The Bessemer Group, Incorporated, et al.; Notice of Application, 25056-25061 [E8-9910]
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SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28258; 813–362]
The Bessemer Group, Incorporated, et
al.; Notice of Application
April 29, 2008.
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’’) granting an exemption from all
provisions of the Act, except section 9
and sections 36 through 53 and the rules
and regulations under the Act. With
respect to sections 17 and 30 of the Act,
and the rules and regulations
thereunder, and rule 38a–1 under the
Act, the exemption is limited as set
forth in the application.
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AGENCY:
Summary of Application: Applicants
request an order to exempt certain
limited liability companies and other
investment vehicles formed for the
benefit of eligible employees of The
Bessemer Group, Incorporated
(‘‘Bessemer’’) and its affiliates from
certain provisions of the Act. Each
limited liability company or other
investment vehicle will be an
‘‘employees’ securities company’’
within the meaning of section 2(a)(13) of
the Act.
Applicants: Bessemer Employee
Investment Fund I LLC, Bessemer
Employee Fund-Fifth Avenue LLC,
Bessemer Employee Fund-OWGREF
LLC (each a ‘‘Bessemer Employee
Fund’’), Bessemer, and Bessemer Trust
Company, N.A. (‘‘BTNA’’).
Filing Dates: The application was filed
on March 30, 2006, and amended on
March 12, 2008. 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 May 27, 2008, 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
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notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F
Street, NE., Washington, DC 20549–
1090; Applicants, 630 Fifth Avenue,
New York, NY 10111.
FOR FURTHER INFORMATION CONTACT:
Christine Y. Greenlees, Senior Counsel,
at (202) 551–6879, 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
20549–1520 (telephone (202) 551–5850).
Applicants’ Representations
1. Bessemer is a bank holding
company registered under the Bank
Holding Company Act of 1956. The
shares of Bessemer are privately held by
descendants of Henry Phipps directly
and through a series of trusts for the
benefit of descendants of Henry Phipps.
BTNA, a national bank, is a whollyowned subsidiary of Bessemer. BTNA
provides trust, custody, investment
management and other fiduciary
services to very high net worth
individuals and family groups.
Bessemer also has several other whollyowned direct and indirect subsidiaries
that are banks or trust companies.
Bessemer and its ‘‘affiliates,’’ as defined
in rule 12b–2 under the Securities
Exchange Act of 1934 (the ‘‘1934 Act’’),
are referred to collectively as
‘‘Bessemer’’ or ‘‘Bessemer entities.’’
2. Bessemer has established the
Bessemer Employee Funds as part of a
program designed to create capital
building opportunities that are
competitive with those at other financial
institutions and to facilitate Bessemer’s
recruitment and retention of high
caliber professionals. Bessemer expects
to establish in the future other
investment vehicles on terms
substantially the same as those
described in the application for the
Bessemer Employee Funds (the ‘‘Other
Employee Funds,’’ and together with
Bessemer Employee Funds, the
‘‘Employee Funds’’).
3. Each of the Employee Funds is or
will be a limited partnership or limited
liability company, organized under the
laws of the state of Delaware or another
jurisdiction. Each Employee Fund will
be an ‘‘employees’ securities company’’
within the meaning of section 2(a)(13) of
the Act. Each of the Employee Funds
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will operate as a non-diversified closedend management investment company.
4. Each Employee Fund will have a
Manager (as defined below) that is
controlled by, or is under common
control with, Bessemer and that is either
(i) Registered as an investment adviser
under the Investment Advisers Act of
1940 (‘‘Advisers Act’’), (ii) exempt from
the registration requirements of the
Advisers Act by virtue of section
203(b)(3) of the Advisers Act, or (iii)
excluded from the definition of
investment adviser under the Advisers
Act because it is a bank. The initial
Manager of Bessemer Employee Funds
is BTNA, and the Manager of each Other
Employee Fund is or will be BTNA or
an affiliate that controls, is controlled by
or is under common control with BTNA.
BTNA is exempt from registration under
the Advisers Act. The term ‘‘Manager’’
refers to BTNA, and any other affiliate
that controls, is controlled by or is
under common control with BTNA that
acts as the manager of an Employee
Fund. The Manager will manage,
operate, and control each of the
Employee Funds. However, the Manager
may exercise its authority through its
board of managers or directors,
including a committee of Bessemer
employees. The Manager will delegate
management responsibility only to
entities that control, are controlled by,
or are under common control with
Bessemer.
5. The Employee Funds will invest in
one or more private ‘‘fund of funds’’
managed by BTNA and operated
primarily for investment by clients of
BTNA and its affiliates (the ‘‘Underlying
Funds’’),1 or alongside the Underlying
Funds in the private investment funds
and other investments in which the
Underlying Funds invest.
6. A Bessemer Employee Fund may
pay an administrative fee to its Manager.
A Bessemer Employee Fund may also
pay the Manger or Bessemer annually
any ‘‘carried interest’’ to which the
Manager is entitled (from the Employee
Fund or from a Third Party Fund
managed by the Manager or a Bessemer
entity in which the Employee Fund
invests).2
1 Applicants are not requesting any exemption
from any provision of the Act or any rule
thereunder that may govern an Employee Fund’s
eligibility to invest in an Underlying Fund relying
on section 3(c)(1) or 3(c)(7) of the Act or an
Underlying Fund’s status under the Act.
2 A ‘‘carried interest’’ is an allocation to the
Manager based on the net gains of an investment
program. A Manager that is registered under the
Advisers Act may charge a carried interest only if
permitted by rule 205–3 under the Advisers Act.
Any carried interest paid to a Manager that is not
registered under the Advisers Act will be structured
to comply with section 205(b)(3) of the Advisers
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7. Interests (‘‘Interests’’) in the
Employee Funds 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 (‘‘Regulation D’’), and
will be sold only to Bessemer, Eligible
Employees (as defined below), and
certain related interests of Eligible
Employees as described below. Prior to
offering Interests to an Eligible
Employee, the Manager must reasonably
believe that the Eligible Employee will
be a sophisticated investor capable of
understanding and evaluating the risks
of participating in an Employee Fund
without the benefit of regulatory
safeguards and is able to afford a loss of
any investment. All investors in an
Employee Fund will be ‘‘Members’’ or
‘‘Participants.’’
8. An ‘‘Eligible Employee’’ is an
individual who is a current or former
employee, officer, or director of
Bessemer or its direct and indirect
subsidiaries and an ‘‘accredited
investor’’ as defined in rule 501(a)(5) or
501(a)(6) of Regulation D.3 In the
discretion of Bessemer and at the
request of an Eligible Employee,
Interests may be assigned by such
Eligible Employee to a Qualified
Participant (as defined below) of an
Eligible Employee or purchased by the
Qualified Participant. A ‘‘Qualified
Participant’’ is an individual or entity
that is an Eligible Family Member or
Qualified Entity (in each case as defined
below), respectively, of an Eligible
Employee and, if such individual or
entity is purchasing an Interest, come
within one of the categories of an
‘‘accredited investor’’ under rule 501(a)
of Regulation D. An ‘‘Eligible Family
Member’’ is a parent, sibling, spouse,
child, spouse of a child, or grandchild
of an Eligible Employee (including step
and adoptive relationships). A
‘‘Qualified Entity’’ is (a) A trust of
which the trustee, grantor and/or
beneficiary is an Eligible Employee, (b)
Act as if an Employee Fund were a business
development company as defined in the Advisers
Act.
