FBR Fund Advisers, Inc., et al.; Notice of Application, 1034-1036 [E7-60]
Download as PDF
<![CDATA[
1034
Federal Register / Vol. 72, No. 5 / Tuesday, January 9, 2007 / Notices
non-confidential submissions received
in electronic form will be made
available on USTR’s Web site at https://
www.ustr.gov.
Chris Wilson,
Acting Assistant USTR for Intellectual
Property and Innovation.
[FR Doc. E7–108 Filed 1–8–07; 8:45 am]
BILLING CODE 3190–W7–P
OVERSEAS PRIVATE INVESTMENT
CORPORATION
Sunshine Act Meeting Notice
Thursday, January 18,
2007, 9:30 a.m. (Open Portion) 9:45 a.m.
(Closed Portion).
PLACE: Offices of the Corporation,
Twelfth Floor Board Room, 1100 New
York Avenue, NW., Washington, DC.
STATUS: Meeting Open to the Public
from 9:30 a.m. to 9:45 a.m., Closed
portion will commence at 9:45 a.m.
(approx.)
MATTERS TO BE CONSIDERED:
1. President’s Report.
2. Tribute—Collister Johnson.
3. Approval of September 21, 2006
Minutes (Open Portion).
FURTHER MATTERS TO BE CONSIDERED:
(Closed to the Public 10:15 a.m.)
1. Report from Audit Committee.
2. Auditor’s Report to the Board.
3. Finance Project—Afghanistan.
4. Finance Project—Russia.
5. Finance Project—Jordan.
6. Finance Project—Global.
7. Finance Project—Global.
8. Finance Project—Latin America.
9. Finance Project—Jordan.
10. Finance Project—Lebanon/Jordan/
Middle East.
11. Approval of September 21, 2006
Minutes (Closed Portion).
6. Pending Major Projects.
7. Reports.
CONTACT PERSON FOR INFORMATION:
Information on the meeting may be
obtained from Connie M. Downs at (202)
336–8438.
TIME AND DATE:
Dated: January 5, 2007.
Dev Jagadesan,
Deputy General Counsel, Overseas Private
Investment Corporation.
[FR Doc. 07–41 Filed 1–5–07; 11:51 am]
BILLING CODE 3210–01–M
ycherry on PROD1PC63 with NOTICES
POSTAL REGULATORY COMMISSION
Sunshine Act Meetings
NAME OF AGENCY:
Postal Regulatory
Commission.
Convening on Tuesday,
January 9, 2007, at 9:30 a.m., and
TIME AND DATE:
VerDate Aug<31>2005
13:55 Jan 08, 2007
Jkt 211001
continuing daily thereafter as needed, at
9:30 a.m. or after, until completed.
PLACE: Commission conference room,
901 New York Avenue, NW., Suite 200,
Washington, DC 20268–0001.
STATUS: Closed.
MATTERS TO BE CONSIDERED:
Recommendations in Docket No.
R2006–1.
CONTACT PERSON FOR MORE INFORMATION:
Stephen L. Sharfman, General Counsel,
Postal Regulatory Commission, 202–
789–6820.
Dated: January 5, 2007.
Steven W. Williams,
Secretary.
[FR Doc. 07–40 Filed 1–5–07; 12:35 pm]
BILLING CODE 7710–FW–M
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–27652; 812–13351]
FBR Fund Advisers, Inc., et al.; Notice
of Application
December 29, 2006.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Temporary order and notice of
application for a permanent order under
section 9(c) of the Investment Company
Act of 1940 (the ‘‘Act’’).
AGENCY:
Applicants
have received a temporary order
exempting them from section 9(a) of the
Act, with respect to an injunction
entered against Friedman, Billings,
Ramsey & Co., Inc. (‘‘FBR & Co.’’) on or
about December 22, 2006 by the United
States District Court for the District of
Columbia, until the Commission takes
final action on an application for a
permanent order. Applicants also have
applied for a permanent order.
