Citigroup Global Markets Inc., et al.; Notice of Application and Temporary Order, 65534-65536 [2010-26870]
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Federal Register / Vol. 75, No. 205 / Monday, October 25, 2010 / Notices
Policy, 202–205–7426
george.solomon@sba.gov Curtis B. Rich,
Management Analyst, 202–205–7030
curtis.rich@sba.gov.
The Office
of Entrepreneurial Development (ED)
needs to collect information on the
impact of training programs delivered
by both its resource partners—SCORE,
SBDC and WBCs and focused initiatives
like E200 using a uniform methodology
in order to provide generally accepted
outcome measures and to report to
Congress and the President on these
programs. Respondents are small
business owners and potential small
business owners from throughout the
U.S. and the territories.
Title: ‘‘Impact of Training Programs.’’
Description of Respondents: Small
business owners and potential small
business owners from throughout the
U.S. and the territories.
Form Number: N/A.
Annual Responses: 600,000.
Annual Burden: 100,000.
SUPPLEMENTARY INFORMATION:
Jacqueline White,
Chief, Administrative Information Branch.
[FR Doc. 2010–26790 Filed 10–22–10; 8:45 am]
BILLING CODE P
SMALL BUSINESS ADMINISTRATION
Immediate Disaster Assistance
Program (IDAP)
U.S. Small Business
Administration (SBA).
ACTION: Notice of IDAP loan program
interest rates.
AGENCY:
This Notice announces the
maximum allowable rates for Immediate
Disaster Assistance Program (IDAP)
loans.
SUMMARY:
Effective Date: The interest rate
is effective October 25, 2010.
FOR FURTHER INFORMATION CONTACT:
Grady Hedgespeth, Director of Financial
Assistance, at (202) 205–7562 or
Grady.Hedgespeth@sba.gov.
DATES:
The Food,
Conservation, and Energy Act of 2008
(the Farm Act), Public Law 110–246,
enacted June 18, 2008, amended the
Small Business Act (the Act) and
authorized changes to make SBA’s
disaster assistance program more
accessible to disaster victims. One
provision included in the Farm Act
requires SBA to implement an
Immediate Disaster Assistance Program
(IDAP) to provide interim loans to
businesses affected by a disaster that
meet the basic eligibility standards for a
disaster loan authorized under section
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SUPPLEMENTARY INFORMATION:
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7(b) of the Act. The provision authorizes
SBA to provide an 85 percent guarantee
on loans made by participating lenders
for up to $25,000. The intent of the
IDAP loan program is to provide bridge
financing as quickly and as prudently as
possible following a declared disaster
while the business is awaiting approval
for permanent financing through a
direct disaster loan from SBA.
Agency regulations implementing the
IDAP loan program state that the
maximum interest rates an IDAP Lender
may charge an IDAP Borrower during
the Initial Period and Term Period will
be published in the Federal Register
from time to time. 13 CFR 123.703(e).
This notice establishes the maximum
interest rates for IDAP loans as follows:
Initial Period: The maximum interest
rate an IDAP Lender may charge an
IDAP Borrower during the Initial Period
(as defined in 13 CFR 123.700(b)(1)) is
the prime rate in effect on the first
business day of the month in which
SBA receives the IDAP loan application,
as printed in a national financial
newspaper published each business
day, plus one percentage point. The
interest rate must remain fixed while
the IDAP loan is in the Initial Period.
Term Period: In the event that the
IDAP loan enters the Term Period (as
defined in 13 CFR 123.700(b)(17)), the
interest rate may remain fixed at a rate
not to exceed the maximum rate for the
Initial Period as described above or may
begin to fluctuate at a variable rate that
is not more than the prime rate in effect
on the first business day of the month
in which the Term Period begins, as
printed in a national financial
newspaper published each business
day, plus one percentage point. If the
rate during the Term Period is a variable
rate, the lender must specify in the Note
the frequency at which the interest rate
adjustment will occur (the ‘‘adjustment
period’’), and such adjustments may not
occur more frequently than monthly.
The lender shall adjust the interest rate
on the first calendar day of each
adjustment period using the prime rate
in effect on the first business day of the
adjustment period, plus one percentage
point. The change in interest rate is
effective on that day whether or not the
lender gives the borrower notice of the
change. The adjustment period may not
be changed without the written
agreement of the borrower.
