AXA Equitable Life Insurance Company, et al., 42324-42328 [2018-17936]
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Federal Register / Vol. 83, No. 162 / Tuesday, August 21, 2018 / Notices
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
SECURITIES AND EXCHANGE
COMMISSION
DATES:
Date of required notice: August
21, 2018.
[Investment Company Act Release No.
33201; File No. 812–14831]
FOR FURTHER INFORMATION CONTACT:
AXA Equitable Life Insurance
Company, et al.
Elizabeth Reed, 202–268–3179.
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on August 16,
2018, it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Express & Priority Mail
Contract 71 to Competitive Product List.
Documents are available at
www.prc.gov, Docket Nos. MC2018–209,
CP2018–291.
SUPPLEMENTARY INFORMATION:
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2018–17990 Filed 8–20–18; 8:45 am]
BILLING CODE 7710–12–P
POSTAL SERVICE
Product Change—Priority Mail
Negotiated Service Agreement
AGENCY:
ACTION:
Postal ServiceTM.
Notice.
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
SUMMARY:
Date of required notice: August
21, 2018.
DATES:
FOR FURTHER INFORMATION CONTACT:
Elizabeth Reed, 202–268–3179.
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on August 16,
2018, it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Contract 463 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2018–208, CP2018–290.
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SUPPLEMENTARY INFORMATION:
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2018–17989 Filed 8–20–18; 8:45 am]
August 15, 2018.
Securities and Exchange
Commission (‘‘Commission’’).
AGENCY:
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’’) and an order of
exemption pursuant to section 17(b) of
the Act from section 17(a) of the Act.
AXA Equitable Life
Insurance Company (‘‘AXA Equitable’’),
MONY Life Insurance Company of
America (‘‘MONY America’’), Separate
Account 70 of AXA Equitable
(‘‘Separate Account 70’’), Separate
Account A of AXA Equitable (‘‘Separate
Account A’’), Separate Account FP of
AXA Equitable (‘‘Separate Account
FP’’), MONY America Variable Account
K ((‘‘MONY America Separate Account
K’’) and together with Separate Account
70, Separate Account A and Separate
Account FP, the ‘‘Separate Accounts’’)
(collectively, the ‘‘Section 26
Applicants’’); and Separate Account 65
of AXA Equitable (‘‘Separate Account
65’’) and EQ Advisors Trust (the ‘‘EQ
Trust’’ and collectively with Separate
Account 65 and the Section 26
Applicants, the ‘‘Section 17
Applicants’’).1
APPLICANTS:
The Section
26 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 ‘‘Removed
Portfolios’’) for shares of certain
investment portfolios of the EQ Trust
(the ‘‘Replacement Portfolios’’), held by
the Separate Accounts (except for
Separate Account 65) to support certain
variable annuity contracts and/or
variable life insurance contracts (the
‘‘Contracts’’). The Section 17 Applicants
seek an order pursuant to section 17(b)
of the Act exempting them from section
17(a) of the Act to the extent necessary
to permit them to engage in certain inkind transactions.
SUMMARY OF APPLICATION:
BILLING CODE 7710–12–P
1 For purposes of this Notice, Separate Account
65 is also a ‘‘Separate Account’’ and collectively
with Separate Account 70, Separate Account A,
Separate Account FP and MONY America Separate
Account K, the ‘‘Separate Accounts.’’
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The application was filed
on October 4, 2017 and was amended on
February 8, 2018 and August 10, 2018.
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
September 10, 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: Steven M. Joenk, Managing
Director and Chief Investment Officer,
AXA Equitable Life Insurance Company,
1290 Avenue of the Americas, New
York, New York 10104; Patricia Louie,
Esq., Managing Director and Associate
General Counsel, AXA Equitable Life
Insurance Company, 1290 Avenue of the
Americas, New York, New York 10104;
and Mark C. Amorosi, Esq., K&L Gates
LLP, 1601 K Street NW, Washington, DC
20006.
FOR FURTHER INFORMATION CONTACT:
Jennifer O. Palmer, Senior Counsel, at
(202) 551–5786, or David J. Marcinkus,
Branch Chief at (202) 551–6825
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
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.
FILING DATE:
Applicants’ Representations
1. AXA Equitable is a New York stock
life insurance company licensed to
conduct insurance business in all fifty
states of the United States, the District
of Columbia, Puerto Rico and the Virgin
Islands. AXA Equitable is whollyowned by AXA Financial, Inc. (‘‘AXA
Financial’’), a holding company.
2. MONY America is an Arizona stock
life insurance company licensed to
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conduct insurance business in all fifty
states of the United States, the District
of Columbia, Puerto Rico and the Virgin
Islands. MONY America is an indirect
wholly-owned subsidiary of AXA
Financial.
3. 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. With the
exception of Separate Account 65, the
Separate Accounts are registered under
the Act as unit investment trusts.
Separate Account 65 is excluded from
registration under the Act pursuant to
section 3(c)(11) of the Act and is not a
Section 26 Applicant. The assets of the
Separate Accounts support the
Contracts and interests in the Separate
Accounts offered through such
Contracts. AXA Equitable and MONY
America are the legal owners of the
assets in their respective 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.
