UBS Securities LLC, et al.; Notice of Application and Temporary Order, 80452-80454 [E8-31087]
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80452
Federal Register / Vol. 73, No. 251 / Wednesday, December 31, 2008 / Notices
principal underwriter to the Funds
would result in potentially severe
financial hardships for the Funds and
their shareholders. The Applicants have
distributed, or will distribute as soon as
reasonably practical, written materials,
including an offer to meet in person to
discuss the materials, to the board of
directors of each Fund, including the
directors who are not ‘‘interested
persons,’’ as defined in section 2(a)(19)
of the Act, of such Fund, and their
independent legal counsel as defined in
rule 0–1(a)(6) under the Act, if any,
regarding the Judgment, any impact on
the Funds, and the application. The
Applicants state they will provide the
Funds with all information concerning
the Judgment and the application that is
necessary for the Funds to fulfill their
disclosure and other obligations under
the federal securities laws.
6. Applicants also state that, if they
were barred from serving as investment
adviser, depositor or principal
underwriter to the Funds, the effect on
their businesses and employees would
be severe. Applicants state that they
have committed substantial resources to
establish an expertise in providing
services covered by section 9(a) of the
Act to Funds. Applicants further state
that prohibiting them from providing
advisory and distribution services
would not only adversely affect their
businesses, but would also adversely
affect approximately 50 employees that
are involved in those activities.
Applicants also state that disqualifying
the ESC Advisers from continuing to
provide investment advisory services to
ESCs is not in the public interest or in
furtherance of the protection of
investors. Because the ESCs have been
formed for certain eligible officers,
directors and persons on retainer of
Citigroup and its affiliates, it would not
be consistent with the purposes of the
ESC provisions of the Act or the ESC
Order to require another entity not
affiliated with the ESC Advisers to
manage the ESCs. In addition,
participating employees of Citigroup
and its affiliates subscribed for interests
with the expectation that the ESCs
would be managed by an affiliate of
Citigroup.
7. Applicants previously have
received exemptions under section 9(c)
as the result of conduct that triggered
section 9(a) as described in greater
detail in the application.
Applicants’ Condition:
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
Any temporary exemption granted
pursuant to the application shall be
without prejudice to, and shall not limit
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the Commission’s rights in any manner
with respect to, any Commission
investigation of, or administrative
proceedings involving or against,
Covered Persons, including without
limitation, the consideration by the
Commission of a permanent exemption
from section 9(a) of the Act requested
pursuant to the application or the
revocation or removal of any temporary
exemptions granted under the Act in
connection with the application.
Temporary Order:
The Commission has considered the
matter and finds that Applicants have
made the necessary showing to justify
granting a temporary exemption.
Accordingly,
It is hereby ordered, pursuant to
section 9(c) of the Act, that the
Applicants and any other Covered
Persons are granted a temporary
exemption from the provisions of
section 9(a), solely with respect to the
Injunction, subject to the condition in
the application, from December 23,
2008, until the Commission takes final
action on their application for a
permanent order.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–31090 Filed 12–30–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC—28569; 812–13609]
UBS Securities LLC, et al.; Notice of
Application and Temporary Order
December 23, 2008.
AGENCY: Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Temporary order and notice of
application for a permanent order under
section 9(c) of the Investment Company
Act of 1940 (‘‘Act’’).
Summary of Application: Applicants
have received a temporary order
exempting them from section 9(a) of the
Act, with respect to an injunction
entered against UBS Securities LLC
(‘‘UBS Securities’’) and UBS Financial
Services Inc. (‘‘UBSFS,’’ and together
with UBS Securities, the ‘‘Settling
Firms’’) on December 23, 2008 by the
United States District Court for the
Southern District of New York
(‘‘Injunction’’) until the Commission
takes final action on an application for
a permanent order. Applicants also have
applied for a permanent order.
