The Royal Bank of Scotland plc, et al.; Notice of Application and Temporary Order, 30311-30314 [2015-12757]

Download as PDF Federal Register / Vol. 80, No. 101 / Wednesday, May 27, 2015 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES 2015.5 On February 20, 2015, the Commission issued an order instituting proceedings pursuant to Section 19(b)(2)(B) of the Act 6 to determine whether to approve or disapprove the proposal. The order was published for comment in the Federal Register on February 26, 2015.7 The Commission received a further four comments regarding the proceedings or in response to Amendment No. 1,8 to which FINRA responded via letter on May 5, 2015.9 Section 19(b)(2) of the Act 10 provides that, after initiating approval or disapproval proceedings, the Commission shall issue an order approving or disapproving the proposed rule change not later than 180 days after the date of publication of notice of filing of the proposed rule change. The Commission may extend the period for issuing an order approving or disapproving the proposed rule change, however, by not more than 60 days if the Commission determines that a longer period is appropriate and publishes the reasons for such determination. The proposal was published for comment in the Federal Register on November 24, 2014.11 The 180th day after publication of the notice of the filing of the proposed rule change in the Federal Register is May 23, 2015 and the 240th day after publication of the notice of the filing of the proposed rule change in the Federal Register is July 22, 2015. The Commission finds it appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change, including the 5 Exchange Act Release No. 74490 (Mar. 12, 2015); 80 FR 14198 (Mar. 18, 2015). 6 15 U.S.C. 78s(b)(2)(B). 7 Exchange Act Release No. 74340 (Feb. 20, 2015); 80 FR 10538 (Feb. 26, 2015). Specifically, the Commission instituted proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 15A(b)(9) of the Act, which requires that FINRA’s rules be designed to, among other things, promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. See id. 8 Letter from Stephanie R. Nicholas, WilmerHale, dated Apr. 6, 2015, Letter from Kurt N. Schacht, Managing Director, Standards and Financial Market Integrity, and Linda L. Rittenhouse, Director, Capital Markets Policy, CFA Institute, to Brent J. Fields, Secretary, SEC, dated April 7, 2015, an anonymous comment dated Apr. 8, 2015, and Letter from William Beatty, President and Washington (State) Securities Administrator, North American Securities Administrators Association, Inc., dated Apr. 17, 2015. 9 Letter from Philip Shaikun, Vice President and Associate General Counsel, FINRA, dated May 5, 2015. 10 15 U.S.C. 78s(b)(2). 11 See supra note 3 and accompanying text. VerDate Sep<11>2014 16:45 May 26, 2015 Jkt 235001 matters raised in the comment letters to the proposed rule change. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,12 designates July 22, 2015 as the date by which the Commission shall either approve or disapprove the proposed rule change (File No. SR– FINRA–2014–048). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–12690 Filed 5–26–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. IC–31642; File No. 812–14469] The Royal Bank of Scotland plc, et al.; Notice of Application and Temporary Order May 20, 2015. 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 (‘‘Temporary Order’’) exempting them from section 9(a) of the Act, with respect to a guilty plea entered on May 20, 2015, by the Royal Bank of Scotland plc (‘‘RBS’’ or the ‘‘Settling Firm’’) in the United States District Court for the District of Connecticut (the ‘‘District Court’’) in connection with a plea agreement (‘‘Plea Agreement’’) between the Settling Firm and the United States Department of Justice (‘‘DOJ’’), 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: RBS and Citizens Investment Advisors (‘‘Citizens IA’’) (each an ‘‘Applicant’’ and together, the ‘‘Applicants’’). DATES: Filing Date: The application was filed on May 20, 2015. 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 SUMMARY OF APPLICATION: 12 15 13 17 PO 00000 U.S.C. 78s(b)(2). CFR 200.30–3(a)(57). Frm 00106 Fmt 4703 Sfmt 4703 30311 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 June 15, 2015, 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: RBS: RBS, Gogarburn, P.O. Box 1000, Edinburgh, EH12 1HQ, Scotland; Citizens IA: c/o Citizens Bank, N.A., Mail Stop RC 03–30, One Citizens Plaza, Providence, Rhode Island 02903. FOR FURTHER INFORMATION CONTACT: Parisa Haghshenas, Senior Counsel, Vanessa M. Meeks, Senior Counsel, or Holly Hunter-Ceci, Branch Chief, at (202) 551–6825 (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. RBS is a company organized under the laws of Scotland and is a whollyowned subsidiary of The Royal Bank of Scotland Group plc (‘‘RBSG’’). RBS and RBSG are international banking and financial services companies that provide a wide range of products and services to customers around the world. RBS and RBSG are both foreign banking organizations for purposes of Section 8 of the International Banking Act of 1978, as amended, and Subpart B of Regulation K, bank holding