Document ID: SEC-2010-0558-0001
Agency: sec
Document Type: Notice
Title: Applications: Jackson National Life Insurance Company, et al.
Posted Date: 2010-04-13T04:00Z

[Federal Register: April 13, 2010 (Volume 75, Number 70)]
[Notices]               
[Page 18908-18915]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ap10-97]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-29205; File No. 812-13703]

 
Jackson National Life Insurance Company, et al.

April 7, 2010.
AGENCY: The Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under Section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') granting exemptions from 
the provisions of Sections 2(a)(32), 22(c) and 27(i)(2)(A) of the Act 
and Rule 22c-1 thereunder to permit the recapture of contract 
enhancements applied to purchase payments made under certain deferred 
variable annuity contracts.

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

APPLICANTS: Jackson National Life Insurance Company (``Jackson 
National''), Jackson National Separate Account--I (the ``JNL Separate 
Account''), Jackson National Life Insurance Company of New York (``JNL 
New York'' and collectively with Jackson National, the ``Insurance 
Companies,'' and individually as made appropriate by the context, an 
``Insurance Company''), JNLNY Separate Account I (the ``JNLNY Separate 
Account,'' collectively with the JNL Separate Account, the ``Separate 
Accounts,'' and individually as made appropriate by the context, a 
``Separate Account'') and Jackson National Life Distributors LLC 
(``Distributor,'' and collectively with the Insurance Companies and the 
Separate Accounts, ``Applicants'').

SUMMARY OF APPLICATION: Applicants seek an order under Section 6(c) of 
the

[[Page 18909]]

Act to exempt certain transactions from the provisions of Sections 
2(a)(32), 22(c), and 27(i)(2)(A) of the Act and Rule 22c-1 thereunder, 
to the extent necessary to permit the recapture, under specified 
circumstances, of certain contract enhancements applied to purchase 
payments made under the deferred variable annuity contracts described 
herein that Jackson National has issued and will issue through the JNL 
Separate Account (the ``JNL Contracts'') and that JNL New York has 
issued and will issue through the JNLNY Separate Account (the ``JNLNY 
Contracts,'' and collectively with the JNL Contracts, the 
``Contracts'') as well as other contracts that the Insurance Companies 
may issue in the future through their existing or future separate 
accounts (``Other Accounts'') that are substantially similar in all 
material respects to the Contracts (``Future Contracts''). Applicants 
also request that the order being sought extend to any other Financial 
Industry Regulatory Authority (``FINRA'') member broker-dealer 
controlling or controlled by, or under common control with, Jackson 
National, whether existing or created in the future, that serves as 
distributor or principal underwriter for the Contracts or Future 
Contracts (``Affiliated Broker-Dealers'') and any successors in 
interest to the Applicants.

Filing Date: The application was filed on September 24, 2009, and 
amended on October 16, 2009; January 8, 2010; February 24, 2010; and 
March 29, 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 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 April 29, 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 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: c/o Jackson National Life 
Insurance Company, 1 Corporate Way, Lansing, Michigan 48951, Attn: 
Anthony L. Dowling, Esq.

FOR FURTHER INFORMATION CONTACT: Ellen J. Sazzman, Senior Counsel, at 
(202) 551-6762, or Harry Eisenstein, Branch Chief, at (202) 551-6795, 
Office of Insurance Products, Division of Investment Management.

