Mutual of America Life Insurance Company, et al., 53482-53487 [2019-21811]
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Federal Register / Vol. 84, No. 194 / Monday, October 7, 2019 / Notices
operative delay and designates the
proposal as operative upon filing.12
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CBOE–2019–066 and
should be submitted on or before
October 28, 2019.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Jill M. Peterson,
Assistant Secretary.
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2019–066 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2019–066. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
12 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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[FR Doc. 2019–21729 Filed 10–4–19; 8:45 am]
BILLING CODE 8011–01–P
[Investment Company Act Release No.
33654; File No. 812–15033]
Mutual of America Life Insurance
Company, et al.
October 2, 2019.
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’’) and an order of
exemption pursuant to section 17(b) of
the Act from section 17(a) of the Act.
APPLICANTS: Mutual of America Life
Insurance Company (‘‘Mutual of
America’’), Wilton Reassurance Life
Company of New York (‘‘Wilton,’’ and
together with Mutual of America, the
‘‘Companies’’), Mutual of America
Separate Account No. 2, Mutual of
America Separate Account No. 3,
American Separate Account No. 2, and
American Separate Account No. 3 (the
‘‘Separate Accounts,’’ and together with
the Companies, the ‘‘Section 26
Applicants’’); and Mutual of America
Variable Insurance Portfolios, Inc.
(‘‘Investment Corporation II’’) and
Mutual of America Capital Management
LLC (the ‘‘Adviser,’’ and collectively
with Investment Corporation II and the
Section 26 Applicants, the ‘‘Section 17
Applicants’’).
13 17
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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 (the ‘‘Existing
Portfolios’’) of Mutual of America
Investment Corporation (‘‘Investment
Corporation I’’) for shares of certain
investment portfolios of the Investment
Corporation II (the ‘‘Replacement
Portfolios’’), held by the Separate
Accounts to support certain variable
annuity insurance contracts (‘‘NonQualified Annuity Contracts’’) and
variable life insurance contracts (the
‘‘Life Insurance Contracts’’).1 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 DATES: The application was filed
on May 15, 2019 and amended on
August 20, 2019 and September 27,
2019.
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
October 28, 2019 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: Mutual of America Life
Insurance Company, 320 Park Avenue,
New York, New York 10022.
FOR FURTHER INFORMATION CONTACT: HaeSung Lee, Senior Counsel, at (202) 551–
7345, or Trace W. Rakestraw, Branch
Chief at (202) 551–6825 (Division of
1 The variable annuity contracts that are issued in
connection with retirement plans or individual
retirement annuities under the Code (other than the
individual retirement annuities issued by American
Separate Account No. 2) are referred to herein as
the ‘‘Qualified Annuity Contracts.’’ The NonQualified Annuity Contracts, the Life Insurance
Contracts, and the Qualified Annuity Contracts are
collectively referred to herein as the ‘‘Contracts.’’
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Federal Register / Vol. 84, No. 194 / Monday, October 7, 2019 / Notices
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. Mutual of America is a mutual life
insurance company organized under the
laws of the state of New York and is
authorized to transact its business in 50
states and the District of Columbia.
2. Wilton is a life insurance company
organized under New York law and is
authorized to transact the business of
life insurance, including annuities, in
all 50 states, the Virgin Islands, and the
District of Columbia. Wilton was a
wholly-owned subsidiary of a holding
company that was, in turn, 100% owned
by Mutual of America. Mutual of
America sold the holding company that
owned Wilton but retained full
authority and responsibility to take all
actions in regard to American Separate
Account No. 2 and American Separate
Account No. 3, under an agreement with
the holding company, and assumptively
reinsured the variable contracts offered
through those accounts.
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. The
Separate Accounts are registered with
the Commission under the Act as unit
investment trusts. The assets of the
Separate Accounts support the
Contracts and interests in the Separate
Accounts offered through such
Contracts. The Companies 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 individual and
group flexible premium variable annuity
and variable life insurance contracts.
Each Contract is registered under the
Securities Act of 1933, as amended (the
‘‘1933 Act’’) on Form N–4 or Form N–
6 (or, in the case of the variable life
insurance contract supported by
American Separate Account No. 3, on
Form S–6). Each Contract has particular
fees, charges, and investment options, as
described in the Contracts’ respective
prospectuses.
5. As set forth under each Contract, as
well as in the prospectus for each
Contract, the Companies reserve the
right to substitute shares of the
underlying fund for shares of another
underlying fund. The substitutions will
be performed only for the Non-Qualified
Annuity Contracts and the Life
Insurance Contracts. The substitutions
will not affect the Qualified Annuity
Contracts.
6. The Companies, on their own
behalf and on behalf of their Separate
Accounts, propose to exercise their
contractual rights to substitute
underlying funds currently available
under the Contracts for different
underlying funds (‘‘Substitutions’’ or
each, a ‘‘Substitution’’), as shown in the
table below:
Substitution No.
Existing portfolio
1 ...................................
2 ...................................
3 ...................................
4 ...................................
5 ...................................
6 ...................................
7 ...................................
8 ...................................
9 ...................................
10 .................................
11 .................................
12 .................................
13 .................................
14 .................................
15 .................................
16 .................................
17 .................................
18 .................................
19 .................................
20 .................................
21 .................................
22 .................................
23 .................................
24 .................................
25 .................................
26 .................................
27 .................................
Equity Index Fund ............................................................................................
All America Fund ..............................................................................................
Small Cap Value Fund .....................................................................................
Small Cap Growth Fund ...................................................................................
Small Cap Equity Index Fund ..........................................................................
Mid Cap Value Fund ........................................................................................
Mid-Cap Equity Index Fund ..............................................................................
Composite Fund ...............................................................................................
International Fund .............................................................................................
Money Market Fund .........................................................................................
Mid-Term Bond Fund .......................................................................................
Bond Fund ........................................................................................................
Retirement Income Fund ..................................................................................
2010 Retirement Fund ......................................................................................
2015 Retirement Fund ......................................................................................
2020 Retirement Fund ......................................................................................
2025 Retirement Fund ......................................................................................
2030 Retirement Fund ......................................................................................
2035 Retirement Fund ......................................................................................
2040 Retirement Fund ......................................................................................
2045 Retirement Fund ......................................................................................
2050 Retirement Fund ......................................................................................
2055 Retirement Fund ......................................................................................
2060 Retirement Fund ......................................................................................
Conservative Allocation Fund ...........................................................................
