Federal Register / Vol. 60, No. 56 / Thursday, March 23, 1995 / Notices 15313

1 Jackson National may waive the minimum

premiums at any time.

2Applicants define the valuation period as the

period commencing at the close of normal trading

on each day the New York Stock Exchange

(‘‘NYSE’’) is open for business. (‘‘Valuation Date’’)

and ending at the close of the NYSE on the next

succeeding Valuation Date.

Research, U.S. Nuclear Regulatory

Commission, Washington, DC 20555,

telephone (301) 415–6498; e-mail

jxw4@nrc.gov.

Dated at Rockville, Maryland, this 2nd day

of March 1995.

For the Nuclear Regulatory Commission.

Franklin D. Coffman, Jr.,

Chief, Control, Instrumentation & Human

Factors Branch, Division of Systems

Technology, Office of Nuclear Regulatory

Research.

[FR Doc. 95–7186 Filed 3–22–95; 8:45 am]

BILLING CODE 7590–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–20961; No. 812–9302]

Jackson National Life Insurance

Company, et al.

March 17, 1995.

AGENCY: Securities and Exchange

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

ACTION: Notice of application for an

order under the Investment Company

Act of 1940 (‘‘1940 Act’’).

APPLICANTS: Jackson National Life

Insurance Company (‘‘Jackson

National’’), Jackson National Separate

Account–I (‘‘Separate Account’’) and

Jackson National Financial Services,

Inc. (‘‘Services’’).

RELEVANT 1940 ACT SECTIONS: Order

requested under Section 6(c) of the 1940

Act granting exemptions from the

provisions of Sections 26(a)(2)(C) and

27(c)(2) of the 1940 Act.

SUMMARY OF APPLICATION: Applicants

seek an order to permit the deduction of

a mortality and expense risk charge

from the assets of the Separate Account

or any other separate account (‘‘Other

Accounts’’) established by Jackson

National to support certain flexible

premium individual deferred variable

annuity contracts (‘‘Contracts’’) as well

as other variable annuity contracts that

are substantially similar in all material

respects to the Contracts (‘‘Future

Contracts’’).

FILING DATE: The application was filed

on October 21, 1994, and was amended

and restated on December 29, 1994.

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 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

April 11, 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 requestor’s interest, the reason for

the request, and the issues contested.

Persons may request notification of a

hearing by writing to the Secretary of

the SEC.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 5th Street

NW., Washington, D.C. 20549.

Applicants, Thomas J. Meyer, Esq., 5901

Executive Drive, Lansing, Michigan

48911.

FOR FURTHER INFORMATION CONTACT:

Pamela K. Ellis, Attorney, or Wendy F.

Friedlander, Deputy Chief, both at (202)

942–0670, Office of Insurance Products

(Division of Investment Management).

SUPPLEMENTARY INFORMATION: Following

is a summary of the Application; the

complete Application is available for a

fee from the SEC’s Public Reference

Branch.

Applicants’ Representations

1. Jackson National, a stock life

insurance company, is organized in

Michigan and licensed to do business in

the District of Columbia and all states

except Maine and New York. Jackson

National is an indirect wholly-owned

subsidiary of Prudential Corporation

plc, London, England.

2. The Separate Account is a separate

account established by Jackson National

to fund the Contracts. The Separate

Account is registered with the

Commission as a unit investment trust

under the 1940 Act and the Contracts

are registered as securities under the

Securities Act of 1933.

3. Jackson National will establish for

each investment option offered under

the Contract a Separate Account

subaccount or portfolio (‘‘Subaccount’’),

which will invest solely in a specific

corresponding series of the JNL Series

Trust or of some other designated

investment company (‘‘Funds’’). The

Funds will be registered under the 1940

Act as open-end management

investment companies. Each Fund

series will have separate investment

objectives and policies.

4. Services will serve as the

distributor and principal underwriter of

the Contracts. Services, a wholly owned

subsidiary of Jackson National, 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 are flexible premium

individual deferred variable annuity

contracts. They may be purchased on a

non-tax qualified basis (‘‘Non-Qualified

Contracts’’) or they may be purchased

and used in connection with retirement

plans that qualify for favorable federal

income tax treatment (‘‘Qualified

Contracts’’). The Non-Qualified

Contracts may be purchased with an

initial premium of $5,000 and the

Qualified Contracts may be purchased

with an initial premium of $2,000. The

minimum subsequent premium for both

the Unqualified and Qualified Contracts

is $500 (or $50 if made in connection

with an automatic payment plan).1

Premiums may be allocated to one or

more of the Separate Account

Subaccounts that have been established

to support the Contracts. The Contracts

also provide for the allocation of

premiums to the general account of

Jackson National, where such premiums

are credited with a predetermined fixed

rate of interest.

