27362 Federal Register / Vol. 60, No. 99 / Tuesday, May 23, 1995 / Notices

22The current SDFS Participants Fund consists of

approximately $253 million in cash contributions,

$50 million in internal sources, $500 million in

external lines of credit and $500 million in

additional external lines of credit exclusively

dedicated to the MMI program.

23 ‘‘Federal Reserve Policy Statement on Private

Delivery-Against-Payment Systems,’’ Board of

Governors of the Federal Reserve System (June 15,

1989).

24A participant’s net debit cap currently is the

least of the following: (1) An amount which is a

multiple of the participant’s mandatory and

voluntary deposits in the fund; (2) an amount equal

to 75% of DTC’s lines of credit; (3) an amount, if

any, determined by the participant’s settling bank;

or (4) an amount, if any, determined by DTC.

25Because a participant’s current adjustable net

debit cap is based on the participant’s mandatory

fund deposit, it will only change on a monthly basis

as the required deposit changes. However, a

participant may choose to increase its adjustable net

debit cap at any time by making voluntary deposits.

26Supra note 15. 27 17 CFR 200.30–3(a)(12) (1994).

million in cash deposit and $700

million in committed line(s) of credit.22

In the event that a participant fails to

settle for any reason, the all-cash fund

in most cases should provide enough

immediate liquidity to complete

settlement without causing DTC to use

its lines of credit. The size of the fund,

$400 million in cash, was designed to

provide sufficient liquidity to cover all

but a few of DTC’s largest participants’

individual net settlement debits. The

$700 million in committed lines of

credit should provide additional

liquidity sufficient to cover the large

end-of-day net debits expected to be

produced by these few largest

participants with the application of a

new net debit cap of $900 million.

Although the minimum deposit to the

Participants Fund has been decreased

from $200,000 to $10,000, participants

will be required to deposit additional

amounts based on the size of their

intraday net debits weighted against

other participants’ net debits. As a

result, the cash deposits in the SDFS

system fund will be increased from $210

to $400 million. The allocation under

the new Participants Fund formula will

apportion fund deposits among

participants in proportion to the

liquidity requirements they generate in

the system. The new Participants Fund

formula also will more accurately reflect

each participant’s liquidity

requirements because it is based on a

participant’s net debit peaks for the

prior sixty days. The current fund

formula is based on a participant’s

average gross debits and credits only for

the prior month. While the use of gross

debits and credits reflects a participant’s

activity levels, the use of net debit peaks

reflects a participants actual liquidity

needs.

The changes to DTC’s risk

management controls also are intended

to protect DTC and its participants

against the inability of one or more

participants to fulfill its or their

settlement obligations. DTC’s risk

management controls are based on the

Board of Governors of the Federal

Reserve System’s guidelines for bookentry securities systems that settle over

Fedwire.23 The new net debit cap

formula establishes a single net debit

cap as opposed to the several adjustable

and fixed net debit caps currently used

in the SDFS system.24 The new net debit

cap will better reflect the participants

most recent liquidity needs and not just

its liquidity needs for the prior month25

because it will be calculated daily using

a 90-day rolling average.26 By requiring

participants to have sufficient collateral

to support their net debits and by

ensuring that their net debits do not

exceed their net debit caps, the new

LPNC procedure should help to ensure

that the occurrence of a combined MMI

issuer’s default and a participant’s

failure to settle does not expose DTC to

loss and liquidity risks. The application

of the LPNC procedure to both the net

debit cap and the collateralization

procedures should result in a failing

participant’s net debit remaining

collateralized and within its net debit

cap if the MMI issuer in which it has the

largest net credit also defaulted.

The rule change implements certain

modifications to DTC’s current SDFS

system to provide for an efficient

conversion to SDFS environment for all

securities transactions. The Commission

believes that the overall conversion to a

SDFS system will help reduce systemic

risk by eliminating overnight credit risk.

