83 FR 2476 - The Guardian Insurance & Annuity Company, Inc., et al.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 11 (January 17, 2018)

Page Range		2476-2480
FR Document		2018-00626

Federal Register, Volume 83 Issue 11 (Wednesday, January 17, 2018)

[Federal Register Volume 83, Number 11 (Wednesday, January 17, 2018)]
[Notices]
[Pages 2476-2480]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2018-00626]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32967; File No. 812-14714]

The Guardian Insurance & Annuity Company, Inc., et al.

January 10, 2018.
AGENCY: Securities and Exchange Commission (``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 ``Act'').

Applicants: The Guardian Insurance & Annuity Company, Inc.,
(``Guardian''), The Guardian Separate Account Q, and The Guardian
Separate Account R (each, a ``Separate Account'' and together, the
``Separate Accounts''). Guardian and the Separate Accounts are referred
to as the ``Applicants.''

Summary of Application: Applicants seek an order pursuant to section
26(c) of the Act, approving the substitution of shares issued by
certain investment portfolios of registered investment companies (the
``Existing Portfolios'') for shares of certain investment portfolios of
Guardian Variable Products Trust (the ``Replacement Portfolios''), held
by the Separate Accounts to support certain variable annuity contracts
(the ``Contracts''). Guardian Variable Products Trust is referred to as
the ``Trust.''

Filing Date: The application was filed on November 3, 2016 and was
amended on April 10, 2017 and September 18, 2017. Applicants have
agreed to file an amendment during the notice period, the substance of
which is reflected in this notice.

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 Secretary of
the Commission and serving the Applicants with a copy of the request,
personally or by mail. Hearing requests should be received by the
Commission by 5:30 p.m. on February 6, 2018 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 writing to the
Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street
NE, Washington, DC 20549-1090. Applicants: Richard T. Potter, Senior
Vice President, Counsel and Assistant Corporate Secretary, The Guardian
Insurance & Annuity Company, Inc., 7 Hanover Square, New York, New York
10004.

FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-6873, or Robert H. Shapiro, Branch Chief at (202) 551-6821
(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. Guardian is a Delaware stock life insurance company licensed to
conduct insurance business in the District of Columbia and all fifty
states of the United States. Guardian is wholly-owned by The Guardian
Life Insurance Company of America (``Guardian Life''), a mutual life
insurance company.
2. Each Separate Account meets the definition of ``separate
account,'' as defined in section 2(a)(37) of the Act and rule 0-1(e)
thereunder. The Separate Accounts are registered 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. Guardian is the legal owner of the assets in the Separate
Accounts. The Separate Accounts are segmented into subaccounts, and
each subaccount invests in an underlying registered open-end management
investment company or series thereof.
3. The Contracts are each registered under the Securities Act of
1933, as amended (the ``1933 Act'') on Form N-4. Each Contract has
particular fees, charges, and investment options, as described in the
Contracts' respective prospectuses.
4. The Contracts are individual flexible or single premium deferred
variable annuity contracts. As set forth in the prospectuses for the
Contracts, each Contract provides that Guardian reserves the right to
substitute shares of the funds in which the Separate Accounts invest
for shares of any funds already held or to be held in the future by the
Separate Accounts.\1\
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\1\ Certain Contracts make or made available guaranteed living
benefit riders (each, a ``Living Benefit Rider'' and collectively,
the ``Living Benefit Riders''). The terms of certain Living Benefit
Riders include investment restrictions that limit the available
investment options to identified allocation models consisting of a
specified selection of investment options. A Contract owner with a
Living Benefit Rider that has investment restrictions may transfer
Contract value by reallocating all of his Contract value to a
different allocation model under the rider or, depending on the
terms of the rider, by reallocating his Contract value within the
parameters of the allocation model.
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5. Guardian, on behalf of itself and the Separate Accounts,
proposes to exercise its contractual right to substitute shares of the
Existing Portfolios for shares of the Replacement Portfolios
(``Substitutions''), as shown in the table below:

------------------------------------------------------------------------
Replacement
Substitution No. Existing portfolio portfolio
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1........................... Variable Portfolio Guardian Large Cap
Loomis Sayles Disciplined Growth
Growth Fund (Class VIP Fund.
2).
2........................... Fidelity VIP Guardian Large Cap
Contrafund Disciplined Growth
Portfolio (Service VIP Fund.
Class 2).
3........................... Fidelity VIP Growth Guardian Large Cap
Portfolio (Service Disciplined Growth
Class 2). VIP Fund.
4........................... Alger Capital Guardian Large Cap
Appreciation Fundamental Growth
Portfolio (Class S). VIP Fund.
5........................... BlackRock Capital Guardian Large Cap
Appreciation V.I. Fundamental Growth
Fund (Class III). VIP Fund.
6........................... Columbia Variable Guardian Large Cap
Portfolio Large Cap Fundamental Growth
Growth Fund (Class VIP Fund.
2).
7........................... Invesco V.I. Guardian Large Cap
American Franchise Fundamental Growth
Fund (Series II). VIP Fund.
8........................... MFS[supreg] Growth Guardian Large Cap
Series (Service Fundamental Growth
Class). VIP Fund.

