The Jeffrey Company; Notice of Application, 13531-13533 [2017-04810]
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Federal Register / Vol. 82, No. 47 / Monday, March 13, 2017 / Notices
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. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities, or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
Rule 17d–1(b) under the Act provides
that in passing upon an application filed
under the rule, the Commission will
consider whether the participation of
the registered investment company in a
joint enterprise, joint arrangement or
profit sharing plan on the basis
proposed 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 the
other participants.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–04812 Filed 3–10–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IA–4659; File No. 803–00231]
The Jeffrey Company; Notice of
Application
March 7, 2017.
Securities and Exchange
Commission (the ‘‘Commission’’).
ACTION: Notice of application for an
exemptive order under the Investment
Advisers Act of 1940 (‘‘Advisers Act’’).
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AGENCY:
The Jeffrey Company (the
‘‘Applicant’’).
RELEVANT ADVISERS ACT SECTIONS:
Exemption requested under Section
202(a)(11)(H) of the Advisers Act from
Section 202(a)(11) of the Advisers Act.
APPLICANT:
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The Applicant
requests that the Commission issue an
order declaring the Applicant to be a
person not within the intent of Section
202(a)(11) of the Advisers Act, which
defines the term ‘‘investment adviser.’’
FILING DATES: The application was filed
on September 2, 2016, and amended on
December 14, 2016 and February 9,
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 the
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 April 3, 2017, and
should be accompanied by proof of
service on the Applicant, in the form of
an affidavit or, for lawyers, a certificate
of service. Pursuant to Rule 0–5 under
the Advisers 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 may request
notification of a hearing by writing to
the Commission’s Secretary.
ADDRESSES: Secretary, Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549. Applicant, The
Jeffrey Company, c/o Dan L. Jaffe, Vorys,
Sater, Seymour and Pease LLP, 52 East
Gay Street, Columbus, Ohio 43215.
FOR FURTHER INFORMATION CONTACT:
James McGinnis, Senior Counsel, at
(202) 551–3025 or Holly Hunter-Ceci,
Acting Assistant Chief Counsel, at (202)
551–6825 (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 either at https://www.sec.gov/
rules/iareleases.shtml or 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.
SUMMARY OF APPLICATION:
Applicant’s Representations
1. The Applicant, an Ohio
corporation, is the managing member of
Jeffrey LLC, a Delaware limited liability
company. By acting as managing
member of Jeffrey LLC, the Applicant
provides services to the family and
descendants of Joseph A. Jeffrey (1836–
1928) (‘‘J.A. Jeffrey’’); all of the
membership interests in Jeffrey LLC
(‘‘units’’) are owned directly or
indirectly by the descendants of J.A.
Jeffrey. The securities of the Applicant
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13531
also are 100% owned directly or
indirectly by the descendants of J.A.
Jeffrey. The Applicant is managed by a
board of directors (the ‘‘Board’’), a
majority of the members of which are
Family Members as defined in
paragraph (d)(6) of Rule 202(a)(11)(G)–1
(the ‘‘Family Office Rule’’) (with J.A.
Jeffrey being the ‘‘common ancestor’’ for
this purpose). Unless otherwise defined
herein, capitalized terms have the same
meaning as defined in the Family Office
Rule.
2. The Applicant provides services
(both advisory and non-advisory) to
Jeffrey LLC in its capacity as the
managing member of Jeffrey LLC.
3. The Applicant has engaged
Katahdin Asset Management LLC, a
Delaware limited liability company
(‘‘KAM’’), to provide advisory and nonadvisory services to, and to conduct the
day-to-day operations of, Jeffrey LLC
and the Applicant, with KAM’s own
employees (neither Jeffrey LLC nor the
Applicant having employees of its own),
subject to the direction of the Board.
The Board also has the responsibility to
establish and periodically review and
change as necessary the policies,
directives, and goals of Jeffrey LLC, as
well as the right to monitor and evaluate
the performance of KAM in
implementing the policies and
directives and in obtaining the goals of
Jeffrey LLC.
4. The Applicant represents that (i)
each person served by the Applicant is
a Family Client, i.e., the Applicant has
no clients other than a Family Client as
required by paragraph (b)(1) of the
Family Office Rule, (ii) the Applicant is
owned and controlled in a manner that
complies in all respects with paragraph
(b)(2) of the Family Office Rule, and (iii)
the Applicant does not hold itself out to
the public as an investment adviser as
required by paragraph (b)(3) of the
Family Office Rule.
