Tower 21st Century Fund LLC, et al.; Notice of Application, 64255-64259 [E7-22297]
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Federal Register / Vol. 72, No. 220 / Thursday, November 15, 2007 / Notices
from sections 18(c) and 18(i) to permit
the Funds to issue multiple classes of
shares.
4. Applicants submit that the
proposed allocation of expenses and
voting rights among multiple classes is
equitable and will not discriminate
against any group of shareholders.
Applicants submit that the proposed
arrangements would permit a Fund to
facilitate the distribution of its shares
and provide investors with a broader
choice of shareholder services.
Applicants assert that the proposed
closed-end investment company
multiple class structure does not raise
the concerns underlying section 18 of
the Act to any greater degree than openend investment companies’ multiple
class structures that are permitted by
rule 18f–3 under the Act. Applicants
state that each Fund will comply with
the provisions of rule 18f–3 as if it were
an open-end investment company.
5. Applicants also state that because
the Funds, like open-end investment
companies, will continuously offer their
shares and offer investors a variety of
distribution channels and service fees,
they will comply with rule 12b–1 and
6c–10 under the Act as if those rules
applied to the Funds.
Applicants’ Condition
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
Each Fund relying on the order will
comply with the provisions of rules 6c–
10, 12b–1 and 18f–3 under the Act, as
amended from time to time, as if those
rules applied to closed-end management
investment companies, and will comply
with NASD Conduct Rule 2830(d), as
amended from time to time, as if that
rule applied to all closed-end
management investment companies.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–22204 Filed 11–14–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28046; 813–350]
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Tower 21st Century Fund LLC, et al.;
Notice of Application
November 8, 2007.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under sections 6(b) and 6(e) of the
AGENCY:
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Investment Company Act of 1940 (the
‘‘Act’’) exempting applicants 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.
Applicants
request an order to exempt certain
investment vehicles formed for the
benefit of partners and key eligible
current and former employees of
Sonnenschein Nath & Rosenthal LLP
(‘‘Sonnenschein’’ or the ‘‘Firm’’) and
certain of its affiliates from certain
provisions of the Act. Each such entity
will be an ‘‘employees’’ securities
company’’ within the meaning of
section 2(a)(13) of the Act.
APPLICANTS: Tower 21st Century Fund
LLC (the ‘‘Investment Fund’’) and
Sonnenschein.
FILING DATES: The application was filed
on July 2, 2002, and amended on
December 30, 2003, July 7, 2004, March
12, 2007 and November 7, 2007.
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 December 3, 2007, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F
Street, NE., Washington, DC 20549–
9303. Applicants, c/o Paul J. Miller,
Esq., Sonnenschein Nath & Rosenthal
LLP, 7800 Sears Tower, Chicago, Illinois
60611.
FOR FURTHER INFORMATION CONTACT: Jaea
F. Hahn, Senior Counsel, at (202) 551–
6870, or Nadya B. Roytblat, Assistant
Director, 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,
SUMMARY OF APPLICATION:
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64255
100 F Street, NE., Washington, DC
20549–0102 (tel. 202–551–5850).
Applicants’ Representations
1. Sonnenschein is a law firm
organized as a Delaware limited liability
partnership. The Firm and its
‘‘affiliates,’’ as defined in rule 12b–2
under the Securities Act of 1934 (the
‘‘Exchange Act’’), are referred to
collectively as the ‘‘Sonnenschein
Group’’ and individually as a
‘‘Sonnenschein Entity.’’
2. The Investment Fund is a Delaware
limited liability company. The
applicants may in the future offer
additional pooled investment vehicles
identical in all material respects (other
than form of organization, investment
objective and strategy) to the Investment
Fund (each, an ‘‘Additional Fund’’)
(together, the Investment Fund and the
Additional Fund are referred to as the
‘‘Funds’’). The applicants anticipate that
each Additional Fund will also be
structured as a limited liability
company, although an Additional Fund
could be structured, either domestically
or, or for tax purposes, offshore, as a
general partnership, limited
partnership, corporation or other
business organization formed as an
‘‘employees’ securities company’’
within the meaning of section 2(a)(13) of
the Act. Each Fund will operate as a
non-diversified, closed-end
management investment company. The
Funds will be established to enable the
Partners (as defined below) and certain
employees of the Sonnenschein Group
to participate in certain investment
opportunities that come to the attention
of the Sonnenschein Group.
