SEC Division of Investment Management staff letter: The Equitable Life Assurance Society of the United States

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON. D.C. 20549

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Decmber 22, 1995
Thomas C. Lauerman, Es.

Freeman, Levy, Kroll & Simonds

Washigton Squae-1050 Connecticut Ave., N.W.
Washigton, D.C. 20036-5366

Re: The Eqitable Life Assurace Society of the United States Dea Mr. Lauerman:

Enclosed is our response to your lettr of Decmber 20, 1995. In any future corresndence on this matter, pleae refer to our Reference No. IP-7-95. Sincerely, - J~- ~ Susa Nash

Senior Adviser to the Director
Enclosure

p DEe 2 2 1995
REPONSE OF THE OFFICE OF Our Reference No; IP-7-95 INSURANCE PRODUCTS The Equitable Life Assurance DIVISION OF INVESTMENT MANAGEMENT Society of the United States

By letter dated December 20, 1995 ("Request Letter"), you request assurance that the staff would not recommend enforcement action againt The Equitable Life Assurance Society of the. United States ("Equitable Life") if certin annuity contracts that contain a "market value adjustment" feature ("MV A Contracts") are amended. The amendment would provide ' for legal insulation of the non-unitized separate accounts ("Accounts") that support Equitable Life's liabilties under the MV A Contracts, and Equitable Life does not intend to register the Accounts pursuant to the Investment Company Act of 1940 (the "Investment Company Act"). Based on the representations in the Request Letter, which are sumaried below, we would not recommend enforcement action if Equitable Life takes the proposed actions. The staff also withdraws its positions as set fort in The Travelers T-Mark Anuity (pub. avaiL. May 13, 1993) ("Travelers") and Fortis Benefits Insurance Company (pub. avaiL. June 8,
1993) ("Fortis").
I. Operation of the MV A Contracts

A. MV A Contract Guarantees

The holder of an MV A Contract may elect one or more of sever~l "Guarantee Periods" offered by Equitable Life. A Guarantee Period is a period of time with a specified expiration date ("Expiration Date") during which Equitable Life wil credit a guaranteed rate ("Guaranteed Rate") of interest to amounts allocated by the holder to that Guarantee Period. For each business day, Equitable Life establishes a Guaranteed Rate of interest for each Guarantee Period. The Guaranteed Rate established for a specified Guarantee Period and business day applies to all amounts newly allocated to that Guarantee Period on that day and continues in effect as to such amounts so long as they remain allocated to that Guarantee Period. This results in an amount credited to the holder at the Expiration Date ("Maturity Value") that is guaranteed by Equitable Life and is mathematically determinable in advance.

The Guaranteed Rate established for a Guarantee Period each business day is in large
part based on then-current yields for zero coupon corporate securities with approximately the
same maturity as that Guarantee Period, less a "spread" established by Equitable Life. Neither the return earned by assets in the Accounts nor any realized or unrealized gains or

losses in the Accounts' assets are considered by Equitable Life in setting Guaranteed Rates.

Rather, such rates are based on considerations that are solely prospective in nature. B. MVA Contract "Market Value Adjustment" 1/ Subject to certin restrictions, the holder of an MV A Contract may withdraw or transfer his or her interest allocated to a Guarantee Period prior to the Expiration Date. In the event of such a premature withdrawal or transfer, the value of the holder's interest on the withdrawal or transfer date ("Annuity Account Value") is the then present value of the ' Maturity Value. The discount rate used to compute the Anuity Account Value is generally the Guaranteed Rate applicable on the withdrawal or transfer date to new allocations made to 1/ Because of the "market value adjustment" feature, the MV A Contracts are registered

under the Securities Act of 1933.
.'

that same Guarantee Period (i.e., the Guarantee Period having the same Expiration Date). 2/ As a result, on any business day prior to the Expiration Date, the amount that a holder may withdraw or transfer from a Guarantee Period having a given Maturity Value is generally the same as the amount that would need to be allocated to that Guarantee Period on that date to provide that same Maturity Value. Ths precludes holders from seeking to profit by withdrawing funds earng a paricular Guaranteed Rate from a Guarantee Period and

simultaneously reallocating those funds to the same Guarantee Period at a time when Equitable Life is offering a higher Guaranteed Rate. If the Guaranteed Rates for a Guaratee Period are different at the tie a holder

allocates monies to the Guarantee Period and the time he or she makes a prematue surrender or withdrawal, the holder's Anuity Account Value on surrender or withdrawal wil be different from the "Guaranteed Period Amount," which is the amount the holder

originally allocated to the Guarantee Period~ plus interest accumulated to the surrender or withdrawal date at the Guaranteed Rate applicable at the time of the .originl allocation. The difference between the Anuity Account Value and the Guaranteed Period Amount is, the . "market value adjustment." The market value adjustment results from any difference between the Guaranteed Rates for a Guarantee Period at the time the holder of an MV A Contract allocates monies to the Guarantee Period and the time he or she makes a premature surrender or withdrawaL. The amount of the market value adjustment is not determined by the market value of any assets or class of assets, including assets maintained in the Accounts, or any index, except to the extent that Equitable Life's daily establishment of 2/ If Equitable Life is no longer offering a Guarantee Period with that same Expiration

Date, it wil use the Guaranteed Rate for the next closest Expiration Date. If

Equitable Life is no longer offering new Guarantee Periods, it wil use a rate

determined in accordance with its procedures then in effect. Equitable Life also reserves the right, for purposes of computing the Anuity Account Value, to add to the current Guaranteed Rate that is used for discounting the Maturity Value an additional percentage'up to specified limits. In the case of a withdrawal, a surrender

charge also may apply.
"

Guaranteed Rates takes account of certin then-current market rates of interest. 'JJ
II. Background and Business Purposes of Non-Unitized Separate Accounts

The Request Letter represents that insurers generally have maintained assets supporting market value adjustment contracts in non-unitized separate accounts M primarily to permit such assets to be valued on a market value basis, rather than an amortizd cost basis, for purposes of state insurance law requirements. Equitable Life believes tht valuation of assets and liabilties associated with MV A Contracts on a market value basis, rather than'an amortizd cost basis, results in a more timely and direct reflection of market value adjustment contract operations in statutory fincial statements. Equitable Life also.

believes that use of a non-unitized separate account faciltates the establishment and

monitoring of specific investment policies appropriate to the assets supporting the MV A Contracts. In establishing the Accounts, Equitable Life was motivated primarily by the foregoing considerations. If the MV A Contracts are amended to provide for legal inlation of the

Accounts, the holders of MV A Contracts wil, in the event of Equitable Lif~'s liquidation under circumstances where it could not pay all of its inurance obligations, have a priority 'J/ The Request Letter provided the following example of the operation of the "market

value adjustment. II Assume that $100,000 is allocated on February 15, 1996, to a Guarantee Period with an Expiration Date of February 15, 2005, at a Guaranteed

Rate of 7%, resulting in a Maturity Value at the Expiration Date of $183,845. If a full surrender was made on February 15, 2000, the holder of the contract would receive the following Annuity Account Values and be subject to the following market value adjustments.

