Exhibit 10.26
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No.
SECURITIES EXCHANGE ACT OF 1934
Release No.
INVESTMENT ADVISERS ACT OF 1940
Release No.
INVESTMENT COMPANY ACT OF 1940
Release No.
ADMINISTRATIVE PROCEEDING
File No.

     

In the Matter of

HARTFORD INVESTMENT FINANCIAL SERVICES, LLC,
HL INVESTMENT ADVISORS, LLC, AND
HARTFORD SECURITIES DISTRIBUTION COMPANY, INC.,
Respondents.
  ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS, MAKING
FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER PURSUANT
TO SECTION 8A OF THE SECURITIES ACT OF 1933, SECTION 15(b) OF THE SECURITIES
EXCHANGE ACT OF 1934, SECTIONS 203(e) AND 203(k) OF THE INVESTMENT ADVISERS ACT
OF 1940, AND SECTIONS 9(b) AND 9(f) OF THE INVESTMENT COMPANY ACT of 1940

I.
     The Securities and Exchange Commission (“Commission”) deems it appropriate
and in the public interest that public administrative and cease-and-desist
proceedings be, and hereby are, instituted against: (1) Hartford Investment
Financial Services, LLC (“Hartford Investment”) pursuant to Section 8A of the
Securities Act of 1933 (“Securities Act”), Section 15(b) of the Securities
Exchange Act of 1934 (“Exchange Act”), Sections 203(e) and 203(k) of the
Investment

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Advisers Act of 1940 (“Advisers Act”) and Sections 9(b) and 9(f) of the
Investment Company Act of 1940 (“Investment Company Act”); (2) HL Investment
Advisors, LLC (“HL Advisors”) pursuant to Section 8A of the Securities Act,
Sections 203(e) and 203(k) of the Advisers Act and Sections 9(b) and 9(f) of the
Investment Company Act; and (3) Hartford Securities Distribution Company, Inc.
(“Hartford Distribution”) pursuant to Section 8A of the Securities Act, Section
15(b) of the Exchange Act, Section 203(k) of the Advisers Act and Sections 9(b)
and 9(f) of the Investment Company Act.
II.
     In anticipation of the institution of these proceedings, the Respondents
have submitted an Offer of Settlement (the “Offer”) which the Commission has
determined to accept. Solely for the purpose of these proceedings and any other
proceedings brought by or on behalf of the Commission, or to which the
Commission is a party, and without admitting or denying the findings herein,
except as to the Commission’s jurisdiction over them and the subject matter of
these proceedings, which are admitted, Respondents consent to the entry of this
Order Instituting Administrative and Cease-and-Desist Proceedings, Making
Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant
to Section 8A of the Securities Act of 1933, Section 15(b) of the Securities
Exchange Act of 1934, Sections 203(e) and 203(k) of the Investment Advisers Act
of 1940, and Sections 9(b) and 9(f) of the Investment Company Act of 1940
(“Order”), as set forth below.
III.
     On the basis of this Order and Respondents’ Offer, the Commission finds 1
that:
Respondents
     1. Hartford Investment Financial Services, LLC is a Delaware limited
liability company located in Simsbury, Connecticut. It has been registered as
both an investment adviser and broker-dealer with the Commission since 1997.
Hartford Investment is the investment adviser, distributor and underwriter for
the 51 Hartford retail mutual funds; 44 of which are series of the Hartford
Mutual Funds, Inc. and 7 of which are series of The Hartford Mutual Funds II,
Inc. (collectively the “Retail Funds”). Hartford Investment is responsible for
managing the investment activities of the Retail Funds either directly or
through subadvisers it selects. As of June 30, 2005, Hartford Investment managed
approximately $26.7 billion in assets.
     2. HL Investment Advisors, LLC is a Connecticut limited liability company
located in Simsbury, Connecticut. It has been registered as an investment
adviser with the Commission since 1986. HL Advisors is the investment adviser
for the 36 funds supporting Hartford’s variable and fixed annuity products; 26
of which are series of the Hartford HLS Series Funds, Inc. and 10 of which are
series of the Hartford HLS Series Funds II, Inc. (collectively the “HLS Funds”).
 

1   The findings herein are made pursuant to Respondents’ Offer of Settlement
and are not binding on any other person or entity in this or any other
proceeding.

