Document ID: SEC-2010-0165-0001
Agency: sec
Document Type: Notice
Title: Assurant, Inc., et al.; Notice of Applicationand Temporary Order
Posted Date: 2010-02-01T05:00Z

[Federal Register: February 1, 2010 (Volume 75, Number 20)]
[Notices]               
[Page 5154-5156]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01fe10-117]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-29125; File No. 812-13746]

 
Assurant, Inc., et al.; Notice of Application and Temporary Order

January 26, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Temporary order and notice of application for a permanent order 
under section 9(c) of the Investment Company Act of 1940 (``Act'').

-----------------------------------------------------------------------

Summary of Application: Applicants have received a temporary order 
exempting them from section 9(a) of the Act, with respect to an 
injunction entered against Assurant, Inc. (``Assurant'') on January 26, 
2010 by the United States District Court for the Southern District of 
New York (``Injunction''), until the Commission takes final action on 
an application for a permanent order. Applicants also have applied for 
a permanent order. APPLICANTS: Assurant, Union Security Insurance 
Company (``USIC'') and Union Security Life Insurance Company of New 
York (``USLICNY,'' and, together with USIC, the ``Depositor 
Applicants'').\1\
---------------------------------------------------------------------------

    \1\ Applicants request that any relief granted pursuant to the 
application also apply to any other company of which Assurant is or 
may become an affiliated person (together with the Applicants, the 
``Covered Persons'').

DATES: Filing Date: The application was filed on January 21, 2010, and 
---------------------------------------------------------------------------
amended on January 26, 2010.

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 Commission's Secretary 
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 February 22, 2010, 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 who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090; Applicants: Assurant, One Chase 
Manhattan Plaza, 41st Floor, New York, NY 10005; USIC, 2323 Grand 
Boulevard, Kansas City, MO 64108-2670; USLICNY, 212 Highbridge Street, 
Suite D, Fayetteville, NY 13066.

FOR FURTHER INFORMATION CONTACT: John Yoder, at (202) 551-6878, or 
Michael W. Mundt, Assistant Director, at (202) 551-6821 (Division of 
Investment Management, Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a temporary order and a 
summary of the application. The complete application may be obtained 
via the Commission's website by searching for the file number, or an 
applicant using the Company name box, at http://www.sec.gov/search/
search.htm, or by calling (202) 551-8090.
    Applicants' Representations:
    1. Assurant, through its subsidiaries and affiliates, is a provider 
of specialized insurance products and related services. The Depositor 
Applicants are indirect wholly-owned subsidiaries of Assurant and, 
before 2002, issued and sold variable life insurance and annuity 
contracts. In April 2001, Assurant's predecessor, Fortis, Inc., sold 
its entire variable life insurance and annuity contract business to The 
Hartford Financial Services Group, Inc. (``Hartford'') through modified 
coinsurance (the ``Hartford Transaction''). As a result, the Depositor 
Applicants remained the issuers of the outstanding life insurance and 
annuity products, but Hartford has assumed all day-to-day 
responsibility for the administration of the policies. The Depositor 
Applicants currently serve as depositors for three separate accounts 
organized as unit investment trusts and

[[Page 5155]]

registered under the Act (``Separate Accounts'').
    2. On January 26, 2010, the United States District Court for the 
Southern District of New York entered the Injunction against Assurant 
in a matter brought by the Commission.\2\ The Commission alleged in the 
complaint (``Complaint'') that Assurant violated sections 13(a), 
13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and rules 12b-20, 13a-
11 and 13a-13 under the Exchange Act, in connection with Assurant's 
accounting and public reporting practices. The Complaint related to 
Assurant's inaccurate recording of income for third quarter of 2004 in 
the consolidated financial statements included in its periodic and 
other filings for 2004. The inaccuracies in the financial statements 
relate to recorded income from a purported reinsurance contract. The 
Complaint alleged that Assurant violated the corporate reporting, 
recordkeeping, and internal controls provisions of the Exchange Act. 
Without admitting or denying any of the allegations in the Complaint, 
except as to jurisdiction, Assurant consented to the entry of the 
Injunction.
---------------------------------------------------------------------------

    \2\ Securities and Exchange Commission v. Assurant, Inc., Final 
Judgment as to Defendant Assurant, Inc., 10-CV-0484 (S.D.N.Y, 
January 26, 2010).
---------------------------------------------------------------------------

