Kohlberg Capital Corporation; Notice of Application, 14447-14450 [2012-5732]
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Federal Register / Vol. 77, No. 47 / Friday, March 9, 2012 / Notices
For the Nuclear Regulatory Commission.
Melanie A. Galloway,
Acting Director, Division of License Renewal,
Office of Nuclear Reactor Regulation.
II. Background
The NRC issues LR–ISGs to
communicate insights and lessons
learned and to address emergent issues
not covered in license renewal guidance
documents, such as the GALL Report
and SRP–LR. In this way, the NRC staff
and stakeholders may use the guidance
in an LR–ISG document before it is
incorporated into a formal license
renewal guidance document revision.
The NRC staff issues LR–ISG in
accordance with the LR–ISG Process,
Revision 2 (ADAMS Accession No.
ML100920158), for which a notice of
availability was published in the
Federal Register on June 22, 2010
(75 FR 35510).
The NRC staff has developed draft
LR–ISG–2011–03 to (a) include
inspection recommendations for plants
that will not have a cathodic protection
system in the period of extended
operation, (b) remove the
recommendation to volumetrically
inspect underground piping to detect
internal corrosion, (c) base further
increased inspection sample sizes on an
analysis of extent of cause and extent of
condition when adverse conditions are
detected in the initial and subsequent
doubled sample size rather than
continuing to double the sample size,
(d) add a recommendation that where
damage to the coating is significant and
the damage was caused by nonconforming backfill, an extent of
condition evaluation should be
conducted to ensure that the as-left
condition of backfill in the vicinity of
observed damage will not lead to further
degradation, (e) add specific acceptance
criteria for cathodic protection surveys,
(f) add the specific preventive and
mitigative actions utilized by the AMP
in the FSAR Supplement description of
the program as contained in the SRP–
LR, and (g) make miscellaneous and
editorial changes.
srobinson on DSK4SPTVN1PROD with NOTICES
not edit comment submissions to
remove such information before making
the comment submissions available to
the public or entering the comment
submissions into ADAMS.
BILLING CODE 7590–01–P
Proposed Action
By this action, the NRC is requesting
public comments on draft LR–ISG–
2011–03. This LR–ISG proposes certain
revisions to NRC guidance on
implementation of the requirements in
10 CFR Part 54. The NRC staff will make
a final determination regarding issuance
of the LR–ISG after it considers any
public comments received in response
to this request.
Dated at Rockville, Maryland, this 1st day
of March 2012.
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[FR Doc. 2012–5743 Filed 3–8–12; 8:45 am]
POSTAL SERVICE
Board of Governors; Sunshine Act
Meeting
Board Votes to Close March 1, 2012,
Meeting
By telephone vote on March 1, 2012,
members of the Board of Governors of
the United States Postal Service met and
voted unanimously to close to public
observation its meeting held in
Washington, DC, via teleconference. The
Board determined that no earlier public
notice was possible.
ITEMS CONSIDERED:
1. Strategic Issues.
2. Financial Matters.
GENERAL COUNSEL CERTIFICATION: The
General Counsel of the United States
Postal Service has certified that the
meeting was properly closed under the
Government in the Sunshine Act.
CONTACT PERSON FOR MORE INFORMATION:
Requests for information about the
meeting should be addressed to the
Secretary of the Board, Julie S. Moore,
at (202) 268–4800.
Julie S. Moore,
Secretary.
[FR Doc. 2012–5850 Filed 3–7–12; 11:15 am]
BILLING CODE 7710–12–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
29975; File No. 812–13882]
Kohlberg Capital Corporation; Notice
of Application
March 5, 2012.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under section 6(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from section
12(d)(3) of the Act.
AGENCY:
Kohlberg Capital
Corporation (the ‘‘Company’’).
SUMMARY OF APPLICATION: Applicant
requests an order (‘‘Order’’) of the
Commission pursuant to section 6(c) of
the Act granting an exemption from the
provisions of section 12(d)(3) of the Act,
APPLICANT:
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14447
to the extent necessary, in order to
permit the Company and its whollyowned holding companies Katonah
Management Holdings LLC (‘‘Katonah
Management’’) and Commodore
Holdings, L.L.C. (‘‘Commodore
Holdings’’ and together with Katonah
Management, the ‘‘Holding
Companies’’) to continue to hold a
greater than 50% equity interest in
Katonah Debt Advisors, LLC (‘‘KDA’’),
Trimaran Advisors, L.L.C. (‘‘Trimaran’’
and together with KDA, the ‘‘Advisers’’),
and the Special Purpose Subsidiaries (as
defined below), each of which is a direct
or indirect wholly-owned portfolio
company of the Company, when the
Advisers and the Special Purpose
Subsidiaries are required to register as
investment advisers under the
Investment Advisers Act of 1940, as
amended (‘‘Advisers Act’’).
FILING DATES: The application was filed
on March 18, 2011, and amended on
September 12, 2011, and March 1, 2012.
Applicant has agreed to file an
amendment during the notice period,
the substance of which is reflected in
this notice.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicant with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on March 26, 2012, and
should be accompanied by proof of
service on applicant, 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: Elizabeth M. Murphy,
Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC, 20549–1090;
Applicant, 295 Madison Avenue, 6th
Floor, New York, NY 10017.
