Wortham Finance, L.P. et al.; Notice of Application, 67901-67905 [E8-27213]
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Federal Register / Vol. 73, No. 222 / Monday, November 17, 2008 / Notices
Because virtually all funds extant
have now adopted audit committee
charters, the annual one-time collection
of information burden associated with
adopting audit committee charters is
limited to the burden incurred by newly
established funds. Commission staff
estimates that fund sponsors establish
approximately 153 new funds each
year,6 and that all of these funds will
adopt an audit committee charter in
order to rely on rule 32a–4. Thus,
Commission staff estimates that the
annual one-time hour burden associated
with adopting an audit committee
charter under rule 32a–4 going forward
will be approximately 459 hours.7
As noted above, all funds that rely on
rule 32a–4 are subject to the ongoing
collection of information requirement to
preserve a copy of the charter in an
easily accessible place. This ongoing
requirement, which Commission staff
has estimated has no hourly burden,
applies to all funds that have adopted
an audit committee charter and
continue to maintain it.
When funds adopt an audit committee
charter in order to rely on rule 32a–4,
they also may incur one-time costs
related to hiring outside counsel to
prepare the charter. Commission staff
estimates that those costs average
approximately $1000 per fund.8
Commission staff understands that
virtually all funds now rely on rule 32a–
4 and have adopted audit committee
charters, and thus estimates that the
annual cost burden related to hiring
outside legal counsel is limited to newly
established funds.
As noted above, Commission staff
estimates that approximately 153 new
funds each year will adopt an audit
committee charter in order to rely on
rule 32a–4. Thus, Commission staff
estimates that the ongoing annual cost
burden associated with rule 32a–4 in
the future will be approximately
$153,000.9
The estimates of average burden hours
and costs are made solely for the
purposes of the Paperwork Reduction
Act, and are not derived from a
comprehensive or even a representative
survey or study of the costs of
Commission rules and forms.
The collections of information
required by rule 32a–4 are necessary to
obtain the benefits of the rule. The
Commission is seeking OMB approval,
because an agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
Please direct general comments
regarding the above information to the
following persons: (i) Desk Officer for
the Securities and Exchange
Commission, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503
or e-mail to: nfraser@omb.eop.gov; and
(ii) Lewis W. Walker, Acting Director/
CIO, Securities and Exchange
Commission, c/o Shirley Martinson,
6432 General Green Way, Alexandria,
VA 22312; or send an e-mail to:
PRA_Mailbox@sec.gov. Comments must
be submitted to OMB within 30 days of
this notice.
Dated: November 10, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–27241 Filed 11–14–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28484; 813–365]
Wortham Finance, L.P. et al.; Notice of
Application
November 10, 2008.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under sections 6(b) and 6(e) of the
Investment Company Act of 1940 (the
‘‘Act’’) granting an exemption from all
provisions of the Act, except section 9
and sections 36 through 53, and the
rules and regulations under the Act.
With respect to sections 17 and 30 of the
Act, and the rules and regulations
thereunder, and rule 38a–1 under the
Act, the exemption is limited as set
forth in the application.
jlentini on PROD1PC65 with NOTICES
AGENCY:
107–204, 116 Stat. 745) and other developments.
However, the costs associated with these revisions
are not attributable to the requirements of rule 32a–
4.
6 This estimate is based on the number of Form
N–8As filed from January 2005 through December
2007.
7 This estimate is based on the following
calculation: (3.0 burden hours for establishing
charter × 153 new funds = 459 burden hours).
8 Costs may vary based on the individual needs
of each fund. However, based on the staff’s
conversations with outside counsel that prepare
these charters, legal fees related to the preparation
and adoption of an audit committee charter usually
average $1000 or less. The Commission also
understands that the ICI has prepared a model audit
committee charter, which most legal professionals
use when establishing audit committees, thereby
reducing the costs associated with drafting a
charter.
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9 This
estimate is based on the following
calculations: ($1000 cost of adopting charter × 153
newly established funds = $153,000).
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67901
SUMMARY OF THE APPLICATION:
Applicants request an order to exempt
a vehicle formed for the benefit of
certain eligible current employees of
John L. Wortham & Son, L.P.
(‘‘Insurance LP’’) from certain
provisions of the Act. The vehicle will
be an ‘‘employees’ securities company’’
as defined in section 2(a)(13) of the Act.
APPLICANTS: Wortham Finance, L.P.
(‘‘Finance LP’’), JLW Finance, LLC
(‘‘Finance GP’’), J. Wortham, LLC
(‘‘Insurance GP’’) and Insurance LP
(together with any business organization
that results solely from a reorganization
of Insurance LP into a different
organizational structure or into an entity
organized under the laws of another
jurisdiction, ‘‘Insurance LP’’). Insurance
LP, Finance LP, Finance GP and
Insurance GP are collectively referred to
herein as the ‘‘Firm’’.
FILING DATES: The application was filed
on April 10, 2007 and amended on
December 5, 2007 and October 30, 2008.
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 8, 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, Securities and
Exchange Commission, 100 F St., NE.,
Washington, DC 20549–1090.
Applicants, 2727 Allen Parkway, Suite
2400, Houston, Texas 77109–2115.
FOR FURTHER INFORMATION CONTACT:
Shannon Conaty, Senior Counsel, at
(202) 551–6827, or Janet M. Grossnickle,
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 Room,
100 F St., NE., Washington, DC 20549–
1520 (tel. 202–551–5850).
