Hartford Life Insurance Company, et al; Notice of Application, 90398-90402 [2016-29933]
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90398
Federal Register / Vol. 81, No. 240 / Wednesday, December 14, 2016 / Notices
Substitution Notice; and (c) values of
the Contract owner’s positions in the
Existing Portfolio before the
Substitution and the Replacement
Portfolio after the Substitution.
11. For a period of two years
following the Substitution Date, for
those Contracts with assets allocated to
the Existing Portfolio on the
Substitution Date, the Hartford
Insurance Companies will reimburse, on
the last business day of each fiscal
quarter, the Contract owners whose
subaccounts invest in the applicable
Replacement Portfolio to the extent that
the Replacement Portfolio’s net annual
operating expenses (taking into account
fee waivers and expense
reimbursements) for such period
exceeds, on an annualized basis, the net
annual operating expenses of the
Existing Portfolio for fiscal year 2015. In
addition, the Section 26 Applicants will
not increase the Contract fees and
charges that would otherwise be
assessed under the terms of the
Contracts for a period of at least two
years following the Substitution Date.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–29934 Filed 12–13–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–32385; File No. 812–14446]
Hartford Life Insurance Company, et
al; Notice of Application
December 8, 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 (‘‘Act’’) and an order
of exemption pursuant to section 17(b)
of the Act from section 17(a) of the Act.
AGENCY:
Hartford Life Insurance
Company (‘‘Hartford Life’’), Hartford
Life and Annuity Insurance Company
(‘‘Hartford Life and Annuity,’’ and
together with Hartford Life, the
‘‘Hartford Life Insurance Companies’’);
their respective separate accounts,
Hartford Life Insurance Company
Separate Account Three (‘‘HL Separate
Account 3’’), Hartford Life and Annuity
Insurance Company Separate Account
Three (‘‘HLA Separate Account 3’’),
Hartford Life Insurance Company
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APPLICANTS:
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Separate Account Seven (‘‘HL Separate
Account 7’’), Hartford Life and Annuity
Insurance Company Separate Account
Seven (‘‘HLA Separate Account 7)
(collectively, the ‘‘Separate Accounts,’’
and together with the Hartford
Insurance Companies, the ‘‘Section 26
Applicants’’); HIMCO Variable
Insurance Trust (the ‘‘Trust’’), Hartford
Investment Management Company
(‘‘HIMCO,’’ and collectively with the
Section 26 Applicants and the Trust, the
‘‘Section 17 Applicants’’).
SUMMARY OF APPLICATION: The
Applicants seek an order pursuant to
section 26(c) of the Act, approving the
substitution of shares of thirty-five (35)
investment portfolios of registered
investment companies (the ‘‘Existing
Portfolios’’) with shares of five (5)
investment portfolios of the Trust (the
‘‘Replacement Portfolios’’), under
certain variable annuity contracts (the
‘‘Contracts’’), each funded through the
Separate Accounts (the
‘‘Substitutions’’). In addition, the
Section 17 Applicants also seek an order
pursuant to section 17(b) of the Act
exempting them from section 17(a) of
the Act to the extent necessary to permit
them to engage in certain in-kind
transactions (the ‘‘In-Kind
Transactions’’) in connection with the
Substitutions.
DATES: Filing Date:
The application was filed on April 21,
2015, and amended on May 25, 2016
and August 31, 2016.
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 January 3, 2017, 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
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: Hartford Life Insurance
Company, Attn: Lisa Proch, Vice
President, Assistant General Counsel,
P.O. Box 2999, Hartford, CT 06104–
2999.
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FOR FURTHER INFORMATION CONTACT:
Jessica Shin, Attorney-Adviser at (202)
551–5921 or David J. Marcinkus, Branch
Chief, at (202) 551–6821 (Chief
Counsel’s Office, Division of Investment
Management).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or 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. Hartford Life is a stock life
insurance company incorporated under
the laws of the state of Connecticut.
Hartford Life was engaged in the
business of writing individual and
group life insurance and annuity
contracts until April 30, 2013, and
remains authorized to do business in
every state and the District of Columbia.
Hartford Life is an indirect, whollyowned subsidiary of The Hartford
Financial Services Group, Inc. (‘‘The
Hartford’’), a Delaware corporation
whose stock is traded on the New York
Stock Exchange.
2. Hartford Life and Annuity is a stock
life insurance company incorporated
under the laws of the state of
Connecticut. Hartford Life and Annuity
was engaged in the business of writing
individual and group life insurance and
annuity contracts until April 30, 2013,
and remains authorized to do business
in every state (except New York), the
District of Columbia and Puerto Rico.
Hartford Life and Annuity is an indirect
wholly-owned subsidiary of The
Hartford.
3. Hartford Life established HL
Separate Account 3 and HL Separate
Account 7 as segregated asset accounts
under Connecticut law on June 22, 1994
and December 8, 1986, respectively.
Hartford Life and Annuity established
HLA Separate Account 3 and HLA
Separate Account 7 as segregated asset
accounts under Connecticut law on June
22, 1994 and April 1, 1999, respectively.
Each of the Separate Accounts meets the
definition of ‘‘separate account,’’ as
defined in Section 2(a)(37) of the Act.
The Separate Accounts are registered
with the Commission under the Act as
unit investment trusts. The assets of the
Separate Accounts support the
Contracts and interests in the Separate
Accounts offered through such
Contracts. The Separate Accounts are
segmented into subaccounts, and certain
of these subaccounts invest in the
Existing Portfolios. The Contracts are
individual and group deferred variable
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annuity contracts, with group
participants acquiring certain
ownership rights as described in the
group contract or plan documents.
Contract owners and participants in
group contracts (each, a ‘‘Contract
owner,’’ and collectively, ‘‘Contract
owners’’) may allocate some or all of
their Contract value to one or more
subaccounts available as investment
options under their respective Contracts
and any rider(s).
4. By the terms of each Contract (and
as set forth in the prospectuses for the
Contracts), the Hartford Insurance
Companies reserve the right to
substitute shares of another registered
investment company for the shares of
any registered investment company
already purchased or to be purchased in
the future by the Separate Accounts.
5. The Trust is a Delaware statutory
trust that was established on January 13,
Substitution
1
2
3
4
Existing portfolio (share class(es))
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5 ........................
6 ........................
7 ........................
8 ........................
9 ........................
10 ......................
