Goldman, Sachs & Co., et al.; Notice of Application and Temporary Order, 44031-44033 [2010-18313]

Download as PDF Federal Register / Vol. 75, No. 143 / Tuesday, July 27, 2010 / Notices Type of request: Extension of a currently approved collection. Affected public: Individuals or households, Business or other for-profit, Non-profit institutions, State, Local or Tribal Government. Abstract: The information collection has two purposes. When RRB records that railroad service and/or compensation is insufficient to qualify a claimant for unemployment or sickness benefits, the RRB obtains information needed to reconcile the compensation and/or service on record with that claimed by the employee. Other forms in the collection allow the RRB to determine whether unemployment or sickness benefits were properly obtained. Changes Proposed: The RRB proposes no changes to any of the forms in the collection. The proposed burden estimate for this ICR is as follows: Estimated annual number of respondents: 10,700. Total annual responses: 10,700. Total annual reporting hours: 2,512. FOR FURTHER INFORMATION CONTACT: Copies of the form and supporting documents can be obtained from Charles Mierzwa, the agency clearance officer at (312–751–3363) or Charles.Mierzwa@RRB.gov. Comments regarding the information collection should be addressed to Patricia A. Henaghan, Railroad Retirement Board, 844 North Rush Street, Chicago, Illinois 60611–2092 or e-mailed to Patricia.Henaghan@RRB.GOV and to the OMB Desk Officer for the RRB, at the Office of Management and Budget, Room 10230, New Executive Office Building, Washington, DC 20503. Charles Mierzwa, Clearance Officer. [FR Doc. 2010–18271 Filed 7–26–10; 8:45 am] BILLING CODE 7905–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. IC–29366; 812–13796] Goldman, Sachs & Co., et al.; Notice of Application and Temporary Order July 21, 2010. 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’’). sroberts on DSKD5P82C1PROD with NOTICES AGENCY: Applicants have received a temporary order SUMMARY OF APPLICATION: VerDate Mar<15>2010 16:30 Jul 26, 2010 Jkt 220001 exempting them from section 9(a) of the Act, with respect to an injunction entered against Goldman, Sachs & Co. (‘‘Goldman Sachs’’) on July 20, 2010 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: Goldman Sachs, Goldman Sachs Asset Management, L.P. (‘‘GSAM, L.P.’’), Goldman Sachs Asset Management International (‘‘GSAMI’’), Goldman Sachs Hedge Fund Strategies LLC (‘‘GSHFS’’), Commonwealth Annuity and Life Insurance Company (‘‘Commonwealth’’), First Allmerica Financial Life Insurance Company (‘‘FAFLIC’’) and Epoch Securities, Inc. (‘‘Epoch,’’ together, the ‘‘Applicants’’).1 FILING DATES: The application was filed on July 16, 2010, and amended on July 21, 2010. 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 August 16, 2010, 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 & Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. Applicants: Goldman Sachs, GSAM, L.P. and GSHFS, 200 West Street, New York, NY 10282; GSAMI, Christchurch Court, 10–15 Newgate Street, London, England EC1A7HD; and Commonwealth, FAFLIC and Epoch, 132 Turnpike Road, Southborough, MA 01772. FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202) 551– 6870 or Janet M. Grossnickle, Assistant Director, at 202–551–6821 (Division of Investment Management, Office of Investment Company Regulation). 1 Applicants request that any relief granted pursuant to the application also apply to any existing company of which Goldman Sachs is an affiliated person and to any other company of which Goldman Sachs may become an affiliated person in the future (together with Applicants, ‘‘Covered Persons’’). PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 44031 The following is a temporary order and 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. SUPPLEMENTARY INFORMATION: Applicants’ Representations 1. Goldman Sachs, a New York limited partnership, is a global investment banking and securities firm. Goldman Sachs is registered as an investment adviser with the Commission pursuant to section 203 of the Investment Advisers Act of 1940 (‘‘Advisers Act’’). Goldman Sachs is also registered as a broker-dealer under the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’) and acts as a principal underwriter of certain registered investment companies. GSAM, L.P., GSAMI and GSHFS are each registered under the Advisers Act as investment advisors and provide investment advisory or subadvisory services to Funds.2 Commonwealth and FAFLIC are insurance companies domiciled in Massachusetts and each acts as depositor for certain separate accounts that are registered as UITs under the Act. Epoch is a registered broker-dealer that acts as principal underwriter for the UITs of Commonwealth and FAFLIC. Each of Goldman Sachs, GSAM, L.P., GSAMI and GSHFS provide investment advisory services to ESCs, as defined in section 2(a)(13) of the Act, which provide investment opportunities for partners of Goldman Sachs (prior to its initial public offering) and certain employees and consultants of Goldman Sachs and its affiliates. GSHFS does not currently provide investment advisory services to registered investment companies. 