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Metro Insurance and Annuity (Jun. 6, 2003) (Investment Company Registration)

Metro Insurance and Annuity (Jun. 6, 2003) (Investment Company Registration)

Friday, 06 June 2003 08:00

No-Action Letter under
Investment company Act of 1940 Section 7(b)

Metropolitan Insurance and Annuity Company

June 6, 2003

Response of the Office of Chief Counsel
Division of Investment Management
Our Ref. No. 200326918
File No. 132-3

Your letter dated March 21, 2003 requests our assurance that we would not recommend enforcement action to the Commission under Section 7(b) of the Investment Company Act of 1940 (the “1940 Act”) against Metropolitan Insurance and Annuity Company (the “Company”) if, as more fully explained below and in your letter, the Company causes MIAC Taiwan Separate Account Mh3003 (the “Account”) to issue flexible premium variable life insurance policies solely in Taiwan during the Interim Period through its Taiwanese branch without registering the Account under the 1940 Act.

Background

You state that the Company is a life insurance company organized and domiciled under the laws of Delaware and a wholly owned subsidiary of MetLife, Inc. (“Metlife”). You state further that the Company has a well-established branch in Taiwan (the “Branch”) that sells conventional fixed life insurance and annuities under authority from the Taiwanese government. You state that the Branch is largely a self-contained unit, is strictly regulated under Taiwanese law, and performs virtually all of the functions of a free-standing insurance company in Taiwan.

You state that the Company, in a period of five to twelve months from the date of your letter (the “Interim Period”), intends to spin off the Branch, or otherwise transfer the assets and liabilities of the Branch, to a newly formed Taiwanese-incorporated insurance company that will be a subsidiary of MetLife (the “proposed reorganization”). You state that the Interim Period delay is occasioned primarily by the pendency of a change in Taiwanese law that will equalize the capitalization requirements for branch and subsidiary operations of insurance companies (“change of Taiwanese law”). You state that, to convert the Branch into a Taiwanese-incorporated subsidiary at this time, the Company would have to contribute between approximately $15 to $35 million (“Current Conversion Amount”) to satisfy the current Taiwanese capitalization requirements.1 You state further that if the Company were to convert the Branch into a Taiwanese subsidiary before the change of Taiwanese law, the Company may not be able to recoup the difference between the Current Conversion Amount and the amount that it must contribute to convert the Branch once the change of Taiwanese law occurs (“Future Conversion Amount”).2 You state that if there is no difference between the Current Conversion Amount and the Future Conversion Amount, the Company will at least be able to defer its contribution for converting the Branch until the change in Taiwanese law.3

You state that the Ministry of Finance of Taiwan recently authorized the sale of variable life insurance and annuities in Taiwan. The Company would like to introduce a variable life product (“Policy”) for distribution in Taiwan during the Interim Period. You state that the Policies will be issued by the Company through the Branch during the Interim Period. You state that all typical insurance-related functions and administration of the Policies, including marketing, compliance, issuance, suitability review, underwriting, premium acceptance, investment of proceeds, reallocation of policy value among underlying fund options, payment of surrenders, and payment of death benefits, will take place in Taiwan; the United States arm of the Company will not be involved in these administrative functions. You state that the United States arm of the Company anticipates reviewing marketing and other material only for the limited purpose of ensuring the appropriate use and protection of MetLife’s logo and brand consistency, and the proper characterization of the relationship between the Branch and the Company affiliates. You state that the Company’s United States operation will also be involved with the Branch in its supervisory capacity and in certain financial matters, such as the communication of information necessary to the preparation of financial statements.

You state that Delaware will recognize the Account as a valid separate account, segregated and insulated from the general assets of the Company and that Taiwan likewise will treat the Account as fully segregated and insulated from the Company and the Branch. You represent that the Account will be physically located, funded, maintained and regulated in Taiwan and that the Account’s assets will be maintained in the custody of a bank in Taiwan in conformance with Taiwanese practices and requirements. You represent that, during the Interim Period, the Account’s assets will be invested only in offshore investment funds organized, managed and marketed outside the United States, and that the securities held by these funds will be securities of offshore issuers that will neither be traded nor tradable in United States markets (“offshore funds”). You represent that upon formation of the subsidiary, the subsidiary will become the successor to all of the obligations under Policies previously issued by the Company and that the Account will no longer be subject to Delaware insurance law.

