62482 Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 

1As used herein, a ‘‘Future Variable Fund’’ is any 

investment company (or investment portfolio or 

series thereof), other than the Existing Variable 

Fund, designed to be sold to VA Accounts or VLI 

Accounts and for which USBFS or any of its 

affiliates serves in the future as investment adviser, 

subadviser, manager, administrator, principal 

underwriter, or sponsor. The Existing Variable 

Fund and any Future Variable Fund is referred to 

herein as a ‘‘Variable Fund,’’ and collectively, as the 

‘‘Variable Funds.’’ 

Subsidiary would be entitled to rely on 

section 18(k) if it were a BDC, there is 

no policy reason to deny the benefit of 

that exemption to the Company. 

Applicants’ Condition 

Applicants agree that any order 

granting the requested relief will be 

subject to the following condition: 

The Company will not itself issue or 

sell any senior security and the 

Company will not cause or permit New 

Mountain SBIC or any other SBIC 

Subsidiary to issue or sell any senior 

security of which the Company, New 

Mountain SBIC or any other SBIC 

Subsidiary is the issuer except to the 

extent permitted by Section 18 (as 

modified for BDCs by Section 61); 

provided that, immediately after the 

issuance or sale of any such senior 

security by any of the Company, New 

Mountain SBIC or any other SBIC 

Subsidiary, the Company, individually 

and on a consolidated basis, shall have 

the asset coverage required by Section 

18(a) (as modified by Section 61(a)). In 

determining whether the Company, 

New Mountain SBIC and any other SBIC 

Subsidiary on a consolidated basis have 

the asset coverage required by Section 

18(a) (as modified by Section 61(a)), any 

senior securities representing 

indebtedness of New Mountain SBIC or 

another SBIC Subsidiary if that SBIC 

Subsidiary has issued indebtedness that 

is held or guaranteed by the SBA shall 

not be considered senior securities and, 

for purposes of the definition of ‘‘asset 

coverage’’ in Section 18(h), shall be 

treated as indebtedness not represented 

by senior securities. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–24685 Filed 10–16–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. IC–31268A; File No. 812– 

14250] 

Managed Portfolio Series, et al.; Notice 

of Application 

October 15, 2014. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application under 

section 6(c) of the Investment Company 

Act of 1940 (‘‘Act’’) seeking exemptions 

from sections 9(a), 13(a), 15(a), and 

15(b) of the Act and rules 6e–2(b)(15) 

and 6e–3(T)(b)(15) thereunder. 

APPLICANTS: Managed Portfolio Series 

(the ‘‘Trust’’), U.S. Bancorp Fund 

Services, LLC (‘‘USBFS’’), and Tortoise 

Capital Advisors, L.L.C. (‘‘Tortoise’’). 

SUMMARY OF APPLICATION: Applicants 

request an order under section 6(c) of 

the Act granting exemptions from the 

provisions of sections 9(a), 13(a), 15(a), 

and 15(b) of the Act and rules 6e– 

2(b)(15) and 6e–3(T)(b)(15) (or any 

comparable provisions of a permanent 

rule that replaces rule 6e–3(T)) 

thereunder to permit an existing series 

of the Trust, Tortoise VIP MLP & 

Pipeline Portfolio (‘‘Existing Variable 

Fund’’), and/or any Future Variable 

Fund 1 to be sold to and held by: (i) 

Separate accounts registered as 

investment companies or separate 

accounts that are not registered as 

investment companies under the Act 

pursuant to exemptions from 

registration under section 3(c) of the Act 

that fund variable annuity contracts 

(‘‘VA Accounts’’) and variable life 

insurance contracts (‘‘VLI Accounts’’) 

(VA Accounts and VLI Accounts 

together ‘‘Separate Accounts’’) issued by 

both affiliated life insurance companies 

and unaffiliated life insurance 

companies (‘‘Participating Insurance 

Companies’’); (ii) trustees of qualified 

group pension or group retirement plans 

(‘‘Qualified Plans’’) outside the Separate 

Account context; (iii) investment 

adviser(s) or affiliated person(s) of the 

investment adviser(s) (each an 

‘‘Adviser’’) to a Variable Fund for the 

purpose of providing seed capital to a 

series of a Variable Fund; and (iv) 

general accounts (‘‘General Accounts’’) 

of insurance company depositors of VA 

Accounts and/or VLI Accounts. 

DATES: Filing Date: The application was 

filed on December 13, 2013, and 

amended on July 23, 2014 and 

September 11, 2014. 

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 Secretary of 

the Commission and serving applicants 

with a copy of the request, personally or 

by mail. Hearing requests should be 

received by the Commission by 5:30 

p.m. on October 31, 2014 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 writer’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 Commission. 

ADDRESSES: Secretary, Securities and 

Exchange Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

Applicants: Angela Pingel, Esq., U.S. 

Bancorp Fund Services, LLC, 615 East 

Michigan Street, Milwaukee, WI 53202. 

FOR FURTHER INFORMATION CONTACT: 

Courtney S. Thornton, Senior Counsel, 

or David P. Bartels, Branch Chief 

(Division of Investment Management, 

Chief Counsel’s Office) at 202–551– 

6821. 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

Web site by searching for the file 

number, or for an applicant using the 

Company name box, at http://

www.sec.gov/search.htm, or by calling 

(202) 551–8090. 

Applicants’ Representations 

1. The Trust was organized as a 

Delaware statutory trust on January 27, 

2011, and is registered under the Act as 

an open-end management investment 

company (Reg. File No. 811–22525). The 

Trust is a series investment company as 

defined by Rule 18f–2 under the Act 

and currently is comprised of 24 series 

(including the Existing Variable Fund) 

managed by 16 different advisers and 

two sub-advisers. The Trust has 

registered two classes of shares of the 

Existing Variable Fund under the 

Securities Act of 1933 (the ‘‘1933 Act’’) 

(Reg. File No. 333–172080) on Form N– 

1A. The Trust may establish Future 

Variable Funds and additional classes of 

shares for any of the Variable Funds. 

