Federal Register / Vol. 75, No. 233 / Monday, December 6, 2010 / Notices 75711 

have no adverse tax consequences to 

Contract Owners and will in no way 

alter the tax benefits to Contract 

Owners. 

Applicants’ Legal Analysis: 

1. Section 26(c) of the 1940 Act 

provides that it shall be unlawful for 

any depositor or trustee of a registered 

unit investment trust holding the 

security of a single issuer to substitute 

another security for such security unless 

the Commission shall have approved 

such substitution; and the Commission 

shall issue an order approving such 

substitution if the evidence establishes 

that it is consistent with the protection 

of investors and the purposes fairly 

intended by the policies and provisions 

of the 1940 Act. Section 26(c) protects 

the expectation of investors that the unit 

investment trust will accumulate shares 

of a particular issuer and is intended to 

insure that unnecessary or burdensome 

sales loads, additional reinvestment 

costs or other charges will not be 

incurred due to unapproved 

substitutions of securities. 

2. The proposed Substitution of 

shares held by the AUL Account, as 

described above, may be deemed to 

involve a substitution of securities 

within the meaning of Section 26(c) of 

the 1940 Act. The Applicants therefore 

request an order from the Commission 

pursuant to Section 26(c) approving the 

proposed Substitution. 

3. The investment objective and 

primary risks of the Substituted 

Portfolio are the same as that of the 

Removed Portfolio and the investment 

strategies of the two are nearly identical; 

thus, Contract Owners will have 

reasonable continuity in investment 

expectations. Accordingly, the 

Substituted Portfolio is an appropriate 

investment vehicle for those Contract 

Owners who have Contract values 

allocated to the Removed Portfolio. 

Further, the Substituted Portfolio has 

lower expenses and better historical 

performance than that of the Removed 

Portfolio. 

4. In connection with assets held 

under the Contracts affected by the 

Substitution, Applicants will not 

receive for three (3) years from the date 

of substitution any direct or indirect 

benefits from the Substituted Portfolio, 

its advisors or underwriters (or their 

affiliates) at a rate higher than that 

which they had received from the 

Removed Portfolio, its advisors or 

underwriters (or their affiliates) 

including but without limitation, 12b-1, 

shareholder service, administration or 

other service fees, revenue sharing or 

other arrangements. 

5. Applicants represent and warrant 

that the Substitution and the selection 

of the Substituted Portfolio were not 

motivated by any financial 

consideration paid or to be paid to AUL 

or its affiliates by the Substituted 

Portfolio, its advisors or underwriters or 

their respective affiliates. 

6. The Substitution will not result in 

the type of costly forced redemption 

that Section 26(c) was intended to guard 

against because the Contract Owner will 

continue to have the same type of 

investment choice, with better potential 

returns and lower expenses and will not 

otherwise have any incentive to redeem 

their shares or terminate their Contracts. 

7. The purposes, terms and conditions 

of the proposed Substitution are 

consistent with the protection of 

investors, and the principles and 

purposes of Section 26(c), and do not 

entail any of the abuses that Section 

26(c) is designed to prevent. 

(a) The Substituted Portfolio has 

better historical performance than the 

Removed Portfolio. 

(b) The current total annual operating 

expenses and management fee of the 

Substituted Portfolio are lower than 

those of the Removed Portfolio. 

(c) The Substituted Portfolio is an 

appropriate portfolio to move Contract 

Owners’ values currently allocated to 

the Removed Portfolio because the 

portfolios have the same objectives and 

risks and very similar strategies. 

(d) All costs of the Substitution, 

including any allocated brokerage costs, 

will be borne by Applicants and will not 

be borne by Contract Owners. No 

charges will be assessed to effect the 

Substitution. 

(e) The Substitution will be at the net 

asset value of the respective portfolio 

shares without the imposition of any 

transfer or similar charge and with no 

change in the amount of any Contract 

Owners’ Contract values. 

