Beverly Hills Bancorp Inc.; Notice of Application, 26410-26412 [2013-10607]

Download as PDF mstockstill on DSK4VPTVN1PROD with NOTICES 26410 Federal Register / Vol. 78, No. 87 / Monday, May 6, 2013 / Notices Managers Structure. The prospectus will prominently disclose that the Adviser has the ultimate responsibility, subject to oversight by the Board, to oversee the Subadvisers and recommend their hiring, termination, and replacement. 3. Subadvised Funds will inform shareholders of the hiring of a new Subadviser within 90 days after the hiring of the new Subadviser pursuant to the Modified Notice and Access Procedures. 4. An Adviser will not enter into a Subadvisory Agreement with any Affiliated Subadviser unless such agreement, including the compensation to be paid thereunder, has been approved by the shareholders of the applicable Subadvised Fund. 5. At all times, at least a majority of the Board will be Independent Trustees, and the nomination of new or additional Independent Trustees will be placed within the discretion of the thenexisting Independent Trustees. 6. Independent legal counsel, as defined in rule 0–1(a)(6) under the Act, will be engaged to represent the Independent Trustees. The selection of such counsel will be within the discretion of the then-existing Independent Trustees. 7. Whenever a Subadviser change is proposed for a Subadvised Fund with an Affiliated Subadviser, the Board, including a majority of the Independent Trustees, will make a separate finding, reflected in the Board minutes, that the change is in the best interests of the Subadvised Fund and its shareholders, and does not involve a conflict of interest from which the applicable Adviser or the Affiliated Subadviser derives an inappropriate advantage. 8. Whenever a Subadviser is hired or terminated, the applicable Adviser will provide the Board with information showing the expected impact on the profitability of the Adviser. 9. Each Adviser will provide the Board, no less frequently than quarterly, with information about the profitability of the Adviser on a per Subadvised Fund basis. The information will reflect the impact on profitability of the hiring or termination of any Subadviser during the applicable quarter. 10. Each applicable Adviser will provide general management services to each Subadvised Fund, including overall supervisory responsibility for the general management and investment of the Subadvised Fund’s assets and, subject to review and approval of the Board, will: (i) Set the Subadvised Fund’s overall investment strategies; (ii) evaluate, select, and recommend Subadvisers to manage all or a portion of the Subadvised Fund’s assets; (iii) VerDate Mar<15>2010 17:06 May 03, 2013 Jkt 229001 allocate and, when appropriate, reallocate the Subadvised Fund’s assets among Subadvisers; (iv) monitor and evaluate the Subadvisers’ performance; and (v) implement procedures reasonably designed to ensure that Subadvisers comply with the Subadvised Fund’s investment objective, policies and restrictions. 11. No Trustee or officer of a Trust or of a Fund or director or officer of the applicable Adviser will own directly or indirectly (other than through a pooled investment vehicle that is not controlled by such person) any interest in a Subadviser except for (i) ownership of interests in the Adviser or any entity that controls, is controlled by or is under common control with the Adviser; or (ii) ownership of less than 1% of the outstanding securities of any class of equity or debt of any publicly traded company that is either a Subadviser or an entity that controls, is controlled by or is under common control with a Subadviser. 12. Each Subadvised Fund will disclose in its registration statement the Aggregate Fee Disclosure. 13. In the event the Commission adopts a rule under the Act providing substantially similar relief to that in the order requested in the Application, the requested order will expire on the effective date of that rule. 14. For Subadvised Funds that pay fees to a Subadviser directly from fund assets, any changes to a Subadvisory Agreement that would result in an increase in the total management and advisory fees payable by a Subadvised Fund will be required to be approved by the shareholders of the Subadvised Fund. For the Commission, by the Division of Investment Management, under delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–10606 Filed 5–3–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 30497; 812–14135] Beverly Hills Bancorp Inc.; Notice of Application April 30, 2013. Securities and Exchange Commission (the ‘‘Commission’’). ACTION: Notice of application for an order under sections 6(c) and 6(e) of the Investment Company Act of 1940 (‘‘Act’’) for an exemption from all AGENCY: PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 provisions of the Act, except sections 9, 17(a), 17(d), 17(e), 17(f), 36 through 45, and 47 through 51 of the Act and the rules thereunder, modified as discussed in the application. Summary of Application: The requested order would exempt the applicant, Beverly Hills Bancorp Inc. (‘‘BHBC’’), from certain provisions of the Act until the earlier of one year from the date of the requested order or such time as BHBC would no longer be required to register as an