Participation as investors in the Funds
will allow the Eligible Investors (as
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. The Funds will each be managed by
an investment committee (‘‘Investment
Committee’’), each member of which
shall be a Partner of the Firm. The Firm
will initially appoint the members
(each, a ‘‘Manager’’ of the Fund) of each
Investment Committee and vacancies
thereafter will be filled by vote of the
remaining Managers. The Managers or
any person involved in the operation of
the Funds will register as an investment
adviser if required under the Investment
Advisers Act of 1940, or the rules under
that Act.
4. Interests in the Funds (‘‘Interests’’)
will be offered without registration in
reliance on section 4(2) of the Securities
Act of 1933 (the ‘‘Securities Act’’) or
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Regulation D under the Securities Act,
or any successor rule. Interests will be
offered solely to Sonnenschein Entities
or persons (each an ‘‘Eligible Investor’’)
who, at the time of the offer, are either
‘‘Eligible Employees’’ or ‘‘Qualified
Investment Vehicles’’. ‘‘Eligible
Employees’’ are (a) equity, non-equity,
special and retired partners and any
other category of partners of the Firm
(‘‘Partners’’), (b) current and former
lawyers who are of counsel to the Firm,
and (c) certain current and former key
employees of the Firm involved in the
Firm’s non-legal business activities
including its administrative, finance
and accounting, and marketing
activities, who in each case meet the
standards of an ‘‘accredited investor’’
set forth in rule 501(a)(5) or rule
501(a)(6) of Regulation D under the
Securities Act.1 A ‘‘Qualified
Investment Vehicle’’ is a trust or other
entity the sole beneficiaries of which are
an Eligible Employee, or one or more of
his or her ‘‘Immediate Family Members’’
(parent, spouse, child, brother or sister,
spouse of child and any step or adoptive
relationship) or as to which the Eligible
Employee is settlor or the principal
decision maker and the primary
beneficiaries of which are one or more
of his or her Immediate Family
Members, which trust or other entity
meets the standards of an ‘‘accredited
investor’’ set forth in rule 501(a) of
Regulation D under the Securities Act.2
Prior to offering Interests to an
individual, the Investment Committee
must reasonably believe that the
individual is a sophisticated investor
capable of understanding and evaluating
the risks of participating in the Fund
without the benefit of regulatory
safeguards. Each investor in a Fund
shall be a ‘‘Member’’ of such Fund.
5. Each Eligible Investor will receive
a copy of the Fund’s organizational
documents and the Application prior to
his or her investment in such Fund.
Each Fund will send its Members
annual reports as soon as practicable
after the end of each fiscal year. The
annual report of a Fund will not contain
financial statements of the Fund, since
1 Any such former Partners, of counsel 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.
2 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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these would not provide useful
information to Members because each
Member will generally have differing
interest in the Fund’s various
investments made since he or she
became a Member, and will not have an
economic interest in the holdings of the
Fund on a consolidated basis. In
addition, as soon as practicable after the
end of each fiscal year, the Funds will
send a report to each Member setting
forth such tax information as shall be
necessary for the preparation by the
Member of his or her federal and state
tax returns.
6. A Member will be permitted to
transfer his or her Interests only to a
Qualified Investment Vehicle or to an
Eligible Employee as permitted by the
Investment Committee in its sole
discretion, or on death, by will, trust or
otherwise in accordance with the laws
of descent and distribution, or to
another Member.3 Capital contributions
made to a Fund by its Members will be
placed in a liquid capital account
(‘‘LCA’’) to the credit of the contributor,
pending the purchase price for an
investment. Interests in the LCA may be
repurchased upon request by Members,
in whole or in part, by notice to the
Investment Committee. Interests in
separate accounts for investments may
be repurchased only with the agreement
of the Investment Committee. No fee of
any kind will be charged in connection
with the sale of Interests.
7. A Member will not be permitted to
participate in any investment made by
the Fund after that Member enters any
of the following categories: (a) A
Member who has notified the
Investment Committee before the
effective date of the Investment
Committee’s investment decision to
make an investment, which notice,
except in the absolute discretion of the
Investment Committee, is irrevocable for
one year, that that Member will not
participate in future investments; (b) a
Member who ceases to be an Eligible
Investor when the Investment
Committee determines to make an
investment; (c) a Member who the
Investment Committee determines is no
longer able to bear the economic risk of
further investment; (d) a Member whose
aliquot share would be below a required
minimum; (e) a Member whose
continued membership would have
adverse tax consequences to the Fund;
or (f) a Member whose continued
3 No person may become a transferee or substitute
Member unless that person is a member of one of
the classes listed in section 2(a)(13) of the Act,
except that a legal representative or executor may
hold an interest in a Fund in order to settle the
estate of a decedent or bankrupt for similar
purposes.