(f) The Substitution will not cause the 

fees and charges under the Contracts 

currently being paid by the Contract 

Owners to be greater after the 

Substitution than before the 

Substitution and will result in Contract 

Owners Contract values being moved to 

a portfolio with lower current total 

annual operating expenses. 

(g) Notice of the proposed 

Substitution will be mailed to all 

Contract Owners at least 30 days prior 

to the Substitution, All Contract Owners 

will have an opportunity at any time 

after receipt of the notice of the 

Substitution and for 30 days after the 

Substitution to transfer Contract account 

value affected by the Substitution to 

other available subaccounts without the 

imposition of any transfer charge or 

limitation and without being counted as 

one of the Contract Owner’s free 

transfers in a contract year. 

(h) Within five business days after the 

Substitution, Applicants will send to 

their affected Contract Owners a written 

confirmation that the Substitution has 

occurred. 

(i) The Substitution will, in no way, 

alter the terms of the Contracts or the 

obligations of Applicants under them. 

(j) The Substitution will have no 

adverse tax consequences to Contract 

Owners and will, in no way, alter the 

tax benefits to Contract Owners. 

Conclusion 

Applicants assert that, for the reasons 

summarized above, the Commission 

should grant the requested order 

approving the Proposed Substitution. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–30461 Filed 12–3–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. SIPA–169; File No. SIPC–2010– 

01] 

Securities Investor Protection 

Corporation; Notice of Filing of a 

Proposed Bylaw Change Relating to 

SIPC Fund Assessments on SIPC 

Members 

November 30, 2010. 

Pursuant to Section 3(e)(1) of the 

Securities Investor Protection Act of 

1970 (‘‘SIPA’’), 15 U.S.C. 78ccc(e)(1), 

notice is hereby given that on October 

8, 2010, the Securities Investor 

Protection Corporation (‘‘SIPC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) a proposed 

bylaw change. The Commission is 

publishing this notice to solicit 

comments on the proposed bylaw 

change from interested persons. 

I. Description of Proposed Bylaw 

Change 

Section 4(c)(2) of SIPA requires SIPC 

to impose assessments upon its member 

broker-dealers deemed necessary and 

appropriate to establish and maintain a 

broker-dealer liquidation fund 

administered by SIPC (the ‘‘SIPC Fund’’) 

and to repay any borrowings by SIPC 

used to liquidate a broker-dealer. 

Pursuant to this authority, SIPC collects 

an annual assessment from its members. 

The amount of the annual assessment is 

prescribed by SIPA and the SIPC 


jdjones on DSK8KYBLC1PROD with NOTICES
75712 Federal Register / Vol. 75, No. 233 / Monday, December 6, 2010 / Notices 

1 15 U.S.C. 78ddd(d)(1)(A)(ii). 

2SIPC Bylaws, Article 6, Section (a)(1)(C)(i). 

3The Dodd-Frank Act, Section 929V. 

4 15 U.S.C. 78ddd(c)(2) and 78lll(9). 

5Securities Investor Protection Corporation; 

Notice of Proposed Bylaw Change Relating to SIPC 

Fund Assessments on SIPC Members, Rel. No. 

SIPA–156, 56 FR 51952 (Oct. 16, 1991). 

6Securities Investor Protection Corporation; 

Order Approving Proposed Bylaw Change Relating 

to SIPC Fund Assessments on SIPC Members, Rel. 

No. SIPA–157, 56 FR 60145 (Nov. 27, 1991). 

bylaws. For example, if SIPC has an 

outstanding loan from the Commission, 

SIPA provides that SIPC assess its 

member broker-dealers 1⁄2 of 1% of the 

gross revenues from their securities 

business.1 In addition, if the SIPC Fund 

aggregates or is likely to aggregate less 

than $2.5 billion for six months or more, 

SIPC must raise each member’s 

assessment to 1⁄2 of 1% of net operating 

revenues.2 When the SIPC Fund is at its 

targeted level, SIPC collects a minimum 

assessment as provided for in SIPA. The 

current target level for the SIPC Fund is 

$2.5 billion. 

