Goldman Sachs (Malaysia) Sdn. Bhd., et al.; Notice of Application and Temporary Order, 68105-68110 [2020-23778]
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Federal Register / Vol. 85, No. 208 / Tuesday, October 27, 2020 / Notices
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice to (i) MBX.OMB.OIRA.SEC_desk_
officer@omb.eop.gov and (ii) David
Bottom, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Cynthia Roscoe, 100 F
Street NE, Washington, DC 20549, or by
sending an email to: PRA_Mailbox@
sec.gov.
Dated: October 22, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–23748 Filed 10–26–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–654, OMB Control No.
3235–0704]
Submission for OMB Review;
Comment Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
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Extension:
Rule 506(e) of Regulation D Felons and
Other Bad Actors Disclosure Statement
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget the
following request for an extension of the
previously approved collection of
information discussed below.
Regulation 506(e) of Regulation D (17
CFR 230.506(e)) under the Securities
Act of 1933 (15 U.S.C. 77a et seq.)
requires the issuer to furnish to each
purchaser, a reasonable time prior to
sale, a description in writing of any
matters that would have triggered
disqualification under Rule 506(d)(1) of
Regulation D, but occurred before
September 23, 2013. The disclosure
required by Rule 506(e) is not filed with
the Commission, but serves as an
important investor protection tool to
inform investors of an issuer’s and its
covered persons, involvement in past
‘‘bad actor’’ disqualifying events such as
pre-existing criminal convictions, court
injunctions, disciplinary proceedings,
and other sanctions enumerated in Rule
506(d). Without the mandatory written
statement requirements set forth in Rule
506(e), purchasers may have the
impression that all bad actors are
disqualified from participation in Rule
506 offerings.
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We estimate there are 19,908
respondents that will conduct a onehour factual inquiry to determine
whether the issuer and its covered
persons have had pre-existing
disqualifying events before September
23, 2013. Of those 19,908 respondents,
we estimate that 220 respondents with
disqualifying events will spend ten
hours to prepare a disclosure statement
describing the matters that would have
triggered disqualification under
506(d)(1) of Regulation D, except that
these disqualifying events occurred
before September 23, 2013, the effective
date of the Rule 506 amendments. An
estimated 2,200 burden hours are
attributed to the 220 respondents with
disqualifying events in addition to the
19,908 burden hours associated with the
one-hour factual inquiry. In sum, the
total annual increase in paperwork
burden for all affected respondents to
comply with the Rule 506(e) disclosure
statement is estimated to be
approximately 22,108 hours of company
personnel time.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice to (i) www.reginfo.gov/public/do/
PRAMain and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission,
c/o Cynthia Roscoe, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: October 22, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–23747 Filed 10–26–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–34071; File No. 812–15172]
Goldman Sachs (Malaysia) Sdn. Bhd.,
et al.; Notice of Application and
Temporary Order
October 22, 2020.
Securities and Exchange
Commission (‘‘Commission’’)
AGENCY:
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68105
Temporary order and notice of
application for a permanent order under
section 9(c) of the Investment Company
Act of 1940 (‘‘Act’’).
ACTION:
Applicants
have received a temporary order
(‘‘Temporary Order’’) exempting them
from section 9(a) of the Act, with
respect to a guilty plea entered on
October 22, 2020 (‘‘Guilty Plea’’), by
Goldman Sachs (Malaysia) Sdn. Bhd.
(the ‘‘Pleading Entity’’ or ‘‘GS
Malaysia’’) in the United States District
Court for the Eastern District of New
York (the ‘‘District Court’’) in
connection with a plea agreement (‘‘Plea
Agreement’’) between the Pleading
Entity and the United States Department
of Justice (‘‘DOJ’’), until the Commission
takes final action on an application for
a permanent order (the ‘‘Permanent
Order,’’ and with the Temporary Order,
the ‘‘Orders’’). Applicants also have
applied for a Permanent Order.
Applicants: GS Malaysia, Goldman
Sachs & Co. LLC (‘‘GS&Co.’’), Goldman
Sachs Asset Management, L.P.