6. The Contracts provide for a series

of annuity payments beginning on the

annuity date. Several annuity forms are

available under the Contracts.

7. The Contracts provide for a death

benefit if the annuitant dies during the

accumulation period. The standard

death benefit is the greater of: (1) The

Contract value at the end of the

valuation period; 2 or (2) the total dollar

amount of premiums made prior to the

annuitant’s death, minus the sum of any

partial withdrawals and premium taxes

incurred. Where permitted by state law,

Jackson National will provide an

enhanced death benefit. This benefit is

determined by recomputing the total

dollar amounts under (2) above

annually at 5% (4% if the annuitant was

age 70 or older on the issue date) to the

date of death, and paying the greater of

the amount so determined and the

following amount, which is deemed to

be $0 if the annuitant dies prior to the

seventh Contract year: the Contract

value at the seventh Contract year, plus

any premiums made since that time and

before the death of the annuitant, minus

the sum of the total amount of partial

withdrawals since the seventh year and

premium taxes incurred since the

seventh year, all accumulated annually

at 5% (4% if the annuitant was age 70

or older on the issue date) to the date

of death. However, the enhanced death

benefit shall not exceed 250% of all

premiums paid under a Contract,
15314 Federal Register / Vol. 60, No. 56 / Thursday, March 23, 1995 / Notices

3 Jackson National states that it may waive the

CDSC under certain circumstances.

4Applicants represent that, during the notice

period, the application will be amended to reflect

this representation.

reduced by the amount of any partial

withdrawals.

8. Certain charges and fees are

assessed under the Contracts. During the

accumulation and annuity periods,

amounts allocated to the Separate

Accounts may be transferred among

Subaccounts. Prior to the annuity date,

transfers from the Separate Account to

the fixed account and, to a limited

extent, from the fixed account to the

Separate Account, also are permitted.

There is no transfer fee charged for the

first 15 transactions effecting transfers

in any Contract year. Subsequent

transfers within a Contract year,

however, will be assessed a fee of $25

per transfer. This fee will be deducted

from Contract values that remain in the

Subaccount from which the transfer was

made. If these Contract values are

insufficient to pay the transfer fee, the

fee will be deducted from transferred

Contract values. The transfer fee is at

cost with no anticipation of profit.

9. A contingent deferred sales charge

(‘‘CDSC’’) may be imposed on certain

withdrawals. The amount of the CDSC

decreases annually from 7% to 0% over

8 Contract years. The CDSC is deducted

from the remaining Contract value. For

the purposes of determining the CDSC

withdrawals will be allocated first to

investment income, if any (which may

generally be withdrawn free of the

CDSC), and then to premiums on a firstin, first-out basis so that all withdrawals

are allocated to premiums to which the

lowest (if any) CDSC applies. In

addition, there may be a free withdrawal

amount for the first withdrawal during

a Contract year. This withdrawal

amount is equal to 10% of premiums

that remain subject to the CDSC, less

earnings in the owner’s account.3

10. During the valuation period,

Jackson National will deduct an

administration charge from each

Subaccount of the Separate Account.

The charge is equal, on an annual basis,

to .15% of the net asset value of each

Subaccount. The administration charge

is designed to compensate Jackson

National for assuming administrative

expenses related to the Separate

Account and the issuance and

maintenance of the Contracts.

11. An annual contract maintenance

charge of $35 will be charged against

each Contract. The contract

maintenance charge will be assessed

each anniversary of the Contract date

that occurs on or prior to the annuity

date. In the event that a total surrender

of the Contract value is made other than

on such anniversary, the charge will be

assessed as of the date of surrender

without assert that this charge

reimburses Jackson National for the

expenses incurred in establishing and

maintaining records relating to the

Contracts.

12. Applicants represent that the

administration charge and the contract

maintenance charge will not increase

regardless of the actual cost incurred. In

addition, Applicants represent that

these charges are at cost with no

anticipation of profit. Applicants rely on

Rule 26(a)(1) of the Act to deduct the

transfer fee, the CDSC, the

administration charge and the contract

maintenance charge.4

13. Jackson National proposes to

deduct a mortality and expense risk

charge from each Subaccount during

each valuation period. Jackson National

represents that the aggregate mortality

and expense risk charge is equal, on an

annual basis, to 1.25% of the net asset

value on each Subaccount. Of this

amount, approximately 1.02% is for

mortality risks (of which .90% is for the

standard death benefit and .12% is

assessed for the enhanced death benefit)

and .23% is for expense risks.