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investment would violate applicable
law or regulation.
8. Each Fund will bear its own
expenses. The Firm may be reimbursed
by a Fund for reasonable services and
necessary out-of-pocket costs directly
associated with the organization and
operation of the Funds, including
administrative and overhead expenses.
There will be no allocation of any of the
Firm’s operating expenses to a Fund. No
management fee or other compensation
will be paid by the Fund or its Members
to the Investment Committee or the
Managers for their services in such
capacity.
9. The Funds may borrow from
Sonnenschein Group, a Partner, or a
bank or other financial institution,
provided that a Fund 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 Fund (other than shortterm paper). Any borrowings by a Fund
will be non-recourse to Members. If a
Sonnenschein Entity or a Partner makes
a loan to the Funds, the interest rate on
the loan will be no less favorable to the
Funds than the rate that could be
obtained on an arm’s length basis.
10. A Fund will not acquire any
security issued by a registered
investment company if immediately
after the acquisition the Fund would
own more than 3% of the outstanding
voting stock of the registered investment
company.
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).
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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 Funds 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 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 Fund to: (a)
Purchase, from the Firm or any affiliated
person thereof, securities or interests in
properties previously acquired for the
account of the Firm or any affiliated
person thereof; (b) sell, to the Firm or
any affiliated person thereof, securities
or interests in properties previously
acquired by the Funds; (c) 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) purchase interests in
any company or other investment
vehicle (i) in which the Firm owns 5%
or more of the voting securities, or (ii)
that otherwise is an affiliated person of
the Fund (or an affiliated person of such
a person) or an affiliated person of the
Firm; and (f) to participate as a selling
securityholder 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
protection of investors and the purposes
of the Act. Applicants state that the
Members will be informed by the
offering materials for a Fund of the
possible extent of the Fund’s dealings
with the Firm or any affiliated person
thereof. Applicants also state that, as
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financially sophisticated professionals,
Eligible Investors will be able to
evaluate the attendant risks. Applicants
assert that the community of interest
among the Members and the Firm will
provide the best protection against any
risk of abuse.
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
with the company unless authorized by
the Commission. Applicants request
relief to permit affiliated persons of each
Fund, or affiliated persons of any of
these persons, to participate in any joint
arrangement in which the Fund is a
participant. Joint transactions in which
a Fund may participate could include
the following: (a) An investment by one
or more Funds in a security in which
the Firm or its affiliated person
(including Partners of the Firm), or
another Fund, is a participant, or with
respect to which the Firm or an
affiliated person is entitled to receive
fees (including, but not limited to, legal
fees, consulting fees, or other economic
benefits or interests); (b) an investment
by one or more Funds in an investment
vehicle sponsored, offered or managed
by the Firm; and (c) an investment by
one or more Funds in a security in
which an affiliate is or may become a
participant.
6. Applicants state that compliance
with section 17(d) would cause the
Funds to forego investment
opportunities simply because a Member,
the Firm or other affiliates of the Fund
also had made or contemplated making
a similar investment. In addition,
because investment opportunities of the
types considered by the Funds often
require that each participant make
available funds in an amount that may
be substantially greater than that
available to the investor alone, there
may be certain attractive opportunities
of which a Fund may be unable to take
advantage except as a co-participant
with other persons, including affiliates.
Applicants note that, in light of the
Firm’s purpose of establishing the
Funds so as to reward Eligible Investors
and to attract highly qualified personnel
to the Firm, the possibility is minimal
that an affiliated party investor will
enter into a transaction with a Fund
with the intent of disadvantaging the
Fund. Finally, applicants contend that
the possibility that a Fund may be
disadvantaged by the participation of an
affiliate in a transaction will be
minimized by compliance with the
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lockstep procedures described in
condition 4 below. Applicants assert
that the flexibility to structure coinvestments 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)
A Fund’s investments may be kept in
the locked files of the Firm or of a
Partner; (b) for purposes of paragraph
(d) of the rule, (i) Partners and
employees of the Firm will be deemed
employees of the Funds, (ii) each
Manager of a Fund will be deemed to be
an officer of such Fund; and (iii) the
Investment Committee of a Fund will be
deemed to be the board of directors of
the Fund; and (c) in place of the
verification procedures under paragraph
(f) of the rule, verification will be
effected quarterly by two employees of
the Firm. Applicants assert that the
securities held by the Funds 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
(‘‘disinterested directors’’) 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).
