NF Investment Corp., et al.; Notice of Application, 76395-76400 [2016-26401]
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Federal Register / Vol. 81, No. 212 / Wednesday, November 2, 2016 / Notices
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NSX–2016–14 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File No.
SR–NSX–2016–14. This file number
should be included in the subject line
if email is used. To help the
Commission process and review
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. eastern time. Copies of
such filings also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
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submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to file number SR–NSX–
2016–14 and should be submitted on or
before November 23, 2016.
For the Commission by the Division of
Trading and Markets, pursuant to the
delegated authority.15
Brent J. Fields,
Secretary.
[FR Doc. 2016–26403 Filed 11–1–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–32340; File No. 812–14472]
NF Investment Corp., et al.; Notice of
Application
October 27, 2016.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order to amend a prior order under
sections 17(d), 57(a)(4) 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),
57(a)(4) and 57(i) of the Act and rule
17d–1 under the Act.
AGENCY:
Applicants
request an order (‘‘Order’’) to amend a
prior order to permit certain business
development companies (‘‘BDCs’’) and
closed-end investment companies to coinvest in portfolio companies with each
other and with certain other affiliated
investment funds and broker-dealers.
The Order would supersede the prior
order.1
APPLICANTS: NF Investment Corp.
(‘‘NFIC’’); Carlyle GMS Finance, Inc.
(‘‘CGMSF,’’ and together with NFIC, the
‘‘Existing Regulated Funds’’); NFIC SPV
LLC (‘‘NFIC Sub’’); Carlyle GMS
Finance SPV LLC (‘‘CGMSF Sub’’’);
Carlyle GMS Finance MM CLO 2015–1
LLC (‘‘2015–1 Issuer,’’ and together with
CFMSF Sub and NFIC Sub, the
‘‘Existing SPV Subs’’) (collectively, the
‘‘Existing Co-Investment Affiliates’’);
Carlyle GMS Investment Management
L.L.C. (‘‘CGMSIM’’) on behalf of itself
and its successors; 2 and TCG Securities,
L.L.C. (‘‘TCG’’).
SUMMARY OF APPLICATION:
15 17
CFR 200.30–3(a)(12).
Investment Corp., et al., Investment
Company Act Rel. Nos. 30900 (Jan. 31, 2014)
(notice) and 30968 (Feb. 26, 2014) (order).
2 The term ‘‘successor’’ as applied to CGMSIM
means an entity that results from a reorganization
into another jurisdiction or change in the type of
business organization.
1 NF
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The application was filed
on May 22, 2015, and amended on
October 8, 2015, March 30, 2016, and
August 4, 2016.
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 November 21, 2016, 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: The Commission: Brent J.
Fields, Secretary, U.S. Securities and
Exchange Commission, 100 F St. NE.,
Washington, DC 20549–1090.
Applicants: Carlyle GMS Finance, Inc.,
520 Madison Avenue, 38th Floor, New
York, NY 10022.
FOR FURTHER INFORMATION CONTACT: Jean
E. Minarick, Senior Counsel, at (202)
551–6811 or Daniele Marchesani,
Branch Chief, at (202) 551–6821 (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.
FILING DATES:
Applicants’ Representations
1. CGMSF and NFIC are both
Maryland corporations organized as
non-diversified, closed-end
management investment companies that
have elected to be regulated as BDCs
under Section 54(a) of the Act.3 The
Objectives and Strategies 4 of both
3 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.
4 ‘‘Objectives and Strategies’’ means the
investment objectives and strategies of a Regulated
Fund (as defined below), as described in the filings
made with the Commission by the Regulated Fund
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CGMSF and NFIC are to generate
current income and capital appreciation
primarily through debt investments in
U.S. middle market companies. The
board of directors of NFIC and CGMSF
(each a ‘‘Board’’) will be comprised of
directors, a majority of whom will not
be ‘‘interested persons,’’ within the
meaning of section 2(a)(19) of the Act
(the ‘‘Non-Interested Directors’’) of NFIC
or CGMSF. The Existing SPV Subs are
each an SPV Sub (defined below) of
either NFIC or CGMSF.
2. CGMSIM is registered as an
investment adviser under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’) and serves as the
investment adviser to the Existing
Regulated Funds. CGMSIM is a
Delaware corporation and a wholly
owned subsidiary of The Carlyle Group
L.P. (‘‘Carlyle’’).
3. TCG, a wholly owned subsidiary of
Carlyle, is registered as a limited
purpose broker-dealer under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) and is a Delaware
limited liability company that, from
time to time, may hold various assets in
a principal capacity. When acting in this
capacity, TCG, and any other future
wholly or majority owned broker-dealer
subsidiaries of Carlyle and any future
wholly owned subsidiaries of such
broker-dealer subsidiaries who intend to
participate in the Co-Investment
Program are collectively referred to as
the ‘‘Capital Markets Affiliates.’’
4. Applicants seek an Order to permit
a Regulated Fund 5 (or any SPV Sub, as
defined below), on the one hand, and
one or more Co-Investment Affiliates,6
on the other hand, to participate in the
same investment opportunities through
a co-investment program (the ‘‘CoInvestment Program’’) where such
participation would otherwise be
under the Exchange Act or under the Securities Act
of 1933 (the ‘‘Securities Act’’) and the Act, and the
Regulated Fund’s reports to shareholders.
5 ‘‘Regulated Fund’’ means any of the Existing
Regulated Funds and any Future Regulated Fund.
