34758 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Notices

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

24464; 812–11938]

CIGNA Funds Group, et al.; Notice of

Application

May 23, 2000.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’).

ACTION: Notice of an application under

section 17(b) of the Investment

Company Act of 1940 (‘‘Act’’) for an

exemption from section 17(a) of the Act.

SUMMARY OF THE APPLICATION:

Applicants request an order to permit

Life Insurance Company of North

America (‘‘LINA’’) to transfer some or

all of its portfolio of ‘‘equity securities’’

of companies which comprise the

‘‘Standard & Poor’s 500 Composite

Stock Price Index’’ (‘‘S&P 500

Securities’’ and ‘‘S&P 500,’’

respectively) to a series of CIGNA Funds

Group (‘‘CFG’’) in exchange for shares of

the series.

Applicants: CFG and LINA.

Filing Dates: The application was

filed on January 12, 2000, and amended

on May 22, 2000.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicants with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

June 15, 2000, 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 by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549–

0609. Applicants, Cigna Corporation,

900 Cottage Grove Road, Hartford, CT

06152–2215.

FOR FURTHER INFORMATION CONTACT:

Bruce R. MacNeil, Staff Attorney, (202)

942–0634, or Nadya B. Roytblat,

Assistant Director, (202) 942–0564

(Division of Investment Management,

Office of Investment Company

Regulation).

SUPPLEMENTAL INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee from the SEC’s

Public Reference Branch, 450 Fifth

Street, N.W., Washington, D.C. 20549–

0102 (telephone (202) 942–8090).

Applicants’ Representations

1. CFG is an open-end management

investment company registered under

the Act. One of CFG’s series is the

Charter Large Company Stock Index

Fund (‘‘Fund’’). The Fund is an index

fund that replicates the composition of

the S&P 500.

2. Times Square Capital Management,

Inc. (the ‘‘Adviser’’) is an investment

adviser registered under the Investment

Adviser Act of 1940 and serves as the

investment adviser to the Fund. The

Adviser is an indirect wholly owned

subsidiary of Cigna Corporaiton

(‘‘CIGNA’’).

3. LINA is a life insurance company

and an indirect wholly owned

subsidiary of CIGNA. LINA is a provider

of group life insurance and investment

products and services. LINA has

invested a portion of its portfolio of

assets in S&P 500 Securities.

4. Applicants state that four

shareholders own approximately 98% of

the outstanding shares of the Fund.

Applicants seek relief to enable LINA to

invest in-kind in the Fund in the event

one or more of these four shareholders

redeems some or all of their shares and

the redemption results in the Fund’s

assets being reduced below a level

required for the Fund to be

economically viable.

5. Applicants propose that LINA

would sell some or all of its S&P 500

Securities to the Fund in exchange for

shares of the Fund (the ‘‘Transfer’’). The

Transfer will not affect the

proportionate composition of the Fund’s

portfolio since the S&P 500 Securities

transferred by LINA will replicate the

composition of the S&P 500. The

Transfer would take place as soon as

practicable following a large redemption

of Fund shares and a determination by

the Adviser that the Transfer was

necessary for the Fund to maintain

critical mass.

6. The S&P 500 Securities would be

valued at the last quoted sale price on

the business day immediately prior to

the Transfer, the same method that is

used to calculate the Fund’s new asset

value. The number of shares to be

issued by the Fund to LINA would be

determined by dividing the value of the

S&P 500 Securities by the current net

asset value of the Fund’s shares.

Applicants’ Legal Analysis

1. Section 17(a) of the Act, in relevant

part, prohibits an affiliated person of a

registered investment company, or any

affiliated person of such person, acting

as principal, from selling to or

purchasing from such investment

company any security or other property.

2. Section 2(a)(3) of the Act defines an

‘‘affiliated person’’ of another person to

include (a) any person directly or

indirectly controlling, controlled by, or

under common control with the other

person and (b) if the other person is an

investment company, any investment

adviser of that company. Applicants

state that both CFG and LINA may be

deemed to be an affiliated person of the

other under section 2(a)(3) because they

may be deemed to be under the common

control of CIGNA. LINA thus is an

affiliated person of an affiliated person

of the Fund, and the Transfer may be

prohibited by section 17(a).