The Dodd-Frank Wall Street Reform 

and Consumer Protection Act of 2010 

(‘‘Dodd-Frank Act’’) amended SIPA to 

change the minimum assessment from 

an amount not to exceed $150 to an 

amount not to exceed 0.02 percent of 

the gross revenues from the securities 

business of the SIPC member.3 Under 

Article 6 of the SIPC bylaws, SIPC must 

assess its members a minimum amount 

($150) unless certain conditions apply. 

Because in some cases an assessment of 

$150 would exceed 0.02 percent of the 

gross revenues, the SIPC Assessment 

bylaw must be amended to be consistent 

with the Dodd-Frank Act. First, SIPC 

has proposed to amend Article 6, 

Section 1(a)(1)(B) of the SIPC bylaws by 

replacing ‘‘$150’’ with the term ‘‘0.02 

percent of the net operating revenues 

from the securities business.’’ This 

amendment clarifies that the minimum 

assessment for members, once the SIPC 

Fund reaches its target, is 0.02 percent 

of a member’s net operating revenues, 

not $150. Second, SIPC has proposed 

deleting Section 1(a)(3) of Article 6, 

which stated that $150 was the 

minimum assessment a SIPC member 

would be required to pay in any 

calendar year. These amendments were 

approved by SIPC’s Board of Directors 

on September 16, 2010. 

As indicated above, SIPC’s bylaw 

changes refer to ‘‘net operating 

revenues’’ instead of ‘‘gross revenues.’’ 

Since 1991, when assessing on a 

percentage basis (i.e., not a flat $150 

minimum assessment), SIPC has based 

the assessment amount on a percentage 

of net operating revenues, not gross 

revenues, from the securities business. 

In 1991, a SIPC Task Force study found 

that securities firms no longer 

structured their business on a gross 

revenue basis but instead used a net 

operating revenue basis, which excludes 

interest expense and dividend expense 

in accounting for revenue. SIPC bases its 

assessment on the net revenues 

associated with that business, which it 

believes is consistent with SIPA. Basing 

the assessment on net operating 

revenues as opposed to gross revenues 

will decrease the amount of the 

assessment in most situations. However, 

under SIPA, SIPC may adjust the basis 

for collecting assessments and the 

amount of assessments as long as the 

assessments are within the parameters 

prescribed in SIPA.4 Using a minimum 

assessment of 0.02 percent of net 

operating revenues would not cause the 

amount of the assessment to exceed the 

maximum amount permitted for the 

minimum assessment under Section 

4(d)(1)(C) of SIPA, as amended by the 

Dodd-Frank Act. 

In 1991, when SIPC changed its 

assessment methodology from gross 

revenues to net operating revenues, the 

Commission published notice of the 

proposed change and requested 

comment.5 The comments received 

were in support of the proposed change, 

which made the assessments more 

consistent with how industry revenues 

are calculated.6

II. Need for Public Comment 

Section 3(e)(1) of SIPA provides that 

SIPC must file with the Commission a 

copy of proposed bylaw changes. That 

section further provides that bylaw 

changes shall take effect 30 days after 

filing, unless the Commission either; (i) 

disapproves the change as contrary to 

the public interest or the purposes of 

SIPA, or (ii) finds that the change 

involves a matter of such significant 

public interest that public comment 

should be obtained. Thus, under Section 

3(e)(1) of SIPA, a proposed bylaw 

change does not have to be noticed for 

public comment. However, under 

Section 3(e)(1)(B) of SIPA, the 

Commission can find that ‘‘such 

proposed change involves a matter of 

such significant public interest that 

public comment should be obtained,’’ in 

which case, the Commission may, after 

notifying SIPC in writing of such 

finding, require that the proposed bylaw 

change be considered by the same 

procedures as a proposed rule change 

including, among other things, 

publication in the Federal Register and 

opportunity for public comment. 