[[Page 2477]]

9........................... Oppenheimer Capital Guardian Large Cap
Appreciation Fund/ Fundamental Growth
VA. VIP Fund.
(Service Shares)....
10.......................... T. Rowe Price Blue Guardian Large Cap
Chip Growth Fundamental Growth
Portfolio (Class VIP Fund.
II).
11.......................... Invesco V.I. Core Guardian Diversified
Equity Fund (Series Research VIP Fund.
II).
12.......................... MFS[supreg] Core Guardian Diversified
Equity Portfolio Research VIP Fund.
(Service Class).
13.......................... MFS[supreg] Guardian Diversified
Investors Trust Research VIP Fund.
Series (Service
Class).
14.......................... Pioneer Fund VCT Guardian Diversified
Portfolio (Class Research VIP Fund.
II).
15.......................... MFS[supreg] Value Guardian Large Cap
Series (Service Disciplined Value
Class). VIP Fund.
16.......................... Pioneer Equity Guardian Large Cap
Income VCT Disciplined Value
Portfolio (Class VIP Fund.
II).
17.......................... AB Value Portfolio Guardian Growth &
(Class B). Income VIP Fund.
18.......................... Invesco V.I. Guardian Growth &
Comstock Fund Income VIP Fund.
(Series II).
19.......................... Invesco V.I. Growth Guardian Growth &
and Income Fund Income VIP Fund.
(Series II).
20.......................... Invesco V.I. Guardian
International International
Growth Fund (Series Growth VIP Fund.
II).
21.......................... Oppenheimer Guardian
International International
Growth Fund/VA Growth VIP Fund.
(Service Shares).
22.......................... Wells Fargo VT Guardian
International International Value
Equity Fund (Class VIP Fund.
2).
23.......................... Ivy VIP Mid Cap Guardian Mid Cap
Growth. Traditional Growth
VIP Fund.
24.......................... American Century VP Guardian Mid Cap
Mid Cap Value Fund Relative Value VIP
(Class II). Fund.
25.......................... Invesco V.I. Guardian Mid Cap
American Value Fund Relative Value VIP
(Series II). Fund.
26.......................... Invesco V.I. Mid Cap Guardian Mid Cap
Core Equity Fund Relative Value VIP
(Series II). Fund.
27.......................... MFS[supreg] Total Guardian Core Plus
Return Bond Series Fixed Income VIP
(Service Class). Fund.
28.......................... PIMCO Total Return Guardian Core Plus
Portfolio (Advisor Fixed Income VIP
Class). Fund.
------------------------------------------------------------------------

6. The Replacement Portfolios are series of the Trust, a Delaware
statutory trust registered as an open-end management investment company
under the Act (File No. 811-23148) and whose shares are registered
under the 1933 Act (File No. 333-210205). The Replacement Portfolios
are currently available only as investment allocation options under
variable insurance contracts issued by Guardian.
7. Park Avenue Institutional Advisers LLC (``Park Avenue''), an
indirect wholly-owned subsidiary of Guardian Life, serves as the
investment adviser of each Replacement Portfolio. Park Avenue is a
Delaware limited liability company that is registered as an investment
adviser under the Investment Advisers Act of 1940. Each Replacement
Portfolio is sub-advised by a registered investment adviser that is
unaffiliated with Applicants, the Trust, or Park Avenue.
8. Applicants state that the proposed Substitutions are part of a
strategic business goal of Guardian to improve the administrative
efficiency and cost-effectiveness of the Contracts, as well as to make
the Contracts more attractive to Contract owners. Applicants note that
the proposed Substitutions are intended to improve portfolio manager
selection \2\ and simplify fund lineups while reducing costs and
maintaining a menu of investment options that would offer a similar
diversity of investment options after the proposed Substitutions as is
currently available under the Contracts. Applicants believe that the
Replacement Portfolios have investment objectives, principal investment
strategies, and principal risks, as described in their prospectuses,
which are substantially similar to the corresponding Existing
Portfolios, making those Replacement Portfolios appropriate candidates
as substitutes. Information for each Existing Portfolio and Replacement
Portfolio, including investment objectives, principal investment
strategies, principal risks, and comparative performance history, can
be found in the application.
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\2\ The Trust and Park Avenue may rely on an order from the
Commission that permits Park Avenue, subject to certain conditions,
including approval of the Trust's board of directors but without the
approval of shareholders, to select certain wholly-owned and non-
affiliated investment sub-advisers to manage all or a portion of the
assets of each portfolio of the Trust pursuant to an investment sub-
advisory agreement with Park Avenue, and to materially amend sub-
advisory agreements with Park Avenue. See Guardian Variable Products
Trust and Park Avenue Institutional Advisers LLC, Investment Company
Act Release Nos. 32420 (Jan. 9, 2017) (notice) and 32468 (Feb. 6,
2017) (the ``Manager of Managers Order''). After the Substitution
Date (defined below), Park Avenue will not change a Replacement
Portfolio's 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 rely on the
Manager of Managers Order or any replacement order from the
Commission, at a shareholder meeting, the record date for which will
be after the proposed Substitution has been effected.
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9. Applicants state that for all the proposed Substitutions, the
net annual operating expenses of the Replacement Portfolio will not
exceed, on an annualized basis, the annual net operating expenses of
any corresponding Existing Portfolio for the last fiscal year preceding
the date of the application (the ``Expense Cap''). Applicants will
cause Park Avenue, as the investment adviser of each Replacement
Portfolio, to enter into a written contract with the Replacement
Portfolio under which the net annual operating expenses of the
Replacement Portfolio will not exceed the Expense Cap. The Expense Cap
for each proposed Substitution will remain in place for a period of two
years following the implementation of the proposed Substitution (the
``Substitution Date''), except that for those proposed Substitutions
for which the sum of the current management fee and rule 12b-1 fees of
the Replacement Portfolio is greater than that of the corresponding
Existing Portfolio, the Expense Cap for that proposed Substitution will
extend for the life of the affected Contracts following the
Substitution Date. The Expense Cap applicable to Substitution No. 10
will also extend for the life of the affected Contracts following the
Substitution Date. Any amounts waived or reimbursed by Park Avenue
pursuant to any Expense Cap will not be subject to Park Avenue's
recoupment rights.
10. Applicants represent that as of the Substitution Date, the
Separate Accounts will redeem shares of the Existing Portfolios for
cash. Redemption requests and purchase orders will be placed
simultaneously so that Contract values will remain fully invested at
all times.
11. 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 Act and rule 22c-1 thereunder
without the imposition of any transfer or similar charges by
Applicants. The Substitutions will be effected without change in the
amount