Moderate Allocation Fund ................................................................................
Aggressive Allocation Fund ..............................................................................
7. The Existing Portfolios are series of
Investment Corporation I, a Maryland
corporation registered as an open-end
management investment company
under the Act (File No. 811–05084) and
whose shares are registered under the
1933 Act (File No. 033–06486).
Investment Corporation I issues separate
classes (or series) of shares, each of
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Replacement portfolio
which represents a separate portfolio of
investments. There are currently 27
series of Investment Corporation I; they
are the Existing Portfolios. Investment
Corporation I intends to begin offering
shares of its series directly to the general
public through the retail market.
8. The Replacement Portfolios are
series of Investment Corporation II, a
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Equity Index Portfolio.
All America Portfolio.
Small Cap Value Portfolio.
Small Cap Growth Portfolio.
Small Cap Equity Index Portfolio.
Mid Cap Value Portfolio.
Mid-Cap Equity Index Portfolio.
Moderate Allocation Portfolio.
International Portfolio.
Money Market Portfolio.
Mid-Term Bond Portfolio.
Bond Portfolio.
Retirement Income Portfolio.
2010 Retirement Portfolio.
2015 Retirement Portfolio.
2020 Retirement Portfolio.
2025 Retirement Portfolio.
2030 Retirement Portfolio.
2035 Retirement Portfolio.
2040 Retirement Portfolio.
2045 Retirement Portfolio.
2050 Retirement Portfolio.
2055 Retirement Portfolio.
2060 Retirement Portfolio.
Conservative Allocation Portfolio.
Moderate Allocation Portfolio.
Aggressive Allocation Portfolio.
Maryland corporation. On June 13,
2019, Investment Corporation II filed a
new registration statement on Form N–
1A to register as an open-end
management investment company
under the Act (File No. 811–23449) and
to register shares of the Replacement
Portfolios under the 1933 Act (File No.
333–232095). There will be 26 series of
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Investment Corporation II; they are the
Replacement Portfolios. Investment
Corporation II was formed for the
purpose of performing the Substitutions.
However, new series of Investment
Corporation II may be established in the
future, and the series of Investment
Corporation II may be made available as
investment allocation options under
variable insurance contracts of the
Companies other than the NonQualified Annuity Contracts and the
Life Insurance Contracts.
9. The Adviser serves as the
investment adviser for the Existing
Portfolios and the Replacement
Portfolios. The Adviser is a Delaware
limited liability company that is
registered as an investment adviser
under the Investment Advisers Act of
1940. A sub-adviser has not been
engaged to manage any of the Portfolios.
10. Applicants state that the primary
purpose of the Substitutions is to
preserve the favorable tax treatment of
the Non-Qualified Annuity Contracts
and the Life Insurance Contracts that are
currently supported by the Existing
Portfolios. With exception of
Substitution No. 8, each Existing
Portfolio and its corresponding
Replacement Portfolio have identical
investment objectives, strategies, and
risks and substantially identical fee
structures (with different expense ratios
due to differences in net assets). With
respect to Substitution No. 8, the
Existing Portfolio and its corresponding
Replacement Portfolio have
substantially similar objectives,
strategies, and risks, and the
Replacement Portfolio has a lower
expense ratio. The Portfolios are advised
by the same Adviser and share a
common board of directors. As such, the
Substitutions will permit owners of the
Non-Qualified Annuity Contracts
(‘‘Non-Qualified Annuity Contract
Owners’’) and owners of the Life
Insurance Contracts (‘‘Life Insurance
Contract Owners’’) to maintain the
favorable tax treatment of their NonQualified Annuity and Life Insurance
Contracts and continue their
investments in substantially identical
underlying funds (or a substantially
similar underlying fund with respect to
Substitution No. 8).
11. In order to preserve that favorable
tax treatment, Section 26 Applicants
propose to reallocate contract values
attributable to the Non-Qualified
Annuity and Life Insurance Contracts
from the Existing Portfolios to the
Replacement Portfolios. Applicants
represent that the Substitutions will
preserve the favorable tax treatment of
the Non-Qualified Annuity and Life
Insurance Contracts because the
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Replacement Portfolios will be offered
only under variable annuity and life
insurance contracts. The Replacement
Portfolios will not be sold directly to the
general public through the retail market.
12. Mutual of America will cause the
Adviser to enter into a written contract
with Investment Corporation II
whereby, for a period of two years
following the date of substitution for
each Substitution (the ‘‘Substitution
Date’’), the Adviser will, at least as
frequently as the last business day of
each fiscal quarter, reimburse the
expenses of the Replacement Portfolio
to the extent that the net annual
operating expenses of the Replacement
Portfolio (after taking into account any
other fee waivers or expense
reimbursements) for such period
exceed, on an annualized basis, the net
annual operating expenses of the
Existing Portfolio for the most recent
fiscal year preceding the date of the
application (the ‘‘Expense Caps’’). Any
amounts waived or reimbursed by the
Adviser will not be subject to
recoupment rights. Any Expense Cap
that applies to a Replacement Portfolio
as a condition of this application is
separate and apart from any other
contractual expense reimbursement
agreement between Investment
Corporation II and the Adviser. To the
extent that an Expense Cap caps a
Replacement Portfolio’s net annual
operating expenses at a lower
percentage of net assets than any other
contractual expense reimbursement
agreement between Investment
Corporation II and the Adviser, such
other contractual expense
reimbursement agreement will have no
practical impact on the Replacement
Portfolio’s net annual operating
expenses due to the operation of the
Expense Cap. In addition, for each
Substitution, the Section 26 Applicants
will not increase the Contract fees and
charges that would otherwise be
assessed under the terms of the
Contracts for the Non-Qualified Annuity
and Life Insurance Contract Owners for
a period of at least two years following
the Substitution Date.
13. Applicants represent that as of the
Substitution Date, the Separate
Accounts will redeem shares of the
applicable Existing Portfolios for cash
and/or in-kind. Redemption requests
and purchase orders will be placed
simultaneously so that the NonQualified Annuity and Life Insurance
Contract values will remain fully
invested at all times.
