William Blair & Company, L.L.C. and Wilblairco II, L.L.C.; Notice of Application, 19242-19247 [E9-9576]
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Federal Register / Vol. 74, No. 80 / Tuesday, April 28, 2009 / Notices
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the Comptroller of the Currency, the
Board of Governors of the Federal
Reserve System, the Federal Deposit
Insurance Corporation, and the Office of
Thrift Supervision (together, the
‘‘Agencies’’), in May 2006. The
Statement describes the types of internal
controls and risk management
procedures that the Agencies believe are
particularly effective in assisting
financial institutions to identify and
address the reputational, legal, and
other risks associated with elevated risk
complex structured finance
transactions.
The primary purpose of the Statement
is to ensure that these transactions
receive enhanced scrutiny by the
institution and to ensure that the
institution does not participate in illegal
or inappropriate transactions.
The Commission estimates that
approximately 5 registered brokerdealers or investment advisers will
spend an average of approximately 25
hours per year complying with the
Statement. Thus, the total compliance
burden is estimated to be approximately
125 burden-hours per year.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information to be collected; and
(d) ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Comments should be directed to
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: PRA_Mailbox@sec.gov.
Dated: April 20, 2009.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–9554 Filed 4–27–09; 8:45 am]
BILLING CODE 8010–01–P
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SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
28700; File No. 813–00274]
William Blair & Company, L.L.C. and
Wilblairco II, L.L.C.; Notice of
Application
April 22, 2009.
AGENCY: Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under sections 6(b) and 6(e) of the
Investment Company Act of 1940 (the
‘‘Act’’) granting an exemption from all
provisions of the Act, except section 9
and sections 36 through 53 of the Act
and the rules and regulations under
those sections. With respect to sections
17 and 30 of the Act, and the rules and
regulations thereunder, and rule 38a–1
under the Act, the exemption is limited
as set forth in the application.
SUMMARY OF APPLICATION: Applicants
request an order to exempt certain
limited partnerships and other
investment vehicles formed for the
benefit of eligible employees of William
Blair & Company, L.L.C. (‘‘Blair’’) and
its affiliates from certain provisions of
the Act. Each limited partnership or
other investment vehicle will be an
‘‘employees’ securities company’’
within the meaning of section 2(a)(13) of
the Act.
APPLICANTS: Blair and Wilblairco II,
L.L.C. (the ‘‘Initial Company’’).
FILING DATES: The application was filed
on June 8, 2000, and amended on March
11, 2004, May 15, 2007, January 25,
2008, May 27, 2008 and April 10, 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 May 19, 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, 222 West Adams
Street, Chicago, Illinois 60606.
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INFORMATION CONTACT: Laura J. Riegel,
Senior Counsel, at (202) 551–6873, 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 summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. Blair, a Delaware limited liability
company, is an investment firm that
offers investment banking, equity
research, institutional banking,
institutional and private brokerage, asset
management and private capital to
various clients. Blair and its ‘‘affiliates,’’
as defined in rule 12b–2 under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’), are referred to
collectively as ‘‘WB Group’’ and
individually as a ‘‘WB Entity.’’
2. The Initial Company is a Delaware
limited liability company. Blair may
form in the future other investment
vehicles identical in all material
respects to the Initial Fund (other than
specific investment terms, investment
objectives and strategies and form of
organization) (together with the Initial
Company, the ‘‘Companies’’). Interests
in a Company (‘‘Interests’’) will be
offered without registration in reliance
on section 4(2) of the Securities Act of
1933 (the ‘‘1933 Act’’) or Regulation D
under the 1933 Act, and will be issued
in one or more designated series, each
of which may correspond to a
Company’s investment in a particular
transaction, collective investment
vehicle or other investment opportunity
(each, a ‘‘Series’’). Each Company will
be organized as a limited partnership or
other investment vehicle. Each
Company and Series will be an
‘‘employees’ security company’’ within
the meaning of section 2(a)(13) of the
Act.
3. Each Company will operate as a
closed-end management investment
company. Applicants state that they
anticipate that each Company will
operate as a non-diversified vehicle. The
Companies are intended to provide
investment opportunities to Eligible
Employees (as defined below) that are
competitive with those at other financial
services firms and to facilitate the
recruitment and retention of high
caliber professionals. All investors in a
Company are ‘‘Members.’’
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4. Each Company will have a general
partner, manager or other similar entity
(a ‘‘Manager’’) that is a WB Entity that
will manage, operate and control such
Company. The Manager of a Company
will be registered as an investment
adviser under the Investment Advisers
Act of 1940 (the ‘‘Advisers Act’’) or
exempt from such registration. Blair, the
Manager of the Initial Company, is
registered as an investment adviser
under the Advisers Act. The Manager
will be permitted to delegate certain of
its responsibilities regarding the
acquisition, management and
disposition of Company investments, or
other management responsibilities, to a
WB Entity or to a principal, member,
employee, executive, officer or director
of one or more WB Entities, or to a
committee of principals, members,
employees, executives, officers or
directors of one or more WB Entities
(each such committee, a ‘‘Manager
Committee’’). The ultimate
responsibility for a Company’s
operations will remain with the
Manager. The Manager may be entitled
to receive a performance-based fee (a
‘‘carried interest’’) in addition to any
amount allocable to the Manager’s
capital contribution.1
5. Interests in a Company or any
Series will be sold only to ‘‘Qualified
Participants’’ (as defined below). Prior
to offering Interests to a Qualified
Participant, a Manager must reasonably
believe that the Qualified Participant
will be capable of understanding and
evaluating the merits and risks of
participation in a Company or any
Series and that each such individual is
able to bear the economic risk of such
participation and afford a complete loss
of his or her investment.
6. ‘‘Qualified Participants’’ are (a)
current key principals, members,
employees, executives, officers and
directors of the WB Group (collectively,
‘‘Eligible Employees’’), (b) spouses,
parents, children, spouses of children,
brothers, sisters and grandchildren of
Eligible Employees (‘‘Eligible Family
Members’’ and, together with Eligible
Employees, ‘‘Eligible Individuals’’), (c)
trusts or other investment vehicles
established solely for the benefit of
Eligible Employees or Eligible Family
Members (‘‘Eligible Investment
Vehicles’’), and (d) WB Entities. Each
1 A ‘‘carried interest’’ is an allocation to the
Manager based on the net gains of an investment
program. A Manager that is registered under the
Advisers Act may charge a carried interest only if
permitted by rule 205–3 under the Advisers Act.
Any carried interest paid to a Manager that is not
registered under the Advisers Act will be structured
to comply with section 205(b)(3) of the Advisers
Act as if the Company were a business development
company as defined in the Advisers Act.
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Eligible Employee and Eligible Family
Member will be an ‘‘accredited
investor’’ under rule 501(a)(5) or rule
501(a)(6) of Regulation D (‘‘Accredited
Investor’’), except that a maximum of 35
Eligible Employees per Series who are
sophisticated investors but who are not
Accredited Investors may become
Members if each of them falls into one
of the following two categories: (A)
Eligible Employees who (i) have a
graduate degree in business, law or
accounting, (ii) have a minimum of
three years of consulting, investment
management, investment banking,
financial services, legal or similar
business experience, and (iii) had
reportable income from all sources
(including any profit shares or bonus) of
$100,000 in each of the two most recent
years immediately preceding the
Eligible Employee’s admission as a
Member and have a reasonable
expectation of income from all sources
of at least $140,000 in each year in
which the Eligible Employee will be
committed to make investments in the
Series; or (B) Eligible Employees who
are ‘‘knowledgeable employees,’’ as
defined in rule 3c–5 of the Act, of the
Company (with the Company treated as
though it were a ‘‘covered company’’ for
purposes of the rule). An Eligible
Employee who is described in category
(A) above will not be permitted to invest
in any year more than 10% of his or her
income from all sources for the
immediately preceding year in the
aggregate in a Company or relevant
Series of a Company and in all other
Companies in which that investor has
previously invested.