investment company under the Act. The requested exemption would extend an exemption originally granted until May 15, 2013.1 DATES: Filing Dates: The application was filed on March 15, 2013 and amended on April 26, 2013. HEARING OR NOTIFICATION OF HEARING: An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission’s Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on May 23, 2013 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. Applicant, Post Office Box 8280, Calabasas, CA 91372. FOR FURTHER INFORMATION CONTACT: Deepak Pai, Senior Counsel, at (202) 551–6876, or Mary Kay Frech, Branch Chief, at (202) 551–6821 (Division of Investment Management, Exemptive Applications Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s Web site by searching for the file number, or an applicant using the Company name box, at https:// www.sec.gov/search/search.htm or by calling (202) 551–8090. SUMMARY: Applicant’s Representations 1. BHBC is a bank holding company that conducted its banking and lending 1 Beverly Hills Bancorp Inc., Investment Company Act Release Nos. 30036 (April 18, 2012) (notice) and 30064 (May 15, 2012) (order) (‘‘Original Order’’). E:\FR\FM\06MYN1.SGM 06MYN1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 87 / Monday, May 6, 2013 / Notices operations through its wholly-owned subsidiary First Bank of Beverly Hills, a California banking corporation (the ‘‘Bank’’). From its incorporation in 1996 until April 24, 2009, the Bank was the source of substantially all of BHBC’s revenues and income. The Bank sustained substantial losses in its real estate loan and mortgage-backed securities portfolios, and as of December 31, 2008, it no longer met applicable regulatory capital requirements. As a result, on February 13, 2009, the Federal Deposit Insurance Corporation (‘‘FDIC’’) and the California Department of Financial Institutions (the ‘‘CDFI’’) issued an order requiring the Bank to increase its regulatory capital within 60 days. Because the Bank was unable to increase its regulatory capital within the specified time period, on April 24, 2009, the CDFI closed the Bank and the FDIC was appointed as the Bank’s receiver. 2. BHBC has one class of common stock outstanding, which it voluntarily delisted from the NASDAQ Global Select Market on February 12, 2009. On February 19, 2009, BHBC deregistered its common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), and on March 13, 2009, its reporting obligations under Section 15(d) of the Exchange Act were suspended. As such, BHBC is no longer subject to the reporting requirements of the Exchange Act and its common stock is traded on the Pink Sheets. As of February 28, 2013, BHBC had 79 holders of record. 3. BHBC has options outstanding under an equity incentive plan, the 2002 Equity Participation Plan (the ‘‘Plan’’). All outstanding awards under the Plan were granted prior to the FDIC’s appointment as receiver for the Bank. As of February 28, 2013, the only options outstanding under the Plan are options to purchase 120,000 shares of BHBC common stock, all of which are held by four persons, each of whom is a director and/or officer of BHBC. BHBC will not issue any additional awards under the Plan. 4. As of January 31, 2013, on a consolidated basis, for financial reporting purposes BHBC has assets of $7.9 million, liabilities of $40.4 million, and a stockholders’ equity of negative $32.5 million. On a non-consolidated basis, BHBC’s assets total approximately $6.3 million. BHBC currently has invested the assets in Permitted Securities (as defined below) since the Original Order. 5. BHBC has several direct or indirect wholly owned subsidiaries, none of which has any ongoing business or operations. As of January 31, 2013, the following assets were held by BHBC VerDate Mar<15>2010 17:06 May 03, 2013 Jkt 229001 subsidiaries: (i) Wilshire Acquisitions Corporation (‘‘Wilshire Asquisitions’’) has assets with a book value of $161,936 consisting of accrued interest and prepaid expenses related to a subsidiary trust; (ii) WFC Inc. has assets with a book value of $331,589 consisting of approximately 16 small consumer and residential mortgage loans, cash, and prepaid expenses; and (iii) BH Commercial Capital I, Inc. has assets with a book value of $1,084,799 consisting of two secured commercial real estate loans (collectively, the ‘‘Subsidiary Assets’’). In addition, BHBC also either directly or indirectly owns the common securities of two subsidiary trusts that were formed in connection with offerings of trust preferred securities in which the trust subsidiaries issued their common securities to BHBC or Wilshire Acquisitions and their preferred securities to third party investors. The subsidiary trusts then loaned all the proceeds of the sale of trust preferred securities to BHBC or Wilshire Acquisitions in exchange for junior subordinated debentures (the ‘‘Subordinated Debentures’’). The subsidiary trusts have no assets other than the Subordinated Debentures. 