9. Applicants request an exemption
from section 17(g) and rule 17g–1 to the
extent necessary to permit each Fund to
comply with rule 17g–1 without the
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necessity of having a majority of the
disinterested directors take such action
and make such approvals as are set forth
in the rule. Specifically, each Fund will
comply by having the Investment
Committee 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
the Fund, a Fund 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
the 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 Funds.
The Investment Committee 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 Investment Committee 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
given to the board of directors would be
unnecessary as the Funds will not have
boards of directors. The Funds will
comply with all other requirements of
rule 17g–1.
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.
11. 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 Funds and would
entail administrative and legal costs that
outweigh any benefit to the Members.
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Applicants request exemptive relief to
the extent necessary to permit each
Fund to report annually to its Members.
Applicants also request an exemption
from section 30(h) to the extent
necessary to exempt the Managers of
each Fund and any other persons who
may be deemed members of an advisory
board of a Fund from filing Forms 3, 4
and 5 under section 16 of the Exchange
Act with respect to their ownership of
Interests in the Fund. 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.
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 and to appoint a chief
compliance officer. The Funds will
comply with rule 38a–1(a), (c) and (d),
except that (a) since the Funds do not
have boards of directors, the Investment
Committee will fulfill the
responsibilities assigned to a Fund’s
board of directors under the rule, and
(b) since the Managers are not
disinterested persons of the Funds,
approval by a majority of the
disinterested board members required
by rule 38a–1 will not be obtained.
Applicants’ Conditions
The 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 (each, a ‘‘Section 17
Transaction’’) will be effected only if the
Investment Committee determines 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 Investment
Committee will record and preserve a
description of such Section 17
Transactions, its findings, the
information or materials upon which its
findings are based and the basis
therefor. All such records will be
maintained for the life of a Fund and at
least six years thereafter, and will be
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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 an entity affiliated
with the Fund by reason of a Partner or
employee of the Sonnenschein Group
(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, such
individual will not participate in the
Fund’s determination of whether or not
to effect the purchase or sale.
3. The Investment Committee 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 Investment Committee will not
acquire for a Fund any investment in
which a 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 Fund and the CoInvestor are participants, unless any
such Co-Investor, prior to disposing all
or part of its investment, (a) gives the
Investment Committee 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 ‘‘CoInvestor’’ with respect to any Fund
means any person who is (a) an
‘‘affiliated person’’ (as defined in
section 2(a)(3) of the Act) of the Fund;
(b) the Sonnenschein Group; (c) a
Partner, lawyer, or employee of the
Sonnenschein Group; (d) an investment
vehicle offered, sponsored, or managed
by the Firm or an affiliated person of the
Firm; or (e) an entity in which a
Sonnenschein Entity 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, 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
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Federal Register / Vol. 72, No. 220 / Thursday, November 15, 2007 / Notices
pwalker on PROD1PC71 with NOTICES
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 Immediate
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 comprised of securities
that are national market system
securities pursuant to section 11A(a)(2)
of the Exchange Act and rule 11Aa2–1
thereunder.
5. The Investment Committee 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 may be unaudited. At the
end of each fiscal year, the Investment
Committee 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 the
customary practice with respect to the
valuation of assets of the kind held by
the Fund. In addition, as soon as
practicable after the end of each fiscal
year of each Fund, the Managers of the
Fund shall send a report to each person
who was a Fund Investor at any time
during the fiscal year then ended,
setting forth such tax information as
shall be necessary for the preparation by
the Fund Investor of his or her federal
and state income tax returns and a
report of the investment activities of
such Fund during such year.