11 ......................
12 ......................
13 ......................
14 ......................
15 ......................
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20
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24
25
26
27
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29
30
31
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HIMCO VIT Global Core Equity Fund (Class IB).
HIMCO VIT Large Cap Growth Fund (Class IB).
HIMCO VIT Small & Mid Cap Core Fund (Class IB).
HIMCO VIT Conservative Allocation Fund (Class IB).
Replacement Portfolio without first obtaining
shareholder approval of the change in sub-adviser,
the new sub-adviser, or the Replacement Portfolio’s
ability to add or to replace a sub-adviser in reliance
on the Manager of Managers Order or any
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may rely on the the Manager of
Managers Order, and the Trust’s
registration statement discloses and
explains the existence, substance and
effect of the Manager of Managers
Order.1
7. The Section 26 Applicants propose
to substitute shares of the Existing
Portfolios with shares of the
corresponding Replacement Portfolios,
as shown in the table below. As
discussed in greater detail in the
application, the Section 26 Applicants
believe that each Existing Portfolio has
substantially similar investment
objectives, principal investment
strategies, and principal investment
risks, and has substantially similar risk
and return characteristics, as its
corresponding Replacement Portfolio.
Replacement portfolio (share class)
American Funds Global Growth and Income Fund (Class 2) .............
American Funds Global Growth Fund (Class 2).
American Funds Global Small Capitalization Fund (Class 2).
Franklin Mutual Global Discovery VIP Fund.
(Class 2).
(Class 4).
MFS Global Equity Series (Initial Class).
Oppenheimer Global Fund/VA (Service Shares).
Templeton Growth VIP Fund.
(Class 2).
(Class 4).
American Funds Growth Fund (Class 2) .............................................
Fidelity VIP Contrafund Portfolio (Service Class 2).
Fidelity VIP Growth Portfolio (Service Class 2).
Franklin Flex Cap Growth VIP Fund.
(Class 2).
(Class 4).
Franklin Large Cap Growth VIP Fund (Class 2).
Invesco V.I. American Franchise Fund.
(Series I).
(Series II).
MFS Core Equity Portfolio (Initial Class).
MFS Growth Series.
(Initial Class).
(Service Class).
MFS Massachusetts Investors Growth Stock Portfolio.
(Initial Class).
MFS Research Series (Initial Class).
Oppenheimer Capital Appreciation Fund/VA (Service Shares).
AB VPS Small/Mid Cap Value Portfolio (Class B) ..............................
Fidelity VIP Mid Cap Portfolio (Service Class 2).
Fidelity VIP Value Strategies Portfolio (Service Class 2).
Franklin Small Cap Value VIP Fund (Class 2) (Class 4).
Franklin Small-Mid Cap Growth VIP Fund (Class 2) (Class 4).
Invesco V.I. American Value Fund (Series II).
Invesco V.I. Mid Cap Core Equity Fund (Series I) (Series II).
Invesco V.I. Small Cap Equity Fund (Series I) (Series II).
MFS Mid Cap Growth Series (Initial Class).
MFS New Discovery Series (Initial Class) (Service Class).
Oppenheimer Main Street Small Cap Fund/VA (Service Shares).
UIF Mid Cap Growth Portfolio (Class II).
Franklin Income VIP Fund ...................................................................
1 HIMCO has agreed, as a condition of the
application, that it will not change a sub-adviser,
add a new sub-adviser, or otherwise rely on the
Manager of Managers Order or any replacement
order from the Commission with respect to any
VerDate Sep<11>2014
2012. The Trust is registered with the
Commission as an open-end
management investment company
under the Act and its shares are
registered under the Securities Act of
1933. The Trust is a series investment
company and currently has twenty-four
(24) separate portfolios (each a ‘‘HIMCO
VIT Fund,’’ and collectively, the
‘‘HIMCO VIT Funds’’). Five (5) HIMCO
VIT Funds comprise the Replacement
Portfolios.
6. HIMCO, a Delaware corporation
and a registered investment adviser,
serves as investment adviser to each of
the HIMCO VIT Funds pursuant to an
investment advisory agreement between
the Trust, on behalf of each HIMCO VIT
Fund, and HIMCO. In addition, the
Trust has obtained an exemptive order
from the Commission (File No. 812–
11684) (the ‘‘Manager of Managers
Order’’). The Replacement Portfolios
90399
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replacement order from the Commission at a
shareholder meeting, the record date for which
shall be after the proposed Substitution has been
effected.
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Substitution
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35
Existing portfolio (share class(es))
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(Class 2).
(Class 4).
AB VPS Balanced Wealth Strategy Portfolio (Class B) ......................
American Funds Asset Allocation Fund (Class 2).
Invesco V.I. Equity and Income Fund (Series II).
MFS Total Return Series.
(Initial Class).
(Service Class).
8. The Hartford Insurance Companies
state that the proposed Substitutions are
intended to improve the administrative
efficiency and cost-effectiveness of the
Contracts, as well as to make the
Contracts more attractive to existing
Contract owners. Applicants state that
by eliminating overlapping investment
options that duplicate one another by
having substantially similar investment
objectives, strategies and risks, the
Hartford Insurance Companies can
present a more streamlined menu of
investment options under the Contracts.
Applicants further state that since the
proposed Substitutions were designed
to reduce investment-option
redundancy, the diversity of available
investment styles under the Contracts
will not be adversely impacted.
Additional information for each Existing
Portfolio and the corresponding
Replacement Portfolio, including
investment objectives, principal
investment strategies, principal risks,
and fees can be found in the
application.
9. Applicants state that through the
proposed Substitutions, the Hartford
Insurance Companies seek to replace
certain investment options in the
Contracts’ current fund lineups with
investment options that will provide
Contract owners with lower expenses,
while maintaining a high-quality menu
of investment options. In this regard, the
Section 26 Applicants believe that
Contract owners with Contract value
allocated to the subaccounts of the
Existing Portfolios will have lower total
and net annual operating expenses
immediately after the proposed
Substitutions than before the proposed
Substitutions. Applicants also state that,
for each Substitution, the combined
management fee and Rule 12b–1 fee of
each Replacement Portfolio is lower
than that of the corresponding Existing
Portfolio. The application sets forth the
fees and expenses of each Existing
Portfolio and its corresponding
Replacement Portfolio in greater detail.