Any future change to interest rates on
IDAP Loans will be published in the
Federal Register.
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Authority: 15 U.S.C. 657n and 13 CFR
§ 123.703(e).
Eric R. Zarnikow,
Associate Administrator, Office of Capital
Access.
[FR Doc. 2010–26921 Filed 10–22–10; 8:45 am]
BILLING CODE 8025–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No. IC–
29464; 812–13808]
Citigroup Global Markets Inc., et al.;
Notice of Application and Temporary
Order
October 19, 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’’).
AGENCY:
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 Citigroup Inc.
(‘‘Citigroup’’) on October 19, 2010 by the
United States District Court for the
District of Columbia (the ‘‘Injunction’’),
until the Commission takes final action
on an application for a permanent order.
Applicants also have applied for a
permanent order.
Applicants: Citigroup Global Markets
Inc. (‘‘CGMI’’), CEFOF GP I Corp.
(‘‘CEFOF’’), CELFOF GP Corp.
(‘‘CELFOF’’), Citibank, N.A. (‘‘Citibank’’),
Citigroup Alternative Investments LLC
(‘‘Citigroup Alternative’’), Consulting
Group Advisory Services LLC
(‘‘Advisory Services’’), Citigroup Capital
Partners I GP I Corp. (‘‘CCP I’’), and
Citigroup Capital Partners I GP II Corp.
(‘‘CCP II’’) (collectively, ‘‘Applicants’’).1
DATES: Filing Date: The application was
filed on July 29, 2010 and amended on
July 30, 2010, and amended on October
19, 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
SUMMARY:
1 Applicants request that any relief granted
pursuant to the application also apply to any other
company of which Citigroup is or hereafter may
become an affiliated person within the meaning of
section 2(a)(3) of the Act (together with the
Applicants, the ‘‘Covered Persons’’).
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Federal Register / Vol. 75, No. 205 / Monday, October 25, 2010 / Notices
by 5:30 p.m. on November 12, 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
and Exchange Commission, 100 F
Street, NE., Washington, DC 20549–
1090. Applicants: CGMI, CEFOF,
CELFOF, CCP I and CCP II, 388
Greenwich Street, New York, NY 10013;
Citibank, 399 Park Avenue, New York,
NY 10043; Citigroup Alternative, 731
Lexington Avenue, 28th Floor, New
York, NY 10022; and Advisory Services,
222 Delaware Avenue, Wilmington, DE
19801.
FOR FURTHER INFORMATION CONTACT:
Laura J. Riegel, Senior Counsel, at (202)
551–6873, or Mary Kay Frech, Branch
Chief, at (202) 551–6821 (Division of
Investment Management, Office of
Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The
following is a temporary order and a
summary of the application. The
complete application may be obtained
via the Commission’s Web site by
searching for the file number, or for an
applicant using the Company name box,
at https://www.sec.gov/search/
search.htm, or by calling (202) 551–
8090.
emcdonald on DSK2BSOYB1PROD with NOTICES
Applicants’ Representations
1. Each of the Applicants is either an
indirect wholly-owned subsidiary of
Citigroup or is owned by an entity in
which Citigroup has an indirect interest.
Citigroup is a global financial holding
company whose businesses provide a
broad range of financial services. CGMI
is registered as a broker-dealer under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) and serves as principal
underwriter for one or more registered
investment companies (‘‘Funds’’).
Citigroup Alternative and Advisory
Services are registered as investment
advisers under the Investment Advisers
Act of 1940 and serve as investment
advisers for one or more Funds. CEFOF,
CELOF, Citibank, Citigroup Alternative,
CCP I and CCP II (‘‘ESC Advisers’’) serve
as investment advisers to certain
employees’ securities companies within
the meaning of section 2(a)(13) of the
Act, which provide investment
opportunities for certain eligible
employees, officers, directors and
persons on retainer of Citigroup and its
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affiliates (‘‘ESCs’’ and included in the
term ‘‘Funds’’).2
2. On October 19, 2010, the United
States District Court for the District of
Columbia (‘‘District Court’’) entered a
judgment against Citigroup (‘‘Judgment’’)
in a matter brought by the Commission.3
The Commission alleged in the
complaint (‘‘Complaint’’) that Citigroup
had violated section 17(a)(2) of the
Securities Act of 1933 and section 13(a)
of the Exchange Act and Exchange Act
rules 12b–20 and 13a–11 in connection
with disclosures made between July
2007 and October 2007 about the
subprime exposure in Citigroup’s
investment banking unit. Without
admitting or denying the allegations in
the Complaint, except as to jurisdiction,
Citigroup consented to the entry of the
Judgment that included, among other
things, the entry of the Injunction, a
civil penalty of $75 million, and certain
undertakings requested by the District
Court.