3 Bessemer may also, in its discretion, purchase
and full fund Interests in an Employee Fund and
grant such Interests as bonuses to certain employees
of Bessemer under non-contributory compensation
programs in which the employee does not have the
right to determine whether to participate. The
recipients of such bonuses would become owners
of equity interests in the Employee Funds without
payment of consideration. The employees receiving
bonus grants in an Employee Fund under such a
program would not be required to be limited to
persons who meet the accredited investor,
sophistication, educational, professional,
experience and related criteria or income levels
described herein, and would be treated as ‘‘Eligible
Employees’’ in respect of Interests received under
such bonus grants.
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a partnership, limited liability company,
corporation or other entity controlled by
an Eligible Employee, or (c) an
individual retirement account, trust or
other entity established solely for the
benefit of the Eligible Employee or
Eligible Family Members of an Eligible
Employee. Bessemer may in its
discretion circumscribe more narrowly
the permitted categories of Qualified
Participants and Qualified Entities that
may invest or own an Interest in an
Employee Fund.
9. The terms of an Employee Fund
will be fully disclosed to each Eligible
Employee at the time the Eligible
Employee is invited to participate in the
Employee Fund, and the Eligible
Employee will be furnished with a copy
of the operating agreement for the
Employee Fund (the ‘‘Employee Fund
Agreement’’). An Employee Fund will
send its Members an audited financial
statement as soon as practicable after
the end of its fiscal year. In addition, as
soon as practicable after the end of each
fiscal year of each Employee Fund, the
Manager of such Employee Fund will
send a report to each Member of such
Employee Fund setting forth the tax
information necessary for the
preparation by the Member of his, her
or its federal and state income tax
returns.
10. Interests in the Employee Funds
will be non-transferable except with the
prior written consent of the Manager.
No person or entity will be admitted
into an Employee Fund unless the
person or entity is an Eligible Employee,
a Qualified Participant of an Eligible
Employee, or a Bessemer entity. No
sales load will be charged in connection
with the sale of Interests.
11. An Eligible Employee’s Interest
may be subject to repurchase or
cancellation if the Eligible Employee’s
relationship with Bessemer terminates
for any reason other than death,
disability or normal retirement. Upon
repurchase or cancellation, the Manager
will pay to the Eligible Employee at
least the lesser of (a) the net amount
paid by the Eligible Employee to acquire
the Interest (less prior distributions,
plus a specified rate of return as
determined by the Manager), or (b) the
fair value of the Interest as determined
in good faith at the time of repurchase
or cancellation by the Manager. The
terms of any repurchase or cancellation
will apply equally to any Qualified
Participant of an Eligible Employee.
12. Subject to the terms of the
applicable Employee Fund Agreement,
an Employee Fund will be permitted to
enter into transactions involving (a) A
Bessemer entity, (b) a portfolio
investment, (c) any Member or person or
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entity affiliated with a Member, (d) an
investment fund or separate account,
organized primarily for the benefit of
investors who are not affiliated with
Bessemer, over which a Bessemer entity
exercises investment discretion (a
‘‘Third Party Fund’’), or (e) any partner
or other investor of a Third Party Fund
that is not affiliated with Bessemer (a
‘‘Third Party Investor’’). Prior to
entering into any of these transactions,
the Manager or its delegate must
determine that the terms are fair to the
Members.
13. If the Manager or another
Bessemer entity makes loans to an Other
Employee Fund, the loans would bear
interest at a rate no less favorable to the
Employee Fund than the rate that could
be obtained on an arm’s length basis. An
Employee 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 securities of
the Employee Fund (other than shortterm paper). Any indebtedness of an
Employee Fund will be non-recourse to
the Members other than the Manager.
14. An Employee Fund will not
acquire any security issued by a
registered investment company if,
immediately after the acquisition, the
Employee Fund will 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, in relevant part, 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
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from selling or redeeming their
securities. Section 6(e) of the Act
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 Employee Funds
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 Bessemer
entity or a Third Party Fund (or any
affiliated person of any such entity or
Third Party Fund), acting as principal,
to engage in any transaction directly or
indirectly with any Employee Fund or
any company controlled by such
Employee Fund; (b) any Employee Fund
to invest in or engage in any transaction
with any Bessemer entity (or any
affiliated person of any such entity) or
a Third Party Fund, acting as principal
(i) in which such Employee Fund, any
company controlled by such Employee
Fund or any Bessemer entity or Third
Party Fund has invested or will invest,
or (ii) with which such Employee Fund,
any company controlled by such
Employee Fund or any Bessemer entity
or Third Party Fund is or will become
otherwise affiliated; and (c) any Third
Party Investor, acting as principal, to
engage in any transaction directly or
indirectly with an Employee Fund and
any company controlled by the
Employee Fund.
4. Applicants submit that an
exemption from section 17(a) is
consistent with the purposes of the
Employee Funds and the protection of
investors. Applicants state that the
Participants in each Employee Fund
will have been fully informed of the
possible extent of such Employee
Fund’s dealings with Bessemer.
Applicants also state that, as
professionals employed in the
investment, banking and financial
services businesses, the Participants
will be able to understand and evaluate
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the attendant risks. Applicants assert
that the community of interest among
the Participants in each Employee Fund
and Bessemer is the best insurance
against any risk of abuse.
5. Section 17(d) of the Act and rule
17d–1 under the Act prohibit any
affiliated person of a registered
investment company, or any affiliated
person of such person, acting as
principal, from participating in any joint
arrangement with the company unless
authorized by the Commission.
Applicants request relief to permit
affiliated persons of each Employee
Fund (including, without limitation, the
Manager, Bessemer, other Bessemer
entities and a Third Party Fund), or
affiliated persons of any of these
persons (including, without limitation,
the Third Party Investors) to participate
in, or effect any transaction in
connection with, any joint enterprise or
other joint arrangement or profit-sharing
plan in which such Employee Fund or
a company controlled by such Employee
Fund is a participant.
6. Applicants assert that compliance
with section 17(d) would cause the
Employee Fund to forego investment
opportunities simply because a
Participant in such Employee Fund or
other affiliated person of such Employee
Fund (or any affiliate of such a person)
also had, or contemplated making, a
similar investment. Applicants also
submit that the types of investment
opportunities considered by an
Employee Fund often require each
participant to make available funds in
an amount that may be substantially
greater than may be available to such
Employee Fund alone. Applicants
contend that, as a result, the only way
in which an Employee Fund may be
able to participate in such opportunities
may be to co-invest with other persons,
including its affiliates. 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. Side-by-side investments held by a
Third Party Fund, or by a Bessemer
entity pursuant to a contractual
obligation to a Third Party Fund, will
not be subject to condition 3 below.
Applicants note that it is common for a
Third Party Fund to require that
Bessemer invest its own capital in Third
Party Fund investments, and that such
Bessemer investments be subject to
substantially the same terms as those
applicable to the Third Party Fund’s
investments. Applicants believe it is
important that the interests of the Third
Party Fund take priority over the
interests of the Employee Funds, and
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that the activities of the Third Party
Fund not be burdened or otherwise
affected by activities of the Employee
Funds. In addition, applicants assert
that the relationship of an Employee
Fund to a Third Party Fund is
fundamentally different from such
Employee Fund’s relationship to
Bessemer. Applicants contend that the
focus of, and the rationale for, the
protections contained in the requested
relief are to protect the Employee Funds
from any overreaching by Bessemer in
the employer/employee context,
whereas the same concerns are not
present with respect to the Employee
´
Funds vis-a-vis the investors of a Third
Party Fund.