APPLICANTS: FBR Fund Advisers, Inc.
(‘‘FBR Advisers’’), FBR Investment
Services, Inc. (‘‘FBRIS’’), and FBR
Investment Management, Inc.
(‘‘FBRIM’’) (collectively, the
‘‘Applicants’’).1
FILING DATE: The application was filed
on December 22, 2006. Applicants have
agreed to file a final amendment during
the notice period, the substance of
which is reflected in this notice.
HEARING OR NOTIFICATION OF HEARING: An
order granting the application will be
SUMMARY OF APPLICATION:
1 Applicants request that any relief granted
pursuant to the application also apply to any other
company of which FBR & Co. is or becomes an
affiliated person, other than any company of which
Emanual J. Friedman is or becomes an affiliated
person (together with Applicants, ‘‘Covered
Persons’’).
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
issued unless the Commission orders a
hearing. Interested persons may request
a hearing by writing to the
Commission’s Secretary and serving
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 January 23, 2007, and
should be accompanied by proof of
service on Applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’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
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F
Street, NE., Washington, DC 20549–
1090. Applicants, c/o William Ginivan,
General Counsel, Friedman, Billings,
Ramsey Group, Inc., Potomac Tower,
1001 Nineteenth Street North,
Arlington, VA 22209.
FOR FURTHER INFORMATION CONTACT:
Marilyn Mann, Senior Counsel, at (202)
551–6813, or Mary Kay Frech, Branch
Chief, at (202) 551–6821 (Division of
Investment Management, Office of
Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The
following is a temporary order and a
summary of the application. The
complete application may be obtained
for a fee at the Commission’s Public
Reference Branch, 100 F Street, NE.,
Washington, DC 20549–0102 (tel. 202–
551–5850).
Applicants’ Representations
1. FBR Advisers, FBRIS, and FBRIM
are wholly-owned subsidiaries of
Friedman, Billings, Ramsey Group, Inc.
(‘‘FBR’’). FBR, a Virginia corporation, is
a diversified financial services holding
company that engages in investment
banking, institutional brokerage and
asset management services, among other
activities. FBR Advisers, an investment
adviser registered under the Investment
Advisers Act of 1940 (‘‘Advisers Act’’),
serves as investment adviser to certain
series of FBR Funds (the ‘‘Funds’’), an
open-end management investment
company organized as a Delaware
statutory trust and registered under the
Act. FBRIS, a broker-dealer registered
under the Securities Exchange Act of
1934 (‘‘Exchange Act’’), serves as
principal underwriter and distributor of
shares of the Funds. FBRIM, an
investment adviser registered under the
Advisers Act, serves as investment
adviser to certain employees’ securities
companies (‘‘ESCs’’), as defined in
section 2(a)(13) of the Act, which are
E:\FR\FM\09JAN1.SGM
09JAN1
Federal Register / Vol. 72, No. 5 / Tuesday, January 9, 2007 / Notices
ycherry on PROD1PC63 with NOTICES
investment vehicles formed for the
benefit of employees of FBR and its
affiliates.
2. On or about December 22, 2006, the
United States District Court for the
District of Columbia entered a final
judgment against FBR & Co., a brokerdealer registered under the Exchange
Act, in a matter brought by the
Commission (the ‘‘Final Judgment’’).2
FBR & Co. is a wholly-owned subsidiary
of FBR. The Commission alleged in the
complaint (‘‘Complaint’’) that, in
connection with a Private Investment in
Public Equity offering of stock by
CompuDyne Corporation, for which
FBR & Co. served as placement agent,
FBR & Co. failed to establish, maintain
and enforce policies and procedures
reasonably designed to prevent the
misuse of material, nonpublic
information, unlawfully traded while
aware of material nonpublic information
and conducted unregistered sales of
securities. One of the individuals
alleged to have been involved in the
conduct underlying the Complaint is
Emanuel J. Friedman, the former cochairman and co-chief executive officer
of FBR, former chairman and co-chief
executive officer of FBR & Co., and
former chairman and co-chief executive
officer of FBRIM. Without admitting or
denying any of the allegations in the
Complaint, except as to jurisdiction,
FBR & Co. consented to the entry of the
Final Judgment. The Final Judgment
permanently restrains and enjoins FBR
& Co., and its agents, servants,
employees, and attorneys, from
violating sections 10(b) and 15(f) of the
Exchange Act and rule 10b–5
thereunder and sections 5 and 17(a) of
the Securities Act of 1933 (‘‘Securities
Act’’) (the ‘‘Injunction’’).3 FBR & Co.