7. An Eligible Individual may
purchase an Interest through an Eligible
Investment Vehicle only if either (i) the
investment vehicle is an ‘‘accredited
investor,’’ as defined in rule 501(a) of
Regulation D under the 1933 Act, or (ii)
the Eligible Employee is the settlor 2 and
principal investment decision-maker
with respect to the investment vehicle.
Any Eligible Investment Vehicles that is
not an accredited investor will be
counted in accordance with Regulation
D under the 1933 Act toward the 35
non-accredited investor limit discussed
above. A WB Entity that acquires an
Interest in a Company will be an
‘‘accredited investor’’ as defined in rule
501(a) of Regulation D under the 1933
Act.
8. The terms of a Company will be
fully disclosed to the Qualified
Participants at the time they are offered
2 If the Eligible Investment Vehicle is an entity
other than a trust, the term ‘‘settlor’’ will be read
to mean a person who created the Eligible
Investment Vehicle, alone or together with others,
and contributed funds to such vehicle.
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the right to subscribe for Interests, at
which time they will be furnished with
a copy of the private placement
memorandum, the operating agreement
(except with respect to Qualified
Participants that are already Members of
the Company and are subscribing for
Interests in a Series thereof) and the
operative documents of the relevant
Series of a Company. A Manager will
send to a Company’s Members an
audited financial statement with respect
to those Series in which the Member
held Interests as soon as practicable
after the end of the Company’s fiscal
year. In addition, the Manager will send
a report to each person who was a
Member at any time during the fiscal
year then ended setting forth the tax
information necessary for the
preparation by the person of his, her or
its federal and state income tax returns.
9. Except for certain involuntary
transfers resulting from the death or
incapacity of a Member, Interests in the
Companies will be non-transferable
except with the express consent of the
Manager and then only to Qualified
Participants. No sales load or similar fee
of any kind will be charged in
connection with the sale of Interests.
10. The operating agreement of the
Initial Company will provide that the
company may have the right, but not the
obligation, to purchase all or any
portion of the Interests of a Member
who ceases to be or is not, a current
principal, member, employee, executive
officer, or director of a WB Entity for
any reason, including but not limited to,
death, bankruptcy, becoming
permanently disabled, removal or
termination (with or without cause),
withdrawal, or resignation (‘‘Terminated
Member’’). Other Companies may offer
Interests with repurchase rights. The
Manager of a Company may repurchase
Interests for cash, in-kind or a
combination of both. With respect to
cash repurchases, the Manager will pay
the fair market value, as defined in the
application, of any repurchased
Interests as of the time the affected
Member is deemed to be a Terminated
Member.
11. The investment objectives and
policies of the Companies will be
disclosed to Qualified Participants
when Interests are offered, and may vary
among the Companies. The Companies
may invest directly or through
investment pools (including registered
investment companies and companies
that rely on section 3(c)(1) or section
3(c)(7) of the Act).3 A Company may
3 Applicants are not requesting any exemption
from any provision of the Act or any rule
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make investments side-by-side with a
WB Entity or a Third Party Fund (as
defined below) in investment funds or
accounts collectively organized for the
primary benefit of investors who are not
affiliated with the WB Group and over
which a WB Entity exercises investment
discretion (‘‘Third Party Funds’’).
12. If a WB Entity makes a loan to a
Company, the loan would bear interest
at a rate no less favorable to the
Company than the rate that could be
obtained on an arm’s length basis. A
Company will not borrow from any
person if the borrowing would cause
any person not named in section
2(a)(13) of the Act to own securities of
the Company (other than short-term
paper). Any borrowing by a Company
will be non-recourse to the Members.
13. A Company will not acquire any
security issued by a registered
investment company if, immediately
after the acquisition, the Company will
own in the aggregate more than 3% of
the outstanding voting stock of the
registered investment company.
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Applicants’ Legal Analysis
1. Section 6(b) of the Act provides, in
part, that the Commission will exempt
employees’ securities companies from
the provisions of the Act to the extent
that the exemption is consistent with
the protection of investors. Section 6(b)
provides that the Commission will
consider, in determining the provisions
of the Act from which the company
should be exempt, the company’s form
of organization and capital structure, the
persons owning and controlling its
securities, the price of the company’s
securities and the amount of any sales
load, how the company’s funds are
invested, and the relationship between
the company and the issuers of the
securities in which it invests. Section
2(a)(13) defines an employees’ securities
company, in relevant part, as any
investment company all of whose
securities (other than short-term paper)
are beneficially owned (a) by current or
former employees, or persons on
retainer, of one or more affiliated
employers, (b) by immediate family
members of such persons, or (c) by such
employer or employers together with
any of the persons in (a) or (b).
2. Section 7 of the Act generally
prohibits investment companies that are
not registered under section 8 of the Act
from selling or redeeming their
securities. Section 6(e) of the Act
provides that, in connection with any
thereunder that may govern the eligibility of a
Company or Series to invest in an entity relying on
section 3(c)(1) or 3(c)(7) of the Act or any such
entity’s status under the Act.
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order exempting an investment
company from any provision of section
7, certain provisions of the Act, as
specified by the Commission, will be
applicable to the company and other
persons dealing with the company as
though the company were registered
under the Act. Applicants request an
order under sections 6(b) and 6(e) of the
Act exempting the Companies from all
provisions of the Act, except section 9
and sections 36 through 53 of the Act
and the rules and regulations under
those sections. With respect to sections
17 and 30 of the Act, and the rules and
regulations thereunder, and rule 38a–1
under the Act, the exemption is limited
as set forth in the application.
3. Section 17(a) generally prohibits
any affiliated person of a registered
investment company, or any affiliated
person of an affiliated person, acting as
principal, from knowingly selling or
purchasing any security or other
property to or from the company.
Applicants request an exemption from
section 17(a) to permit: (A) A WB Entity
or a Third Party Fund (or any affiliated
person of a WB Entity or a Third Party
Fund), acting as principal, to engage in
any transaction directly or indirectly
with any Company or any company
controlled by such Company; (b) a
Company to invest in or engage in any
transaction with any entity, acting as
principal (i) in which such Company,
any company controlled by such
Company or any WB Entity or Third
Party Fund has invested or will invest,
or (ii) with which such Company, any
company controlled by such Company
or any WB Entity or Third Party Fund
is or will otherwise become affiliated;
and (c) a Third Party Investor, acting as
principal, to engage in any transaction
directly or indirectly with a Company or
any company controlled by such
Company. The term ‘‘Third Party
Investor’’ refers to any person or entity
that is not a WB Entity or affiliated with
the WB Group and is a partner or other
investor from a Third Party Fund.
4. Applicants submit that an
exemption from section 17(a) is
consistent with the purposes of the
Companies and the protection of
investors. Applicants state that the
Members in each Company will be
informed of the possible extent of such
Company’s dealings with the WB
Group. Applicants also state that, as
professionals employed in the financial
services businesses, the Members will
be able to understand and evaluate the
attendant risks. Applicants assert that
the community of interest among the
Members in each Company and the WB
Group will serve to reduce the risk of
abuse.
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5. Section 17(d) of the Act and rule
17d–1 under the Act prohibit any
affiliated person of a registered
investment company, or any affiliated
person of such person, acting as
principal, from participating in any joint
arrangement with the company unless
authorized by the Commission.
Applicants request relief to permit
affiliated persons of each Company, or
affiliated persons of any of these
persons to participate in, or effect any
transaction in connection with, any
joint enterprise or other joint
arrangement or profit-sharing plan in
which the Company or a company
controlled by such Company is a
participant.
6. Applicants assert that compliance
with section 17(d) would cause a
Company to forego investment
opportunities simply because the
Members, the Manager or any other
affiliated person of the Company (or any
affiliate of such a person) had made a
similar investment. Applicants also
submit that the types of investment
opportunities considered by a Company
often require each participant to make
available funds in an amount that may
be substantially greater than may be
available to such Company alone.
