The Guardian Insurance & Annuity Company, Inc., et al; Notice of Application, 3847-3850 [2016-01230]
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Federal Register / Vol. 81, No. 14 / Friday, January 22, 2016 / Notices
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
2016–002 and should be submitted on
or before February 12, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–01200 Filed 1–21–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–31958; File No. 812–14449]
The Guardian Insurance & Annuity
Company, Inc., et al; Notice of
Application
January 15, 2016.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order approving the substitution of
certain securities pursuant to Section
26(c) of the Investment Company Act of
1940, as amended (the ‘‘1940 Act’’).
AGENCY:
The Guardian Insurance &
Annuity Company (the ‘‘Company’’),
The Guardian Separate Account K, The
Guardian Separate Account M, The
Guardian Separate Account N (each, a
‘‘Life Account’’) and The Guardian
Separate Account R (the ‘‘Annuity
Account’’ and together with the Life
Accounts, the ‘‘Accounts’’) (together,
the ‘‘Applicants’’).
SUMMARY OF APPLICATION: The
Applicants seek an order pursuant to
Section 26(c) of the 1940 Act approving
the substitution of shares issued by
certain investment portfolios (the
‘‘Existing Funds’’) of registered
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APPLICANTS:
19 17
CFR 200.30–3(a)(12).
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investment companies with shares of
certain investment portfolios (the
‘‘Replacement Funds’’) of registered
investment companies, under certain
variable life insurance policies and
variable annuity contracts issued by the
Company (the ‘‘Contracts’’), each
funded through the Accounts.
FILING DATE: The application was filed
on April 24, 2015, and amended on
September 4, 2015, and November 10,
2015.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary 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 February 9, 2016, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to Rule 0–5 under the
1940 Act, hearing requests should state
the nature of the writer’s interest, any
facts bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090;
Applicants: Richard T. Potter, The
Guardian Insurance & Annuity
Company, Inc., 7 Hanover Square, New
York, New York 10004.
FOR FURTHER INFORMATION CONTACT:
Elizabeth G. Miller, Senior Counsel, at
(202) 551–8707, or Holly L. Hunter-Ceci,
Branch Chief, at (202) 551–6825
(Division of Investment Management,
Chief Counsel’s Office).
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. The Company is a stock life
insurance company incorporated in the
State of Delaware. The Company is
wholly owned by The Guardian Life
Insurance Company of America, a
mutual life insurance company
organized in the State of New York
(‘‘Guardian Life’’). Guardian Life does
not issue the Contracts and does not
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3847
guarantee any benefits provided under
the Contracts.
2. Each Account is a ‘‘separate
account’’ as defined in Rule 0–1(e)
under the 1940 Act and is registered
with the Commission as a unit
investment trust under the 1940 Act.
The interests in each Account offered
through the Contracts have been
registered under the Securities Act of
1933 on Form N–4 for the variable
annuity Contracts offered under the
Annuity Account, and on Form N–6 for
the variable life insurance Contracts
offered under the Life Accounts. The
application sets forth the registration
statement file numbers for the Accounts.
Each Account was established by the
board of directors of the Company under
the laws of the State of Delaware as
follows:
Separate account
The Guardian
Account K.
The Guardian
Account M.
The Guardian
Account N.
The Guardian
Account R.
Separate
Separate
Separate
Separate
Date established
November 18,
1993.
February 27, 1997.
September 23,
1999.
March 12, 2003.
3. Each Account supports certain
Contracts issued by the Company. Each
Account consists of investment
divisions, each corresponding to a
registered open-end management
investment company or series of a
registered open-end management
investment company in which the
Account invests. The assets of each
Account equal to its reserves and other
liabilities are not chargeable with the
Company’s obligations except those
under Contracts issued through such
Account. Income, gains and losses,
whether or not realized, of each
Account are kept separate from other
income, gains or losses of the Company
and other separate accounts. The
income and capital gains or capital
losses of each investment division,
whether realized or unrealized, are
credited to or charged against the assets
held in that division according to the
terms of the applicable Contract,
without regard to the income, capital
gains or capital losses of the other
investment divisions of the Company.
4. The Contracts are flexible premium
or modified scheduled premium
variable life insurance policies and
variable annuity contracts. For so long
as a variable life insurance Contract
remains in force or a variable annuity
Contract has not yet been annuitized, a
Contract owner may transfer all or part
of their accumulation values among the
variable investment options under the
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Federal Register / Vol. 81, No. 14 / Friday, January 22, 2016 / Notices
Contracts, subject to certain limits as
described in the applicable Contract
prospectus, or to a fixed or indexed
account in the case of some of the
Contracts. The terms and conditions,
including charges and expenses,
applicable to each Contract are
described in the prospectus relating to
such Contract.