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 an applicant 
using the Company name box at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. Jackson National is a stock life insurance company organized 
under the laws of the state of Michigan in June 1961. Its legal 
domicile and principal business address is 1 Corporate Way, Lansing, 
Michigan 48951. Jackson National is admitted to conduct life insurance 
and annuity business in the District of Columbia and all states except 
New York. Jackson National is ultimately a wholly owned subsidiary of 
Prudential plc (London, England).
    2. JNL New York is a stock life insurance company organized under 
the laws of the state of New York in July 1995. Its legal domicile and 
principal address is 2900 Westchester Avenue, Purchase, New York 10577. 
JNL New York is admitted to conduct life insurance and annuity business 
in Delaware, Michigan, and New York. JNL New York is ultimately a 
wholly owned subsidiary of Prudential plc (London, England).
    3. The JNL Separate Account was established by Jackson National on 
June 14, 1993, pursuant to the provisions of Michigan law and the 
authority granted under a resolution of Jackson National's Board of 
Directors. The JNLNY Separate Account was established by JNL New York 
on September 12, 1997, pursuant to the provisions of New York law and 
the authority granted under a resolution of JNL New York's Board of 
Directors. Jackson National and JNL New York are the depositors of 
their respective Separate Accounts. Each of the Separate Accounts meets 
the definition of a ``separate account'' under the federal securities 
laws and each is registered with the Commission as a unit investment 
trust under the Act (File Nos. 811-8664 and 811-8401, respectively). 
JNL Separate Account and JNLNY Separate Account will fund, 
respectively, the variable benefits available under the JNL Contracts 
and the JNLNY Contracts. The registration statements relating to the 
offering of the Contracts were filed under the Securities Act of 1933 
(the ``1933 Act'') (File Nos. 333-70472, 333-70384).
    4. The Distributor is a wholly owned subsidiary of Jackson National 
and serves as the distributor of the Contracts. The Distributor is 
registered with the Commission as a broker-dealer under the Securities 
Exchange Act of 1934 (the ``1934 Act'') and is a member of FINRA. The 
Distributor enters into selling group agreements with affiliated and 
unaffiliated broker-dealers. The Contracts are sold by licensed 
insurance agents, where the Contracts may be lawfully sold, who are 
registered representatives of broker-dealers that are registered under 
the 1934 Act and are members of FINRA.
    5. The Contracts require a minimum initial premium payment of 
$5,000 or $10,000 under most circumstances depending on the contract 
($2,000 for a qualified plan contract). Subsequent payments may be made 
at any time during the accumulation phase but before the contract 
anniversary after the owner's 85th birthday. Each subsequent payment 
must be at least $500 ($50 under an automatic payment plan). Prior 
approval of the relevant Insurance Company is required for aggregate 
premium payments of over $1,000,000.
    6. The Contracts permit owners to accumulate contract values on a 
fixed basis through allocations to one of six fixed accounts (the 
``Fixed Accounts''). In addition, if the optional LifeGuard Select 
Guaranteed Minimum Withdrawal Benefit (``GMWB'') or the optional 
LifeGuard Select with Joint Option Guaranteed Minimum Withdrawal 
Benefit (``GMWB'') is elected in the JNL Contracts, automatic transfers 
of an owner's contract value may be allocated to a fixed account 
designated for these guaranteed minimum withdrawal benefits (``GMWB 
Fixed Account'').
    7. The Contracts also permit owners to accumulate contract values 
on a variable basis, through allocations to one or more of the sub-
accounts, also referred to as investment divisions, of the Separate 
Accounts (the ``Investment Divisions,'' collectively with the Fixed 
Account and the GMWB Fixed Account, the ``Allocation Options''). Under 
most Contracts, 98 Investment Divisions currently are expected to be 
offered through the Separate Accounts but additional Investment 
Divisions may be offered in the future and some could be eliminated or 
combined with other Investment Divisions in the future. Similarly, 
Future Contracts may offer additional or different Investment 
Divisions. Each Investment Division will invest in shares of a 
corresponding series (``Series'') of JNL Series Trust (``Trust'') or 
JNL Variable Fund LLC (``Fund'') (collectively the ``Trust and Fund''). 
Not all Investment Divisions may be available under every Contract.

[[Page 18910]]

