Harvest Capital Credit Corporation, et al.; Notice of Application, 61262-61266 [2015-25760]
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Federal Register / Vol. 80, No. 196 / Friday, October 9, 2015 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–31860; File No. 812–14365]
Harvest Capital Credit Corporation, et
al.; Notice of Application
October 5, 2015.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under sections 17(d) and 57(i) of
the Investment Company Act of 1940
(the ‘‘Act’’) and rule 17d–1 under the
Act to permit certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and rule 17d–1
under the Act.
AGENCY:
Applicants
request an order to permit a business
development company (‘‘BDC’’) to coinvest in portfolio companies with
certain affiliated investment funds and
certain affiliated persons’ proprietary
accounts.
APPLICANTS: Harvest Capital Credit
Corporation (‘‘HCC’’); HCAP Advisors
LLC (the ‘‘BDC Adviser’’); JMP Credit
Advisors LLC (‘‘JMPCA’’); JMP Group
LLC (‘‘JMPG LLC’’), JMP Group Inc.
(‘‘JMPG’’), JMP Capital LLC (‘‘JMP
Capital’’), JMP Credit Corporation (‘‘JMP
Credit’’), and JMP Holding LLC (‘‘JMP
Holding’’ and together with JMPG LLC,
JMPG, JMP Capital, and JMP Credit, the
‘‘JMPG Companies’’).
FILING DATES: The application was filed
on October 1, 2014, and amended on
February 11, 2015, and June 2, 2015.
HEARING OR NOTIFICATION OF HEARING:
An order granting the requested relief
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 October 30, 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, 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: Brent J. Fields, Secretary,
U.S. Securities and Exchange
Commission, 100 F St. NE., Washington,
DC 20549–1090. Applicants: Richard
Buckanavage, Harvest Capital Credit
Corporation, 767 Third Avenue, 25th
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SUMMARY OF APPLICATION:
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Floor, New York, NY 10017; Steven
Boehm, Esq., and Harry Pangas, Esq.,
Sutherland Asbill & Brennan LLP, 700
Sixth Street NW., Suite 700,
Washington, DC 20001–3980.
FOR FURTHER INFORMATION CONTACT: Anil
K. Abraham, Senior Special Counsel, at
(202) 551–2614 or James M. Curtis,
Branch Chief, at (202) 551–6712 (Chief
Counsel’s Office, Division of Investment
Management).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or 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. HCC is a Delaware corporation
organized in February 2011 as a closedend management investment company
that has elected to be regulated as a BDC
under section 54(a) of the Act.1 HCC’s
Objectives and Strategies 2 are to
generate both current income and
capital appreciation primarily by
making direct investments in the form
of subordinated debt, senior debt, and
minority equity investments in
privately-held, small to mid-sized U.S.
companies. The board of directors of
HCC (the ‘‘HCC Board,’’ and together
with any board of directors of a Future
Regulated Fund (defined below), the
‘‘Boards,’’ and each, a ‘‘Board,’’ as
applicable) is composed of five
directors, three of whom are not
‘‘interested persons,’’ as defined in
section 2(a)(19) of the Act (‘‘NonInterested Directors’’), of HCC. Each
Regulated Fund invests or intends to
invest its assets so as to qualify for U.S.
federal income tax treatment as a
regulated investment company.
2. JMPG was incorporated in
Delaware in January 2000 and
completed its initial public offering in
May 2007. On January 1, 2015, JMP
Merger Corp., a Delaware corporation
and wholly-owned subsidiary of JMPG
1 Section 2(a)(48) defines a BDC to be any closedend investment company that operates for the
purpose of making investments in securities
described in sections 55(a)(1) through 55(a)(3) of the
Act and makes available significant managerial
assistance with respect to the issuers of such
securities.
2 ‘‘Objectives and Strategies’’ means a Regulated
Fund’s (defined below) investment objectives and
strategies, as described in the Regulated Fund’s
registration statement on Form N–2, other filings
the Regulated Fund has made with the Commission
under the Securities Act of 1933 (the ‘‘Securities
Act’’), or under the Securities Exchange Act of
1934, and the Regulated Fund’s reports to
shareholders.
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LLC, merged with and into JMPG, with
JMPG as the surviving entity.
Consequently, JMPG LLC replaced
JMPG as the publicly traded company,
and JMPG LLC’s common stock is
currently listed on the New York Stock
Exchange under the symbol ‘‘JMP.’’
3. JMPG LLC is a Delaware limited
liability company and, together with its
subsidiaries, is a full-service investment
banking and asset management firm that
provides investment banking, sales and
trading, and equity research services to
corporate and institutional clients, and
alternative asset management products
and services to institutional investors
and high net-worth individuals. JMPG,
JMP Capital, JMP Credit, and JMP
Holding are direct or indirect whollyowned subsidiaries of JMPG LLC.
4. The JMPG Companies, from time to
time, may hold various financial assets
in a principal capacity (together, in such
capacity, ‘‘Existing JMPG Proprietary
Accounts,’’ and together with any
Future JMPG Proprietary Account
(defined below), the ‘‘JMPG Proprietary
Accounts’’).
5. The BDC Adviser and JMPCA are
Delaware limited liability companies
registered with the Commission as
investment advisers under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’). The BDC Adviser is a
majority-owned subsidiary of JMPG
LLC. The BDC Adviser serves as
investment adviser to HCC and manages
HCC’s portfolio in accordance with
HCC’s Objectives and Strategies.
JMPCA, a wholly-owned subsidiary of
JMPG LLC, serves as the administrator
to HCC. JMPCA also serves as
investment adviser to several
collateralized loan obligation vehicles
(‘‘CLOs’’) and manages the portfolios of
the CLOs.
6. Applicants seek an order (‘‘Order’’)
to permit one or more Regulated Funds 3
and/or one or more Affiliated Funds 4 to
3 ‘‘Regulated Fund’’ means HCC and any Future
Regulated Fund. ‘‘Future Regulated Fund’’ means
any closed-end management investment company
(a) that is registered under the Act or has elected
to be regulated as BDC, (b) whose investment
adviser is an Adviser, and (c) that intends to
participate in the Co-Investment Program (defined
below). The term ‘‘Adviser’’ means (a) the BDC
Adviser and JMPCA and (b) any future investment
adviser that controls, is controlled by or is under
common control with JMPG LLC and is registered
as an investment adviser under the Advisers Act.
4 ‘‘Affiliated Fund’’ means the Existing JMPG
Proprietary Accounts, any Future JMPG Proprietary
Accounts, and any Future Affiliated Funds. ‘‘Future
JMPG Proprietary Account’’ means any direct or
indirect, wholly- or majority-owned subsidiary of
JMPG LLC that is formed in the future and, from
time to time, may hold various financial assets in
a principal capacity. ‘‘Future Affiliated Fund’’
means any entity (a) whose investment adviser is
an Adviser, (b) that would be an investment
company but for section 3(c)(1) or 3(c)(7) of the Act,
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participate in the same investment
opportunities through a co-investment
program (the ‘‘Co-Investment Program’’)
where such participation would
otherwise be prohibited by section 17(d)
or section 57(a)(4) and rule 17d–1 by (a)
co-investing with each other in
securities issued by issuers in private
placement transactions in which an
Adviser negotiates terms in addition to
price; 5 and (b) making additional
investments in securities of such
issuers, including through the exercise
of warrants, conversion privileges, and
other rights to purchase securities of the
issuers (‘‘Follow-On Investments’’). ‘‘CoInvestment Transaction’’ means any
transaction in which a Regulated Fund
(or its Wholly-Owned Investment Sub,
as defined below) has participated
together with one or more other
Regulated Funds and/or one or more
Affiliated Funds in reliance on the
requested Order. ‘‘Potential CoInvestment Transaction’’ means any
investment opportunity in which a
Regulated Fund (or its Wholly-Owned
Investment Sub) could not participate
together with one or more Affiliated
Funds and/or one or more other
Regulated Funds without obtaining and
relying on the Order.6
7. Applicants state that a Regulated
Fund may, from time to time, form one
or more Wholly-Owned Investment
Subs.7 Such a subsidiary would be
prohibited from investing in a CoInvestment Transaction with any
Affiliated Fund or Regulated Fund
because it would be a company
controlled by its parent Regulated Fund
for purposes of section 57(a)(4) and rule
17d–1. Applicants request that each
Wholly-Owned Investment Sub be
permitted to participate in CoInvestment Transactions in lieu of its
parent Regulated Fund and that the
Wholly-Owned Investment Sub’s
and (c) that intends to participate in the CoInvestment Program.
