SA Investment Partners LLC, et al., 11062-11066 [E7-4291]
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Federal Register / Vol. 72, No. 47 / Monday, March 12, 2007 / Notices
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Mabel Echols, Office of Information and
Regulatory Affairs, Office of
Management and Budget, NEOB, Room
10201, 725 17th Street, NW.,
Washington, DC 20503. Telephone:
(202) 395–3093.
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Specifically, Section 624 of the FY 2001
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and Regulatory Affairs.
[FR Doc. E7–4375 Filed 3–9–07; 8:45 am]
BILLING CODE 3110–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
27747; 813–284]
SA Investment Partners LLC, et al.;
Notice of Application
March 5, 2007.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under sections 6(b) and 6(e) of the
Investment Company Act of 1940 (the
‘‘Act’’) granting an exemption from all
provisions of the Act, except section 9,
and sections 36 through 53, and the
rules and regulations under the Act.
With respect to sections 17 and 30 of the
Act, and the rules and regulations
thereunder, and rule 38a–1 under the
Act, the exemption is limited as set
forth in the application.
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AGENCY:
Applicants
request an order to exempt certain
SUMMARY OF APPLICATION:
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investment funds formed for the benefit
of eligible current and former employees
of Sidley Austin LLP and its affiliates
from certain provisions of the Act. Each
fund will be an employees’ securities
company within the meaning of section
2(a)(13) of the Act.
APPLICANTS: SA Investment Partnership
LLC (the ‘‘Investment Fund’’), and
Sidley Austin LLP and any entity
controlling, controlled by, or under
common control with Sidley Austin LLP
(the ‘‘Firm’’).
FILING DATES: The application was filed
on July 26, 2000, and amended on
March 8, 2001, March 23, 2001,
November 14, 2003, and November 13,
2006. Applicants have agreed to file an
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, March 30, 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, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–1090;
Applicants: One South Dearborn,
Chicago, IL 60603.
FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Senior Counsel, at (202)
551–6876 or Julia Kim Gilmer, Branch
Chief, at (202) 551–6821, (Division of
Investment Management, Office of
Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The
following is 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 (telephone (202) 551–5850).
Applicants’ Representations
1. The Firm is a law firm organized
as a Delaware limited liability
partnership. The Investment Fund is a
Delaware limited liability company.
Applicants may offer additional pooled
investment vehicles to the same class of
investors eligible to invest in the
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Investment Fund (the ‘‘Subsequent
Funds,’’ and together with the
Investment Fund, the ‘‘Funds’’) which
will be substantially similar in all
material respects to the Investment
Fund except for investment objectives
and strategies, operational differences
related to the form of organization, and
differences which reflect revisions to
applicable law. Each Subsequent Fund,
if any, will be structured as a general
partnership, limited partnership or
limited liability company, although a
Subsequent Fund could be structured as
a corporation, trust or other entity. The
Funds will operate as non-diversified,
closed-end management investment
companies.
2. The Funds will enable Eligible
Investors to participate in investment
opportunities that come to the attention
of the Firm. Each entity in which a
Fund invests is referred to as a
‘‘Portfolio Company.’’ Participation as
investors in a Fund will allow Eligible
Investors (defined below) to diversify
their investments and to have the
opportunity to participate in
investments that might not otherwise be
available to them or that might be
beyond their individual means.
3. Interests in each Fund (‘‘Interests’’)
will be offered and sold in reliance
upon the exemption from registration
contained in Section 4(2) of the
Securities Act of 1933 (the ‘‘Securities
Act’’) or Regulation D under the
Securities Act. Interests will be offered
solely to investors who, at the time of
the offer, are: (a) Eligible Employees
(defined below); (b) trusts of which the
trustees and/or grantors are Eligible
Employees or of which the sole
beneficiaries are Eligible Employees and
their immediate family members
(spouses, parents, brothers, sisters,
children, spouses of children, and
grandchildren) (‘‘Eligible Trusts’’); (c)
entities, all of the voting power of which
is controlled by Eligible Employees 1
(together with Eligible Trusts,
‘‘Qualified Investment Vehicles’’); (d)
spouses of Eligible Employees; and (e)
the Firm (collectively, ‘‘Eligible
Investors’’).
4. ‘‘Eligible Employees’’ are current or
former partners of the Firm, lawyers and
other professionals employed by the
Firm, and certain current or former
1 The inclusion of entities controlled by an
Eligible Employee in the definition of Eligible
Investor is intended to enable Eligible Employees
and their immediate family members to make
investments in the Funds through private
investment vehicles for the purpose of personal and
family investment and estate planning objectives.
Eligible Employees will exercise investment
discretion and control over these investment
vehicles, thereby creating a close nexus between the
Firm and these investment vehicles.
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employees of the Firm involved in
managing the day-to-day affairs of the
Funds.2 An Eligible Employee must be
either an accredited investor who meets
the income requirements in rule
501(a)(6) of regulation D under the
Securities Act, or, one of a maximum of
35 people (collectively, ‘‘NonAccredited Investors’’) who: (a) Meets
the sophistication requirements in rule
506(b)(2)(ii) of regulation D under the
Securities Act, has a graduate degree, a
minimum of five years of legal or
business experience, and compensation
of at least $150,000 in the prior year and
a reasonable expectation of at least
$150,000 in each of the two
immediately succeeding years; 3 or (b)
meets the definition of a knowledgeable
employee in rule 3c–5 under the Act
(with a Fund treated as though it were
a covered company for purposes of the
rule. Qualified Investment Vehicles that
are not accredited investors must (a)
have an Eligible Employee or a spouse
of an Eligible Employee as the settlor,
and the Eligible Employee as principal
investment decision maker, and (b) be
counted as one of the 35 NonAccredited Investors.4 A spouse of an
Eligible Employee must be an accredited
investor who meets the requirements of
rule 501(a)(5) or 501(a)(6) of regulation
D under the Securities Act. Any other
Eligible Investor must be an accredited
investor as defined in rule 501(a) of
Regulation D. Prior to offering Interests
in a Fund to an Eligible Employee or a
spouse of an Eligible Employee, the
Managing Members (defined below)
must reasonably believe that such
individual has such knowledge,
sophistication, and experience in
business and financial matters to be
capable of evaluating the merits and
risks of participating in the Fund, is able
to bear the economic risk of the
investment and is able to afford a
complete loss of the investment. Each
investor in a Fund shall be a
(‘‘Member’’) of such Fund.
5. Administration of the Funds,
including the screening of investment
opportunities, will be vested in one or
more (‘‘Managing Members’’) who are
2 Any such former partners, lawyers or employees
will maintain a sufficiently close nexus with the
Firm so as to preserve the community of interest
between the Eligible Employee and the Firm.
3 In addition, such Eligible Employee may not
invest or commit to invest (as applicable) in any
year more than 10% of such person’s income from
all sources for the immediately preceding year, in
the aggregate in a Fund and in all other Funds in
which that Eligible Employee has previously
invested.