‘‘Future Regulated Fund’’ means any future closedend management investment company that (a) has
elected to be regulated as a BDC or is registered
under the Act; (b) will be advised by an Investment
Adviser and (c) that intends to participate in the CoInvestment Program (as defined below). The term
‘‘Investment Adviser’’ means (a) CGMSIM and (b)
any future investment adviser controlling,
controlled by, or under common control with
CGMSIM and is registered as an investment adviser
under the Advisers Act.
6 ‘‘Co-Investment Affiliates’’ means (a) the
Existing Co-Investment Affiliates, (b) any Capital
Markets Affiliate, or (c) any Regulated Fund, SPV
Sub, or Private Fund. ‘‘Private Fund’’ means any
entity (a) whose investment adviser is an
Investment 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.
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prohibited under sections 17(d) and
57(a)(4) of the Act and rule 17d–1 under
the Act by (a) co-investing with each
other in securities issued by issuers in
private placement transactions in which
an Investment Adviser negotiates terms
in addition to price; 7 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 any of the Regulated Funds (or
any SPV Sub) participated together with
one or more Co-Investment Affiliates in
reliance on the Order. ‘‘Potential CoInvestment Transaction’’ means any
investment opportunity in which any of
the Regulated Funds (or any SPV Sub)
could not participate together with one
or more Co-Investment Affiliates
without obtaining and relying on the
Order.8
5. Applicants state that a Regulated
Fund may, from time to time, form one
or more SPV Subs.9 Such a subsidiary
would be prohibited from investing in a
Co-Investment Transaction with any CoInvestment Affiliate because it would be
a company controlled by its parent
Regulated Fund for purposes of sections
17(d) and 57(a)(4) and rule 17d–1.
Applicants request that each SPV Sub
be permitted to participate in CoInvestment Transactions in lieu of its
parent Regulated Fund and that the SPV
Sub’s participation in any such
transaction be treated, for purposes of
the Order, as though the parent
Regulated Fund were participating
directly. Applicants represent that this
treatment is justified because a SPV Sub
7 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.
8 All existing entities that currently intend to rely
upon the Order have been named as applicants.
Any other existing or future entity that relies on the
Order in the future will comply with the terms and
conditions of the application.
9 ‘‘SPV Sub’’ means an entity that (a) is whollyowned by a Regulated Fund (with such Regulated
Fund at all times holding, beneficially and of
record, 100% of the voting and economic interests);
(b) whose sole business purpose is to hold one or
more investments on behalf of the Regulated Fund
(and, in the case of an SBIC Subsidiary (as defined
below), maintain a license under the SBA Act (as
defined below) and issue debentures guaranteed by
the SBA (as defined below)); (c) with respect to
which the Regulated Fund’s Board has the sole
authority to make all determinations with respect
to the SPV Sub’s participation under the conditions
of the application; and (d) that would be an
investment company but for section 3(c)(1) or
3(c)(7) of the Act. ‘‘SBIC Subsidiary’’ means an SPV
Sub that is licensed by the Small Business
Administration to operate under the Small Business
Investment Act of 1958 (the ‘‘SBA Act’’) as a small
business investment company.
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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 SPV Sub. The Board would make all
relevant determinations under the
conditions with regard to a SPV Sub’s
participation in a Co-Investment
Transaction, and the Board would be
informed of, and take into
consideration, any proposed use of a
SPV Sub in the Regulated Fund’s place.
If the Regulated Fund proposes to
participate in the same Co-Investment
Transaction with any of its SPV Subs,
the Board will also be informed of, and
take into consideration, the relative
participation of the Regulated Fund and
the SPV Sub.
6. When considering Potential CoInvestment Transactions for any
Regulated Fund, the applicable
Investment Adviser will consider only
the Objectives and Strategies,
investment policies, investment
positions, capital available for
investment (‘‘Available Capital’’),10 and
other factors relevant to such Regulated
Fund. Upon issuance of the Order, the
Investment Adviser to a Co-Investment
Affiliate or the Co-Investment Affiliates
(in the case of Capital Market Affiliates)
will refer to the Investment Advisers of
the Regulated Funds all Potential CoInvestment Transactions within a
Regulated Fund’s Objectives and
Strategies that are considered for or by
a Co-Investment Affiliate, and such
investment opportunities may result in
a Co-Investment Transaction. A Capital
Markets Affiliate would have the
opportunity to participate in a CoInvestment Transaction only if the
demand for a Potential Co-Investment
Transaction from the Regulated Funds
and the other Co-Investment Affiliates is
less than the total investment
opportunity presented by such Potential
Co-Investment Transaction.
7. 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 applicable
Investment Adviser will present each
Potential Co-Investment Transaction
and the proposed allocation to the
directors of the Board that are eligible to
vote under section 57(o) of the Act
(‘‘Eligible Directors’’). The ‘‘required
10 Available Capital consists solely of liquid
assets not held for permanent investment, including
cash, amounts that can currently be drawn down
from lines of credit, and marketable securities held
for short-term purposes. In addition, Available
Capital would include bona fide uncalled capital
commitments that can be called by the settlement
date of the Co-Investment Transaction.
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majority,’’ as defined in section 57(o) of
the Act (‘‘Required Majority’’),11 of a
Regulated Fund will approve each CoInvestment Transaction prior to any
investment by the Regulated Fund.
8. With respect to the pro rata
dispositions and Follow-On Investments
as 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 Co-Investment
Affiliate and Regulated Fund in such
disposition or Follow-On Investment 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.
9. No Non-Interested Director of a
Regulated Fund will have a financial
interest in any Co-Investment
Transaction, other than indirectly
through share ownership in one of the
Regulated Funds.