14. Jackson National assumes the

mortality risk that the life expectancy of

the annuitant will be greater than that

assumed in the guaranteed annuity

purchase rates, thus requiring Jackson

National to pay out more in annuity

income than it had planned. Additional

mortality risks assumed by Jackson

National are that it will waive the CDSC

in the event of the death of the owner

and Jackson National’s contractual

obligation to provide a standard and an

enhanced death benefit prior to the

annuity date. Thus, Jackson National

assumes the risk that it may not be able

to cover its distribution expenses and

that the owner may die at a time when

the amount of the death benefit payable

exceeds the then net surrender value of

the Contracts. The expense risk assumed

by Jackson National is that the contract

administration charge will be

insufficient to cover the cost of

administering the Contracts.

15. In the event the mortality and

expense risk charges are more than

sufficient to cover Jackson National’s

costs and expenses, any excess will be

a profit to Jackson National. Any profit

realized by these charges may be used

by Jackson National to, among other

things, offset losses experienced when

the mortality and expense risk charges

are insufficient. These charges may not

be increased under the Contracts.

16. Should the owner live in a

jurisdiction that levies a premium tax,

Jackson National will pay the taxes

when due. Jackson National represents

that state premium taxes may range up

to 3.5% to purchase payments and are

subject to change. Jackson National

reserves the right to deduct the amount

of the tax either from the premiums as

they are received or deduct the tax at a

later date as permitted or required by

applicable law.

Applicants’ Legal Analysis

1. Section 6(c) of the 1940 Act

authorizes the Commission, by order

upon application, to conditionally or

unconditionally grant an exemption

from any provision, rule or regulation of

the 1940 to the extent that the

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 1940 Act.

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

the 1940, in relevant part, prohibit a

registered unit investment trust, its

depositor or principal underwriter, from

selling periodic payment plan

certificates unless the proceeds of all

payments, other than sales loads, are

deposited with a qualified bank and

held under arrangements which prohibit

any payment to the depositor or

principal underwriter except a

reasonable fee, as the Commission may

prescribe, for performing bookkeeping

and other administrative duties

normally performed by the bank itself.

3. Applicants request exemptions

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

the 1940 Act to the extent necessary to

permit the deduction from the assets of

the Separate Account and the Other

Accounts in connection with the

Contracts and Future Contracts of the

1.25% charge for the assumption of

mortality and expense risks. Applicants

assert that the terms of the relief

requested with respect to any Future

Contracts funded by the Separate

Account or Other Accounts are

consistent with the standards

enumerated in Section 6(c) of the 1940

Act. Without the requested relief,

Applicants would have to request and

obtain exemptive relief for each new

Other Account it establishes to fund any

Future Contract. Applicants submit that

any such additional request for

exemption would present no issues

under the 1940 Act that have not

already been addressed in this

application, and that investors would
Federal Register / Vol. 60, No. 56 / Thursday, March 23, 1995 / Notices 15315

5Applicants represent that, during the Notice

Period, the application will be amended to reflect

this representation.

1 15 U.S.C. § 78s(b) (1988).

2Securities Exchange Act Release No. 35193

(January 4, 1995), 60 FR 3015.

3Letter from P. Howard Edelstein, President,

Electronic Settlements Group, Thomson Trading

Services, Inc., to Jonathan G. Katz, Secretary,

Commission (February 1, 1995).

4 17 CFR 240.15c6–1 (1994).

5Securities Exchange Act Release Nos. 33023

(October 6, 1993), 58 FR 52891 (order adopting Rule

15c6–1 and 34952 (November 9, 1994), 59 FR 59137

(changing effective date from June 1, 1995, to June

7, 1995).

6The transition from five day settlement to three

day settlement will occur over a four day period.

Friday, June 2, will be the last trading day with five

business day settlement. Monday, June 5, and

Tuesday, June 6, will be trading days with four

business day with three business day settlement. As

a result, trades from June 2 and June 5 will settle

on Friday, June 9. Trades from June 6 and June 7

will settle on Monday, June 12.

not receive any benefit or additional

protections thereby.5

Applicants submit that the requested

relief is appropriate in the public

interest, because it would promote

competitiveness in the variable annuity

contract market by eliminating the need

for Applicants to file redundant

exemptive applications, thereby

reducing their administrative expenses

and maximizing the efficient use of their

resources. The delay and expense

involved in having repeatedly to seek

exemptive relief would reduce

Applicants’ ability effectively to take

advantage of business opportunities as

they arise.

