Banc of America Mortgage Securities, Inc., et al.; Notice of Application and Temporary Order, 71466-71468 [2014-28314]
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Federal Register / Vol. 79, No. 231 / Tuesday, December 2, 2014 / Notices
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sharing agreement requirements of rule
22c–2(a)(2) and (3), it requires a total of
32,945.5 hours at a cost of
$12,476,169.50.19
The Commission staff estimates that
on average, each fund group requests
shareholder information once a week,
and gives instructions regarding the
restriction of shareholder trades every
day, for a total of 417 responses related
to information sharing systems per fund
group each year, and a total 334,017
responses for all fund groups
annually.20 In addition, as described
above, the staff estimates that funds
make 68 responses related to board
determinations, 2403 responses related
to new intermediaries of existing fund
groups, 5800 responses related to new
fund group information sharing
agreements, and 801 responses related
to recordkeeping, for a total of 9072
responses related to the other
requirements of rule 22c–2. Therefore,
the Commission staff estimates that the
total number of responses is 343,164
(334,017 + 9147 = 343,164).
The Commission staff estimates that
the total hour burden for rule 22c–2 is
33,829.5 hours at a cost of
$13,123,121.50.21 Responses provided
to the Commission will be accorded the
same level of confidentiality accorded to
other responses provided to the
Commission in the context of its
examination and oversight program.
Responses provided in the context of
the Commission’s examination and
oversight program are generally kept
confidential. Complying with the
information collections of rule 22c–2 is
mandatory for funds that redeem their
shares within 7 days of purchase. An
agency may not conduct or sponsor, and
a person is not required to respond to
a collection of information unless it
displays a currently valid control
number.
The public may view the background
documentation for this information
collection at the following Web site,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
19 This estimate is based on the following
calculations: (9612 hours + 23,200 hours + 133.5
hours = 32,945.5 hours); ($3,652,560 + $8,816,000
+ $7609.50 = $12,476,169.50).
20 This estimate is based on the following
calculations: (52 + 365 = 417); (417 × 801 fund
groups = 334,017).
21 This estimate is based on the following
calculations: (884 hours (board determination) +
32,945.5 hours (information sharing agreements) =
33,829.5 total hours); ($12,476,169.50 + $646,952 =
$13,123,121.50).
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or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 100 F Street NE., Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov. Comments must be
submitted to OMB within 30 days of
this notice.
Dated: November 25, 2014.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–28309 Filed 12–1–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–31359; 812–14390
Banc of America Mortgage Securities,
Inc., et al.; Notice of Application and
Temporary Order
November 25, 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 (the ‘‘Temporary
Order’’) exempting them from section
9(a) of the Act, with respect to
injunctions entered against Bank of
America, N.A. (‘‘BANA’’), Merrill
Lynch, Pierce, Fenner & Smith
Incorporated (‘‘Merrill Lynch’’), and
Banc of America Mortgage Securities,
Inc. (‘‘BOAMS,’’ and, together with
BANA and Merrill Lynch, the
‘‘Respondents’’) on November 25, 2014
by the United States District Court for
the Western District of North Carolina
(the ‘‘District Court’’) until the
Commission takes final action on an
application for a permanent order (the
‘‘Permanent Order,’’ and with the
Temporary Order, the ‘‘Orders’’).
Applicants also have applied for a
Permanent Order.
Applicants: BofA Advisors, LLC
(‘‘BoA Advisors’’), BofA Distributors,
Inc. (‘‘BoA Distributors’’), KECALP Inc.
(‘‘KECALP’’), Merrill Lynch Ventures,
LLC (‘‘Ventures’’), Merrill Lynch Global
Private Equity, Inc. (‘‘MLGPE’’), and
Merrill Lynch Alternative Investments
LLC (‘‘MLAI’’) (each, an ‘‘Applicant’’
and collectively, the ‘‘Applicants’’), and
solely for purposes of agreeing to
condition 3 of the application, the
Respondents.
DATES: Filing Date: The application was
filed on November 25, 2014.