3. Section 17(b) of the Act provides

that the SEC may exempt a transaction

from the provisions of section 17(a) if

the evidence establishes that the terms

of the proposed transaction, including

the consideration to be paid, are

reasonable and fair and do not involve

overreaching on the part of any person

concerned, and that the proposed

transaction is consistent with the policy

of each registered investment company

concerned and with the general

purposes of the Act.

4. Applicants submit that the terms of

the Transfer satisfy the standards set

forth in section 17(b). Applicants state

the Fund’s board of trustees (‘‘Board’’),

including a majority of the trustees who

are not interested persons as defined in

section 2(a)(19) of the Act

(‘‘Disinterested Trustees’’), found that

participation in the Transfer is in the

best interests of the Fund and that the

interests of the existing shareholders of

the Fund will not be diluted as a result

of the Transfer. Applicants state that all

the S&P 500 Securities to be transferred

to the Fund fit into the categories of

securities described in rule 17a–7(b) (1)

through (3) under the Act. Applicants

further state that no brokerage

commission, fee (except for customary

transfer fees) or other remuneration will

be paid in connection with the Transfer.

Applicants’ Conditions

Applicants agree that any order

granting the requested relief will be

subject to the following conditions:

1. The securities to be transferred to

the Fund will be limited to the S&P 500

Securities.

2. The S&P 500 Securities transferred

by LINA will be valued in the same

manner as they would be valued for

purposes of computing the Fund’s net

asset value, which, in the case of

securities traded on a public securities

market for which quotations are

available, is their last reported sales

price on the exchange on which the

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Notices 34759

1 15 U.S.C. 78q(d).

2 15 U.S.C. 78k–1(a)(3)(B).

3 17 CFR 240.17d–2.

4 15 U.S.C. 78s(g)(1).

5 15 U.S.C. 78s(g)(2).

6Securities Acts Amendments of 1975, Report of

the Senate Committee on Banking, Housing, and

Urban Affairs to Accompany S. 249, S. Rep. No. 94–

75, 94th Cong., 1st Session. 32 (1975).

7 17 CFR 240.17d–1 and 17 CFR 240.17d–2.

8Securities Exchange Act Release No. 12352

(April 20, 1976), 41 FR 18809 (May 3, 1976).

9Securities Exchange Act Release No. 12935

(October 28, 1976), 41 FR 49093 (November 8,

1976).

10Securities Exchange Act Release No. 20158

(September 8, 1983), 48 FR 41256 (September 14,

1983).

securities are primarily traded or at the

last sales price on the national securities

market.

3. At the next regular meeting

following the Transfer, the Board,

including a majority of the Disinterested

Trustees will determine: (a) whether the

S&P 500 Securities were valued in

accordance with condition (2); and (b)

whether the acquisition of the S&P 500

Securities was consistent with the

policies of the Fund as reflected in the

registration statement and reports filed

under the Act.

4. The Fund will maintain and

preserve for a period of not less than six

years from the end of the fiscal year in

which the Transfer occurs, the first two

years in an easily accessible place, a

written record of the Transfer setting

forth a description of each security

transferred, the terms of the transfer,

and the information or materials upon

which the determinations required by

condition (3) were made.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–13529 Filed 5–30–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42816, File No. S7–966]

Program for Allocation of Regulatory

Responsibilities Pursuant to Rule 17d–

2; Notice of Filing and Order Granting

Approval of Amendment to the Plan for

the Allocation of Regulatory

Responsibilities Among the American

Stock Exchange LLC, the Chicago

Board Options Exchange, Inc., the

Chicago Stock Exchange, Inc., the

International Securities Exchange LLC,

the National Association of Securities

Dealers, Inc., the New York Stock

Exchange, the Pacific Exchange, Inc.,

and the Philadelphia Stock Exchange,

Inc.

May 23, 2000.

