Citigroup Global Markets Inc., et al.; Notice of Application and Temporary Order, 47160-47162 [2014-18983]
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47160
Federal Register / Vol. 79, No. 155 / Tuesday, August 12, 2014 / Notices
appropriate course of action to address
the event or issue.
If the NRC determines that an event
or issue may have or has the potential
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Submit, by October 14, 2014,
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comments to the Acting NRC Clearance
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Questions about the information
collection requirements may be directed
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VerDate Mar<15>2010
17:45 Aug 11, 2014
Jkt 232001
Kristen Benney (T–5 F50), U.S. Nuclear
Regulatory Commission, Washington,
DC 20555–0001, by telephone at 301–
415–6355, or by email to
INFOCOLLECTS.Resource@NRC.GOV.
Dated at Rockville, Maryland, this 7th day
of August, 2014.
For the Nuclear Regulatory Commission.
Kristen Benney,
Acting NRC Clearance Officer, Office of
Information Services.
[FR Doc. 2014–19016 Filed 8–11–14; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–31199; File No. 812–13970]
Citigroup Global Markets Inc., et al.;
Notice of Application and Temporary
Order
August 6, 2014.
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 Citigroup Global
Markets Inc. (‘‘CGMI’’) on August 5,
2014 by the United States District Court
for the Southern District of New York
(‘‘Injunction’’), until the Commission
takes final action on an application for
a permanent order. Applicants also have
applied for a permanent order.
APPLICANTS: CGMI, CEFOF GP I Corp.
(‘‘CEFOF’’), CELFOF GP Corp.
(‘‘CELFOF’’), Citibank, N.A.
(‘‘Citibank’’), Citigroup Alternative
Investments LLC (‘‘Citigroup
Alternative’’), Citigroup Capital Partners
I GP I Corp. (‘‘CCP I’’), Citigroup Capital
Partners I GP II Corp. (‘‘CCP II’’),
Citigroup Private Equity (Offshore) LLC
(‘‘CPE (Offshore)’’), Citigroup First
Investment Management Americas LLC
(‘‘CFIMA,’’ and along with CGMI,
CEFOF, CELFOF, Citibank, Citigroup
Alternative, CCP I, CCP II, and CPE
(Offshore), the ‘‘Applicants’’).1
DATES: Filing Date: The application was
filed on October 20, 2011 and amended
on August 5, 2014.
SUMMARY OF APPLICATION:
1 Applicants request that any relief granted
pursuant to the application also apply to any other
company of which CGMI is or may become an
affiliated person within the meaning of section
2(a)(3) of the Act (together with the Applicants, the
‘‘Covered Persons’’).
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Fmt 4703
Sfmt 4703
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 September 2, 2014, and
should be accompanied by proof of
service on Applicants, in the form of an
affidavit, or for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090;
Applicants: CGMI, CEFOF, CELFOF,
CCP I, CCP II, CPE (Offshore), CFIMA,
388 Greenwich Street, New York, NY
10013; Citibank, Citigroup Alternative,
399 Park Avenue, New York, NY 10043.
FOR FURTHER INFORMATION CONTACT: Jill
Ehrlich, Senior Counsel, at (202) 551–
6819, or Mary Kay Frech, Branch Chief,
at (202) 551–6821 (Division of
Investment Management, Chief
Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a temporary order and a
summary of the application. The
complete application may be obtained
via the Commission’s Web site by
searching for the file number, or an
applicant using the Company name box,
at https://www.sec.gov/search/
search.htm, or by calling (202) 551–
8090.
Applicants’ Representations
1. Each of the Applicants is an
indirect wholly-owned subsidiary of
Citigroup Inc. (‘‘Citigroup’’), a
diversified financial services company.
