SEC Division of Investment Management staff letter: Jackson National Life

Investment Company Act of 1940 – Section 24(f)(2) and Rule 24f-2

RESPONSE OF THE CHIEF COUNSEL’S OFFICE DIVISION OF INVESTMENT MANAGEMENT

Jackson National Life IM Ref. No. 20156231348

Your letter dated June 16, 2015 requests our assurance that we would not recommend enforcement action to the Securities and Exchange Commission (the "Commission" or "SEC") under Section 6(b) of the Securities Act of 1933 (the "1933 Act"), Section 24(f)(2) of the Investment Company Act of 1940 (the "1940 Act") or Rule 24f-2 thereunder, against Jackson National Life Insurance Company, Jackson National Life Insurance Company of New York (together, "Jackson") or certain sub-accounts of certain Jackson separate accounts and feeder funds in which they invest (described further below) in connection with variable insurance products sponsored by Jackson, if Rule 24f-2 registration fees are calculated and paid in the manner described in your letter and summarized below.

You state the following:

Jackson offers variable insurance products ("VIPs") through several of its separate accounts (the "Separate Accounts"). Selected sub-accounts of the Separate Accounts (the "Divisions") invest in underlying funds (the "Underlying Funds") that are separate series structured as feeder funds (the "Feeder Funds", and, together with Jackson and the Divisions, the "Requestors") of open-end management investment companies in a master-feeder arrangement. The Divisions invest substantially all of their assets in the Feeder Funds in reliance on Section 12(d)(1)(E) of the 1940 Act. The Feeder Funds are managed by SEC-registered investment advisers that are affiliates of Jackson. Each Feeder Fund, also in reliance on Section 12(d)(1)(E), invests substantially all of its assets in shares of a corresponding series of an unaffiliated registered management investment company (each a "Master Fund" and collectively, the "Master Funds").

The contract owners' interests in the Divisions are registered as securities under the 1933 Act. The shares of each Feeder Fund and the shares of each corresponding Master Fund also are registered under the 1933 Act. Each Division’s assets, other than cash, will consist solely of shares of its corresponding Underlying Fund, whose sole portfolio holding, other than cash, will be shares of the Master Fund in which it invests as a Feeder Fund. The Separate Accounts are unit investment trusts ("UITs") registered under the 1940 Act, and the Feeder Funds and the Master Funds are series of open-end management investment companies registered under the 1940 Act. The Separate Accounts, Feeder Funds and Master Funds are therefore subject to Section 24(f) of the 1940 Act.

You propose that each Division and Feeder Fund, in calculating its portion of annual share registration fees required by Section 24(f)(2) of the 1940 Act and Rule 24f-2 thereunder, should be permitted to exclude from the aggregate sales price of its securities the aggregate net sales price of Master Fund shares that are, in effect, sold through the Feeder Fund to the Division, under circumstances where registration fees have been paid on the aggregate net sales of Master Fund shares to the Feeder Fund in accordance with Rule 24f-2 and Form 24F-2. You assert that such calculation and payment would be consistent with the purposes of Section 24(f) of the 1940 Act and Rule 24f-2 thereunder.

Analysis

Section 6(b) of the 1933 Act generally requires a registrant to pay to the Commission a fee to register the securities it proposes to offer. Section 24(f) of the 1940 Act and the rules thereunder modify the 1933 Act registration provisions for certain registered investment companies. Section 24(f) of the 1940 Act, in relevant part, provides that an open-end management company or UIT shall be deemed to have registered an indefinite amount of securities upon the effective date of its registration statement and shall pay a registration fee based on the aggregate sales price for which the company’s securities were sold pursuant to a registration of an indefinite amount of securities under Section 24(f)(2) during the previous fiscal year, which is then reduced by the aggregate redemption or repurchase price of the securities of the company during that year and by the aggregate redemption or repurchase price of any securities of the company that were not used in prior years. Rule 24f-2 requires an open-end management company to file a Form 24F-2 accompanied by a registration fee not later than 90 days after the end of any fiscal year during which it has publicly offered its securities.