companies for purposes of the Bank Holding Company Act of 1956, as amended (the ‘‘BHC Act’’) and financial holding companies for purposes of the BHC Act. Citizens IA is a separately identifiable department of Citizens Bank, N.A., which is an indirect subsidiary of RBSG and bank subsidiary of Citizens Financial Group, Inc. 2. Citizens IA is an investment adviser registered under the Investment Advisers Act of 1940, as amended. Citizens IA serves as investment sub- E:\FR\FM\27MYN1.SGM 27MYN1 mstockstill on DSK4VPTVN1PROD with NOTICES 30312 Federal Register / Vol. 80, No. 101 / Wednesday, May 27, 2015 / Notices adviser to one management investment company registered under the Act (the ‘‘Fund’’). No existing company of which the Settling Firm is an ‘‘affiliated person’’ within the meaning of section 2(a)(3) of the Act (‘‘Affiliated Person’’) (other than Citizens IA as described above) currently serves as an investment adviser or depositor of any investment company registered under the Act (‘‘RIC’’), employees’ securities company (‘‘ESC’’) or investment company that has elected to be treated as a business development company under the Act (‘‘BDC’’), or principal underwriter for any open-end registered investment company under the Act (‘‘Open-End Fund’’), unit investment trust registered under the Act (‘‘UIT’’), or face-amount certificate company registered under the Act (‘‘FACC’’) (such activities, ‘‘Fund Service Activities’’), Applicants request that any relief granted by the Commission pursuant to the application also apply to any existing company of which the Settling Firm is an Affiliated Person and to any other company of which the Settling Firm 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.1 3. On May 20, 2015, the United States Department of Justice (the ‘‘Department of Justice’’) filed a one-count criminal information (the ‘‘Information’’) in the U.S. District Court for the District of Connecticut (the ‘‘District Court’’). The Information charges that between approximately December 2007 and April 2010, the Settling Firm, through one of its euro/U.S. dollar (‘‘EUR/USD’’) traders, entered into and engaged in a conspiracy to fix, stabilize, maintain, increase or decrease the price of, and rig bids and offers for, the EUR/USD currency pair exchanged in the foreign currency exchange spot market (‘‘FX Spot Market’’) by agreeing to eliminate competition in the purchase and sale of the EUR/USD currency pair in the United States and elsewhere (the ‘‘Conduct’’) in violation of Title 15, United States Code, Section 1. The Conduct involved near daily conversations, some of which were in code, in an exclusive electronic chat room used by certain EUR/USD traders, including the EUR/USD trader employed by RBS. 4. Pursuant to the Plea Agreement, the Settling Firm entered a plea of guilty (the ‘‘Guilty Plea’’) on May 20, 2015 in 1 The Applicants and other Covered Persons may, if the Orders are granted, in the future act in any of the capacities contemplated by Section 9(a) of the Act subject to the applicable conditions of the Orders. VerDate Sep<11>2014 16:45 May 26, 2015 Jkt 235001 the District Court to the offense charged in the Information. In the Plea Agreement, the Settling Firm, among other things, agreed to a fine of $395 million. The Applicants expect that the District Court will enter a judgment against the Settling Firm (the ‘‘Judgment’’) that will require remedies that are materially the same as set forth in the Plea Agreement. The individual at the Settling Firm who was identified by the Settling Firm, RBSG or any U.S. or non-U.S. regulatory or enforcement agencies as being responsible for the Conduct has left RBS as of April 2010. RBS and RBS Securities Inc. will also enter into a settlement with the Board of Governors of the Federal Reserve System to resolve certain findings by the Federal Reserve (the ‘‘Federal Reserve Order’’). Additionally, RBS entered into a settlement with the U.S. Commodity Futures Trading Commission on November 11, 2014 to resolve certain findings by the CFTC (the ‘‘CFTC Order’’) and with the U.K. Financial Conduct Authority (‘‘FCA’’) on November 11, 2014 to resolve certain findings by the FCA (the ‘‘FCA Order’’). Applicants’ Legal Analysis 1. Section 9(a)(1) of the Act provides, in pertinent part, that a person may not serve or act as an investment adviser or depositor of any registered investment company or a principal underwriter for any registered open-end investment company, registered unit investment trust, or registered face-amount certificate company, if such person within ten years has been convicted of any felony or misdemeanor, including those arising out of such person’s conduct as a bank. Section 2(a)(10) of the Act defines the term ‘‘convicted’’ to include a plea of guilty. Section 9(a)(3) of the Act extends the prohibitions of section 9(a)(1) to a company any affiliated person of which has been disqualified under the provisions of section 9(a)(1). 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. The Settling Firm is an Affiliated Person of Citizens IA within the meaning of section 2(a)(3) of the Act. Therefore, the Applicants state that the Guilty Plea would result in a disqualification of the Applicants for ten years under section 9(a)(3) were they to act in any of the capacities listed in section 9(a) because they would become the subject of a conviction described in section 9(a)(1). 