The SDFS system also will reduce risk

by achieving closer conformity with the

payment methods used in the

derivatives markets, government

securities markets and other markets.

For the reasons described above, the

Commission believes that DTC’s

proposed rule change fulfills the

requirements of Section 17A(b)(3)(F) of

the Act because the proposal assures the

safeguarding of securities and funds in

the custody and control of DTC.

Furthermore, the proposed rule change

facilitates the overall conversion of

DTC’s payment system to an SDFS

system which should facilitate the

prompt and accurate clearance and

settlement of securities transactions.

DTC has requested that the

Commission find good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice of the filing. The

Commission finds good cause for so

approving the proposed rule change

because the modifications implemented

by the rule change are part of the

planned conversion of DTC’s entire

money settlement system to an SDFS

system. The Commission believes that

participants should have the

opportunity to become familiar with the

SDFS system capability and the new

risk management controls prior to the

complete conversion to an SDFS system

for securities transactions.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposal is

consistent with the requirements of the

Act, particularly with Section

17A(b)(3)(F) of the Act and the rules and

regulations thereunder.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act, that the

proposed rule change (File No. SR–

DTC–95–06) be, and hereby is,

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.27

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–12520 Filed 5–22–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. IC–21075; 812–9530]

Northern Life Insurance Company, et

al.; Notice of Application

May 16, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

Order under the Investment Company

Act of 1940 (the ‘‘Act’’).

APPLICANTS: Northern Life Insurance

Company (‘‘Northern Life’’), Separate

Account One (the ‘‘Separate Account’’),

and Washington Square Securities, Inc.

(the ‘‘Distributor’’).

RELEVANT ACT SECTIONS: Order requested

under section 6(c) of the Act granting an

exemption from sections 26(a)(2)(C) and

27(c)(2) of the Act.

SUMMARY OF APPLICATION: Applicants

request an order permitting Northern

Life to deduct a mortality and expense

risk charge from the assets of the

Separate Account in connection with

the offering of certain flexible premium

individual deferred variable annuity

contracts.

FILING DATE: The application was filed

on March 20, 1995.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be
Federal Register / Vol. 60, No. 99 / Tuesday, May 23, 1995 / Notices 27363

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 13, 1995, 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 SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Applicants, c/o James E. Nelson, Esq.,

ReliaStar Financial Corp., 20

Washington Avenue South,

Minneapolis, Minnesota 55401.

FOR FURTHER INFORMATION CONTACT:

Sarah A. Wagman, Staff Attorney, at

(202) 942–0654, or Robert A. Robertson,

Branch Chief, at (202) 942–0564

(Division of Investment Management,

Office of Investment Company

Regulation).

SUPPLEMENTARY INFORMATION: Following

is a summary of the application. The

complete application may be obtained

for a fee from the SEC’s Public

Reference Branch.

Applicants’ Representations

1. Northern Life, a stock life insurance

company, is incorporated under

Washington law. Northern Life is an

indirect, wholly-owned subsidiary of

ReliaStar Financial Corp.

2. The Separate Account was

established by Northern Life as a

funding medium for certain flexible

premium individual deferred variable

annuity contracts (the ‘‘Contracts’’). The

Separate Account is registered with the

SEC as a unit investment trust under the

Act. Units of interest in the Separate

Account under the Contracts will be

registered under the Securities Act of

1933.

3. The Separate Account currently is

divided into subaccounts which invest

in the series (‘‘Series’’) of Variable

Insurance Products Fund, Variable

Insurance Products Fund II, or

Northstar/NWNL (each, a ‘‘Fund’’). Each

Fund is a diversified, open-end

management investment company. Each

Series has separate investment

objectives and policies.

4. The Distributor is the distributor

and principal underwriter of the

Contracts. The Distributor is registered

under the Securities Exchange Act of

1934 as a broker-dealer, and is a

member of the National Association of

Securities Dealers, Inc.