5. The Applicant represents that
Jeffrey LLC currently relies on an
exception from the definition of
investment company pursuant to
Section 3(c)(1) of the Investment
Company Act of 1940, as amended (the
‘‘ICA’’). Jeffrey LLC would like to offer
to additional Family Clients the
opportunity to invest in Jeffrey LLC
(subject to securities law compliance,
including complying with applicable
federal and state exemptions from the
registration of its securities). The
Applicant states that the 100 beneficial
owner limitation of Section 3(c)(1) of
the ICA would cause family friction by
denying to many Family Clients the
opportunity to invest in Jeffrey LLC. The
Applicant states that there are
approximately 350 Family Members.
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Federal Register / Vol. 82, No. 47 / Monday, March 13, 2017 / Notices
Accordingly, on March 11, 2016, Jeffrey
LLC filed an application with the
Commission pursuant to Section 6(c) of
the ICA requesting an exemption from
all of the provisions of the ICA and all
rules and regulations thereunder. Such
exemption would permit Jeffrey LLC to
allow all Family Clients the opportunity
to invest in Jeffrey LLC without
imposing on Jeffrey LLC the costs of
registering under, and complying with,
the ICA.
6. The Applicant represents that, in
the event Jeffrey LLC were to exceed the
100 beneficial owner limitation of
Section 3(c)(1) of the ICA, the Applicant
would continue to meet the three
general conditions of the Family Office
Rule set forth in item 4 above, with the
exception that Jeffrey LLC would not
qualify as a Family Client, as more fully
described below. The Applicant
represents that the assets owned
beneficially by Family Members and/or
Family Entities (including assets
beneficially owned by Family Members
and/or Family Entities indirectly
through Jeffrey LLC) will account for at
least 75% of the assets for which the
Applicant provides services.
7. The Applicant represents that units
have not been, and will not be, offered
or sold to the public. The Applicant
states that under Jeffrey LLC’s limited
liability company agreement, sales or
other transfers of units for value to any
purchaser, other than to Jeffrey LLC
itself, are prohibited. The Applicant
further states that transfers for value to
existing members or other Family
Clients are prohibited.1 The Applicant
represents that a market never will
develop for units. Applicant represents
that the exit strategies available to a
Family Client will be to surrender units
for redemption by Jeffrey LLC at fair
market value or to gift or contribute
units to other Family Clients. Investors
are permitted to redeem their units at
the end of each calendar quarter.
Applicant’s Legal Analysis
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1. Section 202(a)(11) of the Advisers
Act defines the term ‘‘investment
adviser’’ to mean ‘‘any person who, for
compensation, engages in the business
1 Applicant states that Jeffrey LLC allows a very
limited exception for estate planning transfers for
value, such as installment sales to a grantor trust.
Any such transfers will be made only to Family
Clients. Additionally, investors are permitted to
pledge units as collateral for a loan, but only if the
pledge documents require, in lieu of foreclosure or
other enforcement action in the event of a default,
that the pledged units be redeemed by Jeffrey LLC
prior to any transfer of economic or voting rights.
In the event that units are pledged, the party to
which such units are pledged shall not receive
direct economic benefit from the units nor can such
party directly or indirectly vote the units.
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of advising others, either directly or
through publications or writings, as to
the value of securities or as to the
advisability of investing in, purchasing,
or selling securities, or who, for
compensation and as a part of a regular
business, issues or promulgates analyses
or reports concerning securities . . . .’’
2. The Applicant currently complies
with the Family Office Rule, and thus
the Applicant is not considered to be an
‘‘investment adviser’’ under Section
202(a)(11) of the Advisers Act. In the
event that Jeffrey LLC were to exceed
the 100 beneficial owner limitation of
Section 3(c)(1) of the ICA and thereby
no longer would be excepted from the
definition of ‘‘investment company’’
under the ICA, the Applicant would not
comply with the Family Office Rule
exclusion from the term ‘‘investment
adviser’’ because the Applicant’s
‘‘client’’ (Jeffrey LLC) would not qualify
as a Family Client under paragraph
(d)(4)(xi) of the Family Office Rule. The
Applicant does not qualify for any of the
exemptions from registration as an
investment adviser set forth in Section
203(b) of the Advisers Act and, because
the Applicant has regulatory assets
under management of more than $100
million, the Applicant is not prohibited
from registering with the Commission
under Section 203A(a) of the Advisers
Act. Therefore, absent relief, the
Applicant may be required to register as
an investment adviser under Section
203(a) of the Advisers Act.
