Automated Trading Desk Specialists, LLC, et al., 11617-11619 [E9-5790]
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Federal Register / Vol. 74, No. 51 / Wednesday, March 18, 2009 / Notices
public company will be unable to timely
file a required periodic or transition
report pursuant to the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.) and the Investment Company Act
of 1940 (15 U.S.C. 80a et seq.). If all the
filing conditions of the form are met, the
company is granted an automatic filing
extension. The information required is
filed on occasion and is mandatory. All
information is available to the public for
review. Publicly held companies file
Form 12b–25. Approximately 7,799
registrants file Form 12b–25 and it takes
approximately 2.5 hours per response
for a total of 19,498 burden hours.
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.
Written comments regarding the
above information should be directed to
the following persons: (i) Desk Officer
for the Securities and Exchange
Commission, Office of Information and
Regulatory Affairs, Office of
Management and Budget, Room 10102,
New Executive Office Building,
Washington, DC 20503; and an e-mail to
Shagufta_Ahmed@omb.eop.gov; and (ii)
Charles Boucher, 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: March 11, 2009.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–5768 Filed 3–17–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Upon written request, copies available
from: Securities and Exchange
Commission, Office of Investor
Education and Advocacy,
Washington, DC 20549–0213.
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Extension:
Rules 17Ad–6 and 17Ad–7, OMB Control
No. 3235–0291, SEC File No. 270–151.
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the existing collection of
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information provided for in the
following rules: Rule 17Ad–6 (17 CFR
240.17Ad–6) and Rule 17Ad–7 (17 CFR
240.17Ad–7) under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.) (‘‘Exchange Act’’).
Rule 17Ad–6 under the Exchange Act
requires every registered transfer agent
to make and keep current records about
a variety of information, such as: (1)
Specific operational data regarding the
time taken to perform transfer agent
activities (to ensure compliance with
the minimum performance standards in
Rule 17Ad–2 (17 CFR 240.17Ad–2); (2)
written inquiries and requests by
shareholders and broker-dealers and
response time thereto; (3) resolutions,
contracts or other supporting documents
concerning the appointment or
termination of the transfer agent; (4)
stop orders or notices of adverse claims
to the securities; and (5) all canceled
registered securities certificates.
Rule 17Ad–7 under the Exchange Act
requires each registered transfer agent to
retain the records specified in Rule
17Ad–6 in an easily accessible place for
a period of six months to six years,
depending on the type of record or
document. Rule 17Ad–7 also specifies
the manner in which records may be
maintained using electronic, microfilm,
and microfiche storage methods.
These recordkeeping requirements are
designed to ensure that all registered
transfer agents are maintaining the
records necessary for transfer agents to
monitor and keep control over their own
performance and for the Commission to
adequately examine registered transfer
agents on an historical basis for
compliance with applicable rules.
The Commission estimates that
approximately 600 registered transfer
agents will spend a total of 300,000
hours per year complying with Rules
17Ad–6 and 17Ad–7 (500 hours per year
per transfer agent).
The retention period for the
recordkeeping requirements under Rule
17Ad–6 is six months to one year. In
addition, such records must be retained
for a total of two to six years or for one
year after termination of the transfer
agency, depending on the particular
record or document. The recordkeeping
requirements under Rules 17Ad–6 and
17Ad–7 are mandatory to assist the
Commission and other regulatory
agencies with monitoring transfer agents
and ensuring compliance with the rule.
This rule does not involve the collection
of confidential information.
Please note that 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.
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11617
Comments should be directed to: (i)
Desk Officer for the Securities and
Exchange Commission, Office of
Information and Regulatory Affairs,
Office of Management and Budget,
Room 10102, New Executive Office
Building, Washington, DC 20503 or by
sending an e-mail to:
ShaguftalAhmed@omb.eop.gov; and
(ii) Charles Boucher, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Shirley
Martinson, 6432 General Green Way,
Alexandria, VA 22312 or send an e-mail
to PRAlMailbox@sec.gov. Comments
must be submitted within 30 days of
this notice.