5. The Contracts consist of two series

of flexible premium individual deferred

variable annuity contracts. The first

series of Contracts consists of an

individual deferred tax-sheltered

annuity contract, an individual deferred

retirement annuity contract, and an

individual deferred annuity contract

(the ‘‘Transfer Series Contracts’’). The

second series of Contracts consists of a

flexible premium individual deferred

tax-sheltered annuity contract and a

flexible premium individual deferred

retirement annuity contract (the ‘‘Flex

Series Contracts’’).

6. The minimum purchase payment

for a Transfer Series Contract is $15,000,

and subsequent payments must be at

least $5,000. The minimum purchase

payment, and minimum subsequent

payment, for a Flex Series Contract is

$50. Purchase payments may be

allocated to one or more of the

subaccounts of the Separate Account

which have been established to support

the Contracts, or to Fixed Account A or

Fixed Account B, which are part of the

general account of Northern Life.

7. Several annuity payout options, on

both a fixed and variable basis, are

available under the Contracts. Northern

Life also provides a guaranteed death

benefit. If the Contract owner (or, in the

case of certain Transfer Series Contracts,

the annuitant) dies prior to age 80, the

death benefit is equal to the greater of

(i) all purchase payments less any

withdrawals, amounts used to purchase

annuity payouts, any outstanding loan

balance, and the amount of previously

deducted annual Contract charges, (ii)

the Contract value less any outstanding

loan balance, or (iii) the Contract value

on the most recent Contract anniversary

that is a multiple of six years, measured

from the Contract issue date, plus any

purchase payments since that

anniversary and minus any

withdrawals, amounts used to purchase

annuity payouts, and any previously

deducted annual Contract charges since

that anniversary, and less any

outstanding loan balance. If the Contract

owner (or, in the case of certain Transfer

Series Contracts, the annuitant) dies on

or after age 80, the death benefit is the

Contract value less the outstanding loan

balance. If the Contract owner of a

Transfer Series individual deferred

annuity Contract dies at any age, the

death benefit will be equal to the

Contract value less any applicable

contingent deferred sales charge, any

outstanding loan balance and the $30

annual Contract charge.

8. Among the various charges and fees

Northern Life will deduct under the

Contracts is an annual Contract charge

of $30 designed to compensate Northern

Life for the administrative services

provided under the Contracts. It will be

deducted pro rata from the fixed

accounts and each Separate Account

subaccount, and is guaranteed not to

increase.

9. Northern Life also will deduct from

the assets of the Separate Account a

daily asset administration charge, equal

to an annual rate of .15%. This charge

is designed to reimburse Northern Life

for administrative services it provides

with respect to the Contracts and the

Separate Account, and is guaranteed not

to increase.

10. Northern Life does not currently

intend to impose a charge for any

transfers among the Separate Account

subaccounts and the fixed accounts, but

reserves the right to impose a charge of

up to $25 for each transfer. Northern

Life also does not currently intend to

impose a processing fee for partial

withdrawals of Contract value, but

reserves the right to assess a fee not to

exceed the lesser of 2% of the partial

withdrawal account, of $25.

11. These administrative charges will

be deducted in reliance on rule 26a–1

under the Act, and each represents

reimbursement only for administration

costs expected to be incurred over the

life of the Contracts. Northern Life does

not anticipate any profit from any of

these charges. Administrative charges

may be reduced or waived under certain

circumstances.

