20298 Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices

1 15 U.S.C. 78s(b)(1) (1988).

benefits provided under the Policies and

varies from insured to insured based

upon issue age, gender (except where

unisex rates are mandated by law),

smoking status and risk class. Cost of

insurance rates on amounts added by

face increase are based on the same

factors, but determined based upon the

time of increase instead of issue.

19. A mortality and expense risk

charge is deducted from Policy Value at

the beginning of each Policy month, at

a rate of .067% through the later of the

tenth Policy year and the youngest life

insured’s attained age 55. Currently, it is

expected that this charge will reduce to

.0215 per month thereafter, although the

Company reserves the right not to

reduce this charge.

20. Charges will be imposed on

certain transfers of Policy Values,

including a $35 charge for transfers in

any Policy month after the first transfer,

a $15 charge for each asset allocation

rebalancing transfer and a $5 charge for

each dollar cost averaging transfer when

Policy Value does not exceed $15,000.

Applicants’ Legal Analysis

1. Section 27(a)(3) of the 1940 Act

provides that the amount of sales charge

deducted from any of the fist twelve

monthly payments of a periodic

payment plan certificate may not exceed

proportionately the amount deducted

from any other such payment, and that

the amount deducted from any

subsequent payment may not exceed

proportionately the amount deducted

from any other subsequent payment.

This prohibition is commonly referred

to as the ‘‘stair-step’’ rule.

2. Rule 6e–3(T)(b)(13)(ii) provides an

exemption from Section 27(a)(3),

provided that the proportionate amount

of sales charge deducted from any

payment does not exceed the

proportionate amount deducted from

any prior payment.

3. Under the Policies described

herein, a Policy owner paying premiums

in excess of the Target Premium in any

of the first ten Policy years will pay a

5.5% front-end sales load on the portion

of the premium up to the Target

Premium, but will pay no front-end

sales load on premiums about the Target

Premium in that year. Applicants

submit that this sales load structure

could be deemed to violate Section

27(a)(3). In addition, a Policy owner

paying more than a Target Premium in

any of the first ten Policy years who

subsequently makes a premium

payment equal to the Target Premium

will pay a higher front-end sales in that

subsequent Policy year. Consequently,

the exemption provided in Rule 6e–

3(T)(b)(13)(ii) would be unavailable.

4. According to the Applicants,

Section 27 was designed to protect

Policy owners against sales load

structures that deducted large amounts

of front-end sales charges so early in the

life of a Policy that little of the Policy

owner’s early payments were actually

invested, or if an owner redeemed in the

early years of an investment, that

investor would recoup little of his or her

investment upon redemption.

Applicants assert that the front-end

sales load structure under the Policies

does not present these concerns. Rather,

Applicants state that they expect that by

imposing a lower front-end sales load

on premiums in excess of the Target

Premium, the Company will lower the

aggregate level of sales load paid in each

of the first ten Policy years (or the first

ten years after a face amount increase).

5. Applicants state that the

Company’s front-end sales load

structure significantly benefits Policy

owners by eliminating sales charges on

payments in excess of Target Premiums

in any Policy year. According to the

Applicants, the Company could avoid

the stair-step issue presented by Section

27(a)(3) and Rule 6e–3(T) simply by

imposing a higher front-end load on the

full amount of premium payments in

each Policy year, including amounts

over the Target Premium. Under this

arrangement, however, a Policy owner

would pay a higher overall sales load,

and would be left with a smaller

percentage of his or her premium

payment for investment under the

Policy. Further, if the Company were to

impose the higher sales charge on

premiums about the Target Premium, it

would generate more revenue from the

Policies than it believes necessary to

support the distribution costs associated

with the Policies.

6. Rule 6e–3(T)(b)(13)(ii) contains an

exception to its policy prohibiting

increases in sales load that allow

insurance companies to charge a lower

sales charge or amounts transferred to a

flexible premium variable life insurance

policy from another plan of insurance,

and thereafter to impose a full sales

charge on later premium payments.

Applicants contend that this exception

implicitly recognizes that insurance

companies incur lower costs on

premium payments that consist of

amounts transferred from other policies

and permits insurance companies to

pass those costs savings through to

Policy owners. For the same reason,

Applicants submit that the Company

should be permitted to pass through to

Policy owners its reduced costs with

respect to premiums about the Target

Premium by reducing its front-end sales

load on premiums above the Target

Premium in each Policy year that a

front-end sales load applies.

Conclusion

For the reasons set forth above,

Applicants submit that the requested

exemptions from the provisions of

Section 27(a)(3) of the 1040 Act and

Rule 6e–3(T)(b)(13)(ii) thereunder, are

in accordance with the standards of

Section 6(c) of the 1940 Act, and with

the protection of investors and the

purposes and policies of the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–11231 Filed 5–3–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37149; File No. SR–DCC–

96–05]

Self-Regulatory Organizations; Delta

Clearing Corp.; Notice of Filing and

Immediate Effectiveness of a Proposed

Rule Change Relating to a Change in

Interdealer Brokers

April 29, 1996.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

April 17, 1996, Delta Clearing Corp.