You represent that the Policy will be prepared in Taiwan and written in the Mandarin Chinese language that is used in Taiwan, as will all sales material, applications and administrative forms. You represent that the form of the Policy, and its marketing and distribution, will be in conformity with Taiwanese law and will be regulated by the Taiwanese authorities. You represent that the Policies will be distributed only in Taiwan in a public offering through branch agents located in Taiwan. You represent that all activity constituting the “offer” or “sale” of the Policies will occur in Taiwan and will be conducted in accordance with all of the regulatory requirements of that country. You represent that, during the Interim Period, there will be no offers or sales of the Policy to United States citizens residing in Taiwan or to any persons resident in the United States. You assert that there is no issue of “flow back” of the Policies to United States markets because there is no secondary market in variable life insurance policies.

You state that the offer and sale of the Policies will entail limited contact with the United States operations of the Company, as more fully described below. You indicate that, despite these minimal contacts with the United States, the proposed offering of the Policies in Taiwan could result in a violation of Section 7(b) of the 1940 Act.4

Analysis

Section 7(b) of the 1940 Act prohibits a depositor or trustee of, or underwriter for, any investment company, organized or otherwise created under the laws of the United States or of a state and not having a board of directors, from, among other things, offering or selling any security of which the investment company is the issuer (or engaging in certain other activities) by use of the mails or any means or instrumentality of interstate commerce unless the company is registered under the 1940 Act.5 The Account may be deemed to have been organized or otherwise created under the laws of the United States or a state because of its status as a separate account of a Delaware insurance company. In addition, the Account may be deemed to use, during the Interim Period, the mails or a means or instrumentality of interstate commerce in connection with the Policies.

The 1940 Act provides persons who invest in United States registered investment companies with the substantive protections of the 1940 Act. You essentially contend, however, that the substantive provisions of the 1940 Act are not necessary for the owners of the Policies because, during the Interim Period, the Account is like a foreign fund with limited contacts with the United States. You represent that, during the Interim Period, the Policies will not be offered or sold to any United States citizen residing in Taiwan or to any person resident in the United States, and that all offers and sales of the Policies will occur in Taiwan. You also represent that the Account’s investments will be solely in offshore funds. You state that the Branch’s administration of the Policies will entail only limited contact with the Company’s United States operations. You state that the decisions regarding the selection of underlying offshore funds for the Policy (and any additions or deletions to the underlying offshore fund options in the future) will be made by branch personnel located in Taiwan, although such personnel may consult on these decisions with the investment department of MetLife in the United States.6

Finally, you assert that failure to introduce a variable life insurance product in the Taiwanese market during the Interim Period would negatively affect the Branch’s market share in Taiwan.7 You represent, however, that registering the Account under the 1940 Act would not be feasible because, as a United States registered separate account, the Account, in its proposed form, would not be able to operate in compliance with the United States federal securities laws (e.g., the Account would not be able to invest its assets as proposed in offshore funds).8

Based on the foregoing facts and representations, we would not recommend enforcement action to the Commission under Section 7(b) of the 1940 Act against the Company if, as described above and in your letter, the Company causes the Account to issue the Policies solely in Taiwan during the Interim Period through the Branch without registering the Account under the 1940 Act.9 This letter expresses the Division’s position on enforcement action only and does not purport to express any legal conclusion on the issues presented.10 Our position is based upon the facts and representations set forth in your letter, including your representations that:

  • the Policies will not be offered or sold to any United States citizen residing in Taiwan or to any person resident in the United States, and that all offers and sales of the Policies will occur in Taiwan;
  • the Account will invest solely in offshore funds;
  • the Branch’s administration of the Policies will entail only limited contact with the Company’s United States operations; and
  • the Interim Period will last from five to twelve months from the date of your letter.11

Any different facts or representations may require a different conclusion.