4. The Contracts are each registered
under the Securities Act of 1933, as
amended (the ‘‘1933 Act’’) on Form N–
4 or Form N–6, as applicable. Each
Contract has particular fees, charges,
and investment options, as described in
the Contracts’ respective prospectuses.
5. The Contracts include individual
and group variable annuity contracts or
flexible premium, scheduled premium
and single premium individual, second
to die and corporate variable life
42325
policies. As set forth in the prospectuses
for the Contracts, each Contract
provides that AXA Equitable or MONY
America, as applicable, reserves the
right to substitute shares of the
underlying investment options in which
the Separate Accounts invest for shares
of any underlying investment options
already held or to be held in the future
by the Separate Accounts.
6. AXA Equitable and MONY
America, on behalf of themselves and
their respective Separate Accounts,
propose to exercise their contractual
rights to substitute shares of the
Removed Portfolios for shares of the
Replacement Portfolios
(‘‘Substitutions’’), as shown in the table
below:
Substitution
No.
Removed portfolio
Replacement portfolio
1 ....................
2 ....................
American Century VP Mid Cap Value Fund (Class II) ...............
Fidelity® VIP Contrafund® (Initial Class, Service Class 2) .........
3 ....................
4 ....................
5 ....................
6 ....................
7 ....................
8 ....................
9 ....................
10 ..................
11 ..................
Franklin Rising Dividends VIP Fund (Class 2) ...........................
Franklin Strategic Income VIP Fund (Class 2) ...........................
Goldman Sachs VIT Mid Cap Value Fund (Service Class) .......
Invesco V.I. Global Real Estate Fund (Series II Class) .............
Invesco V.I. International Growth Fund (Series II Class) ...........
Ivy VIP Energy (Class II) ............................................................
Ivy VIP Mid Cap Growth (Class II) .............................................
Ivy VIP Science and Technology (Class II) ................................
Lazard Retirement Emerging Markets Equity Portfolio (Service
Class).
MFS International Value Portfolio (Service Class) .....................
MFS Technology Portfolio (Service Class) .................................
MFS Utilities Series (Initial Class, Service Class) ......................
PIMCO Real Return Portfolio (Advisor Class) ............................
PIMCO Total Return Portfolio (Advisor Class) ...........................
T. Rowe Price Health Sciences Portfolio (II Class) ....................
EQ/American Century Mid Cap Value Portfolio (Class IB).
EQ/Fidelity Institutional AMSM Large Cap Portfolio (Class K,
Class IB).
EQ/Franklin Rising Dividends Portfolio (Class IB).
EQ/Franklin Strategic Income Portfolio (Class IB).
EQ/Goldman Sachs Mid Cap Value Portfolio (Class IB).
EQ/Invesco Global Real Estate Portfolio (Class IB).
EQ/Invesco International Growth Portfolio (Class IB).
EQ/Ivy Energy Portfolio (Class IB).
EQ/Ivy Mid Cap Growth Portfolio (Class IB).
EQ/Ivy Science and Technology Portfolio (Class IB).
EQ/Lazard Emerging Markets Equity Portfolio (Class IB).
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12
13
14
15
16
17
..................
..................
..................
..................
..................
..................
7. The Replacement Portfolios are
series of the EQ Trust, a Delaware
statutory trust registered as an open-end
management investment company
under the Act (File No. 811–07953) and
whose shares are registered under the
1933 Act (File No. 333–17217). The
Replacement Portfolios are currently
available only as investment allocation
options under variable insurance
contracts issued by AXA Equitable and
MONY America.
8. AXA Equitable Funds Management
Group, LLC (‘‘FMG’’), a wholly-owned
subsidiary of AXA Equitable and an
affiliate of MONY America, serves as the
investment adviser of each Replacement
Portfolio. FMG 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 the Section 26
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EQ/MFS International Value Portfolio (Class IB).
EQ/MFS Technology Portfolio (Class IB).
EQ/MFS Utilities Series Portfolio (Class K, Class IB).
EQ/PIMCO Real Return Portfolio (Class IB).
EQ/PIMCO Total Return Portfolio (Class IB).
EQ/T. Rowe Price Health Sciences Portfolio (Class IB).
Applicants, the Section 17 Applicants
or FMG.
9. Applicants state that the proposed
Substitutions are part of an ongoing
effort by AXA Equitable and MONY
America to make their Contracts more
attractive to existing and prospective
Contract owners. Applicants note that
the proposed Substitutions are intended
to improve portfolio manager selection 2
2 The EQ Trust and FMG may rely on an order
from the Commission that permits FMG, subject to
certain conditions, including approval of the EQ
Trust’s board of trustees 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
EQ Trust pursuant to an investment sub-advisory
agreement with FMG, and to materially amend subadvisory agreements with FMG. See EQ Advisors
Trust and EQ Financial Consultants, Inc.,
Investment Company Act Release Nos. 23093 (Mar.