3. The Applicant submits that, in the
event Jeffrey LLC were to exceed the 100
beneficial owner limitation of Section
3(c)(1) of the ICA, the Applicant’s
relationship with Jeffrey LLC would not
change the nature of the Applicant into
that of a commercial advisory firm. In
support of this argument, the Applicant
notes that the Applicant would continue
to be held entirely by Family Clients,
and the Applicant would continue not
to hold itself out to the public as an
investment adviser. The Applicant
represents that Jeffrey LLC would
continue to be managed and controlled
by the Applicant, which in turn is
managed by the Board, a majority of the
members of which are Family Members.
4. The Applicant states that, in
requesting the order, the Applicant is
not attempting to expand its operations
or engage in any level of commercial
activity to which the Advisers Act is
designed to apply. Further, in the event
Jeffrey LLC receives from the
Commission an order exempting Jeffrey
LLC from all of the provisions of the
ICA and all rules and regulations
thereunder, given the conditions of such
exemptive order, which are designed to
alleviate the policy concerns implicated
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by expanding Jeffrey LLC beyond one
hundred investors, the Applicant
submits that there is no practical
difference from a regulatory standpoint
between (i) a pooled investment vehicle
created exclusively for the benefit of
and wholly owned by Family Clients
that is ‘‘excepted from the definition’’ of
‘‘investment company’’ under the ICA,
and (ii) such a pooled investment
vehicle that is, by virtue of a
Commission order, exempt from all the
provisions of the ICA and all rules and
regulations thereunder.
5. The Applicant also submits that
there is no public interest in requiring
the Applicant to be registered under the
Advisers Act. The Applicant’s services
as managing member of Jeffrey LLC are
specifically and exclusively tailored to
the needs of Jeffrey LLC. In the event
Jeffrey LLC were to exceed 100
beneficial owners, the Applicant’s only
‘‘client’’ would continue to be Jeffrey
LLC (and possibly other Family Clients).
6. The Applicant argues that, although
the Family Office Rule largely codified
the exemptive orders that the
Commission had previously issued
before the enactment of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act, the Commission
recognized in proposing the Family
Office Rule that the exact
representations, conditions, or terms
contained in every exemptive order
could not be captured in a rule of
general applicability. The Commission
noted that family offices would remain
free to seek a Commission exemptive
order to advise an individual or entity
that did not meet the proposed ‘‘family
client’’ definition, and that certain
situations may raise unique conflicts
and issues that are more appropriately
addressed through an exemptive order
process where the Commission can
consider the specific facts and
circumstances, than through a rule of
general applicability.
7. The Applicant notes that the
Commission has issued orders
subsequent to the adoption of the
Family Office Rule, and that each of
those orders treated the applicant as a
Family Office even though the applicant
was providing services to persons who
did not fall within the definition of
‘‘Family Client.’’ The Applicant submits
that those orders recognized unusual
circumstances in which an entity
provided services to such persons while
remaining focused on a single family’s
needs. The Applicant maintains that its
unusual circumstances—providing
services, in its capacity as a managing
member, to an entity that currently
qualifies as a Family Client because it is
excepted from the definition of
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Federal Register / Vol. 82, No. 47 / Monday, March 13, 2017 / Notices
‘‘investment company’’ under the ICA
but would not be so excepted if it were
to exceed 100 beneficial owners—would
not change the nature of the Applicant’s
operations into that of a commercial
advisory business, and that an
exemptive order is appropriate based on
the Applicant’s facts and circumstances.
8. For the foregoing reasons, the
Applicant requests an order declaring it
to be a person not within the intent of
Section 202(a)(11) of the Advisers Act.
The Applicant submits that the order is
necessary and appropriate, in the public
interest, consistent with the protection
of investors, and consistent with the
purposes fairly intended by the policy
and provisions of the Advisers Act.
Applicant’s Conditions
1. The Applicant will offer and
provide services only to: (i) Jeffrey LLC,
which will generally be deemed to be,
and treated as if it were, a Family Client,
and (ii) other Family Clients.