SUMMARY:
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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 22, 2014, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, 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: BOAMS, 21 North Tryon
Street, Charlotte, NC 28255; BANA and
Merrill Lynch, Bank of America Tower,
One Bryant Park, New York, NY 10036;
BoA Advisors and BoA Distributors, 100
Federal Street, Boston, MA 02110;
KECALP and Ventures, 135 South
LaSalle Street, Chicago, IL 60604;
MLGPE, 135 South La Salle Street, Suite
811, Chicago, IL 60603; and MLAI, 4
World Financial Center, 250 Vesey
Street, 11th Floor, New York, NY 10080.
FOR FURTHER INFORMATION CONTACT:
David J. Marcinkus, Senior Counsel, at
202–551–6882 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
summary of the application. The
complete application may be obtained
via the Commission’s Web site by
searching for the file number, or for an
applicant using the Company name box,
at https://www.sec.gov/search/
search.htm, or by calling (202) 551–
8090.
Applicants’ Representations
1. Bank of America Corporation
(‘‘BAC’’), a corporation organized under
the laws of Delaware, is a publicly
traded company headquartered in
Charlotte, North Carolina. As noted
below, each of the Respondents and
each of the Applicants is a direct or
indirect wholly-owned subsidiary of
BAC. BANA is a nationally chartered
banking association headquartered in
Charlotte, North Carolina that conducts
retail, trust and commercial banking
operations. BANA is an indirect wholly-
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owned subsidiary of BAC. BOAMS, a
corporation organized under the laws of
Delaware, is a direct wholly-owned
subsidiary of BANA. Merrill Lynch, a
corporation organized under the laws of
Delaware, is an indirect wholly-owned
subsidiary of BAC. Merrill Lynch,
directly and through its subsidiaries and
affiliates, provides investment,
financing, advisory, insurance, banking
and related products and services, and
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 (the
‘‘Advisers Act’’). Merrill Lynch does not
currently engage in Fund Service
Activities (defined below), but it may do
so in the future.
2. Each of the Applicants serves either
as investment adviser (as defined in
section 2(a)(20) of the Act) to
investment companies registered under
the Act or series of such companies
(‘‘Funds’’) or employees’ securities
companies (‘‘ESCs’’), or as principal
underwriter (as defined in section
2(a)(29) of the Act) to open-end
management investment companies
registered under the Act (‘‘Open-End
Funds’’). BoA Advisors, a limited
liability company organized under the
laws of Delaware, is registered as an
investment adviser under the Advisers
Act. BoA Advisors is a direct whollyowned subsidiary of BofA Global
Capital Management Group, LLC, which
is in turn a direct wholly-owned
subsidiary of BANA. BoA Distributors, a
corporation organized under the laws of
Massachusetts, is an indirect whollyowned subsidiary of BoA Advisors. BoA
Distributors is a limited purpose brokerdealer registered with the Commission.
KECALP, a corporation organized under
the laws of Delaware, is an indirect
wholly-owned subsidiary of BAC.
Ventures, a limited liability company
organized under the laws of Delaware,
is an indirect wholly-owned subsidiary
of BAC. MLGPE, a corporation
organized under the laws of Delaware,
is registered as an investment adviser
under the Advisers Act. MLGPE is an
indirect wholly-owned subsidiary of
BAC. MLAI, a limited liability company
organized under the laws of Delaware,
is registered as an investment adviser
under the Advisers Act. MLAI is an
indirect wholly-owned subsidiary of
BAC.
3. While no existing company of
which the Respondents is an ‘‘affiliated
person’’ within the meaning of section
2(a)(3) of the Act (‘‘Affiliated Person’’),
other than the Applicants, currently
serves as an investment adviser or
depositor of any Fund or ESC or
investment company that has elected to
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be treated as a business development
company under the Act, or principal
underwriter for any Open-End Fund,
unit investment trust registered under
the Act, or face-amount certificate
company registered under the Act (such
activities, collectively, (‘‘Fund Service
Activities’’), Applicants request that any
relief granted also apply to any existing
company of which any of the
Respondents is an Affiliated Person and
to any other company of which any of
the Respondents may become an
Affiliated Person in the future (together
with Applicants and Merrill Lynch, the
‘‘Covered Persons’’) with respect to any
activity contemplated by section 9(a) of
the Act.
