Transamerica Life Insurance Company, et al., 15774-15778 [2017-06247]

Download as PDF 15774 Federal Register / Vol. 82, No. 60 / Thursday, March 30, 2017 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES fees and expenses as a result of the Substitutions. 4. Each of the prospectuses for the Contracts discloses that the issuing Company reserves the right, subject to compliance with applicable law, to substitute shares of another registered open-end management investment company for shares of an open-end management investment company held by a sub-account of an Account. 5. Applicants also assert that none of the proposed Substitutions is of the type that Section 26(c) was designed to prevent. Unlike a traditional unit investment trust where a depositor could only substitute an investment security in a manner which permanently affected all the investors in the trust, the Contracts provide each Contract owner with the right to exercise his or her own judgment and transfer account values into other subaccounts. Moreover, the Contracts will offer affected Contract owners the opportunity to transfer amounts out of the affected sub-accounts into any of the remaining sub-accounts without cost or other disadvantage. The Substitution, therefore, will not result in the type of costly forced redemptions that Section 26(c) was designed to prevent. Applicants also maintain that the Substitutions are unlike the type of substitutions which Section 26(c) was designed to prevent in that by purchasing a Contract, Contract owners select much more than a particular registered management open-end investment company in which to invest their account values. They also select the specific type of insurance coverage offered by the Companies under their Contracts as well as other rights and privileges set forth in the Contract. Applicants’ Conditions Applicants agree that any order of the Commission granting the requested relief will be subject to the following conditions: 1. The proposed Substitutions will not be effected unless the Companies determine that: (a) The Contracts allow the substitution of shares of registered open-end investment companies in the manner contemplated by the application; (b) the 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 Substitutions. 2. The Companies or their affiliates will pay all expenses and transaction costs of the Substitutions, including legal and accounting expenses, any VerDate Sep<11>2014 19:09 Mar 29, 2017 Jkt 241001 applicable brokerage expenses, and other fees and expenses. No fees or charges will be assessed to the Contract owners to effect the 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 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 affected Contract owners as a result of the Substitutions. 5. The rights or obligations of the Companies under the Contracts of affected Contract owners will not be altered in any way. 6. Affected Contract owners will be permitted to make at least one transfer of Contract value from the sub-account investing in the Existing Fund (before the Effective Date) or the Replacement Fund (after the Effective Date) to any other available investment option under the Contract without charge for a period beginning at least 30 days before the Effective Date through at least 30 days following the Effective 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 sub-accounts under the Contracts, including limitations on the future number of transfers, for a period beginning at least 30 days before the Effective Date through at least 30 days following the Effective Date. 7. All affected Contract owners will be notified, at least 30 days before the Effective Date about: (a) The intended substitution of Existing Funds with the Replacement Funds; (b) the intended Effective Date; and (c) information with respect to transfers as set forth in Condition 6 above. In addition, the Companies will deliver to all affected Contract owners, at least 30 days before the Effective Date, a prospectus for each applicable Replacement Fund. 8. The Companies will deliver to each affected Contract owner within five (5) business days of the Effective 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 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 Contract owner’s position in the (i) Existing Fund before the Substitution, and (ii) Replacement Fund after the Substitution. 9. After the Effective Date, the Applicants agree not to change a Replacement Fund’s sub-adviser without obtaining shareholder approval of either (a) the sub-adviser change or (b) the parties’ continued ability to rely on their manager-of-managers exemptive order. 10. For two years following the Effective Date the net annual expenses of each Replacement Fund that is a Transamerica Series Trust Fund will not exceed the net annual expenses of the corresponding Existing Fund as of the fund’s most recent fiscal year. To achieve this limitation, the Replacement Fund’s investment adviser will waive fees or reimburse the Replacement Fund in certain amounts to maintain expenses at or below the limit. Any adjustments will be made at least on a quarterly basis. In addition, the Insurance Companies will not increase the Contract fees and charges, including asset based charges such as mortality expense risk charges deducted from the sub-accounts that would otherwise be assessed under the terms of the Contracts for a period of at least two years following the Effective Date. For the Commission, by the Division of Investment Management, under delegated authority. Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–06246 Filed 3–29–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 32574; File No. 812–14490] Transamerica Life Insurance Company, et al. March 24, 2017. Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’). ACTION: Notice. AGENCY: 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’’ or ‘‘Act’’). APPLICANTS: Transamerica Life Insurance Company (‘‘TLIC’’), Transamerica Financial Life Insurance Company (‘‘TFLIC’’) (each a ‘‘Company’’ and together, the ‘‘Companies’’), Separate Account VA B, and Separate E:\FR\FM\30MRN1.SGM 30MRN1 Federal Register / Vol. 82, No. 60 / Thursday, March 30, 2017 / Notices Account VA BNY (each, an ‘‘Account’’ and together, the ‘‘Accounts’’). The Companies and the Accounts collectively are referred to herein as the ‘‘Applicants.’’ Applicants seek an order pursuant to Section 26(c) of the 1940 Act, approving the substitution of shares issued by certain series of Transamerica Series Trust (the ‘‘Replacement Funds’’) for shares of certain registered investment companies currently held by sub-accounts of the Accounts (the ‘‘Existing Funds’’), to support certain variable annuity contracts (collectively, the ‘‘Contracts’’) issued by the Companies. SUMMARY OF APPLICATION: The application was filed on June 15, 2015, and was amended on December 8, 2015, July 1, 2016, and November 14, 2016. FILING DATE: 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 Secretary of the Commission and serving the Applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on April 18, 2017 and should be accompanied by proof of service on the 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: Commission: Secretary, SEC, 100 F Street NE., Washington, DC 20549–1090. Applicants: Alison C. Ryan, Associate General Counsel, Transamerica, 1150 South Olive Street, T–27–01, Los Angeles, CA 90015. FOR FURTHER INFORMATION CONTACT: David J. Marcinkus, Branch Chief, at (202) 551–6821 (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 for an Applicant using the Company name box, at http:// www.sec.gov/search/search.htm, or by calling (202) 551–8090. Applicants’ Representations 1. TLIC is the depositor of Account VA B. TFLIC is the depositor of Account VA BNY. Each Company is an indirect, wholly-owned subsidiary of AEGON, N.V. 2. Each Account is a ‘‘separate account’’ as defined by Rule 0–1(e) under the 1940 Act, and each is registered under the 1940 Act as a unit investment trust. Each Account is divided into sub-accounts, which reflect the investment performance of certain registered investment companies, including Transamerica Series Trust. The Accounts are administered and accounted for as part of the general business of the Companies. The application sets forth the registration statement file numbers for the security interests under the Contracts and the Accounts. Existing fund asabaliauskas on DSK3SPTVN1PROD with NOTICES 3. The Contracts are individual and group variable annuity contracts. Each of the prospectuses for the Contracts discloses that the issuing Company reserves the right, subject to compliance with applicable law, to substitute shares of another registered open-end management investment company for shares of a registered open-end management investment company held by a sub-account of an Account. 4. Transamerica Series Trust is an open-end management investment company of the series type that is registered with the Commission under the 1940 Act (File No. 811–04419).1 Shares of the series are registered under the Securities Act of 1933 (File No. 033– 00507) and are sold to the separate accounts of life insurance companies to fund benefits under variable life policies or variable annuity contracts and to certain affiliated asset allocation funds. 5. Transamerica Asset Management, Inc. (‘‘TAM’’), an investment adviser that is registered with the Commission, has overall responsibility for the management of each Transamerica Series Trust Replacement Fund. TAM delegates to a sub-adviser the responsibility for day-to-day management of the investments of each Transamerica Series Trust Replacement Fund, subject to TAM’s oversight. TAM may, in the future, determine to provide the day-to-day management of any Transamerica Series Trust Replacement Fund without the use of a sub-adviser. 6. Applicants propose, as set forth below, to substitute shares of the Replacement Funds for shares of the Existing Funds (‘‘Substitutions’’) to fund the Contracts: Replacement fund Wanger USA ............................................................................................. Invesco V.I. Value Opportunities Fund (Series II) ................................... 7. The Applicants believe that the Replacement Funds have investment objectives, policies and risk profiles, as described in their prospectuses, that are substantially the same as, or sufficiently similar to, the corresponding Existing Funds to make those Replacement Funds appropriate candidates as substitutes. Applicants also state that the investment objectives and investment strategies of each Replacement Fund are similar to the Transamerica T. Rowe Price Small Cap VP (Initial Class). Transamerica Barrow Hanley Dividend Focused VP (Initial Class). corresponding Existing Fund, or each Replacement Fund’s underlying portfolio construction and investment results are similar to those of the Existing Fund, and therefore the fundamental objectives, risk, and performance expectations of those Contract owners with interests in subaccounts of the Existing Funds will continue to be met after the Substitutions. 8. The investment objectives of each Existing Fund and its corresponding Replacement Fund are set forth below. Additional information for each Existing Fund and Replacement Fund, including principal investment strategies, principal risks, and comparative performance history, can be found in the application. 