12. Northern Life may assess a

contingent deferred sales charge

(‘‘CDSC’’) in the event of any partial or

full withdrawal of Contract value under

the Transfer Series Contracts and the

Flex Series Contracts. The CDSC for the

Transfer Series Contracts is calculated

as a percentage of each purchase

payment. The CDSC will apply during

the year the Contract takes effect and for

the five Contract years immediately

thereafter, according to the following

schedule:

Contract year of withdrawal minus contract year

of purchase payment

Withdrawal

charge as a percentage of each

purchase payment (percent)

0 ........................................ 6

1 ........................................ 6

2 ........................................ 5

3 ........................................ 5

4 ........................................ 4

5 ........................................ 2

6 and later ........................ 0

For purposes of imposing the CDSC,

purchase payments are considered to be

withdrawn on a first-in, first-out basis,
27364 Federal Register / Vol. 60, No. 99 / Tuesday, May 23, 1995 / Notices

and purchase payments are considered

to be withdrawn before earnings

thereon. No CDSC is imposed upon

either annuitization or payment of the

death benefit, except that if the Contract

owner of a Transfer Series individual

deferred annuity Contracts dies, a CDSC

is deducted upon payment of the death

benefit.

13. The CDSC for the Flex Series

Contracts is calculated as a percentage

of Contract value withdrawn. The CDSC

may be assessed against any full or

partial withdrawal of Contract value

occurring before the eleventh Contract

year, in accordance with the following

schedule:

Contract year Withdrawal

charge

1 ........................................ 8

2 ........................................ 8

3 ........................................ 8

4 ........................................ 7

5 ........................................ 6

6 ........................................ 5

7 ........................................ 4

8 ........................................ 3

9 ........................................ 2

10 ...................................... 1

11+ .................................... 0

No CDSC is imposed upon either

annuitization or payment of the death

benefit.

14. Under both the Transfer Series

Contracts and the Flex Series Contracts,

the Contract owner may withdraw a

portion of the Contract value during any

12-month period after the issue date of

the Contract without Northern Life

deducting a CDSC. The amount on

which no CDSC will be imposed is the

greater of: (i) 10% of the Contract value

less any outstanding loan balance, or (ii)

the purchase payments remaining

which are no longer subject to a CDSC

(Transfer Series Contracts) or the

Contract value no longer subject to a

CDSC (Flex Series Contracts). This

privilege may only be exercised a

limited number of times during any 12-

month period. In addition, the CDSC

may be reduced or waived under certain

circumstances.

15. Northern Life does not anticipate

that CDSC revenues from the Transfer

Series Contracts and the Flex Series

Contracts will generate sufficient funds

to pay the cost of distributing the

Contracts. If CDSC revenues are

insufficient to cover distribution

expenses, the deficiency will be met

with amounts from Northern Life’s

general account, which may include

amounts derived from the mortality and

expense risk charge.

16. Northern Life may deduct any

applicable premium taxes levied by any

unit of government. As permitted or

required by applicable state law,

Northern Life may deduct premium

taxes from purchase payments upon

receipt, or deduct premium taxes from

Contract value at a later date.

17. Northern Life proposes to assess a

charge to compensate it for bearing

certain mortality and expense risks in

connection with both Contracts. This

charge is equal to an effective annual

rate of 1.25% of the value of the assets

in the Separate Account. Of that

amount, .85% is attributable to

mortality risks, and .40% is attributed to

expense risks. The rate of the mortality

and expense risk charge is guaranteed

not to increase.

18. The mortality risk arises from

Northern Life’s contractual obligation to

make annuity payments regardless of

how long all annuitants, or any

individual annuitant, may live. This

obligation assures that neither an

annuitant’s own longevity, nor an

improvement in general live

expectancy, will adversely affect the

monthly annuity payments that an

annuitant will receive under a Contract.

Northern Life also incurs a mortality

risk in connection with the death

benefit guarantee. In addition, Northern

Life assumes the expense risk that its

actual administrative costs will exceed

the amount recovered through the

administrative charges.

19. If the mortality and expense risk

charge is insufficient to cover Northern

Life’s actual costs and assumed risks,

the loss will fall on Northern Life. If the

charge is more than sufficient to cover

costs, any excess will be profit to

Northern Life. Northern Life currently

anticipates a profit from this charge.

Applicant’s Legal Analysis

1. Applicants request an exemption

under section 6(c) of the Act from

sections 26(a)(2)(C) and 27(c)(2) of the

Act to permit the deduction of a

mortality and expense risk charge from

the assets of the Separate Account under

the Contracts.

