Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices 17833

9Because the Exchange will submit data covering

seven-day price movements, the Exchange agreed to

delete references to seven-day price/yield

movements in order to clarify the proposal. March

22 conversation, supra note 2. 10 17 CFR 200.30–3(a)(12) (1994).

and the minimum required margin will

be 5% of the underlying component

value.

The Exchange has agreed to a system

for periodic review to ensure the

adequacy of the proposed margin

requirements and for increasing the

requirements on an expedited basis if

necessary. The NYSE’s monitoring plan

will consist of the following:

• Semi-annual reviews of the sevenday price 9 movements will be done.

These volatility reviews will cover both

the last six months and the last three

years.

• The semi-annual review must

indicate a 97.5% confidence level (i.e.,

the required margin level is adequate for

seven-day price movements 97.5% of

the time).

• For each option category, reports

must be done by two member

organizations using their own pricing

data or by one member organization

using an independent pricing source

acceptable to the Exchange. These

reports must be submitted to the

Exchange.

• If one semi-annual review indicates

the margin level is inadequate for an

option category, the Exchange will

increase the margin requirements by

filing a proposal pursuant to Section

19(b)(3)(A) under the Act for immediate

effectiveness.

• In order to lower the margin

requirements, two consecutive sixmonth reviews must demonstrate that

the lower requirement meets the 97.5%

confidence level. Amendments to lower

the requirement will be made by filing

a proposed rule change pursuant to

Section 19(b)(2) under the Act.

• In addition, before lowering the

margin requirements, the Exchange will

take into consideration other relevant

factors, such as current market

conditions, member organization views,

and margin levels implied from other

options products (where similar OCCissued options exist).

(b) Basis

The NYSE believes that the proposed

rule change is consistent with the

requirements of the Act and, in

particular, furthers the objectives of

Section 6(b)(5), which provides that the

rules of the Exchange be designed to

promote just and equitable principles of

trade and to protect the investing

public. The NYSE believes that the

proposed rule change is also consistent

with the rules and regulations of the

Board of Governors of the Federal

Reserve System for the purpose of

preventing the excessive use of credit

for the purchase or carrying of

securities, pursuant to Section 7(a)

under the Act.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes that the

proposed rule change will not impose

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

No written comments were either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reason for so finding or (ii)

as to which the self-regulatory

organization consents, the Commission

will:

(a) By order approve such proposed

rule change, or

(b) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written date, views and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying at

the Commission’s Public Reference

Section, 450 Fifth Street, N.W.,

Washington, D.C. Copies of such filing

will also be available for inspection and

copying at the principal office of the

above-mentioned self-regulatory

organization. All submissions should

refer to the file number in the caption

above and should be submitted by April

28, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–8546 Filed 4–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–20981; File No. 812–9360]

American Skandia Life Assurance

Corporation, et al.

March 31, 1995.

AGENCY: Securities and Exchange

Commission (the ‘‘Commission’’ or the

‘‘SEC’’).

ACTION: Notice of application of

exemption under the Investment

Company Act of 1940 (the ‘‘1940 Act’’

or ‘‘Act’’).

APPLICANTS: American Skandia Life

Assurance Corporation (‘‘Skandia Life’’);

American Skandia Life Assurance

Corporation Variable Account B (Class 3

Sub-Accounts) (the ‘‘Account’’); and

Skandia Life Equity Sales Corporation

(‘‘SLESCO’’).

RELEVANT 1940 ACT SECTIONS: Order

requested under Section 6(c) for

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

27(c)(2) of the Act.

SUMMARY OF APPLICATION: Applicants

seek an order to permit the deduction of

a mortality and expense risk charge

from the assets of the Account with

respect to certain flexible premium

deferred variable annuity contracts

(‘‘Contracts’’) and contracts offered in

the future that are substantially similar

in all material respects to the Contracts

(‘‘Future Contracts’’) that are issued

through the Account or any other

Accounts established in the future by

Skandia Life (‘‘Future Accounts’’).