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These two series funds constitute the only investment options underlying the
variable annuities and variable insurance products. HL Advisors is responsible
for managing the investment activities of the Hartford HLS Funds either directly
or through subadvisers it selects. As of June 30, 2005, HL Advisors managed
approximately $58.8 billion in assets.
     3. Hartford Securities Distribution Company, Inc. is a Connecticut
corporation located in Simsbury, Connecticut. Hartford Distribution has been
registered as a broker-dealer with the Commission since 1995. Hartford
Distribution is the distributor and underwriter for the HLS Funds and group and
registered annuity products. Prior to November 1, 1998, Hartford Distribution
also served as the distributor and underwriter for the Retail Funds, after which
Hartford Investment replaced Hartford Distribution in that role.
Other Relevant Entity
     4. Hartford Life, Inc. (“Hartford Life”) is a Delaware corporation located
in Simsbury, Connecticut and is the parent company to Hartford Investment, HL
Advisors, and Hartford Distribution, among others. The Respondents are operated
by many of the same officers and employees. They also share finance, legal and
administrative functions. As a result, each Respondent knew of the role the
others played with respect to shelf space and directed brokerage. Hartford
Financial Services Group, Inc. (“Hartford”) is the parent company to Hartford
Life. Hartford is one of the nation’s largest financial services and insurance
companies, with 2004 revenues of $22.7 billion. As of September 30, 2005,
Hartford had total assets of $280.5 billion. The financial information of
Hartford Investment, HL Advisors, and Hartford Distribution is incorporated in
the consolidated financial statements of Hartford Life, which, in turn, is
incorporated in the consolidated financial statements of Hartford.
Overview
     5. Between 2000 and 2003, Hartford offered and sold more than 20 million
shares of the Retail Funds and 44 million shares of the HLS Funds.
     6. From at least January 2000 through December 2003, Hartford Investment
and HL Advisors, with Hartford Distribution’s knowledge, made material
misrepresentations and omitted to state material facts to the Retail and HLS
Funds’ (collectively the “Funds”) shareholders and Boards of Directors relating
to their use of $51 million of Fund assets in the form of directed brokerage
commissions to satisfy financial obligations to certain broker-dealers for the
marketing and distribution of the Retail and HLS Funds.
Hartford Investment and Hartford Distribution Entered into Financial
Arrangements
with Broker-Dealers for Shelf Space
     7. From at least January 2000 through December 2003, Hartford Investment
and Hartford Distribution, with the knowledge and approval of HL Advisors,
negotiated and entered into revenue sharing agreements with 73 broker-dealers as
a quid pro quo for special marketing and distribution benefits for the Retail
Funds and the HLS Funds, respectively.

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     8. Specifically, Hartford Investment and Hartford Distribution typically
agreed to remunerate broker-dealers for the special marketing and distribution
benefits based on either a specific percentage of gross sales of the Retail and
HLS Funds or the value of Hartford Fund shares held by the broker-dealers’
customers for more than one year (“aged assets”), or, in some cases, both.
     9. The special marketing and distribution benefits that Hartford
Investment, HL Advisors and Hartford Distribution received were referred to as
“shelf space” and included: inclusion of the Funds on the broker-dealers’
“preferred list” of mutual funds; participation in the broker-dealers’ national
and regional conferences which were held to educate and train registered
representatives regarding the Retail and HLS Funds; access to the
broker-dealers’ sales force; links to Hartford’s website from the
broker-dealers’ websites; and articles in the broker-dealers’ publications
highlighting new products and services.
     10. The purpose behind these special marketing and distribution benefits
was to incentivize broker-dealers to increase sales of the Retail and HLS Funds.
Fund families that did not enter into shelf space arrangements typically did not
receive these benefits. As the Funds’ advisers, Hartford Investment and HL
Advisors benefited from these special benefits because an increase in sales of
Funds resulted in an increase in the investment management fee Hartford
Investment and HL Advisors received. Likewise, as the Funds’ distributors and
underwriters, Hartford Investment and Hartford Distribution benefited because as
sales of the Retail and HLS Funds increased, so did the amount of sales charges
they received.
Hartford Investment and HL Advisors Represented in the Retail and HLS Funds’
Public
Filings That the Shelf Space Arrangements Were Not Paid For By Shareholders
     11. The Retail and HLS Funds provided prospectuses and statements of
additional information (“SAI”) to Fund shareholders. Hartford Investment and HL
Advisors prepared and distributed the Retail and HLS Funds’ prospectuses and
SAIs, and thus were responsible for ensuring that they were accurate.
     12. Hartford Investment and HL Advisors made some disclosure of shelf space
payments, but misrepresented that the shelf space was not paid for by
shareholders. Specifically, Hartford Investment disclosed in its Retail Funds
prospectuses that:
ADDITIONAL COMPENSATION TO BROKERS: In addition to the commissions described
above, the distributor pays additional compensation to dealers based on a number
of factors described in the fund’s statement of additional information. This
additional compensation is not paid by you. [emphasis added]
     13. Similarly, both the Retail and HLS Funds’ SAI misrepresented that
shareholders do not pay for shelf space. Specifically, the SAIs represented that
Hartford Investment, Hartford