(‘‘GSAM’’), Goldman Sachs Asset
Management International (‘‘GSAMI’’)
and GS Investment Strategies, LLC
(‘‘GSIS’’ and collectively, the
‘‘Applicants’’).
FILING DATE: The application was filed
on October 22, 2020.
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 emailing the
Commission’s Secretary at SecretarysOffice@sec.gov and serving applicants
with a copy of the request, by email.
Hearing requests should be received by
the Commission by 5:30 p.m. on
November 16, 2020 and should be
accompanied by proof of service on the
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 emailing the
Commission’s Secretary at SecretarysOffice@sec.gov.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
David A. Markowitz, The Goldman
Sachs Group, Inc., david.markowitz@
gs.com.
FOR FURTHER INFORMATION CONTACT:
Kieran G. Brown, Senior Counsel, at
(202) 551–6773 or David J. Marcinkus,
Branch Chief, at (202) 551–6821
SUMMARY OF APPLICATION:
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Federal Register / Vol. 85, No. 208 / Tuesday, October 27, 2020 / Notices
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a temporary order and a
summary of the application. The
complete application may be obtained
via the Commission’s website by
searching for the file number, or an
applicant using the Company name box,
at https://www.sec.gov/search/
search.htm, or by calling (202) 551–
8090.
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Applicants’ Representations:
1. The Pleading Entity is a Malaysia
Sendirian Berhad (private company
limited by shares) that provides asset
management and corporate finance
services to clients in Malaysia and is a
wholly-owned indirect subsidiary of
Goldman Sachs Group, Inc. (‘‘GS
Group’’). GS Group is a bank holding
company and a financial holding
company regulated by the Board of
Governors of the Federal Reserve
System (‘‘FRB’’).
2. GS&Co., a New York limited
liability company, is registered as an
investment adviser under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’) and is a direct, whollyowned subsidiary (as such term is
defined in the Act) of GS Group. GS&Co.
is also registered as a broker-dealer
under the Securities Exchange Act of
1934 (the ‘‘Exchange Act’’). GS&Co.
serves as principal underwriter to the
Funds 1 and as adviser to the ESCs (as
defined below) listed in Part 1 of
Appendix A to the application.
3. GSAM, a New York limited
partnership, is registered as an
investment adviser under the Advisers
Act and is a wholly-owned indirect
subsidiary of GS Group. GSAM serves as
an adviser or subadviser to the Funds
listed in Part 2 of Appendix A to the
application.
4. GSAMI, a United Kingdom limited
company, is registered as an investment
adviser under the Advisers Act and is a
wholly-owned indirect subsidiary of GS
Group. GSAMI serves as an adviser or
subadviser to the Funds listed in Part 3
of Appendix A to the application.
5. GSIS, a Delaware limited liability
company, is registered as an investment
1 The term ‘‘Funds’’ as used herein refers to any
registered investment company, employees’
securities company or investment company that has
elected to be treated as a business development
company under the Act for which a Covered Person
(as defined below) currently or in the future serves
as an investment adviser (as defined in section
2(a)(20) of the Act) or depositor, or any registered
open-end investment company, registered unit
investment trust, or registered face-amount
certificate company for which a Covered Person
currently or in the future serves as principal
underwriter (as defined in section 2(a)(29) of the
Act).
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adviser under the Advisers Act and is a
wholly-owned indirect subsidiary of GS
Group. GSIS serves as an adviser to the
ESCs listed in Part 4 of Appendix A to
the application.