1 Effective May 1, 2008, Transamerica Series Trust changed its name from AEGON/Transamerica Series Trust. VerDate Sep<11>2014 19:09 Mar 29, 2017 Jkt 241001 15775 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 E:\FR\FM\30MRN1.SGM 30MRN1 15776 Federal Register / Vol. 82, No. 60 / Thursday, March 30, 2017 / Notices Existing fund Replacement fund Wanger USA seeks long-term capital appreciation ................................. Transamerica T. Rowe Price Small Cap VP seeks long-term growth of capital by investing primarily in common stocks of small growth companies. Transamerica Barrow Hanley Dividend Focused VP seeks total return gained from the combination of dividend yield, growth of dividends and capital appreciation. Invesco V.I. Value Opportunities Fund’s investment objective is longterm growth of capital. asabaliauskas on DSK3SPTVN1PROD with NOTICES 9. Applicants state that the Substitutions are designed to allow Contract owners to continue their investment in similar or better investment options without interruption and at no additional cost to them. Contract owners with sub-account balances invested through the Accounts in shares of the Replacement Funds will have the same or lower total expense ratios taking into account fund expenses (including Rule 12b–1 fees, if any). With respect to all of the proposed Substitutions, the combined management fee and Rule 12b–1 fees paid by the Replacement Fund are the same or lower than those of the corresponding Existing Fund. The application sets forth the fees and expenses of each Existing Fund and its corresponding Replacement Fund in greater detail. 10. Applicants represent that as of the effective date of the Substitutions (‘‘Effective Date’’) shares of the Existing Funds will be redeemed for cash. The Companies, on behalf of each Existing Fund sub-account of each relevant Account, will simultaneously place a redemption request with each Existing Fund and a purchase order with the corresponding Replacement Fund so that the purchase of Replacement Fund shares will be for the exact amount of the redemption proceeds. Thus, Contract values will remain fully invested at all times. 11. The Substitutions will take place at relative net asset value (in accordance with Rule 22c–1 under the 1940 Act) with no change in the amount of any affected Contract owner’s contract value, cash value, accumulation value, account value or death benefit or in dollar value of his or her investment in the applicable Accounts.2 No brokerage 2 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 also 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 the Existing Funds and Replacement Funds, which Applicants cannot predict. Nevertheless, Applicants note that at the time of the Substitutions, the Contracts will offer a VerDate Sep<11>2014 19:09 Mar 29, 2017 Jkt 241001 commissions or other fees will be paid by either the Existing Funds or the Replacement Funds or by the affected Contract owners in connection with the Substitutions. 12. The affected Contract owners will not incur any fees or charges as a result of the Substitutions nor will their rights or the Companies’ obligations under the Contracts be altered in any way. The Companies or their affiliates will pay all expenses and transaction costs of the Substitutions, including brokerage, legal, accounting, and other fees and expenses. The Substitutions will not cause the Contract fees and charges currently being paid by affected Contract owners to be greater after the Substitutions than before the Substitutions. Moreover, the Substitutions will not impose any tax liability on affected Contract owners. 13. As described in the application, after notification of the Substitution and for 30 days after the Effective Date, affected Contract owners may reallocate the sub-account value of an Existing Fund to any other investment option available under their Contract without incurring any transfer charges. 14. All Contract owners affected by the Substitutions will be notified of this application by means of supplements to the Contract prospectuses at least 30 days prior to the Effective Date. The notice will advise Contract owners that from the date of the notice until the Effective Date, owners are permitted to make one transfer of Contract value out of the Existing Fund sub-account to one or more other sub-accounts without the transfer (or exchange) being treated as one of a limited number of transfers (or exchanges) permitted without a transfer charge. Among other information, the notice will inform affected Contract owners that the Companies will not exercise any rights reserved under any Contract to impose additional restrictions on transfers until at least 30 days after the Effective Date. 15. If affected Contract owners reallocate account value during this 60 day period, there will be no charge for the reallocation of accumulated value from the Existing Fund sub-accounts comparable variety of investment options with as broad a range of risk/return characteristics. PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 and the reallocation will not count as a transfer when imposing any applicable restriction or limit under the Contract on transfers. Additionally, all affected Contract owners will be sent prospectuses of the applicable Replacement Funds at least 30 days before the Effective Date. 16. Within five (5) business days after the Effective Date, affected Contract owners will be sent a written confirmation, which will include confirmation that the Substitutions were carried out as previously notified, a restatement of the information set forth in the pre-Substitution notice and values of the Contract owner’s position in the Existing Fund before the Substitution and the Replacement Fund after the Substitution. Applicants’ Legal Analysis 1. Applicants request that the Commission issue an order pursuant to Section 26(c) of the 1940 Act approving the Substitutions. Section 26(c) requires the depositor of a registered unit investment trust holding the securities of a single issuer to obtain Commission approval before substituting the securities held by the trust. Section 26(c) requires the Commission to issue such an order 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 1940 Act. 2. Applicants submit that the terms and conditions of the Substitutions meet the standards set forth in Section 26(c) and assert that the replacement of an Existing Fund with the corresponding Replacement Fund is consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the l940 Act. As described in the application, for a period of two years following the Effective Date, the Companies or their affiliates will reimburse any Contract owner affected by the proposed Substitutions involving Transamerica Series Trust Replacement Funds and whose sub-account invests in the Replacement Fund to the extent a Replacement Fund’s net annual operating expenses exceeds the net annual operating expenses of the corresponding Existing Fund. E:\FR\FM\30MRN1.SGM 30MRN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 82, No. 60 / Thursday, March 30, 2017 / Notices Applicants further assert that each Replacement Fund has similar investment objectives and investment strategies as the corresponding Existing Fund, or each Replacement Fund’s underlying portfolio construction and investment results are similar to those of the corresponding Existing Fund. Accordingly, Applicants believe that the fundamental investment objectives, risk and performance expectations of the Contract owners will continue to be met after the Substitutions. 