The Guardian Insurance & Annuity Company, Inc., et al., 2476-2480 [2018-00626]
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Federal Register / Vol. 83, No. 11 / Wednesday, January 17, 2018 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–00636 Filed 1–16–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32967; File No. 812–14714]
The Guardian Insurance & Annuity
Company, Inc., et al.
January 10, 2018.
Securities and Exchange
Commission (‘‘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 ‘‘Act’’).
APPLICANTS: The Guardian Insurance &
Annuity Company, Inc., (‘‘Guardian’’),
The Guardian Separate Account Q, and
The Guardian Separate Account R (each,
a ‘‘Separate Account’’ and together, the
‘‘Separate Accounts’’). Guardian and the
Separate Accounts are referred to as the
‘‘Applicants.’’
SUMMARY OF APPLICATION: Applicants
seek an order pursuant to section 26(c)
of the Act, approving the substitution of
shares issued by certain investment
portfolios of registered investment
companies (the ‘‘Existing Portfolios’’)
for shares of certain investment
portfolios of Guardian Variable Products
Trust (the ‘‘Replacement Portfolios’’),
held by the Separate Accounts to
support certain variable annuity
contracts (the ‘‘Contracts’’). Guardian
Variable Products Trust is referred to as
the ‘‘Trust.’’
FILING DATE: The application was filed
on November 3, 2016 and was amended
on April 10, 2017 and September 18,
Substitution No.
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Applicants’ Representations
1. Guardian is a Delaware stock life
insurance company licensed to conduct
insurance business in the District of
Columbia and all fifty states of the
United States. Guardian is whollyowned by The Guardian Life Insurance
Company of America (‘‘Guardian Life’’),
a mutual life insurance company.
2. Each Separate Account meets the
definition of ‘‘separate account,’’ as
defined in section 2(a)(37) of the Act
and rule 0–1(e) thereunder. The
Separate Accounts are registered 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. Guardian is the legal owner
of the assets in the Separate Accounts.
The Separate Accounts are segmented
into subaccounts, and each subaccount
invests in an underlying registered
open-end management investment
company or series thereof.
3. The Contracts are each registered
under the Securities Act of 1933, as
amended (the ‘‘1933 Act’’) on Form N–
4. Each Contract has particular fees,
charges, and investment options, as
described in the Contracts’ respective
prospectuses.
4. The Contracts are individual
flexible or single premium deferred
variable annuity contracts. As set forth
in the prospectuses for the Contracts,
each Contract provides that Guardian
reserves the right to substitute shares of
the funds in which the Separate
Accounts invest for shares of any funds
already held or to be held in the future
by the Separate Accounts.1
5. Guardian, on behalf of itself and the
Separate Accounts, proposes to exercise
its contractual right to substitute shares
of the Existing Portfolios for shares of
the Replacement Portfolios
(‘‘Substitutions’’), as shown in the table
below:
Existing portfolio
Replacement portfolio
Variable Portfolio Loomis Sayles Growth Fund (Class 2) ....
Fidelity VIP Contrafund Portfolio (Service Class 2) ..............
Fidelity VIP Growth Portfolio (Service Class 2) ....................
Alger Capital Appreciation Portfolio (Class S) ......................
BlackRock Capital Appreciation V.I. Fund (Class III) ...........
Columbia Variable Portfolio Large Cap Growth Fund (Class
2).
Invesco V.I. American Franchise Fund (Series II) ................
MFS® Growth Series (Service Class) ...................................
9 17
CFR 200.30–3(a)(12).
Contracts make or made available
guaranteed living benefit riders (each, a ‘‘Living
Benefit Rider’’ and collectively, the ‘‘Living Benefit
Riders’’). The terms of certain Living Benefit Riders
1 Certain
VerDate Sep<11>2014
2017. Applicants have agreed to file an
amendment during the notice period,
the substance of which is reflected in
this notice.
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
February 6, 2018 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: Secretary, Securities and
Exchange Commission, 100 F Street NE,
Washington, DC 20549–1090.
Applicants: Richard T. Potter, Senior
Vice President, Counsel and Assistant
Corporate Secretary, The Guardian
Insurance & Annuity Company, Inc., 7
Hanover Square, New York, New York
10004.
FOR FURTHER INFORMATION CONTACT:
Laura J. Riegel, Senior Counsel, at (202)
551–6873, or Robert H. Shapiro, 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
website 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.
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Guardian
Guardian
Guardian
Guardian
Guardian
Large
Large
Large
Large
Large
Large
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Disciplined Growth VIP Fund.
Disciplined Growth VIP Fund.
Disciplined Growth VIP Fund.
Fundamental Growth VIP Fund.
Fundamental Growth VIP Fund.
Fundamental Growth VIP Fund.
Guardian Large Cap Fundamental Growth VIP Fund.
Guardian Large Cap Fundamental Growth VIP Fund.
include investment restrictions that limit the
available investment options to identified allocation
models consisting of a specified selection of
investment options. A Contract owner with a Living
Benefit Rider that has investment restrictions may
PO 00000
Cap
Cap
Cap
Cap
Cap
Cap
transfer Contract value by reallocating all of his
Contract value to a different allocation model under
the rider or, depending on the terms of the rider,
by reallocating his Contract value within the
parameters of the allocation model.
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Substitution No.
Existing portfolio
9 ...............................
Oppenheimer Capital Appreciation Fund/VA ........................
(Service Shares) ....................................................................
T. Rowe Price Blue Chip Growth Portfolio (Class II) ............
Invesco V.I. Core Equity Fund (Series II) .............................
MFS® Core Equity Portfolio (Service Class) .........................
MFS® Investors Trust Series (Service Class) .......................
Pioneer Fund VCT Portfolio (Class II) ..................................