Applicants: UBS Securities; UBSFS;
UBS Fund Advisor, L.L.C. (‘‘UBSFA’’);
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
UBS Willow Management, L.L.C. (‘‘UBS
Willow’’), UBS Eucalyptus
Management, L.L.C., UBS Tamarack
Management, L.L.C., UBS Juniper
Management, L.L.C., and UBS Enso
Management L.L.C. (collectively,
‘‘UBSFA Advisers’’); UBS Global Asset
Management (Americas) Inc. (‘‘UBS
Global AM Americas’’); UBS Global
Asset Management (US) Inc. (‘‘UBS
Global AM US’’); and UBS AG and UBS
IB Co-Investment 2001 GP Limited
(‘‘ESC GP’’) (together, other than UBS
Securities, ‘‘Fund Servicing Applicants’’
and together with UBS Securities, the
‘‘Applicants’’).1
Filing Dates: The application was
filed on December 16, 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 January 15, 2009, 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: UBS Securities, 299
Park Avenue, New York, NY 10171;
UBSFS, 1200 Harbor Boulevard,
Weehawken, NJ 07086; UBSFA, UBSFA
Advisers, and UBS Global AM US, 51
West 52nd Street, New York, NY 10019;
UBS Global AM Americas, One North
Wacker Drive, Chicago, IL 60606; and
UBS AG and ESC–GP, 677 Washington
Boulevard, Stamford, CT 06901.
FOR FURTHER INFORMATION CONTACT: John
Yoder, Senior Counsel, at 202–551–6878
or Julia Kim Gilmer, Branch Chief, at
202–551–6821 (Division of Investment
Management, Office of Investment
Company Regulation).
SUPPLEMENTARY INFORMATION: The
following is a temporary order and
summary of the application. The
1 Applicants request that any relief granted
pursuant to the application also apply to any other
company of which either of the Settling Firms is or
may become affiliated persons (together with the
Applicants, the ‘‘Covered Persons’’).
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complete application may be obtained
for a fee at the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549–1520 (tel. 202–
551–5850).
Applicants’ Representations
1. UBS AG is a bank established
under the laws of Switzerland that
directly or through its subsidiaries
provides global wealth management,
securities and retail and commercial
banking services. Each of the Applicants
are either directly or indirectly
controlled by UBS AG. UBS Securities
is a full service investment banking firm
engaged in securities underwriting,
sales and trading, investment banking,
financial advisory services and
investment research services. UBSFS,
UBSFA, UBSFA Advisers and UBS
Global AM Americas are registered as
investment advisers under the
Investment Advisers Act of 1940 and
currently serve as investment advisers
to registered management investment
companies (‘‘Funds’’). UBSFS and UBS
Global AM U.S. are registered as brokerdealers under the Securities Exchange
Act of 1934 (‘‘Exchange Act’’) and act as
principal underwriter to various openend Funds and unit investment trusts
(‘‘UITs’’). UBSFS also serves as a
depositor to UITs. UBS AG and ESC GP
provide investment advisory services to
employees’ securities companies
(‘‘ESCs’’), as defined in section 2(a)(13)
of the Act, which provide investment
opportunities for highly compensated
key employees, officers, directors and
current consultants of UBS AG and its
affiliates.
2. On December 23, 2008, the United
States District Court for the Southern
District of New York entered a
judgment, which included the
Injunction, against the Settling Firms
(‘‘Judgment’’) in a matter brought by the
Commission.2 The Commission alleged
in the complaint (‘‘Complaint’’) that the
Settling Firms violated section 15(c) of
the Exchange Act in connection with
the marketing and sale of auction rate
securities (‘‘ARS’’). The Complaint
alleged that the Settling Firms misled
their customers regarding the
fundamental nature and increasing risks
associated with ARS that the Settling
Firms underwrote, marketed and sold.
The Complaint further alleged that the
Settling Firms misrepresented to their
customers that ARS were safe, highly
liquid investments that were equivalent
to cash or money-market funds. Without
2 Securities and Exchange Commission v. UBS
Securities LLC and UBS Financial Services Inc.,
Judgment as to UBS Securities LLC and UBS
Financial Services Inc., 1:08–CV–10754 (S.D.N.Y.)
(entered Dec. 23, 2008).
VerDate Aug<31>2005
17:41 Dec 30, 2008
Jkt 217001
admitting or denying any of the
allegations in the Complaint, except as
to jurisdiction, the Settling Firms
consented to the entry of the Injunction
and other equitable relief, including
undertakings to take various remedial
actions for the benefit of purchasers of
certain ARS.