5. The Applicants state that under the
Contracts, the Company reserves the
right, subject to Commission approval
and compliance with applicable law, to
substitute shares of one registered openend management investment company
available as a variable investment
option for shares of another registered
open-end management investment
company.
6. The Applicants propose the
substitution of shares of Existing Funds
currently held by the Life Accounts and
the Annuity Account to support variable
life insurance policies and variable
annuity contracts issued by the
Company for shares of the Replacement
Funds (‘‘Substitutions’’):
Substitution
Existing fund
Replacement fund
1. ........................
2. ........................
Pioneer Disciplined Value VCT Portfolio—Class II Shares .....
Columbia Variable Portfolio—Seligman Global Technology
Fund—Class 2 Shares.
Dreyfus Variable Investment Fund: Appreciation Portfolio—
Service Class Shares.
AB VPS International Value Portfolio—Class B Shares ..........
AB VPS Growth and Income Portfolio—Class B Shares.
Janus Aspen Series—Global Technology Portfolio—Service
Shares.
Putnam VT Investors Fund—Class IB Shares.
3. ........................
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4. ........................
7. Applicants represent that under the
proposed Substitutions, each Existing
Fund’s shares will be redeemed for
cash, and the cash from the redemption
will be used to purchase shares of the
respective Replacement Fund.
8. The Applicants represent that the
proposed Substitutions and the
selection of the Replacement Funds
were not motivated by any financial
consideration paid or to be paid to the
Company or its affiliates by the
respective Replacement Fund, its
adviser or underwriter, or their
affiliates.
9. The Applicants represent that each
proposed Substitution is appropriate
given the substantial similarity between
the stated investment objectives and
principal investment strategies of each
Existing Fund as compared to each
corresponding Replacement Fund,
which would offer Contract owners
continuity of their investment strategies
and risks. The Applicants state that the
proposed Substitutions are expected to
provide competitive long-term returns
as compared to the Existing Funds.
Additional information for each Existing
Fund and the corresponding
Replacement Fund, including
investment objectives, principal
investment strategies, principal risks,
and performance can be found in the
application.
10. The Applicants represent that the
proposed Substitutions will be
described to the applicable prospectuses
for the Contracts filed with the
Commission or in other supplemental
disclosure documents for the Contracts
(collectively, the ‘‘Supplements’’). The
Supplements will: (a) Give Contract
owners notice of the Company’s
intention to take the necessary actions
to substitute shares of the Existing
Funds on the Substitution Date (defined
herein); (b) advise Contract owners of
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Templeton Foreign VIP Fund—Class 2 Shares.
their pre- and post-Substitution transfer
rights; (c) instruct Contract owners how
to submit transfer requests in light of the
proposed Substitutions; and (d) advise
Contract owners that any Contract value
remaining in an Existing Fund
Subaccount on the Substitution Date
will be transferred to a subaccount
investing in the corresponding
Replacement Fund, and that the
Substitutions will take place at relative
net asset value. From the date of the
Supplements (which will be at least 30
days prior to the Substitution Date) until
the Substitution Date, Contract owners
will have a pre-Substitution transfer
right, the specifics of which will be
determined by whether they have
selected an optional living benefit rider,
as discussed in more detail in the
application.1
11. The Supplement will also inform
Contract owners that, except as
described in the market timing
limitations section or limitations
imposed by any living benefit riders of
the relevant prospectus or disclosure
document, the Company will not
exercise any rights reserved by it under
the Contracts to impose additional
restrictions on transfers out of a
1 Certain Contract owners have selected a
Contract rider that provides a living benefit rider.
The terms of the living benefit riders offered by the
Company limit the available investment options to
identified allocation models consisting of a
specified selection of registered open-end
management investment companies available as
variable investment options under the applicable
Contract. Each allocation model sets forth a specific
allocation percentage for each variable investment
option within the model. For Contract owners who
have selected a living benefit rider, all transfers,
including the transfers contemplated by condition
6 of this Notice, are limited to transfers of the entire
Contract value to one of the other allocation models
available under the applicable living benefit rider.
On the Substitution Date, assets in a living benefit
rider allocation model that are held in an Existing
Fund Subaccount will be transferred to the
applicable Replacement Fund Subaccount.
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Replacement Fund Subaccount from the
date of the Supplements (which will be
at least 30 days prior to the Substitution
Date) until at least 30 days after the
Substitution Date.
12. The Company will send affected
Contract owners a written confirmation
of the completed proposed Substitutions
in accordance with Rule 10b–10 under
the Securities Exchange Act of 1934.