Applicants’ Legal Analysis
1. Section 9(a)(2) of the Act, in
relevant part, prohibits a person who
has been enjoined from engaging in or
continuing any conduct or practice in
connection with the purchase or sale of
a security or in connection with
activities as an underwriter, broker or
dealer, from acting, among other things,
as an investment adviser or depositor of
any registered investment company or a
principal underwriter for any registered
open-end investment company,
registered unit investment trust or
registered face-amount certificate
company. Section 9(a)(3) of the Act
makes the prohibition in section 9(a)(2)
applicable to a company, any affiliated
person of which has been disqualified
under the provisions of section 9(a)(2).
Section 2(a)(3) of the Act defines
‘‘affiliated person’’ to include any person
directly or indirectly controlling,
controlled by, or under common control
with, the other person. Applicants state
that Citigroup is an affiliated person of
each of the Applicants within the
meaning of section 2(a)(3) of the Act.
Applicants state that the entry of the
Injunction results in Applicants being
subject to the disqualification
provisions of section 9(a) of the Act.
2. Section 9(c) of the Act provides that
the Commission shall grant an
application for exemption from the
2 Greenwich Street Employees Fund, L.P., et al.,
Investment Company Act Release Nos. 25324 (Dec.
21, 2001) (notice) and 25367 (Jan. 16, 2002) (order)
(‘‘ESC Order’’).
3 Securities and Exchange Commission v.
Citigroup Inc., Judgment on Consent Against
Defendant Citigroup Inc., Civil Action No. 1:10–cv–
01277 (ESH) (D.D.C. October 19, 2010).
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65535
disqualification provisions of section
9(a) if it is established that these
provisions, as applied to the Applicants,
are unduly or disproportionately severe
or that the Applicants’ conduct has been
such as not to make it against the public
interest or the protection of investors to
grant the exemption. Applicants have
filed an application pursuant to section
9(c) seeking a temporary and permanent
order exempting them and Covered
Persons from the disqualification
provisions of section 9(a) of the Act.
3. Applicants believe they meet the
standard for exemption specified in
section 9(c). Applicants state that the
prohibitions of section 9(a) as applied to
the Applicants would be unduly and
disproportionately severe and that the
conduct of Applicants has been such as
not to make it against the public interest
or the protection of investors to grant
the exemption from section 9(a).
4. Applicants state that the alleged
conduct giving rise to the Injunction did
not involve any of the Applicants acting
in the capacity of investment adviser,
subadviser or depositor to a Fund, or
principal underwriter for any Fund, and
no such Funds bought or held any
securities issued by Citigroup during the
period of misconduct alleged in the
Complaint, other than with respect to
index Funds. Applicants also state that
none of the current or former directors,
officers, or employees of the Applicants
participated in the violative conduct
alleged in the Complaint, with the
exception of one employee of an
Applicant. Applicants further state that
the personnel at Citigroup who were
involved in the violations alleged in the
Complaint are either no longer
employed at Citigroup or have had no
and will not have any future
involvement in providing advisory,
subadvisory or depository services to
the Funds, or principal underwriting
services to the Funds.
5. Applicants state that the inability of
the Applicants to continue to serve as
investment adviser, depositor or
principal underwriter to the Funds
would result in potentially severe
financial hardships for the Funds and
their shareholders. The Applicants have
distributed, or will distribute as soon as
reasonably practical, written materials,
including an offer to meet in person to
discuss the materials, to the board of
directors of each Fund, including the
directors who are not ‘‘interested
persons,’’ as defined in section 2(a)(19)
of the Act, of such Fund, and their
independent legal counsel as defined in
rule 0–1(a)(6) under the Act, if any,
regarding the Judgment, any impact on
the Funds, and the application. The
Applicants state they will provide the
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65536
Federal Register / Vol. 75, No. 205 / Monday, October 25, 2010 / Notices
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Funds with all information concerning
the Judgment and the application that is
necessary for the Funds to fulfill their
disclosure and other obligations under
the Federal securities laws.