also consented to the payment of
disgorgement plus prejudgment interest
in addition to civil penalties in an
aggregate amount of approximately $3.7
million.4
2 Securities and Exchange Commission v.
Friedman, Billings, Ramsey & Co., Inc., et al., Final
Judgment as to Friedman, Billings, Ramsey & Co.,
Inc., 06–CV–02160 (RCL) (D.D.C., filed Dec. 22,
2006).
3 The Final Judgment also enjoins Mr. Friedman
from violating section 5 of the Securities Act and,
as a controlling person pursuant to section 20(a) of
the Exchange Act, from violating sections 10(b) and
15(f) of the Exchange Act and rule 10b-5
thereunder. The Final Judgment also imposes civil
penalties on Mr. Friedman. Mr. Friedman is an
affiliated person of FBR under section 2(a)(3)(A) of
the Act by virtue of his ownership of 6.09% of the
outstanding voting securities of FBR. The requested
temporary and permanent orders will not apply to
Mr. Friedman or to any company of which Mr.
Friedman is or becomes an affiliated person, which
currently includes FBR.
4 FBR & Co. also has agreed to certain
undertakings designed to ensure that it does not
VerDate Aug<31>2005
13:55 Jan 08, 2007
Jkt 211001
Applicants’ Legal Analysis
1. Section 9(a)(2) of the Act, in
relevant part, prohibits a person who
has been enjoined from engaging in or
continuing any conduct or practice in
connection with the purchase or sale of
a security from acting, among other
things, as an investment adviser or
depositor of any registered investment
company or a principal underwriter for
any registered open-end investment
company, registered unit investment
trust or registered face-amount
certificate company. Section 9(a)(3) of
the Act makes the prohibition in section
9(a)(2) applicable to a company, any
affiliated person of which has been
disqualified under the provisions of
section 9(a)(2). ‘‘Affiliated person’’ is
defined in section 2(a)(3) of the Act to
include any person directly or indirectly
controlling, controlled by, or under
common control with, the other person.
Applicants state that FBR & Co. is an
affiliated person of each of the
Applicants within the meaning of
section 2(a)(3) of the Act because FBR
controls FBR & Co., FBR Advisers,
FBRIS and FBRIM. Applicants state
that, as a result of the Injunction, they
would be subject to the prohibitions of
section 9(a).
2. Section 9(c) of the Act provides that
the Commission shall grant an
application for an exemption from the
disqualification provisions of section
9(a) of the Act if it is established that
these provisions, as applied to the
applicants, are unduly or
disproportionately severe or that the
conduct of the applicants has been such
as not to make it against the public
interest or protection of investors to
grant the exemption. Applicants have
filed an application pursuant to section
9(c) seeking temporary and permanent
orders exempting them from the
disqualification provisions of section
9(a) of the Act.
3. Applicants believe they meet the
standards for exemption specified in
section 9(c). Applicants state that the
prohibitions of section 9(a) as applied to
them would be unduly and
disproportionately severe and that the
conduct of Applicants has been such as
not to make it against the public interest
or the protection of investors to grant
the exemption from section 9(a).
4. Applicants state that although Mr.
Friedman was co-chairman and co-chief
executive officer of FBR, co-chairman
and co-chief executive officer of FBRIM
and also participated in the conduct
described in the Injunction, Mr.
Friedman is no longer employed by
commit future violations with respect to the misuse
of material nonpublic information.