5 The term ‘‘private placement transactions’’
means transactions in which the offer and sale of
securities by the issuer are exempt from registration
under the Securities Act.
6 All existing entities that currently intend to rely
upon the requested Order have been named as
applicants. Any other existing or future entity that
subsequently relies on the Order will comply with
the terms and conditions of the application.
7 The term ‘‘Wholly-Owned Investment Sub’’
means an entity (i) that is wholly-owned by a
Regulated Fund (with the Regulated Fund at all
times holding, beneficially and of record, 100% of
the voting and economic interests); (ii) whose sole
business purpose is to hold one or more
investments on behalf of the Regulated Fund; (iii)
with respect to which the Regulated Fund’s Board
has the sole authority to make all determinations
with respect to the entity’s participation under the
conditions of the application; and (iv) that would
be an investment company but for section 3(c)(1) or
3(c)(7) of the Act.
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participation in any such transaction be
treated, for purposes of the requested
Order, as though the parent Regulated
Fund were participating directly.
Applicants represent that this treatment
is justified because a Wholly-Owned
Investment Sub would have no purpose
other than serving as a holding vehicle
for the Regulated Fund’s investments,
and, therefore, no conflicts of interest
could arise between the Regulated Fund
and the Wholly-Owned Investment Sub.
The Regulated Fund’s Board would
make all relevant determinations under
the Conditions with regard to a WhollyOwned Investment Sub’s participation
in a Co-Investment Transaction, and the
Regulated Fund’s Board would be
informed of, and take into
consideration, any proposed use of a
Wholly-Owned Investment Sub in the
Regulated Fund’s place. If the Regulated
Fund proposes to participate in the
same Co-Investment Transaction with
any of its Wholly-Owned Investment
Subs, the Board of the Regulated Fund
will also be informed of, and take into
consideration, the relative participation
of the Regulated Fund and the WhollyOwned Investment Sub.
8. When considering Potential CoInvestment Transactions for any
Regulated Fund, the applicable Adviser
will consider only the Objectives and
Strategies, investment policies,
investment positions, capital available
for investment, and other pertinent
factors applicable to that Regulated
Fund. The Regulated Fund Advisers
expect that any portfolio company that
is an appropriate investment for a
Regulated Fund should also be an
appropriate investment for one or more
other Regulated Funds and/or one or
more Affiliated Funds, with certain
exceptions based on available capital or
diversification.8
9. Other than pro rata dispositions
and Follow-On Investments as provided
in Conditions 7 and 8, and after making
the determinations required in
Conditions 1 and 2(a), the Adviser will
present each Potential Co-Investment
Transaction and the proposed allocation
to the directors of the Board eligible to
vote under section 57(o) of the Act
(‘‘Eligible Directors’’), and the ‘‘required
majority,’’ as defined in section 57(o) of
the Act (‘‘Required Majority’’) 9 will
approve each Co-Investment
8 The Regulated Funds, however, will not be
obligated to invest, or co-invest, when investment
opportunities are referred to them.
9 In the case of a Regulated Fund that is a
registered closed-end fund, the Board members that
make up the Required Majority will be determined
as if the Regulated Fund were a BDC subject to
section 57(o).
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Transaction prior to any investment by
the participating Regulated Fund.
10. With respect to the pro rata
dispositions and Follow-On Investments
provided in Conditions 7 and 8, a
Regulated Fund may participate in a pro
rata disposition or Follow-On
Investment without obtaining prior
approval of the Required Majority if,
among other things: (i) The proposed
participation of each Regulated Fund
and Affiliated Fund in such disposition
is proportionate to its outstanding
investments in the issuer immediately
preceding the disposition or Follow-On
Investment, as the case may be; and (ii)
the Board of the Regulated Fund has
approved that Regulated Fund’s
participation in pro rata dispositions
and Follow-On Investments as being in
the best interests of the Regulated Fund.
If the Board does not so approve, any
such disposition or Follow-On
Investment will be submitted to the
Regulated Fund’s Eligible Directors. The
Board of any Regulated Fund may at any
time rescind, suspend or qualify its
approval of pro rata dispositions and
Follow-On Investments with the result
that all dispositions and/or Follow-On
Investments must be submitted to the
Eligible Directors.
11. No Non-Interested Director of a
Regulated Fund will have a financial
interest in any Co-Investment
Transaction, other than through share
ownership in one of the Regulated
Funds.
Applicants’ Legal Analysis
1. Section 57(a)(4) of the Act prohibits
certain affiliated persons of a BDC from
participating in joint transactions with
the BDC or a company controlled by a
BDC in contravention of rules as
prescribed by the Commission. Under
section 57(b)(2) of the Act, any person
who is directly or indirectly controlling,
controlled by, or under common control
with a BDC is subject to section 57(a)(4).
Applicants submit that each of the
Regulated Funds and Affiliated Funds
could be deemed to be a person related
to each Regulated Fund in a manner
described by section 57(b) by virtue of
being under common control. Section
57(i) of the Act provides that, until the
Commission prescribes rules under
section 57(a)(4), the Commission’s rules
under section 17(d) of the Act
applicable to registered closed-end
investment companies will be deemed
to apply to transactions subject to
section 57(a)(4). Because the
Commission has not adopted any rules
under section 57(a)(4), rule 17d–1 also
applies to joint transactions with
Regulated Funds that are BDCs. Section
17(d) of the Act and rule 17d–1 under
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the Act are applicable to Regulated
Funds that are registered closed-end
investment companies.
2. Section 17(d) of the Act and rule
17d–1 under the Act prohibit affiliated
persons of a registered investment
company from participating in joint
transactions with the company unless
the Commission has granted an order
permitting such transactions. In passing
upon applications under rule 17d–1, the
Commission considers whether the
company’s participation in the joint
transaction is consistent with the
provisions, policies, and purposes of the
Act and the extent to which such
participation is on a basis different from
or less advantageous than that of other
participants.
3. Applicants state that in the absence
of the requested relief, the Regulated
Funds would be, in some
circumstances, limited in their ability to
participate in attractive and appropriate
investment opportunities. Applicants
believe that the proposed terms and
conditions will ensure that the CoInvestment Transactions are consistent
with the protection of each Regulated
Fund’s shareholders and with the
purposes intended by the policies and
provisions of the Act. Applicants state
that the Regulated Funds’ participation
in the Co-Investment Transactions will
be consistent with the provisions,
policies, and purposes of the Act and on
a basis that is not different from or less
advantageous than that of other
participants.
