RBS Securities Inc. and Citizens Investment Advisors; Notice of Application and Temporary Order, 72132-72133 [2013-28759]

Download as PDF 72132 Federal Register / Vol. 78, No. 231 / Monday, December 2, 2013 / Notices For the Commission, by the Division of Investment Management, pursuant to delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–28726 Filed 11–29–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. IC–30808; 812–14232] RBS Securities Inc. and Citizens Investment Advisors; Notice of Application and Temporary Order November 25, 2013. Securities and Exchange Commission (‘‘Commission’’). ACTION: Temporary order and notice of application for a permanent order under section 9(c) of the Investment Company Act of 1940 (‘‘Act’’). AGENCY: Applicants have received a temporary order exempting them from section 9(a) of the Act, with respect to an injunction entered against RBS Securities Inc. (‘‘RBS Securities’’) on November 25, 2013, by the United States District Court for the District of Connecticut (the ‘‘District Court’’) until the Commission takes final action on an application for a permanent order. Applicants also have applied for a permanent order. APPLICANTS: RBS Securities and Citizens Investment Advisors (‘‘Citizens IA’’), a separately identifiable department of RBS Citizens, N.A. (each an ‘‘Applicant’’ and collectively, the ‘‘Applicants’’).1 DATES: Filing Date: The application was filed on November 7, 2013, and amended on November 25, 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 December 20, 2013, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of emcdonald on DSK67QTVN1PROD with NOTICES SUMMARY OF APPLICATION: 1 Applicants request that any relief granted pursuant to the application also apply to any existing company of which RBS Securities is an affiliated person within the meaning of section 2(a)(3) of the Act (an ‘‘Affiliated Person’’) and to any other company of which RBS Securities may become an Affiliated Person in the future (together with the Applicants, the ‘‘Covered Persons’’) with respect to any activity contemplated by Section 9(a) of the Act. VerDate Mar<15>2010 20:41 Nov 29, 2013 Jkt 232001 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: RBS Securities, 600 Washington Boulevard, Stamford, CT 06901; Citizens IA, c/o RBS Citizens Financial Group Inc., 101 Park Avenue, 10th Floor, New York, NY 10178. FOR FURTHER INFORMATION CONTACT: David J. Marcinkus, Senior Counsel, at 202–551–6882 or David P. Bartels, Branch Chief, at 202–551–6821 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a temporary order and 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 http://www.sec.gov/search/ search.htm, or by calling (202) 551– 8090. Applicants’ Representations 1. RBS Securities, a Delaware corporation, is registered as a brokerdealer under the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), and is an indirect wholly-owned subsidiary of the Royal Bank of Scotland Group plc (‘‘RBSG’’). RBS Securities does not serve as investment adviser, depositor or principal underwriter to any registered investment company. Citizens IA, an investment adviser registered under the Investment Advisers Act of 1940, is a separately identifiable department of RBS Citizens, N.A., which is an indirect whollyowned subsidiary of RBSG and bank subsidiary of RBS Citizens Financial Group, Inc. (‘‘CFG’’). CFG is a whollyowned subsidiary of RBSG. Citizens IA serves as investment sub-adviser to one management investment company registered under the Act, Aquila Narragansett Tax-Free Income Fund (the ‘‘Fund’’). The Applicants and other Covered Persons may, if the relief is granted, in the future act in any of the capacities contemplated by section 9(a) of the Act subject to the conditions of the temporary order and the permanent order. 2. On November 7, 2013, the Commission filed a complaint (the ‘‘Complaint’’) against RBS Securities in the District Court in a civil action PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 captioned Securities and Exchange Commission v. RBS Securities Inc. The Complaint alleged that RBS Securities violated sections 17(a)(2) and (3) of the Securities Act of 1933 (the ‘‘Securities Act’’) arising out of a single offering of residential mortgage-backed securities in 2007 (the ‘‘Conduct’’). In settlement of this action, RBS Securities submitted an executed Consent of Defendant RBS Securities Inc. (the ‘‘Consent’’). In the Consent, RBS Securities agreed to the entry of a final judgment, without admitting or denying the allegations made in the Complaint (other than those relating to the jurisdiction of the District Court over it and the subject matter, solely for the purposes of this action). On November 25, 2013, the District Court entered a judgment against RBS Securities (the ‘‘Judgment’’) 2 that enjoined RBS Securities from violating, directly or indirectly, sections 17(a)(2) and (a)(3) of the Securities Act (the ‘‘Injunction’’). Additionally, pursuant to the Judgment, RBS Securities will pay disgorgement, prejudgment interest and a civil monetary penalty. Applicants’ Legal Analysis 1. Section 9(a)(2) of the Act, in relevant part, prohibits a person who has been enjoined from engaging in or continuing any conduct or practice in connection with the purchase or sale of a security, or in connection with activities as an underwriter, broker or dealer, from acting, among other things, as an investment adviser or depositor of any registered investment company, or a principal underwriter for any registered open-end investment company, registered UIT, or registered face-amount certificate company (such activities, collectively, ‘‘Fund Services Activities’’). Section 9(a)(3) of the Act makes the prohibition in section 9(a)(2) applicable to a company, any Affiliated Person of which has been disqualified under the provisions of section 9(a)(2). Section 2(a)(3) of the Act defines ‘‘affiliated person’’ to include, among others: (A) any person directly or indirectly owning, controlling, or holding with power to vote, five per centum or more of the outstanding voting securities of such other person; (B) any person five per centum or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other person; and (C) any person directly or indirectly controlling, controlled by, or under common control, with the other person. 