6. While no existing company of
which the Pleading Entity is an
‘‘affiliated person’’ within the meaning
of section 2(a)(3) of the Act (‘‘Affiliated
Person’’), other than GSIS, GS&Co.,
GSAM and GSAMI (together, the ‘‘Fund
Servicing Applicants’’), currently serves
as an investment adviser (as defined in
section 2(a)(20) of the Act) or depositor
of any registered investment company,
employees’ securities company (‘‘ESC’’),
or investment company that has elected
to be treated as a business development
company under the Act, or as principal
underwriter (as defined in section
2(a)(29) of the Act) for any registered
open-end investment company (‘‘OpenEnd Fund’’), registered unit investment
trust (‘‘UIT’’), or registered face-amount
certificate company (‘‘FACC’’) (such
activities performed on behalf of such
persons, collectively ‘‘Fund Servicing
Activities’’), Applicants request that any
relief granted by the Commission
pursuant to the application also apply to
any other current or future Affiliated
Person of the Pleading Entity other than
GS Group (together with the Fund
Servicing Applicants, the ‘‘Covered
Persons’’) with respect to any activity
contemplated by section 9(a) of the
Act.2
7. On October 22, 2020, the DOJ filed
a criminal information (the
‘‘Information’’) in the District Court
charging the Pleading Entity with one
count of conspiracy to commit offenses
against the United States, in violation of
Title 18, United States Code, Section
371, that is, to violate the anti-bribery
provisions of the Foreign Corrupt
Practices Act of 1977 (‘‘FCPA’’), as
amended, see Title 15, United States
Code, Sections 78dd–1 and 78dd–3.
According to the Statement of Facts that
served as the basis for the Plea
Agreement (the ‘‘Statement of Facts’’),
between 2009 and 2014, the GS Group
(together with its wholly-owned
subsidiaries and affiliated entities, the
‘‘Company’’), through certain of its
agents and employees, including Tim
Leissner (‘‘Leissner’’) 3 and Roger Ng
2 Covered Persons may, if the Order is granted, in
the future act in any of the capacities contemplated
by section 9(a) of the Act subject to the applicable
terms and conditions of the Orders. GS Group, the
ultimate parent of the Pleading Entity, does not and
will not serve as an investment adviser, depositor
or principal underwriter to any registered
investment company as it is not a Covered Person.
3 From November 2006 to February 2016, Leissner
was a Participating Managing Director of the
Company and, from 2011 to 2016, held various
senior positions in the Company’s investment
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(‘‘Ng’’),4 knowingly and willfully
conspired with others to provide
payments and other things of value to or
for the benefit of foreign officials to
induce the officials to influence the
decisions of 1Malaysia Development
Berhad (‘‘1MDB’’), a sovereign
development company wholly owned
by the Government of Malaysia,
International Petroleum Investment
Company (‘‘IPIC’’) (an investment fund
wholly owned by the Government of
Abu Dhabi), and Aabar Investments PJS
(a subsidiary of IPIC) to obtain and
retain business for the Company (the
‘‘Conduct’’), as further described in the
application, in violation of the FCPA.
Leissner, Ng, and another employee of
the Company referred to in the
Statement of Facts as Employee 1
(‘‘Employee 1’’), also used the
connections of an outside individual
involved in the Conduct (Jho Low) to
obtain and retain business for the
Company and, in turn, concealed that
individual’s involvement in the deals
from certain other employees and agents
of the Company.5 In connection with
the Plea, the Company expects to enter
into a deferred prosecution agreement
with DOJ (the ‘‘DPA’’).
8. Pursuant to the Plea Agreement, the
Pleading Entity entered the Guilty Plea
on October 22, 2020 in the District Court
to the charge set out in the Information.
Applicants state that, according to the
Plea Agreement, the Pleading Entity
agrees as follows: First, the Pleading
Entity shall cooperate fully with the DOJ
and the United States Attorney’s Office
for the Eastern District of New York
(collectively, the ‘‘Offices’’) in any and
all matters relating to the conduct
described in the Plea Agreement and the
Statement of Facts and other conduct
under investigation by the Offices or
any other component of the DOJ at any
time during the term of the DPA (the
‘‘Term’’) until the later of the date upon
which all investigations and
prosecutions arising out of such conduct
are concluded or the end of the Term.
Second, at the request of the Offices, the
Pleading Entity shall also cooperate
fully with other domestic or foreign law
enforcement and regulatory authorities
and agencies, as well as the Multilateral
Development Banks in any investigation
of the Pleading Entity, GS Group, or any
of its present or former officers,
directors, employees, agents, and
banking division in Asia and served on the board
of directors of GS Malaysia.
