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Federal Register / Vol. 67, No.

217 / Friday, November 8, 2002 / Notices 68213

year compensation is not less than 2.5 SECURITIES AND EXCHANGE and to broker-dealers who are not
times the monthly compensation base COMMISSION affiliated with the Life Companies
for months in such base year. (‘‘Unaffiliated Broker-Dealers’’).
[Rel. No. IC–25792; File No. 812–12875]
Multiplying 2.5 by the calendar year FILING DATE: The application
2003 monthly compensation base of Allstate Life Insurance Company, et al.; (‘‘Application’’) was filed on August 28,
$1,120 produces $2,800. Accordingly, Notice of Application 2002.
the amount determined under section 3 HEARING OR NOTIFICATION OF HEARING: An
is $2,800 for calendar year 2003. November 4, 2002. order granting the Application will be
AGENCY: Securities and Exchange issued unless the Commission orders a
Under section 4(a–2)(i)(A), an
Commission (‘‘SEC’’ or ‘‘Commission’’). hearing. Interested persons may request
employee who leaves work voluntarily
ACTION: Notice of application for an a hearing by writing to the Secretary of
without good cause is disqualified from
amended order under Section 6(c) of the the Commission and serving Applicants
receiving unemployment benefits until with a copy of the request, personally or
Investment Company Act of 1940, as
he has been paid compensation of not by mail. Hearing requests must be
amended (‘‘Act’’) granting exemptions
less than 2.5 times the monthly received by the Commission by 5:30
from the provisions of Sections 2(a)(231)
compensation base for months in the and 27(i)(2)(A) of the Act and Rule 22c– p.m. on December 4, 2002, and should
calendar year in which the 1 thereunder. be accompanied by proof of service on
disqualification ends. Multiplying 2.5 Applicants in the form of an affidavit or,
by the calendar year 2003 monthly APPLICANTS: Allstate Life Insurance for lawyers, a certificate of service.
compensation base of $1,120 produces Company (‘‘Allstate’’), Allstate Life Hearing requests should state the nature
$2,800. Accordingly, the amount Insurance Company of New York of the requester’s interest, the reason for
determined under section 4(a–2)(i)(A) is (‘‘Allstate Life of New York’’), the request, and the issues contested.
$2,800 for calendar year 2003. Glenbrook Life & Annuity Company Persons who wish to be notified of a
(‘‘Glenbrook’’), Lincoln Benefit Life hearing may request notification by
Maximum Daily Benefit Rate writing to the Secretary of the
Company (‘‘Lincoln Benefit’’),
Section 2(a)(3) contains a formula for Northbrook Life Insurance Company Commission.
determining the maximum daily benefit (‘‘Northbrook,’’ together with Allstate, ADDRESSES: Secretary, Securities and
rate for registration periods beginning Allstate Life of New York, Glenbrook Exchange Commission, 450 Fifth Street,
after June 30, 1989, and after each June and Lincoln Benefit, the ‘‘Life NW., Washington, DC 20549–0609.
30 thereafter. Legislation enacted on Companies’’), Allstate Life Insurance Applicants, Angela King, Esq., Assistant
October 9, 1996, revised the formula for Company Separate Account A (‘‘Allstate Counsel, Allstate Life Insurance
Separate Account A’’), and Allstate Company, 3100 Sanders Road,
indexing maximum daily benefit rates.
Distributors, L.L.C., (‘‘Allstate Northbrook, Illinois 60062; with a copy
Under the prescribed formula, the