The Company will deliver to each
affected Contract owner within five
business days of the date of the
proposed Substitutions (the
‘‘Substitution Date’’) a written
confirmation which will include: (a) A
confirmation that the proposed
Substitutions were carried out as
previously notified; (b) a restatement of
the information set forth in the
Supplements; and (c) before and after
account values. The confirmation
statement will also include or be
accompanied by a statement that
reiterates the free transfer rights
disclosed in the Supplements. The
Company will also send each Contract
owner a current prospectus for each
Replacement Fund involved in the
proposed Substitutions to the extent
that such Contract owners have not
previously received a copy.
13. Each Substitution will take place
at the relative net asset value
determined on the Substitution Date
pursuant to Section 22(c) of the 1940
Act and Rule 22c–1 thereunder, with no
change in the amount of any Contract
owner’s Contract value or death benefit
or in the dollar value of his or her
investments in any of the subaccounts.
The rights or obligations of the
Company under the Contracts will not
be altered in any way. The proposed
Substitutions will take place with no
change to the Contract owner’s Contract
value, cash value and accumulation
value.
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14. Applicants will effectuate the
Substitutions after the issuance of the
requested order by the Commission. As
of the Substitution Date, shares of the
Existing Fund will be redeemed for
cash. The Company, on behalf of the
Accounts, will simultaneously place a
redemption request with the Existing
Fund and a purchase order with the
Replacement Fund so that the purchase
of the Replacement Fund shares will be
for the exact amount of the redemption
proceeds.
15. The Company or its affiliates will
pay all expenses and transaction costs of
the proposed Substitutions, including
legal and accounting expenses, any
applicable brokerage expenses and other
fees and expenses. No fees or charges
will be assessed to the Contract owners
to effect the proposed Substitutions. The
proposed Substitutions will not result in
an increase in Contract fees and
expenses, including mortality and
expense risk fees and administration
and distribution fees charged by the
Separate Accounts. The proposed
Substitutions will not result in adverse
tax consequences to Contract owners
and will not alter any tax benefits
associated with the Contracts. No costs
of the proposed Substitutions will be
borne directly or indirectly by Contract
owners.
16. Applicants will not receive, for
three years from the Substitution Date
any direct or indirect benefits from the
applicable Replacement Fund, its
adviser or underwriter (or their
affiliates), in connection with assets
attributable to Contracts affected by the
proposed Substitutions, at a higher rate
than they had received from the Existing
Fund, its adviser or underwriter (or
their affiliates), including without
limitation 12b–1 fees, shareholder
service, administrative or other service
fees, revenue sharing, or other
arrangements.
Legal Analysis
1. Applicants request that the
Commission issue an order pursuant to
Section 26(c) of the 1940 Act approving
the proposed Substitution by the
Company of shares of each Replacement
Fund for shares of the corresponding
Existing Fund. Section 26(c) of the 1940
Act requires the depositor of a registered
unit investment trust holding securities
of a single issuer to receive Commission
approval before substituting the
securities held by the trust. Section
26(c) provides that such approval shall
be granted by order of the Commission
if the evidence establishes that the
substitution is consistent with the
protection of investors and the purposes
of the 1940 Act.
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2. The Applicants submit that the
proposed Substitutions meet the
standards set forth in Section 26(c) and
that, if implemented, the Substitutions
would not raise any of the concerns that
Congress intended to address when the
1940 Act was amended to include this
provision. As described in the
application, Applicants represent that
each Replacement Fund and its
corresponding Existing Fund have
substantially similar investment
objectives and principal investment
strategies, which would offer Contract
owners continuity of their investment
strategies and risks, and that Existing
Funds will have lower net operating
expenses immediately after the
proposed Substitutions.
3. The Contracts will offer Contract
owners the opportunity to make at least
one transfer of Contract value from the
subaccount investing in the Existing
Fund (for at least 30 days before the
Substitution Date), or the Replacement
Fund (for at least 30 days after the
Substitution Date) to any other available
investment option under the Contract
without any cost or limitation other
than those disclosed in the applicable
prospectuses previously provided to
Contract owners.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. The proposed Substitutions will
not be effected unless the Company
determines that: (a) The Contracts allow
the substitution of shares of registered
open-end investment companies in the
manner contemplated by the
application; (b) the proposed
Substitutions can be consummated as
described in the application under
applicable insurance laws; and (c) any
regulatory requirements in each
jurisdiction where the Contracts are
qualified for sale have been complied
with to the extent necessary to complete
the proposed Substitutions.
2. The Company or its affiliates will
pay all expenses and transaction costs of
the Substitutions, including legal and
accounting expenses, any applicable
brokerage expenses and other fees and
expenses. No fees or charges will be
assessed to the Contract owners to effect
the proposed Substitutions.