2. On July 20, 2010, the United States District Court for the Southern District of New York entered a final judgment, which included the Injunction against Goldman Sachs in a matter brought by the Commission (‘‘Final Judgment’’).3 The Commission alleged in the complaint (‘‘Complaint’’) that offering materials related to a transaction in 2 ‘‘Funds’’ refer to any registered investment company or employees’ securities company (‘‘ESC’’) for which a Covered Person serves as an investment adviser, subadviser or depositor, or any registered open-end investment company, registered unit investment trust (‘‘UIT’’) or registered face amount certificate company for which a Covered Person serves as principal underwriter (such activities, collectively, ‘‘Fund Servicing Activities’’). 3 Securities and Exchange Commission v. Goldman, Sachs & Co. and Fabrice Tourre, 10–CV– 03229 (S.D.N.Y. July 20, 2010). E:\FR\FM\27JYN1.SGM 27JYN1 44032 Federal Register / Vol. 75, No. 143 / Tuesday, July 27, 2010 / Notices which Goldman Sachs or its affiliates sold synthetic collateralized debt obligations, which referenced a portfolio of synthetic mortgage-backed securities, to two institutional investors in early 2007 (‘‘Transaction’’), should have disclosed that the hedge fund assuming the short side of the Transaction had played a role in the selection process. As part of an agreement to settle the action, Goldman Sachs entered into a consent in which it acknowledged that it was a mistake not to disclose the role of the hedge fund in the Transaction and consented to the entry of the Final Judgment, including the Injunction. The Final Judgment will also decree that Goldman Sachs is liable for disgorgement of $15 million and a civil penalty of $535 million.4 sroberts on DSKD5P82C1PROD with NOTICES 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 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 UITs 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 any person directly or indirectly controlling, controlled by, or under common control with, the other person. Applicants state that Goldman Sachs is an affiliated person of each of the other Applicants within the meaning of section 2(a)(3) of the Act because they are under common control. Applicants state that entry of the Final Judgment would result in the disqualification of Goldman Sachs under section 9(a)(2) and the other Applicants under section 9(a)(3) of the Act. 4 The Final Judgment will also require Goldman Sachs to comply with certain undertakings relating to (i) the vetting and approval process for offerings of residential mortgage-related securities products by its firmwide Capital Committee, (ii) review of marketing materials used in connection with residential mortgage-related securities offerings by Goldman Sachs’ Legal Department and Compliance Department, (iii) annual internal audits of the review of such marketing materials, (iv) where Goldman Sachs is the lead underwriter of an offering of residential mortgage-related securities and retains outside counsel to advise on the offering, review of the related offering materials by outside counsel and (v) education and training of persons involved in the structuring or marketing of residential mortgage-related securities offerings. VerDate Mar<15>2010 16:30 Jul 26, 2010 Jkt 220001 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) if it is established that these provisions, as applied to Applicants, are unduly or disproportionately severe or that Applicants’ conduct has been such as not to make it against the public interest or the protection of investors to grant the application. Applicants have filed an application pursuant to section 9(c) seeking a temporary and permanent order exempting them from the disqualification provisions of section 9(a) of the Act. 3. Applicants believe they meet the standards for exemption specified in section 9(c). Applicants state that the prohibitions of section 9(a) as applied to them would be unduly and disproportionately severe and that the conduct of Applicants has been such as not to make it against the public interest or the protection of investors to grant the exemption from section 9(a). 