10. If an Investment Adviser, the
principal owners of the Investment
Adviser (‘‘Principals’’), or any person
controlling, controlled by, or under
common control with the Investment
Adviser or the Principals, and the CoInvestment Affiliates (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 required under condition
16. Applicants believe that this
condition will ensure that the NonInterested Directors will act
independently in evaluating the CoInvestment Program, because the ability
of an Investment Adviser or the
Principals to influence the NonInterested Directors by a suggestion,
explicit or implied, that the NonInterested Directors can be removed will
11 With respect to Regulated Funds that are not
BDCs, the defined terms Eligible Directors and
Required Majority apply as if each Regulated Fund
were a BDC subject to section 57(o) of the Act.
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be limited significantly. Applicants
represent that the Non-Interested
Directors will evaluate and approve any
such voting trust or proxy adviser,
taking into accounts its qualifications,
reputation for independence, cost to the
shareholders, and other factors that they
deem relevant.
Applicants’ Legal Analysis
1. 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 or a
company controlled by such registered
investment company unless the
Commission has granted an order
permitting such transactions. 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
such BDC) in contravention of rules as
prescribed by the Commission. 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 BDCs. Because the
Commission has not adopted any rules
under section 57(a)(4), rule 17d–1
applies.
2. Applicants submit that the
Investment Advisers and the entities
that they advise would be deemed to be
a person related to, or affiliated with, a
Regulated Fund in a manner described
by sections 17(d) or 57(b) and therefore
prohibited by sections 17(d) or 57(a)(4)
and rule 17d–1 from participating in the
Co-Investment Transactions. Further,
because the SPV Subs are controlled by
the Regulated Funds, the SPV Subs are
subject to sections 17(d) or 57(a)(4) and
would be prohibited by rule 17d–1 from
participating in the Co-Investment
Transactions without the Order. Finally,
because each Capital Markets Affiliate is
under common control with CGMSIM
and, therefore, is an ‘‘affiliated person’’
of CGMSIM, each Capital Markets
Affiliate could be deemed to be a person
related to a Regulated Fund (or an SPV
Sub) in a manner described by section
17(d) or section 57(b) and also
prohibited from participating in the CoInvestment Program.
3. Rule 17d–1 under the Act generally
prohibits participation by a registered
investment company, or a company
controlled by such registered
investment company, and an affiliated
person (as defined in section 2(a)(3) of
the Act) or principal underwriter for
that investment company, or an
affiliated person of such affiliated
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76397
person or principal underwriter, in any
joint enterprise or other joint
arrangement or profit sharing plan, as
defined in the rule, absent an order by
the Commission. Similarly, rule 17d–1,
as made applicable to BDCs by section
57(i), prohibits any person who is
related to a BDC in a manner described
in section 57(b), acting as principal,
from participating in, or effecting any
transaction in connection with, any
joint enterprise or other joint
arrangement or profit-sharing plan in
which the BDC (or a company
controlled by such BDC) is a participant,
absent an order from the Commission.
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.
4. 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.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Each time an investment adviser to
any Co-Investment Affiliate or a CoInvestment Affiliate considers a
Potential Co-Investment Transaction for
a Co-Investment Affiliate that falls
within a Regulated Fund’s then-current
Objectives and Strategies, the Regulated
Fund’s Investment Adviser will make an
independent determination of the
appropriateness of the investment for
the Regulated Fund in light of such
Regulated Fund’s then-current
circumstances.
2. (a) If the Investment Adviser deems
the Regulated Fund’s participation in
any such Potential Co-Investment
Transaction is appropriate for the
Regulated Fund, it will then determine
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an appropriate level of investment for
the Regulated Fund.
(b) If the aggregate amount
recommended by an Investment Adviser
to be invested by the Regulated Fund in
the Potential Co-Investment Transaction
together with the amount proposed to be
invested by the other Co-Investment
Affiliates, 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 Available Capital available
for investment in the asset class being
allocated, up to the amount proposed to
be invested by each. The Investment
Advisers will provide the Eligible
Directors of each participating
Regulated Fund with information
concerning each participating CoInvestment Affiliate’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
Investment Adviser will distribute
written information concerning the
Potential Co-Investment Transaction,
including the amount proposed to be
invested by each Co-Investment
Affiliate, to the Eligible Directors of
each participating Regulated Fund for
their consideration. A Regulated Fund
will co-invest with Co-Investment
Affiliates only if, prior to such
Regulated Fund’s and any CoInvestment Affiliates’ participation in
the Potential Co-Investment
Transaction, a Required Majority of
such Regulated Fund 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 of such 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 such Regulated Fund; and
(B) such Regulated Fund’s thencurrent Objectives and Strategies;
(iii) the investment by the CoInvestment Affiliates would not
disadvantage such Regulated Fund, and
participation by such Regulated Fund is
not on a basis different from or less
advantageous than that of any CoInvestment Affiliate; provided, that if a
Co-Investment Affiliate, other than such
Regulated Fund, 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
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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 Investment Advisers agree to,
and do, provide, periodic reports to
such 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 Co-Investment Affiliate or any
affiliated person of a Co-Investment
Affiliate receives in connection with the
right of the Co-Investment Affiliate 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
Co-Investment Affiliates (the CoInvestment Affiliates (other than the
Regulated Funds) may, in turn, share
their portion with their affiliated
persons)) and the applicable Regulated
Fund in accordance with the amount of
each party’s investment; and
(iv) the proposed investment by such
Regulated Fund will not benefit the
Investment Advisers or the CoInvestment Affiliates or any affiliated
person of either 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 sections 17(e) and
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 Investment Adviser
will present to the Board of the
Regulated Fund, on a quarterly basis, a
record of all investments made by the
Co-Investment Affiliates in Potential CoInvestment Transactions during the
preceding quarter that fell within such
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
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Fmt 4703
Sfmt 4703
information presented to the Board of
such Regulated Fund pursuant to this
condition will be kept for the life of
such 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 8,12
a Regulated Fund will not invest in
reliance on the Order in any issuer in
which any Co-Investment Affiliate or
any affiliated person of a Co-Investment
Affiliate 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 such Regulated Fund as for the
Co-Investment Affiliates. The grant to a
Co-Investment Affiliate, but not such
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 Co-Investment Affiliate
elects to sell, exchange or otherwise
dispose of an interest in a security that
was acquired in a Co-Investment
Transaction, the applicable Investment
Adviser or Co-Investment Affiliate (only
as to clause (i)) 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 other
Co-Investment Affiliates.