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
1035
FBR, FBRIM or FBR & Co. Applicants
also state that none of their officers,
directors or employees who are engaged
in the provision of investment advisory
or underwriting services to the Funds or
investment advisory services to the
ESCs participated in any way in the
conduct underlying the Injunction.
Applicants further state that the conduct
underlying the Injunction did not
involve any Funds or ESCs.
5. Applicants state that the inability to
continue providing advisory and
underwriting services to the Funds
would result in potentially severe
hardships for the Funds and their
shareholders. Applicants also state that
they have distributed, or will distribute
as soon as reasonably practicable,
written materials, including an offer to
meet in person to discuss the materials,
to the boards of directors or trustees of
the Funds (the ‘‘Boards’’), including the
directors who are not ‘‘interested
persons,’’ as defined in section 2(a)(19)
of the Act, of such Funds and their
independent legal counsel, as defined in
rule 0–1(a)(6) under the Act, if any,
regarding the Injunction, any impact on
the Funds, and the application.
Applicants will provide the Boards with
all information concerning the
Injunction and the application that is
necessary for the Funds to fulfill their
disclosure and other obligations under
the federal securities laws.
6. Applicants also assert that, if they
were barred from providing services to
the Funds, the effect on their businesses
and employees would be severe.
Applicants state that they have
committed substantial resources to
establish an expertise in underwriting
and advising the Funds. The Applicants
have never before received an
exemptive order under section 9(c).
7. Applicants further state that
prohibiting FBRIM from continuing to
serve as investment adviser to the ESCs
is not in the public interest or in
furtherance of the protection of
investors. Because the ESCs relate to
employee retention and compensation
matters and are sponsored for
employees of FBR and its affiliates, it
would not be consistent with the
purposes of the employees’ securities
company provisions of the Act to
require another entity not affiliated with
FBR to serve as investment adviser to
the ESCs. In addition, the participating
employees have agreed to participate in
the ESCs with the expectation that the
ESCs will be managed by their
employer.
E:\FR\FM\09JAN1.SGM
09JAN1
1036
Federal Register / Vol. 72, No. 5 / Tuesday, January 9, 2007 / Notices
Applicants’ Condition
Applicants agree that any order
granting the requested relief shall be
subject to the following condition:
Any temporary exemption granted
pursuant to the application shall be
without prejudice to, and shall not limit
the Commission’s rights in any manner
with respect to, any Commission
investigation of, or administrative
proceedings involving or against,
Covered Persons, including, without
limitation, the consideration by the
Commission of a permanent exemption
from section 9(a) of the Act requested
pursuant to the application or the
revocation or removal of any temporary
exemption granted under the Act in
connection with the application.
Temporary Order
The Commission has considered the
matter and finds that Applicants have
made the necessary showing to justify
granting a temporary exemption.
Accordingly, it is hereby ordered,
pursuant to section 9(c) of the Act, that
the Covered Persons are granted a
temporary exemption from the
provisions of section 9(a), effective as of
the date of the Injunction, solely with
respect to the Injunction, subject to the
condition in the application, until the
date the Commission takes final action
on an application for a permanent order.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E7–60 Filed 1–8–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Rel. No. IC–27651; File No. 812–13282]
Sun Life Assurance Company of
Canada (U.S.), et al., Notice of
Application
December 29, 2006.
Securities and Exchange
Commission (the ‘‘Commission’’).
ACTION: Notice of application for an
order of approval pursuant to Section
26(c) of the Investment Company Act of
1940, as amended (the ‘‘Act’’), and an
order of exemption pursuant to Section
17(b) of the Act from Section 17(a) of
the Act.
