Federal Register / Vol. 65, No. 210 / Monday, October 30, 2000 / Notices 64727

that his information not be released to

the public by writing a letter asking that

it remain confidential under one of the

exemptions described in FOIA (see 5

U.S.C. 552). The SEC determines

whether the investor’s claim of an

exemption if valid when someone

requests the investor’s information

under FOIA. The SEC often makes it

files available to other governmental

agencies, particularly United States

Attorneys and state prosecutors. There

is a likelihood that information supplied

by investors will be made available to

such agencies where appropriate.

Whether or not the SEC makes its files

available to other governmental agencies

is, in general, all confidential matter

between the SEC and such other

governmental agencies. An agency may

not conduct or sponsor, and a person is

not required to respond to, a collection

of information unless it displays a

currently valid control number.

General comments regarding the

above information should be directed to

the following persons: (i) Desk Officer

for Securities and Exchange

Commission, Office of Information and

Regulatory Affairs, Office of

Management and Budget, Room 10102,

New Executive Office Building,

Washington, DC 20503; and (ii) Michael

E. Bartell, Associate Executive Director,

Office of Information Technology,

Securities and Exchange Commission,

450 Fifth Street, NW., Washington, DC

20549. Comments must be submitted to

OMB within 30 days of this notice.

Dated: October 20, 2000.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–27718 Filed 10–27–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. IC–24696; File No. 812–12060]

The Wachovia Variable Insurance

Funds, et al.

October 25, 2000.

AGENCY: Securities and Exchange

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

ACTION: Notice of application for an

Order under section 6(c) of the

Investment Company Act of 1940

(‘‘Act’’) for exemption 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.

Applicants: The Wachovia Variable

Insurance Funds (‘‘Trust’’) and

Wachovia Bank, N.A., on behalf of

Wachovia Asset Management

(‘‘Wachovia’’), a business unit of

Wachovia Bank, N.A.

Summary of Application: Applicants

seek an order to permit shares of the

Trust and shares of any other

investment company or series thereof

that is designed to fund insurance

products and for which Wachovia, or

any of its affiliates, may serve in the

future as investment adviser,

administrator, manager, principal

underwriter or sponsor (‘‘Future

Trusts’’, together with Trust, ‘‘Trusts’’)

to be sold to and held by (a) variable

annuity and variable life insurance

separate accounts of both affiliated and

unaffiliated life insurance companies,

(b) qualified pension and retirement

plans outside of the separate account

context, and (c) separate accounts that

are not registered under the Act

pursuant to exemptions from

registration under Section 3(c) of the

Act.

Filing Date: The application was filed

on April 6, 2000, and amended and

restated on September 14, 2000.

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 November 14, 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 requester’s interest, the reason for

the request, and the issues contested.

Persons who wish to be notified of a

hearing may request notification by

writing to the Secretary of the

Commission.

FOR FURTHER INFORMATION CONTACT:

Mark Cowan, Senior Counsel, or Keith

Carpenter, Branch Chief, Office of

Insurance Products, Division of

Investment Management, at (202) 942–

0670.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

NW., Washington, DC 20549–0609.

Applicants, R. Edward Bowling,

Wachovia Bank, N.A., 100 North Main

Street, Winston-Salem, NC 27101.

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application is

available for a fee from the Public

Reference Branch of the Commission,

450 Fifth Street, NW., Washington, DC

20549 (tel. (202) 942–8090).

Applicants’ Representations

1. The Trust is a Massachusetts

business trust and is registered under

the Act as an open-end management

investment company. The Trust

currently consists of three separately

managed series (‘‘Funds’’). Additional

series could be added to the Trust in the

future. Each Fund has its own

investment objective and policies.

2. Wachovia, a business unit of

Wachovia Bank, N.A., is the investment

adviser for the Trust. As a ‘‘bank’’

within the meaning of section

202(a)(2)(A) of the Investment Advisers

Act of 1940 (‘‘Advisers Act’’), Wachovia

Bank, N.A. is excluded from the

definition of an investment adviser in

section 202(a)(11) of the Advisers Act

and, accordingly, is exempt from the

registration requirements of section 203

of the Act.

3. Upon the granting of the exemptive

relief requested by this application, the

Trust intends to offer its shares

representing interests in each Fund, and

any other series established by the Trust

(‘‘Future Funds’’) (Funds, together with

Future Funds, ‘‘Funds’’ or each a

‘‘Fund’’) to separate accounts of both

affiliated and unaffiliated insurance

companies to serve as the investment

vehicle for variable annuity contracts

and variable life insurance contracts

(‘‘Variable Contracts’’). In addition,

Applicants propose that the Trust offer

and sell shares representing interests in

the Funds directly to qualified pension

and retirement plans (‘‘Qualified Plans’’

or ‘‘Plans’’) outside of the separate

account context. Separate accounts

owning shares of the Funds and their

insurance company depositors are

referred to herein as ‘‘Participating

Separate Accounts’’ and ‘‘Participating

Insurance Companies,’’ respectively.

4. Participating Insurance Companies

will establish their own Participating

Separate Accounts and design their own

Variable Contracts. Each Participating

Insurance Company will enter into a

participation agreement with the Trust

on behalf of its Participating Separate

Account, and will have the legal

obligation of satisfying all applicable

requirements under state and federal

law. The role of the Trust, so far as the

federal securities laws are applicable,

will be limited to that of offering its

shares to separate accounts of various

insurance companies and fulfilling any

conditions the Commission may impose

upon granting the Order requested

herein.