Dated: March 11, 2009.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–5769 Filed 3–17–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–28647; 812–13641]
Automated Trading Desk Specialists,
LLC, et al.; Notice of Application and
Temporary Order
March 12, 2009.
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 Automated Trading
Desk Specialists, LLC (‘‘ATDS’’) on
March 11, 2009 by the United States
District Court for the Southern District
of New York (the ‘‘Injunction’’), until
the Commission takes final action on an
application for a permanent order.
Applicants also have applied for a
permanent order.
APPLICANTS: ATDS, Citigroup Global
Markets Inc. (‘‘CGMI’’), CEFOF GP I
Corp. (‘‘CEFOF’’), CELFOF GP Corp.
(‘‘CELFOF’’), Citibank, N.A.
(‘‘Citibank’’), Citigroup Alternative
Investments LLC (‘‘Citigroup
Alternative’’), Citigroup Investment
Advisory Services Inc. (‘‘Citigroup
Advisory’’), Citigroup Capital Partners I
GP I Corp. (‘‘CCP I’’) and Citigroup
Capital Partners I GP II Corp. (‘‘CCP II,’’
and along with CGMI, CEFOF, CELFOF,
Citibank, Citigroup Alternative,
Citigroup Advisory and CCP I, the
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Federal Register / Vol. 74, No. 51 / Wednesday, March 18, 2009 / Notices
‘‘Fund Servicing Applicants,’’ together
with ATDS, the ‘‘Applicants’’).1
FILING DATE: The application was filed
on March 12, 2009.
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 April 6, 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: ATDS, 401 S. LaSalle
Street, Chicago, IL 60605; CGMI and
Citigroup Advisory, 787 Seventh
Avenue, New York, NY 10019; CEFOF,
CELFOF, CCP I and CCP II, 388
Greenwich Street, New York, NY 10013;
Citibank, 399 Park Avenue, New York,
NY 10043; and Citigroup Alternative,
731 Lexington Avenue, 28th Floor, New
York, NY 10022.
FOR FURTHER INFORMATION CONTACT: Jaea
F. Hahn, Senior Counsel, at (202) 551–
6870, 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 a
summary of the application. The
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).
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Applicants’ Representations
1. Each of the Applicants is an
indirect wholly-owned subsidiary of
Citigroup Inc. (‘‘Citigroup’’), a financial
holding company whose businesses
provide a broad range of financial
services to consumer and corporate
customers. ATDS is a broker-dealer that
was registered with the Commission
under the Securities Exchange Act of
1 Applicants request that any relief granted
pursuant to the application also apply to any other
company of which ATDS is or hereafter may
become an affiliated person within the meaning of
section 2(a)(3) of the Act (together with the
Applicants, the ‘‘Covered Persons’’).
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14:48 Mar 17, 2009
Jkt 217001
1934 (‘‘Exchange Act’’).2 Citigroup
acquired the parent company of ATDS,
ATD Holdings, Inc., in 2007. ATDS has
never served or acted an investment
adviser or depositor to registered
investment companies (‘‘Funds’’),
including unit investment trusts
(‘‘UITs’’) and face amount certificate
companies, or as principal underwriter
to Funds, nor does ATDS have any
present intention of doing so in the
future. ATDS currently has no
operations.
2. CGMI is registered as a brokerdealer under the Exchange Act and
serves as principal underwriter for one
or more registered investment
companies and as the depositor of
certain unit investment trusts (‘‘UITs,’’
together with all other registered
investment companies, ‘‘Funds’’).