Applicants contend that, as a result, the
only way in which a Company may be
able to participate in such opportunities
may be to co-invest with other persons,
including its affiliates. Applicants note
that each Company will be primarily
organized for the benefit of Eligible
Employees as an incentive for them to
remain with the WB Group and for the
generation and maintenance of
goodwill. Applicants assert that the
flexibility to structure co-investments
and joint investments in the context of
employees’ securities companies will
not involve abuses of the type section
17(d) and rule 17d–1 were designed to
prevent.
7. Co-investments with a Third Party
Fund will not be subject to condition 3
below. Applicants believe it is
important that the interests of the Third
Party Fund take priority over the
interests of the Companies, and that the
Third Party Fund not be burdened or
otherwise affected by activities of the
Companies. In addition, applicants
assert that the relationship of a
Company to a Third Party Fund is
fundamentally different from such
Company’s relationship to the WB
Group. Applicants contend that the
focus of, and the rationale for, the
protections contained in the requested
relief are to protect the Companies from
any overreaching by the WB Group in
the employer/employee context,
whereas the same concerns are not
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present with respect to the Companies
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vis-a-vis the investors of a Third Party
Fund.
8. Section 17(e) of the Act and rule
17e–1 under the Act limit the
compensation an affiliated person may
receive when acting as agent or broker
for a registered investment company.
Applicants request an exemption from
section 17(e) to permit a WB Entity
including the Manager), acting as an
agent or broker, to receive placement
fees, advisory fees, or other
compensation from a Company in
connection with the purchase or sale by
the Company of securities, provided
that such placement fees, advisory fees
or other compensation can be deemed
‘‘usual and customary.’’ Applicants state
that for purposes of the application, fees
or other compensation that are charged
or received by a WB Entity will be
deemed ‘‘usual and customary’’ only if
(a) the Company is purchasing or selling
securities alongside other unaffiliated
third parties, including Third Party
Funds, (b) the fees or other
compensation being charged to the
Company are also being charged to the
unaffiliated third parties, including
Third Party Funds, and (c) the amount
of securities being purchased or sold by
the Company does not exceed 50% of
the total amount of securities being
purchased or sold by the Company and
the unaffiliated third parties, including
Third Party Funds. Applicants assert
that, because the WB Group does not
wish to appear to be favoring the
Companies, compliance with section
17(e) would prevent a Company from
participating in transactions where the
Company is being charged lower fees
than unaffiliated third parties.
Applicants assert that the fees or other
compensation paid by a Company to a
WB Entity are those established at arm’s
length with unaffiliated third parties.
9. Rule 17e–1(b) under the Act
requires that a majority of directors who
are not ‘‘interested persons’’ (as defined
in section 2(a)(19) of the Act) take
actions and make approvals regarding
commissions, fees, or other
remuneration. Rule 17e–1(c) under the
Act requires each Company to comply
with the fund governance standards
defined in rule 0–1(a)(7) under the Act.
Applicants request an exemption from
rule 17e–1 to permit each Company to
comply with the rule without having a
majority of the members of the
governing body of the Manager or, the
Manager Committee, as applicable, who
are not interested persons take actions
and make determinations as set forth in
paragraph (b) of the rule, and without
having to satisfy the standards as
required by paragraph (c) of the rule.
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Applicants state that because all the
members of the governing body of the
Manager of a Company or, the Manager
Committee, as applicable, will be
affiliated persons, without the relief
requested, a Company could not comply
with rule 17e–1. Applicants state that
each Company will comply with rule
17e–1 by having a majority of the
members of the governing body of the
Manager take such actions and make
such approvals as are set forth in rule
17e–1. Applicants state that each
Company will comply with all other
requirements of rule 17e–1.
10. Section 17(f) of the Act designates
the entities that may act as investment
company custodians, and rule 17f–1
under the Act imposes certain
requirements when the custodian is a
member of a national securities
exchange. Applicants request an
exemption from section 17(f) and rule
17f–1 to permit a WB Entity to act as
custodian without a written contract.
Applicants also request an exemption
from the rule 17f–1(b)(4) requirement
that an independent accountant
periodically verify the assets held by the
custodian. Applicants state that, given
the community of interest of all the
parties involved and the existing
requirement for an independent audit,
compliance with this requirement
would be unnecessary. Each Company
will otherwise comply with all the
provisions of rule 17f–1.
11. Applicants also request an
exemption from rule 17f–2 to permit the
following exceptions from the
requirements of rule 17f–2: (A) A
Company’s investments may be kept in
the locked files of the Manager for
purposes of paragraph (b) of the rule; (b)
for purposes of paragraph (d) of the rule,
(i) employees of the Manager will be
deemed to be employees of the
Companies, (ii) officers or managers of
the Manager of a Company will be
deemed to be officers of the Company,
and (iii) the Manager or, where
applicable, the Manager Committee, of a
Company will be deemed to be the
board of directors of the Company; and
(c) in place of the verification procedure
under paragraph (f) of the rule,
verification will be effected quarterly by
two employees of the Manager. With
respect to certain Companies, applicants
expect that many of their investments
will be evidenced only by partnership
agreements, participation agreements or
similar documents, rather than by
negotiable certificates that could be
misappropriated. Applicants believe
that these instruments are most suitably
kept in the files of the Manager, where
they can be referred to as necessary.
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12. Section 17(g) of the Act and rule
17g–1 under the Act generally require
the bonding of officers and employees of
a registered investment company who
have access to its securities or funds.
Rule 17g–1 requires that a majority of
directors who are not interested persons
take certain actions and give certain
approvals relating to fidelity bonding.
Applicants state that, because the
Manager of each Company, or the
Manager Committee, as applicable, will
be interested persons, a Company could
not comply with rule 17g–1 without the
requested relief. Specifically, each
Company will comply with rule 17g–1
by having the Manager of the Company,
or the Manager Committee, as
applicable, take such actions and make
such approvals as are set forth in rule
17g–1. Applicants also request an
exemption from the requirements of
paragraph (g) of rule 17g–1 (relating to
the filing of copies of fidelity bonds and
related information with the
Commission and the provision of
notices to the board of directors),
paragraph (h) of rule 17g–1 (relating to
the appointment of a person to make the
filings and provide the notices required
by paragraph (g)), and an exemption
from the requirements of paragraph
(j)(3) of rule 17g–1 that the Companies
comply with the fund governance
standards defined in rule 0–1(a)(7).
Applicants state that each Company will
comply with all other requirements of
rule 17g–1.
13. Section 17(j) of the Act and
paragraph (b) of rule 17j–1 under the
Act make it unlawful for certain
enumerated persons to engage in
fraudulent or deceptive practices in
connection with the purchase or sale of
a security held or to be acquired by a
registered investment company. Rule
17j–1 also requires that every registered
investment company adopt a written
code of ethics and that every access
person of a registered investment
company report personal securities
transactions. Applicants request an
exemption from the provisions of rule
17j–1, except for the anti-fraud
provisions of paragraph (b), because
they are unnecessarily burdensome as
applied to the Companies.
14. Applicants request an exemption
from the requirements in sections 30(a),
30(b), and 30(e) of the Act, and the rules
under those sections, that registered
investment companies prepare and file
with the Commission and mail to their
shareholders certain periodic reports
and financial statements. Applicants
contend that the forms prescribed by the
Commission for periodic reports have
little relevance to the Companies and
would entail administrative and legal
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costs that outweigh any benefit to the
Members. Applicants request exemptive
relief to the extent necessary to permit
each Company to report annually to its
Members. Applicants also request an
exemption from section 30(h) of the Act
to the extent necessary to exempt the
Manager of each Company, members of
the Manager, and any other persons who
may be deemed to be members of a
Manager Committee for a Company from
filing Forms 3, 4, and 5 under section
16(a) of the Exchange Act with respect
to their ownership of Interests in the
Company. Applicants assert that,
because there will be no trading market
and the transfers of Interests will be
severely restricted, these filings are
unnecessary for the protection of
investors and burdensome to those
required to make them.
