Teachers Insurance and Annuity Association of America, et al.

Published date14 May 2021
Citation86 FR 26572
Record Number2021-10159
SectionNotices
CourtSecurities And Exchange Commission
Federal Register, Volume 86 Issue 92 (Friday, May 14, 2021)
[Federal Register Volume 86, Number 92 (Friday, May 14, 2021)]
                [Notices]
                [Pages 26572-26574]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-10159]
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                SECURITIES AND EXCHANGE COMMISSION
                [Investment Company Act Release No. 34267; File No. 812-15143]
                Teachers Insurance and Annuity Association of America, et al.
                May 10, 2021.
                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: Teachers Insurance and Annuity Association of America
                (``TIAA'') and TIAA Separate Account VA-3 (the ``Separate Account,''
                and together with TIAA, the ``Applicants'').
                Summary of Application: The Applicants seek an order pursuant to
                section 26(c) of the Act, approving the proposed substitution
                (``Substitution'') of Vanguard Institutional Index Fund (``Replacement
                Fund'') for shares of Vanguard 500 Index Fund (``Original Fund'') held
                by the Separate Account to fund certain variable annuity insurance
                contracts (collectively, the ``Contracts'').
                Filing Dates: The application was filed on July 13, 2020 and amended on
                November 13, 2020, February 26, 2021, and April 22, 2021.
                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 emailing the Commission's
                Secretary at [email protected] and serving applicants with a
                copy of the request by email. Hearing requests should be received by
                the Commission by 5:30 p.m. on June 4, 2021, 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 emailing the
                Commission's Secretary.
                ADDRESSES: The Commission: [email protected]. Applicants: Aneal
                Krishnamurthy, [email protected].
                FOR FURTHER INFORMATION CONTACT: Harry Eisenstein, Senior Special
                Counsel, at (202) 551-6764 or Kaitlin C. Bottock, Branch Chief at (202)
                551-6825 (Division of Investment Management, Chief Counsel's Office).
                SUPPLEMENTARY INFORMATION: The following is a summary of the
                application. The complete application may be obtained via the
                Commission's website by searching for the file number, or for an
                Applicant using the Company name box, at http://www.sec.gov.search/search.htm, or by calling (202) 551-8090.
                Applicants' Representations
                 1. TIAA is a stock life insurance company organized under the laws
                of the state of New York. TIAA is the depositor and sponsor of the
                Separate Account.
                 2. The Separate Account is registered with the Commission under the
                Act as a unit investment trust. The Separate Account is divided into
                subaccounts and each sub account invests in a single underlying mutual
                fund, such as the Original Fund (all such underlying fund, ``investment
                options'').
                 3. The Original Fund and the Replacement Fund are each registered
                under the 1940 Act as an open-end, management investment company and
                its securities are registered under the 1933 Act. The Original Fund and
                the Replacement Fund are each advised by The Vanguard Group, Inc.,
                which is not an affiliate of the Applicants.
                 4. The Contracts are registered under the Securities Act of 1933,
                as amended (the ``1933 Act''). The Contracts allow Contract owners to
                allocate Contract value to one or more of the investment options
                available in the Separate Account.
                 5. As set forth under each Contract, as well as in the prospectus
                for each Contract, the Companies reserve the right to substitute shares
                of the underlying fund for shares of another underlying fund.
                 6. The Applicants propose to replace shares of the Admiral share
                class of the Original Fund in the Separate Account with shares of the
                Institutional Plus share class of the Replacement Fund.
                 7. The Applicants state they are seeking the Substitution because
                the Original Fund, thought it provides a relatively low ``Admiral''
                share class, does not have an institutional share class which TIAA's
                clients are demanding. Additional information for the Existing Fund and
                the Replacement Fund, including investment objectives, principal
                investment strategies, principal risks, and performance, as well as the
                fees and expenses of the Existing Fund and the Replacement Fund, can be
                found in the application.