CGMI is a full service investment
banking firm that engages in securities
underwriting, sales and trading,
investment banking, financial advisory
and investment research services. CGMI
is registered as a broker-dealer under the
Securities Exchange Act of 1934 and as
an investment adviser under the
Investment Advisers Act of 1940
(‘‘Advisers Act’’). It currently does not
serve as principal underwriter or
investment adviser of any Funds, but it
may seek to do so in the future.2 CFIMA
2 ‘‘Funds’’ refers to any registered investment
company, business development company, or ESC
(as defined herein) for which a Covered Person
serves as an investment adviser, sub-adviser,
general partner or depositor, or any registered open-
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12AUN1
Federal Register / Vol. 79, No. 155 / Tuesday, August 12, 2014 / Notices
is registered as an investment adviser
under the Advisers Act and serves as
investment adviser for one or more
Funds. CEFOF, CELFOF, Citibank,
Citigroup Alternative, CCP I, CCP II, and
CPE (Offshore) (‘‘ESC Advisers’’) serve
as investment advisers to certain
employees’ securities companies within
the meaning of section 2(a)(13) of the
Act, which provide investment
opportunities for certain eligible
employees, officers, directors and
persons on retainer of Citigroup and its
affiliates (‘‘ESCs’’ and included in the
term ‘‘Funds’’).3
2. On August 5, 2014, the United
States District Court for the Southern
District of New York entered a
judgment, which included the
Injunction, against CGMI (‘‘Final
Judgment’’) in a matter brought by the
Commission.4 The conduct of CGMI,
along with certain of its affiliates,
(together, ‘‘Citi’’) alleged in the
complaint (‘‘Complaint’’) involved Citi’s
role in the structuring and marketing of
a largely synthetic collateralized debt
obligation (‘‘CDO’’) whose investment
portfolio consisted primarily of credit
default swaps referencing other CDO
securities with collateral consisting
primarily of residential mortgage-backed
securities. The Complaint alleged that
the marketing materials for the CDO
were materially misleading because they
suggested that Citi was acting in the
traditional role of an arranging bank,
when in fact Citi had allegedly
exercised influence over the selection of
the assets and had retained a proprietary
short position of the assets it had helped
select, which gave Citi allegedly
undisclosed economic interests adverse
to those of the investors in the CDO. The
Final Judgment would restrain and
enjoin CGMI from violating sections
17(a)(2) and (3) of the Securities Act of
1933. Without admitting or denying any
of the allegations in the Complaint,
except as to personal and subject matter
jurisdiction, CGMI consented to the
entry of the Final Judgment and other
equitable relief, including certain
undertakings and the payment of a civil
penalty.
emcdonald on DSK67QTVN1PROD with NOTICES
Applicants’ Legal Analysis
1. Section 9(a)(2) of the Act, in
relevant part, prohibits a person who
end investment company, registered unit
investment trust or registered face amount
certificate company for which a Covered Person
serves as principal underwriter.
3 Greenwich Street Employees Fund, L.P., et al.,
Investment Company Act Release Nos. 25324 (Dec.
21, 2001) (notice) and 25367 (Jan. 16, 2002) (order)
(‘‘ESC Order’’).
4 Securities and Exchange Commission v.
Citigroup Global Markets Inc., 11–CV–7387
(S.D.N.Y. Aug. 5, 2014).
VerDate Mar<15>2010
17:45 Aug 11, 2014
Jkt 232001
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 company, registered unit
investment trust or registered faceamount certificate company. Section
9(a)(3) of the Act makes the prohibition
in section 9(a)(2) applicable to a
company, any affiliated person of which
has been disqualified under the
provisions of section 9(a)(2). Section
2(a)(3) of the Act defines ‘‘affiliated
person’’ to include, among others, any
person directly or indirectly controlling,
controlled by, or under common control
with, the other person. Applicants state
that CGMI is an affiliated person of each
of the other Applicants within the
meaning of section 2(a)(3) of the Act.
Applicants state that the entry of the
Injunction results in Applicants being
subject to the disqualification
provisions of section 9(a) of the Act.
2. Section 9(c) of the Act provides that
the Commission shall grant an
application for exemption from the
disqualification provisions of section
9(a) if it is established that these
provisions, as applied to the applicants,
are unduly or disproportionately severe
or that the applicants’ conduct has been
such as not to make it against the public
interest or the protection of investors to
grant the exemption. Applicants have
filed an application pursuant to section
9(c) seeking a temporary and permanent
order exempting them and other
Covered Persons from the
disqualification provisions of section
9(a) of the Act.
3. Applicants believe they meet the
standard for exemption specified in
section 9(c). Applicants state that the
prohibitions of section 9(a) as applied to
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 alleged
conduct giving rise to the Injunction did
not involve any of the Applicants acting
in the capacity of investment adviser,
sub-adviser or depositor for any Fund
(including as general partner providing
investment advisory services to ESCs) or
as principal underwriter for any
registered open-end company, registered
unit investment trust or registered faceamount certificate company. Applicants
also state that, to the best of their
knowledge, none of the current
PO 00000
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Sfmt 4703
47161
directors, officers, or employees of the
Applicants that are involved in
providing services as investment adviser
or sub-adviser of the Funds (including
as general partner providing investment
advisory services to ESCs) or principal
underwriter for any registered open-end
company (or any other persons in such
roles during the time period covered by
the Complaint) participated in the
conduct alleged in the Complaint to
have constituted the violations that
provide a basis for the Injunction.
