Stephens Inc., et al.; Notice of Application, 31631-31636 [E7-10924]

Download as PDF Federal Register / Vol. 72, No. 109 / Thursday, June 7, 2007 / Notices Office of Personnel Management. Linda M. Springer, Director. [FR Doc. E7–11083 Filed 6–6–07; 8:45 am] BILLING CODE 6325–38–P OFFICE OF PERSONNEL MANAGEMENT Federal Employees’ Retirement System; Normal Cost Percentages Office of Personnel Management. ACTION: Notice. rwilkins on PROD1PC63 with NOTICES AGENCY: SUMMARY: The Office of Personnel Management (OPM) is providing notice of revised normal cost percentages for employees covered by the Federal Employees’ Retirement System (FERS) Act of 1986. DATES: The revised normal cost percentages are effective at the beginning of the first pay period commencing on or after October 1, 2007. Agency appeals of the normal cost percentages must be filed no later than December 7, 2007. ADDRESSES: Send or deliver agency appeals of the normal cost percentages and requests for actuarial assumptions and data to the Board of Actuaries, care of Gregory Kissel, Manager, Office of Actuaries, Strategic Human Resources Policy Division, Office of Personnel Management, Room 4307, 1900 E Street, NW., Washington, DC 20415. FOR FURTHER INFORMATION CONTACT: Jessica Johnson, (202) 606–0299. SUPPLEMENTARY INFORMATION: The FERS Act of 1986, Public Law 99–335, created a new retirement system intended to cover most Federal employees hired after 1983. Most Federal employees hired before 1984 are under the older Civil Service Retirement System (CSRS). Section 8423 of title 5, United States Code, as added by the FERS Act of 1986, provides for the payment of the Government’s share of the cost of the retirement system under FERS. Employees’ contributions are established by law and constitute only a small fraction of the cost of funding the retirement system; employing agencies are required to pay the remaining costs. The amount of funding required, known as ‘‘normal cost,’’ is the entry age normal cost of the provisions of FERS that relate to the Civil Service Retirement and Disability Fund (Fund). The normal cost must be computed by OPM in accordance with generally accepted actuarial practices and standards (using dynamic assumptions). Subpart D of part 841 of title 5, Code of VerDate Aug<31>2005 20:59 Jun 06, 2007 Jkt 211001 Federal Regulations, regulates how normal costs are determined. Recently, the Board of Actuaries of the Civil Service Retirement System approved a revised set of economic assumptions for use in the dynamic actuarial valuations of FERS. These assumptions were adopted after the Board reviewed statistical data prepared by the OPM actuaries and considered trends that may affect future experience under the System. Based on its analysis, the Board concluded that it would be appropriate to assume a rate of investment return of 6.25 percent, with no difference from the current rate of 6.25 percent. The Board increased the anticipated inflation rate from 3.25 percent to 3.50 percent, and increased the projected rate of General Schedule salary increases from 4.00 percent to 4.25 percent. These salary increases are in addition to assumed within-grade increases that reflect past experience. The new assumptions anticipate that, over the long term, the annual rate of investment return will exceed inflation by 2.75 percent and General Schedule salary increases will exceed inflation by .75 percent a year, as compared to 3 percent and .75 percent, respectively, under the previous assumptions. In addition, the Board found changes in all the demographic assumptions listed as factors under § 841.404(a) of title 5, Code of Federal Regulations. The normal cost calculations depend on both the economic and demographic assumptions. The demographic assumptions are determined separately for each of a number of special groups, in cases where separate experience data is available. Based on the new economic assumptions and the change in the demographic assumption, OPM has determined the normal cost percentage for each category of employees under § 841.403 of title 5, Code of Federal Regulations. The Governmentwide normal cost percentages, including the employee contributions, are as follows: Members ....................................... Congressional employees ............ Law enforcement officers, members of the Supreme Court Police, firefighters, nuclear materials couriers and employees under section 302 of the Central Intelligence Agency Retirement Act of 1964 for Certain Employees ................................ Air traffic controllers ...................... Military reserve technicians .......... PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 31631 Percent Employees under section 303 of the Central Intelligence Agency Retirement Act of 1964 for Certain Employees (when serving abroad) ...................................... All other employees ...................... 17.0 12.0 Under section 841.408 of title 5, Code of Federal Regulations, these normal cost percentages are effective at the beginning of the first pay period commencing on or after October 1, 2007. The time limit and address for filing agency appeals under sections 841.409 through 841.412 of title 5, Code of Federal Regulations, are stated in the DATES and ADDRESSES sections of this notice. Office of Personnel Management. Linda M. Springer, Director. [FR Doc. E7–11084 Filed 6–6–07; 8:45 am] BILLING CODE 6325–38–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 27843; 813–306] Stephens Inc., et al.; Notice of Application May 29, 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. AGENCY: Applicants request an order to exempt certain limited liability companies and other entities (‘‘Companies’’) formed for the benefit of key employees of Stephens Percent Inc. (‘‘Stephens’’) and its affiliates from 18.6 certain provisions of the Act. Each 17.1 Company will be an ‘‘employees’ securities company’’ within the meaning of section 2(a)(13) of the Act. APPLICANTS: Stephens; Stephens Investment Partners 2001 LLC, Stephens Investment Partners 2001A LLC, Stephens Investment Partners 2001B 26.2 LLC, Stephens Investment Partners 25.8 2001C LLC, Stephens Investment 14.8 Partners 2003 LLC, Stephens Investment SUMMARY OF APPLICATION: E:\FR\FM\07JNN1.SGM 07JNN1 31632 Federal Register / Vol. 72, No. 109 / Thursday, June 7, 2007 / Notices rwilkins on PROD1PC63 with NOTICES Partners 2003A LLC, Stephens Investment Partners 2003B LLC, Stephens Investment Partners 2004 LLC, Stephens Investment Partners 2004A LLC, Stephens Investment Partners 2004B LLC, Stephens Investment Partners 2006 LLC, Stephens Investment Partners 2006A LLC, and Stephens Investment Partners 2006B LLC (collectively, the ‘‘Initial Companies’’). FILING DATES: The application was filed on October 4, 2000, and amended on February 22, 2007 and April 27, 2007. 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 June 25, 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, 111 Center Street, Suite 2300, Little Rock, AR 72201. FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at (202) 551–6811 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 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. Stephens is an investment banking firm organized under the laws of the State of Arkansas. Stephens is a wholly owned subsidiary of SI Holdings Inc., a holding company for a limited number of financial and insurance related companies. Stephens engages in municipal underwriting, mergers and acquisitions, corporate underwriting, private placements, trading, discretionary portfolio management, VerDate Aug<31>2005 20:59 Jun 06, 2007 Jkt 211001 and offers a full range of investment banking services. Stephens is a brokerdealer registered under the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’) and an investment adviser registered under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). Stephens and its ‘‘affiliates,’’ as defined in rule 12b–2 under the Exchange Act, are referred to collectively as the ‘‘Stephens Group’’ and each entity within the Stephens Group is referred to individually as a ‘‘Stephens Group Entity.’’ 2. Stephens has established the Initial Companies as limited liability companies organized under the laws of the state of Arkansas and may in the future establish additional pooled investment vehicles identical in all material respects to the Initial Companies (other than investment objectives and strategies and form of organization) (the ‘‘Subsequent Companies’’ and collectively with the Initial Companies, the ‘‘Companies’’) for the benefit of current or former key employees, officers, directors and consultants of the Stephens Group and certain entities and individuals affiliated with employees of the Stephens Group (‘‘Members’’). The Companies are designed primarily to create capital building opportunities that are competitive with those at other investment banking firms for the Members and to facilitate the recruitment and retention of high caliber professionals. 3. Each Company will operate as a closed-end, management investment company and may be diversified or nondiversified. The Initial Companies are organized in a ‘‘master-feeder’’ structure, in which several feeder Companies invest all of their assets in a master Company (‘‘Master Company’’) that invests directly or indirectly in portfolio companies. Each Company, including the Master Company, will be an ‘‘employees’ securities company’’ within the meaning of section 2(a)(13) of the Act. The investment objectives and policies for each Company may vary from Company to Company. Participation in the Companies is voluntary, except with respect to Plan Interest Holders (as defined below) who will receive an award of interests in the Companies on an involuntary basis (as described below). 