~ Guaranteed Rate Offered on February 15,
2000, for Guarantee Period with February

15. 2005 Expiration Date
    5% 7% 9%
    (1) Annuity Account Value $144,048 $131,080 $119,487 (2) Guaranteed Period Amount $131,080 (3) Market Value Adjustment $12,968 $0 ($11,593) ((1) - (2))

Thus, the contractholder is subject to a positive market value adjustment when rates have fallen from 7% to 5%, no market value adjustment when rates remain at 7%, and a negative market value adjustment when rates have risen from 7% to 9%. ~I "Non-unitized separate account" refers to a separate account that is not strctured as

a single unit operating independently of the investment experience of the insurer's general account. See Defintion of Anuity Contract or Optional Anuity Contract,

Securities Act ReI. No. 33-6645, at n.13 (May 29, 1986). of,

claim to the portion of the related Account's assets covered by the insulation provision, 'J/ while retaining the right to share in the general assets of Equitable Life to the extent of any deficiency in amounts available from the Account. Legal inulation for the Accounts' would

therefore serve the additional purpose of providing the holders of MV A Contracts with enhnced assurance that, in the event of Equitable Life's liquidation under circumstances where it could not pay all of its insrance obligations, sufficient assets wil be available to satisfy Equitable Life's obligations with respect to the MV A Contracts. Equitable Life believes that ths additional protection may enhance its competitive position with respect to the sale of MV A Contracts. m. Account Investment Experience is Not Passed Through to the Holders of MV A

Contracts
Amounts received by the holders of MV A Contracts upon maturity do not depend' upon the investment experience of the Accounts. As described above, upon the Expiration Date of a Guarantee Period, the holder of an MV A Contract receives the amount originlly allocated to the Guarantee Period, plus interest accumulated to the Expiration Date at the Life and is mathematically Guaranteed Rate. Ths amount, which is guaranteed by Equitable

determinble in advance, is not affected by the investment experience of the related

Account.

Nor do amounts received by the holders of MV A Contracts upon premature

withdrawal or surrender depend upon the investment experience of the Accounts. The

amount of any market value adjustment results from and depends on the difference between

the Guaranteed Rates for a Guarantee Period at the time the holder of an MV A Contract

'allocates monies to the Guarantee Period and the time he or she makes a premature surrender or withdrawaL. In setting Guaranteed Rates, Equitable Life does not consider the investment performance of the related Account. The assets maintained in the Accounts are the propert of Equitable Life and are

managed as a part of its business. Like assets supporting traditional inurance products

other than the MV A Contracts, Account assets are managed with the ultimate objective of

generating a return to Equitable Life that, after payment of all obligations to holders of

MV A Contracts, covers expenses and provides a profit to Equitable Life. To the extent

these efforts are successful, Equitable Life retains the resulting profit. To the extent they

are unsuccessful, Equitable Life bears the resulting loss.

IV. OblÌímtions of Equitable Life

When the holder of an MV A Contract holds his or her, interest to the Expiration Date, Equitable Life is obligated, without regard to the value of Account assets, to pay the full amount allocated to the Guarantee Period, plus accumulated interest at the Guaranteed Rate, as in the case of fixed inurance products. Equitable Life is also obligated, without regard to the value of Account assets, to pay the Anuity Account Value to a holder who makes a premature withdrawal or surrender. So long as Equitable Life is not liquidated under circumstances where it could not pay all of its inurance obligations, holders of MV A Contracts have no claim against the Accounts. Moreover, even in the event of Equitable, Life's liquidation under circumstances where it could not pay all of its insurance obligations, ~/ That is, the portion of the Account's assets equal to the reserves and other contract

liabilties.
~.

the holder of an MV A Contract has a claim against the related Account's assets and against Equitable Life that is measured not by the value of the Account's assets or the Account's investment performance over any period of time, but by a mathematical formula based on Guaranteed Rates. State insurance laws require life inurance companies periodically to value their assets and liabilties according to prescribed accounting principles. These laws require that the insurer maintain an excess of such "statutory assets" over "statutory liabilties" of at least a prescribed amount -- i.e., a minium amount of statutory capital and surplus. The minium capital and surplus required of Equitable Life in its domicilary state of New York ' is $2 milion. As a practical matter, Equitable Life has statutory capital and surplus far in excess of that amount -- approximately $2 bilion at September 30, 1995. Under New York law, providing legal insulation for a separate account does not affect the computation of (or the required minum amount of) an inurer's statutory capital and surplus. New York state has adopted regulations applicable to market value adjustment contrcts and the non-unitized separate accounts that fund them. Under New York law, Equitable Life is required to value the assets and contract liabilties of the Accounts at least annually. In addition, the law imposes on Equitable Life an ongoing requirement to

mainin Account assets at least equal to the Account's contract liabilties, and procedures must be maintained to assure that ths requirement is satisfied. If the liabilties exceed the assets, Equitable Life is required imediately to transfer sufficient assets into the Account to remedy the shortfall. On the other hand, whenever the value of an Account's assets exceeds

the value of the Account's contract liabilties, state law permits Equitable Life to transfer the surplus to its general account. Holders of MV A Contracts have no claim upon or interest in such transferred assets, except that such assets are part of Equitable Life's general account. Equitable Life represents that the value of the assets maintained in each Account wil at all times at least equal the amount of that Account's contract liabilties, both determined as required by New York law. Providing legal insulation for the Accounts wil not change the New York inurance law requirements as to contributing, withdrawing, and maintaining Account assets; nor wil it change Equitable Life's practices in these regards.
v. Marketin!! the MV A Contracts

Equitable Life wil take steps to ensure that its marketing program and materials refer to the Accounts as pools of assets that provide an additional measure of assurance that the holders of MV A Contracts wil receive full payment and not as investment vehicles in whose performance the holders of MV A Contracts wil have any int~rest.
VI. Conclusion

In Hartford Life Insurance Company (pub. avaiL. Oct. 29, 1984) ("Hartford"), we indicated that we would not recommend enforcement action againt an inurance company that established a non-unitized separate account to support its liabilties under annuity contracts that contain a "market value adjustment" feature without registration of the account under the Investment Company Act. We believe that legal insulation of the account alone should not alter the Hartford conclusion. We have therefore reconsidered the Travelers and Fortis letters and have determined that the position taken in those letters regarding legally insulated non-unitized separate accounts supporting annuity contracts that contain a "market value adjustment" feature no longer represents the views of the Division. A non-unitized

separate account that supports an annuity contract that contains a "market value adjustment" feature is not an issuer for purposes of section 3(a) of the Investment Company Act solely because the separate account is legally insulated. Legal insulation provides an additional protection for the holder of such a contract, which does not change the fact that the insurance company is obligated to pay the holder an amount that is mathematically determinable and not dependent on the investment experience of the account. §.I Based on the representations in the Request Letter, and without necessarily agreeing with your legal analysis, the staff would not recommend enforcement action againt Equitable Life if the MV A Contracts are amended to provide for legal inulation of the Accounts without registration of the Accounts pursuant to the Investment Company Act. Our conclusion is based in particular on the representations that:
(1) a holder of an MV A Contract receives an amount upon maturity that is

mathematically determinble in advance and is not affected by the investment experience of the related Account; (2) a holder of an MY A Contract who makes a premature withdrawal or

surrender receives an amount adjusted by a mathematical formula based on changes in guaranteed interest rates and not based on the investment experience of the related Account; (3) Equitable Life is obligated to pay all amounts due to the holder of an MV A