MFS® Value Series (Service Class) .....................................
Pioneer Equity Income VCT Portfolio (Class II) ....................
AB Value Portfolio (Class B) .................................................
Invesco V.I. Comstock Fund (Series II) ................................
Invesco V.I. Growth and Income Fund (Series II) ................
Invesco V.I. International Growth Fund (Series II) ................
Oppenheimer International Growth Fund/VA (Service
Shares).
Wells Fargo VT International Equity Fund (Class 2) ............
Ivy VIP Mid Cap Growth ........................................................
American Century VP Mid Cap Value Fund (Class II) .........
Invesco V.I. American Value Fund (Series II) .......................
Invesco V.I. Mid Cap Core Equity Fund (Series II) ..............
MFS® Total Return Bond Series (Service Class) .................
PIMCO Total Return Portfolio (Advisor Class) ......................
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6. The Replacement Portfolios are
series of the Trust, a Delaware statutory
trust registered as an open-end
management investment company
under the Act (File No. 811–23148) and
whose shares are registered under the
1933 Act (File No. 333–210205). The
Replacement Portfolios are currently
available only as investment allocation
options under variable insurance
contracts issued by Guardian.
7. Park Avenue Institutional Advisers
LLC (‘‘Park Avenue’’), an indirect
wholly-owned subsidiary of Guardian
Life, serves as the investment adviser of
each Replacement Portfolio. Park
Avenue is a Delaware limited liability
company that is registered as an
investment adviser under the
Investment Advisers Act of 1940. Each
Replacement Portfolio is sub-advised by
a registered investment adviser that is
unaffiliated with Applicants, the Trust,
or Park Avenue.
8. Applicants state that the proposed
Substitutions are part of a strategic
business goal of Guardian to improve
the administrative efficiency and costeffectiveness of the Contracts, as well as
to make the Contracts more attractive to
Contract owners. Applicants note that
the proposed Substitutions are intended
to improve portfolio manager selection 2
2 The Trust and Park Avenue may rely on an
order from the Commission that permits Park
Avenue, subject to certain conditions, including
approval of the Trust’s board of directors but
without the approval of shareholders, to select
certain wholly-owned and non-affiliated investment
sub-advisers to manage all or a portion of the assets
of each portfolio of the Trust pursuant to an
investment sub-advisory agreement with Park
Avenue, and to materially amend sub-advisory
agreements with Park Avenue. See Guardian
Variable Products Trust and Park Avenue
Institutional Advisers LLC, Investment Company
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Replacement portfolio
Guardian Large Cap Fundamental Growth VIP Fund.
Guardian
Guardian
Guardian
Guardian
Guardian
Guardian
Guardian
Guardian
Guardian
Guardian
Guardian
Guardian
Large Cap Fundamental Growth VIP Fund.
Diversified Research VIP Fund.
Diversified Research VIP Fund.
Diversified Research VIP Fund.
Diversified Research VIP Fund.
Large Cap Disciplined Value VIP Fund.
Large Cap Disciplined Value VIP Fund.
Growth & Income VIP Fund.
Growth & Income VIP Fund.
Growth & Income VIP Fund.
International Growth VIP Fund.
International Growth VIP Fund.
Guardian
Guardian
Guardian
Guardian
Guardian
Guardian
Guardian
International Value VIP Fund.
Mid Cap Traditional Growth VIP Fund.
Mid Cap Relative Value VIP Fund.
Mid Cap Relative Value VIP Fund.
Mid Cap Relative Value VIP Fund.
Core Plus Fixed Income VIP Fund.
Core Plus Fixed Income VIP Fund.
and simplify fund lineups while
reducing costs and maintaining a menu
of investment options that would offer
a similar diversity of investment options
after the proposed Substitutions as is
currently available under the Contracts.
Applicants believe that the Replacement
Portfolios have investment objectives,
principal investment strategies, and
principal risks, as described in their
prospectuses, which are substantially
similar to the corresponding Existing
Portfolios, making those Replacement
Portfolios appropriate candidates as
substitutes. Information for each
Existing Portfolio and Replacement
Portfolio, including investment
objectives, principal investment
strategies, principal risks, and
comparative performance history, can
be found in the application.
9. Applicants state that for all the
proposed Substitutions, the net annual
operating expenses of the Replacement
Portfolio will not exceed, on an
annualized basis, the annual net
operating expenses of any
corresponding Existing Portfolio for the
last fiscal year preceding the date of the
application (the ‘‘Expense Cap’’).
Applicants will cause Park Avenue, as
Act Release Nos. 32420 (Jan. 9, 2017) (notice) and
32468 (Feb. 6, 2017) (the ‘‘Manager of Managers
Order’’). After the Substitution Date (defined
below), Park Avenue will not change a Replacement
Portfolio’s 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 rely on the
Manager of Managers Order or any replacement
order from the Commission, at a shareholder
meeting, the record date for which will be after the
proposed Substitution has been effected.
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the investment adviser of each
Replacement Portfolio, to enter into a
written contract with the Replacement
Portfolio under which the net annual
operating expenses of the Replacement
Portfolio will not exceed the Expense
Cap. The Expense Cap for each
proposed Substitution will remain in
place for a period of two years following
the implementation of the proposed
Substitution (the ‘‘Substitution Date’’),
except that for those proposed
Substitutions for which the sum of the
current management fee and rule 12b–
1 fees of the Replacement Portfolio is
greater than that of the corresponding
Existing Portfolio, the Expense Cap for
that proposed Substitution will extend
for the life of the affected Contracts
following the Substitution Date. The
Expense Cap applicable to Substitution
No. 10 will also extend for the life of the
affected Contracts following the
Substitution Date. Any amounts waived
or reimbursed by Park Avenue pursuant
to any Expense Cap will not be subject
to Park Avenue’s recoupment rights.