2. Section 9(c) of the Act provides that, upon application, the Commission shall by order grant an exemption from PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 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: (a) The prohibitions of section 9(a), as applied to the person, are unduly or disproportionately severe or (b) 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 the Applicants 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 applicable terms and conditions of the Orders. 3. Applicants believe they meet the standards for exemption specified in section 9(c). Applicants assert that (i) the scope of the misconduct was limited and did not involve the Adviser Applicant (as defined below) or Fund Service Activities, (ii) application of the statutory bar would impose significant hardships on the Fund and its shareholders, (iii) the prohibitions of section 9(a), if applied to the Adviser Applicant and other Covered Persons, would be unduly or disproportionately severe and (iv) the Conduct did not constitute conduct that would make it against the public interest or protection of investors to grant the exemption from section 9(a). 4. Applicants represent that the Conduct did not involve the Adviser Applicant nor did it involve any of the Applicants acting in the capacity of investment adviser, sub-adviser or depositor to any RIC, or in the capacity of principal underwriter for any OpenEnd Fund, UIT or FACC. Applicants represent that the Conduct similarly did not involve any RIC, Open-End Fund, UIT or FACC with respect to which the Applicants engaged in Fund Service Activities. Instead, a single employee, who was not employed by the Adviser Applicant or engaged in Fund Service Activities, was identified as being responsible for the Conduct. That employee is no longer employed, and will not be employed in the future, by the Applicants or any other Covered Person. Applicants assert that, in light of the limited scope of the Conduct, it would be unduly and disproportionately severe to impose a section 9(a) disqualification on the Applicants. Applicants further represent that depriving the Fund of the Adviser E:\FR\FM\27MYN1.SGM 27MYN1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 80, No. 101 / Wednesday, May 27, 2015 / Notices Applicant as its sub-adviser because of the activities of the Settling Firm would be an unduly severe result, both for the Adviser Applicant’s financial position and for the shareholders of the Fund, who would be deprived of the knowledge and expertise of a key service provider. Applicants assert that the conduct of the Applicants has not been such to make it against the public interest or the protection of investors to grant the exemption from section 9(a). 5. Applicants assert that the inability of the Applicant, i.e., Citizens IA, that serves as investment sub-adviser to the Fund (the ‘‘Adviser Applicant’’) to continue providing such services to the Fund would result in the Fund and its shareholders facing potential hardship, as outlined in the application. Applicants assert that neither the protection of investors nor the public interest would be served by permitting the section 9(a) disqualifications to apply to the Adviser Applicant because those disqualifications would deprive the Fund of the sub-advisory services that shareholders expected the Fund would receive when they decided to invest in the Fund. Applicants also assert that the prohibitions of section 9(a) could operate to the financial detriment of the Fund and its shareholders, which would be an unduly and disproportionately severe consequence given that the Adviser Applicant was not involved in the Conduct and that the Conduct did not involve Fund Service Activities. 6. Applicants assert that if the Adviser Applicant were barred under section 9(a) from providing investment advisory services to the Fund and were unable to obtain the requested exemption, the effect on its business and employees would be unduly and disproportionately severe. Applicants state that the Adviser Applicant has committed substantial capital and other resources to establishing expertise in sub-advising RICs. Applicants further state that prohibiting the Adviser Applicant from engaging in Fund Service Activities would not only adversely affect its business, but would also adversely affect its employees who are involved in these activities. Many of these employees could experience significant difficulties in finding alternative, fund-related employment. In addition, Applicants assert that if the Applicants or Covered Persons are unable to expand their businesses in the future because of the imposition of the section 9(a) disqualification, it could also have an adverse impact on their businesses. 