Distributors’’) (collectively, the to Richard T. Choi, Esq., Foley &
maximum daily benefit rate increases by
‘‘Applicants’’). Lardner, 3000 K Street, NW, Suite 500,
approximately two-thirds of the SUMMARY OF APPLICATION: Applicants
cumulative growth in average national Washington, DC 20007.
seek an order to amend an Existing FOR FURTHER INFORMATION CONTACT:
wages since 1984. The maximum daily Order (described below) to grant
benefit rate for registration periods Alison Toledo, Senior Counsel, or Lorna
exemptions from the provisions of MacLeod, Branch Chief, Office of
beginning after June 30, 2003, shall be Sections 2(a)(32) and 27(i)(2)(A) of the Insurance Products, Division of
equal to 5 percent of the monthly Act and Rule 22c–1 thereunder to the Investment Management, at (202) 942–
compensation base for the base year extent necessary to permit Applicants to 0670.
immediately preceding the beginning of recapture certain bonuses applied to
the benefit year. Section 2(a)(3) further contributions made under (a) certain SUPPLEMENTARY INFORMATION: The
provides that if the amount so computed amended deferred variable annuity following is a summary of the
is not a multiple of $1, it shall be contracts an certificates, described Application. The complete Application
rounded down to the nearest multiple of herein, including certain amended is available for a fee from the Public
$1. certificate data pages and endorsements, Reference Branch of the Commission,
that Allstate will issue in the future 450 Fifth Street, NW., Washington, DC
The calendar year 2002 monthly 20549–0102, (202) 942–8090.
compensation base is $1,100. through Allstate Separate Account A
(the ‘‘Amended Contracts’’), and (b) Applicant’s Representations
Multiplying $1,100 by 0.05 yields
under contracts and certificates,
$55.00, an even multiple of $1. 1. On June 5, 2001, the Commission
including certain certificate data pages
Accordingly, the maximum daily benefit issued an order (‘‘Existing Order’’) 1
and endorsements, that the Life
rate for days of unemployment and days exempting certain transactions of the
Companies may issue in the future
of sickness beginning in registration Life Companies, the Existing Separate
through any separate account of the Life
periods after June 30, 2003, is Accounts (defined below), Allstate
Companies (‘‘Future Account’’) and that
determined to be $55. Distributors, and ALFS, Inc. (‘‘ALFS’’)
are substantially similar in all material
(collectively, the ‘‘Prior Applicants’’),
Dated: November 4, 2002. respects to the Amended Contracts
from the provisions of Sections 2(a)(32)
By Authority of the Board. (‘‘Future Contracts’’). Applicants also
and 27(i)(2)(A) of the Act and Rule 22c–
request that the order being sought
Beatrice Ezerski, 1, thereunder. The Existing Order
extend to the Allstate LifeContracts,’’
Secretary to the Board. provides relief to the extent necessary to
‘‘Future Contracts’’ (hereinafter ‘‘Future
[FR Doc. 02–28459 Filed 11–7–02; 8:45 am] permit the recapture, under specified
Contracts Covered by the Existing
circumstances, of certain credits
BILLING CODE 7905–01–P Order’’), and ‘‘Affiliated Broker-Dealers’’
as defined in the application for the 1 Allstate Life Insurance Company, Investment
Existing Order (‘‘Prior Application’’) Company Act Release No. 24998 (June 5, 2001)(File
which definitions are described below, No. 812–12386).

