Federal Register / Vol. 74, No. 165 / Thursday, August 27, 2009 / Notices 43729 

Licensing Board, or a Presiding Officer. 

Participants are requested not to include 

personal privacy information, such as 

social security numbers, home 

addresses, or home phone numbers in 

their filings. With respect to copyrighted 

works, except for limited excerpts that 

serve the purpose of the adjudicatory 

filings and would constitute a Fair Use 

application, participants are requested 

not to include copyrighted materials in 

their works. 

VII 

In the absence of any request for 

hearing, or written approval of an 

extension of time in which to request a 

hearing, the provisions specified in 

Section V above shall be final 20 days 

from the date this Order is published in 

the Federal Register without further 

order or proceedings. If an extension of 

time for requesting a hearing has been 

approved, the provisions specified in 

Section V shall be final when the 

extension expires if a hearing request 

has not been received. A REQUEST FOR 

HEARING SHALL NOT STAY THE 

IMMEDIATE EFFECTIVENESS OF THIS 

ORDER. 

Dated this 18th day of August 2009. 

For the Nuclear Regulatory Commission. 

Victor M. McCree, 

Deputy Regional Administrator for 

Operations. 

[FR Doc. E9–20678 Filed 8–26–09; 8:45 am] 

BILLING CODE 7590–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. IC–28849; File No. 812–13611] 

MML Series Investment Fund, et al.; 

Notice of Application 

August 20, 2009. 

AGENCY: The Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of application for an 

exemption pursuant to Section 6(c) of 

the Investment Company Act of 1940, as 

amended (the ‘‘1940 Act or Act’’), 

seeking exemptions from Sections 9(a), 

13(a), 15(a) and 15(b) of the 1940 Act 

and Rules 6e–2(b)(15) and 6e– 

3(T)(b)(15) thereunder. 

Applicants: MML Series Investment 

Fund (‘‘MML Trust’’), MML Series 

Investment Fund II (‘‘MML II Trust’’) 

and Massachusetts Mutual Life 

Insurance Company (‘‘MassMutual’’) 

(collectively, ‘‘Applicants’’). 

SUMMARY: Summary of Application: 

Applicants request an order pursuant to 

Section 6(c) of the 1940 Act exempting 

each life insurance company separate 

account supporting variable life 

insurance contracts (‘‘VLI Account’’) 

(and its insurance company depositor) 

that may invest in shares of an existing 

portfolio of the MML Trust or the MML 

II Trust (an ‘‘Existing Fund’’) or a 

‘‘Future Fund,’’ as defined below, from 

the provisions of Sections 9(a), 13(a), 

15(a) and 15(b) of the Act and Rules 6e– 

2(b)(15) and 6e–3(T)(b)(15) thereunder, 

in situations where such VLI Accounts 

hold shares of any Existing Fund or 

Future Fund (each, a ‘‘Fund;’’ 

collectively, the ‘‘Funds’’) when one or 

more of the following other types of 

investors also hold shares of the Funds: 

(1) a life insurance company separate 

account supporting variable annuity 

contracts (a ‘‘VA Account’’), (2) any VLI 

account, (3) a Fund’s investment adviser 

or affiliated person of the investment 

adviser (representing seed money 

investments in the Fund), and/or (4) 

trustees of a qualified group pension or 

group retirement plan outside the 

separate account context. As used 

herein, a Future Fund is any investment 

company (or investment portfolio or 

series thereof), other than an Existing 

Fund, designed to be sold to VLI 

Accounts and to which Applicants or 

their affiliates may in the future serve as 

investment advisers, investment 

subadvisers, investment managers, 

administrators, principal underwriters, 

or sponsors. 

DATES: Filing Date: The application was 

filed on December 15, 2008, and 

amended and restated on April 14, 2009 

and August 12, 2009. 

Hearing or Notification of Hearing: An 

order granting the application 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 Applicants 

with a copy of the request, personally or 

by mail. Hearing requests should be 

received by the Commission by 5:30 

p.m. on September 14, 2009, and should 

be accompanied by proof of service on 

Applicants, in the form of an affidavit 

or, for lawyers, a certificate of service. 

Hearing requests should state the nature 

of the writer’s interest, the reason for the 

request, and the issues contested. 

Persons may request notification of a 

hearing by writing to the Secretary of 

the Commission. 

ADDRESSES: Secretary, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090. 

Applicants, c/o Andrew M. Goldberg, 

Massachusetts Mutual Life Insurance 

Company, 1295 State Street, Springfield, 

MA 01111. Copy to Mary Thornton 

Payne, Sutherland Asbill & Brennan 

LLP, 1275 Pennsylvania Avenue, 

Washington, DC 20004–2415. 

FOR FURTHER INFORMATION CONTACT: 

Mark Cowan, Senior Counsel, or Zandra 

Bailes, Branch Chief, Office of Insurance 

Products, Division of Investment 

Management at (202) 551–6795. 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application is 

available for a fee from the 

Commission’s Public Reference Branch, 

100 F Street, NE., Washington, DC 

20549 ((202) 551–8090). 

Applicants’ Representations 

1. MML Trust was organized as a 

Massachusetts business trust on 

December 19, 1984. MML Trust is 

registered under the 1940 Act as an 

open-end management investment 

company (File No. 811–02224). MML 

Trust is a series investment company as 

defined by Rule 18f–2 under the Act 

and is currently comprised of twentyseven series. 

2. Shares of the series of the MML 

Trust are offered solely to separate 

investment accounts established by 

MassMutual and its life insurance 

company subsidiaries. The MML Trust 

has filed a registration statement under 

the Securities Act of 1933 (the ‘‘1933 

Act’’) on Form N–1A (File No. 2–39334) 

to register such shares. The Trust may 

establish additional series in the future 

and additional classes of shares for such 

series. Shares of MML Trust are not 

offered to the general public. 

3. MML II Trust was formed as a 

Massachusetts business trust on 

February 8, 2005. MML II Trust is 

registered under the 1940 Act as an 

open-end management investment 

company (File No. 811–21714). MML II 

Trust is a series investment company as 

defined by Rule 18f–2 under the Act 

and is currently comprised of ten series. 

4. Shares of the series of the MML II 

Trust are offered solely to separate 

investment accounts established by 

MassMutual and its life insurance 

company subsidiaries. The MML II 

Trust has filed a registration statement 

under the 1933 Act on Form N–1A (File 

No. 333–122804) to register such shares. 

The Trust may establish additional 

series in the future and additional 

classes of shares for such series. Shares 

of MML II Trust are not offered to the 

general public. 

5. MassMutual is the investment 

adviser to the MML Trust and the MML 

II Trust and is responsible for providing 

all necessary investment management 

and administrative services. 

MassMutual is paid an investment 

management fee from each Fund’s 

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43730 Federal Register / Vol. 74, No. 165 / Thursday, August 27, 2009 / Notices 

average daily net assets. MassMutual 

contracts with subadvisers to help 

manage the Funds. 

6. The Existing Funds and Future 

Funds may offer their shares to VLI and 

VA Accounts of various life insurance 

companies (‘‘Participating Insurance 

Companies’’) to serve as an investment 

medium to support variable life 

insurance contracts and variable 

annuity contracts (together, ‘‘Variable 

Contracts’’) issued through such 

accounts. Each VLI Account and VA 

Account is or will be established as a 

segregated asset account by a 

Participating Insurance Company 

pursuant to the insurance law of the 

insurance company’s State of domicile. 