30, 1998) (notice) and 23128 (April 24, 1998) (the
‘‘Manager of Managers Order’’). After the
Substitution Date (defined below), FMG 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
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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, as
described in their prospectuses, which
are identical, and principal investment
strategies and principal risks, as
described in their prospectuses, which
are identical or substantially similar to
the corresponding Removed Portfolios,
making those Replacement Portfolios
appropriate candidates as substitutes.
Information for each Removed Portfolio
the Commission with respect to any Replacement
Portfolio without first obtaining shareholder
approval of the change in sub-adviser, the new subadviser, or the Replacement Portfolio’s ability to
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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and Replacement Portfolio, including
investment objectives, principal
investment strategies, principal risks,
and comparative performance history,
can be found in the application.
10. The Section 26 Applicants agree
that, for a period of two years following
the implementation of the proposed
Substitution (the ‘‘Substitution Date’’),
and for those Contracts with assets
allocated to the Removed Portfolio on
the Substitution Date, AXA Equitable,
MONY America or an affiliate thereof
(other than the EQ Trust) will
reimburse, on the last business day of
each fiscal quarter, the Contract owners
whose subaccounts invest in the
applicable Replacement Portfolio to the
extent that the Replacement Portfolio’s
net annual operating expenses (taking
into account fee waivers and expense
reimbursements) for such period
exceeds, on an annualized basis, the net
annual operating expenses of the
Removed Portfolio for the most recent
fiscal year preceding the date of the
most recently filed application. Neither
AXA Equitable nor MONY America will
increase the Contract fees and charges
that would otherwise be assessed under
the terms of the Contracts for a period
of at least two years following the
Substitution Date. Importantly, for each
Substitution, the combined current
management fee and rule 12b–1 fee of
the Replacement Portfolio at all asset
levels will be no higher than that of the
corresponding Removed Portfolio at
corresponding asset levels.
11. Applicants represent that as of the
Substitution Date, the Separate
Accounts will redeem shares of the
Removed Portfolios for cash or in-kind.
Redemption requests and purchase
orders will be placed simultaneously so
that Contract values will remain fully
invested at all times.
12. 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 the
Section 26 Applicants. The
Substitutions will be effected without
change in the amount or value of any
Contracts held by affected Contract
owners.3
3 The Section 26 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. The Section 26 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
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13. Contract owners will not incur
any fees or charges as a result of the
proposed Substitutions. The obligations
of the Section 26 Applicants and the
rights of the affected Contract owners,
under the Contracts of affected Contract
owners will not be altered in any way.
AXA Equitable, MONY America and/or
their affiliates (other than the EQ 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.
14. From the date of the PreSubstitution Notice (defined below)
through 30 days following the
Substitution Date, Contract owners may
make at least one transfer of Contract
value from the subaccount investing in
a Removed 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 Removed Portfolio
will be transferred to the corresponding
Replacement Portfolio without charge
and without being subject to any
transfer limitations. Moreover, except as
described in the disruptive transfer or
market timing provisions of the relevant
prospectus, AXA Equitable and MONY
America will not exercise any rights
reserved under the Contracts to impose
restrictions on transfers between the
subaccounts under the Contracts,
including limitations on the future
number of transfers, for a period
beginning at least 30 days before the
Substitution Date through at least 30
days following the Substitution Date.
15. At least 30 days prior to the
Substitution Date, Contract owners will
be notified via prospectus supplements
that the Section 26 Applicants received
or expect to receive Commission
Removed Portfolios and Replacement Portfolios,
which the Section 26 Applicants cannot predict.
Nevertheless, the Section 26 Applicants note that at
the time of the Substitutions, the Contracts will
offer a comparable variety of investment options
with as broad a range of risk/return characteristics.
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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, Contract owners may
make at least one transfer of Contract
value from the subaccounts investing in
the Removed 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 as described in the
disruptive transfers or market timing
provisions of the relevant prospectus,
AXA Equitable and MONY America 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.
16. 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
Removed Portfolio before the
Substitution and the Replacement
Portfolio after the Substitution.
Legal Analysis
1. The Section 26 Applicants request
that the Commission issue an order
pursuant to section 26(c) of the Act
approving the proposed Substitutions.
Section 26(c) 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
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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. The Section 26 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 a Removed Portfolio by
providing Replacement Portfolios with
identical investment objectives and
identical or substantially similar
strategies and risks, and providing
Contract owners with investment
options that have net annual operating
expense ratios that are lower than, or
equal to, their corresponding investment
options before the Substitutions.
3. AXA Equitable and MONY America
have reserved the right under the
Contracts to substitute shares of another
underlying portfolio for one of the
current portfolios offered as an
investment option under the Contracts.
The Contracts and the Contracts’
prospectuses disclose this right.
4. The Section 26 Applicants submit
that the ultimate effect of the proposed
Substitutions will be to 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. The Section 26
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
AXA Equitable and MONY America to
present information to their Contract
owners in a simpler and more concise
manner. The Section 26 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. The
Section 26 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 other aspects of the Contracts. In
addition, the proposed Substitutions
will not adversely affect any features or
riders under the Contracts because none
of the features or riders will change as
a result of the Substitutions.