The Trust and Fund are open-end management investment companies 
registered under the Act and their shares are registered under the 1933 
Act.
    8. Transfers among the Investment Divisions are permitted. The 
first 15 transfers in a contract year are free; subsequent transfers 
cost $25. Certain transfers to, from and among the Fixed Account 
Options are also permitted during the Contracts' accumulation phase, 
but are subject to certain adjustments and limitations. Dollar cost 
averaging and rebalancing transfers are offered at no charge and do not 
count against the 15 free transfers permitted each year. If the 
optional LifeGuard Select GMWB or the optional LifeGuard Select with 
Joint Option GMWB is elected in the JNL Contracts, automatic transfers 
may be required to and from the GMWB Fixed Account according to non-
discretionary formulas. These automatic transfers also do not count 
against the 15 free transfers permitted each year and are without 
charge.
    9. If the owner dies during the accumulation phase of the 
Contracts, the beneficiary named by the owner is paid a death benefit 
by the Insurance Company. The Contracts' base death benefit, which 
applies unless an optional death benefit has been elected, is a payment 
to the beneficiary of the greater of: (i) Contract value on the date 
the Insurance Company receives proof of death and completed claim forms 
from the beneficiary or (ii) the total premiums paid under that 
Contract minus any prior withdrawals (including any withdrawal charges, 
recapture charges or other charges or adjustments applicable to such 
withdrawals).
    10. The owner of a JNL Contract may be offered certain optional 
endorsements (for various fees) that can change the death benefit paid 
to the beneficiary. First, an ``Earnings Protection Benefit 
Endorsement'' is offered to owners who are no older than age 75 when 
their Contracts are issued. Second, the owner of a JNL Contract 
currently may be offered six optional death benefits (state variations 
may apply) that would replace the base death benefit. The optional 
death benefits for the JNL Contract include the following: (i) A 5% 
Roll-Up death benefit, (ii) a 6% Roll-Up death benefit, (iii) a Highest 
Quarterly Anniversary Value Death Benefit, (iv) a Combination 5% Roll-
Up and Highest Quarterly Anniversary Value Death Benefit, (v) a 
Combination 6% Roll-Up and Highest Quarterly Anniversary Value Death 
Benefit, and (vi) a death benefit available only in conjunction with 
the purchase of a particular GMWB (LifeGuard Freedom 6 GMWB).
    11. The owner of a JNLNY Contract may also be offered certain 
optional endorsements that can change the death benefit paid to the 
beneficiary. The owner of a JNLNY Contract may be offered the following 
two optional death benefits that would replace the base death benefit: 
(i) A Highest Anniversary Value Death Benefit which is the greatest of 
the contract value on the date JNL New York receives proof of death and 
completed claim forms from the beneficiary; or total net premiums since 
the contract was issued; or the greatest contract value on any contract 
anniversary prior to the owner's 81st birthday, adjusted for any 
withdrawals subsequent to that contract anniversary (including any 
applicable withdrawal charges, recapture charges, and other charges or 
adjustments for such withdrawals), plus any premium paid subsequent to 
that contract anniversary; and (ii) a death benefit available only in 
conjunction with the purchase of the LifeGuard Freedom 6 GMWB.
    12. The Contracts offer fixed and variable versions of the 
following four types of annuity payment or ``income payment'': Life 
income, joint and survivor, life annuity with at least 120 or 240 
monthly payments guaranteed to be paid (although not guaranteed as to 
amount if variable), and income for a specified period of 5 to 30 
years. The Insurance Companies may also offer other income payment 
options. The Contracts may also offer an optional Guaranteed Minimum 
Income Benefit (``GMIB'') endorsement and various GMWB optional 
endorsements.
    13. All contract enhancements are paid from the Insurance Company's 
general account assets. The contract enhancement endorsements available 
are the 2% Contract Enhancement endorsement, 3% Contract Enhancement 
endorsement, 4% Contract Enhancement endorsement, or 5% Contract 
Enhancement endorsement. However, the 5% Contract Enhancement 
endorsement is not available under the JNLNY Contracts. If one of the 
optional contract enhancement endorsements is elected, the Insurance 
Company will add an additional amount to the owner's contract value (a 
``Contract Enhancement'') for the initial premium payment, and for each 
subsequent premium payment received within the first seven contract 
years (five contract years for the 2% Contract Enhancement 
endorsement). The actual Contract Enhancement percentage applied to the 
premium payment varies, depending upon which Contract Enhancement 
endorsement is elected and the contract year in which the premium 
payment is received as follows:

----------------------------------------------------------------------------------------------------------------
                                                             Contract year premium is received
                                         -----------------------------------------------------------------------
                                              0-1         1-2         2-3         3-4         4-5         5+
----------------------------------------------------------------------------------------------------------------
                                       2% Contract Enhancement Endorsement
----------------------------------------------------------------------------------------------------------------
Contract Enhancement Percentage of the         2.00%       2.00%       1.25%       1.25%       0.50%          0%
 Premium Payment........................
----------------------------------------------------------------------------------------------------------------

                                                                                         Contract year premium is received
                                                         -----------------------------------------------------------------------------------------------
                                                              0-1         1-2         2-3         3-4         4-5         5-6         6-7         7+
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           3% Contract Enhancement Endorsement
--------------------------------------------------------------------------------------------------------------------------------------------------------
Contract Enhancement Percentage of the Premium Payment..       3.00%       3.00%       2.25%       2.00%       2.00%       1.00%       1.00%          0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           4% Contract Enhancement Endorsement
--------------------------------------------------------------------------------------------------------------------------------------------------------
Contract Enhancement Percentage of the Premium Payment..       4.00%       4.00%       3.00%       2.50%       2.50%       1.25%       1.25%          0%
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 18911]]

                                        5% Contract Enhancement Endorsement (not available under JNLNY Contracts)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Contract Enhancement Percentage of the Premium Payment..       5.00%       4.50%       3.75%       3.00%       2.25%       1.75%       1.00%          0%
--------------------------------------------------------------------------------------------------------------------------------------------------------