Citigroup Alternative and Citigroup
Advisory are registered as investment
advisers under the Investment Advisers
Act of 1940 and serve as investment
advisers for one or more Funds. CEFOF,
CELOF, Citibank, and CCP I and CCP II
(‘‘ESC Advisers’’) serve as investment
advisers to certain employees’ securities
companies within the meaning of
section 2(a)(13) of the Act, which
provide investment opportunities for
certain eligible employees, officers,
directors and persons on retainer of
Citigroup and its affiliates (‘‘ESCs’’ and
included in the term ‘‘Funds’’).3
3. On March 11, 2009, the United
States District Court for the Southern
District of New York entered a final
judgment, which included the
Injunction, against ATDS (‘‘Judgment’’)
in a matter brought by the Commission.4
The Commission alleged in the
complaint (‘‘Complaint’’) that ATDS
violated certain rules of the Chicago
Stock Exchange by engaging in
improper trades for its own proprietary
accounts by trading ahead of, instead of
matching customer orders,
interpositioning and trading ahead of
unexecuted open or cancelled orders.
The Complaint also alleged that ATDS
violated section 17(a) of the Exchange
Act and rule 17a–3 by failing to make
or keep a current blotter containing an
itemized daily record of all purchases
and sales of securities effected by ATDS
for its proprietary accounts. Without
admitting or denying the allegations in
2 ATDS deregistered with the Commission as a
broker-dealer on July 16, 2004.
3 Greenwich Street Employees Fund, LP, et al.,
Investment Company Act Release Nos. 25324 (Dec.
21, 2001) (notice) and 25367 (Jan. 16, 2002) (order).
4 Securities and Exchange Commission v.
Automated Trading Desk Specialists, LLC., Final
Consent Judgment as to Automated Trading Desk
Specialists LLC., 1:09cv1977 (LTS) (S.D.N.Y., Mar.
11, 2009).
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the Complaint, except as to jurisdiction,
ATDS consented to the entry of the
Judgment that included, among other
things, the entry of the Injunction.
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 a 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 UIT 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 ATDS is an
affiliated person of each of the Fund
Servicing Applicants within the
meaning of section 2(a)(3) of the Act.
Applicants state that the entry of the
Injunction results in Applicants being
subject to the disqualification
provisions of section 9(a) of the Act.
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
Applicants’ conduct 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 them and Covered
Persons from the disqualification
provisions of section 9(a) of the Act.
3. Applicants believe they meet the
standard for exemption specified in
section 9(c). Applicants state that the
prohibitions of section 9(a) as applied to
the Fund Servicing Applicants 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 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,
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Federal Register / Vol. 74, No. 51 / Wednesday, March 18, 2009 / Notices
subadviser or depositor to a Fund, or
principal underwriter for any open-end
Fund or UIT and that the conduct
occurred prior to Citigroup’s acquisition
of the parent company of ATDS when
the Fund Servicing Applicants were not
affiliated persons of ATDS. Applicants
also state that none of the current or
former directors, officers, or employees
of the Fund Servicing Applicants had
any involvement in the conduct alleged
in the Complaint. Applicants further
state that the personnel at ATDS who
allegedly participated in the conduct
giving rise to the Injunction have had no
and will not have any future
involvement in providing advisory,
subadvisory or depository services to
Funds, or principal underwriting
services to open-end Funds or UITs and
are no longer employed by ATDS.
5. Applicants state that the inability of
the Fund Servicing Applicants to
continue to serve as investment adviser,
depositor or principal underwriter to
the Funds would result in potentially
severe financial hardships for the Funds
and their shareholders. 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.
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 the
Fund Servicing Applicants 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 the Fund Servicing
Applicants 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 the Fund
Servicing Applicants 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
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investors. Because the ESCs have been
formed for the benefit of certain eligible
employees, 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, the employees of Citigroup
and its affiliates subscribed for interests
in the ESCs 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 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 March 11, 2009,
until the Commission takes final action
on their application for a permanent
order.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9–5790 Filed 3–17–09; 8:45 am]
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11619
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–28645; 812–13639]
E*TRADE Capital Markets LLC, et al.;
Notice of Application and Temporary
Order
March 12, 2009.