7. Applicants represent that: (i) None of the current or former directors, VerDate Sep<11>2014 16:45 May 26, 2015 Jkt 235001 officers or employees of Citizens IA had any knowledge of, or had any involvement in, the Conduct; (ii) no current or former employee of the Settling Firm or of any other Covered Person who previously has been or who subsequently may be identified by the Settling Firm, or any U.S. or non-U.S. regulatory or enforcement agencies as having been responsible for the Conduct will have any involvement in providing Fund Service Activities on behalf of any Covered Person or will be an officer, director, or employee of any Applicants or of any other Covered Person; (iii) no employee of the Settling Firm or of any other Covered Person who was involved in the Conduct had any, or will have any future, involvement in the Covered Persons’ activities in any capacity described in section 9(a) of the Act; and (iv) because the personnel of Citizens IA did not have any involvement in the Conduct, 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. 8. Applicants have agreed that neither they nor any of the other Covered Persons will employ any of the current or former employees of Settling Firm or any Covered Person who previously have been or who subsequently may be identified by the Settling Firm, RBSG or any U.S. or non-U.S. regulatory or enforcement agency as having been responsible for the Conduct without first making a further application to the Commission pursuant to section 9(c). 9. Applicants have also agreed that each Applicant (and any Covered Person) will adopt and implement policies and procedures reasonably designed to ensure compliance with the terms and conditions of the Orders granted under section 9(c). 10. In addition, the Settling Firm has agreed to comply in all material respects with the material terms and conditions of the Plea Agreement, the CFTC Order, the Federal Reserve Order, the FCA Order, or any other orders issued by regulatory or enforcement agencies addressing the Conduct. Applicants further state that RBS and its affiliates have undertaken certain remedial measures, as described in greater detail in the application. These include certain remedial measures as required by the Plea Agreement, the CFTC Order, the Federal Reserve Order, and the FCA Order, including improvements to the oversight, internal controls, compliance, risk management and audit programs for FX trading. Specifically, Applicants represent that RBSG and RBS have taken a number of steps to enhance its internal controls, policies and PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 30313 procedures relating to its FX activities. These changes, include, but are not limited to the following: Restricting participation by traders in multi-bank chat rooms; prohibiting mobile communication devices on dealing floors; strengthening surveillance of electronic, audio and trade communications at FX desks; mandating regular training for all FX employees concerning appropriate trading behavior; enhancing policies, procedures and guidance related to market color, client orders and FX fix orders; and improving customer disclosures relating to and enhancing controls around FX fix orders. 11. As a result, Applicants submit that granting an exemption as requested in the application would be consistent with the public interest and the protection of investors. 12. To provide further assurance that the exemptive relief being requested herein would be consistent with the public interest and the protection of the investors, the Applicants agree that they will, as soon as reasonably practical, distribute to the board of trustees (‘‘Board’’) of the Fund written materials describing the circumstances that led to the Guilty Plea, 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 of the Fund, 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. The Applicants undertake to provide the Fund’s Board with all information concerning the Plea Agreement and the application necessary for the Fund to fulfill its disclosure and other obligations under the federal securities laws and will provide it a copy of the Judgment as entered by the District Court. 13. Applicants state that certain of the Applicants and their affiliates 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’ Conditions Applicants agree that any order granted by the Commission pursuant to the application will be subject to the following conditions: 1. 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 E:\FR\FM\27MYN1.SGM 27MYN1 30314 Federal Register / Vol. 80, No. 101 / Wednesday, May 27, 2015 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES 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. Neither the Applicants nor any of the other Covered Persons will employ any of the current or former employees of the Settling Firm or any Covered Person who previously has been or who subsequently may be identified by the Settling Firm, RBSG or any U.S. or nonU.S. regulatory or enforcement agency as having been responsible for the Conduct, without first making a further application to the Commission pursuant to section 9(c). 3. 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 or, with respect to condition 4, such date as may be contemplated by the Plea Agreement, or the CFTC Order, the Federal Reserve Order, the FCA Order, or any other orders issued by regulatory or enforcement agencies addressing the Conduct. 