81 FR 90398 - Hartford Life Insurance Company, et al; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 240 (December 14, 2016)

Page Range		90398-90402
FR Document		2016-29933

Federal Register, Volume 81 Issue 240 (Wednesday, December 14, 2016)

[Federal Register Volume 81, Number 240 (Wednesday, December 14, 2016)]
[Notices]
[Pages 90398-90402]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2016-29933]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-32385; File No. 812-14446]

Hartford Life Insurance Company, et al; Notice of Application

December 8, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: 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 (``Act'') and an order of exemption
pursuant to section 17(b) of the Act from section 17(a) of the Act.

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Applicants: Hartford Life Insurance Company (``Hartford Life''),
Hartford Life and Annuity Insurance Company (``Hartford Life and
Annuity,'' and together with Hartford Life, the ``Hartford Life
Insurance Companies''); their respective separate accounts, Hartford
Life Insurance Company Separate Account Three (``HL Separate Account
3''), Hartford Life and Annuity Insurance Company Separate Account
Three (``HLA Separate Account 3''), Hartford Life Insurance Company
Separate Account Seven (``HL Separate Account 7''), Hartford Life and
Annuity Insurance Company Separate Account Seven (``HLA Separate
Account 7) (collectively, the ``Separate Accounts,'' and together with
the Hartford Insurance Companies, the ``Section 26 Applicants''); HIMCO
Variable Insurance Trust (the ``Trust''), Hartford Investment
Management Company (``HIMCO,'' and collectively with the Section 26
Applicants and the Trust, the ``Section 17 Applicants'').

Summary of Application: The Applicants seek an order pursuant to
section 26(c) of the Act, approving the substitution of shares of
thirty-five (35) investment portfolios of registered investment
companies (the ``Existing Portfolios'') with shares of five (5)
investment portfolios of the Trust (the ``Replacement Portfolios''),
under certain variable annuity contracts (the ``Contracts''), each
funded through the Separate Accounts (the ``Substitutions''). In
addition, the Section 17 Applicants also seek an order pursuant to
section 17(b) of the Act exempting them from section 17(a) of the Act
to the extent necessary to permit them to engage in certain in-kind
transactions (the ``In-Kind Transactions'') in connection with the
Substitutions.

DATES: Filing Date:
The application was filed on April 21, 2015, and amended on May 25,
2016 and August 31, 2016.

HEARING OR NOTIFICATION OF HEARING: An order granting the requested
relief 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 January 3, 2017, and should be accompanied by proof of
service on 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 writing to the
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090. Applicants: Hartford Life
Insurance Company, Attn: Lisa Proch, Vice President, Assistant General
Counsel, P.O. Box 2999, Hartford, CT 06104-2999.

FOR FURTHER INFORMATION CONTACT: Jessica Shin, Attorney-Adviser at
(202) 551-5921 or David J. Marcinkus, Branch Chief, at (202) 551-6821
(Chief Counsel's Office, 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 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. Hartford Life is a stock life insurance company incorporated
under the laws of the state of Connecticut. Hartford Life was engaged
in the business of writing individual and group life insurance and
annuity contracts until April 30, 2013, and remains authorized to do
business in every state and the District of Columbia. Hartford Life is
an indirect, wholly-owned subsidiary of The Hartford Financial Services
Group, Inc. (``The Hartford''), a Delaware corporation whose stock is
traded on the New York Stock Exchange.
2. Hartford Life and Annuity is a stock life insurance company
incorporated under the laws of the state of Connecticut. Hartford Life
and Annuity was engaged in the business of writing individual and group
life insurance and annuity contracts until April 30, 2013, and remains
authorized to do business in every state (except New York), the
District of Columbia and Puerto Rico. Hartford Life and Annuity is an
indirect wholly-owned subsidiary of The Hartford.
3. Hartford Life established HL Separate Account 3 and HL Separate
Account 7 as segregated asset accounts under Connecticut law on June
22, 1994 and December 8, 1986, respectively. Hartford Life and Annuity
established HLA Separate Account 3 and HLA Separate Account 7 as
segregated asset accounts under Connecticut law on June 22, 1994 and
April 1, 1999, respectively. Each of the Separate Accounts meets the
definition of ``separate account,'' as defined in Section 2(a)(37) of
the Act. The Separate Accounts are registered with the Commission under
the Act as unit investment trusts. The assets of the Separate Accounts
support the Contracts and interests in the Separate Accounts offered
through such Contracts. The Separate Accounts are segmented into
subaccounts, and certain of these subaccounts invest in the Existing
Portfolios. The Contracts are individual and group deferred variable