[[Page 2478]]

or value of any Contracts held by affected Contract owners.\3\
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\3\ 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 also
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 the Existing
Portfolios and Replacement Portfolios, which Applicants cannot
predict. Nevertheless, 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.
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12. Contract owners will not incur any fees or charges as a result
of the proposed Substitutions. The obligations of Applicants and the
rights of the affected Contract owners, under the Contracts of affected
Contract owners will not be altered in any way. Guardian and/or its
affiliates (other than the Trust) will pay all expenses and transaction
costs of the Substitutions, including legal and 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. In addition, 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.
13. From the date of the Pre-Substitution Notice (defined below)
through 30 days following the Substitution Date, subject to the terms
of certain Living Benefit Riders, Contract owners may make at least one
transfer of Contract value from the subaccount investing in an Existing
Portfolio (before the Substitution) or the Replacement Portfolio (after
the Substitution) to any other available subaccount under the Contract
without charge and without imposing any transfer limitations. Further,
on the Substitution Date, Contract values attributable to investments
in each Existing Portfolio will be transferred to the corresponding
Replacement Portfolio without charge and without being subject to any
transfer limitations. Moreover, except with respect to market timing
policies and procedures and the terms of the Living Benefit Riders,
Guardian will not exercise any rights reserved under the Contracts to
impose restrictions on transfers between the subaccounts under the
Contracts for a period beginning at least 30 days, including
limitations on the future number of transfers, before the Substitution
Date through at least 30 days following the Substitution Date.
14. At least 30 days prior to the Substitution Date, Contract
owners will be notified via prospectus supplements that Applicants
received or expect to receive Commission approval of the applicable
proposed Substitutions and of the anticipated Substitution Date (the
``Pre-Substitution Notice''). Pre-Substitution Notices sent to Contract
owners will be filed with the Commission pursuant to rule 497 under the
1933 Act. The Pre-Substitution Notice will advise Contract owners that
from the date of the Pre-Substitution Notice through the date 30 days
after the Substitutions, subject to the terms of certain Living Benefit
Riders, Contract owners may make at least one transfer of Contract
value from the subaccounts investing in the Existing Portfolios (before
the Substitutions) or the Replacement Portfolios (after the
Substitutions) to any other available subaccount without charge and
without imposing any transfer limitations. Among other information, the
Pre-Substitution Notice will inform affected Contract owners that,
except with respect to market timing policies and procedures and
limitations imposed by Living Benefit Riders, Guardian will not
exercise any rights reserved under the Contracts to impose additional
restrictions on transfers out of a Replacement Portfolio subaccount
from the date of the Pre-Substitution Notice, including limitations on
the future number of transfers, until at least 30 days after the
Substitution Date. Additionally, all affected Contract owners will be
sent prospectuses of the applicable Replacement Portfolios at least 30
days before the Substitution Date.
15. In addition to the Supplements distributed to the Contract
owners, within five 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 also will restate the
information set forth in the Pre-Substitution Notice. The Confirmation
will also reflect the values of the Contract owner's positions in the
Existing Portfolio before the Substitution and the Replacement
Portfolio after the Substitution.