Applicants’ Legal Analysis
1. Section 9(a)(2) of the Act, in
relevant part, prohibits a person who
has been enjoined from engaging in or
continuing any conduct or practice in
connection with the purchase or sale of
a security, or in connection with
activities as an underwriter, broker or
dealer, from acting, among other things,
as an investment adviser or depositor of
any registered investment company or a
principal underwriter for any registered
open-end investment company,
registered unit investment trust, or
registered face-amount certificate
company. Section 9(a)(3) of the Act
makes the prohibition in section 9(a)(2)
applicable to a company, any affiliated
person of which has been disqualified
under the provisions of section 9(a)(2).
Section 2(a)(3) of the Act defines
‘‘affiliated person’’ to include, among
others, any person directly or indirectly
controlling, controlled by, or under
common control, with the other person.
Applicants state that the Settling Firms
are affiliated persons of each of the
other Applicants within the meaning of
section 2(a)(3). Applicants state that, as
a result of the Injunction, they would be
subject to the prohibitions of section
9(a).
2. Section 9(c) of the Act provides that
the Commission shall grant an
application for exemption from the
disqualification provisions of section
9(a) of the Act if it is established that
these provisions, as applied to
Applicants, are unduly or
disproportionately severe or that the
conduct of the Applicants has been such
as not to make it against the public
interest or the protection of investors to
grant the exemption. Applicants have
filed an application pursuant to section
9(c) seeking a temporary and permanent
order exempting the Applicants and the
other Covered Persons from the
disqualification provisions of section
9(a).
3. Applicants believe that they meet
the standards for exemption specified in
section 9(c). Applicants state that the
prohibitions of section 9(a) as applied to
them would be unduly and
disproportionately severe and that the
conduct of Applicants has been such as
not to make it against the public interest
or the protection of investors to grant
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80453
the requested exemption from section
9(a).
4. Applicants state that the alleged
conduct giving rise to the Injunction did
not involve any of the Applicants acting
in the capacity of investment adviser,
sub-adviser or depositor to any
registered investment company or in the
capacity of principal underwriter for
any open-end Fund or UIT (‘‘Fund
Service Activities’’). Applicants note
that none of the current or former
directors, officers, or employees of the
Applicants (other than the Settling
Firms) had any involvement in the
conduct alleged in the Complaint,
except as noted in footnote 3.3
Applicants further state that the
personnel at the Settling Firms who
were involved in the violations alleged
in the Complaint have had no and will
not have any future involvement in
Fund Service Activities.
5. Applicants state that the inability of
the Applicants to engage in Fund
Service Activities would result in
potentially severe financial hardships
for the registered investment companies
they serve and the registered investment
companies’ shareholders or unitholders.
Applicants state that they will distribute
written materials, including an offer to
meet in person to discuss the materials,
to the boards of directors of the Funds
(the ‘‘Boards’’), including the directors
who are not ‘‘interested persons,’’ as
defined in section 2(a)(19) of the Act, of
such Funds, and their independent legal
counsel as defined in rule 0–1(a)(6)
under the Act, if any, regarding the
Injunction, any impact on the Funds,
and the application. Applicants state
that they will provide the Boards with
all information concerning the
Injunction and the application that is
necessary for the Funds to fulfill their
disclosure and other obligations under
the federal securities laws.
6. Applicants also state that, if they
were barred from providing Fund
Service Activities to registered
investment companies and ESCs, the
effect on their businesses and
employees would be severe. Applicants
state that they have committed
substantial resources to establish an
3 The Complaint alleges that several senior
executives of the Settling Firms sold all or some of
their personal auction rate securities holdings after
becoming aware of undisclosed risk factors
associated with the auction rate securities program,
including concerns about the Settling Firms’ ability
and willingness to support the auctions. Certain of
these officers or employees may also have been
officers or employees of UBS AG. These officers or
employees have had no involvement in Applicants’
Fund Service Activities and are either no longer
employed by the Settling Firms or UBS AG or are
not and will not have any involvement in
Applicants’ Fund Service Activities.