[[Page 90399]]

annuity contracts, with group participants acquiring certain ownership
rights as described in the group contract or plan documents. Contract
owners and participants in group contracts (each, a ``Contract owner,''
and collectively, ``Contract owners'') may allocate some or all of
their Contract value to one or more subaccounts available as investment
options under their respective Contracts and any rider(s).
4. By the terms of each Contract (and as set forth in the
prospectuses for the Contracts), the Hartford Insurance Companies
reserve the right to substitute shares of another registered investment
company for the shares of any registered investment company already
purchased or to be purchased in the future by the Separate Accounts.
5. The Trust is a Delaware statutory trust that was established on
January 13, 2012. The Trust is registered with the Commission as an
open-end management investment company under the Act and its shares are
registered under the Securities Act of 1933. The Trust is a series
investment company and currently has twenty-four (24) separate
portfolios (each a ``HIMCO VIT Fund,'' and collectively, the ``HIMCO
VIT Funds''). Five (5) HIMCO VIT Funds comprise the Replacement
Portfolios.
6. HIMCO, a Delaware corporation and a registered investment
adviser, serves as investment adviser to each of the HIMCO VIT Funds
pursuant to an investment advisory agreement between the Trust, on
behalf of each HIMCO VIT Fund, and HIMCO. In addition, the Trust has
obtained an exemptive order from the Commission (File No. 812-11684)
(the ``Manager of Managers Order''). The Replacement Portfolios may
rely on the the Manager of Managers Order, and the Trust's registration
statement discloses and explains the existence, substance and effect of
the Manager of Managers Order.\1\
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\1\ HIMCO has agreed, as a condition of the application, that it
will not change a sub-adviser, add a new sub-adviser, or otherwise
rely on the Manager of Managers Order or any replacement order from
the Commission with respect to any Replacement Portfolio without
first obtaining shareholder approval of the change in sub-adviser,
the new sub-adviser, or the Replacement Portfolio's ability to add
or to replace a sub-adviser in reliance on the Manager of Managers
Order or any replacement order from the Commission at a shareholder
meeting, the record date for which shall be after the proposed
Substitution has been effected.
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7. The Section 26 Applicants propose to substitute shares of the
Existing Portfolios with shares of the corresponding Replacement
Portfolios, as shown in the table below. As discussed in greater detail
in the application, the Section 26 Applicants believe that each
Existing Portfolio has substantially similar investment objectives,
principal investment strategies, and principal investment risks, and
has substantially similar risk and return characteristics, as its
corresponding Replacement Portfolio.

------------------------------------------------------------------------
Replacement
Substitution Existing portfolio portfolio (share
(share class(es)) class)
------------------------------------------------------------------------
1....................... American Funds Global HIMCO VIT Global
Growth and Income Fund Core Equity Fund
(Class 2). (Class IB).
2....................... American Funds Global
Growth Fund (Class 2).
3....................... American Funds Global
Small Capitalization
Fund (Class 2).
4....................... Franklin Mutual Global
Discovery VIP Fund.
(Class 2)...............
(Class 4)...............
5....................... MFS Global Equity Series
(Initial Class).
6....................... Oppenheimer Global Fund/
VA (Service Shares).
7....................... Templeton Growth VIP
Fund.
(Class 2)...............
(Class 4)...............
8....................... American Funds Growth HIMCO VIT Large Cap
Fund (Class 2). Growth Fund (Class
IB).
9....................... Fidelity VIP Contrafund
Portfolio (Service
Class 2).
10...................... Fidelity VIP Growth
Portfolio (Service
Class 2).
11...................... Franklin Flex Cap Growth
VIP Fund.
(Class 2)...............
(Class 4)...............
12...................... Franklin Large Cap
Growth VIP Fund (Class
2).
13...................... Invesco V.I. American
Franchise Fund.
(Series I)..............
(Series II).............
14...................... MFS Core Equity
Portfolio (Initial
Class).
15...................... MFS Growth Series.......
(Initial Class).........
(Service Class).........
16...................... MFS Massachusetts
Investors Growth Stock
Portfolio.
(Initial Class).........
17...................... MFS Research Series
(Initial Class).
18...................... Oppenheimer Capital
Appreciation Fund/VA
(Service Shares).
19...................... AB VPS Small/Mid Cap HIMCO VIT Small &
Value Portfolio (Class Mid Cap Core Fund
B). (Class IB).
20...................... Fidelity VIP Mid Cap
Portfolio (Service
Class 2).
21...................... Fidelity VIP Value
Strategies Portfolio
(Service Class 2).
22...................... Franklin Small Cap Value
VIP Fund (Class 2)
(Class 4).
23...................... Franklin Small-Mid Cap
Growth VIP Fund (Class
2) (Class 4).
24...................... Invesco V.I. American
Value Fund (Series II).
25...................... Invesco V.I. Mid Cap
Core Equity Fund
(Series I) (Series II).
26...................... Invesco V.I. Small Cap
Equity Fund (Series I)
(Series II).
27...................... MFS Mid Cap Growth
Series (Initial Class).
28...................... MFS New Discovery Series
(Initial Class)
(Service Class).
29...................... Oppenheimer Main Street
Small Cap Fund/VA
(Service Shares).
30...................... UIF Mid Cap Growth
Portfolio (Class II).
31...................... Franklin Income VIP Fund HIMCO VIT
Conservative
Allocation Fund
(Class IB).