FOR FURTHER INFORMATION CONTACT:
Barbara T. Heussler, Senior Counsel, at
(202) 551–6990, or Jennifer Sawin,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Office of Investment Company
Regulation).
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
SUPPLEMENTARY INFORMATION:
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Federal Register / Vol. 77, No. 47 / Friday, March 9, 2012 / Notices
number, or applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
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Applicant’s Representations
1. The Company, a Delaware
corporation, is a non-diversified, closedend management investment company
that has elected to be regulated as a
business development company
(‘‘BDC’’) under section 54(a) the Act.1
The Company’s investment objective is
to generate current income and capital
appreciation from investments made in
senior secured term loans, mezzanine
debt and selected equity investments in
privately-held middle market
companies. The Company originates
and invests in senior secured term
loans, mezzanine debt and selected
equity securities primarily in middle
market companies. The Company was
formed in 2006 for the purpose of
acquiring 100% of the equity interests
in KDA, and raising capital in an initial
public offering (‘‘Formation
Transactions’’). On February 29, 2012,
the Company acquired 100% of the
equity interests in Trimaran, an
unregistered investment adviser (the
‘‘Trimaran Transaction’’).2 Trimaran
was acquired as a wholly-owned
subsidiary of Commodore Holdings,
which is a newly formed wholly-owned
subsidiary of the Company. The
Company is and will continue to be an
internally managed BDC. In connection
with the Formation Transactions, KDA
became a wholly-owned portfolio
company of the Company. In connection
with the Trimaran Transaction,
Trimaran became an indirect whollyowned portfolio company of the
Company. The Company, the Advisers
and the Special Purpose Subsidiaries
are directly or indirectly overseen by the
Company’s eight member board of
directors (‘‘Board’’), of whom five are
not considered ‘‘interested persons’’ of
the Company within the meaning of
section 2(a)(19) of the Act.
2. The Advisers manage certain
unregistered collateralized loan
obligation funds that invest in broadly
syndicated loans, high yield bonds and
1 Section 2(a)(48) of the Act defines a BDC to be
any closed-end investment company that operates
for the purpose of making investments in securities
described in sections 55(a)(1) through 55(a)(3) of the
Act, makes available significant managerial
assistance with respect to the issuers of such
securities, and has elected to be subject to sections
55 through 65 of the Act.
2 The Advisers and the Special Purpose
Subsidiaries currently rely on the exemption set
forth in section 203(b)(3) of the Advisers Act, which
provides generally that an investment adviser with
fewer than 15 clients is not required to register
under the Advisers Act. As discussed below, this
exemption has been eliminated.
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other credit instruments (‘‘CLO
Funds’’).3 The Advisers and the Special
Purpose Subsidiaries do not currently
offer any other investment advisory
services or provide services to any other
entities other than the CLO Funds. The
Advisers receive contractual and
recurring management fees and may
also receive incentive fees from the CLO
Funds for management and advisory
services. The Company expects to
receive dividends of earnings from the
Advisers that are derived from recurring
fee income and to generate capital
appreciation from its investment in the
asset management business of the
Advisers. Alternatively, for internal
structuring purposes, these fees may be
paid to certain special purpose vehicles
that are direct or indirect wholly-owned
subsidiaries of the Company (each a
‘‘Special Purpose Subsidiary’’).4 The
revenue that the Advisers and the
Special Purpose Subsidiaries generate
through the fees they receive for
managing the CLO Funds and after
paying the expenses associated with its
operations, including compensation of
employees, may be distributed to the
Company as dividends.5
3. The Company has made an election
to be treated for tax purposes as a
regulated investment company (‘‘RIC’’).
The fee income received by the Advisers
and the Special Purpose Subsidiaries in
connection with the provision of
services to the CLO Funds could impair
the Company’s RIC status if the
Company earned such income directly.
Therefore, in order for the Company to
maintain its RIC status while continuing
to receive this income, the Company
believes that it is in the best interests of
the Company and its shareholders for
the Advisers and the Special Purpose
Subsidiaries to continue to receive fees
from the CLO Funds instead of the
Company receiving such fees directly.
3 The
CLO Funds are not registered as
‘‘investment companies’’ under the Act in reliance
on section 3(c)(1) or 3(c)(7) of the Act, which
excepts certain funds from the definition of
investment company.
4 The Special Purpose Subsidiaries are currently
wholly owned subsidiaries of Katonah Management
Company. In the future, Special Purpose
Subsidiaries may be wholly owned directly or
indirectly by the Advisers, Katonah Management,
Commodore Holdings, or another holding company
wholly owned by the Company. Currently, the
Company’s only subsidiaries are KDA, Trimaran,
the Holding Companies, the Special Purpose
Subsidiaries, and Kohlberg Capital Funding LLC I
and KCAP Funding, two wholly owned, special
purpose financing subsidiaries.