Contract without regard to the value of the related Account's assets, and Equitable Life retains the profits and bears the losses from Account operations; (4) Equitable Life is obligated under state law to maintain Account assets at least

equal to the related contract liabilties and imediately to transfer to an Account sufficient assets to remedy any shortfall, and Equitable Life represents that the value of the assets in each Account wil at all times at least equal the amount of that Account's contract liabilties; (5) whenever the value of an Account's assets exceeds the value of the Account's contract liabilties, state law permits Equitable life to transfer the surplus to its general account, and the holders of MV A Contracts have no claim upon or interest in such transferred assets, except that such assets are part of Equitable Life's general account;

(6) Equitable Life established, and proposes to provide for legal insulation of, the

Accounts for business purposes unrelated to any attempt to pass though investment experience of the Accounts; and (7) Equitable Life wil take steps to ensure that its marketing program and

materials refer to the Accounts as pools of assets that provide an additional measure of assurance that the holders of MV A Contracts wil receive full §.I Cf. Prudential Insurance Company of America v. Securities and Exchange

Commission, 326 F.2d 383 (3d Cir. 1964), cert. denied, 377 U.S. 953 (1964) (separate account funding variable annuity subject to Investment Company Act where amounts received by annuitant depend on account performance). !

payment and not as investment vehicles in whose performance the holders of MV A Contracts wil have any interest. .

Because our position is based on the facts and representations set fort in the Request Letter,

you should note that different facts or representations may require a different conclusion. k.-/Y Kevin M. Kif off

Senior Counsel

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LAW OFFICES
FREEDMAN, LEVY, KROLL & SIMONDS
WASHINGTON SOUARE-IOSO CONNECTICUT AVE.,N. W.
WASHINGTON, D. C. 20036-5366

(202) 457-5100 CABLE '"ATTORNEYS"
THOMAS C.LAUERMAN TELECOPIER: 202-457-5151

/2021457-5108
Investment Company Act of 1940/Sections 3(a) and (2) (a) (22) BY HAD DELIVRY Brenda D. Sneed, Esquire

Assistant Director

Office of Insurance Products

Room 10162, Stop 10-6

Division of Investment Management

Securities and Exchange Commssion

450 Fifth Street, N.W.
Washington, D.C. 20549

Re: The Equitable Life Assurance Society of the United States Dear Ms. Sneed:

INTODUCTION AND BACKGROUND

We are wrting on behalf of our client, The Equitable lie Assurance Society Qf the

United States ("Equitable Ufe"), a stock life inurance company, domiciled in and organed under the laws of the state of New York. Ths letter concern the status under the Investment Company Act of 1940 (the "1940 Act") of separate accounts (the "Accounts") established by Equitable Ufe to fund certain annuity contractsl that incorporate what is 1 For convenience, anuity contracts are generaly hereinafer referred to as .contracts." When contracts are

issued in group form, holders receive certicates under the group contracts that represent interests substantialy equivalent to the interests of holders of contracts issued in individual form. When used herein the term "contracts. also includes any certifcates under contracts issue~ in group form.

commonly referred to as a market value adjustment ("MY A'i) featue.2 This MV A feature3 applies to certain "MV A Interests," described further below, that are supported by the Accounts. The Accounts are a tye of separate account that is commonly described as "non￾untied." Equitable Lie intends to amend the contracts to provide that the portion of the

Accounts' assets equal to the reserves and other contract liabilties under the MY A contract

will not be chargeable with liabilties arising from any other business of Equitable Life. By

virtue of this amendment, as discussed further in i. below, the Accounts' assets will be

"legally insulated" from the claims of certain other creditors of Equitable Ufe.4 We are writing this letter to seek assurance that, following such amendment to the contracts, the staff of the Securities and Exchange Commssion (the "Commssion") will not recommend enforcement action to the Commssion if the Accounts are not registered under the 1940 Act.s For the reasons set fort in i. through iv. under "DISCUSSION" below, the legally￾insulated Accounts will not be "issuers" of securities withi the meang of 1940 Act Section 2(a)(22) and, therefore, will not be "investment companes" withi the meaning of 1940 Act
Section 3(a). On the contrary, contract holders will not have interests in the Account with
the investment characteristics that other precedents (discussed in iv. below) have held to 2 Certai of the contracts that are the subject of thi no-action request alo include traditional variable separate account opûons. Equitable Lie curently has effecûve under the Securties Act of 1933 (the "1933 Act") two Form S-3 regitraûon statements with respect to the "MV A Interests" isued pursuant to the contracts (File Nos. 33-8856 and 33-89510) and two Form N-4 regitraûon statements with respect to the tradiûonal varable component of such combinaûon contracts (File Nos. 33-83750 and 2-300). These regitraûon statements are

maitaied for Equitable Lie's "Income Manager" and "Equi-Vest" series of contract, respectively, the MYA

Interests under each of which are fuded by a dierent Accunt. For convenience, our dicusion of parûcular proviions of the MY A contract is in terms of the Income Manager contracts covered by File No. 33-8856.

Except for the matuty dates involved, which in any cae wi change from tie-to-time, the interests covered by File No. 33-8856 are the sae as those covered by File No. 33-89510. For marketig puroses, the term "Fixed Maturty Period" intead of "Guaantee Period," is used in the prospectus contaied in File No. 33-89510. 3 Although industr usage would term the MY A feature a "market value adjustment," thi is somethig of a

minomer, as dicused at page 5 below.
4Secûon 4240(a)(12) of the New York Inurance Law (hereinafer Insurance Law) provides that, to the extent provided in the contract, "the asets in a separate accunt shal not be chargeable with liabilûes aring out of any other business of the inurer:

The Travelers Insurance Company The staf of the Commision has previously considered similar requests of

("Travelers") and Fortis Benefits Insurance Company ("Fortis"). SEC staf letters, date~ May 13, 1993 and June 8, 1993, respectively. The related request letters from Travelers and Forti are referred to hereinafter as the "Request Letters."