Applicants further represent that the
personnel at CGMI who participated in
the conduct alleged in the Complaint to
have constituted the violations that
provided a basis for the Injunction have
had no, and will not have any,
involvement in providing advisory or
depositary services (including as general
partner providing investment advisory
services to ESCs) to the Funds or
principal underwriting services to any
registered open-end company, registered
unit investment trust, or registered faceamount certificate company on the
behalf of the Applicants or other
Covered Persons. Applicants also
represent that because the personnel of
the Applicants (other than those at
CGMI) 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 those Funds were not
affected any differently than if those
Funds had received services from any
other non-affiliated investment adviser
or principal underwriter. Applicants
state that the alleged conduct did not
involve any Fund or the assets of any
Fund.
5. Applicants state that their inability
to continue to provide investment
advisory and subadvisory services to the
Funds (including as general partner
providing investment advisory services
to ESCs) and principal underwriting
services to any registered open-end
company would result in potential
hardship for some of the Funds and
their shareholders. Applicants state that
they will, as soon as reasonably
practicable, distribute written materials,
including an offer to meet in person to
discuss the materials, to the boards of
directors of the Funds (‘‘Boards’’)
(excluding, for this purpose, the ESCs)
for which the Applicants serve as
investment adviser, investment subadviser or principal underwriter,
including the directors who are not
‘‘interested persons,’’ as defined in
section 2(a)(19) of the Act, of such
Funds, and their independent legal
counsel, if any, describing the
circumstances that led to the Injunction
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Federal Register / Vol. 79, No. 155 / Tuesday, August 12, 2014 / Notices
and any impact on the Funds, and the
application. Applicants state they will
provide the Boards with the information
concerning the Injunction and the
application that is necessary for the
Funds to fulfill their disclosure and
other obligations under the federal
securities laws.
6. Applicants also state that, if they
were barred from providing services to
the Funds, the effect on their businesses
and employees would be severe.
Applicants state that they have
committed substantial resources to
establishing an expertise in providing
advisory and distribution services to
Funds. Applicants further state that
prohibiting them from providing such
services would not only adversely affect
their businesses, but would also
adversely affect numerous employees
who are involved in those activities.
Applicants also state that disqualifying
the ESC Advisers from continuing to
provide investment advisory services to
the ESCs is not in the public interest or
in the furtherance of the protection of
investors. Because the ESCs have been
formed for certain key employees,
officers and directors of Citigroup and
its affiliates, it would not be consistent
with the purposes of the ESC provisions
of the Act or the terms and conditions
of the ESC Order to require another
entity not affiliated with Citigroup to
manage the ESCs. In addition,
participating employees of Citigroup
and its affiliates likely subscribed for
interests in the ESCs with the
expectation that the ESCs would be
managed by an affiliate of Citigroup.
7. Certain of the Applicants
previously have applied for and
received exemptions under section 9(c)
as the result of conduct that triggered
section 9(a) of the Act, as described in
greater detail in the application.
Applicants’ Condition
emcdonald on DSK67QTVN1PROD with NOTICES
Any temporary exemption granted
pursuant to the application shall be without
prejudice to, and shall not limit the
Commission’s rights in any manner with
respect to, any Commission investigation of,
or administrative proceedings involving or
against, Covered Persons, including, without
limitation, the consideration by the
Commission of a permanent exemption from
section 9(a) of the Act requested pursuant to
the application or the revocation or removal
of any temporary exemptions granted under
the Act in connection with the application.
Temporary Order
The Commission has considered the
matter and finds that Applicants have
18:22 Aug 11, 2014
Jkt 232001
By the Commission.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–18983 Filed 8–11–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Federal Register Citation of Previous
Announcement: [to be published]
STATUS: Closed Meeting.
PLACE: 100 F Street NE., Washington,
DC.
DATE AND TIME OF PREVIOUSLY ANNOUNCED
MEETING: Thursday, August 14, 2014.
Cancellation of
Meeting.
The Closed Meeting scheduled for
Thursday, August 14, 2014 at 2:00 p.m.
has been cancelled.
For further information please contact
the Office of the Secretary at (202) 551–
5400.
CHANGE IN THE MEETING:
Dated: August 7, 2014.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–19100 Filed 8–8–14; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
VerDate Mar<15>2010
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
August 5, 2014, until the Commission
takes final action on their application
for a permanent order.