[[Page 90400]]

(Class 2)...............
(Class 4)...............
32...................... AB VPS Balanced Wealth HIMCO VIT Moderate
Strategy Portfolio Allocation Fund
(Class B). (Class B).
33...................... American Funds Asset
Allocation Fund (Class
2).
34...................... Invesco V.I. Equity and
Income Fund (Series II).
35...................... MFS Total Return Series.
(Initial Class).........
(Service Class).........
------------------------------------------------------------------------

8. The Hartford Insurance Companies state that the proposed
Substitutions are intended to improve the administrative efficiency and
cost-effectiveness of the Contracts, as well as to make the Contracts
more attractive to existing Contract owners. Applicants state that by
eliminating overlapping investment options that duplicate one another
by having substantially similar investment objectives, strategies and
risks, the Hartford Insurance Companies can present a more streamlined
menu of investment options under the Contracts. Applicants further
state that since the proposed Substitutions were designed to reduce
investment-option redundancy, the diversity of available investment
styles under the Contracts will not be adversely impacted. Additional
information for each Existing Portfolio and the corresponding
Replacement Portfolio, including investment objectives, principal
investment strategies, principal risks, and fees can be found in the
application.
9. Applicants state that through the proposed Substitutions, the
Hartford Insurance Companies seek to replace certain investment options
in the Contracts' current fund lineups with investment options that
will provide Contract owners with lower expenses, while maintaining a
high-quality menu of investment options. In this regard, the Section 26
Applicants believe that Contract owners with Contract value allocated
to the subaccounts of the Existing Portfolios will have lower total and
net annual operating expenses immediately after the proposed
Substitutions than before the proposed Substitutions. Applicants also
state that, for each Substitution, the combined management fee and Rule
12b-1 fee of each Replacement Portfolio is lower than that of the
corresponding Existing Portfolio. The application sets forth the fees
and expenses of each Existing Portfolio and its corresponding
Replacement Portfolio in greater detail.
10. The Section 26 Applicants also agree that, during a period of
two (2) years following the implementation of the proposed Substitution
(the ``Substitution Date''), and for those Contracts with assets
allocated to an Existing Portfolio on the Substitution Date, the
Hartford Insurance Companies will reimburse, on the last business day
of each fiscal quarter, the owners of those Contracts invested in the
applicable Replacement Portfolio to the extent that the Replacement
Portfolio's total net annual operating expenses (taking into account
fee waivers and expense reimbursements) for such period exceeds, on an
annualized basis, the total net annual operating expenses of the
Existing Portfolio for fiscal year 2015. In addition, the Hartford
Insurance Companies will not increase the Contract fees and charges
that would otherwise be assessed under the terms of those Contracts for
a period of at least two (2) years following the Substitution Date.
11. Applicants state that the Hartford Insurance Companies or their
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. Applicants state that
no fees or charges will be assessed to the affected Contract owners to
effect the proposed Substitutions. Applicants state that the proposed
Substitutions will not cause the Contract fees and charges currently
being paid by existing Contract owners to be greater after the
Substitutions than before the Substitutions.
12. Applicants state that the Contract value of each Contract owner
affected by the proposed Substitutions will not change as a result of
the proposed Substitutions. Applicants state that, because the
Substitutions will occur at relative net asset value, and the fees and
charges under the Contracts will not change as a result of the
Substitutions, the benefits offered by the guarantees under the
Contracts will be the same immediately before and after the
Substitutions. Applicants further state that what effect the
Substitutions may have on the value of the benefits offered by the
Contract guarantees would depend, among other things, on the relative
future performance of each Existing Portfolio and Replacement
Portfolio, which the Section 26 Applicants cannot predict.
Nevertheless, the Section 26 Applicants note that at the time of the
Substitutions, the Contracts will offer a comparable variety of
investment options with as broad a range of risk/return
characteristics.
13. At least 30 days prior to the Substitution Date, Contract
owners will be notified via prospectus supplements, which will be filed
with the Commission pursuant to Rule 497 under the Securities Act of
1933, that the Section 26 Applicants received or expect to receive
Commission approval of the applicable proposed Substitutions and of the
anticipated Substitution Date (the ``Pre-Substitution Notice''). The
Pre-Substitution Notice will advise Contract owners that Contract
values attributable to investments in the Existing Portfolios will be
transferred to the Replacement Portfolios, without any charge that
would otherwise apply and without being subject to any limitations on
transfers, on the Substitution Date. The Pre-Substitution Notice also
will state that, from the date of the Pre-Substitution Notice through
the date thirty (30) days after the Substitutions, Contract owners may
transfer Contract value from the subaccounts investing in the Existing
Portfolios (before the Substitutions) or the Replacement Portfolios
(after the Substitutions) to any other available investment option
without charge and without imposing any transfer limitations.
14. The Section 26 Applicants will also deliver to affected
Contract owners, at least thirty (30) days before the Substitution
Date, a prospectus for each applicable Replacement Portfolio. In
addition, within five (5) business days after the Substitution Date,
Contract owners whose assets are allocated to a Replacement Portfolio
as part of the proposed Substitutions will be sent a written notice
(each, a ``Confirmation'') informing them that the Substitutions were
carried out as previously notified. The Confirmation will also restate
the information set forth in the Pre-Substitution Notice. The
Confirmation will also reflect the Contract owners Contract values
before and after the Substitution(s).