4 From 2010 to 2014, Ng was a Managing Director
of the Company and, for part of that time, served
as Head of Investment Banking for, and was on the
board of directors of, GS Malaysia.
5 Employee 1 is no longer employed by any
Company affiliate.
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Federal Register / Vol. 85, No. 208 / Tuesday, October 27, 2020 / Notices
consultants, or any other party, in any
and all matters relating to the conduct
described in the Plea Agreement and the
Statement of Facts and any other
conduct under investigation by the
Offices or any other component of the
DOJ. Third, should the Pleading Entity
learn during the Term of any evidence
or any allegations of conduct that may
constitute a violation of the money
laundering laws that involve the
employees or agents of the Pleading
Entity, or should the Pleading Entity
learn of any evidence or allegation of
conduct that may constitute a violation
of the FCPA’s anti-bribery or accounting
provisions had the conduct occurred
within the jurisdiction of the United
States, the Pleading Entity shall
promptly report such evidence or
allegation to the Offices. Fourth, the
Pleading Entity agrees that any fine
imposed by the District Court will be
due and payable as specified in
Paragraph 19 of the Plea Agreement, and
that any restitution imposed by the
District Court will be due and payable
in accordance with the District Court’s
order. Finally, the Pleading Entity
agrees to commit no further crimes and
to work with GS Group in fulfilling GS
Group’s obligations under the DPA.
9. The Applicants expect that the
District Court will enter a judgment
against the Pleading Entity (the
‘‘Judgment’’) that will require remedies
that are materially the same as set forth
in the Plea Agreement. The individuals
referenced in the Information as
responsible for the Conduct are no
longer employed by the Pleading Entity
or any of its affiliates.
10. On October 22, 2020, the SEC
instituted cease-and-desist proceedings
against GS Group relating to the
Conduct (the ‘‘SEC Order’’). In
anticipation of the institution of those
proceedings, GS Group submitted an
Offer of Settlement consenting to the
entry of such order, which the
Commission has accepted. The SEC
Order includes findings that GS Group
violated the following sections of the
Exchange Act: Section 30A (the antibribery provisions of the FCPA), section
13(b)(2)(A) (the books and records
provision of the FCPA), and section
13(b)(2)(B) (requiring Exchange Act
registered companies to devise and
maintain a sufficient system of internal
accounting controls).6
11. GS Group and its affiliates have
entered into settlement agreements with
other U.S. and non-U.S. regulatory or
enforcement agencies related to the
Conduct. The Board of Governors of the
6 15 U.S.C. 78m(b)(2)(A), 78m(b)(2)(B), and
78dd–1.
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Federal Reserve System (‘‘FRB’’) entered
a cease and desist order and order of
assessment of a civil monetary penalty
(the ‘‘FRB Order’’) on October 22, 2020
against GS Group concerning unsafe and
unsound banking practices relating to
the 1MDB transactions that resulted
from deficient policies, procedures and
controls. The New York State
Department of Financial Services
(‘‘DFS’’) entered into a consent order
(the ‘‘DFS Order’’) on October 22, 2020
with GS Group as the parent company
of Goldman Sachs Bank USA (‘‘GS
Bank’’) (which operates in New York
State and is licensed and regulated by
the DFS) to settle DFS’ investigations
into alleged violations of New York
banking law arising out of GS Bank’s
investments in 1MDB-related
instruments. GS Group entered into a
Settlement Agreement with the
Government of Malaysia and 1MDB (the
‘‘Malaysian Settlement Agreement’’) on
August 18, 2020 to resolve all criminal
and regulatory proceedings in Malaysia
involving the Company, including
pending criminal proceedings against
subsidiaries of GS Group and certain of
their current and former directors,
relating to the 1MDB transactions and
the Conduct. On October 22, 2020, the
U.K. Financial Conduct Authority and
the U.K. Prudential Regulation
Authority each entered a warning notice
(together, the ‘‘U.K. Notices’’) against
Goldman Sachs International (‘‘GSI’’),
an indirect wholly owned subsidiary of
GS Group, relating to GSI’s failure to
assess and manage the risks associated
with the 1MDB transactions, properly
record how GSI committees assessed
and managed those risks and respond
appropriately to allegations of bribery.