2. The Applicant at all times will be
wholly owned by Family Clients and
exclusively controlled (directly or
indirectly) by one or more Family
Members and/or Family Entities as
defined in paragraph (d)(5) of the
Family Office Rule.
3. Jeffrey LLC at all times will be
wholly owned by Family Clients.
4. At all times the assets beneficially
owned by Family Members and/or
Family Entities (including assets
beneficially owned by Family Members
and/or Family Entities indirectly
through Jeffrey LLC) will account for at
least 75% of the assets for which the
Applicant provides services.
5. The Applicant will comply with all
the terms for exclusion from the
definition of ‘‘investment adviser’’
under the Advisers Act set forth in the
Family Office Rule except for the
limited exception requested by the
application.
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from all
provisions of the Act and all rules and
regulations thereunder.
Applicant
requests an order for an exemption from
all provisions of the Act and all rules
and regulations thereunder, as
Applicant is a private investment
company wholly owned and controlled
by a single family.
APPLICANT: Jeffrey LLC (‘‘Applicant’’).
FILING DATES: The application was filed
on March 11, 2016 and amended on
September 2, 2016, December 14, 2016,
and February 9, 2017.
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
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 April 3, 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 St.
NE., Washington, DC 20549–1090.
Applicant: Jeffrey LLC, 100 East Broad
Street, Suite 1700, Columbus, OH
43215.
SUMMARY OF APPLICATION:
FOR FURTHER INFORMATION CONTACT:
SECURITIES AND EXCHANGE
COMMISSION
James D. McGinnis, Senior Counsel, at
(202) 551–3025, or Holly Hunter-Ceci,
Acting Assistant Chief Counsel, at (202)
551–6825 (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.
[Release No. IC–32526; File No. 812–14624]
Applicant’s Representations
Jeffrey LLC; Notice of Application
1. Applicant is a Delaware limited
liability company. Applicant’s
managing member is The Jeffrey
Company, an Ohio corporation (‘‘TJC’’).
All of the outstanding shares of capital
stock of TJC are owned by trusts for
descendants of Joseph A. Jeffrey (1836–
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–04810 Filed 3–10–17; 8:45 am]
mstockstill on DSK3G9T082PROD with NOTICES
BILLING CODE 8011–01–P
March 7, 2017.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under section 6(c) of the
AGENCY:
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13533
1928) (‘‘J.A. Jeffrey’’). Approximately
50% of the units of membership interest
in Applicant (‘‘units’’) are owned by TJC
as the managing member, with the
remaining units being owned by trusts
for descendants of J.A. Jeffrey. 100% of
Applicant’s units are owned directly or
indirectly by trusts for descendants of
J.A. Jeffrey.
2. J.A. Jeffrey created the Joseph A.
Jeffrey Trust (the ‘‘Trust’’) on May 6,
1914, for the benefit of his descendants,
and transferred virtually all of the TJC
shares to the Trust. TJC was founded to
manufacture the world’s first coalmining machines. TJC sold its operating
assets to Dresser Industries in 1974 and
became a pure investment enterprise.
TJC thereafter relied on an exception
from the definition of investment
company pursuant to Section 3(c)(1) of
the Investment Company Act of 1940, as
amended (the ‘‘Act’’). In 2002, the Trust
was divided into separate trusts, one for
each current income beneficiary (each
an ‘‘Individual Trust’’), but still
operating pursuant to the terms of the
instrument establishing the Trust. In
2009, in connection with the formation
of Applicant, TJC contributed
marketable securities to Applicant in
exchange for 100% of the units in
Applicant, and immediately distributed
the non-managing member units to
TJC’s shareholders. In 2010 and then
again in 2011, TJC distributed
marketable securities to its
shareholders, who in turn contributed
those securities to Applicant in
exchange for additional units in
Applicant.
3. TJC contributed to Applicant, as of
December 31, 2016, 100% of TJC’s
marketable securities and other assets
(excluding its managing member units
in Applicant and any assets associated
with TJC’s deferred compensation
plans) in exchange for additional
managing member units in Applicant.1
Applicant states that the number of
additional units in Applicant issued to
TJC as of December 31, 2016 was based
on relative fair market value at that
time. As a result of the contribution,
Applicant holds essentially all of the
family enterprise’s investment assets.