(c) A Regulated Fund may participate
in such disposition without obtaining
prior approval of the Required Majority
if: (i) The proposed participation of each
Co-Investment Affiliate 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
12 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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sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 81, No. 212 / Wednesday, November 2, 2016 / Notices
participate in such dispositions on a pro
rata basis (as described in greater detail
in the application); and (iii) the Board
of each 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
applicable Investment 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 Co-Investment Affiliate will
bear its own expenses in connection
with any such disposition.
8. (a) If any Co-Investment Affiliate
desires to make a Follow-On Investment
in a portfolio company whose securities
were acquired in a Co-Investment
Transaction, the Investment Adviser or
Co-Investment Affiliate (only as to
clause (i)) 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 Co-Investment
Affiliate 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
applicable Investment 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 Co-Investment
Affiliate’s outstanding investments
immediately preceding the Follow-On
Investment; and
(ii) the aggregate amount
recommended by the applicable
Investment Adviser to be invested by
such Regulated Fund in the Follow-On
Investment, together with the amount
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17:18 Nov 01, 2016
Jkt 241001
proposed to be invested by the other CoInvestment Affiliates 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 Available 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 the 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 any Co-Investment Affiliate
that the applicable 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 which such
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 applicable
Regulated Fund of participating in new
and existing Co-Investment
Transactions. All information presented
to such Regulated Fund’s Board
pursuant to this condition will be kept
for the life of such Regulated Fund and
at least two years thereafter, and will be
subject to examination by the
Commission and its staff.
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).
11. No Non-Interested Director of a
Regulated Fund also will be a director,
general partner, managing member or
principal, or otherwise an ‘‘affiliated
person’’ (as defined in the 1940 Act) of
any Co-Investment Affiliate (other than
any other Regulated 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 applicable Investment Adviser
under its respective investment advisory
agreement with the applicable
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Fmt 4703
Sfmt 4703
76399
Regulated Fund or other Co-Investment
Affiliate, be shared by such Regulated
Fund and each Co-Investment Affiliate
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 13 (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
applicable Regulated Fund and the CoInvestment Affiliates 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 the
Investment Advisers of Co-Investment
Affiliates pending consummation of the
transaction, the fee will be deposited
into an account maintained by the
Investment Advisers of the CoInvestment Affiliates 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 between such Fund and the CoInvestment Affiliates based on the
amounts they invest in such CoInvestment Transaction. None of the CoInvestment Affiliates, their investment
advisers, nor any affiliated person (as
defined in the Act) of the Regulated
Funds or the Co-Investment Affiliates
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 Co-Investment Affiliates, 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 the Investment Advisers, investment
advisory fees paid in accordance with
the agreements between such
Investment Advisers and the CoInvestment Affiliates).
14. The Capital Markets Affiliates will
not be permitted to invest in a Potential
Co-Investment Transaction except to the
extent the demand from the Regulated
Funds and the other Co-Investment
Affiliates is less than the total
investment opportunity.
15. The Investment Advisers 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 of the applicable
Investment Advisers will be notified of
13 Applicants are not requesting any relief for
transaction fees received in connection with any
Co-Investment Transaction.
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Federal Register / Vol. 81, No. 212 / Wednesday, November 2, 2016 / Notices
all Potential Co-Investment Transactions
that fall within each Regulated Fund’s
then-current Objectives and Strategies
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 percent of the 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.
Brent J. Fields,
Secretary.
[FR Doc. 2016–26401 Filed 11–1–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79173; File No. SR–
NYSEArca–2016–62]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Designation of a
Longer Period for Commission Action
on Proceedings To Determine Whether
To Approve or Disapprove a Proposed
Rule Change Relating to a Change to
the Underlying Index for the
PowerShares Build America Bond
Portfolio
sradovich on DSK3GMQ082PROD with NOTICES
October 27, 2016.
On May 3, 2016, NYSE Arca, Inc.
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to:
(1) Permit the continued listing and
trading of shares of the PowerShares
Build America Bond Portfolio (‘‘Fund’’)
following a change to the index
underlying the Fund, and (2) propose
changes to the index underlying the
Fund and the name of the Fund. The
proposed rule change was published for
comment in the Federal Register on
May 23, 2016.3 On June 27, 2016,
pursuant to section 19(b)(2) of the Act,4
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 77849
(May 17, 2016), 81 FR 32371.
4 15 U.S.C. 78s(b)(2).
2 17
VerDate Sep<11>2014
17:18 Nov 01, 2016
Jkt 241001
the Commission designated a longer
period within which to either approve
the proposed rule change, disapprove
the proposed rule change, or institute
proceedings to determine whether to
disapprove the proposed rule change.5
On August 12, 2016, the Commission
instituted proceedings to determine
whether to approve or disapprove the
proposed rule change.6 The Commission
received no comments on the proposed
rule change.