10. Applicants represent that as of the
Substitution Date, the Separate
Accounts will redeem shares of the
Existing Portfolios for cash. Redemption
requests and purchase orders will be
placed simultaneously so that Contract
values will remain fully invested at all
times.
11. 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 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
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or value of any Contracts held by
affected Contract owners.3
12. Contract owners will not incur
any fees or charges as a result of the
proposed Substitutions. The obligations
of Applicants and the rights of the
affected Contract owners, under the
Contracts of affected Contract owners
will not be altered in any way. Guardian
and/or its affiliates (other than the
Trust) 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 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.
In addition, 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.
13. From the date of the PreSubstitution Notice (defined below)
through 30 days following the
Substitution Date, subject to the terms of
certain Living Benefit Riders, Contract
owners may make at least one transfer
of Contract value from the subaccount
investing in an Existing Portfolio (before
the Substitution) or the Replacement
Portfolio (after the Substitution) to any
other available subaccount under the
Contract without charge and without
imposing any transfer limitations.
Further, on the Substitution Date,
Contract values attributable to
investments in each Existing Portfolio
will be transferred to the corresponding
Replacement Portfolio without charge
and without being subject to any
transfer limitations. Moreover, except
with respect to market timing policies
and procedures and the terms of the
Living Benefit Riders, Guardian will not
exercise any rights reserved under the
Contracts to impose restrictions on
transfers between the subaccounts
3 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 Portfolios and
Replacement Portfolios, 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.
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under the Contracts for a period
beginning at least 30 days, including
limitations on the future number of
transfers, before the Substitution Date
through at least 30 days following the
Substitution Date.
14. At least 30 days prior to the
Substitution Date, Contract owners will
be notified via prospectus supplements
that Applicants received or expect to
receive Commission approval of the
applicable proposed Substitutions and
of the anticipated Substitution Date (the
‘‘Pre-Substitution Notice’’). PreSubstitution Notices sent to Contract
owners will be filed with the
Commission pursuant to rule 497 under
the 1933 Act. The Pre-Substitution
Notice will advise Contract owners that
from the date of the Pre-Substitution
Notice through the date 30 days after the
Substitutions, subject to the terms of
certain Living Benefit Riders, Contract
owners may make at least one transfer
of Contract value from the subaccounts
investing in the Existing Portfolios
(before the Substitutions) or the
Replacement Portfolios (after the
Substitutions) to any other available
subaccount without charge and without
imposing any transfer limitations.
Among other information, the PreSubstitution Notice will inform affected
Contract owners that, except with
respect to market timing policies and
procedures and limitations imposed by
Living Benefit Riders, Guardian will not
exercise any rights reserved under the
Contracts to impose additional
restrictions on transfers out of a
Replacement Portfolio subaccount from
the date of the Pre-Substitution Notice,
including limitations on the future
number of transfers, until at least 30
days after the Substitution Date.
Additionally, all affected Contract
owners will be sent prospectuses of the
applicable Replacement Portfolios at
least 30 days before the Substitution
Date.
15. In addition to the Supplements
distributed to the Contract owners,
within five 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 also will restate the
information set forth in the PreSubstitution Notice. The Confirmation
will also reflect the values of the
Contract owner’s positions in the
Existing Portfolio before the
Substitution and the Replacement
Portfolio after the Substitution.
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Legal Analysis
1. Applicants request that the
Commission issue an order pursuant to
section 26(c) of the Act approving the
proposed Substitutions. Section 26(c)
prohibits any depositor or trustee of a
unit investment trust that invests
exclusively in the securities of a single
issuer from substituting the securities of
another issuer without the approval of
the Commission. Section 26(c) provides
that such approval shall be granted by
order from the Commission if the
evidence establishes that the
substitution is consistent with the
protection of investors and the purposes
of the Act.
2. Applicants submit that the
Substitutions meet the standards set
forth in section 26(c) and that, if
implemented, the Substitutions would
not raise any of the concerns that
Congress intended to address when the
Act was amended to include this
provision. Applicants state that each
Substitution protects the Contract
owners who have Contract value
allocated to an Existing Portfolio by
providing Replacement Portfolios with
substantially similar investment
objectives, strategies, and risks, and
providing Contract owners with
investment options that have net annual
operating expenses that will not exceed
the Expense Cap.
3. Guardian has reserved the right
under the Contracts to substitute shares
of another underlying fund for one of
the current funds offered as an
investment option under the Contracts.
The Contracts and the Contracts’
prospectuses disclose this right.
4. Applicants submit that the ultimate
effect of the proposed Substitutions will
be to streamline and simplify the
investment line-ups that are available to
Contract owners while reducing
expenses and continuing to provide
Contract owners with a wide array of
investment options. Applicants state
that the proposed Substitutions will not
reduce in any manner the nature or
quality of the available investment
options and the proposed Substitutions
also will permit Guardian to present
information to its Contract owners in a
simpler and more concise manner.
Applicants also state it is anticipated
that after the proposed Substitutions,
Contract owners will be provided with
disclosure documents that contain a
simpler presentation of the available
investment options under the Contracts.
Applicants also assert that the proposed
Substitutions are not of the type that
section 26 was designed to prevent
because they will not result in costly
forced redemption, nor will they affect
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other aspects of the Contracts. In
addition, the proposed Substitutions
will not adversely affect any features or
riders under the Contracts. Accordingly,
no Contract owner will involuntarily
lose his or her features or riders as a
result of any proposed Substitution.