                 8. The Applicants state that the Substitution will be described in
                a supplement to the prospectuses (``Supplement'') for the Contract
                filed with the Commission and delivered to all affected Contract owners
                at least 30 days before the Substitution Date. The Supplement will
                advise Contract owners that, for a period beginning 30 days before the
                Substitution Date through at least 30 days following the Substitution
                Date, Contract owners are permitted to make at least one transfer of
                Contract value from the subaccount investing in the Existing Fund or
                the Replacement Fund to any other available investment option offered
                under their Contracts without the transfer being counted as a transfer
                for purposes of transfer limitations and fees
                [[Page 26573]]
                that would otherwise be applicable under the terms of the Contracts.
                 9. The Applicants will send the Supplements to all affected
                Contract owners. Prospective purchasers and new purchasers of Contracts
                will be provided with a Contract prospectus and the Supplement, as well
                as the prospectus and any supplements for the Replacement Fund.
                 10. In addition to the Supplement distributed to Contract owners,
                within five business days after the Substitution Date, affected
                Contract owners will be sent a written confirmation of the completed
                Substitution. The confirmation statement will include a statement that
                reiterates the free transfer rights disclosed in the Supplement.
                 11. The Substitution will be effected at the relative net asset
                value in conformity with section 22(c) of the Act and rule 22c-1
                thereunder. The Substitution will be effected by TIAA, on behalf of the
                Separate Account, by redeeming its Original Fund shares in cash on the
                Substitution Date and simultaneously purchasing shares of the
                Replacement Fund for the exact amount of the redemption proceeds.
                 12. TIAA or an affiliate will pay all expenses incurred in
                connection with the Substitution. No costs of the Substitution will be
                borne directly or indirectly by Contract owners. Contract owners will
                not incur any fees or charges as a result of the Substitution, nor will
                their rights or the obligations of the Companies under the Contracts be
                altered in any way. The Substitution will not cause the fees and
                charges under the Contracts currently being paid by Contract owners to
                be greater after the Substitution than before the Substitution. In
                addition, the Substitution 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
                Substitution.
                 13. The Applicants state that the Contract value for each Contract
                owner impacted by the Substitution will not change as a result of the
                Substitution. In addition, the Applicants also state that the benefits
                offered by the guarantees under the Contracts will be the same
                immediately before and after the Substitution. The Applicants further
                state that the effect Substitution 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 Fund and the
                Replacement Fund, which the Applicants cannot predict. The Applicants
                further note that, at the time of the Substitution, the Contracts will
                offer a comparable variety of investment options with as broad a range
                of risk/return characteristics.
                 14. The Applicants state that TIAA will not receive, for three
                years from the date of the Substitution, any direct or indirect
                benefits from the Replacement Fund, advisors, their underwriters or
                their respective affiliates in connection with the assets attributable
                to the Contracts affected by the Substitution at a higher rate than it
                had received from the Original Fund, advisors, underwriters or their
                respective affiliates, including, without limitation, 12b-l
                distribution, shareholder service, administrative or other service
                fees, revenue sharing or other arrangements. In addition, the
                Applicants state that the Substitution is not motivated by any
                financial consideration paid or to be paid to the Insurance Company or
                its affiliates by the Replacement Fund, its investment advisor or
                underwriter, or their affiliates.
                Legal Analysis
                 1. The Applicants request that the Commission issue an order
                pursuant to section 26(c) of the Act approving the Substitution.