The Hong Kong Securities and Futures
Commission issued a Statement of
Disciplinary Action (the ‘‘SFC
Statement’’) against Goldman Sachs
(Asia) L.L.C. (‘‘GS Asia’’), an indirect
wholly owned subsidiary of GS Group,
on October 22, 2020, relating to GS
Asia’s failure to properly examine and
address red flags in connection with the
1MDB transactions and to diligently
supervise its senior personnel in
connection with their participation in
the 1MDB transactions. On October 22,
2020, the Singapore Commercial Affairs
Department, at the direction of the
Singapore Attorney General’s Chambers,
issued a Notice of Conditional Warning
against Goldman Sachs (Singapore) Pte,
an indirect wholly owned subsidiary of
GS Group (‘‘GS Singapore’’), relating to
the Conduct (the ‘‘Singapore Notice’’).
On October 22, 2020, the Monetary
Authority of Singapore (the ‘‘MAS’’)
issued a letter of direction (the ‘‘MAS
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Letter’’) requiring GS Singapore to
appoint an independent auditor to
review the effectiveness and
sustainability of the remedial measures
implemented by GS Singapore following
the MAS’ inspection.
Applicants’ Legal Analysis
1. Section 9(a)(1) of the Act provides,
in pertinent part, that a person may not
serve or act as an investment adviser or
depositor of any registered investment
company or as principal underwriter for
any Open-End Fund, UIT, or FACC, if
such person within ten years has been
convicted of any felony or
misdemeanor, including those arising
out of such person’s conduct as a
broker, dealer or bank. Section 2(a)(10)
of the Act defines the term ‘‘convicted’’
to include a plea of guilty. Section
9(a)(3) of the Act extends the
prohibitions of section 9(a)(1) to a
company, any affiliated person of which
has been disqualified under the
provisions of section 9(a)(1). Section
2(a)(3) of the Act defines ‘‘affiliated
person’’ to include, among others, any
person directly or indirectly controlling,
controlled by, or under common control
with, the other person. The Pleading
Entity is an Affiliated Person of each of
the other Applicants within the
meaning of section 2(a)(3) of the Act.
Therefore, the Applicants state that the
Plea Agreement would result in a
disqualification of each Fund Servicing
Applicant for ten years under section
9(a)(3) were they to act in any of the
capacities listed in section 9(a), by effect
of a conviction described in section
9(a)(1).
2. Section 9(c) of the Act provides
that: ‘‘[t]he Commission shall by order
grant [an] application [for relief from the
prohibitions of subsection 9(a)], either
unconditionally or on an appropriate
temporary or other conditional basis, if
it is established [i] that the prohibitions
of subsection 9(a), as applied to such
person, are unduly or
disproportionately severe or [ii] that the
conduct of such person has been such
as not to make it against the public
interest or the protection of investors to
grant such application.’’ Applicants
have filed an application pursuant to
section 9(c) seeking a Temporary Order
and a Permanent Order exempting the
Fund Servicing Applicants and other
Covered Persons from the
disqualification provisions of section
9(a) of the Act. The Covered Persons
may, if the Orders are granted, in the
future act in any of the capacities
contemplated by section 9(a) of the Act
subject to the applicable terms and
conditions of the Orders.
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3. Applicants believe they meet the
standards for exemption specified in
section 9(c). Applicants assert that (i)
the scope of the misconduct was limited
and did not involve any of the
Applicants acting as an investment
adviser, depositor or principal
underwriter for any Fund, or any Fund
with respect to which the Fund
Servicing Applicants engage in Fund
Servicing Activities, (ii) application of
the statutory bar would impose
significant hardships on the Funds and
their shareholders, (iii) the prohibitions
of section 9(a), if applied to the Fund
Servicing Applicants, would be unduly
or disproportionately severe and (iv) the
Conduct did not constitute conduct that
would make it against the public
interest or protection of investors to
grant the exemption from section 9(a).