Shares of the Variable Funds will not be 

offered to the general public. The 

application seeks exemptive relief only 

for the Existing Variable Fund and any 

Future Variable Fund, as defined herein, 

but does not seek exemptive relief for 

the remaining 23 current series because 

they are not designed to be sold to VA 

Accounts and/or VLI Accounts. 

2. Tortoise is the investment adviser 

to the Existing Variable Fund as well as 

the investment adviser to three other 

series of the Trust. Tortoise is a 

Delaware limited liability company and 

is registered as an investment adviser 

under the Investment Advisers Act of 

1940 (‘‘Advisers Act’’). Subject to the 

authority of the Board of Trustees of the 

Trust (‘‘Board’’), Tortoise will oversee 

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Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 62483 

2There is currently only one participating 

insurance company, a variable annuity separate 

account. 

the investment operations of the 

Existing Variable Fund, including the 

purchase, retention and disposition of 

securities in accordance with the 

Existing Variable Fund’s investment 

objective. 

3. USBFS is a Wisconsin limited 

liability company. Subject to the 

supervision of the Board, USBFS 

provides administration, fund 

accounting and transfer agent services to 

the existing series of the Trust, and is 

proposed to provide the same services 

to the Existing Variable Fund and 

Future Variable Funds of the Trust. 

USBFS may provide individuals to 

serve as officers of the Trust, which 

officers may be directors, officers or 

employees of USBFS or its affiliates. 

USBFS is paid a fee for its services, 

which may consist of a base fee, a per 

account fee and/or an asset based fee. 

4. The Existing Variable Fund 

proposes, and Future Variable Funds 

will propose, to offer their shares to 

Separate Accounts of Participating 

Insurance Companies to serve as 

investment media to support variable 

life insurance contracts (‘‘VLI 

Contracts’’) and variable annuity 

contracts (‘‘VA Contracts,’’ together with 

VLI Contracts, ‘‘Variable Contracts’’) 

issued through such accounts.2 Each 

Separate Account is or will be 

established as a segregated asset account 

by a Participating Insurance Company 

pursuant to the insurance law of the 

insurance company’s state of domicile. 

As such, the assets of each will be the 

property of the Participating Insurance 

Company, and that portion of the assets 

of such Separate Account equal to the 

reserves and other contract liabilities 

with respect to the Separate Account 

will not be chargeable with liabilities 

arising out of any other business that the 

insurance company may conduct. The 

income, gains and losses, realized or 

unrealized from such Separate 

Account’s assets will be credited to or 

charged against the Separate Account 

without regard to other income, gains or 

losses of the Participating Insurance 

Company. If a VLI Account or VA 

Account is registered as an investment 

company, it will be a ‘‘separate 

account’’ as defined by Rule 0–1(e) (or 

any successor rule) under the Act and 

will be registered as a unit investment 

trust. For purposes of the Act, the 

Participating Insurance Company that 

establishes such a registered VLI 

Account or VA Account is the depositor 

and sponsor of the Separate Account as 

those terms have been interpreted by the 

Commission with respect to variable life 

insurance and variable annuity separate 

accounts. 

5. The Variable Funds will sell their 

shares to Separate Accounts only if each 

Participating Insurance Company 

sponsoring such Separate Account 

enters into a participation agreement 

with the Variable Funds (‘‘Participation 

Agreement’’). The Participation 

Agreements define or will define the 

relationship between each Variable 

Fund and each Participating Insurance 

Company and memorialize or will 

memorialize, among other matters, the 

fact that, except where the agreement 

specifically provides otherwise, the 

Participating Insurance Company will 

remain responsible for establishing and 

maintaining any Separate Account 

covered by the agreement and for 

complying with all applicable 

requirements of state and federal law 

pertaining to such accounts and to the 

sale and distribution of Variable 

Contracts issued through such Separate 

Accounts. The role of the Variable 

Funds under this arrangement, with 

regard to the federal securities laws, will 

consist of offering and selling shares of 

the Variable Funds to the Separate 

Accounts and fulfilling any conditions 

that the Commission may impose in 

granting the requested order. 

6. The use of a common management 

investment company (or series thereof) 

as an investment medium for both VLI 

Accounts and VA Accounts of the same 

Participating Insurance Company, or of 

two or more insurance companies that 

are affiliated persons of each other, is 

referred to herein as ‘‘mixed funding.’’ 

The use of a common management 

investment company (or investment 

portfolio thereof) as an investment 

medium for VLI Accounts and/or VA 

Accounts of two or more Participating 

Insurance Companies that are not 

affiliated persons of each other is 

referred to herein as ‘‘shared funding.’’ 

7. Applicants propose that the 

Existing Variable Fund and any Future 

Variable Funds may offer their shares 

directly to Qualified Plans, the 

respective Variable Fund’s Adviser, and 

the General Accounts of Participating 

Insurance Companies. 

8. The use of a common management 

investment company (or series thereof) 

as an investment medium for VLI 

Accounts, VA Accounts, Qualified 

Plans, Advisers and General Accounts is 

referred to herein as ‘‘extended mixed 

funding.’’ 

Applicants’ Legal Analysis 

1. Section 9(a) of the 1940 Act makes 

it unlawful for any company to serve as 

an investment adviser or principal 

underwriter of any investment 

company, including a unit investment 

trust, if an affiliated person of that 

company is subject to disqualification 

enumerated in Section 9(a)(1) or (2) of 

the Act. Sections 13(a), 15(a), and 15(b) 

of the 1940 Act have been deemed by 

the Commission to require ‘‘passthrough’’ voting with respect to an 

underlying investment company’s 

shares. 