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68214 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Notices

(‘‘Credits’’) applied to contributions 5. Each of the Existing Separate Benefit Contracts, each time the relevant
made under Contracts or Future Accounts is a segragated asset account Life Company receives a purchase
Contracts Covered by the Existing Order of the corresponding Life Company that payment from an owner of such a
(defined below). serves as its depositor, and each is Contract, it will add the applicable
2. As described in the Prior registered with the Commission as unit Credit to the owner’s contract value, and
Application, Allstate, Allstate New investment trust under the 1940 Act. will allocate the Credit among the
York, Lincoln Benefit, and Northbrook Each of the Existing Separate Accounts available Portfolios according to the
are all stock life insurance companies is divided into multiple subaccounts, allocation instructions in effect for the
organized under the law of Illinois, New each of which invests in shares of a purchase payments. Each Life Company
York, Nebraska, and Illinois corresponding portfolio (‘‘Portfolio’’) will fund Credits from its general
respectively. Glenbrook is a stock life that serves as an investment option account assets.
insurance company organized under the under Contracts issued through the 10. Under the Allstate Contracts and
laws of Illinois and redomesticated separate account. Lincoln Benefit Contracts, the Credit is
under the laws of Arizona in 1998. 6. As described in the Prior equal to 4% of the purchase payment
3. The Existing Order covers Application, Allstate Distributors and amount. Under the Glenbrook Contracts,
‘‘Contracts,’’ which the Prior ALFS each serves as distributor of there are two credit options available as
Application defines to mean certain certain deferred variable annuity follows:
contracts, including certain Contracts, a. Under option 1, Glenbrook will add
deferred variable annuity contracts and
issued by the Life Companies through to the owner’s contract value a Credit
certificates issued by Allstate, Lincoln
the Existing Separate Accounts. Each is equal to 4% of the purchase payment
Benefit, and Glenbrook (hereinafter, the
registered with the Commission as a amount.
‘‘Allstate Contracts, the ‘‘Lincoln Benefit b. Under option 2, Glenbrook will add
Contracts,’’ and the ‘‘Glenbrook broker-dealer under the Securities
Exchange Act of 1934 (the ‘‘1934 Act’’) to the owner’s contract value a Credit
Contracts,’’ respectively). The Existing equal to 2% of the purchase payment
Order also covers ‘‘Future Contracts and is a member of the National
Association of Securities Dealers, Inc. amount. In addition, on every 5th
covered by the Existing Order,’’ which contract anniversary during the
(‘‘NASD’’). The Contracts issued by
the Prior Application defines to mean accumulation phase, Glenbrook will add
Allstate are offered through registered
certain other deferred variable annuity to the owner’s contract value a Credit
representatives of broker-dealers that are
contracts and certificates that the Life equal to 2% of the owner’s contract
registered under the 1934 Act and
Companies may issue in the future value as of such contract anniversary.
members of the NASD, and that have
through the Existing Separate Accounts 11. The Allstate Contracts, Glenbrook
selling agreements with Allstate
(defined below) or through other Contracts, and Lincoln Benefit Contracts
Distributors. The Contracts (other than
separate accounts that the Life all provide for various surrender
the Contracts issued by Allstate) are
Companies may establish in the future, options, annuity benefits and annuity
offered through registered