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 Bessemer entity
(including the Manager), acting as an
agent or broker, to receive placement
fees, advisory fees, or other
compensation from an Employee Fund
in connection with the purchase or sale
by the Employee Fund of securities,
provided that such placement fees,
advisory fees or other compensation can
be deemed ‘‘usual and customary.’’
Applicants state that for purposes of the
application, fees or other compensation
that are charged or received by a
Bessemer entity will be deemed ‘‘usual
and customary’’ only if (a) The
Employee Fund is purchasing or selling
securities alongside other unaffiliated
third parties (including Third Party
Funds) who are also similarly
purchasing or selling securities, (b) the
fees or other compensation that are
being charged to the Employee Fund are
also being charged to the unaffiliated
third parties (including Third Party
Funds), and (c) the amount of securities
being purchased or sold by the
Employee Fund does not exceed 50% of
the total amount of securities being
purchased or sold by the Employee
Fund and the unaffiliated third parties
(including Third Party Funds).
Applicants assert that, because
Bessemer does not wish to appear to be
favoring the Employee Funds,
compliance with section 17(e) would
prevent an Employee Fund from
participating in transactions where the
Employee Fund is being charged lower
fees than unaffiliated third parties.
Applicants assert that the fees or other
compensation paid by an Employee
Fund to a Bessemer entity are those
established at arm’s length with
unaffiliated third parties.
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9. Rule 17e–1(b) under the Act
requires that a majority of directors who
are not ‘‘interested persons’’ (as defined
in section 2(a)(19) of the Act) take
actions and make approvals regarding
commissions, fees, or other
remuneration. Rule 17e–1(c) under the
Act requires each Employee Fund to
comply with the fund governance
standards defined in rule 0–1(a)(7)
under the Act (the ‘‘Fund Governance
Standards’’). Applicants request an
exemption from rule 17e–1 to the extent
necessary to permit each Employee
Fund to comply with paragraph (b) of
the rule and without having to satisfy
the Fund Governance Standards as
required by paragraph (c) of the rule
without the necessity of having a
majority of the directors or managers of
the Manager who are not interested
persons take such actions and make
such approvals as are set forth in rule
17e–1. Applicants state that because all
the directors or managers of the
Manager will be affiliated persons,
without the relief requested, an
Employee Fund could not comply with
rule 17e–1. Applicants state that each
Employee Fund will comply with rule
17e–1 by having a majority of the board
of directors or managers of the Manager,
or a committee of Bessemer employees
to whom the Manager may delegate its
functions (such as the trust committee
of the Bessemer trust department or an
advisory board established for the
Employee Fund), take such actions and
make such approvals as are set forth in
rule 17e–1. Applicants state that each
Employee Fund will comply with all
other requirements of rule 17e–1.
10. Section 17(f) of the Act designates
the entities that may act as investment
company custodians, and rule 17f–1
under the Act 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 to permit a Bessemer entity to act
as custodian 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 state that, given
the community of interest of all the
parties involved and the existing
requirement for an independent annual
audit, compliance with this requirement
would be unnecessary. Each Employee
Fund will otherwise comply with all the
provisions of rule 17f–1.
11. Applicants also request an
exemption from rule 17f–2 to permit the
following exceptions from the
requirements of rule 17f–2: (a) An
Employee Fund’s investments may be
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kept in the locked files of a Bessemer
entity; (b) for purposes of paragraph (d)
of the rule, (i) Employees of Bessemer
will be deemed to be employees of the
Employee Funds, (ii) officers or
managers of the Manager of an
Employee Fund will be deemed to be
officers of the Employee Fund, and (iii)
the Manager of an Employee Fund, its
board of directors or managers, or a
committee of Bessemer employees to
whom the Manager may delegate its
functions will be deemed to be the
board of directors of such Employee
Fund; and (c) in place of the verification
procedure under paragraph (f) of the
rule, verification will be effected
quarterly by two employees of
Bessemer. Applicants expect that many
of the Employee Funds’ investments
will be evidenced only by partnership
agreements, participation agreements or
similar documents, rather than by
negotiable certificates that could be
misappropriated. Applicants believe
that these instruments are most suitably
kept in the files of a Bessemer entity,
where they can be referred to as
necessary.
12. Section 17(g) of the Act and rule
17g–1 under the Act 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.
The rule also requires that the board of
directors of any investment company
relying on the rule satisfy the Fund
Governance Standards. Applicants
request relief to permit the Manager’s
board of directors or managers, who
may be deemed interested persons, to
take actions and make determinations as
set forth in the rule. Applicants state
that, because all the members of a board
of managers or directors of a Manager
will be affiliated persons, an Employee
Fund could not comply with rule 17g–
1 without the requested relief.
Specifically, each Employee Fund will
comply with rule 17g–1 by having a
majority of the members of the board of
directors or managers of the Manager, its
board of directors or managers, or a
committee of Bessemer employees to
whom the Manager may delegate its
functions take such actions and make
such approvals as are set forth in rule
17g–1. Applicants also request an
exemption from the requirements of
paragraph (g) of rule 17g–1 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,
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paragraph (h) of rule 17g–1 relating to
the appointment of a person to make the
filings and provide the notices required
by paragraph (g), and paragraph (j)(3) of
rule 17g–1 relating to compliance with
the Fund Governance Standards.
Applicants state that each Employee
Fund will comply with all other
requirements of rule 17g–1.
13. Section 17(j) of the Act and
paragraph (b) of rule 17j–1 under the
Act 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 Employee Funds.
14. Applicants request an exemption
from the requirements in sections 30(a),
30(b), and 30(e) of the Act, 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 an Employee Fund
and would entail administrative and
legal costs that outweigh any benefit to
the Participants in such Employee
Fund. Applicants request exemptive
relief to the extent necessary to permit
each Employee Fund to report annually
to the Participants in such Employee
Fund. Applicants also request an
exemption from section 30(h) of the Act
to the extent necessary to exempt the
Manager of each Employee Fund,
members of the Manager, or any board
of managers or directors or committee of
Bessemer employees to whom the
Manager may delegate its functions, and
any other persons who may be deemed
to be members of an advisory board of
such Employee Fund from filing Forms
3, 4, and 5 under section 16(a) of the
1934 Act with respect to their
ownership of Interests in such
Employee 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.