[Release No. 34–72779; File No. SR–
NASDAQ–2014–065]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change To Adopt New Rule 5713
and List Paired Class Shares Issued by
AccuShares® Commodities Trust I
(2) list and trade Paired Class Shares
issued by AccuShares® Commodities
Trust I relating to the following funds
pursuant to new Rule 5713: (a)
AccuShares S&P GSCI® Spot Fund; (b)
AccuShares S&P GSCI® Agriculture and
Livestock Spot Fund; (c) AccuShares
S&P GSCI® Industrial Metals Spot Fund;
(d) AccuShares S&P GSCI® Crude Oil
Spot Fund; (e) AccuShares S&P GSCI®
Brent Oil Spot Fund; (f) AccuShares
S&P GSCI® Natural Gas Spot Fund; and
(g) AccuShares Spot CBOE® VIX® Fund.
The proposed rule change was
published for comment in the Federal
Register on June 23, 2014.1 The
Commission has not received any
comments on the proposed rule change.
Section 19(b)(2) of the Act 2 provides
that, within 45 days of the publication
of notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The Commission is
extending this 45-day time period.
The Commission finds that it is
appropriate to designate a longer period
within which to take action on the
proposed rule change so that it has
sufficient time to consider the proposed
rule change. Accordingly, the
Commission, pursuant to Section
19(b)(2) of the Act,3 designates
September 19, 2014, as the date by
which the Commission shall either
approve or disapprove or institute
proceedings to determine whether to
disapprove the proposed rule change
(File Number SR–NASDAQ–2014–065).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.4
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–18980 Filed 8–11–14; 8:45 am]
BILLING CODE 8011–01–P
August 6, 2014.
On June 11, 2014, The NASDAQ
Stock Market LLC filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to: (1) Adopt new Rule 5713 governing
the listing of Paired Class Shares; and
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1 See Securities Exchange Act Release No. 72412
(June 17, 2014), 79 FR 35610.
2 15 U.S.C. 78s(b)(2).
3 Id.
4 17 CFR 200.30–3(a)(31).
E:\FR\FM\12AUN1.SGM
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]]>Agencies
[Federal Register Volume 79, Number 155 (Tuesday, August 12, 2014)]
[Notices]
[Pages 47160-47162]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18983]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-31199; File No. 812-13970]
Citigroup Global Markets Inc., et al.; Notice of Application and
Temporary Order
August 6, 2014.
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 Citigroup Global Markets Inc. (``CGMI'') on
August 5, 2014 by the United States District Court for the Southern
District of New York (``Injunction''), until the Commission takes final
action on an application for a permanent order. Applicants also have
applied for a permanent order.
Applicants: CGMI, CEFOF GP I Corp. (``CEFOF''), CELFOF GP Corp.
(``CELFOF''), Citibank, N.A. (``Citibank''), Citigroup Alternative
Investments LLC (``Citigroup Alternative''), Citigroup Capital Partners
I GP I Corp. (``CCP I''), Citigroup Capital Partners I GP II Corp.
(``CCP II''), Citigroup Private Equity (Offshore) LLC (``CPE
(Offshore)''), Citigroup First Investment Management Americas LLC
(``CFIMA,'' and along with CGMI, CEFOF, CELFOF, Citibank, Citigroup
Alternative, CCP I, CCP II, and CPE (Offshore), the ``Applicants'').\1\
---------------------------------------------------------------------------
\1\ Applicants request that any relief granted pursuant to the
application also apply to any other company of which CGMI is or may
become an affiliated person within the meaning of section 2(a)(3) of
the Act (together with the Applicants, the ``Covered Persons'').
DATES: Filing Date: The application was filed on October 20, 2011 and
---------------------------------------------------------------------------
amended on August 5, 2014.
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 September 2, 2014, and should be accompanied by proof of
service on Applicants, in the form of an affidavit, or for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants: CGMI, CEFOF, CELFOF,
CCP I, CCP II, CPE (Offshore), CFIMA, 388 Greenwich Street, New York,
NY 10013; Citibank, Citigroup Alternative, 399 Park Avenue, New York,
NY 10043.