Applicants’ Representations
1. Founded in 1915, Insurance LP, a
Texas limited partnership, is the largest
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independent insurance broker in Texas
with headquarters in Houston and
offices in Addison, Austin, Dallas, Fort
Worth and San Antonio. Insurance LP
offers a comprehensive portfolio of
services, including insurance brokerage,
claims management, loss control, risk
management consulting, personal life
insurance and employee benefits to
public and private companies,
professional practices and individuals
engaged in an extensive range of
industries. Since its inception,
Insurance LP has been an independent,
privately-owned entity. In 1965,
Insurance LP was purchased from its
founders, Gus Wortham and other
selling founders, by a new generation of
partners, thus beginning a cyclical
succession of ownership that continues
today. Prior to December 1, 2003, when
an Insurance LP partner sold all or a
portion of his or her partnership interest
in Insurance LP, the Insurance LP
Executive Committee (as defined below)
designated either a new or existing
partner to buy such interest. On
December 1, 2003, Insurance LP was
restructured and two new limited
partnerships were formed, Insurance LP
and Finance LP.
2. Insurance LP conducts the
traditional insurance business of the
Firm while Finance LP buys and sells
ownership interests in the Firm. The
two new limited partnerships, and the
corresponding limited liability
companies created to be the general
partners of such limited partnerships,
Insurance GP and Finance GP, are
owned directly or indirectly by each
equity partner of the Firm in the same
proportion as their pre-restructuring
ownership in Insurance LP. Limited
partnership interests in Insurance LP
and membership interests in Insurance
GP may only be transferred together
(such interests, the ‘‘Insurance Units’’).
Limited partnership interests in Finance
LP and membership interests in Finance
GP may only be transferred together
(such interests, the ‘‘Finance Units’’,
and together with the Insurance Units,
‘‘Units’’).
3. Finance LP is a Texas limited
partnership. Finance LP operates as a
non-diversified, closed-end
management investment company.
Finance LP has been established to
facilitate the purchase or sale of Units.
Finance GP, a Texas limited liability
company, serves as the sole general
partner of Finance LP. Finance GP has
delegated all management functions for
Finance LP to an executive committee
(the ‘‘Finance GP Executive
Committee’’) composed of managing
members of Finance GP elected by a
majority of the individuals and entities
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which currently own Units
(‘‘Unitholders’’). Insurance GP, a Texas
limited liability company, serves as the
sole general partner of Insurance LP.
Insurance GP has delegated all
management functions for Insurance LP
to an executive committee (the
‘‘Insurance GP Executive Committee’’)
composed of managing members of
Insurance GP elected by a majority of
the Unitholders. All the members of the
Finance GP Executive Committee and
the Insurance GP Executive Committee
are Unitholders. The Finance GP
Executive Committee will be the sole
manager of Finance LP and make all
investment and other operational
decisions for Finance LP. Finance GP or
any person involved in the operation of
Finance LP will register as an
investment adviser if required under the
Investment Advisers Act of 1940
(‘‘Advisers Act’’), or the rules under it.
4. Unitholders and Eligible
Unitholders (as defined below) are
required to buy and sell their Insurance
Units and Finance Units
simultaneously. Finance LP is
responsible for (a) purchasing Units
from Unitholders, (b) issuing its own
promissory notes for such purchases, (c)
selling Units acquired by it to Eligible
Unitholders, (d) accepting promissory
notes from Eligible Unitholders
purchasing Units, (e) holding and
managing investments in certain
marketable securities and other assets,
and (f) handling the administration of
such activities.
5. Units will be offered without
registration in reliance on section 4(2) of
the Securities Act of 1933 (the
‘‘Securities Act’’) or Regulation D under
the Securities Act, and will be offered
solely to Eligible Unitholders. Eligible
Unitholders must be (a) persons who
are, at the time of investment, current
employees of Insurance LP (‘‘Wortham
Employees’’) but who are not yet
Unitholders, (b) persons who are, at the
time of investment, current Wortham
Employees and who are Unitholders, (c)
persons who are highly-experienced
individual insurance professionals who
laterally join Insurance LP (‘‘Lateral
Partners’’), or (d) a limited partnership,
corporation or other business entity all
of the voting power of which is
controlled by such Lateral Partners
(‘‘Lateral Partner Investment Vehicle’’).
In order for a Lateral Partner Investment
Vehicle to be an ‘‘Eligible Unitholder’’,
it must qualify as either (a) an
accredited investor as defined in rule
501(a) of Regulation D or (b) an entity
for which a Lateral Partner is a settlor
and principal investment decision-
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maker.1 In order for a Wortham
Employee or Lateral Partner to qualify
as an ‘‘Eligible Unitholder’’, that person
must be a person who is, at the time of
investment, a current Wortham
Employee or Lateral Partner who (a)
meets 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, or (b) is one of 35 or
fewer current Wortham Employees or
Lateral Partners who meets certain
requirements (‘‘Category 2 investors’’).
6. Each Category 2 investor will be a
current Wortham Employee or Lateral
Partner, who meets the sophistication
requirements set forth in rule
506(b)(2)(ii) of Regulation D under the
Securities Act and who (a) has a college
education and/or has had a minimum of
five years of business and/or
professional experience in the insurance
and risk management industries, and (b)
has had compensation of at least
$80,000 in the preceding 12 month
period, and has a reasonable expectation
of compensation of at least $140,000 in
each of the two immediately succeeding
12 month periods.
7. Prior to offering Units to an
individual, the Insurance GP Executive
Committee and the Finance GP
Executive Committee must reasonably
believe that the individual is a
sophisticated investor capable of
understanding and evaluating the risks
of investing in the Firm without the
benefit of regulatory safeguards.