3. The proposed Substitutions will be
effected at the relative net asset values
of the respective shares in conformity
with Section 22(c) of the 1940 Act and
Rule 22c–1 thereunder without the
imposition of any transfer or similar
charges by Applicants. The proposed
Substitutions will be effected without
change in the amount or value of any
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3849
Contracts held by affected Contract
owners.
4. The proposed Substitutions will in
no way alter the tax treatment of
affected Contract owners in connection
with their Contracts, and no tax liability
will arise for Contract owners as a result
of the proposed Substitutions.
5. The rights or obligations of the
Company under the Contracts of
affected Contract owners will not be
altered in any way. The proposed
Substitutions will not adversely affect
any riders under the Contracts since
each Replacement Fund is an allowable
investment option for use with such
riders.
6. Affected Contract owners will be
permitted to make at least one transfer
of Contract value from the subaccount
investing in the Existing Fund (before
the Substitution Date) or the
Replacement Fund (after the
Substitution Date) to any other available
investment option under the Contract
without charge for a period beginning at
least 30 days before the Substitution
Date through at least 30 days following
the Substitution Date. Except as
described in any market timing/shortterm trading provisions of the relevant
prospectus, the Company will not
exercise any right it may have under the
Contract to impose restrictions on
transfers between the subaccounts
under the Contracts, including
limitations on the future number of
transfers, for a period beginning at least
30 days before the Substitution Date
through at least 30 days following the
Substitution Date.
7. All affected Contract owners will be
notified, at least 30 days before the
Substitution Date about: (a) The
intended substitution of the Existing
Funds with the Replacement Funds; (b)
The intended Substitution Date; and (c)
information with respect to transfers as
set forth in Condition 6 above. In
addition, the Company will deliver to
all affected Contract owners, at least 30
days before the Substitution Date, a
prospectus for each applicable
Replacement Fund.
8. The Company will deliver to each
affected Contract owner within five (5)
business days of the Substitution Date a
written confirmation which will
include: (a) A confirmation that the
proposed Substitutions were carried out
as previously notified; (b) a restatement
of the information set forth in the
Supplements; and (c) before and after
account values.
9. Applicants will not receive, for
three years from the Substitution Date,
any direct or indirect benefits from the
applicable Replacement Fund, its
adviser or underwriter (or their
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Federal Register / Vol. 81, No. 14 / Friday, January 22, 2016 / Notices
affiliates), in connection with assets
attributable to Contracts affected by the
proposed Substitutions, at a higher rate
than they had received from the Existing
Fund, its adviser or underwriter (or
their affiliates), including without
limitation 12b-1 fees, shareholder
service, administrative or other service
fees, revenue sharing, or other
arrangements.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–01230 Filed 1–21–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76920; File No. SR–OC–
2015–03]
Self-Regulatory Organizations;
OneChicago, LLC; Notice of Filing of
Proposed Rule Change Relating to the
Summary Imposition of Fines
January 15, 2016.
mstockstill on DSK4VPTVN1PROD with NOTICES
Pursuant to Section 19(b)(7) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 notice is hereby given that on
December 30, 2015, OneChicago, LLC
(‘‘OneChicago,’’ ‘‘OCX,’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change described in Items I, II, and III
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
OneChicago has also filed this rule
change with the Commodity Futures
Trading Commission (‘‘CFTC’’).
OneChicago filed a written certification
with the CFTC under Section 5c(c) of
the Commodity Exchange Act (‘‘CEA’’)
on December 29, 2015.
I. Self-Regulatory Organization’s
Description of the Proposed Rule
Change
OneChicago is proposing to amend
OCX Rule 717 (Summary Imposition of
Fines) and concurrently issue Notice to
Members (‘‘NTM’’) 2015–48. OCX Rule
717 lays out OneChicago’s summary
fine procedure. Specifically, OCX Rule
717 lists the violations for which the
Exchange may impose summary fines,
as well as the process the Exchange
must follow to impose such fines.
OneChicago proposes to amend Rule
717 to add several rule violations to the
1 15
U.S.C. 78s(b)(7).
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16:59 Jan 21, 2016
list of items for which the Exchange
may impose summary fines. In addition
to adding several rule violations for
which the Exchange may impose
summary fines, OCX is also proposing
to add a summary fine schedule for each
rule violation. The summary fine
schedule informs market participants of
the fines for each rule violation based
on the number of offenses within a
rolling twelve month period. OCX
developed this summary fine schedule
with input from the CFTC staff, and
many of the summary fines are in line
with summary fines for similar
violations at other security futures
exchanges.2 OneChicago is also making
minor technical changes to OCX Rule
717 to support the foregoing
amendments to the rule.
OneChicago is concurrently issuing
NTM 2015–48. The NTM informs
market participants that OneChicago is
amending OCX Rule 717. Additionally,
the NTM lists the violations for which
summary fines may be imposed. Then,
in order to provide market participants
with more clarity regarding the rule
violations, guidance is provided
regarding what activity or omission the
Exchange would consider to constitute
a violation of the listed rules.