Applicants also request that the

exemptive relief granted to SLESCO

extend to any other National

Association of Securities Dealers

member broker-dealer controlling,

controlled by, or under common control

with Skandia Life (‘‘Skandia Life

Broker-Dealers’’), that may serve in the

future as distributor and/or principal

underwriter for the Contracts or Future

Contracts.

FILING DATE: The application was filed

on December 13, 1994 and amended on

February 27, 1995.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be
17834 Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices

1An amendment will be filed during the notice

period to confirm this representation.

issued unless the Commission orders a

hearing. Interested persons may request

a hearing on this application, or ask to

be notified if a hearing is ordered, by

writing to the Commission’s Secretary

and serving the Applicants with a copy

of the request, either personally or by

mail. Hearing requests must be received

by the SEC by 5:30 pm., on April 25,

1995 and should be accompanied by

proof of service on the Applicants,

either by affidavit, or, for lawyers, by

certificate of service. Hearing requests

should state the nature of the writer’s

interest, the reason for the request, and

the issues contested.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

NW., Washington, DC 20549.

Applicants, c/o American Skandia Life

Assurance Corporation, One Corporate

Drive, P.O. Box 883, Shelton,

Connecticut 06484–9932, Attention:

Jeffrey M. Ulness, Esq.

FOR FURTHER INFORMATION CONTACT:

Joyce Merrick Pickholz, Senior Counsel,

or Wendy Finck Friedlander, Deputy

Chief, 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. Skandia Life is a stock life

insurance company incorporated under

the laws of Connecticut. It is wholly

owned by American Skandia Investment

Holding Corporation (‘‘AHIHC’’) which

in turn is ultimately wholly owned by

Skandia Insurance Company Ltd., a

Swedish Corporation.

2. The Account was established by

Skandia Life as a unitized separate

account under the laws of Connecticut

and is registered with the Commission

under the Act as a unit investment trust.

3. SLESCO, a wholly owned

subsidiary of AHIHC, will serve as the

distributor and principal underwriter of

the Contracts. SLESCO is registered

under the Securities Exchange Act of

1934 and with the National Association

of Securities Dealers, Inc. as a brokerdealer.

4. The Contracts are flexible premium

deferred variable annuities. Contract

owners may allocate premium payments

or account value to one or more subaccounts of the Account which will

invest in shares of corresponding

investment portfolios of American

Skandia Trust or such other investment

company as may be made available in

the future.

5. During the accumulation phase, a

death benefit is generally payable upon

the death of the first Contract owner to

die (if the Contract is held by one or

more natural persons) or upon the death

of the annuitant. If death occurs prior to

the 70th birthday of the individual upon

whose death the benefit is payable, the

death benefit is the greater of a

Contract’s Account Value or the

minimum death benefit (which is the

sum of all Purchase Payments less the

sum of all withdrawals). If death occurs

on or after the 70th birthday of the

individual on whose death the benefit is

payable, the death benefit is the

Account Value.

6. Prior to the annuity date and upon

surrender, Skandia Life will deduct a

maintenance fee of the lesser of 2% of

Account Value or $35 per annuity year

from the sub-account holdings

attributable to any particular Contract in

the same proportion that each subaccount holding bears to the Account

Value of such Contract. Skandia Life

states that this fee for maintaining the

Contracts will not be greater than the

anticipated costs. Also, during the

accumulation period, Skandia Life will

deduct from the Account, on a daily

basis, an administration fee at the rate

of 0.15% per annum of the average daily

total value of assets of the Account.

Applicants assert 1 that a relationship

does not necessarily exist between the

administration charge and maintenance

fee upon a particular Contract and the

expenses attributable to that particular

Contract, however, the total

administrative charge assessed against

the Account will not be greater than the

total anticipated cost of services to be

provided over the life of the Contract(s)

in accordance with the applicable

standards in Rule 26a–1 under the 1940

Act. The administration and

maintenance fees can be increased only

for contracts issued subsequent to the

effective date of any such change. In

addition, Skandia Life deducts an

amount equal to any premium taxes due

either prior to allocation to the subaccounts or upon annuitization. A

charge of $10 is assessable for each

transfer in excess of four transfers in

each annuity year. Finally, a $10 charge

is assessed for each transfer after the

fourth in each annuity year and for each

withdrawal after the first in each

annuity year except for transfers from

the fixed account, a death benefit,

surrender medically-related surrender

or annuity payment.