14. Each Substitution will be effected
at the relative net asset values of the
respective shares of the Replacement
Portfolios in conformity with section
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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
Non-Qualified Annuity and Life
Insurance Contracts.2
15. Non-Qualified Annuity and Life
Insurance Contract Owners will not
incur any fees or charges as a result of
the Substitutions. The obligations of the
Section 26 Applicants, and the rights of
the Non-Qualified Annuity and Life
Insurance Contract Owners, under the
Contracts will not be altered in any way.
The Companies and/or their affiliates
(other than Investment Corporation II)
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 paid by the NonQualified Annuity and Life Insurance
Contract Owners to effect the
Substitutions. The Substitutions will
not cause the Contract fees and charges
currently being paid by Non-Qualified
Annuity and Life Insurance Contract
Owners to be greater after any
Substitution than before the
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.
16. From the date of the PreSubstitution Notice (defined below)
through 30 days following the
Substitution Date, Non-Qualified
Annuity and Life Insurance 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 a Substitution Date, values
2 The Section 26 Applicants note that, because
the Substitutions will occur at relative net asset
value, and the fees and charges under the NonQualified Annuity and Life Insurance 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. What effect the
Substitutions may have on the value of the benefits
offered by the Contract guarantees would depend,
among other things, on the relative future
performance of each Existing Portfolio and
Replacement Portfolio, which the Section 26
Applicants cannot predict. Nevertheless, the
Section 26 Applicants note that at the time of the
Substitutions, the Contracts will offer a comparable
variety of investment options with as broad a range
of risk/return characteristics.
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under Non-Qualified Annuity and Life
Insurance Contracts attributable to
investments in the applicable Existing
Portfolio will be transferred to the
corresponding Replacement Portfolio
without charge and without being
subject to any transfer limitations.
Moreover, for each Substitution, except
with respect to frequent trading
restrictions described in the Contracts’
prospectuses, the Companies will not
exercise any rights reserved under their
policies to impose restrictions on
transfers between the subaccounts for a
period beginning at least 30 days before
the Substitution Date through at least 30
days following the Substitution Date.
17. For each Substitution, at least 30
days prior to the Substitution Date, NonQualified Annuity and Life Insurance
Contract Owners will be notified via
prospectus supplements (i) that the
Section 26 Applicants received or
expect to receive Commission approval
of the Substitution and (ii) of the
anticipated Substitution Date (the ‘‘PreSubstitution Notice’’). Pre-Substitution
Notices sent to Non-Qualified Annuity
and Life Insurance Contract Owners
(including a subset of contract owners
that own inactive contracts (‘‘Inactive
Contract Owners’’)) will be filed with
the Commission pursuant to rule 497(e)
under the 1933 Act. The PreSubstitution Notice will also advise
Non-Qualified Annuity and Life
Insurance Contract Owners of their preand post-Substitution rights. For each
Substitution, the Section 26 Applicants
will also deliver to affected NonQualified Annuity and Life Insurance
Contract Owners (including Inactive
Contract Owners), at least 30 days
before the Substitution Date, a
prospectus for the Replacement
Portfolio.
18. In addition, within five business
days after the Substitution Date, NonQualified Annuity and Life Insurance
Contract Owners (including Inactive
Contract Owners) whose assets were
allocated to the Replacement Portfolio
as part of the Substitution will be sent
a written notice (a ‘‘Confirmation’’)
informing them that the Substitution
was carried out as previously notified.
The Confirmation will also restate the
information set forth in the PreSubstitution Notice. The Confirmation
will also reflect the values of the NonQualified Annuity or Life Insurance
Contract Owner’s positions in the
Existing 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
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pursuant to section 26(c) of the Act
approving the 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. 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 they are
seeking the Substitutions to preserve the
favorable tax treatment of the NonQualified Annuity Contracts and the
Life Insurance Contracts. A key feature
of annuity and life insurance contracts
is the deferral of federal income taxes on
the accumulated earnings within such
contracts if fund shares supporting such
contracts are not offered directly to the
general public. The Existing Portfolios
are presently sold in a manner that
facilitates the deferral of federal income
taxes on the accumulated earnings
under the Non-Qualified Annuity and
Life Insurance Contracts. However, in
an effort to expand the markets to which
the Existing Portfolios are offered,
Investment Corporation I intends to
begin offering shares of the Existing
Portfolios directly to the general public
through the retail market. While this
initiative will generally benefit the
Existing Portfolios, and will not affect
the tax treatment of the Qualified
Annuity Contracts, it would result in
the Non-Qualified Annuity and Life
Insurance Contracts no longer receiving
tax deferral unless the Substitutions are
performed.
3. Companies have 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. The Section 26 Applicants submit
that the Substitutions are not of the type
that section 26 was designed to prevent
because they will not result in costly
forced redemptions, nor will they affect
any other aspects of the Contracts. In the
current situation, Contract owners are
contractually provided investment
discretion during the accumulation
phase of the Contracts to allocate and
reallocate their Contract values among
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53485
the investment options available under
the Contracts. Accordingly, after the
Substitutions, each Non-Qualified
Annuity and Life Insurance Contract
Owner may exercise his or her own
judgment as to the most appropriate
investment alternative available under
the Contract. Moreover, for each
Substitution, the Section 26 Applicants
will offer Non-Qualified Annuity and
Life Insurance Contract Owners the
opportunity to transfer amounts out of
the affected subaccounts which, as with
all transfers under the Contracts, will be
without any cost or other penalty (other
than those necessary to implement
policies and procedures designed to
detect and deter disruptive transfers) for
a period beginning on the date of the
Pre-Substitution Notice (which
supplement will be delivered to the
Non-Qualified Annuity and Life
Insurance Contract Owners at least 30
days before the Substitution Date) and
ending no earlier than 30 days after the
Substitution Date. The Substitutions,
therefore, will not result in the type of
forced redemption that section 26(c)
was designed to prevent.
5. The 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. Specifically,
the Substitutions will not affect the type
of benefits offered by the Companies
under the Contracts, or numerous other
rights and privileges associated with the
Contracts.
6. 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 Substitutions. The
Section 17 Applicants state that because
the Substitutions may be effected, in
whole or in part, by means of in-kind
redemptions and purchases, the
Substitutions may be deemed to involve
one or more purchases or sales of
securities or property between affiliated
persons.