FOR FURTHER INFORMATION CONTACT: Jill Ehrlich, Senior Counsel, at
(202) 551-6819, or Mary Kay Frech, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a temporary order and a
summary of the application. The complete application may be obtained
via the Commission's Web site by searching for the file number, or an
applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1. Each of the Applicants is an indirect wholly-owned subsidiary of
Citigroup Inc. (``Citigroup''), a diversified financial services
company. CGMI is a full service investment banking firm that engages in
securities underwriting, sales and trading, investment banking,
financial advisory and investment research services. CGMI is registered
as a broker-dealer under the Securities Exchange Act of 1934 and as an
investment adviser under the Investment Advisers Act of 1940
(``Advisers Act''). It currently does not serve as principal
underwriter or investment adviser of any Funds, but it may seek to do
so in the future.\2\ CFIMA
[[Page 47161]]
is registered as an investment adviser under the Advisers Act and
serves as investment adviser for one or more Funds. CEFOF, CELFOF,
Citibank, Citigroup Alternative, CCP I, CCP II, and CPE (Offshore)
(``ESC Advisers'') serve as investment advisers to certain employees'
securities companies within the meaning of section 2(a)(13) of the Act,
which provide investment opportunities for certain eligible employees,
officers, directors and persons on retainer of Citigroup and its
affiliates (``ESCs'' and included in the term ``Funds'').\3\
---------------------------------------------------------------------------
\2\ ``Funds'' refers to any registered investment company,
business development company, or ESC (as defined herein) for which a
Covered Person serves as an investment adviser, sub-adviser, general
partner or depositor, or any registered open-end investment company,
registered unit investment trust or registered face amount
certificate company for which a Covered Person serves as principal
underwriter.
\3\ Greenwich Street Employees Fund, L.P., et al., Investment
Company Act Release Nos. 25324 (Dec. 21, 2001) (notice) and 25367
(Jan. 16, 2002) (order) (``ESC Order'').
---------------------------------------------------------------------------
2. On August 5, 2014, the United States District Court for the
Southern District of New York entered a judgment, which included the
Injunction, against CGMI (``Final Judgment'') in a matter brought by
the Commission.\4\ The conduct of CGMI, along with certain of its
affiliates, (together, ``Citi'') alleged in the complaint
(``Complaint'') involved Citi's role in the structuring and marketing
of a largely synthetic collateralized debt obligation (``CDO'') whose
investment portfolio consisted primarily of credit default swaps
referencing other CDO securities with collateral consisting primarily
of residential mortgage-backed securities. The Complaint alleged that
the marketing materials for the CDO were materially misleading because
they suggested that Citi was acting in the traditional role of an
arranging bank, when in fact Citi had allegedly exercised influence
over the selection of the assets and had retained a proprietary short
position of the assets it had helped select, which gave Citi allegedly
undisclosed economic interests adverse to those of the investors in the
CDO. The Final Judgment would restrain and enjoin CGMI from violating
sections 17(a)(2) and (3) of the Securities Act of 1933. Without
admitting or denying any of the allegations in the Complaint, except as
to personal and subject matter jurisdiction, CGMI consented to the
entry of the Final Judgment and other equitable relief, including
certain undertakings and the payment of a civil penalty.
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\4\ Securities and Exchange Commission v. Citigroup Global
Markets Inc., 11-CV-7387 (S.D.N.Y. Aug. 5, 2014).
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Applicants' Legal Analysis
1. Section 9(a)(2) of the Act, in relevant part, prohibits a person
who has been enjoined from engaging in or continuing any conduct or
practice in connection with the purchase or sale of a security, or in
connection with activities as an underwriter, broker or dealer, from
acting, among other things, as an investment adviser or depositor of
any registered investment company or a principal underwriter for any
registered open-end company, registered unit investment trust or
registered face-amount certificate company. Section 9(a)(3) of the Act
makes the prohibition in section 9(a)(2) applicable to a company, any
affiliated person of which has been disqualified under the provisions
of section 9(a)(2). Section 2(a)(3) of the Act defines ``affiliated
person'' to include, among others, any person directly or indirectly
controlling, controlled by, or under common control with, the other
person. Applicants state that CGMI is an affiliated person of each of
the other Applicants within the meaning of section 2(a)(3) of the Act.
Applicants state that the entry of the Injunction results in Applicants
being subject to the disqualification provisions of section 9(a) of the
Act.
2. Section 9(c) of the Act provides that the Commission shall grant
an application for exemption from the disqualification provisions of
section 9(a) if it is established that these provisions, as applied to
the applicants, are unduly or disproportionately severe or that the
applicants' conduct has been such as not to make it against the public
interest or the protection of investors to grant the exemption.
Applicants have filed an application pursuant to section 9(c) seeking a
temporary and permanent order exempting them and other Covered Persons
from the disqualification provisions of section 9(a) of the Act.