4. On August 6, 2013, the Commission
filed a complaint (the ‘‘Complaint’’)
against the Respondents in the District
Court in a civil action captioned
Securities and Exchange Commission v.
Bank of America, N.A., et al. (the
‘‘BOAMS Action’’).1 The Complaint
alleges violations of sections 17(a)(2)
and 17(a)(3) of the Securities Act of
1933 (the ‘‘Securities Act’’) by
Respondents arising out of an offering of
prime residential mortgage-backed
securities (‘‘RMBS’’) in 2008 known as
BOAMS 2008–A. The Complaint also
alleges that Merrill Lynch and BOAMS
violated section 5(b)(1) of the Securities
Act by disclosing certain data regarding
BOAMS 2008–A to some, but not all,
investors, as well as by failing to file
such data with the Commission.
5. In settlement of the BOAMS
Action, Respondents submitted
executed Consents of Defendants
BANA, Merrill Lynch and BOAMS (the
‘‘Consents’’). In the Consents,
Respondents agreed to the entry of a
final judgment, without admitting or
denying the allegations contained in the
Complaint (other than those relating to
the jurisdiction of the District Court).
On November 25, 2014 the District
Court entered a judgment against
Respondents (the ‘‘Judgment’’) 2 that
enjoined Respondents from violating,
directly or indirectly, sections 17(a)(2),
17(a)(3) and 5(b)(1) 3 of the Securities
Act (the ‘‘Injunctions’’).
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
1 The conduct alleged in the Complaint is referred
to herein as the ‘‘Conduct.’’
2 Securities and Exchange Commission v. Bank of
America, N.A., et al., Civil Action No. 3:13–cv–447
(W.D.N.C. Nov. 25, 2014).
3 BANA was not named as a defendant in
connection with the Commission’s section 5(b)(1)
claim and therefore did not consent to the entry of
an injunction under that section.
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continuing any conduct or practice in
connection with the purchase or sale of
a security, or in connection with
activities as an underwriter, from
performing Fund Service 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. Applicants state that,
taken together, sections 9(a)(2) and
9(a)(3) would have the effect of
precluding Applicants and Covered
Persons from engaging in Fund Service
Activities upon the entry of the
Injunctions because the Respondents are
Affiliated Persons of each Applicant and
Covered Person.
2. Section 9(c) of the Act provides
that, upon application, the Commission
shall by order grant an exemption from
the disqualification provisions of
section 9(a) of the Act, either
unconditionally or on an appropriate
temporary or other conditional basis, to
any person if that person establishes
that: (i) The prohibitions of section 9(a),
as applied to the person, are unduly or
disproportionately severe or (ii) the
conduct of the person 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 Order and a
Permanent Order exempting them and
other Covered Persons from the
disqualification provisions of section
9(a) of the Act. 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.
3. Applicants believe they meet the
standard for exemption specified in
section 9(c) of the Act. Applicants state
that the prohibitions of section 9(a) as
applied to them would be unduly and
disproportionately severe and that the
conduct of Applicants has been such as
not to make it against the public interest
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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
engaging in Fund Service Activities.4
Applicants also state that the Conduct
did not involve any Fund or ESC with
respect to which Applicants engaged in
Fund Service Activities. In addition,
Applicants state that none of the Funds
or ESCs with respect to which
Applicants provide Fund Service
Activities purchased or held BOAMS
2008–A.
5. Applicants and Respondents state
that (a) none of the current directors,
officers or employees of Applicants had
any involvement in the Conduct; (b)
none of the current directors, officers or
employees of Respondents had any
responsibility for the Conduct; (c) no
current or former employee of
Respondents who previously has been
or who subsequently may be identified
by Respondents or any U.S. regulatory
or enforcement agencies as having been
responsible for the Conduct will be an
officer, director or employee of any
Covered Person; and (d) the employees
of Respondents who were identified as
having been responsible for the Conduct
have had no, and will not have any
involvement in the provision of Fund
Service Activities on behalf of
Applicants or other Covered Persons.