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 E*TRADE Capital
Markets LLC (‘‘ETCM’’) on March 11,
2009, 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: ETCM, E*TRADE Financial
Corporation (‘‘ETFC’’), E*TRADE Asset
Management, Inc. (‘‘E*TRADE Asset
Management’’), E*TRADE Securities
LLC (‘‘E*TRADE Securities’’) and
Kobren Insight Management, Inc.
(‘‘Kobren’’) (collectively, other than
ETCM and ETFC, the ‘‘Fund Servicing
Applicants,’’ and together, the
‘‘Applicants’’).1
FILING DATES: The application was filed
on March 4, 2009 and amended on
March 12, 2009.
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 April 6, 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.
1 Applicants request that any relief granted
pursuant to the application also apply to any other
company of which ETCM is or hereafter becomes
an affiliated person within the meaning of section
2(a)(3) of the Act (together with the Applicants, the
‘‘Covered Persons’’).
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]]>Agencies
[Federal Register Volume 74, Number 51 (Wednesday, March 18, 2009)]
[Notices]
[Pages 11617-11619]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-5790]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-28647; 812-13641]
Automated Trading Desk Specialists, LLC, et al.; Notice of
Application and Temporary Order
March 12, 2009.
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 Automated Trading Desk Specialists, LLC
(``ATDS'') on March 11, 2009 by the United States District Court for
the Southern District of New York (the ``Injunction''), until the
Commission takes final action on an application for a permanent order.
Applicants also have applied for a permanent order.
Applicants: ATDS, Citigroup Global Markets Inc. (``CGMI''), CEFOF GP I
Corp. (``CEFOF''), CELFOF GP Corp. (``CELFOF''), Citibank, N.A.
(``Citibank''), Citigroup Alternative Investments LLC (``Citigroup
Alternative''), Citigroup Investment Advisory Services Inc.
(``Citigroup Advisory''), Citigroup Capital Partners I GP I Corp.
(``CCP I'') and Citigroup Capital Partners I GP II Corp. (``CCP II,''
and along with CGMI, CEFOF, CELFOF, Citibank, Citigroup Alternative,
Citigroup Advisory and CCP I, the
[[Page 11618]]
``Fund Servicing Applicants,'' together with ATDS, 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 ATDS is or
hereafter may become an affiliated person within the meaning of
section 2(a)(3) of the Act (together with the Applicants, the
``Covered Persons'').
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Filing Date: The application was filed on March 12, 2009.
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 April 6, 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: ATDS, 401 S.
LaSalle Street, Chicago, IL 60605; CGMI and Citigroup Advisory, 787
Seventh Avenue, New York, NY 10019; CEFOF, CELFOF, CCP I and CCP II,
388 Greenwich Street, New York, NY 10013; Citibank, 399 Park Avenue,
New York, NY 10043; and Citigroup Alternative, 731 Lexington Avenue,
28th Floor, New York, NY 10022.
FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202)
551-6870, 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 a
summary of the application. The 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. Each of the Applicants is an indirect wholly-owned subsidiary of
Citigroup Inc. (``Citigroup''), a financial holding company whose
businesses provide a broad range of financial services to consumer and
corporate customers. ATDS is a broker-dealer that was registered with
the Commission under the Securities Exchange Act of 1934 (``Exchange
Act'').\2\ Citigroup acquired the parent company of ATDS, ATD Holdings,
Inc., in 2007. ATDS has never served or acted an investment adviser or
depositor to registered investment companies (``Funds''), including
unit investment trusts (``UITs'') and face amount certificate
companies, or as principal underwriter to Funds, nor does ATDS have any
present intention of doing so in the future. ATDS currently has no
operations.
---------------------------------------------------------------------------
\2\ ATDS deregistered with the Commission as a broker-dealer on
July 16, 2004.