John L. Sullivan
Senior Counsel

Endnotes

1 Telephone conversation among John L. Sullivan of the staff and Stephen E. Roth and Mary E. Thornton of Sutherland Asbill & Brennan LLP on April 28, 2003 (the “April 28 Telephone Conversation”).

2 Id.

3 Id.

4 The Account has no board of directors, and the Company could be deemed the depositor of the Account. Id.

5 Additionally, Section 5 of the Securities Act of 1933 (“1933 Act”) requires registration of each offer or sale of securities involving United States jurisdictional means, unless an exemption is available. Regulation S under the 1933 Act clarifies the extraterritorial application of the registration provisions of the 1933 Act and generally provides that any offer or sale that occurs within the United States is subject to Section 5 of the 1933 Act and any offer or sale that occurs outside of the United States is not subject to Section 5. See Securities Act Release No. 6863 (Apr. 24, 1990) (Regulation S Adopting Release) (“Release No. 6863”). Preliminary Note 8 of Regulation S states that the regulation does not apply to offers and sales of securities issued by, among other things, open-end investment companies or unit investment trusts that are registered or required to be registered under the 1940 Act. In Release No. 6863, the Commission solicited comment regarding whether to extend the application of Regulation S to offers and sales of securities issued by registered open-end investment companies and unit investment trusts, and, if so, the method by which to accomplish such extension. To date, the Commission has not taken any action on this issue.

6 You represent that after the Interim Period, the newly formed Taiwanese subsidiary of the Company will maintain the Account and offer and sell the Policies, and the Account will no longer be organized or otherwise created under the laws of the United States or Delaware. April 28 Telephone Conversation.

7 You also represent that it would not be practicable to create, before the change of Taiwanese law, a Taiwanese subsidiary that could maintain the Account and thereby avoid a possible section 7 violation or to convert the Branch into such a subsidiary at this time, due to uncertainty concerning the Future Conversion Amount. April 28 Telephone Conversation.

8 Id.

9 This letter confirms the position that the staff provided orally on April 28, 2003 to Stephen E. Roth of Sutherland Asbill & Brennan LLP.

10 You do not ask, and we express no view regarding, whether the Branch’s offer, sale or maintenance of the Policies, pursuant to a public offering under the laws of Taiwan, as described in your letter would in fact: (1) implicate Section 5 of the 1933 Act and Regulation S under the 1933 Act; and (2) involve the use of the mails or any means or instrumentality of interstate commerce under Section 7(b) of the 1940 Act.

11 You represent that if the Interim Period lasts longer than anticipated (five to twelve months from the date of your letter) or the proposed reorganization does not occur, you will notify the Commission staff. April 28 Telephone Conversation.

Incoming Letter:

STEPHEN E. ROTH
DIRECT LINE: 202.383.0158
Internet: [email protected]

Investment Company Act of 1940
Section 7

March 21, 2003

Douglas J. Scheidt, Esq.
Office of Chief Counsel
Division of Investment Management
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Metropolitan Insurance and Annuity Company and
MIAC Taiwan Separate Account Mh3003
Request for No-Action Relief Variable Life Insurance Offering in Taiwan

Dear Mr. Scheidt:

We are writing on behalf of Metropolitan Insurance and Annuity Company (the “Company”), a life insurance company domiciled in and organized under the laws of the state of Delaware and a wholly owned subsidiary of MetLife, Inc. (“MetLife”), and the MIAC Taiwan Separate Account Mh3003 (the “Account”), a separate account established in accordance with both Delaware and Taiwan insurance laws but maintained solely in Taiwan, to request that the Staff of the Securities and Exchange Commission (the “Commission”) confirm that it will not recommend enforcement action to the Commission under Section 7 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), if the Company issues flexible premium variable life insurance policies supported by the Account solely in Taiwan through its Taiwan branch in the manner described below without registering the Account under the Investment Company Act.