Legal Analysis

1. Applicants request that the Commission issue an order pursuant
to section 26(c) of the Act approving the proposed Substitutions.
Section 26(c) 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 from the Commission if the evidence establishes that
the substitution is consistent with the protection of investors and the
purposes of the Act.
2. Applicants submit that the Substitutions meet the standards set
forth in section 26(c) and that, if implemented, the Substitutions
would not raise any of the concerns that Congress intended to address
when the Act was amended to include this provision. Applicants state
that each Substitution protects the Contract owners who have Contract
value allocated to an Existing Portfolio by providing Replacement
Portfolios with substantially similar investment objectives,
strategies, and risks, and providing Contract owners with investment
options that have net annual operating expenses that will not exceed
the Expense Cap.
3. Guardian has reserved the right under the Contracts to
substitute shares of another underlying fund for one of the current
funds offered as an investment option under the Contracts. The
Contracts and the Contracts' prospectuses disclose this right.
4. Applicants submit that the ultimate effect of the proposed
Substitutions will be to streamline and simplify the investment line-
ups that are available to Contract owners while reducing expenses and
continuing to provide Contract owners with a wide array of investment
options. Applicants state that the proposed Substitutions will not
reduce in any manner the nature or quality of the available investment
options and the proposed Substitutions also will permit Guardian to
present information to its Contract owners in a simpler and more
concise manner. Applicants also state it is anticipated that after the
proposed Substitutions, Contract owners will be provided with
disclosure documents that contain a simpler presentation of the
available investment options under the Contracts. Applicants also
assert that the proposed Substitutions are not of the type that section
26 was designed to prevent because they will not result in costly
forced redemption, nor will they affect

[[Page 2479]]

other aspects of the Contracts. In addition, the proposed Substitutions
will not adversely affect any features or riders under the Contracts.
Accordingly, no Contract owner will involuntarily lose his or her
features or riders as a result of any proposed Substitution. Moreover,
Applicants will offer Contract owners the opportunity to transfer
amounts out of the affected subaccounts without any cost or other
penalty (other than those necessary to implement policies and
procedures designed to detect and deter disruptive transfers and other
``market timing'' activities and administer the terms of the Living
Benefit Riders) that may otherwise have been imposed for a period
beginning on the date of the Pre-Substitution Notice (which supplement
will be delivered to the Contract owners at least 30 days before the
Substitution Date) and ending no earlier than 30 days after the
Substitution Date. The proposed Substitutions are also unlike the type
of substitution that section 26(c) was designed to prevent in that the
Substitutions have no impact on other aspects of the Contracts.
5. The proposed 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 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.

Applicants' Conditions

Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The Substitutions will not be effected unless Guardian
determines that: (i) The Contracts allow the substitution of shares of
registered open-end investment companies in the manner contemplated by
the application; (ii) the Substitutions can be consummated as described
in the 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. After the Substitution Date, Park Avenue will not change a
Replacement Portfolio's 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
rely 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.
3. Guardian or an affiliate thereof (other than the Trust) will pay
all expenses and transaction costs of the Substitutions, including
legal and 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.
4. 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 Act and rule 22c-1 thereunder
without the imposition of any transfer or similar charges by the
Applicants. The Substitutions will be effected without change in the
amount or value of any Contracts held by affected Contract owners.
5. 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.
6. The obligations of the Applicants and the rights of the affected
Contract owners, under the Contracts of affected Contract owners will
not be altered in any way.
7. Affected Contract owners will be permitted to transfer Contract
value from the subaccount investing in the Existing Portfolio (before
the 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 Living 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 Applicants will not exercise any rights
reserved under the Contracts to impose restrictions on transfers
between the subaccounts under the Contracts, transfers, 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.
8. All affected Contract owners will be notified via the Pre-
Substitution Notice, at least 30 days before the Substitution Date,
about: (i) The intended Substitution of Existing Portfolios with the
Replacement Portfolios; (ii) the intended Substitution Date; and (iii)
information with respect to transfers as set forth in Condition 7
above. In addition, the Applicants will also deliver to affected
Contract owners, at least 30 days before the Substitution Date, a
prospectus for each applicable Replacement Portfolio.
9. The Applicants will deliver to each affected Contract owner
within five business days of the Substitution Date a written
confirmation which will include: (i) A confirmation that the
Substitutions were carried out as previously notified; (ii) a
restatement of the information set forth in the Pre-Substitution
Notice; and (iii) values of the Contract owner's positions in the
Existing Portfolio before the Substitution and the Replacement
Portfolio after the Substitution.
10. Guardian will cause Park Avenue, as the investment adviser of
each Replacement Portfolio, to enter into a written contract with the
Replacement Portfolio whereby the net annual operating expenses of the
Replacement Portfolio will not exceed the Expense Cap. The Expense Cap
for each proposed Substitution will remain in place for a period of two
years following the Substitution Date. For those proposed Substitutions
for which the sum of the current management fee and rule 12b-1 fees of
the Replacement Portfolio is greater than that of the corresponding
Existing Portfolio, the Expense Cap for that proposed Substitution will
extend for the life of the affected Contracts following the
Substitution Date. The Expense Cap applicable to Substitution No. 10
will also extend for the life of the affected Contracts following the
Substitution Date.