2. Rules 6e–2(b)(15) and 6e– 

3(T)(b)(15) under the Act provide partial 

exemptions from Sections 9(a), 13(a), 

15(a), and 15(b) of the Act to VLI 

Accounts organized as unit investment 

trusts (‘‘UITs’’) supporting certain VLI 

Contracts and to their life insurance 

company depositors under limited 

circumstances, as described in the 

application. VLI Accounts, their 

depositors and their principal 

underwriters may not rely on the 

exemptions provided by Rules 6e– 

2(b)(15) and 6e–3(T)(b)(15) if shares of 

the Fund are held by a VLI Account 

through which certain VLI Contracts are 

issued, a VLI Account of an unaffiliated 

Participating Insurance Company, an 

unaffiliated investment adviser, any VA 

Account, a Qualified Plan or a General 

Account. Accordingly, Applicants 

request an order of the Commission 

granting exemptions from Sections 9(a), 

13(a), 15(a), and 15(b) of the Act and 

Rules 6e–2(b)(15) and 6e–3(T)(b)(15) 

(and any comparable permanent rule) 

thereunder to permit shares of a 

Variable Fund to be sold to and held by: 

(i) VA Accounts and VLI Accounts 

issued by both affiliated and unaffiliated 

Participating Insurance Companies; (ii) 

trustees of Qualified Plans; (iii) a 

Variable Fund’s Adviser for the purpose 

of providing seed capital to the Variable 

Fund; and (iv) General Accounts. 

3. Applicants maintain that there is 

no policy reason for the sale of Variable 

Fund shares to Qualified Plans, 

Advisers or General Accounts to 

prohibit or otherwise limit a 

Participating Insurance Company from 

relying on the relief provided by Rules 

6e–2(b)(15) and 6e–3(T)(b)(15). 

Nonetheless, Rule 6e–2 and Rule 6e– 

3(T) each specifically provides that the 

relief granted thereunder is available 

only where shares of the underlying 

fund are offered exclusively to 

insurance company separate accounts. 

In this regard, applicants request 

exemptive relief to the extent necessary 

to permit shares of the Variable Funds 

to be sold to Qualified Plans, Advisers 

and General Accounts while allowing 

Participating Insurance Companies and 

their VA Accounts and VLI Accounts to 

enjoy the benefits of the relief granted 

under Rule 6e–2(b)(15) and Rule 6e– 

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62484 Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 

3(T)(b)(15). Applicants note that if the 

Variable Funds were to sell their shares 

only to Qualified Plans, exemptive relief 

under Rule 6e–2 and Rule 6e–3(T) 

would not be necessary. The relief 

provided for under Rule 6e–2(b)(15) and 

Rule 6e–3(T)(b)(15) does not relate to 

Qualified Plans, Advisers, or General 

Accounts or to a registered investment 

company’s ability to sell its shares to 

such purchasers. 

4. Applicants are not aware of any 

reason for excluding Separate Accounts 

and investment companies engaged in 

shared funding from the exemptive 

relief provided under Rules 6e–2(b)(15) 

and 6e–3(T)(b)(15), or for excluding 

Separate Accounts and investment 

companies engaged in mixed funding 

from the exemptive relief provided 

under Rule 6e–2(b)(15). Similarly, 

applicants are not aware of any reason 

for excluding Participating Insurance 

Companies from the exemptive relief 

requested because the Variable Funds 

may also sell their shares to Qualified 

Plans, Advisers and General Accounts. 

Rather, applicants submit that the 

proposed sale of shares of the Variable 

Funds to these purchasers may allow for 

the development of larger pools of assets 

resulting in the potential for greater 

investment and diversification 

opportunities, and for decreased 

expenses at higher asset levels resulting 

in greater cost efficiencies. 

5. For the reasons explained below, 

Applicants have concluded that 

investment by Qualified Plans, Advisers 

and General Accounts in the Variable 

Funds should not increase the risk of 

material irreconcilable conflicts 

between owners of VLI Contracts and 

other types of investors or between 

owners of VLI Contracts issued by 

unaffiliated Participating Insurance 

Companies. 

6. Consistent with the Commission’s 

authority under Section 6(c) of the Act 

to grant exemptive orders to a class or 

classes of persons and transactions, 

applicants request exemptions for a 

class consisting of Participating 

Insurance Companies and their separate 

accounts investing in the Existing 

Variable Fund and Future Variable 

Funds, as well as their principal 

underwriters, that currently invest, or in 

the future will invest, in the Variable 

Funds. 

7. Section 6(c) of the Act provides, in 

part, that the Commission, by order 

upon application, may conditionally or 

unconditionally exempt any person, 

security or transaction, or any class or 

classes of persons, securities or 

transactions, from any provision or 

provisions of the Act, or any rule or 

regulation 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 Act. Applicants submit that the 

exemptions requested 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 Act. 

8. Section 9(a)(3) of the Act provides, 

among other things, that it is unlawful 

for any company to serve as investment 

adviser or principal underwriter of any 

registered open-end investment 

company if an affiliated person of that 

company is subject to a disqualification 

enumerated in sections 9(a)(1) or (2). 

Rules 6e–2(b)(15)(i) and (ii) and rules 

6e–3(T)(b)(15)(i) and (ii) under the Act 

provide exemptions from section 9(a) 

under certain circumstances, subject to 

the limitations discussed above on 

mixed funding, extended mixed funding 

and shared funding. These exemptions 

limit the application of the eligibility 

restrictions to affiliated individuals or 

companies that directly participate in 

management of the underlying 

investment company. 

9. Rules 6e–2(b)(15)(iii) and 6e– 

3(T)(b)(15)(iii) under the Act provide 

exemptions from pass-through voting 

requirements with respect to several 

significant matters, assuming the 

limitations on mixed funding, extended 

mixed funding and shared funding are 

observed. Rules 6e–2(b)(15)(iii)(A) and 

6e–3(T)(b)(15)(iii)(A) provide that the 

insurance company may disregard the 

voting instructions of its variable life 

insurance contract owners with respect 

to the investments of an underlying 

investment company, or any contract 

between such an investment company 

and its investment adviser, when 

required to do so by an insurance 

regulatory authority (subject to the 

provisions of paragraphs (b)(5)(i) and 

(b)(7)(ii)(A) of Rules 6e–2 and 6e–3(T)). 