6. BHBC’s liabilities consist principally of $25.8 million of the Subordinated Debentures issued to its two direct trust subsidiaries and $10.3 million of Subordinated Debentures issued to its indirect trust subsidiary. In the aggregate, interest in an approximate amount of $900,000 accrues on a yearly basis pursuant to these three series of Subordinated Debentures. BHBC states that there is no public market for the Subordinated Debentures or the trust preferred securities. Under the terms of the Subordinated Debentures, BHBC may defer interest payments for up to 20 consecutive quarters.2 On January 29, 2009, BHBC elected to exercise this right and no payments are due under the Subordinated Debentures until March, 2014. 7. BHBC may be subject to contingent liabilities of uncertain amounts related to claims associated with its former operations, as well as regulatory and stockholder claims in connection with the failure of the Bank. In addition, current and former directors and officers of the Bank are subject to two pending actions (the ‘‘Actions’’) in connection with the failure of the Bank. These are: (a) An administrative action brought by the FDIC in 2011 against two former officers (one of whom has settled) 2 During the period when interest payments are being deferred, interest continues to accrue, compounding quarterly, at an annual rate equal to the interest in effect for such period and must be paid at the end of the deferral period. PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 26411 seeking certain administrative sanctions and penalties; and (b) a lawsuit brought by the FDIC in April, 2012 against the Bank’s former directors (including all four current members of the board of directors of BHBC) and several former officers of the Bank for negligence, gross negligence, and breach of fiduciary duty in connection with their activities with the Bank. The latter action seeks $100.6 million in damages related to losses allegedly incurred by the Bank on certain loans. 8. BHBC states that it is subject to indemnification and expense obligations in connection with various actions brought against its current and former directors, officers, employees or agents. As a result, BHBC is indemnifying these directors and officers in connection with the Actions. The potential amount of the indemnification claim is unknown. 9. Since the Bank was placed into receivership, BHBC has had no active business or operations. Within several months of the receivership, BHBC terminated all employees, and since that time has paid two consultants on an hourly basis primarily for administrative and accounting services. BHBC does not maintain an office and is managed by its four member board of directors, which has considered various alternatives, including liquidation and acquisition of an operating business, while preserving its assets. BHBC states that because of its financial condition and contingent liabilities, pursuing these courses of action has not been feasible. Applicant’s Legal Analysis 1. Section 3(a)(1)(A) of the Act defines an investment company as any issuer who ‘‘is or holds itself out as being engaged primarily . . . in the business of investing, reinvesting or trading in securities.’’ Section 3(a)(1)(C) of the Act further defines an investment company as an issuer who is engaged in the business of investing in securities that have a value in excess of 40% of the issuer’s total assets (excluding government securities and cash). 2. Section 6(c) of the Act provides that the Commission may exempt any person from any provision of the Act if 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. Section 6(e) provides that, in connection with any order exempting an investment company from any provision of section 7, certain provisions of the Act, as specified by the Commission, shall apply to the company and other persons E:\FR\FM\06MYN1.SGM 06MYN1 mstockstill on DSK4VPTVN1PROD with NOTICES 26412 Federal Register / Vol. 78, No. 87 / Monday, May 6, 2013 / Notices dealing with the company, as if such company were a registered investment company. 3. BHBC acknowledges that it may be deemed to fall within one of the Act’s definitions of an investment company. Accordingly, BHBC requests an order of the Commission pursuant to sections 6(c) and 6(e) of the Act exempting it from all provisions of the Act, subject to certain exceptions described below. BHBC requests an exemption until the earlier of one year from the date of the requested order or such time as it would no longer be required to register as an investment company under the Act. During the term of the proposed exemption, BHBC states that it will comply with sections 9, 17(a), 17(d), 17(e), 17(f), 36 through 45, and 47 through 51 of the Act and the rules thereunder, subject to certain modifications described in the application. 4. BHBC requests exemptive relief to the extent necessary to permit it to hold certain types of instruments that may be considered ‘‘securities’’, as defined in section 2(a)(36) under the Act, such as short-term U.S. government securities, certificates of deposit and deposit accounts with banks that are insured by the FDIC, shares of registered money market funds, and any instruments that are eligible for investment by money market funds consistent with rule 2a–7 under the Act (collectively, ‘‘Permitted Securities’’) without being required to register as an investment company under the Act. BHBC requests this relief in order to permit it to preserve the value of its assets for the benefit of its security holders, and submits that this relief is necessary and appropriate for the public interest. 