5 The Company has invested in the CLO Funds
managed by the Advisers and the Special Purpose
Subsidiaries and expects to invest in future CLO
Funds to be managed by the Advisers and the
Special Purpose Subsidiaries for which the
Company expects to receive a current cash return.
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4. The Private Fund Investment
Advisers Registration Act of 2010 (the
‘‘2010 Act’’) 6 eliminated the exemption
from investment advisor registration on
which the Advisers and the Special
Purpose Subsidiaries have relied, and
they will be required to register with the
Commission as investment advisers
under the Advisers Act.7 The Company
states that if relief is not granted, the
Company will likely be forced to decide
between losing its RIC status,
terminating its relationship with the
Advisers and the Special Purpose
Subsidiaries, or limiting the dollar
amount of assets that the Adviser and
the Special Purpose Subsidiaries
manage in order to avoid them having
to register as investment advisers with
the Commission.
Applicant’s Legal Analysis
1. Section 12(d)(3) of the Act makes
it unlawful for any registered
investment company and any company
controlled by such registered
investment company,8 to purchase or
otherwise acquire any security issued by
or any other interest in certain
securities-related businesses, including
the business of any person who is an
investment adviser registered under the
Advisers Act, unless (a) such person is
a corporation all the outstanding
securities of which are owned by one or
more registered investment companies;
and (b) such person is primarily
engaged in the business of underwriting
and distributing securities issued by
other persons, selling securities to
customers, or any one or more of such
or related activities, and the gross
income of such person normally is
derived principally from such business
or related activities. Section 60 of the
Act provides that section 12 shall apply
to a BDC to the same extent as if it were
6 Title IV of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, Public Law 111–203,
124 Stat. 1376 (2010).
7 None of the Advisers or Special Purpose
Subsidiaries is expected to qualify for an exemption
from registration under the rules the Commission
recently adopted. See Exemptions for Advisers to
Venture Capital Funds, Private Fund Advisers With
Less Than $150 Million in Assets Under
Management, and Foreign Private Advisers,
Investment Advisers Act Release No. IA–3222 (Jun.
22, 2011). The Company intends to register KDA
and the Special Purpose Subsidiaries on a single
application for registration. See Commission staff
letter issued January 18, 2012, to the American Bar
Association Business Law Section, Subcommittee
on Hedge Funds (‘‘2012 ABA Letter’’). Trimaran
intends to register separately as an investment
adviser. The Company will not own any security or
other interest in any investment adviser that will
not be registered under the Advisers Act.
8 The Holding Companies are wholly owned by
the Company, and therefore are subject to section
12(d)(3).
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Federal Register / Vol. 77, No. 47 / Friday, March 9, 2012 / Notices
srobinson on DSK4SPTVN1PROD with NOTICES
a registered closed-end investment
company.
2. Section 6(c) of the Act provides that
the Commission may conditionally or
unconditionally exempt any person,
security, or transaction from any
provision of the Act or any rule
thereunder, if and to the extent that
such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act.
3. It is not expected that the Advisers
or the Special Purpose Subsidiaries
would also be broker-dealers that are
primarily engaged in the business of
underwriting and distributing securities
issued by other persons. The ownership
of the Advisers and the Special Purpose
Subsidiaries, at such point as it becomes
necessary for them to register as
investment advisers, could thus cause
the Company (and the Holding
Companies) to be in violation of section
12(d)(3) of the Act.9
4. The Company requests an order
pursuant to section 6(c) of the Act
granting an exemption from the
provisions of section 12(d)(3) of the Act,
to the extent necessary to permit the
Company (and the Holding Companies)
to continue to hold a greater than 50%
equity interest in the Advisers and the
Special Purpose Subsidiaries, when the
Advisers and the Special Purpose
Subsidiaries are required to register as
investment advisers under the Advisers
Act.
5. The Company states that section
12(d)(3) was intended to safeguard
investment companies from (a)
entrepreneurial risks of securities
related businesses, and (b) conflicts of
interest and reciprocal practices
between investment companies and
securities related businesses.
6. The Company does not believe a
greater than 50% ownership of the
Advisers or the ownership of the
Special Purpose Subsidiaries presents
the potential for the type of abuse
intended to be eliminated by section
12(d)(3) of the Act. The Company’s and
Holding Companies’ ownership and
control of the Advisers and the Special
Purpose Subsidiaries does not raise the
concerns regarding entrepreneurial risks
and conflicts of interests and reciprocal
9 Rule 12d3–1 under the Act provides certain
limited relief from the restrictions of section
12(d)(3). Since the Company expects that a
significant portion of the Advisers and the Special
Purpose Subsidiaries’ gross revenues will be
derived from ‘‘securities related activities’’ as
defined in rule 12d3–1, and since the Company
owns all of the outstanding securities of the
Advisers and the Special Purpose Subsidiaries, rule
12d3–1 does not appear to be available.
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practices. The Company notes that the
form of organization of most securities
related businesses has changed since the
time section 12(d)(3) was enacted, from
privately held general partnerships to
corporate forms that are characterized
by limited liability. The Company’s
ownership of the Advisers and the
Special Purpose Subsidiaries does not
expose its shareholders to unlimited
liability because the Advisers and the
Special Purpose Subsidiaries are each
organized as a separate entity and are
structured as limited liability
companies, not partnerships.