I. Background

The Company has advised us as follows:

The Company

The Company currently has authority to sell conventional fixed life insurance and annuities in the United States. It does not currently, nor does it plan in the immediate future, to sell variable life insurance or variable annuities in the United States. The Company has a well-established branch in Taiwan that sells conventional fixed life insurance and annuities under authority from the Taiwan government. As of February 2003, the Taiwan branch’s sales force included 519 full time agents in 33 agencies throughout Taiwan. These conventional fixed life insurance policies are subject to regulation and approval under Taiwan law. There are approximately 170,000 holders of conventional fixed life insurance policies issued by the Company through its Taiwan branch.

The Company’s Taiwan branch operation is largely a self-contained unit, is strictly regulated under Taiwan law, and performs virtually all the functions of a free-standing insurance company in Taiwan. The Taiwan branch operations are segregated from the Company’s United States operations, although its operational liabilities extend to the Company.1

Intent to Sell Variable Life Insurance in Taiwan

In 2002, the Taiwan Ministry of Finance authorized the sale of variable life insurance and annuities, thus creating a new and important market in that country. For competitive reasons, the Company believes it imperative to introduce a flexible premium variable life insurance product as soon as possible in Taiwan, both to secure market share and to retain its agency force. Ultimately, in a period of five to twelve months, the Company will spin off its Taiwan branch, or otherwise transfer its assets and liabilities to a newly formed Taiwan-incorporated insurance company that will be a separate foreign subsidiary of MetLife. In the interim five to twelve month period, the Company desires to introduce a Chinese language flexible premium variable life product (the “Policy”) for distribution in Taiwan so that it is not competitively disadvantaged by having to refrain from entering the market during that period.

The Policy and the Account

In order to issue the Policy during the interim period, the Company is obtaining variable life insurance authority from the Delaware Insurance Department. The Policy will be prepared in Taiwan and written in the Mandarin Chinese language used in Taiwan, as will all sales material, applications, and administrative forms. The form of the Policy, and its marketing and distribution, will be in conformity with Taiwan law and will be regulated by the Taiwan authorities. Requisite approvals to commence distribution in Taiwan have already been obtained in Taiwan.

All premiums collected under the Policies will be deposited in the Account. The Account will be maintained in the custody of a bank in Taiwan in conformance with Taiwan practices and requirements. The establishment of the Account in Taiwan has been ratified by resolution of the Company’s board of directors. Delaware will recognize the Account as a valid separate account, segregated and insulated from the general assets of the Company. Taiwan likewise will treat the Account as fully segregated and insulated. The Taiwan Ministry of Finance has promulgated comprehensive regulations addressing the establishment and operation of separate accounts, including custody of assets, permissible investments, accounting, and valuation.

The Account thus will be physically located, funded, maintained, and regulated in Taiwan. The Account will invest in various pooled investment funds. Policyholders will be able to allocate their investment among the available underlying funds as provided in the Policy. During the interim period prior to the establishment of the separate Taiwan insurance company subsidiary, the Account investments will be only in funds organized, managed, and marketed outside the United States. Moreover, all the securities held by the funds will be securities of offshore issuers that will neither be traded nor tradable in United States markets.

The Proposed Manner of Offering the Policies

The Policies will be distributed only in Taiwan in a public offering through branch agents located in Taiwan. All activity constituting the “offer” or “sale” of the Policies will occur in Taiwan, and will be conducted in accordance with all regulatory requirements of that country. There will be no offers or sales of the Policy occurring in the United States. Furthermore, during the period prior to reorganization of the branch into a separate subsidiary, there will be no offers or sales of the Policy to United States citizens residing in Taiwan or to any persons resident in the United States, including Taiwan citizens residing in the United States. During this period, purchasers will be required to sign a declaration stating that they are not citizens or residents of the United States, nor do they intend to become United States citizens or move to the United States within the next year. There will be no English language version of the Policy for distribution in the United States. The Policies would not, in any event, be marketable to United States citizens or residents because they will not be specifically designed to comply with United States income tax law requirements for variable life insurance policies. Since there is no secondary market in variable life insurance policies, there is no issue of “flow back” of the Policies into United States markets.