and that are substantially similar in all representatives of broker-dealers that are payout options, as well as transfer
material respects to the Contracts. The registered under the 1934 Act and privileges among subaccounts, dollar
Existing Order also covers ‘‘Affiliated members of the NASD, and that have cost averaging, and other features.
Broker-Dealers,’’ which, under the Prior selling agreements with ALFS. 12. The Allstate Contracts contain the
Application, means any other NASD 7. As described in the Prior following charges: (a) A withdrawal
member broker-dealer controlling or Application, all of the Life Companies, charge as a percentage of purchase
controlled by, or under common control Allstate Distributors, and ALFS are payments surrendered, which is 8% in
with, Allstate whether existing or direct or indirect wholly-owned years one, two, and three, 7% in year
created in the future, that serves as a subsidiaries of Allstate Insurance four, 6% in year five, 5% in year six,
distributor or principal underwriter for Company. 3% in year eight, and 9% thereafter; (b)
Contracts or Future Contracts Covered 8. The variable portions of the Lincoln a mortality and expense risk fee of
by the Existing Order. Benefit Contracts, Glenbrook Contracts, 1.60% annually; and (c) a transfer fee of
4. The Existing Separate Accounts and Allstate Contracts are registered .50% of the amount transferred on
covered by the Existing Order include: under the Securities Act of 1933 (the transfers in excess of twelve within a
Allstate Separate Account A, Allstate ‘‘1933 Act’’). The variable portions of calendar year. (The Allstate Contract
Life Insurance Company of New York the Future Contracts Covered by the does not assess an annual contract
Separate Account A (‘‘ALNY Separate Existing Order also will be registered maintenance charge or annual
Account’’), Glenbrook Life & Annuity under the 1933 Act. That portion of the administrative fee.)
Company Variable Annuity Account, assets of each Existing Separate Account 13. The Lincoln Benefit Contracts
Glenbrook Life Multi-Manager Variable that is equal to the reserves and other contain the following charges: (a) A
Account, Glenbrook Life & Annuity contract liabilities with respect to contingent deferred sales charge as a
Company Separate Account A Contracts is not chargeable with percentage of purchase payments
(‘‘Glenbrook Separate Account A’’), liabilities arising out of any other surrendered, which is 8% in year one,
Glenbrook Scudder Variable Account business of the corresponding Life 7% in years two and three, 6% in years
(A), and Lincoln Benefit Life Variable Company. Any income, gains or losses, four and five, 5% in year six, 4% in year
Annuity Account (‘‘Lincoln Separate realized or unrealized, from assets seven, 3% in year eight, and 0%
Account’’) (collectively, the ‘‘Existing allocated to a Existing Separate Account thereafter; (b) a $35 annual
Separate Accounts’’). Glenbrook Life & will be, in accordance with such administrative charge (which is waived
Annuity Company Variable Annuity Account’s Contracts, credited to or if total purchase payments exceed
Account, Glenbrook Life Multi-Manager charged against such Existing Separate $50,000); (c) a mortality and expense
Variable Account, Glenbrook Separate Account, without regard to other risk fee of 1.30% annually; (d) an
Account A, and Glenbrook Scudder income, gains or losses of the administrative charge of 0.10%
Variable Account (A) are hereinafter corresponding Life Company. annually; and (e) a transfer fee of $10
referred to as the ‘‘Glenbrook Separate 9. Under the Allstate Contracts, per transfer with certain exceptions,
Accounts.’’ Glenbrook Contracts, and Lincoln which currently is being waived.