7. Applicant also asserts that the
Company’s and Holding Companies’
ownership and control of the Advisers
and the Special Purpose Subsidiaries do
not present potential conflicts of interest
and reciprocal practices. The Company
owns 100% of the equity interests in the
Advisers and the Special Purpose
Subsidiaries and, as a result, exercises
total control over the strategic direction
of the Advisers and the Special Purpose
Subsidiaries, including the power to
control the policies that affect the
Company and to protect the Company
from potential conflicts of interest and
reciprocal practices. The investment
focus of the CLO Funds and the
Company are distinct and generally do
not overlap.10 Furthermore, the CLO
Funds do not hold securities of the
Advisers or Special Purpose
Subsidiaries or the Company, and the
Advisers and the Special Purpose
Subsidiaries do not serve as investment
adviser, underwriter or promoter to the
Company.
8. No advisory personnel employed
by the Company or any of its investment
adviser subsidiaries are involved in any
advisory businesses or activities outside
of the Company’s ownership and
control, except for certain principals of
Trimaran (the ‘‘Trimaran Principals’’).
These principals serve as employees of
Trimaran, serve as directors of the
Company, and are also the principals
10 In the unusual circumstance where the
Company and the CLO Funds invest in the same
security, the policies and procedures of the
Company and the Advisers and the Special Purpose
Subsidiaries govern the allocation of investment
opportunities. These policies provide that
investment opportunities are allocated according to
‘‘optimum investment amounts’’ for the Company
and the CLO Funds based on criteria such as
investment objectives, diversification cash flow,
liquidity requirements and asset allocation targets
specific to each CLO Fund. If the total investment
is unavailable, the allocation available is generally
allocated among investing entities pro rata based on
the optimum investment amount. The Company,
the Advisers and Special Purpose Subsidiaries have
also adopted other policies and procedures to
address potential conflicts, including but not
limited to, allocation of expenses, personal
securities trading, insider trading and
confidentiality of proprietary information.
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14449
and sole owners of a registered
investment adviser that is not an
affiliated person (as defined in section
2(a)(3) of the Act) of the Company
(together with any adviser that is a
‘‘relying adviser’’ (as that term is used
in the 2012 ABA Letter) of such
registered investment adviser, the
‘‘Unaffiliated Adviser’’). No new
investments are currently being
recommended to the Unaffiliated
Adviser’s clients. Furthermore, the
investment strategies of the CLO Funds
and the Unaffiliated Adviser’s clients
(the ‘‘Unaffiliated Adviser Clients’’) 11
do not overlap. The Company, the
Advisers, the Special Purpose
Subsidiaries, and the CLO Funds shall
not invest in the same securities or
investments as the Unaffiliated Adviser
or the Unaffiliated Adviser Clients.
9. The Company asserts that allowing
the Company and Holding Companies to
own the Advisers and the Special
Purpose Subsidiaries after they have
registered as advisers under the
Advisers Act is not only consistent with
the protection of investors, but it
benefits the Company and its
shareholders by ultimately increasing its
gross revenues and net income. The
Company’s Board found that the
continued investment by the Company
in the Advisers and Special Purpose
Subsidiaries is in the best interests of
the Company and its shareholders.
Moreover, if the requested relief is not
granted, the Company, and, thus, the
Company’s shareholders, will likely
suffer the harm of either losing some or
all of the benefit of the income from
owning the Advisers and Special
Purpose Subsidiary business or
potentially losing the benefit of the
Company’s RIC status.
10. For the foregoing reasons, the
Company believes that permitting the
Company and the Holding Companies to
continue to hold a greater than 50%
equity interest of each Adviser and to
hold each Special Purpose Subsidiary
after their registration as an investment
adviser under the Advisers Act is in the
best interests of the Company and its
shareholders, appropriate in the public
interest, and consistent with the
protection of investors and the purposes
fairly intended by the policies and
provisions of the Act.
11 The term ‘‘Unaffiliated Adviser Clients’’
includes the current clients of the Unaffiliated
Adviser and any future advisory clients of the
Unaffiliated Adviser so long as any Trimaran
Principal is employed by, or on the Board of, the
Company or any investment adviser owned by the
Company.
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Applicant’s Conditions
The Company agrees that the order
granting the requested relief will be
subject to the following conditions:
1. The Company will not dispose of
its interests in an Adviser if, as a result,
the Company would own, directly or
indirectly, 50% or less of the
outstanding voting interests or
economic interests in that Adviser
unless the Company disposes of 100%
of its interests in such Adviser.
2. The Board will review at least
annually the investment management
business of the Company, the Advisers
and the Special Purpose Subsidiaries in
order to determine whether the benefits
derived by the Company warrant the
continuation of the ownership by the
Company of the Advisers and the
Special Purpose Subsidiaries and, if
appropriate, will approve (by at least a
majority of the directors of the Company
who are not ‘‘interested persons’’ of the
Company as defined by the Act) at least
annually, such continuation.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–5732 Filed 3–8–12; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–66511; File No. SR–NSX–
2012–04]
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change To Amend
the NSX Fee and Rebate Schedule
March 5, 2012.
srobinson on DSK4SPTVN1PROD with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 1,
2012, National Stock Exchange, Inc.