4. The Initial Companies are managed by a committee of ten managers (collectively, the ‘‘Managers’’). Each Manager is a senior executive of Stephens and an Accredited Investor (as defined below) who is eligible to invest in a Company. It is currently anticipated that Subsequent Companies will be PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 managed by the Managers, however, Stephens may in the future organize one or more Stephens Group Entities to serve as the Manager of one or more Subsequent Companies. The Managers will register as investment advisers under the Advisers Act, if required under applicable law. 5. Interests in the Companies (‘‘Interests’’) will be offered without registration in reliance on section 4(2) of the Securities Act of 1933 (the ‘‘Securities Act’’) or Regulation D under the Securities Act, and will be offered and sold only to (a) certain officers, directors, employees and ‘‘Consultants’’ 1 of the Stephens Group who meet the standards set forth below (‘‘Stephens Employees’’), and (b) trusts or other investment vehicles of which the trustees or grantors are Stephens Employees or Stephens Employees together with their Qualified Family Members (as defined below), trusts or other investment vehicles established solely for the benefit of Stephens Employees or their Qualified Family Members, or partnerships, corporations or other entities all of the voting power of which is controlled by Stephens Employees (‘‘Qualified Investment Vehicles’’ and collectively with Stephens Employees, ‘‘Eligible Investors’’). Qualified Family Members include any parent, child, spouse of a child, spouse, brother, sister or grandchild, and includes any step and adoptive relationships. Each Eligible Investor must have, in the reasonable belief of the Managers, the knowledge, sophistication and experience in business and financial matters to be capable of evaluating the merits and risks of investing in a Company and be able to bear the economic risk of such investment, and be able to afford a complete loss of the investment. In the future, Stephens Group Entities may invest in a Company and Interests in a Company may be offered and sold to Qualified Family Members. 6. To be a Stephens Employee, an individual must (a) meet the standards of an accredited investor under rule 501(a)(5) or 501(a)(6) of Regulation D under the Securities Act (an ‘‘Accredited Investor’’) or (b) be one of 35 Stephens Employees who (i) is a Managing Employee (as defined below) or (ii) has a minimum of three years business experience in management, consulting, accounting, finance, law or 1 A ‘‘Consultant’’ is a person or entity whom a Stephens Group Entity has engaged on retainer to provide services and professional expertise on an ongoing basis as a regular consultant or as a business or legal adviser and who shares a community of interest with the Stephens Group and its employees. E:\FR\FM\07JNN1.SGM 07JNN1 rwilkins on PROD1PC63 with NOTICES Federal Register / Vol. 72, No. 109 / Thursday, June 7, 2007 / Notices investment banking; will have a reportable income from all sources (including any profit share or bonus) in the calendar year immediately preceding his or her admission as a Member of at least $100,000 and a reasonable expectation of reportable income of at least $100,000 in each year in which he or she invests in a Company; and has a graduate degree in business, law, finance or accounting (‘‘Sophisticated Employee’’); except that a Managing Employee who is an Accredited Investor is not counted toward the 35 employee limit referred to in (b) above. A Managing Employee is an employee of Stephens Group who meets the definition of ‘‘knowledgeable employee’’ in rule 3c–5(a)(4) under the Act (with the Company treated as though it were a ‘‘Covered Company’’ for purposes of the rule). Each Sophisticated Employee will not be permitted to invest in any year more than 10% of such person’s income from all sources for the immediately preceding year in the aggregate in a Company and in all other Companies in which he or she has previously invested. 7. To be a Stephens Employee, an entity must (a) be a current or former Consultant of a Stephens Group Entity and (b) meet the standards of an accredited investor under rule 501(a) of Regulation D. To be a Qualified Family Member, a person must be an Accredited Investor. A Stephens Employee or a Qualified Family Member may purchase an Interest through a Qualified Investment Vehicle only if either (a) the Qualified Investment Vehicle is an accredited investor, or (b) the Qualified Investment Vehicle, which is not an accredited investor, (i) has a Stephens Employee or Qualified Family Member as the settlor 2 and principal investment decisionmaker, and (ii) is counted toward the limit on the 35 non-accredited investors that may invest in a Company. 8. Certain employees of the Stephens Group who do not qualify as Eligible Investors may receive Interests from Stephens without payment as part of an employee benefit plan in order to reward and retain these employees (‘‘Plan Interest Holders’’). Interests awarded to Plan Interest Holders will not be registered under the Securities Act and, because these employees will not be investing their own funds and will not have discretion over whether or not they receive Interests, these 2 If a Qualified Investment Vehicle is an entity other than a trust, the reference to ‘‘settler’’ shall be construed to mean a person who created the vehicle, alone or together with others, and who contributed funds to the vehicle. VerDate Aug<31>2005 20:59 Jun 06, 2007 Jkt 211001 employees will not meet the sophistication and salary requirements to which Eligible Investors are subject. Plan Interest Holders will receive Interests at no cost and will neither make, nor be permitted to make, any financial contribution in order to acquire Interests. Plan Interest Holders will not be permitted to elect to receive an equivalent cash payment or other compensation in lieu of Interests. Plan Interest Holders will have no control or input as to whether they are awarded Interests, and the Interests given to Plan Interest Holders will not replace any part of, or reduce in any manner, the compensation of, or other benefits provided to, the Plan Interest Holders. 9. The investment objectives and strategies for each Company will be set forth in offering documents relating to the Interests offered by the Company. Prior to being invited to participate in a Company or receiving an Interest in a Company, each Eligible Investor or Plan Interest Holder will receive a copy of the offering documents and the operating agreement (or other organizational document) of the Company or an offering memorandum, which will set forth all the terms of participation in the Company. The Managers will send an annual report to each Member not later than 120 days after the close of the fiscal year, which will contain financial statements of the Company that have been audited by independent accountants. In addition, the Members will receive at least annually all information necessary to enable the Members to prepare their federal and state income tax returns. 10. Interests in the Companies will be non-transferable by a Member except with the express consent of the Managers or to the Eligible Investor’s estate in the event of his or her death. No person will be admitted as a Member of a Company unless the person is an Eligible Investor, a Plan Interest Holder, a Stephens Group Entity, a Qualified Family Member, or a Qualified Investment Vehicle, except that a legal representative may hold an Interest in order to settle the estate of a deceased Member or administer its property. No fee of any kind will be charged in connection with the sale of Interests. 11. A Member’s Interests in a Company may be subject to a vesting schedule that will provide that such Interests will initially be unvested or only partially vested and will vest over time at specified percentages and specified intervals as set out in the Company’s operating agreement or other constitutive document. A Member’s Interests in a Company will be subject to repurchase or cancellation if: (a) The PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 31633 Member’s employment relationship with the Stephens Group is terminated for cause, (b) the Member becomes a consultant to or joins any firm that the Managers determine, in their reasonable discretion, is competitive with any business of the Stephens Group, or (c) the Member voluntarily resigns from employment with the Stephens Group. Upon the occurrence of one of the events specified above, the relevant Company or a Stephens Group Entity will have the right to repurchase all of the terminating Member’s Interests in exchange for a payment equal to the amount actually paid by the Member to acquire the Interests less the fair market value of any distributions received by that Member from the Fund, plus interest. This repurchase right also applies upon any attempted transfer of Interests (whether vested or not) in violation of the transfer restrictions. Following termination where the Company’s repurchase option does not apply, the terminating Member (or, following the death of the Member, the Member’s estate or beneficiary) has the right to continue to hold the Interests purchased or awarded prior to termination and to receive distributions on the same terms as other Interest holders in the relevant Companies. 12. Certain of the Companies may leverage their investments through loans from a Stephens Group Entity. Each such Company loan will be made at an interest rate no less favorable than that which could be obtained on an arm’s length basis. The Companies will not borrow from any person if the borrowing would cause any person not named in section 2(a)(13) of the Act to own outstanding securities of the Company (other than short-term paper). Any Company loan made to a Company will be non-recourse to the Members. 