Saratoga Investment Corp., et al.; Notice of Application, 44700-44701 [2012-18449]
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Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Notices
provides authority for the Commission
to implement registration,
recordkeeping, financial reporting, and
oversight rules with respect to registered
credit rating agencies.
In 2009, the Commission adopted
amendments to Rule 17g–5. Rule 17g–5,
as amended, imposes additional
requirements on NRSROs in order to
address concerns about the integrity of
their credit rating procedures and
methodologies in light of the role they
played in determining credit ratings for
securities collateralized by or linked to
subprime residential mortgages.
Rule 17g–5, as amended, requires
NRSROs to disclose and manage certain
conflicts of interest. The collection of
information obligation imposed by Rule
17g–5 is mandatory for credit rating
agencies that are applying to register or
are registered with the Commission as
NRSROs. Registration with the
Commission as an NRSRO is voluntary.
The Rating Agency Act added a new
Section 15E, ‘‘Registration of Nationally
Recognized Statistical Rating
Organizations’’ (15 U.S.C. 78o–7) to the
Exchange Act. Exchange Act Section
15E(h)(2) provides the Commission with
authority to prohibit, or require the
management and disclosure of, any
potential conflict of interest relating to
the issuance of credit ratings by an
NRSRO (15 U.S.C. 78o–7(h)(2)).
Rule 17g–5, as amended, requires the
disclosure and establishment of
procedures to manage an additional
conflict of interest and prohibits an
NRSRO from issuing a rating for a
structured finance product unless
information about the transaction and
the assets underlying the rated security
are disclosed to certain persons. The
Commission estimates that it will take
10 NRSROs approximately 300 hours to
develop a system, as well as the policies
and procedures, for the disclosures
required by Rule 17g–5, resulting in a
total one-time hour burden of 3,000.
Rule 17g–5, as amended, also requires
disclosures on a transaction by
transaction basis. The Commission
estimates that the total number of
structured finance ratings issued by all
NRSROs in a given year would be
14,880 and that it would take 1 hour per
transaction to make the information
publicly available resulting in a total
aggregate annual burden to the industry
of 14,880 hours.
Rule 17g–5, as amended, also requires
arrangers to disclose certain
information. The Commission estimates
that it would take 200 arrangers subject
to the rule approximately 300 hours to
develop a system, as well as the policies
and procedures, for the disclosures
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required by Rule 17g–5, resulting in a
total one-time hour burden of 60,000.
Rule 17g–5, as amended, also requires
disclosures by arrangers on a transaction
by transaction basis. The Commission
estimates that 200 arrangers would
arrange approximately 20 new
transactions per year and that it would
take 1 hour per transaction to make the
information publicly available, resulting
in a total aggregate annual burden of
4,000 hours.
Rule 17g–5, as amended, also requires
disclosure of information by arrangers
on an ongoing basis that is used by an
NRSRO to undertake credit rating
surveillance on the structured finance
product. The Commission estimates this
disclosure would be required for
approximately 125 transactions a
month, and it would take each
respondent approximately 0.5 hours per
transaction to disclose the information.
Therefore, the Commission estimates
that it would take each respondent
approximately 750 hours on an annual
basis to disclose such information, for a
total aggregate annual burden of 150,000
hours.
Finally, Rule 17g–5, as amended,
requires NRSROs to submit an annual
certification to the Commission. The
Commission estimates that it would take
each NRSRO approximately 2 hours to
complete the certification, resulting in a
total aggregate annual burden of 20
hours.
Accordingly, the total estimated
burden associated with Rule 17g–5 is
63,000 hours on a one-time basis (3,000
+ 60,000 = 63,000) and 168,900 on an
annual basis (14,880 + 150,000 + 4,000
+ 20 = 168,900).
The Commission may not conduct or
sponsor a collection of information
unless it displays a currently valid OMB
control number. No person shall be
subject to any penalty for failing to
comply with a collection of information
subject to the PRA that does not display
a valid OMB control number.
The public may view background
documentation for this information
collection at the following Web site,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503
or by sending an email to:
Shagufta_Ahmed@omb.eop.gov; and (ii)
Thomas Bayer, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 6432 General Green Way,
Alexandria, VA 22312 or send an email
to PRA_Mailbox@sec.gov. Comments
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must be submitted within 30 days of
this notice.