4. The Settling Firm will comply in all material respects with the material terms and conditions of the Plea Agreement, with the material terms of the CFTC Order, the Federal Reserve Order, the FCA Order or any other orders issued by regulatory or enforcement agencies addressing the Conduct. 5. 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 any of the Orders 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 the Applicants and any other Covered Persons are granted a temporary exemption from the provisions of section 9(a), solely with respect to the guilty plea entered into pursuant to the Plea Agreement, subject to the representations and conditions in the VerDate Sep<11>2014 16:45 May 26, 2015 Jkt 235001 application, from May 20, 2015 until the Commission takes final action on their application for a permanent order. By the Commission. Jill M. Peterson, Assistant Secretary. [FR Doc. 2015–12757 Filed 5–26–15; 8:45 am] BILLING CODE P SECURITIES AND EXCHANGE COMMISSION Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 20549–2736 Extension: Rule 23c–3 and Form N–23c–3, OMB Control No. 3235–0422, SEC File No. 270–373. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et. seq.), the Securities and Exchange Commission (the ‘‘Commission’’) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget (‘‘OMB’’) for extension and approval. Rule 23c–3 (17 CFR 270.23c–3) under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) permits a registered closed-end investment company (‘‘closed-end fund’’ or ‘‘fund’’) that meets certain requirements to repurchase common stock of which it is the issuer from shareholders at periodic intervals, pursuant to repurchase offers made to all holders of the stock. The rule enables these funds to offer their shareholders a limited ability to resell their shares in a manner that previously was available only to open-end investment company shareholders. To protect shareholders, a closed-end fund that relies on rule 23c–3 must send shareholders a notification that contains specified information each time the fund makes a repurchase offer (on a quarterly, semi-annual, or annual basis, or, for certain funds, on a discretionary basis not more often than every two years). The fund also must file copies of the shareholder notification with the Commission (electronically through the Commission’s Electronic Data Gathering, Analysis, and Retrieval System (‘‘EDGAR’’)) on Form N–23c–3, a filing that provides certain information about the fund and the type PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 of offer the fund is making.1 The fund must describe in its annual report to shareholders the fund’s policy concerning repurchase offers and the results of any repurchase offers made during the reporting period. The fund’s board of directors must adopt written procedures designed to ensure that the fund’s investment portfolio is sufficiently liquid to meet its repurchase obligations and other obligations under the rule. The board periodically must review the composition of the fund’s portfolio and change the liquidity procedures as necessary. The fund also must file copies of advertisements and other sales literature with the Commission as if it were an open-end investment company subject to section 24 of the Investment Company Act (15 U.S.C. 80a–24) and the rules that implement section 24. Rule 24b–3 under the Investment Company Act (17 CFR 270.24b–3), however, exempts the fund from that requirement if the materials are filed instead with the Financial Industry Regulatory Authority (‘‘FINRA’’). The requirement that the fund send a notification to shareholders of each offer is intended to ensure that a fund provides material information to shareholders about the terms of each offer. The requirement that copies be sent to the Commission is intended to enable the Commission to monitor the fund’s compliance with the notification requirement. The requirement that the shareholder notification be attached to Form N–23c–3 is intended to ensure that the fund provides basic information necessary for the Commission to process the notification and to monitor the fund’s use of repurchase offers. The requirement that the fund describe its current policy on repurchase offers and the results of recent offers in the annual shareholder report is intended to provide shareholders current information about the fund’s repurchase policies and its recent experience. The requirement that the board approves and review written procedures designed to maintain portfolio liquidity is intended to ensure that the fund has enough cash or liquid securities to meet its repurchase obligations, and that written procedures are available for review by shareholders and examination by the Commission. The requirement that the fund file advertisements and sales literature as if it were an open-end fund is intended to facilitate the review 1 Form N–23c–3, entitled ‘‘Notification of Repurchase Offer Pursuant to Rule 23c–3,’’ requires the fund to state its registration number, its full name and address, the date of the accompanying shareholder notification, and the type of offer being made (periodic, discretionary, or both). E:\FR\FM\27MYN1.SGM 27MYN1