---------------------------------------------------------------------------
2. CGMI is registered as a broker-dealer under the Exchange Act and
serves as principal underwriter for one or more registered investment
companies and as the depositor of certain unit investment trusts
(``UITs,'' together with all other registered investment companies,
``Funds''). Citigroup Alternative and Citigroup Advisory are registered
as investment advisers under the Investment Advisers Act of 1940 and
serve as investment advisers for one or more Funds. CEFOF, CELOF,
Citibank, and CCP I and CCP II (``ESC Advisers'') serve as investment
advisers to certain employees' securities companies within the meaning
of section 2(a)(13) of the Act, which provide investment opportunities
for certain eligible employees, officers, directors and persons on
retainer of Citigroup and its affiliates (``ESCs'' and included in the
term ``Funds'').\3\
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\3\ Greenwich Street Employees Fund, LP, et al., Investment
Company Act Release Nos. 25324 (Dec. 21, 2001) (notice) and 25367
(Jan. 16, 2002) (order).
---------------------------------------------------------------------------
3. On March 11, 2009, the United States District Court for the
Southern District of New York entered a final judgment, which included
the Injunction, against ATDS (``Judgment'') in a matter brought by the
Commission.\4\ The Commission alleged in the complaint (``Complaint'')
that ATDS violated certain rules of the Chicago Stock Exchange by
engaging in improper trades for its own proprietary accounts by trading
ahead of, instead of matching customer orders, interpositioning and
trading ahead of unexecuted open or cancelled orders. The Complaint
also alleged that ATDS violated section 17(a) of the Exchange Act and
rule 17a-3 by failing to make or keep a current blotter containing an
itemized daily record of all purchases and sales of securities effected
by ATDS for its proprietary accounts. Without admitting or denying the
allegations in the Complaint, except as to jurisdiction, ATDS consented
to the entry of the Judgment that included, among other things, the
entry of the Injunction.
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\4\ Securities and Exchange Commission v. Automated Trading Desk
Specialists, LLC., Final Consent Judgment as to Automated Trading
Desk Specialists LLC., 1:09cv1977 (LTS) (S.D.N.Y., Mar. 11, 2009).
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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 a 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 UIT 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 ATDS is an affiliated person of each of the Fund Servicing
Applicants within the meaning of section 2(a)(3) of the Act. Applicants
state that the entry of the Injunction results in Applicants being
subject to the disqualification provisions of section 9(a) of the Act.
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 Applicants' conduct 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 them and Covered Persons from
the disqualification provisions of section 9(a) of the Act.
3. Applicants believe they meet the standard for exemption
specified in section 9(c). Applicants state that the prohibitions of
section 9(a) as applied to the Fund Servicing Applicants 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 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,
[[Page 11619]]
subadviser or depositor to a Fund, or principal underwriter for any
open-end Fund or UIT and that the conduct occurred prior to Citigroup's
acquisition of the parent company of ATDS when the Fund Servicing
Applicants were not affiliated persons of ATDS. Applicants also state
that none of the current or former directors, officers, or employees of
the Fund Servicing Applicants had any involvement in the conduct
alleged in the Complaint. Applicants further state that the personnel
at ATDS who allegedly participated in the conduct giving rise to the
Injunction have had no and will not have any future involvement in
providing advisory, subadvisory or depository services to Funds, or
principal underwriting services to open-end Funds or UITs and are no
longer employed by ATDS.
5. Applicants state that the inability of the Fund Servicing
Applicants to continue to serve as investment adviser, depositor or
principal underwriter to the Funds would result in potentially severe
financial hardships for the Funds and their shareholders. 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. 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 the Fund Servicing Applicants
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 the Fund Servicing Applicants
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 the Fund Servicing Applicants
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 the benefit of certain eligible
employees, 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, the
employees of Citigroup and its affiliates subscribed for interests in
the ESCs 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 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 March
11, 2009, until the Commission takes final action on their application
for a permanent order.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-5790 Filed 3-17-09; 8:45 am]
BILLING CODE 8011-01-P