AGENCY:
Sun Life Assurance
Company of Canada (U.S.) (‘‘Sun Life
U.S.’’), Sun Life Insurance and Annuity
Company of New York (‘‘Sun Life
N.Y.’’) (together with Sun Life U.S., the
‘‘Companies’’), Keyport Variable
Account A (‘‘Keyport Account A’’), Sun
ycherry on PROD1PC63 with NOTICES
APPLICANTS:
VerDate Aug<31>2005
13:55 Jan 08, 2007
Jkt 211001
Life of Canada (U.S.) Variable Account
F (‘‘Account F’’), Sun Life of Canada
(U.S.) Variable Account I (‘‘Account I’’),
KBL Variable Annuity Account (‘‘KBL
Annuity Account’’), KBL Variable
Account A (‘‘KBL Account A’’), and Sun
Life (N.Y.) Variable Account C
(‘‘Account C’’) (collectively, the
‘‘Applicants’’). Applicants, together
with Sun Capital Advisers Trust (‘‘Sun
Capital Trust’’) are ‘‘Section 17(b)
Applicants.’’
SUMMARY OF APPLICATION: Applicants
seek an order approving the proposed
substitutions (the ‘‘Substitutions’’) of
Class O shares of Alger American
Growth Portfolio of the Alger American
Fund and Class A and Class B shares of
the AllianceBernstein VPS Large Cap
Growth Portfolio of the
AllianceBernstein Variable Product
Series Fund (collectively, the ‘‘Old
Portfolios’’) with Initial and Service
Class Shares of the SC FI Large Cap
Growth Fund of Sun Capital Trust (the
‘‘New Portfolio’’) under certain variable
life insurance policies and variable
annuity contracts (‘‘Contracts’’). Section
17(b) Applicants also seek an order
pursuant to Section 17(b) of the Act to
permit certain in-kind transactions in
connection with the Substitutions.
FILING DATE: The application was
originally filed on April 19, 2006, and
an amended and restated application
was filed on December 20, 2006.
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 Applicants
with a copy of the request, personally or
by mail. Hearing requests must be
received by the Commission by 5:30
p.m. on January 24, 2007, and should be
accompanied by proof of service on
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.
The Commission: Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090; Applicants: c/o Maura A.
Murphy, Esq., Sun Life Assurance
Company of Canada (U.S.), One Sun
Life Executive Park, Wellesley Hills,
Massachusetts 02481.
FOR FURTHER INFORMATION CONTACT:
Rebecca A. Marquigny, Senior Counsel,
or Joyce M. Pickholz, Branch Chief,
ADDRESSES:
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
Office of Insurance Products, Division of
Investment Management, at (202) 551–
6795.
The
following is a summary of the
application. The complete application is
available for a fee from the Public
Reference Branch of the Commission,
100 F Street, NE., Washington, DC
20549 (202–551–8090).
SUPPLEMENTARY INFORMATION:
Applicants’ and Section 17 Applicants’
Representations
1. Sun Life U.S. is a stock life
insurance company ultimately
controlled by Sun Life Financial Inc.
(‘‘Sun Life Financial’’), a Canadian
reporting company under the Securities
Exchange Act of 1934 (the ‘‘1934 Act’’).
Pursuant to a 2003 merger, Keyport Life
Insurance Company (‘‘Keyport’’) was
merged with and into Sun Life U.S. with
Sun Life U.S. as the survivor. Sun Life
U.S. is the depositor and sponsor of
Keyport Account A, Account F, and
Account I.
2. Keyport Account A is registered
with the Commission under the Act as
a unit investment trust (File No. 811–
07543) with interests are offered
through Contracts (the ‘‘Keyport
Contracts’’) registered under the
Securities Act of 1933 (‘‘1933 Act’’) on
Form N–4 (File Nos. 333–114126, 333–
114129, 333–114132, 333–111642, 333–
111645, 333–111646, 333–111647, and
333–111648). Account F is registered as
a unit investment trust (File No. 811–
05846); its interests are also offered
through Contracts (the ‘‘Account F
Contracts’’) registered under the 1933
Act on Form N-4 (File Nos. 33–29852,
33–41628, 333–37907, 333–05227, 333–
82957, 333–30844, 333–31248, 333–
41438, 333–74844, 333–83256, 333–
83362, 333–83364, 333–83516, 333–
74972, 333–115525, and 333–115536).