[[Page 2480]]

For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00626 Filed 1-16-18; 8:45 am]
BILLING CODE 8011-01-P

2478 Federal Register / Vol. 83, No. 11 / Wednesday, January 17, 2018 / Notices

or value of any Contracts held by under the Contracts for a period Legal Analysis
affected Contract owners.3 beginning at least 30 days, including 1. Applicants request that the
12. Contract owners will not incur limitations on the future number of Commission issue an order pursuant to
any fees or charges as a result of the transfers, before the Substitution Date section 26(c) of the Act approving the
proposed Substitutions. The obligations through at least 30 days following the proposed Substitutions. Section 26(c)
of Applicants and the rights of the Substitution Date. prohibits any depositor or trustee of a
affected Contract owners, under the 14. At least 30 days prior to the unit investment trust that invests
Contracts of affected Contract owners Substitution Date, Contract owners will exclusively in the securities of a single
will not be altered in any way. Guardian be notified via prospectus supplements issuer from substituting the securities of
and/or its affiliates (other than the that Applicants received or expect to another issuer without the approval of
Trust) will pay all expenses and receive Commission approval of the the Commission. Section 26(c) provides
transaction costs of the Substitutions, applicable proposed Substitutions and that such approval shall be granted by
including legal and accounting of the anticipated Substitution Date (the order from the Commission if the
expenses, any applicable brokerage ‘‘Pre-Substitution Notice’’). Pre-
expenses and other fees and expenses. evidence establishes that the
Substitution Notices sent to Contract substitution is consistent with the
No fees or charges will be assessed to owners will be filed with the
the affected Contract owners to effect protection of investors and the purposes
Commission pursuant to rule 497 under of the Act.
the Substitutions. The proposed the 1933 Act. The Pre-Substitution 2. Applicants submit that the
Substitutions will not cause the Notice will advise Contract owners that
Contract fees and charges currently Substitutions meet the standards set
from the date of the Pre-Substitution forth in section 26(c) and that, if
being paid by Contract owners to be Notice through the date 30 days after the
greater after the proposed Substitution implemented, the Substitutions would
Substitutions, subject to the terms of not raise any of the concerns that
than before the proposed Substitution. certain Living Benefit Riders, Contract
In addition, the Substitutions will in no Congress intended to address when the
owners may make at least one transfer Act was amended to include this
way alter the tax treatment of affected of Contract value from the subaccounts
Contract owners in connection with provision. Applicants state that each
investing in the Existing Portfolios Substitution protects the Contract
their Contracts, and no tax liability will (before the Substitutions) or the
arise for Contract owners as a result of owners who have Contract value
Replacement Portfolios (after the allocated to an Existing Portfolio by
the Substitutions. Substitutions) to any other available
13. From the date of the Pre- providing Replacement Portfolios with
subaccount without charge and without substantially similar investment
Substitution Notice (defined below)
imposing any transfer limitations. objectives, strategies, and risks, and
through 30 days following the
Substitution Date, subject to the terms of Among other information, the Pre- providing Contract owners with
certain Living Benefit Riders, Contract Substitution Notice will inform affected investment options that have net annual
owners may make at least one transfer Contract owners that, except with operating expenses that will not exceed
of Contract value from the subaccount respect to market timing policies and the Expense Cap.
investing in an Existing Portfolio (before procedures and limitations imposed by 3. Guardian has reserved the right
the Substitution) or the Replacement Living Benefit Riders, Guardian will not under the Contracts to substitute shares
Portfolio (after the Substitution) to any exercise any rights reserved under the of another underlying fund for one of
other available subaccount under the Contracts to impose additional the current funds offered as an
Contract without charge and without restrictions on transfers out of a investment option under the Contracts.
imposing any transfer limitations. Replacement Portfolio subaccount from The Contracts and the Contracts’
Further, on the Substitution Date, the date of the Pre-Substitution Notice, prospectuses disclose this right.
Contract values attributable to including limitations on the future 4. Applicants submit that the ultimate
investments in each Existing Portfolio number of transfers, until at least 30 effect of the proposed Substitutions will
will be transferred to the corresponding days after the Substitution Date. be to streamline and simplify the
Replacement Portfolio without charge Additionally, all affected Contract investment line-ups that are available to
and without being subject to any owners will be sent prospectuses of the Contract owners while reducing
transfer limitations. Moreover, except applicable Replacement Portfolios at expenses and continuing to provide
with respect to market timing policies least 30 days before the Substitution Contract owners with a wide array of
and procedures and the terms of the Date. investment options. Applicants state
Living Benefit Riders, Guardian will not 15. In addition to the Supplements that the proposed Substitutions will not
exercise any rights reserved under the distributed to the Contract owners, reduce in any manner the nature or
Contracts to impose restrictions on within five business days after the quality of the available investment
transfers between the subaccounts Substitution Date, Contract owners options and the proposed Substitutions
whose assets are allocated to a also will permit Guardian to present
3 Applicants state that, because the Substitutions Replacement Portfolio as part of the information to its Contract owners in a
will occur at relative net asset value, and the fees proposed Substitutions will be sent a simpler and more concise manner.
and charges under the Contracts will not change as Applicants also state it is anticipated
a result of the Substitutions, the benefits offered by
written notice (each, a ‘‘Confirmation’’)
the guarantees under the Contracts will be the same informing them that the Substitutions that after the proposed Substitutions,
immediately before and after the Substitutions. were carried out as previously notified. Contract owners will be provided with
Applicants also state that what effect the The Confirmation also will restate the disclosure documents that contain a
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Substitutions may have on the value of the benefits
offered by the Contract guarantees would depend,
information set forth in the Pre- simpler presentation of the available
among other things, on the relative future Substitution Notice. The Confirmation investment options under the Contracts.
performance of the Existing Portfolios and will also reflect the values of the Applicants also assert that the proposed
Replacement Portfolios, which Applicants cannot Contract owner’s positions in the Substitutions are not of the type that
predict. Nevertheless, Applicants note that at the
time of the Substitutions, the Contracts will offer a
Existing Portfolio before the section 26 was designed to prevent
comparable variety of investment options with as Substitution and the Replacement because they will not result in costly
broad a range of risk/return characteristics. Portfolio after the Substitution. forced redemption, nor will they affect