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Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Notices 68215

14. The Glenbrook Contracts contain 0.19%. Allstate reserves the right to Option for a rider fee at the annual rate
the following charges: (a) A withdrawal raise the administrative expense charge of 0.25% (up to 0.50% for Options
charge as a percentage of purchase to 0.35%. However, Allstate will not added in the future) of the income base
payment surrendered, which is 8% in increase the charge for a Contract once in effect on a Contract anniversary, and
year one and two, 7% in years three and it issues a Contract. a second RIG Option for an additional
four, 6% in year five, 5% in year six, (b) Death Benefit Options and Death rider fee at the annual rate of 0.45% (up
4% in year seven, 3% in year eight, and Benefit Charges to 0.75% for Options added in the
0% thereafter; (b) a $35 annual future) of the income base in effect on
administrative charge (which is waived Allstate Contracts offer a basic death a Contract anniversary. Amended
if total purchase payments exceed benefit including a ‘‘maximum Contracts also offer an Income
$50,000); (c) a mortality and expense anniversary value’’ death benefit at no Protection Benefit Option for a charge of
risk fee of 1.40% annually; and (d) a additional charge, and an ‘‘enhanced 0.50% (up to 0.75% for Options added
transfer fee of $10 on transfers in excess beneficiary protection option’’ for an in the future) of the average daily net
of twelve in any Contract year, which additional morality and expense risk separate account assets supporting the
currently is being waived. charge at the annual rate of 0.15%. variable income payments to which the
15. Under the Allstate Contracts, Amended Contracts offer a basic death Income Protection Benefit Option
Glenbrook Contracts and Lincoln benefit. The Amended Contracts also applies. The charge for the Income
Benefit Contracts, each Life Company offer the following optional death Protection Benefit Option applies
also deducts any applicable state or benefits for the following additional during the payout phase.
local premium taxes up to 4.0%, mortality and expense risk charges:
MAV Death Benefit 0.15% (up to 0.30% (d) Contract Maintenance Charge
depending on the owner’s state of
residence or the state in which the Option. for Options added Allstate Contracts do not impose a
Contract was sold. In addition, assets in the future). contract maintenance fee. Amended
Enhanced Bene- 0.15% (up to 0.30%
invested in the subaccounts are charged ficiary Protection for Options added
Contracts have an annual contract
with the operating expenses of the Option. in the future). maintenance fee of $30 (deducted from
Portfolios. Earnings Protection 0.25% (up to 0.35% account value on each contract
16. The Existing Order provides Death Benefit Op- for Options added anniversary, or upon full surrender).
exemptive relief to the extent necessary tion (issue age 0– in the future). The charge is waived once total
to permit the recapture of Credits if an 70). purchase payments equal $50,000 or
Allstate Contract is returned during the Earnings Protection 0.40% (up to 0.50% more, or if all money is allocated to the
free look period. Death Benefit Op- for Options added fixed account.
tion (issue age 71– in the future).
17. Applicants believe that the 79). (e) Transfer Charges
Allstate Contracts covered by the Spousal Protection 0.00% (up to 0.15%
Existing Order and the Amended Benefit Option. for Options added Under Allstate Contracts Allstate may
Contracts are substantially similar in all in the future). assess a charge on transfers among
material respects relevant to the Existing investment options equal to 0.50% of
Order and that the Amended Contracts (c) Income Benefit the amount transferred. The charge
would constitute Future Contracts Allstate Contracts offer nine income applies to transfers in excess of 12 in a
covered by the Existing Order. plans to receive payments. Amended contract year. The charge is currently
Nevertheless, Applicants are filing the Contracts offer seven income plans to waived. Under Amended Contracts
Application to avoid any uncertainty receive income payments, and allow Allstate may assess a charge on transfers
that may arise as a result of the owners to modify the length and among investment options equal to
following differences between the frequency of income payments during 1.00% (up to 2.00% in the future) of the
Allstate Contracts and the Amended the payout phase. Allstate Contracts amount transferred. The charge applies
Contracts: offer a Retirement Income Guarantee to transfers in excess of 12 in a contract
(‘‘RIG’’) Rider for a rider fee at the year.
(a) Separate Account Charges annual rate of 0.05% of the income base
(f) Contract Withdrawal Charge
Allstate Contracts have a mortality in effect on each Contract anniversary,
and expense risk charge at the annual and a second RIG Rider for a rider fee Allstate Contracts and Amended
rate of 1.60% and no administrative at the annual rate of 0.30% of the Contracts impose a withdrawal charge
expense charge. Amended Contracts income base in effect on each Contract equal to a percentage of contributions
have a lower mortality and expense risk anniversary. Amended Contracts offer determined by the contract year in
charge at the annual rate of 1.40%, and different RIG options with different which such contributions are
an administrative expense charge of charges. Amended Contracts offer a RIG withdrawn as follows:

COMPLETE YEARS SINCE ALLSTATE RECEIVED PAYMENT BEING WITHDRAWN


[In percent]

0 1 2 3 4 5 6 7 8+

Charge (Allstate Con-


tracts) .......................... 8 8 8 7 6 5 4 3 0
Charge (Amended Con-
tracts) .......................... 8.5 8.5 8.5 7.5 6.5 5.5 4 2.5 0

Allstate Contracts offer an annual of purchase payments. Amended withdrawal amount’’ equal to 15% of all
‘‘free withdrawal amount’’ equal to 15% Contracts offer an annual ‘‘free purchase payments that are subject to a

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68216 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Notices

withdrawal charge as of the beginning of through Allstate Separate Account A. subaccounts of Allstate Separate
that contract year, plus 15% of the Allstate also may issue Future Contracts Account A. Accordingly, the asset-based
purchase payments added to the through Future Accounts. charges applicable to the subaccounts
contract during the contract year.2 19. That portion of the assets of will be assessed against the entire
Allstate Separate Account A that is amounts held in the subaccounts,
(g) Fixed Investment Options equal to the reserves and other including the 5% Credit amount, during
Allstate Contracts offer a standard Amended Contract liabilities with the ‘‘free look’’ period. As a result,
fixed account option. Amended respect to Allstate Separate Account A during such period, the aggregate asset-
Contracts offer a standard fixed account is not chargeable with liabilities arising based charges assessed against an
option, a dollar cost averaging fixed out of any other business of Allstate. owner’s annuity account value will be
account option, and a market value Any income, gains or losses, realized or higher than those that would be charged
adjusted fixed account option. unrealized, from assets allocated to if the owner’s contract value did not
Allstate Separate Account A are, in include the 5% Credit.
(h) Minimum Purchase Payments
accordance with Allstate Separate (b) The 5% Credit recapture
Allstate Contracts require a minimum Account A’s Amended Contracts, provisions of the Amended Contracts
initial purchase payment of $500 for credited to or charged against Allstate would not deprive an owner of his or
qualified contracts. Amended Contracts Separate Account A, without regard to her proportionate share of the issuer’s
require a minimum initial purchase other income, gains or losses of Allstate. current net assets. Applicants state that
payment of $2,000 for qualified The same will be true of any Future an owner’s interest in the 5% Credit
contracts. Subsequent purchase Account of the Life Companies. amount allocated to his or her contract
payments must be at least $500 for all 20. Allstate will recapture the 5% value upon receipt of a purchase
Allstate Contracts. Subsequent purchase Credit if the owner returns the payment is not vested until the
payments must be at least $1,000 for all Amended Contract for a refund during applicable free-look period has expired
Amended Contracts. the free look period applicable under without return of the Amended
state law. Allstate will not seek to Contract. Until the free look period has
(i) Change of Annuitant
recapture 5% Credits under Amended expired and any 5% Credit amount is
Allstate Contracts permit a new Contracts under any other circumstance. vested, Applicants submit that Allstate
annuitant to be named upon the death 21. The free look period is the period retains the right and interest in the 5%
of the current annuitant. Amended during which an owner may return an Credit amount, although not in the
Contracts do not permit a change of Amended Contract after it has been earnings attributable to the amount.
annuitant. delivered and received a full refund of Thus, Applicants argue that when
(j) Credits the contract value, less any 5% Credits. Allstate recaptures any 5% Credit, it is
No other charges will apply to the merely retrieving its own assets, and the
Allstate Contracts offer 4% Credits on refund, but the owner bears the owner has not been deprived of a
purchase payments. Under Allstate investment risk from the time of proportionate share of Allstate Separate
Contracts, the oldest contract owner and purchase until he or she returns the Account A’s assets.
oldest annuitant must be age 85 or Amended Contract. The owner also will (c) Permitting an owner to retain a 5%
younger on the date Allstate receives the bear any expenses charged with respect Credit under a contract upon the
completed application for the contract to the credit amount incurred prior to exercise of the free look period would
(‘‘Application Date’’). Amended return of the Amended Contract, e.g., not only be unfair, but would also
Contracts offer credits of up to 5% (‘‘5% any mortality and expense risk charge. encourage individuals to purchase an
Credits’’) as follows: The refund amount may be more or less Amended Contract with no intention of
• 4% credits on purchase payments if than the purchase payment the owner keeping it, and simply to return it for a
the oldest contract owner and oldest made, unless state insurance law quick profit.
annuitant are age 85 or younger on the requires that the full amount of the (d) The 5% Credit will be attractive to
Application Date, purchase payment be refunded. and in the interest of investors because
• 2% credits on purchase payments if it will permit owners to put from 102%
the oldest contract owner or oldest Applicants’ Legal Analysis to 105% of their purchase payments to
annuitant is age 86 or older and both are 1. Section 6(c) of the act authorizes work for them in the selected
90 or younger on the Application Date, the Commission to exempt any person, subaccounts. In addition, the owner will
• an additional 0.5% credit on security or transaction, or any class or retain any earnings attributable to the
purchase payments if the cumulative classes of persons, securities or 5% Credit, as well as the principal
purchase payments less cumulative transactions from the provisions of the amount of the 5% Credit if he or she
withdrawals exceed $500,000, and Act and the rules promulgated does not cancel the Amended Contract.
• an additional 1% credit on thereunder if and to the extent that such (e) The recapture of a 5% Credit does
purchase payments if the cumulative exemption is necessary or appropriate not involves either of the evils that Rule
purchase payments less cumulative in the public interest and consistent 22c–1 was intended to eliminate or
withdrawals exceed $1,000,000. with the protection of investors and the reduce, namely: (a) The dilution of the
18. Allstate Separate Account A will value of outstanding redeemable
purposes fairly intended by the policy
fund the variable benefits available securities of registered investment
and provisions of the Act.
under the Amended Contracts. Units of 2. Applicants submit that the companies through their sale at a price
interest in Allstate Separate Account A recapture of 5% Credits under the below net asset value or their
under the Amended Contracts they fund Amended Contracts will not raise redemption or repurchase at a price
will be registered under the 1933 Act. concerns under sections 2(a)(32) and above it, and (b) other unfair results
Allstate may issue Future Contracts 27(i)(2)(A) of the Act, and Rule 22c–1 including speculative trading practices.
2 The free withdrawal amount applicable to
thereunder, for the same reasons given To effect a recapture of a 5% Credit,
Charitable Remainder Trusts is described in the in support of the Existing order, namely: Allstate will redeem an owner’s interest
prospectus for the Amended Contracts (File No. (a) It is not administratively feasible in a subaccount at a price determined
333–96115). to track the 5% Credit amount in the on the basis of current net asset value

