The Guardian Insurance & Annuity Company, Inc., et al., 2476-2480 [2018-00626]

Download as PDF 2476 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. ethrower on DSK3G9T082PROD with NOTICES 1 2 3 4 5 6 ............................... ............................... ............................... ............................... ............................... ............................... 7 ............................... 8 ............................... 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. 17:14 Jan 16, 2018 Jkt 244001 Guardian Guardian Guardian Guardian Guardian Guardian Large Large Large Large Large Large Frm 00055 Fmt 4703 Sfmt 4703 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. E:\FR\FM\17JAN1.SGM 17JAN1 Federal Register / Vol. 83, No. 11 / Wednesday, January 17, 2018 / Notices 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) ...................... 10 11 12 13 14 15 16 17 18 19 20 21 ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. 22 23 24 25 26 27 28 ............................. ............................. ............................. ............................. ............................. ............................. ............................. ethrower on DSK3G9T082PROD with NOTICES 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 VerDate Sep<11>2014 17:14 Jan 16, 2018 Jkt 244001 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. PO 00000 Frm 00056 2477 Fmt 4703 Sfmt 4703 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 E:\FR\FM\17JAN1.SGM 17JAN1 2478 Federal Register / Vol. 83, No. 11 / Wednesday, January 17, 2018 / Notices ethrower on DSK3G9T082PROD with NOTICES 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. VerDate Sep<11>2014 17:14 Jan 16, 2018 Jkt 244001 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. PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 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 E:\FR\FM\17JAN1.SGM 17JAN1 Federal Register / Vol. 83, No. 11 / Wednesday, January 17, 2018 / Notices ethrower on DSK3G9T082PROD with NOTICES 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- VerDate Sep<11>2014 17:14 Jan 16, 2018 Jkt 244001 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 PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 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
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.