Section 19(b)(2) of the Act 7 provides
that, after initiating 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 proposed rule
change was published for notice and
comment in the Federal Register on
May 23, 2016. November 19, 2016 is 180
days from that date, and January 18,
2017 is 240 days from that date.
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
this proposed rule change. Accordingly,
the Commission, pursuant to section
19(b)(2) of the Act,8 designates January
18, 2017 as the date by which the
Commission should either approve or
disapprove the proposed rule change
(File No. SR–NYSEArca–2016–62).
5 See Securities Exchange Act Release No. 78157,
81 FR 43327 (July 1, 2016). The Commission
determined that it was appropriate to designate a
longer period within which to take action on the
proposed rule change so that it has sufficient time
to consider the proposed rule change. Accordingly,
the Commission designated August 21, 2016 as the
date by which it should approve, disapprove, or
institute proceedings to determine whether to
disapprove the proposed rule change.
6 See Securities Exchange Act Release No. 78564,
81 FR 55247 (August 18, 2016). Specifically, the
Commission instituted proceedings to allow for
additional analysis of the proposed rule change’s
consistency with section 6(b)(5) of the Act, which
requires, among other things, that the rules of a
national securities exchange be ‘‘designed to
prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles
of trade,’’ and ‘‘to protect investors and the public
interest.’’ See id. at 55250.
7 15 U.S.C. 78s(b)(2).
8 Id.
PO 00000
Frm 00070
Fmt 4703
Sfmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Brent J. Fields,
Secretary.
[FR Doc. 2016–26404 Filed 11–1–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79171; File No. SR–
NYSEArca–2016–101]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change Relating to the Listing
and Trading of Shares of SolidX
Bitcoin Trust Under NYSE Arca
Equities Rule 8.201
October 27, 2016.
On July 13, 2016, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade shares
(‘‘Shares’’) of the SolidX Bitcoin Trust
(‘‘Trust’’) under NYSE Arca Equities
Rule 8.201. The proposed rule change
was published for comment in the
Federal Register on August 2, 2016.3
On September 6, 2016, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 The Commission
has received no comments on the
proposed rule change.
This order institutes proceedings
under Section 19(b)(2)(B) of the Act 6 to
determine whether to approve or
disapprove the proposed rule change.
I. Summary of the Proposal 7
The Exchange proposes to list and
trade the Shares under NYSE Arca
9 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 78426
(Jul. 27, 2016), 81 FR 50763 (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 78770,
81 FR 62780 (Sept. 12, 2016). The Commission
designated October 31, 2016, as the date by which
it should approve, disapprove, or institute
proceedings to determine whether to disapprove the
proposed rule change.
6 15 U.S.C. 78s(b)(2)(B).
7 The Commission notes that additional
information regarding the Trust and the Shares can
1 15
E:\FR\FM\02NON1.SGM
02NON1
]]>Agencies
[Federal Register Volume 81, Number 212 (Wednesday, November 2, 2016)]
[Notices]
[Pages 76395-76400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26401]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-32340; File No. 812-14472]
NF Investment Corp., et al.; Notice of Application
October 27, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order to amend a prior order
under sections 17(d), 57(a)(4) 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), 57(a)(4) and
57(i) of the Act and rule 17d-1 under the Act.
-----------------------------------------------------------------------
Summary of Application: Applicants request an order (``Order'') to
amend a prior order to permit certain business development companies
(``BDCs'') and closed-end investment companies to co-invest in
portfolio companies with each other and with certain other affiliated
investment funds and broker-dealers. The Order would supersede the
prior order.\1\
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\1\ NF Investment Corp., et al., Investment Company Act Rel.
Nos. 30900 (Jan. 31, 2014) (notice) and 30968 (Feb. 26, 2014)
(order).
Applicants: NF Investment Corp. (``NFIC''); Carlyle GMS Finance, Inc.
(``CGMSF,'' and together with NFIC, the ``Existing Regulated Funds'');
NFIC SPV LLC (``NFIC Sub''); Carlyle GMS Finance SPV LLC (``CGMSF
Sub'''); Carlyle GMS Finance MM CLO 2015-1 LLC (``2015-1 Issuer,'' and
together with CFMSF Sub and NFIC Sub, the ``Existing SPV Subs'')
(collectively, the ``Existing Co-Investment Affiliates''); Carlyle GMS
Investment Management L.L.C. (``CGMSIM'') on behalf of itself and its
successors; \2\ and TCG Securities, L.L.C. (``TCG'').
---------------------------------------------------------------------------
\2\ The term ``successor'' as applied to CGMSIM means an entity
that results from a reorganization into another jurisdiction or
change in the type of business organization.
Filing Dates: The application was filed on May 22, 2015, and amended on
---------------------------------------------------------------------------
October 8, 2015, March 30, 2016, and August 4, 2016.
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 November 21, 2016, 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: The Commission: Brent J. Fields, Secretary, U.S. Securities
and Exchange Commission, 100 F St. NE., Washington, DC 20549-1090.
Applicants: Carlyle GMS Finance, Inc., 520 Madison Avenue, 38th Floor,
New York, NY 10022.
FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at
(202) 551-6811 or Daniele Marchesani, Branch Chief, at (202) 551-6821
(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. CGMSF and NFIC are both Maryland corporations organized as non-
diversified, closed-end management investment companies that have
elected to be regulated as BDCs under Section 54(a) of the Act.\3\ The
Objectives and Strategies \4\ of both
[[Page 76396]]
CGMSF and NFIC are to generate current income and capital appreciation
primarily through debt investments in U.S. middle market companies. The
board of directors of NFIC and CGMSF (each a ``Board'') will be
comprised of directors, a majority of whom will not be ``interested
persons,'' within the meaning of section 2(a)(19) of the Act (the
``Non-Interested Directors'') of NFIC or CGMSF. The Existing SPV Subs
are each an SPV Sub (defined below) of either NFIC or CGMSF.
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\3\ 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.
\4\ ``Objectives and Strategies'' means the investment
objectives and strategies of a Regulated Fund (as defined below), as
described in the filings made with the Commission by the Regulated
Fund under the Exchange Act or under the Securities Act of 1933 (the
``Securities Act'') and the Act, and the Regulated Fund's reports to
shareholders.
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2. CGMSIM is registered as an investment adviser under the
Investment Advisers Act of 1940 (the ``Advisers Act'') and serves as
the investment adviser to the Existing Regulated Funds. CGMSIM is a
Delaware corporation and a wholly owned subsidiary of The Carlyle Group
L.P. (``Carlyle'').
3. TCG, a wholly owned subsidiary of Carlyle, is registered as a
limited purpose broker-dealer under the Securities Exchange Act of 1934
(``Exchange Act'') and is a Delaware limited liability company that,
from time to time, may hold various assets in a principal capacity.
When acting in this capacity, TCG, and any other future wholly or
majority owned broker-dealer subsidiaries of Carlyle and any future
wholly owned subsidiaries of such broker-dealer subsidiaries who intend
to participate in the Co-Investment Program are collectively referred
to as the ``Capital Markets Affiliates.''
4. Applicants seek an Order to permit a Regulated Fund \5\ (or any
SPV Sub, as defined below), on the one hand, and one or more Co-
Investment Affiliates,\6\ on the other hand, to participate in the same
investment opportunities through a co-investment program (the ``Co-
Investment Program'') where such participation would otherwise be
prohibited under sections 17(d) and 57(a)(4) of the Act and rule 17d-1
under the Act by (a) co-investing with each other in securities issued
by issuers in private placement transactions in which an Investment
Adviser negotiates terms in addition to price; \7\ 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 any of the
Regulated Funds (or any SPV Sub) participated together with one or more
Co-Investment Affiliates in reliance on the Order. ``Potential Co-
Investment Transaction'' means any investment opportunity in which any
of the Regulated Funds (or any SPV Sub) could not participate together
with one or more Co-Investment Affiliates without obtaining and relying
on the Order.\8\
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\5\ ``Regulated Fund'' means any of the Existing Regulated Funds
and any Future Regulated Fund. ``Future Regulated Fund'' means any
future closed-end management investment company that (a) has elected
to be regulated as a BDC or is registered under the Act; (b) will be
advised by an Investment Adviser and (c) that intends to participate
in the Co-Investment Program (as defined below). The term
``Investment Adviser'' means (a) CGMSIM and (b) any future
investment adviser controlling, controlled by, or under common
control with CGMSIM and is registered as an investment adviser under
the Advisers Act.
\6\ ``Co-Investment Affiliates'' means (a) the Existing Co-
Investment Affiliates, (b) any Capital Markets Affiliate, or (c) any
Regulated Fund, SPV Sub, or Private Fund. ``Private Fund'' means any
entity (a) whose investment adviser is an Investment 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.
\7\ 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.
\8\ All existing entities that currently intend to rely upon the
Order have been named as applicants. Any other existing or future
entity that relies on the Order in the future will comply with the
terms and conditions of the application.
---------------------------------------------------------------------------
5. Applicants state that a Regulated Fund may, from time to time,
form one or more SPV Subs.\9\ Such a subsidiary would be prohibited
from investing in a Co-Investment Transaction with any Co-Investment
Affiliate because it would be a company controlled by its parent
Regulated Fund for purposes of sections 17(d) and 57(a)(4) and rule
17d-1. Applicants request that each SPV Sub be permitted to participate
in Co-Investment Transactions in lieu of its parent Regulated Fund and
that the SPV Sub's participation in any such transaction be treated,
for purposes of the Order, as though the parent Regulated Fund were
participating directly. Applicants represent that this treatment is
justified because a SPV 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
SPV Sub. The Board would make all relevant determinations under the
conditions with regard to a SPV Sub's participation in a Co-Investment
Transaction, and the Board would be informed of, and take into
consideration, any proposed use of a SPV Sub in the Regulated Fund's
place. If the Regulated Fund proposes to participate in the same Co-
Investment Transaction with any of its SPV Subs, the Board will also be
informed of, and take into consideration, the relative participation of
the Regulated Fund and the SPV Sub.
---------------------------------------------------------------------------
\9\ ``SPV Sub'' means an entity that (a) is wholly-owned by a
Regulated Fund (with such Regulated Fund at all times holding,
beneficially and of record, 100% of the voting and economic
interests); (b) whose sole business purpose is to hold one or more
investments on behalf of the Regulated Fund (and, in the case of an
SBIC Subsidiary (as defined below), maintain a license under the SBA
Act (as defined below) and issue debentures guaranteed by the SBA
(as defined below)); (c) with respect to which the Regulated Fund's
Board has the sole authority to make all determinations with respect
to the SPV Sub's participation under the conditions of the
application; and (d) that would be an investment company but for
section 3(c)(1) or 3(c)(7) of the Act. ``SBIC Subsidiary'' means an
SPV Sub that is licensed by the Small Business Administration to
operate under the Small Business Investment Act of 1958 (the ``SBA
Act'') as a small business investment company.