13. A Company will not acquire any security issued by a registered investment company if immediately after the acquisition, the Company would own more than 3% of the outstanding voting stock of the registered investment company. 14. The Managers may charge the Companies an administrative fee or a management fee, including a performance fee.3 The Managers may receive reimbursement of their out-ofpocket expenses, including 3 Any performance fee payable by a Company to the Managers may be charged only to the extent permitted by rule 205–3 under the Advisers Act (in the case of Managers registered under the Advisers Act) or will comply with section 205(b)(3) of the Advisers Act (in the case of Managers exempt from registration under the Advisers Act), with the Company treated as a business development company solely for the purpose of that section. E:\FR\FM\07JNN1.SGM 07JNN1 31634 Federal Register / Vol. 72, No. 109 / Thursday, June 7, 2007 / Notices rwilkins on PROD1PC63 with NOTICES reimbursement for the allocable portion of the salaries of the Stephens Group employees who participate in any of the Companies’ affairs. 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) 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 as any investment company all of whose securities (other than shortterm paper) 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 investment companies that are not registered under section 8 of the Act from selling or redeeming their 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 an order under sections 6(b) and 6(e) of the Act exempting the Companies from all provisions of the Act, except section 9 and sections 36 through 53 of the Act, 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 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 permit: (a) A Stephens Group Entity, or an affiliated person of a Stephens Group Entity (‘‘Stephens Affiliate’’), acting as principal, to engage VerDate Aug<31>2005 20:59 Jun 06, 2007 Jkt 211001 in any transaction directly or indirectly with any Company or any entity controlled by the Company; (b) a Company to invest in or engage in any transaction with any entity, acting as principal (i) in which the Company, any company controlled by the Company or any entity in which a Stephens Group Entity has invested or will invest or (ii) with which the Company, any company controlled by the Company, or a Stephens Group Entity is or will otherwise become affiliated; (c) a partner or other investor in any entity in which a Company invests, acting as principal, to engage in transactions directly or indirectly with a Company or any company controlled by a Company; or (d) a sale by a Company as a selling security holder in a public offering in which a Stephens Group Entity or a Stephens Affiliate acts as a member of the selling group. 4. Applicants state that an exemption from section 17(a) is consistent with the protection of investors and the purposes of the Act. Applicants state that the Members in each Company will be informed of the possible extent of the Company’s dealings with Stephens Group Entities and of the potential conflicts of interest that may exist. Applicants also state that, as professionals engaged in the investment banking business, the Members will be able to understand and evaluate the attendant risks. Applicants assert that the community of interest among the Members and Stephens will serve to reduce any risk of abuse in transactions involving a Company and a Stephens Group Entity. 5. Section 17(d) of the Act and rule 17d–1 under the Act prohibit any affiliated person or principal underwriter of a registered investment company, or any affiliated person of an affiliated person or principal underwriter, acting as principal, from participating in any joint arrangement unless authorized by the Commission. Applicants request relief to permit affiliated persons of each Company, or affiliated persons of such persons, to participate in any joint arrangement in which the Company or an entity controlled by the Company is a participant. 6. Applicants submit that it is likely that suitable investments will be brought to the attention of a Company because of its affiliation with the Stephens Group and Stephen Group’s experience in investment and merchant banking. Applicants also submit that the types of investment opportunities considered by a Company often require each investor to make funds available in an amount that may be substantially PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 greater than what a Company may make available on its own. Applicants contend that, as a result, the only way in which a Company may be able to participate in these opportunities may be to co-invest with other persons, including its affiliates. Applicants note that each Company will be primarily organized for the benefit of Members as an incentive for them to remain with the Stephens Group and for the generation and maintenance of goodwill. Applicants believe that, if coinvestments with the Stephens Group Entities are prohibited, the appeal of the Companies would be substantially eliminated. 7. Applicants state that the possibility that permitting co-investments by a Stephens Group Entity and a Company might lead to less advantageous treatment of the Company is mitigated by (a) the community of interest between the Stephens Group and the Members in the Company and (b) the fact that officers and directors of Stephens Group Entities will be investing in the Company. In addition, applicants assert that compliance with section 17(d) could cause a Company to forego attractive investment opportunities simply because an affiliated person of the Company has made, or may make, the same investment. 8. Section 17(e) of the Act and rule 17e–1 under the Act limit the compensation an affiliated person may receive when acting as agent or broker for a registered investment company. Applicants request an exemption from section 17(e) to permit a Stephens Group Entity, acting as agent or broker, to receive placement fees, advisory fees, or other compensation from a Company in connection with the purchase or sale by a Company of securities, subject to the requirement that the fees or other compensation must be deemed ‘‘usual and customary.’’ Applicants state that for the purposes of the application, fees or other compensation that is charged or received by a Stephens Group Entity will be deemed ‘‘usual and customary’’ only if (a) the Company is purchasing or selling securities alongside other unaffiliated third parties who also are similarly purchasing or selling securities, (b) the fees or compensation being charged to the Company are also being charged to the unaffiliated third parties, and (c) the amount of securities being purchased or sold by the Company does not exceed 50% of the total amount of securities being purchased or sold by the Company and the unaffiliated third parties. Applicants assert that, because the Stephens Group does not wish it to appear as if it is E:\FR\FM\07JNN1.SGM 07JNN1 rwilkins on PROD1PC63 with NOTICES Federal Register / Vol. 72, No. 109 / Thursday, June 7, 2007 / Notices favoring the Companies, compliance with section 17(e) would prevent a Company from participating in a transaction where the Company is being charged lower fees than the unaffiliated third parties. Applicants assert that the fees or other compensation paid by a Company to a Stephens Group Entity will be the same as those negotiated at arm’s length with unaffiliated third parties. 9. Rule 17e–1(b) requires that a majority of directors who are not ‘‘interested persons’’ (as defined by section 2(a)(19) of the Act) take actions and make approvals regarding commissions, fees, or other remuneration. Rule 17e–1(c) requires each Company to comply with the fund governance standards defined in rule 0– 1(a)(7). Applicants request an exemption from rule 17e–1(b) to the extent necessary to permit each Company to comply with the rule without having a majority of the Managers of the Company who are not interested persons take actions and make determinations as set forth in the rule. Applicants state that because the Managers of a Company will be deemed interested persons of the Company, without the relief requested, a Company could not comply with rule 17e–1(b). Applicants state that each Company will comply with rule 17e–1(b) by having a majority of the Managers take actions and make approvals as set forth in rule 17e–1. Applicants also request an exemption from rule 17e–1(c). Applicants state that each Company will otherwise comply with the requirements of rule 17e–1. 10. Section 17(f) designates the entities that may act as investment company custodians, and rule 17f–1 imposes certain requirements when the custodian is a member of a national securities exchange. Applicants request an exemption from section 17(f) and rule 17f–1(a) to permit Stephens to act as custodian of a Company’s assets without a written contract. Applicants also request an exemption from the rule 17f–1(b)(4) requirement that an independent accountant periodically verify the assets held by the custodian. Applicants further request an exemption from rule 17f–1(c)’s requirement of transmitting to the Commission a copy of any contract executed pursuant to rule 17f–1. Applicants believe that, because of the community of interest between the Stephens Group and the Companies and the existing requirement for an independent audit, compliance with these requirements would be unnecessary. Applicants state that they will comply with rule 17f–1(d), provided that ratification by the VerDate Aug<31>2005 20:59 Jun 06, 2007 Jkt 211001 Managers of any Company will be deemed to be ratification by a majority of the board of directors of that Company. Applicants state that each Company will comply with all other requirements of rule 17f–1. 11. 