As such, the assets of each will be the 

property of the Participating Insurance 

Company, and that portion of the assets 

of such an Account equal to the reserves 

and other contract liabilities with 

respect to the Account will not be 

chargeable with liabilities arising out of 

any other business that the insurance 

company may conduct. The income, 

gains and losses, realized or unrealized 

from such an Account’s assets will be 

credited to or charged against the 

Account without regard to other 

income, gains or losses of the 

Participating Insurance Company. If a 

VLI Account or VA Account is 

registered as an investment company, it 

will be a ‘‘separate account’’ as defined 

by Rule 0–1(e) (or any successor rule) 

under the 1940 Act and will be 

registered as a unit investment trust. For 

purposes of the Act, the Participating 

Insurance Company that establishes 

such a registered VLI Account or VA 

Account is the depositor and sponsor of 

the Account as those terms have been 

interpreted by the Commission with 

respect to variable life insurance and 

variable annuity separate accounts. 

7. The Participating Insurance 

Companies are currently MassMutual 

and MassMutual’s affiliated life 

insurance companies: C. M. Life 

Insurance Company, and MML Bay 

State Life Insurance Company. Various 

other life insurance companies that are 

not affiliated persons of MassMutual 

may be Participating Insurance 

Companies in the future. MassMutual is 

an affiliated person of the MML Trust 

and MML II Trust. 

8. As described more fully below, the 

Funds will sell their shares to registered 

VLI and VA Accounts only if each 

Participating Insurance Company 

sponsoring such a VLI or VA Account 

enters into a participation agreement 

with the Fund. The participation 

agreements define or will define the 

relationship between each Fund and 

each Participating Insurance Company 

and memorialize or will memorialize, 

among other matters, the fact that, 

except where the agreement specifically 

provides otherwise, the Participating 

Insurance Company will remain 

responsible for establishing and 

maintaining any VLI or VA Account 

covered by the agreement and for 

complying with all applicable 

requirements of State and Federal law 

pertaining to such accounts and to the 

sale and distribution of variable 

contracts issued through such accounts. 

The participation agreements also 

memorialize or will memorialize, among 

other matters, the fact that, with regard 

to compliance with Federal securities 

laws, unless the agreement specifically 

states otherwise, the Funds’ obligations 

relate solely to offering and selling their 

shares to VLI and VA Accounts covered. 

9. The use of a common management 

investment company (or investment 

portfolio thereof) as an investment 

medium for both VLI Accounts and VA 

Accounts of the same Participating 

Insurance Company, or of two or more 

insurance companies that are affiliated 

persons of each other, is referred to 

herein as ‘‘mixed funding.’’ The use of 

a common management investment 

company (or investment portfolio 

thereof) as an investment medium for 

VLI Accounts and/or VA Accounts of 

two or more Participating Insurance 

Companies that are not affiliated 

persons of each other, is referred to 

herein as ‘‘shared funding.’’ 

10. Applicants propose that each 

Existing Fund and any Future Fund may 

offer and sell its shares directly to a 

qualified group pension or group 

retirement plan (a ‘‘Plan’’ or ‘‘Qualified 

Plan’’) outside the separate account 

context. Federal tax law permits 

investment companies such as the 

Funds to increase their net assets by 

selling shares to Plans. 

11. Plans may invest in shares of an 

investment company as the sole 

investment under the Plan, or as one of 

several investments. Plan participants 

may or may not be given an investment 

choice depending on the terms of the 

Plan itself. The trustees or other 

fiduciaries of a Plan may vote 

investment company shares held by the 

Plan in their own discretion or, if the 

applicable Plan so provides, vote such 

shares in accordance with instructions 

from participants in such Plans. 

Applicants have no control over 

whether trustees or other fiduciaries of 

Plans, rather than participants in the 

Plans, have the right to vote under any 

particular Plan. Each Plan must be 

administered in accordance with the 

terms of the Plan and as determined by 

its trustee or trustees. 

12. Applicants propose that any Fund 

may also sell shares to its investment 

adviser. The Treasury Regulations 

permit such sales as long as the return 

on shares held by the adviser is 

computed in the same manner as shares 

held by VLI Accounts and VA Accounts, 

the adviser does not intend to sell the 

shares to the public, and sales to an 

investment adviser are only made in 

connection with the creation or 

management of the Fund for the 

purpose of providing seed money for the 

Fund. 

13. The promulgation of Rules 6e– 

2(b)(15) and 6e–3(T)(b)(15) preceded the 

issuance of the Treasury Regulations 

permitting the shares of Funds to be 

held by a Qualified Plan or an adviser 

for the Fund without adversely affecting 

the ability of the VLI Account to also 

hold shares. The use of a common 

management investment company (or 

investment portfolio thereof) as an 

investment medium for VLI Accounts, 

VA Accounts, investment advisers, and 

Qualified Plans is referred to herein as 

‘‘extended mixed funding.’’ 

Applicants’ Legal Analysis 

1. Section 9(a)(2) of the 1940 Act 

makes it unlawful for any company to 

serve as an investment adviser or 

principal underwriter of any investment 

company, including a unit investment 

trust, if an affiliated person of that 

company is subject to disqualification 

enumerated in Section 9(a)(1) or (2) of 

the Act. Sections 13(a), 15(a), and 15(b) 

of the Act have been deemed by the 

Commission to require ‘‘pass-through’’ 

voting with respect to an underlying 

investment company’s shares. 

2. Rule 6e–2(b)(15) under the 1940 

Act provides partial exemptions from 

Sections 9(a), 13(a), 15(a), and 15(b) of 

the Act to VLI Accounts supporting 

scheduled premium VLI Contracts and 

to their life insurance company 

depositors. The exemptions granted by 

the Rule are available, however, only 

where a Fund offers its shares 

exclusively to VLI Accounts of the same 

Participating Insurance Company and/or 

of Participating Insurance Companies 

that are affiliated persons of the same 

Participating Insurance Company and 

then, only where scheduled premium 

VLI Contracts are issued through such 

VLI Accounts. Therefore, VLI Accounts, 

their depositors and their principal 

underwriters may not rely on the 

exemptions provided by Rule 6e– 

2(b)(15) if shares of the Fund are held 

by a VLI Account through which 

flexible premium VLI Contracts are 

issued, a VLI Account of an unaffiliated 

Participating Insurance Company, an 

unaffiliated investment adviser, any VA 

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Federal Register / Vol. 74, No. 165 / Thursday, August 27, 2009 / Notices 43731 

Account or a Qualified Plan. In other 

words, Rule 6e–2(b)(15) does not 

provide exemptions when a scheduled 

premium VLI Account invests in shares 

of a management investment company 

that serves as a vehicle for mixed 

funding, extended mixed funding or 

shared funding. 

3. Accordingly, Applicants request an 

order of the Commission granting 

exemptions from Sections 9(a), 13(a), 

15(a), and 15(b) of the 1940 Act, and 

Rule 6e–2(b)(15) thereunder, in cases 

where a scheduled premium VLI 

Account holds shares of Funds and one 

or more of the following types of 

investors also hold shares of such 

Funds: (1) VA Accounts, (2) VLI 

Accounts, (3) a Fund’s investment 

adviser (or an affiliated person of the 

investment adviser), and/or (4) a 

Qualified Plan. 

4. Rule 6e–3(T)(b)(15) under the 1940 

Act provides partial exemptions from 

Sections 9(a), 13(a), 15(a), and 15(b) of 

the Act to VLI Accounts supporting 

flexible premium variable life insurance 

contracts and their life insurance 

company depositors. The exemptions 

granted by the Rule are available, 

however, only where a Fund offers its 

shares exclusively to VLI Accounts 

(through which either scheduled 

premium or flexible premium VLI 

Contracts are issued) of the same 

Participating Insurance Company and/or 

of Participating Insurance Companies 

that are affiliated persons of the same 

Participating Insurance Company, VA 

Accounts of the same Participating 

Insurance Company or of affiliated 

Participating Insurance Companies, or 

the general account of the same 

Participating Insurance Company or of 

affiliated Participating Insurance 

Companies. Therefore, VLI Accounts, 

their depositors and their principal 

underwriters may not rely on the 

exemptions provided by Rule 6e– 

3(T)(b)(15) if shares of the Fund are held 

by a VLI Account of an unaffiliated 

Participating Insurance Company, a VA 

Account of an unaffiliated Participating 

Insurance Company, an unaffiliated 

investment adviser, or a Qualified Plan. 