4 If such Qualified Investment Vehicle is an entity
other than a trust, the reference to ‘‘settlor’’ shall
be construed to mean a person who created the
vehicle, alone or together with others and who
contributed funds or other assets to the vehicle.
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also Eligible Investors. Managing
Members may delegate certain functions
to one or more investment committees
consisting of partners or employees of
the Firm or delegate investment
decisions to one or more advisers (each,
an ‘‘Adviser’’). An Adviser will either be
an individual that is a Managing
Member, or an entity that is whollyowned by the Firm.5 An Eligible
Investor who is a Managing Member
will not receive any form of
compensation for acting as a Managing
Member.
6. The Investment Fund will bear its
own expenses. No fees or compensation
shall be paid to the Firm by the Funds,
except for the reimbursement of direct
out of pocket costs of disbursements and
expenses incurred on behalf of such
Funds. These direct out of pocket
expenses will not include any markup
or profit component.
7. Each Eligible Investor will receive
a copy of the organizational documents
and offering memorandum for a Fund,
which will disclose the Fund’s specific
investment objective and strategies and
other material terms of the Fund, before
investing in such Fund. Each Fund will
send its Members an annual report
regarding its operations which will
contain audited financial statements.
Each Fund will also transmit a report to
each Member containing information on
that Member’s distributive share of
income, gains, losses, credits and other
items for federal and state income tax
purposes, resulting from operations of
the Fund that year. Members will not be
entitled to redeem their Interests in the
Investment Fund, but the Investment
Fund may in the future be restructured
to periodically repurchase Interests from
Members. Subsequent Funds may also
periodically repurchase Interests from
Members. Except in the case of death, a
Member will not be permitted to
transfer or assign his or her Interest in
the Investment Fund absent approval of
a Managing Member. No fee will be
charged in connection with the sale or
a Fund’s repurchase of Interests of the
Funds.
8. A Member may be required to
withdraw from a Fund if that Member’s
5 An Adviser will register as an investment
adviser under the Investment Advisers Act of 1940
(‘‘Advisers Act’’) if required. Any performance fee
or carried interest payable by a Fund to an Adviser
(a) will be charged only if permitted by rule 205–
3 under the Advisers Act if paid to an Adviser
registered under the Advisers Act, and (b) will
comply with section 205(b)(3) of the Advisers Act
(with the Fund treated as if it were a business
development company solely for the purpose of that
section) if paid to an Adviser not registered under
the Advisers Act. A ‘carried interest’ is an
allocation to an Adviser based on the net gains in
addition to the amount allocable to the Adviser that
is in proportion to its capital contributions, if any.
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continued participation would subject
the Fund to possible adverse tax
consequences, or violate applicable law
or regulations. Upon withdrawal, the
Member shall receive an amount equal
to the Member’s net capital
contributions (capital contributions less
all distributions received to the date of
withdrawal) plus interest from the date
each capital contribution was made at
the prime rate.
9. A Fund will not acquire any
security issued by a registered
investment company if immediately
after the acquisition such Fund would
own more than 3% of the total
outstanding voting securities of the
registered investment company.
10. A Fund or Member will not
borrow from any person if such
borrowing would cause any person not
named in section 2(a)(13) of the Act to
own outstanding securities of the Fund
(other than short term paper). Any
borrowing by a Fund will be nonrecourse to the Fund’s Members.
11. The applicants reserve the right to
impose vesting provisions on a
Member’s investments in a Fund. In an
investment program that provides for
vesting, all or a portion of a Member’s
Interests would be treated as unvested,
and vesting would occur over a
specified period of time. To the extent
a Member’s Interests are or become
vested, the termination of the Member’s
association or employment with the
Firm would not affect the Member’s
rights with respect to the vested
Interests. The portion of a Member’s
Interests that are unvested at the time of
the termination of a Member’s
association or employment with the
Firm may be subject to repurchase or
cancellation by the Fund. Upon any
repurchase or cancellation of all or a
portion of a Member’s Interests, the
Fund will at a minimum pay to the
Member the lesser of (a) the amount
actually paid by the Member to acquire
the Interests (plus interest at or above
the prime rate, as determined by the
Managing Members); and (b) the fair
market value of the Interests determined
at the time of repurchase or
cancellation, as the case may be, as
determined in good faith by the
Managing Members. Any interest owed
to a Member pursuant to (a) above will
begin to accrue at the end of the
investment period.
Applicants’ Legal Analysis
1. Section 6(b) of the Act provides, in
part, that the Commission will exempt
employees’ securities companies from
the provisions of the Act to the extent
that the exemption is consistent with
the protection of investors. Section 6(b)
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provides that the Commission will
consider, in determining the provisions
of the Act from which the company
should be exempt, the company’s form
of organization and capital structure, the
persons owning and controlling its
securities, the price of the company’s
securities and the amount of any sales
load, how the company’s funds are
invested, and the relationship between
the company and the issuers of the
securities in which it invests. Section
2(a)(13) defines an employees’ securities
company, in relevant part, as any
investment company all of whose
securities are beneficially owned (a) by
current or former employees, or persons
on retainer, of one or more affiliated
employers, (b) by immediate family
members of such persons, or (c) by such
employer or employers together with
any of the persons in (a) or (b).
2. Section 7 of the Act generally
prohibits an investment company that is
not registered under section 8 of the Act
from selling or redeeming its securities.
Section 6(e) provides that, in connection
with any order exempting an investment
company from any provision of section
7, certain provisions of the Act, as
specified by the Commission, will be
applicable to the company and other
persons dealing with the company as
though the company were registered
under the Act. Applicants request relief
under sections 6(b) and 6(e) of the Act
for an exemption from all provisions of
the Act except section 9 and sections 36
through 53, and the rules and
regulations under the Act. With respect
to sections 17 and 30 of the Act, and the
rules and regulations thereunder, and
rule 38a–1 under the Act, the exemption
is limited as set forth in the application.
3. Section 17(a) generally prohibits
any affiliated person of a registered
investment company, or any affiliated
person of such an affiliated person,
acting as principal, from knowingly
selling or purchasing any security or
other property to or from the company.
Applicants request an exemption from
section 17(a) to the extent necessary to
permit a Fund: (a) To purchase, from the
Firm or any affiliated person thereof,
securities or interests in properties
acquired for the account of the Firm or
any affiliated person thereof; (b) to sell,
to the Firm or any affiliated person
thereof, securities or interests in
properties previously acquired by the
Funds; (c) to invest in companies,
partnerships, or other investment
vehicles offered, sponsored or managed
by the Firm or any affiliated person
thereof; (d) to invest in securities of
issuers for which the Firm or any
affiliated person thereof have performed
services and from which they may have
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received fees; (e) to purchase interests in
any company or other investment
vehicle: (i) In which the Firm or its
partners or employees own 5% or more
of the voting securities, or (ii) that is
otherwise an affiliated person of the
Fund or the Firm (or any affiliated
person of the Fund); and (f) to
participate as a selling security holder
in a public offering in which the Firm
or any affiliated person thereof acts as
or represents as counsel a member of the
selling group or the issuer or
underwriter.
