Future Contracts. Future
Underwriters also may act as principal underwriter for Future Accounts
and as distributor for any of the Contracts.
8. The New Contracts are deferred combination variable and fixed
annuity contracts that Minnesota Life may issue to individuals on a
``non-qualified'' basis or in connection with certain types of
retirement plans that receive favorable federal income tax treatment
under the Internal Revenue Code of 1986, as amended. The New Contracts
also make available a number of sub-accounts of the Separate Account to
which a contract owner may allocate net purchase payments and
associated Credit Enhancement(s), as described below.
9. A contract owner's initial purchase payment must be at least
$10,000 (unless a lower qualified plan limitation applies). Thereafter,
a contract owner may choose the amount and frequency of purchase
payments, except that the minimum subsequent purchase payment is $500
($100 for automatic payment plans). A contract owner may make transfers
of contract value among and between the sub-account options at any
time. Applicants have reserved the right to impose a $10 charge for
each transfer when transfer requests exceed 12 in a single contract
year, but are not currently imposing the charge.
10. The New Contracts offer a contract owner a variety of annuity
payment options. The contract owner may annuitize at any time. If a
deferred sales charge (``DSC'') would otherwise apply to New Contract
withdrawals at the time of annuitization, the DSC will be waived for
amounts applied to provide annuity payments.
11. The New Contracts provide for an annual administrative charge
of $50 that Minnesota Life deducts from the New Contract's accumulation
value on each contract anniversary and upon a full surrender of a New
Contract if the greater of: (a) Contract value or (b) purchase payments
less withdrawals, is less than $50,000. For the B Series of the New
Contracts, a daily mortality and expense risk charge for the base New
[[Page 75583]]
Contract is deducted from the assets of the Separate Account at an
annual rate equal to 1.15% of average account value, which is lower
than the Prior Contracts contemplated by the 2008 Order. For the L
Series of the New Contracts, a daily mortality and expense risk charge
for the base New Contract is deducted from the assets of the Separate
Account at an annual rate equal to 1.55% of average account value,
which is higher than the Prior Contracts contemplated by the 2008
Order. For each series of the New Contracts, a daily administrative
charge for the base New Contract is deducted from the assets of the
Separate Account at an annual rate equal to 0.15% of average account
value. The New Contracts have a DSC which is applicable on surrender
and withdrawal of accumulation values. Credit Enhancements are not
recaptured upon surrender or withdrawal. A charge may also be assessed
depending on the type of optional benefit elected, if any.
12. The New Contracts offer a standard DSC schedule as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8
Contract years since payment (percent) (percent) (percent) (percent) (percent) (percent) (percent) (percent) 8+
--------------------------------------------------------------------------------------------------------------------------------------------------------
B Series Deferred Sales Charge........................ 8.0 8.0 7.0 6.0 6.0 5.0 4.0 3.0 0
L Series Deferred Sales Charge........................ 8.0 8.0 7.0 6.0 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
The DSC does not apply in any circumstances under which Credit
Enhancements will be recaptured.
13. Subject to state availability, a contract owner may elect to
purchase an optional living benefit rider. There are currently eight
different Guaranteed Lifetime Withdrawal Benefit optional riders
available (the ``GLWB Riders''), however, a contract owner may only
elect a single living benefit on a New Contract. In the future,
Minnesota Life may offer other living benefit riders as options under
the Contracts.
14. Minnesota Life will deduct a maximum annual charge ranging from
0.25% to 2.25% (current charges range from 0.45% to 1.50%) of the
greater of the contract value or benefit base (as described in the
applicable GLWB Rider) depending on which GLWB Rider is elected. One
quarter of the GLWB Rider charge will be taken three months after the
GLWB Rider effective date and at the end of every three months
thereafter. The charge does not apply after annuitization.
15. If a contract owner dies before the annuity start date, the New
Contract provides for a death benefit payable to a beneficiary computed
as described in the Application. In the future, Minnesota Life may
offer other optional death benefit riders as options under the
Contracts.
16. For the Highest Anniversary Value II Death Benefit, the Premier
II Death Benefit, and the MyPath Highest Anniversary Death Benefit,
Minnesota Life will deduct a maximum annual charge ranging from 0.30%
to 1.00% of the death benefit amount, depending on which optional death
benefit option is elected, if any. For the Estate Enhancement Benefit
II, Minnesota Life will deduct a daily charge from the assets of the
Separate Account at a maximum annual charge ranging from 0.25% to 0.40%
of average account value.
17. The Contract provides three standard annuity options: a life
annuity, a life annuity with a period certain, or a joint and last
survivor annuity. Minnesota Life may make other options available on
request.