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
National Stock Exchange, Inc.
(‘‘NSX®’’ or ‘‘Exchange’’) is proposing to
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
1 15
amend its Fee and Rebate Schedule (the
‘‘Fee Schedule’’) issued pursuant to
Exchange Rule 16.1(c) to adjust the
rebates for certain orders executed in
the Exchange’s Automatic Execution
Mode, amend the fee tiers for certain
orders executed in the Exchange’s Order
Delivery Mode, adjust the routing fee,
and establish a fee for receipt of the
Exchange’s Depth of Book feed.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.nsx.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
1. Purpose
With this rule change, the Exchange is
proposing to modify the Fee Schedule
in four respects. First, the proposed rule
change would amend the rebates
applicable to liquidity adding orders in
securities priced at least one dollar in
the Exchange’s Automatic Execution
Mode of order interaction (‘‘AutoEx’’).
Second, the proposed rule change
would amend the rebate tiers applicable
to orders in securities priced at least one
dollar in the Exchange’s Order Delivery
Mode of order interaction (‘‘Order
Delivery’’). Third, the proposed rule
change would increase the order routing
fee from $0.0029 to $0.0030 per share.
Finally, the proposed rule change would
establish a fee applicable to direct
recipients of the Exchange’s Depth of
Book (‘‘DOB’’) feed. Each of the
proposed changes is further addressed
below.
Rebates for Securities Priced at Least
One Dollar in AutoEx
The proposed rule change proposes to
modify the rebates applicable to
liquidity adding orders in securities
priced one dollar or more in AutoEx.
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These changes can be found in Section
I of the Fee Schedule.
Currently, for Tape A and C
securities, the Exchange offers a rebate
in AutoEx for displayed orders that add
liquidity based upon an ETP Holder’s
Liquidity Adding ADV (as such term is
defined in Endnote 3 of the Fee
Schedule). For Tape A and C securities,
the Exchange offers per share rebates of
$0.0026 or $0.0029 depending on
whether the ETP Holder has achieved a
Liquidity Adding ADV of at least 10
million. For Tape B securities, the
Exchange currently offers a rebate of
$0.0030 per share. The proposed rule
change would eliminate all rebate
volume tiers in AutoEx and establish a
flat $0.0026 rebate per share for
liquidity adding orders of securities of
at least one dollar, regardless of an ETP
Holder’s Liquidity Adding ADV or
whether the security is Tape A, B or C.
Corresponding edits are made to
Endnote 3 to reflect the elimination of
the distinction between Tapes A, B and
C with respect to this rebate.
For Zero Display Orders (as defined in
Endnote 4 of the Fee Schedule) that add
liquidity in AutoEx, the Exchange
currently offers a rebate of $0.0025 per
share if an ETP Holder’s Total ADV (as
defined in Endnote 5 of the Fee
Schedule) is at least 30 million and
Liquidity Adding ADV is at least 5
million. The proposed fee change would
eliminate this rebate altogether, such
that there would be no rebate associated
with such orders. The defined term
‘‘Total ADV’’ would also be deleted
from Endnote 5 of the Fee Schedule as
no longer utilized.
Rebates for Securities Priced at Least
One Dollar in Order Delivery
As reflected in Section II of the Fee
Schedule, for all liquidity adding
displayed orders of securities priced at
least one dollar in Order Delivery, the
Exchange currently offers a $0.0008 or
$0.0024 per share rebate depending on
whether an ETP Holder’s Liquidity
Adding ADV is between one and 5
million, or over 5 million, respectively.
The proposed rule filing would adjust
these tiers and rebates such that an
$0.0008 per share rebate would apply to
each Order Delivery displayed order
that adds liquidity where an ETP
Holder’s Liquidity Adding ADV is less
than 15 million, or a $0.0024 per share
rebate would apply to each such order
where an ETP Holder’s Liquidity
Adding ADV is at least 15 million.
In addition, for Zero Display Reserve
Orders in Order Delivery of securities
priced at least one dollar, the current
rebate tiers, depending on Liquidity
Adding ADV, of between $0.0008 and
E:\FR\FM\09MRN1.SGM
09MRN1
]]>Agencies
[Federal Register Volume 77, Number 47 (Friday, March 9, 2012)]
[Notices]
[Pages 14447-14450]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-5732]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29975; File No. 812-13882]
Kohlberg Capital Corporation; Notice of Application
March 5, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
section 12(d)(3) of the Act.
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Applicant: Kohlberg Capital Corporation (the ``Company'').