5. The Plans will be pension or

retirement plans intended to qualify

under sections 401(a) and 501(c) of the

Internal Revenue Code of 1986, as

64728 Federal Register / Vol. 65, No. 210 / Monday, October 30, 2000 / Notices

amended (‘‘Code’’). Many of the Plans

will include a cash or deferred

arrangement (permitting salary

reduction contributions) intended to

qualify under section 401(k) of the

Code. The Plans will also be subject to,

and will be designed to comply with,

the provisions of the Employee

Retirement Income Security Act of 1974

(‘‘ERISA’’) applicable to either defined

benefit or to defined contribution profitsharing plans, specifically ‘‘Title I—

Protection of Employee Benefit Rights.’’

The Plans therefore will be subject to

regulatory provisions under the Code

and ERISA regarding, for example,

reporting and disclosure, participation

and vesting, funding, fiduciary,

responsibility, and enforcement.

Applicants’ Legal Analysis

1. Applicants request an order

pursuant to section 6(c) of the Act

exempting them from sections 9(a),

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

Rules 6e–2(b)(15) and 6e–3T(b)(15)

thereunder, to the extent necessary to

permit shares of the Trusts to be offered

and sold to, and held by: (a) Both

variable annuity and variable life

insurance separate accounts of the same

life insurance company or of any

affiliated life insurance company

(‘‘mixed funding’’); (b) separate

accounts of unaffiliated life insurance

companies (including both variable

annuity separate accounts and variable

life insurance separate accounts )

(‘‘shared funding’’); (c) trustees of

Qualified Plans; and (d) separate

accounts that are not registered under

the Act pursuant to exemptions from

registration under section 3(c) of the

Act.

2. In connection with the funding of

scheduled premium variable life

insurance contracts issued through a

separate account registered under the

Act as a unit investment trust (‘‘UIT’’),

Rule 6e–2(b)(15) provides partial

exemptions from the following sections

of the Act: (a) section 9(a), which makes

it unlawful for any company to serve as

an investment adviser or principal

underwriter of any UIT, if an affiliated

person of that company is subject to a

disqualification enumerated in section

9(a)(1) or (2); and (b), sections 13(a),

15(a) and 15(b) of the Act to the extent

that those sections have been deemed by

the Commission to require ‘‘passthrough’’ voting with respect to an

underlying investment company’s

shares. The exemptions granted to a

separate account by Rule 6e–2(b)(15) are

available only where all of the assets of

the separate account consist of the

shares of one or more registered

management investment companies

which offer their shares ‘‘exclusively to

variable life insurance separate accounts

of the life insurer, or of any affiliated

life insurance company.’’ Therefore, the

relief granted by Rule 6e–2(b)(15) is not

available with respect to a scheduled

premium variable life insurance

separate account that owns shares of an

investment company that also offers its

shares to a variable annuity separate

account or a flexible premium variable

life insurance account of the same

company or of any affiliated or

unaffiliated insurance company. In

addition, the relief granted by Rule 6e–

2(b)(15) is not available if the scheduled

premium variable life insurance

separate account owns shares of an

underlying investment company that

also offers its shares to separate

accounts funding variable contracts of

one or more unaffiliated life insurance

companies. Moreover, because the relief

under Rule 6e–2(b)(15) is available only

where shares are offered exclusively to

separate accounts, additional exemptive

relief is necessary if the shares of the

Funds are also to be sold to Qualified

Plans.

3. In connection with flexible

premium variable life insurance

contracts issued through a separate

account registered under the Act as a

UIT, Rule 6e–3(T)(b)(15) provides

partial exemptions from sections 9(a)

and from 13(a), 15(a) and 15(b) of the

Act to the extent that those sections

have been deemed by the Commission

to require ‘‘pass-through’’ voting with

respect to an underlying investment

company’s shares. The exemptions

granted to a separate account by Rule

6e–3T(b)(15) are available only where

all of the assets of the separate account

consist of the shares of one or more

registered management investment

companies which offer their shares

‘‘exclusively to separate accounts of the

life insurer, or of any affiliated life

insurance company, offering either

scheduled contracts or flexible

contracts, or both; or which also offer

their shares to variable annuity separate

accounts of the life insurer or of an

affiliated life insurance company.’’

Therefore, Rule 6e–3(T) permits mixed

funding for flexible premium variable

life insurance separate accounts.

However, Rule 6e–3(T) does not

permit shared funding, because the

relief granted by Rule 6e–3(T)(b)(15) is

not available with respect to a flexible

premium variable life insurance

separate account that owns shares of an

investment company that also offers its

shares to separate accounts (including

flexible premium variable life insurance

separate accounts) of unaffiliated life

insurance companies. Moreover,

because the relief under Rule 6e–3(T) is

available only where shares are offered

exclusively to separate accounts,

additional exemptive relief is necessary

if the shares of the Trust are also to be

sold to Qualified Plans.

4. Due to changes in the federal tax

law subsequent to the adoption of Rules

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

is afforded an opportunity to increase its

asset base by selling shares to Qualified

Plans. Section 817(h) of the Code

imposes certain diversification

standards on the assets underlying

Variable Contracts held in the Funds.

The Code provides that Variable

Contracts will not be treated as annuity

contracts or life insurance contracts for

any period (and any subsequent period)

for which the investments are not, in

accordance with regulations issued by

the Treasury Department, adequately

diversified. On March 2, 1989, the

Treasury Department issued Regulations

(Treas. Reg. § 1.817–5), which

established diversification requirements

for the investment portfolios underlying

Variable Contracts. The Regulations

generally provide that, in order to meet

the diversification requirements, all of

the beneficial interests in the underlying

investment company must be held by

the segregated asset accounts of one or

more insurance companies. However,

the Regulations also contain certain

exceptions to this requirement, one of

which allows trustees of a Qualified

Plan to hold shares of an investment

company without adversely affecting

the status of the investment company as

an adequately diversified underlying

investment for Variable Contracts issued

through separate accounts of insurance

companies. (Treas. Reg. § 1.817–

5(f)(3)(iii).) As a result of this exception

to the general diversification

requirements, Qualified Plans may

select the Trust as an investment option

without endangering the tax status of

Variable Contracts issued through

Participating Insurance Companies.