The Commission and its staff have consistently taken the position that share registration fees under Section 24(f)(2) of the 1940 Act need only be paid once in certain circumstances where an investment vehicle is effectively limited to a single substantive share issuance, notwithstanding the fact that its structure may involve multiple share issuances. In adopting Form 24F-2 in 1995, the Commission codified interpretive advice previously given to the American Council of Life Insurance (the "ACLI Letter") [1] that registered investment companies (such as the Underlying Funds) in which variable insurance contract premiums are invested through unmanaged insurance company separate accounts are not required to pay registration fees on securities they sell to the separate accounts. [2] In its adopting release, the Commission stated that the ACLI Letter was intended ". . . to prevent payment of registration fees under the [1933 Act] for the same aggregate proceeds from investors in variable insurance products that results in ‘double counting’ of assets on which such fees are paid." [3] To that end, Instructions B.5 and C.4 to Form 24F-2 make clear that an underlying fund that files a notice under Rule 24f-2 generally is not required to include securities sold to an unmanaged separate account (typically organized as a UIT) that issues interests that are registered under the 1933 Act and on which registration fees have been or will be paid. Therefore, the underlying fund generally is not required to pay a registration fee for those securities, provided that such an underlying fund relying on this exemption does not include shares redeemed or repurchased from such unmanaged separate accounts for purposes of netting sales under Rule 24f-2. [4]

In a 2012 letter to GMO Trust (the "GMO Letter"), [5] the staff stated that it would not recommend enforcement action to the Commission under Section 6(b) of the 1933 Act, Section 24 of the 1940 Act or Rule 24f-2 thereunder, against funds in a master-feeder structure if the funds excluded the net sales price of shares of each master fund sold to corresponding feeder funds when calculating aggregate sales proceeds for purposes of Form 24F-2. Among other things, the staff conditioned its no-action assurances on the representation that each feeder fund was a feeder fund in a master-feeder structure and would invest substantially all of its assets in a corresponding master fund. You assert that it would be consistent with our position in the GMO Letter and Section 24(f) and Rule 24f-2 if each Division and Feeder Fund, in calculating its respective portion of annual share registration fees, excluded from the aggregate sales price of its securities the aggregate net sales price of Master Fund shares that are, in effect, sold through the Feeder Fund to the Division, under circumstances where registration fees have been paid on the aggregate net sales of Master Fund shares to the Feeder Fund in accordance with Rule 24f-2 and Form 24F-2. In particular, you note that such treatment would avoid the payment, in effect, of triple Rule 24f-2 registration fees for the same aggregate proceeds from contract owners of VIPs that are invested in the Divisions that in turn purchase Feeder Fund (and, indirectly, Master Fund) shares. Your request is conditioned on representations that are designed to ensure that each Division and Feeder Fund is a conduit for investment in the corresponding Master Fund, and that appropriate share registration fees are in fact paid.

Based on the facts and representations in your letter, we would not recommend enforcement action to the Commission under Section 6(b) of the 1933 Act, Section 24(f)(2) of the 1940 Act, or Rule 24f-2 thereunder against any of the Requestors if Rule 24f-2 registration fees are calculated and paid in the manner described in your letter and summarized above. Our position is based particularly on your representations that:

The Separate Accounts will be registered as UITs under the 1940 Act;

The Feeder Funds and the Master Funds will be registered as open-end management investment companies under the 1940 Act;

All interests in the top two tiers of this three-tiered structure will serve as conduits to the contract owners’ interests and benefits under the VIP funded through the various entities;

Each Division will invest exclusively in a corresponding Feeder Fund; [6]

Under normal circumstances, each Feeder Fund will invest at least 95% of its assets in the shares of the corresponding Master Fund, with any remaining assets held in cash;

If a Division or Feeder Fund avoids a registration fee on any sales of its securities (the "Non-Fee Securities") by excluding the net sales price of any Master Fund shares from the amount of that Division’s or Feeder Fund’s sales that are reported in Item 5(i) of Form 24F-2, redemptions or repurchases of such Non-Fee Securities will not be used for purposes of determining the redemption or repurchase price reported for that Division or Feeder Fund in Items 5(ii) and 5(iii) of Form 24F-2;

If either the Division or the Feeder Fund incurs registration fees, thereby permitting the two other entities to avoid registration fees with respect to any related securities they issue, redemptions or repurchases of such Non-Fee Securities will not be used for purposes of determining the redemption or repurchase price reported for such two other entities in Items 5(ii) and 5(iii) of Form 24F-2; and

In all cases, the Division, the Feeder Fund, or the Master Fund will pay the registration fees that the other two entities have excluded from their payments. Each Division, Feeder Fund and Master Fund shall request and obtain confirmation, in writing prior to the payment deadline, of the identity of the entity making the payment and of the actual payment, and the entities shall remain liable for payment of the applicable Rule 24f-2 fees until payment has been made.