Brenda D. Sneed, Esquire be a sine qua non for applying the federal secuties laws in the context of anuity contract. Our opinon that the Accounts wi not be investment companes is strongly supported by the precedents and priciples applied to pools of secuties that serve as collateral (discussed in il. below) in the context of retai repurchase agreements and so-caed "defeasance"

truts.
Moreover, as explaied in i. below, Congress has recogned that holders of traditional anuity contracts generaly do not requie the protections of the 1940 Act. Legal

insulation of the Accounts wil provide additional protection for contract holders and will have no adverse consequences for such holders. Accordingly, such legal inulation wi

render 1940 Act regulation even more unnecessar.
As a predicate for the more detailed analysis that is set forth below under "DISCUSSION," the following paragraphs provide a brief description of the MV A Interests and the Accounts.6

Contract holders acquire MV A Interests when they elect one or more of several "Guarantee Periods" offered by Equitable Ufe. A Guarantee Period is the name for a period of time during which Equitable Life will credit a "Guaranteed Rate" of interest to amounts allocated by the holder to that Guarantee Period. Currently, depending on the series of contract, Equitable Life offers up to fifteen dierent Guarantee Periods, with one such period expirng on Februar 15 of each of the fieen years commencig with 1996 (each such date being an "Expiration Date"). Other Guarantee Periods, of course, are expected to be offered in the futue. While Equitable lie may not termate Guarantee Periods to which allocations already have been made, Equitable lie is not obligated to

maintain any paricular numbers or maturities of Guarantee Periods for future allocations. For each business day, Equitable Ufe establishes a Guaranteed Rate of interest for each Guarantee Period that will apply to al amounts newly alocated to that Guarantee Period on that day.' For example, contract holders may alocate new premium payments made by them to a Guarantee Period or may, subject to certai restrctions, make transfers to one Guarantee Period from another or from any other investment options under the contract. Simarly, the amount credited to the holder in a Guarantee Period at its Exiration Date, which is referred to as the "Matuty Value," may, among other alternatives, 6With respect to the characteritics of the MV A Interests, maner of the Accunts' operation, and matters of state inurance law and reguation, we have relied upon inormation supplied to us by Equitable Lüe for purposes of thi letter. 'The frequency with which Equitable Lüe adjusts the Guaranteed Rates wi var dependig on the series

of contracts and other factors.

from among those then being be "rolled over" to one or more other Guarantee Periods

offered, subject to certai restrictons.

Each day's Guaranteed Rate offered for a given Guarantee Period is applicable to new premium, "rollovers," and tranfers alocated to that Guarantee Period on that day. That day's Guaranteed Rate (which, under New York law, must be at least 3% per anum)8 wil be applied to al such amounts alocated to the related Guarantee Period on that day and wi continue in effect as to such amounts so long as they remai alocated to that Guarantee Period. This results in a Maturity Value at the Exiration Date that is

guaranteed by Equitable Life and is mathematicaly determnable in advance.

Subject to certain restrictions, an MV A Interest holder may withdraw or tranfer his or her interest allocated to a Guarantee Period prior to the Expiration Date. For puroses of such premature withdrawals or tranfers, the value of the holder's interest on any date is calculated as the then present discounted value of the Maturity Value of that Guarantee Period. Equitable lie refers to the resulting amount as the "Anuity Account Value."9

For purposes of computing ths amount, the Guarantee Period's Maturity Value is discounted to present, value using the Guaranteed Rate then being offered10 on new allocations to that same Guarantee Period (i.e., the Guarantee Period having the same Exiration Date).l1 The effect of this is that, on any business day prior to the Expiration Date, the amount that a holder can withdraw or tranfer from a Guarantee Period having a given Maturity Value is the same as the amount that would need to be allocated to that Guarantee Period on that date to provide that same Maturity ValueP Thus, all MV A Interests having the same Exiration Dates are, in economic substance, "zero coupon"

obligations that Equitable Life "issues" and "repurchases" at the same "price" (i.e., the same 8Secûon 44.3(a)(3) of Title 11 of the Compilation of Codes, Rules and Regulations of the State of New York lhereinafer NYCRR). 9The Anuity Account Value is alo the amount that wi be applied to an anuity payment option under a contract if the anuity commencement date is prior to the Guarantee Period's Exiraûon Date. 10 If Equitable Lie is no longer offeri a Guarantee Period with that same Exiraûon Date, it wi use the Guaranteed Rate for the next closest Exiraûon Date. If Equitable Lie is no longer offeri new Guarantee Period, it wi use a rate determed in accrdace with its procdures then in effect. Equitable Lie reserves the right, for purses of computi the Anuity Accunt Value, to add to the cuent Guaranteed Rate that is used for dicounti the Matuty Value an addiûonal percentage of up to .2% under the Income Manager

contracts and up to .50% under the Equi-Vest contract. is subject to certai 11 In the cae of a withdrawal a surender charge may alo apply. Th surender charge

exceptions and curently is a maxum of 7% of each premium paid.
12The only exceptions would result from the factors dicussed in footnotes 10 and 11 above.

interest rate to maturity) on any given business day prior to the Exiration Date. Ths precludes holders from seeking to profit by withdrawig fuds from one Guarantee Period and simultaneously allocating funds to another Guarantee Period with the same Exiration Date. . Because, as descrbed above, tranactons in MY A Interests on each date are "priced"a based on CUent Guaranteed Rates, if such cuent rates have changed since the time

holder alocated an amount to a Guarantee Period, the holder's Anuity Account Value in that Guarantee Period wi be dierent (higher or lower) from what Equitable lie refers to as the holder's "Guaranteed Period Amount." The Guaranteed Period Amount is the amount the holder originally allocated to a Guarantee Period, with interest accuulated to date at the actual Guaranteed Rate applicable thereto. Although, consistent with common parlance, Equitable Ufe refers to the diference between an MY A Interest's Anuity Account Value and its Guaranteed Period Amount as a "market value adjustment," ths termology should not be misinterpreted. The amount of the adjustment is not determed by the "market value" of any assets or class of assets (in the Accounts or otherwse) or any index, except to the extent that Equitable lie's daiy setting of Guaranteed Rates for the "issuance" and "repurchase" of MY A Interests on that day takes account of certai then-

current market rates of interest, as discussed in II.B. below. Examples of MY A computations are enclosed as Exibit A to this letter. The Accounts have been duly established under New York insurance law as separate accounts of Equitable lie that do not have unit values and which thus fal within the

category of "non-unitized" separate accountsP Income realed by each Account, and other realed and unealed gai and losses with respect to assets in the Account are, pursuant to the requiements of New York law, credited to the Account without regard to any other business conducted by Equitable lie.14 Nevertheless, the MY A Interests are par of Equitable lie's inurance business. Accordingly, the assets in the Accounts are the

propert of Equitable lie and wi be managed as a par of Equitable lie's inurance business. That is, lie the assets supportg traditional inurance products other than the MY A Interests, the Accounts' assets wi be managed with the ultimate objective of holders generatig a retu to Equitable lie that, afer payment of al of its obligations to

of MY A Interests, covers expenses and provides a profit to Equitable lie. To the extent

these effort are successfuL, the benefit wi be Equitable lie's. To the extent unsuccessful, the risk wi be Equitable lie's. 13lnurance Law § 424(a). 14 Insurance Law § 4240(a)(1). Th requiement, however, in no way restrcts Equitable's right to or access to any assets in an Account that are in excess of tle contract liabilties. See footnote 23 below.