5. Qualified Plans may choose the

Trust (or any series thereof) as their sole

investment or as one of several

investments. Plan participants may or

may not be given an investment choice

depending on the Plan itself. Shares of

the Funds sold to such Qualified Plans

would be held by the trustee(s) of the

Plans as mandated by section 403(a) of

ERISA. As described elsewhere herein,

there will be no pass-through voting to

the participants in such Qualified Plans,

as it is not required to be provided to

such participants pursuant to ERISA.

6. The promulgation of Rules 6e–

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

issuance of the Treasury Regulations

that made it possible for shares of an

Federal Register / Vol. 65, No. 210 / Monday, October 30, 2000 / Notices 64729

investment company to be held by

trustees of a Qualified Plan without

adversely affecting the ability of

separate accounts of insurance

companies to hold shares of the same

investment company in connection with

their variable annuity and variable life

contracts. Thus, the sale of shares of the

same investment company to both

separate accounts and Qualified Plans

could not have been envisioned at the

time of the adoption of Rules 6e–

2(b)(15) and 6e–3(T)(b)(15).

7. Accordingly, an Order of the

Commission is hereby requested

exempting flexible premium variable

life insurance separate accounts (and, to

the extent necessary, any investment

adviser or sub-adviser, principal

underwriter and depositor of such an

account) from sections 9(a), 13(a), 15(a),

and 15(b) of the Act, and Rule 6e–

3(T)(b)(15) (and any comparable

permanent rule) thereunder, to the

extent necessary to permit shares of the

Funds to be offered and sold to variable

annuity and variable life insurance

separate accounts of both affiliated and

unaffiliated life insurance companies, to

Qualified Plans, and to separate

accounts that are not registered under

the Act pursuant to exemptions from

registration under section 3(c) of the

Act.

8. 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, this

application requests relief for the class

consisting of insurers and separate

accounts investing in the Funds (and, to

the extent necessary, investment

advisers, sub-advisers, principal

underwriters and depositors of such

accounts). The Commission staff will

have an opportunity to review

compliance by the Participating

Insurance Companies with the

conditions of the requested Order at the

time each Participating Separate

Account files its registration statement.

9. Section 6(c) authorizes the

Commission to exempt any person,

security or transaction, or any class or

classes of persons, securities or

transactions from any provisions of the

Act and the rules or regulations

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

are not aware of any stated rationale for

the exclusion of separate accounts and

investment companies, or series thereof,

engaged in shared funding from the

exemptive relief provided under Rules

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

exclusion of separate accounts and

investment companies, or series thereof,

engaged in mixed funding from the

exemptive relief provided under Rule

6e–2(b)(15). Indeed, the Commission’s

proposed amendments to Rule 6e–2

would eliminate the exclusion of mixed

funding from the relief provided under

Rule 6e–2(b)(15) and, as noted above,

numerous exemptions permitting both

mixed and shared funding have been

granted since the adoption of Rules 6e–

2 and 6e–3.

10. Similarly, Applicants are not

aware of any stated rationale for

excluding Participating Insurance

Companies from the exemptive relief

requested because the Funds may also

sell their shares to Qualified Plans. In

fact, Applicants assert that the proposed

sale of shares of the Funds 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 cost efficiencies. If the Funds were to

sell shares only to Qualified Plans, no

exemptive relief would be necessary.

The relief provided under Rules 6e–

2(b)(15) and 6e–3(T)(b)(15) does not

relate to Qualified Plans or to a

registered investment company’s ability

to sell its shares to such Plans.

Exemptive relief is requested in the

application only because the separate

accounts investing in the Funds are

themselves investment companies

seeking relief under Rules 6e–2 and 6e–

3(T) and do not wish to be denied such

relief if the Funds sell shares to

Qualified Plans. As noted above, the

Commission has granted numerous

exemptions permitting extended mixed

and shared funding. Moreover, for the

reasons stated below, applicants believe

that the requested exemptions 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.

11. Section 9(a) of the Act provides

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

disqualification enumerated in section

9(a)(1) or (2). However, Rules 6e–

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

and (ii) provide partial exemptions from

Section 9(a) under certain

circumstances, subject to the limitations

discussed above on mixed and shared

funding. These exemptions limit the

disqualification to affiliated individuals

or companies that directly participate in

the management or administration of

the underlying investment company or

series thereof.

12. Rules 6e–2(b)(15)(i) and 6e–

3(T)(b)(15)(i) allow an individual

disqualified under section 9(a)(1) or (2)

to be an officer, director, or employee of

an insurance company, or any of its

affiliates that serves in any capacity

with respect to an underlying

investment company, so long as the

disqualified individual does not

participate directly in the management

or administration of the underlying

investment company. Similarly, Rules

6e–2(b)(15)(ii) and 6e–3(T)(b)(15)(ii)

permit an insurance company

disqualified under section 9(a) of the

Act to serve in any capacity with respect

to an underlying investment company,

provided that the affiliated person,

ineligible under section 9(a)(1) or (2) of

the Act, does not participate directly in

the management or administration of

the investment company.