[[Page 90401]]

15. Each Substitution will be effected at the relative net asset
values of the respective shares of the Replacement Portfolios 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 the
Section 26 Applicants. The Substitutions will be effected without
change in the amount or value of any Contracts held by affected
Contract owners. As such, the Section 26 Applicants believe that the
procedures to be implemented are sufficient to assure that each
Contract owner's cash values immediately after the Substitution will be
equal to the cash value immediately before the Substitution. As of the
Substitution Date, the Separate Accounts will redeem shares of the
Existing Portfolios for cash or in-kind. The proceeds of such
redemptions will then be used to purchase shares of the corresponding
Replacement Portfolio, as each subaccount of the Separate Accounts will
invest the proceeds of its redemption from the Existing Portfolios in
the applicable Replacement Portfolios.

Legal Analysis

1. The Section 26 Applicants request that the Commission issue an
order pursuant to section 26(c) of the Act approving the proposed
Substitutions. Section 26(c) of the Act prohibits any depositor or
trustee of a unit investment trust holding the security of a single
issuer from substituting another security 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 Act].''
2. The Section 26 Applicants submit that each of the Substitutions
meet the standards set forth in section 26(c) and that, if implemented,
the Substitutions would not raise any of the concerns underlying this
provision. The Section 26 Applicants believe that each Replacement
Portfolio and its corresponding Existing Portfolio(s) have
substantially similar investment objectives, principal investment
strategies and principal risks. Applicants state that, accordingly, no
Contract owner will involuntarily lose his or her rider(s) as a result
of any proposed Substitution. Contract owners will not incur any fees
or charges as a result of the proposed Substitutions.
3. The Section 17 Applicants request that the Commission issue an
order pursuant to section 17(b) of the Act exempting them from section
17(a) of the Act to the extent necessary to permit them to carry out,
as part of the Substitutions, the In-Kind Transactions. Section
17(a)(1) of the Act prohibits any affiliated person of a registered
investment company, or any affiliated person of such person, acting as
principal, from selling any security or other property to such
registered investment company. Section 17(a)(2) of the Act prohibits
any of the persons described above, acting as principals, from
purchasing any security or other property from such registered
investment company.
4. Because the proposed Substitutions may be effected, in whole or
in part, by means of in-kind redemptions and purchases, the proposed
Substitutions may be deemed to involve one or more purchases or sales
of securities or property between affiliated persons. The proposed
transactions may involve a transfer of portfolio securities by the
Existing Portfolios to the Separate Accounts. Immediately thereafter,
the Separate Accounts would purchase shares of the Replacement
Portfolios with the portfolio securities received from the Existing
Portfolios. Accordingly, to the extent the Separate Accounts and the
Existing Portfolios, and the Separate Accounts and the Replacement
Portfolios, are deemed to be affiliated persons of one another under
Section 2(a)(3) of the Act, it is conceivable that this aspect of the
proposed Substitutions could be viewed as being prohibited by Section
17(a). As such, the Section 17 Applicants have determined that it is
prudent to seek relief from Section 17(a) in the context of this
application.
5. The Section 17 Applicants maintain that the terms of the
proposed In-Kind Transactions, including the consideration to be paid
by each Existing Portfolio and received by each Replacement Portfolio
involved, are reasonable, fair and do not involve overreaching,
principally because the transactions will conform with all but one of
the conditions enumerated in Rule 17a-7. The In-Kind Transactions will
take place at relative net asset value in conformity with the
requirements of Section 22(c) of the Act and Rule 22c-1 thereunder
without the imposition of any transfer or similar charges by the
Section 26 Applicants. The Substitutions will be effected without
change in the amount or value of any Contract held by the affected
Contract owners. The 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 Contract owners as a
result of the Substitutions. The fees and charges under the Contracts
will not increase because of the Substitutions. Even though the
Separate Accounts, the Hartford Insurance Companies and the Trust may
not rely on Rule 17a-7, the Section 17 Applicants believe that the
Rule's conditions outline the type of safeguards that result in
transactions that are fair and reasonable to registered investment
company participants and preclude overreaching in connection with an
investment company by its affiliated persons.
6. The Section 17 Applicants submit that the proposed in-kind
purchases by the Separate Accounts are consistent with the policies of
the Trust and the Replacement Portfolios, as recited in the Trust's
current registration statement and reports filed under the Act.