3. Applicants also maintain that it is in the best interests of the Contract owners to substitute the Replacement Fund for its corresponding Existing Fund. Applicants anticipate that the substitution of an Existing Fund with the corresponding Replacement Fund will result in a Contract that is administered and managed more efficiently, and one that is more competitive with other variable products. The rights of affected Contract owners and the obligations of the Companies under the Contracts will not be altered by the Substitutions. Affected Contract owners will not incur any additional tax liability or any additional fees and expenses as a result of the Substitutions. 4. Each of the prospectuses for the Contracts discloses that the issuing Company reserves the right, subject to compliance with applicable law, to substitute shares of another registered open-end management investment company for shares of an open-end management investment company held by a sub-account of an Account. 5. Applicants also assert that none of the proposed Substitutions is of the type that Section 26(c) was designed to prevent. Unlike a traditional unit investment trust where a depositor could only substitute an investment security in a manner which permanently affected all the investors in the trust, the Contracts provide each Contract owner with the right to exercise his or her own judgment and transfer account values into other subaccounts. Moreover, the Contracts will offer affected Contract owners the opportunity to transfer amounts out of the affected sub-accounts into any of the remaining sub-accounts without cost or other disadvantage. The Substitution, therefore, will not result in the type of costly forced redemptions that Section 26(c) was designed to prevent. Applicants also maintain that the Substitutions are unlike the type of substitutions which Section 26(c) was designed to prevent in that by purchasing a Contract, Contract owners select much more than a particular VerDate Sep<11>2014 19:09 Mar 29, 2017 Jkt 241001 registered management open-end investment company in which to invest their account values. They also select the specific type of insurance coverage offered by the Companies under their Contracts as well as other rights and privileges set forth in the Contracts. 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 Companies determine that: (a) The Contracts allow the substitution of shares of registered open-end investment companies in the manner contemplated by the application; (b) the 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 Substitutions. 2. The Companies or their 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 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 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 affected Contract owners as a result of the Substitutions. 5. The rights or obligations of the Companies under the Contracts of affected Contract owners will not be altered in any way. 6. Affected Contract owners will be permitted to make at least one transfer of Contract value from the sub-account investing in the Existing Fund (before the Effective Date) or the Replacement Fund (after the Effective Date) to any other available investment option under the Contract without charge for a period beginning at least 30 days before the Effective Date through at least 30 days following the Effective Date. Except as described in any market timing/shortterm trading provisions of the relevant PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 15777 prospectus, the Company will not exercise any right it may have under the Contract to impose restrictions on transfers between the sub-accounts under the Contracts, including limitations on the future number of transfers, for a period beginning at least 30 days before the Effective Date through at least 30 days following the Effective Date. 7. All affected Contract owners will be notified, at least 30 days before the Effective Date about: (a) The intended substitution of Existing Funds with the Replacement Funds; (b) the intended Effective Date; and (c) information with respect to transfers as set forth in Condition 6 above. In addition, the Companies will deliver to all affected Contract owners, at least 30 days before the Effective Date, a prospectus for each applicable Replacement Fund. 8. The Companies will deliver to each affected Contract owner within five (5) business days of the Effective 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 Fund before the Substitution and the Replacement Fund after the Substitution. 9. After the Effective Date the Applicants agree not to change a Replacement Fund’s sub-adviser without first obtaining shareholder approval of either (a) the sub-adviser change or (b) the parties’ continued ability to rely on their manager-ofmanagers exemptive order. 