Applicants assert that because the
personnel of Applicants did not have
any involvement in the Conduct,
shareholders of the Funds and ESCs
were not affected any differently than if
those Funds and ESCs had received
services from any investment adviser or
principal underwriter that was not
affiliated with Respondents.
6. Applicants submit that section 9(a)
should not operate to bar them from
serving the Funds or ESCs and their
shareholders in the absence of improper
activities relating to their Fund Service
Activities. Applicants state that the
section 9(a) disqualification would
result in material economic losses for
the Funds and ESCs to which
Applicants provide Funds Service
Activities, and such Funds’ operations
would be disrupted, as they sought to
engage new advisers and distributors.
Applicants assert that these effects
would be unduly severe given the
Applicants’ lack of involvement in the
Conduct. Moreover, Applicants state
that the Respondents have taken
4 Applicants state that none of the Respondents
currently serve in any of the capacities described
in section 9(a) of the Act, and BANA and BOAMS
will not do so in the future. Merrill Lynch has
engaged in Fund Service Activities in the past
(although it ceased doing so by the end of 2010),
and it may do so in the future.
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remedial actions to address the
Conduct, as outlined in the application.
Thus, Applicants believe that granting
the exemption from section 9(a), as
requested, would be consistent with the
public interest and the protection of
investors.
7. Applicants state that (a) inability of
the Adviser Applicants 5 to continue
providing investment advisory services
to Funds would result in the Funds and
their shareholders facing potential
hardship and (b) the inability of BoA
Distributors to continue to serve as
principal underwriters to the Open-End
Funds would similarly result in
potential hardship to the Open-End
Funds and their shareholders.
Applicants state that they will distribute
to the board of trustees/directors of the
Funds (the ‘‘Boards’’) written materials
describing the circumstances alleged in
the BOAMS Action and any impact on
the Funds, and the application. The
written materials will include an offer to
discuss the materials at an in-person
meeting with each Board for which
Applicants provide Fund Service
Activities, 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 Boards with the information
concerning the BOAMS Action and the
application that is necessary for those
Funds to fulfill their disclosure and
other obligations under the federal
securities laws and will provide them a
copy of the Judgment as entered by the
District Court.
8. Applicants state that if the
Applicants were barred under section
9(a) of the Act from engaging in Fund
Service Activities and were unable to
obtain the requested exemption, the
effect on their businesses and
employees would be severe because
they have committed substantial capital
and other resources to establishing an
expertise in the provision of Fund
Service Activities. Applicants further
state that prohibiting them from
providing Fund Service Activities
would not only adversely affect their
business, but would also adversely
affect their employees who 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
Applicants have previously received
5 The ‘‘Adviser Applicants’’ are BoA Advisors,
KECALP, Ventures, MLGPE, and MLAI.
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orders 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’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Any temporary exemption granted
pursuant to the application will be
without prejudice to, and will 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.
2. Each Applicant and Covered Person
will adopt and implement policies and
procedures reasonably designed to
ensure that it will comply with the
terms and conditions of the Orders
within 60 days of the date of the
Permanent Order.
3. Respondents will comply in all
material respects with the material
terms and conditions of the Orders.
4. Applicants will provide written
notification to the Chief Counsel of the
Commission’s Division of Investment
Management with a copy to the Chief
Counsel of the Commission’s Division of
Enforcement of a material violation of
the terms and conditions of the Orders
and the Judgment within 30 days of
discovery of the material violation.
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 Injunctions, subject to the
representations and conditions in the
application, from November 25, 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. 2014–28314 Filed 12–1–14; 8:45 am]
BILLING CODE 8011–01–P
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]]>Agencies
[Federal Register Volume 79, Number 231 (Tuesday, December 2, 2014)]
[Notices]
[Pages 71466-71468]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-28314]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-31359; 812-14390
Banc of America Mortgage Securities, Inc., et al.; Notice of
Application and Temporary Order
November 25, 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: Applicants have received a temporary order (the ``Temporary
Order'') exempting them from section 9(a) of the Act, with respect to
injunctions entered against Bank of America, N.A. (``BANA''), Merrill
Lynch, Pierce, Fenner & Smith Incorporated (``Merrill Lynch''), and
Banc of America Mortgage Securities, Inc. (``BOAMS,'' and, together
with BANA and Merrill Lynch, the ``Respondents'') on November 25, 2014
by the United States District Court for the Western District of North
Carolina (the ``District Court'') until the Commission takes final
action on an application for a permanent order (the ``Permanent
Order,'' and with the Temporary Order, the ``Orders''). Applicants also
have applied for a Permanent Order.