DISCUSSION
I. CONTCl HOLDERS WILL NOT REQUIRE TH PROTECTONS OF TH 1940

ACl WITH RESPECl TO TH LEGALLY-INSULTED ACCOUNS.
By excluding inurance companes from the 1940 Act defition of an investment

company,15 Congress recogned that, as a general matter, the guarantees of an inurance company, together with the protections aforded by state inurance regulation, make the protection of the 1940 Act unnecessar for purchasers of inurance products. Solely

because, pnor to Exiration Dates, the MV A feature imposes on contract holders certai

investment nsks associated with changing interest rates, the MV A Interests are registered under the 1933 Act. This 1933 Act registration prôvides stil further protections to holders. At the same time, when a contact holder holds an MV A Interest to its Exiration Date, the contracts specifically obligate Equitable Life to pay the fu amount of the holder's contnbution and accumulated interest, as in the case of fixed insurance products that are excluded from 1933 Act requirements by Section 3(a)(8) thereof. The contracts also specifically obligate Equitable Life, without regard to the value of Account assets, to pay the Anuity Account Value to a holder who termnates an MV A Interest at a time when an MV A adjustment, either upward or downward, is niade.16 Legal inulation of the Accounts would have relevance for MV A Interests holders only in the event of Equitable Life's liquidation under cicumstances where it could not pay all of its inurance obligations. (For simplicity, this letter refers to such a state of afais as "inolvency.") Providing legal insulation for the Accounts, moreover, will not relieve Equitable Lie of its obligations referred to in the preceding paragraph, even in the event of Equitable Life's inolvency.
Section 7435 of the Insurance Law controls the distnbution of the "estate" of an
inolvent lie insurer, settig forth the pnonties of each class of creditor. Subsection (c)

thereof deduct from the estate "any assets held in separate accounts that, pursuant to
section. . . (4240 of the Inurance Law), are not chargeable with liabilties ansing out of any
15 See 1940 Act §3(c)(3).
16The terms of the contracts do not provide for any "pas though" to holders of any Accunt investment results in the determination of the amounts owed to such holders upon termintion_of their MV A Interests, either at the Exiration Dates or prior thereto. Nor wi Equitable Life's operation of the Account or

admintration of the MV A Interests effect any such pass though as explaied in II.B. below.

other business of the inurer."17 Subsection (b) of Secton 7435 provides that clai under an "agreement" (such as the contract) providing for such legal inulation "shal be satisfied out of the assets in the separate account equal to the reserves maitaied in such accountl8 for such agreement and, to the extent, if any, not fully discharged thereby, shal be treated as a class four (policyholderl clai agait the estate of the lie inurance company." The effect of these provisions is that, once the contract are amended to add a legal inulation proviion as contemplated by thi letter, MY A Interest holders wi have a pnonty claim in the event of Equitable life's inolvency to that portion of the Account's assets covered by

such proviion, whie retaig the nght to share with other inurance policy holders in the general assets of Equitable lie to the extent of any deficiency. On the other hand, to the

extent an Account held more assets than sufcient to discharge the contract obligations to MY A Interest holders, such excess would revert to Equitable lie's estate and not to such

holders.
The insurance laws of al states, of course, require lie inurance companes penodicaly to value their assets and liabilties according to accounting priciples that are prescnbed for these regulatory purposes. These laws uniformy requie that the inurer

maitain an excess of such statutory assets over statutory liabilties of at least a prescnbed amount -- i.e., a mimum amount of statutory capital and surplus. These requiements vary from state to state, but the mium capital and surplus required of Equitable lie in its domiciiar state of New York is $2 millon.19 As a practical matter, however, this requiement has little relevance to Equitable lie, which has statutory capital and surlus far in excess of that amount -- approxiately $2 bilon at September 30, 1995. Under New York law (and, so far as Equitable lie is aware, in al other states) providig legal inulation for a separate account does not afect the computation of (or the required

minium amount ot) the inurets statutory capital and surplus.
New York state, moreover, has adopted an extensive regulation that specifcally reguates MV A contract and the separate accounts that fud them, including the Accounts.20 Among other thgs, thi regulation prescribes' requiements for the term of the MY A formula, valuation of contract liabilties, mium reservg requirements, and duration matchig of separate account assets and related contract liabilties. 17 See footnote 4 above'and accmpanyi text. 18Por th purse, the reserves maitaied in the Accounts include al liabilties to contract holders. 191nsurance Law §420(a)(2).

2°11 NYCRR 44.

Brenda D. Sneed, Esquire

The New York Inurance Law specicaly requies Equitable Ufe to value the assets . and contract liabilties of a separate account at least anualy.21 However, the law alo imposes on Equitable Life an ongoing requiement to maitai separate account assets at least equal to the account's contract liabilties,22 and procedures must be maitaied to

assure that this requiement is satisfied.23 If the liabilties exceed the assets, Equitable Ufe

is requied imediately to tranfer sufcient assets into the separate account from its

general account to remedy the shortfal.24 On the other hand, whenever the value of a

separate account's assets exceeds the value of the account's contract liabilties, state law

permts Equitable Life to tranfer the surlus to its general account. Contract holders wi

have no clai upon or interest in such tranferred assets, except that such assets wi

become par of Equitable Life's general account.
Equitable Life represents that the value of the assets in each Account (determned as set forth in footnote 23 above) will at all times at least equal the amount of that Account's contract liabilties (also determned as set fort in footnote 23). Providing legal insulation for the Accounts will not in any way change the above￾described New York insurance law requirements as to contrbuting, withdrawing and maintaining Account assets; nor will it change Equitable Life's practices in these regards. Under the circumstances, therefore, we respectfuy submit that the additional protections afforded by legal insulation will, if anything, make the protections of 1940 Act regulation even less necessary than if the Accounts were not legaly insulated. 21Inurance Law §§307, 13 and 424(a). The dicusion in th paragaph, althoug phrased in terms of separate accunts generaly, is fuy applicable to the Accunts, specicay. 22Inurance Law §4240(a)(8); 11 NYCRR 44.11(b)(S). 23Por these purses, an Account's asets are requied to be valued at curent market value or at fai value. The Account's liabilties are deemed to be the greater of (a) the agegate Anuity Accunt Values, less surender chges, under al outstandi MV A Interests or (b) the present value of the Matuty Values under such outstandi interests usin a dicount rate equal to the weigted average market yield to maturty of the

related Accunt's asets, which dicount rate is reduced by a proviion for reasonably anticipated expnses, a margi for adverse deviation, and an adjustment for any Accunt securties that are below investment grade. 11 NYCRR 44.11(b)(4). '

24lnsurance Law §4240(a)(8); 11 NYCRR 44.11(b)(S).
."