Finally, OneChicago is also amending
OCX Rule 705 (Review of Investigative
Reports). OCX Rule 705 describes the
process by which the OneChicago Chief
Regulatory Officer (‘‘CRO’’) will review
investigation reports conducted by the
Compliance Department. OneChicago
proposes to amend OCX Rule 705 to
allow the CRO to authorize the
summary imposition of fines as a result
of an investigation.
The text of the proposed rule change
is attached as Exhibit 4 to the filing
submitted by the Exchange but is not
attached to the published notice of the
filing.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
OneChicago 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
self-regulatory organization has
prepared summaries, set forth in
sections A, B, and C below, of the most
significant aspects of such statements.
2 See,
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Frm 00075
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
OCX Rule 717 (Summary Imposition of
Fines)
OCX Rule 717 lays out the Exchange’s
summary fine authority. Currently, the
Rule describes that the Chief Regulatory
Officer may summarily impose a fine
against a Member for failing (i) to make
timely payments of original or variation
margin, options premiums, fees, cost,
charges or fines to the Exchange or the
Clearinghouse; (ii) to make timely and
accurate submissions to the Exchange of
notices, reports or other information
required by the Rules of the Exchange;
and (iii) to keep any books and records
required by the Rules of the Exchange.
Additionally, in its current form, the
Rule describes what requirements the
Exchange must follow when issuing a
summary fine pursuant to Rule 717. The
Exchange must provide notice of any
summary fine imposed, and the notice
must contain the violations of the Rules
of the Exchange for which the fine was
imposed, the violation date, and the
amount of the fine. Furthermore, the
Rule describes the requirements for the
Member or Access Person to pay the
fine or to appeal the fine pursuant to
OCX Rule 716. Finally, Rule 717 then
sets the maximum fine for each
violation at $5,000, and explains that
the summary imposition of fines does
not preclude the Exchange from
bringing any other action against the
fined market participant.
OneChicago is now proposing to make
certain amendments to this Rule 717.
Namely, OCX is proposing to add to
Rule 717 a list of items for which
summary fines may be imposed. The
items added generally relate to
violations of reporting, audit trail,
recordkeeping, and other Exchange
Rules. The list of items which
OneChicago proposes to add to Rule 717
and their associated proposed summary
fines as described below:
• Failure to make timely payments of
fees, costs, or charges to the Exchange
or Clearinghouse. The proposed
summary fines for this rule violation are
a warning letter for the first offense,
$1,000 fine for the second offense,
$2,500 fine for the third offense, and
$5,000 for all subsequent offenses
within a rolling twelve month period.
• Failure to make timely and accurate
submissions to the Exchange of notices,
reports or other information required by
the Rules of the Exchange. The
proposed summary fines for this rule
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]]>Agencies
[Federal Register Volume 81, Number 14 (Friday, January 22, 2016)]
[Notices]
[Pages 3847-3850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01230]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-31958; File No. 812-14449]
The Guardian Insurance & Annuity Company, Inc., et al; Notice of
Application
January 15, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order approving the substitution
of certain securities pursuant to Section 26(c) of the Investment
Company Act of 1940, as amended (the ``1940 Act'').
-----------------------------------------------------------------------
APPLICANTS: The Guardian Insurance & Annuity Company (the ``Company''),
The Guardian Separate Account K, The Guardian Separate Account M, The
Guardian Separate Account N (each, a ``Life Account'') and The Guardian
Separate Account R (the ``Annuity Account'' and together with the Life
Accounts, the ``Accounts'') (together, the ``Applicants'').
SUMMARY OF APPLICATION: The Applicants seek an order pursuant to
Section 26(c) of the 1940 Act approving the substitution of shares
issued by certain investment portfolios (the ``Existing Funds'') of
registered investment companies with shares of certain investment
portfolios (the ``Replacement Funds'') of registered investment
companies, under certain variable life insurance policies and variable
annuity contracts issued by the Company (the ``Contracts''), each
funded through the Accounts.
FILING DATE: The application was filed on April 24, 2015, and amended
on September 4, 2015, and November 10, 2015.
HEARING OR NOTIFICATION OF HEARING: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary 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 February 9, 2016, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to Rule 0-5 under the 1940 Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request notification by writing to the
Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants: Richard T. Potter,
The Guardian Insurance & Annuity Company, Inc., 7 Hanover Square, New
York, New York 10004.
FOR FURTHER INFORMATION CONTACT: Elizabeth G. Miller, Senior Counsel,
at (202) 551-8707, or Holly L. Hunter-Ceci, Branch Chief, at (202) 551-
6825 (Division of Investment Management, Chief Counsel's Office).