6. Applicants also state that, if they
were barred from continuing to serve as
investment adviser or principal
underwriter to the Funds, the effect on
their businesses and employees would
be severe. Applicants state that they
have committed substantial resources to
establish an expertise in providing
services covered by section 9(a) of the
Act to Funds. Applicants further state
that prohibiting them from continuing
to serve as investment adviser or
principal underwriter to Funds would
not only adversely affect their
businesses, but would also adversely
affect approximately 250 employees that
are involved in those activities.
Applicants also state that disqualifying
the ESC Advisers from continuing to
provide investment advisory services to
ESCs is not in the public interest or in
furtherance of the protection of
investors. Because the ESCs have been
formed for certain eligible, officers,
directors and persons on retainer of
Citigroup and its affiliates, it would not
be consistent with the purposes of the
ESC provisions of the Act or the ESC
Order to require another entity not
affiliated with Citigroup to manage the
ESCs. In addition, participating
employees of Citigroup and its affiliates
subscribed for interests with the
expectation that the ESCs would be
managed by an affiliate of Citigroup.
7. Applicants previously have
received exemptions under section 9(c)
as the result of conduct that triggered
section 9(a) as described in greater
detail in the application.
Applicants’ Condition
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
Any temporary exemption granted
pursuant to the application shall be
without prejudice to, and shall not limit
the Commission’s rights in any manner
with respect to, any Commission
investigation of, or administrative
proceedings involving or against,
Covered Persons, including without
limitation, the consideration by the
Commission of a permanent exemption
from section 9(a) of the Act requested
pursuant to the application or the
revocation or removal of any temporary
exemptions granted under the Act in
connection with the application.
Temporary Order
The Commission has considered the
matter and finds that Applicants have
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made the necessary showing to justify
granting a temporary exemption.
Accordingly,
It is hereby ordered, pursuant to
section 9(c) of the Act, that the
Applicants and any other Covered
Persons are granted a temporary
exemption from the provisions of
section 9(a), solely with respect to the
Injunction, subject to the condition in
the application, from October 19, 2010,
until the Commission takes final action
on their application for a permanent
order.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010–26870 Filed 10–22–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63119; File No. 4–546]
Joint Industry Plan; Notice of Filing
and Immediate Effectiveness of
Amendment to the Options Order
Protection and Locked/Crossed Market
Plan To Add the C2 Options Exchange,
Incorporated as a Participant
October 15, 2010.
Pursuant to Section 11A(a)(3) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 608 thereunder,2
notice is hereby given that on October
7, 2010, C2 Options Exchange,
Incorporated (‘‘C2’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) an
amendment to the Options Order
Protection and Locked/Crossed Market
Plan (‘‘Plan’’).3 The amendment
proposes to add C2 as a Participant 4 to
the Plan. The Commission is publishing
this notice to solicit comments on the
proposed rule change from interested
persons.
1 15
U.S.C. 78k–1(a)(3).
CFR 242.608.
3 On July 30, 2009, the Commission approved a
national market system plan relating to Options
Order Protection and Locked/Crossed Markets
proposed by Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’), International Securities
Exchange, LLC (‘‘ISE’’), The NASDAQ Stock Market
LLC (‘‘Nasdaq’’), NASDAQ OMX BX, Inc. (‘‘BOX’’),
NASDAQ OMX PHLX, Inc. (‘‘Phlx’’), NYSE Amex,
LLC (‘‘NYSE Amex’’), and NYSE Arca, Inc. (‘‘NYSE
Arca’’). See Securities Exchange Act Release No.
60405 (July 30, 2009), 74 FR 39362 (August 6,
2009). See also Securities Exchange Act Release No.
61546 (February 19, 2010), 75 FR 8762 (February
25, 2010) (adding BATS Exchange, Inc. (‘‘BATS’’) as
a Participant).