10. The Section 26 Applicants also
agree that, during a period of two (2)
years following the implementation of
the proposed Substitution (the
‘‘Substitution Date’’), and for those
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HIMCO VIT Moderate Allocation Fund (Class B).
Contracts with assets allocated to an
Existing Portfolio on the Substitution
Date, the Hartford Insurance Companies
will reimburse, on the last business day
of each fiscal quarter, the owners of
those Contracts invested in the
applicable Replacement Portfolio to the
extent that the Replacement Portfolio’s
total net annual operating expenses
(taking into account fee waivers and
expense reimbursements) for such
period exceeds, on an annualized basis,
the total net annual operating expenses
of the Existing Portfolio for fiscal year
2015. In addition, the Hartford
Insurance Companies will not increase
the Contract fees and charges that would
otherwise be assessed under the terms
of those Contracts for a period of at least
two (2) years following the Substitution
Date.
11. Applicants state that the Hartford
Insurance Companies or their 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.
Applicants state that no fees or charges
will be assessed to the affected Contract
owners to effect the proposed
Substitutions. Applicants state that the
proposed Substitutions will not cause
the Contract fees and charges currently
being paid by existing Contract owners
to be greater after the Substitutions than
before the Substitutions.
12. Applicants state that the Contract
value of each Contract owner affected by
the proposed Substitutions will not
change as a result of the proposed
Substitutions. Applicants state that,
because the Substitutions will occur at
relative net asset value, and the fees and
charges under the Contracts will not
change as a result of the Substitutions,
the benefits offered by the guarantees
under the Contracts will be the same
immediately before and after the
Substitutions. Applicants further state
that what effect the Substitutions may
have on the value of the benefits offered
by the Contract guarantees would
depend, among other things, on the
relative future performance of each
Existing Portfolio and Replacement
Portfolio, which the Section 26
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Applicants cannot predict.
Nevertheless, the Section 26 Applicants
note that at the time of the
Substitutions, the Contracts will offer a
comparable variety of investment
options with as broad a range of risk/
return characteristics.
13. At least 30 days prior to the
Substitution Date, Contract owners will
be notified via prospectus supplements,
which will be filed with the
Commission pursuant to Rule 497 under
the Securities Act of 1933, that the
Section 26 Applicants received or
expect to receive Commission approval
of the applicable proposed Substitutions
and of the anticipated Substitution Date
(the ‘‘Pre-Substitution Notice’’). The
Pre-Substitution Notice will advise
Contract owners that Contract values
attributable to investments in the
Existing Portfolios will be transferred to
the Replacement Portfolios, without any
charge that would otherwise apply and
without being subject to any limitations
on transfers, on the Substitution Date.
The Pre-Substitution Notice also will
state that, from the date of the PreSubstitution Notice through the date
thirty (30) days after the Substitutions,
Contract owners may transfer Contract
value from the subaccounts investing in
the Existing Portfolios (before the
Substitutions) or the Replacement
Portfolios (after the Substitutions) to any
other available investment option
without charge and without imposing
any transfer limitations.
14. The Section 26 Applicants will
also deliver to affected Contract owners,
at least thirty (30) days before the
Substitution Date, a prospectus for each
applicable Replacement Portfolio. In
addition, within five (5) business days
after the Substitution Date, Contract
owners whose assets are allocated to a
Replacement Portfolio as part of the
proposed Substitutions will be sent a
written notice (each, a ‘‘Confirmation’’)
informing them that the Substitutions
were carried out as previously notified.
The Confirmation will also restate the
information set forth in the PreSubstitution Notice. The Confirmation
will also reflect the Contract owners
Contract values before and after the
Substitution(s).
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15. Each Substitution will be effected
at the relative net asset values of the
respective shares of the Replacement
Portfolios 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 the
Section 26 Applicants. The
Substitutions will be effected without
change in the amount or value of any
Contracts held by affected Contract
owners. As such, the Section 26
Applicants believe that the procedures
to be implemented are sufficient to
assure that each Contract owner’s cash
values immediately after the
Substitution will be equal to the cash
value immediately before the
Substitution. As of the Substitution
Date, the Separate Accounts will redeem
shares of the Existing Portfolios for cash
or in-kind. The proceeds of such
redemptions will then be used to
purchase shares of the corresponding
Replacement Portfolio, as each
subaccount of the Separate Accounts
will invest the proceeds of its
redemption from the Existing Portfolios
in the applicable Replacement
Portfolios.
Legal Analysis
1. The Section 26 Applicants request
that the Commission issue an order
pursuant to section 26(c) of the Act
approving the proposed Substitutions.
Section 26(c) of the Act prohibits any
depositor or trustee of a unit investment
trust holding the security of a single
issuer from substituting another security
of another issuer without the approval
of the Commission. 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
fairly intended by the policy and
provisions of [the Act].’’
2. The Section 26 Applicants submit
that each of the Substitutions meet the
standards set forth in section 26(c) and
that, if implemented, the Substitutions
would not raise any of the concerns
underlying this provision. The Section
26 Applicants believe that each
Replacement Portfolio and its
corresponding Existing Portfolio(s) have
substantially similar investment
objectives, principal investment
strategies and principal risks.
Applicants state that, accordingly, no
Contract owner will involuntarily lose
his or her rider(s) as a result of any
proposed Substitution. Contract owners
will not incur any fees or charges as a
result of the proposed Substitutions.
3. The Section 17 Applicants request
that the Commission issue an order
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pursuant to section 17(b) of the Act
exempting them from section 17(a) of
the Act to the extent necessary to permit
them to carry out, as part of the
Substitutions, the In-Kind Transactions.
Section 17(a)(1) of the Act prohibits any
affiliated person of a registered
investment company, or any affiliated
person of such person, acting as
principal, from selling any security or
other property to such registered
investment company. Section 17(a)(2) of
the Act prohibits any of the persons
described above, acting as principals,
from purchasing any security or other
property from such registered
investment company.
4. Because the proposed Substitutions
may be effected, in whole or in part, by
means of in-kind redemptions and
purchases, the proposed Substitutions
may be deemed to involve one or more
purchases or sales of securities or
property between affiliated persons. The
proposed transactions may involve a
transfer of portfolio securities by the
Existing Portfolios to the Separate
Accounts. Immediately thereafter, the
Separate Accounts would purchase
shares of the Replacement Portfolios
with the portfolio securities received
from the Existing Portfolios.