    Applicants' Legal Analysis:
    1. Section 9(a)(2) of the Act, in relevant part, prohibits a person 
who has been enjoined from engaging in or continuing any conduct or 
practice in connection with the purchase or sale of a security from 
acting, among other things, as an investment adviser or depositor of 
any registered investment company or a principal underwriter for any 
registered open-end investment company, registered unit investment 
trust, or registered face-amount certificate company (the registered 
investment companies are collectively referred to as ``Funds''). 
Section 9(a)(3) of the Act makes the prohibition in section 9(a)(2) 
applicable to a company, any affiliated person of which has been 
disqualified under the provisions of section 9(a)(2). Section 2(a)(3) 
of the Act defines ``affiliated person'' to include, among others, any 
person directly or indirectly controlling, controlled by, or under 
common control, with the other person and any person directly or 
indirectly owning, controlling, or holding with the power to vote, 5 
percent or more of the outstanding voting securities of such other 
person. Applicants state that Assurant is an affiliated person of each 
of the other Applicants within the meaning of section 2(a)(3). 
Applicants state that, as a result of the Injunction, they would be 
subject to the disqualification provisions of section 9(a).
    2. Section 9(c) of the Act provides that the Commission shall grant 
an application for an exemption from the disqualification provisions of 
section 9(a) of the Act if it is established that these provisions, as 
applied to applicants, are unduly or disproportionately severe or that 
the conduct of the applicants has been such as not to make it against 
the public interest or the protection of investors to grant the 
exemption. Applicants have filed an application pursuant to section 
9(c) seeking temporary and permanent orders exempting them from the 
disqualification provisions of section 9(a).
    3. Applicants believe that they meet the standards for exemption 
specified in section 9(c). Applicants state that the prohibitions of 
section 9(a) as applied to them would be unduly and disproportionately 
severe and that it would not be against the public interest or the 
protection of investors to grant the requested exemption from section 
9(a).
    4. Applicants state that the alleged conduct giving rise to the 
Injunction did not involve any of the Applicants acting in the capacity 
of investment adviser, subadviser, depositor or principal underwriter 
for any Fund. Applicants state that the alleged conduct did not involve 
the assets of any of the Separate Accounts. Applicants state that, 
except as discussed below, since the closing of the Hartford 
Transaction in 2001, (i) none of the current or former directors, 
officers or employees of the Applicants (other than Assurant itself and 
its predecessor entities) had any knowledge of or had any involvement 
in, the conduct alleged in the Complaint and (ii) the personnel at 
Assurant who were involved in the violations alleged in the Complaint 
have had no, and will not have any future, involvement in the Covered 
Persons' serving as investment adviser, depositor, or principal 
underwriter for any Fund. In addition, Applicants represent that since 
the closing of the Hartford Transaction, Applicants have not been 
involved in any investment decisions with respect to the Separate 
Accounts.
    5. Applicants state that three persons who are current or former 
officers of Assurant received Wells notices in connection with the 
Commission's investigation into the facts underlying the Complaint 
(``Wells Notice Recipients''). Applicants state that these persons have 
served as officers or directors of the Depositor Applicants. Applicants 
further state that one of the Wells Notice Recipients has overall 
responsibility for Assurant's health insurance business and therefore 
continues to serve as an officer of USIC to perform necessary services 
solely in connection with that business segment. Applicants state that 
neither of the other Wells Notice Recipients is currently an officer, 
director or employee of either of the Depositor Applicants.
    6. Applicants state that, other than signing certain public filings 
required under the federal securities laws containing representations 
with respect to the Separate Accounts and receiving communications that 
referenced the Separate Accounts, since the closing of the Hartford 
Transaction in 2001, the Wells Notice Recipients have not been involved 
in the Depositor Applicants' serving as a depositor for the Separate 
Accounts and will not be involved in that capacity in the future.\3\ 
Applicants further state that, to the extent other current or former 
officers, directors, or employees of the Depositor Applicants had any 
knowledge of, or any involvement in, the conduct alleged in the 
Complaint (``Certain Depositor Applicant Personnel''), since the 
closing of the Hartford Transaction in 2001, those individuals have not 
been involved in the Depositor Applicants' serving as a depositor for 
the Separate Accounts and will not be involved in that capacity in the 
future.
---------------------------------------------------------------------------

    \3\ Certain Wells Notice Recipients may, however, pursuant to 
their roles as officers of Assurant, sign, and receive information 
regarding the Separate Accounts from the Applicants in connection 
with the signing of, Assurant filings required under the applicable 
Federal securities laws that make reference to Depositor Applicants.
---------------------------------------------------------------------------

    7. Applicants state that the inability of the Depositor Applicants 
to continue to serve as depositors to the Separate Accounts would 
result in potential hardships for the Depositor Applicants and the 
variable annuity contract holders and variable life insurance 
policyholders. If disqualified from serving as depositors for the 
Separate Accounts, the Depositor Applicants could no longer hold those 
assets and would be forced to cancel and unwind the variable annuity 
contracts and variable life insurance policies. Contract holders and 
policyholders, through no fault of their own, would incur the costs of 
seeking and purchasing viable alternatives. Applicants also state that 
the Depositor Applicants have committed substantial resources to serve 
as depositors to the Separate Accounts and that prohibiting the 
Depositor Applicants from serving as depositors to the Separate 
Accounts would render critical terms of the Hartford

[[Page 5156]]

Transaction void and would require significant and costly restructuring 
of the modified coinsurance transaction structure.
    8. Applicants state that they have not previously applied for an 
exemptive order under section 9(c) of the Act.
    Applicants' Conditions:
    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The Wells Notice Recipients and Certain Depositor Applicant 
Personnel will not be involved in the Covered Persons' serving as an 
investment adviser, depositor, or principal underwriter to any Fund. 
Applicants will develop and implement procedures designed reasonably to 
assure compliance with this condition.
    2. Any temporary exemption granted pursuant to the application 
shall be without prejudice to, and shall not limit the Commission's 
rights in any manner with respect to, any Commission investigation of, 
or administrative proceedings involving or against, Covered Persons, 
including, without limitation, the consideration by the Commission of a 
permanent exemption from section 9(a) of the Act requested pursuant to 
the application or the revocation or removal of any temporary 
exemptions granted under the Act in connection with the application.
    Temporary Order:
    The Commission has considered the matter and finds that the 
Applicants have made the necessary showing to justify granting a 
temporary exemption. Accordingly,
    It Is Hereby Ordered, pursuant to section 9(c) of the Act, that 
Assurant, USIC, USLICNY, and any other Covered Persons are granted a 
temporary exemption from the provisions of section 9(a), solely with 
respect to the Injunction, subject to the conditions in the 
application, from January 26, 2010, until the Commission takes final 
action on their application for a permanent order.

    By the Commission.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-1950 Filed 1-29-10; 8:45 am]
BILLING CODE 8011-01-P