General Electric Company and GE Capital International Holdings Limited; Notice of Application, 11079-11081 [2017-03184]
Download as PDF
<![CDATA[
Federal Register / Vol. 82, No. 32 / Friday, February 17, 2017 / Notices
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 22 of the Act to
determine whether the proposed rule
change 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:
mstockstill on DSK3G9T082PROD with NOTICES
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–
NYSEARCA–2017–10 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEARCA–2017–10. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
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
10:00 a.m. and 3:00 p.m. Copies of the
filing 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
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
22 15
U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014
17:38 Feb 16, 2017
NYSEARCA–2017–10 and should be
submitted on or before March 10, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–03183 Filed 2–16–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32477; 812–14743]
General Electric Company and GE
Capital International Holdings Limited;
Notice of Application
February 13, 2017.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application under
section 6(c) of the Investment Company
Act of 1940 (‘‘Act’’).
AGENCY:
General
Electric Company (‘‘GE’’) and GE
Capital International Holdings Limited
(‘‘European Holdco’’) request an order
under section 6(c) of the Act exempting
European Holdco from all provisions of
the Act during the period from the date
of the requested order to the earlier of
(a) three years from such date and (b)
the completion of the sales process
described in the application
(‘‘Exemption Period’’).
APPLICANTS: GE and European Holdco.
FILING DATES: The application was filed
on February 10, 2017.
HEARING OR NOTIFICATION OF HEARING:
An order granting the application will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicant with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on March 10, 2017, and
should be accompanied by proof of
service on applicant, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090;
SUMMARY OF APPLICATION:
23 17
Jkt 241001
PO 00000
CFR 200.30–3(a)(12).
Frm 00080
Fmt 4703
Sfmt 4703
11079
Applicants: 299 Park Avenue, New
York, NY 10171.
FOR FURTHER INFORMATION CONTACT:
Steven I. Amchan, Senior Counsel, at
(202) 551–6826, or Daniele Marchesani,
Assistant Chief Counsel, at (202) 551–
6821 (Division of Investment
Management, Chief Counsel’s Office).
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 the applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. GE, a New York corporation, is one
of the largest and most diversified
infrastructure and financial services
corporations in the world. Its products
and services range from aircraft engines,
power generation, oil and gas
production equipment and household
appliances to medical imaging, business
and consumer financing, and industrial
products. Applicants state that GE is not
an investment company as defined in
section 3(a) of the Act.
2. European Holdco, a UK limited
company and a wholly-owned
subsidiary of GE, is the successor to the
former General Electric Capital
Corporation (‘‘Old GE Capital’’) with
respect to various foreign businesses
formerly held by Old GE Capital.
European Holdco, directly or through its
majority-owned subsidiaries, engages in
financing activities primarily for midsized companies within the industries
in which GE provides its services.
3. On April 10, 2015, GE announced
a plan to reduce the size of its financial
services businesses through the sale of
most of the assets of Old GE Capital over
the next 24 months and to focus on the
continued investment and growth of
GE’s industrial businesses. As part of
this plan, Old GE Capital’s businesses
were reorganized principally into
European Holdco and a separate U.S.
holding company (the
‘‘Reorganization’’), with the non-U.S.
businesses being contributed to
European Holdco.1 The non-U.S.
businesses transferred from Old GE
Capital to European Holdco include,
among others, (i) banking, (ii)
equipment financing, (iii) inventory
financing, (iv) factoring, (v) automobile
1 As part of the plan to restructure and reduce the
Old GE Capital business, Old GE Capital formed a
finance subsidiary (‘‘FinCo’’), whose primary
purpose is to finance the operations of GE’s foreign
subsidiaries.
E:\FR\FM\17FEN1.SGM
17FEN1
mstockstill on DSK3G9T082PROD with NOTICES
11080
Federal Register / Vol. 82, No. 32 / Friday, February 17, 2017 / Notices
leasing, and (vi) aircraft and aircraft
engine leasing.