8. Finance LP is a financing vehicle
intended to create an opportunity for
Eligible Unitholders to become owners
in the Firm when they might not have
otherwise been able to make immediate
full payment of the purchase price of
the Units. Eligible Unitholders who are
individuals acquire Units by executing
a non-recourse 10-year promissory note
bearing interest at prime rate (but not
exceeding 10%) to Finance LP in a face
amount equal to (i) a fixed formula price
calculated monthly for the Insurance
Units (as determined in accordance with
the terms of the Insurance Units transfer
agreement) multiplied by the total
number of Insurance Units purchased
and sold plus (ii) a fixed formula price
calculated monthly for the Finance
Units (as determined in accordance with
the terms of the Finance Units transfer
agreement) multiplied by the total
number of Finance Units purchased and
sold (together, the ‘‘Formula Price’’).
Eligible Unitholders that are S
corporations contribute their net
1 If a Lateral Partner Investment Vehicle is an
entity other than a trust, the reference to ‘‘settlor’’
shall be construed to mean a person who created
the vehicle, alone or together with others, and who
contributed funds or other assets to the vehicle.
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insurance brokerage business assets as
tax-free contributions to Insurance LP in
exchange for newly issued Units and
execute 10-year promissory notes for
any shortfall in their pro-rata share of
the combined equity in the Firm.
9. Each selling Unitholder currently
receives a non-recourse 10-year prime
rate (not to exceed 10%) bearing
promissory note in an amount equal to
the Formula Price for the number of
Units sold. Through a credit facility
with a local financial institution (the
‘‘Credit Facility’’), Finance LP provides
letter of credit enhanced promissory
notes to selling Unitholders in exchange
for their Units. All promissory notes for
Eligible Unitholders contain a prepayment provision exercisable at the
option of Finance LP. On rare occasions,
cash is paid for the Units acquired from
selling Unitholders.
10. To secure full and complete
payment and performance of the
obligations under the Credit Facility,
Finance LP must grant the lender a first
priority security interest in certain
collateral held by Finance LP. Such
collateral is comprised of a portfolio
consisting of high quality fixed income
securities, including municipal bonds
(rated AA or better) and U.S. Treasury
and Agency securities (rated AAA), and
registered money market funds
operating in compliance with rule 2a–7.
The Finance GP Executive Committee
selects one or more investment advisers
registered under the Advisers Act to
manage Finance LP’s portfolio based on
such adviser’s overall level of
professional experience and its
conservative value preservation
strategies. Neither the Credit Facility
nor any other borrowing by Finance LP
from a bank or other financial
institution would cause any person not
named in section 2(a)(13) of the Act to
own outstanding securities of Finance
LP (other than short-term paper). Any
borrowings by Finance LP will be nonrecourse other than to the Firm.
11. The terms of the Units will be
fully disclosed in the private placement
memorandum of the Firm, and each
Eligible Unitholder will receive a
private placement memorandum,
Finance LP’s limited partnership
agreement and Insurance LP’s limited
partnership agreement (or other
organizational documents) prior to his
or her investment in the Units. Finance
GP will send Unitholders annual reports
of the Firm, which will contain audited
financial statements, as soon as
practicable after the end of each fiscal
year, but no later than 180 days after the
fiscal year end. In addition, as soon as
practicable after the end of each fiscal
year of the Firm, Finance GP shall send
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a report to each person who was a
Unitholder at any time during the fiscal
year then ended, setting forth such tax
information as shall be necessary for the
preparation by the Unitholder of his or
her federal and state income tax returns
and a report of the investment activities
of Finance LP during such year.
12. Unitholders will be permitted to
transfer Units only by operation of law,
to a receiver or trustee in bankruptcy for
that Unitholder, to the Unitholder’s
estate in the event of his or her death,
or with the express consent of both the
Insurance GP Executive Committee and
the Finance GP Executive Committee.
No person may become a transferee or
substitute Unitholder unless that person
is a member of one of the classes of
persons listed in section 2(a)(13) of the
Act, except that a legal representative or
executor may hold Units in order to
settle the estate of a decedent or
bankrupt or for similar purposes. No fee
of any kind will be charged in
connection with the sale of Units.
13. No separate management fee will
be charged to Finance LP by Finance
GP, and no compensation will be paid
by Finance LP or by Unitholders to
Finance GP for its services.
14. Finance LP will not acquire any
security issued by a registered
investment company if immediately
after the acquisition Finance LP 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 may 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 Finance LP 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 the extent necessary
permit Finance LP to: (a) Purchase, from
the Firm or any affiliated person thereof,
Units for the account of the Firm or any
affiliated person thereof; or (b) sell, to
the Firm or any affiliated person thereof,
Units previously acquired by Finance
LP.
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
Unitholders will be informed in the
Firm’s private placement memorandum
of the possible extent of Finance LP’s
dealings with the Firm or any affiliated
person thereof. Applicants also state
that, as financially sophisticated
professionals, Unitholders will be able
to evaluate the attendant risks.
Applicants assert that the community of
interest among Unitholders and the
Firm will provide the best protection
against any risk of abuse.
5. 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)
The promissory notes and non-publicly
traded securities held by Finance LP
may be kept in the locked files of
Finance LP; (b) for purposes of
paragraph (d) of the rule, (i) employees
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of the Firm will be deemed employees
of Finance LP, (ii) officers of Finance GP
(including the Finance GP Executive
Committee) will be deemed to be
officers of Finance LP, and (iii) the
Finance GP Executive Committee will
be deemed to be the board of directors
of Finance LP; and (c) in place of the
verification procedure under paragraph
(f) of the rule, verification will be
effected quarterly by two employees of
the Firm. Applicants assert that the
promissory notes and non-publicly
traded securities held by Finance LP are
most suitably kept in Finance LP’s files,
where they can be referred to as
necessary. The publicly traded
securities owned by Finance LP are held
in one or more brokerage accounts.