All typical insurance-related functions and administration of the Policies, including marketing, compliance, issuance, suitability review, underwriting, premium acceptance, investment of proceeds, reallocation of policy value among underlying fund options, payment of surrenders, and payment of death benefits, will take place in Taiwan. The United States arm of the Company will not be involved in these administrative functions. They anticipate reviewing marketing and other material only for the limited purpose of ensuring the appropriate use and protection of MetLife’s logo and brand consistency, and the proper characterization of the relationship between the branch and the affiliates of the Company. The Company’s United States operation will also be involved with the branch office in its supervisory capacity and in certain financial matters, such as the communication of information necessary to the preparation of financial statements. The decisions regarding the selection of underlying funds for the Policy (and any additions or deletions to the underlying fund options in the future) will be made by branch personnel located in Taiwan, although such personnel may consult on these decisions with the investment department of MetLife in the United States. Neither the Company nor MetLife will have any involvement in the investment decisions of the underlying funds, which are independently managed foreign investment pools. In sum, the home office will continue to have general oversight of the branch, but will not be involved in the distribution or administration of the Policy.

Reason for the Proposed Manner of Offering the Policies

The Company intends to spin off its Taiwan branch, or otherwise transfer its assets and liabilities to a newly formed Taiwan-incorporated insurance company that will be a separate foreign subsidiary of MetLife, for a variety of business and regulatory reasons. The creation of the new corporation cannot immediately be accomplished, but will occur within five months to a year. The five to twelve month delay is occasioned primarily by the pendency of an anticipated change in Taiwan law regarding minimum solvency that is expected to occur within that time frame. Once the new requirements for minimum solvency go into effect for all insurers in Taiwan, it will equalize the solvency requirements for branches and subsidiary operations. At that time, both subsidiary insurance companies and branch offices of foreign insurance companies will be subject to the same solvency requirements, which will eliminate a primary disadvantage to forming a subsidiary.

Accordingly, during the interim period before the creation of the Taiwan subsidiary, the Policies would be issued by the Company through its Taiwan branch. After the reorganization of the branch into a separate subsidiary, new Policies will be issued directly by the Taiwan subsidiary. Upon formation of the subsidiary, the subsidiary will become the successor to all of the obligations under Policies previously issued by the Company. Furthermore, the Account will no longer be subject to Delaware insurance law. The Company, however, will remain jointly and severally liable for assets and liabilities (including the Policies) transferred to the subsidiary for a period of two years.

II. Issue Presented

An insurance company separate account supporting variable annuities or variable life insurance polices generally is viewed as an investment company under Section 3(a)(1) of the Investment Company Act.2 Section 7(b) of the Investment Company Act imposes limitations on activities in interstate commerce for investment companies “organized or otherwise created under the laws of the U.S. or of a state” that do not have a board of directors. The scope of interstate commerce as defined in Section 2(a)(18) of the Investment Company Act is broad and includes communications between a foreign country and any state. Although the Account will be maintained in Taiwan and does not have a separate corporate existence in the United States, its status as a separate account of a Delaware insurance company could be viewed as sufficient to subject the Account to regulation in the United States given the broad definition of interstate commerce and the contact, albeit extremely limited, between the Company in the United States and the branch in Taiwan.

Accordingly, during the five to twelve month period prior to reorganization of the branch into a separate subsidiary, the issuance of the Policy by the Company’s Taiwan branch through the Account could subject the Account to regulation under the Investment Company Act. For the reasons set forth below, we do not believe that public interest is served by requiring the Account to register under the Investment Company Act if it is used to support the Policies in public offerings in Taiwan in compliance with the provisions of Regulation S under the Securities Act of 1933, as amended (the “Securities Act”).

