Document ID: SEC-2020-1752-0001
Agency: sec
Document Type: Notice
Title: Application: New York Life Insurance and Annuity Corporation, et al.
Posted Date: 2020-11-04T05:00Z

[Federal Register Volume 85, Number 214 (Wednesday, November 4, 2020)]
[Notices]
[Pages 70213-70216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24449]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34079; File No. 812-15121]

New York Life Insurance and Annuity Corporation, et al; Notice of 
Application

October 30, 2020.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice.

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    Notice of application for an order approving the substitution of 
certain securities pursuant to Section 26(c) of the Investment Company 
Act of 1940, as amended (the ``1940 Act'').

Applicants:  New York Life Insurance and Annuity Corporation 
(``NYLIAC''), NYLIAC Variable Annuity Separate Account--I (``VA I''), 
NYLIAC Variable Annuity Separate Account--II (``VA II''), NYLIAC 
Variable Annuity Separate Account--III (``VA III''), NYLIAC Variable 
Annuity Separate Account--IV (``VA IV''), NYLIAC Variable Universal 
Life Separate Account--I (``VUL I''), NYLIAC Corporate Sponsored 
Variable Universal Life Separate Account--I (``Corporate VUL I''), 
NYLIAC Private Placement Variable Universal Life Separate Account--I 
(``Private VUL I''), and NYLIAC Private Placement Variable Universal 
Life Separate Account--II (``Private VUL II'') (each, a ``Separate 
Account'' and together, the ``Separate Accounts''). NYLIAC and the 
Separate Accounts are collectively the ``Applicants.''

Summary of Application:  Applicants seek an order pursuant to Section 
26(c) of the 1940 Act, approving the substitution of shares issued by 
certain investment certain investment portfolios (the ``Existing 
Portfolios'') for the shares of certain investment portfolios of 
registered investment companies (the ``Replacement Portfolios''), held 
by the Separate Accounts as investment options for certain variable 
life insurance policies and variable annuity contracts (such policies 
and contracts, the ``Contracts'') issued by NYLIAC (the ``Proposed 
Substitutions'').

Filing Date:  The application was filed on April 8, 2020 and was 
amended on July 24, 2020, October 23, 2020, October 26, 2020, and 
October 27, 2020.

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 emailing the Commission's Secretary at 
Secretarys-Office@sec.gov 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 November 19, 2020 and should be 
accompanied by proof of service on the Applicants in the form of an 
affidavit or, for lawyers, a certificate of service. Pursuant to rule 
0-5 under the Act, hearing requests should state the nature of the 
writer's interest, any facts bearing upon the desirability of a hearing 
on the matter, the reason for the request, and the issues contested. 
Persons who wish to be notified of a hearing may request notification 
by emailing the Commission's Secretary.

ADDRESSES: The Commission: Secretarys-Office@sec.gov. Applicants: Erica 
E. Carrig, Esq., New York Life Insurance and Annuity Corporation, 51 
Madison Avenue, New York, NY 10010 and Richard Choi, Esq., Carlton 
Fields, P.A., 1025 Thomas Jefferson St. NW, Suite 400 West, Washington, 
DC 20007.

FOR FURTHER INFORMATION CONTACT:  Thankam A. Varghese, Senior Counsel 
at (202) 551-6446 or Parisa Haghshenas, Branch Chief, at (202) 551-6825 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website by searching for the file number, or for an 
Applicant using the Company name box, at http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.