This response expresses our view on enforcement action only and does not represent any legal or interpretive position on the issues presented. Because our position is based upon all of your facts and representations, any different facts or representations may require a different conclusion.

Kyle R. Ahlgren Senior Counsel

[1] American Council of Life Insurance, SEC Staff Letter (June 20, 1995).

[2] Registration Fees for Certain Investment Companies, SEC Release No. IC-21332 (Sept. 1, 1995) ("1995 Release") at 17-19.

[3] 1995 Release at 18.

[4] 1995 Release at 18-19.

[5] GMO Trust, SEC Staff Letter (May 24, 2012).

[6] The Divisions may hold cash on a temporary basis as a result of receiving cash after the close of trading that cannot be invested in a Feeder Fund until the following trading day.

Incoming Letter

The Incoming Letter is in Acrobat format.

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Stradley Ronon Stevens & Young, LLP STRADLEY 1250 Connecticut Avenue, N.W., Suite 500 Washington, DC 20036-2652 RONON Telephone 202.822.9611 Fax 202.822 .0140 ATTORNEYS AT LAW www.stradley.com Joan E. Boros, Esq. (202) 507-6413 Jboros@Stradley.com June 16, 2015 Via Electronic Mail Division ofInvestment Management United States Securities and Exchange Commission 100 F Street, N .E. Washington, DC 20549 Attn: Douglas J. Scheidt, Esq. Re: Request for No-Action Relief under Section 6(b) ofthe Securities Act of 1933,
Section 24(f)(2) of the Investment Company Act of 1940, and Rule 24f-2 thereunder
Introduction and Relief Requested
I am writing on behalf of Jackson National Life Insurance Company and Jackson National Life Insurance Company ofNew York (collectively referred to as "Jackson") to request your assurance that the staff of the Division ofInvestment Management (the "Staff') will not recommend that the Securities and Exchange Commission (the "Commission" or "SEC") take enforcement action under Section 6(b) of the Securities Act of 1933, as amended (the "1933 Act"), Section 24(f)(2) of the Investment Company Act of 1940 ("1940 Act"), or Rule 24f-2 thereunder, against any ofthe Requestors (defined below) if Rule 24f-2 registration fees are calculated and paid in the manner described below. Philadelphia, PA • Malvern, PA • New York, NY • Harrisburg, PA • Wilmington, DE • Cherry Hill, NJ • Washington, DC A Pennl)'lvanla LlmJttd Ll•bUity Partnership lifMERITAS LAW FIRMS WORLDWIDE

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Background
Jackson offers variable insurance products ("VIP s") through several of its separate accounts (the "Separate Accounts"). Selected sub-accounts of the Separate Accounts (the "Divisions") invest in underlying funds (the "Underlying Funds") that are separate series structured as feeder funds (the "Feeder Funds", and, together with the "Divisions," the "Requestors") of open-end management investment companies in a master-feeder arrangement. Each of the Requestors is or will be registered with the Commission, either as a unit investment trust ("UIT") or as a management investment company under the 1940 Act. 1 The Divisions invest substantially all oftheir assets in the Feeder Funds in reliance on Section 12(d)(1)(E) ofthe 1940 Act. The Underlying Funds are Feeder Funds that are managed by SEC￾registered investment advisers that are affiliates ofJackson.2 Each Feeder Fund, also in reliance on Section 12(d)(1)(E), invests substantially all of its assets in shares of a corresponding series of an unaffiliated registered management investment company (each a "Master Fund" and collectively, the "Master Funds"). The contract owners' interests in the Divisions are registered as securities under the 1933 Act. The shares of each Feeder Fund and the shares of each corresponding Master Fund also are registered under the 1933 Act. Each Division's assets, other than cash, will consist solely of shares of its corresponding Underlying Fund, whose sole portfolio holding, other than cash, will be shares of the Master Fund in which it invests as a Feeder Fund. Given that the Separate Accounts are UITs registered under the 1940 Act, and the Feeder Funds and the Master Funds are series of open-end management investment companies registered under the 1940 Act, all of these entities are subject to Section 24(f) ofthe 1940 Act.
Section 24(f)(1) provides that an open-end management company or UIT is deemed to have
registered an indefinite amount of securities upon the effective date of its registration statement under the 1933 Act. Section 24(f)(2) requires an open-end management company or UIT to pay a registration fee to the Commission, calculated in the manner specified in Section 6(b) of the 1933 1 Each Separate Account is registered with the Commission as a UIT and, as such, does not have an investment adviser. Each Feeder Fund is managed by an affiliated investment adviser registered with the Commission under the Investment Advisers Act of 1940, as amended. 2 Assets of separate accounts of insurance companies offering YIPs are, as mandated under state insurance law, owned exclusively by the insurance company. The "units" in the sub-accounts of an insurance company's separate account, while owned legally by the insurance company, serve as the measuring values of the interests and benefits provided by the YIPs offered through the sub-accounts. Thus, contract owners are beneficial owners rather than legal owners of not only the underlying fund shares in which the sub-accounts invest, but also of the sub-accounts units.