13. The partial relief granted in Rules

6e–2(b)(15) and 6e–3(T)(b)(15) from

requirements of section 9 of the Act, in

effect, limits the amount of monitoring

of an insurer’s personnel that would

otherwise be necessary to ensure

compliance with section 9 to that which

is appropriate in light of the policy and

purposes of section 9. The exemptions

contained in Rules 6e–2(b)(15) and 6e–

3(T)(b)(15) 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 section 9(a) to the many

individuals who may be involved in a

large insurance company but would

have no connection with the investment

company, or any series thereof, funding

the separate accounts. Applicants

believe that it is unnecessary to limit the

applicability of the rules merely because

shares of the Trust may be sold in

connection with mixed and shared

funding. The Participating Insurance

Companies will not be involved in the

management or administration of the

Trust or the Funds. Therefore, applying

the restrictions of section 9(a) serves no

regulatory purpose. Indeed, applying

such restrictions would increase the

monitoring costs incurred by the

Participating Insurance Companies and,

therefore, would reduce the net rates of

return realized by Variable Contract

owners.

14. Moreover, the appropriateness of

the relief requested herein will not be

affected by the proposed sale of shares

of the Trust to Qualified Plans. The

insulation of the Trust from those

individuals who are disqualified under

the Act remains in place. Applying the

requirements of section 9(a) because of

investment by Qualified Plans would be

64730 Federal Register / Vol. 65, No. 210 / Monday, October 30, 2000 / Notices

1Although section 403(a) of ERISA provides plan

trustees with complete discretion to manage and

control their plan, including exercising any voting

rights attributable to investment securities held by

the plan, nothing therein prohibits the trustees from

obligating themselves to solicit and follow voting

instructions from plan participants. However, it is

not generally a common practice for plan trustees

to undertake such obligations, even for 401(k)

plans.

unjustified and would not serve any

regulatory purpose. Since the Qualified

Plans are not investment companies and

will not be deemed to be affiliated

solely by virtue of their shareholdings,

no additional relief is necessary.

15. Rules 6e–2(b)(15) and 6e–

3(T)(b)(15) under the Act give the

Participating Insurance Companies the

right to disregard voting instructions of

contract owners. Rules 6e–

2(b)(15)(iii)(A) and 6e–3(T)(b)(15)(iii)(A)

each provide that the insurance

company may disregard the voting

instructions of its contract owners with

respect to the investments of an

underlying fund, or any contract

between a fund 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) under the Act). Rules 6e–

2(b)(15)(iii)(B) and 6e–

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

the insurance company may disregard

voting instructions of contract owners if

the contract owners initiate any change

in the underlying investment company’s

investment policies, principal

underwriter, or any investment adviser

(subject to the provisions of paragraphs

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

Rules 6e–2 and 6e–3(T) under the Act).

These rights do not raise any issues

different from those raised by the

authority of state insurance

administrators over separate accounts.

Under Rules 6e–2(b)(15) and 6e–

3(T)(b)(15), an insurer can disregard

voting instructions of contract owners

only with respect to certain specified

items.

16. The potential for disagreement

among Participating Separate Accounts

is limited by the requirements in Rules

6e–2 and 6e–3 that a Participating

Insurance Company’s disregard of

voting instructions be reasonable and

based on specific good faith

determinations. Voting instructions

with respect to a change in investment

policies may be disregarded only if such

disapproval is reasonable and the

insurance company makes a good faith

determination that such change would:

(a) Violate state law; (b) result in

investments that were not consistent

with the investment objectives of the

separate account; or (c) result in

investments that 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. Voting

instructions with respect to a change in

the principal underwriter may be

disapproved if such disapproval is

reasonable. Voting instructions with

respect to a change in an investment

adviser may be disregarded only if such

disapproval is reasonable and the

insurance company makes a good faith

determination that: (a) The adviser’s fee

would exceed the maximum rate that

may be charged against the separate

account’s assets; (b) the proposed

adviser may be expected to employ

investment techniques that vary from

the general techniques used by the

current adviser; or (c) the proposed

adviser may be expected to manage the

investment company’s investments in a

manner that would be inconsistent with

its investment objectives or in a manner

that would result in investments that

vary from certain standards.

17. In addition, the sale of shares of

the Funds to Qualified Plans will not

have any impact on the relief requested

in this regard. Shares of the Funds sold

to Qualified Plans will be held by the

trustees of the Plans as mandated by

section 403(a) of ERISA. Section 403(a)

provides that the trustee(s) must have

exclusive authority and discretion to

manage and control a Plan with two

exceptions: (a) when the Plan expressly

provides that the trustee(s) is (are)

subject to the direction of a named

fiduciary who is not a trustee, in which

case the trustee(s) is (are) subject to

proper directions made in accordance

with the terms of the Plan and not

contrary to ERISA, and (b) 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. Unless

one of the two exceptions stated in

section 403(a) applies, Plan trustees

have the exclusive authority and

responsibility for voting proxies. Where

a name fiduciary 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 trustees or

the named fiduciary. Accordingly,

unlike the case with insurance company

separate accounts, the issue of the

resolution of material irreconcilable

conflicts with respect to voting is not

present with respect to Qualified Plans

since such Plans are not entitled to passthrough voting privileges.

18. Even if a Qualified Plan were to

hold a controlling interest in the Trust,

Applicants do not believe that such

control would disadvantage other

investors in the Trust to any greater

extent than is the case when any

institutional shareholder holds a

majority of the voting securities of any

open-end management investment

company. In this regard, Applicants

submit that investment in the Funds by

a Qualified Plan will not create any of

the voting complications occasioned by

mixed and shared funding. Unlike

mixed or shared funding, Plan investor

voting rights cannot be frustrated by

veto rights of insurers or state

regulators.