4. Applicants assert that European
Holdco is exempt from the Act pursuant
to section 3(c)(6), the same exemption
Old GE Capital was able to rely on prior
to the Reorganization. Applicants state
that in complying with section 3(c)(6),
European Holdco relies not only on
businesses described in sections 3(c)(3),
(4), and (5), but also on businesses other
than investing, reinvesting, owning,
holding, or trading in securities. As
such, to relying on section 3(c)(6), at
least 25% of European Holdco’s gross
income (i.e., revenue) generally must be
derived from European Holdco’s 3(c)(3),
(4), and (5) businesses. GE has
calculated that, as of September 30,
2016, approximately 91% of European
Holdco’s assets and 57% of its net
income were derived from its section
3(c)(3), (4), and (5) businesses and its
other businesses that are not investing,
reinvesting, owning, holding, or trading
in securities, and approximately 36% of
its revenue was derived from its section
3(c)(3), (4), and (5) businesses.
Applicants maintain that as such,
European Holdco was in compliance
with section 3(c)(6) as of that time.
5. Applicants state that GE intends
over time to sell many of the foreign
businesses contributed to European
Holdco as part of the Reorganization,
and would like to be able to manage this
sales process so as to maximize
shareholder value, rather than in a
manner necessary to continuously
comply with European Holdco’s
exemption under the Act. GE has
developed a plan for selling such
businesses and expects that the sales
process will be mostly complete within
two years, with potentially some sales
activity continuing into a third year.
Applicants state that the sales process
may extend into a third year given the
tremendous complexity of GE’s
structure and the Reorganization. At the
conclusion of the sales process, GE
expects that European Holdco will not
be an investment company pursuant to
rule 3a–1 under the Act (or otherwise),
as its anticipated remaining businesses
will involve significant amounts of
assets that are not investment securities
for purposes of the Act (such as aircraft
and aircraft engines). Accordingly,
applicants request an order of
exemption for the duration of the
Exemption Period to permit GE to sell
various businesses without concern that
it might cause European Holdco
inadvertently and temporarily to
become an investment company under
the Act.
VerDate Sep<11>2014
17:38 Feb 16, 2017
Jkt 241001
Applicants’ Legal Analysis
1. Under section 3(a)(1)(C) of the Act,
an issuer is an investment company if
it is engaged or proposes to engage in
the business of investing, reinvesting,
owning, holding, or trading in
securities, and owns or proposes to
acquire investment securities having a
value exceeding 40 percent of the value
of such issuer’s total assets (exclusive of
government securities and cash items)
on an unconsolidated basis. Section
3(a)(2) of the Act defines ‘‘investment
securities’’ to include all securities
except government securities, securities
issued by employees’ securities
companies, and securities issued by
majority-owned subsidiaries of the
owner that are not investment
companies and are not relying on the
exception from the definition of
investment company in section 3(c)(1)
or 3(c)(7) of the Act.
2. Rule 3a–1 under the Act provides
an exemption from the definition of
investment company if, on a
consolidated basis with wholly-owned
subsidiaries, no more than 45% of an
issuer’s total assets (exclusive of
government securities and cash items)
consist of, and no more than 45% of its
net income after taxes over the last four
fiscal quarters combined is derived
from, securities other than: Government
securities, securities issued by
employees’ securities companies, and
securities of certain majority-owned
subsidiaries and companies controlled
primarily by the issuer.
3. Applicants assert that although
European Holdco’s financing businesses
involve significant holdings of
investment securities (such as mortgages
and equipment finance loans), European
Holdco as currently structured is not an
investment company under section
3(c)(6) of the Act, the same exemption
Old GE Capital was able to rely on prior
to the Reorganization. However,
applicants state that there could be
times during the process of selling
European Holdco’s businesses,
depending on the order in which the
businesses are sold and the remaining
mix of businesses, when European
Holdco would technically not satisfy
section 3(c)(6), rule 3a–1, or any other
exception from the definition of
‘‘investment company,’’ and thus may
fall within the definition of ‘‘investment
company’’ in section 3(a)(1)(C).
4. Rule 3a–2 under the Act generally
provides that, for purposes of sections
3(a)(1)(A) and 3(a)(1)(C), an issuer will
not be deemed to be engaged in the
business of investing, reinvesting,
owning, holding or trading in securities
for a period not to exceed one year if the
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
issuer has a bona fide intent to be
engaged in a non-investment company
business. This enables the issuer to
make an orderly transition to a noninvestment company business.