                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. The Applicants submit that the Substitution is consistent with
                the protection of investors and the purposes fairly intended by the
                policy and provisions of the Act. In particular, the Applicants point
                to the following: (a) The Contracts permit the Substitution, as
                permitted by applicable law and the New York Insurance Department; (b)
                the prospectus for the Contracts contain appropriate disclosure of
                these rights; (c) the Substitution will be described in the Supplements
                delivered to all affected Contract owners at least 30 days before the
                Substitution Date; (d) the Supplements also will advise Contract owners
                that, for a period beginning at least 30 days before the Substitution
                Date through at least 30 days following the Substitution Date, Contract
                owners are permitted to make at least one transfer of Contract value
                from the subaccount investing in the Existing Fund to any other
                available subaccounts offered under their Contract without the transfer
                being counted as a transfer for purposes of transfer limitations and
                fees that would otherwise be applicable under the terms of the
                Contracts; (e) the Replacement Fund and the Existing Fund have
                substantially similar investment objectives, principal investment
                strategies, and principal risks; and (f) the net operating expenses of
                the Replacement Fund are lower than those of the Existing Fund. The
                Applicants assert that, based on the terms noted above, and subject to
                the conditions set forth below, the Substitution does not raise the
                concerns underlying section 26(c).
                Applicants' Conditions
                 The Applicants agree that any order granting the requested relief
                will be subject to the following conditions:
                 1. The Substitution will not be effected unless TIAA determines
                that: (a) The Contracts allow the substitution of shares of registered
                open-end investment companies in the manner contemplated by the
                application; (b) the Substitution can be consummated as described in
                the application under applicable insurance laws; and (c) any regulatory
                requirements in each jurisdiction where the Contracts are qualified for
                sale have been complied with to the extent necessary to complete the
                Substitution.
                 2. TIAA or its affiliates will pay all expenses and transaction
                costs of the Substitution, 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
                Substitution. The proposed Substitution 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.
                 3. The Substitution will be effected at the relative net asset
                values of the respective shares 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 Substitution will be effected
                without change in the amount or value of any Contracts held by affected
                Contract owners.
                 4. The Substitution will in no way alter the tax treatment of
                affected Contract owners in connection with their Contracts, and no tax
                liability will arise for affected Contract owners as a result of the
                Substitution.
                 5. Affected Contract owners will be permitted to make at least one
                transfer of Contract value from the sub-account investing in the
                Original Fund (before the Substitution Date) or the Replacement Fund
                (after the Substitution Date) to any other available investment option
                under the Contract
                [[Page 26574]]
                without charge for a period beginning at least 30 days before the
                Substitution Date through at least 30 days following the Substitution
                Date. Except as described in any market timing/short-term trading
                provisions of the relevant prospectus, the Applicants will not exercise
                any right they may have under the Contracts to impose restrictions on
                transfers between the sub-accounts 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.
                 6. All affected Contract owners will be notified via the Supplement
                at least 30 days before the Substitution Date about: (i) The intended
                Substitution of the Existing Fund with the Replacement Fund; (ii) the
                intended Substitution Date; and (iii) information with respect to
                transfers as set forth in Condition 5 above. In addition, the
                Applicants will deliver to all affected Contract owners, at least 30
                days before the Substitution Date, a prospectus for the Replacement
                Fund.
                 7. The Companies will deliver to each affected Contract owner
                within five business days of the Substitution Date, a written
                confirmation which will include: (a) A confirmation that the
                Substitution was carried out as previously notified; (b) a restatement
                of the information set forth in the Supplement; and (c) the values of
                the Contract owners' positions in the Original Fund before the
                Substitution and the Replacement Fund after the Substitution.
                 8. Applicants and their affiliates will not receive, for three
                years from the Substitution Date, any direct or indirect benefits from
                the Replacement Fund, their investment advisors or underwriters (or
                their affiliates) in connection with assets attributable to Contracts
                affected by the Substitution at a higher rate than they had received
                from the Original Fund, its investment advisors or underwriters (or
                their affiliates), including without limitation 12b-1 fees, shareholder
                service, administrative or other service fees, revenue sharing, or
                other arrangements.
                 9. The obligations of the TIAA and the rights of affected Contract
                owners under the Contracts will not be altered in any way.
                 For the Commission, by the Division of Investment Management,
                pursuant to delegated authority.
                J. Matthew DeLesDernier,
                Assistant Secretary.
                [FR Doc. 2021-10159 Filed 5-13-21; 8:45 am]
                BILLING CODE 8011-01-P
                

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