15. Rule 38a–1 requires investment
companies to adopt, implement and
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periodically review written policies
reasonably designed to prevent violation
of the federal securities law and to
appoint a chief compliance officer. Each
Employee Fund will comply will rule
38a–1(a), (c) and (d), except that (a)
Because the Employee Fund does not
have a board of directors, the board of
managers or directors of the Manager of
each Employee Fund will fulfill the
responsibilities assigned to the
Employee Fund’s board of directors
under the rule, (b) since the board of
managers or directors of the Manager
does not have any disinterested
members, approval by a majority of
disinterested board members required
by rule 38a–1 will not be obtained, and
(c) because the board of managers or
directors of the Manager does not have
any independent members, the
Employee Funds will comply with the
requirement in rule 38a–1(a)(4)(iv) that
the chief compliance officer meet with
the independent board members by
having the chief compliance officer
meet with the board of managers or
directors of the Manager as constituted.
rwilkins on PROD1PC63 with NOTICES
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Each proposed transaction
otherwise prohibited by section 17(a) or
section 17(d) and rule 17d–1 to which
an Employee Fund is a party (the
‘‘Section 17 Transactions’’) will be
effected only if the Manager 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
such Employee Fund and do not involve
overreaching of such Employee 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 such Employee Fund, such
Employee Fund’s organizational
documents and such Employee Fund’s
reports to its Members.
In addition, the Manager of each
Employee Fund will record and
preserve a description of all Section 17
Transactions, the Manager’s findings,
the information or materials upon
which the findings are based and the
basis for the findings. All records
relating to an investment program will
be maintained until the termination of
such investment program and for at
least six years thereafter, and will be
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17:11 May 05, 2008
Jkt 214001
subject to examination by the
Commission and its staff.4
2. In connection with the Section 17
Transactions, the Manager of each
Employee Fund 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 such
Employee Fund, or any affiliated person
of such a person, promoter or principal
underwriter.
3. The Manager of each Employee
Fund will not invest the funds of such
Employee Fund in 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 and where the
investment transaction involves a joint
enterprise or other joint arrangement
within the meaning of rule 17d–1 in
which such Employee Fund and the CoInvestor are participants unless any
such Co-Investor agrees to, prior to
disposing of all or part of its investment,
(a) give such Manager sufficient, but not
less than one day’s, notice of its intent
to dispose of its investment, and (b)
refrain from disposing of its investment
unless such Employee Fund has the
opportunity to dispose of such
Employee Fund’s investment prior to or
concurrently with, and on the same
terms as, and pro rata with, the CoInvestor. The term ‘‘Co-Investor’’ with
respect to any Employee Fund means
any person who is: (a) An ‘‘affiliated
person’’ (as such term is defined in
section 2(a)(3) of the Act) of such
Employee Fund (other than a Third
Party Fund); (b) Bessemer; (c) an officer
or director of Bessemer; or (d) an entity
(other than a Third Party Fund) in
which the Manager of such Employee
Fund acts as a manager or has a similar
capacity to control the sale or
disposition of the entity’s securities.
The restrictions contained in this
condition shall not be deemed to limit
or prevent the disposition of an
investment by a Co-Investor: (a) To its
direct or indirect wholly-owned
subsidiary, to any company (a ‘‘parent’’)
of which such 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 such Co-Investor or
a trust or other investment vehicle
established for any such immediate
family member; (c) when the investment
is comprised of securities that are listed
on any exchange registered as a national
securities exchange under section 6 of
the 1934 Act; (d) when the investment
is comprised of securities that are NMS
stocks pursuant to section 11A(a)(2) of
the 1934 Act and rule 600(a) of
Regulation NMS thereunder; (e) when
the investment is comprised of
securities that are listed on, or traded
on, any foreign securities exchange or
board of trade that satisfies regulatory
requirements under the law of the
jurisdiction in which such foreign
securities exchange or board of trade is
organized similar to those that apply to
a national securities exchange or a
national market system for securities; or
(f) when the investment is comprised of
securities that are government securities
as defined in section 2(a)(16) of the Act
or other securities that meet the
definition of ‘‘Eligible Security’’ in rule
2a–7 under the Act.
4. Each Employee Fund and the
Manager will maintain and preserve, for
the life of such Employee Fund and for
at least six years thereafter, such
accounts, books, and other documents
as constitute the record forming the
basis for the audited financial
statements that are to be provided to the
Participants in such Employee Fund,
and each annual report of such
Employee Fund required to be sent to
such Participants, and agree that all
such records will be subject to
examination by the Commission and its
staff.5
5. The Manager of each Employee
Fund will send to each Participant in
such Employee Fund who had an
interest in such Employee Fund, at any
time during the fiscal year then ended,
Employee Fund financial statements
audited by such Employee Fund’s
independent accountants. At the end of
each fiscal year, the Manager will make
a valuation or have a valuation made of
all of the assets of the Employee Fund
as of such fiscal year end in a manner
consistent with customary practice with
respect to the valuation of assets of the
kind held by the Employee Fund. In
addition, within 90 days after the end of
each fiscal year of each Employee Fund,
or as soon as practicable after the end
of each fiscal year of each Employee
Fund, the Manager of such Employee
Fund will send a report to each person
who was a Participant in such Employee
Fund at any time during the fiscal year
4 Each Employee Fund will preserve the accounts,
books and other documents required to be
maintained in an easily accessible place for the first
two years.
5 Each Employee Fund will preserve the accounts,
books and other documents required to be
maintained in an easily accessible place for the first
two years.
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Federal Register / Vol. 73, No. 88 / Tuesday, May 6, 2008 / Notices
then ended, setting forth such tax
information as shall be necessary for the
preparation by the Participant of that
Participant’s federal and state income
tax returns, and a report of the
investment activities of the Employee
Fund during that fiscal year.
6. If an Employee Fund makes
purchases or sales from or to an entity
affiliated with the Employee Fund by
reason of an officer, director or
employee of Bessemer (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 Employee Fund’s
determination 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. E8–9910 Filed 5–5–08; 8:45 am]
BILLING CODE 8010–01–P
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact: the Office of the Secretary at
(202) 551–5400.
Dated: May 1, 2008.
Nancy M. Morris,
Secretary.
[FR Doc. E8–10020 Filed 5–5–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57739; File No. SR–Amex–
2008–17]
Self-Regulatory Organizations;
American Stock Exchange LLC; Order
Granting Approval of Proposed Rule
Change, as Modified by Amendment
No. 1 Thereto, to Adopt Listing Rules
for Fixed Income-Linked Securities,
Futures-Linked Securities, and
Combination-Linked Securities
April 30, 2008.
I. Introduction
SECURITIES AND EXCHANGE
COMMISSION
rwilkins on PROD1PC63 with NOTICES
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold a Closed Meeting
on May 8, 2008 at 10 a.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters may also be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3) (5), (7), (9)(B), and (10)
and 17 CFR 200.402(a)(3), (5), (7), 9(ii)
and (10), permit consideration of the
scheduled matters at the Closed
Meeting.
Commissioner Casey, as duty officer,
voted to consider the items listed for the
Closed Meeting in closed session.
The subject matter of the Closed
Meeting scheduled for May 8, 2008 will
be:
Formal orders of investigation;
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings of an
enforcement nature; and an opinion.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
VerDate Aug<31>2005
17:11 May 05, 2008
Jkt 214001
On February 29, 2008, the American
Stock Exchange LLC (‘‘Amex’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
adopt generic listing standards for Fixed
Income-Linked Securities, FuturesLinked Securities, and CombinationLinked Securities. On March 20, 2008,
the Exchange filed Amendment No. 1 to
the proposed rule change. The proposed
rule change, as amended, was published
for comment in the Federal Register on
March 27, 2008.3 The Commission
received no comments on the proposal.
This order approves the proposed rule
change, as modified by Amendment No.
1 thereto.