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. The Company is a stock life insurance company incorporated in
the State of Delaware. The Company is wholly owned by The Guardian Life
Insurance Company of America, a mutual life insurance company organized
in the State of New York (``Guardian Life''). Guardian Life does not
issue the Contracts and does not guarantee any benefits provided under
the Contracts.
2. Each Account is a ``separate account'' as defined in Rule 0-1(e)
under the 1940 Act and is registered with the Commission as a unit
investment trust under the 1940 Act. The interests in each Account
offered through the Contracts have been registered under the Securities
Act of 1933 on Form N-4 for the variable annuity Contracts offered
under the Annuity Account, and on Form N-6 for the variable life
insurance Contracts offered under the Life Accounts. The application
sets forth the registration statement file numbers for the Accounts.
Each Account was established by the board of directors of the Company
under the laws of the State of Delaware as follows:
------------------------------------------------------------------------
Separate account Date established
------------------------------------------------------------------------
The Guardian Separate Account K....... November 18, 1993.
The Guardian Separate Account M....... February 27, 1997.
The Guardian Separate Account N....... September 23, 1999.
The Guardian Separate Account R....... March 12, 2003.
------------------------------------------------------------------------
3. Each Account supports certain Contracts issued by the Company.
Each Account consists of investment divisions, each corresponding to a
registered open-end management investment company or series of a
registered open-end management investment company in which the Account
invests. The assets of each Account equal to its reserves and other
liabilities are not chargeable with the Company's obligations except
those under Contracts issued through such Account. Income, gains and
losses, whether or not realized, of each Account are kept separate from
other income, gains or losses of the Company and other separate
accounts. The income and capital gains or capital losses of each
investment division, whether realized or unrealized, are credited to or
charged against the assets held in that division according to the terms
of the applicable Contract, without regard to the income, capital gains
or capital losses of the other investment divisions of the Company.
4. The Contracts are flexible premium or modified scheduled premium
variable life insurance policies and variable annuity contracts. For so
long as a variable life insurance Contract remains in force or a
variable annuity Contract has not yet been annuitized, a Contract owner
may transfer all or part of their accumulation values among the
variable investment options under the
[[Page 3848]]
Contracts, subject to certain limits as described in the applicable
Contract prospectus, or to a fixed or indexed account in the case of
some of the Contracts. The terms and conditions, including charges and
expenses, applicable to each Contract are described in the prospectus
relating to such Contract.
5. The Applicants state that under the Contracts, the Company
reserves the right, subject to Commission approval and compliance with
applicable law, to substitute shares of one registered open-end
management investment company available as a variable investment option
for shares of another registered open-end management investment
company.
6. The Applicants propose the substitution of shares of Existing
Funds currently held by the Life Accounts and the Annuity Account to
support variable life insurance policies and variable annuity contracts
issued by the Company for shares of the Replacement Funds
(``Substitutions''):
------------------------------------------------------------------------
Substitution Existing fund Replacement fund
------------------------------------------------------------------------
1......................... Pioneer Disciplined AB VPS Growth and
Value VCT Portfolio-- Income Portfolio--
Class II Shares. Class B Shares.
2......................... Columbia Variable Janus Aspen Series--
Portfolio--Seligman Global Technology
Global Technology Portfolio--Service
Fund--Class 2 Shares. Shares.
3......................... Dreyfus Variable Putnam VT Investors
Investment Fund: Fund--Class IB
Appreciation Shares.
Portfolio--Service
Class Shares.
4......................... AB VPS International Templeton Foreign VIP
Value Portfolio-- Fund--Class 2
Class B Shares. Shares.
------------------------------------------------------------------------
7. Applicants represent that under the proposed Substitutions, each
Existing Fund's shares will be redeemed for cash, and the cash from the
redemption will be used to purchase shares of the respective
Replacement Fund.
8. The Applicants represent that the proposed Substitutions and the
selection of the Replacement Funds were not motivated by any financial
consideration paid or to be paid to the Company or its affiliates by
the respective Replacement Fund, its adviser or underwriter, or their
affiliates.
9. The Applicants represent that each proposed Substitution is
appropriate given the substantial similarity between the stated
investment objectives and principal investment strategies of each
Existing Fund as compared to each corresponding Replacement Fund, which
would offer Contract owners continuity of their investment strategies
and risks. The Applicants state that the proposed Substitutions are
expected to provide competitive long-term returns as compared to the
Existing Funds. Additional information for each Existing Fund and the
corresponding Replacement Fund, including investment objectives,
principal investment strategies, principal risks, and performance can
be found in the application.