2 Securities and Exchange Commission v. RBS Securities Inc., Case Number 1:13–cv–01643–WWE (D. Conn. Nov. 25, 2013). E:\FR\FM\02DEN1.SGM 02DEN1 emcdonald on DSK67QTVN1PROD with NOTICES Federal Register / Vol. 78, No. 231 / Monday, December 2, 2013 / Notices Applicants state that RBS Securities is an Affiliated Person of Citizens IA. Applicants state that, taken together, sections 9(a)(2) and 9(a)(3) would have the effect of precluding Citizens IA from acting as a sub-adviser to the Fund. 2. Section 9(c) of the Act provides that, upon application, the Commission shall grant an application for exemption from the disqualification provisions of section 9(a) of the Act if it is established that these provisions, as applied to the Applicants, are unduly or disproportionately severe or that the conduct of the Applicants has been such as not to make it against the public interest or the protection of investors to grant the exemption. Applicants have filed an application pursuant to section 9(c) seeking a temporary and permanent order exempting them and other Covered Persons from the disqualification provisions of section 9(a). 3. Applicants believe they meet the standard for exemption specified in section 9(c). Applicants state that the prohibitions of section 9(a) as applied to them would be unduly and disproportionately severe and that the conduct of the Applicants has been such as not to make it against the public interest or the protection of investors to grant the exemption from section 9(a). 4. Applicants state that the Conduct did not involve any of the Applicants’ Fund Service Activities. Applicants state that RBS Securities does not serve in any of the capacities described in section 9(a) of the Act. In addition, Applicants state that the Conduct did not involve the Fund, or the assets of the Fund, with respect to which the Applicants provided Fund Service Activities. 5. Applicants also state to the best of their knowledge (i) none of the current directors, officers, or employees of Citizens IA that are involved in providing Fund Service Activities (or any other persons in such roles during the time period covered by the Complaint) had knowledge of or participated in the conduct alleged in the Complaint to have constituted the violations that provide a basis for the Injunction; (ii) the directors, officers and employees at RBS Securities who participated in the conduct alleged in the Complaint to have constituted the violations that provide a basis for the Injunction have had no, and will not have any, involvement in providing Fund Service Activities on behalf of the Applicants or other Covered Persons; and (iii) because the personnel of Citizens IA did not participate in the conduct alleged in the Complaint to have constituted the violations that VerDate Mar<15>2010 20:41 Nov 29, 2013 Jkt 232001 provide a basis for the Injunction, the shareholders of the Fund were not affected any differently than if the Fund had received services from any other non-affiliated investment adviser or principal underwriter. 6. Applicants submit that they have taken sufficient remedial actions to address the conduct that served as the basis for the Injunction and that granting the exemption requested is consistent with the public interest and the protection of investors. 7. Applicants state that the inability of Citizens IA to continue providing Fund Service Activities to the Fund would result in the Fund and its shareholders facing potential hardship. Applicants state that they will distribute to the board of trustees of the Fund (the ‘‘Board’’) written materials describing the circumstances that led to the Injunction, any impact on the Fund, and the application. The written materials will include an offer to discuss the materials at an in-person meeting with the Board, including the directors who are not ‘‘interested persons’’ of the Fund as defined in section 2(a)(19) of the Act, and their independent legal counsel as defined in rule 0–1(a)(6) under the Act. Applicants state that they will provide the Board with the information concerning the Injunction and the application that is necessary for the Fund to fulfill its disclosure and other obligations under the federal securities laws. 8. Applicants state that if Citizens IA were barred from providing investment advisory services to the Fund, the effect on its businesses and employees would be severe. Applicants state that Citizens IA has committed substantial capital and other resources to establish an expertise in sub-advising registered investment companies. Applicants further state that prohibiting Citizens IA from providing Fund Service Activities would not only adversely affect its business, but would also adversely affect its employees that are involved in those activities. Applicants state that many of these employees could experience significant difficulties in finding alternative fund-related employment. 9. Applicants state that Applicants and certain other affiliated persons of the Applicants have previously received an order under section 9(c) of the Act, as the result of conduct that triggered section 9(a), as described in greater detail in the application. Applicants’ Condition Applicants agree that any order granting the requested relief will be subject to the following condition: PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 72133 Any temporary exemption granted pursuant to the application shall be without prejudice to, and shall not limit the Commission’s rights in any manner with respect to, any Commission investigation of, or administrative proceedings involving or against, Covered Persons, including without limitation, the consideration by the Commission of a permanent exemption from section 9(a) of the Act requested pursuant to the application or the revocation or removal of any temporary exemptions granted under the Act in connection with the application. Temporary Order The Commission has considered the matter and finds that the Applicants have made the necessary showing to justify granting a temporary exemption. Accordingly, It is hereby ordered, pursuant to section 9(c) of the Act, that Applicants and any other Covered Persons are granted a temporary exemption from the provisions of section 9(a), solely with respect to the Injunction, subject to the condition in the application, from November 25, 2013, until the Commission takes final action on their application for a permanent order. By the Commission. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–28759 Filed 11–29–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting. 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 Wednesday, December 4, 2013 at 10:30 a.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 her designee, has certified that, in her 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 matter at the Closed Meeting. Commissioner Stein, as duty officer, voted to consider the items listed for the Closed Meeting in a closed session and E:\FR\FM\02DEN1.SGM 02DEN1