6. Each Fund and its Investment
Committee will maintain and preserve,
for the life of that 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, pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–22297 Filed 11–14–07; 8:45 am]
BILLING CODE 8011–01–P
VerDate Aug<31>2005
19:50 Nov 14, 2007
Jkt 214001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56766; File No. SR–Amex–
2007–114]
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change Relating to
Collection of the Activity Assessment
Fee
November 7, 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 October
26, 2007, the American Stock Exchange
LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been substantially prepared by
Amex. Amex filed the proposal
pursuant to Section 19(b)(3)(A)(ii) of the
Act 3 and Rule 19b–4(f)(2) 4 thereunder,
as establishing or changing a due, fee, or
other charge applicable to a member,
which renders the proposed rule change
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Amex Rule 393 and the Amex Fee
Schedule to revise the procedures by
which the Exchange collects fees from
its members and member organizations
to offset its fee obligations under
Section 31 of the Act.5 The text of the
proposed rule change is available on the
Amex’s Web site at https://
www.amex.com, Amex’s principal
office, and the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Amex included statements concerning
the purpose of, and basis for, the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
5 15 U.S.C. 78ee.
2 17
PO 00000
Frm 00069
Fmt 4703
Sfmt 4703
64259
in Item IV below. Amex has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Background
Effective August 6, 2004, the
Commission established new
procedures that govern the calculation,
payment, and collection of fees and
assessments on securities transactions
owed by each national securities
exchange and association.6 Pursuant to
the new procedures, each exchange and
association must provide data on its
securities transactions to the
Commission using Form R31. Generally,
only data obtained from a registered
clearing agency may be submitted to the
Commission for this purpose.7 The
Commission in turn, calculates the
amount of fees and assessments based
on the aggregate dollar volume of these
transactions and the fee rate in effect at
that time and bills the exchange or
association that amount twice annually.
Historically, the Exchange has funded
the payment of these fees by requiring
members pursuant to Rule 393 to: (i)
Report on a monthly basis the aggregate
volume of equity sales, aggregate sales
price of those equity sales, and the
amount of the fee owed; and (ii) submit
along with the monthly report a check
in the amount of the fee owed. The
funds collected by the Exchange
pursuant to Rule 393 for all equity
securities are then remitted to the
Commission in accordance with Rule
31. In addition, the Exchange uses the
OCC to collect the funds to offset the
payment of Section 31 fees owed based
on the sales of options and sales of
securities resulting from the exercise of
physical delivery options. OCC collects
fees directly from Exchange members
through their clearing firms and remits
the amount collected to the Commission
on behalf of Amex.
Proposal
The Exchange now proposes to amend
Rule 393 and the Amex Fee Schedule to
revise the current procedures used to
6 See Securities Exchange Act Release No. 49928
(June 28, 2004), 69 FR 1060 (July 7, 2004).
7 In connection with these new procedures the
Commission concluded that the data collected by a
registered clearing agency is the most reliable and
auditable source for covered sales information. The
National Securities Clearing Corporation (‘‘NSCC’’)
is the primary source of data for equity transactions
and the Options Clearing Corporation (‘‘OCC’’) is
the primary source of data for option transactions.
E:\FR\FM\15NON1.SGM
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]]>Agencies
[Federal Register Volume 72, Number 220 (Thursday, November 15, 2007)]
[Notices]
[Pages 64255-64259]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-22297]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28046; 813-350]
Tower 21st Century Fund LLC, et al.; Notice of Application
November 8, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under sections 6(b) and 6(e)
of the Investment Company Act of 1940 (the ``Act'') exempting
applicants 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 vehicles formed for the benefit of partners and key eligible
current and former employees of Sonnenschein Nath & Rosenthal LLP
(``Sonnenschein'' or the ``Firm'') and certain of its affiliates from
certain provisions of the Act. Each such entity will be an
``employees'' securities company'' within the meaning of section
2(a)(13) of the Act.
Applicants: Tower 21st Century Fund LLC (the ``Investment Fund'') and
Sonnenschein.
Filing Dates: The application was filed on July 2, 2002, and amended on
December 30, 2003, July 7, 2004, March 12, 2007 and November 7, 2007.
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 December 3, 2007, and should be accompanied by proof of service
on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-9303. Applicants, c/o Paul J. Miller,
Esq., Sonnenschein Nath & Rosenthal LLP, 7800 Sears Tower, Chicago,
Illinois 60611.
FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202)
551-6870, or Nadya B. Roytblat, Assistant Director, 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 (tel. 202-551-5850).