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80454
Federal Register / Vol. 73, No. 251 / Wednesday, December 31, 2008 / Notices
expertise in providing Fund Service
Activities. Applicants further state that
prohibiting them from providing
advisory and distribution services
would not only adversely affect their
businesses, but would also adversely
affect over 450 employees that are
involved in those activities. Applicants
also state that disqualifying UBS AG
and ESC GP from continuing to provide
investment advisory services to ESCs is
not in the public interest or in
furtherance of the protection of
investors. Because the ESCs have been
formed for the benefit of key employees,
officers, directors and current
consultants of UBS AG and its affiliates,
it would not be consistent with the
purposes of the ESC provisions of the
Act to require another entity not
affiliated with UBS AG to manage the
ESCs. In addition, participants in the
ESCs have subscribed for interests in the
ESCs with the expectation that the ESCs
would be managed by an affiliate of
UBS AG.
7. Applicants state that UBS
Securities and certain other Applicants
have previously received an order under
section 9(c) of the Act.4 Applicants also
state that affiliated persons of UBS
Securities previously have received
exemptions under section 9(c) as the
result of conduct that triggered section
9(a), as described in greater detail in the
application.
Applicants’ Condition
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
Any temporary exemption granted
pursuant to the application shall be
without prejudice to, and shall not limit
the Commission’s rights in any manner
with respect to, any Commission
investigation of, or administrative
proceedings involving or against,
Covered Persons, including without
limitation, the consideration by the
Commission of a permanent exemption
from section 9(a) of the Act requested
pursuant to the application or the
revocation or removal of any temporary
exemptions granted under the Act in
connection with the application.
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Temporary Order
The Commission has considered the
matter and finds that the Applicants
have made the necessary showing to
justify granting a temporary exemption.
Accordingly,
It is hereby ordered, pursuant to
section 9(c) of the Act, that Applicants
4 UBS Securities L.L.C., et al., Investment
Company Act Rel. Nos. 26245 (Oct. 31, 2003)
(notice) and 27047 (Apr. 25, 2005) (order).
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Jkt 217001
and any other Covered Persons are
granted a temporary exemption from the
provisions of section 9(a), solely with
respect to the Injunction, subject to the
condition in the application, from
December 23, 2008, until the
Commission takes final action on their
application for a permanent order.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–31087 Filed 12–30–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28568; 812–13488]
AdvisorShares Investments, LLC and
AdvisorShares Trust; Notice of
Application
December 23, 2008.
AGENCY: Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under section 6(c) of the
Investment Company Act of 1940
(‘‘Act’’) for an exemption from sections
2(a)(32), 5(a)(1) and 22(d) of the Act and
rule 22c–1 under the Act, and under
sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and
(a)(2) of the Act.
Applicants: AdvisorShares
Investments, LLC (the ‘‘Advisor’’) and
AdvisorShares Trust (the ‘‘Trust’’).
Summary of Application: Applicants
request an order that permits: (a) Series
of certain open-end management
investment companies to issue shares
(‘‘Shares’’) redeemable in large
aggregations only (‘‘Creation Units’’); (b)
secondary market transactions in Shares
to occur at negotiated market prices; and
(c) certain affiliated persons of the series
to deposit securities into, and receive
securities from, the series in connection
with the purchase and redemption of
Creation Units.
Filing Dates: The application was
filed on January 31, 2008, and amended
on October 17, 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 requested relief 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
PO 00000
Frm 00094
Fmt 4703
Sfmt 4703
by 5:30 p.m. on January 15, 2009, 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: Noah Hamman, c/o
Morgan, Lewis & Bockius LLP, 1111
Pennsylvania Avenue, NW.,
Washington, DC 20004.
FOR FURTHER INFORMATION CONTACT:
Courtney S. Thornton, Senior Counsel,
or Michael W. Mundt, 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 Desk,
100 F Street, NE., Washington, DC
20549–1520 (tel. 202–551–5850).