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Act, based upon the aggregate sales price ofits securities sold during each fiscal year, reduced by the aggregate price of such securities redeemed or repurchased during that fiscal year. Discussion Requestors believe that each Division and Feeder Fund, in calculating its portion of annual share registration fees required by Section 24(f)(2) and Rule 24f-2 thereunder, should be permitted to exclude from the aggregate sales price ofits securities the aggregate net sales price of Master Fund shares that are, in effect, sold through the Feeder Fund to the Division, under circumstances where registration fees have been paid on the aggregate net sales of Master Fund shares to the Feeder Fund, in accordance with Rule 24f-2 and Form 24F-2. Such treatment would avoid the payment, in effect, of triple Rule 24f-2 registration fees for the same aggregate proceeds from contract owners ofVIPs that are invested in the Divisions that in turn purchase Feeder Fund (and, indirectly, Master Fund) shares. Such calculation and payment would be consistent with the purposes of Section 24(f) of the 1940 Act and Rule 24f-2 thereunder. Rule 24f-2 through its related Form 24F-2 provides for the elimination offees on assets"... for the same aggregate proceeds from investors in variable insurance products that results in 'double counting' of assets on which such fees are paid ...." 3 The relief requested hereby would apply that principle of eliminating duplicate fees to both the Divisions and Feeder Funds. In this regard, Requestors assert, as discussed below, that the Commission's rationale in revising Rule 24f-2 to avoid a "doubling up" ofregistration fees is, if anything, even more compelling in order to prevent a "tripling up" of registration fees under the Requestor's three-tiered structure. Rule 24f-2(a) provides as follows:
Any face-amount certificate company, open-end management company or unit investment trust ("issuer") that is deemed to have registered an indefinite amount of securities pursuant to section 24(f) ofthe Act (15 U.S.C. 80a-24(f)) must not later than 90 days after the end of any fiscal year during which it has publicly offered such securities, file Form 24F -2 (17 CFR 274.24) with the Commission. Form 24F-2 must be prepared in accordance with the requirements ofthat form, and must be accompanied by the payment of a registration fee with respect to the securities sold during the fiscal year in reliance upon registration pursuant to
section 24(f) ofthe Act calculated in the manner specified in section 24(f) ofthe
Act and in the Form. (Emphasis provided)
3 See Registration Fees for Certain Investment Companies, IC-21332 (Sept. 1, 1995) [60 FR 47041 (Sept. 11, 1995)] at 47044, and American Council ofLife Insurance, SEC No-Action Letter (pub. avail June 20, 1995) (the "ACLI Letter").

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Instruction C to Form 24F-2 provides as follows:
3. Special Rule for Unit Investment Trusts - The aggregate sale price of securities
sold to a [UIT] that offers interests that are registered under the Securities Act and on which a registration fee has been or will be paid to the Commission, may be excluded from the aggregate sale price of securities reported in Item 5(i). If the issuer chooses to exclude the aggregate sale price of these securities from Item 5(i), the issuer may not use securities redeemed or repurchased from those UITs for purposes of determining the redemption or repurchase price of securities in Items 5(ii) and 5(iii). The above-quoted provisions are the basis under which Jackson and all its Underlying Funds have been able to avoid paying duplicate fees (although the associated Master Funds have paid duplicative fees). These provisions reflect an underlying principle under Rule 24f-2 of eliminating duplicative registration fees, as articulated by the Commission when amending the rule in 1995 and by the SEC Staff in the ACLI Letter from which that 1995 amendment was derived. This principle also has been embodied in the recent staff letter to GMO Trust,4 which extended such relief to management investment companies. Consistent with all of the precedent cited, and with particular focus on the GMO Letter, the relief requested herein should be granted as to the Requestors' three-tiered structure that would otherwise incur duplicative fees, rather than being limited to the funds underlying a UIT that are specifically described in the above￾quoted instruction to Form 24F-2. Thus, when a Division, in compliance with Section 12(d)(1)(E), invests in a Feeder Fund that invests in a Master Fund, only one entity would be required to pay registration fees on the net amounts of proceeds from contract owners that are ultimately invested in a master fund. In order to achieve that result, the amount of registration fees payable for any period would be computed as described in this request, although in differing situations it may be the Master Fund, the Feeder Fund or the Divisions that actually bears the cost of paying that amount. In Jackson's case it has been the Divisions rather than the Feeder Funds (as well as the Master Funds) that have borne the cost ofthe registration fee payments, as the Divisions to date have only invested in affiliated Feeder Funds. It is, however, industry practice to negotiate and specify in so-called "Participation Agreements" entered into with unaffiliated underlying funds in which 4 GMO Trust, SEC No-Action Letter (pub. avail May 24, 2012 (the "GMO Letter"). The GMO Letter articulates the GMO Trust's assertion that the grant ofrelief"would prevent the payment of rule 24f-2 registration fees for the same aggregate proceeds from investors in each GMO Feeder Fund, thereby avoiding "double counting" of assets on which such registration fees are paid." This principle is equally relevant to "triple counting" of the same proceeds.