4 The term ‘‘Participant’’ is defined as an Eligible
Exchange whose participation in the Plan has
become effective pursuant to Section 3(c) of the
Plan.
2 17
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Fmt 4703
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I. Description and Purpose of the
Amendment
The current Participants in the
Linkage Plan are CBOE, BATS, ISE,
Nasdaq, BOX, Phlx, NYSE Amex, and
NYSE Arca. The proposed amendment
to the Plan would add C2 as a
Participant in the Plan. C2 has
submitted a signed copy of the Plan to
the Commission in accordance with the
procedures set forth in the Plan
regarding new Participants. Section 3(c)
of the Plan provides for the entry of new
Participants to the Plan. Specifically an
Eligible Exchange 5 may become a
Participant in the Plan by: (i) Executing
a copy of the Plan, as then in effect; (ii)
providing each current Participant with
a copy of such executed Plan; (iii)
effecting an amendment to the Plan, as
specified in Section 4(b) of the Plan.
Section 4(b) of the Plan puts forth the
process by which an Eligible Exchange
may effect an amendment to the Plan.
Specifically, an Eligible Exchange must:
(a) Execute a copy of the Plan with the
only change being the addition of the
new participant’s name in Section 3(a)
of the Plan; and (b) submit the executed
Plan to the Commission. The Plan then
provides that such an amendment will
be effective when the amendment is
approved by the Commission or
otherwise becomes effective pursuant to
Section 11A of the Act and Rule 608
thereunder.
II. Effectiveness of the Proposed
Linkage Plan Amendment
The foregoing proposed Plan
amendment has become effective
pursuant to Rule 608(b)(3)(iii) of the
Act 6 because it involves solely
technical or ministerial matters. At any
time within sixty days of the filing of
this amendment, the Commission may
summarily abrogate the amendment and
require that it be refiled pursuant to
paragraph (b)(1) of Rule 608,7 if it
appears to the Commission that such
5 Section 2(6) of the Plan defines an ‘‘Eligible
Exchange’’ as a national securities exchange
registered with the Commission pursuant to Section
6(a) of the Act, 15 U.S.C. 78f(a), that: (a) Is a
‘‘Participant Exchange’’ in the Options Clearing
Corporation (‘‘OCC’’) (as defined in OCC By-laws,
Section VII); (b) is a party to the Options Price
Reporting Authority (‘‘OPRA’’) Plan (as defined in
the OPRA Plan, Section 1); and (c) if the national
securities exchange chooses not to become part to
this Plan, is a participant in another plan approved
by the Commission providing for comparable
Trade-Through and Locked and Crossed Market
protection. C2 has represented that it has met the
requirements for being considered an Eligible
Exchange. See letter from Edward J. Joyce, President
and Chief Operating Officer, C2, to Elizabeth
Murphy, Secretary, Commission, dated October 6,
2010.
6 17 CFR 242.608(b)(3)(iii).
7 17 CFR 242.608(b)(1).
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]]>Agencies
[Federal Register Volume 75, Number 205 (Monday, October 25, 2010)]
[Notices]
[Pages 65534-65536]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-26870]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. IC-29464; 812-13808]
Citigroup Global Markets Inc., et al.; Notice of Application and
Temporary Order
October 19, 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'').
-----------------------------------------------------------------------
SUMMARY: 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 Citigroup Inc. (``Citigroup'') on October
19, 2010 by the United States District Court for the District of
Columbia (the ``Injunction''), until the Commission takes final action
on an application for a permanent order. Applicants also have applied
for a permanent order.
Applicants: Citigroup Global Markets Inc. (``CGMI''), CEFOF GP I
Corp. (``CEFOF''), CELFOF GP Corp. (``CELFOF''), Citibank, N.A.
(``Citibank''), Citigroup Alternative Investments LLC (``Citigroup
Alternative''), Consulting Group Advisory Services LLC (``Advisory
Services''), Citigroup Capital Partners I GP I Corp. (``CCP I''), and
Citigroup Capital Partners I GP II Corp. (``CCP II'') (collectively,
``Applicants'').\1\
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\1\ Applicants request that any relief granted pursuant to the
application also apply to any other company of which Citigroup is or
hereafter may become an affiliated person within the meaning of
section 2(a)(3) of the Act (together with the Applicants, the
``Covered Persons'').