Applicants' Representations
1. Sonnenschein is a law firm organized as a Delaware limited
liability partnership. The Firm and its ``affiliates,'' as defined in
rule 12b-2 under the Securities Act of 1934 (the ``Exchange Act''), are
referred to collectively as the ``Sonnenschein Group'' and individually
as a ``Sonnenschein Entity.''
2. The Investment Fund is a Delaware limited liability company. The
applicants may in the future offer additional pooled investment
vehicles identical in all material respects (other than form of
organization, investment objective and strategy) to the Investment Fund
(each, an ``Additional Fund'') (together, the Investment Fund and the
Additional Fund are referred to as the ``Funds''). The applicants
anticipate that each Additional Fund will also be structured as a
limited liability company, although an Additional Fund could be
structured, either domestically or, or for tax purposes, offshore, as a
general partnership, limited partnership, corporation or other business
organization formed as an ``employees' securities company'' within the
meaning of section 2(a)(13) of the Act. Each Fund will operate as a
non-diversified, closed-end management investment company. The Funds
will be established to enable the Partners (as defined below) and
certain employees of the Sonnenschein Group to participate in certain
investment opportunities that come to the attention of the Sonnenschein
Group. Participation as investors in the Funds will allow the Eligible
Investors (as 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. The Funds will each be managed by an investment committee
(``Investment Committee''), each member of which shall be a Partner of
the Firm. The Firm will initially appoint the members (each, a
``Manager'' of the Fund) of each Investment Committee and vacancies
thereafter will be filled by vote of the remaining Managers. The
Managers or any person involved in the operation of the Funds will
register as an investment adviser if required under the Investment
Advisers Act of 1940, or the rules under that Act.
4. Interests in the Funds (``Interests'') will be offered without
registration in reliance on section 4(2) of the Securities Act of 1933
(the ``Securities Act'') or
[[Page 64256]]
Regulation D under the Securities Act, or any successor rule. Interests
will be offered solely to Sonnenschein Entities or persons (each an
``Eligible Investor'') who, at the time of the offer, are either
``Eligible Employees'' or ``Qualified Investment Vehicles''. ``Eligible
Employees'' are (a) equity, non-equity, special and retired partners
and any other category of partners of the Firm (``Partners''), (b)
current and former lawyers who are of counsel to the Firm, and (c)
certain current and former key employees of the Firm involved in the
Firm's non-legal business activities including its administrative,
finance and accounting, and marketing activities, who in each case meet
the standards of an ``accredited investor'' set forth in rule 501(a)(5)
or rule 501(a)(6) of Regulation D under the Securities Act.\1\ A
``Qualified Investment Vehicle'' is a trust or other entity the sole
beneficiaries of which are an Eligible Employee, or one or more of his
or her ``Immediate Family Members'' (parent, spouse, child, brother or
sister, spouse of child and any step or adoptive relationship) or as to
which the Eligible Employee is settlor or the principal decision maker
and the primary beneficiaries of which are one or more of his or her
Immediate Family Members, which trust or other entity meets the
standards of an ``accredited investor'' set forth in rule 501(a) of
Regulation D under the Securities Act.\2\ Prior to offering Interests
to an individual, the Investment Committee must reasonably believe that
the individual is a sophisticated investor capable of understanding and
evaluating the risks of participating in the Fund without the benefit
of regulatory safeguards. Each investor in a Fund shall be a ``Member''
of such Fund.
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\1\ Any such former Partners, of counsel 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.
\2\ 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.
---------------------------------------------------------------------------
5. Each Eligible Investor will receive a copy of the Fund's
organizational documents and the Application prior to his or her
investment in such Fund. Each Fund will send its Members annual reports
as soon as practicable after the end of each fiscal year. The annual
report of a Fund will not contain financial statements of the Fund,
since these would not provide useful information to Members because
each Member will generally have differing interest in the Fund's
various investments made since he or she became a Member, and will not
have an economic interest in the holdings of the Fund on a consolidated
basis. In addition, as soon as practicable after the end of each fiscal
year, the Funds will send a report to each Member setting forth such
tax information as shall be necessary for the preparation by the Member
of his or her federal and state tax returns.