Dated: July 24, 2012.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–18447 Filed 7–27–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
30145; 812–14022]
Saratoga Investment Corp., et al.;
Notice of Application
July 23, 2012.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under section 6(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from sections
18(a) and 61(a) of the Act.
AGENCY:
Saratoga Investment Corp.
(the ‘‘Company’’), Saratoga Investment
Advisors, LLC (the ‘‘Investment
Adviser’’), Saratoga Investment Corp.
SBIC GP, LLC (the ‘‘General Partner’’),
and Saratoga Investment Corp. SBIC LP
(‘‘Saratoga SBIC’’).
SUMMARY OF THE APPLICATION: The
Company requests an order to permit it
to adhere to a modified asset coverage
requirement.
FILING DATES: The application was filed
April 2, 2012. Applicants have 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 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 17, 2012, and
should be accompanied by proof of
service on the 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: Elizabeth M. Murphy,
Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
Applicants: 535 Madison Avenue, NY,
NY 10022.
APPLICANTS:
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Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Notices
FOR FURTHER INFORMATION CONTACT:
Lewis B. Reich, Senior Counsel, at (202)
551–6919, or Jennifer L. 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
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
mstockstill on DSK4VPTVN1PROD with NOTICES
Applicants’ Representations
1. The Company, a Maryland
corporation, is an externally managed,
non-diversified, closed-end
management investment company that
has elected to be regulated as a business
development company (‘‘BDC’’) under
the Act.1 The Company seeks to
generate both current income and
capital appreciation on its investments
primarily through mezzanine debt,
leveraged loans and to a lesser extent
equity. The Investment Adviser, a
Delaware limited liability company, is
the investment adviser to the Company.
The Investment Adviser is registered
under the Investment Advisers Act of
1940.
2. Saratoga SBIC, a Delaware limited
partnership, is a small business
investment company (‘‘SBIC’’) licensed
by the Small Business Administration
(‘‘SBA’’) to operate under the Small
Business Investment Act of 1958
(‘‘SBIA’’). Saratoga SBIC is excluded
from the definition of investment
company by section 3(c)(7) of the Act.
The Company directly owns 99% of
Saratoga SBIC in the form of a limited
partnership interest and is the sole
member of the General Partner. The
General Partner, a Delaware limited
liability company that is a whollyowned subsidiary of the Company,
owns 1% of Saratoga SBIC in the form
of a general partnership interest. The
Company acts as manager of and
investment adviser to Saratoga SBIC.
Applicants’ Legal Analysis
1. The Company requests an
exemption pursuant to section 6(c) of
the Act from the provisions of sections
18(a) and 61(a) of the Act to permit it
to adhere to a modified asset coverage
requirement with respect to any direct
1 Section 2(a)(48) defines a BDC to be any closedend investment company that operates for the
purpose of making investments in securities
described in section 55(a)(1) through 55(a)(3) of the
Act and makes available significant managerial
assistance with respect to the issuers of such
securities.
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or indirect wholly owned subsidiary of
the Company that is licensed by the
SBA to operate under the SBIA as a
SBIC and relies on Section 3(c)(7) for an
exception from the definition of
‘‘investment company’’ under the 1940
Act (each, a ‘‘SBIC Subsidiary’’).2
Applicants state that companies
operating under the SBIA, such as SBIC
Subsidiaries, will be subject to the
SBA’s substantial regulation of
permissible leverage in their capital
structure.
2. Section 18(a) of the Act prohibits a
registered closed-end investment
company from issuing any class of
senior security or selling any such
security of which it is the issuer unless
the company complies with the asset
coverage requirements set forth in that
section. Section 61(a) of the Act makes
section 18 applicable to BDCs, with
certain modifications. Section 18(k)
exempts an investment company
operating as an SBIC from the asset
coverage requirements for senior
securities representing indebtedness
that are contained in section 18(a)(1)(A)
and (B).
3. Applicants state that the Company
may be required to comply with the
asset coverage requirements of section
18(a) (as modified by section 61(a)) on
a consolidated basis because the
Company may be deemed to be an
indirect issuer of any class of senior
security issued by Saratoga SBIC or
another SBIC Subsidiary. Applicants
state that applying section 18(a) (as
modified by section 61(a)) on a
consolidated basis generally would
require that the Company treat as its
own all assets and any liabilities held
directly either by itself, by Saratoga
SBIC, or by another SBIC Subsidiary.