7. 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.
8. The Section 17 Applicants state
that the proposed transactions may
involve a transfer of portfolio securities
by the Existing Portfolios to the Separate
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Accounts. Immediately thereafter, the
Separate Accounts would purchase
shares of the Replacement Portfolios
with the portfolio securities received
from the Existing Portfolios.
Accordingly, the Section 17 Applicants
provide that to the extent that the
Companies, the Separate Accounts, the
Adviser, Investment Corporation II, or
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 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).
9. 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 also submit that the terms
of the proposed in-kind transactions,
including the consideration to be paid
by each Existing Portfolio and received
by each Replacement Portfolio involved,
are reasonable, fair, and do not involve
overreaching principally because the
transactions will conform with all but
one of the conditions enumerated in
rule 17a–7 under the Act.
10. 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
Non-Qualified Annuity Contract or any
Life Insurance Contract. The
Substitutions will in no way alter the
tax treatment of Non-Qualified Annuity
and Life Insurance Contract Owners in
connection with their Contracts, and no
tax liability will arise for Non-Qualified
Annuity and Life Insurance Contract
Owners as a result of the Substitutions.
The fees and charges under the NonQualified Annuity and Life Insurance
Contracts will not increase because of
the Substitutions. Even though the
Company, the Separate Accounts, the
Adviser, Investment Corporation II, and
the Replacement Portfolios 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
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18:29 Oct 04, 2019
Jkt 250001
with an investment company by its
affiliated persons.
11. The Section 17 Applicants also
submit that the proposed in-kind
purchases by the Separate Accounts are
consistent with the investment policies
and restrictions of the Section 17
Applicants and the Replacement
Portfolio. Finally, the Section 17
Applicants submit that the 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 the Companies
determine 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. The Companies or an affiliate
thereof (other than Investment
Corporation II) 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
paid by Non-Qualified Annuity and Life
Insurance Contract Owners to effect the
Substitutions. The Substitutions will
not cause the Contract fees and charges
currently being paid by Non-Qualified
Annuity and Life Insurance Contract
Owners to be greater after the
Substitution than before the
Substitution.
3. 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 Non-Qualified Annuity
Contract or Life Insurance Contract.
4. The Substitutions will in no way
alter the tax treatment of Non-Qualified
Annuity and Life Insurance Contract
Owners in connection with their
Contracts, and no tax liability will arise
for Non-Qualified Annuity and Life
Insurance Contract Owners as a result of
the Substitutions.
5. The obligations of the Section 26
Applicants, and the rights of the Non-
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
Qualified Annuity and Life Insurance
Contract Owners, under the NonQualified Annuity and Life Insurance
Contracts will not be altered in any way.
6. For each Substitution, NonQualified Annuity and Life Insurance
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
subaccount without charge for a period
beginning at least 30 days before the
Substitution Date through at least 30
days following the Substitution Date.
Except with respect to any frequent
trading restrictions described in the
relevant prospectus, the Applicants will
not exercise any rights reserved under
the Contracts to impose restrictions on
transfers between the subaccounts,
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.
7. For each Substitution, all NonQualified Annuity and Life Insurance
Contract Owners will be notified via the
Pre-Substitution Notice, at least 30 days
before the Substitution Date, about: (i)
The intended Substitution of the
Existing Portfolio with the Replacement
Portfolio; (ii) the intended Substitution
Date; and (iii) information with respect
to transfers as set forth in Condition 6
above. In addition, for each
Substitution, the Section 26 Applicants
will also deliver to Non-Qualified
Annuity and Life Insurance Contract
Owners, at least 30 days before the
Substitution Date, a prospectus for the
applicable Replacement Portfolio.
8. For each Substitution, the Section
26 Applicants will deliver to each NonQualified Annuity and Life Insurance
Contract Owner within five business
days after the Substitution Date, a
written confirmation which will
include: (i) A confirmation that the
Substitution was carried out as
previously notified; (ii) a restatement of
the information set forth in the PreSubstitution Notice; and (iii) values of
the Non-Qualified Annuity and Life
Insurance Contract Owner’s positions in
the Existing Portfolio before the
Substitution and the Replacement
Portfolio after the Substitution.
9. Mutual of America will cause the
Adviser, as the investment adviser of
the Replacement Portfolios, to enter into
a written contract with Investment
Corporation II whereby, for a period of
two years following the Substitution
Date for each Substitution, the Adviser
will, at least as frequently as the last
business day of each fiscal quarter,
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Federal Register / Vol. 84, No. 194 / Monday, October 7, 2019 / Notices
reimburse the expenses of the
Replacement Portfolio to the extent that
the net annual operating expenses of the
Replacement Portfolio (i.e., after taking
into account any other fee waivers or
expense reimbursements) for such
period exceed, on an annualized basis,
the net annual operating expenses of the
Existing Portfolio for the most recent
fiscal year preceding the date of the
application. Any amounts waived or
reimbursed by the Adviser will not be
subject to recoupment rights. In
addition, for each Substitution, the
Section 26 Applicants will not increase
the Contract fees and charges that would
otherwise be assessed under the terms
of the Contracts for the Non-Qualified
Annuity and Life Insurance 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.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–21811 Filed 10–4–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87187; File No. SR–CBOE–
2019–072]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Make Minor Updates
to and Relocate Chapter XIX, Which
Governs the Hearings and Review
Process for Persons Aggrieved by
Exchange Action, of the Currently
Effective Rulebook, to Proposed
Chapter 15 of the Shell Structure for
the Exchange’s Rulebook
October 1, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 27, 2019, Cboe Exchange,
Inc. (the ‘‘Exchange’’ or ‘‘Cboe
Options’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 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
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to make
minor updates to and relocate Chapter
XIX, which governs the hearings and
review process for persons aggrieved by
Exchange action, of the currently
effective Rulebook (‘‘current Rulebook’’)
to proposed Chapter 15 of the shell
structure for the Exchange’s Rulebook
that will become effective upon the
migration of the Exchange’s trading
platform to the same system used by the
Cboe Affiliated Exchanges (as defined
below) (‘‘shell Rulebook’’). The text of
the proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
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, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Shell rule
15.1
15.2
15.3
15.4
15.5
15.6
15.7
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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18:29 Oct 04, 2019
3 15
4 17
Jkt 250001
Exchange 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
In 2016, the Exchange’s parent
company, Cboe Global Markets, Inc.