III. Legal Analysis

Applying the Touche Remnant Letters

We believe that the well-known line of authority elaborating the “Touche Remnant doctrine” provides strong support for the relief requested herein. See, e.g., Touche Remnant & Co. (pub. avail. Aug. 27, 1984); Goodwin, Procter & Hoar (pub. avail. Feb. 28, 1997); Goodwin, Procter & Hoar (pub. avail. Oct. 5, 1998); Wilmer, Cutler & Pickering (pub. avail. Oct. 5. 1998). Each of the cited letters involved “foreign funds” principally engaged in a foreign public offering.3 The precise questions addressed in the letters were what United States activities would potentially convert a foreign public offering into a domestic “public offering” within the meaning of Section 7(d) and what integration principles would apply when a foreign public offering is conducted simultaneously with a domestic private offering. Implicit as an underlying principle in all these letters is the proposition that a purely foreign public offering conducted by a “foreign fund” would not implicate Section 7(d) at all.4 This is consistent with the territoriality approach that runs through Regulation S under the Securities Act and Section 7 of the Investment Company Act, under which the place of the public offering will normally be a principal determinant of whether United States securities laws will apply.5

In the present case, the offering at issue will be a purely “foreign offering” under the principles enunciated in Regulation S under the Securities Act. Because there will be only a foreign public offering, the question then is whether the Account established and maintained in Taiwan may be viewed as analogous to a “foreign fund,”6 and thus spared the need to register under the 1940 Act, for purposes of the five to twelve month period before the Taiwan operations are incorporated into a separate Taiwan insurance company. We think that such treatment is appropriate and warranted for the reasons discussed below.

The Taiwan branch does no business whatsoever in the United States and the Policy will not be offered or sold to any United States persons. The Taiwan branch operations are highly self-contained. The entire operation is so self-sufficient that it can and will be spun off essentially as is, with no significant changes in day-to-day activities or current personnel.

Furthermore, the Account will be located, funded, maintained, and regulated in Taiwan. Its assets will be kept in Taiwan and its investments will be solely in offshore funds that in turn invest only in securities of offshore issuers, and none of these securities will be traded or tradable in United States markets. Thus, even at the underlying investment level, United States markets will not be implicated. Accordingly, the Account will have the hallmarks of a Taiwan resident separate account. And, of course, after the interim period and the establishment of the new corporation, the Taiwan operations will be in every respect a Taiwan domestic entity.7

Given all of the foregoing, we think it appropriate to treat the Account as a “foreign fund” engaging in a purely foreign offering, at least during the brief time until the creation of the separate Taiwan company. We do not believe any significant regulatory concern should be raised by the relief requested.

The Canadian Branch Office Section 6(c) Exemptive Orders

Another, albeit somewhat older, line of authority supporting the grant of the requested no-action relief is a series of Investment Company Act releases granting Section 6(c) exemptions with respect to the activities of the Canadian offices of United States-domiciled insurance companies (the “Canadian releases”). Metropolitan Canadian Separate Accounts, Inv. Co. Rel. No. 6879 (Dec. 8, 1971) (order), Inv. Co. Rel. No. 6230 (Nov. 3, 1970) (notice); Mutual Variable Contract Account, Inv. Co. Rel. No. 5678 (May 15, 1969) (order), Inv. Co. Rel. No. 5656 (Apr. 21, 1969) (notice); The Prudential Variable Contract Account, Inv. Co. Rel. No. 5508 (Oct. 7, 1968) (order), Inv. Co. Rel. No. 5489 (Sept. 5, 1968) (notice).

In these cases, complete exemptions from the Investment Company Act were granted for activities of Canadian offices of United States insurance companies under facts strikingly similar to those here. For example, in the facts underlying the Canadian releases, the Canadian branch office would function similarly to a separate insurance company; all of the assets of the separate account would be physically held in Canada; virtually all of the transactions involving the portfolio securities held in the separate account would be carried out in Canada; and variable contracts supported by the separate accounts would be sold only to individuals and other entities resident in Canada.