6. 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
(‘‘independent 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. Rule 17g–1(j)(3)
requires that the board of directors of an
investment company satisfy the fund
governance standards defined in rule 0–
1(a)(7). Applicants request an
exemption from section 17(g) and rule
17g–1 to the extent necessary to permit
Finance LP to comply with rule 17g–1
without the necessity of having a
majority of the independent directors
take such action and make such
approvals as are set forth in the rule.
Specifically, Finance LP will comply
with rule 17g–1 by having the GP
Finance Executive Committee take such
actions and make such approvals as are
set forth in rule 17g–1. Applicants state
that, because Finance GP will be an
interested person of Finance LP,
Finance LP 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
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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 Finance LP.
The Finance GP Executive 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 Finance GP Executive
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
Finance LP will not have a board of
directors. Finance LP will comply with
all other requirements of rule 17g–1.
7. 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 Finance LP.
8. 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 Finance LP and would
entail administrative and legal costs that
outweigh any benefit to Unitholders.
Applicants request exemptive relief to
the extent necessary to permit Finance
LP to report annually to Unitholders.
Applicants also request an exemption
from section 30(h) to the extent
necessary to exempt the Finance GP
Executive Committee and any other
persons who may be deemed members
of an advisory board of Finance LP from
filing Forms 3, 4 and 5 under section 16
of the under the Securities Exchange
Act of 1934 with respect to their
ownership of Units. Applicants assert
that, because there will be no trading
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market and the transfers of Units will be
severely restricted, these filings are
unnecessary for the protection of
investors and burdensome to those
required to make them.
9. 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. Finance LP will
comply with rule 38a–1(a), (c) and (d),
except that (i) since Finance LP does not
have a board of directors, the Finance
GP Executive Committee will fulfill the
responsibilities assigned to a board of
directors under the rule, and (ii) since
the Finance GP Executive Committee
does not have any independent
members, approval by a majority of the
independent 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
Finance LP is a party otherwise
prohibited by Section 17(a) (each, a
‘‘Section 17 Transaction’’) will be
effected only if the Finance GP
Executive Committee determines that:
(a) the terms of the Section 17
Transaction, including the
consideration to be paid or received, are
fair and reasonable to Unitholders and
do not involve overreaching of Finance
LP or Unitholders on the part of any
person concerned; and (b) the Section
17 Transaction is consistent with the
interests of the Unitholders, the Firm’s
organizational documents and the
Firm’s reports to its Unitholders.
In addition, the Finance GP Executive
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
therefore. All such records will be
maintained for the life of Finance LP
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. Finance GP will send to each
person who was a Unitholder at any
time during the fiscal year then ended
audited financial statements with
respect to the Firm. At the end of each
fiscal year, the Firm will make a
valuation or have a valuation made of
all of the assets of Finance LP as of the
fiscal year end in a manner consistent
with customary practice with respect to
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Federal Register / Vol. 73, No. 222 / Monday, November 17, 2008 / Notices
the valuation of assets of the kind held
by Finance LP. Consistent with the
Firm’s customary practice, Units will be
valued in accordance with the terms of
the Transfer Agreements. In addition, as
soon as practicable after the end of each
fiscal year of the Firm, Finance GP shall
send a report to each person who was
a Unitholder at any time during the
fiscal year then ended, setting forth such
tax information as shall be necessary for
the preparation by the Unitholder of his
or her federal and state income tax
returns and a report of the investment
activities of Finance LP during such
year.
3. Finance LP and the Finance GP
Executive Committee will maintain and
preserve, for the life of Finance LP and
at least six years thereafter, such
accounts, books, and other documents
as constitute the record forming the
basis for the audited financial
statements and annual reports of the
Firm to be provided to Unitholders, and
agree that all such records will be
subject to examination by the
Commission and its staff. All such
records will be maintained in an easily
accessible place for at least the first two
years.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–27213 Filed 11–14–08; 8:45 am]
BILLING CODE 8011–01–P
jlentini on PROD1PC65 with NOTICES
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 an Open Meeting
on Wednesday, November 19, 2008 at
10 a.m., in the Auditorium, Room L–
002.
The subject matter of the Open
Meeting will be:
Item 1: The Commission will consider
whether to adopt rule amendments that
would impose additional requirements
on nationally recognized statistical
rating organizations in order to address
concerns about the integrity of their
credit rating procedures and
methodologies.
Item 2: The Commission will consider
whether to adopt rule amendments to
improve mutual fund disclosure by
providing investors with a summary
prospectus containing key information
in plain English in a clear and concise
Jkt 217001
BILLING CODE 8011–01–P
On October 9, 2008, FINRA filed
Amendment No. 1 to the proposed rule
change.5 November 3, 2008, FINRA filed
Amendment No. 2.6 This order approves
the proposed rule change, as amended.
II. Description of Proposed Rule Change
A. Summary
FINRA has proposed to amend its
trade reporting rules applicable to OTC
equity transactions 7 to: (1) Replace the
current market maker-based trade
reporting framework with an ‘‘executing
party’’ framework; and (2) require that
any member with the trade reporting
obligation under FINRA rules that is
acting in a riskless principal or agency
capacity on behalf of one or more other
members submit non-tape reports to
FINRA, as necessary, to identify such
other member(s) as a party to the trade.