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. Rule 17g–1(j)(3) requires that the board of directors of an investment company satisfy the fund governance standards defined in rule 0– 1(a)(7). Applicants request an exemption from section 17(g) and rule 17g–1 to the extent necessary to permit each Company to comply with rule 17g– 1 without the necessity of having a majority of the disinterested directors take such action and make the determinations set forth in the rule. Specifically, each Company will comply with rule 17g–1 by having the Managers take such actions and make such approvals as are set forth in rule 17g– 1. Applicants state that, because the Managers will be interested persons of each Company, a Company could not comply with rule 17g–1 without the requested relief. Applicants also request an exemption from the requirements of rule 17g–1(g) and (h) relating to the filing of copies of fidelity bonds and related information with the Commission and provision of notices to the board of directors and from the requirements of rule 17g–1(j)(3). Applicants believe the filing requirements are burdensome and unnecessary as applied to the Companies. The Managers will maintain the materials otherwise required to be filed with the Commission by rule 17g– 1(g) and agree that all such material will be subject to examination by the Commission and its staff. The Managers PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 31635 will designate a person to maintain the records otherwise required to be filed with the Commission under paragraph (g) of the rule. Applicants also state that the notices otherwise required to be give to the board of directors would be unnecessary as the Companies will not have boards of directors. The Companies will comply with all other requirements of rule 17g–1. 12. 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 provisions of rule 17j–1, except for the anti-fraud provisions of paragraph (b), because they are unnecessarily burdensome as applied to the Companies. 13. Applicants request an exemption from the requirements in sections 30(a), 30(b) and 30(e), and the rules under those sections, that registered investment companies prepare and file with the Commission and mail to their shareholders certain periodic reports and financial statements. Applicants contend that the forms prescribed by the Commission for periodic reports have little relevance to the Companies and would entail administrative and legal costs that outweigh any benefit to the Members. Applicants request exemptive relief to the extent necessary to permit each Company to report annually to its Members. Applicants also request also an exemption from section 30(h) to the extent necessary to exempt the Managers of each Company and any other person who may be deemed to be a member of an advisory board of a Company from filing Forms 3, 4, and 5 under section 16(a) of the Exchange Act with respect to their ownership of Interests in a Company. Applicants assert that, because there will be no trading market and the transfers of Interests will be severely restricted, these filings are unnecessary for the protection of investors and burdensome to those required to make them. 14. 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 and to appoint a chief compliance officer. Each Company will comply with rule 38a–1(a), (c) and (d), except that (a) because the Companies E:\FR\FM\07JNN1.SGM 07JNN1 31636 Federal Register / Vol. 72, No. 109 / Thursday, June 7, 2007 / Notices rwilkins on PROD1PC63 with NOTICES do not have boards of directors, the Managers of each Company will fulfill the responsibilities assigned to a Company’s board of directors under the rule, and (b) because all Managers would be considered interested persons of the Companies, approval by a majority of 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 involving a Company otherwise prohibited by section 17(a) or section 17(d) of the Act and rule 17d–1 thereunder (each, a ‘‘Section 17 Transaction’’) will be effected only if the Managers 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 and do not involve overreaching of the Company or its Members on the part of any person concerned; and (b) the Section 17 Transaction is consistent with the interests of the Members, the Company’s organizational documents and the Company’s reports to its Members. In addition, the Managers will record and preserve a description of all Section 17 Transactions, their findings, the information or materials upon which their findings are based, and the basis therefor. All such records will be maintained for the life of the Companies and at least six years thereafter, and will be subject to examination by the Commission and its staff. Each Company will preserve the accounts, books, and other documents required to be maintained in an easily accessible place for the first two years. 2. In connection with the Section 17 Transactions, the Managers will adopt, and periodically review and update, procedures designed to ensure that reasonable inquiry is made, before the consummation of any such transaction, with respect to the possible involvement in the transaction of any affiliated person or promoter of or principal underwriter for the Companies, or any affiliated person of an affiliated person, promoter, or principal underwriter. 3. The Managers of each Company will not invest the funds of any Company in any investment in which an Affiliated Co-Investor (as defined below) has acquired or proposes to acquire the same class of securities of the same issuer, where the investment involves a joint enterprise or other joint arrangement within the meaning of rule VerDate Aug<31>2005 20:59 Jun 06, 2007 Jkt 211001 17d–1 in which the Company and an Affiliated Co-Investor are participants, unless any such Affiliated Co-Investor, prior to disposing of all or part of its investment, (a) gives the Managers 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 Company has the opportunity to dispose of the Company’s investment prior to or concurrently with, on the same terms as, and pro rata with the Affiliated CoInvestor. The term ‘‘Affiliated CoInvestor’’ with respect to a Company means: (a) An ‘‘affiliated person,’’ as such term is defined in the Act, of the Company; (b) the Stephens Group; (c) an officer, director or employee of the Stephens Group; (d) an investment vehicle offered, sponsored or managed by the Stephens Group, or (e) an entity in which a member of the Stephens Group acts as a general partner or has a similar capacity to control the sale or other disposition of the entity’s securities. The restrictions contained in this condition, however, will not be deemed to limit or prevent the disposition of an investment by an Affiliated Co-Investor: (a) To its direct or indirect wholly-owned subsidiary, to any company (a ‘‘Parent’’) of which the Affiliated 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 Affiliated CoInvestor or a trust established for any Affiliated Co-Investor or any such family member; or (c) when the investment is comprised of securities that are (i) listed on any national securities exchange registered under section 6 of the Exchange Act; (ii) national market system securities pursuant to section 11A(a)(2) of the Exchange Act and rule 11Aa2–1 thereunder; or (iii) government securities as defined in section 2(a)(16) of the Act. 4. Each Company and its Managers will maintain and preserve, for the life of each Company and at least six years thereafter, all accounts, books, and other documents as constitute the record forming the basis for the audited financial statements that are to be provided to the Members, and each annual report of such Company required to be sent to the Members, and agree that all such records will be subject to examination by the Commission and its staff.4 4 Each Company will preserve the accounts, books and other documents required to be maintained in an easily accessible place for the first two years. PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 5. The Managers will send to each Member who had an Interest in the Company, at any time during the fiscal year then ended, Company financial statements that have been audited by that Company’s independent accountants. At the end of each fiscal year, the Managers will make a valuation or have a valuation made of all of the assets of the Company 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 Company. In addition, within 120 days after the end of each fiscal year of the Company or as soon as practicable thereafter, the Managers of the Company shall send a report to each person who was a Member at any time during the fiscal year then ended setting forth tax information 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 Company during that year. 6. Whenever a Company makes a purchase from or sale to an entity that is affiliated with the Company by reason of a Stephens Group director, officer, or employee (a) serving as an officer, director, general partner or investment adviser of the entity or (b) having a 5% or more investment in the entity, that individual will not participate in the determination by the Managers of whether or not to effect the purchase or sale. For the Commission, by the Division of Investment Management, under delegated authority. Florence E. Harmon, Deputy Secretary. [FR Doc. E7–10924 Filed 6–6–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55843; File No. SR–Amex– 2004–27] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of a Proposed Rule Change as Modified by Amendment Nos. 2 and 3 Thereto Relating to the Listing and Trading of Fixed Return Options June 1, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 29, 2004, the American Stock Exchange LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission 1 15 2 17 E:\FR\FM\07JNN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 07JNN1