Moreover, Applicants will offer Contract
owners the opportunity to transfer
amounts out of the affected subaccounts
without any cost or other penalty (other
than those necessary to implement
policies and procedures designed to
detect and deter disruptive transfers and
other ‘‘market timing’’ activities and
administer the terms of the Living
Benefit Riders) that may otherwise have
been imposed for a period beginning on
the date of the Pre-Substitution Notice
(which supplement will be delivered to
the Contract owners at least 30 days
before the Substitution Date) and ending
no earlier than 30 days after the
Substitution Date. The proposed
Substitutions are also unlike the type of
substitution that section 26(c) was
designed to prevent in that the
Substitutions have no impact on other
aspects of the Contracts.
5. The proposed 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
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.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. The Substitutions will not be
effected unless Guardian determines
that: (i) The Contracts allow the
substitution of shares of registered openend investment companies in the
manner contemplated by the
application; (ii) the Substitutions can be
consummated as described in the
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. After the Substitution Date, Park
Avenue will not change a Replacement
Portfolio’s sub-adviser, add a new sub-
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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 rely
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.
3. Guardian or an affiliate thereof
(other than the Trust) 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 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.
4. 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 Act and rule 22c–1
thereunder without the imposition of
any transfer or similar charges by the
Applicants. The Substitutions will be
effected without change in the amount
or value of any Contracts held by
affected Contract owners.
5. 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.
6. The obligations of the Applicants
and the rights of the affected Contract
owners, under the Contracts of affected
Contract owners will not be altered in
any way.
7. Affected Contract owners will be
permitted to transfer Contract value
from the subaccount investing in the
Existing Portfolio (before the
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 Living 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
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2479
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 Applicants will not exercise any
rights reserved under the Contracts to
impose restrictions on transfers between
the subaccounts under the Contracts,
transfers, 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.
8. All affected Contract owners will be
notified via the Pre-Substitution Notice,
at least 30 days before the Substitution
Date, about: (i) The intended
Substitution of Existing Portfolios with
the Replacement Portfolios; (ii) the
intended Substitution Date; and (iii)
information with respect to transfers as
set forth in Condition 7 above. In
addition, the Applicants will also
deliver to affected Contract owners, at
least 30 days before the Substitution
Date, a prospectus for each applicable
Replacement Portfolio.
9. The Applicants will deliver to each
affected Contract owner within five
business days of the Substitution Date a
written confirmation which will
include: (i) A confirmation that the
Substitutions were carried out as
previously notified; (ii) a restatement of
the information set forth in the PreSubstitution Notice; and (iii) values of
the Contract owner’s positions in the
Existing Portfolio before the
Substitution and the Replacement
Portfolio after the Substitution.
10. Guardian will cause Park Avenue,
as the investment adviser of each
Replacement Portfolio, to enter into a
written contract with the Replacement
Portfolio whereby the net annual
operating expenses of the Replacement
Portfolio will not exceed the Expense
Cap. The Expense Cap for each
proposed Substitution will remain in
place for a period of two years following
the Substitution Date. For those
proposed Substitutions for which the
sum of the current management fee and
rule 12b–1 fees of the Replacement
Portfolio is greater than that of the
corresponding Existing Portfolio, the
Expense Cap for that proposed
Substitution will extend for the life of
the affected Contracts following the
Substitution Date. The Expense Cap
applicable to Substitution No. 10 will
also extend for the life of the affected
Contracts following the Substitution
Date.
E:\FR\FM\17JAN1.SGM
17JAN1
2480
Federal Register / Vol. 83, No. 11 / Wednesday, January 17, 2018 / Notices
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
September 13, 2017, 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.8 The Commission
subsequently received one comment
letter on the proposed rule change.9 On
December 12, 2017, the Commission
designated a longer period for action on
the proposed rule change.10
On January 10, 2018, the Exchange
withdrew the proposed rule change
(SR–BatsBZX–2017–30).
[FR Doc. 2018–00626 Filed 1–16–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82482; File No. SR–
BatsBZX–2017–30]
Self-Regulatory Organizations; Bats
BZX Exchange, Inc.; Notice of
Withdrawal of a Proposed Rule Change
To Permit the Listing and Trading of
Managed Portfolio Shares and To List
and Trade Shares of the Following
Under Proposed Rule 14.11(k):
ClearBridge Appreciation ETF,
ClearBridge Large Cap ETF,
ClearBridge MidCap Growth ETF,
ClearBridge Select ETF, and
ClearBridge All Cap Value ETF
January 10, 2018.
On June 1, 2017, Bats BZX Exchange,
Inc. (‘‘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:
(1) Adopt Rule 14.11(k) (Managed
Portfolio Shares); and (2) list and trade
shares of the ClearBridge Appreciation
ETF, ClearBridge Large Cap ETF,
ClearBridge MidCap Growth ETF,
ClearBridge Select ETF, and ClearBridge
All Cap Value ETF under proposed Rule
14.11(k). The proposed rule change was
published for comment in the Federal
Register on June 19, 2017.3 On July 28,
2017, 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
The Commission received four comment
letters on the proposed rule change.6 On
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 80911
(June 13, 2017), 82 FR 27925.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 81247,
82 FR 36031 (August 2, 2017). The Commission
designated September 17, 2017 as the date by which
the Commission shall approve or disapprove, or
institute proceedings to determine whether to
disapprove, the proposed rule change.
6 See Letter from Gary L. Gastineau, President,
ETF Consultants.com, Inc., to Brent J. Fields,
Secretary, Commission, dated July 7, 2017; Letter
from Todd J. Broms, Chief Executive Officer, Broms
& Company LLC, to Brent J. Fields, Secretary,
ethrower on DSK3G9T082PROD with NOTICES
2 17
VerDate Sep<11>2014
17:14 Jan 16, 2018
Jkt 244001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–00645 Filed 1–16–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82480; File No. SR–FINRA–
2018–001]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend the Expiration
Date of FINRA Rule 0180 (Application
of Rules to Security-Based Swaps)
January 10, 2018.