Agencies

[Federal Register Volume 80, Number 101 (Wednesday, May 27, 2015)]
[Notices]
[Pages 30311-30314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12757]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31642; File No. 812-14469]


The Royal Bank of Scotland plc, et al.; Notice of Application and 
Temporary Order

May 20, 2015.
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 
(``Temporary Order'') exempting them from section 9(a) of the Act, with 
respect to a guilty plea entered on May 20, 2015, by the Royal Bank of 
Scotland plc (``RBS'' or the ``Settling Firm'') in the United States 
District Court for the District of Connecticut (the ``District Court'') 
in connection with a plea agreement (``Plea Agreement'') between the 
Settling Firm and the United States Department of Justice (``DOJ''), 
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: RBS and Citizens Investment Advisors (``Citizens IA'') 
(each an ``Applicant'' and together, the ``Applicants'').

DATES:  Filing Date: The application was filed on May 20, 2015.

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 June 15, 2015, 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: RBS: RBS, Gogarburn, 
P.O. Box 1000, Edinburgh, EH12 1HQ, Scotland; Citizens IA: c/o Citizens 
Bank, N.A., Mail Stop RC 03-30, One Citizens Plaza, Providence, Rhode 
Island 02903.

FOR FURTHER INFORMATION CONTACT: Parisa Haghshenas, Senior Counsel, 
Vanessa M. Meeks, Senior Counsel, or Holly Hunter-Ceci, Branch Chief, 
at (202) 551-6825 (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. RBS is a company organized under the laws of Scotland and is a 
wholly-owned subsidiary of The Royal Bank of Scotland Group plc 
(``RBSG''). RBS and RBSG are international banking and financial 
services companies that provide a wide range of products and services 
to customers around the world. RBS and RBSG are both foreign banking 
organizations for purposes of Section 8 of the International Banking 
Act of 1978, as amended, and Subpart B of Regulation K, bank holding 
companies for purposes of the Bank Holding Company Act of 1956, as 
amended (the ``BHC Act'') and financial holding companies for purposes 
of the BHC Act. Citizens IA is a separately identifiable department of 
Citizens Bank, N.A., which is an indirect subsidiary of RBSG and bank 
subsidiary of Citizens Financial Group, Inc.
    2. Citizens IA is an investment adviser registered under the 
Investment Advisers Act of 1940, as amended. Citizens IA serves as 
investment sub-

[[Page 30312]]

adviser to one management investment company registered under the Act 
(the ``Fund''). No existing company of which the Settling Firm is an 
``affiliated person'' within the meaning of section 2(a)(3) of the Act 
(``Affiliated Person'') (other than Citizens IA as described above) 
currently serves as an investment adviser or depositor of any 
investment company registered under the Act (``RIC''), employees' 
securities company (``ESC'') or investment company that has elected to 
be treated as a business development company under the Act (``BDC''), 
or principal underwriter for any open-end registered investment company 
under the Act (``Open-End Fund''), unit investment trust registered 
under the Act (``UIT''), or face-amount certificate company registered 
under the Act (``FACC'') (such activities, ``Fund Service 
Activities''), Applicants request that any relief granted by the 
Commission pursuant to the application also apply to any existing 
company of which the Settling Firm is an Affiliated Person and to any 
other company of which the Settling Firm 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.\1\
---------------------------------------------------------------------------

    \1\ The Applicants and other Covered Persons may, if the Orders 
are granted, in the future act in any of the capacities contemplated 
by Section 9(a) of the Act subject to the applicable conditions of 
the Orders.
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    3. On May 20, 2015, the United States Department of Justice (the 
``Department of Justice'') filed a one-count criminal information (the 
``Information'') in the U.S. District Court for the District of 
Connecticut (the ``District Court''). The Information charges that 
between approximately December 2007 and April 2010, the Settling Firm, 
through one of its euro/U.S. dollar (``EUR/USD'') traders, entered into 
and engaged in a conspiracy to fix, stabilize, maintain, increase or 
decrease the price of, and rig bids and offers for, the EUR/USD 
currency pair exchanged in the foreign currency exchange spot market 
(``FX Spot Market'') by agreeing to eliminate competition in the 
purchase and sale of the EUR/USD currency pair in the United States and 
elsewhere (the ``Conduct'') in violation of Title 15, United States 
Code, Section 1. The Conduct involved near daily conversations, some of 
which were in code, in an exclusive electronic chat room used by 
certain EUR/USD traders, including the EUR/USD trader employed by RBS.
    4. Pursuant to the Plea Agreement, the Settling Firm entered a plea 
of guilty (the ``Guilty Plea'') on May 20, 2015 in the District Court 
to the offense charged in the Information. In the Plea Agreement, the 
Settling Firm, among other things, agreed to a fine of $395 million. 
The Applicants expect that the District Court will enter a judgment 
against the Settling Firm (the ``Judgment'') that will require remedies 
that are materially the same as set forth in the Plea Agreement. The 
individual at the Settling Firm who was identified by the Settling 
Firm, RBSG or any U.S. or non-U.S. regulatory or enforcement agencies 
as being responsible for the Conduct has left RBS as of April 2010. RBS 
and RBS Securities Inc. will also enter into a settlement with the 
Board of Governors of the Federal Reserve System to resolve certain 
findings by the Federal Reserve (the ``Federal Reserve Order''). 
Additionally, RBS entered into a settlement with the U.S. Commodity 
Futures Trading Commission on November 11, 2014 to resolve certain 
findings by the CFTC (the ``CFTC Order'') and with the U.K. Financial 
Conduct Authority (``FCA'') on November 11, 2014 to resolve certain 
findings by the FCA (the ``FCA Order'').