(formerly named CBOE Holdings, Inc.)
(‘‘Cboe Global’’), which is also the
parent company of Cboe C2 Exchange,
Inc. (‘‘C2’’), acquired Cboe EDGA
Exchange, Inc. (‘‘EDGA’’), Cboe EDGX
Exchange, Inc. (‘‘EDGX’’ or ‘‘EDGX
Options’’), Cboe BZX Exchange, Inc.
(‘‘BZX’’ or ‘‘BZX Options’’), and Cboe
BYX Exchange, Inc. (‘‘BYX’’ and,
together with Cboe Options, C2, EDGX,
EDGA, and BZX, the ‘‘Cboe Affiliated
Exchanges’’). The Cboe Affiliated
Exchanges are working to align certain
system functionality, retaining only
intended differences, between the Cboe
Affiliated Exchanges, in the context of a
technology migration. Cboe Options
intends to migrate its trading platform to
the same system used by the Cboe
Affiliated Exchanges, which the
Exchange expects to complete on
October 7, 2019. In connection with this
technology migration, the Exchange has
a shell Rulebook that resides alongside
its current Rulebook, which shell
Rulebook will contain the Rules that
will be in place upon completion of the
Cboe Options technology migration.
The Exchange proposes to relocate
and reorganize current Chapter XIX,
which governs the hearings and review
process for persons aggrieved by
Exchange action, into proposed Chapter
15 in the shell Rulebook. The Exchange
notes that in addition to relocating and
reorganizing the current rules, the
proposed rule change deletes these rules
from the current Rulebook. The
proposed rule change relocates and,
where applicable, reorganizes the rules
as follows:
Current rule
Scope .............................................................................................
Submission of Application to Exchange ........................................
Procedure Following Applications for Hearing ..............................
Hearing ...........................................................................................
Review ...........................................................................................
Miscellaneous Provisions ...............................................................
Requests for Verification of Fees and Charges:
15.7(a) ...............................................................................................
15.7(b) ...............................................................................................
1 15
53487
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19.1
19.2
19.3
19.4
19.5
19.6
19.50
19.51
Scope, which incorporates 19.1.01 into body of rule.
Submission of Application to Exchange.
Procedure Following Applications for Hearing.
Hearing, which incorporates 19.4.01 into body of shell 15.4(a).
Review.
Miscellaneous Provisions.
Scope of Part B.
Definitions.
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
Frm 00090
Fmt 4703
Sfmt 4703
E:\FR\FM\07OCN1.SGM
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]]>Agencies
[Federal Register Volume 84, Number 194 (Monday, October 7, 2019)]
[Notices]
[Pages 53482-53487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21811]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33654; File No. 812-15033]
Mutual of America Life Insurance Company, et al.
October 2, 2019.
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'') and an order of exemption
pursuant to section 17(b) of the Act from section 17(a) of the Act.
Applicants: Mutual of America Life Insurance Company (``Mutual of
America''), Wilton Reassurance Life Company of New York (``Wilton,''
and together with Mutual of America, the ``Companies''), Mutual of
America Separate Account No. 2, Mutual of America Separate Account No.
3, American Separate Account No. 2, and American Separate Account No. 3
(the ``Separate Accounts,'' and together with the Companies, the
``Section 26 Applicants''); and Mutual of America Variable Insurance
Portfolios, Inc. (``Investment Corporation II'') and Mutual of America
Capital Management LLC (the ``Adviser,'' and collectively with
Investment Corporation II and the Section 26 Applicants, the ``Section
17 Applicants'').
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 (the ``Existing Portfolios'')
of Mutual of America Investment Corporation (``Investment Corporation
I'') for shares of certain investment portfolios of the Investment
Corporation II (the ``Replacement Portfolios''), held by the Separate
Accounts to support certain variable annuity insurance contracts
(``Non-Qualified Annuity Contracts'') and variable life insurance
contracts (the ``Life Insurance Contracts'').\1\ 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.
---------------------------------------------------------------------------
\1\ The variable annuity contracts that are issued in connection
with retirement plans or individual retirement annuities under the
Code (other than the individual retirement annuities issued by
American Separate Account No. 2) are referred to herein as the
``Qualified Annuity Contracts.'' The Non-Qualified Annuity
Contracts, the Life Insurance Contracts, and the Qualified Annuity
Contracts are collectively referred to herein as the ``Contracts.''
Filing Dates: The application was filed on May 15, 2019 and amended on
---------------------------------------------------------------------------
August 20, 2019 and September 27, 2019.
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 October 28, 2019 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: Mutual of America Life
Insurance Company, 320 Park Avenue, New York, New York 10022.
FOR FURTHER INFORMATION CONTACT: Hae-Sung Lee, Senior Counsel, at (202)
551-7345, or Trace W. Rakestraw, Branch Chief at (202) 551-6825
(Division of
[[Page 53483]]
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. Mutual of America is a mutual life insurance company organized
under the laws of the state of New York and is authorized to transact
its business in 50 states and the District of Columbia.
2. Wilton is a life insurance company organized under New York law
and is authorized to transact the business of life insurance, including
annuities, in all 50 states, the Virgin Islands, and the District of
Columbia. Wilton was a wholly-owned subsidiary of a holding company
that was, in turn, 100% owned by Mutual of America. Mutual of America
sold the holding company that owned Wilton but retained full authority
and responsibility to take all actions in regard to American Separate
Account No. 2 and American Separate Account No. 3, under an agreement
with the holding company, and assumptively reinsured the variable
contracts offered through those accounts.
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. The Separate Accounts are registered with the Commission
under the Act as unit investment trusts. The assets of the Separate
Accounts support the Contracts and interests in the Separate Accounts
offered through such Contracts. The Companies 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 individual and group flexible premium variable
annuity and variable life insurance contracts. Each Contract is
registered under the Securities Act of 1933, as amended (the ``1933
Act'') on Form N-4 or Form N-6 (or, in the case of the variable life
insurance contract supported by American Separate Account No. 3, on
Form S-6). Each Contract has particular fees, charges, and investment
options, as described in the Contracts' respective prospectuses.