Summary of Application: Applicant requests an order (``Order'') of the
Commission pursuant to section 6(c) of the Act granting an exemption
from the provisions of section 12(d)(3) of the Act, to the extent
necessary, in order to permit the Company and its wholly-owned holding
companies Katonah Management Holdings LLC (``Katonah Management'') and
Commodore Holdings, L.L.C. (``Commodore Holdings'' and together with
Katonah Management, the ``Holding Companies'') to continue to hold a
greater than 50% equity interest in Katonah Debt Advisors, LLC
(``KDA''), Trimaran Advisors, L.L.C. (``Trimaran'' and together with
KDA, the ``Advisers''), and the Special Purpose Subsidiaries (as
defined below), each of which is a direct or indirect wholly-owned
portfolio company of the Company, when the Advisers and the Special
Purpose Subsidiaries are required to register as investment advisers
under the Investment Advisers Act of 1940, as amended (``Advisers
Act'').
Filing Dates: The application was filed on March 18, 2011, and amended
on September 12, 2011, and March 1, 2012. Applicant has agreed to file
an amendment during the notice period, the substance of which is
reflected in this notice.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicant with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on March 26, 2012, and should be accompanied by proof of
service on applicant, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC, 20549-1090; Applicant,
295 Madison Avenue, 6th Floor, New York, NY 10017.
FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel,
at (202) 551-6990, or Jennifer Sawin, 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
[[Page 14448]]
number, or applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicant's Representations
1. The Company, a Delaware corporation, is a non-diversified,
closed-end management investment company that has elected to be
regulated as a business development company (``BDC'') under section
54(a) the Act.\1\ The Company's investment objective is to generate
current income and capital appreciation from investments made in senior
secured term loans, mezzanine debt and selected equity investments in
privately-held middle market companies. The Company originates and
invests in senior secured term loans, mezzanine debt and selected
equity securities primarily in middle market companies. The Company was
formed in 2006 for the purpose of acquiring 100% of the equity
interests in KDA, and raising capital in an initial public offering
(``Formation Transactions''). On February 29, 2012, the Company
acquired 100% of the equity interests in Trimaran, an unregistered
investment adviser (the ``Trimaran Transaction'').\2\ Trimaran was
acquired as a wholly-owned subsidiary of Commodore Holdings, which is a
newly formed wholly-owned subsidiary of the Company. The Company is and
will continue to be an internally managed BDC. In connection with the
Formation Transactions, KDA became a wholly-owned portfolio company of
the Company. In connection with the Trimaran Transaction, Trimaran
became an indirect wholly-owned portfolio company of the Company. The
Company, the Advisers and the Special Purpose Subsidiaries are directly
or indirectly overseen by the Company's eight member board of directors
(``Board''), of whom five are not considered ``interested persons'' of
the Company within the meaning of section 2(a)(19) of the Act.
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\1\ Section 2(a)(48) of the Act defines a BDC to be any closed-
end investment company that operates for the purpose of making
investments in securities described in sections 55(a)(1) through
55(a)(3) of the Act, makes available significant managerial
assistance with respect to the issuers of such securities, and has
elected to be subject to sections 55 through 65 of the Act.
\2\ The Advisers and the Special Purpose Subsidiaries currently
rely on the exemption set forth in section 203(b)(3) of the Advisers
Act, which provides generally that an investment adviser with fewer
than 15 clients is not required to register under the Advisers Act.
As discussed below, this exemption has been eliminated.
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2. The Advisers manage certain unregistered collateralized loan
obligation funds that invest in broadly syndicated loans, high yield
bonds and other credit instruments (``CLO Funds'').\3\ The Advisers and
the Special Purpose Subsidiaries do not currently offer any other
investment advisory services or provide services to any other entities
other than the CLO Funds. The Advisers receive contractual and
recurring management fees and may also receive incentive fees from the
CLO Funds for management and advisory services. The Company expects to
receive dividends of earnings from the Advisers that are derived from
recurring fee income and to generate capital appreciation from its
investment in the asset management business of the Advisers.
Alternatively, for internal structuring purposes, these fees may be
paid to certain special purpose vehicles that are direct or indirect
wholly-owned subsidiaries of the Company (each a ``Special Purpose
Subsidiary'').\4\ The revenue that the Advisers and the Special Purpose
Subsidiaries generate through the fees they receive for managing the
CLO Funds and after paying the expenses associated with its operations,
including compensation of employees, may be distributed to the Company
as dividends.\5\
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\3\ The CLO Funds are not registered as ``investment companies''
under the Act in reliance on section 3(c)(1) or 3(c)(7) of the Act,
which excepts certain funds from the definition of investment
company.
\4\ The Special Purpose Subsidiaries are currently wholly owned
subsidiaries of Katonah Management Company. In the future, Special
Purpose Subsidiaries may be wholly owned directly or indirectly by
the Advisers, Katonah Management, Commodore Holdings, or another
holding company wholly owned by the Company. Currently, the
Company's only subsidiaries are KDA, Trimaran, the Holding
Companies, the Special Purpose Subsidiaries, and Kohlberg Capital
Funding LLC I and KCAP Funding, two wholly owned, special purpose
financing subsidiaries.
\5\ The Company has invested in the CLO Funds managed by the
Advisers and the Special Purpose Subsidiaries and expects to invest
in future CLO Funds to be managed by the Advisers and the Special
Purpose Subsidiaries for which the Company expects to receive a
current cash return.