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Federal Register / Vol. 83, No. 11 / Wednesday, January 17, 2018 / Notices 2479

other aspects of the Contracts. In adviser, or otherwise rely on the respective riders without charge and
addition, the proposed Substitutions Manager of Managers Order or any without imposing any transfer
will not adversely affect any features or replacement order from the Commission limitations. Except as described in any
riders under the Contracts. Accordingly, with respect to any Replacement market timing/short-term trading
no Contract owner will involuntarily Portfolio without first obtaining provisions of the relevant prospectus,
lose his or her features or riders as a shareholder approval of the change in the Applicants will not exercise any
result of any proposed Substitution. sub-adviser, the new sub-adviser, or the rights reserved under the Contracts to
Moreover, Applicants will offer Contract Replacement Portfolio’s ability to rely impose restrictions on transfers between
owners the opportunity to transfer on the Manager of Managers Order, or the subaccounts under the Contracts,
amounts out of the affected subaccounts any replacement order from the
transfers, including limitations on the
without any cost or other penalty (other Commission, at a shareholder meeting,
future number of transfers, for a period
than those necessary to implement the record date for which shall be after
policies and procedures designed to the proposed Substitution has been beginning at least 30 days before the
detect and deter disruptive transfers and effected. Substitution Date through at least 30
other ‘‘market timing’’ activities and 3. Guardian or an affiliate thereof days following the Substitution Date.
administer the terms of the Living (other than the Trust) will pay all 8. All affected Contract owners will be
Benefit Riders) that may otherwise have expenses and transaction costs of the notified via the Pre-Substitution Notice,
been imposed for a period beginning on Substitutions, including legal and at least 30 days before the Substitution
the date of the Pre-Substitution Notice accounting expenses, any applicable Date, about: (i) The intended
(which supplement will be delivered to brokerage expenses and other fees and Substitution of Existing Portfolios with
the Contract owners at least 30 days expenses. No fees or charges will be the Replacement Portfolios; (ii) the
before the Substitution Date) and ending assessed to the affected Contract owners intended Substitution Date; and (iii)
no earlier than 30 days after the to effect the Substitutions. The proposed information with respect to transfers as
Substitution Date. The proposed Substitutions will not cause the
set forth in Condition 7 above. In
Substitutions are also unlike the type of Contract fees and charges currently
addition, the Applicants will also
substitution that section 26(c) was being paid by Contract owners to be
greater after the proposed Substitution deliver to affected Contract owners, at
designed to prevent in that the
Substitutions have no impact on other than before the proposed Substitution. least 30 days before the Substitution
aspects of the Contracts. 4. The Substitutions will be effected Date, a prospectus for each applicable
5. The proposed transactions will take at the relative net asset values of the Replacement Portfolio.
place at relative net asset value in respective shares of the Replacement 9. The Applicants will deliver to each
conformity with the requirements of Portfolios in conformity with section affected Contract owner within five
section 22(c) of the Act and rule 22c–1 22(c) of the Act and rule 22c–1 business days of the Substitution Date a
thereunder without the imposition of thereunder without the imposition of written confirmation which will
any transfer or similar charges by the any transfer or similar charges by the include: (i) A confirmation that the
Applicants. The Substitutions will be Applicants. The Substitutions will be Substitutions were carried out as
effected without change in the amount effected without change in the amount previously notified; (ii) a restatement of
or value of any Contract held by the or value of any Contracts held by
the information set forth in the Pre-
affected Contract owners. The affected Contract owners.
5. The Substitutions will in no way Substitution Notice; and (iii) values of
Substitutions will in no way alter the
alter the tax treatment of affected the Contract owner’s positions in the
tax treatment of affected Contract
Contract owners in connection with Existing Portfolio before the
owners in connection with their
Contracts, and no tax liability will arise their Contracts, and no tax liability will Substitution and the Replacement
for Contract owners as a result of the arise for Contract owners as a result of Portfolio after the Substitution.
Substitutions. The fees and charges the Substitutions. 10. Guardian will cause Park Avenue,
under the Contracts will not increase 6. The obligations of the Applicants as the investment adviser of each
because of the Substitutions. and the rights of the affected Contract Replacement Portfolio, to enter into a
owners, under the Contracts of affected written contract with the Replacement
Applicants’ Conditions Contract owners will not be altered in Portfolio whereby the net annual
Applicants agree that any order any way. operating expenses of the Replacement
granting the requested relief will be 7. Affected Contract owners will be
Portfolio will not exceed the Expense
subject to the following conditions: permitted to transfer Contract value
Cap. The Expense Cap for each
1. The Substitutions will not be from the subaccount investing in the
Existing Portfolio (before the proposed Substitution will remain in
effected unless Guardian determines
Substitution Date) or the Replacement place for a period of two years following
that: (i) The Contracts allow the
Portfolio (after the Substitution Date) to the Substitution Date. For those
substitution of shares of registered open-
end investment companies in the any other available investment option proposed Substitutions for which the
manner contemplated by the under the Contract without charge for a sum of the current management fee and
application; (ii) the Substitutions can be period beginning at least 30 days before rule 12b–1 fees of the Replacement
consummated as described in the the Substitution Date through at least 30 Portfolio is greater than that of the
application under applicable insurance days following the Substitution Date. corresponding Existing Portfolio, the
laws; and (iii) any regulatory Contract owners with Living Benefit Expense Cap for that proposed
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requirements in each jurisdiction where Riders, as applicable, may transfer Substitution will extend for the life of
the Contracts are qualified for sale have Contract value from the subaccounts the affected Contracts following the
been complied with to the extent investing in the Existing Portfolios Substitution Date. The Expense Cap
necessary to complete the Substitutions. (before the Substitutions) or the applicable to Substitution No. 10 will
2. After the Substitution Date, Park Replacement Portfolios (after the also extend for the life of the affected
Avenue will not change a Replacement Substitutions) to any other available Contracts following the Substitution
Portfolio’s sub-adviser, add a new sub- investment option available under their Date.