15. Rule 38a–1 requires investment
companies to adopt, implement and
periodically review written policies
reasonably designed to prevent violation
of the federal securities law and to
appoint a chief compliance officer. Each
Company will comply with rule 38a–
1(a), (c) and (d), except that (a) because
the Company does not have a board of
directors, the governing body of the
Manager of each Company will fulfill
the responsibilities assigned to the
Company’s board of directors under the
rule, (b) since the governing body of the
Manager does not have any
disinterested members, approval by a
majority of disinterested board members
required by rule 38a–1 will not be
obtained, and (c) because the governing
body of the Manager does not have any
disinterested members, the Company
will comply with the requirement in
rule 38a–1(a)(4)(iv) that the chief
compliance officer meet with the
independent board members by having
the chief compliance officer meet with
the governing body of the Manager as
constituted.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Each proposed transaction to which
a Company is a party otherwise
prohibited by section 17(a) or section
17(d) of the Act and rule 17d–1 under
the Act (the ‘‘Section 17 Transactions’’)
will be effected only if the Manager
determines that: (a) The terms of the
Section 17 Transaction, including the
consideration to be paid or received, are
fair and reasonable to the Members of
the Company and do not involve
overreaching of the Company or its
Members on the part of any person
concerned and (b) the Section 17
Transaction is consistent with the
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15:33 Apr 27, 2009
Jkt 217001
interests of the Members, the Company’s
organizational documents and the
Company’s reports to its Members.
In addition, the Manager of the
Company will record and preserve a
description of all Section 17
Transactions, the Manager’s findings,
the information or materials upon
which the findings are based and the
basis therefor. All such records will be
maintained for the life of the Company
and at least six years thereafter and will
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. The Manager of each Company will
adopt, and periodically review and
update, procedures designed to ensure
that reasonable inquiry is made, prior to
the consummation of any Section 17
Transaction, with respect to the possible
involvement in the transaction of any
affiliated person or promoter of or
principal underwriter for the Company,
or any affiliated person of such person,
promoter or principal underwriter.
3. The Manager of each Company will
not invest the funds of the Company in
any investment in which an ‘‘Affiliated
Co-Investor’’ (as defined below) has
acquired or proposes to acquire the
same class of securities of the same
issuer and where the investment
involves a joint enterprise or other joint
arrangement within the meaning of rule
17d–1 in which the Company and the
Affiliated Co-Investor are participants,
unless any such Affiliated Co-Investor,
prior to disposing of all or part of its
investment, (a) gives the Manager
sufficient, but not less than one day’s
notice of its intent to dispose of its
investment, and (b) refrains from
disposing of its investment unless the
Company has the opportunity to dispose
of its investment prior to or
concurrently with, on the same terms as,
and on a pro rata basis with, the
Affiliated Co-Investor. The term
‘‘Affiliated Co-Investor’’ with respect to
any Company means any person who is:
(A) An ‘‘affiliated person’’ (as defined in
section 2(a)(3) of the Act) of the
Company (other than a Third Party
Fund); (b) a WB Entity; (c) an officer,
director or employee of the WB Group;
(d) an investment vehicle offered,
sponsored or managed by a WB Entity
(other than a Third Party Fund); or (e)
an entity (other than a Third Party
Fund) in which a WB Entity acts as a
general partner or has a similar capacity
to control the sale or other disposition
of the entity’s securities. The
restrictions contained in this condition,
however, shall not be deemed to limit
or prevent the disposition of an
PO 00000
Frm 00054
Fmt 4703
Sfmt 4703
investment by an Affiliated Co-Investor:
(a) To its direct or indirect wholly
owned subsidiary, to any company (a
‘‘Parent’’) of which the Affiliated CoInvestor is a direct or indirect whollyowned subsidiary or to a direct or
indirect wholly-owned subsidiary of its
Parent; (b) to immediate family
members of the Affiliated Co-Investor or
a trust or other investment vehicle
established for any such family member;
or (c) when the investment is comprised
of securities that are (i) listed on a
national securities exchange registered
under section 6 of the Exchange Act; (ii)
NMS stocks, pursuant to section
11A(a)(2) of the Exchange Act and rule
600(a) of Regulation NMS thereunder;
(iii) government securities as defined in
section 2(a)(16) of the Act, or (iv) listed
or traded on any foreign securities
exchange or board of trade that satisfies
regulatory requirements under the law
of the jurisdiction in which such foreign
securities exchange or board of trade is
organized similar to those that apply to
a national securities exchange or a
national market system for securities.
4. Each Company and its Manager
will maintain and preserve, for the life
of each such Company and at least six
years thereafter, such accounts, books,
and other documents constituting the
record forming the basis for the audited
financial statements that are to be
provided to the Members of such
Company, and each annual report of the
Company required to be sent to the
Members, and agree that all such
records will be subject to examination
by the Commission and its staff. Each
Company will preserve the accounts,
books and other documents required to
be maintained in an easily accessible
place for the first two years.
5. The Manager of each Company will
send to each Member having an Interest
in the Company at any time during the
fiscal year then ended, audited financial
statements with respect to those Series
in which the Member held Interests. At
the end of each fiscal year, the Manager
will make or cause to be made a
valuation of all of the assets of the
Company as of such fiscal year end in
a manner consistent with customary
practice with respect to the valuation of
assets of the kind held by the Company.
In addition, within 120 days after the
end of each fiscal year of the Company,
if possible, or as soon as practicable
thereafter, the Manager will send a
report to each person who was a
Member at any time during the fiscal
year then ended, setting forth such tax
information as shall be necessary for the
preparation by the Member of his, her
or its federal and state income tax
returns and a report of the investment
E:\FR\FM\28APN1.SGM
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Federal Register / Vol. 74, No. 80 / Tuesday, April 28, 2009 / Notices
activities of the Company during that
fiscal year.
6. If any purchase or sale is made by
a Company from or to an entity
affiliated with the Company by reason
of an officer, director or employee of a
WB Entity (a) serving as an officer,
director, general partner or investment
adviser to the entity, or (b) having a 5%
or more interest in the entity, such
individual will not participate in the
Manager’s determination of whether or
not to effect the purchase or sale.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9–9576 Filed 4–27–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59795; File No. SR–
NASDAQ–2006–064]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Approving Proposed Rule Change as
Modified by Amendments No. 2 and 3
Thereto To Modify the Fee for
Connecting to a Nasdaq Data Center
Over the Internet
April 20, 2009.
On December 22, 2006, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’)1 and Rule 19b–4
thereunder,2 a proposed rule change to
modify the fee for connecting to a
Nasdaq data center over the Internet. On
January 19, 2007, Nasdaq filed
Amendment No. 1 to the proposed rule
change. On February 22, 2007, Nasdaq
filed Amendment No. 2 to the proposed
rule change.3 The proposed rule change,
as amended, was published for
comment in the Federal Register on
March 21, 2007.4 On April 6, 2009,
Nasdaq filed Amendment No. 3 to the
proposed rule change.5 The Commission
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Amendment No. 2 replaced and superseded the
original filing and Amendment No. 1 in their
entirety.
4 See Securities Exchange Act Release No. 55457
(March 13, 2007), 72 FR 13328 (‘‘Notice’’).
5 In Amendment No. 3, Nasdaq made certain
technical changes to the filing to reflect changes to
the Nasdaq rules since filing Amendment No. 2. In
addition, Nasdaq clarified that the only market data
product currently delivered via Internet ports is its
TotalView ITCH data product. This technical
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2 17
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15:33 Apr 27, 2009
Jkt 217001
received no comment letters on the
proposal. This order approves the
proposed rule change as modified by
Amendments No. 2 and 3.