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Distribution and their affiliates pay, “out of their own assets,” compensation
to brokers-dealers for shelf space.
     14. Contrary to those representations, Hartford Investment and Hartford
Distribution often used the brokerage commissions generated by the Retail and
HLS Funds portfolio transactions, which are assets of the Funds and their
shareholders, to meet their financial obligations under the shelf space
arrangements.
Hartford Investment and HL Advisors Used Directed Brokerage Commissions to
Satisfy Hartford Investment and Hartford Distribution’s Obligations
Under the Shelf Space Arrangements
     15. As part of their normal operations, the Retail and HLS Funds bought and
sold securities through broker-dealers. Hartford Investment and HL Advisors
retained an unaffiliated subadviser to, among other things, select
broker-dealers to execute these transactions. Hartford Investment and HL
Advisors, as the investment advisers for the Retail Funds and HLS Funds,
respectively, paid commissions out of the Funds’ assets to those broker-dealers
for the portfolio transactions that they executed. As such, the assets used to
pay these directed brokerage commissions were assets of the Funds.
     16. Hartford Investment and HL Advisors used directed brokerage to meet
Hartford Investment and Hartford Distribution’s obligations under the shelf
space arrangements. Had these obligations been satisfied with cash payments,
those cash payments would have come from Hartford Life and its affiliates’
assets. In order to reduce Hartford Life and its affiliates’ expenses, officers
of Hartford Investment and Hartford Distribution instructed their staff that it
was their preference to satisfy the financial obligations under the shelf space
arrangements by directing brokerage commissions to broker-dealers rather than
paying in cash. In fact, between January 2000 and December 2003, Hartford
Investment and Hartford Distribution successfully negotiated with at least 61 of
the 73 broker-dealers with which they had shelf space arrangements the right to
satisfy at least a portion of their financial obligations by directing a certain
amount of portfolio transactions to those broker-dealers.
     17. Hartford Investment and Hartford Distribution frequently calculated the
amount of brokerage commissions to direct to a broker-dealer by projecting the
sales of that particular broker-dealer for the next year and then multiplying an
agreed upon percentage. The resulting dollar amount represented the amount of
brokerage that Hartford Investment or HL Advisors would be required to direct to
that broker-dealer to satisfy Hartford Investment and Hartford Distribution’s
financial obligations under the shelf space arrangements.
     18. When Hartford Investment and HL Advisors used directed brokerage
instead of cash to meet Hartford Investment and Hartford Distribution’s
obligations under the shelf space arrangements, they were often required to
“gross up,” or direct additional brokerage commissions to the broker-dealer
above the agreed-upon cash amount, to cover the transaction costs associated
with executing the fund portfolio transactions. Thus, Hartford Investment and HL
Advisors had to