Applicants' Legal Analysis

    1. Section 9(a)(1) of the Act provides, in pertinent part, that a 
person may not serve or act as an investment adviser or depositor of 
any registered investment company or a principal underwriter for any 
registered open-end investment company, registered unit investment 
trust, or registered face-amount certificate company, if such person 
within ten years has been convicted of any felony or misdemeanor, 
including those arising out of such person's conduct as a bank. Section 
2(a)(10) of the Act defines the term ``convicted'' to include a plea of 
guilty. Section 9(a)(3) of the Act extends the prohibitions of section 
9(a)(1) to a company any affiliated person of which has been 
disqualified under the provisions of section 9(a)(1). 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. The Settling Firm is an 
Affiliated Person of Citizens IA within the meaning of section 2(a)(3) 
of the Act. Therefore, the Applicants state that the Guilty Plea would 
result in a disqualification of the Applicants for ten years under 
section 9(a)(3) were they to act in any of the capacities listed in 
section 9(a) because they would become the subject of a conviction 
described in section 9(a)(1).
    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: (a) The prohibitions of section 9(a), as 
applied to the person, are unduly or disproportionately severe or (b) 
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 the Applicants 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 applicable terms 
and conditions of the Orders.
    3. Applicants believe they meet the standards for exemption 
specified in section 9(c). Applicants assert that (i) the scope of the 
misconduct was limited and did not involve the Adviser Applicant (as 
defined below) or Fund Service Activities, (ii) application of the 
statutory bar would impose significant hardships on the Fund and its 
shareholders, (iii) the prohibitions of section 9(a), if applied to the 
Adviser Applicant and other Covered Persons, would be unduly or 
disproportionately severe and (iv) the Conduct did not constitute 
conduct that would make it against the public interest or protection of 
investors to grant the exemption from section 9(a).
    4. Applicants represent that the Conduct did not involve the 
Adviser Applicant nor did it involve any of the Applicants acting in 
the capacity of investment adviser, sub-adviser or depositor to any 
RIC, or in the capacity of principal underwriter for any Open-End Fund, 
UIT or FACC. Applicants represent that the Conduct similarly did not 
involve any RIC, Open-End Fund, UIT or FACC with respect to which the 
Applicants engaged in Fund Service Activities. Instead, a single 
employee, who was not employed by the Adviser Applicant or engaged in 
Fund Service Activities, was identified as being responsible for the 
Conduct. That employee is no longer employed, and will not be employed 
in the future, by the Applicants or any other Covered Person. 
Applicants assert that, in light of the limited scope of the Conduct, 
it would be unduly and disproportionately severe to impose a section 
9(a) disqualification on the Applicants. Applicants further represent 
that depriving the Fund of the Adviser

[[Page 30313]]