II. Description of the Proposal
The Exchange proposes to add new
Sections 107G, 107H, and 107I of the
Amex Company Guide to provide
generic listing standards for Fixed
Income-Linked Securities, FuturesLinked Securities, and CombinationLinked Securities (collectively, the
‘‘New Linked Securities’’). The primary
purpose of the proposed rule change is
to enable the listing and trading of the
New Linked Securities pursuant to Rule
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 57539
(March 20, 2008), 73 FR 16395.
2 17
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Fmt 4703
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25061
19b–4(e) 4 under the Act, without
individual Commission approval of
each such product pursuant to section
19(b)(2) of the Act.5 The Exchange
represents that within five business
days after commencement of trading of
a series of New Linked Securities under
proposed Sections 107G, 107H, and 107I
of the Amex Company Guide, as
applicable, the Exchange will file a
Form 19b–4(e).6
General Issuer and Issue Eligibility
As with Index-Linked Securities
under current Section 107D of the Amex
Company Guide,7 Commodity-Linked
Securities under Section 107E,8 and
Currency-Linked Securities under
Section 107F of the Amex Company
Guide,9 the New Linked Securities do
not give the holder any right to receive
a portfolio component or any other
ownership right or interest in the
portfolio or underlying components
comprising the applicable Reference
Asset (as defined herein) and may or
4 Rule 19b–4(e) provides that the listing and
trading of a new derivative securities product by a
self-regulatory organization (‘‘SRO’’) shall not be
deemed a proposed rule change, pursuant to section
(c)(1) of Rule 19b–4 (17 CFR 240.19b–4(c)(1)), if the
Commission has approved, pursuant to section
19(b) of the Act (15 U.S.C. 78s(b)), the SRO’s trading
rules, procedures, and listing standards for the
product class that would include the new
derivatives securities product, and the SRO has a
surveillance program for the product class. See 17
CFR 240.19b–4(e).
5 15 U.S.C. 78s(b)(2). The Exchange also seeks to
make a technical change to Section 107D of the
Amex Company Guide as part of the proposal. See
infra note 7.
6 17 CFR 240.19b–4(e)(2)(ii); 17 CFR 249.820.
7 Index-Linked Securities are securities that
provide for the payment at maturity of a cash
amount based on the performance of an underlying
index or indexes. As part of this proposed rule
change, the Exchange seeks to make a technical
change to Section 107D of the Amex Company
Guide to define such underlying index or indexes
as the ‘‘Equity Reference Asset.’’ Such securities
may or may not provide for the repayment of the
original principal investment amount. See Section
107D and Section 107D(d) of the Amex Company
Guide.
8 Commodity-Linked Securities are securities that
provide for the payment at maturity of a cash
amount based on the performance of one or more
commodities, commodity futures, options or other
commodity derivatives or Commodity-Based Trust
Shares (as defined in Amex rule 1200A), or a basket
or index of any of the foregoing (the ‘‘Commodity
Reference Asset’’). Such securities may or may not
provide for the repayment of the original principal
investment amount. See Section 107E of the Amex
Company Guide.
9 Currency-Linked Securities are securities that
provide for the payment at maturity of a cash
amount based on the performance of one or more
currencies, or options or currency futures or other
currency derivatives or Currency Trust Shares (as
defined in Amex Rule 1200B), or a basket or index
of any of the foregoing (the ‘‘Currency Reference
Asset’’). Such securities may or may not provide for
the repayment of the original principal investment
amount. See Section 107F of the Amex Company
Guide.
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]]>Agencies
[Federal Register Volume 73, Number 88 (Tuesday, May 6, 2008)]
[Notices]
[Pages 25056-25061]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-9910]
[[Page 25056]]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28258; 813-362]
The Bessemer Group, Incorporated, et al.; Notice of Application
April 29, 2008.
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'') 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 investment vehicles formed for
the benefit of eligible employees of The Bessemer Group, Incorporated
(``Bessemer'') and its affiliates from certain provisions of the Act.
Each limited liability company or other investment vehicle will be an
``employees' securities company'' within the meaning of section
2(a)(13) of the Act.
Applicants: Bessemer Employee Investment Fund I LLC, Bessemer Employee
Fund-Fifth Avenue LLC, Bessemer Employee Fund-OWGREF LLC (each a
``Bessemer Employee Fund''), Bessemer, and Bessemer Trust Company, N.A.
(``BTNA'').
Filing Dates: The application was filed on March 30, 2006, and amended
on March 12, 2008. 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 May 27, 2008, and should be accompanied by proof of service on
applicants, in the form of an affidavit or, for lawyers, a certificate
of service. Hearing requests should state the nature of the writer's
interest, the reason for the request, and the issues contested. Persons
who wish to be notified of a hearing may request notification by
writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090; Applicants, 630 Fifth Avenue,
New York, NY 10111.
FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior
Counsel, at (202) 551-6879, 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
20549-1520 (telephone (202) 551-5850).
Applicants' Representations
1. Bessemer is a bank holding company registered under the Bank
Holding Company Act of 1956. The shares of Bessemer are privately held
by descendants of Henry Phipps directly and through a series of trusts
for the benefit of descendants of Henry Phipps. BTNA, a national bank,
is a wholly-owned subsidiary of Bessemer. BTNA provides trust, custody,
investment management and other fiduciary services to very high net
worth individuals and family groups. Bessemer also has several other
wholly-owned direct and indirect subsidiaries that are banks or trust
companies. Bessemer and its ``affiliates,'' as defined in rule 12b-2
under the Securities Exchange Act of 1934 (the ``1934 Act''), are
referred to collectively as ``Bessemer'' or ``Bessemer entities.''
2. Bessemer has established the Bessemer Employee Funds as part of
a program designed to create capital building opportunities that are
competitive with those at other financial institutions and to
facilitate Bessemer's recruitment and retention of high caliber
professionals. Bessemer expects to establish in the future other
investment vehicles on terms substantially the same as those described
in the application for the Bessemer Employee Funds (the ``Other
Employee Funds,'' and together with Bessemer Employee Funds, the
``Employee Funds'').
3. Each of the Employee Funds is or will be a limited partnership
or limited liability company, organized under the laws of the state of
Delaware or another jurisdiction. Each Employee Fund will be an
``employees' securities company'' within the meaning of section
2(a)(13) of the Act. Each of the Employee Funds will operate as a non-
diversified closed-end management investment company.
4. Each Employee Fund will have a Manager (as defined below) that
is controlled by, or is under common control with, Bessemer and that is
either (i) Registered as an investment adviser under the Investment
Advisers Act of 1940 (``Advisers Act''), (ii) exempt from the
registration requirements of the Advisers Act by virtue of section
203(b)(3) of the Advisers Act, or (iii) excluded from the definition of
investment adviser under the Advisers Act because it is a bank. The
initial Manager of Bessemer Employee Funds is BTNA, and the Manager of
each Other Employee Fund is or will be BTNA or an affiliate that
controls, is controlled by or is under common control with BTNA. BTNA
is exempt from registration under the Advisers Act. The term
``Manager'' refers to BTNA, and any other affiliate that controls, is
controlled by or is under common control with BTNA that acts as the
manager of an Employee Fund. The Manager will manage, operate, and
control each of the Employee Funds. However, the Manager may exercise
its authority through its board of managers or directors, including a
committee of Bessemer employees. The Manager will delegate management
responsibility only to entities that control, are controlled by, or are
under common control with Bessemer.