Applicants’ Representations
1. The Trust, a statutory trust
established under the laws of Delaware,
is registered with the Commission as an
open-end management investment
company. The Trust is organized as a
series investment company with one
initial series (the ‘‘Initial Fund’’). The
investment objective of the Initial Fund
will be to provide long term growth of
capital. The Initial Fund and all future
series of the Trust (‘‘Future Funds,’’
collectively with the Initial Fund,
‘‘Funds’’) will attempt to achieve their
investment objectives by utilizing active
management strategies based on various
formulas for asset allocation, security
selection, and portfolio construction.
Each Fund will primarily hold shares of
underlying exchange traded funds
(‘‘ETFs’’), as well as shares of certain
exchange traded products that are not
registered as investment companies
under the Act.1 Applicants will only
1 The Funds may invest in exchange traded
products that invest primarily in commodities or
currency, but otherwise operate in a manner similar
to exchange traded products registered under the
Act. In addition, the Funds may also invest in
equity securities or fixed income securities traded
in a U.S. or non-U.S. markets, as well as futures
contracts, options on such futures contracts, swaps,
forward contracts or other derivatives, and shares
of money market mutual funds or other investment
companies, all in accordance with their investment
objectives. The Funds may also invest in equity
securities or fixed income securities traded in
international markets or in a combination of equity,
E:\FR\FM\31DEN1.SGM
31DEN1
]]>Agencies
[Federal Register Volume 73, Number 251 (Wednesday, December 31, 2008)]
[Notices]
[Pages 80452-80454]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-31087]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC--28569; 812-13609]
UBS Securities LLC, et al.; Notice of Application and Temporary
Order
December 23, 2008.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Temporary order and notice of application for a permanent order
under section 9(c) of the Investment Company Act of 1940 (``Act'').
-----------------------------------------------------------------------
Summary of Application: Applicants have received a temporary order
exempting them from section 9(a) of the Act, with respect to an
injunction entered against UBS Securities LLC (``UBS Securities'') and
UBS Financial Services Inc. (``UBSFS,'' and together with UBS
Securities, the ``Settling Firms'') on December 23, 2008 by the United
States District Court for the Southern District of New York
(``Injunction'') until the Commission takes final action on an
application for a permanent order. Applicants also have applied for a
permanent order.
Applicants: UBS Securities; UBSFS; UBS Fund Advisor, L.L.C.
(``UBSFA''); UBS Willow Management, L.L.C. (``UBS Willow''), UBS
Eucalyptus Management, L.L.C., UBS Tamarack Management, L.L.C., UBS
Juniper Management, L.L.C., and UBS Enso Management L.L.C.
(collectively, ``UBSFA Advisers''); UBS Global Asset Management
(Americas) Inc. (``UBS Global AM Americas''); UBS Global Asset
Management (US) Inc. (``UBS Global AM US''); and UBS AG and UBS IB Co-
Investment 2001 GP Limited (``ESC GP'') (together, other than UBS
Securities, ``Fund Servicing Applicants'' and together with UBS
Securities, the ``Applicants'').\1\
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\1\ Applicants request that any relief granted pursuant to the
application also apply to any other company of which either of the
Settling Firms is or may become affiliated persons (together with
the Applicants, the ``Covered Persons'').
---------------------------------------------------------------------------
Filing Dates: The application was filed on December 16, 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 January 15, 2009, 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: UBS Securities, 299
Park Avenue, New York, NY 10171; UBSFS, 1200 Harbor Boulevard,
Weehawken, NJ 07086; UBSFA, UBSFA Advisers, and UBS Global AM US, 51
West 52nd Street, New York, NY 10019; UBS Global AM Americas, One North
Wacker Drive, Chicago, IL 60606; and UBS AG and ESC-GP, 677 Washington
Boulevard, Stamford, CT 06901.
FOR FURTHER INFORMATION CONTACT: John Yoder, Senior Counsel, at 202-
551-6878 or Julia Kim Gilmer, Branch Chief, at 202-551-6821 (Division
of Investment Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a temporary order and
summary of the application. The
[[Page 80453]]
complete application may be obtained for a fee at the Commission's
Public Reference Room, 100 F Street, NE., Washington, DC 20549-1520
(tel. 202-551-5850).