10. Applicants represent that the sale 

of Variable Fund shares to Qualified 

Plans, Advisers or General Accounts 

will not have any impact on the 

exemptions requested herein regarding 

the disregard of pass-through voting 

rights. Shares sold to Qualified Plans 

will be held by such Qualified Plans. 

The exercise of voting rights by 

Qualified Plans, whether by trustees, 

participants, beneficiaries, or 

investment managers engaged by the 

Qualified Plans, does not raise the type 

of issues respecting disregard of voting 

rights that are raised by VLI Accounts. 

With respect to Qualified Plans, which 

are not registered as investment 

companies under the Act, there is no 

requirement to pass through voting 

rights to Qualified Plan participants. 

Indeed, to the contrary, applicable law 

expressly reserves voting rights 

associated with Qualified Plan assets to 

certain specified persons as disclosed in 

the application. 

11. Similarly, Advisers and General 

Accounts are not subject to any passthrough voting rights. Accordingly, 

unlike the circumstances surrounding 

Separate Account investments in shares 

of the Variable Funds, the issue of the 

resolution of any material irreconcilable 

conflicts with respect to voting is not 

present with respect to Advisers or 

General Accounts of Participating 

Insurance Companies. 

12. Applicants recognize that the 

prohibitions on mixed and shared 

funding might reflect concern regarding 

possible different investment 

motivations among investors. When 

Rule 6e–2 was first adopted, variable 

annuity separate accounts could invest 

in mutual funds whose shares were also 

offered to the general public. However, 

now, under the Internal Revenue Code 

of 1986 (‘‘Code’’), any underlying fund, 

including the Variable Funds, that sells 

shares to VA Accounts or VLI Accounts, 

would, in effect, be precluded from also 

selling its shares to the public. 

Consequently, the Funds may not sell 

their shares to the public. 

13. Applicants assert that the rights of 

an insurance company or a state 

insurance regulator to disregard the 

voting instructions of owners of 

Variable Contracts is not inconsistent 

with either mixed funding or shared 

funding. Applicants state that The 

National Association of Insurance 

Commissioners Variable Life Insurance 

Model Regulation (the ‘‘NAIC Model 

Regulation’’) suggests that it is unlikely 

that insurance regulators would find an 

underlying fund’s investment policy, 

investment adviser or principal 

underwriter objectionable for one type 

of Variable Contract but not another 

type. 

14. Applicants assert that shared 

funding by unaffiliated insurance 

companies does not present any issues 

that do not already exist where a single 

insurance company is licensed to do 

business in several or all states. A 

particular state insurance regulator 

could require action that is inconsistent 

with the requirements of other states in 

which the insurance company offers its 

contracts. However, the fact that 

different insurers may be domiciled in 

different states does not create a 

significantly different or enlarged 

problem. Shared funding by unaffiliated 

insurers, in this respect, is no different 

than the use of the same investment 

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Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 62485 

company as the funding vehicle for 

affiliated insurers, which Rules 6e– 

2(b)(15) and 6e–3(T)(b)(15) permit. 

Affiliated insurers may be domiciled in 

different states and be subject to 

differing state law requirements. 

Affiliation does not reduce the 

potential, if any exists, for differences in 

state regulatory requirements. 

Applicants state that, in any event, the 

conditions set forth below are designed 

to safeguard against, and provide 

procedures for resolving, any adverse 

effects that differences among state 

regulatory requirements may produce. If 

a particular state insurance regulator’s 

decision conflicts with the majority of 

other state regulators, then the affected 

Participating Insurance Company will 

be required to withdraw its separate 

account investments in the relevant 

Variable Fund. This requirement will be 

provided for in the Participation 

Agreement that will be entered into by 

Participating Insurance Companies with 

the relevant Variable Fund. 

15. Rules 6e–2(b)(15) and 6e– 

3(T)(b)(15) give Participating Insurance 

Companies the right to disregard the 

voting instructions of VLI Contract 

owners in certain circumstances. This 

right derives from the authority of state 

insurance regulators over Separate 

Accounts. Under Rules 6e–2(b)(15) and 

6e–3(T)(b)(15), a Participating Insurance 

Company may disregard VLI Contract 

owner voting instructions only with 

respect to certain specified items. 

Affiliation does not eliminate the 

potential, if any exists, for divergent 

judgments as to the advisability or 

legality of a change in investment 

policies, principal underwriter or 

investment adviser initiated by such VLI 

Contract owners. The potential for 

disagreement is limited by the 

requirements in Rules 6e–2 and 6e–3(T) 

that the Participating Insurance 

Company’s disregard of voting 

instructions be reasonable and based on 

specific good faith determinations. 

16. A particular Participating 

Insurance Company’s disregard of 

voting instructions, nevertheless, could 

conflict with the voting instructions of 

a majority of VLI Contract owners. The 

Participating Insurance Company’s 

action possibly could be different than 

the determination of all or some of the 

other Participating Insurance 

Companies (including affiliated 

insurers) that the voting instructions of 

VLI Contract owners should prevail, and 

either could preclude a majority vote 

approving the change or could represent 

a minority view. If the Participating 

Insurance Company’s judgment 

represents a minority position or would 

preclude a majority vote, then the 

Participating Insurance Company may 

be required, at the relevant Variable 

Fund’s election, to withdraw its 

Separate Accounts’ investments in the 

relevant Variable Fund. No charge or 

penalty will be imposed as a result of 

such withdrawal. This requirement will 

be provided for in the participation 

agreement entered into by the 

Participating Insurance Companies with 

the relevant Variable Fund. 

17. Applicants assert that there is no 

reason why the investment policies of a 

Variable Fund would or should be 

materially different from what these 

policies would or should be if the 

Variable Fund supported only VA 

Accounts or VLI Accounts supporting 

flexible premium or scheduled premium 

VLI Contracts. Each type of insurance 

contract is designed as a long-term 

investment program. 