Agencies

[Federal Register Volume 72, Number 109 (Thursday, June 7, 2007)]
[Notices]
[Pages 31631-31636]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-10924]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27843; 813-306]


Stephens Inc., et al.; Notice of Application

May 29, 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.

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Summary of Application: Applicants request an order to exempt certain 
limited liability companies and other entities (``Companies'') formed 
for the benefit of key employees of Stephens Inc. (``Stephens'') and 
its affiliates from certain provisions of the Act. Each Company will be 
an ``employees' securities company'' within the meaning of section 
2(a)(13) of the Act.

Applicants: Stephens; Stephens Investment Partners 2001 LLC, Stephens 
Investment Partners 2001A LLC, Stephens Investment Partners 2001B LLC, 
Stephens Investment Partners 2001C LLC, Stephens Investment Partners 
2003 LLC, Stephens Investment

[[Page 31632]]

Partners 2003A LLC, Stephens Investment Partners 2003B LLC, Stephens 
Investment Partners 2004 LLC, Stephens Investment Partners 2004A LLC, 
Stephens Investment Partners 2004B LLC, Stephens Investment Partners 
2006 LLC, Stephens Investment Partners 2006A LLC, and Stephens 
Investment Partners 2006B LLC (collectively, the ``Initial 
Companies'').

Filing Dates: The application was filed on October 4, 2000, and amended 
on February 22, 2007 and April 27, 2007. 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 June 25, 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, 111 Center Street, Suite 
2300, Little Rock, AR 72201.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at 
(202) 551-6811 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 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. Stephens is an investment banking firm organized under the laws 
of the State of Arkansas. Stephens is a wholly owned subsidiary of SI 
Holdings Inc., a holding company for a limited number of financial and 
insurance related companies. Stephens engages in municipal 
underwriting, mergers and acquisitions, corporate underwriting, private 
placements, trading, discretionary portfolio management, and offers a 
full range of investment banking services. Stephens is a broker-dealer 
registered under the Securities Exchange Act of 1934 (the ``Exchange 
Act'') and an investment adviser registered under the Investment 
Advisers Act of 1940 (the ``Advisers Act''). Stephens and its 
``affiliates,'' as defined in rule 12b-2 under the Exchange Act, are 
referred to collectively as the ``Stephens Group'' and each entity 
within the Stephens Group is referred to individually as a ``Stephens 
Group Entity.''
    2. Stephens has established the Initial Companies as limited 
liability companies organized under the laws of the state of Arkansas 
and may in the future establish additional pooled investment vehicles 
identical in all material respects to the Initial Companies (other than 
investment objectives and strategies and form of organization) (the 
``Subsequent Companies'' and collectively with the Initial Companies, 
the ``Companies'') for the benefit of current or former key employees, 
officers, directors and consultants of the Stephens Group and certain 
entities and individuals affiliated with employees of the Stephens 
Group (``Members''). The Companies are designed primarily to create 
capital building opportunities that are competitive with those at other 
investment banking firms for the Members and to facilitate the 
recruitment and retention of high caliber professionals.
    3. Each Company will operate as a closed-end, management investment 
company and may be diversified or non-diversified. The Initial 
Companies are organized in a ``master-feeder'' structure, in which 
several feeder Companies invest all of their assets in a master Company 
(``Master Company'') that invests directly or indirectly in portfolio 
companies. Each Company, including the Master Company, will be an 
``employees' securities company'' within the meaning of section 
2(a)(13) of the Act. The investment objectives and policies for each 
Company may vary from Company to Company. Participation in the 
Companies is voluntary, except with respect to Plan Interest Holders 
(as defined below) who will receive an award of interests in the 
Companies on an involuntary basis (as described below).
    4. The Initial Companies are managed by a committee of ten managers 
(collectively, the ``Managers''). Each Manager is a senior executive of 
Stephens and an Accredited Investor (as defined below) who is eligible 
to invest in a Company. It is currently anticipated that Subsequent 
Companies will be managed by the Managers, however, Stephens may in the 
future organize one or more Stephens Group Entities to serve as the 
Manager of one or more Subsequent Companies. The Managers will register 
as investment advisers under the Advisers Act, if required under 
applicable law.
    5. Interests in the Companies (``Interests'') will be offered 
without registration in reliance on section 4(2) of the Securities Act 
of 1933 (the ``Securities Act'') or Regulation D under the Securities 
Act, and will be offered and sold only to (a) certain officers, 
directors, employees and ``Consultants'' \1\ of the Stephens Group who 
meet the standards set forth below (``Stephens Employees''), and (b) 
trusts or other investment vehicles of which the trustees or grantors 
are Stephens Employees or Stephens Employees together with their 
Qualified Family Members (as defined below), trusts or other investment 
vehicles established solely for the benefit of Stephens Employees or 
their Qualified Family Members, or partnerships, corporations or other 
entities all of the voting power of which is controlled by Stephens 
Employees (``Qualified Investment Vehicles'' and collectively with 
Stephens Employees, ``Eligible Investors''). Qualified Family Members 
include any parent, child, spouse of a child, spouse, brother, sister 
or grandchild, and includes any step and adoptive relationships. Each 
Eligible Investor must have, in the reasonable belief of the Managers, 
the knowledge, sophistication and experience in business and financial 
matters to be capable of evaluating the merits and risks of investing 
in a Company and be able to bear the economic risk of such investment, 
and be able to afford a complete loss of the investment. In the future, 
Stephens Group Entities may invest in a Company and Interests in a 
Company may be offered and sold to Qualified Family Members.
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    \1\ A ``Consultant'' is a person or entity whom a Stephens Group 
Entity has engaged on retainer to provide services and professional 
expertise on an ongoing basis as a regular consultant or as a 
business or legal adviser and who shares a community of interest 
with the Stephens Group and its employees.
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    6. To be a Stephens Employee, an individual must (a) meet the 
standards of an accredited investor under rule 501(a)(5) or 501(a)(6) 
of Regulation D under the Securities Act (an ``Accredited Investor'') 
or (b) be one of 35 Stephens Employees who (i) is a Managing Employee 
(as defined below) or (ii) has a minimum of three years business 
experience in management, consulting, accounting, finance, law or