4. Applicants state that an exemption
from Section 17(a) is consistent with the
purposes of the Act and the protection
of investors. Applicants state that the
risks associated with a Fund engaging in
transactions with affiliated parties will
be disclosed to Eligible Investors.
Applicants state that Eligible Investors,
as financially sophisticated persons,
will be able to understand and evaluate
the risks associated with those dealings.
Applicants also assert that the
community of interest among the
Members and the Firm will serve to
reduce the risk of abuse in transactions
involving a Fund and the Firm or any
affiliated person thereof.
5. Section 17(d) and rule 17d–1
thereunder prohibit any affiliated
person of a registered investment
company, or any affiliated person of
such person, acting as principal, from
participating in any joint arrangement
with the company unless authorized by
the Commission. Applicants request
relief under section 17(d) and rule 17d–
1 to the extent necessary to permit a
Fund to engage in transactions in which
an affiliated person of the Fund or an
affiliated person of such person
participates as a joint, or a joint and
several participants with such Fund.
6. Applicants submit that compliance
with section 17(d) would cause the
Funds to forgo investment opportunities
simply because a Member, the Firm, or
another affiliated person of a Fund
made, or is concurrently making, an
investment. Applicants also state that
because certain attractive investment
opportunities often require that each
participant make available funds in an
amount that may be substantially greater
than that available to one Fund alone,
there may be attractive opportunities
that a Fund may be unable to take
advantage of except as a co-participant
with other persons, including affiliated
persons. Applicants assert that the
flexibility to structure co-investments
and joint investments will not involve
abuses of the type section 17(d) and rule
17d–1 were designed to prevent.
7. Section 17(f) of the Act designates
the entities that may act as investment
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company custodians, and rule 17f–2
allows an investment company to act as
self-custodian, subject to certain
requirements. Applicants request an
exemption from section 17(f) and rule
17f–2 to permit the following exceptions
from the requirements of rule 17f–2: (a)
Compliance with paragraph (b) of the
rule may be achieved through
safekeeping in the locked files of the
Firm, a partner of the Firm, or a senior
administrator of the Firm; (b) for
purposes of paragraph (d) of the rule, (i)
employees of the Firm will be deemed
employees of the Funds, (ii) officers and
Managing Members of a Fund will be
deemed to be officers of such Fund, and
(iii) the Managing Members of a Fund
will be deemed to be the board of
directors of such Fund; and (c) instead
of the verifications procedure under
paragraph (f) of the rule, the verification
will be effected quarterly by no fewer
than two employees of the Firm.
Applicants state that they expect that
many of the Funds’ investments are
most suitably kept in the Firm’s files
where they can be referred to as
necessary.
8. Section 17(g) and rule 17g–1
generally require the bonding of officers
and employees of a registered
investment company who have access to
its securities or funds. Rule 17g–1
requires that a majority of directors who
are not interested persons take certain
actions and give certain approvals
relating to fidelity bonding. Paragraph
(g) of rule 17g–1 sets forth certain
materials relating to the fidelity bond
that must be filed with the Commission
and certain notices relating to the
fidelity bond that must be given to each
member of the investment company’s
board of directors. Paragraph (h) of rule
17g–1 provides that an investment
company must designate one of its
officers to make the filings and give the
notices required by paragraph (g).
Paragraph (j) of rule 17g–1 exempts a
joint insured bond provided and
maintained by an investment company
and one or more other parties from
section 17(d) of the Act and the rules
thereunder, but also requires, in 17g–
1(j)(3), that the board of directors of
such company satisfy the fund
governance standards in rule 0–1(a)(7).
9. Applicants request an exemption
from section 17(g) and rule 17g–1 to the
extent necessary to permit the Managing
Members, who would all be considered
interested persons of the Funds, to take
the actions and make the approvals set
forth in rule 17g–1. Applicants could
not comply with rule 17g–1 absent such
relief. Applicants also request an
exemption from the requirements of
17g–1(g) and (h) because applicants
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believe that they are burdensome and
unnecessary as applied to the Funds.
The Managing Members will retain the
materials required to be filed under
17g–1(g) and designate a person to
maintain such records. Finally,
applicants request an exemption from
section 17g–1(j)(3) because the Funds
will not have boards of directors.
Additionally, in light of the purpose of
the Funds and the community of
interest among the Funds, and between
the Funds and the Managing Members,
applicants believe that little purpose
would be served by this requirement.
10. Section 17(j) and paragraph (b) of
rule 17j–1 make it unlawful for certain
enumerated persons to engage in
fraudulent or deceptive practices in
connection with the purchase or sale of
a security held or to be acquired by a
registered investment company. Rule
17j–1 also requires that every registered
investment company adopt a written
code of ethics and that every access
person of a registered investment
company report personal securities
transactions. Applicants request an
exemption from the requirements of rule
17j–1, except for the anti-fraud
provisions of paragraph (b), because
they are unnecessarily burdensome as
applied to the Funds and would serve
little purpose in light of the community
of interests among the Members of the
Funds by virtue of their common
association with the Firm.
11. Applicants request an exemption
from the requirements in sections 30(a),
30(b) and 30(e) of the Act, and the rules
and regulations thereunder, that
registered investment companies file
with the Commission and mail their
shareholders certain periodic reports
and financial statements. Applicants
contend that the forms prescribed by the
Commission for periodic reports have
little relevance to a Fund and would
entail administrative and legal costs that
outweigh any benefit to the Members.
Applicants request exemptive relief to
the extent necessary to permit a Fund to
report annually to its Members in the
manner described in the application.
Applicants also request an exemption
from section 30(h) of the Act to the
extent necessary to exempt the
Managing Members and any other
persons who may be deemed to be
members of an advisory board of a Fund
from filing Forms 3, 4, and 5, under
Section 16 of the Securities Exchange
Act of 1934, as amended (‘‘Exchange
Act’’) with respect to their ownership of
Interests in a Fund. Applicants assert
that, because there is no trading market
for Interests and the transferability of
Interests is severely restricted, these
filings are unnecessary for the
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protection of investors and burdensome
to those required to file them.