    14. At issue, a Contract owner can choose only one of the Contract 
Enhancement endorsements. An owner may not elect the 3%, 4%, or 5% 
Contract Enhancement endorsement if the 20% additional free withdrawal 
endorsement is elected. The Insurance Companies will allocate the 
Contract Enhancement to the Fixed Accounts and/or Investment Divisions 
in the same proportion as the premium payment allocation. Contract 
Enhancement endorsements are available only to owners 87 years old and 
younger.
    15. There is an asset-based charge for each of the Contract 
Enhancement endorsements. The 2% Contract Enhancement endorsement has a 
0.395% charge that applies only for the first five contract years, as 
opposed to five years from the date of the premium payment. The asset-
based charges for the other Contract Enhancement endorsements apply 
only for the first seven contract years, as opposed to seven years from 
the date of the premium payment, and are 0.42%, 0.56%, and 0.695%, 
respectively, for the 3%, 4%, and 5% Contract Enhancement endorsements. 
These charges will also be assessed against any amounts that Contract 
owners have allocated to the Fixed Accounts, resulting in a lower 
annual credited interest rate that would apply to the Fixed Account if 
the Contract Enhancement endorsement had not been elected.
    16. The Insurance Companies will recapture all or a declining 
portion of any Contract Enhancements by imposing a recapture charge 
whenever an owner: (i) Makes a total withdrawal within the recapture 
charge period (up to five years after a premium payment in the case of 
the 2% Contract Enhancement endorsement and up to seven years after a 
premium payment in the case of the other Contract Enhancement 
endorsements) or a partial withdrawal of corresponding premiums within 
the recapture charge period in excess of those permitted under the 
Contracts' free withdrawal provisions, unless the withdrawal is made 
for certain health-related emergencies specified in the Contracts; (ii) 
elects to receive payments under an income option within the recapture 
charge period; or (iii) returns the Contract during the free-look 
period.
    17. The amount of the recapture charge varies, depending upon (i) 
Which Contract Enhancement endorsement is elected; (ii) the 
corresponding declining amount of the Contract Enhancement based on the 
contract year when the premium payment being withdrawn was received; 
and (iii) when the charge is imposed based on Completed Years since 
receipt of the related premium. For Contracts with the 2% or 3% 
Contract Enhancement endorsement, the recapture charge is as follows:

                                                          Contract Enhancement Recapture Charge
              [as a percentage of the corresponding premium payment withdrawn if an optional Contract Enhancement endorsement is selected]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Completed years since receipt of premium
            Contract year premium is received            -----------------------------------------------------------------------------------------------
                                                              0-1         1-2         2-3         3-4         4-5         5-6         6-7         7+
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           2% Contract Enhancement Endorsement
--------------------------------------------------------------------------------------------------------------------------------------------------------
0-1.....................................................          2%          2%       1.25%       1.25%        .50%          0%          0%          0%
1-2.....................................................          2%       1.25%       1.25%        .50%          0%          0%          0%          0%
2-3.....................................................       1.25%       1.25%        .50%          0%          0%          0%          0%          0%
3-4.....................................................       1.25%        .50%          0%          0%          0%          0%          0%          0%
4-5.....................................................        .50%          0%          0%          0%          0%          0%          0%          0%
5-6.....................................................          0%          0%          0%          0%          0%          0%          0%          0%
6-7.....................................................          0%          0%          0%          0%          0%          0%          0%          0%
7+......................................................          0%          0%          0%          0%          0%          0%          0%          0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           3% Contract Enhancement Endorsement
--------------------------------------------------------------------------------------------------------------------------------------------------------
0-1.....................................................          3%          3%          2%          2%          2%          1%          1%          0%
1-2.....................................................          3%          2%          2%          2%          1%          1%          0%          0%
2-3.....................................................          2%          2%       1.25%          1%          1%          0%          0%          0%
3-4.....................................................          2%          2%          1%          1%          0%          0%          0%          0%
4-5.....................................................          2%          1%          1%          0%          0%          0%          0%          0%
5-6.....................................................          1%          1%          0%          0%          0%          0%          0%          0%
6-7.....................................................          1%          0%          0%          0%          0%          0%          0%          0%
7+......................................................          0%          0%          0%          0%          0%          0%          0%          0%
--------------------------------------------------------------------------------------------------------------------------------------------------------

    18. Following are recapture charges for JNL Contracts having the 4% 
or 5% Contract Enhancement endorsement. The 4% Contract Enhancement 
Recapture Charge schedule applicable to JNLNY Contracts is provided 
later in this notice. The 5% Contract Enhancement Recapture Charge 
schedule is not applicable to JNLNY Contracts because the 5% Contract 
Enhancement endorsement is not available under the JNLNY Contracts.