2. Sections 26(a)(2)(C) and 27(c)(2) of

the Act, in relevant part, prohibit a

principle underwriter for, or depositor

of, a registered unit investment trust

from selling periodic payment plan

certificates unless the proceeds of all

payments, other than sales loads, on

such certificates are deposited with a

qualified trustee or custodian, within

the meaning of section 26(a)(1), and are

held under arrangements that prohibit

any payment to the depositor or

principal underwriter except a

reasonable fee, as the SEC may

prescribe, for performing bookkeeping

and other administrative duties

normally performed by the trustee or

custodian. Northern Life’s deduction of

a mortality and expense risk charge

from the assets of the Separate Account

may be deemed to be a payment

prohibited by sections 26(a)(2)(C) and

27(c)(2).

3. Section 6(c) of the Act authorizes

the SEC, by order upon application, to

grant an exemption from any provision

of the Act, or any rule or regulation

promulgated 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.

4. Applicants believe that Northern

Life is entitled to reasonable

compensation for its assumption of

mortality and expense risks. Applicants

represent that the proposed mortality

and expense risk charge of 1.25% is

consistent with the protection of

investors because it is a reasonable and

proper insurance charge. The charge is

a reasonable one to compensate

Northern Life for the risks that: (i)

Annuitants under the Contracts will live

longer individually or as a group than

has been anticipated in setting the

annuity rates guaranteed in the

Contracts; (ii) the Contract value will be

less than the death benefit; and (iii)

administrative expenses will be greater

than amounts derived from the

administrative charges.

5. Northern Life represents that the

1.25% mortality and expense risk

charge under the Contracts is within the

range of industry practice for

comparable annuity products. This

representation is based upon Northern

Life’s analysis of publicly available

information about similar industry

products, taking into consideration such

factors as current charge levels, the

existence of charge level guarantees, and

guaranteed annuity rates. Northern Life

will maintain at its administrative

offices, and make available to the SEC

upon request, a memorandum setting

forth in detail the products analyzed in

the course of, and the methodology and

results of, its comparative survey.

6. Applicants acknowledge that if a

profit is realized from the mortality and

expense risk charge, all or a portion of

such profit may be viewed as being

offset by distribution expenses not

reimbursed by CDSC revenues. Northern

Life has concluded that there is a

reasonable likelihood that the proposed

distribution financing arrangements for

the Contracts will benefit the Separate

Account and the Contract owners. The

basis for that conclusion will be set

forth in a memorandum that will be
Federal Register / Vol. 60, No. 99 / Tuesday, May 23, 1995 / Notices 27365

maintained by Northern Life at its

administrative offices and will be

available to the SEC.

7. Northern Life states that the

Separate Account will invest only in

those management investment

companies that undertake, in the event

such company should adopt a plan

under rule 12b–1 under the Act to

finance distribution expenses, to have a

board of directors (or trustees), a

majority of whom are not ‘‘interested

persons’’ of such investment company,

formulate and approve any such plan

pursuant to rule 12b–1.

Conclusion

For the reasons set forth above,

applicants believe that the requested

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.

For the SEC, by the Division of Investment

Management, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–12598 Filed 5–22–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21079; 812–9496]

Quest for Value Distributors, et al.;

Notice of Application

May 17, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘Act’’).

APPLICANTS: Quest for Value’s Unit

Investment Laddered Trust Series

(‘‘Quilts’’) and Quest for Value

Distributors (‘‘Quest Distributors’’ or the

‘‘Sponsor’’).

RELEVANT ACT SECTIONS: Order requested

under sections 11(a) and 11(c).

SUMMARY OF APPLICATION: Applicants

request an order to permit certain offers

of exchange between unit investment

trusts.

FILING DATES: The application was filed

on February 23, 1995, and amended on

April 12, 1995 and May 5, 1995.