12. Rule 38a–1 requires investment
companies to adopt, implement and
periodically review written policies and
procedures reasonably designed to
prevent violation of the federal
securities laws, appoint a chief
compliance officer and maintain certain
records. The Funds will comply with
rule 38a–1(a), (c) and (d), except that the
Managing Members of each Fund will
fulfill the responsibilities assigned to a
Fund’s board of directors under the rule,
and since all Managing Members would
be considered interested persons of the
Funds, approval by a majority of the
disinterested directors required by rule
38a–1 will not be obtained.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Each proposed transaction to which
a Fund is a party otherwise prohibited
by section 17(a) or section 17(d) and
Rule 17d–1 (the ‘‘Section 17
Transactions’’) will be effected only if
the Managing Members determine that:
(a) The terms of the Section 17
Transaction, including the
consideration to be paid or received, are
fair and reasonable to the Members of
the participating Fund and do not
involve overreaching of the Fund or its
Members on the part of any person
concerned, and (b) the Section 17
Transaction is consistent with the
interests of the Members of the
participating Fund, the Fund’s
organizational documents and the
Fund’s reports to its Members. In
addition, the Managing Members will
record and preserve a description of
Section 17 Transactions, their findings,
the information or materials upon
which their findings are based and the
basis therefore. All such records will be
maintained for the life of a Fund and at
least six years thereafter, and will be
subject to examination by the
Commission and its staff. All such
records will be maintained in an easily
accessible place for at least the first two
years.
2. If purchases or sales are made by
a Fund from or to a Portfolio Company
affiliated with the Fund by reason of a
partner or employee of the Firm (a)
serving as officer, director, general
partner or investment adviser of the
Portfolio Company, or (b) having a 5%
or more investment in the Portfolio
Company, such individual will not
participate in the Fund’s determination
of whether or not to effect the purchase
or sale.
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3. The Managing Members will adopt,
and periodically review and update,
procedures designed to ensure that
reasonable inquiry is made, prior to the
consummation of any Section 17
Transaction, with respect to the possible
involvement in the transaction of any
affiliated person or promoter of or
principal underwriter for the Funds, or
any affiliated person of such a person,
promoter, or principal underwriter.
4. The Managing Members will not
make available to the Members of a
Fund any investment in which a CoInvestor (as defined below), with respect
to any Fund, has or proposes to acquire
the same class of securities of the same
issuer, where the investment may
involve a joint enterprise or other joint
arrangement within the meaning of rule
17d–1 in which the Fund and the CoInvestor are participants, unless any
such Co-Investor, prior to disposing of
all or part of its investment: (a) Gives
the Managing Members of the
participating Fund holding such
investment sufficient, but not less than
one day’s, notice of its intent to dispose
of its investment, and (b) refrains from
disposing of its investment unless the
participating Fund holding such
investment has the opportunity to
dispose of its investment prior to or
concurrently with, on the same terms as,
and on a pro rata basis with, the CoInvestor. The term (‘‘Co-Investor’’) with
respect to any Fund, means any person
who is: (a) An ‘‘affiliated person’’ (as
such term is defined in section 2(a)(3)
of the Act) of the Fund, (b) the Firm and
any entities controlled by the Firm, (c)
a current or former partner or employee
of the Firm, (d) an investment vehicle
offered, sponsored, or managed by the
Firm or an affiliated person of the Firm,
or (e) a company in which the Firm or
a Managing Member acts as an officer,
director, or general partner, or has a
similar capacity to control the sale or
disposition of the company’s securities.
The restrictions contained in this
condition, however, shall not be
deemed to limit or prevent the
disposition of an investment by a CoInvestor: (a) To its direct or indirect
wholly-owned subsidiary, to any
company (a ‘‘parent’’) of which the CoInvestor is a direct or indirect whollyowned subsidiary, or to a direct or
indirect wholly-owned subsidiary of its
parent, (b) to immediate family
members of the Co-Investor or a trust
established for any such family member,
(c) when the investment is comprised of
securities that are listed on a national
securities exchange registered under
section 6 of the Exchange Act, or (d)
when the investment is composed of
securities that are national market
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11066
Federal Register / Vol. 72, No. 47 / Monday, March 12, 2007 / Notices
system securities pursuant to section
11A(a)(2) of the Exchange Act and rule
11Aa2–1 thereunder.
5. The Managing Members of each
Fund will send to each Member who
had an Interest in that Fund, at any time
during the fiscal year then ended, Fund
financial statements. Such financial
statements shall be audited by
independent accountants in accordance
with United States generally accepted
accounting principles. At the end of
each fiscal year, the Managing Members
will make a valuation or have a
valuation made of all of the assets of the
Fund as of such fiscal year end in a
manner consistent with customary
practice with respect to the valuation of
assets of the kind held by the Fund. In
addition, within 90 days after the end of
each tax year of the Fund, or as
promptly as practicable thereafter, the
Managing Members shall send a report
to each person who was a Member at
any time during the fiscal year then
ended, setting forth such tax
information as shall be necessary for the
preparation by the Member of his or her
federal and state income tax returns and
a report of the investment activities of
the Fund during such year.
6. Each Fund and its Managing
Members will maintain and preserve,
for the life of each such Fund and at
least six years thereafter, such accounts,
books, and other documents as
constitute the record forming the basis
for the financial statements and annual
reports of such Fund to be provided to
its Members, and agree that all such
records will be subject to examination
by the Commission and its staff. All
such records will be maintained in an
easily accessible place for at least the
first two years.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–4291 Filed 3–9–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
pwalker on PROD1PC71 with NOTICES
[Release No. 34–55397; File No. 4–208]
Intermarket Trading System; Notice of
Filing and Immediate Effectiveness of
the Twenty Fourth Amendment to the
ITS Plan Relating to the Elimination of
the ITS Plan
March 5, 2007.
Pursuant to Section 11A of the
Securities Exchange Act of 1934
VerDate Aug<31>2005
18:04 Mar 09, 2007
Jkt 211001
(‘‘Act’’),1 and Rule 608 thereunder,2
notice is hereby given that on February
27, 2007, the ITS Participants, through
the ITS Operating Committee, submitted
to the Securities and Exchange
Commission (‘‘Commission’’) a
proposed amendment (‘‘Twenty Fourth
Amendment’’) to the restated ITS Plan.3
The purpose of the Twenty Fourth
Amendment is to eliminate the ITS Plan
concurrent with the Trading Phase
Date.4 Pursuant to Rule 608(b)(3)(ii)
under the Act,5 the ITS Participants
designated the amendment as concerned
solely with the administration of the
Plan. As a result, the Twenty Fourth
Amendment has become effective upon
filing with the Commission. At any time
within 60 days of the filing of the
amendment, the Commission may
summarily abrogate the amendment and
require that such amendment be refiled
in accordance with paragraph (a)(1) of
Rule 608 and reviewed in accordance
with paragraph (b)(2) of Rule 608, if it
appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or the maintenance of fair and
orderly markets, to remove impediments
to, and perfect the mechanisms of, a
national market system or otherwise in
furtherance of the purposes of the Act.
The Commission is publishing this
notice to solicit comments from
interested persons.
I. Description and Purpose of the
Proposed Amendment
The purpose of the proposed
amendment is to eliminate the ITS Plan
concurrent with the Trading Phase Date.
1 15
U.S.C. 78k–1.
CFR 242.608.