Finally, the Section 17 Applicants submit that the proposed
Substitutions are consistent with the general purposes of the Act.
Applicants' Conditions
The Section 26 Applicants, and HIMCO as applicable, agree that any
order granting the requested relief will be subject to the following
conditions.
1. The Substitutions will not be effected unless the Section 26
Applicants determine that: (i) The Contracts allow the substitution of
shares of registered open-end investment companies in the manner
contemplated by this application; (ii) the Substitutions can be
consummated as described in this application under applicable insurance
laws; and (iii) any regulatory requirements in each jurisdiction where
the Contracts are qualified for sale have been complied with to the
extent necessary to complete the Substitutions.
2. The Hartford Insurance Companies will seek approval of the
proposed Substitutions from any state insurance regulators whose
approval may be necessary or appropriate.
3. HIMCO will not change a sub-adviser, add a new sub-adviser, or
otherwise rely on the Manager of Managers Order or any replacement
order from the Commission with respect to any Replacement Portfolio
without first obtaining shareholder approval of the change in sub-
adviser, the new sub-adviser, or the Replacement Portfolio's ability to
add or to replace a sub-adviser at a shareholder meeting, the record
date for which shall be after the proposed Substitution has been
effected.
4. The Hartford Insurance Companies or their affiliates will pay
all expenses and transaction costs of the Substitutions, including
legal and

[[Page 90402]]

accounting expenses, any applicable brokerage expenses and other fees
and expenses. No fees or charges will be assessed to the affected
Contract owners to effect the Substitutions. The proposed Substitutions
will not cause the Contract fees and charges currently being paid by
Contract owners to be greater after the proposed Substitution than
before the proposed Substitution.
5. The Substitutions will be effected at the relative net asset
values of the respective shares of the Replacement Portfolios 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 the
Section 26 Applicants. The Substitutions will be effected without
change in the amount or value of any Contracts held by affected
Contract owners.
6. The 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 Contract owners as a result of the
Substitutions.
7. The obligations of the Section 26 Applicants, and the rights of
the affected Contract owners, under the Contracts of affected Contract
owners will not be altered in any way.
8. Affected Contract owners will be permitted to transfer Contract
value from the subaccount investing in the Existing Portfolio (before
Substitution Date) or the Replacement Portfolio (after the Substitution
Date) to any other available investment option under the Contract
without charge for a period beginning at least 30 days before the
Substitution Date through at least 30 days following the Substitution
Date. Contract owners with guaranteed living and/or death benefit
riders, as applicable, may transfer Contract value from the subaccounts
investing in the Existing Portfolios (before the Substitutions) or the
Replacement Portfolios (after the Substitutions) to any other available
investment option available under their respective riders without
charge and without imposing any transfer limitations. Except as
described in any market timing/short-term trading provisions of the
relevant prospectus, the Section 26 Applicants will not exercise any
rights reserved under the Contracts 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 Substitution Date through at least 30 days following the
Substitution Date.
9. All affected Contract owners will be notified, at least 30 days
before the Substitution Date about: (a) The intended Substitution of
Existing Portfolios with the Replacement Portfolios; (b) the intended
Substitution Date; and (c) information with respect to transfers as set
forth in Condition 8 above. In addition, the Section 26 Applicants will
also deliver to affected Contract owners, at least thirty (30) days
before the Substitution Date, a prospectus for each applicable
Replacement Portfolio.
10. The Section 26 Applicants will deliver to each affected
Contract owner within five (5) business days of the Substitution 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) values of the Contract owner's positions in the
Existing Portfolio before the Substitution and the Replacement
Portfolio after the Substitution.
11. For a period of two years following the Substitution Date, for
those Contracts with assets allocated to the Existing Portfolio on the
Substitution Date, the Hartford Insurance Companies will reimburse, on
the last business day of each fiscal quarter, the Contract owners whose
subaccounts invest in the applicable Replacement Portfolio to the
extent that the Replacement Portfolio's net annual operating expenses
(taking into account fee waivers and expense reimbursements) for such
period exceeds, on an annualized basis, the net annual operating
expenses of the Existing Portfolio for fiscal year 2015. In addition,
the Section 26 Applicants will not increase the Contract fees and
charges that would otherwise be assessed under the terms of the
Contracts for a period of at least two years following the Substitution
Date.