Nasdaq proposes to increase its fees
for Internet ports that deliver market
data. Following the consolidation of
Nasdaq’s three order books and
corresponding matching engines—INET,
Brut, and SuperMontage—into a single
book (‘‘SingleBook’’) within the Nasdaq
Market Center (‘‘NMC’’), Nasdaq users
retained the ability to connect with the
NMC using the legacy access protocols
of all three systems. Access to the NMC
via secure Internet connectivity is one of
several options available to INET
protocol users for entering orders and
receiving market data. Other NMC
connectivity options include extranet
connectivity, where a user contracts
directly with a third-party extranet
provider, and private line connectivity,
where a user leases a circuit directly
from a third-party provider.
Currently, Nasdaq charges INET
protocol users an additional $200 (in
addition to the established charges for
port pairs) for each port used to connect
to a Nasdaq data center over the Internet
because making such ports available
requires Nasdaq to procure and
maintain appropriate
telecommunications circuits connecting
its data centers to the points-of-presence
of an Internet service provider. By
contrast, in the case of extranet and
private circuit connections, Nasdaq is
not responsible for the outside
telecommunications circuits.
In the Notice, Nasdaq stated that since
the introduction of SingleBook, the
volume of market data delivered from
Nasdaq to subscribers increased from a
peak of approximately 5Mbs at the end
of October of 2006 to a peak of
approximately 25Mbs as of the date of
filing of the proposal. Nasdaq stated that
in order to continue to adequately
support Internet market data
connections, Nasdaq expanded its
available Internet bandwidth. In light of
the expanded Internet bandwidth
requirements, Nasdaq proposes to
increase its Internet port fee from $200
to $600 per Internet port that is used to
deliver market data. The additional
Internet port fee with respect to Internet
ports used for order entry will remain at
the current $200 level.
The Commission has reviewed
carefully the proposed rule change and
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
amendment did not require notice and comment, as
it did not affect the substance of the rule filing.
PO 00000
Frm 00055
Fmt 4703
Sfmt 4703
19247
securities exchange 6 and, in particular,
Section 6(b)(4) of the Act,7 which
requires, among other things, that
Nasdaq’s rules provide for the equitable
allocation of reasonable dues, fees and
other charges among members and
issuers and other persons using any
facility or system which Nasdaq
operates or controls. The Commission
also finds that the proposed rule change
is consistent with Section 6(b)(5) of the
Act,8 which requires, among other
things, that Nasdaq’s rules are not
designed to unfairly discriminate
between customers, issuers, brokers or
dealers.
Nasdaq proposes to increase its
Internet port fee from $200 to $600 per
Internet port that is used to deliver noncore market data. The proposed fee will
apply equally to all market participants
that use an Internet port to receive
market data from Nasdaq.
The Commission believes that the
proposal meets the criteria, formulated
by the Commission 9 in connection with
the petition filed by NetCoalition,10 for
approval of proposed rule changes
concerning the distribution of non-core
market data.11 In its order issued in
connection with the NetCoalition
petition, the Commission stated that
‘‘reliance on competitive forces is the
most appropriate and effective means to
assess whether the terms for the
distribution of non-core data are
equitable, fair and reasonable, and not
unreasonably discriminatory.’’12 As
such, the ‘‘existence of significant
competition provides a substantial basis
for finding that the terms of an
exchange’s fee proposal are equitable,
fair, reasonable, and not unreasonably
or unfairly discriminatory.’’13 If an
exchange ‘‘was subject to significant
competitive forces in setting the terms
of a proposal,’’ the proposal will be
approved unless the Commission
determines that ‘‘there is a substantial
countervailing basis to find that the
6 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
7 15 U.S.C. 78f(b)(4).
8 15 U.S.C. 78f(b)(5).
9 See Securities Exchange Act Release No. 59039
(December 2, 2008), 73 FR 74770 (December 9,
2008) (SR–NYSEArca-2006–21).
10 See Securities Exchange Act Release No. 55011
(December 27, 2006) (order granting petition for
review of SR–NYSEArca-2006–21).
11 The Commission’s order distinguishes between
core market data, which is defined as ‘‘the bestpriced quotations and last sale information of all
markets in U.S.-listed equities that Commission
rules require to be consolidated and distributed to
the public by a single central processor,’’ and noncore market data. See 73 FR at 74771.
12 Id. at 74781.
13 Id. at 74781–82.
E:\FR\FM\28APN1.SGM
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]]>Agencies
[Federal Register Volume 74, Number 80 (Tuesday, April 28, 2009)]
[Notices]
[Pages 19242-19247]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-9576]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 28700; File No. 813-00274]
William Blair & Company, L.L.C. and Wilblairco II, L.L.C.; Notice
of Application
April 22, 2009.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under sections 6(b) and 6(e)
of the Investment Company Act of 1940 (the ``Act'') granting an
exemption from all provisions of the Act, except section 9 and sections
36 through 53 of the Act and the rules and regulations under those
sections. With respect to sections 17 and 30 of the Act, and the rules
and regulations thereunder, and rule 38a-1 under the Act, the exemption
is limited as set forth in the application.
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Summary of Application: Applicants request an order to exempt certain
limited partnerships and other investment vehicles formed for the
benefit of eligible employees of William Blair & Company, L.L.C.
(``Blair'') and its affiliates from certain provisions of the Act. Each
limited partnership or other investment vehicle will be an ``employees'
securities company'' within the meaning of section 2(a)(13) of the Act.
Applicants: Blair and Wilblairco II, L.L.C. (the ``Initial Company'').
Filing Dates: The application was filed on June 8, 2000, and amended on
March 11, 2004, May 15, 2007, January 25, 2008, May 27, 2008 and April
10, 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 May 19, 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, 222 West Adams
Street, Chicago, Illinois 60606.
Information Contact: Laura J. Riegel, Senior Counsel, at (202) 551-
6873, 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 summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at https://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. Blair, a Delaware limited liability company, is an investment
firm that offers investment banking, equity research, institutional
banking, institutional and private brokerage, asset management and
private capital to various clients. Blair and its ``affiliates,'' as
defined in rule 12b-2 under the Securities Exchange Act of 1934
(``Exchange Act''), are referred to collectively as ``WB Group'' and
individually as a ``WB Entity.''
2. The Initial Company is a Delaware limited liability company.
Blair may form in the future other investment vehicles identical in all
material respects to the Initial Fund (other than specific investment
terms, investment objectives and strategies and form of organization)
(together with the Initial Company, the ``Companies''). Interests in a
Company (``Interests'') will be offered without registration in
reliance on section 4(2) of the Securities Act of 1933 (the ``1933
Act'') or Regulation D under the 1933 Act, and will be issued in one or
more designated series, each of which may correspond to a Company's
investment in a particular transaction, collective investment vehicle
or other investment opportunity (each, a ``Series''). Each Company will
be organized as a limited partnership or other investment vehicle. Each
Company and Series will be an ``employees' security company'' within
the meaning of section 2(a)(13) of the Act.
3. Each Company will operate as a closed-end management investment
company. Applicants state that they anticipate that each Company will
operate as a non-diversified vehicle. The Companies are intended to
provide investment opportunities to Eligible Employees (as defined
below) that are competitive with those at other financial services
firms and to facilitate the recruitment and retention of high caliber
professionals. All investors in a Company are ``Members.''
[[Page 19243]]
4. Each Company will have a general partner, manager or other
similar entity (a ``Manager'') that is a WB Entity that will manage,
operate and control such Company. The Manager of a Company will be
registered as an investment adviser under the Investment Advisers Act
of 1940 (the ``Advisers Act'') or exempt from such registration. Blair,
the Manager of the Initial Company, is registered as an investment
adviser under the Advisers Act. The Manager will be permitted to
delegate certain of its responsibilities regarding the acquisition,
management and disposition of Company investments, or other management
responsibilities, to a WB Entity or to a principal, member, employee,
executive, officer or director of one or more WB Entities, or to a
committee of principals, members, employees, executives, officers or
directors of one or more WB Entities (each such committee, a ``Manager
Committee''). The ultimate responsibility for a Company's operations
will remain with the Manager. The Manager may be entitled to receive a
performance-based fee (a ``carried interest'') in addition to any
amount allocable to the Manager's capital contribution.\1\
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\1\ A ``carried interest'' is an allocation to the Manager based
on the net gains of an investment program. A Manager that is
registered under the Advisers Act may charge a carried interest only
if permitted by rule 205-3 under the Advisers Act. Any carried
interest paid to a Manager that is not registered under the Advisers
Act will be structured to comply with section 205(b)(3) of the
Advisers Act as if the Company were a business development company
as defined in the Advisers Act.