18. Minnesota Life will credit the contract value allocated to the
sub-accounts and the fixed-interest accounts with a Credit Enhancement
when total cumulative net purchase payments reach the aggregate levels
set forth in the following table:
------------------------------------------------------------------------
Credit
Cumulative net purchase payments enhancement
percentage
------------------------------------------------------------------------
$250,000-$499,999.99....................................... 0.25%
$500,000-$749,999.99....................................... 0.50%
$750,000-$999,999.99....................................... 0.75%
$1,000,000 or more......................................... 1.00%
------------------------------------------------------------------------
19. The term ``cumulative net purchase payments'' means the total
of all purchase payments applied to the contract less any amounts
previously withdrawn from contract value. Similar to the Prior
Contracts contemplated by the 2008 Order, the amount of the Credit
Enhancement to be credited will be calculated as follows: (a)
Cumulative net purchase payments; multiplied by (b) the applicable
Credit Enhancement percentage from the table above; minus (c) any
Credit Enhancements previously applied to contract value.
20. Minnesota Life will allocate the Credit Enhancement for the
applicable purchase payment among the sub-accounts and fixed interest
accounts the contract owner selects in accordance with a contract
owner's current purchase payment allocation instructions. As disclosed
in the prospectus for the New Contracts, Minnesota Life reserves the
right to increase or decrease the amount of the Credit Enhancement or
discontinue the Credit Enhancement in the future. In such case,
Minnesota Life would seek any additional exemptive relief to the extent
required.
21. Minnesota Life intends to recapture or retain the Credit
Enhancements only in the following circumstances. First, Minnesota Life
recaptures or retains 100% of the Credit Enhancements in the event that
the contract owner exercises his or her cancellation right during the
``free look'' period. Second, Minnesota Life recaptures all of the
Credit Enhancements added to the Contract within 12 months prior to the
date any amounts are paid out as a death benefit. Any Credit
Enhancement added to the Contract more than 12 months prior to the date
any amount is paid out as a death benefit would not be recaptured.
Third, Minnesota Life will recapture all of the Credit Enhancements
added to the Contract within 12 months prior to the annuitization date
of the Contract. Any Credit Enhancement added to the Contract more than
12 months prior to the date of annuitization would not be recaptured.
(If only a partial annuitization were elected, a pro rata portion of
the Credit Enhancements added to the Contract within 12 months of the
annuitization date would be recaptured.)
22. Investment gains attributable to the Credit Enhancement will
not be recaptured. Since Minnesota Life does not recapture the
investment gain/loss attributable to the Credit Enhancement, only the
dollar amount of the Credit Enhancement added to the Contract is
recaptured in the circumstances described in the application.
23. Finally, because it is not administratively feasible to track
the Credit Enhancements in the Separate Account which may still be
subject to recapture, Minnesota Life deducts the daily mortality and
expense risk charge from the entire net asset value of the Separate
Account. As a result, the daily mortality and expense risk charge, and
any optional benefit charges paid by any
[[Page 75584]]
contract owner may be greater than that which he or she would pay
without the Credit Enhancement.
Applicants' Legal Analysis
1. Applicants request that the Commission, pursuant to Section 6(c)
of the 1940 Act, grant the exemptions set forth below to permit
Applicants to recapture Credit Enhancements previously applied to
purchase payments under the New Contracts: (1) In the event a contract
owner exercises his or her right to cancellation/``free look'' under
the New Contract; (2) if the Credit Enhancements were added to the
Contract within 12 months prior to the date any amounts are paid out as
a death benefit; and (3) if the Credit Enhancements were added to the
Contract within 12 months prior to the date of annuitization or partial
annuitization of the Contract.
2. 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 under the Act, 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.
3. Appellants submit that the Credit Enhancement recapture is not a
sales load. Rather, it is a recapture of a Credit Enhancement
previously applied to a contract owner's purchase payments. Minnesota
Life provides the Credit Enhancement from its general account on a
guaranteed basis. The Contracts are designed to be long-term investment
vehicles. If a contract owner withdraws his or her money during the
free look period, if a death benefit is owed shortly after Credit
Enhancements are applied, or if the Contract is annuitized before this
anticipated period, Minnesota Life must recapture the Credit
Enhancement subject to recapture in order to avoid a loss.
4. Applicants submit that the proposed recapture of the Credit
Enhancement would not violate Section 2(a)(32) or 27(i)(2)(A) of the
1940 Act or rule 22c-1 under the Act. Minnesota Life would grant Credit
Enhancements out of its general account assets. Applicants submit if
Minnesota Life recaptures any Credit Enhancements or part of a Credit
Enhancement in the circumstances described above, it would merely be
retrieving its own assets.
5. Applicants further submit that the operation of the proposed
Credit Enhancements would not violate Section 2(a)(32) or 27(i)(2)(A)
of the 1940 Act because the recapture of Credit Enhancements would not,
at any time, deprive a contract owner of his or her proportionate share
of the current net assets of the Separate Account.
6. Applicant's assert that rule 22c-1 was intended to eliminate or
reduce, as far as was reasonably practicable: (1) The dilution of the
value of outstanding redeemable securities of registered investment
companies through their sale at a price below net asset value or their
redemption at a price above net asset value; or (2) other unfair
results, including speculative trading practices. Applicants submit
that the industry and regulatory concerns prompting the adoption of
rule 22c-1 were primarily the result of backward pricing, the practice
of basing the price of a mutual fund share on the net asset value per
share determined as of the close of the market on the previous day.