II. TH LEGALLY-INSULTED ACCOUNS WILL NOT CLOSELY RESEMBLE

THE TYES OF ENTTIES THT HISTORICALY HAVE BEEN SUBJECl TO

1940 ACl REGULTION.
A. The principal puroses of the Accounts ar dierent frm the investment purposes historically associated with investment companies. Historicaly, inurers have used non-untized separate accounts to hold the assets

supportg MY A contracts priary to permt such assets to be valued on a market value

basis for purposes of state insurance law requiements that would otherwse requie

amortized cost valuation.2S To the extent that an inurer's assets and liabilties associated with MV A contracts are valued on a market value basis, rather than an amortized cost basis, Equitable believes that the insurer's statutory financial statements wi reflect the inurer's

MV A operations in a more direct and timely way. Under the inurance laws of many states, including New York, the assets can be valued on a market value basis only if they are held in a separate account.26 Use of a non-unitized separate account faciltates the establishment and monitoring of specic investment policies appropriate to the assets supporting the MV A Interests. By segregating such assets in a separate account, Equitable Life is better able to make direct, rather than approximate, duration matching

calculations27 and asset risk profie analyses.

Accordingly, in establishig the Accounts, Equitable Life was motivated priary by the above-mentioned accounting, legal and administrative considerations. Legal insulation for the Accounts wil serve the additional purpose of providing holders with enhanced

assurance that, in the unlikely event of Equitable Life's inolvency, sufcient assets wi be available to satisfy Equitable lie's obligations with respect to the MY A Interests.28

Equitable Life believes that this additional protection for holders may enhance its competitive position with respect to the offer and sale of the MV A Interests. For example, because of the credit enhancement inherent in legal insulation, plan fiduciares may be more likely to make MY A Interests avaiable as an investment option under anuity contracts offered pursuant to certai defied contrbution employee benefit plan. 2S See Jan. 17, 199 Fort Request Letter at 3-; March 27,199 Travelers Request Letter at 2-3. 26lnsurance Law §§1414, 424O(a)(5)(il), and 424O(a)(10). 27 See footnotes 29-31 below and accmpanyig text. 28 Other inurers that have proposed legaly-inulated non-untid separate accuntsin connection with MV A interests have been similarly motivated. See Dee. 2, 1991 Travelers Request Letter at 4; Jan. 17, 199 Fortis Request Letter at 3.

In contrast to the above puroses, investment companes cutomary are established for the priar purose of providing investment retu to their secuty holders.

B. Income, gains and losses or the Accounts ar not passed thrugh to MY A

Interest holders.

The Guaranteed Rate applicable to any amount alocated to a Guarantee Period is established at the tie of such allocation and does not change for the remaider of the Guarantee Period. As noted previously, Equitable Lie establishes for each business day a Guaranteed Rate for new alocations to each currently avaiable Guarantee Period. The rate so established for any Guarantee Period is in large par based on then￾cuent yields for zero coupon corporate securities with approxiately the same matuty as that Guarantee Period, less a "spread" established by Equitable Ufe from time to time. Th technque provides assurance that Equitable Ufe will be able to fid investments for the Accounts that meet its fudig requirements. It also reflects the fact that MV A Interests "compete" for sales with other debt instruments having characteristics more or less simiar to such interests. Neither the return eared by assets in the Accounts nor any realed or unrealized gai or losses in the Accounts' assets are considered by Equitable lie in setting

Guaranteed Rates. Rather, such rates are based on considerations that are solely prospectie in natue. Nor do the Guaranteed Rates "pass through" to holders any futue retu, gai or

losses of the Accounts. Ths follows inherently from the fact that Equitable lie, rather than

the contract holders, retai the "spread," whether positive or negative, between what

Equitable Lie guarantees to holders and what it ear in the Accounts. Moreover, even if Equitable Lie wihed to establish Guaranteed Rates that would pass through to holders

futue retu, gai or losses of the related Account, it would not be practcal to do so.

This results not only from the inerent falbilty of predicting Account investment

performance for periods of time that may extend many years into the futue, but alo from

the investment discretion that the Accounts' portfolio manager is expected to exercise, as discused below.

Each Account wi be., managed in such a way that the "duration,,29 of the assets in 29WDurationw as used in connection with an Accunt refers to its dollar-weigted average tie of cah flows.

Because an MY A Interest is payable at a futue date and has no interi ca flow, whie most bonds pay

periodic interest, an MV A Interest with a given maturty date wi have a dierent duration than for exaple, a coupon bond havig the same maturty date. - .

the Account, taken as a whole, is expected at al times to approxiate the duration of the

outstandig Guarantee Period liabilties with respect to that Account.30 Ths afords the portono manager greater flexibilty to seek enhanced retu than would be the cae if the

Account's assets were segmented by Guarantee Period and the assets supportg each Guarantee Period were requied to have the same duration as that Guarantee Period.31 (Exercise of thi flexibilty, of course, could also afect the Account's investment results liewise adversely.) Other techniques that the portfolio manager is expected to use wi

cause each Account's investment results to be better (if successfu) or worse (if unuccessful) than could have been predicted at the time Guaranteed Rates are set: e.g., options and futues tranactions, interest rate swaps, varations in average qualty of securities purchased,

and other efforts by the portfolio manager to make investment decisions with respect to

specifc securities that will enhance Equitable life's return.

Nor does the MVA operate to pass through any Account gains or losses to MYA Interest holders. The amount of any MV A depends on the amount of any change in the Guaranteed Rates Equitable lie offers for a Guarantee Period between the date that the holder's funds were allocated to that Guarantee Period and the date of a prematue withdrawal or tranfer. As discussed above, such Guaranteed Rates do not correspond to

the yield (or any other form of investment performance) with respect to the related

Account's assets for any period of time, whether before or afer the date that any such rate

is set. Accordingly, although holders that termnate their MV A interests prematurely are, pursuant to the MV A, charged with certain "losses" and credited with certai "gaitl that are

associated, respectively, with risiIlg or faling interest rates, such losses or gains bear no precise relationship to losses or gains in the Accounts' investment portfolios due to changig interest rates.

Nor does the MY A make any adjustment to reflect any losses or gai that may occu in the related Accounts' portfolio of investments due to factors other than changig interest rates. Such other factors include changes in credit worthiess of the issuers in which the Accounts invest, defaults by such issuers, or the success of the portolio manager (or lack thereof) in exercising the investment flexibilty descrbed above. Moreover, the MY A Interests will be guaranteed by Equitable lie, including a full guarantee of principal and interest, subject only to the MY A that wi apply prior to matuty. 30Th duration matchig is a specic New York legal requiement. 11 NYCRR 44.11(b).

31Th flexibilty is fuer enhanced by the fact that New York law permits the duration of an Accunt's

asets to dier by as much as one year from the duation of ihe Account's liabilties. Id.

Brenda D. Sneed, Esquire

In contrast to the foregoing characteritiès of the Accounts, most tyes of investment companes customary (1) are designed to permt their interest holders to parcipate directy in the investment results of the secuties in which the investment company invests, and (2) do not provide such interest holders a repayment of pricipal and a specied rate

of retu that are guaranteed by the investment company's sponsor if the interest is held for a specied period or to a matuty date.
III. TH LEGALLY-INSULTED ACCOUNS WILL MOST CLOSELY RESEMBLE

POOLS OF COLLATERA THT HAVE NOT HISTORICALLY BEEN

REGULTED AS INVSTMNT COMPANIES.