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 January 4,
2018, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
Commission, dated July 10, 2017; Letter from James
J. Angel, Associate Professor of Finance,
Georgetown University, McDonough School of
Business, to the Commission, dated July 10, 2017;
and Letter from Terence W. Norman, Founder, Blue
Tractor Group, LLC, to Brent J. Fields, Secretary,
Commission, dated August 1, 2017. The comment
letters are available on the Commission’s website at:
https://www.sec.gov/comments/sr-batsbzx-2017-30/
batsbzx201730.htm.
7 15 U.S.C. 78s(b)(2)(B).
8 See Securities Exchange Act Release No. 81599,
82 FR 43621 (September 18, 2017).
9 See Letter from Terence W. Norman, Founder,
Blue Tractor Group, LLC, to Brent J. Fields,
Secretary, Commission, dated December 5, 2017.
The comment letter is available on the
Commission’s website at: https://www.sec.gov/
comments/sr-batsbzx-2017-30/batsbzx201730.htm.
10 See Securities Exchange Act Release No. 82301,
82 FR 60073 (December 18, 2017). The Commission
designated February 14, 2018 as the date by which
the Commission must either approve or disapprove
the proposed rule change.
11 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
Frm 00059
Fmt 4703
Sfmt 4703
and III below, which Items have been
prepared by FINRA. FINRA has
designated the proposed rule change as
constituting a ‘‘non-controversial’’ rule
change under paragraph (f)(6) of Rule
19b–4 under the Act,3 which renders
the proposal effective upon receipt of
this filing by the Commission. 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
FINRA is proposing to extend the
expiration date of FINRA Rule 0180
(Application of Rules to Security-Based
Swaps) to February 12, 2019. FINRA
Rule 0180 temporarily limits, with
certain exceptions, the application of
FINRA rules with respect to securitybased swaps.
The text of the proposed rule change
is available on FINRA’s website at
https://www.finra.org, at the principal
office of FINRA and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On July 1, 2011, the SEC issued an
Order granting temporary exemptive
relief (the ‘‘Temporary Exemptions’’)
from compliance with certain
provisions of the Exchange Act in
connection with the revision, pursuant
to Title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (the ‘‘Dodd-Frank Act’’),4 of the
Exchange Act definition of ‘‘security’’ to
encompass security-based swaps.5
3 17
CFR 240.19b–4(f)(6).
Law 111–203, 124 Stat. 1376 (2010).
5 See Securities Exchange Act Release No. 64795
(July 1, 2011), 76 FR 39927 (July 7, 2011) (Order
Granting Temporary Exemptions Under the
Securities Exchange Act of 1934 in Connection
With the Pending Revision of the Definition of
‘‘Security’’ To Encompass Security-Based Swaps,
4 Public
E:\FR\FM\17JAN1.SGM
17JAN1
]]>Agencies
[Federal Register Volume 83, Number 11 (Wednesday, January 17, 2018)]
[Notices]
[Pages 2476-2480]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00626]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 32967; File No. 812-14714]
The Guardian Insurance & Annuity Company, Inc., et al.
January 10, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
-----------------------------------------------------------------------
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 ``Act'').
Applicants: The Guardian Insurance & Annuity Company, Inc.,
(``Guardian''), The Guardian Separate Account Q, and The Guardian
Separate Account R (each, a ``Separate Account'' and together, the
``Separate Accounts''). Guardian and the Separate Accounts are referred
to as the ``Applicants.''
Summary of Application: Applicants seek an order pursuant to section
26(c) of the Act, approving the substitution of shares issued by
certain investment portfolios of registered investment companies (the
``Existing Portfolios'') for shares of certain investment portfolios of
Guardian Variable Products Trust (the ``Replacement Portfolios''), held
by the Separate Accounts to support certain variable annuity contracts
(the ``Contracts''). Guardian Variable Products Trust is referred to as
the ``Trust.''
Filing Date: The application was filed on November 3, 2016 and was
amended on April 10, 2017 and September 18, 2017. Applicants have
agreed to file an amendment during the notice period, the substance of
which is reflected in this notice.
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 February 6, 2018 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: Secretary, Securities and Exchange Commission, 100 F Street
NE, Washington, DC 20549-1090. Applicants: Richard T. Potter, Senior
Vice President, Counsel and Assistant Corporate Secretary, The Guardian
Insurance & Annuity Company, Inc., 7 Hanover Square, New York, New York
10004.
FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-6873, or Robert H. Shapiro, 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 website 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. Guardian is a Delaware stock life insurance company licensed to
conduct insurance business in the District of Columbia and all fifty
states of the United States. Guardian is wholly-owned by The Guardian
Life Insurance Company of America (``Guardian Life''), a mutual life
insurance company.
2. Each Separate Account meets the definition of ``separate
account,'' as defined in section 2(a)(37) of the Act and rule 0-1(e)
thereunder. The Separate Accounts are registered 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. Guardian is the legal owner of the assets in the Separate
Accounts. The Separate Accounts are segmented into subaccounts, and
each subaccount invests in an underlying registered open-end management
investment company or series thereof.
3. The Contracts are each registered under the Securities Act of
1933, as amended (the ``1933 Act'') on Form N-4. Each Contract has
particular fees, charges, and investment options, as described in the
Contracts' respective prospectuses.