19. Applicants generally expect many

Qualified Plans to have their trustee(s)

or other fiduciaries exercise voting

rights attributable to investment

securities held by the Qualified Plan in

their discretion. Some of the Qualified

Plans, however, may provide for the

trustee(s), an investment adviser(s) or

another named fiduciary to exercise

voting rights in accordance with

instructions from participants.1

20. Where a Qualified Plan does not

provide participants with the right to

give voting instructions, Applicants

submit that there is no potential for

material irreconcilable conflicts of

interest between or among contract

owners and Plan investors with respect

to voting of the Funds’ shares.

21. Where a Plan provides

participants with the right to give voting

instructions, Applicants see no reason

to believe that participants in Qualified

Plans generally or those in a particular

Plan, either as a single group or in

combination with participants in other

Qualified Plans, would vote in a manner

that would disadvantage contract

owners. The purchase of shares of the

Funds by Qualified Plans that provide

voting rights does not present any

complications not otherwise occasioned

by mixed and shared funding.

22. As demonstrated below, no

increased conflicts of interest would be

present if the Commission grants the

exemptive relief sought hereby.

23. Shared funding does not present

any issues that do not already exist

where a single insurance company is

licensed to do business in several states.

For example, when different

Participating Insurance Companies are

domiciled in different states, it is

possible that the state insurance

regulatory body in a state in which one

Participating Insurance Company is

domiciled could require action that is

inconsistent with the requirements of

insurance regulators in one or more

other states in which other Participating

Insurance Companies are domiciled.

Federal Register / Vol. 65, No. 210 / Monday, October 30, 2000 / Notices 64731

That possibility, however, is no

different and no greater than that which

exists when a single insurer and its

affiliates offer their insurance products

in several states, as currently is

permitted.

24. Affiliations among insurers do not

reduce the potential, if any exists, for

differences in state regulatory

requirements. In any event, the

conditions discussed below (which are

adapted from the conditions included in

Rule 6e–3(T)(b)(15)) are designed to

safeguard against any adverse effects

that differences among state regulatory

requirements may produce. For

example, if a particular state insurance

regulator’s decision conflicts with the

majority of other state regulators, the

affected insurer may be required to

withdraw its Participating Separate

Account’s investment in the Trust.

25. Similarly, affiliation does not

eliminate the potential, if any exists, for

divergent judgments as to when a

Participating Insurance Company could

disregard contract owner voting

instructions. The potential for

disagreement is limited by the

requirement that disregarding voting

instructions be reasonable and based on

specified good faith determinations.

However, if a Participating Insurance

Company’s decision to disregard

Contract owner voting instructions

represents a minority position or would

preclude a majority vote approving a

particular change, such Participating

Insurance Company may be required, at

the election of the Trust, to withdraw its

separate account’s investment in the

Trust and no charge or penalty will be

imposed as a result of such withdrawal.

26. There is no reason why the

investment policies of the Trust, were it

to engage in mixed funding, would or

should materially differ from what those

policies would or should be if the Trust

supported only variable annuity or only

variable life insurance contracts. Hence,

there is no reason to believe that

conflicts of interest would result from

mixed funding. Moreover, the Trust will

not be managed to favor or disfavor any

particular insurer or any type of

contract.

27. No one investment strategy can be

identified as appropriate to a particular

insurance product or to a Plan. Each

pool of variable annuity and variable

life insurance contract owners is

composed of individuals of diverse

financial status, age, insurance and

investment goals. Those diversities are

of greater significance than any

differences in insurance products. An

investment company supporting even

one type of insurance product must

accommodate those diverse factors.

28. The sale of shares of the Funds to

Qualified Plans should not increase the

potential for material irreconcilable

conflicts of interest between or among

different types of investors. There

should be very little potential for such

conflicts beyond that which would

otherwise exist between variable

annuity and variable life insurance

contract owners.

29. Section 817(h) of the Code

imposes certain diversification

standards on the assets underlying

Variable Contracts held in the portfolios

of management investment companies.

Treasury Regulation 1.817–5(f)(3)(iii),

which establishes diversification

requirements for such portfolios,

specifically permits, among other

things, ‘‘qualified pension or retirement

plans’’ and separate accounts to share

the same underlying management

investment company. Therefore, neither

the Code, the Treasury regulations nor

the revenue rulings thereunder

recognize or proscribe any inherent

conflicts of interest if Qualified Plans,

variable annuity separate accounts and

variable life separate accounts all invest

in the same management investment

company.

30. While there are differences in the

manner in which distributions from

Variable Contracts and Qualified Plans

are taxed, the tax consequences do not

raise any conflicts of interest. When

distributions are to be made, and the

Participating Separate Account or a

Qualified Plan cannot net purchase

payments to make the distribution, the

Separate Account or the Plan will

redeem shares of the Trust at their net

asset value in conformity with Rule

22c–1 under the Act to provide

proceeds to meet distribution needs.

The Qualified Plan will then make

distributions in accordance with the

terms of the Plan. The life insurance

company will surrender values from the

Separate Account into the general

account to make distributions in

accordance with the terms of the

Variable Contract.

31. It is possible to provide an

equitable means of giving voting rights

to Participating Separate Account

contract owners and to Qualified Plans.

The transfer agent for the Trust will

inform each Participating Insurance

Company of each Participating Separate

Account’s share ownership in the Trust,

as well as inform the trustees of

Qualified Plans of their holdings. The

Participating Insurance Company then

will solicit voting instructions in

accordance with Rules 6e–2 and 6e–

3(T), as applicable, and its participation

agreement with the Trust. Shares held

by Qualified Plans will be voted in

accordance with applicable law. The

voting rights provided to Qualified

Plans with respect to shares of the Trust

would be no different from the voting

rights that are provided to Qualified

Plans with respect to shares of funds

sold to the general public.