Applicants state that the expected
length of the sales process may preclude
European Holdco from relying on rule
3a–2 because applicants cannot state
that European Holdco has a bona fide
intent to be engaged primarily in a
business other than investing,
reinvesting, owning, holding, or trading
in securities within one year.
5. Section 6(c) of the Act permits the
Commission to exempt any person from
any provision of the Act, if and to the
extent that the exemption is necessary
or appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act.
6. Applicants request an order under
section 6(c) exempting European Holdco
from all provisions of the Act for the
duration of the Exemption Period.
Applicants believe that the period of
time requested will provide GE with
enough time to execute the sales plan in
a manner that maximizes economic
value while ensuring that, at the end of
the Exemption Period, European Holdco
will not be an investment company.
7. Applicants assert that as a result of
GE’s plan to reduce its financial services
businesses through the sale of foreign
businesses held by European Holdco,
European Holdco may temporarily fall
within the statutory definition of an
investment company, even though that
definition is not an accurate depiction
of European Holdco’s business.
Applicants assert that their officers will
work diligently to bring European
Holdco into compliance with rule 3a–1
(or another exemption) under the Act
within three years. Applicants state that
European Holdco’s transactions in
securities will not be for speculative
purposes, but rather in furtherance of its
business as a holding company for
certain international financial
businesses of GE. Applicants contend
that registration under the Act would
involve unnecessary burden and
expense for the applicants and GE’s
shareholders, and would serve no
regulatory purpose. For the reasons
discussed above, applicants assert that
the requested relief under section 6(c) of
the Act is consistent with the protection
of investors and the purposes fairly
intended by the policy and provisions of
the Act.
E:\FR\FM\17FEN1.SGM
17FEN1
Federal Register / Vol. 82, No. 32 / Friday, February 17, 2017 / Notices
Applicants’ Conditions
Applicants agree that the requested
exemption will be subject to the
following conditions:
1. European Holdco will not engage in
the trading of securities for short-term
speculative purposes;
2. European Holdco will not hold
itself out as being engaged primarily in
the business of investing, reinvesting, or
trading in securities; and
3. European Holdco will have no
securities outstanding while it is relying
on the order other than (i) guarantees of
FinCo debt that is also guaranteed by
GE, (ii) debt securities (including
commercial paper) guaranteed by GE
and (iii) securities held by European
Holdco’s affiliates.
4. European Holdco will seek to
decrease the percentage of its total
assets comprised of investment
securities so as not to be an investment
company within the meaning of the Act
and the rules and regulations
thereunder as soon as reasonably
possible and in any event within three
years from the date of the requested
order.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80025; File No. SR–
BatsEDGX–2017–04]
Self-Regulatory Organizations; Bats
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Adopt
Option Regulatory Fees as They Relate
to the Equity Options Platform
mstockstill on DSK3G9T082PROD with NOTICES
February 13, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
30, 2017, Bats EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange has designated the proposed
rule change as one establishing or
changing a member due, fee, or other
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Sep<11>2014
17:38 Feb 16, 2017
Jkt 241001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange filed a proposal to
amend the fee schedule applicable to
Members 5 and non-Members of the
Exchange pursuant to Exchange Rules
15.1(a) and (c) to adopt an Options
Regulatory Fee (‘‘ORF’’).
The text of the proposed rule change
is available at the Exchange’s Web site
at www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
[FR Doc. 2017–03184 Filed 2–16–17; 8:45 am]
1 15
charge imposed by the Exchange under
Section 19(b)(3)(A)(ii) of the Act 3 and
Rule 19b–4(f)(2) thereunder,4 which
renders the proposed rule change
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to modify its
fee schedule applicable to its equity
options platform (‘‘EDGX Options’’) to
adopt an ORF in the amount of $0.0004
per contract side.6 The per-contract ORF
3 15
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
5 The term ‘‘Member’’ is defined as ‘‘any
registered broker or dealer that has been admitted
to membership in the Exchange.’’ See Exchange
Rule 1.5(n).