Applicants submit that the Credit Enhancements do not give rise to
either of the two concerns that rule 22c-1 was designed to address.
First, Applicants contend that the proposed Credit Enhancements pose no
such threat of dilution. A contract owner's interest in his or her
contract value or in the Separate Account would always be offered at a
price based on net asset value next calculated after receipt of the
request. Second, Applicants submit that speculative trading practices
calculated to take advantage of backward pricing will not occur as a
result of Minnesota Life's recapture of the Credit Enhancement.
Variable annuities are designed for long-term investment, and by their
nature, do not lend themselves to the kind of speculative short-term
trading that rule 22c-1 was designed to prevent. More importantly, the
Credit Enhancement recapture simply does not create the opportunity for
speculative trading.
7. Applicants assert that the Credit Enhancement is generally
beneficial to a contract owner. The recapture tempers this benefit
somewhat, but unless: (1) The contract owner exercises his or her right
to cancel the contract during the ``free look'' period, or (2)
Minnesota Life applies Credit Enhancements and pays a death benefit
during the same 12-month period, or (3) Minnesota Life applies Credit
Enhancements and a contract owner annuitizes during the same 12-month
period, the contract owner retains the ability to avoid the Credit
Enhancement recapture. Applicants submit that as any earnings on Credit
Enhancements applied would not be subject to recapture and thus would
be immediately available to a contract owner. Applicants submit that
the Credit Enhancement recapture does not diminish the overall value of
the Credit Enhancement.
8. Applicants assert that recapture provision is necessary for
Minnesota Life to offer the Credit Enhancement and prevent anti-
selection--the risk that a contract owner would make significant
purchase payments into the Contract solely to receive a quick profit
from the Credit Enhancements and then withdraw his or her money.
Applicants submit it would be unfair to Minnesota Life to permit a
contract owner to keep his or her Credit Enhancement upon his or her
exercise of the Contract's ``free look'' provision. Applicants submit
it would also be unfair to Minnesota Life to permit a contract owner to
keep his or her Credit Enhancements paid shortly before death benefits
are paid or the contract is annuitized. Applicants further submit that
because no additional DSC applies upon payment of a death benefit, a
death shortly after the award of Credit Enhancements would afford a
contract owner or a beneficiary a similar profit at Minnesota Life's
expense. Finally, because no additional DSC applies on annuitization,
if a contract owner annuitizes his or her contract shortly after the
award of the Credit Enhancement, such event would afford a contract
owner a similar profit at Minnesota Life's expense.
9. Applicants state that the Commission's authority under Section
6(c) of the 1940 Act to grant exemptions from various provisions of the
1940 Act and rules under that Act is broad enough to permit orders of
exemption that cover classes of unidentified persons. Applicants
request an order of the Commission that would exempt them, Minnesota
Life's successors in interest, Future Accounts and Future Underwriters
from the provisions of Sections 2(a)(32) and 27(i)(2)(A) of the 1940
Act and rule 22c-1 under the Act with respect to the Contracts.
Applicants submit that the exemption of these classes of persons is
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 because all of the potential members of the
class could obtain the foregoing exemptions for themselves on the same
basis as Applicants, but only at a cost to each of them that is not
justified by any public policy purpose. As discussed in the
application, the requested exemptions would only extend to persons that
in all material respects are the same as Applicants.
10. Applicants represent that any Future Contracts will be
substantially
[[Page 75585]]
similar in all material respects to the New Contracts, but particularly
with respect to the Credit Enhancements and recapture of Credit
Enhancements and that each factual statement and representation about
the Credit Enhancement feature will be equally true of any Future
Contracts. Applicants also represent that each material representation
made by them about the Separate Account and SFS will be equally true of
Future Accounts and Future Underwriters, to the extent that such
representations relate to the issues discussed in this Application. In
particular, each Future Underwriter will be registered as a broker-
dealer under the Securities Exchange Act of 1934 and be a member of
FINRA.
11. Based upon the foregoing, Applicants submit that recapture of
the proposed Credit Enhancement involves none of the abuses to which
provisions of the 1940 Act and rules thereunder are directed. The
contract owner will always retain the investment experience
attributable to the Credit Enhancement and will retain the principal
amount in all cases except under the circumstances described in the
Application. Further, Applicants assert that Minnesota Life should be
able to recapture such Credit Enhancement to limit potential losses
associated with such Credit Enhancements.
Conclusions
For the reasons set forth in the Application, the Applicants assert
that the provisions for recapture of Credit Enhancements under the
Contracts do not violate Section 2(a)(32) and 27(i)(2)(A) of the Act
and rule 22c-1 under the Act and that the requested relief is
consistent with the standards set forth in Section 6(c) of the Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-29625 Filed 12-11-13; 8:45 am]
BILLING CODE 8011-01-P