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3. The Company has made an election to be treated for tax purposes
as a regulated investment company (``RIC''). The fee income received by
the Advisers and the Special Purpose Subsidiaries in connection with
the provision of services to the CLO Funds could impair the Company's
RIC status if the Company earned such income directly. Therefore, in
order for the Company to maintain its RIC status while continuing to
receive this income, the Company believes that it is in the best
interests of the Company and its shareholders for the Advisers and the
Special Purpose Subsidiaries to continue to receive fees from the CLO
Funds instead of the Company receiving such fees directly.
4. The Private Fund Investment Advisers Registration Act of 2010
(the ``2010 Act'') \6\ eliminated the exemption from investment advisor
registration on which the Advisers and the Special Purpose Subsidiaries
have relied, and they will be required to register with the Commission
as investment advisers under the Advisers Act.\7\ The Company states
that if relief is not granted, the Company will likely be forced to
decide between losing its RIC status, terminating its relationship with
the Advisers and the Special Purpose Subsidiaries, or limiting the
dollar amount of assets that the Adviser and the Special Purpose
Subsidiaries manage in order to avoid them having to register as
investment advisers with the Commission.
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\6\ Title IV of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, Public Law 111-203, 124 Stat. 1376 (2010).
\7\ None of the Advisers or Special Purpose Subsidiaries is
expected to qualify for an exemption from registration under the
rules the Commission recently adopted. See Exemptions for Advisers
to Venture Capital Funds, Private Fund Advisers With Less Than $150
Million in Assets Under Management, and Foreign Private Advisers,
Investment Advisers Act Release No. IA-3222 (Jun. 22, 2011). The
Company intends to register KDA and the Special Purpose Subsidiaries
on a single application for registration. See Commission staff
letter issued January 18, 2012, to the American Bar Association
Business Law Section, Subcommittee on Hedge Funds (``2012 ABA
Letter''). Trimaran intends to register separately as an investment
adviser. The Company will not own any security or other interest in
any investment adviser that will not be registered under the
Advisers Act.
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Applicant's Legal Analysis
1. Section 12(d)(3) of the Act makes it unlawful for any registered
investment company and any company controlled by such registered
investment company,\8\ to purchase or otherwise acquire any security
issued by or any other interest in certain securities-related
businesses, including the business of any person who is an investment
adviser registered under the Advisers Act, unless (a) such person is a
corporation all the outstanding securities of which are owned by one or
more registered investment companies; and (b) such person is primarily
engaged in the business of underwriting and distributing securities
issued by other persons, selling securities to customers, or any one or
more of such or related activities, and the gross income of such person
normally is derived principally from such business or related
activities. Section 60 of the Act provides that section 12 shall apply
to a BDC to the same extent as if it were
[[Page 14449]]
a registered closed-end investment company.
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\8\ The Holding Companies are wholly owned by the Company, and
therefore are subject to section 12(d)(3).
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2. Section 6(c) of the Act provides that the Commission may
conditionally or unconditionally exempt any person, security, or
transaction from any provision of the Act or any rule thereunder, if
and to the extent that such exemption is necessary or appropriate in
the public interest and consistent with the protection of investors and
the purposes fairly intended by the policy and provisions of the Act.
3. It is not expected that the Advisers or the Special Purpose
Subsidiaries would also be broker-dealers that are primarily engaged in
the business of underwriting and distributing securities issued by
other persons. The ownership of the Advisers and the Special Purpose
Subsidiaries, at such point as it becomes necessary for them to
register as investment advisers, could thus cause the Company (and the
Holding Companies) to be in violation of section 12(d)(3) of the
Act.\9\
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\9\ Rule 12d3-1 under the Act provides certain limited relief
from the restrictions of section 12(d)(3). Since the Company expects
that a significant portion of the Advisers and the Special Purpose
Subsidiaries' gross revenues will be derived from ``securities
related activities'' as defined in rule 12d3-1, and since the
Company owns all of the outstanding securities of the Advisers and
the Special Purpose Subsidiaries, rule 12d3-1 does not appear to be
available.
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4. The Company requests an order pursuant to section 6(c) of the
Act granting an exemption from the provisions of section 12(d)(3) of
the Act, to the extent necessary to permit the Company (and the Holding
Companies) to continue to hold a greater than 50% equity interest in
the Advisers and the Special Purpose Subsidiaries, when the Advisers
and the Special Purpose Subsidiaries are required to register as
investment advisers under the Advisers Act.
5. The Company states that section 12(d)(3) was intended to
safeguard investment companies from (a) entrepreneurial risks of
securities related businesses, and (b) conflicts of interest and
reciprocal practices between investment companies and securities
related businesses.
6. The Company does not believe a greater than 50% ownership of the
Advisers or the ownership of the Special Purpose Subsidiaries presents
the potential for the type of abuse intended to be eliminated by
section 12(d)(3) of the Act. The Company's and Holding Companies'
ownership and control of the Advisers and the Special Purpose
Subsidiaries does not raise the concerns regarding entrepreneurial
risks and conflicts of interests and reciprocal practices. The Company
notes that the form of organization of most securities related
businesses has changed since the time section 12(d)(3) was enacted,
from privately held general partnerships to corporate forms that are
characterized by limited liability. The Company's ownership of the
Advisers and the Special Purpose Subsidiaries does not expose its
shareholders to unlimited liability because the Advisers and the
Special Purpose Subsidiaries are each organized as a separate entity
and are structured as limited liability companies, not partnerships.