Account I, registered as a unit
investment trust (File No. 811–09137)
also offers its interests through
Contracts (the ‘‘Account I Contracts’’)
registered under the 1933 Act on Form
N–6 (File Nos. 333–68601, 333–59662,
333–94359, 333–100831, and 333–
100829).
3. Sun Life N.Y., a wholly owned
subsidiary of Sun Life U.S., is a stock
life insurance company which merged
with Keyport Benefit Life Insurance
Company (‘‘KBL’’), a subsidiary of
Keyport, in 2002. Sun Life N.Y. is the
depositor and sponsor of the KBL
Annuity Account, KBL Account A, and
Account C.
4. KBL Annuity Account is a
registered unit investment trust (File
No. 811–05422) for which interests are
offered through a Contract (the ‘‘KBL
E:\FR\FM\09JAN1.SGM
09JAN1
]]>Agencies
[Federal Register Volume 72, Number 5 (Tuesday, January 9, 2007)]
[Notices]
[Pages 1034-1036]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-60]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-27652; 812-13351]
FBR Fund Advisers, Inc., et al.; Notice of Application
December 29, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Temporary order and notice of application for a permanent order
under section 9(c) of the Investment Company Act of 1940 (the ``Act'').
-----------------------------------------------------------------------
SUMMARY OF APPLICATION: Applicants have received a temporary order
exempting them from section 9(a) of the Act, with respect to an
injunction entered against Friedman, Billings, Ramsey & Co., Inc.
(``FBR & Co.'') on or about December 22, 2006 by the United States
District Court for the District of Columbia, until the Commission takes
final action on an application for a permanent order. Applicants also
have applied for a permanent order.
APPLICANTS: FBR Fund Advisers, Inc. (``FBR Advisers''), FBR Investment
Services, Inc. (``FBRIS''), and FBR Investment Management, Inc.
(``FBRIM'') (collectively, the ``Applicants'').\1\
---------------------------------------------------------------------------
\1\ Applicants request that any relief granted pursuant to the
application also apply to any other company of which FBR & Co. is or
becomes an affiliated person, other than any company of which
Emanual J. Friedman is or becomes an affiliated person (together
with Applicants, ``Covered Persons'').
FILING DATE: The application was filed on December 22, 2006. Applicants
have agreed to file a final amendment during the notice period, the
---------------------------------------------------------------------------
substance of which is reflected in this notice.
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 Commission's Secretary
and serving 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 January 23, 2007, and should be accompanied by proof of service
on Applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer'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 Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090. Applicants, c/o William
Ginivan, General Counsel, Friedman, Billings, Ramsey Group, Inc.,
Potomac Tower, 1001 Nineteenth Street North, Arlington, VA 22209.
FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Senior Counsel, at (202)
551-6813, or Mary Kay Frech, Branch Chief, at (202) 551-6821 (Division
of Investment Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a temporary order and a
summary of the application. The complete application may be obtained
for a fee at the Commission's Public Reference Branch, 100 F Street,
NE., Washington, DC 20549-0102 (tel. 202-551-5850).
Applicants' Representations
1. FBR Advisers, FBRIS, and FBRIM are wholly-owned subsidiaries of
Friedman, Billings, Ramsey Group, Inc. (``FBR''). FBR, a Virginia
corporation, is a diversified financial services holding company that
engages in investment banking, institutional brokerage and asset
management services, among other activities. FBR Advisers, an
investment adviser registered under the Investment Advisers Act of 1940
(``Advisers Act''), serves as investment adviser to certain series of
FBR Funds (the ``Funds''), an open-end management investment company
organized as a Delaware statutory trust and registered under the Act.