4. Under Condition 16 below, if the
Advisers, the principals of any of the
Advisers (the ‘‘Principals’’), or any
person controlling, controlled by, or
under common control with the
Advisers or the Principals, and the
Affiliated Funds (collectively, the
‘‘Holders’’) own in the aggregate more
than 25 percent of the outstanding
voting shares of a Regulated Fund (the
‘‘Shares’’), then the Holders will vote
such Shares as directed by an
independent third party (such as the
trustee of a voting trust or a proxy
adviser) when voting on (1) the election
of directors; (2) the removal of one or
more directors; or (3) any matters
requiring approval by the vote of a
majority of the outstanding voting
securities, as defined in section 2(a)(42)
of the Act. Applicants believe that this
Condition will ensure that the NonInterested Directors will act
independently in evaluating the CoInvestment Program, because the ability
of the Advisers or the Principals to
influence the Non-Interested Directors
by a suggestion, explicit or implied, that
the Non-Interested Directors can be
removed will be limited significantly.
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Applicants represent that the NonInterested Directors shall evaluate and
approve any such voting trust or proxy
adviser, taking into account its
qualifications, reputation for
independence, cost to the shareholders,
and other factors that they deem
relevant.
Applicants’ Conditions
Applicants agree that the Order will
be subject to the following Conditions:
1. Each time an Adviser considers a
Potential Co-Investment Transaction for
an Affiliated Fund or another Regulated
Fund that falls within a Regulated
Fund’s then-current Objectives and
Strategies, the Regulated Fund’s Adviser
will make an independent
determination of the appropriateness of
the investment for such Regulated Fund
in light of the Regulated Fund’s thencurrent circumstances.
2. (a) If the Adviser deems a Regulated
Fund’s participation in any Potential
Co-Investment Transaction to be
appropriate for the Regulated Fund, it
will then determine an appropriate level
of investment for the Regulated Fund.
(b) If the aggregate amount
recommended by the applicable Adviser
to be invested by the applicable
Regulated Fund in the Potential CoInvestment Transaction, together with
the amount proposed to be invested by
the other participating Regulated Funds
and Affiliated Funds, collectively, in the
same transaction, exceeds the amount of
the investment opportunity, the
investment opportunity will be
allocated among them pro rata based on
each participant’s capital available for
investment in the asset class being
allocated, up to the amount proposed to
be invested by each. The applicable
Adviser will provide the Eligible
Directors of each participating
Regulated Fund with information
concerning each participating party’s
available capital to assist the Eligible
Directors with their review of the
Regulated Fund’s investments for
compliance with these allocation
procedures.
(c) After making the determinations
required in Conditions 1 and 2(a), the
applicable Adviser will distribute
written information concerning the
Potential Co-Investment Transaction
(including the amount proposed to be
invested by each participating Regulated
Fund and Affiliated Fund) to the
Eligible Directors of each participating
Regulated Fund for their consideration.
A Regulated Fund will co-invest with
one or more other Regulated Funds and/
or one or more Affiliated Funds only if,
prior to the Regulated Fund’s
participation in the Potential Co-
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Investment Transaction, a Required
Majority concludes that:
(i) the terms of the Potential CoInvestment Transaction, including the
consideration to be paid, are reasonable
and fair to the Regulated Fund and its
shareholders and do not involve
overreaching in respect of the Regulated
Fund or its shareholders on the part of
any person concerned;
(ii) the Potential Co-Investment
Transaction is consistent with:
(A) the interests of the shareholders of
the Regulated Fund; and
(B) the Regulated Fund’s then-current
Objectives and Strategies;
(iii) the investment by any other
Regulated Funds or Affiliated Funds
would not disadvantage the Regulated
Fund, and participation by the
Regulated Fund would not be on a basis
different from or less advantageous than
that of other Regulated Funds or
Affiliated Funds; provided that, if any
other Regulated Fund or Affiliated
Fund, but not the Regulated Fund itself,
gains the right to nominate a director for
election to a portfolio company’s board
of directors or the right to have a board
observer or any similar right to
participate in the governance or
management of the portfolio company,
such event shall not be interpreted to
prohibit the Required Majority from
reaching the conclusions required by
this Condition (2)(c)(iii), if:
(A) the Eligible Directors will have the
right to ratify the selection of such
director or board observer, if any;
(B) the applicable Adviser agrees to,
and does, provide periodic reports to
the Regulated Fund’s Board with respect
to the actions of such director or the
information received by such board
observer or obtained through the
exercise of any similar right to
participate in the governance or
management of the portfolio company;
and
(C) any fees or other compensation
that any Affiliated Fund or any
Regulated Fund or any affiliated person
of any Affiliated Fund or any Regulated
Fund receives in connection with the
right of an Affiliated Fund or a
Regulated Fund to nominate a director
or appoint a board observer or otherwise
to participate in the governance or
management of the portfolio company
will be shared proportionately among
the participating Affiliated Funds (who
each may, in turn, share its portion with
its affiliated persons) and the
participating Regulated Funds in
proportion to the amount of each party’s
investment; and
(iv) the proposed investment by the
Regulated Fund will not benefit the
Advisers, the Affiliated Funds or the
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other Regulated Funds or any affiliated
person of any of them (other than the
parties to the Co-Investment
Transaction), except (A) to the extent
permitted by Condition 13, (B) to the
extent permitted by section 17(e) or
57(k) of the Act, as applicable, (C)
indirectly, as a result of an interest in
the securities issued by one of the
parties to the Co-Investment
Transaction, or (D) in the case of fees or
other compensation described in
Condition 2(c)(iii)(C).
3. Each Regulated Fund has the right
to decline to participate in any Potential
Co-Investment Transaction or to invest
less than the amount proposed.
4. The applicable Adviser will present
to the Board of each Regulated Fund, on
a quarterly basis, a record of all
investments in Potential Co-Investment
Transactions made by any of the other
Regulated Funds or Affiliated Funds
during the preceding quarter that fell
within the Regulated Fund’s thencurrent Objectives and Strategies that
were not made available to the
Regulated Fund, and an explanation of
why the investment opportunities were
not offered to the Regulated Fund. All
information presented to the Board
pursuant to this Condition will be kept
for the life of the Regulated Fund and
at least two years thereafter, and will be
subject to examination by the
Commission and its staff.
5. Except for Follow-On Investments
made in accordance with Condition 8,10
a Regulated Fund will not invest in
reliance on the Order in any issuer in
which another Regulated Fund,
Affiliated Fund, or any affiliated person
of another Regulated Fund or Affiliated
Fund is an existing investor.
6. A Regulated Fund will not
participate in any Potential CoInvestment Transaction unless the
terms, conditions, price, class of
securities to be purchased, settlement
date, and registration rights will be the
same for each participating Regulated
Fund and Affiliated Fund. The grant to
an Affiliated Fund or another Regulated
Fund, but not the Regulated Fund, of
the right to nominate a director for
election to a portfolio company’s board
of directors, the right to have an
observer on the board of directors or
similar rights to participate in the
governance or management of the
portfolio company will not be
interpreted so as to violate this
Condition 6, if Conditions 2(c)(iii)(A),
(B) and (C) are met.
10 This exception applies only to Follow-On
Investments by a Regulated Fund in issuers in
which that Regulated Fund already holds
investments.
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7. (a) If any Affiliated Fund or any
Regulated Fund elects to sell, exchange
or otherwise dispose of an interest in a
security that was acquired in a CoInvestment Transaction, the applicable
Advisers will:
(i) notify each Regulated Fund that
participated in the Co-Investment
Transaction of the proposed disposition
at the earliest practical time; and
(ii) formulate a recommendation as to
participation by each Regulated Fund in
the disposition.
(b) Each Regulated Fund will have the
right to participate in such disposition
on a proportionate basis, at the same
price and on the same terms and
conditions as those applicable to the
participating Affiliated Funds and
Regulated Funds.