Applicants' Representations

    1. NYLIAC is a Delaware stock life insurance company. NYLIAC is an 
indirect wholly-owned subsidiary of New York Life Insurance Company, a 
mutual life insurance company. NYLIAC serves as the depositor of the 
Separate Accounts, which are segregated asset accounts NYLIAC that fund 
the Contracts.
    2. Each Separate Account, except for Private VUL I and Private VUL 
II, is registered under the 1940 Act as a unit investment trust.\1\ 
Each Separate Account meets the definition of ``separate account'' 
contained in Section 2(a)(37) of the 1940 Act. Interests under the 
Contracts, except for Contracts issued through Private VUL I and 
Private VUL II, are registered under the Securities Act of 1933.\2\ 
Each Account is divided into subaccounts, each of which invests 
exclusively in the securities of an underlying insurance-dedicated 
mutual fund (``Portfolio''). The application sets forth the 
registration statement file numbers for the Contracts and the Separate 
Accounts, with the exceptions of Private VUL I and Private VUL II.
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    \1\ Private VUL I and Private VUL II are exempt from 
registration under the 1940 Act pursuant to Sections 3(c)(1) and 
3(c)(7) thereof.
    \2\ Contracts issued through Private VUL I and Private VUL II 
are sold without registration under the 1933 Act in reliance on the 
private offering exemption of Section 4(2) of the 1933 Act and 
Regulation D thereunder.
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    3. The Contracts include the variable annuity contracts and the 
variable universal life policies. The Contracts may be issued as 
individual or group Contracts. Contract owners and participants in 
group Contracts (each a ``Contract Owner'' and collectively, the 
``Contract Owners'') may allocate some or all of their Contract value 
to one or more Subaccounts that are available as investment options 
under the Contracts.
    4. Each Contract permits its owner to transfer all or a portion of 
the Contract value from one Subaccount to another at any time, subject 
to certain policy limitations, as well as potential restrictions if 
NYLIAC determines that such transfers may disadvantage or potentially 
harm the rights and interests of other policy holders. No sales charges 
applies to any such transfer of Contract value among Subaccounts. None 
of the Contracts currently assess a transfer charge, and no transfer 
charges will apply in connection with the Proposed Substitutions.
    5. Under the Contracts, NYLIAC reserves the right to substitute, 
for the shares of a Portfolio held in any Subaccount, the shares of 
another Portfolio. NYLIAC, on behalf of itself and its Separate 
Accounts, proposes to substitute shares of one Portfolio for that of 
another Portfolio by replacing the shares of four Existing Portfolios 
that are held in Subaccounts of their Separate Accounts with shares of 
the corresponding Replacement Portfolios as shown in the table below. 
NYLIAC states that the proposed Substitutions are part of an ongoing 
effort to make their Contracts more attractive to existing and 
prospective Contract Owners. Additional information for

[[Page 70214]]

each Existing Portfolio and the corresponding Replacement Portfolio, 
including investment objectives, principal investment strategies, 
principal risks, and performance, as well as the fees and expenses of 
each Existing Portfolio and its corresponding Replacement Portfolio, 
can be found in the application.

------------------------------------------------------------------------
       Substitution           Existing portfolio   Replacement portfolio
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1.........................  MainStay VP Indexed    Fidelity VIP Bond
                             Bond Portfolio--       Index Portfolio--
                             Initial Class.         Initial Class.
                            MainStay VP Indexed    Fidelity VIP Bond
                             Bond Portfolio--       Index Portfolio--
                             Service Class.         Service Class 2.
2.........................  Victory Variable       MainStay VP MacKay
                             Insurance              S&P 500 Index
                             Diversified Stock      Portfolio--Initial
                             Fund--Class A Shares.  Class.
                            Victory Variable       MainStay VP MacKay
                             Insurance              S&P 500 Index
                             Diversified Stock      Portfolio--Service
                             Fund--Class A Shares.  Class.
3.........................  LVIP SSgA              Fidelity VIP
                             International Index    International Index
                             Fund--Standard Class.  Portfolio--Initial
                                                    Class.
4.........................  Invesco VI American    MFS VIT III Mid Cap
                             Value Fund--Series I.  Value Portfolio--
                                                    Initial Class.
                            Invesco V.I. America   MFS VIT III Mid Cap
                             Value Fund--Series     Value Portfolio--
                             II.                    Service Class.
------------------------------------------------------------------------