(‘‘DCC’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

the proposed rule change as described

in Items I, II, and III below, which items

have been prepared primarily by DCC.

The Commission is publishing this

notice to solicit comments on the

proposed rule change from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The purpose of the proposed rule

change is to revise the procedures for

DCC’s Over-The-Counter Options

Trading System by including in the

definition of ‘‘RMJ’’ a statement that all

references to RMJ in the procedures

shall be deemed to be references to the

broker then performing the duties and

responsibilities of RMJ under the

procedures.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

DCC included statements concerning

the purpose of and basis for the

proposed rule change and discussed any
Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices 20299

2The Commission has modified parts of these

statements.

3For a complete description of the DCC’s options

clearance system, refer to Securities Exchange Act

Release No. 26450 (January 18, 1989), 54 FR 2010

(Order granting DCC temporary registration as a

clearing agency).

4 15 U.S.C. 78q–1 (1988).

5 15 U.S.C. 78s(b)(3)(A)(iii) (1988).

6 17 CFR 240.19b–4(e)(4) (1995).

7 178 CFR 200.30–3a(a)(12) (1995).

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

2On April 19, 1996, the NASD filed Amendment

No. 1 to the proposed rule change. Letter from

Suzanne E. Rothwell, Associate General Counsel,

NASD, to Mark P. Barracca, Special Counsel,

Division of Market Regulation, SEC, dated April 19,

1996.

3Pursuant to a new rule numbering system for the

NASD Manual anticipated to be effective no later

than May 1, 1996, Sec. 5 of Art. IV and the

Resolution of the Board of Governors thereto of the

Rules of Fair Practice that are the subject of this

proposed rule change will become Rules 8210 and

8220, respectively. Securities Exchange Act Release

No. 36698 (Jan. 11, 1996), 61 FR 1419 (Jan. 19,

1996) (order approving File No. SR–NASD–95–51).

comments it received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. DCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

Through its options clearing system,

DCC clears trades in over-the-counter

options that have been agreed to

through the facilities of RMJ Options

Trading Corp. (‘‘RMJ’’).3 RMJ has

informed DCC that it intends to

eliminate its options trading business.

The purpose of the proposed rule

change is to allow DCC to replace RMJ

with Euro Broker Maxcor Inc. The

proposed rule change amends the

definition of RMJ contained in Article I

of the DCC’s procedures to state that all

references to RMJ in the procedures

shall be deemed references to the broker

then performing the duties and

responsibilities of RMJ under the

procedures.

The proposed rule change will

facilitate the prompt and accurate

clearance and settlement of securities

transactions. Therefore, the proposed

rule change is consistent with the

requirements of the Act, specifically

Section 17A of the Act, and the rules

and regulations thereunder.4

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

DCC does not believe that the

proposed rule change will 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

Comments were neither solicited nor

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective pursuant to Section

19(b)(3)(A)(iii) of the Act 5 and Rule

19b–4(e)(4) thereunder 6 in that the

proposal effects a change in an existing

service of a registered clearing agency

that does not adversely affect the

safeguarding of securities or funds in

the custody or control of the clearing

agency or for which it is responsible and

does not significantly affect the

respective rights or obligations of the

clearing agency or persons using the

service. At any time within sixty days

of the filing of the proposed rule change,

the Commission may summarily

abrogate such rule change if it appears

to the Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, 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, NW.,

Washington, DC 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

communication 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 in the

Commission’s Public Reference Section,

450 Fifth Street, NW., Washington, DC

20549. Copies of such filing also will be

available for inspection and copying at

DCC. All submissions should refer to

File No. SR–DCC–96–05 and should be

submitted by May 28, 1996.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–11141 Filed 5–3–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37150; File No. SR–NASD–

96–14]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to the

Requirement That Members Provide

Information to Other Regulators for

Regulatory Purposes

April 29, 1996.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

April 4, 1996, the National Association

of Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’) the proposed rule

change,2 as described in Items I, II, and

III below, which Items have been

prepared by NASD. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The NASD is filing a proposed rule

change to amend NASD Rules 8210 and

8220.3 The NASD is proposing to amend

Rule 8210 to require members to

provide information to domestic and

foreign self-regulatory organizations,

associations, securities or contract

markets or regulators with which the

Association has entered into

information sharing agreements for

regulatory purposes and to the NASD’s

Market Surveillance Committee.

Pursuant to Amendment No. 1, the

NASD is amending Rule 8220 to

authorize any Market Surveillance

Committee to require any member to

submit a report in writing with regard

to any matter connected with such

member’s business or business

practices, and to inspect the books,

records and accounts of any member.

Below is the text of the proposed rule

change. Proposed new language is

italicized.