10. The Applicants represent that the proposed Substitutions will
be described to the applicable prospectuses for the Contracts filed
with the Commission or in other supplemental disclosure documents for
the Contracts (collectively, the ``Supplements''). The Supplements
will: (a) Give Contract owners notice of the Company's intention to
take the necessary actions to substitute shares of the Existing Funds
on the Substitution Date (defined herein); (b) advise Contract owners
of their pre- and post-Substitution transfer rights; (c) instruct
Contract owners how to submit transfer requests in light of the
proposed Substitutions; and (d) advise Contract owners that any
Contract value remaining in an Existing Fund Subaccount on the
Substitution Date will be transferred to a subaccount investing in the
corresponding Replacement Fund, and that the Substitutions will take
place at relative net asset value. From the date of the Supplements
(which will be at least 30 days prior to the Substitution Date) until
the Substitution Date, Contract owners will have a pre-Substitution
transfer right, the specifics of which will be determined by whether
they have selected an optional living benefit rider, as discussed in
more detail in the application.\1\
---------------------------------------------------------------------------
\1\ Certain Contract owners have selected a Contract rider that
provides a living benefit rider. The terms of the living benefit
riders offered by the Company limit the available investment options
to identified allocation models consisting of a specified selection
of registered open-end management investment companies available as
variable investment options under the applicable Contract. Each
allocation model sets forth a specific allocation percentage for
each variable investment option within the model. For Contract
owners who have selected a living benefit rider, all transfers,
including the transfers contemplated by condition 6 of this Notice,
are limited to transfers of the entire Contract value to one of the
other allocation models available under the applicable living
benefit rider. On the Substitution Date, assets in a living benefit
rider allocation model that are held in an Existing Fund Subaccount
will be transferred to the applicable Replacement Fund Subaccount.
---------------------------------------------------------------------------
11. The Supplement will also inform Contract owners that, except as
described in the market timing limitations section or limitations
imposed by any living benefit riders of the relevant prospectus or
disclosure document, the Company will not exercise any rights reserved
by it under the Contracts to impose additional restrictions on
transfers out of a Replacement Fund Subaccount from the date of the
Supplements (which will be at least 30 days prior to the Substitution
Date) until at least 30 days after the Substitution Date.
12. The Company will send affected Contract owners a written
confirmation of the completed proposed Substitutions in accordance with
Rule 10b-10 under the Securities Exchange Act of 1934. The Company will
deliver to each affected Contract owner within five business days of
the date of the proposed Substitutions (the ``Substitution Date'') a
written confirmation which will include: (a) A confirmation that the
proposed Substitutions were carried out as previously notified; (b) a
restatement of the information set forth in the Supplements; and (c)
before and after account values. The confirmation statement will also
include or be accompanied by a statement that reiterates the free
transfer rights disclosed in the Supplements. The Company will also
send each Contract owner a current prospectus for each Replacement Fund
involved in the proposed Substitutions to the extent that such Contract
owners have not previously received a copy.
13. Each Substitution will take place at the relative net asset
value determined on the Substitution Date pursuant to Section 22(c) of
the 1940 Act and Rule 22c-1 thereunder, with no change in the amount of
any Contract owner's Contract value or death benefit or in the dollar
value of his or her investments in any of the subaccounts. The rights
or obligations of the Company under the Contracts will not be altered
in any way. The proposed Substitutions will take place with no change
to the Contract owner's Contract value, cash value and accumulation
value.
[[Page 3849]]
14. Applicants will effectuate the Substitutions after the issuance
of the requested order by the Commission. As of the Substitution Date,
shares of the Existing Fund will be redeemed for cash. The Company, on
behalf of the Accounts, will simultaneously place a redemption request
with the Existing Fund and a purchase order with the Replacement Fund
so that the purchase of the Replacement Fund shares will be for the
exact amount of the redemption proceeds.
15. The Company or its affiliates will pay all expenses and
transaction costs of the proposed Substitutions, including legal and
accounting expenses, any applicable brokerage expenses and other fees
and expenses. No fees or charges will be assessed to the Contract
owners to effect the proposed Substitutions. The proposed Substitutions
will not result in an increase in Contract fees and expenses, including
mortality and expense risk fees and administration and distribution
fees charged by the Separate Accounts. The proposed Substitutions will
not result in adverse tax consequences to Contract owners and will not
alter any tax benefits associated with the Contracts. No costs of the
proposed Substitutions will be borne directly or indirectly by Contract
owners.
16. Applicants will not receive, for three years from the
Substitution Date any direct or indirect benefits from the applicable
Replacement Fund, its adviser or underwriter (or their affiliates), in
connection with assets attributable to Contracts affected by the
proposed Substitutions, at a higher rate than they had received from
the Existing Fund, its adviser or underwriter (or their affiliates),
including without limitation 12b-1 fees, shareholder service,
administrative or other service fees, revenue sharing, or other
arrangements.