B. Description of Proposed Rule Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58903; File No. SR–FINRA–
2008–011]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Approving
Proposed Rule Change To Amend the
Trade Reporting Structure and Require
Submission of Non-Tape Reports That
Identify Other Members Who
Participated in Agency and Riskless
Principal Transactions as Modified by
Amendments Nos. 1 and 2
I. Introduction
Sunshine Act Meeting
18:18 Nov 14, 2008
Dated: November 12, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–27295 Filed 11–14–08; 8:45 am]
November 5, 2008.
SECURITIES AND EXCHANGE
COMMISSION
VerDate Aug<31>2005
format, and by enhancing the
availability on the Internet of more
detailed information to investors. The
Commission also will consider whether
to adopt related amendments to Form
N–1A, including amendments that
address exchange-traded funds.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
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.
67905
On March 28, 2008, the Financial
Industry Regulatory Authority, Inc.,
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘SEC’’)
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 amend its trade
reporting rules applicable to over-thecounter (‘‘OTC’’) equity transactions.
The proposed rule change was
published for comment in the Federal
Register on April 24, 2008.3 The
Commission received four comment
letters on the proposed rule change.4
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 57681
(April 17, 2008), 73 FR 22186 (‘‘Notice’’).
4 See letters from Romeo Bermudez, Chief
Compliance Officer, Direct Edge ECN LLC, to
Florence E. Harmon, Acting Secretary, Commission,
dated May 13, 2008 (‘‘Direct Edge Letter’’); Eric
Swanson, General Counsel, BATS Trading, Inc, to
Florence E. Harmon, Acting Secretary, Commission,
dated May 14, 2008 (‘‘BATS Letter’’); Ann Vlcek,
Managing Director and Associate General Counsel,
2 17
PO 00000
Frm 00071
Fmt 4703
Sfmt 4703
1. Trade Reporting Structure
Currently, the following structure is
in place for purposes of reporting most
OTC equity transactions to FINRA: (1)
In transactions between two market
makers, the sell-side reports; (2) in
transactions between a market maker
and a non-market maker, the market
maker reports; (3) in transactions
between two non-market makers, the
sell-side reports; and (4) in transactions
between a member and either a nonmember or customer, the member
reports. FINRA has proposed to amend
its rules to require that for transactions
between members, the ‘‘executing
party’’ reports the trade to FINRA and
Securities Industry and Financial Markets
Association (‘‘SIFMA’’) to Florence E. Harmon,
Acting Secretary, Commission, dated May 15, 2008
(‘‘SIFMA Letter’’); Philip M. Pinc, Vice President,
Counsel, National Stock Exchange, Inc. (‘‘NSX’’), to
Florence E. Harmon, Acting Secretary, Commission,
dated May 29, 2008 (‘‘NSX Letter’’).
5 In Amendment No. 1, FINRA made technical
changes to the rule text to reflect changes approved
by the Commission in SR–FINRA–2008–021, which
renumbered certain rules and replaced references to
‘‘NASD’’ with ‘‘FINRA.’’ See Securities Exchange
Act Release No. 58643 (September 25, 2008), 73 FR
57174 (October 1, 2008).
6 In Amendment No. 2, FINRA clarified that the
implementation date for this proposed rule change
would be 180 days from the date of this approval
order. The Commission is not publishing the
amendment for comment.
7 Specifically, OTC equity transactions are: (1)
Transactions in NMS stocks, as defined in Rule
600(b) of Regulation NMS under the Act, effected
otherwise than on an exchange, which are reported
through the Alternative Display Facility (‘‘ADF’’) or
a Trade Reporting Facility (‘‘TRF’’); and (2)
transactions in ‘‘OTC Equity Securities,’’ as defined
in NASD Rule 6610 (e.g., OTC Bulletin Board and
Pink Sheets securities), Direct Participation
Program (‘‘DPP’’) securities and PORTAL equity
securities, which are reported through the OTC
Reporting Facility (‘‘ORF’’). The ADF, TRFs and
ORF are collectively referred to herein as the
‘‘FINRA Facilities.’’
E:\FR\FM\17NON1.SGM
17NON1
]]>Agencies
[Federal Register Volume 73, Number 222 (Monday, November 17, 2008)]
[Notices]
[Pages 67901-67905]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-27213]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28484; 813-365]
Wortham Finance, L.P. et al.; Notice of Application
November 10, 2008.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under sections 6(b) and
6(e) of the Investment Company Act of 1940 (the ``Act'') granting an
exemption from all provisions of the Act, except section 9 and sections
36 through 53, and the rules and regulations under the Act. With
respect to sections 17 and 30 of the Act, and the rules and regulations
thereunder, and rule 38a-1 under the Act, the exemption is limited as
set forth in the application.
-----------------------------------------------------------------------
Summary of the Application: Applicants request an order to exempt a
vehicle formed for the benefit of certain eligible current employees of
John L. Wortham & Son, L.P. (``Insurance LP'') from certain provisions
of the Act. The vehicle will be an ``employees' securities company'' as
defined in section 2(a)(13) of the Act.
Applicants: Wortham Finance, L.P. (``Finance LP''), JLW Finance, LLC
(``Finance GP''), J. Wortham, LLC (``Insurance GP'') and Insurance LP
(together with any business organization that results solely from a
reorganization of Insurance LP into a different organizational
structure or into an entity organized under the laws of another
jurisdiction, ``Insurance LP''). Insurance LP, Finance LP, Finance GP
and Insurance GP are collectively referred to herein as the ``Firm''.