(c) A Regulated Fund may participate
in such disposition without obtaining
prior approval of the Required Majority
if: (i) The proposed participation of each
Regulated Fund and each Affiliated
Fund in such disposition is
proportionate to its outstanding
investments in the issuer immediately
preceding the disposition; (ii) the Board
of the Regulated Fund has approved as
being in the best interests of the
Regulated Fund the ability to participate
in such dispositions on a pro rata basis
(as described in greater detail in the
application); and (iii) the Board of the
Regulated Fund is provided on a
quarterly basis with a list of all
dispositions made in accordance with
this Condition. In all other cases, the
Adviser will provide its written
recommendation as to the Regulated
Fund’s participation to the Eligible
Directors, and the Regulated Fund will
participate in such disposition solely to
the extent that a Required Majority
determines that it is in the Regulated
Fund’s best interests.
(d) Each Affiliated Fund and each
Regulated Fund will bear its own
expenses in connection with any such
disposition.
8. (a) If any Affiliated Fund or any
Regulated Fund desires to make a
Follow-On Investment in a portfolio
company whose securities were
acquired in a Co-Investment
Transaction, the applicable Advisers
will:
(i) Notify each Regulated Fund that
participated in the Co-Investment
Transaction of the proposed transaction
at the earliest practical time; and
(ii) formulate a recommendation as to
the proposed participation, including
the amount of the proposed Follow-On
Investment, by each Regulated Fund.
(b) A Regulated Fund may participate
in such Follow-On Investment without
obtaining prior approval of the Required
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Majority if: (i) The proposed
participation of each Regulated Fund
and each Affiliated Fund in such
investment is proportionate to its
outstanding investments in the issuer
immediately preceding the Follow-On
Investment; and (ii) the Board of the
Regulated Fund has approved as being
in the best interests of the Regulated
Fund the ability to participate in
Follow-On Investments on a pro rata
basis (as described in greater detail in
the application). In all other cases, the
Adviser will provide its written
recommendation as to the Regulated
Fund’s participation to the Eligible
Directors, and the Regulated Fund will
participate in such Follow-On
Investment solely to the extent that a
Required Majority determines that it is
in the Regulated Fund’s best interests.
(c) If, with respect to any Follow-On
Investment:
(i) the amount of the opportunity is
not based on the Regulated Funds’ and
the Affiliated Funds’ outstanding
investments immediately preceding the
Follow-On Investment; and
(ii) the aggregate amount
recommended by the Adviser to be
invested by each Regulated Fund in the
Follow-On Investment, together with
the amount proposed to be invested by
the participating Affiliated Funds in the
same transaction, exceeds the amount of
the opportunity; then the amount
invested by each such party will be
allocated among them pro rata based on
each participant’s capital available for
investment in the asset class being
allocated, up to the amount proposed to
be invested by each.
(d) The acquisition of Follow-On
Investments as permitted by this
Condition will be considered a CoInvestment Transaction for all purposes
and subject to the other Conditions set
forth in this application.
9. The Non-Interested Directors of
each Regulated Fund will be provided
quarterly for review all information
concerning Potential Co-Investment
Transactions and Co-Investment
Transactions, including investments
made by other Regulated Funds or
Affiliated Funds that the Regulated
Fund considered but declined to
participate in, so that the Non-Interested
Directors may determine whether all
investments made during the preceding
quarter, including those investments
that the Regulated Fund considered but
declined to participate in, comply with
the Conditions of the Order. In addition,
the Non-Interested Directors will
consider at least annually the continued
appropriateness for the Regulated Fund
of participating in new and existing CoInvestment Transactions.
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tkelley on DSK3SPTVN1PROD with NOTICES
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Federal Register / Vol. 80, No. 196 / Friday, October 9, 2015 / Notices
10. Each Regulated Fund will
maintain the records required by section
57(f)(3) of the Act as if each of the
Regulated Funds were a BDC and each
of the investments permitted under
these Conditions were approved by the
Required Majority under section 57(f) of
the Act.
11. No Non-Interested Director of a
Regulated Fund will also be a director,
general partner, managing member or
principal, or otherwise an ‘‘affiliated
person’’ (as defined in the Act) of an
Affiliated Fund.
12. The expenses, if any, associated
with acquiring, holding or disposing of
any securities acquired in a CoInvestment Transaction (including,
without limitation, the expenses of the
distribution of any such securities
registered for sale under the Securities
Act) will, to the extent not payable by
the Advisers under their respective
investment advisory agreements with
Affiliated Funds and the Regulated
Funds, be shared by the Regulated
Funds and the Affiliated Funds in
proportion to the relative amounts of the
securities held or to be acquired or
disposed of, as the case may be.
13. Any transaction fee (including
break-up or commitment fees but
excluding broker’s fees contemplated by
section 17(e) or 57(k) of the Act, as
applicable), received in connection with
a Co-Investment Transaction will be
distributed to the participating
Regulated Funds and Affiliated Funds
on a pro rata basis based on the amounts
they invested or committed, as the case
may be, in such Co-Investment
Transaction. If any transaction fee is to
be held by an Adviser pending
consummation of the transaction, the
fee will be deposited into an account
maintained by such Adviser at a bank or
banks having the qualifications
prescribed in section 26(a)(1) of the Act,
and the account will earn a competitive
rate of interest that will also be divided
pro rata among the participating
Regulated Funds and Affiliated Funds
based on the amounts they invest in
such Co-Investment Transaction. None
of the Affiliated Funds, the Advisers,
the other Regulated Funds or any
affiliated person of the Regulated Funds
or Affiliated Funds will receive
additional compensation or
remuneration of any kind as a result of
or in connection with a Co-Investment
Transaction (other than (a) in the case
of the Regulated Funds and the
Affiliated Funds, the pro rata
transaction fees described above and
fees or other compensation described in
Condition 2(c)(iii)(C); and (b) in the case
of an Adviser, investment advisory fees
paid in accordance with the agreement
VerDate Sep<11>2014
17:44 Oct 08, 2015
Jkt 238001
between the Adviser and the Regulated
Fund or Affiliated Fund.
14. The JMPG Proprietary Accounts
will not be permitted to invest in a
Potential Co-Investment Transaction
except to the extent the aggregate
demand from the Regulated Funds and
the other Affiliated Funds is less than
the total investment opportunity.
15. Each Adviser will maintain
written policies and procedures
reasonably designed to ensure
compliance with the foregoing
Conditions. These policies and
procedures will require, among other
things, that each Adviser will be
notified of all Potential Co-Investment
Transactions that fall within the thencurrent Objectives and Strategies of any
Regulated Fund it advises and will be
given sufficient information to make its
independent determination and
recommendations under Conditions 1,
2(a), 7 and 8.
16. If the Holders own in the aggregate
more than 25% of the outstanding
Shares of a Regulated Fund, then the
Holders will vote such Shares as
directed by an independent third party
(such as the trustee of a voting trust or
a proxy adviser) when voting on (1) the
election of directors; (2) the removal of
one or more directors; or (3) any matters
requiring approval by the vote of a
majority of the outstanding voting
securities, as defined in section 2(a)(42)
of the Act.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–25760 Filed 10–8–15; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
Audit and Financial Management
Advisory Committee (AFMAC)
U.S. Small Business
Administration.
ACTION: Notice of open Federal advisory
committee meeting.
AGENCY:
The SBA is issuing this notice
to announce the location, date, time,
and agenda for the next meeting of the
Audit and Financial Management
Advisory Committee (AFMAC).
The meeting will be open to the
public.
DATES: The meeting will be held on
Thursday, October 29, 2015, starting at
1:00 p.m. until approximately 3:00 p.m.
Eastern Time.