7. No deduction or charge will be

made from Purchase Payments for sales

or distribution expenses. However, a

contingent deferred sales charge

(‘‘CDSC’’) may be assessed on surrender

or withdrawal. The Contract offers a free

withdrawal privilege that, under certain

circumstance, permits a Contract owner

to withdraw funds without any CDSC

being imposed. For purposes of the

CDSC, amounts withdrawn as a free

withdrawal are not considered a

liquidation of purchase payments. For

withdrawals of unliquidated new

premiums that exceed the free

withdrawal amount, the CDSC under

the Contracts begins at 6% and declines

to 0% in year eight in accordance with

a schedule set forth in the application.

However, Applicants represent that in

no event will the total CDSC for a

particular Contract or Future Contract

exceed 9% of purchase payments under

the Contract or Future Contract. CDSC’s

will be used to compensate Skandia Life

for sales commissions and other

promotional or distribution expenses

incurred by Skandia Life which are

associated with the marketing of the

Contracts. Skandia Life does not

anticipate that the CDSC will be

sufficient to permit it to recoup all its

sales and distribution expenses. To the

extent the CDSC is not sufficient,

Skandia Life will pay these expenses

from its general assets which may

include proceeds (if available) from the

mortality and expense risk charges.

8. A mortality and expense risk charge

will be deducted daily from the net

asset value of the Account attributable

to the Contracts at a rate of 0.85% per

annum of the daily net assets in the

Account. Of that amount, approximately

0.55% is allocable to Skandia Life’s

assumption of mortality risks and 0.30%

is allocable to Skandia Life’s

assumption of administration and

expense risks. The annuity rates

incorporated in any issued Contracts

cannot be changed. Skandia Life’s

assumption of mortality risks guarantees

that the variable annuity payments

made to Contract owners will not be

affected by the mortality experience of

persons receiving such payments or of

the general population. Skandia Life

assumes this risk by virtue of the

annuity rates incorporated in the

Contracts which cannot be changed.

Additional mortality risks are assumed

when the sub-accounts decline in the

value resulting in losses to Skandia Life

on paying death benefits. The expense

risk undertaken by Skandia Life is that

the administration and maintenance

fees, which are guaranteed for current

Contract owners, may be insufficient to

cover the actual costs of maintaining the

Contracts and the Account.
Federal Register / Vol. 60, No. 67 / Friday, April 7, 1995 / Notices 17835

2An amendment will be filed during the notice

period to confirm that the Board of Directors will

formulate and approve any plan adopted under rule

12b–1.

9. If the charges for the mortality and

expense risks prove insufficient to cover

mortality, administration and

maintenance costs, then the excess of

the expenses over the charges made for

these expenses will result in a loss, and

such loss will be borne by Skandia Life.

Conversely, if the charges prove more

than sufficient to cover such costs, the

excess will result in a profit to Skandia

Life.

Applicants’ Legal Analysis

1. Applicants request exemptive

relief, pursuant to Section 6(c) of the

1940 Act from the provisions of

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 Account or Future

Accounts with respect to the Contracts

and Future Contracts that are

substantially similar in all material

respects to the Contracts. Applicants

also request that the exemptive relief

granted to SLESCO extend to any other

National Association of Securities

Dealers member broker-dealer

controlling, controlled by, or under

common control with Skandia Life that

may serve in the future as principal

underwriter for the Contracts or Future

Contracts.

2. Section 26(a)(2)(C) provides that no

payment to the depositor of, or principal

underwriter for a registered unit

investment trust shall be allowed the

trustee or custodian as an expense

except compensation, not exceeding

such reasonable amount as the

Commission may prescribe, for

performing bookkeeping and other

administrative duties normally

performed by the trustee or custodian.