4. On January 17, 2017, the Trust
terminated pursuant to its terms, and
the assets of each Individual Trust
(substantially all of which consist of
units in Applicant and shares of TJC)
became distributable to the then-current
1 As a result of such contribution, virtually all of
TJC’s assets consist of the managing member units
in Applicant, which Applicant has determined are
not securities. Applicant has stated that, as such,
TJC itself can no longer rely on Section 3(c)(1) of
the Act and does require the relief requested by the
application.
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]]>Agencies
[Federal Register Volume 82, Number 47 (Monday, March 13, 2017)]
[Notices]
[Pages 13531-13533]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-04810]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IA-4659; File No. 803-00231]
The Jeffrey Company; Notice of Application
March 7, 2017.
AGENCY: Securities and Exchange Commission (the ``Commission'').
ACTION: Notice of application for an exemptive order under the
Investment Advisers Act of 1940 (``Advisers Act'').
-----------------------------------------------------------------------
Applicant: The Jeffrey Company (the ``Applicant'').
Relevant Advisers Act Sections: Exemption requested under Section
202(a)(11)(H) of the Advisers Act from Section 202(a)(11) of the
Advisers Act.
Summary of Application: The Applicant requests that the Commission
issue an order declaring the Applicant to be a person not within the
intent of Section 202(a)(11) of the Advisers Act, which defines the
term ``investment adviser.''
Filing Dates: The application was filed on September 2, 2016, and
amended on December 14, 2016 and February 9, 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 the 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 April 3, 2017, and should be accompanied by proof of service on
the Applicant, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to Rule 0-5 under the Advisers 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 may request
notification of a hearing by writing to the Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street
NE., Washington, DC 20549. Applicant, The Jeffrey Company, c/o Dan L.
Jaffe, Vorys, Sater, Seymour and Pease LLP, 52 East Gay Street,
Columbus, Ohio 43215.
FOR FURTHER INFORMATION CONTACT: James McGinnis, Senior Counsel, at
(202) 551-3025 or Holly Hunter-Ceci, Acting Assistant Chief Counsel, at
(202) 551-6825 (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 either at https://www.sec.gov/rules/iareleases.shtml or 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.
Applicant's Representations
1. The Applicant, an Ohio corporation, is the managing member of
Jeffrey LLC, a Delaware limited liability company. By acting as
managing member of Jeffrey LLC, the Applicant provides services to the
family and descendants of Joseph A. Jeffrey (1836-1928) (``J.A.
Jeffrey''); all of the membership interests in Jeffrey LLC (``units'')
are owned directly or indirectly by the descendants of J.A. Jeffrey.
The securities of the Applicant also are 100% owned directly or
indirectly by the descendants of J.A. Jeffrey. The Applicant is managed
by a board of directors (the ``Board''), a majority of the members of
which are Family Members as defined in paragraph (d)(6) of Rule
202(a)(11)(G)-1 (the ``Family Office Rule'') (with J.A. Jeffrey being
the ``common ancestor'' for this purpose). Unless otherwise defined
herein, capitalized terms have the same meaning as defined in the
Family Office Rule.
2. The Applicant provides services (both advisory and non-advisory)
to Jeffrey LLC in its capacity as the managing member of Jeffrey LLC.
3. The Applicant has engaged Katahdin Asset Management LLC, a
Delaware limited liability company (``KAM''), to provide advisory and
non-advisory services to, and to conduct the day-to-day operations of,
Jeffrey LLC and the Applicant, with KAM's own employees (neither
Jeffrey LLC nor the Applicant having employees of its own), subject to
the direction of the Board. The Board also has the responsibility to
establish and periodically review and change as necessary the policies,
directives, and goals of Jeffrey LLC, as well as the right to monitor
and evaluate the performance of KAM in implementing the policies and
directives and in obtaining the goals of Jeffrey LLC.
4. The Applicant represents that (i) each person served by the
Applicant is a Family Client, i.e., the Applicant has no clients other
than a Family Client as required by paragraph (b)(1) of the Family
Office Rule, (ii) the Applicant is owned and controlled in a manner
that complies in all respects with paragraph (b)(2) of the Family
Office Rule, and (iii) the Applicant does not hold itself out to the
public as an investment adviser as required by paragraph (b)(3) of the
Family Office Rule.