10. For two years following the Effective Date the net annual expenses of each Replacement Fund that is a Transamerica Series Trust Fund will not exceed the net annual expenses of the corresponding Existing Fund as of the fund’s most recent fiscal year. To achieve this limitation, the Replacement Fund’s investment adviser will waive fees or reimburse the Replacement Fund in certain amounts to maintain expenses at or below the limit. Any adjustments will be made at least on a quarterly basis. In addition, the Companies will not increase the Contract fees and charges, including asset based charges such as mortality expense risk charges deducted from the sub-accounts that would otherwise be assessed under the terms of the Contracts for a period of at least two years following the Effective Date. E:\FR\FM\30MRN1.SGM 30MRN1 15778 Federal Register / Vol. 82, No. 60 / Thursday, March 30, 2017 / Notices For the Commission, by the Division of Investment Management, under delegated authority. Eduardo A. Aleman, Assistant Secretary. places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. [FR Doc. 2017–06247 Filed 3–29–17; 8:45 am] A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 1. Purpose [Release No. 34–80305; File No. SR–Phlx– 2017–25] Self-Regulatory Organizations; NASDAQ PHLX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange’s Pricing Schedule at Section VII(A) March 24, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 20, 2017, NASDAQ PHLX, LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Section VII(A) of the Exchange’s Pricing Schedule, as described in further detail below. While the changes proposed herein are effective upon filing, the Exchange has designated that the amendments be operative on May 1, 2017. The text of the proposed rule change is available on the Exchange’s Web site at http://nasdaqphlx.cchwallstreet.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. asabaliauskas on DSK3SPTVN1PROD with NOTICES II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 19:09 Mar 29, 2017 Jkt 241001 The purpose of the proposed rule change is to amend the Exchange’s Pricing Schedule at Section VII(A), entitled ‘‘Option Trading Floor Fees,’’ to add certain new fees that it will charge to members, member organizations and non-members that install and operate server and telecommunications equipment on the premises of the Exchange, and connect such servers and equipment to off-site locations, such as their remote offices, in connection with conducting a floor trading business. The Exchange recently moved to a new state-of-the-art operations center.3 The new operations center will provide significantly upgraded facilities for the Exchange’s members and member organizations to conduct their floor trading business. Among these upgraded facilities are a new trading floor, equipped with intercooled Erich Keller workstations specifically designed for trading floors, and a new data center supported by enhanced power supplies.4 The Exchange anticipates increased utility and operational costs due to the above described enhancements. In the past, members and member organizations installed and operated their own server and telecommunications equipment on the premises of the Exchange in an ad hoc manner, supervised by the Exchange. In an effort to establish greater oversight and control over such activities, to standardize the manner in which these activities occur, and to generally provide for a more secure and orderly operating environment for both the Exchange and its members and member organizations, the Exchange will provide dedicated, segregated, and access-limited space (‘‘cabinets’’) in its new data center to members, member organizations and non-members for their telecommunications vendors to house servers and telecommunications 3 The Exchange relocated its premises from 1900 Market Street in Philadelphia, Pennsylvania to a new location at FMC Tower, 2929 Walnut Street in Philadelphia, Pennsylvania. 4 The new trading floor will be driven by brand new 300 kVA UPS units, with an 800 kw back-up generator. PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 equipment.5 Furthermore, the Exchange will provide for the connection of such servers and equipment to the trading floor and to off-site locations, including the remote offices of members and member organizations. The Exchange proposes to charge its members, member organizations and non-members new fees for providing them with these upgraded facilities and services. In particular, the Exchange proposes to charge monthly fees for providing dedicated half cabinets ($250 per month) or whole cabinets ($800 per month) in its data center to house the servers and telecommunications equipment of its members, member organizations and non-members and their telecommunications vendors.6 The Exchange also proposes to charge a monthly fee of $50 to connect one cabinet to another cabinet and the same monthly fee to connect a cabinet to offsite locations, including to a member’s or member organization’s remote office.7 Lastly, the Exchange proposes a fee of $150 per hour (billable on a quarter hour basis) for ‘‘remote hands,’’ meaning technical support that Exchange personnel provides with respect to the installation, configuration, maintenance, and repair of hardware, cables, and circuits. 2. Statutory Basis The Exchange believes that its proposal is consistent with the provisions of Section 6(b) of the Act,8 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,9 in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers, and other persons using its facilities, and does not unfairly discriminate between customers, issuers, brokers or dealers. The proposed fees are equitable and non-discriminatory in that they are applicable to all members, member organizations and non-members that choose to house their servers and 5 The Exchange will assign each member, member organization and non-member a minimum of one half cabinet in its new data center. 6 The Exchange proposes to charge substantially less for half cabinets than whole cabinets to incentivize members, member organizations, and non-members to make efficient use of the limited space in the new data center. That is, the Exchange seeks to discourage the purchase of a whole cabinet if the purchase of a half cabinet would suffice. 7 The proposed Pricing Schedule refers to this as a ‘‘Cabinet to MPOE Connectivity’’ fee, where ‘‘MPOE’’ refers to the ‘‘Main Point of Entry,’’ meaning the place within the Exchange’s facilities where members and member organizations can connect to the Exchange using external telecommunications lines. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(4) and (5). E:\FR\FM\30MRN1.SGM 30MRN1