3. Applicants believe they meet the standard for exemption
specified in section 9(c). Applicants state that the prohibitions of
section 9(a) as applied to 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 alleged conduct giving rise to the
Injunction did not involve any of the Applicants acting in the capacity
of investment adviser, sub-adviser or depositor for any Fund (including
as general partner providing investment advisory services to ESCs) or
as principal underwriter for any registered open-end company,
registered unit investment trust or registered face-amount certificate
company. Applicants also state that, to the best of their knowledge,
none of the current directors, officers, or employees of the Applicants
that are involved in providing services as investment adviser or sub-
adviser of the Funds (including as general partner providing investment
advisory services to ESCs) or principal underwriter for any registered
open-end company (or any other persons in such roles during the time
period covered by the Complaint) participated in the conduct alleged in
the Complaint to have constituted the violations that provide a basis
for the Injunction. Applicants further represent that the personnel at
CGMI who participated in the conduct alleged in the Complaint to have
constituted the violations that provided a basis for the Injunction
have had no, and will not have any, involvement in providing advisory
or depositary services (including as general partner providing
investment advisory services to ESCs) to the Funds or principal
underwriting services to any registered open-end company, registered
unit investment trust, or registered face-amount certificate company on
the behalf of the Applicants or other Covered Persons. Applicants also
represent that because the personnel of the Applicants (other than
those at CGMI) 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 those Funds were not affected any
differently than if those Funds had received services from any other
non-affiliated investment adviser or principal underwriter. Applicants
state that the alleged conduct did not involve any Fund or the assets
of any Fund.
5. Applicants state that their inability to continue to provide
investment advisory and subadvisory services to the Funds (including as
general partner providing investment advisory services to ESCs) and
principal underwriting services to any registered open-end company
would result in potential hardship for some of the Funds and their
shareholders. Applicants state that they will, as soon as reasonably
practicable, distribute written materials, including an offer to meet
in person to discuss the materials, to the boards of directors of the
Funds (``Boards'') (excluding, for this purpose, the ESCs) for which
the Applicants serve as investment adviser, investment sub-adviser or
principal underwriter, including the directors who are not ``interested
persons,'' as defined in section 2(a)(19) of the Act, of such Funds,
and their independent legal counsel, if any, describing the
circumstances that led to the Injunction
[[Page 47162]]
and any impact on the Funds, and the application. Applicants state they
will provide the Boards with the information concerning the Injunction
and the application that is necessary for the Funds to fulfill their
disclosure and other obligations under the federal securities laws.
6. Applicants also state that, if they were barred from providing
services to the Funds, the effect on their businesses and employees
would be severe. Applicants state that they have committed substantial
resources to establishing an expertise in providing advisory and
distribution services to Funds. Applicants further state that
prohibiting them from providing such services would not only adversely
affect their businesses, but would also adversely affect numerous
employees who are involved in those activities. Applicants also state
that disqualifying the ESC Advisers from continuing to provide
investment advisory services to the ESCs is not in the public interest
or in the furtherance of the protection of investors. Because the ESCs
have been formed for certain key employees, officers and directors of
Citigroup and its affiliates, it would not be consistent with the
purposes of the ESC provisions of the Act or the terms and conditions
of the ESC Order to require another entity not affiliated with
Citigroup to manage the ESCs. In addition, participating employees of
Citigroup and its affiliates likely subscribed for interests in the
ESCs with the expectation that the ESCs would be managed by an
affiliate of Citigroup.
7. Certain of the Applicants previously have applied for and
received exemptions under section 9(c) as the result of conduct that
triggered section 9(a) of the Act, as described in greater detail in
the application.
Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
Any temporary exemption granted pursuant to the application
shall be without prejudice to, and shall not limit the Commission's
rights in any manner with respect to, any Commission investigation
of, or administrative proceedings involving or against, Covered
Persons, including, without limitation, the consideration by the
Commission of a permanent exemption from section 9(a) of the Act
requested pursuant to the application or the revocation or removal
of any temporary exemptions granted under the Act in connection with
the application.
Temporary Order
The Commission has considered the matter and finds that Applicants
have made the necessary showing to justify granting a temporary
exemption.
Accordingly,
It is hereby ordered, pursuant to section 9(c) of the Act, that
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
August 5, 2014, until the Commission takes final action on their
application for a permanent order.
By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18983 Filed 8-11-14; 8:45 am]
BILLING CODE 8011-01-P