18. Each Variable Fund will be 

managed to attempt to achieve its 

specified investment objective, and not 

favor or disfavor any particular 

Participating Insurance Company or 

type of insurance contract. Applicants 

assert that there is no reason to believe 

that different features of various types of 

Variable Contracts will lead to different 

investment policies for each or for 

different VLI Accounts and VA 

Accounts. The sale of Variable Contracts 

and ultimate success of all VA Accounts 

and VLI Accounts depends, at least in 

part, on satisfactory investment 

performance, which provides an 

incentive for each Participating 

Insurance Company to seek optimal 

investment performance. 

19. Furthermore, no single investment 

strategy can be identified as appropriate 

to a particular Variable Contract. Each 

‘‘pool’’ of VLI Contract and VA Contract 

owners is composed of individuals of 

diverse financial status, age, insurance 

needs and investment goals. A Variable 

Fund supporting even one type of 

Variable Contract must accommodate 

these diverse factors in order to attract 

and retain purchasers. Applicants state 

that permitting mixed and shared 

funding will provide economic support 

for the continuation of the Variable 

Funds. Applicants state further that 

mixed and shared funding will broaden 

the base of potential Variable Contract 

owner investors, which may facilitate 

the establishment of additional Variable 

Funds serving diverse goals. 

20. Applicants do not believe that the 

sale of the shares to Qualified Plans, 

Advisers or General Accounts will 

increase the potential for material 

irreconcilable conflicts of interest 

between or among different types of 

investors. In particular, applicants see 

very little potential for such conflicts 

beyond those that would otherwise exist 

between owners of VLI Contracts and 

VA Contracts. Applicants submit that 

either there are no conflicts of interest 

or that there exists the ability by the 

affected parties to resolve such conflicts 

consistent with the best interests of VLI 

Contract owners, VA Contract owners 

and Qualified Plan participants. 

21. Applicants state that they 

considered whether there are any issues 

raised under the Code, Treasury 

Regulations, or Revenue Rulings 

thereunder, if Qualified Plans, Separate 

Accounts, Advisers and General 

Accounts all invest in the same Variable 

Fund. Applicants have concluded that 

neither the Code, nor the Treasury 

Regulations nor Revenue Rulings 

thereunder present any inherent 

conflicts of interest if Qualified Plans, 

VA Accounts, VLI Accounts, Advisers 

and General Accounts all invest in the 

same Variable Fund. 

22. Applicants note that, while there 

are differences in the manner in which 

distributions from separate accounts 

and Qualified Plans are taxed, these 

differences have no impact on the 

Variable Funds. When distributions are 

to be made, and a Separate Account or 

Qualified Plan is unable to net purchase 

payments to make distributions, the 

Separate Account or Qualified Plan will 

redeem shares of the relevant Variable 

Fund at its net asset values in 

conformity with rule 22c–1 under the 

Act (without the imposition of any sales 

charge) to provide proceeds to meet 

distribution needs. A Participating 

Insurance Company will then make 

distributions in accordance with the 

terms of its Variable Contracts, and a 

Qualified Plan will then make 

distributions in accordance with the 

terms of the Qualified Plan. 

23. Applicants state that they 

considered whether it is possible to 

provide an equitable means of giving 

voting rights to Variable Contract 

owners, Qualified Plans, Advisers and 

General Accounts. In connection with 

any meeting of Variable Fund 

shareholders, the Variable Fund will 

inform each Participating Insurance 

Company (with respect to its Separate 

Accounts and General Account), 

Adviser(s), and Qualified Plan of its 

share holdings and provide other 

information necessary for such 

shareholders to participate in the 

meeting (e.g., proxy materials). Each 

Participating Insurance Company then 

will solicit voting instructions from 

owners of VLI Contracts and VA 

Contracts in accordance with rules 6e– 

2 or 6e–3(T), or section 

12(d)(1)(E)(iii)(aa) of the Act, as 

applicable, and its Participation 

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62486 Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 

Agreement with the relevant Variable 

Fund. Shares of a Variable Fund that are 

held by an Adviser or a General 

Account will generally be in the same 

proportion as all votes cast on behalf of 

all Variable Contract owners having 

voting rights. However, an Adviser or 

General Account will vote its shares in 

such other manner as may be required 

by the Commission or its staff. Shares 

held by Qualified Plans will be voted in 

accordance with applicable law. The 

voting rights provided to Qualified 

Plans with respect to the shares would 

be no different from the voting rights 

that are provided to Qualified Plans 

with respect to shares of mutual funds 

sold to the general public. Furthermore, 

if a material irreconcilable conflict 

arises because of a Qualified Plan’s 

decision to disregard Qualified Plan 

participant voting instructions, if 

applicable, and that decision represents 

a minority position or would preclude 

a majority vote, the Qualified Plan may 

be required, at the election of the 

relevant Variable Fund, to withdraw its 

investment in the Variable Fund, and no 

charge or penalty will be imposed as a 

result of such withdrawal. 

24. Applicants do not believe that the 

ability of a Variable Fund to sell its 

shares to a Qualified Plan, Adviser or 

General Account gives rise to a senior 

security as defined by section 18(g) of 

the Act. Regardless of the rights and 

benefits of participants under Qualified 

Plans or owners of Variable Contracts, 

VLI Accounts, VA Accounts, Qualified 

Plans, Advisers and General Accounts 

only have, or will only have, rights with 

respect to their respective shares of a 

Variable Fund. These parties can only 

redeem such shares at net asset value. 

No shareholder of a class of the Variable 

Fund has any preference over any other 

shareholder of the class with respect to 

distribution of assets or payment of 

dividends. 

25. Applicants do not believe that the 

veto power of state insurance 

commissioners over certain potential 

changes to Variable Fund investment 

objectives approved by Variable 

Contract owners creates conflicts 

between the interests of such owners 

and the interests of Qualified Plan 

participants, Advisers or General 

Accounts. Applicants note that a basic 

premise of corporate democracy and 

shareholder voting is that not all 

shareholders may agree with a 

particular proposal. Their interests and 

opinions may differ, but this does not 

mean that inherent conflicts of interest 

exist between or among such 

shareholders or that occasional conflicts 

of interest that do occur between or 

among them are likely to be 

irreconcilable. 