4. The Contracts are individual flexible or single premium deferred
variable annuity contracts. As set forth in the prospectuses for the
Contracts, each Contract provides that Guardian reserves the right to
substitute shares of the funds in which the Separate Accounts invest
for shares of any funds already held or to be held in the future by the
Separate Accounts.\1\
---------------------------------------------------------------------------
\1\ Certain Contracts make or made available guaranteed living
benefit riders (each, a ``Living Benefit Rider'' and collectively,
the ``Living Benefit Riders''). The terms of certain Living Benefit
Riders include investment restrictions that limit the available
investment options to identified allocation models consisting of a
specified selection of investment options. A Contract owner with a
Living Benefit Rider that has investment restrictions may transfer
Contract value by reallocating all of his Contract value to a
different allocation model under the rider or, depending on the
terms of the rider, by reallocating his Contract value within the
parameters of the allocation model.
---------------------------------------------------------------------------
5. Guardian, on behalf of itself and the Separate Accounts,
proposes to exercise its contractual right to substitute shares of the
Existing Portfolios for shares of the Replacement Portfolios
(``Substitutions''), as shown in the table below:
------------------------------------------------------------------------
Replacement
Substitution No. Existing portfolio portfolio
------------------------------------------------------------------------
1........................... Variable Portfolio Guardian Large Cap
Loomis Sayles Disciplined Growth
Growth Fund (Class VIP Fund.
2).
2........................... Fidelity VIP Guardian Large Cap
Contrafund Disciplined Growth
Portfolio (Service VIP Fund.
Class 2).
3........................... Fidelity VIP Growth Guardian Large Cap
Portfolio (Service Disciplined Growth
Class 2). VIP Fund.
4........................... Alger Capital Guardian Large Cap
Appreciation Fundamental Growth
Portfolio (Class S). VIP Fund.
5........................... BlackRock Capital Guardian Large Cap
Appreciation V.I. Fundamental Growth
Fund (Class III). VIP Fund.
6........................... Columbia Variable Guardian Large Cap
Portfolio Large Cap Fundamental Growth
Growth Fund (Class VIP Fund.
2).
7........................... Invesco V.I. Guardian Large Cap
American Franchise Fundamental Growth
Fund (Series II). VIP Fund.
8........................... MFS[supreg] Growth Guardian Large Cap
Series (Service Fundamental Growth
Class). VIP Fund.
[[Page 2477]]
9........................... Oppenheimer Capital Guardian Large Cap
Appreciation Fund/ Fundamental Growth
VA. VIP Fund.
(Service Shares)....
10.......................... T. Rowe Price Blue Guardian Large Cap
Chip Growth Fundamental Growth
Portfolio (Class VIP Fund.
II).
11.......................... Invesco V.I. Core Guardian Diversified
Equity Fund (Series Research VIP Fund.
II).
12.......................... MFS[supreg] Core Guardian Diversified
Equity Portfolio Research VIP Fund.
(Service Class).
13.......................... MFS[supreg] Guardian Diversified
Investors Trust Research VIP Fund.
Series (Service
Class).
14.......................... Pioneer Fund VCT Guardian Diversified
Portfolio (Class Research VIP Fund.
II).
15.......................... MFS[supreg] Value Guardian Large Cap
Series (Service Disciplined Value
Class). VIP Fund.
16.......................... Pioneer Equity Guardian Large Cap
Income VCT Disciplined Value
Portfolio (Class VIP Fund.
II).
17.......................... AB Value Portfolio Guardian Growth &
(Class B). Income VIP Fund.
18.......................... Invesco V.I. Guardian Growth &
Comstock Fund Income VIP Fund.
(Series II).
19.......................... Invesco V.I. Growth Guardian Growth &
and Income Fund Income VIP Fund.
(Series II).
20.......................... Invesco V.I. Guardian
International International
Growth Fund (Series Growth VIP Fund.
II).
21.......................... Oppenheimer Guardian
International International
Growth Fund/VA Growth VIP Fund.
(Service Shares).
22.......................... Wells Fargo VT Guardian
International International Value
Equity Fund (Class VIP Fund.
2).
23.......................... Ivy VIP Mid Cap Guardian Mid Cap
Growth. Traditional Growth
VIP Fund.
24.......................... American Century VP Guardian Mid Cap
Mid Cap Value Fund Relative Value VIP
(Class II). Fund.
25.......................... Invesco V.I. Guardian Mid Cap
American Value Fund Relative Value VIP
(Series II). Fund.
26.......................... Invesco V.I. Mid Cap Guardian Mid Cap
Core Equity Fund Relative Value VIP
(Series II). Fund.
27.......................... MFS[supreg] Total Guardian Core Plus
Return Bond Series Fixed Income VIP
(Service Class). Fund.
28.......................... PIMCO Total Return Guardian Core Plus
Portfolio (Advisor Fixed Income VIP
Class). Fund.
------------------------------------------------------------------------
6. The Replacement Portfolios are series of the Trust, a Delaware
statutory trust registered as an open-end management investment company
under the Act (File No. 811-23148) and whose shares are registered
under the 1933 Act (File No. 333-210205). The Replacement Portfolios
are currently available only as investment allocation options under
variable insurance contracts issued by Guardian.
7. Park Avenue Institutional Advisers LLC (``Park Avenue''), an
indirect wholly-owned subsidiary of Guardian Life, serves as the
investment adviser of each Replacement Portfolio. Park Avenue is a
Delaware limited liability company that is registered as an investment
adviser under the Investment Advisers Act of 1940. Each Replacement
Portfolio is sub-advised by a registered investment adviser that is
unaffiliated with Applicants, the Trust, or Park Avenue.