Accordingly, to the extent the Separate
Accounts and the Existing Portfolios,
and the Separate Accounts and the
Replacement Portfolios, are deemed to
be affiliated persons of one another
under Section 2(a)(3) of the Act, it is
conceivable that this aspect of the
proposed Substitutions could be viewed
as being prohibited by Section 17(a). As
such, the Section 17 Applicants have
determined that it is prudent to seek
relief from Section 17(a) in the context
of this application.
5. The Section 17 Applicants
maintain that the terms of the proposed
In-Kind Transactions, including the
consideration to be paid by each
Existing Portfolio and received by each
Replacement Portfolio involved, are
reasonable, fair and do not involve
overreaching, principally because the
transactions will conform with all but
one of the conditions enumerated in
Rule 17a–7. The In-Kind Transactions
will take place at relative net asset value
in conformity with the requirements of
Section 22(c) of the Act and Rule 22c–
1 thereunder without the imposition of
any transfer or similar charges by the
Section 26 Applicants. The
Substitutions will be effected without
change in the amount or value of any
Contract held by the affected Contract
owners. The Substitutions will in no
way alter the tax treatment of affected
Contract owners in connection with
their Contracts, and no tax liability will
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90401
arise for Contract owners as a result of
the Substitutions. The fees and charges
under the Contracts will not increase
because of the Substitutions. Even
though the Separate Accounts, the
Hartford Insurance Companies and the
Trust may not rely on Rule 17a–7, the
Section 17 Applicants believe that the
Rule’s conditions outline the type of
safeguards that result in transactions
that are fair and reasonable to registered
investment company participants and
preclude overreaching in connection
with an investment company by its
affiliated persons.
6. The Section 17 Applicants submit
that the proposed in-kind purchases by
the Separate Accounts are consistent
with the policies of the Trust and the
Replacement Portfolios, as recited in the
Trust’s current registration statement
and reports filed under the Act. Finally,
the Section 17 Applicants submit that
the proposed Substitutions are
consistent with the general purposes of
the Act.
Applicants’ Conditions
The Section 26 Applicants, and
HIMCO as applicable, agree that any
order granting the requested relief will
be subject to the following conditions.
1. The Substitutions will not be
effected unless the Section 26
Applicants determine that: (i) The
Contracts allow the substitution of
shares of registered open-end
investment companies in the manner
contemplated by this application; (ii)
the Substitutions can be consummated
as described in this application under
applicable insurance laws; and (iii) any
regulatory requirements in each
jurisdiction where the Contracts are
qualified for sale have been complied
with to the extent necessary to complete
the Substitutions.
2. The Hartford Insurance Companies
will seek approval of the proposed
Substitutions from any state insurance
regulators whose approval may be
necessary or appropriate.
3. HIMCO will not change a subadviser, add a new sub-adviser, or
otherwise rely on the Manager of
Managers Order or any replacement
order from the Commission with respect
to any Replacement Portfolio without
first obtaining shareholder approval of
the change in sub-adviser, the new subadviser, or the Replacement Portfolio’s
ability to add or to replace a sub-adviser
at a shareholder meeting, the record
date for which shall be after the
proposed Substitution has been effected.
4. The Hartford Insurance Companies
or their affiliates will pay all expenses
and transaction costs of the
Substitutions, including legal and
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accounting expenses, any applicable
brokerage expenses and other fees and
expenses. No fees or charges will be
assessed to the affected Contract owners
to effect the Substitutions. The proposed
Substitutions will not cause the
Contract fees and charges currently
being paid by Contract owners to be
greater after the proposed Substitution
than before the proposed Substitution.
5. The Substitutions will be effected
at the relative net asset values of the
respective shares of the Replacement
Portfolios 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 the
Section 26 Applicants. The
Substitutions will be effected without
change in the amount or value of any
Contracts held by affected Contract
owners.
6. The 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 Substitutions.
7. The obligations of the Section 26
Applicants, and the rights of the
affected Contract owners, under the
Contracts of affected Contract owners
will not be altered in any way.
8. Affected Contract owners will be
permitted to transfer Contract value
from the subaccount investing in the
Existing Portfolio (before Substitution
Date) or the Replacement Portfolio (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.
Contract owners with guaranteed living
and/or death benefit riders, as
applicable, may transfer Contract value
from the subaccounts investing in the
Existing Portfolios (before the
Substitutions) or the Replacement
Portfolios (after the Substitutions) to any
other available investment option
available under their respective riders
without charge and without imposing
any transfer limitations. Except as
described in any market timing/shortterm trading provisions of the relevant
prospectus, the Section 26 Applicants
will not exercise any rights reserved
under the Contracts 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.
9. All affected Contract owners will be
notified, at least 30 days before the
VerDate Sep<11>2014
18:45 Dec 13, 2016
Jkt 241001
Substitution Date about: (a) The
intended Substitution of Existing
Portfolios with the Replacement
Portfolios; (b) the intended Substitution
Date; and (c) information with respect to
transfers as set forth in Condition 8
above. In addition, the Section 26
Applicants will also deliver to affected
Contract owners, at least thirty (30) days
before the Substitution Date, a
prospectus for each applicable
Replacement Portfolio.
10. The Section 26 Applicants 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 Substitutions were carried out
as previously notified; (b) a restatement
of the information set forth in the PreSubstitution Notice; and (c) values of
the Contract owner’s positions in the
Existing Portfolio before the
Substitution and the Replacement
Portfolio after the Substitution.
11. For a period of two years
following the Substitution Date, for
those Contracts with assets allocated to
the Existing Portfolio on the
Substitution Date, the Hartford
Insurance Companies will reimburse, on
the last business day of each fiscal
quarter, the Contract owners whose
subaccounts invest in the applicable
Replacement Portfolio to the extent that
the Replacement Portfolio’s net annual
operating expenses (taking into account
fee waivers and expense
reimbursements) for such period
exceeds, on an annualized basis, the net
annual operating expenses of the
Existing Portfolio for fiscal year 2015. In
addition, the Section 26 Applicants will
not increase the Contract fees and
charges that would otherwise be
assessed under the terms of the
Contracts for a period of at least two
years following the Substitution Date.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–29933 Filed 12–13–16; 8:45 am]
BILLING CODE 8011–01–P
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79510; File No. SR–
NYSEMKT–2016–58]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Designation of a
Longer Period for Commission Action
on Proceedings To Determine Whether
To Approve or Disapprove a Proposed
Rule Change, as Modified by
Amendments No. 1 and 2 Thereto,
Relating to Amendments to NYSE MKT
Rules 1600 et seq. and the Listing
Rules Applicable to the Shares of the
Nuveen Diversified Commodity Fund
and the Nuveen Long/Short
Commodity Total Return Fund
December 8, 2016.
