[Federal Register Volume 60, Number 12 (Thursday, January 19, 1995)]
[Notices]
[Pages 3897-3898]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1286]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20837; File No. 812-9284]


Hartford Life and Accident Insurance Company, et al.

January 12, 1995.
AGENCY: Securities and Exchange Commission (``the Commission'').

ACTION: Notice of application for exemption under the Investment 
Company Act of 1940 (``1940 Act'').

-----------------------------------------------------------------------

APPLICANTS: Hartford Life and Accident Insurance Company (``Hartford 
Life and Accident''), Hartford Life and Accident Insurance Company 
Separate Account One (``HLA Separate Account One'') and Hartford Life 
and Accident Insurance Company/Putnam Capital Management Separate 
Account One (``HLA/PCM Separate Account One'') (HLA Separate Account 
One and HLA/PCM Separate Account One referred to collectively as the 
``Separate Accounts''), and Hartford Securities Distributors, Inc. 
(``HSD'').

RELEVANT 1940 ACT SECTIONS: Order requested under Section 6(c) 
exempting Applicants from Sections 26(a)(2)(C) and 27(c)(2) of the 1940 
Act.

SUMMARY OF APPLICATION: Applicants seek an order permitting payment to 
Hartford Life and Accident of a mortality and expense risk charge from 
the assets of the Separate Accounts funding individual and group 
variable annuity contracts issued by Hartford Life and Accident and 
underwritten by HSD (the ``Contracts''). The order would apply to 
future separate accounts of Hartford Life and Accident issuing 
contracts that are materially similar to the Contracts, and would 
permit applicants to substitute HSD for Hartford Equity Sales Company 
(``HESCO'') as the principal underwriter of the Contracts.

FILING DATE: The application was filed on October 12, 1994, an amended 
on November 14, 1994, December 22, 1994, and January 5, 1995.

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 on the application by writing to the 
Secretary of the Commission and serving the Applicants with a copy of 
the request, either personally or by mail. Hearing requests must be 
received by the Commission by 5:30 p.m. on February 6, 1995, and should 
be accompanied by proof of service on the Applicants in the form of an 
affidavit or, for lawyers, by certificate of service. Hearing requests 
should state the nature of the interest, the reason for the request, 
and the issues contested. Persons may request notification of the date 
of a hearing by writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 5th 
Street, N.W., Washington, D.C. 20549. Applicants, c/o Rodney J. 
Vessels, Counsel, Hartford Life and Accident Insurance Company, 200 
Hopmeadow Street, Simsbury, CT 06089.

FOR FURTHER INFORMATION CONTACT:
Joseph G. Mari, Senior Special Counsel, or Wendy F. Friedlander, Deputy 
Chief, at (202) 942-0670, Office of Insurance Products (Division of 
Investment Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application is available for a fee from the 
Commission's Public Reference Branch.

Applicants' Representations

    1. Hartford Life and Accident is a stock life insurance company 
licensed to do business in all states except New York and the District 
of Columbia.
    2. HSD will register as a broker-dealer under the Securities 
Exchange Act of 1934 and will apply to become a member of the National 
Association of Securities Dealers, Inc. (``NASD'').
    3. Hartford Life and Accident and each of the Separate Accounts 
filed applications previously, and orders were issued granting the 
requested exemptions from Sections 26(a)(2)(C) and 27(c)(2) of the 1940 
Act.\1\ HESCO, the designated principal underwriter for the Contracts, 
was an applicant in the previous applications for exemptive relief from 
Sections 26(a)(2)(C) and 27(c)(2). This application seeks relief to 
permit Applicants to substitute HSD for HESCO as the designated 
principal underwriter for the Contracts, which would allow HESCO to 
continue as broker-dealer engaged in distribution functions with 
respect to HESCO's own registered representatives, and would permit HSD 
to serve as principal underwriter and distributor with respect to 
entering into sales agreements with independent broker-dealers.