Agencies

[Federal Register Volume 82, Number 60 (Thursday, March 30, 2017)]
[Notices]
[Pages 15774-15778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-06247]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32574; File No. 812-14490]


Transamerica Life Insurance Company, et al.

March 24, 2017.
AGENCY:  Securities and Exchange Commission (``SEC'' or 
``Commission'').

ACTION:  Notice.

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    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'' or ``Act'').

Applicants:  Transamerica Life Insurance Company (``TLIC''), 
Transamerica Financial Life Insurance Company (``TFLIC'') (each a 
``Company'' and together, the ``Companies''), Separate Account VA B, 
and Separate

[[Page 15775]]

Account VA BNY (each, an ``Account'' and together, the ``Accounts''). 
The Companies and the Accounts collectively are referred to herein as 
the ``Applicants.''

Summary of Application:  Applicants seek an order pursuant to Section 
26(c) of the 1940 Act, approving the substitution of shares issued by 
certain series of Transamerica Series Trust (the ``Replacement Funds'') 
for shares of certain registered investment companies currently held by 
sub-accounts of the Accounts (the ``Existing Funds''), to support 
certain variable annuity contracts (collectively, the ``Contracts'') 
issued by the Companies.

Filing Date:  The application was filed on June 15, 2015, and was 
amended on December 8, 2015, July 1, 2016, and November 14, 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 Secretary of 
the Commission and serving the Applicants with a copy of the request, 
personally or by mail. Hearing requests should be received by the 
Commission by 5:30 p.m. on April 18, 2017 and should be accompanied by 
proof of service on the 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:  Commission: Secretary, SEC, 100 F Street NE., Washington, 
DC 20549-1090. Applicants: Alison C. Ryan, Associate General Counsel, 
Transamerica, 1150 South Olive Street, T-27-01, Los Angeles, CA 90015.

FOR FURTHER INFORMATION CONTACT:  David J. Marcinkus, Branch Chief, at 
(202) 551-6821 (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 for an 
Applicant using the Company name box, at http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.

Applicants' Representations

    1. TLIC is the depositor of Account VA B. TFLIC is the depositor of 
Account VA BNY. Each Company is an indirect, wholly-owned subsidiary of 
AEGON, N.V.
    2. Each Account is a ``separate account'' as defined by Rule 0-1(e) 
under the 1940 Act, and each is registered under the 1940 Act as a unit 
investment trust. Each Account is divided into sub-accounts, which 
reflect the investment performance of certain registered investment 
companies, including Transamerica Series Trust. The Accounts are 
administered and accounted for as part of the general business of the 
Companies. The application sets forth the registration statement file 
numbers for the security interests under the Contracts and the 
Accounts.
    3. The Contracts are individual and group variable annuity 
contracts. Each of the prospectuses for the Contracts discloses that 
the issuing Company reserves the right, subject to compliance with 
applicable law, to substitute shares of another registered open-end 
management investment company for shares of a registered open-end 
management investment company held by a sub-account of an Account.
    4. Transamerica Series Trust is an open-end management investment 
company of the series type that is registered with the Commission under 
the 1940 Act (File No. 811-04419).\1\ Shares of the series are 
registered under the Securities Act of 1933 (File No. 033-00507) and 
are sold to the separate accounts of life insurance companies to fund 
benefits under variable life policies or variable annuity contracts and 
to certain affiliated asset allocation funds.
---------------------------------------------------------------------------

    \1\ Effective May 1, 2008, Transamerica Series Trust changed its 
name from AEGON/Transamerica Series Trust.
---------------------------------------------------------------------------

    5. Transamerica Asset Management, Inc. (``TAM''), an investment 
adviser that is registered with the Commission, has overall 
responsibility for the management of each Transamerica Series Trust 
Replacement Fund. TAM delegates to a sub-adviser the responsibility for 
day-to-day management of the investments of each Transamerica Series 
Trust Replacement Fund, subject to TAM's oversight. TAM may, in the 
future, determine to provide the day-to-day management of any 
Transamerica Series Trust Replacement Fund without the use of a sub-
adviser.
    6. Applicants propose, as set forth below, to substitute shares of 
the Replacement Funds for shares of the Existing Funds 
(``Substitutions'') to fund the Contracts:

------------------------------------------------------------------------
             Existing fund                       Replacement fund
------------------------------------------------------------------------
Wanger USA.............................  Transamerica T. Rowe Price
                                          Small Cap VP (Initial Class).
Invesco V.I. Value Opportunities Fund    Transamerica Barrow Hanley
 (Series II).                             Dividend Focused VP (Initial
                                          Class).
------------------------------------------------------------------------

    7. The Applicants believe that the Replacement Funds have 
investment objectives, policies and risk profiles, as described in 
their prospectuses, that are substantially the same as, or sufficiently 
similar to, the corresponding Existing Funds to make those Replacement 
Funds appropriate candidates as substitutes. Applicants also state that 
the investment objectives and investment strategies of each Replacement 
Fund are similar to the corresponding Existing Fund, or each 
Replacement Fund's underlying portfolio construction and investment 
results are similar to those of the Existing Fund, and therefore the 
fundamental objectives, risk, and performance expectations of those 
Contract owners with interests in sub-accounts of the Existing Funds 
will continue to be met after the Substitutions.
    8. The investment objectives of each Existing Fund and its 
corresponding Replacement Fund are set forth below. Additional 
information for each Existing Fund and Replacement Fund, including 
principal investment strategies, principal risks, and comparative 
performance history, can be found in the application.