32. The ability of the Trust to sell its

shares directly to Qualified Plans does

not create a ‘‘senior security,’’ as such

term is defined under section 18(g) of

the Act, with respect to any contract

owner as opposed to a Qualified Plan

participant. As noted above, regardless

of the rights and benefits of Qualified

Plan participants or contract owners, the

Qualified Plans and the Participating

Separate Accounts only have rights with

respect to their respective shares of the

Trust. They can only redeem such

shares at their net asset value. No

shareholder of any of the Trust has any

preference over any other shareholder

with respect to distribution of assets or

payment of dividends.

33. There are no conflicts between the

contract owners of Participating

Separate Accounts and Qualified Plan

participants with respect to the state

insurance commissioners’ veto powers

(direct with respect to variable life and

indirect with respect to variable

annuity) over investment objectives.

The basic premise of shareholder voting

is that shareholders may not all agree

with a particular proposal. While the

interests and opinions of shareholders

may differ, however, this does not mean

that there are any inherent conflicts of

interest between or among such

shareholders. State insurance

commissioners have been given the veto

power in recognition of the fact that

insurance companies usually cannot

simply redeem their separate accounts

out of one fund and invest in another.

Generally, time-consuming, complex

transactions must be undertaken to

accomplish such redemptions and

transfers. Trustees of Qualified Plans, on

the other hand, can make the decision

quickly and redeem their shares of the

Trust and reinvest in another funding

vehicle without the same regulatory

impediments faced by separate accounts

or, as is the case with most Plans, even

hold cash pending suitable investment.

Based on the foregoing, even if there

should arise issues where the interests

of contract owners and the interests of

Qualified Plans are in conflict, the

issues can be almost immediately

resolved because the trustees of the

Qualified Plans can, on their own,

redeem the shares out of the Trust.

34. There does not appear to be any

greater potential for material

irreconcilable conflicts arising between

the interests of Qualified Plan

64732 Federal Register / Vol. 65, No. 210 / Monday, October 30, 2000 / Notices

participants and contract owners of

Participating Insurance Companies from

possible future changes in the federal

tax laws than that which already exists

between variable annuity and variable

life insurance contract owners.

35. Applicants recognize that the

foregoing is not an all inclusive list, but

rather is representative of issues which

they believe are relevant to this

application. Applicants believe that the

discussion contained herein

demonstrates that the sale of shares of

the Funds to Qualified Plans and

Variable Contracts does not increase the

risk of material irreconcilable conflicts

of interest. Furthermore, the use of the

Trust with respect to variable life

insurance contracts and Qualified Plans

is not substantially different from the

Trust’s current use, in that variable

insurance contracts and Qualified Plans,

like variable annuity contracts, are

generally long-term retirement vehicles.

36. Various factors have prevented

more insurance companies from offering

variable annuity and variable life

insurance contracts than currently do

so. These factors include the costs of

organizing and operating a funding

medium, the lack of expertise with

respect to investment management

(principally with respect to stock and

money market investments) and the lack

of public name recognition as

investment professionals. 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.

37. Use of the Funds as common

investment media for Variable Contracts

would ameliorate these concerns.

Participating Insurance Companies

would benefit not only from the

investment advisory and administrative

expertise of Wachovia and its affiliates,

but also from the cost efficiencies and

investment flexibility afforded by a large

pool of funds. Therefore, making the

Funds available for mixed and shared

funding will encourage more insurance

companies to offer Variable Contracts.

This should result in increased

competition with respect to both

Variable Contract design and pricing,

which can be expected to result in more

product variation and lower charges.

Contract owners would benefit because

mixed and shared funding should

eliminate a significant portion of the

costs of establishing and administering

separate funds.

38. Moreover, sale of the shares of the

Funds to Qualified Plans should further

increase the amount of assets available

for investment by the Funds. This, in

turn, should inure to the benefit of

contract owners by promoting

economies of scale, by permitting

greater safety through greater

diversification, and by making the

addition of new series to the Trust more

feasible.

39. Regardless of the type of

shareholder in the Funds, Wachovia is

or would be contractually or otherwise

obligated to manage each Fund solely

and exclusively in accordance with that

series’ investment objectives, policies

and restrictions as well as any

guidelines established by the board of

trustees of the Trust.

Applicants’ Conditions

Applicants consent to the following

conditions:

1. A majority of the Board of Trustees

of each Trust (‘‘Board’’) will consist of

persons who are not ‘‘interested

persons’’ of the Trust, as defined by

section 2(a)(19) of the 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 the death, disqualification,

or bona fide resignation of any Trustee

or Trustees, then the operation of this

condition shall be suspended (a) for a

period of 45 days if the vacancy or

vacancies may be filled by the Board; (b)

for a period of 60 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.

2. Each Board will monitor its

respective Trust for the existence of any

material irreconcilable conflict between

the interests of the contract owners of

all Participating Separate Accounts and

of the participants in Qualified Plans

investing in such Trust 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, noaction 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 investment of such Trust

are being managed; (e) a difference in

voting instructions given by variable

annuity contract owners and variable

life insurance contract owners and

trustees of the Qualified plans; (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 its

participants.

3. Participating Insurance Companies,

Wachovia or an affiliate, or any other

investment adviser of the Trusts, and

any Qualified Plans that execute a fund

participation agreement upon becoming

an owner of 10% or more of the assets

of any Fund (‘‘Participants’’) will report

any potential or existing conflicts to the

relevant Board. Participants will be

responsible for assisting the relevant

Board in carrying out its responsibilities

under these conditions by providing the

relevant Board with all information

reasonably necessary for the Board to

consider any issues raised. This

responsibility includes, but is not

limited to, an obligation of each

Participating Insurance Company to

inform the relevant Board whenever it

has determined to disregard contract

owner voting instructions and, when

pass-through voting is applicable, an

obligation of each Plan to inform the

Board whenever it has determined to

disregard voting instructions from Plan

participants. The responsibilities to

report such information and conflicts

and to assist the Board will be

contractual obligations of all

Participating Insurance Companies and

Plans under their participation

agreements with the Trusts, and such

agreements shall provide, in the case of

Participating Insurance Companies, that

these responsibilities will be carried out

with a view only to the interests of

contract owners, and in the case of

Qualified Plans, that these

responsibilities will be carried out with

a view only to the interest of Plan

participants.