---------------------------------------------------------------------------
6. When considering Potential Co-Investment Transactions for any
Regulated Fund, the applicable Investment Adviser will consider only
the Objectives and Strategies, investment policies, investment
positions, capital available for investment (``Available
Capital''),\10\ and other factors relevant to such Regulated Fund. Upon
issuance of the Order, the Investment Adviser to a Co-Investment
Affiliate or the Co-Investment Affiliates (in the case of Capital
Market Affiliates) will refer to the Investment Advisers of the
Regulated Funds all Potential Co-Investment Transactions within a
Regulated Fund's Objectives and Strategies that are considered for or
by a Co-Investment Affiliate, and such investment opportunities may
result in a Co-Investment Transaction. A Capital Markets Affiliate
would have the opportunity to participate in a Co-Investment
Transaction only if the demand for a Potential Co-Investment
Transaction from the Regulated Funds and the other Co-Investment
Affiliates is less than the total investment opportunity presented by
such Potential Co-Investment Transaction.
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\10\ Available Capital consists solely of liquid assets not held
for permanent investment, including cash, amounts that can currently
be drawn down from lines of credit, and marketable securities held
for short-term purposes. In addition, Available Capital would
include bona fide uncalled capital commitments that can be called by
the settlement date of the Co-Investment Transaction.
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7. 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 applicable Investment Adviser
will present each Potential Co-Investment Transaction and the proposed
allocation to the directors of the Board that are eligible to vote
under section 57(o) of the Act (``Eligible Directors''). The ``required
[[Page 76397]]
majority,'' as defined in section 57(o) of the Act (``Required
Majority''),\11\ of a Regulated Fund will approve each Co-Investment
Transaction prior to any investment by the Regulated Fund.
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\11\ With respect to Regulated Funds that are not BDCs, the
defined terms Eligible Directors and Required Majority apply as if
each Regulated Fund were a BDC subject to section 57(o) of the Act.
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8. With respect to the pro rata dispositions and Follow-On
Investments as 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 Co-Investment Affiliate
and Regulated Fund in such disposition or Follow-On Investment 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.
9. No Non-Interested Director of a Regulated Fund will have a
financial interest in any Co-Investment Transaction, other than
indirectly through share ownership in one of the Regulated Funds.
10. If an Investment Adviser, the principal owners of the
Investment Adviser (``Principals''), or any person controlling,
controlled by, or under common control with the Investment Adviser or
the Principals, and the Co-Investment Affiliates (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 required under condition 16.
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 an Investment Adviser 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 will evaluate and approve any such voting trust or
proxy adviser, taking into accounts its qualifications, reputation for
independence, cost to the shareholders, and other factors that they
deem relevant.
Applicants' Legal Analysis
1. 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 or a company
controlled by such registered investment company unless the Commission
has granted an order permitting such transactions. 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 such BDC) in contravention of rules as prescribed by the
Commission. 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 BDCs. Because the
Commission has not adopted any rules under section 57(a)(4), rule 17d-1
applies.
2. Applicants submit that the Investment Advisers and the entities
that they advise would be deemed to be a person related to, or
affiliated with, a Regulated Fund in a manner described by sections
17(d) or 57(b) and therefore prohibited by sections 17(d) or 57(a)(4)
and rule 17d-1 from participating in the Co-Investment Transactions.
Further, because the SPV Subs are controlled by the Regulated Funds,
the SPV Subs are subject to sections 17(d) or 57(a)(4) and would be
prohibited by rule 17d-1 from participating in the Co-Investment
Transactions without the Order. Finally, because each Capital Markets
Affiliate is under common control with CGMSIM and, therefore, is an
``affiliated person'' of CGMSIM, each Capital Markets Affiliate could
be deemed to be a person related to a Regulated Fund (or an SPV Sub) in
a manner described by section 17(d) or section 57(b) and also
prohibited from participating in the Co-Investment Program.
3. Rule 17d-1 under the Act generally prohibits participation by a
registered investment company, or a company controlled by such
registered investment company, and an affiliated person (as defined in
section 2(a)(3) of the Act) or principal underwriter for that
investment company, or an affiliated person of such affiliated person
or principal underwriter, in any joint enterprise or other joint
arrangement or profit sharing plan, as defined in the rule, absent an
order by the Commission. Similarly, rule 17d-1, as made applicable to
BDCs by section 57(i), prohibits any person who is related to a BDC in
a manner described in section 57(b), acting as principal, from
participating in, or effecting any transaction in connection with, any
joint enterprise or other joint arrangement or profit-sharing plan in
which the BDC (or a company controlled by such BDC) is a participant,
absent an order from the Commission. 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.
4. 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.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Each time an investment adviser to any Co-Investment Affiliate
or a Co-Investment Affiliate considers a Potential Co-Investment
Transaction for a Co-Investment Affiliate that falls within a Regulated
Fund's then-current Objectives and Strategies, the Regulated Fund's
Investment Adviser will make an independent determination of the
appropriateness of the investment for the Regulated Fund in light of
such Regulated Fund's then-current circumstances.
2. (a) If the Investment Adviser deems the Regulated Fund's
participation in any such Potential Co-Investment Transaction is
appropriate for the Regulated Fund, it will then determine
[[Page 76398]]
an appropriate level of investment for the Regulated Fund.