5. The Employee Funds will invest in one or more private ``fund of
funds'' managed by BTNA and operated primarily for investment by
clients of BTNA and its affiliates (the ``Underlying Funds''),\1\ or
alongside the Underlying Funds in the private investment funds and
other investments in which the Underlying Funds invest.
---------------------------------------------------------------------------
\1\ Applicants are not requesting any exemption from any
provision of the Act or any rule thereunder that may govern an
Employee Fund's eligibility to invest in an Underlying Fund relying
on section 3(c)(1) or 3(c)(7) of the Act or an Underlying Fund's
status under the Act.
---------------------------------------------------------------------------
6. A Bessemer Employee Fund may pay an administrative fee to its
Manager. A Bessemer Employee Fund may also pay the Manger or Bessemer
annually any ``carried interest'' to which the Manager is entitled
(from the Employee Fund or from a Third Party Fund managed by the
Manager or a Bessemer entity in which the Employee Fund invests).\2\
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\2\ A ``carried interest'' is an allocation to the Manager based
on the net gains of an investment program. A Manager that is
registered under the Advisers Act may charge a carried interest only
if permitted by rule 205-3 under the Advisers Act. Any carried
interest paid to a Manager that is not registered under the Advisers
Act will be structured to comply with section 205(b)(3) of the
Advisers Act as if an Employee Fund were a business development
company as defined in the Advisers Act.
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[[Page 25057]]
7. Interests (``Interests'') in the Employee Funds 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 (``Regulation D''), and will be sold only to Bessemer, Eligible
Employees (as defined below), and certain related interests of Eligible
Employees as described below. Prior to offering Interests to an
Eligible Employee, the Manager must reasonably believe that the
Eligible Employee will be a sophisticated investor capable of
understanding and evaluating the risks of participating in an Employee
Fund without the benefit of regulatory safeguards and is able to afford
a loss of any investment. All investors in an Employee Fund will be
``Members'' or ``Participants.''
8. An ``Eligible Employee'' is an individual who is a current or
former employee, officer, or director of Bessemer or its direct and
indirect subsidiaries and an ``accredited investor'' as defined in rule
501(a)(5) or 501(a)(6) of Regulation D.\3\ In the discretion of
Bessemer and at the request of an Eligible Employee, Interests may be
assigned by such Eligible Employee to a Qualified Participant (as
defined below) of an Eligible Employee or purchased by the Qualified
Participant. A ``Qualified Participant'' is an individual or entity
that is an Eligible Family Member or Qualified Entity (in each case as
defined below), respectively, of an Eligible Employee and, if such
individual or entity is purchasing an Interest, come within one of the
categories of an ``accredited investor'' under rule 501(a) of
Regulation D. An ``Eligible Family Member'' is a parent, sibling,
spouse, child, spouse of a child, or grandchild of an Eligible Employee
(including step and adoptive relationships). A ``Qualified Entity'' is
(a) A trust of which the trustee, grantor and/or beneficiary is an
Eligible Employee, (b) a partnership, limited liability company,
corporation or other entity controlled by an Eligible Employee, or (c)
an individual retirement account, trust or other entity established
solely for the benefit of the Eligible Employee or Eligible Family
Members of an Eligible Employee. Bessemer may in its discretion
circumscribe more narrowly the permitted categories of Qualified
Participants and Qualified Entities that may invest or own an Interest
in an Employee Fund.
---------------------------------------------------------------------------
\3\ Bessemer may also, in its discretion, purchase and full fund
Interests in an Employee Fund and grant such Interests as bonuses to
certain employees of Bessemer under non-contributory compensation
programs in which the employee does not have the right to determine
whether to participate. The recipients of such bonuses would become
owners of equity interests in the Employee Funds without payment of
consideration. The employees receiving bonus grants in an Employee
Fund under such a program would not be required to be limited to
persons who meet the accredited investor, sophistication,
educational, professional, experience and related criteria or income
levels described herein, and would be treated as ``Eligible
Employees'' in respect of Interests received under such bonus
grants.
---------------------------------------------------------------------------
9. The terms of an Employee Fund will be fully disclosed to each
Eligible Employee at the time the Eligible Employee is invited to
participate in the Employee Fund, and the Eligible Employee will be
furnished with a copy of the operating agreement for the Employee Fund
(the ``Employee Fund Agreement''). An Employee Fund will send its
Members an audited financial statement as soon as practicable after the
end of its fiscal year. In addition, as soon as practicable after the
end of each fiscal year of each Employee Fund, the Manager of such
Employee Fund will send a report to each Member of such Employee Fund
setting forth the tax information necessary for the preparation by the
Member of his, her or its federal and state income tax returns.
10. Interests in the Employee Funds will be non-transferable except
with the prior written consent of the Manager. No person or entity will
be admitted into an Employee Fund unless the person or entity is an
Eligible Employee, a Qualified Participant of an Eligible Employee, or
a Bessemer entity. No sales load will be charged in connection with the
sale of Interests.
11. An Eligible Employee's Interest may be subject to repurchase or
cancellation if the Eligible Employee's relationship with Bessemer
terminates for any reason other than death, disability or normal
retirement. Upon repurchase or cancellation, the Manager will pay to
the Eligible Employee at least the lesser of (a) the net amount paid by
the Eligible Employee to acquire the Interest (less prior
distributions, plus a specified rate of return as determined by the
Manager), or (b) the fair value of the Interest as determined in good
faith at the time of repurchase or cancellation by the Manager. The
terms of any repurchase or cancellation will apply equally to any
Qualified Participant of an Eligible Employee.
12. Subject to the terms of the applicable Employee Fund Agreement,
an Employee Fund will be permitted to enter into transactions involving
(a) A Bessemer entity, (b) a portfolio investment, (c) any Member or
person or entity affiliated with a Member, (d) an investment fund or
separate account, organized primarily for the benefit of investors who
are not affiliated with Bessemer, over which a Bessemer entity
exercises investment discretion (a ``Third Party Fund''), or (e) any
partner or other investor of a Third Party Fund that is not affiliated
with Bessemer (a ``Third Party Investor''). Prior to entering into any
of these transactions, the Manager or its delegate must determine that
the terms are fair to the Members.
13. If the Manager or another Bessemer entity makes loans to an
Other Employee Fund, the loans would bear interest at a rate no less
favorable to the Employee Fund than the rate that could be obtained on
an arm's length basis. An Employee 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 securities of the Employee Fund (other than short-
term paper). Any indebtedness of an Employee Fund will be non-recourse
to the Members other than the Manager.
14. An Employee Fund will not acquire any security issued by a
registered investment company if, immediately after the acquisition,
the Employee Fund will 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, in relevant part, 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
[[Page 25058]]
from selling or redeeming their securities. Section 6(e) of the Act
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 Employee Funds 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
Bessemer entity or a Third Party Fund (or any affiliated person of any
such entity or Third Party Fund), acting as principal, to engage in any
transaction directly or indirectly with any Employee Fund or any
company controlled by such Employee Fund; (b) any Employee Fund to
invest in or engage in any transaction with any Bessemer entity (or any
affiliated person of any such entity) or a Third Party Fund, acting as
principal (i) in which such Employee Fund, any company controlled by
such Employee Fund or any Bessemer entity or Third Party Fund has
invested or will invest, or (ii) with which such Employee Fund, any
company controlled by such Employee Fund or any Bessemer entity or
Third Party Fund is or will become otherwise affiliated; and (c) any
Third Party Investor, acting as principal, to engage in any transaction
directly or indirectly with an Employee Fund and any company controlled
by the Employee Fund.