Agencies

[Federal Register Volume 78, Number 231 (Monday, December 2, 2013)]
[Notices]
[Pages 72132-72133]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28759]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-30808; 812-14232]


RBS Securities Inc. and Citizens Investment Advisors; Notice of 
Application and Temporary Order

November 25, 2013.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Temporary order and notice of application for a permanent order 
under section 9(c) of the Investment Company Act of 1940 (``Act'').

-----------------------------------------------------------------------

Summary of Application: Applicants have received a temporary order 
exempting them from section 9(a) of the Act, with respect to an 
injunction entered against RBS Securities Inc. (``RBS Securities'') on 
November 25, 2013, by the United States District Court for the District 
of Connecticut (the ``District Court'') until the Commission takes 
final action on an application for a permanent order. Applicants also 
have applied for a permanent order.

Applicants: RBS Securities and Citizens Investment Advisors (``Citizens 
IA''), a separately identifiable department of RBS Citizens, N.A. (each 
an ``Applicant'' and collectively, the ``Applicants'').\1\
---------------------------------------------------------------------------

    \1\ Applicants request that any relief granted pursuant to the 
application also apply to any existing company of which RBS 
Securities is an affiliated person within the meaning of section 
2(a)(3) of the Act (an ``Affiliated Person'') and to any other 
company of which RBS Securities may become an Affiliated Person in 
the future (together with the Applicants, the ``Covered Persons'') 
with respect to any activity contemplated by Section 9(a) of the 
Act.

DATES: Filing Date: The application was filed on November 7, 2013, and 
---------------------------------------------------------------------------
amended on November 25, 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 December 20, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants: 
RBS Securities, 600 Washington Boulevard, Stamford, CT 06901; Citizens 
IA, c/o RBS Citizens Financial Group Inc., 101 Park Avenue, 10th Floor, 
New York, NY 10178.

FOR FURTHER INFORMATION CONTACT: David J. Marcinkus, Senior Counsel, at 
202-551-6882 or David P. Bartels, Branch Chief, at 202-551-6821 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a temporary order and 
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 http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.

