
[Federal Register Volume 78, Number 59 (Wednesday, March 27, 2013)]
[Notices]
[Pages 18634-18637]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07012]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-30431; File No. 812-14033]


ING Life Insurance and Annuity Company, et al; Notice of 
Application

March 21, 2013.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application for an order approving the substitution 
of certain securities pursuant to Section 26(c) of the Investment 
Company Act of 1940, as amended (the ``1940 Act'' or ``Act'').

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APPLICANTS: ING Life Insurance and Annuity Company (``ING Life''), ING 
USA Annuity and Life Insurance Company (``ING USA''), ReliaStar Life 
Insurance Company of New York (``ReliaStar NY''), and Security Life of 
Denver Insurance Company (each a ``Company'' and together, the 
``Companies''), Variable Annuity Account B of ING Life Insurance and 
Annuity Company, Variable Annuity Account I of ING Life Insurance and 
Annuity Company, Separate Account B of ING USA Annuity and Life 
Insurance Company, Separate Account EQ of ING USA Annuity and Life 
Insurance Company, ReliaStar Life Insurance Company of New York 
Separate Account NY-B, Security Life Separate Account S-A1 (each, a 
``Separate Account'' and together, the ``Separate Accounts'') and ING 
Investors Trust. The Companies, the Separate Accounts, and ING 
Investors Trust are collectively referred to herein as the 
``Applicants.''

SUMMARY OF APPLICATION: The Applicants seek an order pursuant to 
Section 26(c) of the 1940 Act, approving the substitution of shares of 
the ING Large Cap Growth Portfolio, a series of the ING Investors Trust 
(the ``Replacement Fund'') for shares of the Fidelity VIP Contrafund 
Portfolio, a series of the Fidelity Variable Insurance Products Fund II 
(the ``Existing Fund''), held by the Separate Accounts to fund certain 
variable annuity contracts (collectively, the ``Contracts'') issued by 
the Companies.

FILING DATE: The application was filed on May 14, 2012, and amended and 
restated applications were filed on November 16, 2012, January 22, 
2013, and March 18, 2013.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
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 April 11, 2013, and should be accompanied by 
proof of service on the applicants in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the requester's interest, 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 Secretary of the Commission.

ADDRESSES: Secretary, SEC, 100 F Street NE., Washington, DC 20549-1090. 
Applicants: J. Neil McMurdie, Esquire, ING Americas U.S. Legal 
Services, One Orange Way, C2N, Windsor, CT 06095.

FOR FURTHER INFORMATION CONTACT: Jeffrey Foor, Senior Counsel, or Joyce 
M. Pickholz, Branch Chief, Insured Investments Office, Division of 
Investment Management, at (202) 551-6795.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or for an 
applicant using the

[[Page 18635]]

Company name box, at http://www.sec.gov/search/search.htm, or by 
calling (202) 551-8090.