3 The ITS Plan is a National Market System
(‘‘NMS’’) plan, which was designed to facilitate
intermarket trading in exchange-listed equity
securities based on current quotation information
emanating from the linked markets. See Securities
Exchange Act Release No. 19456 (January 27, 1983),
48 FR 4938 (February 3, 1983).
The ITS Participants currently include the
American Stock Exchange LLC (‘‘Amex’’), the
Boston Stock Exchange, Inc. (‘‘BSE’’), the Chicago
Board Options Exchange, Inc. (‘‘CBOE’’), the
Chicago Stock Exchange, Inc. (‘‘CHX’’), the Nasdaq
Stock Market LLC (‘‘Nasdaq’’), the National
Association of Securities Dealers, Inc. (‘‘NASD’’),
the National Stock Exchange, Inc. (‘‘NSX’’), the New
York Stock Exchange LLC (‘‘NYSE’’), NYSE Arca,
Inc. (‘‘NYSE Arca’’), and the Philadelphia Stock
Exchange, Inc. (‘‘Phlx’’) (‘‘Participants’’).
4 Trading Phase Date is the required date for full
operation of Regulation NMS-compliant trading
systems of all automated trading centers that intend
to qualify their quotations for trade-through
protection under Rule 611. See Securities Exchange
Act Release No. 53829 (May 18, 2006), 71 FR 30038
(May 24, 2006). See also Securities Exchange Act
Release No. 55160 (January 24, 2007), 72 FR 4202
(January 30, 2007) (extending the Trading Phase
Date until March 5, 2007).
5 17 CFR 242.608(b)(3)(ii).
2 17
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
The ‘‘Plan for the Purpose of Creating
and Operating an Intermarket
Communications Linkage Pursuant to
Section 11A(a)(3)(B) of the Securities
Exchange Act of 1934’’ (‘‘NMS Linkage
Plan’’) 6 remains in effect until June 30,
2007.7
A. Governing or Constituent Documents
Not applicable.
B. Implementation of Amendment
The ITS Participants have manifested
their approval of the proposed
amendment by means of their execution
of the Twenty Fourth Amendment. The
Twenty Fourth Amendment has become
effective upon filing.
C. Development and Implementation
Phases
Not applicable.
D. Analysis of Impact on Competition
The Participants believe that the
proposed amendment does not impose
any burden on competition.
E. Written Understanding or Agreements
Relating to Interpretation of, or
Participation in, Plan
Not applicable.
F. Approval by Sponsors in Accordance
With Plan
Under section 4(c) of the restated ITS
Plan, the requisite approval of the
amendment is achieved by execution of
the amendment on behalf of each ITS
Participant. The amendment is so
executed.
G. Description of Operation of Facility
Contemplated by the Proposed
Amendment
Not applicable.
H. Terms and Conditions of Access
Not applicable.
I. Method of Determination and
Imposition, and Amount of, Fees and
Charges
Not applicable.
J. Method of Frequency of Processor
Evaluation
Not applicable.
6 The NMS Linkage Plan participants include
Amex, BSE, CBOE, CHX, Nasdaq, NSX, NYSE,
NYSE Arca, and PHLX. The NASD is not
participating in the NMS Linkage Plan. The current
ITS technology is being used to effectuate the NMS
Linkage Plan. See Securities Exchange Act Release
No. 54551 (September 29, 2006), 71 FR 59148
(October 6, 2006) (approving the NMS Linkage
Plan).
7 NMS Linkage Plan participants that wish to
extend the term could agree to do so, subject to
Commission approval. See Section 11 of the NMS
Linkage Plan.
E:\FR\FM\12MRN1.SGM
12MRN1
]]>Agencies
[Federal Register Volume 72, Number 47 (Monday, March 12, 2007)]
[Notices]
[Pages 11062-11066]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-4291]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 27747; 813-284]
SA Investment Partners LLC, et al.; Notice of Application
March 5, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under sections 6(b) and
6(e) of the Investment Company Act of 1940 (the ``Act'') granting an
exemption from all provisions of the Act, except section 9, and
sections 36 through 53, and the rules and regulations under the Act.
With respect to sections 17 and 30 of the Act, and the rules and
regulations thereunder, and rule 38a-1 under the Act, the exemption is
limited as set forth in the application.
-----------------------------------------------------------------------
Summary of Application: Applicants request an order to exempt certain
investment funds formed for the benefit of eligible current and former
employees of Sidley Austin LLP and its affiliates from certain
provisions of the Act. Each fund will be an employees' securities
company within the meaning of section 2(a)(13) of the Act.
Applicants: SA Investment Partnership LLC (the ``Investment Fund''),
and Sidley Austin LLP and any entity controlling, controlled by, or
under common control with Sidley Austin LLP (the ``Firm'').
Filing Dates: The application was filed on July 26, 2000, and amended
on March 8, 2001, March 23, 2001, November 14, 2003, and November 13,
2006. Applicants have agreed to file an 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, March 30, 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, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090; Applicants: One South Dearborn,
Chicago, IL 60603.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 551-6876 or Julia Kim Gilmer, Branch Chief, at (202) 551-6821,
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is 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 (telephone (202) 551-5850).
Applicants' Representations
1. The Firm is a law firm organized as a Delaware limited liability
partnership. The Investment Fund is a Delaware limited liability
company. Applicants may offer additional pooled investment vehicles to
the same class of investors eligible to invest in the Investment Fund
(the ``Subsequent Funds,'' and together with the Investment Fund, the
``Funds'') which will be substantially similar in all material respects
to the Investment Fund except for investment objectives and strategies,
operational differences related to the form of organization, and
differences which reflect revisions to applicable law. Each Subsequent
Fund, if any, will be structured as a general partnership, limited
partnership or limited liability company, although a Subsequent Fund
could be structured as a corporation, trust or other entity. The Funds
will operate as non-diversified, closed-end management investment
companies.
2. The Funds will enable Eligible Investors to participate in
investment opportunities that come to the attention of the Firm. Each
entity in which a Fund invests is referred to as a ``Portfolio
Company.'' Participation as investors in a Fund will allow Eligible
Investors (defined below) to diversify their investments and to have
the opportunity to participate in investments that might not otherwise
be available to them or that might be beyond their individual means.
3. Interests in each Fund (``Interests'') will be offered and sold
in reliance upon the exemption from registration contained in Section
4(2) of the Securities Act of 1933 (the ``Securities Act'') or
Regulation D under the Securities Act. Interests will be offered solely
to investors who, at the time of the offer, are: (a) Eligible Employees
(defined below); (b) trusts of which the trustees and/or grantors are
Eligible Employees or of which the sole beneficiaries are Eligible
Employees and their immediate family members (spouses, parents,
brothers, sisters, children, spouses of children, and grandchildren)
(``Eligible Trusts''); (c) entities, all of the voting power of which
is controlled by Eligible Employees \1\ (together with Eligible Trusts,
``Qualified Investment Vehicles''); (d) spouses of Eligible Employees;
and (e) the Firm (collectively, ``Eligible Investors'').