5. In determining whether to grant relief for a company in an extended transition period, the following factors are considered: (a) Whether the failure of the company to become primarily engaged in a non-investment business or excepted business or to liquidate within one year was due to factors beyond its control; (b) whether the company’s officers and employees during that period tried, in good faith, to effect the company’s investment of its assets in a non-investment business or excepted business or to cause the liquidation of the company; and (c) whether the company invested in securities solely to preserve the value of its assets. BHBC believes that it meets these criteria. 6. BHBC believes its failure to become primarily engaged in a non-investment business or to liquidate within a year following the receivership of the Bank is due to factors beyond its control. The board of directors of BHBC has regularly VerDate Mar<15>2010 17:06 May 03, 2013 Jkt 229001 considered the feasibility of liquidating or engaging in an operating noninvestment business and concluded that it is not feasible to commence or acquire a non-investment business or liquidate as a result of BHBC’s negative net worth and the uncertainties associated with actual and potential litigation and regulatory claims. BHBC states that the contingent liabilities make it impossible to liquidate BHBC and distribute its assets to creditors and make it imprudent to utilize any substantial part of its assets in an operating business. BHBC states that these circumstances are unlikely to change over the requested one-year period in light of the nature of the actual and contingent liabilities. BHBC states that it has invested its liquid assets solely to preserve the value of its assets and has invested solely in Permitted Securities since the Original Order. BHBC does not believe its current ownership of certain loans acquired prior to its receivership is inconsistent with its purpose of preserving the value of its assets for the benefit of its security holders. BHBC thus believes that the public interest will be best served by permitting it to continue to invest in Permitted Securities while its liabilities are resolved. Applicant’s Conditions Applicant agrees that the requested order will be subject to the following conditions: 1. BHBC will not purchase or otherwise acquire any securities other than Permitted Securities, except that BHBC may acquire equity securities of an issuer that is not an ‘‘investment company’’ as defined in section 3(a) of the Act or is relying on an exclusion from the definition of ‘‘investment company’’ under section 3(c) of the Act other than section 3(c)(1) or 3(c)(7), in connection with the acquisition of an operating business as evidenced by a resolution approved by BHBC’s board of directors. BHBC may continue to hold the Subsidiary Assets. 2. BHBC will not hold itself out as being engaged in the business of investing, reinvesting, owning, holding, or trading in securities. 3. BHBC will not make any primary or secondary public offerings of its securities, and it will notify its stockholders that an exemptive order has been granted pursuant to sections 6(c) and 6(e) of the Act and that BHBC and other persons, in their transactions and relations with BHBC, are subject to sections 9, 17(a), 17(d), 17(e), 17(f), 36 through 45, and 47 through 51 of the Act, and the rules thereunder, as if BHBC were a registered investment PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 company, except as permitted by the order requested hereby. 4. Notwithstanding sections 17(a) and 17(d) of the Act, an affiliated person (as defined in section 2(a)(3) of the Act) of BHBC may engage in a transaction that otherwise would be prohibited by these sections with BHBC: (a) If such proposed transaction is first approved by a bankruptcy court on the basis that (i) the terms thereof, including the consideration to be paid or received, are reasonable and fair to BHBC, and (ii) the participation of BHBC in the proposed transaction will not be on a basis less advantageous to BHBC than that of other participants; and (b) in connection with each such transaction, BHBC shall inform the bankruptcy court of: (i) The identity of all of its affiliated persons who are parties to, or have a direct or indirect financial interest in, the transaction; (ii) the nature of the affiliation; and (iii) the financial interests of such persons in the transaction. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–10607 Filed 5–3–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meetings Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a Closed Meeting on Thursday, May 9, 2013 at 2:00 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meeting. Certain staff members who have an interest in the matters also may be present. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (5), (7), 9(ii) and (10), permit consideration of the scheduled matters at the Closed Meeting. Commissioner Gallagher, as duty officer, voted to consider the items listed for the Closed Meeting in a closed session. The subject matter of the Closed Meeting will be: institution and settlement of injunctive actions; E:\FR\FM\06MYN1.SGM 06MYN1