5. The Applicant represents that Jeffrey LLC currently relies on an
exception from the definition of investment company pursuant to Section
3(c)(1) of the Investment Company Act of 1940, as amended (the
``ICA''). Jeffrey LLC would like to offer to additional Family Clients
the opportunity to invest in Jeffrey LLC (subject to securities law
compliance, including complying with applicable federal and state
exemptions from the registration of its securities). The Applicant
states that the 100 beneficial owner limitation of Section 3(c)(1) of
the ICA would cause family friction by denying to many Family Clients
the opportunity to invest in Jeffrey LLC. The Applicant states that
there are approximately 350 Family Members.
[[Page 13532]]
Accordingly, on March 11, 2016, Jeffrey LLC filed an application with
the Commission pursuant to Section 6(c) of the ICA requesting an
exemption from all of the provisions of the ICA and all rules and
regulations thereunder. Such exemption would permit Jeffrey LLC to
allow all Family Clients the opportunity to invest in Jeffrey LLC
without imposing on Jeffrey LLC the costs of registering under, and
complying with, the ICA.
6. The Applicant represents that, in the event Jeffrey LLC were to
exceed the 100 beneficial owner limitation of Section 3(c)(1) of the
ICA, the Applicant would continue to meet the three general conditions
of the Family Office Rule set forth in item 4 above, with the exception
that Jeffrey LLC would not qualify as a Family Client, as more fully
described below. The Applicant represents that the assets owned
beneficially by Family Members and/or Family Entities (including assets
beneficially owned by Family Members and/or Family Entities indirectly
through Jeffrey LLC) will account for at least 75% of the assets for
which the Applicant provides services.
7. The Applicant represents that units have not been, and will not
be, offered or sold to the public. The Applicant states that under
Jeffrey LLC's limited liability company agreement, sales or other
transfers of units for value to any purchaser, other than to Jeffrey
LLC itself, are prohibited. The Applicant further states that transfers
for value to existing members or other Family Clients are
prohibited.\1\ The Applicant represents that a market never will
develop for units. Applicant represents that the exit strategies
available to a Family Client will be to surrender units for redemption
by Jeffrey LLC at fair market value or to gift or contribute units to
other Family Clients. Investors are permitted to redeem their units at
the end of each calendar quarter.
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\1\ Applicant states that Jeffrey LLC allows a very limited
exception for estate planning transfers for value, such as
installment sales to a grantor trust. Any such transfers will be
made only to Family Clients. Additionally, investors are permitted
to pledge units as collateral for a loan, but only if the pledge
documents require, in lieu of foreclosure or other enforcement
action in the event of a default, that the pledged units be redeemed
by Jeffrey LLC prior to any transfer of economic or voting rights.
In the event that units are pledged, the party to which such units
are pledged shall not receive direct economic benefit from the units
nor can such party directly or indirectly vote the units.
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Applicant's Legal Analysis
1. Section 202(a)(11) of the Advisers Act defines the term
``investment adviser'' to mean ``any person who, for compensation,
engages in the business of advising others, either directly or through
publications or writings, as to the value of securities or as to the
advisability of investing in, purchasing, or selling securities, or
who, for compensation and as a part of a regular business, issues or
promulgates analyses or reports concerning securities . . . .''
2. The Applicant currently complies with the Family Office Rule,
and thus the Applicant is not considered to be an ``investment
adviser'' under Section 202(a)(11) of the Advisers Act. In the event
that Jeffrey LLC were to exceed the 100 beneficial owner limitation of
Section 3(c)(1) of the ICA and thereby no longer would be excepted from
the definition of ``investment company'' under the ICA, the Applicant
would not comply with the Family Office Rule exclusion from the term
``investment adviser'' because the Applicant's ``client'' (Jeffrey LLC)
would not qualify as a Family Client under paragraph (d)(4)(xi) of the
Family Office Rule. The Applicant does not qualify for any of the
exemptions from registration as an investment adviser set forth in
Section 203(b) of the Advisers Act and, because the Applicant has
regulatory assets under management of more than $100 million, the
Applicant is not prohibited from registering with the Commission under
Section 203A(a) of the Advisers Act. Therefore, absent relief, the
Applicant may be required to register as an investment adviser under
Section 203(a) of the Advisers Act.