ADDRESSES: The meeting will be held at
the U.S. Small Business Administration,
SUMMARY:
PO 00000
Frm 00112
Fmt 4703
Sfmt 4703
409 3rd Street SW., Office of
Performance Management and Chief
Financial Officer Conference Room, 6th
Floor, Washington, DC 20416.
SUPPLEMENTARY INFORMATION: Pursuant
to section 10(a)(2) of the Federal
Advisory Committee Act (5 U.S.C.,
Appendix 2), SBA announces the
meeting of the AFMAC. The AFMAC is
tasked with providing recommendation
and advice regarding the Agency’s
financial management, including the
financial reporting process, systems of
internal controls, audit process and
process for monitoring compliance with
relevant laws and regulations.
The purpose of the meeting is to
discuss the SBA’s Financial Reporting,
Audit Findings Remediation, Ongoing
OIG Audits including the Information
Technology Audit, FMFIA Assurance/
A–123 Internal Control Program, Credit
Modeling, Performance Management,
Acquisition Division Update, Improper
Payments and current initiatives.
FOR FURTHER INFORMATION CONTACT: The
meeting is open to the public, however
advance notice of attendance is
requested. Anyone wishing to attend
and/or make a presentation to the
AFMAC must contact Tami Perriello by
fax or email, in order to be placed on the
agenda. Tami Perriello, Chief Financial
Officer, 409 3rd Street SW., 6th Floor,
Washington, DC 20416, phone: (202)
205–6449, fax: (202) 481–6194, email:
tami.perriello@sba.gov.
Additionally, if you need
accommodations because of a disability
or require additional information, please
contact Donna Wood at (202) 619–1608,
email: Donna.Wood@sba.gov; SBA,
Office of Chief Financial Officer, 409
3rd Street SW., Washington, DC 20416.
For more information, please visit our
Web site at https://www.sba.gov/
aboutsba/sbaprograms/cfo/.
Dated: September 30, 2015.
Miguel L’Heureux,
White House Liaison.
[FR Doc. 2015–25821 Filed 10–8–15; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
Reporting and Recordkeeping
Requirements Under OMB Review
Small Business Administration.
30-Day notice.
AGENCY:
ACTION:
The Small Business
Administration (SBA) is publishing this
notice to comply with requirements of
the Paperwork Reduction Act (PRA) (44
U.S.C. Chapter 35), which requires
agencies to submit proposed reporting
SUMMARY:
E:\FR\FM\09OCN1.SGM
09OCN1
]]>Agencies
[Federal Register Volume 80, Number 196 (Friday, October 9, 2015)]
[Notices]
[Pages 61262-61266]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-25760]
[[Page 61262]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-31860; File No. 812-14365]
Harvest Capital Credit Corporation, et al.; Notice of Application
October 5, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under sections 17(d) and
57(i) of the Investment Company Act of 1940 (the ``Act'') and rule 17d-
1 under the Act to permit certain joint transactions otherwise
prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d-1
under the Act.
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Summary of Application: Applicants request an order to permit a
business development company (``BDC'') to co-invest in portfolio
companies with certain affiliated investment funds and certain
affiliated persons' proprietary accounts.
Applicants: Harvest Capital Credit Corporation (``HCC''); HCAP
Advisors LLC (the ``BDC Adviser''); JMP Credit Advisors LLC
(``JMPCA''); JMP Group LLC (``JMPG LLC''), JMP Group Inc. (``JMPG''),
JMP Capital LLC (``JMP Capital''), JMP Credit Corporation (``JMP
Credit''), and JMP Holding LLC (``JMP Holding'' and together with JMPG
LLC, JMPG, JMP Capital, and JMP Credit, the ``JMPG Companies'').
Filing Dates: The application was filed on October 1, 2014, and
amended on February 11, 2015, and June 2, 2015.
Hearing or Notification of Hearing: An order granting the requested
relief 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 October 30, 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, 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: Brent J. Fields, Secretary, U.S. Securities and Exchange
Commission, 100 F St. NE., Washington, DC 20549-1090. Applicants:
Richard Buckanavage, Harvest Capital Credit Corporation, 767 Third
Avenue, 25th Floor, New York, NY 10017; Steven Boehm, Esq., and Harry
Pangas, Esq., Sutherland Asbill & Brennan LLP, 700 Sixth Street NW.,
Suite 700, Washington, DC 20001-3980.
FOR FURTHER INFORMATION CONTACT: Anil K. Abraham, Senior Special
Counsel, at (202) 551-2614 or James M. Curtis, Branch Chief, at (202)
551-6712 (Chief Counsel's Office, Division of Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or 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. HCC is a Delaware corporation organized in February 2011 as a
closed-end management investment company that has elected to be
regulated as a BDC under section 54(a) of the Act.\1\ HCC's Objectives
and Strategies \2\ are to generate both current income and capital
appreciation primarily by making direct investments in the form of
subordinated debt, senior debt, and minority equity investments in
privately-held, small to mid-sized U.S. companies. The board of
directors of HCC (the ``HCC Board,'' and together with any board of
directors of a Future Regulated Fund (defined below), the ``Boards,''
and each, a ``Board,'' as applicable) is composed of five directors,
three of whom are not ``interested persons,'' as defined in section
2(a)(19) of the Act (``Non-Interested Directors''), of HCC. Each
Regulated Fund invests or intends to invest its assets so as to qualify
for U.S. federal income tax treatment as a regulated investment
company.
---------------------------------------------------------------------------
\1\ Section 2(a)(48) defines a BDC to be any closed-end
investment company that operates for the purpose of making
investments in securities described in sections 55(a)(1) through
55(a)(3) of the Act and makes available significant managerial
assistance with respect to the issuers of such securities.
\2\ ``Objectives and Strategies'' means a Regulated Fund's
(defined below) investment objectives and strategies, as described
in the Regulated Fund's registration statement on Form N-2, other
filings the Regulated Fund has made with the Commission under the
Securities Act of 1933 (the ``Securities Act''), or under the
Securities Exchange Act of 1934, and the Regulated Fund's reports to
shareholders.
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2. JMPG was incorporated in Delaware in January 2000 and completed
its initial public offering in May 2007. On January 1, 2015, JMP Merger
Corp., a Delaware corporation and wholly-owned subsidiary of JMPG LLC,
merged with and into JMPG, with JMPG as the surviving entity.
Consequently, JMPG LLC replaced JMPG as the publicly traded company,
and JMPG LLC's common stock is currently listed on the New York Stock
Exchange under the symbol ``JMP.''
3. JMPG LLC is a Delaware limited liability company and, together
with its subsidiaries, is a full-service investment banking and asset
management firm that provides investment banking, sales and trading,
and equity research services to corporate and institutional clients,
and alternative asset management products and services to institutional
investors and high net-worth individuals. JMPG, JMP Capital, JMP
Credit, and JMP Holding are direct or indirect wholly-owned
subsidiaries of JMPG LLC.
4. The JMPG Companies, from time to time, may hold various
financial assets in a principal capacity (together, in such capacity,
``Existing JMPG Proprietary Accounts,'' and together with any Future
JMPG Proprietary Account (defined below), the ``JMPG Proprietary
Accounts'').
5. The BDC Adviser and JMPCA are Delaware limited liability
companies registered with the Commission as investment advisers under
the Investment Advisers Act of 1940 (the ``Advisers Act''). The BDC
Adviser is a majority-owned subsidiary of JMPG LLC. The BDC Adviser
serves as investment adviser to HCC and manages HCC's portfolio in
accordance with HCC's Objectives and Strategies. JMPCA, a wholly-owned
subsidiary of JMPG LLC, serves as the administrator to HCC. JMPCA also
serves as investment adviser to several collateralized loan obligation
vehicles (``CLOs'') and manages the portfolios of the CLOs.