4. Applicants state that the violations alleged in the Complaint did not involve Fund Servicing Activities or the current or former Goldman Sachs employees who are or were involved in Fund Servicing Activities. Applicants also state that no current or former director, officer, or employee of Goldman Sachs or the other Applicants—who is involved in providing Fund Servicing Activities to Funds—had any knowledge of, or was involved in, the conduct that forms the basis of the Complaint. Applicants further state that the individual defendant named in the Complaint and the other personnel at Goldman Sachs who were involved in the violations alleged in the Complaint have had no and will not have any future involvement in providing Fund Servicing Activities to Funds. Applicants represent that the alleged conduct giving rise to the Final Judgment did not involve any Fund or the assets of any Fund for which an Applicant provided Fund Servicing Activities. 5. Applicants state that the inability of the Applicants to engage in Fund Servicing Activities would result in potentially severe hardships for the Funds (including the UITs) and their shareholders or contract holders. Applicants state that they will distribute, as soon as reasonably practicable, written materials, including an offer to meet in person to discuss the materials, to the boards of directors or trustees of the Funds (excluding for this purpose, the ESCs) (the ‘‘Boards’’), including the directors who are not ‘‘interested persons,’’ as defined in section 2(a)(19) of the Act, of such PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 Funds and their independent legal counsel, as defined in rule 0–1(a)(6) under the Act, if any, regarding the Injunction, any impact on the Funds, and the application. Applicants have provided and will continue to provide the Funds with all information concerning the Final 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 assert that, if they were barred from providing Fund Servicing Activities to the Funds and ESCs, the effect on their businesses and employees would be severe. Applicants state that they have committed substantial resources to establish an expertise in Fund Servicing Activities. Applicants further state that prohibiting them from Fund Servicing Activities would not only adversely affect their businesses, but would also adversely affect over 600 employees at GSAM, L.P. alone that are involved in those activities. Applicants also state that disqualifying Goldman Sachs, GSAM, L.P., GSAMI and GSHFS from continuing to provide investment advisory services to ESCs is not in the public interest or in furtherance of the protection of investors. Applicants assert that it would not be consistent with the purposes of the ESC provisions of the Act or the representations made in the application for the ESC order to require another entity not affiliated with Goldman Sachs to manage the ESCs. In addition, participants in the ESCs have subscribed for interests in the ESCs with the expectation that the ESCs would be managed by Goldman Sachs or one of its affiliates. 7. Applicants state that Goldman Sachs has previously sought and received exemptions under section 9(c) of the Act on four occasions, as described 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, the 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. E:\FR\FM\27JYN1.SGM 27JYN1 Federal Register / Vol. 75, No. 143 / Tuesday, July 27, 2010 / Notices 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 Covered Persons are granted a temporary exemption from the provisions of section 9(a), effective as of the date of the Injunction, solely with respect to the Injunction, subject to the condition in the application, until the date the Commission takes final action on an application for a permanent order. BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [FR Doc. 2010–18313 Filed 7–26–10; 8:45 am] BILLING CODE 8010–01–P [Release No. 34–62539; File No. SR–FINRA– 2010–029] SECURITIES AND EXCHANGE COMMISSION sroberts on DSKD5P82C1PROD with NOTICES Sunshine Act Meetings Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold Closed Meetings on Wednesday, July 28, 2010 at 2:30 p.m. and on Thursday, July 29, 2010 at 2 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meetings. Certain staff members who have an interest in the matters also may be present. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (5), (7), 9(ii) and (10), permit consideration of the scheduled matters at the Closed Meeting. Commissioner Casey, as duty officer, voted to consider the items listed for the Closed Meetings in closed session, and determined that no earlier notice thereof was possible. The subject matter of the Closed Meeting scheduled for Wednesday, July 28, 2010 will be: Institution and settlement of an injunctive action; and Institution and settlement of administrative proceedings. The subject matter of the Closed Meeting scheduled for Thursday, July 29, 2010 will be: Institution and settlement of injunctive actions; 16:30 Jul 26, 2010 Dated: July 22, 2010. Elizabeth M. Murphy, Secretary. [FR Doc. 