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direct an average of 1.3 times the amount of brokerage commissions that it would
have paid in cash to satisfy an equivalent amount of their obligation under
their shelf space arrangements.
     19. Hartford Investment and Hartford Distribution treated the shelf space
arrangements as payment obligations. They continually tracked the amount of
brokerage commissions directed to broker-dealers so that they knew whether they
were satisfying the terms of the shelf space arrangements. Hartford Investment
and Hartford Distribution also received requests for payment from some of the
broker-dealers that reflected the amount of directed brokerage that was due
under the shelf space arrangements.
     20. In addition, on several occasions Hartford Investment and HL Advisors
adjusted the total amount of brokerage commissions that they directed to
broker-dealers when sales of the Retail and HLS Funds by the broker-dealers were
higher than projected and the amount previously directed would not satisfy
Hartford Investment and Hartford Distribution’s financial obligations under
their shelf space arrangements.
     21. Between January 2000 and December 2003, Hartford Investment and HL
Advisors instructed the Retail and HLS Funds’ subadviser to direct brokerage
commissions totaling $51 million to broker-dealers to satisfy Hartford
Investment and Hartford Distribution’s quid pro quo shelf space obligations.
Hartford Investment and HL Advisors Omitted to State Material Facts to the
Retail and HLS Funds’ Shareholders Regarding the Use of Directed Brokerage
     22. Hartford Investment and HL Advisors also omitted to state additional
material facts to shareholders regarding the use of directed brokerage.
Specifically, the Retail Funds’ SAI and the HLS Funds’ prospectus stated that
they may direct brokerage commissions to broker-dealers who also sold shares of
the Retail and HLS Funds. These representations were misleading.
     23. Hartford Investment and HL Advisors did not merely direct fund
portfolio transactions to broker-dealers in recognition of Fund shares sold by
them. In fact, each year Hartford Investment and Hartford Distribution
calculated their financial obligations to certain broker-dealers under the
negotiated shelf space arrangements that Hartford Investment and Hartford
Distribution had with these broker-dealers and directed the Funds’ brokerage
commissions to meet their obligations under those arrangements.
Hartford Investment and HL Advisors Did Not Follow Their
Own Guidelines for Use of Directed Brokerage
     24. During the relevant period, Hartford Investment, HL Advisors and
Hartford Distribution had written guidelines relating to the direction of
brokerage commissions to broker-dealers. They violated these guidelines by
directing the Retail and HLS Funds’ brokerage commissions to meet their
financial obligations under the shelf space arrangements.

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     25. Under these guidelines, Hartford Investment, HL Advisors and Hartford
Distribution were prohibited, among other things, from directing brokerage to
broker-dealers in recognition of marketing or referral arrangements that would
benefit them; directing a specific percentage of brokerage commissions based on
the broker-dealer’s future sale or promised future sale of shares of the Funds;
and directing brokerage to a broker-dealer in exchange for placement of the
Funds on a preferred list. However, with respect to the shelf space arrangements
discussed above, Hartford Investment, HL Advisors and Hartford Distribution in
fact benefited from the increased sales in the form of increased management fees
and/or sales charges; they routinely agreed to direct brokerage to a
broker-dealer based on anticipated future sales of the Funds; and Hartford
Investment and Hartford Distribution specifically negotiated shelf space
arrangements in order for the Funds to be placed on broker-dealers’ preferred
lists and, in many cases, were included on a preferred list.
Hartford Investment, HL Advisors and Hartford Distribution Failed to Disclose
the Use
of Fund Assets to the Retail and HLS Funds’ Boards
     26. Despite their duty to do so, Hartford Investment and HL Advisors failed
to disclose to the Retail and HLS Funds’ Boards of Directors (“Boards”) that
Hartford Investment and Hartford Distribution had entered into shelf space
arrangements and that they were meeting their financial obligations under those
arrangements by directing brokerage commissions to broker-dealers which, in
turn, gave rise to a conflict of interest.
     27. Hartford Investment and HL Advisors, as fiduciaries, owed a duty to the
Boards to tell them about the existence and details of the shelf space
arrangements. However, Hartford Investment and HL Advisors failed to communicate
to the Boards that Hartford Investment and Hartford Distribution negotiated with
at least 61 broker-dealers from 2000 to 2003 to pay a specific percentage of
gross sales and/or aged assets for special marketing and distribution services.
     28. Likewise, Hartford Investment and HL Advisors failed to inform the
Boards that Hartford Investment and Hartford Distribution negotiated the right
to satisfy their financial obligations under the shelf space arrangements with
directed brokerage paid with Fund assets rather than cash out of Hartford Life
and its affiliates’ assets.
     29. During the relevant period, Hartford Distribution was required,
pursuant to the Principal Underwriting Agreement that it executed with the
Funds, to inform the Boards that it negotiated shelf space arrangements with
broker-dealers and that under those arrangements it could satisfy its financial
obligation with directed brokerage commissions paid from Fund assets instead of
cash from Hartford’s assets, yet failed to do so. Moreover, Hartford
Distribution knew that neither Hartford Investment nor HL Advisors informed the
Boards of that practice.
     30. As a result, the Boards were not aware of and did not authorize
Hartford Investment and Hartford Distribution’s use of directed brokerage to
satisfy their financial obligations under their shelf space arrangements.
Furthermore, Hartford Investment and HL Advisors deprived the Boards of the
opportunity to exercise their independent judgment to decide how to use fund
assets in accordance with the best interests of the Retail and HLS Funds’
shareholders.