Agencies

[Federal Register Volume 78, Number 87 (Monday, May 6, 2013)]
[Notices]
[Pages 26410-26412]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10607]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30497; 812-14135]


Beverly Hills Bancorp Inc.; Notice of Application

April 30, 2013.
AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of application for an order under sections 6(c) and 6(e) 
of the Investment Company Act of 1940 (``Act'') for an exemption from 
all provisions of the Act, except sections 9, 17(a), 17(d), 17(e), 
17(f), 36 through 45, and 47 through 51 of the Act and the rules 
thereunder, modified as discussed in the application.

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SUMMARY: Summary of Application: The requested order would exempt the 
applicant, Beverly Hills Bancorp Inc. (``BHBC''), from certain 
provisions of the Act until the earlier of one year from the date of 
the requested order or such time as BHBC would no longer be required to 
register as an investment company under the Act. The requested 
exemption would extend an exemption originally granted until May 15, 
2013.\1\
---------------------------------------------------------------------------

    \1\ Beverly Hills Bancorp Inc., Investment Company Act Release 
Nos. 30036 (April 18, 2012) (notice) and 30064 (May 15, 2012) 
(order) (``Original Order'').

DATES: Filing Dates: The application was filed on March 15, 2013 and 
---------------------------------------------------------------------------
amended on April 26, 2013.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on May 23, 2013 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. Applicant, Post Office Box 8280, 
Calabasas, CA 91372.

FOR FURTHER INFORMATION CONTACT: Deepak Pai, Senior Counsel, at (202) 
551-6876, or Mary Kay Frech, Branch Chief, at (202) 551-6821 (Division 
of Investment Management, Exemptive Applications Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at https://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicant's Representations

