24840 Federal Register / Vol. 61, No. 96 / Thursday, May 16, 1996 / Notices

1The Commission issued an order pursuant to

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 to permit CG Life to impose

on Existing Contracts issued through the Variable

Account a mortality and expense risk charge at an

annual rate of 1.20 percent. Investment Company

Act Release Nos. 21096 (May 25, 1995) (order) and

21035 (Apr. 28, 1995) (notice). CG Life will waive

the collection of the additional 0.05% mortality and

expense risk charge on Existing Contracts issued on

or after May 1, 1996, until the Commission issues

an order approving the 1.25% mortality and

expense risk charge proposed herein. A 1.20%

mortality and expense risk charge will continue to

apply to all Existing Contracts issued before May 1,

1996, even if the requested relief is granted.

2As used herein, the term ‘‘Contract owner’’

refers to a certificate owner under a group contract

(i.e., each of the Existing Contracts) having all

ownership rights regarding his or her participation

in that Existing Contract. The term ‘‘Contract,’’

when used in the singular, shall refer to the

certificate evidencing participation in an Existing

Contract.

Office Building, Washington, D.C.

20503.

Chuck Mierzwa,

Clearance Officer.

[FR Doc. 96–12321 Filed 5–15–96; 8:45 am]

BILLING CODE 7905–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–21948; File No. 812–10046]

Connecticut General Life Insurance

Company, et al.

May 9, 1996.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’ or the

‘‘Commission’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (the ‘‘1940 Act’’).

APPLICANTS: Connecticut General Life

Insurance Company (‘‘CG Life’’), CG

Variable Annuity Separate Account II

(the ‘‘Variable Account’’), and Cigna

Financial Advisors, Inc. (‘‘CFA’’).

RELEVANT 1940 ACT SECTIONS: Order

requested under Section 6(c) of the 1940

Act for exemptions from Sections

26(a)(2)(C) and 27(c)(2) of the 1940 Act.

SUMMARY OF APPLICATION: Applicants

seek an order permitting CG Life to

deduct a mortality and expense risk

charge from: (i) the assets of the Variable

Account, in connection with the offer

and sale of certain flexible premium

deferred annuity contracts (the

‘‘Existing Contracts’’) and any contracts

(‘‘Future Contracts’’) offered in the

future by CG Life which are

substantially similar in all material

respects to the Existing Contracts; and

(ii) the assets of any separate account

(‘‘Future Account’’) established in the

future by CG Life, in connection with

the offer and sale of Future Contracts.

Applicants propose that the order

extend to any broker-dealer (‘‘Other

Broker-Dealers’’) which may serve in the

future as principal underwriter with

respect to the Contracts or Future

Contracts, and which is or will be

registered with the Commission as a

broker-dealer under the Securities

Exchange Act of 1934 (the ‘‘1934 Act’’),

and a member of the National

Association of Securities Dealers (the

‘‘NASD’’).

FILING DATE: The application was filed

March 15, 1996.

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 this application by writing

to the Secretary of the SEC and serving

applicants with a copy of the request,

personally or by mail. Hearing requests

must be received by the Commission by

5:30 p.m. on June 3, 1996, and should

be accompanied by proof of service on

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 SEC.

ADDRESSES: Secretary, SEC, 450 Fifth

Street NW., Washington, DC 20549.

Applicants: Robert A. Picarello, Esq.,

S–321, Connecticut General Life

Insurance Company, 900 Cottage Grove

Road, Hartford, CT 06152, with copies

to George N. Gingold, Esq., 197 King

Phillip Drive, West Hartford, CT 06117–

1409 and Michael Berenson, Esq.,

Jorden Burt Berenson & Johnson LLP,

1025 Thomas Jefferson Street NW., Suite

400 East, Washington, DC 20007–0805.

FOR FURTHER INFORMATION CONTACT:

Peter R. Marcin, Law Clerk, or Patrice

M. Pitts, Special Counsel, Office of

Insurance Products, Division of

Investment Management, at (202) 942–

0670.

SUPPLEMENTARY INFORMATION: Following

is a summary of the application. The

complete application is available for a

fee from the Public Reference Branch of

the SEC.

Applicants’ Representations

1. CG Life, a stock life insurance

company domiciled in Connecticut, is a

wholly-owned subsidiary of CIGNA

Holdings, Inc., which is wholly owned

by CIGNA Corporation.