Accordingly, the Company requests an
order under section 6(c) of the Act
exempting the Company from the
provisions of section 18(a) (as modified
by section 61(a)), such that senior
securities issued by each SBIC
Subsidiary that would be excluded from
the SBIC Subsidiary’s asset coverage
ratio by section 18(k) if it were itself a
BDC would also be excluded from the
Company’s consolidated asset coverage
ratio.
4. Section 6(c) of the Act, in relevant
part, permits the Commission to exempt
any transaction or class of transactions
from any provision of the Act 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. Applicants state
that the requested relief satisfies the
section 6(c) standard. Applicants
contend that, because the SBIC
Subsidiary would be entitled to rely on
section 18(k) if it were a BDC itself,
there is no policy reason to deny the
benefit of that exemption to the
Company.
Applicants’ Condition
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
The Company shall not issue or sell
any senior security and the Company
shall not cause or permit Saratoga SBIC
or any other SBIC Subsidiary to issue or
sell any senior security of which the
Company, Saratoga SBIC or any other
SBIC Subsidiary is the issuer except to
the extent permitted by section 18 (as
modified for BDCs by section 61) of the
Act; provided that, immediately after
the issuance or sale by any of the
Company, Saratoga SBIC or any other
SBIC Subsidiary of any such senior
security, the Company, individually and
on a consolidated basis, shall have the
asset coverage required by section 18(a)
of the Act (as modified by section 61(a)).
In determining whether the Company
has the asset coverage on a consolidated
basis required by section 18(a) of the
Act (as modified by section 61(a)), any
senior securities representing
indebtedness of Saratoga SBIC or
another SBIC Subsidiary shall not be
considered senior securities and, for
purposes of the definition of ‘‘asset
coverage’’ in section 18(h), shall be
treated as indebtedness not represented
by senior securities.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–18449 Filed 7–27–12; 8:45 am]
BILLING CODE 8011–01–P
2 All existing entities that currently intend to rely
on the order are named as applicants. Any other
existing or future entity that may rely on the order
in the future will comply with the terms and
condition of the order.
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]]>Agencies
[Federal Register Volume 77, Number 146 (Monday, July 30, 2012)]
[Notices]
[Pages 44700-44701]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-18449]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30145; 812-14022]
Saratoga Investment Corp., et al.; Notice of Application
July 23, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
sections 18(a) and 61(a) of the Act.
-----------------------------------------------------------------------
Applicants: Saratoga Investment Corp. (the ``Company''), Saratoga
Investment Advisors, LLC (the ``Investment Adviser''), Saratoga
Investment Corp. SBIC GP, LLC (the ``General Partner''), and Saratoga
Investment Corp. SBIC LP (``Saratoga SBIC'').
Summary of the Application: The Company requests an order to permit it
to adhere to a modified asset coverage requirement.
Filing Dates: The application was filed April 2, 2012. Applicants have
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 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 17, 2012, and should be accompanied by proof of service
on the 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants:
535 Madison Avenue, NY, NY 10022.
[[Page 44701]]
FOR FURTHER INFORMATION CONTACT: Lewis B. Reich, Senior Counsel, at
(202) 551-6919, or Jennifer L. 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 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. The Company, a Maryland corporation, is an externally managed,
non-diversified, closed-end management investment company that has
elected to be regulated as a business development company (``BDC'')
under the Act.\1\ The Company seeks to generate both current income and
capital appreciation on its investments primarily through mezzanine
debt, leveraged loans and to a lesser extent equity. The Investment
Adviser, a Delaware limited liability company, is the investment
adviser to the Company. The Investment Adviser is registered under the
Investment Advisers Act of 1940.
---------------------------------------------------------------------------
\1\ Section 2(a)(48) defines a BDC to be any closed-end
investment company that operates for the purpose of making
investments in securities described in section 55(a)(1) through
55(a)(3) of the Act and makes available significant managerial
assistance with respect to the issuers of such securities.