26. Although Participating Insurance 

Companies may have to overcome 

regulatory impediments in redeeming 

shares of a Variable Fund held by their 

Separate Accounts, applicants state that 

the Qualified Plans and participants in 

participant-directed Qualified Plans can 

make decisions quickly and redeem 

their shares in a Variable Fund and 

reinvest in another investment company 

or other funding vehicle without 

impediments, or as is the case with most 

Qualified Plans, hold cash pending 

suitable investment. As a result, 

conflicts between the interests of 

Variable Contract owners and the 

interests of Qualified Plans and 

Qualified Plan participants can usually 

be resolved quickly since the Qualified 

Plans can, on their own, redeem their 

Variable Fund shares. Advisers and 

General Accounts can similarly redeem 

their shares of a Variable Fund and 

make alternative investments at any 

time. 

27. Finally, applicants state that they 

considered whether there is a potential 

for future conflicts of interest between 

Participating Insurance Companies and 

Qualified Plans created by future 

changes in the tax laws. Applicants do 

not see any greater potential for material 

irreconcilable conflicts arising between 

the interests of Variable Contract owners 

and Plan participants from future 

changes in the federal tax laws than that 

which already exists between VLI 

Contract owners and VA Contract 

owners. 

28. Applicants recognize that the 

foregoing is not an all-inclusive list, but 

rather is representative of issues that 

they believe are relevant to this 

application. Applicants believe that the 

sale of Variable Fund shares to 

Qualified Plans would not increase the 

risk of material irreconcilable conflicts 

between the interests of Qualified Plan 

participants and Variable Contract 

owners or other investors. Further, 

applicants submit that the use of the 

Variable Funds with respect to 

Qualified Plans is not substantially 

dissimilar from each Variable Fund’s 

current and anticipated use, in that 

Qualified Plans, like Separate Accounts, 

are generally long-term investors. 

29. Applicants assert that permitting a 

Variable Fund to sell its shares to an 

Adviser for the purpose of obtaining 

seed money or to the General Account 

of a Participating Insurance Company 

will enhance management of each 

Variable Fund without raising 

significant concerns regarding material 

irreconcilable conflicts among different 

types of investors. 

30. Applicants assert that various 

factors have limited the number of 

insurance companies that offer Variable 

Contracts. These factors include the 

costs of organizing and operating a 

funding vehicle, certain insurers’ lack of 

experience with respect to investment 

management, and the lack of name 

recognition by the public of certain 

insurance companies as investment 

experts. In particular, some smaller life 

insurance companies may not find it 

economically feasible, or within their 

investment or administrative expertise, 

to enter the Variable Contract business 

on their own. Applicants state that use 

of the Variable Funds as a common 

investment vehicle for Variable 

Contracts would reduce or eliminate 

these concerns. Mixed and shared 

funding should also provide several 

benefits to owners of Variable Contracts 

by eliminating a significant portion of 

the costs of establishing and 

administering separate underlying 

funds. 

31. Applicants state that the 

Participating Insurance Companies will 

benefit not only from the investment 

and administrative expertise of the 

Variable Fund’s Adviser, but also from 

the potential cost efficiencies and 

investment flexibility afforded by larger 

pools of funds. Therefore, making the 

Variable Funds available for mixed and 

shared funding will encourage more 

insurance companies to offer Variable 

Contracts. This should result in 

increased competition with respect to 

both Variable Contract design and 

pricing, which can in turn be expected 

to result in more product variety. 

Applicants also assert that sale of shares 

in a Variable Fund to Qualified Plans, 

in addition to VLI Accounts and VA 

Accounts, will result in an increased 

amount of assets available for 

investment in a Variable Fund. 

32. Applicants also submit that, 

regardless of the type of shareholder in 

a Variable Fund, an Adviser is or would 

be contractually and otherwise obligated 

to manage the Variable Fund solely and 

exclusively in accordance with the 

Variable Fund’s investment objectives, 

policies and restrictions, as well as any 

guidelines established by the Variable 

Fund’s Board. 

33. Applicants assert that sales of 

Variable Fund shares, as described 

above, will not have any adverse federal 

income tax consequences to other 

investors in such a Variable Fund. 

34. In addition, applicants assert that 

granting the exemptions requested 

herein is in the public interest and, as 

discussed above, will not compromise 

the regulatory purposes of sections 9(a), 

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Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 62487 

13(a), 15(a), or 15(b) of the Act or rules 

6e–2 or 6e–3(T) thereunder. 

Applicants’ Conditions 

Applicants agree that the Commission 

order requested herein shall be subject 

to the following conditions: 

1. A majority of the Board of each 

Variable Fund will consist of persons 

who are not ‘‘interested persons’’ of the 

Variable Fund, as defined by Section 

2(a)(19) of the Act, and the rules 

thereunder, and as modified by any 

applicable orders of the Commission, 

except that if this condition is not met 

by reason of death, disqualification or 

bona fide resignation of any trustee or 

trustees, then the operation of this 

condition will be suspended: (a) for a 

period of 90 days if the vacancy or 

vacancies may be filled by the Board; (b) 

for a period of 150 days if a vote of 

shareholders is required to fill the 

vacancy or vacancies; or (c) for such 

longer period as the Commission may 

prescribe by order upon application, or 

by future rule. 