[[Page 15776]]



------------------------------------------------------------------------
             Existing fund                       Replacement fund
------------------------------------------------------------------------
Wanger USA seeks long-term capital       Transamerica T. Rowe Price
 appreciation.                            Small Cap VP seeks long-term
                                          growth of capital by investing
                                          primarily in common stocks of
                                          small growth companies.
Invesco V.I. Value Opportunities Fund's  Transamerica Barrow Hanley
 investment objective is long-term        Dividend Focused VP seeks
 growth of capital.                       total return gained from the
                                          combination of dividend yield,
                                          growth of dividends and
                                          capital appreciation.
------------------------------------------------------------------------

    9. Applicants state that the Substitutions are designed to allow 
Contract owners to continue their investment in similar or better 
investment options without interruption and at no additional cost to 
them. Contract owners with sub-account balances invested through the 
Accounts in shares of the Replacement Funds will have the same or lower 
total expense ratios taking into account fund expenses (including Rule 
12b-1 fees, if any). With respect to all of the proposed Substitutions, 
the combined management fee and Rule 12b-1 fees paid by the Replacement 
Fund are the same or lower than those of the corresponding Existing 
Fund. The application sets forth the fees and expenses of each Existing 
Fund and its corresponding Replacement Fund in greater detail.
    10. Applicants represent that as of the effective date of the 
Substitutions (``Effective Date'') shares of the Existing Funds will be 
redeemed for cash. The Companies, on behalf of each Existing Fund sub-
account of each relevant Account, will simultaneously place a 
redemption request with each Existing Fund and a purchase order with 
the corresponding Replacement Fund so that the purchase of Replacement 
Fund shares will be for the exact amount of the redemption proceeds. 
Thus, Contract values will remain fully invested at all times.
    11. The Substitutions will take place at relative net asset value 
(in accordance with Rule 22c-1 under the 1940 Act) with no change in 
the amount of any affected Contract owner's contract value, cash value, 
accumulation value, account value or death benefit or in dollar value 
of his or her investment in the applicable Accounts.\2\ No brokerage 
commissions or other fees will be paid by either the Existing Funds or 
the Replacement Funds or by the affected Contract owners in connection 
with the Substitutions.
---------------------------------------------------------------------------

    \2\ 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 also 
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 the Existing 
Funds and Replacement Funds, which Applicants cannot predict. 
Nevertheless, 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.
---------------------------------------------------------------------------

    12. The affected Contract owners will not incur any fees or charges 
as a result of the Substitutions nor will their rights or the 
Companies' obligations under the Contracts be altered in any way. The 
Companies or their affiliates will pay all expenses and transaction 
costs of the Substitutions, including brokerage, legal, accounting, and 
other fees and expenses. The Substitutions will not cause the Contract 
fees and charges currently being paid by affected Contract owners to be 
greater after the Substitutions than before the Substitutions. 
Moreover, the Substitutions will not impose any tax liability on 
affected Contract owners.
    13. As described in the application, after notification of the 
Substitution and for 30 days after the Effective Date, affected 
Contract owners may reallocate the sub-account value of an Existing 
Fund to any other investment option available under their Contract 
without incurring any transfer charges.
    14. All Contract owners affected by the Substitutions will be 
notified of this application by means of supplements to the Contract 
prospectuses at least 30 days prior to the Effective Date. The notice 
will advise Contract owners that from the date of the notice until the 
Effective Date, owners are permitted to make one transfer of Contract 
value out of the Existing Fund sub-account to one or more other sub-
accounts without the transfer (or exchange) being treated as one of a 
limited number of transfers (or exchanges) permitted without a transfer 
charge. Among other information, the notice will inform affected 
Contract owners that the Companies will not exercise any rights 
reserved under any Contract to impose additional restrictions on 
transfers until at least 30 days after the Effective Date.
    15. If affected Contract owners reallocate account value during 
this 60 day period, there will be no charge for the reallocation of 
accumulated value from the Existing Fund sub-accounts and the 
reallocation will not count as a transfer when imposing any applicable 
restriction or limit under the Contract on transfers. Additionally, all 
affected Contract owners will be sent prospectuses of the applicable 
Replacement Funds at least 30 days before the Effective Date.
    16. Within five (5) business days after the Effective Date, 
affected Contract owners will be sent a written confirmation, which 
will include confirmation that the Substitutions were carried out as 
previously notified, a restatement of the information set forth in the 
pre-Substitution notice and values of the Contract owner's position in 
the Existing Fund before the Substitution and the Replacement Fund 
after the Substitution.

Applicants' Legal Analysis

    1. Applicants request that the Commission issue an order pursuant 
to Section 26(c) of the 1940 Act approving the Substitutions. Section 
26(c) requires the depositor of a registered unit investment trust 
holding the securities of a single issuer to obtain Commission approval 
before substituting the securities held by the trust. Section 26(c) 
requires the Commission to issue such an order 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 1940 Act.
    2. Applicants submit that the terms and conditions of the 
Substitutions meet the standards set forth in Section 26(c) and assert 
that the replacement of an Existing Fund with the corresponding 
Replacement Fund is consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the l940 Act. 
As described in the application, for a period of two years following 
the Effective Date, the Companies or their affiliates will reimburse 
any Contract owner affected by the proposed Substitutions involving 
Transamerica Series Trust Replacement Funds and whose sub-account 
invests in the Replacement Fund to the extent a Replacement Fund's net 
annual operating expenses exceeds the net annual operating expenses of 
the corresponding Existing Fund.