5. As set forth under each Contract, as well as in the prospectus
for each Contract, the Companies reserve the right to substitute shares
of the underlying fund for shares of another underlying fund. The
substitutions will be performed only for the Non-Qualified Annuity
Contracts and the Life Insurance Contracts. The substitutions will not
affect the Qualified Annuity Contracts.
6. The Companies, on their own behalf and on behalf of their
Separate Accounts, propose to exercise their contractual rights to
substitute underlying funds currently available under the Contracts for
different underlying funds (``Substitutions'' or each, a
``Substitution''), as shown in the table below:
----------------------------------------------------------------------------------------------------------------
Substitution No. Existing portfolio Replacement portfolio
----------------------------------------------------------------------------------------------------------------
1............................... Equity Index Fund....... Equity Index Portfolio.
2............................... All America Fund........ All America Portfolio.
3............................... Small Cap Value Fund.... Small Cap Value Portfolio.
4............................... Small Cap Growth Fund... Small Cap Growth Portfolio.
5............................... Small Cap Equity Index Small Cap Equity Index Portfolio.
Fund.
6............................... Mid Cap Value Fund...... Mid Cap Value Portfolio.
7............................... Mid-Cap Equity Index Mid-Cap Equity Index Portfolio.
Fund.
8............................... Composite Fund.......... Moderate Allocation Portfolio.
9............................... International Fund...... International Portfolio.
10.............................. Money Market Fund....... Money Market Portfolio.
11.............................. Mid-Term Bond Fund...... Mid-Term Bond Portfolio.
12.............................. Bond Fund............... Bond Portfolio.
13.............................. Retirement Income Fund.. Retirement Income Portfolio.
14.............................. 2010 Retirement Fund.... 2010 Retirement Portfolio.
15.............................. 2015 Retirement Fund.... 2015 Retirement Portfolio.
16.............................. 2020 Retirement Fund.... 2020 Retirement Portfolio.
17.............................. 2025 Retirement Fund.... 2025 Retirement Portfolio.
18.............................. 2030 Retirement Fund.... 2030 Retirement Portfolio.
19.............................. 2035 Retirement Fund.... 2035 Retirement Portfolio.
20.............................. 2040 Retirement Fund.... 2040 Retirement Portfolio.
21.............................. 2045 Retirement Fund.... 2045 Retirement Portfolio.
22.............................. 2050 Retirement Fund.... 2050 Retirement Portfolio.
23.............................. 2055 Retirement Fund.... 2055 Retirement Portfolio.
24.............................. 2060 Retirement Fund.... 2060 Retirement Portfolio.
25.............................. Conservative Allocation Conservative Allocation Portfolio.
Fund.
26.............................. Moderate Allocation Fund Moderate Allocation Portfolio.
27.............................. Aggressive Allocation Aggressive Allocation Portfolio.
Fund.
----------------------------------------------------------------------------------------------------------------
7. The Existing Portfolios are series of Investment Corporation I,
a Maryland corporation registered as an open-end management investment
company under the Act (File No. 811-05084) and whose shares are
registered under the 1933 Act (File No. 033-06486). Investment
Corporation I issues separate classes (or series) of shares, each of
which represents a separate portfolio of investments. There are
currently 27 series of Investment Corporation I; they are the Existing
Portfolios. Investment Corporation I intends to begin offering shares
of its series directly to the general public through the retail market.
8. The Replacement Portfolios are series of Investment Corporation
II, a Maryland corporation. On June 13, 2019, Investment Corporation II
filed a new registration statement on Form N-1A to register as an open-
end management investment company under the Act (File No. 811-23449)
and to register shares of the Replacement Portfolios under the 1933 Act
(File No. 333-232095). There will be 26 series of
[[Page 53484]]
Investment Corporation II; they are the Replacement Portfolios.
Investment Corporation II was formed for the purpose of performing the
Substitutions. However, new series of Investment Corporation II may be
established in the future, and the series of Investment Corporation II
may be made available as investment allocation options under variable
insurance contracts of the Companies other than the Non-Qualified
Annuity Contracts and the Life Insurance Contracts.
9. The Adviser serves as the investment adviser for the Existing
Portfolios and the Replacement Portfolios. The Adviser is a Delaware
limited liability company that is registered as an investment adviser
under the Investment Advisers Act of 1940. A sub-adviser has not been
engaged to manage any of the Portfolios.
10. Applicants state that the primary purpose of the Substitutions
is to preserve the favorable tax treatment of the Non-Qualified Annuity
Contracts and the Life Insurance Contracts that are currently supported
by the Existing Portfolios. With exception of Substitution No. 8, each
Existing Portfolio and its corresponding Replacement Portfolio have
identical investment objectives, strategies, and risks and
substantially identical fee structures (with different expense ratios
due to differences in net assets). With respect to Substitution No. 8,
the Existing Portfolio and its corresponding Replacement Portfolio have
substantially similar objectives, strategies, and risks, and the
Replacement Portfolio has a lower expense ratio. The Portfolios are
advised by the same Adviser and share a common board of directors. As
such, the Substitutions will permit owners of the Non-Qualified Annuity
Contracts (``Non-Qualified Annuity Contract Owners'') and owners of the
Life Insurance Contracts (``Life Insurance Contract Owners'') to
maintain the favorable tax treatment of their Non-Qualified Annuity and
Life Insurance Contracts and continue their investments in
substantially identical underlying funds (or a substantially similar
underlying fund with respect to Substitution No. 8).
11. In order to preserve that favorable tax treatment, Section 26
Applicants propose to reallocate contract values attributable to the
Non-Qualified Annuity and Life Insurance Contracts from the Existing
Portfolios to the Replacement Portfolios. Applicants represent that the
Substitutions will preserve the favorable tax treatment of the Non-
Qualified Annuity and Life Insurance Contracts because the Replacement
Portfolios will be offered only under variable annuity and life
insurance contracts. The Replacement Portfolios will not be sold
directly to the general public through the retail market.