2. The Board will monitor a Variable 

Fund for the existence of any material 

irreconcilable conflict between and 

among the interests of the owners of all 

VLI Contracts and VA Contracts and 

participants of all Qualified Plans 

investing in the Variable Fund, and 

determine what action, if any, should be 

taken in response to such conflicts. A 

material irreconcilable conflict may 

arise for a variety of reasons, including: 

(a) an action by any state insurance 

regulatory authority; (b) a change in 

applicable federal or state insurance, 

tax, or securities laws or regulations, or 

a public ruling, private letter ruling, noaction or interpretive letter, or any 

similar action by insurance, tax or 

securities regulatory authorities; (c) an 

administrative or judicial decision in 

any relevant proceeding; (d) the manner 

in which the investments of the Variable 

Fund are being managed; (e) a difference 

in voting instructions given by VA 

Contract owners, VLI Contract owners, 

and Qualified Plans or Qualified Plan 

participants; (f) a decision by a 

Participating Insurance Company to 

disregard the voting instructions of 

contract owners; or (g) if applicable, a 

decision by a Qualified Plan to 

disregard the voting instructions of 

Qualified Plan participants. 

3. Participating Insurance Companies 

(on their own behalf, as well as by 

virtue of any investment of General 

Account assets in a Variable Fund), the 

Advisers, and any Qualified Plan that 

executes a participation agreement upon 

its becoming an owner of 10% or more 

of the assets of a Variable Fund 

(collectively, ‘‘Participants’’) will report 

any potential or existing conflicts to the 

Board. Each Participant will be 

responsible for assisting the Board in 

carrying out the Board’s responsibilities 

under these conditions by providing the 

Board with all information reasonably 

necessary for the Board to consider any 

issues raised. This responsibility 

includes, but is not limited to, an 

obligation by each Participating 

Insurance Company to inform the Board 

whenever Variable Contract owner 

voting instructions are disregarded, and, 

if pass-through voting is applicable, an 

obligation by each trustee for a 

Qualified Plan to inform the Board 

whenever it has determined to disregard 

Qualified Plan participant voting 

instructions. The responsibility to report 

such information and conflicts, and to 

assist the Board, will be a contractual 

obligation of all Participating Insurance 

Companies under their Participation 

Agreement with a Variable Fund, and 

these responsibilities will be carried out 

with a view only to the interests of the 

Variable Contract owners. The 

responsibility to report such 

information and conflicts, and to assist 

the Board, also will be contractual 

obligations of all Qualified Plans under 

their participation agreement with a 

Variable Fund, and such agreements 

will provide that these responsibilities 

will be carried out with a view only to 

the interests of Qualified Plan 

participants. 

4. If it is determined by a majority of 

the Board, or a majority of the 

disinterested trustees of the Board, that 

a material irreconcilable conflict exists, 

then the relevant Participant will, at its 

expense and to the extent reasonably 

practicable (as determined by a majority 

of the disinterested trustees), take 

whatever steps are necessary to remedy 

or eliminate the material irreconcilable 

conflict, up to and including: (a) 

withdrawing the assets allocable to 

some or all of their VLI Accounts or VA 

Accounts from the Variable Fund and 

reinvesting such assets in a different 

investment vehicle, including another 

Variable Fund; (b) in the case of a 

Participating Insurance Company, 

submitting the question as to whether 

such segregation should be 

implemented to a vote of all affected 

Variable Contract owners and, as 

appropriate, segregating the assets of 

any appropriate group (i.e., VA Contract 

owners or VLI Contact owners of one or 

more Participating Insurance 

Companies) that votes in favor of such 

segregation, or offering to the affected 

Contract owners the option of making 

such a change; (c) withdrawing the 

assets allocable to some or all of the 

Qualified Plans from the affected 

Variable Fund and reinvesting them in 

a different investment medium; and (d) 

establishing a new registered 

management investment company or 

managed separate account. If a material 

irreconcilable conflict arises because of 

a decision by a Participating Insurance 

Company to disregard Variable Contract 

owner voting instructions, and that 

decision represents a minority position 

or would preclude a majority vote, then 

the Participating Insurance Company 

may be required, at the election of the 

Variable Fund, to withdraw such 

Participating Insurance Company’s VLI 

Account and VA Account investments 

in the Variable Fund, and no charge or 

penalty will be imposed as a result of 

such withdrawal. If a material 

irreconcilable conflict arises because of 

a Qualified Plan’s decision to disregard 

Qualified Plan participant voting 

instructions, if applicable, and that 

decision represents a minority position 

or would preclude a majority vote, the 

Qualified Plan may be required, at the 

election of the Variable Fund, to 

withdraw its investment in the Variable 

Fund, and no charge or penalty will be 

imposed as a result of such withdrawal. 

The responsibility to take remedial 

action in the event of a Board 

determination of a material 

irreconcilable conflict and to bear the 

cost of such remedial action will be a 

contractual obligation of all Participants 

under their participation agreement 

with a Variable Fund, and these 

responsibilities will be carried out with 

a view only to the interests of Variable 

Contract owners or, as applicable, 

Qualified Plan participants. 

For purposes of this condition 4, a 

majority of the disinterested trustees of 

the Board will determine whether or not 

any proposed action adequately 

remedies any material irreconcilable 

conflict, but, in no event, will the 

Variable Fund or its investment adviser 

be required to establish a new funding 

vehicle for any Variable Contract or 

Qualified Plan. No Participating 

Insurance Company will be required by 

this condition 4 to establish a new 

funding vehicle for any Variable 

Contract if any offer to do so has been 

declined by vote of a majority of the 

Variable Contract owners materially and 

adversely affected by the material 

irreconcilable conflict. Further, no 

Qualified Plan will be required by this 

condition 4 to establish a new funding 

vehicle for the Qualified Plan if: (a) a 

majority of the Qualified Plan 

participants materially and adversely 

affected by the irreconcilable material 

conflict vote to decline such offer, or (b) 

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62488 Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 

pursuant to documents governing the 

Qualified Plan, the Qualified Plan 

trustee makes such decision without a 

Qualified Plan participant vote. 

5. The determination by the Board of 

the existence of a material irreconcilable 

conflict and its implications will be 

made known in writing promptly to all 

Participants. 