2010–18451 Filed 7–23–10; 11:15 am] By the Commission. Elizabeth M. Murphy, Secretary. VerDate Mar<15>2010 Institution and settlement of administrative proceedings; and Other matters relating to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at (202) 551–5400. Jkt 220001 Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving the Proposed Rule Change To Adopt FINRA Rule 5141 (Sale of Securities in a Fixed Price Offering) in the Consolidated FINRA Rulebook July 21, 2010. I. Introduction On May 27, 2010, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (f/k/a National Association of Securities Dealers, Inc. (‘‘NASD’’)) 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 proposal to adopt FINRA Rule 5141 (Sale of Securities in a Fixed Price Offering) in the consolidated FINRA rulebook and to delete NASD Rules 0120(h), 2730, 2740 and 2750, and NASD IM–2730, IM–2740 and IM–2750. This proposal was published for comment in the Federal Register on June 21, 2010.3 The Commission received no comments regarding the proposal. This order approves this proposed rule change. II. Description of the Proposed Rule Change As part of the process of developing a new consolidated rulebook (‘‘Consolidated FINRA Rulebook’’),4 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Securities Exchange Act Release No. 62299 (June 16, 2010), 75 FR 35105 (June 21, 2010) (SR– FINRA–2010–029) (‘‘Notice’’). 4 The current FINRA rulebook consists of: (1) FINRA Rules; (2) NASD Rules; and (3) rules PO 00000 1 15 2 17 Frm 00119 Fmt 4703 Sfmt 4703 44033 FINRA proposed to adopt FINRA Rule 5141 (Sale of Securities in a Fixed Price Offering) in the Consolidated FINRA Rulebook and to delete NASD Rules 0120(h), 2730, 2740 and 2750, and NASD IM–2730, IM–2740 and IM–2750. Proposed FINRA Rule 5141 would be a new, consolidated rule intended to protect the integrity of fixed price offerings 5 by ensuring that securities in such offerings are sold to the public at the stated public offering price or prices, thereby preventing an undisclosed better price. The proposed rule is based in part on, and would replace, the current fixed price offering rules (NASD Rules 0120(h), 2730, 2740 and 2750 and associated Interpretive Materials (‘‘IMs’’) 2730, 2740 and 2750).6 Like the current fixed price offering rules, the proposed rule would prohibit the grant of certain preferences (e.g., selling concessions, discounts, other allowances or various economic equivalents) in connection with fixed price offerings of securities. A. Proposed FINRA Rule 5141 Paragraph (a) of the proposed rule would provide that no member or person associated with a member that participates in a selling syndicate or incorporated from NYSE (‘‘Incorporated NYSE Rules’’) (together, the NASD Rules and Incorporated NYSE Rules are referred to as the ‘‘Transitional Rulebook’’). While the NASD Rules generally apply to all FINRA members, the Incorporated NYSE Rules apply only to those members of FINRA that are also members of the NYSE (‘‘Dual Members’’). The FINRA Rules apply to all FINRA members, unless such rules have a more limited application by their terms. For more information about the rulebook consolidation process, see Information Notice, March 12, 2008 (Rulebook Consolidation Process). 5 NASD Rule 0120(h) defines the term ‘‘fixed price offering’’ to mean the offering of securities at a stated public offering price or prices, all or part of which securities are publicly offered in the United States or any territory thereof, whether or not registered under the Securities Act of 1933. The term does not include offerings of ‘‘exempted securities’’ or ‘‘municipal securities’’ as those terms are defined in Sections 3(a)(12) and 3(a)(29), respectively, of the Securities Exchange Act or offerings of redeemable securities of investment companies registered pursuant to the Investment Company Act of 1940 which are offered at prices determined by the net asset value of the securities. The proposed rule change would incorporate the definition of ‘‘fixed price offering’’ into the proposed rule in substantially identical form. See proposed FINRA Rule 5141.04. See also Section II.B infra and Section (C) under Item II.C in the Notice. 6 The current fixed price offering rules are also known as the Papilsky rules because of the court decision with which they are commonly associated. See Papilsky v. Berndt, Fed. Sec. L. Rep (CCH) ¶ 95,627 (S.D.N.Y. June 24, 1976). For more information regarding the background of NASD Rules 0120(h), 2730, 2740 and 2750 and the associated IMs, see Notice to Members 81–3 (February 1981) (Adoption of New Rules Concerning Securities Distribution Practices) (‘‘Notice to Members 81–3’’); see also Securities Exchange Act Release No. 17371 (December 12, 1980), 45 FR 83707 (December 19, 1980) (File No. SR–NASD–78–3). E:\FR\FM\27JYN1.SGM 27JYN1