FBRIS, a broker-dealer registered under the Securities Exchange Act of
1934 (``Exchange Act''), serves as principal underwriter and
distributor of shares of the Funds. FBRIM, an investment adviser
registered under the Advisers Act, serves as investment adviser to
certain employees' securities companies (``ESCs''), as defined in
section 2(a)(13) of the Act, which are
[[Page 1035]]
investment vehicles formed for the benefit of employees of FBR and its
affiliates.
2. On or about December 22, 2006, the United States District Court
for the District of Columbia entered a final judgment against FBR &
Co., a broker-dealer registered under the Exchange Act, in a matter
brought by the Commission (the ``Final Judgment'').\2\ FBR & Co. is a
wholly-owned subsidiary of FBR. The Commission alleged in the complaint
(``Complaint'') that, in connection with a Private Investment in Public
Equity offering of stock by CompuDyne Corporation, for which FBR & Co.
served as placement agent, FBR & Co. failed to establish, maintain and
enforce policies and procedures reasonably designed to prevent the
misuse of material, nonpublic information, unlawfully traded while
aware of material nonpublic information and conducted unregistered
sales of securities. One of the individuals alleged to have been
involved in the conduct underlying the Complaint is Emanuel J.
Friedman, the former co-chairman and co-chief executive officer of FBR,
former chairman and co-chief executive officer of FBR & Co., and former
chairman and co-chief executive officer of FBRIM. Without admitting or
denying any of the allegations in the Complaint, except as to
jurisdiction, FBR & Co. consented to the entry of the Final Judgment.
The Final Judgment permanently restrains and enjoins FBR & Co., and its
agents, servants, employees, and attorneys, from violating sections
10(b) and 15(f) of the Exchange Act and rule 10b-5 thereunder and
sections 5 and 17(a) of the Securities Act of 1933 (``Securities Act'')
(the ``Injunction'').\3\ FBR & Co. also consented to the payment of
disgorgement plus prejudgment interest in addition to civil penalties
in an aggregate amount of approximately $3.7 million.\4\
---------------------------------------------------------------------------
\2\ Securities and Exchange Commission v. Friedman, Billings,
Ramsey & Co., Inc., et al., Final Judgment as to Friedman, Billings,
Ramsey & Co., Inc., 06-CV-02160 (RCL) (D.D.C., filed Dec. 22, 2006).
\3\ The Final Judgment also enjoins Mr. Friedman from violating
section 5 of the Securities Act and, as a controlling person
pursuant to section 20(a) of the Exchange Act, from violating
sections 10(b) and 15(f) of the Exchange Act and rule 10b-5
thereunder. The Final Judgment also imposes civil penalties on Mr.
Friedman. Mr. Friedman is an affiliated person of FBR under section
2(a)(3)(A) of the Act by virtue of his ownership of 6.09% of the
outstanding voting securities of FBR. The requested temporary and
permanent orders will not apply to Mr. Friedman or to any company of
which Mr. Friedman is or becomes an affiliated person, which
currently includes FBR.
\4\ FBR & Co. also has agreed to certain undertakings designed
to ensure that it does not commit future violations with respect to
the misuse of material nonpublic information.
---------------------------------------------------------------------------
Applicants' Legal Analysis
1. Section 9(a)(2) of the Act, in relevant part, prohibits a person
who has been enjoined from engaging in or continuing any conduct or
practice in connection with the purchase or sale of a security from
acting, among other things, as an investment adviser or depositor of
any registered investment company or a principal underwriter for any
registered open-end investment company, registered unit investment
trust or registered face-amount certificate company. Section 9(a)(3) of
the Act makes the prohibition in section 9(a)(2) applicable to a
company, any affiliated person of which has been disqualified under the
provisions of section 9(a)(2). ``Affiliated person'' is defined in
section 2(a)(3) of the Act to include any person directly or indirectly
controlling, controlled by, or under common control with, the other
person. Applicants state that FBR & Co. is an affiliated person of each
of the Applicants within the meaning of section 2(a)(3) of the Act
because FBR controls FBR & Co., FBR Advisers, FBRIS and FBRIM.
Applicants state that, as a result of the Injunction, they would be
subject to the prohibitions of section 9(a).