4. Applicants submit that an exemption from section 17(a) is
consistent with the purposes of the Employee Funds and the protection
of investors. Applicants state that the Participants in each Employee
Fund will have been fully informed of the possible extent of such
Employee Fund's dealings with Bessemer. Applicants also state that, as
professionals employed in the investment, banking and financial
services businesses, the Participants will be able to understand and
evaluate the attendant risks. Applicants assert that the community of
interest among the Participants in each Employee Fund and Bessemer is
the best insurance against any risk of abuse.
5. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
any affiliated person of a registered investment company, or any
affiliated person of such person, acting as principal, from
participating in any joint arrangement with the company unless
authorized by the Commission. Applicants request relief to permit
affiliated persons of each Employee Fund (including, without
limitation, the Manager, Bessemer, other Bessemer entities and a Third
Party Fund), or affiliated persons of any of these persons (including,
without limitation, the Third Party Investors) to participate in, or
effect any transaction in connection with, any joint enterprise or
other joint arrangement or profit-sharing plan in which such Employee
Fund or a company controlled by such Employee Fund is a participant.
6. Applicants assert that compliance with section 17(d) would cause
the Employee Fund to forego investment opportunities simply because a
Participant in such Employee Fund or other affiliated person of such
Employee Fund (or any affiliate of such a person) also had, or
contemplated making, a similar investment. Applicants also submit that
the types of investment opportunities considered by an Employee Fund
often require each participant to make available funds in an amount
that may be substantially greater than may be available to such
Employee Fund alone. Applicants contend that, as a result, the only way
in which an Employee Fund may be able to participate in such
opportunities may be to co-invest with other persons, including its
affiliates. 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. Side-by-side investments held by a Third Party Fund, or by a
Bessemer entity pursuant to a contractual obligation to a Third Party
Fund, will not be subject to condition 3 below. Applicants note that it
is common for a Third Party Fund to require that Bessemer invest its
own capital in Third Party Fund investments, and that such Bessemer
investments be subject to substantially the same terms as those
applicable to the Third Party Fund's investments. Applicants believe it
is important that the interests of the Third Party Fund take priority
over the interests of the Employee Funds, and that the activities of
the Third Party Fund not be burdened or otherwise affected by
activities of the Employee Funds. In addition, applicants assert that
the relationship of an Employee Fund to a Third Party Fund is
fundamentally different from such Employee Fund's relationship to
Bessemer. Applicants contend that the focus of, and the rationale for,
the protections contained in the requested relief are to protect the
Employee Funds from any overreaching by Bessemer in the employer/
employee context, whereas the same concerns are not present with
respect to the Employee Funds vis-[aacute]-vis the investors of a Third
Party Fund.
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 Bessemer entity (including the
Manager), acting as an agent or broker, to receive placement fees,
advisory fees, or other compensation from an Employee Fund in
connection with the purchase or sale by the Employee Fund of
securities, provided that such placement fees, advisory fees or other
compensation can be deemed ``usual and customary.'' Applicants state
that for purposes of the application, fees or other compensation that
are charged or received by a Bessemer entity will be deemed ``usual and
customary'' only if (a) The Employee Fund is purchasing or selling
securities alongside other unaffiliated third parties (including Third
Party Funds) who are also similarly purchasing or selling securities,
(b) the fees or other compensation that are being charged to the
Employee Fund are also being charged to the unaffiliated third parties
(including Third Party Funds), and (c) the amount of securities being
purchased or sold by the Employee Fund does not exceed 50% of the total
amount of securities being purchased or sold by the Employee Fund and
the unaffiliated third parties (including Third Party Funds).
Applicants assert that, because Bessemer does not wish to appear to be
favoring the Employee Funds, compliance with section 17(e) would
prevent an Employee Fund from participating in transactions where the
Employee Fund is being charged lower fees than unaffiliated third
parties. Applicants assert that the fees or other compensation paid by
an Employee Fund to a Bessemer entity are those established at arm's
length with unaffiliated third parties.
[[Page 25059]]
9. Rule 17e-1(b) under the Act requires that a majority of
directors who are not ``interested persons'' (as defined in section
2(a)(19) of the Act) take actions and make approvals regarding
commissions, fees, or other remuneration. Rule 17e-1(c) under the Act
requires each Employee Fund to comply with the fund governance
standards defined in rule 0-1(a)(7) under the Act (the ``Fund
Governance Standards''). Applicants request an exemption from rule 17e-
1 to the extent necessary to permit each Employee Fund to comply with
paragraph (b) of the rule and without having to satisfy the Fund
Governance Standards as required by paragraph (c) of the rule without
the necessity of having a majority of the directors or managers of the
Manager who are not interested persons take such actions and make such
approvals as are set forth in rule 17e-1. Applicants state that because
all the directors or managers of the Manager will be affiliated
persons, without the relief requested, an Employee Fund could not
comply with rule 17e-1. Applicants state that each Employee Fund will
comply with rule 17e-1 by having a majority of the board of directors
or managers of the Manager, or a committee of Bessemer employees to
whom the Manager may delegate its functions (such as the trust
committee of the Bessemer trust department or an advisory board
established for the Employee Fund), take such actions and make such
approvals as are set forth in rule 17e-1. Applicants state that each
Employee Fund will comply with all other requirements of rule 17e-1.
10. Section 17(f) of the Act designates the entities that may act
as investment company custodians, and rule 17f-1 under the Act 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 to permit a Bessemer entity to act as custodian 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 state that, given
the community of interest of all the parties involved and the existing
requirement for an independent annual audit, compliance with this
requirement would be unnecessary. Each Employee Fund will otherwise
comply with all the provisions of rule 17f-1.
11. Applicants also request an exemption from rule 17f-2 to permit
the following exceptions from the requirements of rule 17f-2: (a) An
Employee Fund's investments may be kept in the locked files of a
Bessemer entity; (b) for purposes of paragraph (d) of the rule, (i)
Employees of Bessemer will be deemed to be employees of the Employee
Funds, (ii) officers or managers of the Manager of an Employee Fund
will be deemed to be officers of the Employee Fund, and (iii) the
Manager of an Employee Fund, its board of directors or managers, or a
committee of Bessemer employees to whom the Manager may delegate its
functions will be deemed to be the board of directors of such Employee
Fund; and (c) in place of the verification procedure under paragraph
(f) of the rule, verification will be effected quarterly by two
employees of Bessemer. Applicants expect that many of the Employee
Funds' investments will be evidenced only by partnership agreements,
participation agreements or similar documents, rather than by
negotiable certificates that could be misappropriated. Applicants
believe that these instruments are most suitably kept in the files of a
Bessemer entity, where they can be referred to as necessary.