For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-29933 Filed 12-13-16; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 81, No. 240 / Wednesday, December 14, 2016 / Notices 90401

15. Each Substitution will be effected pursuant to section 17(b) of the Act arise for Contract owners as a result of
at the relative net asset values of the exempting them from section 17(a) of the Substitutions. The fees and charges
respective shares of the Replacement the Act to the extent necessary to permit under the Contracts will not increase
Portfolios in conformity with Section them to carry out, as part of the because of the Substitutions. Even
22(c) of the 1940 Act and Rule 22c–1 Substitutions, the In-Kind Transactions. though the Separate Accounts, the
thereunder without the imposition of Section 17(a)(1) of the Act prohibits any Hartford Insurance Companies and the
any transfer or similar charges by the affiliated person of a registered Trust may not rely on Rule 17a–7, the
Section 26 Applicants. The investment company, or any affiliated Section 17 Applicants believe that the
Substitutions will be effected without person of such person, acting as Rule’s conditions outline the type of
change in the amount or value of any principal, from selling any security or safeguards that result in transactions
Contracts held by affected Contract other property to such registered that are fair and reasonable to registered
owners. As such, the Section 26 investment company. Section 17(a)(2) of investment company participants and
Applicants believe that the procedures the Act prohibits any of the persons preclude overreaching in connection
to be implemented are sufficient to described above, acting as principals, with an investment company by its
assure that each Contract owner’s cash from purchasing any security or other affiliated persons.
values immediately after the property from such registered 6. The Section 17 Applicants submit
Substitution will be equal to the cash investment company. that the proposed in-kind purchases by
value immediately before the 4. Because the proposed Substitutions the Separate Accounts are consistent
Substitution. As of the Substitution may be effected, in whole or in part, by with the policies of the Trust and the
Date, the Separate Accounts will redeem means of in-kind redemptions and Replacement Portfolios, as recited in the
shares of the Existing Portfolios for cash purchases, the proposed Substitutions Trust’s current registration statement
or in-kind. The proceeds of such may be deemed to involve one or more and reports filed under the Act. Finally,
redemptions will then be used to purchases or sales of securities or the Section 17 Applicants submit that
purchase shares of the corresponding property between affiliated persons. The the proposed Substitutions are
Replacement Portfolio, as each proposed transactions may involve a consistent with the general purposes of
subaccount of the Separate Accounts transfer of portfolio securities by the the Act.
will invest the proceeds of its Existing Portfolios to the Separate
Applicants’ Conditions
redemption from the Existing Portfolios Accounts. Immediately thereafter, the
in the applicable Replacement Separate Accounts would purchase The Section 26 Applicants, and
Portfolios. shares of the Replacement Portfolios HIMCO as applicable, agree that any
with the portfolio securities received order granting the requested relief will
Legal Analysis from the Existing Portfolios. be subject to the following conditions.
1. The Section 26 Applicants request Accordingly, to the extent the Separate 1. The Substitutions will not be
that the Commission issue an order Accounts and the Existing Portfolios, effected unless the Section 26
pursuant to section 26(c) of the Act and the Separate Accounts and the Applicants determine that: (i) The
approving the proposed Substitutions. Replacement Portfolios, are deemed to Contracts allow the substitution of
Section 26(c) of the Act prohibits any be affiliated persons of one another shares of registered open-end
depositor or trustee of a unit investment under Section 2(a)(3) of the Act, it is investment companies in the manner
trust holding the security of a single conceivable that this aspect of the contemplated by this application; (ii)
issuer from substituting another security proposed Substitutions could be viewed the Substitutions can be consummated
of another issuer without the approval as being prohibited by Section 17(a). As as described in this application under
of the Commission. Section 26(c) such, the Section 17 Applicants have applicable insurance laws; and (iii) any
provides that such approval shall be determined that it is prudent to seek regulatory requirements in each
granted by order of the Commission ‘‘if relief from Section 17(a) in the context jurisdiction where the Contracts are
the evidence establishes that [the of this application. qualified for sale have been complied
substitution] is consistent with the 5. The Section 17 Applicants with to the extent necessary to complete
protection of investors and the purposes maintain that the terms of the proposed the Substitutions.
fairly intended by the policy and In-Kind Transactions, including the 2. The Hartford Insurance Companies
provisions of [the Act].’’ consideration to be paid by each will seek approval of the proposed
2. The Section 26 Applicants submit Existing Portfolio and received by each Substitutions from any state insurance
that each of the Substitutions meet the Replacement Portfolio involved, are regulators whose approval may be
standards set forth in section 26(c) and reasonable, fair and do not involve necessary or appropriate.
that, if implemented, the Substitutions overreaching, principally because the 3. HIMCO will not change a sub-
would not raise any of the concerns transactions will conform with all but adviser, add a new sub-adviser, or
underlying this provision. The Section one of the conditions enumerated in otherwise rely on the Manager of
26 Applicants believe that each Rule 17a–7. The In-Kind Transactions Managers Order or any replacement
Replacement Portfolio and its will take place at relative net asset value order from the Commission with respect
corresponding Existing Portfolio(s) have in conformity with the requirements of to any Replacement Portfolio without
substantially similar investment Section 22(c) of the Act and Rule 22c– first obtaining shareholder approval of
objectives, principal investment 1 thereunder without the imposition of the change in sub-adviser, the new sub-
strategies and principal risks. any transfer or similar charges by the adviser, or the Replacement Portfolio’s
sradovich on DSK3GMQ082PROD with NOTICES