Applicants' Representations
1. UBS AG is a bank established under the laws of Switzerland that
directly or through its subsidiaries provides global wealth management,
securities and retail and commercial banking services. Each of the
Applicants are either directly or indirectly controlled by UBS AG. UBS
Securities is a full service investment banking firm engaged in
securities underwriting, sales and trading, investment banking,
financial advisory services and investment research services. UBSFS,
UBSFA, UBSFA Advisers and UBS Global AM Americas are registered as
investment advisers under the Investment Advisers Act of 1940 and
currently serve as investment advisers to registered management
investment companies (``Funds''). UBSFS and UBS Global AM U.S. are
registered as broker-dealers under the Securities Exchange Act of 1934
(``Exchange Act'') and act as principal underwriter to various open-end
Funds and unit investment trusts (``UITs''). UBSFS also serves as a
depositor to UITs. UBS AG and ESC GP provide investment advisory
services to employees' securities companies (``ESCs''), as defined in
section 2(a)(13) of the Act, which provide investment opportunities for
highly compensated key employees, officers, directors and current
consultants of UBS AG and its affiliates.
2. On December 23, 2008, the United States District Court for the
Southern District of New York entered a judgment, which included the
Injunction, against the Settling Firms (``Judgment'') in a matter
brought by the Commission.\2\ The Commission alleged in the complaint
(``Complaint'') that the Settling Firms violated section 15(c) of the
Exchange Act in connection with the marketing and sale of auction rate
securities (``ARS''). The Complaint alleged that the Settling Firms
misled their customers regarding the fundamental nature and increasing
risks associated with ARS that the Settling Firms underwrote, marketed
and sold. The Complaint further alleged that the Settling Firms
misrepresented to their customers that ARS were safe, highly liquid
investments that were equivalent to cash or money-market funds. Without
admitting or denying any of the allegations in the Complaint, except as
to jurisdiction, the Settling Firms consented to the entry of the
Injunction and other equitable relief, including undertakings to take
various remedial actions for the benefit of purchasers of certain ARS.
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\2\ Securities and Exchange Commission v. UBS Securities LLC and
UBS Financial Services Inc., Judgment as to UBS Securities LLC and
UBS Financial Services Inc., 1:08-CV-10754 (S.D.N.Y.) (entered Dec.
23, 2008).
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Applicants' Legal Analysis
1. Section 9(a)(2) of the Act, in relevant part, prohibits a person
who has been enjoined from engaging in or continuing any conduct or
practice in connection with the purchase or sale of a security, or in
connection with activities as an underwriter, broker or dealer, from
acting, among other things, as an investment adviser or depositor of
any registered investment company or a principal underwriter for any
registered open-end investment company, registered unit investment
trust, or registered face-amount certificate company. Section 9(a)(3)
of the Act makes the prohibition in section 9(a)(2) applicable to a
company, any affiliated person of which has been disqualified under the
provisions of section 9(a)(2). Section 2(a)(3) of the Act defines
``affiliated person'' to include, among others, any person directly or
indirectly controlling, controlled by, or under common control, with
the other person. Applicants state that the Settling Firms are
affiliated persons of each of the other Applicants within the meaning
of section 2(a)(3). Applicants state that, as a result of the
Injunction, they would be subject to the prohibitions of section 9(a).
2. Section 9(c) of the Act provides that the Commission shall grant
an application for exemption from the disqualification provisions of
section 9(a) of the Act if it is established that these provisions, as
applied to Applicants, are unduly or disproportionately severe or that
the conduct of the Applicants has been such as not to make it against
the public interest or the protection of investors to grant the
exemption. Applicants have filed an application pursuant to section
9(c) seeking a temporary and permanent order exempting the Applicants
and the other Covered Persons from the disqualification provisions of
section 9(a).
3. Applicants believe that they meet the standards for exemption
specified in section 9(c). Applicants state that the prohibitions of
section 9(a) as applied to them would be unduly and disproportionately
severe and that the conduct of Applicants has been such as not to make
it against the public interest or the protection of investors to grant
the requested exemption from section 9(a).