---------------------------------------------------------------------------
\1\ The inclusion of entities controlled by an Eligible Employee
in the definition of Eligible Investor is intended to enable
Eligible Employees and their immediate family members to make
investments in the Funds through private investment vehicles for the
purpose of personal and family investment and estate planning
objectives. Eligible Employees will exercise investment discretion
and control over these investment vehicles, thereby creating a close
nexus between the Firm and these investment vehicles.
---------------------------------------------------------------------------
4. ``Eligible Employees'' are current or former partners of the
Firm, lawyers and other professionals employed by the Firm, and certain
current or former
[[Page 11063]]
employees of the Firm involved in managing the day-to-day affairs of
the Funds.\2\ An Eligible Employee must be either an accredited
investor who meets the income requirements in rule 501(a)(6) of
regulation D under the Securities Act, or, one of a maximum of 35
people (collectively, ``Non-Accredited Investors'') who: (a) Meets the
sophistication requirements in rule 506(b)(2)(ii) of regulation D under
the Securities Act, has a graduate degree, a minimum of five years of
legal or business experience, and compensation of at least $150,000 in
the prior year and a reasonable expectation of at least $150,000 in
each of the two immediately succeeding years; \3\ or (b) meets the
definition of a knowledgeable employee in rule 3c-5 under the Act (with
a Fund treated as though it were a covered company for purposes of the
rule. Qualified Investment Vehicles that are not accredited investors
must (a) have an Eligible Employee or a spouse of an Eligible Employee
as the settlor, and the Eligible Employee as principal investment
decision maker, and (b) be counted as one of the 35 Non-Accredited
Investors.\4\ A spouse of an Eligible Employee must be an accredited
investor who meets the requirements of rule 501(a)(5) or 501(a)(6) of
regulation D under the Securities Act. Any other Eligible Investor must
be an accredited investor as defined in rule 501(a) of Regulation D.
Prior to offering Interests in a Fund to an Eligible Employee or a
spouse of an Eligible Employee, the Managing Members (defined below)
must reasonably believe that such individual has such knowledge,
sophistication, and experience in business and financial matters to be
capable of evaluating the merits and risks of participating in the
Fund, is able to bear the economic risk of the investment and is able
to afford a complete loss of the investment. Each investor in a Fund
shall be a (``Member'') of such Fund.
---------------------------------------------------------------------------
\2\ Any such former partners, lawyers or employees will maintain
a sufficiently close nexus with the Firm so as to preserve the
community of interest between the Eligible Employee and the Firm.
\3\ In addition, such Eligible Employee may not invest or commit
to invest (as applicable) in any year more than 10% of such person's
income from all sources for the immediately preceding year, in the
aggregate in a Fund and in all other Funds in which that Eligible
Employee has previously invested.
\4\ If such Qualified Investment Vehicle is an entity other than
a trust, the reference to ``settlor'' shall be construed to mean a
person who created the vehicle, alone or together with others and
who contributed funds or other assets to the vehicle.
---------------------------------------------------------------------------
5. Administration of the Funds, including the screening of
investment opportunities, will be vested in one or more (``Managing
Members'') who are also Eligible Investors. Managing Members may
delegate certain functions to one or more investment committees
consisting of partners or employees of the Firm or delegate investment
decisions to one or more advisers (each, an ``Adviser''). An Adviser
will either be an individual that is a Managing Member, or an entity
that is wholly-owned by the Firm.\5\ An Eligible Investor who is a
Managing Member will not receive any form of compensation for acting as
a Managing Member.
6. The Investment Fund will bear its own expenses. No fees or
compensation shall be paid to the Firm by the Funds, except for the
reimbursement of direct out of pocket costs of disbursements and
expenses incurred on behalf of such Funds. These direct out of pocket
expenses will not include any markup or profit component.
---------------------------------------------------------------------------
\5\ An Adviser will register as an investment adviser under the
Investment Advisers Act of 1940 (``Advisers Act'') if required. Any
performance fee or carried interest payable by a Fund to an Adviser
(a) will be charged only if permitted by rule 205-3 under the
Advisers Act if paid to an Adviser registered under the Advisers
Act, and (b) will comply with section 205(b)(3) of the Advisers Act
(with the Fund treated as if it were a business development company
solely for the purpose of that section) if paid to an Adviser not
registered under the Advisers Act. A `carried interest' is an
allocation to an Adviser based on the net gains in addition to the
amount allocable to the Adviser that is in proportion to its capital
contributions, if any.
---------------------------------------------------------------------------
7. Each Eligible Investor will receive a copy of the organizational
documents and offering memorandum for a Fund, which will disclose the
Fund's specific investment objective and strategies and other material
terms of the Fund, before investing in such Fund. Each Fund will send
its Members an annual report regarding its operations which will
contain audited financial statements. Each Fund will also transmit a
report to each Member containing information on that Member's
distributive share of income, gains, losses, credits and other items
for federal and state income tax purposes, resulting from operations of
the Fund that year. Members will not be entitled to redeem their
Interests in the Investment Fund, but the Investment Fund may in the
future be restructured to periodically repurchase Interests from
Members. Subsequent Funds may also periodically repurchase Interests
from Members. Except in the case of death, a Member will not be
permitted to transfer or assign his or her Interest in the Investment
Fund absent approval of a Managing Member. No fee will be charged in
connection with the sale or a Fund's repurchase of Interests of the
Funds.
8. A Member may be required to withdraw from a Fund if that
Member's continued participation would subject the Fund to possible
adverse tax consequences, or violate applicable law or regulations.
Upon withdrawal, the Member shall receive an amount equal to the
Member's net capital contributions (capital contributions less all
distributions received to the date of withdrawal) plus interest from
the date each capital contribution was made at the prime rate.
9. A Fund will not acquire any security issued by a registered
investment company if immediately after the acquisition such Fund would
own more than 3% of the total outstanding voting securities of the
registered investment company.
10. A Fund or Member will not borrow from any person if such
borrowing would cause any person not named in section 2(a)(13) of the
Act to own outstanding securities of the Fund (other than short term
paper). Any borrowing by a Fund will be non-recourse to the Fund's
Members.
11. The applicants reserve the right to impose vesting provisions
on a Member's investments in a Fund. In an investment program that
provides for vesting, all or a portion of a Member's Interests would be
treated as unvested, and vesting would occur over a specified period of
time. To the extent a Member's Interests are or become vested, the
termination of the Member's association or employment with the Firm
would not affect the Member's rights with respect to the vested
Interests. The portion of a Member's Interests that are unvested at the
time of the termination of a Member's association or employment with
the Firm may be subject to repurchase or cancellation by the Fund. Upon
any repurchase or cancellation of all or a portion of a Member's
Interests, the Fund will at a minimum pay to the Member the lesser of
(a) the amount actually paid by the Member to acquire the Interests
(plus interest at or above the prime rate, as determined by the
Managing Members); and (b) the fair market value of the Interests
determined at the time of repurchase or cancellation, as the case may
be, as determined in good faith by the Managing Members. Any interest
owed to a Member pursuant to (a) above will begin to accrue at the end
of the investment period.