In other words, Rule 6e–3(T)(b)(15) 

provides exemptions when a VLI 

Account supporting flexible premium 

VLI Contracts invests in shares of a 

management investment company that 

serves as a vehicle for mixed funding 

but does not provide exemptions when 

such a VLI Account invests in shares of 

a management investment company that 

serves as a vehicle for extended mixed 

funding or shared funding. 

5. Accordingly, Applicants request an 

order of the Commission granting 

exemptions from Sections 9(a), 13(a), 

15(a) and 15(b) of the 1940 Act and Rule 

6e–3(T)(b)(15) thereunder, in cases 

where a flexible premium VLI Account 

holds shares of Funds and one or more 

of the following types of investors also 

hold shares of such Funds: (1) VA 

Accounts, (2) VLI Accounts, (3) a Fund’s 

investment adviser (or an affiliated 

person of the investment adviser), and/ 

or (4) a Qualified Plan. 

6. As explained below, Applicants 

maintain that there is no policy reason 

for the sale of Fund shares to Qualified 

Plans to prohibit or otherwise limit a 

Participating Insurance Company from 

relying on the relief provided by Rules 

6e–2(b)(15) and 6e–3(T)(b)(15). 

Notwithstanding, Rule 6e–2 and Rule 

6e–3(T) each specifically provide that 

the relief granted thereunder is available 

only where shares of the underlying 

fund are offered exclusively to 

insurance company separate accounts. 

In this regard, Applicants request 

exemptive relief in cases where VLI 

Accounts hold shares of the Funds 

when shares of the Funds are also sold 

to Qualified Plans. 

7. Applicants are not aware of any 

reason for excluding separate accounts 

and investment companies engaged in 

shared funding from the exemptive 

relief provided under Rules 6e–2(b)(15) 

and 6e–3(T)(b)(15), or for excluding 

separate accounts and investment 

companies engaged in mixed funding 

from the exemptive relief provided 

under Rule 6e–2(b)(15). Similarly, 

Applicants are not aware of any reason 

for excluding Participating Insurance 

Companies from the exemptive relief 

requested because the Funds may also 

sell their shares to qualified pension 

and retirement plans. Rather, 

Applicants assert that the proposed sale 

of shares of the Funds to Qualified 

Plans, in fact, may allow for the 

development of larger pools of assets 

resulting in the potential for greater 

investment and diversification 

opportunities, and for decreased 

expenses at higher asset levels resulting 

in greater cost efficiencies. 

8. For the reasons explained below, 

Applicants have concluded that 

investment by Qualified Plans in the 

Funds should not increase the risk of 

material irreconcilable conflicts 

between owners of VLI Contracts and 

other types of investors or between 

owners of VLI Contracts issued by 

unaffiliated Participating Insurance 

Companies. 

9. Consistent with the Commission’s 

authority under Section 6(c) of the Act 

to grant exemptive orders to a class or 

classes of persons and transactions, 

Applicants request exemptions for a 

class consisting of Participating 

Insurance Companies and their VLI 

Accounts investing in the Existing 

Funds and Future Funds, as well as 

their principal underwriters, that 

currently invest or in the future will 

invest in the Funds. 

10. There is ample precedent, in a 

variety of contexts, for granting 

exemptive relief not only to the 

applicants in a given case, but also to 

members of the class not currently 

identified that may be similarly situated 

in the future. Such class relief has been 

granted in various contexts and from a 

wide variety of the 1940 Act’s 

provisions, including class exemptions 

in the context of mixed funding, 

extended mixed funding, and shared 

funding. Such class exemptions have 

included, among other things, 

exemptions permitting the sale of shares 

by unnamed underlying funds to VLI 

and VA Accounts of Participating 

Insurance Companies and Qualified 

Plans. 

11. Applicants note that the 

Commission has previously granted 

exemptive orders in cases where openend management investment companies 

offer their shares directly to Qualified 

Plans in addition to offering their shares 

to separate accounts of affiliated or 

unaffiliated insurance companies which 

issue either or both variable annuity 

contracts or variable life insurance 

contracts. Applicants State that the 

order sought in their application is 

largely identical to these precedents 

with respect to the scope of the 

exemptions and the conditions 

proposed by the Applicants. 

12. Section 6(c) of the 1940 Act 

provides, in part, that the Commission, 

by order upon application, may 

conditionally or unconditionally 

exempt any person, security or 

transaction, or any class or classes of 

persons, securities or transactions, from 

any provision or provisions of the Act, 

or any rule or regulation thereunder, if 

and to the extent that such exemption 

is necessary or appropriate in the public 

interest and consistent with the 

protection of investors and the purposes 

fairly intended by the policy and 

provisions of the Act. Applicants submit 

that the exemptions requested are 

appropriate in the public interest and 

consistent with the protection of 

investors and the purposes fairly 

intended by the policy and provisions of 

the Act. 

13. Section 9(a)(3) of the 1940 Act 

provides, among other things, that it is 

unlawful for any company to serve as 

investment adviser or principal 

underwriter of any registered open-end 

investment company if an affiliated 

person of that company is subject to a 

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43732 Federal Register / Vol. 74, No. 165 / Thursday, August 27, 2009 / Notices 

disqualification enumerated in Sections 

9(a)(1) or (2). Rules 6e–2(b)(15)(i) and 

(ii) and Rules 6e–3(T)(b)(15)(i) and (ii) 

under the Act provide exemptions from 

Section 9(a) under certain 

circumstances, subject to the limitations 

discussed above on mixed funding, 

extended mixed funding and shared 

funding. These exemptions limit the 

application of the eligibility restrictions 

to affiliated individuals or companies 

that directly participate in management 

of the underlying investment company. 

14. The relief provided by Rules 6e– 

2(b)(15)(i) and 6e–3(T)(b)(15)(i) permits 

a person that is disqualified under 

Sections 9(a)(1) or (2) of the 1940 Act to 

serve as an officer, director, or employee 

of the life insurance company, or any of 

its affiliates, as long as that person does 

not participate directly in the 

management or administration of the 

underlying investment company. The 

relief provided by Rules 6e–2(b)(15)(ii) 

and 6e–3(T)(b)(15)(ii) under the Act 

permits the life insurance company to 

serve as the underlying investment 

company’s investment adviser or 

principal underwriter, provided that 

none of the insurer’s personnel who are 

ineligible pursuant to Section 9(a) 

participates in the management or 

administration of the investment 

company. 

15. In effect, the partial relief granted 

in Rules 6e–2(b)(15) and 6e–3(T)(b)(15) 

under the Act from the requirements of 

Section 9 of the Act limits the amount 

of monitoring necessary to ensure 

compliance with Section 9 to that which 

is appropriate in light of the policy and 

purposes of Section 9. Those rules 

recognize that it is not necessary for the 

protection of investors or the purposes 

fairly intended by the policy and 

provisions of the Act to apply the 

provisions of Section 9(a) to all 

individuals in a large insurance 

complex, most of whom will have no 

involvement in matters pertaining to 

investment companies in that 

organization. Applicants assert that it is 

also unnecessary to apply Section 9(a) 

of the Act to the many individuals in 

various unaffiliated insurance 

companies (or affiliated companies of 

Participating Insurance Companies) that 

may utilize the Funds as investment 

vehicles for VLI Accounts and VA 

Accounts. There is no regulatory 

purpose served in extending the 

monitoring requirements to embrace a 

full application of Section 9(a)’s 

eligibility restrictions because of mixed 

funding, extended mixed funding or 

shared funding. The Participating 

Insurance Companies and Qualified 

Plans are not expected to play any role 

in the management of the Funds. Those 

individuals who participate in the 

management of the Funds will remain 

the same regardless of which VA 

Accounts, VLI Accounts, insurance 

companies, investment advisers, or 

Qualified Plans use such Funds. 