The SIPC Fund, which is built from 

assessments on its members and the 

interest earned on the fund, is used for 

the protection of customers of members 

liquidated under SIPA to maintain 

investor confidence in the securities 

markets. In light of this fact and that the 

bylaw change provides for a new 

minimum assessment methodology, the 

Commission finds, pursuant to Section 

3(e)(1)(B) of SIPA, that the proposed 

bylaw change involves a matter of such 

significant public interest that public 

comment should be obtained and that 

the procedures applicable to proposed 

SIPC rule changes in Section 3(e)(2) of 

SIPA should be followed. As required 

by Section 3(e)(1)(B) of SIPA, the 

Commission has notified SIPC of this 

finding in writing. 

III. Date of Effectiveness of the 

Proposed Bylaw Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register, or within such longer period: 

(i) As the Commission may designate up 

to 90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which SIPC consents, the 

Commission will: (A) By order approve 

such proposed bylaw change, or (B) 

Institute proceedings to determine 

whether the proposed bylaw change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/other.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SIPC–2010–01 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SIPC–2010–01. This file 

number should be included on the 

subject line if e-mail 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 Web site (http://www.sec.gov/ 

rules/other.shtml). Copies of the 

submission, all subsequent 


jdjones on DSK8KYBLC1PROD with NOTICES
Federal Register / Vol. 75, No. 233 / Monday, December 6, 2010 / Notices 75713 

7 17 CFR 200.30–3(f)(2)(i). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(iii). 

4 17 CFR 240.19b–4(f)(6). 

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 Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. All comments received 

will be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

publicly available. All submissions 

should refer to File Number SIPC–2010– 

01 and should be submitted on or before 

December 27, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–30434 Filed 12–3–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Thursday, December 9, 2010 at 2 

p.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) 

and 17 CFR 200.402(a)(3), (5), (7), 9(ii) 

and (10), permit consideration of the 

scheduled matters at the Closed 

Meeting. 

Commissioner Aguilar, as duty 

officer, voted to consider the items 

listed for the Closed Meeting in a closed 

session. 

The subject matter of the Closed 

Meeting scheduled for Thursday, 

December 9, 2010 will be: 

institution and settlement of injunctive 

actions; institution and settlement of 

administrative proceedings; and other 

matters relating to enforcement proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact: 

The Office of the Secretary at (202) 

551–5400. 

Dated: December 1, 2010. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–30530 Filed 12–1–10; 4:15 pm] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Wednesday, December 8, 2010 at 10 

a.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemption 5 U.S.C. 

552b(c)(10) and 17 CFR 200.402(a)(10), 

permit consideration of the scheduled 

matter at the Closed Meeting. 

Commissioner Aguilar, as duty 

officer, voted to consider the item listed 

for the Closed Meeting in a closed 

session. 

The subject matter of the Closed 

Meeting scheduled for Wednesday, 

December 8, 2010 will be: 

An adjudicatory matter 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact: 

The Office of the Secretary at (202) 

551–5400. 

Dated: December 1, 2010. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–30628 Filed 12–2–10; 4:15 pm] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63386; File No. SR–CBOE– 

2010–102] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Related to the Penny 

Pilot Program 

November 29, 2010. 

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 November 

24, 2010, the Chicago Board Options 

Exchange, Incorporated (‘‘Exchange’’ or 

‘‘CBOE’’) filed with the Securities and 

Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Exchange has designated 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 

The Exchange is proposing to amend 

its rules relating to the Penny Pilot 

Program. The text of the proposed rule 

change is available on the Exchange’s 

Web site (http://www.cboe.org/Legal), 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 those 

statements may be examined at the 


jdjones on DSK8KYBLC1PROD with NOTICES