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Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Notices 68217

of the subaccount. The amount interest for the reasons described above. comments were received on the
recaptured will equal the amount of the Applicants submit, based on the ground proposal. This order approves the
5% Credits paid out of its general summarized above, that their exemptive proposal.
account assets. Although the owner will request meets the standards set out in
II. Description of the Proposal
be entitled to retain any investment gain section 6(c) of the Act, namely, that the
attributable to the 5% Credit, the exemptions requested are necessary or A. Background
amount of such gain will be determined appropriate in the public interest and The BSE is a participant in the
on the basis of the current net asset consistent with the protection of Intermarket Trading System (‘‘ITS’’).
value of the relevant subaccounts. Thus, investors and the purposes fairly The ITS is an order routing network
no dilution will occur upon the intended by the policy and provisions of designed to facilitate intermarket
recapture of the 5% Credit. Also, the the Act, and that, therefore, the trading in exchange-listed equity
second harm that Rule 22c–1 was Commission should grant the requested securities among participating self-
designed to address, namely, order. regulatory organizations (‘‘SROs’’) based
speculative trading practices calculated For the Commission, by the Division of on current quotation information
to take advantage of backward pricing, Investment Management, pursuant to emanating from their markets. The
will not occur as a result of the delegated authority.
recapture of the 5% Credit. However, to terms of the linkage are governed by the
avoid any uncertainty as to full Margaret H. McFarland, ITS Plan, a national market system plan
compliance with the Act, Applicants Deputy Secretary. approved by the Commission pursuant
request an exemption from the [FR Doc. 02–28484 Filed 11–7–02; 8:45 am]
to Section 11A of the Act and Rule
provisions of Rule 22c–1 to the extent 11Aa3–2 thereunder.4
BILLING CODE 8010–01–M
deemed necessary to permit the Section 8(d)(i) of the ITS Plan
recapture of the 5% Credits under the provides that absent reasonable
Amended Contracts and Future SECURITIES AND EXCHANGE justification or excuse, a member of a
Contracts. COMMISSION Participant Exchange should not effect
3. Applicants submit that their trade-throughs.5 If, however, a trade-
request for an order, which applies to [Release No. 34–46759; File No. SR–BSE– through does occur and a complaint is
any Future Contracts that are 2002–14] received through ITS from the party
substantially similar in all material whose bid or offer was traded through,
respects to the Amended Contracts Self-Regulatory Organizations; Order the party who initiated the trade-
described herein, to Contracts described Granting Accelerated Approval to through may be required to satisfy the
herein, and Future Contracts Covered by Proposed Rule Change by the Boston bid or offer traded through or take other
the Existing Order, that are substantially Stock Exchange, Inc. Relating to an remedial action.6 Each Participant
similar in all material respects to the Interpretation of its Execution Exchange, including the Phlx,7 has
Contracts, is appropriate in the public Guarantee Rule adopted and obtained Commission
interest. Applicants state that such an approval of a ‘‘trade-through rule,’’
November 1, 2002. which is substantively the same as that
order would promote competitiveness
in the viable annuity market by I. Introduction provided in the ITS Plan.
eliminating the need to file redundant In a recent Order, the Commission