4. If it is determined by a majority of

a Board, or by a majority of its

disinterested Trustees, that a material

irreconcilable conflict exists, the

relevant Participating Insurance

Companies and Plans will, at their

expense and to the extent reasonably

practicable (as determined by a majority

of the disinterested Trustees), take

whatever steps are necessary to remedy

or eliminate the material irreconcilable

conflict, which steps could include: (a)

withdrawing the assets allocable to

some or all of the Participating Separate

Accounts form the relevant Fund and

reinvesting such assets in a different

investment medium, which may include

another Fund, or submitting the

question of whether such reinvestment

should be implemented to a vote of all

affected contract owners and, as

appropriate, segregating the assets of

any appropriate group (i.e, variable

annuity contract owners or variable life

insurance contract owners of one or

more Participating Insurance

Federal Register / Vol. 65, No. 210 / Monday, October 30, 2000 / Notices 64733

Companies) that votes in favor of such

segregation, or offering to the affected

contract owners the option of making

such a change; and (b) establishing a

new registered management investment

company or managed separate account.

If a material irreconcilable conflict

arises because of a Participating

Insurance Company’s decision to

disregard contract owners’ voting

instructions and that decision

represents a minority position or would

preclude a majority vote, then that

insurer may be required, at the relevant

Trust’s election, to withdraw its

separate account’s investment in such

Trust, 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 relevant

Trust’s election, to withdraw its

investment in such Trust and no charge

or penalty will be imposed as a result

of such withdrawal. To the extent

permitted by applicable law, the

responsibility of taking remedial action

in the event of a Board determination of

material irreconcilable conflict and

bearing the cost of such remedial action

will be a contractual obligation of all

Participating Insurance Companies and

Qualified Plans under their agreements

governing participation in the Trust and

these responsibilities will be carried out

with a view only to the interests of

contract owners and Plan participants,

respectively.

For purposes of this Condition 4, a

majority of the disinterested Trustees of

a Board will determine whether or not

any proposed action adequately

remedies any material irreconcilable

conflict, but in no event will the Trust,

Wachovia, or Wachovia’s affiliate, as

relevant, be required to establish a new

funding medium for any Variable

Contract. No Participating Insurance

Company shall be required by this

Condition 4 to establish a new funding

medium for any Variable Contract if an

offer to do so has been declined by vote

of a majority of contract owners

materially and adversely affected by the

material irreconcilable conflict. Further,

no Qualified Plan will be required by

this Condition 4 to establish a new

funding medium for the Plan if (a) an

offer to do so has been declined by vote

of a majority of Plan participants

materially and adversely affected by the

material irreconcilable conflict or (b)

pursuant to governing Plan documents

and applicable law, the Plan makes such

decision without a vote of its

participants.

5. Any Board’s determination of the

existence of a material irreconcilable

conflict and its implications will be

made known promptly and in writing to

all Participants.

6. As to Variable Contracts issued by

Participating Separate Accounts

registered under the Act, Participating

Insurance Companies will provide passthrough voting privileges to all contract

owners so long as the Commission

interprets the Act to require passthrough voting for contract owners.

However, as to Variable Contracts

issued by unregistered Participating

Separate Accounts, pass-through voting

privileges will be extended to contract

owners to the extent granted by the

issuing insurance company.

Accordingly, the Participating Insurance

Companies will vote shares of the

applicable Fund held in their

Participating Separate Accounts in a

manner consistent with voting

instructions timely received from

contract owners. Participating Insurance

Companies will be responsible for

assuring that each of their Participating

Separate Accounts calculates voting

privileges in a manner consistent with

all other Participating Insurance

Companies. The obligation to calculate

voting privileges in a manner consistent

with all other Participating Separate

Accounts will be contractual obligation

of all Participating Insurance Companies

under their participation agreements

with the Trusts. Each Participating

Insurance Company will vote shares for

which it has not received timely voting

instructions, as well as shares

attributable to it, in the same proportion

as it votes shares for which it has

received instructions.

7. Each Qualified Plan will vote as

required by applicable law and

governing Plan documents.

8. 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.

9. The Trusts will notify all

Participants that disclosure in separate

account prospectuses or any Qualified

Plan prospectuses or other Plan

disclosure documents regarding

potential risks of mixed and shared

funding may be appropriate. Each Trust

will disclose in its prospectus that: (a)

The Trust is intended to be a funding

vehicle for variable annuity and variable

life insurance contracts offered by

various insurance companies and for

Plans; (b) due to differences of tax

treatment and other considerations, the

interests of various contract owners

participating in the Trust and the

interest of Qualified Plans investing in

the Trust may conflict; and (c) the Board

will monitor the Trust for the existence

of any material conflicts and determine

what action, if any, should be taken.

10. The Trusts 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 shares of the Trusts), and, in

particular, each Trust 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 the

Trusts are not within the trusts

described in section 16(c)) as well as

with Section 16(a), and, if applicable,

section 16(b) of the Act. Further, each

Trust will act in accordance with the

Commission’s interpretation of the

requirements of section 16(a) with

respect to periodic elections of directors

(or trustees) and with whatever rules the

Commission may promulgate with

respect thereto.