Applicants' Representations

    1. RBS Securities, a Delaware corporation, is registered as a 
broker-dealer under the Securities Exchange Act of 1934, as amended 
(the ``Exchange Act''), and is an indirect wholly-owned subsidiary of 
the Royal Bank of Scotland Group plc (``RBSG''). RBS Securities does 
not serve as investment adviser, depositor or principal underwriter to 
any registered investment company. Citizens IA, an investment adviser 
registered under the Investment Advisers Act of 1940, is a separately 
identifiable department of RBS Citizens, N.A., which is an indirect 
wholly-owned subsidiary of RBSG and bank subsidiary of RBS Citizens 
Financial Group, Inc. (``CFG''). CFG is a wholly-owned subsidiary of 
RBSG. Citizens IA serves as investment sub-adviser to one management 
investment company registered under the Act, Aquila Narragansett Tax-
Free Income Fund (the ``Fund''). The Applicants and other Covered 
Persons may, if the relief is granted, in the future act in any of the 
capacities contemplated by section 9(a) of the Act subject to the 
conditions of the temporary order and the permanent order.
    2. On November 7, 2013, the Commission filed a complaint (the 
``Complaint'') against RBS Securities in the District Court in a civil 
action captioned Securities and Exchange Commission v. RBS Securities 
Inc. The Complaint alleged that RBS Securities violated sections 
17(a)(2) and (3) of the Securities Act of 1933 (the ``Securities Act'') 
arising out of a single offering of residential mortgage-backed 
securities in 2007 (the ``Conduct''). In settlement of this action, RBS 
Securities submitted an executed Consent of Defendant RBS Securities 
Inc. (the ``Consent''). In the Consent, RBS Securities agreed to the 
entry of a final judgment, without admitting or denying the allegations 
made in the Complaint (other than those relating to the jurisdiction of 
the District Court over it and the subject matter, solely for the 
purposes of this action). On November 25, 2013, the District Court 
entered a judgment against RBS Securities (the ``Judgment'') \2\ that 
enjoined RBS Securities from violating, directly or indirectly, 
sections 17(a)(2) and (a)(3) of the Securities Act (the 
``Injunction''). Additionally, pursuant to the Judgment, RBS Securities 
will pay disgorgement, prejudgment interest and a civil monetary 
penalty.
---------------------------------------------------------------------------

    \2\ Securities and Exchange Commission v. RBS Securities Inc., 
Case Number 1:13-cv-01643-WWE (D. Conn. Nov. 25, 2013).
---------------------------------------------------------------------------

Applicants' Legal Analysis

    1. Section 9(a)(2) of the Act, in relevant part, prohibits a person 
who has been enjoined from engaging in or continuing any conduct or 
practice in connection with the purchase or sale of a security, or in 
connection with activities as an underwriter, broker or dealer, from 
acting, among other things, as an investment adviser or depositor of 
any registered investment company, or a principal underwriter for any 
registered open-end investment company, registered UIT, or registered 
face-amount certificate company (such activities, collectively, ``Fund 
Services Activities''). Section 9(a)(3) of the Act makes the 
prohibition in section 9(a)(2) applicable to a company, any Affiliated 
Person of which has been disqualified under the provisions of section 
9(a)(2). Section 2(a)(3) of the Act defines ``affiliated person'' to 
include, among others: (A) any person directly or indirectly owning, 
controlling, or holding with power to vote, five per centum or more of 
the outstanding voting securities of such other person; (B) any person 
five per centum or more of whose outstanding voting securities are 
directly or indirectly owned, controlled, or held with power to vote, 
by such other person; and (C) any person directly or indirectly 
controlling, controlled by, or under common control, with the other 
person.

[[Page 72133]]