6. Applicants seek an order (``Order'') to permit one or more
Regulated Funds \3\ and/or one or more Affiliated Funds \4\ to
[[Page 61263]]
participate in the same investment opportunities through a co-
investment program (the ``Co-Investment Program'') where such
participation would otherwise be prohibited by section 17(d) or section
57(a)(4) and rule 17d-1 by (a) co-investing with each other in
securities issued by issuers in private placement transactions in which
an Adviser negotiates terms in addition to price; \5\ and (b) making
additional investments in securities of such issuers, including through
the exercise of warrants, conversion privileges, and other rights to
purchase securities of the issuers (``Follow-On Investments''). ``Co-
Investment Transaction'' means any transaction in which a Regulated
Fund (or its Wholly-Owned Investment Sub, as defined below) has
participated together with one or more other Regulated Funds and/or one
or more Affiliated Funds in reliance on the requested Order.
``Potential Co-Investment Transaction'' means any investment
opportunity in which a Regulated Fund (or its Wholly-Owned Investment
Sub) could not participate together with one or more Affiliated Funds
and/or one or more other Regulated Funds without obtaining and relying
on the Order.\6\
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\3\ ``Regulated Fund'' means HCC and any Future Regulated Fund.
``Future Regulated Fund'' means any closed-end management investment
company (a) that is registered under the Act or has elected to be
regulated as BDC, (b) whose investment adviser is an Adviser, and
(c) that intends to participate in the Co-Investment Program
(defined below). The term ``Adviser'' means (a) the BDC Adviser and
JMPCA and (b) any future investment adviser that controls, is
controlled by or is under common control with JMPG LLC and is
registered as an investment adviser under the Advisers Act.
\4\ ``Affiliated Fund'' means the Existing JMPG Proprietary
Accounts, any Future JMPG Proprietary Accounts, and any Future
Affiliated Funds. ``Future JMPG Proprietary Account'' means any
direct or indirect, wholly- or majority-owned subsidiary of JMPG LLC
that is formed in the future and, from time to time, may hold
various financial assets in a principal capacity. ``Future
Affiliated Fund'' means any entity (a) whose investment adviser is
an Adviser, (b) that would be an investment company but for section
3(c)(1) or 3(c)(7) of the Act, and (c) that intends to participate
in the Co-Investment Program.
\5\ The term ``private placement transactions'' means
transactions in which the offer and sale of securities by the issuer
are exempt from registration under the Securities Act.
\6\ All existing entities that currently intend to rely upon the
requested Order have been named as applicants. Any other existing or
future entity that subsequently relies on the Order will comply with
the terms and conditions of the application.
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7. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subs.\7\ Such a subsidiary
would be prohibited from investing in a Co-Investment Transaction with
any Affiliated Fund or Regulated Fund because it would be a company
controlled by its parent Regulated Fund for purposes of section
57(a)(4) and rule 17d-1. Applicants request that each Wholly-Owned
Investment Sub be permitted to participate in Co-Investment
Transactions in lieu of its parent Regulated Fund and that the Wholly-
Owned Investment Sub's participation in any such transaction be
treated, for purposes of the requested Order, as though the parent
Regulated Fund were participating directly. Applicants represent that
this treatment is justified because a Wholly-Owned Investment Sub would
have no purpose other than serving as a holding vehicle for the
Regulated Fund's investments, and, therefore, no conflicts of interest
could arise between the Regulated Fund and the Wholly-Owned Investment
Sub. The Regulated Fund's Board would make all relevant determinations
under the Conditions with regard to a Wholly-Owned Investment Sub's
participation in a Co-Investment Transaction, and the Regulated Fund's
Board would be informed of, and take into consideration, any proposed
use of a Wholly-Owned Investment Sub in the Regulated Fund's place. If
the Regulated Fund proposes to participate in the same Co-Investment
Transaction with any of its Wholly-Owned Investment Subs, the Board of
the Regulated Fund will also be informed of, and take into
consideration, the relative participation of the Regulated Fund and the
Wholly-Owned Investment Sub.
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\7\ The term ``Wholly-Owned Investment Sub'' means an entity (i)
that is wholly-owned by a Regulated Fund (with the Regulated Fund at
all times holding, beneficially and of record, 100% of the voting
and economic interests); (ii) whose sole business purpose is to hold
one or more investments on behalf of the Regulated Fund; (iii) with
respect to which the Regulated Fund's Board has the sole authority
to make all determinations with respect to the entity's
participation under the conditions of the application; and (iv) that
would be an investment company but for section 3(c)(1) or 3(c)(7) of
the Act.
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8. When considering Potential Co-Investment Transactions for any
Regulated Fund, the applicable Adviser will consider only the
Objectives and Strategies, investment policies, investment positions,
capital available for investment, and other pertinent factors
applicable to that Regulated Fund. The Regulated Fund Advisers expect
that any portfolio company that is an appropriate investment for a
Regulated Fund should also be an appropriate investment for one or more
other Regulated Funds and/or one or more Affiliated Funds, with certain
exceptions based on available capital or diversification.\8\
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\8\ The Regulated Funds, however, will not be obligated to
invest, or co-invest, when investment opportunities are referred to
them.
---------------------------------------------------------------------------
9. Other than pro rata dispositions and Follow-On Investments as
provided in Conditions 7 and 8, and after making the determinations
required in Conditions 1 and 2(a), the Adviser will present each
Potential Co-Investment Transaction and the proposed allocation to the
directors of the Board eligible to vote under section 57(o) of the Act
(``Eligible Directors''), and the ``required majority,'' as defined in
section 57(o) of the Act (``Required Majority'') \9\ will approve each
Co-Investment Transaction prior to any investment by the participating
Regulated Fund.
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\9\ In the case of a Regulated Fund that is a registered closed-
end fund, the Board members that make up the Required Majority will
be determined as if the Regulated Fund were a BDC subject to section
57(o).
---------------------------------------------------------------------------
10. With respect to the pro rata dispositions and Follow-On
Investments provided in Conditions 7 and 8, a Regulated Fund may
participate in a pro rata disposition or Follow-On Investment without
obtaining prior approval of the Required Majority if, among other
things: (i) The proposed participation of each Regulated Fund and
Affiliated Fund in such disposition is proportionate to its outstanding
investments in the issuer immediately preceding the disposition or
Follow-On Investment, as the case may be; and (ii) the Board of the
Regulated Fund has approved that Regulated Fund's participation in pro
rata dispositions and Follow-On Investments as being in the best
interests of the Regulated Fund. If the Board does not so approve, any
such disposition or Follow-On Investment will be submitted to the
Regulated Fund's Eligible Directors. The Board of any Regulated Fund
may at any time rescind, suspend or qualify its approval of pro rata
dispositions and Follow-On Investments with the result that all
dispositions and/or Follow-On Investments must be submitted to the
Eligible Directors.
11. No Non-Interested Director of a Regulated Fund will have a
financial interest in any Co-Investment Transaction, other than through
share ownership in one of the Regulated Funds.
Applicants' Legal Analysis
1. Section 57(a)(4) of the Act prohibits certain affiliated persons
of a BDC from participating in joint transactions with the BDC or a
company controlled by a BDC in contravention of rules as prescribed by
the Commission. Under section 57(b)(2) of the Act, any person who is
directly or indirectly controlling, controlled by, or under common
control with a BDC is subject to section 57(a)(4). Applicants submit
that each of the Regulated Funds and Affiliated Funds could be deemed
to be a person related to each Regulated Fund in a manner described by
section 57(b) by virtue of being under common control. Section 57(i) of
the Act provides that, until the Commission prescribes rules under
section 57(a)(4), the Commission's rules under section 17(d) of the Act
applicable to registered closed-end investment companies will be deemed
to apply to transactions subject to section 57(a)(4). Because the
Commission has not adopted any rules under section 57(a)(4), rule 17d-1
also applies to joint transactions with Regulated Funds that are BDCs.