2. CG Life established the Variable

Account under Connecticut law on

January 25, 1994. The Variable Account

is a unit investment trust registered

under the 1940 Act. The Variable

Account will fund the Existing

Contracts.1

3. CFA will serve as the distributor of

and the principal underwriter for the

Existing Contracts, and is expected to

serve as the distributor of and the

principal underwriter for Future

Contracts. CFA is a wholly-owned

subsidiary of Connecticut General

Corporation, which is wholly owned by

CIGNA Corporation. CFA is a brokerdealer registered under the 1934 Act, an

investment adviser registered under the

Investment Advisers Act of 1940, and a

member of the NASD. Broker-dealers

other than CFA may serve as

distributors of, and principal

underwriters for, the Existing Contracts

and Future Contracts. Such Other

Broker-Dealers shall be registered under

the 1934 Act, and members of the

NASD.

4. The Variable Account consists of

subaccounts (the ‘‘Subaccounts’’). The

assets of each Subaccount will be

invested in a corresponding portfolio of

one of five investment companies (the

‘‘Funds’’). Each of the Funds is a

registered, diversified, open-end

management investment company

consisting of one or more investment

portfolios which pursue different

investment objectives and policies.

Currently, seventeen investment

portfolios of the Funds are available as

investment options under the Existing

Contracts; the number and identity of

available Funds and investment

portfolios may change.

5. The Existing Contracts are

combination fixed and variable annuity

contracts issued on a group basis in the

State of New York.2 The Existing

Contracts may be purchased on a nontax qualified basis or with the proceeds

from certain plans qualifying for

favorable tax treatment under the

Internal Revenue Code of 1986, as

amended (the ‘‘Code’’). The minimum

initial premium for a Contract used in

connection with a non-tax qualified

plan is $2,500; a minimum initial

premium of $2,000 will be permitted for

an individual retirement annuity under

Section 408 of the Code. Subsequent

premium payments must equal at least

$100.

6. The Existing Contracts also provide

for a guaranteed death benefit. If the

Existing Contract owner dies before the

annuity date, CG Life will pay a death

benefit to the beneficiary, upon receipt

of due proof of death and a payment

election. The death benefit will be the

greatest of: (a) the sum of all premium
Federal Register / Vol. 61, No. 96 / Thursday, May 16, 1996 / Notices 24841

payments made, minus the sum of all

partial withdrawals; (b) the annuity

account value as of the time the death

benefit election is effective or deemed to

become effective; or (c) the annuity

account value on the seven-year

anniversary of the Existing Contract

(and each succeeding contract

anniversary occurring at any seven-year

interval thereafter) immediately

preceding the date the death benefit

election is effective or is deemed to

become effective, adjusted for any

subsequent premium payments, partial

withdrawals and charges. If the death

benefit becomes payable after the

Existing Contract owner’s 85th birthday

(or the annuitant’s 85th birthday, if the

Existing Contract owner is not a natural

person), the amount payable will be the

greater of (a) or (b) above. If the

beneficiary designated in the Existing

Contract has predeceased the Existing

Contract owner, CG Life will pay the

death benefit in one lump sum to the

estate of the beneficiary, upon receipt of

due proof of death of the Existing

Contract owner and beneficiary.

7. CG Life will deduct an annual

administrative fee of $35 on Existing

Contracts having a contract value of less

than $100,000. Until the earlier of the

annuity date or surrender of the

Contract, this fee will be deducted pro

rata from all of the Subaccounts in

which the Contract owner invests. If a

variable payout has been selected after

the annuity date, the fee will be

deducted proportionately and in

installments from the annuity payments.

The annual administrative fee partially

compensates CG Life for administrative

services associated with the Existing

Contracts and the Variable Account. CG

Life also proposes to deduct a daily

administrative expense charge equal

annually to 0.15% of the average daily

net asset value of the Variable Account.

8. CG Life will rely upon and comply

with Rule 26a–1 under the 1940 Act in

deducting both the annual

administrative fee and the daily

administrative charge. CG Life does not

anticipate a profit from either

administrative charge. These

administrative charges are guaranteed

not to increase for a Contract once that

Contract has been issued.

9. Upon partial withdrawal or full

surrender of Contract value, a

contingent deferred sales charge (the

‘‘CDSC’’) may be deducted from

purchase payments which have been

credited to a Contract for fewer than

seven years. Each Contract year,

however, a Contract owner may

withdraw up to 15% of the premium

payments paid to date without

imposition of a CDSC. CG Life

guarantees that the aggregate CDSC

under a Contract will not exceed 8.5%

of total premiums paid by a Contract

owner.

10. CG Life proposes to impose a daily

charge equal to an annual effective rate

of 1.25% of the value of the net assets

of the Variable Account to compensate

CG Life for assuming certain mortality

and expense risks in connection with

the Existing Contracts. Applicants state

that approximately 0.75% of the 1.25%

charge is attributable to mortality risk,

and approximately 0.50% is attributable

to expense risk. The mortality and

expense risk charge is guaranteed not to

increase for a group contract (i.e., each

of the Existing Contracts) once that

group contract has been issued.