Accordingly, no Contract owner will
involuntarily lose his or her features or
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riders as a result of any proposed
Substitution. Moreover, the Section 26
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) that may otherwise
have been imposed for a period
beginning on the date of the PreSubstitution 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 Section 17 Applicants request
an order under section 17(b) exempting
them from the provisions of section
17(a) to the extent necessary to permit
the Section 17 Applicants to carry out
some or all of the proposed
Substitutions. The Section 17
Applicants state that because the
proposed Substitutions may be effected,
in whole or in part, by means of in-kind
redemptions and purchases, the
proposed Substitutions may be deemed
to involve one or more purchases or
sales of securities or property between
affiliated persons.
6. Section 17(a)(1) of the Act, in
relevant part, prohibits any affiliated
person of a registered investment
company, or any affiliated person of
such person, acting as principal, from
knowingly selling any security or other
property to that company. Section
17(a)(2) of the Act generally prohibits
the persons described above, acting as
principals, from knowingly purchasing
any security or other property from the
registered investment company.
7. The Section 17 Applicants state
that the proposed transactions may
involve a transfer of portfolio securities
by the Removed Portfolios to the
Separate Accounts. Immediately
thereafter, the Separate Accounts would
purchase shares of the Replacement
Portfolios with the portfolio securities
received from the Removed Portfolios.
Accordingly, the Section 17 Applicants
provide that to the extent AXA
Equitable, MONY America and the
Removed Portfolios, and AXA
Equitable, MONY America and the
Replacement Portfolios, are deemed to
be affiliated persons of one another
under section 2(a)(3) or section 2(a)(9) of
the Act, it is conceivable that this aspect
of the proposed Substitutions could be
viewed as being prohibited by section
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42327
17(a). Accordingly, the Section 17
Applicants have determined to seek
relief from section 17(a).
8. The Section 17 Applicants submit
that the terms of the proposed in-kind
purchases of shares of the Replacement
Portfolios by the Separate Accounts,
including the consideration to be paid
and received, as described in the
application, are reasonable and fair and
do not involve overreaching on the part
of any person concerned. The Section
17 Applicants submit that the terms of
the proposed in-kind transactions,
including those considered to be paid to
each Removed Portfolio and received by
each Replacement Portfolio involved,
are reasonable, fair and do not involve
overreaching principally because the
transactions will conform with all but
one of the conditions enumerated in
rule 17a–7 under the Act. 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 Section 26 Applicants.
The Substitutions will be effected
without change in the amount or value
of any Contract held by the affected
Contract owners. The Substitutions will
in no way alter the tax treatment of
affected Contract owners in connection
with their Contracts, and no tax liability
will arise for Contract owners as a result
of the Substitutions. The fees and
charges under the Contracts will not
increase because of the Substitutions.
Even though the Separate Accounts,
AXA Equitable, MONY America and the
EQ Trust may not rely on rule 17a–7,
the Section 17 Applicants believe that
the rule’s conditions outline the type of
safeguards that result in transactions
that are fair and reasonable to registered
investment company participants and
preclude overreaching in connection
with an investment company by its
affiliated persons.
9. The Section 17 Applicants also
submit that the proposed in-kind
purchases by the Separate Accounts are
consistent with the policies of the EQ
Trust and the Replacement Portfolios, as
provided in the EQ Trust’s registration
statement and reports filed under the
Act. Finally, the Section 17 Applicants
submit that the proposed Substitutions
are consistent with the general purposes
of the Act.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. The Substitutions will not be
effected unless AXA Equitable or
MONY America determines that: (i) The
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Federal Register / Vol. 83, No. 162 / Tuesday, August 21, 2018 / Notices
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, FMG
will not change a sub-adviser, add a
new sub-adviser, or otherwise rely on
the Multi-Manager Order, or any
replacement order from the
Commission, with respect to any
Replacement Portfolio without first
obtaining shareholder approval of the
change in sub-adviser, the new subadviser, or the Replacement Portfolio’s
ability to rely on the Multi-Manager
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 affected.
3. AXA Equitable, MONY America or
an affiliate thereof (other than the EQ
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
Section 26 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 Section 26
Applicants, and the rights of the
affected Contract owners, under the
Contracts of affected Contract owners
will not be altered in any way.
7. Affected Contract owners will be
permitted to make at least one transfer
of Contract value from the subaccount
VerDate Sep<11>2014
17:31 Aug 20, 2018
Jkt 244001
investing in the Removed 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. Except as
described in any market timing/shortterm trading provisions of the relevant
prospectus, the Section 26 Applicants
will not exercise any rights reserved
under the Contracts to impose
restrictions on transfers between the
subaccounts under the Contracts,
including limitations on the future
number of transfers, for a period
beginning at least 30 days before the
Substitution Date through at least 30
days following the Substitution Date.
8. All affected Contract owners will be
notified, at least 30 days before the
Substitution Date about: (i) The
intended Substitution of Removed
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 Section 26
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 Section 26 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
Removed Portfolio before the
Substitution and the Replacement
Portfolio after the Substitution.