The legal inulation of the Accounts will enable them to function as pools of

collateral from which MY A Interest holders may receive payment, in the unlely event that

Equitable Ufe at some future time becomes inolvent. In similar circutances, other pools

of collateral established to secure amounts owed by the priar obligor have not been deemed to be subject to 1940 Act regulation. Such examples include pools of securities servng as collateral in connection with retai repurchase agreement tranactions32 and "defeasance" trusts established to satisfy the priar obligor's obligation to pay principal and interest on debt obligations.33 As in

traditional collateral arangements, the amount of the primar obligation under the MV A benefits owed by Equitable tife) does not depend on the value of the collateral (i.e., the Accounts' assets). . Interests (i.e., the amount of

IV. THE LEGALLY-INSULTED ACCOUNS AR NOT WITHIN THE 1940 ACTS
DEFINITION OF AN "ISSUER," BECAUSE TH CONTCT HOLDERS' INTREST IN TH ACCOUNS DOES NOT CONSTITU A SECUR1Y. 1940 Act Secton 3(a) includes within the defition of an investment company only "issuers." 1940 Act Section 2(a)(22), in tu defies an "issuer" to include only persons or

entities that issue secuties. The only interest of which an Account could be deemed to be the issuer for this purose would appear to be the contract holders' interest in that Account. 32 See SEC ReI. No. IC-11958 (Sept. 25, 1981). 33 See Stephen B. Floo (SEC staf letter, avai. Feb. 2, 1987; Centex Corpration (SEC staf letter, avai. Nov.20,1986).

.
Thus, if the contract holders' interest in a legaly-insulated Account does not constitute a secuty, the Account canot be an investment company.

'For thi purpose, consistent with the authorities discussed below,34 the holder's

interest under the contract as a whole is to be distingushed fròm the holdets interest in the related legaly-inulated Account. The holder's whole interest under the contract comprises al of the ownership rights under the contract. Because of the MY A feature, these

ownership rights may be deemed to have a signcant "investment" character, and, consequently, the MV A Interests under the contracts are registered as securities under the 1933 Act.3S. The interest of a contract holder in a legaly-inulated Account, however, is

only one of the ownership rights under the contract as a whole. Moreover, it is a lited

and contingent interest that is not in the nature of an investment interest and therefore, in our view, is not itself a security for purposes of 1940 Act Section 2(a)(22). There is considerable relevant precedent for assessing whether the limited interest that the contract holder has in an Account has suffcient investment characteristics to constitute a security for purposes of 1940 Act Section 2(a)(22). One lie of precedents essentially analyzes whether an interest in a pool of securities is in the nature of an interest in collateral, as opposed to an investment interest.36 The former interests are not regarded as securities for puroses of the 1940 Act definition of an issuer, whie the latter are. In our view, the contract holders' interest in the legally-insulated Accounts wi not constitute an investment interest for these purposes. Rather, Equitable Life wi retain the investment interest in the Accounts, as par of

its insurance business. As noted elsewhere in this letter, the Accounts are managed with the objective of earg a profit in a maner simar to the profit Equitable lie seeks to earn from investment assets that it own as other par of its inurance business. Any such profits belong to Equitable Lie, and MY A Interest holders wi have no interest in them. Any losses fall on Equitable Life, and Equitable lie wi make the Accounts whole for any losses. Thus, the MY A Interest holders' interest in the Accounts is, in effect a contingent interest: so long as Equitable lie does not become inolvent, holders wi have no interest in the Accounts whatsoever. Moreover, even in the unely event of Equitable Life's 34 See dicussion on page 14 below. 3S Of course, to the extent that the contract have both an MY A option and a traditional varable option, the interests in the separate accunt supportg the traditional varable anuity option alo would be deemed to be securties subject to 1933 Act regitration, absent an avaiable exemption. Th additional factor for such combination contracts does not, however, afect the substance of the dicusion in th paragraph.

36 See II. above.

inolvency, the amount of each MY A Interest holder's clai agait the related Account's

assets (and agait Equitable Lie) would not be measured by the value of the Account's

assets pr the Account's investment performance over any period of time. Rather, that claim would be for any unpaid amounts guaranteed to the holder by Equitable Lie in connection with that holder's MY A Interest and computed in accordance with the term of the applicable contract. The 1964 Prudential case37 provides the most comprehensive guidance to date as

to when an inurance company separate account supporting contracts constitutes an issuer

for 1940 Act purposes. In holding that such a separate account constituted an issuer

different from the insurance company, the court in that case appears to have placed priar

emphasis on the fact that the value of the holders' interest under the contracts was

determned solely with reference to the investment performance of the separate account.38 The Prudential case also established that the interests in a separate account can be distinguished from the other rights under a contract for puroses of determg whether a separate account should be deemed to be a 1940 Act issuer. The Prudential court afirmed and essentially adopted the analysis of the Commssion Opinion that was before the court on appeal. Under that analysis, "units" of interest in a separate account that are the basis of determning the contract holder's return are securities of which the separate account is the issuer; and those securities, moreover, are distinct from the holder's other rights under the contracts,39 of which the inurance company is, in effect, the issuer.40 37Prudential Ins. Co. of Am. v. SEC, 326 F.2d 383 (3rd Cir. 196), cert den., 377 U.S. 953 (hereinafer Prudential). 38The Prudential cour quoted the Commision's reasoni (set out in the Commsion's opinon that

precipitated Prudential's appeal before tht cour) that Prudential would create a separate account "exlusively

for investment" and sell "equity interests in the fOnUnes" of that separate account to holders. Id. at 38 n.3

(quotin The Prudenti In. Co. of Am., SEC Rel No. IC-3620 (Jan. 20,1963) at 6) (hereinafer Commision

Opinon)) (emphas added). The Prudential cour found that a holder who "has an interest" in a "completely segregated" separate accunt tht is "devoted to investin¡l has an interest in that separate accunt and "no other entity (Prudenti at 3f (emphasis added)) or, in other words, solely in the separate account. The Prudential

cour characterid th "interest" by quoti the Supreme Court, which observed, in SEC v. Varble Anuity

Life Ins. Co., 359 U.S. 65 (1959) (hereinafer VALle), that a holder "gets. . . a pro rata share of what the portfolio of equity interests reflects ~- which may be a lot, a little, or nothg" (Prudential at 3f (quoti V ALIC, 359 U.S. at 71)) or, in other words, an interest in the investment performance of the separate accunt. 39The court, quoti the Commision Opinon bein appealed, described such other rights as consistig of "the inurance and anuity promises and the obligation to set up the investment fud." Prudential at 38. 40 Id. at 38 n.3 (quotin the Commision Opinon), 38.

.