    \1\Orders granting exemptive relief were issued as follows:
    (a) Hartford Life and Accident Insurance Company, Investment 
Company Act Release Nos. 18738 (notice) (May 29, 1992) and 18812 
(order) (June 25, 1992); and
    (b) Hartford Life and Accident Insurance Company, Investment 
Company Act Release Nos. 18737 (notice) (May 29, 1992) and 18811 
(order) (June 25, 1992).
---------------------------------------------------------------------------

    4. Applicants reaffirm all facts, representations and undertakings 
contained in the applications for exemptive relief referenced in 
footnote 1 above, and incorporate those applications herein by 
reference. To the extent that there have been any material changes in 
those facts, representations or undertakings, the changes have been 
disclosed herein. Except for the replacement of the principal 
underwriter, there are no material changes in the Separate Accounts or 
the Contracts as described in the previous applications.
    5. The contingent deferred sales charge, annual maintenance fee and 
annual asset charge for providing mortality and expense risk guarantees 
are fully described in the applications for exemptive relief which were 
previously granted.
    6. Hartford Life and Accident will make a daily charge at the rate 
of 1.25% annually from each Contract held in the Separate Accounts for 
providing mortality and expense guarantees with respect to the 
Contracts, of which .90% of the charge is attributable to mortality 
risks and .35% of the charge is attributable to expense risks.
    7. The mortality and expense risk charge will not be increased. If 
the charge is insufficient to cover the actual costs, Hartford Life and 
Accident will bear the loss. Conversely, if the charge proves more than 
sufficient to meet actual expenses, the excess will be surplus to 
Hartford Life and Accident and will be available for any proper 
corporate purpose. Hartford Life and Accident expects a reasonable 
profit from the mortality and expense risk charge.

Applicants' Legal Analysis and Representations

    1. Applicants request an exemption from Sections 26(a)(2)(C) and 
27(c)(2) of the 1940 Act to the extent necessary to permit the 
deduction of a mortality and expense risk charge from the Separate 
Accounts.
    2. Sections 26(a)(2)(C) and 27(c)(2), in pertinent part, prohibit a 
registered unit investment trust and any depositor thereof or 
underwriter therefor from 

[[Page 3898]]
selling periodic payment plan certificates unless the proceeds of all 
payments (other than sales loads) are deposited with a qualified bank 
as trustee or custodian and held under arrangements which prohibit any 
payment to the depositor or principal underwriter except a fee, not 
exceeding such reasonable amount as the Commission may prescribe, for 
performing bookkeeping and other administrative services of a character 
normally performed by the bank itself.
    3. Applicants request that the Commission enter an Order that 
applies to the Separate Accounts and to future separate accounts 
issuing contracts that are materially similar to the Contracts 
exempting them from the provisions of Sections 26(a)(2)(C) and 27(c)(2) 
to the extent necessary to permit the deduction by Hartford Life and 
Accident, and the payment to Hartford Life and Accident, of the fee for 
providing the mortality and expense undertakings (deducted on a daily 
basis).
    4. Applicants represent that:
    (a) The mortality and expense risk charge is reasonable in relation 
to the risks assumed by Hartford Life and Accident under the Contracts;
    (b) The mortality and expense risk charge is within the range of 
industry practice for comparable annuity contracts as determined by a 
survey of comparable contracts issued by a large number of other 
insurance companies. Hartford Life and Accident will undertake to 
maintain and make available to the Commission upon request a memorandum 
outlining the methodology and the contracts of other insurance 
companies underlying this representation;
    (c) There is the likelihood that the proceeds from explicit sales 
loads will be insufficient to cover the expected costs of distributing 
the Contracts. Any shortfall will be covered from the assets of the 
general account, which may include profit from the mortality and 
expense risk charge. Hartford Life and Accident has concluded that 
there is a reasonable likelihood that the Separate Accounts' 
distribution financing arrangement will benefit the Separate Accounts 
and Contract owners. Hartford Life and Accident will maintain and make 
available to the Commission upon request a memorandum setting forth the 
basis for this representation;
    (d) The Separate Accounts will invest only in open-end management 
companies which have undertaken to have a board of directors, a 
majority of whom are not interested persons of the open-end management 
company, formulate and approve any plan under Rule 12b-1 to finance 
distribution expenses; and
    (e) Future variable annuity contracts for which class relief is 
sought will be materially similar to the existing Contracts covered by 
this application.

Conclusion

    Applicants assert that for the reasons and upon the facts set forth 
above, the requested exemptions from Sections 26(a)(2)(C) and 27(c)(2) 
of the 1940 Act are appropriate in the public interest and consistent 
with the protection of investors and the purposes fairly intended by 
the policy and provisions of the 1940 Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-1286 Filed 1-18-95; 8:45 am]
BILLING CODE 8010-01-M