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2480 Federal Register / Vol. 83, No. 11 / Wednesday, January 17, 2018 / Notices

For the Commission, by the Division of September 13, 2017, the Commission and III below, which Items have been
Investment Management, under delegated instituted proceedings under Section prepared by FINRA. FINRA has
authority. 19(b)(2)(B) of the Act 7 to determine designated the proposed rule change as
Eduardo A. Aleman, whether to approve or disapprove the constituting a ‘‘non-controversial’’ rule
Assistant Secretary. proposed rule change.8 The Commission change under paragraph (f)(6) of Rule
[FR Doc. 2018–00626 Filed 1–16–18; 8:45 am] subsequently received one comment 19b–4 under the Act,3 which renders
BILLING CODE 8011–01–P letter on the proposed rule change.9 On the proposal effective upon receipt of
December 12, 2017, the Commission this filing by the Commission. The
designated a longer period for action on Commission is publishing this notice to
SECURITIES AND EXCHANGE the proposed rule change.10 solicit comments on the proposed rule
COMMISSION On January 10, 2018, the Exchange change from interested persons.
withdrew the proposed rule change
[Release No. 34–82482; File No. SR– I. Self-Regulatory Organization’s
(SR–BatsBZX–2017–30).
BatsBZX–2017–30] Statement of the Terms of Substance of
For the Commission, by the Division of the Proposed Rule Change
Self-Regulatory Organizations; Bats Trading and Markets, pursuant to delegated
BZX Exchange, Inc.; Notice of authority.11 FINRA is proposing to extend the
Withdrawal of a Proposed Rule Change Eduardo A. Aleman, expiration date of FINRA Rule 0180
To Permit the Listing and Trading of Assistant Secretary.
(Application of Rules to Security-Based
Managed Portfolio Shares and To List Swaps) to February 12, 2019. FINRA
[FR Doc. 2018–00645 Filed 1–16–18; 8:45 am]
Rule 0180 temporarily limits, with
and Trade Shares of the Following BILLING CODE 8011–01–P
certain exceptions, the application of
Under Proposed Rule 14.11(k):
FINRA rules with respect to security-
ClearBridge Appreciation ETF,
SECURITIES AND EXCHANGE based swaps.
ClearBridge Large Cap ETF, The text of the proposed rule change
ClearBridge MidCap Growth ETF, COMMISSION
is available on FINRA’s website at
ClearBridge Select ETF, and [Release No. 34–82480; File No. SR–FINRA– http://www.finra.org, at the principal
ClearBridge All Cap Value ETF 2018–001] office of FINRA and at the
January 10, 2018. Commission’s Public Reference Room.
Self-Regulatory Organizations;
On June 1, 2017, Bats BZX Exchange, Financial Industry Regulatory II. Self-Regulatory Organization’s
Inc. (‘‘Exchange’’) filed with the Authority, Inc.; Notice of Filing and Statement of the Purpose of, and
Securities and Exchange Commission Immediate Effectiveness of a Proposed Statutory Basis for, the Proposed Rule
(‘‘Commission’’), pursuant to Section Rule Change To Extend the Expiration Change
19(b)(1) of the Securities Exchange Act Date of FINRA Rule 0180 (Application In its filing with the Commission,
of 1934 (‘‘Act’’) 1 and Rule 19b–4 of Rules to Security-Based Swaps) FINRA included statements concerning
thereunder,2 a proposed rule change to: the purpose of and basis for the
(1) Adopt Rule 14.11(k) (Managed January 10, 2018.
proposed rule change and discussed any
Portfolio Shares); and (2) list and trade Pursuant to Section 19(b)(1) of the
comments it received on the proposed
shares of the ClearBridge Appreciation Securities Exchange Act of 1934
rule change. The text of these statements
ETF, ClearBridge Large Cap ETF, (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
may be examined at the places specified
ClearBridge MidCap Growth ETF, notice is hereby given that on January 4,
in Item IV below. FINRA has prepared
ClearBridge Select ETF, and ClearBridge 2018, Financial Industry Regulatory
summaries, set forth in sections A, B,