Applicants' Legal Analysis
1. Section 6(b) of the Act provides, in part, that the Commission
will exempt employees' securities companies from the provisions of the
Act to the extent that the exemption is consistent with the protection
of investors. Section 6(b)
[[Page 11064]]
provides that the Commission will consider, in determining the
provisions of the Act from which the company should be exempt, the
company's form of organization and capital structure, the persons
owning and controlling its securities, the price of the company's
securities and the amount of any sales load, how the company's funds
are invested, and the relationship between the company and the issuers
of the securities in which it invests. Section 2(a)(13) defines an
employees' securities company, in relevant part, as any investment
company all of whose securities are beneficially owned (a) by current
or former employees, or persons on retainer, of one or more affiliated
employers, (b) by immediate family members of such persons, or (c) by
such employer or employers together with any of the persons in (a) or
(b).
2. Section 7 of the Act generally prohibits an investment company
that is not registered under section 8 of the Act from selling or
redeeming its securities. Section 6(e) provides that, in connection
with any order exempting an investment company from any provision of
section 7, certain provisions of the Act, as specified by the
Commission, will be applicable to the company and other persons dealing
with the company as though the company were registered under the Act.
Applicants request relief under sections 6(b) and 6(e) of the Act for
an exemption from all provisions of the Act except section 9 and
sections 36 through 53, and the rules and regulations under the Act.
With respect to sections 17 and 30 of the Act, and the rules and
regulations thereunder, and rule 38a-1 under the Act, the exemption is
limited as set forth in the application.
3. Section 17(a) generally prohibits any affiliated person of a
registered investment company, or any affiliated person of such an
affiliated person, acting as principal, from knowingly selling or
purchasing any security or other property to or from the company.
Applicants request an exemption from section 17(a) to the extent
necessary to permit a Fund: (a) To purchase, from the Firm or any
affiliated person thereof, securities or interests in properties
acquired for the account of the Firm or any affiliated person thereof;
(b) to sell, to the Firm or any affiliated person thereof, securities
or interests in properties previously acquired by the Funds; (c) to
invest in companies, partnerships, or other investment vehicles
offered, sponsored or managed by the Firm or any affiliated person
thereof; (d) to invest in securities of issuers for which the Firm or
any affiliated person thereof have performed services and from which
they may have received fees; (e) to purchase interests in any company
or other investment vehicle: (i) In which the Firm or its partners or
employees own 5% or more of the voting securities, or (ii) that is
otherwise an affiliated person of the Fund or the Firm (or any
affiliated person of the Fund); and (f) to participate as a selling
security holder in a public offering in which the Firm or any
affiliated person thereof acts as or represents as counsel a member of
the selling group or the issuer or underwriter.
4. Applicants state that an exemption from Section 17(a) is
consistent with the purposes of the Act and the protection of
investors. Applicants state that the risks associated with a Fund
engaging in transactions with affiliated parties will be disclosed to
Eligible Investors. Applicants state that Eligible Investors, as
financially sophisticated persons, will be able to understand and
evaluate the risks associated with those dealings. Applicants also
assert that the community of interest among the Members and the Firm
will serve to reduce the risk of abuse in transactions involving a Fund
and the Firm or any affiliated person thereof.
5. Section 17(d) and rule 17d-1 thereunder prohibit any affiliated
person of a registered investment company, or any affiliated person of
such person, acting as principal, from participating in any joint
arrangement with the company unless authorized by the Commission.
Applicants request relief under section 17(d) and rule 17d-1 to the
extent necessary to permit a Fund to engage in transactions in which an
affiliated person of the Fund or an affiliated person of such person
participates as a joint, or a joint and several participants with such
Fund.
6. Applicants submit that compliance with section 17(d) would cause
the Funds to forgo investment opportunities simply because a Member,
the Firm, or another affiliated person of a Fund made, or is
concurrently making, an investment. Applicants also state that because
certain attractive investment opportunities often require that each
participant make available funds in an amount that may be substantially
greater than that available to one Fund alone, there may be attractive
opportunities that a Fund may be unable to take advantage of except as
a co-participant with other persons, including affiliated persons.
Applicants assert that the flexibility to structure co-investments and
joint investments will not involve abuses of the type section 17(d) and
rule 17d-1 were designed to prevent.
7. Section 17(f) of the Act designates the entities that may act as
investment company custodians, and rule 17f-2 allows an investment
company to act as self-custodian, subject to certain requirements.
Applicants request an exemption from section 17(f) and rule 17f-2 to
permit the following exceptions from the requirements of rule 17f-2:
(a) Compliance with paragraph (b) of the rule may be achieved through
safekeeping in the locked files of the Firm, a partner of the Firm, or
a senior administrator of the Firm; (b) for purposes of paragraph (d)
of the rule, (i) employees of the Firm will be deemed employees of the
Funds, (ii) officers and Managing Members of a Fund will be deemed to
be officers of such Fund, and (iii) the Managing Members of a Fund will
be deemed to be the board of directors of such Fund; and (c) instead of
the verifications procedure under paragraph (f) of the rule, the
verification will be effected quarterly by no fewer than two employees
of the Firm. Applicants state that they expect that many of the Funds'
investments are most suitably kept in the Firm's files where they can
be referred to as necessary.
8. Section 17(g) and rule 17g-1 generally require the bonding of
officers and employees of a registered investment company who have
access to its securities or funds. Rule 17g-1 requires that a majority
of directors who are not interested persons take certain actions and
give certain approvals relating to fidelity bonding. Paragraph (g) of
rule 17g-1 sets forth certain materials relating to the fidelity bond
that must be filed with the Commission and certain notices relating to
the fidelity bond that must be given to each member of the investment
company's board of directors. Paragraph (h) of rule 17g-1 provides that
an investment company must designate one of its officers to make the
filings and give the notices required by paragraph (g). Paragraph (j)
of rule 17g-1 exempts a joint insured bond provided and maintained by
an investment company and one or more other parties from section 17(d)
of the Act and the rules thereunder, but also requires, in 17g-1(j)(3),
that the board of directors of such company satisfy the fund governance
standards in rule 0-1(a)(7).
9. Applicants request an exemption from section 17(g) and rule 17g-
1 to the extent necessary to permit the Managing Members, who would all
be considered interested persons of the Funds, to take the actions and
make the approvals set forth in rule 17g-1. Applicants could not comply
with rule 17g-1 absent such relief. Applicants also request an
exemption from the requirements of 17g-1(g) and (h) because applicants
[[Page 11065]]
believe that they are burdensome and unnecessary as applied to the
Funds. The Managing Members will retain the materials required to be
filed under 17g-1(g) and designate a person to maintain such records.
Finally, applicants request an exemption from section 17g-1(j)(3)
because the Funds will not have boards of directors. Additionally, in
light of the purpose of the Funds and the community of interest among
the Funds, and between the Funds and the Managing Members, applicants
believe that little purpose would be served by this requirement.