8. Applicants state that the proposed Substitutions are part of a
strategic business goal of Guardian to improve the administrative
efficiency and cost-effectiveness of the Contracts, as well as to make
the Contracts more attractive to Contract owners. Applicants note that
the proposed Substitutions are intended to improve portfolio manager
selection \2\ and simplify fund lineups while reducing costs and
maintaining a menu of investment options that would offer a similar
diversity of investment options after the proposed Substitutions as is
currently available under the Contracts. Applicants believe that the
Replacement Portfolios have investment objectives, principal investment
strategies, and principal risks, as described in their prospectuses,
which are substantially similar to the corresponding Existing
Portfolios, making those Replacement Portfolios appropriate candidates
as substitutes. Information for each Existing Portfolio and Replacement
Portfolio, including investment objectives, principal investment
strategies, principal risks, and comparative performance history, can
be found in the application.
---------------------------------------------------------------------------
\2\ The Trust and Park Avenue may rely on an order from the
Commission that permits Park Avenue, subject to certain conditions,
including approval of the Trust's board of directors but without the
approval of shareholders, to select certain wholly-owned and non-
affiliated investment sub-advisers to manage all or a portion of the
assets of each portfolio of the Trust pursuant to an investment sub-
advisory agreement with Park Avenue, and to materially amend sub-
advisory agreements with Park Avenue. See Guardian Variable Products
Trust and Park Avenue Institutional Advisers LLC, Investment Company
Act Release Nos. 32420 (Jan. 9, 2017) (notice) and 32468 (Feb. 6,
2017) (the ``Manager of Managers Order''). After the Substitution
Date (defined below), Park Avenue will not change a Replacement
Portfolio's 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 rely on the
Manager of Managers Order or any replacement order from the
Commission, at a shareholder meeting, the record date for which will
be after the proposed Substitution has been effected.
---------------------------------------------------------------------------
9. Applicants state that for all the proposed Substitutions, the
net annual operating expenses of the Replacement Portfolio will not
exceed, on an annualized basis, the annual net operating expenses of
any corresponding Existing Portfolio for the last fiscal year preceding
the date of the application (the ``Expense Cap''). Applicants will
cause Park Avenue, as the investment adviser of each Replacement
Portfolio, to enter into a written contract with the Replacement
Portfolio under which the net annual operating expenses of the
Replacement Portfolio will not exceed the Expense Cap. The Expense Cap
for each proposed Substitution will remain in place for a period of two
years following the implementation of the proposed Substitution (the
``Substitution Date''), except that for those proposed Substitutions
for which the sum of the current management fee and rule 12b-1 fees of
the Replacement Portfolio is greater than that of the corresponding
Existing Portfolio, the Expense Cap for that proposed Substitution will
extend for the life of the affected Contracts following the
Substitution Date. The Expense Cap applicable to Substitution No. 10
will also extend for the life of the affected Contracts following the
Substitution Date. Any amounts waived or reimbursed by Park Avenue
pursuant to any Expense Cap will not be subject to Park Avenue's
recoupment rights.
10. Applicants represent that as of the Substitution Date, the
Separate Accounts will redeem shares of the Existing Portfolios for
cash. Redemption requests and purchase orders will be placed
simultaneously so that Contract values will remain fully invested at
all times.
11. 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 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
[[Page 2478]]
or value of any Contracts held by affected Contract owners.\3\
---------------------------------------------------------------------------
\3\ 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
Portfolios and Replacement Portfolios, 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. Contract owners will not incur any fees or charges as a result
of the proposed Substitutions. The obligations of Applicants and the
rights of the affected Contract owners, under the Contracts of affected
Contract owners will not be altered in any way. Guardian and/or its
affiliates (other than the Trust) 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 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. In addition, 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.
13. From the date of the Pre-Substitution Notice (defined below)
through 30 days following the Substitution Date, subject to the terms
of certain Living Benefit Riders, Contract owners may make at least one
transfer of Contract value from the subaccount investing in an Existing
Portfolio (before the Substitution) or the Replacement Portfolio (after
the Substitution) to any other available subaccount under the Contract
without charge and without imposing any transfer limitations. Further,
on the Substitution Date, Contract values attributable to investments
in each Existing Portfolio will be transferred to the corresponding
Replacement Portfolio without charge and without being subject to any
transfer limitations. Moreover, except with respect to market timing
policies and procedures and the terms of the Living Benefit Riders,
Guardian will not exercise any rights reserved under the Contracts to
impose restrictions on transfers between the subaccounts under the
Contracts for a period beginning at least 30 days, including
limitations on the future number of transfers, before the Substitution
Date through at least 30 days following the Substitution Date.
14. At least 30 days prior to the Substitution Date, Contract
owners will be notified via prospectus supplements that Applicants
received or expect to receive Commission approval of the applicable
proposed Substitutions and of the anticipated Substitution Date (the
``Pre-Substitution Notice''). Pre-Substitution Notices sent to Contract
owners will be filed with the Commission pursuant to rule 497 under the
1933 Act. The Pre-Substitution Notice will advise Contract owners that
from the date of the Pre-Substitution Notice through the date 30 days
after the Substitutions, subject to the terms of certain Living Benefit
Riders, Contract owners may make at least one transfer of Contract
value from the subaccounts investing in the Existing Portfolios (before
the Substitutions) or the Replacement Portfolios (after the
Substitutions) to any other available subaccount without charge and
without imposing any transfer limitations. Among other information, the
Pre-Substitution Notice will inform affected Contract owners that,
except with respect to market timing policies and procedures and
limitations imposed by Living Benefit Riders, Guardian will not
exercise any rights reserved under the Contracts to impose additional
restrictions on transfers out of a Replacement Portfolio subaccount
from the date of the Pre-Substitution Notice, including limitations on
the future number of transfers, until at least 30 days after the
Substitution Date. Additionally, all affected Contract owners will be
sent prospectuses of the applicable Replacement Portfolios at least 30
days before the Substitution Date.