Agencies

[Federal Register Volume 75, Number 143 (Tuesday, July 27, 2010)]
[Notices]
[Pages 44031-44033]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-18313]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-29366; 812-13796]


Goldman, Sachs & Co., et al.; Notice of Application and Temporary 
Order

July 21, 2010.
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'').

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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 Goldman, Sachs & Co. (``Goldman Sachs'') on 
July 20, 2010 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: Goldman Sachs, Goldman Sachs Asset Management, L.P. 
(``GSAM, L.P.''), Goldman Sachs Asset Management International 
(``GSAMI''), Goldman Sachs Hedge Fund Strategies LLC (``GSHFS''), 
Commonwealth Annuity and Life Insurance Company (``Commonwealth''), 
First Allmerica Financial Life Insurance Company (``FAFLIC'') and Epoch 
Securities, Inc. (``Epoch,'' together, the ``Applicants'').\1\
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    \1\ Applicants request that any relief granted pursuant to the 
application also apply to any existing company of which Goldman 
Sachs is an affiliated person and to any other company of which 
Goldman Sachs may become an affiliated person in the future 
(together with Applicants, ``Covered Persons'').

Filing Dates: The application was filed on July 16, 2010, and amended 
---------------------------------------------------------------------------
on July 21, 2010.

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 August 16, 2010, 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 & Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants: Goldman Sachs, 
GSAM, L.P. and GSHFS, 200 West Street, New York, NY 10282; GSAMI, 
Christchurch Court, 10-15 Newgate Street, London, England EC1A7HD; and 
Commonwealth, FAFLIC and Epoch, 132 Turnpike Road, Southborough, MA 
01772.

FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202) 
551-6870 or Janet M. Grossnickle, Assistant Director, at 202-551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a temporary order and 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. Goldman Sachs, a New York limited partnership, is a global 
investment banking and securities firm. Goldman Sachs is registered as 
an investment adviser with the Commission pursuant to section 203 of 
the Investment Advisers Act of 1940 (``Advisers Act''). Goldman Sachs 
is also registered as a broker-dealer under the Securities Exchange Act 
of 1934 (the ``Exchange Act'') and acts as a principal underwriter of 
certain registered investment companies. GSAM, L.P., GSAMI and GSHFS 
are each registered under the Advisers Act as investment advisors and 
provide investment advisory or subadvisory services to Funds.\2\ 
Commonwealth and FAFLIC are insurance companies domiciled in 
Massachusetts and each acts as depositor for certain separate accounts 
that are registered as UITs under the Act. Epoch is a registered 
broker-dealer that acts as principal underwriter for the UITs of 
Commonwealth and FAFLIC. Each of Goldman Sachs, GSAM, L.P., GSAMI and 
GSHFS provide investment advisory services to ESCs, as defined in 
section 2(a)(13) of the Act, which provide investment opportunities for 
partners of Goldman Sachs (prior to its initial public offering) and 
certain employees and consultants of Goldman Sachs and its affiliates. 
GSHFS does not currently provide investment advisory services to 
registered investment companies.
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    \2\ ``Funds'' refer to any registered investment company or 
employees' securities company (``ESC'') for which a Covered Person 
serves as an investment adviser, subadviser or depositor, or any 
registered open-end investment company, registered unit investment 
trust (``UIT'') or registered face amount certificate company for 
which a Covered Person serves as principal underwriter (such 
activities, collectively, ``Fund Servicing Activities'').
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    2. On July 20, 2010, the United States District Court for the 
Southern District of New York entered a final judgment, which included 
the Injunction against Goldman Sachs in a matter brought by the 
Commission (``Final Judgment'').\3\ The Commission alleged in the 
complaint (``Complaint'') that offering materials related to a 
transaction in

[[Page 44032]]