Applicants' Representations

    1. The Companies, on their own behalf and on behalf of their 
respective separate accounts, propose to substitute shares of the 
Replacement Fund for shares of the Existing Fund held by the Separate 
Accounts to fund the Contracts.
    2. ING Life is the depositor of Variable Annuity Account B of ING 
Life Insurance and Annuity Company and Variable Annuity Account I of 
ING Life Insurance and Annuity Company. ING USA is the depositor of 
Separate Account B of ING USA Annuity and Life Insurance Company and 
Separate Account EQ of ING USA Annuity and Life Insurance Company. 
ReliaStar NY is the depositor of ReliaStar Life Insurance Company of 
New York Separate Account NY-B. Security Life of Denver Insurance 
Company is the depositor of Security Life Separate Account S-A1.
    3. Each of Variable Annuity Account B of ING Life Insurance and 
Annuity Company, Variable Annuity Account I of ING Life Insurance and 
Annuity Company, Separate Account B of ING USA Annuity and Life 
Insurance Company, Separate Account EQ of ING USA Annuity and Life 
Insurance Company, ReliaStar Life Insurance Company of New York 
Separate Account NY-B, and Security Life Separate Account S-A1 is a 
``separate account'' as defined by Rule 0-1(e) under the Act and each 
is registered under the Act as a unit investment trust for the purpose 
of funding the Contracts. Security interests under the Contracts have 
been registered under the Securities Act of 1933. Each Separate Account 
is divided into subaccounts, each of which invests exclusively in 
shares of the Existing Fund or another open-end management investment 
company. The application sets forth the registration statement file 
numbers for the Contracts and the Separate Accounts.
    4. ING Investors Trust and Fidelity Variable Insurance Products 
Fund II are registered open-end management investment companies of the 
series type (File Number 811-05629 and 811-05511, respectively).
    5. Overall management services to the Replacement Fund are provided 
by Directed Services, LLC, a registered investment adviser and an 
indirect wholly owned subsidiary of ING Groep, N.V.\1\ The Replacement 
Fund is sub-advised by ING Investment Management Co.
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    \1\ As part of a restructuring plan approved by the European 
Commission, ING has agreed to separate its banking and insurance 
businesses by 2013. ING intends to achieve this separation by 
divestment of its insurance and investment management operations, 
including the Companies. ING has announced that it will explore all 
options for implementing the separation including one or more 
initial public offerings, sales, or a combination thereof. On 
November 10, 2010, ING announced that ING and its U.S. insurance 
affiliates, including the Companies, are preparing for a base case 
of an initial public offering (``IPO'') of its U.S.-based insurance 
and investment management affiliates, including DSL.
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    6. The Contracts are individual variable annuity contracts. Each of 
the Contracts permit the issuing Company to substitute shares of one 
open-end management investment company with shares of another, subject 
to Commission approval and compliance with applicable law. The 
prospectuses for the Contracts and the Separate Accounts contain 
disclosures of this right. The Contracts which offer the Existing Fund 
as an investment option are registered in the Form N-4 Registration 
Statements listed in section II.B. of the application.
    7. Although not articulated exactly the same way, the investment 
objectives of the Existing Fund and the Replacement Fund are similar 
and the principle investment strategies of each portfolio are 
substantially similar. The ING Large Cap Growth Portfolio seeks long-
term capital growth while the Fidelity VIP Contrafund Portfolio seeks 
long-term capital appreciation. Both portfolios invest primarily in 
common stocks of large-cap U.S. companies, with an emphasis on earnings 
growth as a criterion for investment. A comparison of the investing 
strategies and risks of the Existing Fund and the Replacement Fund is 
included in the application.
    The following table compares the fees and expenses of the Existing 
Fund and the Replacement Fund as of December 31, 2012:
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    \2\ Directed Services LLC, the adviser, is contractually 
obligated to limit expenses to 0.60 and 0.85 for Class I and Class S 
shares, respectively, through May 1, 2014; the obligation does not 
extend to interest, taxes, brokerage commissions, Acquired Fund Fees 
and Expenses, and extraordinary expenses. This obligation will 
automatically renew for one-year terms unless it is terminated by 
the Portfolio or the adviser upon written notice within 90 days of 
the end of the current term or upon termination of the management 
agreement and is subject to possible recoupment by the adviser 
within three years. The amount of the Portfolio's expenses to be 
waived, reimbursed or recouped by Directed Services LLC is shown 
under the heading ``Expense Waivers.''

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                                                                                                                      Total
                                                           Management   Distribution  Administrative     Other        annual      Expense     Net annual
                                                              fees      (12b-1) fees    service fee     expenses     expenses     waivers      expenses
                                                            (percent)     (percent)      (percent)     (percent)    (percent)    (percent)    (percent)
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Replacement Fund:
     ING Large Cap Growth Portfolio--Class I....          0.55          0.00            0.10         0.02         0.67    \2\ -0.07         0.60
Existing Fund:
     Fidelity VIP Contrafund Portfolio--Initial           0.56          0.00  ..............         0.08         0.64  ...........         0.64
     Class..............................................
Replacement Fund:
     ING Large Cap Growth Portfolio--Class S....          0.55          0.25            0.10         0.02         0.92    \1\ -0.07         0.85
Existing Fund:
     Fidelity VIP Contrafund Portfolio--Service           0.56          0.25  ..............         0.08         0.89  ...........         0.89
     Class 2............................................
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    8. By means of supplements to the prospectuses for the Contracts, 
all owners of the Contracts affected by the substitutions were notified 
of the application to substitute shares of the funds as described 
herein. Among other