[[Page 31633]]

investment banking; will have a reportable income from all sources 
(including any profit share or bonus) in the calendar year immediately 
preceding his or her admission as a Member of at least $100,000 and a 
reasonable expectation of reportable income of at least $100,000 in 
each year in which he or she invests in a Company; and has a graduate 
degree in business, law, finance or accounting (``Sophisticated 
Employee''); except that a Managing Employee who is an Accredited 
Investor is not counted toward the 35 employee limit referred to in (b) 
above. A Managing Employee is an employee of Stephens Group who meets 
the definition of ``knowledgeable employee'' in rule 3c-5(a)(4) under 
the Act (with the Company treated as though it were a ``Covered 
Company'' for purposes of the rule). Each Sophisticated Employee will 
not be permitted to invest in any year more than 10% of such person's 
income from all sources for the immediately preceding year in the 
aggregate in a Company and in all other Companies in which he or she 
has previously invested.
    7. To be a Stephens Employee, an entity must (a) be a current or 
former Consultant of a Stephens Group Entity and (b) meet the standards 
of an accredited investor under rule 501(a) of Regulation D. To be a 
Qualified Family Member, a person must be an Accredited Investor. A 
Stephens Employee or a Qualified Family Member may purchase an Interest 
through a Qualified Investment Vehicle only if either (a) the Qualified 
Investment Vehicle is an accredited investor, or (b) the Qualified 
Investment Vehicle, which is not an accredited investor, (i) has a 
Stephens Employee or Qualified Family Member as the settlor \2\ and 
principal investment decision-maker, and (ii) is counted toward the 
limit on the 35 non-accredited investors that may invest in a Company.
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    \2\ If a Qualified Investment Vehicle is an entity other than a 
trust, the reference to ``settler'' shall be construed to mean a 
person who created the vehicle, alone or together with others, and 
who contributed funds to the vehicle.
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    8. Certain employees of the Stephens Group who do not qualify as 
Eligible Investors may receive Interests from Stephens without payment 
as part of an employee benefit plan in order to reward and retain these 
employees (``Plan Interest Holders''). Interests awarded to Plan 
Interest Holders will not be registered under the Securities Act and, 
because these employees will not be investing their own funds and will 
not have discretion over whether or not they receive Interests, these 
employees will not meet the sophistication and salary requirements to 
which Eligible Investors are subject. Plan Interest Holders will 
receive Interests at no cost and will neither make, nor be permitted to 
make, any financial contribution in order to acquire Interests. Plan 
Interest Holders will not be permitted to elect to receive an 
equivalent cash payment or other compensation in lieu of Interests. 
Plan Interest Holders will have no control or input as to whether they 
are awarded Interests, and the Interests given to Plan Interest Holders 
will not replace any part of, or reduce in any manner, the compensation 
of, or other benefits provided to, the Plan Interest Holders.
    9. The investment objectives and strategies for each Company will 
be set forth in offering documents relating to the Interests offered by 
the Company. Prior to being invited to participate in a Company or 
receiving an Interest in a Company, each Eligible Investor or Plan 
Interest Holder will receive a copy of the offering documents and the 
operating agreement (or other organizational document) of the Company 
or an offering memorandum, which will set forth all the terms of 
participation in the Company. The Managers will send an annual report 
to each Member not later than 120 days after the close of the fiscal 
year, which will contain financial statements of the Company that have 
been audited by independent accountants. In addition, the Members will 
receive at least annually all information necessary to enable the 
Members to prepare their federal and state income tax returns.
    10. Interests in the Companies will be non-transferable by a Member 
except with the express consent of the Managers or to the Eligible 
Investor's estate in the event of his or her death. No person will be 
admitted as a Member of a Company unless the person is an Eligible 
Investor, a Plan Interest Holder, a Stephens Group Entity, a Qualified 
Family Member, or a Qualified Investment Vehicle, except that a legal 
representative may hold an Interest in order to settle the estate of a 
deceased Member or administer its property. No fee of any kind will be 
charged in connection with the sale of Interests.
    11. A Member's Interests in a Company may be subject to a vesting 
schedule that will provide that such Interests will initially be 
unvested or only partially vested and will vest over time at specified 
percentages and specified intervals as set out in the Company's 
operating agreement or other constitutive document. A Member's 
Interests in a Company will be subject to repurchase or cancellation 
if: (a) The Member's employment relationship with the Stephens Group is 
terminated for cause, (b) the Member becomes a consultant to or joins 
any firm that the Managers determine, in their reasonable discretion, 
is competitive with any business of the Stephens Group, or (c) the 
Member voluntarily resigns from employment with the Stephens Group. 
Upon the occurrence of one of the events specified above, the relevant 
Company or a Stephens Group Entity will have the right to repurchase 
all of the terminating Member's Interests in exchange for a payment 
equal to the amount actually paid by the Member to acquire the 
Interests less the fair market value of any distributions received by 
that Member from the Fund, plus interest. This repurchase right also 
applies upon any attempted transfer of Interests (whether vested or 
not) in violation of the transfer restrictions. Following termination 
where the Company's repurchase option does not apply, the terminating 
Member (or, following the death of the Member, the Member's estate or 
beneficiary) has the right to continue to hold the Interests purchased 
or awarded prior to termination and to receive distributions on the 
same terms as other Interest holders in the relevant Companies.
    12. Certain of the Companies may leverage their investments through 
loans from a Stephens Group Entity. Each such Company loan will be made 
at an interest rate no less favorable than that which could be obtained 
on an arm's length basis. The Companies will not borrow from any person 
if the borrowing would cause any person not named in section 2(a)(13) 
of the Act to own outstanding securities of the Company (other than 
short-term paper). Any Company loan made to a Company will be non-
recourse to the Members.
    13. A Company will not acquire any security issued by a registered 
investment company if immediately after the acquisition, the Company 
would own more than 3% of the outstanding voting stock of the 
registered investment company.
    14. The Managers may charge the Companies an administrative fee or 
a management fee, including a performance fee.\3\ The Managers may 
receive reimbursement of their out-of-pocket expenses, including