Applying the monitoring requirements 

of Section 9(a) of the Act because of 

investment by VLI Accounts and 

Qualified Plans would be unjustified 

and would not serve any regulatory 

purpose. Furthermore, the increased 

monitoring costs could reduce the net 

rates of return realized by owners of VLI 

Contracts and Plan participants. 

Moreover, in the case of Qualified Plans, 

the Plans, unlike separate accounts, are 

not themselves investment companies, 

and therefore are not subject to Section 

9 of the Act. Furthermore, it is not 

anticipated that a Qualified Plan would 

be an affiliated person of the Funds 

except by virtue of its holding 5% or 

more of a Fund’s shares. 

16. Rules 6e–2(b)(15)(iii) and 6e– 

3(T)(b)(15)(iii) under the Act provide 

exemptions from pass-through voting 

requirements with respect to several 

significant matters, assuming the 

limitations on mixed funding, extended 

mixed funding and shared funding are 

observed. Rules 6e–2(b)(15)(iii)(A) and 

6e–3(T)(b)(15)(iii)(A) provide that the 

insurance company may disregard the 

voting instructions of its variable life 

insurance contract owners with respect 

to the investments of an underlying 

investment company, or any contract 

between such an investment company 

and its investment adviser, when 

required to do so by an insurance 

regulatory authority (subject to the 

provisions of paragraphs (b)(5)(i) and 

(b)(7)(ii)(A) of Rules 6e–2 and 6e–3(T)). 

17. Rules 6e–2(b)(15)(iii)(B) and 6e– 

3(T)(b)(15)(iii)(A)(2) provide that an 

insurance company may disregard the 

voting instructions of owners of its 

variable life insurance contracts if such 

owners initiate any change in an 

underlying investment company’s 

investment policies, principal 

underwriter or any investment adviser 

(provided that disregarding such voting 

instructions is reasonable and subject to 

the other provisions of paragraphs 

(b)(5)(ii), (b)(7)(ii)(B) and (b)(7)(ii)(C) of 

Rules 6e–2 and 6e–3(T)). 

18. In the case of a change in the 

investment policies of the underlying 

investment company, the insurance 

company, in order to disregard contract 

owner voting instructions, must make a 

good faith determination that such a 

change either would: (1) Violate State 

law, or (2) result in investments that 

either (a) would not be consistent with 

the investment objectives of its separate 

account, or (b) would vary from the 

general quality and nature of 

investments and investment techniques 

used by other separate accounts of the 

company, or of an affiliated life 

insurance company with similar 

investment objectives. 

19. Both Rule 6e–2 and Rule 6e–3(T) 

generally recognize that a variable life 

insurance contract is primarily a life 

insurance contract containing many 

important elements unique to life 

insurance contracts and subject to 

extensive State insurance regulation. In 

adopting subparagraph (b)(15)(iii) of 

these Rules, the Commission implicitly 

recognized that State insurance 

regulators have authority, pursuant to 

State insurance laws or regulations, to 

disapprove or require changes in 

investment policies, investment 

advisers, or principal underwriters. 

20. The sale of Fund shares to 

Qualified Plans or investment advisers 

will not have any impact on the 

exemptions requested herein regarding 

the disregard of pass-through voting 

rights. Shares sold to Qualified Plans 

will be held by such Plans. The exercise 

of voting rights by Plans, whether by 

trustees, participants, beneficiaries, or 

investment managers engaged by the 

Plans, does not raise the type of issues 

respecting disregard of voting rights that 

are raised by VLI Accounts. With 

respect to Plans, which are not 

registered as investment companies 

under the Act, there is no requirement 

to pass through voting rights to Plan 

participants. Indeed, to the contrary, 

applicable law expressly reserves voting 

rights associated with Plan assets to 

certain specified persons. For example, 

for many Plans, under Section 403(a) of 

Employee Retirement Income Security 

Act of 1974, as amended (‘‘ERISA’’), 

shares of a portfolio of an investment 

company sold to a Plan must be held by 

the trust(s) funding the Plan. Section 

403(a) also provides that the trustee(s) of 

such trusts must have exclusive 

authority and discretion to manage and 

control the Plan, with two exceptions: 

(1) When the Plan expressly provides 

that the trustee(s) are subject to the 

direction of a named fiduciary who is 

not a trustee, in which case the 

trustee(s) are subject to proper 

directions made in accordance with the 

terms of the Plan and not contrary to 

ERISA, and (2) when the authority to 

manage, acquire, or dispose of assets of 

the Plan is delegated to one or more 

investment managers pursuant to 

Section 402(c)(3) of ERISA. For such 

Plans, unless one of the above two 

exceptions stated in Section 403(a) 

applies, Plan trustees have the exclusive 

authority and responsibility for voting 

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investment company shares (or related 

proxies) held by their Plan. 

21. If a named fiduciary to a Plan 

appoints an investment manager, the 

investment manager has the 

responsibility to vote the shares held, 

unless the right to vote such shares is 

reserved to the trustee(s) or another 

named fiduciary. The Plans may have 

their trustee(s) or other fiduciaries 

exercise voting rights attributable to 

investment securities held by the Plans 

in their discretion. Some Plans, 

however, may provide for the trustee(s), 

an investment adviser (or advisers), or 

another named fiduciary to exercise 

voting rights in accordance with 

instructions from Plan participants. 

22. Where a Qualified Plan does not 

provide participants with the right to 

give voting instructions, Applicants do 

not see any potential for material 

irreconcilable conflicts of interest 

between or among the Variable Contract 

owners and Plan participants with 

respect to voting of the respective Fund 

shares. Accordingly, unlike the 

circumstances surrounding VLI 

Accounts and VA Accounts, because 

Plans are not required to pass through 

voting rights to participants, the issue of 

resolution of material irreconcilable 

conflicts of interest should not arise 

with respect to voting Fund shares. 

23. In addition, if a Qualified Plan 

were to hold a controlling interest in a 

Fund, Applicants do not believe that 

such control would disadvantage other 

investors in such Fund to any greater 

extent than is the case when any 

institutional shareholder holds a 

majority of the shares of any open-end 

management investment company. In 

this regard, Applicants submit that 

investment in a Fund by a Plan will not 

create any of the voting complications 

occasioned by VLI Account investments 

in the Fund. Unlike VLI Account 

investments, Plan voting rights cannot 

be frustrated by veto rights of 

Participating Insurance Companies or 

State insurance regulators. 

24. Where a Qualified Plan provides 

participants with the right to instruct 

the trustee(s) as to how to vote Fund 

shares, Applicants see no reason why 

such participants generally or those in 

a particular Plan, either as a single 

group or in combination with 

participants in other Plans, would vote 

in a manner that would disadvantage 

VLI Contract owners. The purchase of 

shares by Plans that provide voting 

rights does not present any 

complications not otherwise occasioned 

by mixed or shared funding. 

25. Similarly, the sale of Fund shares 

to an investment adviser will not have 

any impact on the exemptions requested 

herein regarding the disregard of passthrough voting rights. The exercise of 

voting rights by investment advisers 

does not raise the type of issues 

respecting disregard of voting rights that 

are raised by VLI Accounts. With 

respect to investment advisers, which 

are not registered as investment 

companies under the Act, there is no 

requirement to pass through voting 

rights. 