Filing Dates: The application was filed on April 10, 2007 and amended
on December 5, 2007 and October 30, 2008.
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 8, 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, Securities and Exchange Commission, 100 F St.,
NE., Washington, DC 20549-1090. Applicants, 2727 Allen Parkway, Suite
2400, Houston, Texas 77109-2115.
FOR FURTHER INFORMATION CONTACT: Shannon Conaty, Senior Counsel, at
(202) 551-6827, or Janet M. Grossnickle, 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 Room, 100 F St., NE., Washington, DC
20549-1520 (tel. 202-551-5850).
Applicants' Representations
1. Founded in 1915, Insurance LP, a Texas limited partnership, is
the largest
[[Page 67902]]
independent insurance broker in Texas with headquarters in Houston and
offices in Addison, Austin, Dallas, Fort Worth and San Antonio.
Insurance LP offers a comprehensive portfolio of services, including
insurance brokerage, claims management, loss control, risk management
consulting, personal life insurance and employee benefits to public and
private companies, professional practices and individuals engaged in an
extensive range of industries. Since its inception, Insurance LP has
been an independent, privately-owned entity. In 1965, Insurance LP was
purchased from its founders, Gus Wortham and other selling founders, by
a new generation of partners, thus beginning a cyclical succession of
ownership that continues today. Prior to December 1, 2003, when an
Insurance LP partner sold all or a portion of his or her partnership
interest in Insurance LP, the Insurance LP Executive Committee (as
defined below) designated either a new or existing partner to buy such
interest. On December 1, 2003, Insurance LP was restructured and two
new limited partnerships were formed, Insurance LP and Finance LP.
2. Insurance LP conducts the traditional insurance business of the
Firm while Finance LP buys and sells ownership interests in the Firm.
The two new limited partnerships, and the corresponding limited
liability companies created to be the general partners of such limited
partnerships, Insurance GP and Finance GP, are owned directly or
indirectly by each equity partner of the Firm in the same proportion as
their pre-restructuring ownership in Insurance LP. Limited partnership
interests in Insurance LP and membership interests in Insurance GP may
only be transferred together (such interests, the ``Insurance Units'').
Limited partnership interests in Finance LP and membership interests in
Finance GP may only be transferred together (such interests, the
``Finance Units'', and together with the Insurance Units, ``Units'').
3. Finance LP is a Texas limited partnership. Finance LP operates
as a non-diversified, closed-end management investment company. Finance
LP has been established to facilitate the purchase or sale of Units.
Finance GP, a Texas limited liability company, serves as the sole
general partner of Finance LP. Finance GP has delegated all management
functions for Finance LP to an executive committee (the ``Finance GP
Executive Committee'') composed of managing members of Finance GP
elected by a majority of the individuals and entities which currently
own Units (``Unitholders''). Insurance GP, a Texas limited liability
company, serves as the sole general partner of Insurance LP. Insurance
GP has delegated all management functions for Insurance LP to an
executive committee (the ``Insurance GP Executive Committee'') composed
of managing members of Insurance GP elected by a majority of the
Unitholders. All the members of the Finance GP Executive Committee and
the Insurance GP Executive Committee are Unitholders. The Finance GP
Executive Committee will be the sole manager of Finance LP and make all
investment and other operational decisions for Finance LP. Finance GP
or any person involved in the operation of Finance LP will register as
an investment adviser if required under the Investment Advisers Act of
1940 (``Advisers Act''), or the rules under it.
4. Unitholders and Eligible Unitholders (as defined below) are
required to buy and sell their Insurance Units and Finance Units
simultaneously. Finance LP is responsible for (a) purchasing Units from
Unitholders, (b) issuing its own promissory notes for such purchases,
(c) selling Units acquired by it to Eligible Unitholders, (d) accepting
promissory notes from Eligible Unitholders purchasing Units, (e)
holding and managing investments in certain marketable securities and
other assets, and (f) handling the administration of such activities.
5. Units will be offered without registration in reliance on
section 4(2) of the Securities Act of 1933 (the ``Securities Act'') or
Regulation D under the Securities Act, and will be offered solely to
Eligible Unitholders. Eligible Unitholders must be (a) persons who are,
at the time of investment, current employees of Insurance LP (``Wortham
Employees'') but who are not yet Unitholders, (b) persons who are, at
the time of investment, current Wortham Employees and who are
Unitholders, (c) persons who are highly-experienced individual
insurance professionals who laterally join Insurance LP (``Lateral
Partners''), or (d) a limited partnership, corporation or other
business entity all of the voting power of which is controlled by such
Lateral Partners (``Lateral Partner Investment Vehicle''). In order for
a Lateral Partner Investment Vehicle to be an ``Eligible Unitholder'',
it must qualify as either (a) an accredited investor as defined in rule
501(a) of Regulation D or (b) an entity for which a Lateral Partner is
a settlor and principal investment decision-maker.\1\ In order for a
Wortham Employee or Lateral Partner to qualify as an ``Eligible
Unitholder'', that person must be a person who is, at the time of
investment, a current Wortham Employee or Lateral Partner who (a) meets
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, or (b) is
one of 35 or fewer current Wortham Employees or Lateral Partners who
meets certain requirements (``Category 2 investors'').
---------------------------------------------------------------------------
\1\ If a Lateral Partner Investment Vehicle is an entity other
than a trust, the reference to ``settlor'' shall be construed to
mean a person who created the vehicle, alone or together with
others, and who contributed funds or other assets to the vehicle.