    6. Applicants state that the Proposed Substitutions will be 
described in supplements to the applicable prospectuses for the 
Contracts filed with the Commission or in other supplemental disclosure 
documents (collectively, ``Supplements'') and delivered to all affected 
Contract Owners at least 30 days before the date the Proposed 
Substitution is effected (the ``Effective Date''). Each Supplement, 
among other things, will advise Contract Owners that for 30 days before 
the Effective Date, Contract Owners are permitted to transfer all of or 
a portion of their Contract value that out of any Subaccount investing 
in the Existing Portfolios to any other available Subaccounts offered 
under their Contracts without the transfer being counted as a transfer 
for purposes of transfer limitations and fees that would otherwise be 
applicable under the terms of the Contracts.
    7. Applicants will send the Supplements and the summary 
prospectuses to all existing Contract Owners at least 30 days prior to 
the Effective Date. The Contract prospectus and Supplement, and the 
summary prospectuses for the Replacement Portfolios will be delivered 
to purchasers of new Contracts.
    8. In addition to the Supplement distributed to Contract Owners, 
within five business days after the Effective Date, Contract Owners 
will be sent a written confirmation of the completed Proposed 
Substitutions in accordance with Rule 10b-10 under the Securities 
Exchange Act of 1934. The confirmation statement will include or be 
accompanied by a statement that reiterates the free transfer rights 
disclosed in the Supplement.
    9. The Proposed Substitutions will take place at the Existing and 
Replacement Portfolios' relative per share net asset values determined 
on the Effective Date in accordance with Section 22 of the 1940 Act and 
Rule 22c-1 thereunder. The Proposed Substitutions will be effected by 
having each applicable Existing Portfolio Subaccount redeem its 
Existing Portfolio shares in cash on the Effective date at net asset 
value per share and purchase shares of the corresponding Replacement 
Portfolio at net asset value per share calculated on the same date. The 
Proposed Substitutions will be effective by redeeming shares of an 
Existing Portfolio for cash and using the cash to purchase shares of 
the Replacement Portfolio.
    10. NYLIAC or an affiliate will pay all expenses and transaction 
costs of the Proposed Substitutions. No costs of the Substitutions will 
be borne directly or indirectly by Contract Owners. Affected Contract 
Owners will not incur any fees or charges as a result of the Proposed 
Substitutions, nor will their rights or the obligations of NYLIAC under 
the Contracts be altered in any way. The Proposed Substitutions will 
not cause the fees and charges under the Contracts currently being paid 
by Contract Owners to be greater after the Proposed Substitutions than 
before the Proposed Substitutions. The charges for optional living 
benefit riders may change from time to time and any such changes would 
be unrelated to the Proposed Substitutions. No fees will be charged on 
the transfer made on the Effective Date because the Proposed 
Substitutions will not be treated as a transfer for the purpose of 
assessing transfer charges or, if applicable, for determining the 
number of remaining permissible transfers in a Contract year.
    11. In addition, with respect to Proposed Substitution 2, 
Applicants represent that New York Life Investment Management LLC (the 
``Manager'') will enter into a written contract with the MainStay VP 
MacKay S&P 500 Index Portfolio whereby during the two years following 
the Effective Date the annual net operating expenses of the MainStay VP 
MacKay S&P 500 Index Portfolio will not exceed the annual net operating 
expenses of the Victory VI Diversified Stock Fund for the fiscal year 
ended December 31, 2019.
    12. Applicants represent that with respect to Proposed Substitution 
4, for a period of two (2) years commencing on the Effective Date and 
for those Contracts with assets allocated to the Invesco VI American 
Value Fund on the Effective Date, NYLIAC will, no later than the last 
business day of each fiscal quarter, make a corresponding reduction in 
Separate Account (or Subaccount) expenses to the extent that the annual 
net operating expenses of MFS VIT III Mid Cap Value Portfolio for such 
period exceeds, on an annualized basis, the total annual net operating 
expenses of the Invesco VI American Value Fund for fiscal year 2019. 
The Applicants further agree that separate account charges of any 
Subaccounts investing in the Proposed Substitution 2 and 4 Replacement 
Portfolios for any Contract Owner on the Effective Date will not be 
increased at any time during the two year period following the 
Effective Date.

Legal Analysis

    1. Applicants request that the Commission issue an order pursuant 
to Section 26(c) of the 1940 Act approving the Substitutions. Section 
26(c) of the 1940 Act prohibits any depositor or trustee of a unit 
investment trust that invests exclusively in the securities of a single 
issuer from substituting the securities of another issuer without the 
approval of the Commission. Section 26(c) provides that such approval 
shall be granted by order of the Commission, if the evidence 
establishes that the substitution is consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of the 1940 Act.
    2. Applicants submit that each of the Substitutions is constituent 
with the protection of investors and the purposes fairly intended by 
the policy and provisions of the 1940 Act. In particular, Applicants 
point to the following:

[[Page 70215]]

    (a) The Contracts permit the Proposed Substitutions, subject to 
Commission approval and compliance with applicable laws, upon 
appropriate notice;
    (b) the prospectuses for the Contracts contain appropriate 
disclosure of these rights;
    (c) the Proposed Substitutions will be described in the Supplements 
delivered to all affected Contract Owners 30 days before the Effective 
Date;
    (d) the Supplements will advise Contract Owners that 30 days before 
the Effective Date through 30 days following the Substitution Date, 
Contract Owners are permitted to transfer all or a portion of their 
Contract value out of any Subaccount investing in the Existing 
Portfolios to any other available Subaccounts offered under their 
Contracts without the transfer being counted as a transfer for purposes 
of transfer limitations and fees that would otherwise be applicable 
under the terms of the Contracts;
    (e) each Replacement Portfolio and its corresponding Existing 
Portfolio have similar or substantially similar investment objectives, 
principal investment strategies, and principal risks; \3\ and
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    \3\ Applicants cite to prior Commission orders under Section 
26(c) for similar substitutions in support of their request.
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    (f) the total net operating expenses of each Replacement Portfolio 
will be the same or lower than those of the corresponding Existing 
Portfolio for at least two years following the Substitution Date.
    Applicants assert that, based on the terms noted above, and subject 
to the conditions set forth below, the Proposed Substitutions do not 
raise the concerns underlying section 26(c) of the 1940 Act.

3. Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. The Proposed Substitutions will not be effected unless NYLIAC 
determines that: (a) The Contracts allow the substitution of shares of 
registered open-end investment companies in the manner contemplated by 
the application; (b) the Proposed Substitutions can be consummated as 
described in the Application under applicable insurance laws; and (c) 
any regulatory requirements in each jurisdiction where the Contracts 
are qualified for sale have been complied with to the extent necessary 
to complete the Proposed Substitutions.
    2. NYLIAC or its affiliates will pay all expenses and transaction 
costs of the Proposed Substitutions, including legal and accounting 
expenses, any applicable brokerage expenses and other fees and 
expenses. No fees or charges will be assessed to the Contract Owners to 
effect the Proposed Substitutions.
    3. The Proposed Substitutions will be effected at the relative net 
asset values of the respective shares in conformity with section 22(c) 
of the 1940 Act and rule 22c-1 thereunder without the imposition of any 
transfer or similar charges by Applicants. The Proposed Substitutions 
will be effected without change in the amount or value of any Contracts 
held by affected Contract Owners.
    4. The Proposed Substitutions will in no way alter the tax 
treatment of affected Contract Owners in connection with their 
Contracts, and no tax liability will arise for affected Contract Owners 
as a result of the Proposed Substitutions.
    5. The rights or obligations of the Applicants under the Contracts 
of affected Contract Owners will not be altered in any way. The 
Proposed Substitutions will not adversely affect any riders under the 
Contracts since each Replacement Portfolio is an allowable Investment 
Option for use with such riders.
    6. Affected Contract Owners will be permitted to make at least one 
transfer of Contract value from the Subaccount investing in the 
Existing Portfolio (before the Effective Date) or the Replacement 
Portfolio (after the Effective Date) to any other available investment 
option under the Contract without charge for a period beginning at 
least 30 days before the Effective Date through at least 30 days 
following the Effective Date. Except as described in any market timing/
short-term trading provisions of the relevant prospectus, the NYLIAC 
will not exercise any right it may have under the Contract to impose 
restrictions on transfers between the subaccounts under the Contracts, 
including limitations on the future number of transfers, for a period 
beginning at least 30 days before the Effective Date through at least 
30 days following the Effective Date.
    7. All affected Contract Owners will be notified, at least 30 days 
before the Effective Date about: (a) The intended substitution of the 
Existing Portfolios with the Replacement Portfolios; (b) the intended 
Effective Date; and (c) information with respect to transfers as set 
forth in Condition 6 above. In addition, NYLIAC will also deliver, at 
least 30 days before the Effective Date, a prospectus for each 
applicable Replacement Portfolio.
    8. NYLIAC will deliver to each affected Contract Owner within five 
(5) business days of the Effective Date a written confirmation which 
will include: (a) A confirmation that the Substitutions were carried 
out as previously notified; (b) a restatement of the information set 
forth in the Pre-Substitution Notice; and (c) before and after account 
values.
    9. In addition, with respect to Proposed Substitution 2 the Manager 
will enter into a written contract with the MainStay VP MacKay S&P 500 
Index Portfolio whereby during the two years following the Effective 
Date the annual net operating expenses of the MainStay VP MacKay S&P 
500 Index Portfolio will not exceed the annual net operating expenses 
of the Victory VI Diversified Stock Fund for the fiscal year ended 
December 31, 2019. With respect to Proposed Substitution 4, for a 
period of two (2) years commencing on the Effective Date and for those 
Contracts with assets allocated to the Invesco VI American Value Fund 
on the Effective Date, NYLIAC will, no later than the last business day 
of each fiscal quarter, make a corresponding reduction in Separate 
Account (or Subaccount) expenses to the extent that the annual net 
operating expenses of MFS VIT III Mid Cap Value Portfolio for such 
period exceeds, on an annualized basis, the total annual net operating 
expenses of the Invesco VI American Value Fund for fiscal year 2019. 
The Applicants further agree that separate account charges of any 
Subaccounts investing in the Proposed Substitution 2 and 4 Replacement 
Portfolios for any Contract Owner on the Effective Date will not be 
increased at any time during the two year period following the 
Effective Date.
    10. With respect to Proposed Substitutions 1, 3 and 4, the 
Applicants will not receive, for three years from the Effective Date, 
any direct or indirect benefits paid by the applicable Replacement 
Portfolios, their advisers or underwriters (or their affiliates), in 
connection with assets attributable to Contracts affected by the 
applicable Substitutions, at a higher rate than the Applicants have 
received from the corresponding Existing Portfolio, its advisers or 
underwriters (or their affiliates), including without limitation Rule 
12b-1 fees, shareholder service, administration, or other service fees, 
revenue sharing, or other arrangements in connection with such assets. 
Proposed Substitutions 1, 3 and 4, and the selection of the applicable 
Replacement Portfolios was not motivated by any financial consideration 
paid or to be paid to NYLIAC or its affiliates by the

[[Page 70216]]

applicable Replacement Portfolios, their advisers, underwriters or 
their affiliates.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-24449 Filed 11-3-20; 8:45 am]
BILLING CODE 8011-01-P