Notice is hereby given that the

Securities and Exchange Commission

(‘‘SEC’’ or ‘‘Commission’’) has issued on

Order, pursuant to Sections 17(d) 1 and

11A(a)(3)(B) 2 of the Securities Exchange

Act of 1934 (‘‘Act’’), granting approval

of an amendment to the plan for

allocating regulatory responsibility filed

pursuant to Rule 17d–2 of the Act,3 by

the American Stock Exchange LLC

(‘‘Amex’’), the Chicago Board Options

Exchange, Inc. (‘‘CBOE’’), the Chicago

Stock Exchange, Inc. (‘‘CHX’’), the

International Securities Exchange LLC

(‘‘ISE’’), the National Association of

Securities Dealers, Inc. (‘‘NASD’’), the

New York Stock Exchange (‘‘NYSE’’),

the Pacific Exchange, Inc. (‘‘PCX’’), and

the Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’) (collectively the ‘‘SRO

participants’’).

I. Introduction

Section 19(g)(1) of the Act,4 among

other things, requires every national

securities exchange and registered

securities association (‘‘SRO’’) to

examine for, and enforce, compliance by

its members and persons associated

with its members with the Act, the rules

and regulations thereunder, and the

SRO’s own rules, unless the SRO is

relieved of this responsibility pursuant

to Section 17(d) or 19(g)(2) 5 of the Act.

Without this relief, the statutory

obligation of each individual SRO could

result in a pattern of multiple

examinations of broker-dealers that

maintain memberships in more than one

SRO (‘‘common members’’). This

regulatory duplication would add

unnecessary expenses for common

members and their SROs.

Section 17(d)(1) of the Act was

intended, in part, to eliminate

unnecessary multiple examinations and

regulatory duplication.6 With respect to

a common member, Section 17(d)(1)

authorizes the Commission, by rule or

order, to relieve an SRO of the

responsibility to receive regulatory

reports, to examine for and enforce

compliance with applicable statutes,

rules and regulations, or to perform

other specified regulatory functions.

To implement Section 17(d)(1), the

Commission adopted two rules: Rule

17d–1 and Rule 17d–2 under the Act.7

Rule 17d–1, adopted on April 20, 1976,8

authorizes the Commission to name a

single SRO as the designated examine

authority (‘‘DEA’’) to examine common

members for compliance with the

financial responsibility requirements

imposed by the Act, or by Commission

or SRO rules. When an SRO has been

named as a common member’s DEA, all

other SROs to which the common

member belongs are relieved of the

responsibility to examine the firm for

compliance with applicable financial

responsibility rules.

On its face, Rule 17d–1 deals only

with an SRO’s obligations to enforce

broker-dealer’s compliance with the

financial responsibility requirements.

Rule 17d–1 does not relieve an SRO

from its obligation to examine a

common member for compliance with

its own rules and provisions of the

federal securities laws governing

matters other than financial

responsibility, including sales practices,

and trading activities and practices.

To address regulatory duplication in

these other areas, on October 28, 1976,

the Commission adopted Rule 17d–2

under the Act.9 This rule permits SROs

to propose joint plans allocating

regulatory responsibilities with respect

to common members. Under paragraph

(c) of Rule 17d–2, the Commission may

declare such a plan effective if, after

providing for notice and comment, it

determines that the plan is necessary or

appropriate in the public interest and

for the protection of investors, to foster

cooperation and coordination among the

SROs, to remove impediments to and

foster the development of a national

market system and a national clearance

and settlement system, and in

conformity with the factors set forth in

Section 17(d) of the Act. Commission

approval of a plan filed pursuant to Rule

17d–2 relieves an SRO of those

regulatory responsibilities allocated by

the plan to another SRO.

II. The Plan

On September 8, 1983, the

Commission approved the SRO

participants’ plan for allocating

regulatory responsibilities pursuant to

Rule 17d–2.10 The plan reduces

regulatory duplication for a large

number of firms currently members of

two or more of the SRO participants by

allocating regulatory responsibility for

certain option-related sales practice

matters to one of the SRO participants.

Under the plan, the SRO participant

responsible for conducting optionsrelated sales practice examinations of a

firm, and investigating options-related

customer complaints and terminations

for cause of associated persons of that

firm, is known as the firm’s ‘‘Designated

Options Examining Authority’’

(‘‘DOEA’’). Under the plan, only the

Amex, the CBOE, the NASD and the

NYSE are DOEAs. Pursuant to the plan,

any other SRO of which the firm is a