---------------------------------------------------------------------------
2. Saratoga SBIC, a Delaware limited partnership, is a small
business investment company (``SBIC'') licensed by the Small Business
Administration (``SBA'') to operate under the Small Business Investment
Act of 1958 (``SBIA''). Saratoga SBIC is excluded from the definition
of investment company by section 3(c)(7) of the Act. The Company
directly owns 99% of Saratoga SBIC in the form of a limited partnership
interest and is the sole member of the General Partner. The General
Partner, a Delaware limited liability company that is a wholly-owned
subsidiary of the Company, owns 1% of Saratoga SBIC in the form of a
general partnership interest. The Company acts as manager of and
investment adviser to Saratoga SBIC.
Applicants' Legal Analysis
1. The Company requests an exemption pursuant to section 6(c) of
the Act from the provisions of sections 18(a) and 61(a) of the Act to
permit it to adhere to a modified asset coverage requirement with
respect to any direct or indirect wholly owned subsidiary of the
Company that is licensed by the SBA to operate under the SBIA as a SBIC
and relies on Section 3(c)(7) for an exception from the definition of
``investment company'' under the 1940 Act (each, a ``SBIC
Subsidiary'').\2\ Applicants state that companies operating under the
SBIA, such as SBIC Subsidiaries, will be subject to the SBA's
substantial regulation of permissible leverage in their capital
structure.
---------------------------------------------------------------------------
\2\ All existing entities that currently intend to rely on the
order are named as applicants. Any other existing or future entity
that may rely on the order in the future will comply with the terms
and condition of the order.
---------------------------------------------------------------------------
2. Section 18(a) of the Act prohibits a registered closed-end
investment company from issuing any class of senior security or selling
any such security of which it is the issuer unless the company complies
with the asset coverage requirements set forth in that section. Section
61(a) of the Act makes section 18 applicable to BDCs, with certain
modifications. Section 18(k) exempts an investment company operating as
an SBIC from the asset coverage requirements for senior securities
representing indebtedness that are contained in section 18(a)(1)(A) and
(B).
3. Applicants state that the Company may be required to comply with
the asset coverage requirements of section 18(a) (as modified by
section 61(a)) on a consolidated basis because the Company may be
deemed to be an indirect issuer of any class of senior security issued
by Saratoga SBIC or another SBIC Subsidiary. Applicants state that
applying section 18(a) (as modified by section 61(a)) on a consolidated
basis generally would require that the Company treat as its own all
assets and any liabilities held directly either by itself, by Saratoga
SBIC, or by another SBIC Subsidiary. Accordingly, the Company requests
an order under section 6(c) of the Act exempting the Company from the
provisions of section 18(a) (as modified by section 61(a)), such that
senior securities issued by each SBIC Subsidiary that would be excluded
from the SBIC Subsidiary's asset coverage ratio by section 18(k) if it
were itself a BDC would also be excluded from the Company's
consolidated asset coverage ratio.
4. Section 6(c) of the Act, in relevant part, permits the
Commission to exempt any transaction or class of transactions from any
provision of the Act 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. Applicants state that the requested relief
satisfies the section 6(c) standard. Applicants contend that, because
the SBIC Subsidiary would be entitled to rely on section 18(k) if it
were a BDC itself, there is no policy reason to deny the benefit of
that exemption to the Company.
Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
The Company shall not issue or sell any senior security and the
Company shall not cause or permit Saratoga SBIC or any other SBIC
Subsidiary to issue or sell any senior security of which the Company,
Saratoga SBIC or any other SBIC Subsidiary is the issuer except to the
extent permitted by section 18 (as modified for BDCs by section 61) of
the Act; provided that, immediately after the issuance or sale by any
of the Company, Saratoga SBIC or any other SBIC Subsidiary of any such
senior security, the Company, individually and on a consolidated basis,
shall have the asset coverage required by section 18(a) of the Act (as
modified by section 61(a)). In determining whether the Company has the
asset coverage on a consolidated basis required by section 18(a) of the
Act (as modified by section 61(a)), any senior securities representing
indebtedness of Saratoga SBIC or another SBIC Subsidiary shall not be
considered senior securities and, for purposes of the definition of
``asset coverage'' in section 18(h), shall be treated as indebtedness
not represented by senior securities.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-18449 Filed 7-27-12; 8:45 am]
BILLING CODE 8011-01-P