On September 5, 2002, the Boston
exemptive applications in the future, recognized that the ITS trade-through
Stock Exchange, Inc. (‘‘BSE’’ or
thereby reducing administrative provisions were designed to encourage
‘‘Exchange’’) submitted to the Securities
expenses and maximizing the efficient market participants to display their
and Exchange Commission (‘‘SEC’’ or
use of Applicants’ resources, Applicants trading interest, and to help achieve best
‘‘Commission’’), pursuant to Section
state that requiring them to file execution for customer orders in
19(b)(1) of the Securities Exchange Act
additional Applications would impair exchange-listed securities.8 The
of 1934 (‘‘Act’’),1 and Rule 19b–4
their ability effectively to take advantage Commission also acknowledged,
thereunder,2 a proposed rule change to
of business opportunities as they arise, however, that these rules were designed
render voluntary a CHX specialist’s
and that investors would not receive at a time when ‘‘the order routing and
obligation to fill limit orders in the
any benefit or additional protection by specialist’s book following a primary
requiring Applicants to repeatedly seek 2002) (notice of immediate effective of extension of
market trade-through, if such trade- pilot to November 3, 2002.)
exemptive relief that would present no
through occurs in an exchange-traded 4 See Securities Exchange Act Release No. 19456
issue under the Act that has not already
funds (‘‘ETFs’’) tracking the Nasdaq-100 (January 27, 1983), 48 FR 4938 (February 3, 1983).
been addressed in this Application. The SROs participating in ITS include the
Index (‘‘QQQs’’), the Dow Jones
American Stock Exchange LLC (‘‘Amex’’), the
Conclusion Industrial Average (‘‘DIAMONDs’’), and Boston Stock Exchange, Inc. (‘‘BSE’’), the Chicago
Applicants submit that their request the Standard & Poor’s 500 Index Board Options Exchange, Inc. (‘‘CBOE’’), the
for an order of exemption that applies (‘‘SPDRs’’). Chicago Stock Exchange, Inc. (‘‘CSE’’), the
The proposed rule change was Cincinnati Stock Exchange, Inc. (‘‘Cincinnati’’), the
to the recapture of bonus credits paid on National Association of Securities Dealers, Inc.
the Amended Contracts described published for comment in the Federal (‘‘NASD’’), the New York Stock Exchange, Inc.
herein or Future Contracts that are Register on October 8, 2002.3 No (‘‘NYSE’’), the Pacific Stock Exchange, Inc. (‘‘PCX’’),
and the Phlx (collectively ‘‘Participant Exchanges’’).
substantially similar in all material 1 15 5 A trade-through results when a member
U.S.C. 78s(b)(1).
respects to the Amended Contracts and 2 17 purchases (or sells) a security at a price that is
CFR 240.19b–4.
underwritten or distributed by Allstate 3 See Securities Exchange Act Release No. 46580 higher (lower) than the price offered in one or more
Distributors, Affiliated Broker-Dealers, (October 1, 2002), 67 FR 62839. The proposed rule of the other ITS participant’s markets. See ITS Plan,
or Unaffiliated Broker-Dealers, and to change is currently in effect as a pilot. See Section 8(d)(i).
6 See ITS Plan, Exhibit B.
Future Accounts Covered by the Securities Exchange Act Release Nos. 46482
7 See Phlx Rule 2001A.
(September 10, 2002), 67 FR 58662 (September 17,
Existing Order, Contracts and Future 2002) (notice of immediate effectiveness of pilot for 8 See Securities Exchange Act Release No. 46428
Contracts Covered by the Existing the period September 4, 2002 to October 4, 2002); (August 28, 2002), 67 FR 56607 (September 4, 2002)
Order, is appropriate in the public 46651 (October 11, 2002), 67 FR 64669 (October 21, at 56607 (‘‘ITS Exemption Order’’).

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