On May 24, 2016, NYSE MKT LLC
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
among other things, amend NYSE MKT
Rules 1600 et seq. and to amend the
listing rules applicable to the shares of
the Nuveen Diversified Commodity
Fund and the Nuveen Long/Short
Commodity Total Return Fund, which
the Exchange currently lists and trades.
The proposed rule change was
published for comment in the Federal
Register on June 13, 2016.3
On July 28, 2016, pursuant to Section
19(b)(2) of the Act,4 the Commission
designated a longer period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to disapprove the proposed
rule change.5 On September 2, 2016, the
Exchange filed Amendment No. 1 to the
proposed rule change, which replaced
and superseded the proposed rule
change as originally filed.6 On
September 9, 2016, the Commission
instituted proceedings under Section
19(b)(2)(B) of the Act,7 to determine
whether to approve or disapprove the
proposed rule change, as modified by
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 78000
(June 7, 2016), 81 FR 38232.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 78432,
81 FR 51248 (August 3, 2016). The Commission
designated September 9, 2016, as the date by which
the Commission would either approve or
disapprove, or institute proceedings to determine
whether to disapprove, the proposed rule change.
6 Amendment No. 1 is available at https://
www.sec.gov/comments/sr-nysemkt-201658/
nysemkt201658-2.pdf.
7 15 U.S.C. 78s(b)(2)(B).
2 17
E:\FR\FM\14DEN1.SGM
14DEN1
]]>Agencies
[Federal Register Volume 81, Number 240 (Wednesday, December 14, 2016)]
[Notices]
[Pages 90398-90402]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29933]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-32385; File No. 812-14446]
Hartford Life Insurance Company, et al; Notice of Application
December 8, 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 (``Act'') and an order of exemption
pursuant to section 17(b) of the Act from section 17(a) of the Act.
-----------------------------------------------------------------------
Applicants: Hartford Life Insurance Company (``Hartford Life''),
Hartford Life and Annuity Insurance Company (``Hartford Life and
Annuity,'' and together with Hartford Life, the ``Hartford Life
Insurance Companies''); their respective separate accounts, Hartford
Life Insurance Company Separate Account Three (``HL Separate Account
3''), Hartford Life and Annuity Insurance Company Separate Account
Three (``HLA Separate Account 3''), Hartford Life Insurance Company
Separate Account Seven (``HL Separate Account 7''), Hartford Life and
Annuity Insurance Company Separate Account Seven (``HLA Separate
Account 7) (collectively, the ``Separate Accounts,'' and together with
the Hartford Insurance Companies, the ``Section 26 Applicants''); HIMCO
Variable Insurance Trust (the ``Trust''), Hartford Investment
Management Company (``HIMCO,'' and collectively with the Section 26
Applicants and the Trust, the ``Section 17 Applicants'').
Summary of Application: The Applicants seek an order pursuant to
section 26(c) of the Act, approving the substitution of shares of
thirty-five (35) investment portfolios of registered investment
companies (the ``Existing Portfolios'') with shares of five (5)
investment portfolios of the Trust (the ``Replacement Portfolios''),
under certain variable annuity contracts (the ``Contracts''), each
funded through the Separate Accounts (the ``Substitutions''). In
addition, the Section 17 Applicants also seek an order pursuant to
section 17(b) of the Act exempting them from section 17(a) of the Act
to the extent necessary to permit them to engage in certain in-kind
transactions (the ``In-Kind Transactions'') in connection with the
Substitutions.
DATES: Filing Date:
The application was filed on April 21, 2015, and amended on May 25,
2016 and August 31, 2016.
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 January 3, 2017, 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 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: Hartford Life
Insurance Company, Attn: Lisa Proch, Vice President, Assistant General
Counsel, P.O. Box 2999, Hartford, CT 06104-2999.
FOR FURTHER INFORMATION CONTACT: Jessica Shin, Attorney-Adviser at
(202) 551-5921 or David J. Marcinkus, Branch Chief, at (202) 551-6821
(Chief Counsel's Office, Division of Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or 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. Hartford Life is a stock life insurance company incorporated
under the laws of the state of Connecticut. Hartford Life was engaged
in the business of writing individual and group life insurance and
annuity contracts until April 30, 2013, and remains authorized to do
business in every state and the District of Columbia. Hartford Life is
an indirect, wholly-owned subsidiary of The Hartford Financial Services
Group, Inc. (``The Hartford''), a Delaware corporation whose stock is
traded on the New York Stock Exchange.
2. Hartford Life and Annuity is a stock life insurance company
incorporated under the laws of the state of Connecticut. Hartford Life
and Annuity was engaged in the business of writing individual and group
life insurance and annuity contracts until April 30, 2013, and remains
authorized to do business in every state (except New York), the
District of Columbia and Puerto Rico. Hartford Life and Annuity is an
indirect wholly-owned subsidiary of The Hartford.
3. Hartford Life established HL Separate Account 3 and HL Separate
Account 7 as segregated asset accounts under Connecticut law on June
22, 1994 and December 8, 1986, respectively. Hartford Life and Annuity
established HLA Separate Account 3 and HLA Separate Account 7 as
segregated asset accounts under Connecticut law on June 22, 1994 and
April 1, 1999, respectively. Each of the Separate Accounts meets the
definition of ``separate account,'' as defined in Section 2(a)(37) of
the Act. The Separate Accounts are registered with the Commission under
the Act as unit investment trusts. The assets of the Separate Accounts
support the Contracts and interests in the Separate Accounts offered
through such Contracts. The Separate Accounts are segmented into
subaccounts, and certain of these subaccounts invest in the Existing
Portfolios. The Contracts are individual and group deferred variable
[[Page 90399]]
annuity contracts, with group participants acquiring certain ownership
rights as described in the group contract or plan documents. Contract
owners and participants in group contracts (each, a ``Contract owner,''
and collectively, ``Contract owners'') may allocate some or all of
their Contract value to one or more subaccounts available as investment
options under their respective Contracts and any rider(s).