10. For a period of two years
following the Substitution Date, for
Contract owners who were Contract
owners as of the Substitution Date, AXA
Equitable, MONY America or an affiliate
thereof (other than the EQ Trust) will
reimburse, on the last business day of
each fiscal quarter, the Contract owners
whose subaccounts invest in the
applicable Replacement Portfolio to the
extent that the Replacement Portfolio’s
net annual operating expenses (taking
into account fee waivers and expense
reimbursements) for such period
exceed, on an annualized basis, the net
annual operating expenses of the
Removed Portfolio for the most recent
fiscal year preceding the date of this
application. In addition, the Section 26
Applicants will not increase the
Contract fees and charges that would
otherwise be assessed under the terms
PO 00000
Frm 00077
Fmt 4703
Sfmt 9990
of the Contracts for affected Contract
owners for a period of at least two years
following the Substitution Date.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–17936 Filed 8–20–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
2:00 p.m. on Thursday,
August 23, 2018.
TIME AND DATE:
Closed Commission Hearing
Room 10800.
PLACE:
This meeting will be closed to
the public.
STATUS:
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
Commissioner Peirce, as duty officer,
voted to consider the items listed for the
closed meeting in closed session.
The subject matters of the closed
meeting will be:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed; please contact
Brent J. Fields from the Office of the
Secretary at (202) 551–5400.
Dated: August 16, 2018.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2018–18069 Filed 8–17–18; 11:15 am]
BILLING CODE 8011–01–P
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[Federal Register Volume 83, Number 162 (Tuesday, August 21, 2018)]
[Notices]
[Pages 42324-42328]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17936]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33201; File No. 812-14831]
AXA Equitable Life Insurance Company, et al.
August 15, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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Notice of application for an order approving the substitution of
certain securities pursuant to section 26(c) of the Investment Company
Act of 1940, as amended (the ``Act'') and an order of exemption
pursuant to section 17(b) of the Act from section 17(a) of the Act.
APPLICANTS: AXA Equitable Life Insurance Company (``AXA Equitable''),
MONY Life Insurance Company of America (``MONY America''), Separate
Account 70 of AXA Equitable (``Separate Account 70''), Separate Account
A of AXA Equitable (``Separate Account A''), Separate Account FP of AXA
Equitable (``Separate Account FP''), MONY America Variable Account K
((``MONY America Separate Account K'') and together with Separate
Account 70, Separate Account A and Separate Account FP, the ``Separate
Accounts'') (collectively, the ``Section 26 Applicants''); and Separate
Account 65 of AXA Equitable (``Separate Account 65'') and EQ Advisors
Trust (the ``EQ Trust'' and collectively with Separate Account 65 and
the Section 26 Applicants, the ``Section 17 Applicants'').\1\
---------------------------------------------------------------------------
\1\ For purposes of this Notice, Separate Account 65 is also a
``Separate Account'' and collectively with Separate Account 70,
Separate Account A, Separate Account FP and MONY America Separate
Account K, the ``Separate Accounts.''
SUMMARY OF APPLICATION: The Section 26 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 ``Removed Portfolios'') for shares of certain investment
portfolios of the EQ Trust (the ``Replacement Portfolios''), held by
the Separate Accounts (except for Separate Account 65) to support
certain variable annuity contracts and/or variable life insurance
contracts (the ``Contracts''). The Section 17 Applicants seek an order
pursuant to section 17(b) of the Act exempting them from section 17(a)
of the Act to the extent necessary to permit them to engage in certain
---------------------------------------------------------------------------
in-kind transactions.
FILING DATE: The application was filed on October 4, 2017 and was
amended on February 8, 2018 and August 10, 2018.
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 September 10, 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: Steven M. Joenk, Managing
Director and Chief Investment Officer, AXA Equitable Life Insurance
Company, 1290 Avenue of the Americas, New York, New York 10104;
Patricia Louie, Esq., Managing Director and Associate General Counsel,
AXA Equitable Life Insurance Company, 1290 Avenue of the Americas, New
York, New York 10104; and Mark C. Amorosi, Esq., K&L Gates LLP, 1601 K
Street NW, Washington, DC 20006.
FOR FURTHER INFORMATION CONTACT: Jennifer O. Palmer, Senior Counsel, at
(202) 551-5786, or David J. Marcinkus, Branch Chief at (202) 551-6825
(Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's 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. AXA Equitable is a New York stock life insurance company
licensed to conduct insurance business in all fifty states of the
United States, the District of Columbia, Puerto Rico and the Virgin
Islands. AXA Equitable is wholly-owned by AXA Financial, Inc. (``AXA
Financial''), a holding company.
2. MONY America is an Arizona stock life insurance company licensed
to
[[Page 42325]]
conduct insurance business in all fifty states of the United States,
the District of Columbia, Puerto Rico and the Virgin Islands. MONY
America is an indirect wholly-owned subsidiary of AXA Financial.
3. 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. With the exception of Separate Account 65, the Separate
Accounts are registered under the Act as unit investment trusts.