26. Applicants recognize that the 

prohibitions on mixed and shared 

funding might reflect concern regarding 

possible different investment 

motivations among investors. When 

Rule 6e–2 was first adopted, variable 

annuity separate accounts could invest 

in mutual funds whose shares were also 

offered to the general public. Therefore, 

the Commission staff may have been 

concerned with the potentially different 

investment motivations of public 

shareholders and owners of variable life 

insurance contracts. There also may 

have been some concern with respect to 

the problems of permitting a State 

insurance regulatory authority to affect 

the operations of a publicly available 

mutual fund and the investment 

decisions of public shareholders. 

27. For reasons unrelated to the Act, 

however, Revenue Ruling 81–225 (Sept. 

25, 1981) effectively deprived variable 

annuity contracts funded by publicly 

available mutual funds of their taxbenefited status. The Tax Reform Act of 

1984 codified the prohibition against 

the use of publicly available mutual 

funds as an investment vehicle for both 

variable annuity contracts and variable 

life insurance contracts. In particular, 

Section 817(h) of the Code, in effect, 

requires that the investments made by 

both variable annuity and variable life 

insurance separate accounts be 

‘‘adequately diversified.’’ If such a 

separate account is organized as part of 

a ‘‘two-tiered’’ arrangement where the 

account invests in shares of an 

underlying open-end investment 

company (i.e., an underlying fund), the 

diversification test will be applied to the 

underlying fund (or to each of several 

underlying funds), rather than to the 

separate account itself, but only if ‘‘all 

of the beneficial interests’’ in the 

underlying fund ‘‘are held by one or 

more insurance companies (or affiliated 

companies) in their general account or 

in segregated asset accounts.’’ 

Accordingly, a separate account that 

invests in a publicly available mutual 

fund will not be adequately diversified 

for these purposes. As a result, any 

underlying fund, including the Funds, 

that sells shares to VA Accounts or VLI 

Accounts, would, in effect, be precluded 

from also selling its shares to the public. 

Consequently, the Funds may not sell 

their shares to the public. 

28. Applicants assert that the rights of 

an insurance company or a State 

insurance regulator to disregard the 

voting instructions of owners of 

Variable Contracts is not inconsistent 

with either mixed funding or shared 

funding. The National Association of 

Insurance Commissioners Variable Life 

Insurance Model Regulation (the ‘‘NAIC 

Model Regulation’’) suggests that it is 

unlikely that insurance regulators 

would find an underlying fund’s 

investment policy, investment adviser 

or principal underwriter objectionable 

for one type of Variable Contract but not 

another type. The NAIC Model 

Regulation has long permitted the use of 

a single underlying fund for different 

separate accounts. Moreover, Article VI, 

Section 3 of the NAIC Model Regulation 

has been amended to remove a previous 

prohibition on one separate account 

investing in another separate account. 

Lastly, the NAIC Model Regulation does 

not distinguish between scheduled 

premium and flexible premium variable 

life insurance contracts. The NAIC 

Model Regulation, therefore, reflects the 

NAIC’s apparent confidence that such 

combined funding is appropriate and 

that State insurance regulators can 

adequately protect the interests of 

owners of all variable contracts. 

29. Applicants assert that shared 

funding by unaffiliated insurance 

companies does not present any issues 

that do not already exist where a single 

insurance company is licensed to do 

business in several or all States. A 

particular State insurance regulator 

could require action that is inconsistent 

with the requirements of other States in 

which the insurance company offers its 

contracts. However, the fact that 

different insurers may be domiciled in 

different States does not create a 

significantly different or enlarged 

problem. 

30. Shared funding by unaffiliated 

insurers, in this respect, is no different 

than the use of the same investment 

company as the funding vehicle for 

affiliated insurers, which Rules 6e– 

2(b)(15) and 6e–3(T)(b)(15) permit. 

Affiliated insurers may be domiciled in 

different States and be subject to 

differing State law requirements. 

Affiliation does not reduce the 

potential, if any exists, for differences in 

State regulatory requirements. In any 

event, the conditions set forth below are 

designed to safeguard against, and 

provide procedures for resolving, any 

adverse effects that differences among 

State regulatory requirements may 

produce. If a particular State insurance 

regulator’s decision conflicts with the 

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43734 Federal Register / Vol. 74, No. 165 / Thursday, August 27, 2009 / Notices 

majority of other State regulators, then 

the affected Participating Insurance 

Company will be required to withdraw 

its separate account investments in the 

relevant Fund. This requirement will be 

provided for in the participation 

agreement that will be entered into by 

Participating Insurance Companies with 

the relevant Fund. 

31. Rules 6e–2(b)(15) and 6e– 

3(T)(b)(15) give Participating Insurance 

Companies the right to disregard the 

voting instructions of VLI Contract 

owners in certain circumstances. This 

right derives from the authority of State 

insurance regulators over VLI Accounts 

and VA Accounts. Under Rules 6e– 

2(b)(15) and 6e–3(T)(b)(15), a 

Participating Insurance Company may 

disregard VLI Contract owner voting 

instructions only with respect to certain 

specified items. Affiliation does not 

eliminate the potential, if any exists, for 

divergent judgments as to the 

advisability or legality of a change in 

investment policies, principal 

underwriter or investment adviser 

initiated by such Contract owners. The 

potential for disagreement is limited by 

the requirements in Rules 6e–2 and 6e– 

3(T) that the Participating Insurance 

Company’s disregard of voting 

instructions be reasonable and based on 

specific good faith determinations. 

32. A particular Participating 

Insurance Company’s disregard of 

voting instructions, nevertheless, could 

conflict with the voting instructions of 

a majority of VLI Contract owners. The 

Participating Insurance Company’s 

action possibly could be different than 

the determination of all or some of the 

other Participating Insurance 

Companies (including affiliated 

insurers) that the voting instructions of 

VLI Contract owners should prevail, and 

either could preclude a majority vote 

approving the change or could represent 

a minority view. If the Participating 

Insurance Company’s judgment 

represents a minority position or would 

preclude a majority vote, then the 

Participating Insurance Company may 

be required, at the relevant Fund’s 

election, to withdraw its VLI Accounts’ 

and VA Accounts’ investments in the 

relevant Fund. No charge or penalty will 

be imposed as a result of such 

withdrawal. This requirement will be 

provided for in the participation 

agreement entered into by the 

Participating Insurance Companies with 

the relevant Fund. 

33. Applicants assert that there is no 

reason why the investment policies of 

an Fund would or should be materially 

different from what these policies 

would or should be if the Fund 

supported only VA Accounts or VLI 

Accounts, whether flexible premium or 

scheduled premium VLI Contrasts. Each 

type of insurance contract is designed as 

a long-term investment program. 

34. Each Fund will be managed to 

attempt to achieve its specified 

investment objective, and not favor or 

disfavor any particular Participating 

Insurance Company or type of insurance 

contract. There is no reason to believe 

that different features of various types of 

Variable Contracts will lead to different 

investment policies for each or for 

different VLI Accounts and VA 

Accounts. The sale of Variable Contracts 

and ultimate success of all VA Accounts 

and VLI Accounts depends, at least in 

part, on satisfactory investment 

performance, which provides an 

incentive for each Participating 

Insurance Company to seek optimal 

investment performance. 

35. Furthermore, no single investment 

strategy can be identified as appropriate 

to a particular Variable Contract. Each 

‘‘pool’’ of VLI Contract and VA Contract 

owners is composed of individuals of 

diverse financial status, age, insurance 

needs and investment goals. A Fund 

supporting even one type of Variable 

Contract must accommodate these 

diverse factors in order to attract and 

retain purchasers. Permitting mixed and 

shared funding will provide economic 

support for the continuation of the 

Funds. Mixed and shared funding will 

broaden the base of potential Variable 

Contract owner investors, which may 

facilitate the establishment of additional 

Funds serving diverse goals. 