Applicants: BofA Advisors, LLC (``BoA Advisors''), BofA
Distributors, Inc. (``BoA Distributors''), KECALP Inc. (``KECALP''),
Merrill Lynch Ventures, LLC (``Ventures''), Merrill Lynch Global
Private Equity, Inc. (``MLGPE''), and Merrill Lynch Alternative
Investments LLC (``MLAI'') (each, an ``Applicant'' and collectively,
the ``Applicants''), and solely for purposes of agreeing to condition 3
of the application, the Respondents.
DATES: Filing Date: The application was filed on November 25, 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 December 22, 2014, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, 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: BOAMS, 21 North
Tryon Street, Charlotte, NC 28255; BANA and Merrill Lynch, Bank of
America Tower, One Bryant Park, New York, NY 10036; BoA Advisors and
BoA Distributors, 100 Federal Street, Boston, MA 02110; KECALP and
Ventures, 135 South LaSalle Street, Chicago, IL 60604; MLGPE, 135 South
La Salle Street, Suite 811, Chicago, IL 60603; and MLAI, 4 World
Financial Center, 250 Vesey Street, 11th Floor, New York, NY 10080.
FOR FURTHER INFORMATION CONTACT: David J. Marcinkus, Senior Counsel, at
202-551-6882 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
summary of the application. The complete application may be obtained
via the Commission's Web site by searching for the file number, or for
an applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1. Bank of America Corporation (``BAC''), a corporation organized
under the laws of Delaware, is a publicly traded company headquartered
in Charlotte, North Carolina. As noted below, each of the Respondents
and each of the Applicants is a direct or indirect wholly-owned
subsidiary of BAC. BANA is a nationally chartered banking association
headquartered in Charlotte, North Carolina that conducts retail, trust
and commercial banking operations. BANA is an indirect wholly-
[[Page 71467]]
owned subsidiary of BAC. BOAMS, a corporation organized under the laws
of Delaware, is a direct wholly-owned subsidiary of BANA. Merrill
Lynch, a corporation organized under the laws of Delaware, is an
indirect wholly-owned subsidiary of BAC. Merrill Lynch, directly and
through its subsidiaries and affiliates, provides investment,
financing, advisory, insurance, banking and related products and
services, and 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 (the ``Advisers Act''). Merrill Lynch does not
currently engage in Fund Service Activities (defined below), but it may
do so in the future.
2. Each of the Applicants serves either as investment adviser (as
defined in section 2(a)(20) of the Act) to investment companies
registered under the Act or series of such companies (``Funds'') or
employees' securities companies (``ESCs''), or as principal underwriter
(as defined in section 2(a)(29) of the Act) to open-end management
investment companies registered under the Act (``Open-End Funds''). BoA
Advisors, a limited liability company organized under the laws of
Delaware, is registered as an investment adviser under the Advisers
Act. BoA Advisors is a direct wholly-owned subsidiary of BofA Global
Capital Management Group, LLC, which is in turn a direct wholly-owned
subsidiary of BANA. BoA Distributors, a corporation organized under the
laws of Massachusetts, is an indirect wholly-owned subsidiary of BoA
Advisors. BoA Distributors is a limited purpose broker-dealer
registered with the Commission. KECALP, a corporation organized under
the laws of Delaware, is an indirect wholly-owned subsidiary of BAC.
Ventures, a limited liability company organized under the laws of
Delaware, is an indirect wholly-owned subsidiary of BAC. MLGPE, a
corporation organized under the laws of Delaware, is registered as an
investment adviser under the Advisers Act. MLGPE is an indirect wholly-
owned subsidiary of BAC. MLAI, a limited liability company organized
under the laws of Delaware, is registered as an investment adviser
under the Advisers Act. MLAI is an indirect wholly-owned subsidiary of
BAC.