Separate Account 65 is excluded from registration under the Act
pursuant to section 3(c)(11) of the Act and is not a Section 26
Applicant. The assets of the Separate Accounts support the Contracts
and interests in the Separate Accounts offered through such Contracts.
AXA Equitable and MONY America are the legal owners of the assets in
their respective 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.
4. The Contracts are each registered under the Securities Act of
1933, as amended (the ``1933 Act'') on Form N-4 or Form N-6, as
applicable. Each Contract has particular fees, charges, and investment
options, as described in the Contracts' respective prospectuses.
5. The Contracts include individual and group variable annuity
contracts or flexible premium, scheduled premium and single premium
individual, second to die and corporate variable life policies. As set
forth in the prospectuses for the Contracts, each Contract provides
that AXA Equitable or MONY America, as applicable, reserves the right
to substitute shares of the underlying investment options in which the
Separate Accounts invest for shares of any underlying investment
options already held or to be held in the future by the Separate
Accounts.
6. AXA Equitable and MONY America, on behalf of themselves and
their respective Separate Accounts, propose to exercise their
contractual rights to substitute shares of the Removed Portfolios for
shares of the Replacement Portfolios (``Substitutions''), as shown in
the table below:
------------------------------------------------------------------------
Substitution No. Removed portfolio Replacement portfolio
------------------------------------------------------------------------
1................... American Century VP Mid EQ/American Century Mid
Cap Value Fund (Class Cap Value Portfolio
II). (Class IB).
2................... Fidelity[supreg] VIP EQ/Fidelity
Contrafund[supreg] Institutional AM\SM\
(Initial Class, Service Large Cap Portfolio
Class 2). (Class K, Class IB).
3................... Franklin Rising EQ/Franklin Rising
Dividends VIP Fund Dividends Portfolio
(Class 2). (Class IB).
4................... Franklin Strategic EQ/Franklin Strategic
Income VIP Fund (Class Income Portfolio (Class
2). IB).
5................... Goldman Sachs VIT Mid EQ/Goldman Sachs Mid Cap
Cap Value Fund (Service Value Portfolio (Class
Class). IB).
6................... Invesco V.I. Global Real EQ/Invesco Global Real
Estate Fund (Series II Estate Portfolio (Class
Class). IB).
7................... Invesco V.I. EQ/Invesco International
International Growth Growth Portfolio (Class
Fund (Series II Class). IB).
8................... Ivy VIP Energy (Class EQ/Ivy Energy Portfolio
II). (Class IB).
9................... Ivy VIP Mid Cap Growth EQ/Ivy Mid Cap Growth
(Class II). Portfolio (Class IB).
10.................. Ivy VIP Science and EQ/Ivy Science and
Technology (Class II). Technology Portfolio
(Class IB).
11.................. Lazard Retirement EQ/Lazard Emerging
Emerging Markets Equity Markets Equity
Portfolio (Service Portfolio (Class IB).
Class).
12.................. MFS International Value EQ/MFS International
Portfolio (Service Value Portfolio (Class
Class). IB).
13.................. MFS Technology Portfolio EQ/MFS Technology
(Service Class). Portfolio (Class IB).
14.................. MFS Utilities Series EQ/MFS Utilities Series
(Initial Class, Service Portfolio (Class K,
Class). Class IB).
15.................. PIMCO Real Return EQ/PIMCO Real Return
Portfolio (Advisor Portfolio (Class IB).
Class).
16.................. PIMCO Total Return EQ/PIMCO Total Return
Portfolio (Advisor Portfolio (Class IB).
Class).
17.................. T. Rowe Price Health EQ/T. Rowe Price Health
Sciences Portfolio (II Sciences Portfolio
Class). (Class IB).
------------------------------------------------------------------------
7. The Replacement Portfolios are series of the EQ Trust, a
Delaware statutory trust registered as an open-end management
investment company under the Act (File No. 811-07953) and whose shares
are registered under the 1933 Act (File No. 333-17217). The Replacement
Portfolios are currently available only as investment allocation
options under variable insurance contracts issued by AXA Equitable and
MONY America.
8. AXA Equitable Funds Management Group, LLC (``FMG''), a wholly-
owned subsidiary of AXA Equitable and an affiliate of MONY America,
serves as the investment adviser of each Replacement Portfolio. FMG 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 the Section 26 Applicants, the Section 17
Applicants or FMG.
9. Applicants state that the proposed Substitutions are part of an
ongoing effort by AXA Equitable and MONY America to make their
Contracts more attractive to existing and prospective 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, as
described in their prospectuses, which are identical, and principal
investment strategies and principal risks, as described in their
prospectuses, which are identical or substantially similar to the
corresponding Removed Portfolios, making those Replacement Portfolios
appropriate candidates as substitutes. Information for each Removed
Portfolio
[[Page 42326]]
and Replacement Portfolio, including investment objectives, principal
investment strategies, principal risks, and comparative performance
history, can be found in the application.
---------------------------------------------------------------------------
\2\ The EQ Trust and FMG may rely on an order from the
Commission that permits FMG, subject to certain conditions,
including approval of the EQ Trust's board of trustees 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 EQ Trust pursuant to an
investment sub-advisory agreement with FMG, and to materially amend
sub-advisory agreements with FMG. See EQ Advisors Trust and EQ
Financial Consultants, Inc., Investment Company Act Release Nos.