In certain respects, however, this proposed offering in Taiwan has less connection to the United States than the Canadian offerings that received exemptive relief in the Canadian releases. Although, in the Canadian releases, the great majority of the separate account assets would be invested in Canadian securities, it was possible in some cases for limited investment (of up to 25%) in underlying United States securities or for sales to United States citizens in Canada. In the proposed Taiwan offering, 100% of the underlying investments will be non-United States securities and the Policy will be sold only to non-United States citizens or residents in Taiwan. Furthermore, in the Canadian releases, the investment portfolio either would be managed entirely in the United States home office or initially would be managed by the United States home office, but later transferred to the Canadian office as soon as the size of the portfolio justified such a move. In the proposed Taiwan offering, however, the Taiwanese branch will from the beginning have primary portfolio management authority. The United States home office will be involved only on a consultative basis, as described above, and will have no involvement in managing the underlying funds. Because the Canadian releases involved managed separate accounts (instead of unit investment trust structures like the Account), this distinction resulted in significantly more involvement by the United States office of the insurance company than will be involved in our case.

As the facts in this situation are even stronger than those of the Canadian releases, we believe this exemptive authority strongly supports the conclusion that no-action relief would be consistent with prior Commission positions and would not be inconsistent with the policies underlying the Investment Company Act, especially since the period for which relief is needed here is only a short, finite span.

IV. Request for Relief

In light of the foregoing, we request confirmation that the Staff would not recommend enforcement action under Section 7 of the Investment Company Act if the Taiwan branch commences the offer and sale of the Policy in Taiwan in the manner and under the conditions described above.8

* * *

We appreciate the Commission Staff’s consideration of this request. Please contact the undersigned at 202.383.0158 or Mary Thornton at 202.383.0698 if you need additional information or have any questions regarding the proposed offering described in this letter.

Sincerely,

Stephen E. Roth

cc: Allison M. Fuller, Esq.
John L. Sullivan, Esq.
Marie C. Swift, Esq.
Linda Wintner
Mary E. Thornton, Esq.
Ronald Massumi, Esq.

Endnotes

1 A foreign insurer applying to the Taiwan Ministry of Finance to set up of a branch office in Taiwan must submit a letter undertaking to be held responsible for all liabilities arising from the branch’s business operation. If working capital of a branch becomes lower than the required level, the foreign insurer is required to either replenish it or provide financial statements satisfactory to the Taiwan Ministry of Finance. Furthermore, Taiwan law requires that, in the case of any obligation outstanding after the liquidation of a Taiwan branch of a foreign company, the foreign company shall remain liable.

2 Prudential Ins. Co. v. SEC, 326 F.2d 383 (3d Cir. 1964), cert. denied, 377 U.S. 953 (1964).

3 The most recent letter in the Touche Remnant line of authority is ING Bank, N.V. (pub. avail. July 8, 2002), wherein certain domestic funds obtained no action assurance regarding their reliance on the exemption from registration provided by Section 3(c)(1) of the Investment Company Act while simultaneously conducting both onshore private offerings and offshore public offerings. Because each fund at issue in the ING letter was organized as a corporation, limited liability company, or business trust under the laws of a state of the United States, we believe that the Account is better analogized to the foreign funds that were the subject of the letters cited in the text, rather than the wholly domestic funds involved in the ING letter.

4 “The Commission has indicated that the prohibitions of Section 7(d) apply only to a public offering of a Foreign Fund in the United States or to U.S. persons.” Goodwin, Procter & Hoar (pub. avail. Oct. 5. 1998) (emphasis added).

5 “America’s jurisdictional interest in a company is based on its specific activities in the U.S. or the effects in the U.S. of its activities conducted abroad.” Touche Remnant & Co. (pub. avail. Aug. 27, 1984).

6 The cited letters do not define “foreign fund.” The recitations typically describe them as entities “organized under” the laws of a foreign jurisdiction.

7 The Company, however, will remain jointly and severally liable for assets and liabilities (including the Policies) transferred to the subsidiary for a period of two years.

8 Please note that we are not requesting that you confirm that the offering in Taiwan would in fact meet the requirements of Regulation S under the Securities Act.


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