3. While no existing company of which the Respondents is an
``affiliated person'' within the meaning of section 2(a)(3) of the Act
(``Affiliated Person''), other than the Applicants, currently serves as
an investment adviser or depositor of any Fund or ESC or investment
company that has elected to be treated as a business development
company under the Act, or principal underwriter for any Open-End Fund,
unit investment trust registered under the Act, or face-amount
certificate company registered under the Act (such activities,
collectively, (``Fund Service Activities''), Applicants request that
any relief granted also apply to any existing company of which any of
the Respondents is an Affiliated Person and to any other company of
which any of the Respondents may become an Affiliated Person in the
future (together with Applicants and Merrill Lynch, the ``Covered
Persons'') with respect to any activity contemplated by section 9(a) of
the Act.
4. On August 6, 2013, the Commission filed a complaint (the
``Complaint'') against the Respondents in the District Court in a civil
action captioned Securities and Exchange Commission v. Bank of America,
N.A., et al. (the ``BOAMS Action'').\1\ The Complaint alleges
violations of sections 17(a)(2) and 17(a)(3) of the Securities Act of
1933 (the ``Securities Act'') by Respondents arising out of an offering
of prime residential mortgage-backed securities (``RMBS'') in 2008
known as BOAMS 2008-A. The Complaint also alleges that Merrill Lynch
and BOAMS violated section 5(b)(1) of the Securities Act by disclosing
certain data regarding BOAMS 2008-A to some, but not all, investors, as
well as by failing to file such data with the Commission.
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\1\ The conduct alleged in the Complaint is referred to herein
as the ``Conduct.''
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5. In settlement of the BOAMS Action, Respondents submitted
executed Consents of Defendants BANA, Merrill Lynch and BOAMS (the
``Consents''). In the Consents, Respondents agreed to the entry of a
final judgment, without admitting or denying the allegations contained
in the Complaint (other than those relating to the jurisdiction of the
District Court). On November 25, 2014 the District Court entered a
judgment against Respondents (the ``Judgment'') \2\ that enjoined
Respondents from violating, directly or indirectly, sections 17(a)(2),
17(a)(3) and 5(b)(1) \3\ of the Securities Act (the ``Injunctions'').
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\2\ Securities and Exchange Commission v. Bank of America, N.A.,
et al., Civil Action No. 3:13-cv-447 (W.D.N.C. Nov. 25, 2014).
\3\ BANA was not named as a defendant in connection with the
Commission's section 5(b)(1) claim and therefore did not consent to
the entry of an injunction under that section.
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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, from performing Fund
Service 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.
Applicants state that, taken together, sections 9(a)(2) and 9(a)(3)
would have the effect of precluding Applicants and Covered Persons from
engaging in Fund Service Activities upon the entry of the Injunctions
because the Respondents are Affiliated Persons of each Applicant and
Covered Person.
2. Section 9(c) of the Act provides that, upon application, the
Commission shall by order grant an exemption from the disqualification
provisions of section 9(a) of the Act, either unconditionally or on an
appropriate temporary or other conditional basis, to any person if that
person establishes that: (i) The prohibitions of section 9(a), as
applied to the person, are unduly or disproportionately severe or (ii)
the conduct of the person 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 Order and a Permanent Order exempting them and other Covered
Persons from the disqualification provisions of section 9(a) of the
Act. 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.
3. Applicants believe they meet the standard for exemption
specified in section 9(c) of the Act. Applicants state that the
prohibitions of section 9(a) as applied to them would be unduly and
disproportionately severe and that the conduct of Applicants has been
such as not to make it against the public interest
[[Page 71468]]
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 engaging in Fund Service Activities.\4\ Applicants also
state that the Conduct did not involve any Fund or ESC with respect to
which Applicants engaged in Fund Service Activities. In addition,
Applicants state that none of the Funds or ESCs with respect to which
Applicants provide Fund Service Activities purchased or held BOAMS
2008-A.