---------------------------------------------------------------------------
6. Each Category 2 investor will be a current Wortham Employee or
Lateral Partner, who meets the sophistication requirements set forth in
rule 506(b)(2)(ii) of Regulation D under the Securities Act and who (a)
has a college education and/or has had a minimum of five years of
business and/or professional experience in the insurance and risk
management industries, and (b) has had compensation of at least $80,000
in the preceding 12 month period, and has a reasonable expectation of
compensation of at least $140,000 in each of the two immediately
succeeding 12 month periods.
7. Prior to offering Units to an individual, the Insurance GP
Executive Committee and the Finance GP Executive Committee must
reasonably believe that the individual is a sophisticated investor
capable of understanding and evaluating the risks of investing in the
Firm without the benefit of regulatory safeguards.
8. Finance LP is a financing vehicle intended to create an
opportunity for Eligible Unitholders to become owners in the Firm when
they might not have otherwise been able to make immediate full payment
of the purchase price of the Units. Eligible Unitholders who are
individuals acquire Units by executing a non-recourse 10-year
promissory note bearing interest at prime rate (but not exceeding 10%)
to Finance LP in a face amount equal to (i) a fixed formula price
calculated monthly for the Insurance Units (as determined in accordance
with the terms of the Insurance Units transfer agreement) multiplied by
the total number of Insurance Units purchased and sold plus (ii) a
fixed formula price calculated monthly for the Finance Units (as
determined in accordance with the terms of the Finance Units transfer
agreement) multiplied by the total number of Finance Units purchased
and sold (together, the ``Formula Price''). Eligible Unitholders that
are S corporations contribute their net
[[Page 67903]]
insurance brokerage business assets as tax-free contributions to
Insurance LP in exchange for newly issued Units and execute 10-year
promissory notes for any shortfall in their pro-rata share of the
combined equity in the Firm.
9. Each selling Unitholder currently receives a non-recourse 10-
year prime rate (not to exceed 10%) bearing promissory note in an
amount equal to the Formula Price for the number of Units sold. Through
a credit facility with a local financial institution (the ``Credit
Facility''), Finance LP provides letter of credit enhanced promissory
notes to selling Unitholders in exchange for their Units. All
promissory notes for Eligible Unitholders contain a pre-payment
provision exercisable at the option of Finance LP. On rare occasions,
cash is paid for the Units acquired from selling Unitholders.
10. To secure full and complete payment and performance of the
obligations under the Credit Facility, Finance LP must grant the lender
a first priority security interest in certain collateral held by
Finance LP. Such collateral is comprised of a portfolio consisting of
high quality fixed income securities, including municipal bonds (rated
AA or better) and U.S. Treasury and Agency securities (rated AAA), and
registered money market funds operating in compliance with rule 2a-7.
The Finance GP Executive Committee selects one or more investment
advisers registered under the Advisers Act to manage Finance LP's
portfolio based on such adviser's overall level of professional
experience and its conservative value preservation strategies. Neither
the Credit Facility nor any other borrowing by Finance LP from a bank
or other financial institution would cause any person not named in
section 2(a)(13) of the Act to own outstanding securities of Finance LP
(other than short-term paper). Any borrowings by Finance LP will be
non-recourse other than to the Firm.
11. The terms of the Units will be fully disclosed in the private
placement memorandum of the Firm, and each Eligible Unitholder will
receive a private placement memorandum, Finance LP's limited
partnership agreement and Insurance LP's limited partnership agreement
(or other organizational documents) prior to his or her investment in
the Units. Finance GP will send Unitholders annual reports of the Firm,
which will contain audited financial statements, as soon as practicable
after the end of each fiscal year, but no later than 180 days after the
fiscal year end. In addition, as soon as practicable after the end of
each fiscal year of the Firm, Finance GP shall send a report to each
person who was a Unitholder at any time during the fiscal year then
ended, setting forth such tax information as shall be necessary for the
preparation by the Unitholder of his or her federal and state income
tax returns and a report of the investment activities of Finance LP
during such year.
12. Unitholders will be permitted to transfer Units only by
operation of law, to a receiver or trustee in bankruptcy for that
Unitholder, to the Unitholder's estate in the event of his or her
death, or with the express consent of both the Insurance GP Executive
Committee and the Finance GP Executive Committee. No person may become
a transferee or substitute Unitholder unless that person is a member of
one of the classes of persons listed in section 2(a)(13) of the Act,
except that a legal representative or executor may hold Units in order
to settle the estate of a decedent or bankrupt or for similar purposes.
No fee of any kind will be charged in connection with the sale of
Units.
13. No separate management fee will be charged to Finance LP by
Finance GP, and no compensation will be paid by Finance LP or by
Unitholders to Finance GP for its services.
14. Finance LP will not acquire any security issued by a registered
investment company if immediately after the acquisition Finance LP
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
may exempt employees' securities companies from the provisions of the
Act to the extent that the exemption is consistent with the protection
of investors. Section 6(b) provides that the Commission will consider,
in determining the provisions of the Act from which the company should
be exempt, the company's form of organization and capital structure,
the persons owning and controlling its securities, the price of the
company's securities and the amount of any sales load, how the
company's funds are invested, and the relationship between the company
and the issuers of the securities in which it invests. Section 2(a)(13)
defines an employees' securities company as any investment company all
of whose securities (other than short-term paper) are beneficially
owned (a) by current or former employees, or persons on retainer, of
one or more affiliated employers, (b) by immediate family members of
such persons, or (c) by such employer or employers together with any of
the persons in (a) or (b).