Section 27(c)(2) prohibits a registered

investment company or a depositor or

underwriter for such company from

selling periodic payment plan

certificates unless the proceeds of all

payments, other than sales loads, on

such certificates are deposited with a

trustee or custodian having the

qualifications prescribed in Section

26(a)(1), and are held by such trustee or

custodian under an agreement

containing substantially the provisions

required by Sections 26(a)(2)(C) and

26(a)(3) of the 1940 Act. Applicants

request exemption from those

provisions to the extent necessary to

permit the assessment of the charge for

mortality and expense risks under the

Contracts and Future Contracts.

3. Applicants submit that their

request for an order that applies to

Future Contracts, Future Accounts and

Skandia Life Broker-Dealers is necessary

and appropriate in the public interest.

Applicants assert that the issuance of

the requested order on a prospective

basis would promote competitiveness in

the variable annuity contract market by

eliminating the need to file redundant

exemptive applications, thereby

reducing administrative expenses,

maximizing the efficient use of Skandia

Life’s resources, and enabling Skandia

Life to take advantage of business

opportunities as they arise. Further, if

Skandia Life were required repeatedly

to seek exemptive relief with respect to

the same issues addressed in this

Application, investors would not

receive any benefit or additional

protection thereby.

4. Applicants submit that Skandia

Life is entitled to reasonable

compensation for its assumptions of

mortality and expense risks and that the

charge provided for in the Contracts is

a reasonable and proper insurance

charge. Skandia Life further represents

that the charge of 1.25% for mortality

and expense risks assumed by Skandia

Life is within the range of industry

practice with respect to comparable

annuity products. This representation is

based on Skandia 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. Skandia Life will

maintain at its administrative offices,

available to the Commission, a

memorandum setting forth in detail the

products analyzed in the course of, and

the methodology and results of, its

comparative survey.

5. Similarly, prior to making available

any Future Contracts through the

Account, or through other Future

Accounts, Applicants will represent that

the mortality and expense risk charge

under any such Future Contracts will be

within the range of industry practice for

comparable contracts. Applicants

represent that Skandia Life will

maintain at its administrative offices,

available to the Commission, a

memorandum setting forth in detail the

products analyzed in the course of, and

the methodology and results of, its

comparative survey. Further, such

mortality and expense risk charge

would not exceed 1.25% of the daily net

assets of the Account or Future

Accounts.

6. Applicants acknowledge that the

CDSC may be insufficient to cover all

costs relating to the distribution of the

Contracts and 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. Nevertheless,

Skandia Life has concluded that the

proposed distribution financing

arrangements will benefit the Account

and the Contract owners. The basis for

such conclusion is set forth in a

memorandum which will be maintained

by Skandia Life at its administrative

offices and will be available to the

Commission. Skandia Life also will

maintain and make available to the

Commission memoranda setting forth

the basis for the same representation

with respect to Future Contracts offered

by the Account or Future Accounts.

7. Skandia Life represents that the

Account, and all Future Accounts, shall

invest only in management investment

companies which undertake to have a

Board of Directors, the majority of

whom are not ‘‘interested persons’’ of

such company as that term is used

under Section 2(a)(19) of the Act,

formulate and approve any plan

adopted under Rule 12b–1 of the 1940

Act.2

Conclusion

Applicants submit that the exemptive

relief requested 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.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–8544 Filed 4–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–20980; File No. 812–9362]

American Skandia Life Assurance

Corporation, et al.

March 31, 1995.

AGENCY: Securities and Exchange

Commission (the ‘‘Commission’’ or the

‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘1940 Act’’

or ‘‘Act’’).

APPLICANTS: American Skandia Life

Assurance Corporation (‘‘Skandia Life’’);

American Skandia Life Assurance

Corporation Variable Account B (Class 1

Sub-Accounts) (the ‘‘Account’’); and

Skandia Life Equity Sales Corporation

(‘‘SLESCO’’).

RELEVANT 1940 ACT SECTIONS: Order

requested under Section 6(c) for