6. A Member will be permitted to transfer his or her Interests only
to a Qualified Investment Vehicle or to an Eligible Employee as
permitted by the Investment Committee in its sole discretion, or on
death, by will, trust or otherwise in accordance with the laws of
descent and distribution, or to another Member.\3\ Capital
contributions made to a Fund by its Members will be placed in a liquid
capital account (``LCA'') to the credit of the contributor, pending the
purchase price for an investment. Interests in the LCA may be
repurchased upon request by Members, in whole or in part, by notice to
the Investment Committee. Interests in separate accounts for
investments may be repurchased only with the agreement of the
Investment Committee. No fee of any kind will be charged in connection
with the sale of Interests.
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\3\ No person may become a transferee or substitute Member
unless that person is a member of one of the classes listed in
section 2(a)(13) of the Act, except that a legal representative or
executor may hold an interest in a Fund in order to settle the
estate of a decedent or bankrupt for similar purposes.
---------------------------------------------------------------------------
7. A Member will not be permitted to participate in any investment
made by the Fund after that Member enters any of the following
categories: (a) A Member who has notified the Investment Committee
before the effective date of the Investment Committee's investment
decision to make an investment, which notice, except in the absolute
discretion of the Investment Committee, is irrevocable for one year,
that that Member will not participate in future investments; (b) a
Member who ceases to be an Eligible Investor when the Investment
Committee determines to make an investment; (c) a Member who the
Investment Committee determines is no longer able to bear the economic
risk of further investment; (d) a Member whose aliquot share would be
below a required minimum; (e) a Member whose continued membership would
have adverse tax consequences to the Fund; or (f) a Member whose
continued investment would violate applicable law or regulation.
8. Each Fund will bear its own expenses. The Firm may be reimbursed
by a Fund for reasonable services and necessary out-of-pocket costs
directly associated with the organization and operation of the Funds,
including administrative and overhead expenses. There will be no
allocation of any of the Firm's operating expenses to a Fund. No
management fee or other compensation will be paid by the Fund or its
Members to the Investment Committee or the Managers for their services
in such capacity.
9. The Funds may borrow from Sonnenschein Group, a Partner, or a
bank or other financial institution, provided that a Fund 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 Fund (other than short-term paper). Any borrowings by a Fund will
be non-recourse to Members. If a Sonnenschein Entity or a Partner makes
a loan to the Funds, the interest rate on the loan will be no less
favorable to the Funds than the rate that could be obtained on an arm's
length basis.
10. A Fund will not acquire any security issued by a registered
investment company if immediately after the acquisition the Fund would
own more than 3% of the outstanding voting stock of the registered
investment company.
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).
[[Page 64257]]
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 Funds 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 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 Fund to:
(a) Purchase, from the Firm or any affiliated person thereof,
securities or interests in properties previously acquired for the
account of the Firm or any affiliated person thereof; (b) sell, to the
Firm or any affiliated person thereof, securities or interests in
properties previously acquired by the Funds; (c) 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) purchase interests in any company or other investment vehicle
(i) in which the Firm owns 5% or more of the voting securities, or (ii)
that otherwise is an affiliated person of the Fund (or an affiliated
person of such a person) or an affiliated person of the Firm; and (f)
to participate as a selling securityholder 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 protection of investors and the purposes of the
Act. Applicants state that the Members will be informed by the offering
materials for a Fund of the possible extent of the Fund's dealings with
the Firm or any affiliated person thereof. Applicants also state that,
as financially sophisticated professionals, Eligible Investors will be
able to evaluate the attendant risks. Applicants assert that the
community of interest among the Members and the Firm will provide the
best protection against any risk of abuse.
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 with the company unless authorized by the Commission.
Applicants request relief to permit affiliated persons of each Fund, or
affiliated persons of any of these persons, to participate in any joint
arrangement in which the Fund is a participant. Joint transactions in
which a Fund may participate could include the following: (a) An
investment by one or more Funds in a security in which the Firm or its
affiliated person (including Partners of the Firm), or another Fund, is
a participant, or with respect to which the Firm or an affiliated
person is entitled to receive fees (including, but not limited to,
legal fees, consulting fees, or other economic benefits or interests);
(b) an investment by one or more Funds in an investment vehicle
sponsored, offered or managed by the Firm; and (c) an investment by one
or more Funds in a security in which an affiliate is or may become a
participant.