Legal Analysis
1. Applicants request that the Commission issue an order pursuant
to Section 26(c) of the 1940 Act approving the proposed Substitution by
the Company of shares of each Replacement Fund for shares of the
corresponding Existing Fund. Section 26(c) of the 1940 Act requires the
depositor of a registered unit investment trust holding securities of a
single issuer to receive Commission approval before substituting the
securities held by the trust. Section 26(c) provides that such approval
shall be granted by order of the Commission if the evidence establishes
that the substitution is consistent with the protection of investors
and the purposes of the 1940 Act.
2. The Applicants submit that the proposed Substitutions meet the
standards set forth in Section 26(c) and that, if implemented, the
Substitutions would not raise any of the concerns that Congress
intended to address when the 1940 Act was amended to include this
provision. As described in the application, Applicants represent that
each Replacement Fund and its corresponding Existing Fund have
substantially similar investment objectives and principal investment
strategies, which would offer Contract owners continuity of their
investment strategies and risks, and that Existing Funds will have
lower net operating expenses immediately after the proposed
Substitutions.
3. The Contracts will offer Contract owners the opportunity to make
at least one transfer of Contract value from the subaccount investing
in the Existing Fund (for at least 30 days before the Substitution
Date), or the Replacement Fund (for at least 30 days after the
Substitution Date) to any other available investment option under the
Contract without any cost or limitation other than those disclosed in
the applicable prospectuses previously provided to Contract owners.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The proposed Substitutions will not be effected unless the
Company determines that: (a) The Contracts allow the substitution of
shares of registered open-end investment companies in the manner
contemplated by the application; (b) the proposed Substitutions can be
consummated as described in the application under applicable insurance
laws; and (c) any regulatory requirements in each jurisdiction where
the Contracts are qualified for sale have been complied with to the
extent necessary to complete the proposed Substitutions.
2. The Company or its affiliates will pay all expenses and
transaction costs of the Substitutions, including legal and accounting
expenses, any applicable brokerage expenses and other fees and
expenses. No fees or charges will be assessed to the Contract owners to
effect the proposed Substitutions.
3. The proposed Substitutions will be effected at the relative net
asset values of the respective shares in conformity with Section 22(c)
of the 1940 Act and Rule 22c-1 thereunder without the imposition of any
transfer or similar charges by Applicants. The proposed Substitutions
will be effected without change in the amount or value of any Contracts
held by affected Contract owners.
4. The proposed Substitutions will in no way alter the tax
treatment of affected Contract owners in connection with their
Contracts, and no tax liability will arise for Contract owners as a
result of the proposed Substitutions.
5. The rights or obligations of the Company under the Contracts of
affected Contract owners will not be altered in any way. The proposed
Substitutions will not adversely affect any riders under the Contracts
since each Replacement Fund is an allowable investment option for use
with such riders.
6. Affected Contract owners will be permitted to make at least one
transfer of Contract value from the subaccount investing in the
Existing Fund (before the Substitution Date) or the Replacement Fund
(after the Substitution Date) to any other available investment option
under the Contract without charge for a period beginning at least 30
days before the Substitution Date through at least 30 days following
the Substitution Date. Except as described in any market timing/short-
term trading provisions of the relevant prospectus, the Company will
not exercise any right it may have under the Contract to impose
restrictions on transfers between the subaccounts under the Contracts,
including limitations on the future number of transfers, for a period
beginning at least 30 days before the Substitution Date through at
least 30 days following the Substitution Date.
7. All affected Contract owners will be notified, at least 30 days
before the Substitution Date about: (a) The intended substitution of
the Existing Funds with the Replacement Funds; (b) The intended
Substitution Date; and (c) information with respect to transfers as set
forth in Condition 6 above. In addition, the Company will deliver to
all affected Contract owners, at least 30 days before the Substitution
Date, a prospectus for each applicable Replacement Fund.
8. The Company will deliver to each affected Contract owner within
five (5) business days of the Substitution Date a written confirmation
which will include: (a) A confirmation that the proposed Substitutions
were carried out as previously notified; (b) a restatement of the
information set forth in the Supplements; and (c) before and after
account values.
9. Applicants will not receive, for three years from the
Substitution Date, any direct or indirect benefits from the applicable
Replacement Fund, its adviser or underwriter (or their
[[Page 3850]]
affiliates), in connection with assets attributable to Contracts
affected by the proposed Substitutions, at a higher rate than they had
received from the Existing Fund, its adviser or underwriter (or their
affiliates), including without limitation 12b-1 fees, shareholder
service, administrative or other service fees, revenue sharing, or
other arrangements.
For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01230 Filed 1-21-16; 8:45 am]
BILLING CODE 8011-01-P