Applicants state that, accordingly, no Section 26 Applicants. The ability to add or to replace a sub-adviser
Contract owner will involuntarily lose Substitutions will be effected without at a shareholder meeting, the record
his or her rider(s) as a result of any change in the amount or value of any date for which shall be after the
proposed Substitution. Contract owners Contract held by the affected Contract proposed Substitution has been effected.
will not incur any fees or charges as a owners. The Substitutions will in no 4. The Hartford Insurance Companies
result of the proposed Substitutions. way alter the tax treatment of affected or their affiliates will pay all expenses
3. The Section 17 Applicants request Contract owners in connection with and transaction costs of the
that the Commission issue an order their Contracts, and no tax liability will Substitutions, including legal and

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90402 Federal Register / Vol. 81, No. 240 / Wednesday, December 14, 2016 / Notices

accounting expenses, any applicable Substitution Date about: (a) The SECURITIES AND EXCHANGE
brokerage expenses and other fees and intended Substitution of Existing COMMISSION
expenses. No fees or charges will be Portfolios with the Replacement
assessed to the affected Contract owners Portfolios; (b) the intended Substitution [Release No. 34–79510; File No. SR–
to effect the Substitutions. The proposed Date; and (c) information with respect to NYSEMKT–2016–58]
Substitutions will not cause the transfers as set forth in Condition 8
Contract fees and charges currently Self-Regulatory Organizations; NYSE
above. In addition, the Section 26 MKT LLC; Notice of Designation of a
being paid by Contract owners to be Applicants will also deliver to affected
greater after the proposed Substitution Longer Period for Commission Action
Contract owners, at least thirty (30) days on Proceedings To Determine Whether
than before the proposed Substitution.
before the Substitution Date, a To Approve or Disapprove a Proposed
5. The Substitutions will be effected
at the relative net asset values of the prospectus for each applicable Rule Change, as Modified by
respective shares of the Replacement Replacement Portfolio. Amendments No. 1 and 2 Thereto,
Portfolios in conformity with Section 10. The Section 26 Applicants will Relating to Amendments to NYSE MKT
22(c) of the 1940 Act and Rule 22c–1 deliver to each affected Contract owner Rules 1600 et seq. and the Listing
thereunder without the imposition of within five (5) business days of the Rules Applicable to the Shares of the
any transfer or similar charges by the Substitution Date a written confirmation Nuveen Diversified Commodity Fund
Section 26 Applicants. The which will include: (a) A confirmation and the Nuveen Long/Short
Substitutions will be effected without that the Substitutions were carried out Commodity Total Return Fund
change in the amount or value of any as previously notified; (b) a restatement December 8, 2016.
Contracts held by affected Contract of the information set forth in the Pre-
owners. On May 24, 2016, NYSE MKT LLC
Substitution Notice; and (c) values of (‘‘Exchange’’) filed with the Securities
6. The Substitutions will in no way
the Contract owner’s positions in the and Exchange Commission
alter the tax treatment of affected
Existing Portfolio before the (‘‘Commission’’), pursuant to Section
Contract owners in connection with
their Contracts, and no tax liability will Substitution and the Replacement 19(b)(1) of the Securities Exchange Act
arise for Contract owners as a result of Portfolio after the Substitution. of 1934 (‘‘Act’’) 1 and Rule 19b–4
the Substitutions. 11. For a period of two years thereunder,2 a proposed rule change to
7. The obligations of the Section 26 following the Substitution Date, for among other things, amend NYSE MKT
Applicants, and the rights of the those Contracts with assets allocated to Rules 1600 et seq. and to amend the
affected Contract owners, under the the Existing Portfolio on the listing rules applicable to the shares of
Contracts of affected Contract owners Substitution Date, the Hartford the Nuveen Diversified Commodity