Applicants state that RBS Securities is an Affiliated Person of 
Citizens IA. Applicants state that, taken together, sections 9(a)(2) 
and 9(a)(3) would have the effect of precluding Citizens IA from acting 
as a sub-adviser to the Fund.
    2. Section 9(c) of the Act provides that, upon application, the 
Commission shall grant an application for exemption from the 
disqualification provisions of section 9(a) of the Act if it is 
established that these provisions, as applied to the Applicants, are 
unduly or disproportionately severe or that the conduct of the 
Applicants has been such as not to make it against the public interest 
or the protection of investors to grant the exemption. Applicants have 
filed an application pursuant to section 9(c) seeking a temporary and 
permanent order exempting them and other Covered Persons from the 
disqualification provisions of section 9(a).
    3. Applicants believe they meet the standard for exemption 
specified in section 9(c). Applicants state that the prohibitions of 
section 9(a) as applied to them would be unduly and disproportionately 
severe and that the conduct of the Applicants has been such as not to 
make it against the public interest or the protection of investors to 
grant the exemption from section 9(a).
    4. Applicants state that the Conduct did not involve any of the 
Applicants' Fund Service Activities. Applicants state that RBS 
Securities does not serve in any of the capacities described in section 
9(a) of the Act. In addition, Applicants state that the Conduct did not 
involve the Fund, or the assets of the Fund, with respect to which the 
Applicants provided Fund Service Activities.
    5. Applicants also state to the best of their knowledge (i) none of 
the current directors, officers, or employees of Citizens IA that are 
involved in providing Fund Service Activities (or any other persons in 
such roles during the time period covered by the Complaint) had 
knowledge of or participated in the conduct alleged in the Complaint to 
have constituted the violations that provide a basis for the 
Injunction; (ii) the directors, officers and employees at RBS 
Securities who participated in the conduct alleged in the Complaint to 
have constituted the violations that provide a basis for the Injunction 
have had no, and will not have any, involvement in providing Fund 
Service Activities on behalf of the Applicants or other Covered 
Persons; and (iii) because the personnel of Citizens IA did not 
participate in the conduct alleged in the Complaint to have constituted 
the violations that provide a basis for the Injunction, the 
shareholders of the Fund were not affected any differently than if the 
Fund had received services from any other non-affiliated investment 
adviser or principal underwriter.
    6. Applicants submit that they have taken sufficient remedial 
actions to address the conduct that served as the basis for the 
Injunction and that granting the exemption requested is consistent with 
the public interest and the protection of investors.
    7. Applicants state that the inability of Citizens IA to continue 
providing Fund Service Activities to the Fund would result in the Fund 
and its shareholders facing potential hardship. Applicants state that 
they will distribute to the board of trustees of the Fund (the 
``Board'') written materials describing the circumstances that led to 
the Injunction, any impact on the Fund, and the application. The 
written materials will include an offer to discuss the materials at an 
in-person meeting with the Board, including the directors who are not 
``interested persons'' of the Fund as defined in section 2(a)(19) of 
the Act, and their independent legal counsel as defined in rule 0-
1(a)(6) under the Act. Applicants state that they will provide the 
Board with the information concerning the Injunction and the 
application that is necessary for the Fund to fulfill its disclosure 
and other obligations under the federal securities laws.
    8. Applicants state that if Citizens IA were barred from providing 
investment advisory services to the Fund, the effect on its businesses 
and employees would be severe. Applicants state that Citizens IA has 
committed substantial capital and other resources to establish an 
expertise in sub-advising registered investment companies. Applicants 
further state that prohibiting Citizens IA from providing Fund Service 
Activities would not only adversely affect its business, but would also 
adversely affect its employees that are involved in those activities. 
Applicants state that many of these employees could experience 
significant difficulties in finding alternative fund-related 
employment.
    9. Applicants state that Applicants and certain other affiliated 
persons of the Applicants have previously received an order under 
section 9(c) of the Act, as the result of conduct that triggered 
section 9(a), as described in greater detail in the application.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Any temporary exemption granted pursuant to the application shall 
be without prejudice to, and shall not limit the Commission's rights in 
any manner with respect to, any Commission investigation of, or 
administrative proceedings involving or against, Covered Persons, 
including without limitation, the consideration by the Commission of a 
permanent exemption from section 9(a) of the Act requested pursuant to 
the application or the revocation or removal of any temporary 
exemptions granted under the Act in connection with the application.

Temporary Order

    The Commission has considered the matter and finds that the 
Applicants have made the necessary showing to justify granting a 
temporary exemption.
    Accordingly,
    It is hereby ordered, pursuant to section 9(c) of the Act, that 
Applicants and any other Covered Persons are granted a temporary 
exemption from the provisions of section 9(a), solely with respect to 
the Injunction, subject to the condition in the application, from 
November 25, 2013, until the Commission takes final action on their 
application for a permanent order.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-28759 Filed 11-29-13; 8:45 am]
BILLING CODE 8011-01-P