11. If and to the extent that Rules 6e–

2 and 6e–3(T) are amended (or if 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 by Applicants, then the Trusts

and/or Participating Insurance

Companies, as appropriate, shall take

such steps as may be necessary to

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

amended, or Rule 6e–3, as adopted, to

the extent applicable.

12. No less than annually, the

Participants shall submit to each Board

such reports, materials, or data as the

Board may reasonably request so that

the Board may carry out fully the

obligations imposed upon it by the

conditions contained in the application.

Such reports, materials, and data shall

be submitted more frequently if deemed

appropriate by the Board. The

obligations of the Participants to

provide these reports, materials, and

data to a Board when it so reasonably

requests shall be a contractual

obligation of all Participants under their

participation agreements with the

Trusts.

64734 Federal Register / Vol. 65, No. 210 / Monday, October 30, 2000 / Notices

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

2 17 CFR 240.19b–4.

3See October 18, 2000 letter from Linda Christie,

Exchange, to Heidi Pilpel, Special Counsel,

Division of Market Regulation, SEC (‘‘Amendment

No. 1’’). In Amendment No. 1, the Exchange

requested that the proposed rule change be filed

under Section 19(b)(3)(A) of the Act and Rule 19b–

4(f)(6) thereunder. 15 U.S.C. 78s(b)(3)(A) and 17

CFR 240.19b–4(f)(6). The Exchange also requested

that the Commission treat the original proposed

rule change as the 5 day prefiling notice required

under Rule 19b–4(f)(6); and requested that the

Commission waive the 30-day period before the

proposal becomes effective to permit the proposed

rule change to become immediately effective.

4 15 U.S.C. 78s(b)(3)(A).

5 17 CFR 240.19b–4(f)(6).

6See Securities Exchange Act Release No. 41210

(March 24, 1999), 64 FR 15857 (April 1, 1999), (SR–

Phlx–96–14).

7The Commission requested that the Exchange

provide a report that: (i) addresses the overall

reliability of the System and identifies any System

outages or other technical problems; (ii) provides a

summary of the Exchange’s surveillance efforts; (iii)

discusses the strategies employed by the users and

committers and evaluates whether the system is

useful to market participants; (iv) provides feedback

from Exchange members and non-members

regarding their experience with the system; and (v)

measures the system’s impact and effect on the

primary market of eligible securities. The Exchange

submitted its report in September 2000, which

report identified no significant problems with the

operation of the System.

8 15 U.S.C. 78f(b)(5).

9 15 U.S.C. 78s(b)(3)(A).

10 17 CFR 240.19b–4(f)(6).

13. In the event that a Qualified Plan

should ever become an owner of 10% or

more of the assets of a Fund, such

Qualified Plan will execute a

participation agreement with the

relevant Trust including the conditions

set forth herein, to the extent applicable.

A Qualified Plan will execute an

application containing an

acknowledgment of this condition at the

time of its initial purchase of shares of

the relevant Fund.

Conclusion

For the reasons summarized above,

Applicants submit that the requested

exemptions are necessary and

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.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–27749 Filed 10–27–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43477); File No. SR–Phlx–

00–84]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Philadelphia Stock Exchange, Inc.

Amending PHLX Rule 237 to Extend

the Pilot Program for eVWAP until

November 30, 2001

October 23, 2000.

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on

September 1, 2000, the Philadelphia

Stock Exchange, Inc. (‘‘PHLX’’ or

‘‘Exchange’’), filed a proposed rule

change with the Securities and

Exchange Commission (‘‘SEC’’ or

‘‘Commission’’). The proposed rule

change is described in Items I, II, and III

below, which Items have been prepared

by Exchange. On October 18, 2000, the

Exchange filed Amendment No. 1 to the

proposed rule change.3 The Exchange

filed the proposed rule change, as

amended, pursuant to Section

19(b)(3)(A) of the Act,4 and Rule 19b–

4(f)(6) thereunder,5 which renders the

proposed rule change effective upon

filing with the Commission. The

Commission is publishing this notice to

solicit comments on the proposed rule

change, as amended, from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to extend the

pilot program for the Volume Weighted

Average Price Trading System

(‘‘eVWAP’’ or ‘‘System’’) until

November 30, 2001.

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 these

statements may be examined at the

places specified in Item IV below. The

Exchange has prepared summaries, set

forth in sections A, B, and C below, of

the most significant aspects of such

statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The eVWAP is a pre-opening order

matching session for the electronic

execution of large-sized stock orders at

the volume weighted average price. The

Exchange received Commission

approval to operate eVWAP as a one

year pilot on March 24, 1999.6 The

System became operational on August

27, 1999. As a condition to the pilot

program, the Commission requested that

the Exchange prepare a comprehensive

report pertaining to the operation and

effectiveness of the eVWAP.7

The Exchange now proposes to extend

the current pilot program until

November 30, 2001. Extension of the

pilot program for another year will

allow the Exchange and the Commission

additional time to assess the

effectiveness of the System and its

impact on investors and the market as

a whole.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b)(5) of the Act 8 in that it is

designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, to remove impediments to and

perfect the mechanism of a free and

open market and a national market

system, and, in general, to protect

investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change, as amended,

will result in any burden on

competition that is not necessary or

appropriate in furtherance of the

purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

The Exchange has neither solicited

nor received written comments on the

proposed rule change, as amended.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective upon filing pursuant to Section

19(b)(3)(A)(iii) of the Act 9 and Rule

19b–4(f)(6) 10 thereunder because the

proposed rule change does not (i)

significantly affect the protection of

investors or the public interest; (ii)

impose any significant burden on

competition; and (iii) become operative

for 30 days from the date on which the

proposed rule change was filed, or such

shorter time as the Commission may

designate. At any time within 60 days