[[Page 18912]]

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Contract year premium is received
        Completed years since receipt of premium         -----------------------------------------------------------------------------------------------
                                                              0-1         1-2         2-3         3-4         4-5         5-6         6-7         7+
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                         4% Contract Enhancement Endorsement (not applicable to JNLNY Contracts)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0-1.....................................................          4%          4%       2.50%       2.50%       2.50%       1.25%       1.25%          0%
1-2.....................................................          4%       2.50%       2.50%       2.50%       1.25%       1.25%          0%          0%
2-3.....................................................       2.50%       2.50%          2%       1.25%       1.25%          0%          0%          0%
3-4.....................................................       2.50%       2.50%       1.25%       1.25%          0%          0%          0%          0%
4-5.....................................................       2.50%       1.25%       1.25%          0%          0%          0%          0%          0%
5-6.....................................................       1.25%       1.25%          0%          0%          0%          0%          0%          0%
6-7.....................................................       1.25%          0%          0%          0%          0%          0%          0%          0%
7+......................................................          0%          0%          0%          0%          0%          0%          0%          0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        5% Contract Enhancement Endorsement (not available under JNLNY Contracts)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0-1.....................................................       4.50%       3.75%       3.25%       2.75%          2%       1.25%          1%          0%
1-2.....................................................       3.75%       3.25%       2.75%          2%       1.25%          1%          0%          0%
2-3.....................................................       3.25%       2.75%          2%       1.25%          1%          0%          0%          0%
3-4.....................................................       2.75%          2%       1.25%          1%          0%          0%          0%          0%
4-5.....................................................          2%       1.25%          1%          0%          0%          0%          0%          0%
5-6.....................................................       1.25%          1%          0%          0%          0%          0%          0%          0%
6-7.....................................................          1%          0%          0%          0%          0%          0%          0%          0%
7+......................................................          0%          0%          0%          0%          0%          0%          0%          0%
--------------------------------------------------------------------------------------------------------------------------------------------------------

    19. A ``Completed Year'' is the succeeding twelve months from the 
date on which the Insurance Companies receive a premium payment. 
Completed Years specify the years from the date of receipt of the 
premium and do not refer to contract years. If the premium receipt date 
is on the issue date of the Contract then Completed Year 0-1 does not 
include the first contract anniversary. The first contract anniversary 
begins Completed Year 1-2 and each successive contract anniversary. The 
first contract year (contract year 0-1) starts on the issue date and 
extends to, but does not include, the first contract anniversary. 
Subsequent contract years start on an anniversary date and extend to, 
but do not include, the next anniversary date. If the premium receipt 
date is other than the issue date or a subsequent contract anniversary, 
there is no correlation of the contract anniversary date and Completed 
Years. For example, if the issue date is January 15, 2010 and a premium 
payment is received on February 28, 2010, then, although the first 
contract anniversary is January 15, 2011, the end of Competed Year 0-1 
for that premium payment would be February 27, 2011, and February 28, 
2011 begins Completed Year 1-2.
    20. The recapture charge percentage will be applied to the 
corresponding premium reflected in the amount withdrawn or the amount 
applied to income payments that remain subject to a recapture charge. 
The corresponding premium is determined by treating amounts withdrawn 
as withdrawals first of earnings, which bear no charge, and then 
purchase payments (oldest purchase payments first). The amount 
recaptured will be taken from the Investment Divisions and the Fixed 
Account (and the GMWB Fixed Account, if applicable) in the proportion 
their respective values bear to the contract value. The dollar amount 
recaptured will never exceed the dollar amount of the Contract 
Enhancement added to the Contract. Recapture charges will be applied 
upon electing to commence income payments, even in a situation where 
the withdrawal charge is waived.
    21. The Insurance Companies do not assess the recapture charge on 
any payments paid out as: Death benefits; withdrawals of earnings; 
withdrawals taken under the free withdrawal provisions, which allow for 
free withdrawals of up to 20% of remaining premium, less earnings 
(where a withdrawal is taken that exceeds the free withdrawal amount, 
the recapture charge is imposed only on the excess amount above the 
free withdrawal amount); withdrawals necessary to satisfy the required 
minimum distribution of the Internal Revenue Code (if the withdrawal 
requested exceeds the required minimum distribution, the recapture 
charge will not be waived on the required minimum distribution); if 
permitted by the owner's state, withdrawals of up to $250,000 from the 
JNL Separate Account, the Fixed Account or the GMWB Fixed Account in 
connection with the owner's terminal illness or if the owner needs 
extended hospital or nursing home care as provided in the Contract 
(this recapture charge waiver is not available under the JNLNY 
Contracts); or if permitted by the owner's state, withdrawals of up to 
25% (12.5% for each of two joint owners) of contract value from the JNL 
Separate Account, the Fixed Account, or the GMWB Fixed Account in 
connection with certain serious medical conditions specified in the 
Contract (this recapture charge waiver is not available under the JNLNY 
Contracts).
    22. The contract value will reflect any gains or losses 
attributable to a Contract Enhancement described above. Contract 
Enhancements, and any gains or losses attributable to a Contract 
Enhancement will be considered earnings under the Contract for tax 
purposes and for purposes of calculating free withdrawal amounts.
    23. The JNL Contracts have a ``free-look'' period of ten days 
(twenty days for JNLNY Contracts) after the owner receives the Contract 
(or any longer period required by state law). Contract value (or 
premiums paid, as may be required by state law), less the full amount 
of any Contract Enhancement(s) is returned upon exercise of free-look 
rights by an owner. Therefore, 100% of the Contract Enhancement will be 
recaptured under all circumstances if an owner returns the Contract 
during the free-look period, but any gain or loss on investments of the 
Contract Enhancement would be retained by the owner. The dollar amount 
recaptured will never exceed the dollar amount of the Contract 
Enhancement added to the Contract. A withdrawal charge will not be 
assessed upon exercise of free look rights.
    24. The withdrawal charges shown in the table below apply to 
differing versions of the JNL Contracts. The withdrawal charge 
schedules applicable to the JNLNY Contracts are provided