7. Applicant also asserts that the Company's and Holding Companies'
ownership and control of the Advisers and the Special Purpose
Subsidiaries do not present potential conflicts of interest and
reciprocal practices. The Company owns 100% of the equity interests in
the Advisers and the Special Purpose Subsidiaries and, as a result,
exercises total control over the strategic direction of the Advisers
and the Special Purpose Subsidiaries, including the power to control
the policies that affect the Company and to protect the Company from
potential conflicts of interest and reciprocal practices. The
investment focus of the CLO Funds and the Company are distinct and
generally do not overlap.\10\ Furthermore, the CLO Funds do not hold
securities of the Advisers or Special Purpose Subsidiaries or the
Company, and the Advisers and the Special Purpose Subsidiaries do not
serve as investment adviser, underwriter or promoter to the Company.
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\10\ In the unusual circumstance where the Company and the CLO
Funds invest in the same security, the policies and procedures of
the Company and the Advisers and the Special Purpose Subsidiaries
govern the allocation of investment opportunities. These policies
provide that investment opportunities are allocated according to
``optimum investment amounts'' for the Company and the CLO Funds
based on criteria such as investment objectives, diversification
cash flow, liquidity requirements and asset allocation targets
specific to each CLO Fund. If the total investment is unavailable,
the allocation available is generally allocated among investing
entities pro rata based on the optimum investment amount. The
Company, the Advisers and Special Purpose Subsidiaries have also
adopted other policies and procedures to address potential
conflicts, including but not limited to, allocation of expenses,
personal securities trading, insider trading and confidentiality of
proprietary information.
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8. No advisory personnel employed by the Company or any of its
investment adviser subsidiaries are involved in any advisory businesses
or activities outside of the Company's ownership and control, except
for certain principals of Trimaran (the ``Trimaran Principals''). These
principals serve as employees of Trimaran, serve as directors of the
Company, and are also the principals and sole owners of a registered
investment adviser that is not an affiliated person (as defined in
section 2(a)(3) of the Act) of the Company (together with any adviser
that is a ``relying adviser'' (as that term is used in the 2012 ABA
Letter) of such registered investment adviser, the ``Unaffiliated
Adviser''). No new investments are currently being recommended to the
Unaffiliated Adviser's clients. Furthermore, the investment strategies
of the CLO Funds and the Unaffiliated Adviser's clients (the
``Unaffiliated Adviser Clients'') \11\ do not overlap. The Company, the
Advisers, the Special Purpose Subsidiaries, and the CLO Funds shall not
invest in the same securities or investments as the Unaffiliated
Adviser or the Unaffiliated Adviser Clients.
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\11\ The term ``Unaffiliated Adviser Clients'' includes the
current clients of the Unaffiliated Adviser and any future advisory
clients of the Unaffiliated Adviser so long as any Trimaran
Principal is employed by, or on the Board of, the Company or any
investment adviser owned by the Company.
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9. The Company asserts that allowing the Company and Holding
Companies to own the Advisers and the Special Purpose Subsidiaries
after they have registered as advisers under the Advisers Act is not
only consistent with the protection of investors, but it benefits the
Company and its shareholders by ultimately increasing its gross
revenues and net income. The Company's Board found that the continued
investment by the Company in the Advisers and Special Purpose
Subsidiaries is in the best interests of the Company and its
shareholders. Moreover, if the requested relief is not granted, the
Company, and, thus, the Company's shareholders, will likely suffer the
harm of either losing some or all of the benefit of the income from
owning the Advisers and Special Purpose Subsidiary business or
potentially losing the benefit of the Company's RIC status.
10. For the foregoing reasons, the Company believes that permitting
the Company and the Holding Companies to continue to hold a greater
than 50% equity interest of each Adviser and to hold each Special
Purpose Subsidiary after their registration as an investment adviser
under the Advisers Act is in the best interests of the Company and its
shareholders, appropriate in the public interest, and consistent with
the protection of investors and the purposes fairly intended by the
policies and provisions of the Act.
[[Page 14450]]
Applicant's Conditions
The Company agrees that the order granting the requested relief
will be subject to the following conditions:
1. The Company will not dispose of its interests in an Adviser if,
as a result, the Company would own, directly or indirectly, 50% or less
of the outstanding voting interests or economic interests in that
Adviser unless the Company disposes of 100% of its interests in such
Adviser.
2. The Board will review at least annually the investment
management business of the Company, the Advisers and the Special
Purpose Subsidiaries in order to determine whether the benefits derived
by the Company warrant the continuation of the ownership by the Company
of the Advisers and the Special Purpose Subsidiaries and, if
appropriate, will approve (by at least a majority of the directors of
the Company who are not ``interested persons'' of the Company as
defined by the Act) at least annually, such continuation.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-5732 Filed 3-8-12; 8:45 am]
BILLING CODE 8011-01-P