4. Applicants state that the alleged conduct giving rise to the
Injunction did not involve any of the Applicants acting in the capacity
of investment adviser, sub-adviser or depositor to any registered
investment company or in the capacity of principal underwriter for any
open-end Fund or UIT (``Fund Service Activities''). Applicants note
that none of the current or former directors, officers, or employees of
the Applicants (other than the Settling Firms) had any involvement in
the conduct alleged in the Complaint, except as noted in footnote 3.\3\
Applicants further state that the personnel at the Settling Firms who
were involved in the violations alleged in the Complaint have had no
and will not have any future involvement in Fund Service Activities.
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\3\ The Complaint alleges that several senior executives of the
Settling Firms sold all or some of their personal auction rate
securities holdings after becoming aware of undisclosed risk factors
associated with the auction rate securities program, including
concerns about the Settling Firms' ability and willingness to
support the auctions. Certain of these officers or employees may
also have been officers or employees of UBS AG. These officers or
employees have had no involvement in Applicants' Fund Service
Activities and are either no longer employed by the Settling Firms
or UBS AG or are not and will not have any involvement in
Applicants' Fund Service Activities.
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5. Applicants state that the inability of the Applicants to engage
in Fund Service Activities would result in potentially severe financial
hardships for the registered investment companies they serve and the
registered investment companies' shareholders or unitholders.
Applicants state that they will distribute written materials, including
an offer to meet in person to discuss the materials, to the boards of
directors of the Funds (the ``Boards''), including the directors who
are not ``interested persons,'' as defined in section 2(a)(19) of the
Act, of such Funds, and their independent legal counsel as defined in
rule 0-1(a)(6) under the Act, if any, regarding the Injunction, any
impact on the Funds, and the application. Applicants state that they
will provide the Boards with all information concerning the Injunction
and the application that is necessary for the Funds to fulfill their
disclosure and other obligations under the federal securities laws.
6. Applicants also state that, if they were barred from providing
Fund Service Activities to registered investment companies and ESCs,
the effect on their businesses and employees would be severe.
Applicants state that they have committed substantial resources to
establish an
[[Page 80454]]
expertise in providing Fund Service Activities. Applicants further
state that prohibiting them from providing advisory and distribution
services would not only adversely affect their businesses, but would
also adversely affect over 450 employees that are involved in those
activities. Applicants also state that disqualifying UBS AG and ESC GP
from continuing to provide investment advisory services to ESCs is not
in the public interest or in furtherance of the protection of
investors. Because the ESCs have been formed for the benefit of key
employees, officers, directors and current consultants of UBS AG and
its affiliates, it would not be consistent with the purposes of the ESC
provisions of the Act to require another entity not affiliated with UBS
AG to manage the ESCs. In addition, participants in the ESCs have
subscribed for interests in the ESCs with the expectation that the ESCs
would be managed by an affiliate of UBS AG.
7. Applicants state that UBS Securities and certain other
Applicants have previously received an order under section 9(c) of the
Act.\4\ Applicants also state that affiliated persons of UBS Securities
previously have received exemptions under section 9(c) as the result of
conduct that triggered section 9(a), as described in greater detail in
the application.
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\4\ UBS Securities L.L.C., et al., Investment Company Act Rel.
Nos. 26245 (Oct. 31, 2003) (notice) and 27047 (Apr. 25, 2005)
(order).
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Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
Any temporary exemption granted pursuant to the application shall
be without prejudice to, and shall not limit the Commission's rights in
any manner with respect to, any Commission investigation of, or
administrative proceedings involving or against, Covered Persons,
including without limitation, the consideration by the Commission of a
permanent exemption from section 9(a) of the Act requested pursuant to
the application or the revocation or removal of any temporary
exemptions granted under the Act in connection with the application.
Temporary Order
The Commission has considered the matter and finds that the
Applicants have made the necessary showing to justify granting a
temporary exemption.
Accordingly,
It is hereby ordered, pursuant to section 9(c) of the Act, that
Applicants and any other Covered Persons are granted a temporary
exemption from the provisions of section 9(a), solely with respect to
the Injunction, subject to the condition in the application, from
December 23, 2008, until the Commission takes final action on their
application for a permanent order.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-31087 Filed 12-30-08; 8:45 am]
BILLING CODE 8011-01-P