[[Page 18636]]

information regarding the Substitution, the supplements informed 
affected Contract Owners that beginning on the date of the supplements 
the Companies will not exercise any rights reserved by them under the 
Contracts to impose restrictions or fees on transfers from the Existing 
Fund (other than restrictions related to frequent or disruptive 
transfers) until at least 30 days after the effective date of the 
Substitution. Following the date the order requested by this 
application is issued, but before the effective date, affected Contract 
Owners will receive a second supplement to the Contract prospectuses 
setting forth the effective date and advising affected Contract Owners 
of their right, if they so choose, at any time prior to the effective 
date, to reallocate or withdraw accumulated value in the Existing Fund 
subaccounts under their Contracts or otherwise terminate their interest 
therein in accordance with the terms and conditions of their Contracts. 
If affected Contract Owners reallocate account value prior to the 
effective date or within 30 days after the effective date, there will 
be no charge for the reallocation of accumulated value from the 
Existing Fund subaccount and the reallocation will not count as a 
transfer when imposing any applicable restriction or limit under the 
Contract on transfers. Additionally, all current Contract Owners will 
be sent prospectuses of the Replacement Fund before the effective date.
    9. The proposed substitution will take place at relative net asset 
value with no change in the amount of any affected Contract owner's 
contract value, cash value, accumulation value, account value or death 
benefit or in dollar value of his or her investment in the Separate 
Accounts.
    10. Shares of the Existing Fund will be redeemed for cash. The 
Companies, on behalf of the Existing Fund subaccount of each relevant 
Separate Account, will simultaneously place a redemption request with 
the Existing Fund and a purchase order with the Replacement Fund so 
that the purchase of Replacement Fund shares will be for the exact 
amount of the redemption proceeds. Thus, Contract values will remain 
fully invested at all times. The proceeds of such redemptions will then 
be used to purchase the appropriate number of shares of the Replacement 
Fund. Initial Class shares of the Existing Fund will be substituted for 
Class I shares of the Replacement Fund, while Service Class 2 shares of 
the Existing Fund will be substituted for Class S shares of the 
Replacement Fund.
    11. The affected Contract Owners will not incur any fees or charges 
as a result of the Substitution nor will their rights or the Companies' 
obligations under the Contracts be altered in any way. The Companies or 
their 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. The Substitution will 
not cause the Contract fees and charges currently being paid by 
affected Contract Owners to be greater after the Substitution than 
before the Substitution. Moreover, affected Contract Owners will not 
incur any additional tax liability as a result of the Substitution. 
Also, as described in the application, after notification of the 
Substitution and for 30 days after the effective date, affected 
Contract Owners may reallocate the subaccount value of the Existing 
Fund to any other investment option available under their Contract 
without incurring any administrative costs or allocation (transfer) 
charges.
    12. In addition to the prospectus supplements distributed to owners 
of Contracts, within five business days after the proposed substitution 
is completed, Contract Owners will be sent a written confirmation 
informing them that shares of the Existing Fund have been redeemed and 
that the shares of Replacement Fund have been substituted. The 
confirmation will show how the allocation of the Contract Owner's 
account value before and immediately following the Substitution has 
changed as a result of the Substitution and detail the transactions 
effected on behalf of the respective Contract Owner because of the 
Substitution.
    13. The Applicants state that Contract Owners will be better served 
by the proposed Substitution for many reasons. The Applicants state 
that the Substitution is a part of the Companies' overall business plan 
to make the Contracts more competitive (and thus more attractive to 
customers) and more efficient to administer and oversee. The 
Substitution will replace an unaffiliated fund with a fund that is 
advised and sub-advised by affiliates of the Companies. Additionally, 
the Replacement Fund will only be available through variable insurance 
products offered by the Companies or their affiliated insurance 
companies. Therefore, the Applicants believe the Board of the 
Replacement Fund will have greater sensitivity to the needs of Contract 
Owners. As the Substitution will provide the Companies with more 
influence over the administrative aspects of the funds offered through 
the Contracts, the Applicants assert that the Substitution will reduce 
costs related to unanticipated or off-cycle communications and mailings 
to Contract Owners. Further, the Companies have an on-going fund due 
diligence process through which they select, evaluate and monitor the 
funds available through the Contracts. The Applicants state that this 
process contributes to the Companies' ability to offer competitive 
products and services and assist their customers in meeting their 
financial goals while permitting the Companies to respond to expense, 
performance and management matters that they have identified in their 
due diligence reviews. The Applicants believe another benefit of the 
Substitution is that the Replacement Fund employs substantially similar 
principal investment strategies and resources to fulfill its investment 
objective while providing a decrease in Total Net Expenses for 
shareholders of the Existing Fund. In addition, the Applicants note 
that for Contract Owners affected by the Substitution, the Companies 
will not exercise any rights reserved by them under the Contracts to 
impose restrictions or fees on transfers from the Existing Fund (other 
than restrictions related to frequent or disruptive transfers) until at 
least 30 days after the effective date of the Substitution.
    14. For these reasons, and the reasons discussed in more detail in 
the application, the Applicants assert that the Substitution is 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the 1940 Act.