will not be altered in any way. Fund and the Nuveen Long/Short
Insurance Companies will reimburse, on
8. Affected Contract owners will be Commodity Total Return Fund, which
the last business day of each fiscal
permitted to transfer Contract value the Exchange currently lists and trades.
quarter, the Contract owners whose
from the subaccount investing in the The proposed rule change was
subaccounts invest in the applicable published for comment in the Federal
Existing Portfolio (before Substitution
Date) or the Replacement Portfolio (after Replacement Portfolio to the extent that Register on June 13, 2016.3
the Substitution Date) to any other the Replacement Portfolio’s net annual On July 28, 2016, pursuant to Section
available investment option under the operating expenses (taking into account 19(b)(2) of the Act,4 the Commission
Contract without charge for a period fee waivers and expense designated a longer period within which
beginning at least 30 days before the reimbursements) for such period to approve the proposed rule change,
Substitution Date through at least 30 exceeds, on an annualized basis, the net disapprove the proposed rule change, or
days following the Substitution Date. annual operating expenses of the institute proceedings to determine
Contract owners with guaranteed living Existing Portfolio for fiscal year 2015. In whether to disapprove the proposed
and/or death benefit riders, as addition, the Section 26 Applicants will rule change.5 On September 2, 2016, the
applicable, may transfer Contract value not increase the Contract fees and Exchange filed Amendment No. 1 to the
from the subaccounts investing in the charges that would otherwise be proposed rule change, which replaced
Existing Portfolios (before the assessed under the terms of the and superseded the proposed rule
Substitutions) or the Replacement Contracts for a period of at least two change as originally filed.6 On
Portfolios (after the Substitutions) to any years following the Substitution Date. September 9, 2016, the Commission
other available investment option instituted proceedings under Section
For the Commission, by the Division of
available under their respective riders 19(b)(2)(B) of the Act,7 to determine
Investment Management, under delegated
without charge and without imposing whether to approve or disapprove the
authority.
any transfer limitations. Except as proposed rule change, as modified by
described in any market timing/short- Robert W. Errett,
term trading provisions of the relevant Deputy Secretary. 1 15 U.S.C. 78s(b)(1).
prospectus, the Section 26 Applicants [FR Doc. 2016–29933 Filed 12–13–16; 8:45 am] 2 17 CFR 240.19b–4.
will not exercise any rights reserved BILLING CODE 8011–01–P
3 See Securities Exchange Act Release No. 78000

under the Contracts to impose (June 7, 2016), 81 FR 38232.
4 15 U.S.C. 78s(b)(2).
restrictions on transfers between the 5 See Securities Exchange Act Release No. 78432,
sradovich on DSK3GMQ082PROD with NOTICES

subaccounts under the Contracts, 81 FR 51248 (August 3, 2016). The Commission
including limitations on the future designated September 9, 2016, as the date by which
number of transfers, for a period the Commission would either approve or
beginning at least 30 days before the disapprove, or institute proceedings to determine
whether to disapprove, the proposed rule change.
Substitution Date through at least 30 6 Amendment No. 1 is available at https://
days following the Substitution Date. www.sec.gov/comments/sr-nysemkt-201658/
9. All affected Contract owners will be nysemkt201658-2.pdf.
notified, at least 30 days before the 7 15 U.S.C. 78s(b)(2)(B).

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Document Created: 2016-12-14 00:48:48
Document Modified: 2016-12-14 00:48:48

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
Action		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 (``Act'') and an order of exemption pursuant to section 17(b) of the Act from section 17(a) of the Act.
Dates		Filing Date:
Contact		Jessica Shin, Attorney-Adviser at (202) 551-5921 or David J. Marcinkus, Branch Chief, at (202) 551-6821 (Chief Counsel's Office, Division of Investment Management).
FR Citation		81 FR 90398