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Violations
     31. Sections 17(a)(2) and 17(a)(3) of the Securities Act generally prohibit
any person, in the offer or sale of securities, from making any untrue statement
of a material fact, or omitting to state a material fact necessary in order to
make the statements made, in light of the circumstances under which they were
made, not misleading; or engaging in any transaction, practice or course of
business which operates or would operate as a fraud or deceit upon the
purchaser.
     32. Section 206(2) of the Advisers Act prohibits an investment adviser from
engaging in any transaction, practice or course of business which operates as a
fraud or deceit upon any client or prospective client.
     33. Section 34(b) of the Investment Company Act prohibits any person from
making any untrue statement of a material fact, or omitting to state any fact
necessary in order to prevent the statements made therein, in the light of the
circumstances under which they were made, from being materially misleading, in
any registration statement, application, report, account, record, or other
document filed or transmitted pursuant to the Investment Company Act.
     34. As a result of the conduct described above,

  a.   Hartford Investment and HL Advisors willfully 2 violated
Sections 17(a)(2) and 17(a)(3) of the Securities Act, Section 206(2) of the
Advisers Act and Section 34(b) of the Investment Company Act.     b.   Hartford
Distribution caused and willfully aided and abetted Hartford Investment and HL
Advisors’ violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act and
Section 206(2) the Advisers Act.

Undertakings
     35. The Respondents have voluntarily undertaken the following:

  a.   The Respondents formed a Disclosure Review Committee designed to ensure
that prospectus and SAI disclosures for investment products are accurate,
appropriate, timely and, where appropriate, consistent. The Committee includes
senior business leaders, compliance officers and attorneys.

 

2   “Willfully” as used in this Order means intentionally committing the act
which constitutes the violation, Cf. Wonsover v. SEC, 205 F.3d 408, 414 (D.C.
Cir. 2000); Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965).

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  b.   The Respondents have appointed a senior level employee to implement the
following written policies and procedures:

  i.   all revenue sharing arrangements relating to the sale of fund shares must
be in writing and in a form approved by the chief legal officer of Hartford Life
or his delegate.     ii.   all revenue sharing arrangements relating to the sale
of variable annuities offering investment in Hartford Separate Accounts that
invest in the Hartford HLS Funds must be in writing and in a form approved by
Hartford Life’s chief legal officer or his delegate.

     36. The Respondents agree to undertake the following:

  a.   Within 90 days of the entry of the Order, the Respondents shall appoint a
senior level employee who shall be responsible for the following:

  i.   oversight over compliance matters related to: preventing and detecting
conflicts of interests related to the Investment Products Division’s lines of
businesses; breaches of fiduciary duty by the Respondents; violations of the
federal securities laws by the Respondents; and the creation and maintenance of
policies, procedures and/or guidelines relating to the compliance matters listed
in this paragraph.     ii.   procedures designed to ensure that when the
Respondents, or any subadviser retained by the Respondents, place trades with a
broker-dealer that also sells Retail and HLS Funds shares, the person
responsible for selecting such broker-dealer is not informed by Respondents of,
and does not take into account, the broker-dealer’s promotion or sale of Retail
and HLS Funds shares.

  b.   The Respondents will annually submit, for review and approval by the
Retail and HLS Funds’ Boards, any changes in the disclosures that the Funds will
include in the Funds’ prospectuses and SAIs about payments made by Respondents,
or any of their affiliates, to broker-dealers or other intermediaries relating
to the sale of the Retail and HLS Funds shares in addition to dealer
concessions, shareholder servicing payments, and payments for services that the
Respondents, or any of their affiliates, otherwise would provide, such as
sub-accounting. The disclosures shall state whether such payments are intended
to compensate broker-dealers for various services, including, without
limitation, placement on the broker-dealers’ preferred or recommended fund list,
education of personnel, marketing support and other specified services.