4. By the terms of each Contract (and as set forth in the
prospectuses for the Contracts), the Hartford Insurance Companies
reserve the right to substitute shares of another registered investment
company for the shares of any registered investment company already
purchased or to be purchased in the future by the Separate Accounts.
5. The Trust is a Delaware statutory trust that was established on
January 13, 2012. The Trust is registered with the Commission as an
open-end management investment company under the Act and its shares are
registered under the Securities Act of 1933. The Trust is a series
investment company and currently has twenty-four (24) separate
portfolios (each a ``HIMCO VIT Fund,'' and collectively, the ``HIMCO
VIT Funds''). Five (5) HIMCO VIT Funds comprise the Replacement
Portfolios.
6. HIMCO, a Delaware corporation and a registered investment
adviser, serves as investment adviser to each of the HIMCO VIT Funds
pursuant to an investment advisory agreement between the Trust, on
behalf of each HIMCO VIT Fund, and HIMCO. In addition, the Trust has
obtained an exemptive order from the Commission (File No. 812-11684)
(the ``Manager of Managers Order''). The Replacement Portfolios may
rely on the the Manager of Managers Order, and the Trust's registration
statement discloses and explains the existence, substance and effect of
the Manager of Managers Order.\1\
---------------------------------------------------------------------------
\1\ HIMCO has agreed, as a condition of the application, that it
will not change a sub-adviser, add a new sub-adviser, or otherwise
rely on the Manager of Managers Order or any replacement order from
the Commission with respect to any Replacement Portfolio without
first obtaining shareholder approval of the change in sub-adviser,
the new sub-adviser, or the Replacement Portfolio's ability to add
or to replace a sub-adviser in reliance on the Manager of Managers
Order or any replacement order from the Commission at a shareholder
meeting, the record date for which shall be after the proposed
Substitution has been effected.
---------------------------------------------------------------------------
7. The Section 26 Applicants propose to substitute shares of the
Existing Portfolios with shares of the corresponding Replacement
Portfolios, as shown in the table below. As discussed in greater detail
in the application, the Section 26 Applicants believe that each
Existing Portfolio has substantially similar investment objectives,
principal investment strategies, and principal investment risks, and
has substantially similar risk and return characteristics, as its
corresponding Replacement Portfolio.
------------------------------------------------------------------------
Replacement
Substitution Existing portfolio portfolio (share
(share class(es)) class)
------------------------------------------------------------------------
1....................... American Funds Global HIMCO VIT Global
Growth and Income Fund Core Equity Fund
(Class 2). (Class IB).
2....................... American Funds Global
Growth Fund (Class 2).
3....................... American Funds Global
Small Capitalization
Fund (Class 2).
4....................... Franklin Mutual Global
Discovery VIP Fund.
(Class 2)...............
(Class 4)...............
5....................... MFS Global Equity Series
(Initial Class).
6....................... Oppenheimer Global Fund/
VA (Service Shares).
7....................... Templeton Growth VIP
Fund.
(Class 2)...............
(Class 4)...............
8....................... American Funds Growth HIMCO VIT Large Cap
Fund (Class 2). Growth Fund (Class
IB).
9....................... Fidelity VIP Contrafund
Portfolio (Service
Class 2).
10...................... Fidelity VIP Growth
Portfolio (Service
Class 2).
11...................... Franklin Flex Cap Growth
VIP Fund.
(Class 2)...............
(Class 4)...............
12...................... Franklin Large Cap
Growth VIP Fund (Class
2).
13...................... Invesco V.I. American
Franchise Fund.
(Series I)..............
(Series II).............
14...................... MFS Core Equity
Portfolio (Initial
Class).
15...................... MFS Growth Series.......
(Initial Class).........
(Service Class).........
16...................... MFS Massachusetts
Investors Growth Stock
Portfolio.
(Initial Class).........
17...................... MFS Research Series
(Initial Class).
18...................... Oppenheimer Capital
Appreciation Fund/VA
(Service Shares).
19...................... AB VPS Small/Mid Cap HIMCO VIT Small &
Value Portfolio (Class Mid Cap Core Fund
B). (Class IB).
20...................... Fidelity VIP Mid Cap
Portfolio (Service
Class 2).
21...................... Fidelity VIP Value
Strategies Portfolio
(Service Class 2).
22...................... Franklin Small Cap Value
VIP Fund (Class 2)
(Class 4).
23...................... Franklin Small-Mid Cap
Growth VIP Fund (Class
2) (Class 4).
24...................... Invesco V.I. American
Value Fund (Series II).
25...................... Invesco V.I. Mid Cap
Core Equity Fund
(Series I) (Series II).
26...................... Invesco V.I. Small Cap
Equity Fund (Series I)
(Series II).
27...................... MFS Mid Cap Growth
Series (Initial Class).
28...................... MFS New Discovery Series
(Initial Class)
(Service Class).
29...................... Oppenheimer Main Street
Small Cap Fund/VA
(Service Shares).
30...................... UIF Mid Cap Growth
Portfolio (Class II).
31...................... Franklin Income VIP Fund HIMCO VIT
Conservative
Allocation Fund
(Class IB).
[[Page 90400]]
(Class 2)...............
(Class 4)...............
32...................... AB VPS Balanced Wealth HIMCO VIT Moderate
Strategy Portfolio Allocation Fund
(Class B). (Class B).
33...................... American Funds Asset
Allocation Fund (Class
2).
34...................... Invesco V.I. Equity and
Income Fund (Series II).
35...................... MFS Total Return Series.
(Initial Class).........
(Service Class).........
------------------------------------------------------------------------
8. The Hartford Insurance Companies state that the proposed
Substitutions are intended to improve the administrative efficiency and
cost-effectiveness of the Contracts, as well as to make the Contracts
more attractive to existing Contract owners. Applicants state that by
eliminating overlapping investment options that duplicate one another
by having substantially similar investment objectives, strategies and
risks, the Hartford Insurance Companies can present a more streamlined
menu of investment options under the Contracts. Applicants further
state that since the proposed Substitutions were designed to reduce
investment-option redundancy, the diversity of available investment
styles under the Contracts will not be adversely impacted. Additional
information for each Existing Portfolio and the corresponding
Replacement Portfolio, including investment objectives, principal
investment strategies, principal risks, and fees can be found in the
application.