Section 17(d) of the Act and rule 17d-1 under
[[Page 61264]]
the Act are applicable to Regulated Funds that are registered closed-
end investment companies.
2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
affiliated persons of a registered investment company from
participating in joint transactions with the company unless the
Commission has granted an order permitting such transactions. In
passing upon applications under rule 17d-1, the Commission considers
whether the company's participation in the joint transaction is
consistent with the provisions, policies, and purposes of the Act and
the extent to which such participation is on a basis different from or
less advantageous than that of other participants.
3. Applicants state that in the absence of the requested relief,
the Regulated Funds would be, in some circumstances, limited in their
ability to participate in attractive and appropriate investment
opportunities. Applicants believe that the proposed terms and
conditions will ensure that the Co-Investment Transactions are
consistent with the protection of each Regulated Fund's shareholders
and with the purposes intended by the policies and provisions of the
Act. Applicants state that the Regulated Funds' participation in the
Co-Investment Transactions will be consistent with the provisions,
policies, and purposes of the Act and on a basis that is not different
from or less advantageous than that of other participants.
4. Under Condition 16 below, if the Advisers, the principals of any
of the Advisers (the ``Principals''), or any person controlling,
controlled by, or under common control with the Advisers or the
Principals, and the Affiliated Funds (collectively, the ``Holders'')
own in the aggregate more than 25 percent of the outstanding voting
shares of a Regulated Fund (the ``Shares''), then the Holders will vote
such Shares as directed by an independent third party (such as the
trustee of a voting trust or a proxy adviser) when voting on (1) the
election of directors; (2) the removal of one or more directors; or (3)
any matters requiring approval by the vote of a majority of the
outstanding voting securities, as defined in section 2(a)(42) of the
Act. Applicants believe that this Condition will ensure that the Non-
Interested Directors will act independently in evaluating the Co-
Investment Program, because the ability of the Advisers or the
Principals to influence the Non-Interested Directors by a suggestion,
explicit or implied, that the Non-Interested Directors can be removed
will be limited significantly. Applicants represent that the Non-
Interested Directors shall evaluate and approve any such voting trust
or proxy adviser, taking into account its qualifications, reputation
for independence, cost to the shareholders, and other factors that they
deem relevant.
Applicants' Conditions
Applicants agree that the Order will be subject to the following
Conditions:
1. Each time an Adviser considers a Potential Co-Investment
Transaction for an Affiliated Fund or another Regulated Fund that falls
within a Regulated Fund's then-current Objectives and Strategies, the
Regulated Fund's Adviser will make an independent determination of the
appropriateness of the investment for such Regulated Fund in light of
the Regulated Fund's then-current circumstances.
2. (a) If the Adviser deems a Regulated Fund's participation in any
Potential Co-Investment Transaction to be appropriate for the Regulated
Fund, it will then determine an appropriate level of investment for the
Regulated Fund.
(b) If the aggregate amount recommended by the applicable Adviser
to be invested by the applicable Regulated Fund in the Potential Co-
Investment Transaction, together with the amount proposed to be
invested by the other participating Regulated Funds and Affiliated
Funds, collectively, in the same transaction, exceeds the amount of the
investment opportunity, the investment opportunity will be allocated
among them pro rata based on each participant's capital available for
investment in the asset class being allocated, up to the amount
proposed to be invested by each. The applicable Adviser will provide
the Eligible Directors of each participating Regulated Fund with
information concerning each participating party's available capital to
assist the Eligible Directors with their review of the Regulated Fund's
investments for compliance with these allocation procedures.
(c) After making the determinations required in Conditions 1 and
2(a), the applicable Adviser will distribute written information
concerning the Potential Co-Investment Transaction (including the
amount proposed to be invested by each participating Regulated Fund and
Affiliated Fund) to the Eligible Directors of each participating
Regulated Fund for their consideration. A Regulated Fund will co-invest
with one or more other Regulated Funds and/or one or more Affiliated
Funds only if, prior to the Regulated Fund's participation in the
Potential Co-Investment Transaction, a Required Majority concludes
that:
(i) the terms of the Potential Co-Investment Transaction, including
the consideration to be paid, are reasonable and fair to the Regulated
Fund and its shareholders and do not involve overreaching in respect of
the Regulated Fund or its shareholders on the part of any person
concerned;
(ii) the Potential Co-Investment Transaction is consistent with:
(A) the interests of the shareholders of the Regulated Fund; and
(B) the Regulated Fund's then-current Objectives and Strategies;
(iii) the investment by any other Regulated Funds or Affiliated
Funds would not disadvantage the Regulated Fund, and participation by
the Regulated Fund would not be on a basis different from or less
advantageous than that of other Regulated Funds or Affiliated Funds;
provided that, if any other Regulated Fund or Affiliated Fund, but not
the Regulated Fund itself, gains the right to nominate a director for
election to a portfolio company's board of directors or the right to
have a board observer or any similar right to participate in the
governance or management of the portfolio company, such event shall not
be interpreted to prohibit the Required Majority from reaching the
conclusions required by this Condition (2)(c)(iii), if:
(A) the Eligible Directors will have the right to ratify the
selection of such director or board observer, if any;
(B) the applicable Adviser agrees to, and does, provide periodic
reports to the Regulated Fund's Board with respect to the actions of
such director or the information received by such board observer or
obtained through the exercise of any similar right to participate in
the governance or management of the portfolio company; and
(C) any fees or other compensation that any Affiliated Fund or any
Regulated Fund or any affiliated person of any Affiliated Fund or any
Regulated Fund receives in connection with the right of an Affiliated
Fund or a Regulated Fund to nominate a director or appoint a board
observer or otherwise to participate in the governance or management of
the portfolio company will be shared proportionately among the
participating Affiliated Funds (who each may, in turn, share its
portion with its affiliated persons) and the participating Regulated
Funds in proportion to the amount of each party's investment; and
(iv) the proposed investment by the Regulated Fund will not benefit
the Advisers, the Affiliated Funds or the
[[Page 61265]]
other Regulated Funds or any affiliated person of any of them (other
than the parties to the Co-Investment Transaction), except (A) to the
extent permitted by Condition 13, (B) to the extent permitted by
section 17(e) or 57(k) of the Act, as applicable, (C) indirectly, as a
result of an interest in the securities issued by one of the parties to
the Co-Investment Transaction, or (D) in the case of fees or other
compensation described in Condition 2(c)(iii)(C).
3. Each Regulated Fund has the right to decline to participate in
any Potential Co-Investment Transaction or to invest less than the
amount proposed.
4. The applicable Adviser will present to the Board of each
Regulated Fund, on a quarterly basis, a record of all investments in
Potential Co-Investment Transactions made by any of the other Regulated
Funds or Affiliated Funds during the preceding quarter that fell within
the Regulated Fund's then-current Objectives and Strategies that were
not made available to the Regulated Fund, and an explanation of why the
investment opportunities were not offered to the Regulated Fund. All
information presented to the Board pursuant to this Condition will be
kept for the life of the Regulated Fund and at least two years
thereafter, and will be subject to examination by the Commission and
its staff.
5. Except for Follow-On Investments made in accordance with
Condition 8,\10\ a Regulated Fund will not invest in reliance on the
Order in any issuer in which another Regulated Fund, Affiliated Fund,
or any affiliated person of another Regulated Fund or Affiliated Fund
is an existing investor.