6. Participating Insurance Companies 

will provide pass-through voting 

privileges to all Variable Contract 

owners whose Variable Contracts are 

issued through registered VLI Accounts 

or registered VA Accounts for as long as 

the Commission continues to interpret 

the Act as requiring such pass-through 

voting privileges. However, as to 

Variable Contracts issued through VA 

Accounts or VLI Accounts not registered 

as investment companies under the Act, 

pass-through voting privileges will be 

extended to owners of such Variable 

Contracts to the extent granted by the 

Participating Insurance Company. 

Accordingly, such Participating 

Insurance Companies, where applicable, 

will vote the shares of each Variable 

Fund held in their VLI Accounts and 

VA Accounts in a manner consistent 

with voting instructions timely received 

from Variable Contract owners. 

Participating Insurance Companies will 

be responsible for assuring that each of 

their VLI and VA Accounts investing in 

a Variable Fund calculates voting 

privileges in a manner consistent with 

all other Participating Insurance 

Companies investing in that Variable 

Fund. 

7. The obligation to calculate voting 

privileges as provided in this 

application shall be a contractual 

obligation of all Participating Insurance 

Companies under their Participation 

Agreement with the Variable Fund. 

Each Participating Insurance Company 

will vote shares of each Variable Fund 

held in its Separate Accounts for which 

no timely voting instructions are 

received, as well as shares held in its 

General Account or otherwise attributed 

to it, in the same proportion as those 

shares for which voting instructions are 

received. Each Qualified Plan will vote 

as required by applicable law, governing 

Qualified Plan documents and as 

provided in this application. 

8. As long as the Commission 

continues to interpret the Act as 

requiring that pass-through voting 

privileges be provided to Variable 

Contract owners, a Variable Fund 

Adviser or any General Account will 

vote its respective shares of the Variable 

Fund in the same proportion as all votes 

cast on behalf of all Variable Contract 

owners having voting rights; provided, 

however, that such Adviser or General 

Account shall vote its shares in such 

other manner as may be required by the 

Commission or its staff. 

9. Each Variable Fund will comply 

with all provisions of the Act requiring 

voting by shareholders (which, for these 

purposes, shall be the persons having a 

voting interest in its shares), and, in 

particular, the Variable Fund will either 

provide for annual meetings (except to 

the extent that the Commission may 

interpret Section 16 of the Act not to 

require such meetings) or comply with 

Section 16(c) of the Act (although the 

Trust is not, or will not be, one of those 

trusts of the type described in Section 

16(c) of the Act), as well as with Section 

16(a) of the Act and, if and when 

applicable, Section 16(b) of the Act. 

Further, each Variable Fund will act in 

accordance with the Commission’s 

interpretations of the requirements of 

Section 16(a) with respect to periodic 

elections of trustees and with whatever 

rules the Commission may promulgate 

thereunder. 

10. A Variable Fund will make its 

shares available to the VLI Accounts, 

VA Accounts, and Qualified Plans at or 

about the time it accepts any seed 

capital from its Adviser, or from the 

General Account of a Participating 

Insurance Company. 

11. Each Variable Fund has notified, 

or will notify, all Participants that 

disclosure regarding potential risks of 

mixed and shared funding may be 

appropriate in VLI Account and VA 

Account prospectuses or Qualified Plan 

documents. Each Variable Fund will 

disclose, in its prospectus that: (a) 

shares of the Variable Fund may be 

offered to both VA Accounts and VLI 

Accounts and, if applicable, to Qualified 

Plans; (b) due to differences in tax 

treatment and other considerations, the 

interests of various Variable Contract 

owners participating in the Variable 

Fund and the interests of Qualified Plan 

participants investing in the Variable 

Fund, if applicable, may conflict; and 

(c) the Trust’s Board will monitor events 

in order to identify the existence of any 

material irreconcilable conflicts and to 

determine what action, if any, should be 

taken in response to any such conflicts. 

12. If and to the extent Rule 6e–2 and 

Rule 6e–3(T) under the Act are 

amended, or proposed Rule 6e–3 under 

the Act is adopted, to provide 

exemptive relief from any provision of 

the Act, or the rules thereunder, with 

respect to mixed or shared funding, on 

terms and conditions materially 

different from any exemptions granted 

in the order requested in this 

application, then each Variable Fund 

and/or Participating Insurance 

Companies, as appropriate, shall take 

such steps as may be necessary to 

comply with Rules 6e–2 or 6e–3(T), as 

amended, or Rule 6e–3, to the extent 

such rules are applicable. 

13. Each Participant, at least annually, 

shall submit to the Board such reports, 

materials or data as the Board 

reasonably may request so that the 

trustees may fully carry out the 

obligations imposed upon the Board by 

the conditions contained in this 

application. Such reports, materials and 

data shall be submitted more frequently 

if deemed appropriate by the Board. The 

obligations of the Participants to 

provide these reports, materials and 

data to the Board, when it so reasonably 

requests, shall be a contractual 

obligation of all Participants under their 

participation agreement with the 

Variable Fund. 

14. All reports of potential or existing 

conflicts received by a Board, and all 

Board action with regard to determining 

the existence of a conflict, notifying 

Participants of a conflict and 

determining whether any proposed 

action adequately remedies a conflict, 

will be properly recorded in the minutes 

of the Board or other appropriate 

records, and such minutes or other 

records shall be made available to the 

Commission upon request. 

15. Each Variable Fund will not 

accept a purchase order from a 

Qualified Plan if such purchase would 

make the Qualified Plan an owner of 10 

percent or more of the assets of the 

Variable Fund unless the Qualified Plan 

executes an agreement with the Variable 

Fund governing participation in the 

Variable Fund that includes the 

conditions set forth herein to the extent 

applicable. A Qualified Plan will 

execute an application containing an 

acknowledgement of this condition at 

the time of its initial purchase of shares. 

Conclusion 

Applicants submit, for all of the 

reasons explained above, that the 

exemptions requested 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 Act. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Kevin O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–24877 Filed 10–15–14; 4:15 pm] 

BILLING CODE 8011–01–P 

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