(b) If the aggregate amount recommended by an Investment Adviser to
be invested by the Regulated Fund in the Potential Co-Investment
Transaction together with the amount proposed to be invested by the
other Co-Investment Affiliates, 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 Available Capital available for investment in the asset
class being allocated, up to the amount proposed to be invested by
each. The Investment Advisers will provide the Eligible Directors of
each participating Regulated Fund with information concerning each
participating Co-Investment Affiliate'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 Investment Adviser will distribute written information
concerning the Potential Co-Investment Transaction, including the
amount proposed to be invested by each Co-Investment Affiliate, to the
Eligible Directors of each participating Regulated Fund for their
consideration. A Regulated Fund will co-invest with Co-Investment
Affiliates only if, prior to such Regulated Fund's and any Co-
Investment Affiliates' participation in the Potential Co-Investment
Transaction, a Required Majority of such Regulated Fund 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 of such
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 such Regulated Fund; and
(B) such Regulated Fund's then-current Objectives and Strategies;
(iii) the investment by the Co-Investment Affiliates would not
disadvantage such Regulated Fund, and participation by such Regulated
Fund is not on a basis different from or less advantageous than that of
any Co-Investment Affiliate; provided, that if a Co-Investment
Affiliate, other than such Regulated Fund, 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 Investment Advisers agree to, and do, provide, periodic
reports to such 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 Co-Investment Affiliate
or any affiliated person of a Co-Investment Affiliate receives in
connection with the right of the Co-Investment Affiliate 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 Co-Investment Affiliates (the
Co-Investment Affiliates (other than the Regulated Funds) may, in turn,
share their portion with their affiliated persons)) and the applicable
Regulated Fund in accordance with the amount of each party's
investment; and
(iv) the proposed investment by such Regulated Fund will not
benefit the Investment Advisers or the Co-Investment Affiliates or any
affiliated person of either 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 sections 17(e) and 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 Investment Adviser will present to the Board of
the Regulated Fund, on a quarterly basis, a record of all investments
made by the Co-Investment Affiliates in Potential Co-Investment
Transactions during the preceding quarter that fell within such
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 of such Regulated Fund pursuant to
this condition will be kept for the life of such 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,\12\ a Regulated Fund will not invest in reliance on the
Order in any issuer in which any Co-Investment Affiliate or any
affiliated person of a Co-Investment Affiliate is an existing investor.
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\12\ 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 such Regulated Fund as for the Co-Investment
Affiliates. The grant to a Co-Investment Affiliate, but not such
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 Co-Investment Affiliate elects to sell, exchange or
otherwise dispose of an interest in a security that was acquired in a
Co-Investment Transaction, the applicable Investment Adviser or Co-
Investment Affiliate (only as to clause (i)) 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 other Co-Investment
Affiliates.
(c) A Regulated Fund may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of each Co-Investment Affiliate 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
[[Page 76399]]
participate in such dispositions on a pro rata basis (as described in
greater detail in the application); and (iii) the Board of each
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 applicable Investment 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 Co-Investment Affiliate will bear its own expenses in
connection with any such disposition.
8. (a) If any Co-Investment Affiliate desires to make a Follow-On
Investment in a portfolio company whose securities were acquired in a
Co-Investment Transaction, the Investment Adviser or Co-Investment
Affiliate (only as to clause (i)) 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 Co-Investment Affiliate 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 applicable Investment 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 Co-Investment
Affiliate's outstanding investments immediately preceding the Follow-On
Investment; and
(ii) the aggregate amount recommended by the applicable Investment
Adviser to be invested by such Regulated Fund in the Follow-On
Investment, together with the amount proposed to be invested by the
other Co-Investment Affiliates 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
Available 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 the
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 any Co-Investment Affiliate that the applicable
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 which such
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
applicable Regulated Fund of participating in new and existing Co-
Investment Transactions. All information presented to such Regulated
Fund's Board pursuant to this condition will be kept for the life of
such Regulated Fund and at least two years thereafter, and will be
subject to examination by the Commission and its staff.
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).
11. No Non-Interested Director of a Regulated Fund also will be a
director, general partner, managing member or principal, or otherwise
an ``affiliated person'' (as defined in the 1940 Act) of any Co-
Investment Affiliate (other than any other Regulated 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 applicable Investment Adviser under its
respective investment advisory agreement with the applicable Regulated
Fund or other Co-Investment Affiliate, be shared by such Regulated Fund
and each Co-Investment Affiliate 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 \13\ (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 applicable
Regulated Fund and the Co-Investment Affiliates 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
the Investment Advisers of Co-Investment Affiliates pending
consummation of the transaction, the fee will be deposited into an
account maintained by the Investment Advisers of the Co-Investment
Affiliates 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 between such Fund
and the Co-Investment Affiliates based on the amounts they invest in
such Co-Investment Transaction. None of the Co-Investment Affiliates,
their investment advisers, nor any affiliated person (as defined in the
Act) of the Regulated Funds or the Co-Investment Affiliates 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 Co-Investment Affiliates, 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 the Investment Advisers, investment
advisory fees paid in accordance with the agreements between such
Investment Advisers and the Co-Investment Affiliates).
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\13\ Applicants are not requesting any relief for transaction
fees received in connection with any Co-Investment Transaction.
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14. The Capital Markets Affiliates will not be permitted to invest
in a Potential Co-Investment Transaction except to the extent the
demand from the Regulated Funds and the other Co-Investment Affiliates
is less than the total investment opportunity.
15. The Investment Advisers 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 of the applicable Investment Advisers will be
notified of
[[Page 76400]]
all Potential Co-Investment Transactions that fall within each
Regulated Fund's then-current Objectives and Strategies 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 percent of the
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.
Brent J. Fields,
Secretary.
[FR Doc. 2016-26401 Filed 11-1-16; 8:45 am]
BILLING CODE 8011-01-P