---------------------------------------------------------------------------
5. Interests in a Company or any Series will be sold only to
``Qualified Participants'' (as defined below). Prior to offering
Interests to a Qualified Participant, a Manager must reasonably believe
that the Qualified Participant will be capable of understanding and
evaluating the merits and risks of participation in a Company or any
Series and that each such individual is able to bear the economic risk
of such participation and afford a complete loss of his or her
investment.
6. ``Qualified Participants'' are (a) current key principals,
members, employees, executives, officers and directors of the WB Group
(collectively, ``Eligible Employees''), (b) spouses, parents, children,
spouses of children, brothers, sisters and grandchildren of Eligible
Employees (``Eligible Family Members'' and, together with Eligible
Employees, ``Eligible Individuals''), (c) trusts or other investment
vehicles established solely for the benefit of Eligible Employees or
Eligible Family Members (``Eligible Investment Vehicles''), and (d) WB
Entities. Each Eligible Employee and Eligible Family Member will be an
``accredited investor'' under rule 501(a)(5) or rule 501(a)(6) of
Regulation D (``Accredited Investor''), except that a maximum of 35
Eligible Employees per Series who are sophisticated investors but who
are not Accredited Investors may become Members if each of them falls
into one of the following two categories: (A) Eligible Employees who
(i) have a graduate degree in business, law or accounting, (ii) have a
minimum of three years of consulting, investment management, investment
banking, financial services, legal or similar business experience, and
(iii) had reportable income from all sources (including any profit
shares or bonus) of $100,000 in each of the two most recent years
immediately preceding the Eligible Employee's admission as a Member and
have a reasonable expectation of income from all sources of at least
$140,000 in each year in which the Eligible Employee will be committed
to make investments in the Series; or (B) Eligible Employees who are
``knowledgeable employees,'' as defined in rule 3c-5 of the Act, of the
Company (with the Company treated as though it were a ``covered
company'' for purposes of the rule). An Eligible Employee who is
described in category (A) above will not be permitted to invest in any
year more than 10% of his or her income from all sources for the
immediately preceding year in the aggregate in a Company or relevant
Series of a Company and in all other Companies in which that investor
has previously invested.
7. An Eligible Individual may purchase an Interest through an
Eligible Investment Vehicle only if either (i) the investment vehicle
is an ``accredited investor,'' as defined in rule 501(a) of Regulation
D under the 1933 Act, or (ii) the Eligible Employee is the settlor \2\
and principal investment decision-maker with respect to the investment
vehicle. Any Eligible Investment Vehicles that is not an accredited
investor will be counted in accordance with Regulation D under the 1933
Act toward the 35 non-accredited investor limit discussed above. A WB
Entity that acquires an Interest in a Company will be an ``accredited
investor'' as defined in rule 501(a) of Regulation D under the 1933
Act.
---------------------------------------------------------------------------
\2\ If the Eligible Investment Vehicle is an entity other than a
trust, the term ``settlor'' will be read to mean a person who
created the Eligible Investment Vehicle, alone or together with
others, and contributed funds to such vehicle.
---------------------------------------------------------------------------
8. The terms of a Company will be fully disclosed to the Qualified
Participants at the time they are offered the right to subscribe for
Interests, at which time they will be furnished with a copy of the
private placement memorandum, the operating agreement (except with
respect to Qualified Participants that are already Members of the
Company and are subscribing for Interests in a Series thereof) and the
operative documents of the relevant Series of a Company. A Manager will
send to a Company's Members an audited financial statement with respect
to those Series in which the Member held Interests as soon as
practicable after the end of the Company's fiscal year. In addition,
the Manager will send a report to each person who was a Member at any
time during the fiscal year then ended setting forth the tax
information necessary for the preparation by the person of his, her or
its federal and state income tax returns.
9. Except for certain involuntary transfers resulting from the
death or incapacity of a Member, Interests in the Companies will be
non-transferable except with the express consent of the Manager and
then only to Qualified Participants. No sales load or similar fee of
any kind will be charged in connection with the sale of Interests.
10. The operating agreement of the Initial Company will provide
that the company may have the right, but not the obligation, to
purchase all or any portion of the Interests of a Member who ceases to
be or is not, a current principal, member, employee, executive officer,
or director of a WB Entity for any reason, including but not limited
to, death, bankruptcy, becoming permanently disabled, removal or
termination (with or without cause), withdrawal, or resignation
(``Terminated Member''). Other Companies may offer Interests with
repurchase rights. The Manager of a Company may repurchase Interests
for cash, in-kind or a combination of both. With respect to cash
repurchases, the Manager will pay the fair market value, as defined in
the application, of any repurchased Interests as of the time the
affected Member is deemed to be a Terminated Member.
11. The investment objectives and policies of the Companies will be
disclosed to Qualified Participants when Interests are offered, and may
vary among the Companies. The Companies may invest directly or through
investment pools (including registered investment companies and
companies that rely on section 3(c)(1) or section 3(c)(7) of the
Act).\3\ A Company may
[[Page 19244]]
make investments side-by-side with a WB Entity or a Third Party Fund
(as defined below) in investment funds or accounts collectively
organized for the primary benefit of investors who are not affiliated
with the WB Group and over which a WB Entity exercises investment
discretion (``Third Party Funds'').
---------------------------------------------------------------------------
\3\ Applicants are not requesting any exemption from any
provision of the Act or any rule thereunder that may govern the
eligibility of a Company or Series to invest in an entity relying on
section 3(c)(1) or 3(c)(7) of the Act or any such entity's status
under the Act.
---------------------------------------------------------------------------
12. If a WB Entity makes a loan to a Company, the loan would bear
interest at a rate no less favorable to the Company than the rate that
could be obtained on an arm's length basis. A Company will not borrow
from any person if the borrowing would cause any person not named in
section 2(a)(13) of the Act to own securities of the Company (other
than short-term paper). Any borrowing by a Company will be non-recourse
to the Members.
13. A Company will not acquire any security issued by a registered
investment company if, immediately after the acquisition, the Company
will own in the aggregate more than 3% of the outstanding voting stock
of the registered investment company.
Applicants' Legal Analysis
1. Section 6(b) of the Act provides, in part, that the Commission
will exempt employees' securities companies from the provisions of the
Act to the extent that the exemption is consistent with the protection
of investors. Section 6(b) provides that the Commission will consider,
in determining the provisions of the Act from which the company should
be exempt, the company's form of organization and capital structure,
the persons owning and controlling its securities, the price of the
company's securities and the amount of any sales load, how the
company's funds are invested, and the relationship between the company
and the issuers of the securities in which it invests. Section 2(a)(13)
defines an employees' securities company, in relevant part, as any
investment company all of whose securities (other than short-term
paper) are beneficially owned (a) by current or former employees, or
persons on retainer, of one or more affiliated employers, (b) by
immediate family members of such persons, or (c) by such employer or
employers together with any of the persons in (a) or (b).
2. Section 7 of the Act generally prohibits investment companies
that are not registered under section 8 of the Act from selling or
redeeming their securities. Section 6(e) of the Act provides that, in
connection with any order exempting an investment company from any
provision of section 7, certain provisions of the Act, as specified by
the Commission, will be applicable to the company and other persons
dealing with the company as though the company were registered under
the Act. Applicants request an order under sections 6(b) and 6(e) of
the Act exempting the Companies from all provisions of the Act, except
section 9 and sections 36 through 53 of the Act and the rules and
regulations under those sections. With respect to sections 17 and 30 of
the Act, and the rules and regulations thereunder, and rule 38a-1 under
the Act, the exemption is limited as set forth in the application.