[[Page 18913]]

later in this notice. The amount of the withdrawal charge depends upon 
when the charge is imposed based on the Completed Years since the 
receipt of the related premium as follows:

                                Withdrawal Charge (as a Percentage of Premium Payments) Not Applicable to JNLNY Contracts
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Completed years since receipt of premium              0-1         1-2         2-3         3-4         4-5         5-6         6-7         7+
--------------------------------------------------------------------------------------------------------------------------------------------------------
Withdrawal Charge (Base Withdrawal Charge Schedule for          8.5%          8%          7%          6%          5%          4%          2%           0
 Offerings under File Nos. 333-70472 and 333-132128)....
Withdrawal Charge (Base Withdrawal Charge Schedule for             8           8           7           6           0           0           0           0
 Offering under File No. 333-119656)....................
Withdrawal Charge if Five-Year Period is elected                   8           7           6           4           2           0           0           0
 (Optional Five-Year Withdrawal Charge Schedule for
 Offerings under File No. 333-70472)....................
Withdrawal Charge if Four-Year Period is elected                   8           7         5.5         3.5           0           0           0           0
 (Optional Four-Year Withdrawal Charge Schedule for
 Offering under File No. 333-132128)....................
--------------------------------------------------------------------------------------------------------------------------------------------------------

    25. The Insurance Companies do not assess the withdrawal charge on 
any payments paid out as: Death benefits; election to begin income 
payments after the first contract year under JNL Contracts and after 13 
months from the issue date under JNLNY Contracts; cancellation of the 
Contract upon exercise of free look rights by an owner; withdrawals of 
earnings; withdrawals taken under the free withdrawal provision, which 
allows for free withdrawals up to 20% of remaining premium, less 
earnings (where a withdrawal is taken that exceeds the free withdrawal 
amount, the withdrawal charge is imposed only on the excess amount 
above the free withdrawal amount); withdrawals necessary to satisfy the 
required minimum distribution of the Internal Revenue Code (if the 
withdrawal requested exceeds the required minimum distribution, the 
withdrawal charge will not be waived on the required minimum 
distribution); if permitted by the owner's state law, withdrawals of up 
to $250,000 from the Investment Divisions, Fixed Account, or GMWB Fixed 
Account of the Contracts in connection with the terminal illness of the 
owner of a Contract, or in connection with extended hospital or nursing 
home care for the owner (this withdrawal charge waiver is not available 
under JNLNY Contracts); and if permitted by the owner's state, 
withdrawals of up to 25% (12.5% each for two joint owners) of contract 
value from the Investment Divisions, Fixed Account, or GMWB Fixed 
Account of the Contracts in connection with certain serious medical 
conditions specified in the Contract (this withdrawal charge waiver is 
not available under JNLNY Contracts).
    26. The JNLNY Contracts are identical to the JNL Contracts in the 
operation of Contract Enhancements, Contract Enhancement charges, and 
Contract Enhancement recapture charges except that: (1) The 5% Contract 
Enhancement endorsement is not available under the JNLNY Contracts, (2) 
the recapture charge waivers for terminal illness and specified medical 
conditions are not available under JNLNY Contracts, and (3) the 
recapture charges for the 4% Contract Enhancement endorsement are 1% 
less for JNLNY Contracts in certain years than in the JNL Contracts, as 
indicated in the table below:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Contract year premium is received
        Completed years since receipt of premium         -----------------------------------------------------------------------------------------------
                                                              0-1         1-2         2-3         3-4         4-5         5-6         6-7         7+
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              4% Contract Enhancement Recapture Charge for JNLNY Contracts
--------------------------------------------------------------------------------------------------------------------------------------------------------
0-1.....................................................          3%          3%       2.50%       2.50%       2.50%       1.25%       1.25%          0%
1-2.....................................................          3%       2.50%       2.50%       2.50%       1.25%       1.25%          0%          0%
2-3.....................................................       2.50%       2.50%          2%       1.25%       1.25%          0%          0%          0%
3-4.....................................................       2.50%       2.50%       1.25%       1.25%          0%          0%          0%          0%
4-5.....................................................       2.50%       1.25%       1.25%          0%          0%          0%          0%          0%
5-6.....................................................       1.25%       1.25%          0%          0%          0%          0%          0%          0%
6-7.....................................................       1.25%          0%          0%          0%          0%          0%          0%          0%
7+......................................................          0%          0%          0%          0%          0%          0%          0%          0%
--------------------------------------------------------------------------------------------------------------------------------------------------------