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other insurance company separate accounts invest whether the separate account or the underlying fund bears the costs of registration fees. The Participation Agreements are filed as exhibits to the registration statements of the insurance companies and/or the underlying funds. In the absence of memorialization in the Participation Agreements or any other document, negotiations as to which entity is paying the Rule 24f-2 fees will be concluded and documented in advance of the time when the Form 24F-2 filings need to be made. Conditions The Requestors make the following representations as conditions to the relief:

1. The Separate Accounts will be registered as UITs under the 1940 Act;
2. The Feeder Funds and the Master Funds will be registered as open-end,
   management investment companies under the 1940 Act;
3. All interests in the top two tiers of this three-tiered structure will serve as conduits
   to the contract owners' interests and benefits under the VIP funded through the various entities;
4. Each Division will invest exclusively in a corresponding Feeder Fund5
   ;
5. Under normal circumstances, each Feeder Fund will invest at least 95% of its
   assets in the shares of the corresponding Master Fund, with any remaining assets held in cash;
6. If a Division or Feeder Fund avoids a registration fee on any sales of its securities
   (the "Non-Fee Securities") by excluding the net sales price of any Master Fund shares from the amount of that Division's or Feeder Fund's sales that are reported in Item 5(i) ofForm 24F-2, redemptions or repurchases of such Non-Fee Securities will not be used for purposes of determining the redemption or repurchase price reported for that Division or Feeder Fund in Items 5(ii) and 5(iii) of Form 24f-2;6 5 The Divisions may hold cash on a temporary basis as result of receiving cash after the close of trading that annot be invested in a feeder fund until the following day. 6 This Condition 6 and Condition 7 and the next one are consistent with the principle that is articulated in the second sentence of instruction C.3. to Form 24F-2. Instruction C.3, applicable to the provision permitting the exclusion of duplicate fees as between UITs and underlying funds, states: "If the issuer chooses to exclude the aggregate sale price of these securities from Item 5(i), the issuer may not use securities redeemed or repurchased from those UITs for purposes of determining the redemption or repurchase price of securities in Items 5(ii) and 5(iii)."

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7. If either the Division or the Feeder Fund incurs and pays registration fees, thereby
   permitting the two other entities to avoid registration fees with respect to any related securities they issue, redemptions or repurchases of such Non-Fee Securities will not be used for purposes of determining the redemption or repurchase price reported for such two other entities in Items 5(ii) and 5(iii) of Form 24f-2; and
8. In all cases, the Division, the Feeder Fund, or the Master Fund will pay the
   registration fees that the other two entities have excluded from their payments.
   Each Division, Feeder Fund and Master Fund shall request and obtain confirmation, in writing prior to the payment deadline, of the identity ofthe entity making the payment and ofthe actual payment, and the entities shall remain liable for payment ofthe applicable Rule 24f-2 fees until payment has been made. Conclusion Based on the foregoing, and subject to the representations and conditions stated above, Requestors seek your assurance that the Staff will not recommend that the Commission take enforcement action under Section 6(b) ofthe 1933 Act, Section 24(f) ofthe 1940 Act, or Rule 24f-2 thereunder, against any of the Requestors if Rule 24f-2 registration fees are calculated and paid in the manner described above. cc: Kyle R. Ahlgren Esq., Senior Counsel, Chief Counsel Office, Division oflnvestment Management Susan S. Rhee, Esq., Jackson National Life Insurance Company

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