9. Applicants state that through the proposed Substitutions, the
Hartford Insurance Companies seek to replace certain investment options
in the Contracts' current fund lineups with investment options that
will provide Contract owners with lower expenses, while maintaining a
high-quality menu of investment options. In this regard, the Section 26
Applicants believe that Contract owners with Contract value allocated
to the subaccounts of the Existing Portfolios will have lower total and
net annual operating expenses immediately after the proposed
Substitutions than before the proposed Substitutions. Applicants also
state that, for each Substitution, the combined management fee and Rule
12b-1 fee of each Replacement Portfolio is lower than that of the
corresponding Existing Portfolio. The application sets forth the fees
and expenses of each Existing Portfolio and its corresponding
Replacement Portfolio in greater detail.
10. The Section 26 Applicants also agree that, during a period of
two (2) years following the implementation of the proposed Substitution
(the ``Substitution Date''), and for those Contracts with assets
allocated to an Existing Portfolio on the Substitution Date, the
Hartford Insurance Companies will reimburse, on the last business day
of each fiscal quarter, the owners of those Contracts invested in the
applicable Replacement Portfolio to the extent that the Replacement
Portfolio's total net annual operating expenses (taking into account
fee waivers and expense reimbursements) for such period exceeds, on an
annualized basis, the total net annual operating expenses of the
Existing Portfolio for fiscal year 2015. In addition, the Hartford
Insurance Companies will not increase the Contract fees and charges
that would otherwise be assessed under the terms of those Contracts for
a period of at least two (2) years following the Substitution Date.
11. Applicants state that the Hartford Insurance Companies or their
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. Applicants state that
no fees or charges will be assessed to the affected Contract owners to
effect the proposed Substitutions. Applicants state that the proposed
Substitutions will not cause the Contract fees and charges currently
being paid by existing Contract owners to be greater after the
Substitutions than before the Substitutions.
12. Applicants state that the Contract value of each Contract owner
affected by the proposed Substitutions will not change as a result of
the proposed Substitutions. Applicants state that, because the
Substitutions will occur at relative net asset value, and the fees and
charges under the Contracts will not change as a result of the
Substitutions, the benefits offered by the guarantees under the
Contracts will be the same immediately before and after the
Substitutions. Applicants further state that what effect the
Substitutions may have on the value of the benefits offered by the
Contract guarantees would depend, among other things, on the relative
future performance of each Existing Portfolio and Replacement
Portfolio, which the Section 26 Applicants cannot predict.
Nevertheless, the Section 26 Applicants note that at the time of the
Substitutions, the Contracts will offer a comparable variety of
investment options with as broad a range of risk/return
characteristics.
13. At least 30 days prior to the Substitution Date, Contract
owners will be notified via prospectus supplements, which will be filed
with the Commission pursuant to Rule 497 under the Securities Act of
1933, that the Section 26 Applicants received or expect to receive
Commission approval of the applicable proposed Substitutions and of the
anticipated Substitution Date (the ``Pre-Substitution Notice''). The
Pre-Substitution Notice will advise Contract owners that Contract
values attributable to investments in the Existing Portfolios will be
transferred to the Replacement Portfolios, without any charge that
would otherwise apply and without being subject to any limitations on
transfers, on the Substitution Date. The Pre-Substitution Notice also
will state that, from the date of the Pre-Substitution Notice through
the date thirty (30) days after the Substitutions, Contract owners may
transfer Contract value from the subaccounts investing in the Existing
Portfolios (before the Substitutions) or the Replacement Portfolios
(after the Substitutions) to any other available investment option
without charge and without imposing any transfer limitations.
14. The Section 26 Applicants will also deliver to affected
Contract owners, at least thirty (30) days before the Substitution
Date, a prospectus for each applicable Replacement Portfolio. In
addition, within five (5) business days after the Substitution Date,
Contract owners whose assets are allocated to a Replacement Portfolio
as part of the proposed Substitutions will be sent a written notice
(each, a ``Confirmation'') informing them that the Substitutions were
carried out as previously notified. The Confirmation will also restate
the information set forth in the Pre-Substitution Notice. The
Confirmation will also reflect the Contract owners Contract values
before and after the Substitution(s).
[[Page 90401]]
15. Each Substitution will be effected at the relative net asset
values of the respective shares of the Replacement Portfolios 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 the
Section 26 Applicants. The Substitutions will be effected without
change in the amount or value of any Contracts held by affected
Contract owners. As such, the Section 26 Applicants believe that the
procedures to be implemented are sufficient to assure that each
Contract owner's cash values immediately after the Substitution will be
equal to the cash value immediately before the Substitution. As of the
Substitution Date, the Separate Accounts will redeem shares of the
Existing Portfolios for cash or in-kind. The proceeds of such
redemptions will then be used to purchase shares of the corresponding
Replacement Portfolio, as each subaccount of the Separate Accounts will
invest the proceeds of its redemption from the Existing Portfolios in
the applicable Replacement Portfolios.
Legal Analysis
1. The Section 26 Applicants request that the Commission issue an
order pursuant to section 26(c) of the Act approving the proposed
Substitutions. Section 26(c) of the Act prohibits any depositor or
trustee of a unit investment trust holding the security of a single
issuer from substituting another security of another issuer without the
approval of the Commission. 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 fairly intended by the policy and
provisions of [the Act].''
2. The Section 26 Applicants submit that each of the Substitutions
meet the standards set forth in section 26(c) and that, if implemented,
the Substitutions would not raise any of the concerns underlying this
provision. The Section 26 Applicants believe that each Replacement
Portfolio and its corresponding Existing Portfolio(s) have
substantially similar investment objectives, principal investment
strategies and principal risks. Applicants state that, accordingly, no
Contract owner will involuntarily lose his or her rider(s) as a result
of any proposed Substitution. Contract owners will not incur any fees
or charges as a result of the proposed Substitutions.
3. The Section 17 Applicants request that the Commission issue an
order pursuant to section 17(b) of the Act exempting them from section
17(a) of the Act to the extent necessary to permit them to carry out,
as part of the Substitutions, the In-Kind Transactions. Section
17(a)(1) of the Act prohibits any affiliated person of a registered
investment company, or any affiliated person of such person, acting as
principal, from selling any security or other property to such
registered investment company. Section 17(a)(2) of the Act prohibits
any of the persons described above, acting as principals, from
purchasing any security or other property from such registered
investment company.