23093 (Mar. 30, 1998) (notice) and 23128 (April 24, 1998) (the
``Manager of Managers Order''). After the Substitution Date (defined
below), FMG 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.
---------------------------------------------------------------------------
10. The Section 26 Applicants agree that, for a period of two years
following the implementation of the proposed Substitution (the
``Substitution Date''), and for those Contracts with assets allocated
to the Removed Portfolio on the Substitution Date, AXA Equitable, MONY
America or an affiliate thereof (other than the EQ Trust) will
reimburse, on the last business day of each fiscal quarter, the
Contract owners whose subaccounts invest in the applicable Replacement
Portfolio to the extent that the Replacement Portfolio's net annual
operating expenses (taking into account fee waivers and expense
reimbursements) for such period exceeds, on an annualized basis, the
net annual operating expenses of the Removed Portfolio for the most
recent fiscal year preceding the date of the most recently filed
application. Neither AXA Equitable nor MONY America will increase the
Contract fees and charges that would otherwise be assessed under the
terms of the Contracts for a period of at least two years following the
Substitution Date. Importantly, for each Substitution, the combined
current management fee and rule 12b-1 fee of the Replacement Portfolio
at all asset levels will be no higher than that of the corresponding
Removed Portfolio at corresponding asset levels.
11. Applicants represent that as of the Substitution Date, the
Separate Accounts will redeem shares of the Removed Portfolios for cash
or in-kind. Redemption requests and purchase orders will be placed
simultaneously so that Contract values will remain fully invested at
all times.
12. 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 the
Section 26 Applicants. The Substitutions will be effected without
change in the amount or value of any Contracts held by affected
Contract owners.\3\
---------------------------------------------------------------------------
\3\ The Section 26 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. The Section 26 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 Removed Portfolios and
Replacement Portfolios, which the Section 26 Applicants cannot
predict. Nevertheless, the Section 26 Applicants note that at the
time of the Substitutions, the Contracts will offer a comparable
variety of investment options with as broad a range of risk/return
characteristics.
---------------------------------------------------------------------------
13. Contract owners will not incur any fees or charges as a result
of the proposed Substitutions. The obligations of the Section 26
Applicants and the rights of the affected Contract owners, under the
Contracts of affected Contract owners will not be altered in any way.
AXA Equitable, MONY America and/or their affiliates (other than the EQ
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.
14. From the date of the Pre-Substitution Notice (defined below)
through 30 days following the Substitution Date, Contract owners may
make at least one transfer of Contract value from the subaccount
investing in a Removed 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 Removed Portfolio will be
transferred to the corresponding Replacement Portfolio without charge
and without being subject to any transfer limitations. Moreover, except
as described in the disruptive transfer or market timing provisions of
the relevant prospectus, AXA Equitable and MONY America will not
exercise any rights reserved under the Contracts to impose restrictions
on transfers between the subaccounts under the Contracts, including
limitations on the future number of transfers, for a period beginning
at least 30 days before the Substitution Date through at least 30 days
following the Substitution Date.
15. At least 30 days prior to the Substitution Date, Contract
owners will be notified via prospectus supplements that the Section 26
Applicants received or expect to receive Commission approval of the
applicable proposed Substitutions and of the anticipated Substitution
Date (the ``Pre-Substitution Notice''). 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, Contract owners may
make at least one transfer of Contract value from the subaccounts
investing in the Removed 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 as described in the
disruptive transfers or market timing provisions of the relevant
prospectus, AXA Equitable and MONY America 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.
16. 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
Removed Portfolio before the Substitution and the Replacement Portfolio
after the Substitution.
Legal Analysis
1. The Section 26 Applicants request that the Commission issue an
order pursuant to section 26(c) of the Act approving the proposed
Substitutions. Section 26(c) 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
[[Page 42327]]
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. The Section 26 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 a Removed Portfolio by providing
Replacement Portfolios with identical investment objectives and
identical or substantially similar strategies and risks, and providing
Contract owners with investment options that have net annual operating
expense ratios that are lower than, or equal to, their corresponding
investment options before the Substitutions.
3. AXA Equitable and MONY America have reserved the right under the
Contracts to substitute shares of another underlying portfolio for one
of the current portfolios offered as an investment option under the
Contracts. The Contracts and the Contracts' prospectuses disclose this
right.
4. The Section 26 Applicants submit that the ultimate effect of the
proposed Substitutions will be to 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. The
Section 26 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 AXA Equitable
and MONY America to present information to their Contract owners in a
simpler and more concise manner. The Section 26 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. The Section 26 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 other aspects of the Contracts. In addition, the
proposed Substitutions will not adversely affect any features or riders
under the Contracts because none of the features or riders will change
as a result of the Substitutions. Accordingly, no Contract owner will
involuntarily lose his or her features or riders as a result of any
proposed Substitution. Moreover, the Section 26 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) 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 Section 17 Applicants request an order under section 17(b)
exempting them from the provisions of section 17(a) to the extent
necessary to permit the Section 17 Applicants to carry out some or all
of the proposed Substitutions. The Section 17 Applicants state that
because the proposed Substitutions may be effected, in whole or in
part, by means of in-kind redemptions and purchases, the proposed
Substitutions may be deemed to involve one or more purchases or sales
of securities or property between affiliated persons.