6 The Exchange notes that it previously proposed
to adopt an ORF of $0.0002 per contract in August
2016 which would have been assessed to each
Member and non-Member for all options
transactions cleared by OCC in the ‘‘customer’’
range, regardless of the exchange on which the
transaction occurred. See Securities Exchange Act
Release No. 78452 (August 1, 2016), 81 FR 51951
(August 5, 2016) (SR–BatsEDGX–2016–33). The
Exchange then filed to delay the implementation of
SR–BatsEDGX–2016–33 until February 1, 2017. See
4 17
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
11081
will be assessed by the Exchange to each
Member for all options transactions
executed and cleared, or simply cleared,
by the Member, that are cleared by OCC
in the ‘‘customer’’ range, regardless of
the exchange on which the transaction
occurs.7 The ORF will be collected
indirectly from Members through their
clearing firms by OCC on behalf of the
Exchange.
The ORF also will be charged for
transactions that are not executed by a
Member but are ultimately cleared by a
Member. In the case where a nonMember executes a transaction and a
Member clears the transaction, the ORF
will be assessed to the Member who
clears the transaction. In the case where
a Member executes a transaction and
another Member clears the transaction,
the ORF will be assessed to the Member
who clears the transaction.
Clearing members, however, are
distinguished from executing
participants because they remain
identified to the Exchange regardless of
the identity of the initiating executing
participant, their location, and the
market center on which they execute
transactions. Therefore, the Exchange
believes it is more efficient for the
operation of the Exchange and for the
marketplace as a whole to assess the
ORF to clearing members.
The Exchange believes it is
appropriate to charge the ORF only to
transactions that clear as customer at the
OCC. The Exchange believes that its
broad regulatory responsibilities with
respect to a Member’s activities
supports applying the ORF to
transactions cleared but not executed by
a Member. The Exchange’s regulatory
responsibilities are the same regardless
of whether a Member executes a
transaction or clears a transaction
executed on its behalf. The Exchange
regularly reviews all such activities,
including performing surveillance for
position limit violations, manipulation,
front-running, contrary exercise advice
Securities Exchange Act Release No. 78745
(September 1, 2016), 81 FR 62185 (September 8,
2016) (SR–BatsEDGX–2016–48). The Commission
later issued an order suspending and [sic] SR–
BatsEDGX–2016–33 and instituted proceedings to
determine whether to approve or disapprove the
proposed rule change asking whether the [sic] ‘‘a
sufficient regulatory nexus exists between the
Exchange and a non-Member to justify imposition
of the ORF on such non-Member.’’ See Securities
Exchange Act Release No. 78850 (September 15,
2016), 81 FR 64963 (September 21, 2016). On
January 10, 2017, the Exchange withdrew SR–Bats–
EDGX–2016–33. The Exchange also proposes in this
filing to remove text from its fee schedule adopted
in SR–BatsEDGX–2016–48 which delayed the
implementation of SR–Bats–EDGX–2016–33 until
February 1, 2017.
7 The Exchange also proposes to insert a colon
after the title ‘‘Options Regulatory Fee’’.
E:\FR\FM\17FEN1.SGM
17FEN1
]]>Agencies
[Federal Register Volume 82, Number 32 (Friday, February 17, 2017)]
[Notices]
[Pages 11079-11081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-03184]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 32477; 812-14743]
General Electric Company and GE Capital International Holdings
Limited; Notice of Application
February 13, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (``Act'').
-----------------------------------------------------------------------
Summary of Application: General Electric Company (``GE'') and GE
Capital International Holdings Limited (``European Holdco'') request an
order under section 6(c) of the Act exempting European Holdco from all
provisions of the Act during the period from the date of the requested
order to the earlier of (a) three years from such date and (b) the
completion of the sales process described in the application
(``Exemption Period'').
Applicants: GE and European Holdco.
Filing Dates: The application was filed on February 10, 2017.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicant with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on March 10, 2017, and should be accompanied by proof of service
on applicant, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants: 299 Park Avenue, New
York, NY 10171.
FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at
(202) 551-6826, or Daniele Marchesani, Assistant Chief Counsel, at
(202) 551-6821 (Division of Investment Management, Chief Counsel's
Office).