2. Section 9(c) of the Act provides that the Commission shall grant
an application for an exemption from the disqualification provisions of
section 9(a) of the Act if it is established that these provisions, as
applied to the applicants, are unduly or disproportionately severe or
that the conduct of the applicants has been such as not to make it
against the public interest or protection of investors to grant the
exemption. Applicants have filed an application pursuant to section
9(c) seeking temporary and permanent orders exempting them from the
disqualification provisions of section 9(a) of the Act.
3. Applicants believe they meet the standards for exemption
specified in section 9(c). Applicants state that the prohibitions of
section 9(a) as applied to them would be unduly and disproportionately
severe and that the conduct of Applicants has been such as not to make
it against the public interest or the protection of investors to grant
the exemption from section 9(a).
4. Applicants state that although Mr. Friedman was co-chairman and
co-chief executive officer of FBR, co-chairman and co-chief executive
officer of FBRIM and also participated in the conduct described in the
Injunction, Mr. Friedman is no longer employed by FBR, FBRIM or FBR &
Co. Applicants also state that none of their officers, directors or
employees who are engaged in the provision of investment advisory or
underwriting services to the Funds or investment advisory services to
the ESCs participated in any way in the conduct underlying the
Injunction. Applicants further state that the conduct underlying the
Injunction did not involve any Funds or ESCs.
5. Applicants state that the inability to continue providing
advisory and underwriting services to the Funds would result in
potentially severe hardships for the Funds and their shareholders.
Applicants also state that they have distributed, or will distribute as
soon as reasonably practicable, written materials, including an offer
to meet in person to discuss the materials, to the boards of directors
or trustees of the Funds (the ``Boards''), including the directors who
are not ``interested persons,'' as defined in section 2(a)(19) of the
Act, of such Funds and their independent legal counsel, as defined in
rule 0-1(a)(6) under the Act, if any, regarding the Injunction, any
impact on the Funds, and the application. Applicants will provide the
Boards with all information concerning the Injunction and the
application that is necessary for the Funds to fulfill their disclosure
and other obligations under the federal securities laws.
6. Applicants also assert that, if they were barred from providing
services to the Funds, the effect on their businesses and employees
would be severe. Applicants state that they have committed substantial
resources to establish an expertise in underwriting and advising the
Funds. The Applicants have never before received an exemptive order
under section 9(c).
7. Applicants further state that prohibiting FBRIM from continuing
to serve as investment adviser to the ESCs is not in the public
interest or in furtherance of the protection of investors. Because the
ESCs relate to employee retention and compensation matters and are
sponsored for employees of FBR and its affiliates, it would not be
consistent with the purposes of the employees' securities company
provisions of the Act to require another entity not affiliated with FBR
to serve as investment adviser to the ESCs. In addition, the
participating employees have agreed to participate in the ESCs with the
expectation that the ESCs will be managed by their employer.
[[Page 1036]]
Applicants' Condition
Applicants agree that any order granting the requested relief shall
be subject to the following condition:
Any temporary exemption granted pursuant to the application shall
be without prejudice to, and shall not limit the Commission's rights in
any manner with respect to, any Commission investigation of, or
administrative proceedings involving or against, Covered Persons,
including, without limitation, the consideration by the Commission of a
permanent exemption from section 9(a) of the Act requested pursuant to
the application or the revocation or removal of any temporary exemption
granted under the Act in connection with the application.
Temporary Order
The Commission has considered the matter and finds that Applicants
have made the necessary showing to justify granting a temporary
exemption.
Accordingly, it is hereby ordered, pursuant to section 9(c) of the
Act, that the Covered Persons are granted a temporary exemption from
the provisions of section 9(a), effective as of the date of the
Injunction, solely with respect to the Injunction, subject to the
condition in the application, until the date the Commission takes final
action on an application for a permanent order.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E7-60 Filed 1-8-07; 8:45 am]
BILLING CODE 8011-01-P
