AXA Equitable Life Insurance Company, et al.
Notice.
Citation: "83 FR 42324"
Document Number: "Investment Company Act Release No. 33201; File No. 812-14831"
Page Number: "42324"
"Notices"
Agency: "
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.
APPLICANTS:
FOOTNOTE 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." END FOOTNOTE
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
FILING DATE: The application was filed on
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
ADDRESSES: Secretary,
FOR FURTHER INFORMATION CONTACT:
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 http://www.sec.gov.search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1.
2. MONY America is an
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.
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
6.
Substitution No. Removed portfolio Replacement portfolio 1 American Century VP Mid Cap Value Fund (Class II) EQ/American Century Mid Cap Value Portfolio (Class IB). 2 Fidelity(R) VIP Contrafund(R) (Initial Class, Service Class 2) EQ/Fidelity Institutional AM(SM) Large Cap Portfolio (Class K, Class IB). 3 Franklin Rising Dividends VIP Fund (Class 2) EQ/Franklin Rising Dividends Portfolio (Class IB). 4 Franklin Strategic Income VIP Fund (Class 2) EQ/Franklin Strategic Income Portfolio (Class IB). 5 Goldman Sachs VIT Mid Cap Value Fund (Service Class) EQ/Goldman Sachs Mid Cap Value Portfolio (Class IB). 6 Invesco V.I. Global Real Estate Fund (Series II Class) EQ/Invesco Global Real Estate Portfolio (Class IB). 7 Invesco V.I. International Growth Fund (Series II Class) EQ/Invesco International Growth Portfolio (Class IB). 8 Ivy VIP Energy (Class II) EQ/Ivy Energy Portfolio (Class IB). 9 Ivy VIP Mid Cap Growth (Class II) EQ/Ivy Mid Cap Growth Portfolio (Class IB). 10 Ivy VIP Science and Technology (Class II) EQ/Ivy Science and Technology Portfolio (Class IB). 11 Lazard Retirement Emerging Markets Equity Portfolio (Service EQ/Lazard Emerging Markets Equity Portfolio (Class IB). Class) 12 MFS International Value Portfolio (Service Class) EQ/MFS International Value Portfolio (Class IB). 13 MFS Technology Portfolio (Service Class) EQ/MFS Technology Portfolio (Class IB). 14 MFS Utilities Series (Initial Class, Service Class) EQ/MFS Utilities Series Portfolio (Class K, Class IB). 15 PIMCO Real Return Portfolio (Advisor Class) EQ/PIMCO Real Return Portfolio (Class IB). 16 PIMCO Total Return Portfolio (Advisor Class) EQ/PIMCO Total Return Portfolio (Class IB). 17 T. Rowe Price Health Sciences Portfolio (II Class) EQ/T. Rowe Price Health Sciences Portfolio (Class IB).
7. The Replacement Portfolios are series of the
8.
9. Applicants state that the proposed Substitutions are part of an ongoing effort by
FOOTNOTE 2
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,
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/
FOOTNOTE 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. END FOOTNOTE
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.
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,
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,
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 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
3.
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
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
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,
9. The Section 17 Applicants also submit that the proposed in-kind purchases by the Separate Accounts are consistent with the policies of the
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
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.
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,
For the Commission, by the
Assistant Secretary.
[FR Doc. 2018-17936 Filed 8-20-18;
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