3. Section 17(a) generally prohibits any affiliated person of a
registered investment company, or any affiliated person of an
affiliated person, acting as principal, from knowingly selling or
purchasing any security or other property to or from the company.
Applicants request an exemption from section 17(a) to permit: (A) A WB
Entity or a Third Party Fund (or any affiliated person of a WB Entity
or a Third Party Fund), acting as principal, to engage in any
transaction directly or indirectly with any Company or any company
controlled by such Company; (b) a Company to invest in or engage in any
transaction with any entity, acting as principal (i) in which such
Company, any company controlled by such Company or any WB Entity or
Third Party Fund has invested or will invest, or (ii) with which such
Company, any company controlled by such Company or any WB Entity or
Third Party Fund is or will otherwise become affiliated; and (c) a
Third Party Investor, acting as principal, to engage in any transaction
directly or indirectly with a Company or any company controlled by such
Company. The term ``Third Party Investor'' refers to any person or
entity that is not a WB Entity or affiliated with the WB Group and is a
partner or other investor from a Third Party Fund.
4. Applicants submit that an exemption from section 17(a) is
consistent with the purposes of the Companies and the protection of
investors. Applicants state that the Members in each Company will be
informed of the possible extent of such Company's dealings with the WB
Group. Applicants also state that, as professionals employed in the
financial services businesses, the Members will be able to understand
and evaluate the attendant risks. Applicants assert that the community
of interest among the Members in each Company and the WB Group will
serve to reduce the risk of abuse.
5. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
any affiliated person of a registered investment company, or any
affiliated person of such person, acting as principal, from
participating in any joint arrangement with the company unless
authorized by the Commission. Applicants request relief to permit
affiliated persons of each Company, or affiliated persons of any of
these persons to participate in, or effect any transaction in
connection with, any joint enterprise or other joint arrangement or
profit-sharing plan in which the Company or a company controlled by
such Company is a participant.
6. Applicants assert that compliance with section 17(d) would cause
a Company to forego investment opportunities simply because the
Members, the Manager or any other affiliated person of the Company (or
any affiliate of such a person) had made a similar investment.
Applicants also submit that the types of investment opportunities
considered by a Company often require each participant to make
available funds in an amount that may be substantially greater than may
be available to such Company alone. Applicants contend that, as a
result, the only way in which a Company may be able to participate in
such opportunities may be to co-invest with other persons, including
its affiliates. Applicants note that each Company will be primarily
organized for the benefit of Eligible Employees as an incentive for
them to remain with the WB Group and for the generation and maintenance
of goodwill. Applicants assert that the flexibility to structure co-
investments and joint investments in the context of employees'
securities companies will not involve abuses of the type section 17(d)
and rule 17d-1 were designed to prevent.
7. Co-investments with a Third Party Fund will not be subject to
condition 3 below. Applicants believe it is important that the
interests of the Third Party Fund take priority over the interests of
the Companies, and that the Third Party Fund not be burdened or
otherwise affected by activities of the Companies. In addition,
applicants assert that the relationship of a Company to a Third Party
Fund is fundamentally different from such Company's relationship to the
WB Group. Applicants contend that the focus of, and the rationale for,
the protections contained in the requested relief are to protect the
Companies from any overreaching by the WB Group in the employer/
employee context, whereas the same concerns are not
[[Page 19245]]
present with respect to the Companies vis-[agrave]-vis the investors of
a Third Party Fund.
8. Section 17(e) of the Act and rule 17e-1 under the Act limit the
compensation an affiliated person may receive when acting as agent or
broker for a registered investment company. Applicants request an
exemption from section 17(e) to permit a WB Entity including the
Manager), acting as an agent or broker, to receive placement fees,
advisory fees, or other compensation from a Company in connection with
the purchase or sale by the Company of securities, provided that such
placement fees, advisory fees or other compensation can be deemed
``usual and customary.'' Applicants state that for purposes of the
application, fees or other compensation that are charged or received by
a WB Entity will be deemed ``usual and customary'' only if (a) the
Company is purchasing or selling securities alongside other
unaffiliated third parties, including Third Party Funds, (b) the fees
or other compensation being charged to the Company are also being
charged to the unaffiliated third parties, including Third Party Funds,
and (c) the amount of securities being purchased or sold by the Company
does not exceed 50% of the total amount of securities being purchased
or sold by the Company and the unaffiliated third parties, including
Third Party Funds. Applicants assert that, because the WB Group does
not wish to appear to be favoring the Companies, compliance with
section 17(e) would prevent a Company from participating in
transactions where the Company is being charged lower fees than
unaffiliated third parties. Applicants assert that the fees or other
compensation paid by a Company to a WB Entity are those established at
arm's length with unaffiliated third parties.
9. Rule 17e-1(b) under the Act requires that a majority of
directors who are not ``interested persons'' (as defined in section
2(a)(19) of the Act) take actions and make approvals regarding
commissions, fees, or other remuneration. Rule 17e-1(c) under the Act
requires each Company to comply with the fund governance standards
defined in rule 0-1(a)(7) under the Act. Applicants request an
exemption from rule 17e-1 to permit each Company to comply with the
rule without having a majority of the members of the governing body of
the Manager or, the Manager Committee, as applicable, who are not
interested persons take actions and make determinations as set forth in
paragraph (b) of the rule, and without having to satisfy the standards
as required by paragraph (c) of the rule. Applicants state that because
all the members of the governing body of the Manager of a Company or,
the Manager Committee, as applicable, will be affiliated persons,
without the relief requested, a Company could not comply with rule 17e-
1. Applicants state that each Company will comply with rule 17e-1 by
having a majority of the members of the governing body of the Manager
take such actions and make such approvals as are set forth in rule 17e-
1. Applicants state that each Company will comply with all other
requirements of rule 17e-1.
10. Section 17(f) of the Act designates the entities that may act
as investment company custodians, and rule 17f-1 under the Act imposes
certain requirements when the custodian is a member of a national
securities exchange. Applicants request an exemption from section 17(f)
and rule 17f-1 to permit a WB Entity to act as custodian without a
written contract. Applicants also request an exemption from the rule
17f-1(b)(4) requirement that an independent accountant periodically
verify the assets held by the custodian. Applicants state that, given
the community of interest of all the parties involved and the existing
requirement for an independent audit, compliance with this requirement
would be unnecessary. Each Company will otherwise comply with all the
provisions of rule 17f-1.
11. Applicants also request an exemption from rule 17f-2 to permit
the following exceptions from the requirements of rule 17f-2: (A) A
Company's investments may be kept in the locked files of the Manager
for purposes of paragraph (b) of the rule; (b) for purposes of
paragraph (d) of the rule, (i) employees of the Manager will be deemed
to be employees of the Companies, (ii) officers or managers of the
Manager of a Company will be deemed to be officers of the Company, and
(iii) the Manager or, where applicable, the Manager Committee, of a
Company will be deemed to be the board of directors of the Company; and
(c) in place of the verification procedure under paragraph (f) of the
rule, verification will be effected quarterly by two employees of the
Manager. With respect to certain Companies, applicants expect that many
of their investments will be evidenced only by partnership agreements,
participation agreements or similar documents, rather than by
negotiable certificates that could be misappropriated. Applicants
believe that these instruments are most suitably kept in the files of
the Manager, where they can be referred to as necessary.