11. If the mortality and expense risk

charge is insufficient to cover the actual

costs of the risks assumed, CG Life will

bear the loss. If the charge exceeds

actual costs, this excess will be profit to

CG Life and will be available for any

corporate purpose, including payment

of expenses relating to the distribution

of the Existing Contracts. CG Life

expects a reasonable profit from the

mortality and expense risk charge.

12. The mortality risk borne by CG

Life arises from the contractual

obligation of CG Life to make annuity

payments regardless of how long all

annuitants or any individual annuitant

may live, and the guarantee of a death

benefit. The expense risk assumed by

CG Life under the Existing Contracts is

that the administrative charges assessed

under the Existing Contracts may be

insufficient to cover actual

administrative expenses incurred by CG

Life.

13. CG Life may incur premium taxes

relating to the Existing Contracts, and

will deduct these taxes upon

withdrawal, annuitization or payment of

the death benefit. CG Life reserves the

right to deduct charges made for federal,

state and local taxes incurred by CG Life

in the future.

Applicants’ Legal Analysis and

Conditions

1. Section 6(c) of the 1940 Act

authorizes the commission to exempt

any person, security or transaction, or

any class or classes of persons,

securities or transactions, from the

provisions of the 1940 Act and the rules

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 1940 Act.

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

the 1940 Act, in pertinent part, prohibit

a registered unit investment trust and

any depositor thereof or underwriter

therefor from selling periodic payment

plan certificates unless the proceeds of

all payments (other than sales load) 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 an order of the

Commission under Section 6(c) of the

1940 Act granting exemptions 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: (i) the assets

of the Variable Account in connection

with the offer and sale of Existing

Contracts and Future Contracts; and (ii)

the assets of any Future Account, in

connection with the offer and sale of

Future Contracts. Applicants propose

that the order extend to Other BrokerDealers which may serve in the future

as principal underwriter for the Existing

Contracts or Future Contracts.

Applicants believe that the requested

exemptions 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.

4. Applicants assert that the relief

would promote competitiveness in the

variable annuity market by eliminating

the need to file redundant exemptive

applications, thereby reducing

administrative expenses and

maximizing efficient use of resources.

Applicants submit that the delay and

expense involved in having to seek

exemptive relief repeatedly would

impair the ability of CG Life to take

advantage effectively of business

opportunities as those opportunities

arise, and would not provide any

additional benefit or protection to

Contract owners. Indeed, Contract

owners may be disadvantaged as a result

of additional overhead costs incurred by

the Applicants, any Future Account, or

Other Broker-Dealers.

5. Applicants assert that the 1.25%

mortality and expense risks charge to be

assessed under the Existing Contracts

and Future Contracts is/will be

reasonable in relation to the risks

assumed by CG Life under the Existing

Contracts and the Future Contracts, and

that assessment of the charge is/will be

consistent with the protection of

investors because it is a reasonable and

proper insurance charge for the risks
24842 Federal Register / Vol. 61, No. 96 / Thursday, May 16, 1996 / Notices

1Securities Exchange Act Release No. 36725

(January 17, 1996), 61 FR 2321.

2The Commission declared the CTA Plan

effective as of May 17, 1974. See Securities

Exchange Act Release No. 10787 (May 10, 1974), 39

FR 17799. The Participants filed a restatement and

amendment of that Plan (the ‘‘Restated CTA Plan’’)

with the Commission on May 12, 1980. The

Commission approved the Restated CTA Plan on

July 16, 1980. See Securities Exchange Act Release

No. 16983 (July 16, 1980) 45 FR 49414.

3A description of the amendments and a listing

of the attachments were included in the Notice of

Filing of Amendment (see, note 1 supra), and are

incorporated by reference herein.

4The Participants submitted the version of the

Consolidated Vendor Form currently in use to the

Commission on October 12, 1989. The Commission

published a notice of the effectiveness of the

Consolidated Vendor Form on September 6, 1990.

See Securities Exchange Act Release No. 28407

(September 6, 1990) 55 FR 37276.

5AMEX and NYSE submitted the version of the

CQ Plan currently in effect to the Commission on

July 25, 1978. The Commission granted permanent

approval of that plan effective as of January 22,

1980. See Securities Exchange Act Release No.

16518 (January 22, 1980), 45 FR 6521.

6A description of the amendments and a listing

of the attachments were included in the Notice of

Filing of Amendment (see, note 1, supra), and are

incorporated by reference herein.

assumed and the costs incurred by CG

Life.