    27. The withdrawal charges applicable to the JNLNY Contracts differ 
from the withdrawal charges applicable to the JNL Contracts. The 
withdrawal charges of the JNLNY Contracts are as follows:

[[Page 18914]]

                                                                    Withdrawal Charge
                                                          [as a percentage of premium payments]
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Completed years since receipt of premium              0-1         1-2         2-3         3-4         4-5         5-6         6-7         7+
--------------------------------------------------------------------------------------------------------------------------------------------------------
Withdrawal Charge (Base Withdrawal Charge Schedule for            7%          6%          5%          4%          3%          2%          1%           0
 Offerings under File No. 333-70384)....................
Withdrawal Charge (Base Withdrawal Charge Schedule for            7%          6%          5%          4%           0           0           0           0
 Offerings under File No. 333-119659)...................
Withdrawal Charge if Five-Year Period is elected                6.5%          5%          3%          2%          1%           0           0           0
 (Optional Five-Year Withdrawal Charge Schedule for
 Offerings under File No. 333-70384)....................
--------------------------------------------------------------------------------------------------------------------------------------------------------

Applicants' Legal Analysis

    1. Applicants state that Section 6(c) of the 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 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 Act. Applicants request 
that the Commission, pursuant to Section 6(c) of the Act, grant the 
exemptions requested below with respect to the Contracts and any Future 
Contracts funded by the Separate Accounts or Other Accounts that are 
issued by the Insurance Companies and underwritten or distributed by 
the Distributor or Affiliated Broker-Dealers. Applicants undertake that 
Future Contracts funded by the Separate Accounts or Other Accounts, in 
the future, will be substantially similar in all material respects to 
the 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 Act.
    2. Applicants state that Section 27 of the Act regulates and 
imposes certain restrictions on the sales of periodic payment plan 
certificates issued by any registered investment company. Subsection 
(i) of Section 27 of the Act provides that Section 27 does not apply to 
any registered separate account funding variable insurance contracts, 
or to the sponsoring insurance company and principal underwriter of 
such account, except as provided in paragraph (2) of the subsection. 
Paragraph (2) provides that it shall be unlawful for such a separate 
account or sponsoring insurance company to sell a contract funded by 
the registered separate account unless such contract is a redeemable 
security. Section 2(a)(32) defines ``redeemable security'' as any 
security, other than short-term paper, under the terms of which the 
holder, upon presentation to the issuer, is entitled to receive 
approximately his proportionate share of the issuer's current net 
assets, or the cash equivalent thereof.
    3. Applicants submit that the recapture of the Contract Enhancement 
in the circumstances set forth in the Application would not deprive an 
owner of his or her proportionate share of the issuer's current net 
assets. A Contract owner's interest in the amount of the Contract 
Enhancement allocated to his or her contract value upon the Insurance 
Companies' receipt of a premium payment is not fully vested until five 
or seven complete years following a premium payment. Until or unless 
the amount of any Contract Enhancement is vested, the Insurance 
Companies retain the right and interest in the Contract Enhancement 
amount, although not in the earnings attributable to that amount. Thus, 
Applicants urge that when one of the Insurance Companies recaptures any 
Contract Enhancement, it is simply retrieving its own assets, and 
because a Contract owner's interest in the Contract Enhancement is not 
vested, the Contract owner has not been deprived of a proportionate 
share of the Separate Account's assets, i.e., a share of the Separate 
Account's assets proportionate to the Contract owner's contract value.
    4. In addition, Applicants represent that it would be patently 
unfair to allow a Contract owner exercising the free-look privilege to 
retain the Contract Enhancement amount under a Contract that has been 
returned for a refund after a period of only a few days. If the 
Insurance Companies could not recapture the Contract Enhancement, 
individuals could purchase a Contract with no intention of retaining it 
and simply return it for a quick profit. Furthermore, Applicants state 
that the recapture of the Contract Enhancement relating to withdrawals 
and to income payments within the first five or seven contract years is 
designed to protect the Insurance Companies against Contract owners not 
holding the Contract for a sufficient time period. This recapture of 
the Contract Enhancement would provide the Insurance Companies with 
sufficient time to recover the cost of the Contract Enhancement and to 
avoid the financial detriment that would result from a shorter 
recapture period.
    5. Applicants represent that it is not administratively feasible to 
track the Contract Enhancement amount in the Separate Accounts after 
the Contract Enhancement(s) is applied. Accordingly, the asset-based 
charges applicable to the Separate Accounts will be assessed against 
the entire amounts held in the Separate Accounts, including any 
Contract Enhancement amounts. As a result, the aggregate asset-based 
charges assessed will be higher than those that would be charged if the 
Contract owner's contract value did not include any Contract 
Enhancement.
    6. Applicants submit that the provisions for recapture of any 
Contract Enhancement under the Contracts do not violate Sections 
2(a)(32) and 27(i)(2)(A) of the Act. Sections 26(e) and 27(i) were 
added to the Act to implement the purposes of the National Securities 
Markets Improvement Act of 1996 and Congressional intent. The 
application of a Contract Enhancement to premium payments made under 
the Contracts should not raise any questions as to compliance by the 
Insurance Companies with the provisions of