12. Section 17(g) of the Act and rule 17g-1 under the Act 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. The rule also requires that the board of directors of
any investment company relying on the rule satisfy the Fund Governance
Standards. Applicants request relief to permit the Manager's board of
directors or managers, who may be deemed interested persons, to take
actions and make determinations as set forth in the rule. Applicants
state that, because all the members of a board of managers or directors
of a Manager will be affiliated persons, an Employee Fund could not
comply with rule 17g-1 without the requested relief. Specifically, each
Employee Fund will comply with rule 17g-1 by having a majority of the
members of the board of directors or managers of the Manager, its board
of directors or managers, or a committee of Bessemer employees to whom
the Manager may delegate its functions take such actions and make such
approvals as are set forth in rule 17g-1. Applicants also request an
exemption from the requirements of paragraph (g) of rule 17g-1 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,
paragraph (h) of rule 17g-1 relating to the appointment of a person to
make the filings and provide the notices required by paragraph (g), and
paragraph (j)(3) of rule 17g-1 relating to compliance with the Fund
Governance Standards. Applicants state that each Employee Fund will
comply with all other requirements of rule 17g-1.
13. Section 17(j) of the Act and paragraph (b) of rule 17j-1 under
the Act 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 Employee
Funds.
14. Applicants request an exemption from the requirements in
sections 30(a), 30(b), and 30(e) of the Act, 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 an
Employee Fund and would entail administrative and legal costs that
outweigh any benefit to the Participants in such Employee Fund.
Applicants request exemptive relief to the extent necessary to permit
each Employee Fund to report annually to the Participants in such
Employee Fund. Applicants also request an exemption from section 30(h)
of the Act to the extent necessary to exempt the Manager of each
Employee Fund, members of the Manager, or any board of managers or
directors or committee of Bessemer employees to whom the Manager may
delegate its functions, and any other persons who may be deemed to be
members of an advisory board of such Employee Fund from filing Forms 3,
4, and 5 under section 16(a) of the 1934 Act with respect to their
ownership of Interests in such Employee 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.
15. Rule 38a-1 requires investment companies to adopt, implement
and
[[Page 25060]]
periodically review written policies reasonably designed to prevent
violation of the federal securities law and to appoint a chief
compliance officer. Each Employee Fund will comply will rule 38a-1(a),
(c) and (d), except that (a) Because the Employee Fund does not have a
board of directors, the board of managers or directors of the Manager
of each Employee Fund will fulfill the responsibilities assigned to the
Employee Fund's board of directors under the rule, (b) since the board
of managers or directors of the Manager does not have any disinterested
members, approval by a majority of disinterested board members required
by rule 38a-1 will not be obtained, and (c) because the board of
managers or directors of the Manager does not have any independent
members, the Employee Funds will comply with the requirement in rule
38a-1(a)(4)(iv) that the chief compliance officer meet with the
independent board members by having the chief compliance officer meet
with the board of managers or directors of the Manager as constituted.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Each proposed transaction otherwise prohibited by section 17(a)
or section 17(d) and rule 17d-1 to which an Employee Fund is a party
(the ``Section 17 Transactions'') will be effected only if the Manager
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 such Employee Fund and do not involve overreaching of such
Employee 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 such Employee Fund, such Employee Fund's organizational
documents and such Employee Fund's reports to its Members.
In addition, the Manager of each Employee Fund will record and
preserve a description of all Section 17 Transactions, the Manager's
findings, the information or materials upon which the findings are
based and the basis for the findings. All records relating to an
investment program will be maintained until the termination of such
investment program and for at least six years thereafter, and will be
subject to examination by the Commission and its staff.\4\
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\4\ Each Employee Fund will preserve the accounts, books and
other documents required to be maintained in an easily accessible
place for the first two years.
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2. In connection with the Section 17 Transactions, the Manager of
each Employee Fund 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 such Employee Fund, or any
affiliated person of such a person, promoter or principal underwriter.
3. The Manager of each Employee Fund will not invest the funds of
such Employee Fund in 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 and where the investment transaction
involves a joint enterprise or other joint arrangement within the
meaning of rule 17d-1 in which such Employee Fund and the Co-Investor
are participants unless any such Co-Investor agrees to, prior to
disposing of all or part of its investment, (a) give such Manager
sufficient, but not less than one day's, notice of its intent to
dispose of its investment, and (b) refrain from disposing of its
investment unless such Employee Fund has the opportunity to dispose of
such Employee Fund's investment prior to or concurrently with, and on
the same terms as, and pro rata with, the Co-Investor. The term ``Co-
Investor'' with respect to any Employee Fund means any person who is:
(a) An ``affiliated person'' (as such term is defined in section
2(a)(3) of the Act) of such Employee Fund (other than a Third Party
Fund); (b) Bessemer; (c) an officer or director of Bessemer; or (d) an
entity (other than a Third Party Fund) in which the Manager of such
Employee Fund acts as a manager or has a similar capacity to control
the sale or disposition of the entity's securities. The restrictions
contained in this condition shall not be deemed to limit or prevent the
disposition of an investment by a Co-Investor: (a) To its direct or
indirect wholly-owned subsidiary, to any company (a ``parent'') of
which such 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 such Co-Investor or a trust or other
investment vehicle established for any such immediate family member;
(c) when the investment is comprised of securities that are listed on
any exchange registered as a national securities exchange under section
6 of the 1934 Act; (d) when the investment is comprised of securities
that are NMS stocks pursuant to section 11A(a)(2) of the 1934 Act and
rule 600(a) of Regulation NMS thereunder; (e) when the investment is
comprised of securities that are listed on, or traded on, any foreign
securities exchange or board of trade that satisfies regulatory
requirements under the law of the jurisdiction in which such foreign
securities exchange or board of trade is organized similar to those
that apply to a national securities exchange or a national market
system for securities; or (f) when the investment is comprised of
securities that are government securities as defined in section
2(a)(16) of the Act or other securities that meet the definition of
``Eligible Security'' in rule 2a-7 under the Act.
4. Each Employee Fund and the Manager will maintain and preserve,
for the life of such Employee Fund and for at least six years
thereafter, such accounts, books, and other documents as constitute the
record forming the basis for the audited financial statements that are
to be provided to the Participants in such Employee Fund, and each
annual report of such Employee Fund required to be sent to such
Participants, and agree that all such records will be subject to
examination by the Commission and its staff.\5\
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\5\ Each Employee Fund will preserve the accounts, books and
other documents required to be maintained in an easily accessible
place for the first two years.
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5. The Manager of each Employee Fund will send to each Participant
in such Employee Fund who had an interest in such Employee Fund, at any
time during the fiscal year then ended, Employee Fund financial
statements audited by such Employee Fund's independent accountants. At
the end of each fiscal year, the Manager will make a valuation or have
a valuation made of all of the assets of the Employee Fund as of such
fiscal year end in a manner consistent with customary practice with
respect to the valuation of assets of the kind held by the Employee
Fund. In addition, within 90 days after the end of each fiscal year of
each Employee Fund, or as soon as practicable after the end of each
fiscal year of each Employee Fund, the Manager of such Employee Fund
will send a report to each person who was a Participant in such
Employee Fund at any time during the fiscal year
[[Page 25061]]
then ended, setting forth such tax information as shall be necessary
for the preparation by the Participant of that Participant's federal
and state income tax returns, and a report of the investment activities
of the Employee Fund during that fiscal year.
6. If an Employee Fund makes purchases or sales from or to an
entity affiliated with the Employee Fund by reason of an officer,
director or employee of Bessemer (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 Employee Fund's determination 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. E8-9910 Filed 5-5-08; 8:45 am]
BILLING CODE 8010-01-P