4. Because the proposed Substitutions may be effected, in whole or
in part, by means of in-kind redemptions and purchases, the proposed
Substitutions may be deemed to involve one or more purchases or sales
of securities or property between affiliated persons. The proposed
transactions may involve a transfer of portfolio securities by the
Existing Portfolios to the Separate Accounts. Immediately thereafter,
the Separate Accounts would purchase shares of the Replacement
Portfolios with the portfolio securities received from the Existing
Portfolios. Accordingly, to the extent the Separate Accounts and the
Existing Portfolios, and the Separate Accounts and the Replacement
Portfolios, are deemed to be affiliated persons of one another under
Section 2(a)(3) of the Act, it is conceivable that this aspect of the
proposed Substitutions could be viewed as being prohibited by Section
17(a). As such, the Section 17 Applicants have determined that it is
prudent to seek relief from Section 17(a) in the context of this
application.
5. The Section 17 Applicants maintain that the terms of the
proposed In-Kind Transactions, including the consideration to be paid
by each Existing Portfolio and received by each Replacement Portfolio
involved, are reasonable, fair and do not involve overreaching,
principally because the transactions will conform with all but one of
the conditions enumerated in Rule 17a-7. The In-Kind Transactions will
take place at relative net asset value in conformity with the
requirements of Section 22(c) of the Act and Rule 22c-1 thereunder
without the imposition of any transfer or similar charges by the
Section 26 Applicants. The Substitutions will be effected without
change in the amount or value of any Contract held by the affected
Contract owners. The 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 Substitutions. The fees and charges under the Contracts
will not increase because of the Substitutions. Even though the
Separate Accounts, the Hartford Insurance Companies and the Trust may
not rely on Rule 17a-7, the Section 17 Applicants believe that the
Rule's conditions outline the type of safeguards that result in
transactions that are fair and reasonable to registered investment
company participants and preclude overreaching in connection with an
investment company by its affiliated persons.
6. The Section 17 Applicants submit that the proposed in-kind
purchases by the Separate Accounts are consistent with the policies of
the Trust and the Replacement Portfolios, as recited in the Trust's
current registration statement and reports filed under the Act.
Finally, the Section 17 Applicants submit that the proposed
Substitutions are consistent with the general purposes of the Act.
Applicants' Conditions
The Section 26 Applicants, and HIMCO as applicable, agree that any
order granting the requested relief will be subject to the following
conditions.
1. The Substitutions will not be effected unless the Section 26
Applicants determine that: (i) The Contracts allow the substitution of
shares of registered open-end investment companies in the manner
contemplated by this application; (ii) the Substitutions can be
consummated as described in this application under applicable insurance
laws; and (iii) any regulatory requirements in each jurisdiction where
the Contracts are qualified for sale have been complied with to the
extent necessary to complete the Substitutions.
2. The Hartford Insurance Companies will seek approval of the
proposed Substitutions from any state insurance regulators whose
approval may be necessary or appropriate.
3. HIMCO will not change a sub-adviser, add a new sub-adviser, or
otherwise rely on the Manager of Managers Order or any replacement
order from the Commission with respect to any Replacement Portfolio
without first obtaining shareholder approval of the change in sub-
adviser, the new sub-adviser, or the Replacement Portfolio's ability to
add or to replace a sub-adviser at a shareholder meeting, the record
date for which shall be after the proposed Substitution has been
effected.
4. The Hartford Insurance Companies or their affiliates will pay
all expenses and transaction costs of the Substitutions, including
legal and
[[Page 90402]]
accounting expenses, any applicable brokerage expenses and other fees
and expenses. No fees or charges will be assessed to the affected
Contract owners to effect the Substitutions. The proposed Substitutions
will not cause the Contract fees and charges currently being paid by
Contract owners to be greater after the proposed Substitution than
before the proposed Substitution.
5. The Substitutions will be effected at the relative net asset
values of the respective shares of the Replacement Portfolios 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 the
Section 26 Applicants. The Substitutions will be effected without
change in the amount or value of any Contracts held by affected
Contract owners.
6. The 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
Substitutions.
7. The obligations of the Section 26 Applicants, and the rights of
the affected Contract owners, under the Contracts of affected Contract
owners will not be altered in any way.
8. Affected Contract owners will be permitted to transfer Contract
value from the subaccount investing in the Existing Portfolio (before
Substitution Date) or the Replacement Portfolio (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. Contract owners with guaranteed living and/or death benefit
riders, as applicable, may transfer Contract value from the subaccounts
investing in the Existing Portfolios (before the Substitutions) or the
Replacement Portfolios (after the Substitutions) to any other available
investment option available under their respective riders without
charge and without imposing any transfer limitations. Except as
described in any market timing/short-term trading provisions of the
relevant prospectus, the Section 26 Applicants will not exercise any
rights reserved under the Contracts 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.
9. All affected Contract owners will be notified, at least 30 days
before the Substitution Date about: (a) The intended Substitution of
Existing Portfolios with the Replacement Portfolios; (b) the intended
Substitution Date; and (c) information with respect to transfers as set
forth in Condition 8 above. In addition, the Section 26 Applicants will
also deliver to affected Contract owners, at least thirty (30) days
before the Substitution Date, a prospectus for each applicable
Replacement Portfolio.
10. The Section 26 Applicants 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
Substitutions were carried out as previously notified; (b) a
restatement of the information set forth in the Pre-Substitution
Notice; and (c) values of the Contract owner's positions in the
Existing Portfolio before the Substitution and the Replacement
Portfolio after the Substitution.
11. For a period of two years following the Substitution Date, for
those Contracts with assets allocated to the Existing Portfolio on the
Substitution Date, the Hartford Insurance Companies will reimburse, on
the last business day of each fiscal quarter, the Contract owners whose
subaccounts invest in the applicable Replacement Portfolio to the
extent that the Replacement Portfolio's net annual operating expenses
(taking into account fee waivers and expense reimbursements) for such
period exceeds, on an annualized basis, the net annual operating
expenses of the Existing Portfolio for fiscal year 2015. In addition,
the Section 26 Applicants will not increase the Contract fees and
charges that would otherwise be assessed under the terms of the
Contracts for a period of at least two years following the Substitution
Date.
For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-29933 Filed 12-13-16; 8:45 am]
BILLING CODE 8011-01-P