[[Page 18915]]

Section 27(i). However, to avoid any uncertainty as to full compliance 
with the Act, Applicants request an order providing an exemption from 
Sections 2(a)(32) and 27(i)(2)(A), to the extent deemed necessary, to 
permit the recapture of the Contract Enhancements under the 
circumstances described herein and in the Application, without the loss 
of relief from Section 27 provided by Section 27(i).
    7. Applicants state that Section 22(c) of the Act authorizes the 
Commission to make rules and regulations applicable to registered 
investment companies and to principal underwriters of, and dealers in, 
the redeemable securities of any registered investment company to 
accomplish the same purposes as contemplated by Section 22(a). Rule 
22c-1 under the Act prohibits a registered investment company issuing 
any redeemable security, a person designated in such issuer's 
prospectus as authorized to consummate transactions in any such 
security, and a principal underwriter of, or dealer in, such security, 
from selling, redeeming, or repurchasing any such security except at a 
price based on the current net asset value of such security which is 
next computed after receipt of a tender of such security for redemption 
or of an order to purchase or sell such security.
    8. Applicants state that it is possible that someone might view the 
Insurance Companies' recapture of the Contract Enhancements as 
resulting in the redemption of redeemable securities for a price other 
than one based on the current net asset value of the Separate Accounts. 
Applicants contend, however, that the recapture of the Contract 
Enhancement does not violate Rule 22c-1. The recapture of some or all 
of the Contract Enhancement does not involve either of the evils that 
Section 22(c) and Rule 22c-1 were intended to eliminate or reduce as 
far as reasonably practicable, namely: (i) The dilution of the value of 
outstanding redeemable securities of registered investment companies 
through their sale at a price below net asset value or repurchase at a 
price above it, and (ii) other unfair results, including speculative 
trading practices. To effect a recapture of a Contract Enhancement, the 
Insurance Companies will redeem interests in a Contract owner's 
contract value at a price determined on the basis of the current net 
asset value of the JNL and JNLNY Separate Accounts. The amount 
recaptured will be less than or equal to the amount of the Contract 
Enhancement that the Insurance Companies paid out of its general 
account assets. Although Contract owners will be entitled to retain any 
investment gains attributable to the Contract Enhancement and to bear 
any investment losses attributable to the Contract Enhancement, the 
amount of such gains or losses will be determined on the basis of the 
current net asset values of the Separate Accounts. Thus, no dilution 
will occur upon the recapture of the Contract Enhancement. Applicants 
also submit that the second harm that Rule 22c-1 was designed to 
address, namely, speculative trading practices calculated to take 
advantage of backward pricing, will not occur as a result of the 
recapture of the Contract Enhancement. Because neither of the harms 
that Rule 22c-1 was meant to address is found in the recapture of the 
Contract Enhancement, Rule 22c-1 should not apply to any Contract 
Enhancement. However, to avoid any uncertainty as to full compliance 
with Rule 22c-1, Applicants request an order granting an exemption from 
the provisions of Rule 22c-1 to the extent deemed necessary to permit 
them to recapture the Contract Enhancement under the Contracts.
    9. Applicants submit that extending the requested relief to 
encompass Future Contracts and Other Accounts is appropriate in the 
public interest because it promotes competitiveness in the variable 
annuity market by eliminating the need to file redundant exemptive 
applications prior to introducing new variable annuity contracts. 
Investors would receive no benefit or additional protection by 
requiring Applicants to repeatedly seek exemptive relief that would 
present no issues under the Act not already addressed in the 
Application.
    10. Applicants submit, for the reasons stated herein, that their 
exemptive request meets the standards set out in Section 6(c) of the 
Act, namely, 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 and 
that, therefore, the Commission should grant the requested order.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8369 Filed 4-12-10; 8:45 am]
BILLING CODE 8011-01-P