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 the
applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicants' Representations
1. GE, a New York corporation, is one of the largest and most
diversified infrastructure and financial services corporations in the
world. Its products and services range from aircraft engines, power
generation, oil and gas production equipment and household appliances
to medical imaging, business and consumer financing, and industrial
products. Applicants state that GE is not an investment company as
defined in section 3(a) of the Act.
2. European Holdco, a UK limited company and a wholly-owned
subsidiary of GE, is the successor to the former General Electric
Capital Corporation (``Old GE Capital'') with respect to various
foreign businesses formerly held by Old GE Capital. European Holdco,
directly or through its majority-owned subsidiaries, engages in
financing activities primarily for mid-sized companies within the
industries in which GE provides its services.
3. On April 10, 2015, GE announced a plan to reduce the size of its
financial services businesses through the sale of most of the assets of
Old GE Capital over the next 24 months and to focus on the continued
investment and growth of GE's industrial businesses. As part of this
plan, Old GE Capital's businesses were reorganized principally into
European Holdco and a separate U.S. holding company (the
``Reorganization''), with the non-U.S. businesses being contributed to
European Holdco.\1\ The non-U.S. businesses transferred from Old GE
Capital to European Holdco include, among others, (i) banking, (ii)
equipment financing, (iii) inventory financing, (iv) factoring, (v)
automobile
[[Page 11080]]
leasing, and (vi) aircraft and aircraft engine leasing.
---------------------------------------------------------------------------
\1\ As part of the plan to restructure and reduce the Old GE
Capital business, Old GE Capital formed a finance subsidiary
(``FinCo''), whose primary purpose is to finance the operations of
GE's foreign subsidiaries.
---------------------------------------------------------------------------
4. Applicants assert that European Holdco is exempt from the Act
pursuant to section 3(c)(6), the same exemption Old GE Capital was able
to rely on prior to the Reorganization. Applicants state that in
complying with section 3(c)(6), European Holdco relies not only on
businesses described in sections 3(c)(3), (4), and (5), but also on
businesses other than investing, reinvesting, owning, holding, or
trading in securities. As such, to relying on section 3(c)(6), at least
25% of European Holdco's gross income (i.e., revenue) generally must be
derived from European Holdco's 3(c)(3), (4), and (5) businesses. GE has
calculated that, as of September 30, 2016, approximately 91% of
European Holdco's assets and 57% of its net income were derived from
its section 3(c)(3), (4), and (5) businesses and its other businesses
that are not investing, reinvesting, owning, holding, or trading in
securities, and approximately 36% of its revenue was derived from its
section 3(c)(3), (4), and (5) businesses. Applicants maintain that as
such, European Holdco was in compliance with section 3(c)(6) as of that
time.
5. Applicants state that GE intends over time to sell many of the
foreign businesses contributed to European Holdco as part of the
Reorganization, and would like to be able to manage this sales process
so as to maximize shareholder value, rather than in a manner necessary
to continuously comply with European Holdco's exemption under the Act.
GE has developed a plan for selling such businesses and expects that
the sales process will be mostly complete within two years, with
potentially some sales activity continuing into a third year.
Applicants state that the sales process may extend into a third year
given the tremendous complexity of GE's structure and the
Reorganization. At the conclusion of the sales process, GE expects that
European Holdco will not be an investment company pursuant to rule 3a-1
under the Act (or otherwise), as its anticipated remaining businesses
will involve significant amounts of assets that are not investment
securities for purposes of the Act (such as aircraft and aircraft
engines). Accordingly, applicants request an order of exemption for the
duration of the Exemption Period to permit GE to sell various
businesses without concern that it might cause European Holdco
inadvertently and temporarily to become an investment company under the
Act.
Applicants' Legal Analysis
1. Under section 3(a)(1)(C) of the Act, an issuer is an investment
company if it is engaged or proposes to engage in the business of
investing, reinvesting, owning, holding, or trading in securities, and
owns or proposes to acquire investment securities having a value
exceeding 40 percent of the value of such issuer's total assets
(exclusive of government securities and cash items) on an
unconsolidated basis. Section 3(a)(2) of the Act defines ``investment
securities'' to include all securities except government securities,
securities issued by employees' securities companies, and securities
issued by majority-owned subsidiaries of the owner that are not
investment companies and are not relying on the exception from the
definition of investment company in section 3(c)(1) or 3(c)(7) of the
Act.