DATES: Filing Date: The application was filed on July 29, 2010 and
amended on July 30, 2010, and amended on October 19, 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
[[Page 65535]]
by 5:30 p.m. on November 12, 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 and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090. Applicants: CGMI, CEFOF,
CELFOF, CCP I and CCP II, 388 Greenwich Street, New York, NY 10013;
Citibank, 399 Park Avenue, New York, NY 10043; Citigroup Alternative,
731 Lexington Avenue, 28th Floor, New York, NY 10022; and Advisory
Services, 222 Delaware Avenue, Wilmington, DE 19801.
FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-6873, or Mary Kay Frech, Branch Chief, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a temporary order and a
summary of the application. The complete application may be obtained
via the Commission's Web site by searching for the file number, or for
an applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1. Each of the Applicants is either an indirect wholly-owned
subsidiary of Citigroup or is owned by an entity in which Citigroup has
an indirect interest. Citigroup is a global financial holding company
whose businesses provide a broad range of financial services. CGMI is
registered as a broker-dealer under the Securities Exchange Act of 1934
(``Exchange Act'') and serves as principal underwriter for one or more
registered investment companies (``Funds''). Citigroup Alternative and
Advisory Services are registered as investment advisers under the
Investment Advisers Act of 1940 and serve as investment advisers for
one or more Funds. CEFOF, CELOF, Citibank, Citigroup Alternative, CCP I
and CCP II (``ESC Advisers'') serve as investment advisers to certain
employees' securities companies within the meaning of section 2(a)(13)
of the Act, which provide investment opportunities for certain eligible
employees, officers, directors and persons on retainer of Citigroup and
its affiliates (``ESCs'' and included in the term ``Funds'').\2\
---------------------------------------------------------------------------
\2\ Greenwich Street Employees Fund, L.P., et al., Investment
Company Act Release Nos. 25324 (Dec. 21, 2001) (notice) and 25367
(Jan. 16, 2002) (order) (``ESC Order'').
---------------------------------------------------------------------------
2. On October 19, 2010, the United States District Court for the
District of Columbia (``District Court'') entered a judgment against
Citigroup (``Judgment'') in a matter brought by the Commission.\3\ The
Commission alleged in the complaint (``Complaint'') that Citigroup had
violated section 17(a)(2) of the Securities Act of 1933 and section
13(a) of the Exchange Act and Exchange Act rules 12b-20 and 13a-11 in
connection with disclosures made between July 2007 and October 2007
about the subprime exposure in Citigroup's investment banking unit.
Without admitting or denying the allegations in the Complaint, except
as to jurisdiction, Citigroup consented to the entry of the Judgment
that included, among other things, the entry of the Injunction, a civil
penalty of $75 million, and certain undertakings requested by the
District Court.
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\3\ Securities and Exchange Commission v. Citigroup Inc.,
Judgment on Consent Against Defendant Citigroup Inc., Civil Action
No. 1:10-cv-01277 (ESH) (D.D.C. October 19, 2010).
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Applicants' Legal Analysis
1. Section 9(a)(2) of the Act, in relevant part, prohibits a person
who has been enjoined from engaging in or continuing any conduct or
practice in connection with the purchase or sale of a security or in
connection with activities as an underwriter, broker or dealer, from
acting, among other things, as an investment adviser or depositor of
any registered investment company or a principal underwriter for any
registered open-end investment company, registered unit investment
trust or registered face-amount certificate company. Section 9(a)(3) of
the Act makes the prohibition in section 9(a)(2) applicable to a
company, any affiliated person of which has been disqualified under the
provisions of section 9(a)(2). Section 2(a)(3) of the Act defines
``affiliated person'' to include any person directly or indirectly
controlling, controlled by, or under common control with, the other
person. Applicants state that Citigroup is an affiliated person of each
of the Applicants within the meaning of section 2(a)(3) of the Act.
Applicants state that the entry of the Injunction results in Applicants
being subject to the disqualification provisions of section 9(a) of the
Act.
2. Section 9(c) of the Act provides that the Commission shall grant
an application for exemption from the disqualification provisions of
section 9(a) if it is established that these provisions, as applied to
the Applicants, are unduly or disproportionately severe or that the
Applicants' conduct has been such as not to make it against the public
interest or the protection of investors to grant the exemption.