Applicant as its sub-adviser because of the activities of the Settling 
Firm would be an unduly severe result, both for the Adviser Applicant's 
financial position and for the shareholders of the Fund, who would be 
deprived of the knowledge and expertise of a key service provider. 
Applicants assert that the conduct of the Applicants has not been such 
to make it against the public interest or the protection of investors 
to grant the exemption from section 9(a).
    5. Applicants assert that the inability of the Applicant, i.e., 
Citizens IA, that serves as investment sub-adviser to the Fund (the 
``Adviser Applicant'') to continue providing such services to the Fund 
would result in the Fund and its shareholders facing potential 
hardship, as outlined in the application. Applicants assert that 
neither the protection of investors nor the public interest would be 
served by permitting the section 9(a) disqualifications to apply to the 
Adviser Applicant because those disqualifications would deprive the 
Fund of the sub-advisory services that shareholders expected the Fund 
would receive when they decided to invest in the Fund. Applicants also 
assert that the prohibitions of section 9(a) could operate to the 
financial detriment of the Fund and its shareholders, which would be an 
unduly and disproportionately severe consequence given that the Adviser 
Applicant was not involved in the Conduct and that the Conduct did not 
involve Fund Service Activities.
    6. Applicants assert that if the Adviser Applicant were barred 
under section 9(a) from providing investment advisory services to the 
Fund and were unable to obtain the requested exemption, the effect on 
its business and employees would be unduly and disproportionately 
severe. Applicants state that the Adviser Applicant has committed 
substantial capital and other resources to establishing expertise in 
sub-advising RICs. Applicants further state that prohibiting the 
Adviser Applicant from engaging in Fund Service Activities would not 
only adversely affect its business, but would also adversely affect its 
employees who are involved in these activities. Many of these employees 
could experience significant difficulties in finding alternative, fund-
related employment. In addition, Applicants assert that if the 
Applicants or Covered Persons are unable to expand their businesses in 
the future because of the imposition of the section 9(a) 
disqualification, it could also have an adverse impact on their 
businesses.
    7. Applicants represent that: (i) None of the current or former 
directors, officers or employees of Citizens IA had any knowledge of, 
or had any involvement in, the Conduct; (ii) no current or former 
employee of the Settling Firm or of any other Covered Person who 
previously has been or who subsequently may be identified by the 
Settling Firm, or any U.S. or non-U.S. regulatory or enforcement 
agencies as having been responsible for the Conduct will have any 
involvement in providing Fund Service Activities on behalf of any 
Covered Person or will be an officer, director, or employee of any 
Applicants or of any other Covered Person; (iii) no employee of the 
Settling Firm or of any other Covered Person who was involved in the 
Conduct had any, or will have any future, involvement in the Covered 
Persons' activities in any capacity described in section 9(a) of the 
Act; and (iv) because the personnel of Citizens IA did not have any 
involvement in the Conduct, 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.
    8. Applicants have agreed that neither they nor any of the other 
Covered Persons will employ any of the current or former employees of 
Settling Firm or any Covered Person who previously have been or who 
subsequently may be identified by the Settling Firm, RBSG or any U.S. 
or non-U.S. regulatory or enforcement agency as having been responsible 
for the Conduct without first making a further application to the 
Commission pursuant to section 9(c).
    9. Applicants have also agreed that each Applicant (and any Covered 
Person) will adopt and implement policies and procedures reasonably 
designed to ensure compliance with the terms and conditions of the 
Orders granted under section 9(c).
    10. In addition, the Settling Firm has agreed to comply in all 
material respects with the material terms and conditions of the Plea 
Agreement, the CFTC Order, the Federal Reserve Order, the FCA Order, or 
any other orders issued by regulatory or enforcement agencies 
addressing the Conduct. Applicants further state that RBS and its 
affiliates have undertaken certain remedial measures, as described in 
greater detail in the application. These include certain remedial 
measures as required by the Plea Agreement, the CFTC Order, the Federal 
Reserve Order, and the FCA Order, including improvements to the 
oversight, internal controls, compliance, risk management and audit 
programs for FX trading. Specifically, Applicants represent that RBSG 
and RBS have taken a number of steps to enhance its internal controls, 
policies and procedures relating to its FX activities. These changes, 
include, but are not limited to the following: Restricting 
participation by traders in multi-bank chat rooms; prohibiting mobile 
communication devices on dealing floors; strengthening surveillance of 
electronic, audio and trade communications at FX desks; mandating 
regular training for all FX employees concerning appropriate trading 
behavior; enhancing policies, procedures and guidance related to market 
color, client orders and FX fix orders; and improving customer 
disclosures relating to and enhancing controls around FX fix orders.
    11. As a result, Applicants submit that granting an exemption as 
requested in the application would be consistent with the public 
interest and the protection of investors.
    12. To provide further assurance that the exemptive relief being 
requested herein would be consistent with the public interest and the 
protection of the investors, the Applicants agree that they will, as 
soon as reasonably practical, distribute to the board of trustees 
(``Board'') of the Fund written materials describing the circumstances 
that led to the Guilty Plea, 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 of the Fund, 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. The Applicants undertake to 
provide the Fund's Board with all information concerning the Plea 
Agreement and the application necessary for the Fund to fulfill its 
disclosure and other obligations under the federal securities laws and 
will provide it a copy of the Judgment as entered by the District 
Court.
    13. Applicants state that certain of the Applicants and their 
affiliates 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' Conditions

    Applicants agree that any order granted by the Commission pursuant 
to the application will be subject to the following conditions:
    1. 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

[[Page 30314]]

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. Neither the Applicants nor any of the other Covered Persons will 
employ any of the current or former employees of the Settling Firm or 
any Covered Person who previously has been or who subsequently may be 
identified by the Settling Firm, RBSG or any U.S. or non-U.S. 
regulatory or enforcement agency as having been responsible for the 
Conduct, without first making a further application to the Commission 
pursuant to section 9(c).
    3. 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 or, with respect to condition 4, such 
date as may be contemplated by the Plea Agreement, or the CFTC Order, 
the Federal Reserve Order, the FCA Order, or any other orders issued by 
regulatory or enforcement agencies addressing the Conduct.
    4. The Settling Firm will comply in all material respects with the 
material terms and conditions of the Plea Agreement, with the material 
terms of the CFTC Order, the Federal Reserve Order, the FCA Order or 
any other orders issued by regulatory or enforcement agencies 
addressing the Conduct.
    5. 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 any of the 
Orders 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 the 
Applicants and any other Covered Persons are granted a temporary 
exemption from the provisions of section 9(a), solely with respect to 
the guilty plea entered into pursuant to the Plea Agreement, subject to 
the representations and conditions in the application, from May 20, 
2015 until the Commission takes final action on their application for a 
permanent order.

    By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-12757 Filed 5-26-15; 8:45 am]
 BILLING CODE P
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