10. Section 17(j) and paragraph (b) of rule 17j-1 make it unlawful
for certain enumerated persons to engage in fraudulent or deceptive
practices in connection with the purchase or sale of a security held or
to be acquired by a registered investment company. Rule 17j-1 also
requires that every registered investment company adopt a written code
of ethics and that every access person of a registered investment
company report personal securities transactions. Applicants request an
exemption from the requirements of rule 17j-1, except for the anti-
fraud provisions of paragraph (b), because they are unnecessarily
burdensome as applied to the Funds and would serve little purpose in
light of the community of interests among the Members of the Funds by
virtue of their common association with the Firm.
11. Applicants request an exemption from the requirements in
sections 30(a), 30(b) and 30(e) of the Act, and the rules and
regulations thereunder, that registered investment companies file with
the Commission and mail their shareholders certain periodic reports and
financial statements. Applicants contend that the forms prescribed by
the Commission for periodic reports have little relevance to a Fund and
would entail administrative and legal costs that outweigh any benefit
to the Members. Applicants request exemptive relief to the extent
necessary to permit a Fund to report annually to its Members in the
manner described in the application. Applicants also request an
exemption from section 30(h) of the Act to the extent necessary to
exempt the Managing Members and any other persons who may be deemed to
be members of an advisory board of a Fund from filing Forms 3, 4, and
5, under Section 16 of the Securities Exchange Act of 1934, as amended
(``Exchange Act'') with respect to their ownership of Interests in a
Fund. Applicants assert that, because there is no trading market for
Interests and the transferability of Interests is severely restricted,
these filings are unnecessary for the protection of investors and
burdensome to those required to file them.
12. Rule 38a-1 requires investment companies to adopt, implement
and periodically review written policies and procedures reasonably
designed to prevent violation of the federal securities laws, appoint a
chief compliance officer and maintain certain records. The Funds will
comply with rule 38a-1(a), (c) and (d), except that the Managing
Members of each Fund will fulfill the responsibilities assigned to a
Fund's board of directors under the rule, and since all Managing
Members would be considered interested persons of the Funds, approval
by a majority of the disinterested directors required by rule 38a-1
will not be obtained.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Each proposed transaction to which a Fund is a party otherwise
prohibited by section 17(a) or section 17(d) and Rule 17d-1 (the
``Section 17 Transactions'') will be effected only if the Managing
Members determine that: (a) The terms of the Section 17 Transaction,
including the consideration to be paid or received, are fair and
reasonable to the Members of the participating Fund and do not involve
overreaching of the Fund or its Members on the part of any person
concerned, and (b) the Section 17 Transaction is consistent with the
interests of the Members of the participating Fund, the Fund's
organizational documents and the Fund's reports to its Members. In
addition, the Managing Members will record and preserve a description
of Section 17 Transactions, their findings, the information or
materials upon which their findings are based and the basis therefore.
All such records will be maintained for the life of a Fund and at least
six years thereafter, and will be subject to examination by the
Commission and its staff. All such records will be maintained in an
easily accessible place for at least the first two years.
2. If purchases or sales are made by a Fund from or to a Portfolio
Company affiliated with the Fund by reason of a partner or employee of
the Firm (a) serving as officer, director, general partner or
investment adviser of the Portfolio Company, or (b) having a 5% or more
investment in the Portfolio Company, such individual will not
participate in the Fund's determination of whether or not to effect the
purchase or sale.
3. The Managing Members will adopt, and periodically review and
update, procedures designed to ensure that reasonable inquiry is made,
prior to the consummation of any Section 17 Transaction, with respect
to the possible involvement in the transaction of any affiliated person
or promoter of or principal underwriter for the Funds, or any
affiliated person of such a person, promoter, or principal underwriter.
4. The Managing Members will not make available to the Members of a
Fund any investment in which a Co-Investor (as defined below), with
respect to any Fund, has or proposes to acquire the same class of
securities of the same issuer, where the investment may involve a joint
enterprise or other joint arrangement within the meaning of rule 17d-1
in which the Fund and the Co-Investor are participants, unless any such
Co-Investor, prior to disposing of all or part of its investment: (a)
Gives the Managing Members of the participating Fund holding such
investment sufficient, but not less than one day's, notice of its
intent to dispose of its investment, and (b) refrains from disposing of
its investment unless the participating Fund holding such investment
has the opportunity to dispose of its investment prior to or
concurrently with, on the same terms as, and on a pro rata basis with,
the Co-Investor. The term (``Co-Investor'') with respect to any Fund,
means any person who is: (a) An ``affiliated person'' (as such term is
defined in section 2(a)(3) of the Act) of the Fund, (b) the Firm and
any entities controlled by the Firm, (c) a current or former partner or
employee of the Firm, (d) an investment vehicle offered, sponsored, or
managed by the Firm or an affiliated person of the Firm, or (e) a
company in which the Firm or a Managing Member acts as an officer,
director, or general partner, or has a similar capacity to control the
sale or disposition of the company's securities.
The restrictions contained in this condition, however, shall not be
deemed to limit or prevent the disposition of an investment by a Co-
Investor: (a) To its direct or indirect wholly-owned subsidiary, to any
company (a ``parent'') of which the Co-Investor is a direct or indirect
wholly-owned subsidiary, or to a direct or indirect wholly-owned
subsidiary of its parent, (b) to immediate family members of the Co-
Investor or a trust established for any such family member, (c) when
the investment is comprised of securities that are listed on a national
securities exchange registered under section 6 of the Exchange Act, or
(d) when the investment is composed of securities that are national
market
[[Page 11066]]
system securities pursuant to section 11A(a)(2) of the Exchange Act and
rule 11Aa2-1 thereunder.
5. The Managing Members of each Fund will send to each Member who
had an Interest in that Fund, at any time during the fiscal year then
ended, Fund financial statements. Such financial statements shall be
audited by independent accountants in accordance with United States
generally accepted accounting principles. At the end of each fiscal
year, the Managing Members will make a valuation or have a valuation
made of all of the assets of the Fund as of such fiscal year end in a
manner consistent with customary practice with respect to the valuation
of assets of the kind held by the Fund. In addition, within 90 days
after the end of each tax year of the Fund, or as promptly as
practicable thereafter, the Managing Members shall send a report to
each person who was a Member at any time during the fiscal year then
ended, setting forth such tax information as shall be necessary for the
preparation by the Member of his or her federal and state income tax
returns and a report of the investment activities of the Fund during
such year.
6. Each Fund and its Managing Members will maintain and preserve,
for the life of each such Fund and at least six years thereafter, such
accounts, books, and other documents as constitute the record forming
the basis for the financial statements and annual reports of such Fund
to be provided to its Members, and agree that all such records will be
subject to examination by the Commission and its staff. All such
records will be maintained in an easily accessible place for at least
the first two years.
For the Commission, by the Division of Investment Management,
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-4291 Filed 3-9-07; 8:45 am]
BILLING CODE 8010-01-P