2. Rule 3a-1 under the Act provides an exemption from the
definition of investment company if, on a consolidated basis with
wholly-owned subsidiaries, no more than 45% of an issuer's total assets
(exclusive of government securities and cash items) consist of, and no
more than 45% of its net income after taxes over the last four fiscal
quarters combined is derived from, securities other than: Government
securities, securities issued by employees' securities companies, and
securities of certain majority-owned subsidiaries and companies
controlled primarily by the issuer.
3. Applicants assert that although European Holdco's financing
businesses involve significant holdings of investment securities (such
as mortgages and equipment finance loans), European Holdco as currently
structured is not an investment company under section 3(c)(6) of the
Act, the same exemption Old GE Capital was able to rely on prior to the
Reorganization. However, applicants state that there could be times
during the process of selling European Holdco's businesses, depending
on the order in which the businesses are sold and the remaining mix of
businesses, when European Holdco would technically not satisfy section
3(c)(6), rule 3a-1, or any other exception from the definition of
``investment company,'' and thus may fall within the definition of
``investment company'' in section 3(a)(1)(C).
4. Rule 3a-2 under the Act generally provides that, for purposes of
sections 3(a)(1)(A) and 3(a)(1)(C), an issuer will not be deemed to be
engaged in the business of investing, reinvesting, owning, holding or
trading in securities for a period not to exceed one year if the issuer
has a bona fide intent to be engaged in a non-investment company
business. This enables the issuer to make an orderly transition to a
non-investment company business. Applicants state that the expected
length of the sales process may preclude European Holdco from relying
on rule 3a-2 because applicants cannot state that European Holdco has a
bona fide intent to be engaged primarily in a business other than
investing, reinvesting, owning, holding, or trading in securities
within one year.
5. Section 6(c) of the Act permits the Commission to exempt any
person from any provision of the Act, if and to the extent that the
exemption is necessary or appropriate in the public interest and
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act.
6. Applicants request an order under section 6(c) exempting
European Holdco from all provisions of the Act for the duration of the
Exemption Period. Applicants believe that the period of time requested
will provide GE with enough time to execute the sales plan in a manner
that maximizes economic value while ensuring that, at the end of the
Exemption Period, European Holdco will not be an investment company.
7. Applicants assert that as a result of GE's plan to reduce its
financial services businesses through the sale of foreign businesses
held by European Holdco, European Holdco may temporarily fall within
the statutory definition of an investment company, even though that
definition is not an accurate depiction of European Holdco's business.
Applicants assert that their officers will work diligently to bring
European Holdco into compliance with rule 3a-1 (or another exemption)
under the Act within three years. Applicants state that European
Holdco's transactions in securities will not be for speculative
purposes, but rather in furtherance of its business as a holding
company for certain international financial businesses of GE.
Applicants contend that registration under the Act would involve
unnecessary burden and expense for the applicants and GE's
shareholders, and would serve no regulatory purpose. For the reasons
discussed above, applicants assert that the requested relief under
section 6(c) of the Act is consistent with the protection of investors
and the purposes fairly intended by the policy and provisions of the
Act.
[[Page 11081]]
Applicants' Conditions
Applicants agree that the requested exemption will be subject to
the following conditions:
1. European Holdco will not engage in the trading of securities for
short-term speculative purposes;
2. European Holdco will not hold itself out as being engaged
primarily in the business of investing, reinvesting, or trading in
securities; and
3. European Holdco will have no securities outstanding while it is
relying on the order other than (i) guarantees of FinCo debt that is
also guaranteed by GE, (ii) debt securities (including commercial
paper) guaranteed by GE and (iii) securities held by European Holdco's
affiliates.
4. European Holdco will seek to decrease the percentage of its
total assets comprised of investment securities so as not to be an
investment company within the meaning of the Act and the rules and
regulations thereunder as soon as reasonably possible and in any event
within three years from the date of the requested order.
For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03184 Filed 2-16-17; 8:45 am]
BILLING CODE 8011-01-P