which Goldman Sachs or its affiliates sold synthetic collateralized 
debt obligations, which referenced a portfolio of synthetic mortgage-
backed securities, to two institutional investors in early 2007 
(``Transaction''), should have disclosed that the hedge fund assuming 
the short side of the Transaction had played a role in the selection 
process. As part of an agreement to settle the action, Goldman Sachs 
entered into a consent in which it acknowledged that it was a mistake 
not to disclose the role of the hedge fund in the Transaction and 
consented to the entry of the Final Judgment, including the Injunction. 
The Final Judgment will also decree that Goldman Sachs is liable for 
disgorgement of $15 million and a civil penalty of $535 million.\4\
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    \3\ Securities and Exchange Commission v. Goldman, Sachs & Co. 
and Fabrice Tourre, 10-CV-03229 (S.D.N.Y. July 20, 2010).
    \4\ The Final Judgment will also require Goldman Sachs to comply 
with certain undertakings relating to (i) the vetting and approval 
process for offerings of residential mortgage-related securities 
products by its firmwide Capital Committee, (ii) review of marketing 
materials used in connection with residential mortgage-related 
securities offerings by Goldman Sachs' Legal Department and 
Compliance Department, (iii) annual internal audits of the review of 
such marketing materials, (iv) where Goldman Sachs is the lead 
underwriter of an offering of residential mortgage-related 
securities and retains outside counsel to advise on the offering, 
review of the related offering materials by outside counsel and (v) 
education and training of persons involved in the structuring or 
marketing of residential mortgage-related securities offerings.
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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 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 UITs 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 any person directly or indirectly controlling, controlled by, 
or under common control with, the other person. Applicants state that 
Goldman Sachs is an affiliated person of each of the other Applicants 
within the meaning of section 2(a)(3) of the Act because they are under 
common control. Applicants state that entry of the Final Judgment would 
result in the disqualification of Goldman Sachs under section 9(a)(2) 
and the other Applicants under section 9(a)(3) 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) if it is established that these provisions, as applied to 
Applicants, are unduly or disproportionately severe or that Applicants' 
conduct has been such as not to make it against the public interest or 
the protection of investors to grant the application. Applicants have 
filed an application pursuant to section 9(c) seeking a temporary and 
permanent order exempting them from the disqualification provisions of 
section 9(a) of the Act.
    3. Applicants believe they meet the standards for exemption 
specified in section 9(c). Applicants state that the prohibitions of 
section 9(a) as applied to them would be unduly and disproportionately 
severe and that the conduct of Applicants has been such as not to make 
it against the public interest or the protection of investors to grant 
the exemption from section 9(a).
    4. Applicants state that the violations alleged in the Complaint 
did not involve Fund Servicing Activities or the current or former 
Goldman Sachs employees who are or were involved in Fund Servicing 
Activities. Applicants also state that no current or former director, 
officer, or employee of Goldman Sachs or the other Applicants--who is 
involved in providing Fund Servicing Activities to Funds--had any 
knowledge of, or was involved in, the conduct that forms the basis of 
the Complaint. Applicants further state that the individual defendant 
named in the Complaint and the other personnel at Goldman Sachs who 
were involved in the violations alleged in the Complaint have had no 
and will not have any future involvement in providing Fund Servicing 
Activities to Funds. Applicants represent that the alleged conduct 
giving rise to the Final Judgment did not involve any Fund or the 
assets of any Fund for which an Applicant provided Fund Servicing 
Activities.
    5. Applicants state that the inability of the Applicants to engage 
in Fund Servicing Activities would result in potentially severe 
hardships for the Funds (including the UITs) and their shareholders or 
contract holders. Applicants state that they will distribute, as soon 
as reasonably practicable, written materials, including an offer to 
meet in person to discuss the materials, to the boards of directors or 
trustees of the Funds (excluding for this purpose, the ESCs) (the 
``Boards''), including the directors who are not ``interested 
persons,'' as defined in section 2(a)(19) of the Act, of such Funds and 
their independent legal counsel, as defined in rule 0-1(a)(6) under the 
Act, if any, regarding the Injunction, any impact on the Funds, and the 
application. Applicants have provided and will continue to provide the 
Funds with all information concerning the Final 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 assert that, if they were barred from providing 
Fund Servicing Activities to the Funds and ESCs, the effect on their 
businesses and employees would be severe. Applicants state that they 
have committed substantial resources to establish an expertise in Fund 
Servicing Activities. Applicants further state that prohibiting them 
from Fund Servicing Activities would not only adversely affect their 
businesses, but would also adversely affect over 600 employees at GSAM, 
L.P. alone that are involved in those activities. Applicants also state 
that disqualifying Goldman Sachs, GSAM, L.P., GSAMI and GSHFS from 
continuing to provide investment advisory services to ESCs is not in 
the public interest or in furtherance of the protection of investors. 
Applicants assert that it would not be consistent with the purposes of 
the ESC provisions of the Act or the representations made in the 
application for the ESC order to require another entity not affiliated 
with Goldman Sachs to manage the ESCs. In addition, participants in the 
ESCs have subscribed for interests in the ESCs with the expectation 
that the ESCs would be managed by Goldman Sachs or one of its 
affiliates.
    7. Applicants state that Goldman Sachs has previously sought and 
received exemptions under section 9(c) of the Act on four occasions, as 
described 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, the 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.

[[Page 44033]]

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 
Covered Persons are granted a temporary exemption from the provisions 
of section 9(a), effective as of the date of the Injunction, solely 
with respect to the Injunction, subject to the condition in the 
application, until the date the Commission takes final action on an 
application for a permanent order.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-18313 Filed 7-26-10; 8:45 am]
BILLING CODE 8010-01-P
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