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 12, 1995, 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 who wish to be notified of a

hearing may request notification by

writing to the SEC’s Secretary.

ADDRESSES: Secretary: SEC, 450 5th

Street NW, Washington, DC 20549.

Applicants: Two World Trade Center,

225 Liberty Street, New York, New York

10080–6116.

FOR FURTHER INFORMATION CONTACT:

Elaine M. Boggs, Staff Attorney (202)

942–0572, or C. David Messman, Branch

Chief, at (202) 942–0564 (Division of

Investment Management, Office of

Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application is

available for a fee at the SEC’s Public

Reference Branch.

Applicants’ Representations

1. Quilts is a series of unit investment

trusts registered under the Act and is

sponsored by Quest Distributors. Quilts

consists of Quilts Monthly Income—

U.S. Treasury Series 1, Quilts Asset

Builder—U.S. Series 3, Quilts Income—

Corporate Series 1, and Quilts

Municipal Insured Series 1. Applicants

also request relief for future series of

Quilts and subsequently issued unit

investment trusts sponsored by the

Sponsor or a sponsor controlled by or

under common control with the

Sponsor and registered (or to be

registered) under the Securities Act of

1933 and the Act (collectively with

Quilts, the ‘‘Trusts’’).

2. The sales charge for initial

investment in the Trusts currently

ranges between .85% to 4.5% of the

public offering price, subject to

discounts for certain volume

transactions. Quest Distributors intends

to maintain a secondary market for the

units of each series, although it is not

obligated to do so. The sales charge

upon units sold in the secondary market

ranges from .85% to 4.5% plus net

accrued interest.

3. Applicants propose to offer an

exchange privilege to unitholders of the

Trusts at a reduced sales charge (the

‘‘Exchange Privilege’’). Unitholders

would be able to exchange any of their

units for units in one or more available

series of the Trusts (the ‘‘Exchange

Trust’’). Applicants also propose to offer

a rollover privilege to unitholders of the

Trusts at a reduced sales charge (the

‘‘Rollover Privilege’’). Unitholders

would be able to ‘‘roll over’’ their units

in a series which is terminating for units

of one or more new series of the Trusts

(the ‘‘Rollover Trust’’).

4. To exercise the Exchange or

Rollover Privilege, a unitholder must

notify the Sponsor. Exercise of the

Exchange or Rollover Privilege is subject

to the following conditions: (a) The

Sponsor must be maintaining a

secondary market in units of the Trust

held by the unitholder and units of the

Trust to be acquired in the exchange, (b)

at the time of the exchange, there must

be units of the Exchange or Rollover

Trust to be acquired available for sale,

and (c) exchanges will be in whole units

only.

5. Unitholders who wish to exchange

units under the Exchange or Rollover

Privileges within the first five months of

purchase will not be eligible for the

reduced sales charge. Such unitholders

will be charged a sales load equal to the

greater of (a) the reduced sales load or

(b) an amount which, when added to the

sales charge paid by the unitholder

upon his or her original purchase of

units of the Trusts, would equal the

sales charge applicable to the direct

purchase of the newly acquired units,

determined as of the date of exchange.

Applicants’ Legal Analysis

1. Section 11(a) requires SEC approval

of an offer to exchange securities

between open-end investment

companies if the exchange occurs on

any basis other than the relative net

asset values of the securities to be

exchanged. Section 11(c) makes section

11(a) applicable to any type of exchange

offer of securities of registered unit

investment trusts for the securities of

any other investment company,

irrespective of the basis of exchange.

2. Applicants represent that

unitholders will not be induced or

encouraged to participate in the

exchange privilege through an active

advertising or sales campaign. Quest

Distributors recognizes its responsibility

to its customers against generating

excessive commissions through

churning and asserts that the sales

charge collected will not be a significant

economic incentive to salesmen to

promote inappropriately the exchange

privilege. Applicants further believe

that the Exchange and Rollover

Privileges 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.