    1. BHBC is a bank holding company that conducted its banking and 
lending

[[Page 26411]]

operations through its wholly-owned subsidiary First Bank of Beverly 
Hills, a California banking corporation (the ``Bank''). From its 
incorporation in 1996 until April 24, 2009, the Bank was the source of 
substantially all of BHBC's revenues and income. The Bank sustained 
substantial losses in its real estate loan and mortgage-backed 
securities portfolios, and as of December 31, 2008, it no longer met 
applicable regulatory capital requirements. As a result, on February 
13, 2009, the Federal Deposit Insurance Corporation (``FDIC'') and the 
California Department of Financial Institutions (the ``CDFI'') issued 
an order requiring the Bank to increase its regulatory capital within 
60 days. Because the Bank was unable to increase its regulatory capital 
within the specified time period, on April 24, 2009, the CDFI closed 
the Bank and the FDIC was appointed as the Bank's receiver.
    2. BHBC has one class of common stock outstanding, which it 
voluntarily delisted from the NASDAQ Global Select Market on February 
12, 2009. On February 19, 2009, BHBC deregistered its common stock 
under Section 12(g) of the Securities Exchange Act of 1934, as amended 
(the ``Exchange Act''), and on March 13, 2009, its reporting 
obligations under Section 15(d) of the Exchange Act were suspended. As 
such, BHBC is no longer subject to the reporting requirements of the 
Exchange Act and its common stock is traded on the Pink Sheets. As of 
February 28, 2013, BHBC had 79 holders of record.
    3. BHBC has options outstanding under an equity incentive plan, the 
2002 Equity Participation Plan (the ``Plan''). All outstanding awards 
under the Plan were granted prior to the FDIC's appointment as receiver 
for the Bank. As of February 28, 2013, the only options outstanding 
under the Plan are options to purchase 120,000 shares of BHBC common 
stock, all of which are held by four persons, each of whom is a 
director and/or officer of BHBC. BHBC will not issue any additional 
awards under the Plan.
    4. As of January 31, 2013, on a consolidated basis, for financial 
reporting purposes BHBC has assets of $7.9 million, liabilities of 
$40.4 million, and a stockholders' equity of negative $32.5 million. On 
a non-consolidated basis, BHBC's assets total approximately $6.3 
million. BHBC currently has invested the assets in Permitted Securities 
(as defined below) since the Original Order.
    5. BHBC has several direct or indirect wholly owned subsidiaries, 
none of which has any ongoing business or operations. As of January 31, 
2013, the following assets were held by BHBC subsidiaries: (i) Wilshire 
Acquisitions Corporation (``Wilshire Asquisitions'') has assets with a 
book value of $161,936 consisting of accrued interest and prepaid 
expenses related to a subsidiary trust; (ii) WFC Inc. has assets with a 
book value of $331,589 consisting of approximately 16 small consumer 
and residential mortgage loans, cash, and prepaid expenses; and (iii) 
BH Commercial Capital I, Inc. has assets with a book value of 
$1,084,799 consisting of two secured commercial real estate loans 
(collectively, the ``Subsidiary Assets''). In addition, BHBC also 
either directly or indirectly owns the common securities of two 
subsidiary trusts that were formed in connection with offerings of 
trust preferred securities in which the trust subsidiaries issued their 
common securities to BHBC or Wilshire Acquisitions and their preferred 
securities to third party investors. The subsidiary trusts then loaned 
all the proceeds of the sale of trust preferred securities to BHBC or 
Wilshire Acquisitions in exchange for junior subordinated debentures 
(the ``Subordinated Debentures''). The subsidiary trusts have no assets 
other than the Subordinated Debentures.
    6. BHBC's liabilities consist principally of $25.8 million of the 
Subordinated Debentures issued to its two direct trust subsidiaries and 
$10.3 million of Subordinated Debentures issued to its indirect trust 
subsidiary. In the aggregate, interest in an approximate amount of 
$900,000 accrues on a yearly basis pursuant to these three series of 
Subordinated Debentures. BHBC states that there is no public market for 
the Subordinated Debentures or the trust preferred securities. Under 
the terms of the Subordinated Debentures, BHBC may defer interest 
payments for up to 20 consecutive quarters.\2\ On January 29, 2009, 
BHBC elected to exercise this right and no payments are due under the 
Subordinated Debentures until March, 2014.
---------------------------------------------------------------------------