[[Page 15777]]

Applicants further assert that each Replacement Fund has similar 
investment objectives and investment strategies as the corresponding 
Existing Fund, or each Replacement Fund's underlying portfolio 
construction and investment results are similar to those of the 
corresponding Existing Fund. Accordingly, Applicants believe that the 
fundamental investment objectives, risk and performance expectations of 
the Contract owners will continue to be met after the Substitutions.
    3. Applicants also maintain that it is in the best interests of the 
Contract owners to substitute the Replacement Fund for its 
corresponding Existing Fund. Applicants anticipate that the 
substitution of an Existing Fund with the corresponding Replacement 
Fund will result in a Contract that is administered and managed more 
efficiently, and one that is more competitive with other variable 
products. The rights of affected Contract owners and the obligations of 
the Companies under the Contracts will not be altered by the 
Substitutions. Affected Contract owners will not incur any additional 
tax liability or any additional fees and expenses as a result of the 
Substitutions.
    4. Each of the prospectuses for the Contracts discloses that the 
issuing Company reserves the right, subject to compliance with 
applicable law, to substitute shares of another registered open-end 
management investment company for shares of an open-end management 
investment company held by a sub-account of an Account.
    5. Applicants also assert that none of the proposed Substitutions 
is of the type that Section 26(c) was designed to prevent. Unlike a 
traditional unit investment trust where a depositor could only 
substitute an investment security in a manner which permanently 
affected all the investors in the trust, the Contracts provide each 
Contract owner with the right to exercise his or her own judgment and 
transfer account values into other sub-accounts. Moreover, the 
Contracts will offer affected Contract owners the opportunity to 
transfer amounts out of the affected sub-accounts into any of the 
remaining sub-accounts without cost or other disadvantage. The 
Substitution, therefore, will not result in the type of costly forced 
redemptions that Section 26(c) was designed to prevent. Applicants also 
maintain that the Substitutions are unlike the type of substitutions 
which Section 26(c) was designed to prevent in that by purchasing a 
Contract, Contract owners select much more than a particular registered 
management open-end investment company in which to invest their account 
values. They also select the specific type of insurance coverage 
offered by the Companies under their Contracts as well as other rights 
and privileges set forth in the Contracts.

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 
Companies determine that: (a) The Contracts allow the substitution of 
shares of registered open-end investment companies in the manner 
contemplated by the application; (b) the 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 Substitutions.
    2. The Companies or their 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 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 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 affected Contract owners 
as a result of the Substitutions.
    5. The rights or obligations of the Companies under the Contracts 
of affected Contract owners will not be altered in any way.
    6. Affected Contract owners will be permitted to make at least one 
transfer of Contract value from the sub-account investing in the 
Existing Fund (before the Effective Date) or the Replacement Fund 
(after the Effective Date) to any other available investment option 
under the Contract without charge for a period beginning at least 30 
days before the Effective Date through at least 30 days following the 
Effective 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 sub-accounts under the Contracts, 
including limitations on the future number of transfers, for a period 
beginning at least 30 days before the Effective Date through at least 
30 days following the Effective Date.
    7. All affected Contract owners will be notified, at least 30 days 
before the Effective Date about: (a) The intended substitution of 
Existing Funds with the Replacement Funds; (b) the intended Effective 
Date; and (c) information with respect to transfers as set forth in 
Condition 6 above. In addition, the Companies will deliver to all 
affected Contract owners, at least 30 days before the Effective Date, a 
prospectus for each applicable Replacement Fund.
    8. The Companies will deliver to each affected Contract owner 
within five (5) business days of the Effective 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 Fund before the Substitution and the Replacement Fund after 
the Substitution.
    9. After the Effective Date the Applicants agree not to change a 
Replacement Fund's sub-adviser without first obtaining shareholder 
approval of either (a) the sub-adviser change or (b) the parties' 
continued ability to rely on their manager-of-managers exemptive order.
    10. For two years following the Effective Date the net annual 
expenses of each Replacement Fund that is a Transamerica Series Trust 
Fund will not exceed the net annual expenses of the corresponding 
Existing Fund as of the fund's most recent fiscal year. To achieve this 
limitation, the Replacement Fund's investment adviser will waive fees 
or reimburse the Replacement Fund in certain amounts to maintain 
expenses at or below the limit. Any adjustments will be made at least 
on a quarterly basis. In addition, the Companies will not increase the 
Contract fees and charges, including asset based charges such as 
mortality expense risk charges deducted from the sub-accounts that 
would otherwise be assessed under the terms of the Contracts for a 
period of at least two years following the Effective Date.


[[Page 15778]]


    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-06247 Filed 3-29-17; 8:45 am]
 BILLING CODE 8011-01-P