2. Section 7 of the Act generally prohibits investment companies
that are not registered under section 8 of the Act from selling or
redeeming their securities. Section 6(e) provides that, in connection
with any order exempting an investment company from any provision of
section 7, certain provisions of the Act, as specified by the
Commission, will be applicable to the company and other persons dealing
with the company as though the company were registered under the Act.
Applicants request an order under sections 6(b) and 6(e) of the Act
exempting Finance LP 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 the extent
necessary permit Finance LP to: (a) Purchase, from the Firm or any
affiliated person thereof, Units for the account of the Firm or any
affiliated person thereof; or (b) sell, to the Firm or any affiliated
person thereof, Units previously acquired by Finance LP.
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 Unitholders will be informed in the Firm's
private placement memorandum of the possible extent of Finance LP's
dealings with the Firm or any affiliated person thereof. Applicants
also state that, as financially sophisticated professionals,
Unitholders will be able to evaluate the attendant risks. Applicants
assert that the community of interest among Unitholders and the Firm
will provide the best protection against any risk of abuse.
5. 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) The promissory notes and non-publicly traded securities held by
Finance LP may be kept in the locked files of Finance LP; (b) for
purposes of paragraph (d) of the rule, (i) employees
[[Page 67904]]
of the Firm will be deemed employees of Finance LP, (ii) officers of
Finance GP (including the Finance GP Executive Committee) will be
deemed to be officers of Finance LP, and (iii) the Finance GP Executive
Committee will be deemed to be the board of directors of Finance LP;
and (c) in place of the verification procedure under paragraph (f) of
the rule, verification will be effected quarterly by two employees of
the Firm. Applicants assert that the promissory notes and non-publicly
traded securities held by Finance LP are most suitably kept in Finance
LP's files, where they can be referred to as necessary. The publicly
traded securities owned by Finance LP are held in one or more brokerage
accounts.
6. 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 (``independent 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. Rule 17g-1(j)(3) requires
that the board of directors of an investment company satisfy the fund
governance standards defined in rule 0-1(a)(7). Applicants request an
exemption from section 17(g) and rule 17g-1 to the extent necessary to
permit Finance LP to comply with rule 17g-1 without the necessity of
having a majority of the independent directors take such action and
make such approvals as are set forth in the rule. Specifically, Finance
LP will comply with rule 17g-1 by having the GP Finance Executive
Committee take such actions and make such approvals as are set forth in
rule 17g-1. Applicants state that, because Finance GP will be an
interested person of Finance LP, Finance LP 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
Finance LP. The Finance GP Executive 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 Finance GP Executive
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 Finance LP will
not have a board of directors. Finance LP will comply with all other
requirements of rule 17g-1.
7. 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 Finance LP.
8. 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 Finance LP
and would entail administrative and legal costs that outweigh any
benefit to Unitholders. Applicants request exemptive relief to the
extent necessary to permit Finance LP to report annually to
Unitholders. Applicants also request an exemption from section 30(h) to
the extent necessary to exempt the Finance GP Executive Committee and
any other persons who may be deemed members of an advisory board of
Finance LP from filing Forms 3, 4 and 5 under section 16 of the under
the Securities Exchange Act of 1934 with respect to their ownership of
Units. Applicants assert that, because there will be no trading market
and the transfers of Units will be severely restricted, these filings
are unnecessary for the protection of investors and burdensome to those
required to make them.
9. 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. Finance LP will comply with rule 38a-1(a),
(c) and (d), except that (i) since Finance LP does not have a board of
directors, the Finance GP Executive Committee will fulfill the
responsibilities assigned to a board of directors under the rule, and
(ii) since the Finance GP Executive Committee does not have any
independent members, approval by a majority of the independent 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 Finance LP is a party
otherwise prohibited by Section 17(a) (each, a ``Section 17
Transaction'') will be effected only if the Finance GP Executive
Committee determines that: (a) the terms of the Section 17 Transaction,
including the consideration to be paid or received, are fair and
reasonable to Unitholders and do not involve overreaching of Finance LP
or Unitholders on the part of any person concerned; and (b) the Section
17 Transaction is consistent with the interests of the Unitholders, the
Firm's organizational documents and the Firm's reports to its
Unitholders.
In addition, the Finance GP Executive 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 therefore. All such records will be maintained for the life of
Finance LP 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. Finance GP will send to each person who was a Unitholder at any
time during the fiscal year then ended audited financial statements
with respect to the Firm. At the end of each fiscal year, the Firm will
make a valuation or have a valuation made of all of the assets of
Finance LP as of the fiscal year end in a manner consistent with
customary practice with respect to
[[Page 67905]]
the valuation of assets of the kind held by Finance LP. Consistent with
the Firm's customary practice, Units will be valued in accordance with
the terms of the Transfer Agreements. In addition, as soon as
practicable after the end of each fiscal year of the Firm, Finance GP
shall send a report to each person who was a Unitholder at any time
during the fiscal year then ended, setting forth such tax information
as shall be necessary for the preparation by the Unitholder of his or
her federal and state income tax returns and a report of the investment
activities of Finance LP during such year.
3. Finance LP and the Finance GP Executive Committee will maintain
and preserve, for the life of Finance LP and at least six years
thereafter, such accounts, books, and other documents as constitute the
record forming the basis for the audited financial statements and
annual reports of the Firm to be provided to Unitholders, and agree
that all such records will be subject to examination by the Commission
and its staff. All such records will be maintained in an easily
accessible place for at least the first two years.
For the Commission, by the Division of Investment Management,
under delegated authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-27213 Filed 11-14-08; 8:45 am]
BILLING CODE 8011-01-P