36. Applicants do not believe that the 

sale of the shares to Plans will increase 

the potential for material irreconcilable 

conflicts of interest between or among 

different types of investors. In 

particular, Applicants see very little 

potential for such conflicts beyond 

those that would otherwise exist 

between owners of VLI Contracts and 

VA Contracts. Applicants submit that 

either there are no conflicts of interest 

or that there exists the ability by the 

affected parties to resolve such conflicts 

consistent with the best interests of VLI 

Contract owners, VA Contract owners 

and Plan participants. 

37. Applicants considered whether 

there are any issues raised under the 

Code, Treasury Regulations, or Revenue 

Rulings thereunder, if Qualified Plans, 

VA Accounts, and VLI Accounts all 

invest in the same Fund. Applicants 

have concluded that neither the Code, 

nor the Treasury Regulations nor 

Revenue Rulings thereunder, present 

any inherent conflicts of interest if 

Plans, VLI Accounts, and VA Accounts 

all invest in the same Fund. 

38. Applicants note that, while there 

are differences in the manner in which 

distributions from VLI Accounts and 

Qualified Plans are taxed, these 

differences have no impact on the 

Funds. When distributions are to be 

made, and a VLI Account or Plan is 

unable to net purchase payments to 

make distributions, the VLI Account or 

Plan will redeem shares of the relevant 

Fund at its net asset values in 

conformity with Rule 22c–1 under the 

Act (without the imposition of any sales 

charge) to provide proceeds to meet 

distribution needs. A Participating 

Insurance Company will then make 

distributions in accordance with the 

terms of its VLI Contract and a Plan will 

then make distributions in accordance 

with the terms of the Plan. 

39. Applicants considered whether it 

is possible to provide an equitable 

means of giving voting rights to VLI 

Contract owners and Plans. In 

connection with any meeting of Fund 

shareholders, the Fund’s transfer agent 

will inform each Participating Insurance 

Company, investment adviser, and 

Qualified Plan of their share holdings 

and provide other information necessary 

for such shareholders to participate in 

the meeting (e.g., proxy materials). Each 

Participating Insurance Company then 

will solicit voting instructions from 

owners of VLI Contracts and VA 

Contracts as required by either Rules 

6e–2 or 6e–3(T), or Section 

12(d)(1)(E)(iii)(aa) of the Act, as 

applicable, and its participation 

agreement with the relevant Fund. 

Shares held by Plans will be voted in 

accordance with applicable law. The 

voting rights provided to Plans with 

respect to the shares would be no 

different from the voting rights that are 

provided to Plans with respect to shares 

of mutual funds sold to the general 

public. Furthermore, if a material 

irreconcilable conflict arises because of 

a Plan’s decision to disregard Plan 

participant voting instructions, if 

applicable, and that decision represents 

a minority position or would preclude 

a majority vote, the Plan may be 

required, at the election of the relevant 

Fund, to withdraw its investment in the 

Fund, and no charge or penalty will be 

imposed as a result of such withdrawal. 

40. Applicants do not believe that the 

ability of a Fund to sell its shares to its 

investment adviser or Qualified Plans 

gives rise to a senior security. ‘‘Senior 

Security’’ is defined in Section 18(g) of 

the Act to include ‘‘any stock of a class 

having priority over any other class as 

to distribution of assets or payment of 

dividends.’’ As noted above, regardless 

of the rights and benefits of participants 

under Plans and owners of VLI 

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Contracts, VLI Accounts, VA Accounts, 

Participating Insurance Companies, and 

Plans, only have, or will only have, 

rights with respect to their respective 

shares of a Fund. These parties can only 

redeem such shares at net asset value. 

No shareholder of a Fund has any 

preference over any other shareholder 

with respect to distribution of assets or 

payment of dividends. 

41. Applicants do not believe that the 

veto power of State insurance 

commissioners over certain potential 

changes to Fund investment objectives 

approved by owners of VLI Contracts 

creates conflicts between the interests of 

such owners and the interests of Plan 

participants. Applicants note that a 

basic premise of corporate democracy 

and shareholder voting is that not all 

shareholders may agree with a 

particular proposal. Their interests and 

opinions may differ, but this does not 

mean that inherent conflicts of interest 

exist between or among such 

shareholders or that occasional conflicts 

of interest that do occur between or 

among them are likely to be 

irreconcilable. 

42. Although Participating Insurance 

Companies may have to overcome 

regulatory impediments in redeeming 

shares of a Fund held by their VLI 

Accounts, the Plans and the participants 

in participant-directed Plans can make 

decisions quickly and redeem their 

shares in a Fund and reinvest in another 

investment company or other funding 

vehicle without impediments, or as is 

the case with most Plans, hold cash 

pending suitable investment. As a 

result, conflicts between the interests of 

VLI Contract owners and the interests of 

Plans and Plan participants can usually 

be resolved quickly since the Plans can, 

on their own, redeem their Fund shares. 

43. Finally, Applicants considered 

whether there is a potential for future 

conflicts of interest between 

Participating Insurance Companies and 

Qualified Plans created by future 

changes in the tax laws. Applicants do 

not see any greater potential for material 

irreconcilable conflicts arising between 

the interests of VLI Contract owners (or, 

for that matter, VA Contract owners) 

and Plan participants from future 

changes in the Federal tax laws than 

that which already exists between VLI 

Contract owners and VA Contract 

owners. 

44. Applicants recognize that the 

foregoing is not an all-inclusive list, but 

rather is representative of issues that 

they believe are relevant to their 

application. Applicants believe that the 

discussion contained therein 

demonstrates that the sale of Fund 

shares to Qualified Plans would not 

increase the risk of material 

irreconcilable conflicts between the 

interests of Plan participants and VLI 

Contract owners or other investors. 

Further, Applicants submit that the use 

of the Funds with respect to Plans is not 

substantially dissimilar from each 

Fund’s current and anticipated use, in 

that Plans, like VLI Accounts, are 

generally long-term investors. 

45. Applicants assert that permitting a 

Fund to sell its shares to its investment 

adviser (or the adviser’s affiliates) for 

the purpose of obtaining seed money 

will enhance management of each Fund 

without raising significant concerns 

regarding material irreconcilable 

conflicts among different types of 

investors. A potential source of initial 

capital is a Fund’s investment adviser. 

However, provision of seed capital or 

the purchase of shares in connection 

with the management of a Fund by its 

investment adviser may be deemed to 

violate the exclusivity requirement of 

Rule 6e–2(b)(15) and/or Rule 6e– 

3(T)(b)(15). Given the conditions of 

Treasury Regulation 1.817–5(f)(3) and 

the harmony of interest between a Fund, 

on the one hand, and its investment 

adviser (or affiliates), on the other, 

Applicants assert that little incentive for 

overreaching exists. Furthermore, such 

investment should not implicate the 

concerns discussed above regarding the 

creation of material irreconcilable 

conflicts. Instead, investments by an 

investment adviser (or its affiliates), will 

permit the orderly and efficient creation 

and operation of a Fund, and reduce the 

expense and uncertainty of using 

outside parties at the early stages of the 

Fund’s operations. 

46. Various factors have limited the 

number of insurance companies that 

offer Variable Contracts. These factors 

include the costs of organizing and 

operating a funding vehicle, certain 

insurers’ lack of experience with respect 

to investment management, and the lack 

of name recognition by the public of 

certain insurance companies as 

investment experts. In particular, some 

smaller life insurance companies may 

not find it economically feasible, or 

within their investment or 

administrative expertise, to enter the 

Variable Contract business on their own. 