    \2\ During the period when interest payments are being deferred, 
interest continues to accrue, compounding quarterly, at an annual 
rate equal to the interest in effect for such period and must be 
paid at the end of the deferral period.
---------------------------------------------------------------------------

    7. BHBC may be subject to contingent liabilities of uncertain 
amounts related to claims associated with its former operations, as 
well as regulatory and stockholder claims in connection with the 
failure of the Bank. In addition, current and former directors and 
officers of the Bank are subject to two pending actions (the 
``Actions'') in connection with the failure of the Bank. These are: (a) 
An administrative action brought by the FDIC in 2011 against two former 
officers (one of whom has settled) seeking certain administrative 
sanctions and penalties; and (b) a lawsuit brought by the FDIC in 
April, 2012 against the Bank's former directors (including all four 
current members of the board of directors of BHBC) and several former 
officers of the Bank for negligence, gross negligence, and breach of 
fiduciary duty in connection with their activities with the Bank. The 
latter action seeks $100.6 million in damages related to losses 
allegedly incurred by the Bank on certain loans.
    8. BHBC states that it is subject to indemnification and expense 
obligations in connection with various actions brought against its 
current and former directors, officers, employees or agents. As a 
result, BHBC is indemnifying these directors and officers in connection 
with the Actions. The potential amount of the indemnification claim is 
unknown.
    9. Since the Bank was placed into receivership, BHBC has had no 
active business or operations. Within several months of the 
receivership, BHBC terminated all employees, and since that time has 
paid two consultants on an hourly basis primarily for administrative 
and accounting services. BHBC does not maintain an office and is 
managed by its four member board of directors, which has considered 
various alternatives, including liquidation and acquisition of an 
operating business, while preserving its assets. BHBC states that 
because of its financial condition and contingent liabilities, pursuing 
these courses of action has not been feasible.

Applicant's Legal Analysis

    1. Section 3(a)(1)(A) of the Act defines an investment company as 
any issuer who ``is or holds itself out as being engaged primarily . . 
. in the business of investing, reinvesting or trading in securities.'' 
Section 3(a)(1)(C) of the Act further defines an investment company as 
an issuer who is engaged in the business of investing in securities 
that have a value in excess of 40% of the issuer's total assets 
(excluding government securities and cash).
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person from any provision of the Act if 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. Section 6(e) provides that, in connection 
with any order exempting an investment company from any provision of 
section 7, certain provisions of the Act, as specified by the 
Commission, shall apply to the company and other persons

[[Page 26412]]