6. Applicants assert that the 1.25%

mortality and expense risk charge to be

assessed under the Existing Contracts

and Future Contracts is/will be within

the range of industry practice with

respect to comparable annuity products.

Applicants represent that this

determination is based upon

Applicants’ analysis of publicly

available information about similar

industry products, taking into

consideration such factors as: current

charge levels; benefits provided; charge

level guarantees; and guaranteed

annuity rates. Applicants represent that

CG Life will maintain at its home office,

and make available to the Commission

upon request, a memorandum detailing

the methodology used in, and the

results of, the Applicants’ comparative

survey.

7. Applicants acknowledge that the

CDSC will likely be insufficient to cover

all costs relating to the distribution of

the Existing Contracts. To the extent

distribution costs are not covered by the

CDSC, CG Life will recover its

distribution costs from the assets of the

general account. Those assets may

include that portion of the mortality and

expense risk charge which is profit to

CG Life. Applicants represent that CG

Life has concluded that there is a

reasonable likelihood that the

distribution financing arrangement

proposed under the Existing Contracts

and Future Contracts will benefit the

Variable Account, the Future Accounts,

Contract owners, and Future Contract

owners. The basis for this conclusion is

set forth in a memorandum which will

be maintained by CG Life at its home

office and will be made available to the

Commission upon request.

8. CG Life represents that the Variable

Account and any Future Account will

invest only in open-end management

investment companies which undertake,

in the event such companies should

adopt a plan for financing distribution

expenses pursuant to Rule 12b–1 of the

1940 Act, to have such plan formulated

and approved by the company’s board

of directors/trustees, a majority of whom

are not interested persons of any such

company.

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 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. 96–12238 Filed 5–15–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37191; File No. SR–CTA/

CQ–96–1]

Consolidated Tape Association; Order

Granting Approval of Proposed

Restatements and Amendments to the

Restated Consolidated Tape

Association Plan and the Consolidated

Quotation Plan

May 9, 1996.

I. Introduction

On December 26, 1995, the

Consolidated Tape Association (‘‘CTA’’)

and Consolidated Quotation (‘‘CQ’’)

Plan Participants filed with the

Securities and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) amendments

to the Restated CTA Plan and CQ Plan

pursuant to Rule 11Aa3–2 of the

Securities Exchange Act of 1934

(‘‘Act’’). Notice of the filing appeared in

the Federal Register on January 25,

1996.1 No comment letters were

received in response to the Notice. For

the reasons stated below, the

Commission has determined to approve

the filing.

II. Description

A. Overview of the Changes

The changes to the CQ and CTA Plans

broaden ‘‘concurrent uses’’ of the CTA

and CQ facilities, incorporate a number

of housekeeping changes, and

consolidate and reorganize the

‘‘Financial Matters’’ provisions of both

plans. In an attempt to make the plans

less legalistic, and therefore easier to

read, the filing expands the use of

definitions used throughout the plans,

and deletes certain language that is

almost two decades old and outdated.

Furthermore, the amendments provide

the Participants with greater flexibility

in prescribing contract and other

requirements for vendor and subscriber

services, including the use of the

Subscriber Addendum or such alternate

requirements as the Participants may

prescribe.

B. Second Restatement of the CTA Plan

The filing restates and amends the

Restated CTA Plan.2 The restatement

(the ‘‘Second Restatement of the CTA

Plan’’) incorporates into the Restated

CTA Plan the 17 substantive

amendments, and 16 charges

amendments, to the Restated CTA Plan

that the Commission has previously

approved and incorporates the

additional amendments submitted to the

Commission.3

The amendments (1) revise the form

of agreement 4 into which the

Participants require vendors and certain

end users to enter (the ‘‘Consolidated

Vendor Form’’) and (2) introduce a form

of addendum (the ‘‘Subscriber

Addendum’’) that the Participants,

under appropriate circumstances, will

allow vendors to attach to, or to

incorporate into, agreements with

certain subscribers as a surrogate for the

form of agreement that the participants

currently require subscribers to execute.

C. Restated CQ Plan

The filing restates and amends the CQ

Plan.5 The restatement (the ‘‘Restated

CQ Plan’’) incorporates into the CQ Plan

the 21 substantive amendments, and 6

changes amendments, to the CQ Plan

that the Commission has previously

approved and incorporates the

additional amendments submitted to the

Commission.6

The Participants are also proposing to

use the revised Consolidated Vendor

Form and the Subscriber Addendum in

connection with the Restated CQ Plan,

in the same manner as in the proposed

Second Restatement of the CTA Plan.

III. Discussion

The Commission has determined that

the Second Restatement of the CTA Plan

and the Restated CQ Plan are consistent

with the Act. Rule 11Aa3–2(c)(2) under