[[Page 31634]]

reimbursement for the allocable portion of the salaries of the Stephens 
Group employees who participate in any of the Companies' affairs.
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    \3\ Any performance fee payable by a Company to the Managers may 
be charged only to the extent permitted by rule 205-3 under the 
Advisers Act (in the case of Managers registered under the Advisers 
Act) or will comply with section 205(b)(3) of the Advisers Act (in 
the case of Managers exempt from registration under the Advisers 
Act), with the Company treated as a business development company 
solely for the purpose of that section.
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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) 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 as any investment company all 
of whose securities (other than short-term paper) 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 investment companies 
that are not registered under section 8 of the Act from selling or 
redeeming their 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 an order under sections 6(b) and 6(e) of the Act 
exempting the Companies from all provisions of the Act, except section 
9 and sections 36 through 53 of the Act, 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 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 permit: (a) A 
Stephens Group Entity, or an affiliated person of a Stephens Group 
Entity (``Stephens Affiliate''), acting as principal, to engage in any 
transaction directly or indirectly with any Company or any entity 
controlled by the Company; (b) a Company to invest in or engage in any 
transaction with any entity, acting as principal (i) in which the 
Company, any company controlled by the Company or any entity in which a 
Stephens Group Entity has invested or will invest or (ii) with which 
the Company, any company controlled by the Company, or a Stephens Group 
Entity is or will otherwise become affiliated; (c) a partner or other 
investor in any entity in which a Company invests, acting as principal, 
to engage in transactions directly or indirectly with a Company or any 
company controlled by a Company; or (d) a sale by a Company as a 
selling security holder in a public offering in which a Stephens Group 
Entity or a Stephens Affiliate acts as a member of the selling group.
    4. Applicants state that an exemption from section 17(a) is 
consistent with the protection of investors and the purposes of the 
Act. Applicants state that the Members in each Company will be informed 
of the possible extent of the Company's dealings with Stephens Group 
Entities and of the potential conflicts of interest that may exist. 
Applicants also state that, as professionals engaged in the investment 
banking business, the Members will be able to understand and evaluate 
the attendant risks. Applicants assert that the community of interest 
among the Members and Stephens will serve to reduce any risk of abuse 
in transactions involving a Company and a Stephens Group Entity.
    5. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
any affiliated person or principal underwriter of a registered 
investment company, or any affiliated person of an affiliated person or 
principal underwriter, acting as principal, from participating in any 
joint arrangement unless authorized by the Commission. Applicants 
request relief to permit affiliated persons of each Company, or 
affiliated persons of such persons, to participate in any joint 
arrangement in which the Company or an entity controlled by the Company 
is a participant.
    6. Applicants submit that it is likely that suitable investments 
will be brought to the attention of a Company because of its 
affiliation with the Stephens Group and Stephen Group's experience in 
investment and merchant banking. Applicants also submit that the types 
of investment opportunities considered by a Company often require each 
investor to make funds available in an amount that may be substantially 
greater than what a Company may make available on its own. Applicants 
contend that, as a result, the only way in which a Company may be able 
to participate in these opportunities may be to co-invest with other 
persons, including its affiliates. Applicants note that each Company 
will be primarily organized for the benefit of Members as an incentive 
for them to remain with the Stephens Group and for the generation and 
maintenance of goodwill. Applicants believe that, if co-investments 
with the Stephens Group Entities are prohibited, the appeal of the 
Companies would be substantially eliminated.
    7. Applicants state that the possibility that permitting co-
investments by a Stephens Group Entity and a Company might lead to less 
advantageous treatment of the Company is mitigated by (a) the community 
of interest between the Stephens Group and the Members in the Company 
and (b) the fact that officers and directors of Stephens Group Entities 
will be investing in the Company. In addition, applicants assert that 
compliance with section 17(d) could cause a Company to forego 
attractive investment opportunities simply because an affiliated person 
of the Company has made, or may make, the same investment.
    8. Section 17(e) of the Act and rule 17e-1 under the Act limit the 
compensation an affiliated person may receive when acting as agent or 
broker for a registered investment company. Applicants request an 
exemption from section 17(e) to permit a Stephens Group Entity, acting 
as agent or broker, to receive placement fees, advisory fees, or other 
compensation from a Company in connection with the purchase or sale by 
a Company of securities, subject to the requirement that the fees or 
other compensation must be deemed ``usual and customary.'' Applicants 
state that for the purposes of the application, fees or other 
compensation that is charged or received by a Stephens Group Entity 
will be deemed ``usual and customary'' only if (a) the Company is 
purchasing or selling securities alongside other unaffiliated third 
parties who also are similarly purchasing or selling securities, (b) 
the fees or compensation being charged to the Company are also being 
charged to the unaffiliated third parties, and (c) the amount of 
securities being purchased or sold by the Company does not exceed 50% 
of the total amount of securities being purchased or sold by the 
Company and the unaffiliated third parties. Applicants assert that, 
because the Stephens Group does not wish it to appear as if it is

[[Page 31635]]