3. The Applicant submits that, in the event Jeffrey LLC were to
exceed the 100 beneficial owner limitation of Section 3(c)(1) of the
ICA, the Applicant's relationship with Jeffrey LLC would not change the
nature of the Applicant into that of a commercial advisory firm. In
support of this argument, the Applicant notes that the Applicant would
continue to be held entirely by Family Clients, and the Applicant would
continue not to hold itself out to the public as an investment adviser.
The Applicant represents that Jeffrey LLC would continue to be managed
and controlled by the Applicant, which in turn is managed by the Board,
a majority of the members of which are Family Members.
4. The Applicant states that, in requesting the order, the
Applicant is not attempting to expand its operations or engage in any
level of commercial activity to which the Advisers Act is designed to
apply. Further, in the event Jeffrey LLC receives from the Commission
an order exempting Jeffrey LLC from all of the provisions of the ICA
and all rules and regulations thereunder, given the conditions of such
exemptive order, which are designed to alleviate the policy concerns
implicated by expanding Jeffrey LLC beyond one hundred investors, the
Applicant submits that there is no practical difference from a
regulatory standpoint between (i) a pooled investment vehicle created
exclusively for the benefit of and wholly owned by Family Clients that
is ``excepted from the definition'' of ``investment company'' under the
ICA, and (ii) such a pooled investment vehicle that is, by virtue of a
Commission order, exempt from all the provisions of the ICA and all
rules and regulations thereunder.
5. The Applicant also submits that there is no public interest in
requiring the Applicant to be registered under the Advisers Act. The
Applicant's services as managing member of Jeffrey LLC are specifically
and exclusively tailored to the needs of Jeffrey LLC. In the event
Jeffrey LLC were to exceed 100 beneficial owners, the Applicant's only
``client'' would continue to be Jeffrey LLC (and possibly other Family
Clients).
6. The Applicant argues that, although the Family Office Rule
largely codified the exemptive orders that the Commission had
previously issued before the enactment of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, the Commission recognized in
proposing the Family Office Rule that the exact representations,
conditions, or terms contained in every exemptive order could not be
captured in a rule of general applicability. The Commission noted that
family offices would remain free to seek a Commission exemptive order
to advise an individual or entity that did not meet the proposed
``family client'' definition, and that certain situations may raise
unique conflicts and issues that are more appropriately addressed
through an exemptive order process where the Commission can consider
the specific facts and circumstances, than through a rule of general
applicability.
7. The Applicant notes that the Commission has issued orders
subsequent to the adoption of the Family Office Rule, and that each of
those orders treated the applicant as a Family Office even though the
applicant was providing services to persons who did not fall within the
definition of ``Family Client.'' The Applicant submits that those
orders recognized unusual circumstances in which an entity provided
services to such persons while remaining focused on a single family's
needs. The Applicant maintains that its unusual circumstances--
providing services, in its capacity as a managing member, to an entity
that currently qualifies as a Family Client because it is excepted from
the definition of
[[Page 13533]]
``investment company'' under the ICA but would not be so excepted if it
were to exceed 100 beneficial owners--would not change the nature of
the Applicant's operations into that of a commercial advisory business,
and that an exemptive order is appropriate based on the Applicant's
facts and circumstances.
8. For the foregoing reasons, the Applicant requests an order
declaring it to be a person not within the intent of Section 202(a)(11)
of the Advisers Act. The Applicant submits that the order is necessary
and appropriate, in the public interest, consistent with the protection
of investors, and consistent with the purposes fairly intended by the
policy and provisions of the Advisers Act.
Applicant's Conditions
1. The Applicant will offer and provide services only to: (i)
Jeffrey LLC, which will generally be deemed to be, and treated as if it
were, a Family Client, and (ii) other Family Clients.
2. The Applicant at all times will be wholly owned by Family
Clients and exclusively controlled (directly or indirectly) by one or
more Family Members and/or Family Entities as defined in paragraph
(d)(5) of the Family Office Rule.
3. Jeffrey LLC at all times will be wholly owned by Family Clients.
4. At all times the assets beneficially owned by Family Members
and/or Family Entities (including assets beneficially owned by Family
Members and/or Family Entities indirectly through Jeffrey LLC) will
account for at least 75% of the assets for which the Applicant provides
services.
5. The Applicant will comply with all the terms for exclusion from
the definition of ``investment adviser'' under the Advisers Act set
forth in the Family Office Rule except for the limited exception
requested by the application.
For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-04810 Filed 3-10-17; 8:45 am]
BILLING CODE 8011-01-P