15. In addition to the Supplements distributed to the Contract
owners, within five 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 also will restate the
information set forth in the Pre-Substitution Notice. The Confirmation
will also reflect the values of the Contract owner's positions in the
Existing Portfolio before the Substitution and the Replacement
Portfolio after the Substitution.
Legal Analysis
1. Applicants request that the Commission issue an order pursuant
to section 26(c) of the Act approving the proposed Substitutions.
Section 26(c) prohibits any depositor or trustee of a unit investment
trust that invests exclusively in the securities of a single issuer
from substituting the securities of another issuer without the approval
of the Commission. Section 26(c) provides that such approval shall be
granted by order from the Commission if the evidence establishes that
the substitution is consistent with the protection of investors and the
purposes of the Act.
2. Applicants submit that the Substitutions meet the standards set
forth in section 26(c) and that, if implemented, the Substitutions
would not raise any of the concerns that Congress intended to address
when the Act was amended to include this provision. Applicants state
that each Substitution protects the Contract owners who have Contract
value allocated to an Existing Portfolio by providing Replacement
Portfolios with substantially similar investment objectives,
strategies, and risks, and providing Contract owners with investment
options that have net annual operating expenses that will not exceed
the Expense Cap.
3. Guardian has reserved the right under the Contracts to
substitute shares of another underlying fund for one of the current
funds offered as an investment option under the Contracts. The
Contracts and the Contracts' prospectuses disclose this right.
4. Applicants submit that the ultimate effect of the proposed
Substitutions will be to streamline and simplify the investment line-
ups that are available to Contract owners while reducing expenses and
continuing to provide Contract owners with a wide array of investment
options. Applicants state that the proposed Substitutions will not
reduce in any manner the nature or quality of the available investment
options and the proposed Substitutions also will permit Guardian to
present information to its Contract owners in a simpler and more
concise manner. Applicants also state it is anticipated that after the
proposed Substitutions, Contract owners will be provided with
disclosure documents that contain a simpler presentation of the
available investment options under the Contracts. Applicants also
assert that the proposed Substitutions are not of the type that section
26 was designed to prevent because they will not result in costly
forced redemption, nor will they affect
[[Page 2479]]
other aspects of the Contracts. In addition, the proposed Substitutions
will not adversely affect any features or riders under the Contracts.
Accordingly, no Contract owner will involuntarily lose his or her
features or riders as a result of any proposed Substitution. Moreover,
Applicants will offer Contract owners the opportunity to transfer
amounts out of the affected subaccounts without any cost or other
penalty (other than those necessary to implement policies and
procedures designed to detect and deter disruptive transfers and other
``market timing'' activities and administer the terms of the Living
Benefit Riders) that may otherwise have been imposed for a period
beginning on the date of the Pre-Substitution Notice (which supplement
will be delivered to the Contract owners at least 30 days before the
Substitution Date) and ending no earlier than 30 days after the
Substitution Date. The proposed Substitutions are also unlike the type
of substitution that section 26(c) was designed to prevent in that the
Substitutions have no impact on other aspects of the Contracts.
5. The proposed 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 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.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The Substitutions will not be effected unless Guardian
determines that: (i) The Contracts allow the substitution of shares of
registered open-end investment companies in the manner contemplated by
the application; (ii) the Substitutions can be consummated as described
in the 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. After the Substitution Date, Park Avenue will not change a
Replacement Portfolio's 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
rely 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.
3. Guardian or an affiliate thereof (other than the Trust) 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
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.
4. 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 Act and rule 22c-1 thereunder
without the imposition of any transfer or similar charges by the
Applicants. The Substitutions will be effected without change in the
amount or value of any Contracts held by affected Contract owners.
5. 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.
6. The obligations of the Applicants and the rights of the affected
Contract owners, under the Contracts of affected Contract owners will
not be altered in any way.
7. Affected Contract owners will be permitted to transfer Contract
value from the subaccount investing in the Existing Portfolio (before
the 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 Living 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 Applicants will not exercise any rights
reserved under the Contracts to impose restrictions on transfers
between the subaccounts under the Contracts, transfers, 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.
8. All affected Contract owners will be notified via the Pre-
Substitution Notice, at least 30 days before the Substitution Date,
about: (i) The intended Substitution of Existing Portfolios with the
Replacement Portfolios; (ii) the intended Substitution Date; and (iii)
information with respect to transfers as set forth in Condition 7
above. In addition, the Applicants will also deliver to affected
Contract owners, at least 30 days before the Substitution Date, a
prospectus for each applicable Replacement Portfolio.
9. The Applicants will deliver to each affected Contract owner
within five business days of the Substitution Date a written
confirmation which will include: (i) A confirmation that the
Substitutions were carried out as previously notified; (ii) a
restatement of the information set forth in the Pre-Substitution
Notice; and (iii) values of the Contract owner's positions in the
Existing Portfolio before the Substitution and the Replacement
Portfolio after the Substitution.
10. Guardian will cause Park Avenue, as the investment adviser of
each Replacement Portfolio, to enter into a written contract with the
Replacement Portfolio whereby the net annual operating expenses of the
Replacement Portfolio will not exceed the Expense Cap. The Expense Cap
for each proposed Substitution will remain in place for a period of two
years following the Substitution Date. For those proposed Substitutions
for which the sum of the current management fee and rule 12b-1 fees of
the Replacement Portfolio is greater than that of the corresponding
Existing Portfolio, the Expense Cap for that proposed Substitution will
extend for the life of the affected Contracts following the
Substitution Date. The Expense Cap applicable to Substitution No. 10
will also extend for the life of the affected Contracts following the
Substitution Date.
[[Page 2480]]
For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00626 Filed 1-16-18; 8:45 am]
BILLING CODE 8011-01-P