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  c.   The Respondents will make annual presentations to the Compliance
Committee for the Retail and HLS Funds’ Boards which shall include an overview
of its revenue sharing arrangements and policies, any material changes to such
policies, the number and types of such arrangements, the types of services
received, the identity of participating broker-dealers and the total dollar
amounts paid.     d.   Within 90 days of the entry of the Order, the Respondents
shall establish an Internal Compliance Controls Committee to be chaired by the
Vice President, Securities Compliance of Hartford Life, which Committee shall
have as its members senior business leaders from the Investment Products
Division, at least one member of Hartford Life’s legal department and at least
one member of the Disclosure Review Committee.     e.   Notice of all meetings
of the Internal Compliance Controls Committee shall be given to the outside
independent counsel of the Retail and HLS Funds’ Boards, to the extent that such
meetings relate to the Retail and HLS Funds.     f.   The Internal Compliance
Controls Committee shall review compliance issues relating to the Investment
Products Division’s lines of businesses, endeavor to develop solutions to those
issues as they may arise from time to time, and oversee implementation of those
solutions. The Internal Compliance Controls Committee shall provide reports on
internal compliance matters relevant to the Retail and HLS Funds to the Retail
and HLS Funds’ Boards with such frequency as they may reasonably instruct, and
in any event at least quarterly. The Internal Compliance Controls Committee
shall also provide reports on internal compliance matters relevant to all other
products within the Investment Products Division to Hartford Life’s Board with
such frequency as it may reasonably instruct, and in any event at least
quarterly.     g.   The Internal Compliance Controls Committee shall review at
least annually the Investment Products Division’s policies and procedures
established to address compliance issues under the Investment Advisers Act,
Investment Company Act and any other applicable federal securities laws and that
any violations are reported to the Internal Compliance Controls Committee and
shall document that review.     h.   The Internal Compliance Controls Committee
shall promptly report to Hartford Life’s Board or the Retail or HLS Funds’
Boards, whichever is appropriate, any breach of fiduciary duty owed to Hartford
Life’s Board and/or violations of the federal securities laws of which the
Internal Compliance Controls Committee becomes aware in the course of carrying
out its duties.

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  i.   All employees of the Investment Products Division of Hartford Life shall
be required to receive annual compliance training relating to business ethics
and disclosure obligations jointly planned by the Internal Compliance Controls
Committee and Hartford Life’s legal department.     j.   One year from the entry
of this Order, the Respondents shall submit an affidavit to the Commission staff
attesting to their compliance with the undertakings described in the Order.

     37. For good cause shown, the Commission’s staff may extend any of the
procedural dates set forth above.
IV.
     In view of the foregoing, the Commission deems it appropriate, in the
public interest, and for the protection of investors to impose the sanctions
specified in the Offer submitted by Hartford Investment, HL Advisors and
Hartford Distribution.
     Accordingly, pursuant to Section 8A of the Securities Act, Section 15(b) of
the Exchange Act, Sections 203(e) and 203(k) of the Advisers Act, and Sections
9(b) and 9(f) of the Investment Company Act, it is hereby ORDERED that:
     A. Hartford Investment, HL Advisors and Hartford Distribution are censured.
     B. Respondent Hartford Investment cease and desist from committing or
causing any violations and any future violations of Sections 17(a)(2) and
17(a)(3) of the Securities Act, Section 206(2) of the Advisers Act and Section
34(b) of the Investment Company Act.
     C. Respondent HL Advisors cease and desist from committing or causing any
violations and any future violations of Sections 17(a)(2) and 17(a)(3) of the
Securities Act, Section 206(2) of the Advisers Act and Section 34(b) of the
Investment Company Act.
     D. Respondent Hartford Distribution cease and desist from committing or
causing any violations and any future violations of Section 17(a)(2) and
17(a)(3) of the Securities Act and cease and desist from causing any violations
and any future violations of Section 206(2) of the Advisers Act.
     E. The Respondents shall, within 30 days of the entry of this Order, pay
disgorgement in the amount of $40 million and civil money penalties in the
amount of $15 million, for which they shall be jointly and severally liable. The
Respondents shall pay the entire $55 million to the affected Hartford Funds in
the amounts described in Section IV.G.
     F. There shall be, pursuant to Section 308(a) of the Sarbanes-Oxley Act of
2002, a Fair Fund established for the funds described in Paragraph IV.E.
Regardless of whether any such