All Cap Value ETF under proposed Rule Authority, Inc. (‘‘FINRA’’) filed with the
and C below, of the most significant
14.11(k). The proposed rule change was Securities and Exchange Commission
aspects of such statements.
published for comment in the Federal (‘‘SEC’’ or ‘‘Commission’’) the proposed
Register on June 19, 2017.3 On July 28, rule change as described in Items I, II, A. Self-Regulatory Organization’s
2017, pursuant to Section 19(b)(2) of the Statement of the Purpose of, and
Act,4 the Commission designated a Commission, dated July 10, 2017; Letter from James Statutory Basis for, the Proposed Rule
longer period within which to approve J. Angel, Associate Professor of Finance, Change
Georgetown University, McDonough School of
the proposed rule change, disapprove Business, to the Commission, dated July 10, 2017; 1. Purpose
the proposed rule change, or institute and Letter from Terence W. Norman, Founder, Blue
proceedings to determine whether to Tractor Group, LLC, to Brent J. Fields, Secretary, On July 1, 2011, the SEC issued an
disapprove the proposed rule change.5 Commission, dated August 1, 2017. The comment Order granting temporary exemptive
letters are available on the Commission’s website at: relief (the ‘‘Temporary Exemptions’’)
The Commission received four comment https://www.sec.gov/comments/sr-batsbzx-2017-30/
letters on the proposed rule change.6 On batsbzx201730.htm.
from compliance with certain
7 15 U.S.C. 78s(b)(2)(B). provisions of the Exchange Act in
1 15 U.S.C. 78s(b)(1). 8 See Securities Exchange Act Release No. 81599, connection with the revision, pursuant
2 17 CFR 240.19b–4. 82 FR 43621 (September 18, 2017). to Title VII of the Dodd-Frank Wall
3 See Securities Exchange Act Release No. 80911 9 See Letter from Terence W. Norman, Founder,
Street Reform and Consumer Protection
(June 13, 2017), 82 FR 27925. Blue Tractor Group, LLC, to Brent J. Fields, Act (the ‘‘Dodd-Frank Act’’),4 of the
4 15 U.S.C. 78s(b)(2). Secretary, Commission, dated December 5, 2017.
5 See Securities Exchange Act Release No. 81247, The comment letter is available on the Exchange Act definition of ‘‘security’’ to
82 FR 36031 (August 2, 2017). The Commission Commission’s website at: https://www.sec.gov/ encompass security-based swaps.5
comments/sr-batsbzx-2017-30/batsbzx201730.htm.
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designated September 17, 2017 as the date by which
10 See Securities Exchange Act Release No. 82301, 3 17
the Commission shall approve or disapprove, or CFR 240.19b–4(f)(6).
institute proceedings to determine whether to 82 FR 60073 (December 18, 2017). The Commission 4 Public Law 111–203, 124 Stat. 1376 (2010).
disapprove, the proposed rule change. designated February 14, 2018 as the date by which 5 See Securities Exchange Act Release No. 64795
6 See Letter from Gary L. Gastineau, President, the Commission must either approve or disapprove (July 1, 2011), 76 FR 39927 (July 7, 2011) (Order
ETF Consultants.com, Inc., to Brent J. Fields, the proposed rule change. Granting Temporary Exemptions Under the
11 17 CFR 200.30–3(a)(12).
Secretary, Commission, dated July 7, 2017; Letter Securities Exchange Act of 1934 in Connection
1 15 U.S.C. 78s(b)(1).
from Todd J. Broms, Chief Executive Officer, Broms With the Pending Revision of the Definition of
& Company LLC, to Brent J. Fields, Secretary, 2 17 CFR 240.19b–4. ‘‘Security’’ To Encompass Security-Based Swaps,

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Document Created: 2018-10-26 09:56:01
Document Modified: 2018-10-26 09:56:01

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.
Dates		The application was filed on November 3, 2016 and was amended on April 10, 2017 and September 18, 2017. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in this notice.
Contact		Laura J. Riegel, Senior Counsel, at (202) 551-6873, or Robert H. Shapiro, Branch Chief at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation		83 FR 2476