6. Section 17(a)(1) of the Act, in relevant part, prohibits any
affiliated person of a registered investment company, or any affiliated
person of such person, acting as principal, from knowingly selling any
security or other property to that company. Section 17(a)(2) of the Act
generally prohibits the persons described above, acting as principals,
from knowingly purchasing any security or other property from the
registered investment company.
7. The Section 17 Applicants state that the proposed transactions
may involve a transfer of portfolio securities by the Removed
Portfolios to the Separate Accounts. Immediately thereafter, the
Separate Accounts would purchase shares of the Replacement Portfolios
with the portfolio securities received from the Removed Portfolios.
Accordingly, the Section 17 Applicants provide that to the extent AXA
Equitable, MONY America and the Removed Portfolios, and AXA Equitable,
MONY America and the Replacement Portfolios, are deemed to be
affiliated persons of one another under section 2(a)(3) or section
2(a)(9) of the Act, it is conceivable that this aspect of the proposed
Substitutions could be viewed as being prohibited by section 17(a).
Accordingly, the Section 17 Applicants have determined to seek relief
from section 17(a).
8. The Section 17 Applicants submit that the terms of the proposed
in-kind purchases of shares of the Replacement Portfolios by the
Separate Accounts, including the consideration to be paid and received,
as described in the application, are reasonable and fair and do not
involve overreaching on the part of any person concerned. The Section
17 Applicants submit that the terms of the proposed in-kind
transactions, including those considered to be paid to each Removed
Portfolio and received by each Replacement Portfolio involved, are
reasonable, fair and do not involve overreaching principally because
the transactions will conform with all but one of the conditions
enumerated in rule 17a-7 under the Act. 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
Section 26 Applicants. The Substitutions will be effected without
change in the amount or value of any Contract held by the affected
Contract owners. The Substitutions will in no way alter the tax
treatment of affected Contract owners in connection with their
Contracts, and no tax liability will arise for Contract owners as a
result of the Substitutions. The fees and charges under the Contracts
will not increase because of the Substitutions. Even though the
Separate Accounts, AXA Equitable, MONY America and the EQ Trust may not
rely on rule 17a-7, the Section 17 Applicants believe that the rule's
conditions outline the type of safeguards that result in transactions
that are fair and reasonable to registered investment company
participants and preclude overreaching in connection with an investment
company by its affiliated persons.
9. The Section 17 Applicants also submit that the proposed in-kind
purchases by the Separate Accounts are consistent with the policies of
the EQ Trust and the Replacement Portfolios, as provided in the EQ
Trust's registration statement and reports filed under the Act.
Finally, the Section 17 Applicants submit that the proposed
Substitutions are consistent with the general purposes of the Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The Substitutions will not be effected unless AXA Equitable or
MONY America determines that: (i) The
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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, FMG will not change a sub-adviser,
add a new sub-adviser, or otherwise rely on the Multi-Manager 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 Multi-Manager 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
affected.
3. AXA Equitable, MONY America or an affiliate thereof (other than
the EQ 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
Section 26 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 Section 26 Applicants, and the rights of
the affected Contract owners, under the Contracts of affected Contract
owners will not be altered in any way.
7. Affected Contract owners will be permitted to make at least one
transfer of Contract value from the subaccount investing in the Removed
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. Except as described in any market timing/short-
term trading provisions of the relevant prospectus, the Section 26
Applicants will not exercise any rights reserved under the Contracts to
impose restrictions on transfers between the subaccounts under the
Contracts, including limitations on the future number of transfers, for
a period beginning at least 30 days before the Substitution Date
through at least 30 days following the Substitution Date.
8. All affected Contract owners will be notified, at least 30 days
before the Substitution Date about: (i) The intended Substitution of
Removed 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 Section 26 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 Section 26 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
Removed Portfolio before the Substitution and the Replacement Portfolio
after the Substitution.
10. For a period of two years following the Substitution Date, for
Contract owners who were Contract owners as of the Substitution Date,
AXA Equitable, MONY America or an affiliate thereof (other than the EQ
Trust) will reimburse, on the last business day of each fiscal quarter,
the Contract owners whose subaccounts invest in the applicable
Replacement Portfolio to the extent that the Replacement Portfolio's
net annual operating expenses (taking into account fee waivers and
expense reimbursements) for such period exceed, on an annualized basis,
the net annual operating expenses of the Removed Portfolio for the most
recent fiscal year preceding the date of this application. In addition,
the Section 26 Applicants will not increase the Contract fees and
charges that would otherwise be assessed under the terms of the
Contracts for affected Contract owners for a period of at least two
years following the Substitution Date.
For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-17936 Filed 8-20-18; 8:45 am]
BILLING CODE 8011-01-P