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Fair Fund distribution is made, amounts ordered to be paid as civil money
penalties pursuant to this Order shall be treated as penalties paid to the
government for all purposes, including all tax purposes. To preserve the
deterrent effect of the civil penalty, Respondents agree that they shall not,
after offset or reduction in any Related Investor Action based on Respondents’
payment of disgorgement in this action, argue that they are entitled to, nor
shall they further benefit by offset or reduction of any part of Respondents’
payment of a civil penalty in this action (“Penalty Offset”). If the court in
any Related Investor Action grants such a Penalty Offset, Respondents agree that
they shall, within 30 days after entry of a final order granting the Penalty
Offset, notify the Commission’s counsel in this action and pay the amount of the
Penalty Offset to the United States Treasury or to a Fair Fund, as the
Commission directs. Such a payment shall not be deemed an additional civil
penalty and shall not be deemed to change the amount of the civil penalty
imposed in this proceeding. For purposes of this paragraph, a “Related Investor
Action” means a private damages action brought against Respondents by or on
behalf of one or more investors based on substantially the same facts as alleged
in the Order instituted by the Commission in this proceeding.
     G. The Respondents shall distribute the following amounts to the affected
Hartford Funds listed below:

              DISTRIBUTABLE   FUND:   AMOUNT:  
Hartford Advisers Fund
  $ 1,265,000  
Hartford Capital Appreciation Fund
  $ 5,181,000  
Hartford Disciplined Equity Fund
  $ 291,500  
Hartford Dividend and Growth Fund
  $ 1,017,500  
Hartford Focus Fund
  $ 192,500  
Hartford Global Financial Services Fund
  $ 5,500  
Hartford Global Communications Fund
  $ 5,500  
Hartford Global Health Fund
  $ 104,500  
Hartford Global Leaders Fund
  $ 1,914,000  
Hartford Global Technology Fund
  $ 22,000  
Hartford Growth Fund
  $ 154,000  
Hartford Growth Opportunities Fund
  $ 412,500  
Hartford International Capital Appreciation Fund
  $ 5,500  
Hartford International Opportunities Fund
  $ 27,500  
Hartford MidCap Value Fund
  $ 55,000  
Hartford MidCap Fund
  $ 2,458,500  
Hartford Small Company Fund
  $ 671,000  
Hartford SmallCap Growth Fund
  $ 38,500  
Hartford Stock Fund
  $ 1,567,500  
Hartford Value Opportunities Fund
  $ 16,500  
Hartford Value Fund
  $ 11,000  
Hartford Advisers HLS Fund
  $ 6,803,500  
Hartford Capital Appreciation HLS Fund
  $ 11,566,500  

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              DISTRIBUTABLE   FUND:   AMOUNT:  
Hartford Disciplined Equity HLS Fund
  $ 500,500  
Hartford Dividend and Growth HLS Fund
  $ 3,855,500  
Hartford Focus HLS Fund
  $ 110,000  
Hartford Global Communications HLS Fund
  $ 11,000  
Hartford Global Financial Services HLS Fund
  $ 5,500  
Hartford Global Health HLS Fund
  $ 115,500  
Hartford Global Leaders HLS Fund
  $ 3,344,000  
Hartford Global Technology HLS Fund
  $ 88,000  
Hartford Global Advisers HLS Fund
  $ 572,000  
Hartford Growth HLS Fund
  $ 33,000  
Hartford Growth Opportunities HLS Fund
  $ 841,500  
Hartford International Capital Appreciation HLS Fund
  $ 11,000  
Hartford International Opportunities HLS Fund
  $ 313,500  
Hartford International Small Company HLS Fund
  $ 11,000  
Hartford MidCap Value HLS Fund
  $ 159,500  
Hartford MidCap HLS Fund
  $ 3,817,000  
Hartford Small Company HLS Fund
  $ 1,650,000  
Hartford SmallCap Growth HLS Fund
  $ 121,000  
Hartford Stock HLS Fund
  $ 5,560,500  
Hartford Value Opportunities HLS Fund
  $ 60,500  
Hartford Value HLS Fund
  $ 33,000  
 
     
TOTAL:
  $ 55,000,000  
 
     

     H. Respondents shall maintain the undertakings enumerated in paragraphs
35(a)-(b).
     I. Respondents shall comply with the undertakings enumerated in paragraphs
36(a)-(j).

            By the Commission.
        Nancy M. Morris       Secretary   

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