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\4\ Applicants state that none of the Respondents currently
serve in any of the capacities described in section 9(a) of the Act,
and BANA and BOAMS will not do so in the future. Merrill Lynch has
engaged in Fund Service Activities in the past (although it ceased
doing so by the end of 2010), and it may do so in the future.
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5. Applicants and Respondents state that (a) none of the current
directors, officers or employees of Applicants had any involvement in
the Conduct; (b) none of the current directors, officers or employees
of Respondents had any responsibility for the Conduct; (c) no current
or former employee of Respondents who previously has been or who
subsequently may be identified by Respondents or any U.S. regulatory or
enforcement agencies as having been responsible for the Conduct will be
an officer, director or employee of any Covered Person; and (d) the
employees of Respondents who were identified as having been responsible
for the Conduct have had no, and will not have any involvement in the
provision of Fund Service Activities on behalf of Applicants or other
Covered Persons. Applicants assert that because the personnel of
Applicants did not have any involvement in the Conduct, shareholders of
the Funds and ESCs were not affected any differently than if those
Funds and ESCs had received services from any investment adviser or
principal underwriter that was not affiliated with Respondents.
6. Applicants submit that section 9(a) should not operate to bar
them from serving the Funds or ESCs and their shareholders in the
absence of improper activities relating to their Fund Service
Activities. Applicants state that the section 9(a) disqualification
would result in material economic losses for the Funds and ESCs to
which Applicants provide Funds Service Activities, and such Funds'
operations would be disrupted, as they sought to engage new advisers
and distributors. Applicants assert that these effects would be unduly
severe given the Applicants' lack of involvement in the Conduct.
Moreover, Applicants state that the Respondents have taken remedial
actions to address the Conduct, as outlined in the application. Thus,
Applicants believe that granting the exemption from section 9(a), as
requested, would be consistent with the public interest and the
protection of investors.
7. Applicants state that (a) inability of the Adviser Applicants
\5\ to continue providing investment advisory services to Funds would
result in the Funds and their shareholders facing potential hardship
and (b) the inability of BoA Distributors to continue to serve as
principal underwriters to the Open-End Funds would similarly result in
potential hardship to the Open-End Funds and their shareholders.
Applicants state that they will distribute to the board of trustees/
directors of the Funds (the ``Boards'') written materials describing
the circumstances alleged in the BOAMS Action and any impact on the
Funds, and the application. The written materials will include an offer
to discuss the materials at an in-person meeting with each Board for
which Applicants provide Fund Service Activities, 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 Boards with the information concerning the BOAMS
Action and the application that is necessary for those Funds to fulfill
their disclosure and other obligations under the federal securities
laws and will provide them a copy of the Judgment as entered by the
District Court.
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\5\ The ``Adviser Applicants'' are BoA Advisors, KECALP,
Ventures, MLGPE, and MLAI.
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8. Applicants state that if the Applicants were barred under
section 9(a) of the Act from engaging in Fund Service Activities and
were unable to obtain the requested exemption, the effect on their
businesses and employees would be severe because they have committed
substantial capital and other resources to establishing an expertise in
the provision of Fund Service Activities. Applicants further state that
prohibiting them from providing Fund Service Activities would not only
adversely affect their business, but would also adversely affect their
employees who 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 Applicants have previously received orders 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' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Any temporary exemption granted pursuant to the application will
be without prejudice to, and will 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.
2. Each Applicant and Covered Person will adopt and implement
policies and procedures reasonably designed to ensure that it will
comply with the terms and conditions of the Orders within 60 days of
the date of the Permanent Order.
3. Respondents will comply in all material respects with the
material terms and conditions of the Orders.
4. Applicants will provide written notification to the Chief
Counsel of the Commission's Division of Investment Management with a
copy to the Chief Counsel of the Commission's Division of Enforcement
of a material violation of the terms and conditions of the Orders and
the Judgment within 30 days of discovery of the material violation.
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 Injunctions, subject to the representations and conditions in the
application, from November 25, 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. 2014-28314 Filed 12-1-14; 8:45 am]
BILLING CODE 8011-01-P