Legal Analysis and Conditions

Section 26(c) Relief

    1. The Applicants request that the Commission issue an order 
pursuant to Section 26(c) of the Act approving the proposed 
substitution. Section 26(c) of the Act requires the depositor of a 
registered unit investment trust holding the securities of a single 
issuer to obtain Commission approval before substituting the securities 
held by the trust.
    2. Each of the prospectuses for the Contracts expressly discloses 
that the issuing Company reserves the right, subject to compliance with 
applicable law, to substitute shares of another open-end management 
investment company for shares of an open-end management investment 
company held by a subaccount of a Separate Account. Applicants maintain 
that Contract Owners will be better served by the

[[Page 18637]]

proposed Substitution. Applicants anticipate that the replacement of 
the Existing Fund will result in a Contract that is administered and 
managed more efficiently, and one that is more competitive with other 
variable products. As described in the application, the Replacement 
Fund will be managed according to similar investment objectives and 
policies as the Existing Fund. Moreover, the overall net fees of the 
Replacement Fund are less than those of the Existing Fund.
    3. Applicants assert that the proposed substitution is not of the 
type that Section 26(c) was designed to prevent. Unlike traditional 
unit investment trusts where a depositor could only substitute an 
investment security in a manner which permanently affected all the 
investors in the trust, the Contracts provide each Contract owner with 
the right to exercise his or her own judgment and transfer Contract or 
cash values into other subaccounts. Moreover, the Contracts will offer 
Contract owners the opportunity to transfer amounts out of the affected 
subaccounts into any of the remaining subaccounts without cost or other 
disadvantage. The proposed Substitution, therefore, will not result in 
the type of costly forced redemptions that Section 26(c) was designed 
to prevent. Applicants maintain that the proposed Substitution also is 
unlike the type of substitution which Section 26(c) was designed to 
prevent in that by purchasing a Contract, Contract owners select much 
more than a particular investment company in which to invest their 
account values. They also select the specific types of insurance 
coverage offered by the various Companies under the Contracts as well 
as numerous other rights and privileges set forth in each Contract.
    4. The Applicants agree that for two years following the 
implementation of the Substitution described herein, the net annual 
expenses of the Replacement Fund will not exceed the net annual 
expenses of the Existing Fund as of December 31, 2012 (net annual 
expenses will not exceed 0.64% for the ING Large Cap Growth Portfolio--
Class I, and 0.89% for Class S). To achieve this limitation, DSL will 
waive fees or reimburse the Replacement Fund in certain amounts to 
maintain expenses at or below the limit. Any adjustments will be made 
at least on a quarterly basis. In addition, the Companies will not 
increase the Contract fees and charges, including asset based charges 
such as mortality and expense risk charges deducted from the 
Subaccounts that would otherwise be assessed under the terms of the 
Contracts for a period of at least two years following the 
Substitution.
    5. Under the manager-of-managers relief granted to the ING 
Investors Trust, a vote of the shareholders is not necessary to change 
a sub-adviser, except for changes involving an affiliated sub-adviser. 
Notwithstanding, after the effective date of the Substitutions the 
Applicants agree not to change the Replacement Fund's sub-adviser 
without first obtaining shareholder approval of either (1) the sub-
adviser change or (2) the parties continued ability to rely on their 
manager-of-managers relief.
    6. The Applicants submit that the proposed substitution meets the 
standards set forth in Section 26(c) and assert that the replacement of 
the Existing Fund with the Replacement Fund is consistent with the 
protection of investors and the purposes fairly intended by the policy 
and provisions of the 1940 Act.

Conclusion

    For the reasons and upon the facts set forth above and in the 
application, the Applicants assert that the requested order meets the 
standards set forth in Section 26(c) of the Act and should therefore, 
be granted.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-07012 Filed 3-26-13; 8:45 am]
BILLING CODE 8011-01-P