Use of the Funds as a common 

investment vehicle for VLI Accounts 

would reduce or eliminate these 

concerns. Mixed and shared funding 

should also provide several benefits to 

owners of VLI Contracts by eliminating 

a significant portion of the costs of 

establishing and administering separate 

underlying funds. 

47. Participating Insurance 

Companies will benefit not only from 

the investment and administrative 

expertise of the Funds’ investment 

advisers and subadvisers, but also from 

the potential cost efficiencies and 

investment flexibility afforded by larger 

pools of funds. Mixed and shared 

funding also would permit a greater 

amount of assets available for 

investment by a Fund, thereby 

promoting economies of scale, by 

permitting increased safety through 

greater diversification, or by making the 

addition of new Funds more feasible. 

Therefore, mixed and shared funding 

will encourage more insurance 

companies to offer VLI Accounts. This 

should result in increased competition 

with respect to both VLI Account design 

and pricing, which can in turn be 

expected to result in more product 

variety. Applicants also assert that sale 

of shares in a Fund to Qualified Plans, 

in addition to VLI Accounts and VA 

Accounts, will result in an increased 

amount of assets available for 

investment in a Fund. This may benefit 

VLI Account owners by promoting 

economies of scale, permitting increased 

safety of investments through greater 

diversification, and making the addition 

of new Funds more feasible. 

48. Applicants also submit that, 

regardless of the type of shareholder in 

a Fund, its investment adviser (and the 

adviser’s affiliates) are or would be 

contractually and otherwise obligated to 

manage the Fund solely and exclusively 

in accordance with that Fund’s 

investment objectives, policies and 

restrictions, as well as any guidelines 

established by its board of trustees (a 

‘‘Board’’). Thus, each Fund will be 

managed in the same manner as any 

other mutual fund. 

49. Applicants note that VLI Accounts 

historically have been employed to 

accumulate shares of mutual funds that 

are not affiliated with the depositor or 

sponsor of the VLI Account. In 

particular, Applicants assert that sales 

of Fund shares, as described above, will 

not have any adverse Federal income 

tax consequences to other investors in 

such a Fund. 

50. In addition, Applicants assert that 

granting the exemptions requested 

herein is in the public interest and, as 

discussed above, will not compromise 

the regulatory purposes of Sections 9(a), 

13(a), 15(a), or 15(b) of the Act or Rules 

6e–2 or 6e–3(T) thereunder. 

Applicants’ Conditions 

Applicants agree that the order 

granting the requested relief shall be 

subject to the following conditions 

which shall apply to the Funds as well 

as any Future Fund that relies on the 

order: 

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43736 Federal Register / Vol. 74, No. 165 / Thursday, August 27, 2009 / Notices 

1. A majority of the Board of each 

Fund will consist of persons who are 

not ‘‘interested persons’’ of the Fund, as 

defined by Section 2(a)(19) of the 1940 

Act, and the rules thereunder, and as 

modified by any applicable orders of the 

Commission, except that if this 

condition is not met by reason of death, 

disqualification or bona fide resignation 

of any trustee or trustees, then the 

operation of this condition will be 

suspended: (a) For a period of 90 days 

if the vacancy or vacancies may be filled 

by the Board, (b) for a period of 150 

days if a vote of shareholders is required 

to fill the vacancy or vacancies, or (c) for 

such longer period as the Commission 

may prescribe by order upon 

application, or by future rule. 

2. Each Board will monitor its 

respective Fund for the existence of any 

material irreconcilable conflict between 

and among the interests of the owners 

of all VLI Contracts and VA Contracts 

and participants of all Plans investing in 

the Fund, and determine what action, if 

any, should be taken in response to such 

conflicts. A material irreconcilable 

conflict may arise for a variety of 

reasons, including: (a) An action by any 

State insurance regulatory authority, (b) 

a change in applicable Federal or State 

insurance, tax, or securities laws or 

regulations, or a public ruling, private 

letter ruling, no-action or interpretive 

letter, or any similar action by 

insurance, tax or securities regulatory 

authorities, (c) an administrative or 

judicial decision in any relevant 

proceeding, (d) the manner in which the 

investments of the Fund are being 

managed, (e) a difference in voting 

instructions given by VA Contract 

owners, VLI Contract owners, and Plans 

or Plan participants, (f) a decision by a 

Participating Insurance Company to 

disregard the voting instructions of 

contract owners; or (g) if applicable, a 

decision by a Plan to disregard the 

voting instructions of Plan participants. 

3. Participating Insurance Companies 

(on their own behalf, as well as by 

virtue of any investment of general 

account assets in a Fund), any 

investment adviser to a Fund, and any 

Plan that executes a participation 

agreement upon its becoming an owner 

of 10% or more of the net assets of a 

Fund (collectively, ‘‘Participants’’) will 

report any potential or existing conflicts 

to the relevant Board. Each Participant 

will be responsible for assisting the 

Board in carrying out the Board’s 

responsibilities under these conditions 

by providing the Board with all 

information reasonably necessary for the 

Board to consider any issues raised. 

This responsibility includes, but is not 

limited to, an obligation by each 

Participating Insurance Company to 

inform the Board whenever Variable 

Contract owner voting instructions are 

disregarded, and, if pass-through voting 

is applicable, an obligation by each Plan 

to inform the Board whenever it has 

determined to disregard Plan participant 

voting instructions. The responsibility 

to report such information and conflicts, 

and to assist the Board, will be a 

contractual obligation of all 

Participating Insurance Companies 

under their participation agreement 

with a Fund, and these responsibilities 

will be carried out with a view only to 

the interests of the Variable Contract 

owners. The responsibility to report 

such information and conflicts, and to 

assist the Board, also will be contractual 

obligations of all Plans under their 

participation agreement with a Fund, 

and such agreements will provide that 

these responsibilities will be carried out 

with a view only to the interests of Plan 

participants. 

4. If it is determined by a majority of 

a Board, or a majority of the 

disinterested directors/trustees of such 

Board, that a material irreconcilable 

conflict exists, then the relevant 

Participant will, at its expense and to 

the extent reasonably practicable (as 

determined by a majority of the 

disinterested directors/trustees), take 

whatever steps are necessary to remedy 

or eliminate the material irreconcilable 

conflict, up to and including: (a) 

Withdrawing the assets allocable to 

some or all of their VLI Accounts or VA 

Accounts from the Fund and reinvesting 

such assets in a different investment 

vehicle including another Fund, (b) in 

the case of a Participating Insurance 

Company, submitting the question as to 

whether such segregation should be 

implemented to a vote of all affected 

Variable Contract owners and, as 

appropriate, segregating the assets of 

any appropriate group (i.e., VA Contract 

owners or VLI Contact owners of one or 

more Participating Insurance 

Companies) that votes in favor of such 

segregation, or offering to the affected 

Contract owners the option of making 

such a change, (c) withdrawing the 

assets allocable to some or all of the 

Plans from the affected Fund and 

reinvesting them in a different 

investment medium, and (d) 

establishing a new registered 

management investment company or 

managed separate account. If a material 

irreconcilable conflict arises because of 

a decision by a Participating Insurance 

Company to disregard Variable Contract 

owner voting instructions, and that 

decision represents a minority position 

or would preclude a majority vote, then 

the Participating Insurance Company 

may be required, at the election of the 

Fund, to withdraw such Participating 

Insurance Company’s VA Account and 

VLI Account investments in the Fund, 

and no charge or penalty will be 

imposed as a result of such withdrawal. 

If a material irreconcilable conflict 

arises because of a Plan’s decision to 

disregard Plan participant voting 

instructions, if applicable, and that 

decision represents a minority position 

or would preclude a majority vote, the 

Plan may be required, at the election of 

the Fund, to withdraw its investment in 

the Fund, and no charge or penalty will 

be imposed as a result of such 

withdrawal. The responsibility to take 

remedial action in the event of a Board 

determination of a material 

irreconcilable conflict and to bear the 

cost of such remedial action will be a 

contractual obligation of all Participants 

under their participation agreement 

with a Fund, and these responsibilities 

will be carried out with a view only to 

the interests of Variable Contract owners 

or, as applicable, Plan participants. 