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\10\ This exception applies only to Follow-On Investments by a
Regulated Fund in issuers in which that Regulated Fund already holds
investments.
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6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of
securities to be purchased, settlement date, and registration rights
will be the same for each participating Regulated Fund and Affiliated
Fund. The grant to an Affiliated Fund or another Regulated Fund, but
not the Regulated Fund, of the right to nominate a director for
election to a portfolio company's board of directors, the right to have
an observer on the board of directors or similar rights to participate
in the governance or management of the portfolio company will not be
interpreted so as to violate this Condition 6, if Conditions
2(c)(iii)(A), (B) and (C) are met.
7. (a) If any Affiliated Fund or any Regulated Fund elects to sell,
exchange or otherwise dispose of an interest in a security that was
acquired in a Co-Investment Transaction, the applicable Advisers will:
(i) notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed disposition at the earliest
practical time; and
(ii) formulate a recommendation as to participation by each
Regulated Fund in the disposition.
(b) Each Regulated Fund will have the right to participate in such
disposition on a proportionate basis, at the same price and on the same
terms and conditions as those applicable to the participating
Affiliated Funds and Regulated Funds.
(c) A Regulated Fund may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of each Regulated Fund and each Affiliated Fund in such
disposition is proportionate to its outstanding investments in the
issuer immediately preceding the disposition; (ii) the Board of the
Regulated Fund has approved as being in the best interests of the
Regulated Fund the ability to participate in such dispositions on a pro
rata basis (as described in greater detail in the application); and
(iii) the Board of the Regulated Fund is provided on a quarterly basis
with a list of all dispositions made in accordance with this Condition.
In all other cases, the Adviser will provide its written recommendation
as to the Regulated Fund's participation to the Eligible Directors, and
the Regulated Fund will participate in such disposition solely to the
extent that a Required Majority determines that it is in the Regulated
Fund's best interests.
(d) Each Affiliated Fund and each Regulated Fund will bear its own
expenses in connection with any such disposition.
8. (a) If any Affiliated Fund or any Regulated Fund desires to make
a Follow-On Investment in a portfolio company whose securities were
acquired in a Co-Investment Transaction, the applicable Advisers will:
(i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed transaction at the earliest
practical time; and
(ii) formulate a recommendation as to the proposed participation,
including the amount of the proposed Follow-On Investment, by each
Regulated Fund.
(b) A Regulated Fund may participate in such Follow-On Investment
without obtaining prior approval of the Required Majority if: (i) The
proposed participation of each Regulated Fund and each Affiliated Fund
in such investment is proportionate to its outstanding investments in
the issuer immediately preceding the Follow-On Investment; and (ii) the
Board of the Regulated Fund has approved as being in the best interests
of the Regulated Fund the ability to participate in Follow-On
Investments on a pro rata basis (as described in greater detail in the
application). In all other cases, the Adviser will provide its written
recommendation as to the Regulated Fund's participation to the Eligible
Directors, and the Regulated Fund will participate in such Follow-On
Investment solely to the extent that a Required Majority determines
that it is in the Regulated Fund's best interests.
(c) If, with respect to any Follow-On Investment:
(i) the amount of the opportunity is not based on the Regulated
Funds' and the Affiliated Funds' outstanding investments immediately
preceding the Follow-On Investment; and
(ii) the aggregate amount recommended by the Adviser to be invested
by each Regulated Fund in the Follow-On Investment, together with the
amount proposed to be invested by the participating Affiliated Funds in
the same transaction, exceeds the amount of the opportunity; then the
amount invested by each such party will be allocated among them pro
rata based on each participant's capital available for investment in
the asset class being allocated, up to the amount proposed to be
invested by each.
(d) The acquisition of Follow-On Investments as permitted by this
Condition will be considered a Co-Investment Transaction for all
purposes and subject to the other Conditions set forth in this
application.
9. The Non-Interested Directors of each Regulated Fund will be
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including
investments made by other Regulated Funds or Affiliated Funds that the
Regulated Fund considered but declined to participate in, so that the
Non-Interested Directors may determine whether all investments made
during the preceding quarter, including those investments that the
Regulated Fund considered but declined to participate in, comply with
the Conditions of the Order. In addition, the Non-Interested Directors
will consider at least annually the continued appropriateness for the
Regulated Fund of participating in new and existing Co-Investment
Transactions.
[[Page 61266]]
10. Each Regulated Fund will maintain the records required by
section 57(f)(3) of the Act as if each of the Regulated Funds were a
BDC and each of the investments permitted under these Conditions were
approved by the Required Majority under section 57(f) of the Act.
11. No Non-Interested Director of a Regulated Fund will also be a
director, general partner, managing member or principal, or otherwise
an ``affiliated person'' (as defined in the Act) of an Affiliated Fund.
12. The expenses, if any, associated with acquiring, holding or
disposing of any securities acquired in a Co-Investment Transaction
(including, without limitation, the expenses of the distribution of any
such securities registered for sale under the Securities Act) will, to
the extent not payable by the Advisers under their respective
investment advisory agreements with Affiliated Funds and the Regulated
Funds, be shared by the Regulated Funds and the Affiliated Funds in
proportion to the relative amounts of the securities held or to be
acquired or disposed of, as the case may be.
13. Any transaction fee (including break-up or commitment fees but
excluding broker's fees contemplated by section 17(e) or 57(k) of the
Act, as applicable), received in connection with a Co-Investment
Transaction will be distributed to the participating Regulated Funds
and Affiliated Funds on a pro rata basis based on the amounts they
invested or committed, as the case may be, in such Co-Investment
Transaction. If any transaction fee is to be held by an Adviser pending
consummation of the transaction, the fee will be deposited into an
account maintained by such Adviser at a bank or banks having the
qualifications prescribed in section 26(a)(1) of the Act, and the
account will earn a competitive rate of interest that will also be
divided pro rata among the participating Regulated Funds and Affiliated
Funds based on the amounts they invest in such Co-Investment
Transaction. None of the Affiliated Funds, the Advisers, the other
Regulated Funds or any affiliated person of the Regulated Funds or
Affiliated Funds will receive additional compensation or remuneration
of any kind as a result of or in connection with a Co-Investment
Transaction (other than (a) in the case of the Regulated Funds and the
Affiliated Funds, the pro rata transaction fees described above and
fees or other compensation described in Condition 2(c)(iii)(C); and (b)
in the case of an Adviser, investment advisory fees paid in accordance
with the agreement between the Adviser and the Regulated Fund or
Affiliated Fund.
14. The JMPG Proprietary Accounts will not be permitted to invest
in a Potential Co-Investment Transaction except to the extent the
aggregate demand from the Regulated Funds and the other Affiliated
Funds is less than the total investment opportunity.
15. Each Adviser will maintain written policies and procedures
reasonably designed to ensure compliance with the foregoing Conditions.
These policies and procedures will require, among other things, that
each Adviser will be notified of all Potential Co-Investment
Transactions that fall within the then-current Objectives and
Strategies of any Regulated Fund it advises and will be given
sufficient information to make its independent determination and
recommendations under Conditions 1, 2(a), 7 and 8.
16. If the Holders own in the aggregate more than 25% of the
outstanding Shares of a Regulated Fund, then the Holders will vote such
Shares as directed by an independent third party (such as the trustee
of a voting trust or a proxy adviser) when voting on (1) the election
of directors; (2) the removal of one or more directors; or (3) any
matters requiring approval by the vote of a majority of the outstanding
voting securities, as defined in section 2(a)(42) of the Act.
For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-25760 Filed 10-8-15; 8:45 am]
BILLING CODE 8011-01-P