Applicants further submit that the

requested relief is consistent with the

purposes of the 1940 Act and the

protection of investors for the same

reasons.

Applicants thus believe that the

requested exemption is 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.

4. Applicants represent that the

1.25% per annum mortality and

expense risk charge is within the range

of industry practice for comparable

annuity contracts. This representation is

based upon an analysis of publicly

available information about similar

industry products, taking into

consideration such factors as, among

others, the current charge levels and

benefits provided, the existence of

expense charge guarantees and

guaranteed annuity rates. Jackson

National will maintain at its principal

offices, available to the Commission, a

memorandum setting forth in detail the

products analyzed in the course of, and

the methodology and results of,

Applicants’ comparative review.

5. Jackson National has concluded

that there is a reasonable likelihood that

the Separate Accounts’ proposed

distribution financing arrangements will

benefit the Separate Accounts and their

investors. Jackson National represents

that it will maintain and make available

to the Commission upon request a

memorandum setting forth the basis of

such conclusion.

6. The Separate Accounts will be

invested only in management

investment companies that undertake,

in the event the company should adopt

a plan for financing distribution

expenses pursuant to rule 12b–1 under

the 1940 Act, to have such plan

formulated and approved by the

company’s board members, the majority

of whom are not ‘‘interested persons’’ of

the management investment company

within the meaning of Section 2(a)(19)

of the 1940 Act.

Conclusion

For the reasons set forth above,

Applicants represent that the

exemptions requested 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 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–7139 Filed 3–22–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35502; File No. SR–PSE–

94–27]

Self-Regulatory Organizations; The

Pacific Stock Exchange Incorporated;

Order Approving Proposed Rule

Change Relating to Implementation of

a Three-Day Settlement Standard

March 16, 1995.

On December 19, 1994, The Pacific

Stock Exchange Incorporated (‘‘PSE’’)

filed a proposed rule change (File No.

SR–PSE–94–27) with the Securities and

Exchange Commission (‘‘Commission’’)

pursuant to Section 19(b) of the

Securities Exchange Act of 1934

(‘‘Act’’).1 Notice of the proposal was

published in the Federal Register on

January 12, 1995 to solicit comments

from interested persons.2 The

Commission received one written

comment.3 As discussed below, this

order approves the proposed rule

change.

I. Description

In October 1993, the Commission

adopted Rule 15c6–1 under the Act 4

which establishes three business days

after the trade date (‘‘T+3’’), instead of

five business days (‘‘T+5’’), as the

standard settlement cycle for most

securities transactions. The rule will

become effective June 7, 1995.5 Several

of the PSE’s rules are interrelated with

the standard settlement time frame. The

purpose of the proposed rule change is

to amend PSE’s rules to be consistent

with a T+3 settlement standard for

securities transactions.

Under PSE Rule 5.7, transactions in

stocks traded ‘‘regular’’ will be ‘‘exdividend’’ or ‘‘ex-rights,’’ as the case

may be, on the second business day

preceding the record date fixed by the

company or the date of the closing of

transfer books, except when PSE’s board

of directors rules otherwise. Rule 5.7

also provides that should such record

date or such closing of transfer books

occur upon a day other than a business

day, this rule applies for the third

preceding business day.

Under Rule 5.9(a)(2), transactions in

securities admitted to dealings on an

‘‘issued’’ basis settling ‘‘regular way’’

will be for delivery on the third

business day following the day of the

contract. Rule 5.9(a)(3) provides that

transactions on a ‘‘seller’s option’’ basis

will be made for delivery at the option

of the seller within the time specified in

the option, which time may not be less

than four business days following the

date of the contract. Rule 5.9(a)(4)

provides that transactions in rights and

warrants may be made on a ‘‘next day’’

basis only during the three business

days preceding the final day for trading

therein.

Rule 9.12(a)(4) requires that no

member organization may grant delivery

versus payment (‘‘DVP’’) or receipt

versus payment (‘‘RVP’’) privileges to a

customer without obtaining an

agreement from the customer to provide

instructions to its agent no later than the

second day after the trade date for RVP

trades or no later than the first business

day after trade date for DVP trades.

PSE has requested that the proposed

rule change become effective on the

same date as Rule 15c6–1. Rule 15c6–

1 will become effective on June 7,

1995.6

II. Written Comment

The Commission received one

comment letter from Thomson Trading

Services, Inc. (‘‘Thomson’’) suggesting

that additional regulatory changes may

be necessary to implement T+3