For purposes of this Condition 4, a 

majority of the disinterested directors/ 

trustees of the Board of each Fund will 

determine whether or not any proposed 

action adequately remedies any material 

irreconcilable conflict, but, in no event, 

will the Fund or its investment adviser 

be required to establish a new funding 

vehicle for any Variable Contract or 

Plan. No Participating Insurance 

Company will be required by this 

Condition 4 to establish a new funding 

vehicle for any Variable Contract if any 

offer to do so has been declined by vote 

of a majority of the Contract owners 

materially and adversely affected by the 

material irreconcilable conflict. Further, 

no Plan will be required by this 

Condition 4 to establish a new funding 

vehicle for the Plan if: (a) A majority of 

the Plan participants materially and 

adversely affected by the irreconcilable 

material conflict vote to decline such 

offer, or (b) pursuant to documents 

governing the Plan, the Plan trustee 

makes such decision without a Plan 

participant vote. 

5. A Board’s determination of the 

existence of a material irreconcilable 

conflict and its implications will be 

made known in writing promptly to all 

Participants. 

6. Participating Insurance Companies 

will provide pass-through voting 

privileges to all Variable Contract 

owners whose Contracts are issued 

through registered VLI Accounts or 

registered VA Accounts for as long as 

required by the Act as interpreted by the 

Commission. However, as to Variable 

Contracts issued through VA Accounts 

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

2 17 CFR 240.19b–4. 

or VLI Accounts not registered as 

investment companies under the Act, 

pass-through voting privileges will be 

extended to owners of such Contracts to 

the extent granted by the Participating 

Insurance Company. Accordingly, such 

Participating Insurance Companies, 

where applicable, will vote the shares of 

each Fund held in their VLI Accounts 

and VA Accounts in a manner 

consistent with voting instructions 

timely received from Variable Contract 

owners. Participating Insurance 

Companies will be responsible for 

assuring that each of their VLI and VA 

Accounts investing in a Fund calculates 

voting privileges in a manner consistent 

with all other Participating Insurance 

Companies investing in that Fund. 

The obligation to calculate voting 

privileges as provided in this 

Application shall be a contractual 

obligation of all Participating Insurance 

Companies under their participation 

agreement with the Fund. Each 

Participating Insurance Company will 

vote shares of each Fund held in its VLI 

or VA Accounts for which no timely 

voting instructions are received, as well 

as shares attributed to it, in the same 

proportion as those shares for which 

voting instructions are received. Each 

Plan will vote as required by applicable 

law, governing Plan documents and as 

provided in this application. 

7. As long as the Act requires passthrough voting privileges to be provided 

to Variable Contract owners or the 

Commission interprets the Act to 

require the same, a Fund investment 

adviser (or its affiliates) will vote their 

shares of the Fund in the same 

proportion as all votes cast on behalf of 

all Variable Contract owners having 

voting rights; provided, however, that 

such an investment adviser (or affiliates) 

shall vote its shares in such other 

manner as may be required by the 

Commission or its staff. 

8. Each Fund will comply with all 

provisions of the Act requiring voting by 

shareholders (which, for these purposes, 

shall be the persons having a voting 

interest in its shares), and, in particular, 

the Fund will either provide for annual 

meetings (except to the extent that the 

Commission may interpret Section 16 of 

the Act not to require such meetings) or 

comply with Section 16(c) of the Act 

(although each Fund is not, or will not 

be, one of those trusts of the type 

described in Section 16(c) of the Act), as 

well as with Section 16(a) of the Act 

and, if and when applicable, Section 

16(b) of the Act. Further, each Fund will 

act in accordance with the 

Commission’s interpretations of the 

requirements of Section 16(a) with 

respect to periodic elections of 

directors/trustees and with whatever 

rules the Commission may promulgate 

thereto. 

9. A Fund will make its shares 

available to the VLI Accounts, VA 

Accounts, and Plans at or about the time 

it accepts any seed capital from its 

investment adviser (or affiliates) or from 

a general account of a Participating 

Insurance Company. 

10. Each Fund has notified, or will 

notify, all Participants that disclosure 

regarding potential risks of mixed and 

shared funding may be appropriate in 

VLI Account and VA Account 

prospectuses or Plan documents. Each 

Fund will disclose, in its prospectus 

that: (a) Shares of the Fund may be 

offered to both VA Accounts and VLI 

Accounts and, if applicable, to Plans, (b) 

due to differences in tax treatment and 

other considerations, the interests of 

various Variable Contract owners 

participating in the Fund and the 

interests of Plan participants investing 

in the Fund, if applicable, may conflict, 

and (c) the Fund’s Board will monitor 

events in order to identify the existence 

of any material irreconcilable conflicts 

and to determine what action, if any, 

should be taken in response to any such 

conflicts. 

11. If and to the extent Rule 6e–2 and 

Rule 6e–3(T) under the Act are 

amended, or Rule 6e–3 under the Act is 

adopted, to provide exemptive relief 

from any provision of the Act, or the 

rules thereunder, with respect to mixed 

or shared funding, on terms and 

conditions materially different from any 

exemptions granted in the order 

requested in this Application, then each 

Fund and/or Participating Insurance 

Companies, as appropriate, shall take 

such steps as may be necessary to 

comply with Rules 6e–2 or 6e–3(T), as 

amended, or Rule 6e–3, to the extent 

such rules are applicable. 

12. Each Participant, at least annually, 

shall submit to the Board of each Fund 

such reports, materials or data as the 

Board reasonably may request so that 

the directors/trustees of the Board may 

fully carry out the obligations imposed 

upon the Board by the conditions 

contained in this Application. Such 

reports, materials and data shall be 

submitted more frequently if deemed 

appropriate by the Board of a Fund. The 

obligations of the Participants to 

provide these reports, materials and 

data to the Board, when it so reasonably 

requests, shall be a contractual 

obligation of all Participants under their 

participation agreement with the Fund. 

13. All reports of potential or existing 

conflicts received by a Board, and all 

Board action with regard to determining 

the existence of a conflict, notifying 

Participants of a conflict and 

determining whether any proposed 

action adequately remedies a conflict, 

will be properly recorded in the minutes 

of the Board or other appropriate 

records, and such minutes or other 

records shall be made available to the 

Commission upon request. 

14. Each Fund will not accept a 

purchase order from a Qualified Plan if 

such purchase would make the Plan an 

owner of 10 percent or more of the net 

assets of the Fund unless the Plan 

executes an agreement with the Fund 

governing participation in the Fund that 

includes the conditions set forth herein 

to the extent applicable. A Plan will 

execute an application containing an 

acknowledgement of this condition at 

the time of its initial purchase of shares. 

Conclusion 

Applicants submit, for all the reasons 

explained above, that the exemptions 

requested are appropriate in the public 

interest and consistent with the 

protection of investors and the purposes 

fairly intended by the policy and 

provisions of the 1940 Act. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–20599 Filed 8–26–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60554; File No. SR– 

NYSEAmex–2009–42] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing of 

Amendment No. 1 and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 1, Relating to the 

Electronic Trading of Complex Orders 

August 21, 2009. 

I. Introduction 

On July 9, 2009, NYSE Amex LLC 

(‘‘NYSE Amex’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’),1 and 

Rule 19b–4 thereunder,2 a proposal to 

adopt rules relating to the electronic 

trading of complex orders. The 

proposed rule change was published for 

comment in the Federal Register on July 

mstockstill on DSKH9S0YB1PROD with NOTICES