Applyig the analysis of the cour and the Comm~ion in Prudential, the question is whether the lited and contigent interest that contract holders'wi have in the legaly￾inulated Accounts, as distinct from their other nghts under Equitable Lie's contract,41 constitites a secuty. Unlike Prudential's separate account, Equitable Lie's Accounts wi not have unts of interest that measure values under MY A Interests by the performance of the Accounts. Nor wi the Accounts have any other outstandig interests that could be viewed as the economic equivalent of such unts. Accordingly, we do not believe that, under the reasonig in Prudential, the Accounts should be construed to be issuers of secunties. As the Commssion staf is aware, a number of precedents bear on the question of whether general account interests under contract constitute secuties for puroses of the

federal secunties laws.42 These authonties, generaly speakg, evaluate the degree to which such interests have the charactenstics of an investment (Le., a secuty) or the

charactenstics of inurance (Le., not a secunty). These precedents also have relevance to whether contract holder interests in the Accounts constitute secuties, because that question also turn on whether such interests are in the natue of an investment interest (rather than pnmanly an interest in collateral). Such precedents have focused pnmary on the followig factors:43 a. The degree to which the parcipant bear the investment rik in

connection with the contract. Providig legal inulation for the

Accounts, of course, will reduce rather than increase the "credit" nsk to which MY A Interest holders are exposed and wi not afect any

other tyes of investment nsk.

41 For th purse, it should not matter whether, as in the Prudenti cae, such other rits do not constitute a securty isued by the inurance company or whether, as here, such other rits do (bcause of the MVA featue) constitue a securty isued by the inurance company. Even in the latter cae, the securty that ares as a result of the MV A featue is a securty of which only the inurance company (and not the related Accunt) is the isuer. 42See, e.g., SEC v. United Benefit Lie Ins. Co., 38 U.S. 20 (1967); VAle, supra note 38; Asoåates in Adolescent Psychtr v. Home Lie In. Co., 941 F.2d 561 (7th Cir. 1991); Rule 151 under the 1933 Act. Certai of the authorities address the statu of interests in anuity contract priary in term of the avaibilty of Secton 3( a)(8) under the 1933 Act. Althoug Secon 3( a)(8) by its literal term exempts anuity contract from regitration under the 1933 Act the Commion's stated position is tht contracts fal with the Section

3(a)(8) exemption are not to be regarded as securties for other purses as well SEC ReI. No. 33-6558, n. 2S and accmpanyi text (Nov. 21, 1984). 43 As the Commision staf is aware, however, ~ot al of the relevant precedents refer to al of these factors. f.

.
.

b. The degree to which the insrance compan assumes meaningfl mortality

an investment riks under the contract. Providig legal inulation for the Accounts wi not in any way afect the mortalty or investment risks assumed by Equitable Ufe under any contract.44
c. The degree to which the interests are marketed as an investment.

Equitable Ufe wi take steps to ensure that its marketig program and materials refer to the Accounts accurately: Le., as pools of assets that provide an additional measure of assurance that MY A Interest holders will receive full payment and not as investment vehicles in whose performance MY A Interest holders wil have any interest.45 Accordingly, regardless of the relative weights given to the above three factors, legal insulation for the Accounts would not, under the circumstances, tip the scale toward a fiding that interests in the Accounts are securities. CONCLUSION In summar, we see no basis in public policy, nor anything in the provisions of the 1940 Act, that would require Equitable Life's legally-insulated Accounts to be deemed to be "issuers" subject to regulation under the 1940 Act. On behal of Equitable Life, therefore, we hereby request that the Commssion staff provide assurance to Equitable Ufe that the staf would not recommend that the Commssion take enforcement action if Equitable Lie modifes its contracts for the purose and with the effect of preventig the Accounts' assets that are not in excess of reserves and contract liabilties from being chargeable with liabilties arsing from any other business of Equitable Life without registration of the Accounts under the 1940 Act. 44 Al of the contract provide anuity payment options that impose signcat mortalty riks upon Equitable Lie that anuitants under those options wi live longer than expcted. If the anuitant dies prior to the commencement of anuity payments the Income Manager contract provide a death benefit equa to the greater of the Anuity Accunt Value or the Guaranteed Period Amount. The Equi-Vest contract provide a sim death benefit equa to the greater of the Anuity Accunt Value or the amount of premiums (adjusted for withdrawal and loan) paid to date. These death benefit proviions impose additional mortalty riks on Equitable Life. 45Th wi not, however, preclude Equitable Life from diclosin that it expects Guaranteed Rates to be inuenced by, among other thi, the curent yields. on intrents similar to those expected to be acquied

for the Accounts.

Should you have any questions, please contact the undersigned or Gar O. Cohen, Esq. or Peter E. Panartes, Esq. of this fi. Equitable lie has no objection to the stafs

makg its response to this letter publicly available imediately upon issuance thereof. Than you for your consideration of this matter. Very truly yours, Thomas C. Lauerman TCL/mj

Enclosure

cc: Susan Nash, Esq.

llOl06\SNEED7.LTR

c
.
Exbit A
MAT VALUE ADJUSTMNT EXALES

The examples below show how the market value adjustment would be determed and how it would be applied to a full surrender or a withdrawal, assumig that $100,000 were alocated on Februar 15, 1996 to a Guarantee Period with an Exiration Date of Februar 15, 2005 at a Guaranteed Rate of 7.00%, resultig in a Matuty Value at the Exiration Date of $183,845, and further assumg that a fu surender or a $50,000 withdrawal were made on Februar 15, 200. The calcuations assume a contract under which no surender charge is payable on Februar 15,200. Assumed Guaranteed Rate on February 15. 2000

5.00% 7.00% 9.00%
As of February 15. 2000 (Before Surrender or Withdrawal) (1) Present Value of Maturity Value,

also Anuity Account Value . . . . . . $144,048 $131,080 $119,487 131,080 (2) Guaranteed Period Amount . . . . . . 12,968 o (3) Market Value Adjustment: (1)-(2) . (11,593) On February 15. 2000 (After Withdrawal) (4) Portion of (3) Associated with Withdrawal: (3) x ($50,000+(1)) . . . $ 4,501 0 $ (4,851) (5) Reduction in Guaranteed Period Amount: ($50,000-(4)) .......... 45,499 50,000 54,551 85,581 81,080 76,229 (6) Guaranteed Period Amount: (2)-(5)

120,032 113,718 106,915 (7) Matuty Value ................

(8) Present Value of (7), also Anuity

Account Value. . . . . . . . . . . . . . . . 94,048 81,080 69,487 Under these examples, if a withdrawal is made when rates have increased (from 7.00% to 9.00% in the example), a porton of a negative market value adjustment is

realed. On the other hand, if a withdrawal is made when rates have decreased (from

7.00% to 5.00% in the example), a porton of a positive market value adjustment is realed.

H a full surrender is made in either situation, the fu amount of the market value adjustment (lie (3)) is realized and the Anuity Account Value shown on line (1) is the amount received on surrender. "