12. Mutual of America will cause the Adviser to enter into a
written contract with Investment Corporation II whereby, for a period
of two years following the date of substitution for each Substitution
(the ``Substitution Date''), the Adviser will, at least as frequently
as the last business day of each fiscal quarter, reimburse the expenses
of the Replacement Portfolio to the extent that the net annual
operating expenses of the Replacement Portfolio (after taking into
account any other fee waivers or expense reimbursements) for such
period exceed, on an annualized basis, the net annual operating
expenses of the Existing Portfolio for the most recent fiscal year
preceding the date of the application (the ``Expense Caps''). Any
amounts waived or reimbursed by the Adviser will not be subject to
recoupment rights. Any Expense Cap that applies to a Replacement
Portfolio as a condition of this application is separate and apart from
any other contractual expense reimbursement agreement between
Investment Corporation II and the Adviser. To the extent that an
Expense Cap caps a Replacement Portfolio's net annual operating
expenses at a lower percentage of net assets than any other contractual
expense reimbursement agreement between Investment Corporation II and
the Adviser, such other contractual expense reimbursement agreement
will have no practical impact on the Replacement Portfolio's net annual
operating expenses due to the operation of the Expense Cap. In
addition, for each Substitution, the Section 26 Applicants will not
increase the Contract fees and charges that would otherwise be assessed
under the terms of the Contracts for the Non-Qualified Annuity and Life
Insurance Contract Owners for a period of at least two years following
the Substitution Date.
13. Applicants represent that as of the Substitution Date, the
Separate Accounts will redeem shares of the applicable Existing
Portfolios for cash and/or in-kind. Redemption requests and purchase
orders will be placed simultaneously so that the Non-Qualified Annuity
and Life Insurance Contract values will remain fully invested at all
times.
14. 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 Non-Qualified Annuity and Life
Insurance Contracts.\2\
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\2\ The Section 26 Applicants note that, because the
Substitutions will occur at relative net asset value, and the fees
and charges under the Non-Qualified Annuity and Life Insurance
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. What effect the
Substitutions may have on the value of the benefits offered by the
Contract guarantees would depend, among other things, on the
relative future performance of each Existing Portfolio and
Replacement Portfolio, which the Section 26 Applicants cannot
predict. Nevertheless, the Section 26 Applicants note that at the
time of the Substitutions, the Contracts will offer a comparable
variety of investment options with as broad a range of risk/return
characteristics.
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15. Non-Qualified Annuity and Life Insurance Contract Owners will
not incur any fees or charges as a result of the Substitutions. The
obligations of the Section 26 Applicants, and the rights of the Non-
Qualified Annuity and Life Insurance Contract Owners, under the
Contracts will not be altered in any way. The Companies and/or their
affiliates (other than Investment Corporation II) 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 paid by the Non-Qualified
Annuity and Life Insurance Contract Owners to effect the Substitutions.
The Substitutions will not cause the Contract fees and charges
currently being paid by Non-Qualified Annuity and Life Insurance
Contract Owners to be greater after any Substitution than before the
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.
16. From the date of the Pre-Substitution Notice (defined below)
through 30 days following the Substitution Date, Non-Qualified Annuity
and Life Insurance 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 a Substitution Date, values
[[Page 53485]]
under Non-Qualified Annuity and Life Insurance Contracts attributable
to investments in the applicable Existing Portfolio will be transferred
to the corresponding Replacement Portfolio without charge and without
being subject to any transfer limitations. Moreover, for each
Substitution, except with respect to frequent trading restrictions
described in the Contracts' prospectuses, the Companies will not
exercise any rights reserved under their policies to impose
restrictions on transfers between the subaccounts for a period
beginning at least 30 days before the Substitution Date through at
least 30 days following the Substitution Date.
17. For each Substitution, at least 30 days prior to the
Substitution Date, Non-Qualified Annuity and Life Insurance Contract
Owners will be notified via prospectus supplements (i) that the Section
26 Applicants received or expect to receive Commission approval of the
Substitution and (ii) of the anticipated Substitution Date (the ``Pre-
Substitution Notice''). Pre-Substitution Notices sent to Non-Qualified
Annuity and Life Insurance Contract Owners (including a subset of
contract owners that own inactive contracts (``Inactive Contract
Owners'')) will be filed with the Commission pursuant to rule 497(e)
under the 1933 Act. The Pre-Substitution Notice will also advise Non-
Qualified Annuity and Life Insurance Contract Owners of their pre- and
post-Substitution rights. For each Substitution, the Section 26
Applicants will also deliver to affected Non-Qualified Annuity and Life
Insurance Contract Owners (including Inactive Contract Owners), at
least 30 days before the Substitution Date, a prospectus for the
Replacement Portfolio.
18. In addition, within five business days after the Substitution
Date, Non-Qualified Annuity and Life Insurance Contract Owners
(including Inactive Contract Owners) whose assets were allocated to the
Replacement Portfolio as part of the Substitution will be sent a
written notice (a ``Confirmation'') informing them that the
Substitution was carried out as previously notified. The Confirmation
will also restate the information set forth in the Pre-Substitution
Notice. The Confirmation will also reflect the values of the Non-
Qualified Annuity or Life Insurance Contract Owner's positions in the
Existing 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 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. 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 they are seeking the Substitutions to preserve
the favorable tax treatment of the Non-Qualified Annuity Contracts and
the Life Insurance Contracts. A key feature of annuity and life
insurance contracts is the deferral of federal income taxes on the
accumulated earnings within such contracts if fund shares supporting
such contracts are not offered directly to the general public. The
Existing Portfolios are presently sold in a manner that facilitates the
deferral of federal income taxes on the accumulated earnings under the
Non-Qualified Annuity and Life Insurance Contracts. However, in an
effort to expand the markets to which the Existing Portfolios are
offered, Investment Corporation I intends to begin offering shares of
the Existing Portfolios directly to the general public through the
retail market. While this initiative will generally benefit the
Existing Portfolios, and will not affect the tax treatment of the
Qualified Annuity Contracts, it would result in the Non-Qualified
Annuity and Life Insurance Contracts no longer receiving tax deferral
unless the Substitutions are performed.
3. Companies have 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. The Section 26 Applicants submit that the Substitutions are not
of the type that section 26 was designed to prevent because they will
not result in costly forced redemptions, nor will they affect any other
aspects of the Contracts. In the current situation, Contract owners are
contractually provided investment discretion during the accumulation
phase of the Contracts to allocate and reallocate their Contract values
among the investment options available under the Contracts.