favoring the Companies, compliance with section 17(e) would prevent a 
Company from participating in a transaction where the Company is being 
charged lower fees than the unaffiliated third parties. Applicants 
assert that the fees or other compensation paid by a Company to a 
Stephens Group Entity will be the same as those negotiated at arm's 
length with unaffiliated third parties.
    9. Rule 17e-1(b) requires that a majority of directors who are not 
``interested persons'' (as defined by section 2(a)(19) of the Act) take 
actions and make approvals regarding commissions, fees, or other 
remuneration. Rule 17e-1(c) requires each Company to comply with the 
fund governance standards defined in rule 0-1(a)(7). Applicants request 
an exemption from rule 17e-1(b) to the extent necessary to permit each 
Company to comply with the rule without having a majority of the 
Managers of the Company who are not interested persons take actions and 
make determinations as set forth in the rule. Applicants state that 
because the Managers of a Company will be deemed interested persons of 
the Company, without the relief requested, a Company could not comply 
with rule 17e-1(b). Applicants state that each Company will comply with 
rule 17e-1(b) by having a majority of the Managers take actions and 
make approvals as set forth in rule 17e-1. Applicants also request an 
exemption from rule 17e-1(c). Applicants state that each Company will 
otherwise comply with the requirements of rule 17e-1.
    10. Section 17(f) designates the entities that may act as 
investment company custodians, and rule 17f-1 imposes certain 
requirements when the custodian is a member of a national securities 
exchange. Applicants request an exemption from section 17(f) and rule 
17f-1(a) to permit Stephens to act as custodian of a Company's assets 
without a written contract. Applicants also request an exemption from 
the rule 17f-1(b)(4) requirement that an independent accountant 
periodically verify the assets held by the custodian. Applicants 
further request an exemption from rule 17f-1(c)'s requirement of 
transmitting to the Commission a copy of any contract executed pursuant 
to rule 17f-1. Applicants believe that, because of the community of 
interest between the Stephens Group and the Companies and the existing 
requirement for an independent audit, compliance with these 
requirements would be unnecessary. Applicants state that they will 
comply with rule 17f-1(d), provided that ratification by the Managers 
of any Company will be deemed to be ratification by a majority of the 
board of directors of that Company. Applicants state that each Company 
will comply with all other requirements of rule 17f-1.
    11. 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. Rule 17g-1(j)(3) requires that the 
board of directors of an investment company satisfy the fund governance 
standards defined in rule 0-1(a)(7). Applicants request an exemption 
from section 17(g) and rule 17g-1 to the extent necessary to permit 
each Company to comply with rule 17g-1 without the necessity of having 
a majority of the disinterested directors take such action and make the 
determinations set forth in the rule. Specifically, each Company will 
comply with rule 17g-1 by having the Managers take such actions and 
make such approvals as are set forth in rule 17g-1. Applicants state 
that, because the Managers will be interested persons of each Company, 
a Company could not comply with rule 17g-1 without the requested 
relief. Applicants also request an exemption from the requirements of 
rule 17g-1(g) and (h) relating to the filing of copies of fidelity 
bonds and related information with the Commission and provision of 
notices to the board of directors and from the requirements of rule 
17g-1(j)(3). Applicants believe the filing requirements are burdensome 
and unnecessary as applied to the Companies. The Managers will maintain 
the materials otherwise required to be filed with the Commission by 
rule 17g-1(g) and agree that all such material will be subject to 
examination by the Commission and its staff. The Managers will 
designate a person to maintain the records otherwise required to be 
filed with the Commission under paragraph (g) of the rule. Applicants 
also state that the notices otherwise required to be give to the board 
of directors would be unnecessary as the Companies will not have boards 
of directors. The Companies will comply with all other requirements of 
rule 17g-1.
    12. 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 provisions of rule 17j-1, except for the anti-fraud 
provisions of paragraph (b), because they are unnecessarily burdensome 
as applied to the Companies.
    13. Applicants request an exemption from the requirements in 
sections 30(a), 30(b) and 30(e), and the rules under those sections, 
that registered investment companies prepare and file with the 
Commission and mail to their shareholders certain periodic reports and 
financial statements. Applicants contend that the forms prescribed by 
the Commission for periodic reports have little relevance to the 
Companies and would entail administrative and legal costs that outweigh 
any benefit to the Members. Applicants request exemptive relief to the 
extent necessary to permit each Company to report annually to its 
Members. Applicants also request also an exemption from section 30(h) 
to the extent necessary to exempt the Managers of each Company and any 
other person who may be deemed to be a member of an advisory board of a 
Company from filing Forms 3, 4, and 5 under section 16(a) of the 
Exchange Act with respect to their ownership of Interests in a Company. 
Applicants assert that, because there will be no trading market and the 
transfers of Interests will be severely restricted, these filings are 
unnecessary for the protection of investors and burdensome to those 
required to make them.
    14. 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 and to 
appoint a chief compliance officer. Each Company will comply with rule 
38a-1(a), (c) and (d), except that (a) because the Companies

[[Page 31636]]

do not have boards of directors, the Managers of each Company will 
fulfill the responsibilities assigned to a Company's board of directors 
under the rule, and (b) because all Managers would be considered 
interested persons of the Companies, approval by a majority of 
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 involving a Company otherwise 
prohibited by section 17(a) or section 17(d) of the Act and rule 17d-1 
thereunder (each, a ``Section 17 Transaction'') will be effected only 
if the Managers 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 and do not involve overreaching of the Company or its Members 
on the part of any person concerned; and
    (b) the Section 17 Transaction is consistent with the interests of 
the Members, the Company's organizational documents and the Company's 
reports to its Members.
    In addition, the Managers will record and preserve a description of 
all Section 17 Transactions, their findings, the information or 
materials upon which their findings are based, and the basis therefor. 
All such records will be maintained for the life of the Companies and 
at least six years thereafter, and will be subject to examination by 
the Commission and its staff. Each Company will preserve the accounts, 
books, and other documents required to be maintained in an easily 
accessible place for the first two years.
    2. In connection with the Section 17 Transactions, the Managers 
will adopt, and periodically review and update, procedures designed to 
ensure that reasonable inquiry is made, before the consummation of any 
such transaction, with respect to the possible involvement in the 
transaction of any affiliated person or promoter of or principal 
underwriter for the Companies, or any affiliated person of an 
affiliated person, promoter, or principal underwriter.
    3. The Managers of each Company will not invest the funds of any 
Company in any investment in which an Affiliated Co-Investor (as 
defined below) has acquired or proposes to acquire the same class of 
securities of the same issuer, where the investment involves a joint 
enterprise or other joint arrangement within the meaning of rule 17d-1 
in which the Company and an Affiliated Co-Investor are participants, 
unless any such Affiliated Co-Investor, prior to disposing of all or 
part of its investment, (a) gives the Managers 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 Company has 
the opportunity to dispose of the Company's investment prior to or 
concurrently with, on the same terms as, and pro rata with the 
Affiliated Co-Investor. The term ``Affiliated Co-Investor'' with 
respect to a Company means: (a) An ``affiliated person,'' as such term 
is defined in the Act, of the Company; (b) the Stephens Group; (c) an 
officer, director or employee of the Stephens Group; (d) an investment 
vehicle offered, sponsored or managed by the Stephens Group, or (e) an 
entity in which a member of the Stephens Group acts as a general 
partner or has a similar capacity to control the sale or other 
disposition of the entity's securities. The restrictions contained in 
this condition, however, will not be deemed to limit or prevent the 
disposition of an investment by an Affiliated Co-Investor: (a) To its 
direct or indirect wholly-owned subsidiary, to any company (a 
``Parent'') of which the Affiliated 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 
Affiliated Co-Investor or a trust established for any Affiliated Co-
Investor or any such family member; or (c) when the investment is 
comprised of securities that are (i) listed on any national securities 
exchange registered under section 6 of the Exchange Act; (ii) national 
market system securities pursuant to section 11A(a)(2) of the Exchange 
Act and rule 11Aa2-1 thereunder; or (iii) government securities as 
defined in section 2(a)(16) of the Act.
    4. Each Company and its Managers will maintain and preserve, for 
the life of each Company and at least six years thereafter, all 
accounts, books, and other documents as constitute the record forming 
the basis for the audited financial statements that are to be provided 
to the Members, and each annual report of such Company required to be 
sent to the Members, and agree that all such records will be subject to 
examination by the Commission and its staff.\4\
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    \4\ Each Company will preserve the accounts, books and other 
documentsrequired to be maintained in an easily accessible place for 
the first two years.
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    5. The Managers will send to each Member who had an Interest in the 
Company, at any time during the fiscal year then ended, Company 
financial statements that have been audited by that Company's 
independent accountants. At the end of each fiscal year, the Managers 
will make a valuation or have a valuation made of all of the assets of 
the Company 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 Company. In addition, within 120 days after the end of each 
fiscal year of the Company or as soon as practicable thereafter, the 
Managers of the Company shall send a report to each person who was a 
Member at any time during the fiscal year then ended setting forth tax 
information 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 Company during that year.
    6. Whenever a Company makes a purchase from or sale to an entity 
that is affiliated with the Company by reason of a Stephens Group 
director, officer, or employee (a) serving as an officer, director, 
general partner or investment adviser of the entity or (b) having a 5% 
or more investment in the entity, that individual will not participate 
in the determination by the Managers of whether or not to effect the 
purchase or sale.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-10924 Filed 6-6-07; 8:45 am]
BILLING CODE 8010-01-P