Applicants have filed an application pursuant to section 9(c) seeking a
temporary and permanent order exempting them and Covered Persons from
the disqualification provisions of section 9(a) of the Act.
3. Applicants believe they meet the standard for exemption
specified in section 9(c). Applicants state that the prohibitions of
section 9(a) as applied to the Applicants would be unduly and
disproportionately severe and that the conduct of Applicants has been
such as not to make it against the public interest or the protection of
investors to grant the exemption from section 9(a).
4. Applicants state that the alleged conduct giving rise to the
Injunction did not involve any of the Applicants acting in the capacity
of investment adviser, subadviser or depositor to a Fund, or principal
underwriter for any Fund, and no such Funds bought or held any
securities issued by Citigroup during the period of misconduct alleged
in the Complaint, other than with respect to index Funds. Applicants
also state that none of the current or former directors, officers, or
employees of the Applicants participated in the violative conduct
alleged in the Complaint, with the exception of one employee of an
Applicant. Applicants further state that the personnel at Citigroup who
were involved in the violations alleged in the Complaint are either no
longer employed at Citigroup or have had no and will not have any
future involvement in providing advisory, subadvisory or depository
services to the Funds, or principal underwriting services to the Funds.
5. Applicants state that the inability of the Applicants to
continue to serve as investment adviser, depositor or principal
underwriter to the Funds would result in potentially severe financial
hardships for the Funds and their shareholders. The Applicants have
distributed, or will distribute as soon as reasonably practical,
written materials, including an offer to meet in person to discuss the
materials, to the board of directors of each Fund, including the
directors who are not ``interested persons,'' as defined in section
2(a)(19) of the Act, of such Fund, and their independent legal counsel
as defined in rule 0-1(a)(6) under the Act, if any, regarding the
Judgment, any impact on the Funds, and the application. The Applicants
state they will provide the
[[Page 65536]]
Funds with all information concerning the Judgment and the application
that is necessary for the Funds to fulfill their disclosure and other
obligations under the Federal securities laws.
6. Applicants also state that, if they were barred from continuing
to serve as investment adviser or principal underwriter to the Funds,
the effect on their businesses and employees would be severe.
Applicants state that they have committed substantial resources to
establish an expertise in providing services covered by section 9(a) of
the Act to Funds. Applicants further state that prohibiting them from
continuing to serve as investment adviser or principal underwriter to
Funds would not only adversely affect their businesses, but would also
adversely affect approximately 250 employees that are involved in those
activities. Applicants also state that disqualifying the ESC Advisers
from continuing to provide investment advisory services to ESCs is not
in the public interest or in furtherance of the protection of
investors. Because the ESCs have been formed for certain eligible,
officers, directors and persons on retainer of Citigroup and its
affiliates, it would not be consistent with the purposes of the ESC
provisions of the Act or the ESC Order to require another entity not
affiliated with Citigroup to manage the ESCs. In addition,
participating employees of Citigroup and its affiliates subscribed for
interests with the expectation that the ESCs would be managed by an
affiliate of Citigroup.
7. Applicants previously have received exemptions under section
9(c) as the result of conduct that triggered section 9(a) as described
in greater detail in the application.
Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
Any temporary exemption granted pursuant to the application shall
be without prejudice to, and shall not limit the Commission's rights in
any manner with respect to, any Commission investigation of, or
administrative proceedings involving or against, Covered Persons,
including without limitation, the consideration by the Commission of a
permanent exemption from section 9(a) of the Act requested pursuant to
the application or the revocation or removal of any temporary
exemptions granted under the Act in connection with the application.
Temporary Order
The Commission has considered the matter and finds that Applicants
have made the necessary showing to justify granting a temporary
exemption.
Accordingly,
It is hereby ordered, pursuant to section 9(c) of the Act, that the
Applicants and any other Covered Persons are granted a temporary
exemption from the provisions of section 9(a), solely with respect to
the Injunction, subject to the condition in the application, from
October 19, 2010, until the Commission takes final action on their
application for a permanent order.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-26870 Filed 10-22-10; 8:45 am]
BILLING CODE 8011-01-P