Accordingly, after the Substitutions, each Non-Qualified Annuity and
Life Insurance Contract Owner may exercise his or her own judgment as
to the most appropriate investment alternative available under the
Contract. Moreover, for each Substitution, the Section 26 Applicants
will offer Non-Qualified Annuity and Life Insurance Contract Owners the
opportunity to transfer amounts out of the affected subaccounts which,
as with all transfers under the Contracts, will be without any cost or
other penalty (other than those necessary to implement policies and
procedures designed to detect and deter disruptive transfers) for a
period beginning on the date of the Pre-Substitution Notice (which
supplement will be delivered to the Non-Qualified Annuity and Life
Insurance Contract Owners at least 30 days before the Substitution
Date) and ending no earlier than 30 days after the Substitution Date.
The Substitutions, therefore, will not result in the type of forced
redemption that section 26(c) was designed to prevent.
5. The 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. Specifically, the
Substitutions will not affect the type of benefits offered by the
Companies under the Contracts, or numerous other rights and privileges
associated with the Contracts.
6. 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 Substitutions. The Section 17 Applicants state that because the
Substitutions may be effected, in whole or in part, by means of in-kind
redemptions and purchases, the Substitutions may be deemed to involve
one or more purchases or sales of securities or property between
affiliated persons.
7. 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.
8. The Section 17 Applicants state that the proposed transactions
may involve a transfer of portfolio securities by the Existing
Portfolios to the Separate
[[Page 53486]]
Accounts. Immediately thereafter, the Separate Accounts would purchase
shares of the Replacement Portfolios with the portfolio securities
received from the Existing Portfolios. Accordingly, the Section 17
Applicants provide that to the extent that the Companies, the Separate
Accounts, the Adviser, Investment Corporation II, or 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 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).
9. 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 also submit that the terms of the proposed in-kind
transactions, including the consideration to be paid by each Existing
Portfolio and received by each Replacement Portfolio involved, are
reasonable, fair, and do not involve overreaching principally because
the transactions will conform with all but one of the conditions
enumerated in rule 17a-7 under the Act.
10. 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 Non-Qualified
Annuity Contract or any Life Insurance Contract. The Substitutions will
in no way alter the tax treatment of Non-Qualified Annuity and Life
Insurance Contract Owners in connection with their Contracts, and no
tax liability will arise for Non-Qualified Annuity and Life Insurance
Contract Owners as a result of the Substitutions. The fees and charges
under the Non-Qualified Annuity and Life Insurance Contracts will not
increase because of the Substitutions. Even though the Company, the
Separate Accounts, the Adviser, Investment Corporation II, and the
Replacement Portfolios 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.
11. The Section 17 Applicants also submit that the proposed in-kind
purchases by the Separate Accounts are consistent with the investment
policies and restrictions of the Section 17 Applicants and the
Replacement Portfolio. Finally, the Section 17 Applicants submit that
the 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 the Companies
determine 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. The Companies or an affiliate thereof (other than Investment
Corporation II) 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 paid by Non-Qualified Annuity and Life Insurance Contract Owners to
effect the Substitutions. The Substitutions will not cause the Contract
fees and charges currently being paid by Non-Qualified Annuity and Life
Insurance Contract Owners to be greater after the Substitution than
before the Substitution.
3. 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 Non-Qualified Annuity Contract or Life Insurance
Contract.
4. The Substitutions will in no way alter the tax treatment of Non-
Qualified Annuity and Life Insurance Contract Owners in connection with
their Contracts, and no tax liability will arise for Non-Qualified
Annuity and Life Insurance Contract Owners as a result of the
Substitutions.
5. The obligations of the Section 26 Applicants, and the rights of
the Non-Qualified Annuity and Life Insurance Contract Owners, under the
Non-Qualified Annuity and Life Insurance Contracts will not be altered
in any way.
6. For each Substitution, Non-Qualified Annuity and Life Insurance
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 subaccount without charge for a period beginning at
least 30 days before the Substitution Date through at least 30 days
following the Substitution Date. Except with respect to any frequent
trading restrictions described in the relevant prospectus, the
Applicants will not exercise any rights reserved under the Contracts to
impose restrictions on transfers between the subaccounts, 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.
7. For each Substitution, all Non-Qualified Annuity and Life
Insurance Contract Owners will be notified via the Pre-Substitution
Notice, at least 30 days before the Substitution Date, about: (i) The
intended Substitution of the Existing Portfolio with the Replacement
Portfolio; (ii) the intended Substitution Date; and (iii) information
with respect to transfers as set forth in Condition 6 above. In
addition, for each Substitution, the Section 26 Applicants will also
deliver to Non-Qualified Annuity and Life Insurance Contract Owners, at
least 30 days before the Substitution Date, a prospectus for the
applicable Replacement Portfolio.
8. For each Substitution, the Section 26 Applicants will deliver to
each Non-Qualified Annuity and Life Insurance Contract Owner within
five business days after the Substitution Date, a written confirmation
which will include: (i) A confirmation that the Substitution was
carried out as previously notified; (ii) a restatement of the
information set forth in the Pre-Substitution Notice; and (iii) values
of the Non-Qualified Annuity and Life Insurance Contract Owner's
positions in the Existing Portfolio before the Substitution and the
Replacement Portfolio after the Substitution.
9. Mutual of America will cause the Adviser, as the investment
adviser of the Replacement Portfolios, to enter into a written contract
with Investment Corporation II whereby, for a period of two years
following the Substitution Date for each Substitution, the Adviser
will, at least as frequently as the last business day of each fiscal
quarter,
[[Page 53487]]
reimburse the expenses of the Replacement Portfolio to the extent that
the net annual operating expenses of the Replacement Portfolio (i.e.,
after taking into account any other fee waivers or expense
reimbursements) for such period exceed, on an annualized basis, the net
annual operating expenses of the Existing Portfolio for the most recent
fiscal year preceding the date of the application. Any amounts waived
or reimbursed by the Adviser will not be subject to recoupment rights.
In addition, for each Substitution, the Section 26 Applicants will not
increase the Contract fees and charges that would otherwise be assessed
under the terms of the Contracts for the Non-Qualified Annuity and Life
Insurance 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.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-21811 Filed 10-4-19; 8:45 am]
BILLING CODE 8011-01-P