6. Applicants state that compliance with section 17(d) would cause
the Funds to forego investment opportunities simply because a Member,
the Firm or other affiliates of the Fund also had made or contemplated
making a similar investment. In addition, because investment
opportunities of the types considered by the Funds often require that
each participant make available funds in an amount that may be
substantially greater than that available to the investor alone, there
may be certain attractive opportunities of which a Fund may be unable
to take advantage except as a co-participant with other persons,
including affiliates. Applicants note that, in light of the Firm's
purpose of establishing the Funds so as to reward Eligible Investors
and to attract highly qualified personnel to the Firm, the possibility
is minimal that an affiliated party investor will enter into a
transaction with a Fund with the intent of disadvantaging the Fund.
Finally, applicants contend that the possibility that a Fund may be
disadvantaged by the participation of an affiliate in a transaction
will be minimized by compliance with the lockstep procedures described
in condition 4 below. 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) A Fund's investments may be kept in the locked files of the Firm or
of a Partner; (b) for purposes of paragraph (d) of the rule, (i)
Partners and employees of the Firm will be deemed employees of the
Funds, (ii) each Manager of a Fund will be deemed to be an officer of
such Fund; and (iii) the Investment Committee of a Fund will be deemed
to be the board of directors of the Fund; and (c) in place of the
verification procedures under paragraph (f) of the rule, verification
will be effected quarterly by two employees of the Firm. Applicants
assert that the securities held by the Funds 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 (``disinterested
directors'') 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).
9. Applicants request an exemption from section 17(g) and rule 17g-
1 to the extent necessary to permit each Fund to comply with rule 17g-1
without the
[[Page 64258]]
necessity of having a majority of the disinterested directors take such
action and make such approvals as are set forth in the rule.
Specifically, each Fund will comply by having the Investment Committee
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 the Fund, a Fund 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 the
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 Funds.
The Investment Committee 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 Investment Committee 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 given to the board of directors would be
unnecessary as the Funds will not have boards of directors. The Funds
will comply with all other requirements of rule 17g-1.
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.
11. 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 Funds
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 Fund to report annually to its Members.
Applicants also request an exemption from section 30(h) to the extent
necessary to exempt the Managers of each Fund and any other persons who
may be deemed members of an advisory board of a Fund from filing Forms
3, 4 and 5 under section 16 of the Exchange Act with respect to their
ownership of Interests in the Fund. 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.
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 and to
appoint a chief compliance officer. The Funds will comply with rule
38a-1(a), (c) and (d), except that (a) since the Funds do not have
boards of directors, the Investment Committee will fulfill the
responsibilities assigned to a Fund's board of directors under the
rule, and (b) since the Managers are not disinterested persons of the
Funds, approval by a majority of the disinterested board members
required by rule 38a-1 will not be obtained.
Applicants' Conditions
The 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 (each, a
``Section 17 Transaction'') will be effected only if the Investment
Committee determines 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 Investment Committee will record and preserve a
description of such Section 17 Transactions, its findings, the
information or materials upon which its findings are based and the
basis therefor. 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 an entity
affiliated with the Fund by reason of a Partner or employee of the
Sonnenschein Group (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, such individual will not participate in the
Fund's determination of whether or not to effect the purchase or sale.
3. The Investment Committee 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 Investment Committee will not acquire for a Fund any
investment in which a 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 Fund and the
Co-Investor are participants, unless any such Co-Investor, prior to
disposing all or part of its investment, (a) gives the Investment
Committee 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 defined in section
2(a)(3) of the Act) of the Fund; (b) the Sonnenschein Group; (c) a
Partner, lawyer, or employee of the Sonnenschein Group; (d) an
investment vehicle offered, sponsored, or managed by the Firm or an
affiliated person of the Firm; or (e) an entity in which a Sonnenschein
Entity 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, 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
[[Page 64259]]
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 Immediate 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 comprised of securities that are
national market system securities pursuant to section 11A(a)(2) of the
Exchange Act and rule 11Aa2-1 thereunder.
5. The Investment Committee 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 may be
unaudited. At the end of each fiscal year, the Investment Committee
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 the
customary practice with respect to the valuation of assets of the kind
held by the Fund. In addition, as soon as practicable after the end of
each fiscal year of each Fund, the Managers of the Fund shall send a
report to each person who was a Fund Investor at any time during the
fiscal year then ended, setting forth such tax information as shall be
necessary for the preparation by the Fund Investor of his or her
federal and state income tax returns and a report of the investment
activities of such Fund during such year.
6. Each Fund and its Investment Committee will maintain and
preserve, for the life of that 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,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-22297 Filed 11-14-07; 8:45 am]
BILLING CODE 8011-01-P