dealing with the company, as if such company were a registered 
investment company.
    3. BHBC acknowledges that it may be deemed to fall within one of 
the Act's definitions of an investment company. Accordingly, BHBC 
requests an order of the Commission pursuant to sections 6(c) and 6(e) 
of the Act exempting it from all provisions of the Act, subject to 
certain exceptions described below. BHBC requests an exemption until 
the earlier of one year from the date of the requested order or such 
time as it would no longer be required to register as an investment 
company under the Act. During the term of the proposed exemption, BHBC 
states that it will comply with sections 9, 17(a), 17(d), 17(e), 17(f), 
36 through 45, and 47 through 51 of the Act and the rules thereunder, 
subject to certain modifications described in the application.
    4. BHBC requests exemptive relief to the extent necessary to permit 
it to hold certain types of instruments that may be considered 
``securities'', as defined in section 2(a)(36) under the Act, such as 
short-term U.S. government securities, certificates of deposit and 
deposit accounts with banks that are insured by the FDIC, shares of 
registered money market funds, and any instruments that are eligible 
for investment by money market funds consistent with rule 2a-7 under 
the Act (collectively, ``Permitted Securities'') without being required 
to register as an investment company under the Act. BHBC requests this 
relief in order to permit it to preserve the value of its assets for 
the benefit of its security holders, and submits that this relief is 
necessary and appropriate for the public interest.
    5. In determining whether to grant relief for a company in an 
extended transition period, the following factors are considered: (a) 
Whether the failure of the company to become primarily engaged in a 
non-investment business or excepted business or to liquidate within one 
year was due to factors beyond its control; (b) whether the company's 
officers and employees during that period tried, in good faith, to 
effect the company's investment of its assets in a non-investment 
business or excepted business or to cause the liquidation of the 
company; and (c) whether the company invested in securities solely to 
preserve the value of its assets. BHBC believes that it meets these 
criteria.
    6. BHBC believes its failure to become primarily engaged in a non-
investment business or to liquidate within a year following the 
receivership of the Bank is due to factors beyond its control. The 
board of directors of BHBC has regularly considered the feasibility of 
liquidating or engaging in an operating non-investment business and 
concluded that it is not feasible to commence or acquire a non-
investment business or liquidate as a result of BHBC's negative net 
worth and the uncertainties associated with actual and potential 
litigation and regulatory claims. BHBC states that the contingent 
liabilities make it impossible to liquidate BHBC and distribute its 
assets to creditors and make it imprudent to utilize any substantial 
part of its assets in an operating business. BHBC states that these 
circumstances are unlikely to change over the requested one-year period 
in light of the nature of the actual and contingent liabilities. BHBC 
states that it has invested its liquid assets solely to preserve the 
value of its assets and has invested solely in Permitted Securities 
since the Original Order. BHBC does not believe its current ownership 
of certain loans acquired prior to its receivership is inconsistent 
with its purpose of preserving the value of its assets for the benefit 
of its security holders. BHBC thus believes that the public interest 
will be best served by permitting it to continue to invest in Permitted 
Securities while its liabilities are resolved.

Applicant's Conditions

    Applicant agrees that the requested order will be subject to the 
following conditions:
    1. BHBC will not purchase or otherwise acquire any securities other 
than Permitted Securities, except that BHBC may acquire equity 
securities of an issuer that is not an ``investment company'' as 
defined in section 3(a) of the Act or is relying on an exclusion from 
the definition of ``investment company'' under section 3(c) of the Act 
other than section 3(c)(1) or 3(c)(7), in connection with the 
acquisition of an operating business as evidenced by a resolution 
approved by BHBC's board of directors. BHBC may continue to hold the 
Subsidiary Assets.
    2. BHBC will not hold itself out as being engaged in the business 
of investing, reinvesting, owning, holding, or trading in securities.
    3. BHBC will not make any primary or secondary public offerings of 
its securities, and it will notify its stockholders that an exemptive 
order has been granted pursuant to sections 6(c) and 6(e) of the Act 
and that BHBC and other persons, in their transactions and relations 
with BHBC, are subject to sections 9, 17(a), 17(d), 17(e), 17(f), 36 
through 45, and 47 through 51 of the Act, and the rules thereunder, as 
if BHBC were a registered investment company, except as permitted by 
the order requested hereby.
    4. Notwithstanding sections 17(a) and 17(d) of the Act, an 
affiliated person (as defined in section 2(a)(3) of the Act) of BHBC 
may engage in a transaction that otherwise would be prohibited by these 
sections with BHBC:
    (a) If such proposed transaction is first approved by a bankruptcy 
court on the basis that (i) the terms thereof, including the 
consideration to be paid or received, are reasonable and fair to BHBC, 
and (ii) the participation of BHBC in the proposed transaction will not 
be on a basis less advantageous to BHBC than that of other 
participants; and
    (b) in connection with each such transaction, BHBC shall inform the 
bankruptcy court of: (i) The identity of all of its affiliated persons 
who are parties to, or have a direct or indirect financial interest in, 
the transaction; (ii) the nature of the affiliation; and (iii) the 
financial interests of such persons in the transaction.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10607 Filed 5-3-13; 8:45 am]
BILLING CODE 8011-01-P
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