12. Section 17(g) of the Act and rule 17g-1 under the Act generally
require the bonding of officers and employees of a registered
investment company who have access to its securities or funds. Rule
17g-1 requires that a majority of directors who are not interested
persons take certain actions and give certain approvals relating to
fidelity bonding. Applicants state that, because the Manager of each
Company, or the Manager Committee, as applicable, will be interested
persons, a Company could not comply with rule 17g-1 without the
requested relief. Specifically, each Company will comply with rule 17g-
1 by having the Manager of the Company, or the Manager Committee, as
applicable, take such actions and make such approvals as are set forth
in rule 17g-1. Applicants also request an exemption from the
requirements of paragraph (g) of rule 17g-1 (relating to the filing of
copies of fidelity bonds and related information with the Commission
and the provision of notices to the board of directors), paragraph (h)
of rule 17g-1 (relating to the appointment of a person to make the
filings and provide the notices required by paragraph (g)), and an
exemption from the requirements of paragraph (j)(3) of rule 17g-1 that
the Companies comply with the fund governance standards defined in rule
0-1(a)(7). Applicants state that each Company will comply with all
other requirements of rule 17g-1.
13. Section 17(j) of the Act and paragraph (b) of rule 17j-1 under
the Act make it unlawful for certain enumerated persons to engage in
fraudulent or deceptive practices in connection with the purchase or
sale of a security held or to be acquired by a registered investment
company. Rule 17j-1 also requires that every registered investment
company adopt a written code of ethics and that every access person of
a registered investment company report personal securities
transactions. Applicants request an exemption from the provisions of
rule 17j-1, except for the anti-fraud provisions of paragraph (b),
because they are unnecessarily burdensome as applied to the Companies.
14. Applicants request an exemption from the requirements in
sections 30(a), 30(b), and 30(e) of the Act, and the rules under those
sections, that registered investment companies prepare and file with
the Commission and mail to their shareholders certain periodic reports
and financial statements. Applicants contend that the forms prescribed
by the Commission for periodic reports have little relevance to the
Companies and would entail administrative and legal
[[Page 19246]]
costs that outweigh any benefit to the Members. Applicants request
exemptive relief to the extent necessary to permit each Company to
report annually to its Members. Applicants also request an exemption
from section 30(h) of the Act to the extent necessary to exempt the
Manager of each Company, members of the Manager, and any other persons
who may be deemed to be members of a Manager Committee for a Company
from filing Forms 3, 4, and 5 under section 16(a) of the Exchange Act
with respect to their ownership of Interests in the Company. Applicants
assert that, because there will be no trading market and the transfers
of Interests will be severely restricted, these filings are unnecessary
for the protection of investors and burdensome to those required to
make them.
15. Rule 38a-1 requires investment companies to adopt, implement
and periodically review written policies reasonably designed to prevent
violation of the federal securities law and to appoint a chief
compliance officer. Each Company will comply with rule 38a-1(a), (c)
and (d), except that (a) because the Company does not have a board of
directors, the governing body of the Manager of each Company will
fulfill the responsibilities assigned to the Company's board of
directors under the rule, (b) since the governing body of the Manager
does not have any disinterested members, approval by a majority of
disinterested board members required by rule 38a-1 will not be
obtained, and (c) because the governing body of the Manager does not
have any disinterested members, the Company will comply with the
requirement in rule 38a-1(a)(4)(iv) that the chief compliance officer
meet with the independent board members by having the chief compliance
officer meet with the governing body of the Manager as constituted.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Each proposed transaction to which a Company is a party
otherwise prohibited by section 17(a) or section 17(d) of the Act and
rule 17d-1 under the Act (the ``Section 17 Transactions'') will be
effected only if the Manager determines that: (a) The terms of the
Section 17 Transaction, including the consideration to be paid or
received, are fair and reasonable to the Members of the Company and do
not involve overreaching of the Company or its Members on the part of
any person concerned and (b) the Section 17 Transaction is consistent
with the interests of the Members, the Company's organizational
documents and the Company's reports to its Members.
In addition, the Manager of the Company will record and preserve a
description of all Section 17 Transactions, the Manager's findings, the
information or materials upon which the findings are based and the
basis therefor. All such records will be maintained for the life of the
Company and at least six years thereafter and will 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. The Manager of each Company will adopt, and periodically review
and update, procedures designed to ensure that reasonable inquiry is
made, prior to the consummation of any Section 17 Transaction, with
respect to the possible involvement in the transaction of any
affiliated person or promoter of or principal underwriter for the
Company, or any affiliated person of such person, promoter or principal
underwriter.
3. The Manager of each Company will not invest the funds of the
Company in any investment in which an ``Affiliated Co-Investor'' (as
defined below) has acquired or proposes to acquire the same class of
securities of the same issuer and where the investment involves a joint
enterprise or other joint arrangement within the meaning of rule 17d-1
in which the Company and the Affiliated Co-Investor are participants,
unless any such Affiliated Co-Investor, prior to disposing of all or
part of its investment, (a) gives the Manager sufficient, but not less
than one day's notice of its intent to dispose of its investment, and
(b) refrains from disposing of its investment unless the Company has
the opportunity to dispose of its investment prior to or concurrently
with, on the same terms as, and on a pro rata basis with, the
Affiliated Co-Investor. The term ``Affiliated Co-Investor'' with
respect to any Company means any person who is: (A) An ``affiliated
person'' (as defined in section 2(a)(3) of the Act) of the Company
(other than a Third Party Fund); (b) a WB Entity; (c) an officer,
director or employee of the WB Group; (d) an investment vehicle
offered, sponsored or managed by a WB Entity (other than a Third Party
Fund); or (e) an entity (other than a Third Party Fund) in which a WB
Entity acts as a general partner or has a similar capacity to control
the sale or other disposition of the entity's securities. The
restrictions contained in this condition, however, shall not be deemed
to limit or prevent the disposition of an investment by an Affiliated
Co-Investor: (a) To its direct or indirect wholly owned subsidiary, to
any company (a ``Parent'') of which the Affiliated Co-Investor is a
direct or indirect wholly-owned subsidiary or to a direct or indirect
wholly-owned subsidiary of its Parent; (b) to immediate family members
of the Affiliated Co-Investor or a trust or other investment vehicle
established for any such family member; or (c) when the investment is
comprised of securities that are (i) listed on a national securities
exchange registered under section 6 of the Exchange Act; (ii) NMS
stocks, pursuant to section 11A(a)(2) of the Exchange Act and rule
600(a) of Regulation NMS thereunder; (iii) government securities as
defined in section 2(a)(16) of the Act, or (iv) listed or traded on any
foreign securities exchange or board of trade that satisfies regulatory
requirements under the law of the jurisdiction in which such foreign
securities exchange or board of trade is organized similar to those
that apply to a national securities exchange or a national market
system for securities.
4. Each Company and its Manager will maintain and preserve, for the
life of each such Company and at least six years thereafter, such
accounts, books, and other documents constituting the record forming
the basis for the audited financial statements that are to be provided
to the Members of such Company, and each annual report of the Company
required to be sent to the Members, and agree that all such records
will be subject to examination by the Commission and its staff. Each
Company will preserve the accounts, books and other documents required
to be maintained in an easily accessible place for the first two years.
5. The Manager of each Company will send to each Member having an
Interest in the Company at any time during the fiscal year then ended,
audited financial statements with respect to those Series in which the
Member held Interests. At the end of each fiscal year, the Manager will
make or cause to be made a valuation of all of the assets of the
Company as of such fiscal year end in a manner consistent with
customary practice with respect to the valuation of assets of the kind
held by the Company. In addition, within 120 days after the end of each
fiscal year of the Company, if possible, or as soon as practicable
thereafter, the Manager will send a report to each person who was a
Member at any time during the fiscal year then ended, setting forth
such tax information as shall be necessary for the preparation by the
Member of his, her or its federal and state income tax returns and a
report of the investment
[[Page 19247]]
activities of the Company during that fiscal year.
6. If any purchase or sale is made by a Company from or to an
entity affiliated with the Company by reason of an officer, director or
employee of a WB Entity (a) serving as an officer, director, general
partner or investment adviser to the entity, or (b) having a 5% or more
interest in the entity, such individual will not participate in the
Manager's determination of whether or not to effect the purchase or
sale.
For the Commission, by the Division of Investment Management,
under delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-9576 Filed 4-27-09; 8:45 am]
BILLING CODE 8010-01-P