4. Applicants represent that the
Conduct did not involve any of
Applicants acting in the capacity as an
investment adviser, depositor or
principal underwriter for any Fund.
Applicants represent that the Conduct
similarly did not involve any Fund with
respect to which the Fund Servicing
Applicants engage in Fund Servicing
Activities.7 Instead, the Applicants state
that the Conduct occurred primarily as
a result of the actions of a few
employees. As discussed above, the
individuals referenced in the
Information as responsible for the
Conduct are no longer employed by the
Pleading Entity or any of its affiliates.
5. Applicants acknowledge that the
Conduct also reflected failures of GS
Group control functions and that the
Company’s control functions and
committees should have done more to
follow up on red flags. The application
states that five employees identified in
the Statement of Facts as having been
involved in these failures are employed
by affiliates of the Pleading Entity that
are not Covered Persons. Applicants
represent, however, that none of these
five employees has been, or will in the
future be, employed by a Covered
Person relying on the Orders or
otherwise involved in the Fund
Servicing Activities.
6. Applicants state that one of the
employees discussed above was
employed by a Fund Servicing
Applicant before the 1MDB bond
transactions, but was employed by an
affiliate that is not a Fund Servicing
Applicant at the time of the 1MDB bond
transactions. Applicants state that this
employee did not engage in the
Conduct. Applicants further state that,
7 The Pleading Entity does not engage, has not
engaged, and will not engage in in any of the
capacities contemplated by section 9(a) of the Act.
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after the 1MDB bond transactions were
completed, the employee became aware
of and failed to escalate information and
concerns about bribery related to the
bond transactions. Applicants state that
this individual currently serves as a
manager or director of a Fund Servicing
Applicant and has had, and in the
future will have, no day-to-day
involvement in Fund Servicing
Activities. Applicants state that this
individual’s role includes oversight of
that Fund Servicing Applicant
commensurate with the responsibilities
of a manager or director.
7. Applicants state that GS Group is
committed to promoting a general
culture of compliance, including
continuing to implement significant
changes in connection with its relevant
practices and controls, as summarized
below and described in more detail in
the application. Applicants assert that,
in light of the limited scope of the
Conduct, it would be unduly and
disproportionately severe to impose a
section 9(a) disqualification on the Fund
Servicing Applicants. Applicants assert
that the conduct of the Applicants has
not been such to make it against the
public interest or the protection of
investors to grant the exemption from
section 9(a).
8. Applicants assert that neither the
protection of investors nor the public
interest would be served by permitting
the section 9(a) disqualifications to
apply to the Fund Servicing Applicants
because those disqualifications would
deprive the Fund of the advisory or subadvisory and underwriting services that
shareholders expected the Funds would
receive when they decided to invest in
the Funds. Applicants also assert that
the prohibitions of section 9(a) could
operate to the financial detriment of the
Funds and their shareholders, including
by causing the Funds to spend time and
resources to engage substitute advisers,
subadvisers, and principal underwriters,
which would be an unduly and
disproportionately severe consequence
given that the Conduct did not involve
any of the Fund Servicing Activities.
9. Applicants assert that if the Fund
Servicing Applicants were barred under
section 9(a) from providing investment
advisory services to the Funds and were
unable to obtain the requested
exemption, the effect on their
businesses and employees would be
severe. Applicants state that the Fund
Servicing Applicants have committed
substantial capital and other resources
to establishing expertise in advising and
sub-advising Funds with a view to
continuing and expanding this business,
which Applicants consider strategically
important. Similarly, Applicants
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represent that if GS&Co. were barred
under section 9(a) from continuing to
provide underwriting services to the
Funds and were unable to obtain the
requested exemption, the effect on its
current business and employees would
be significant. GS&Co. has committed
capital and other resources to establish
expertise in underwriting the securities
of the Funds and to establish
distribution arrangements for Fund
shares. Applicants further state that
prohibiting the Fund Servicing
Applicants from engaging in Fund
Servicing Activities would not only
adversely affect their business, but
would also adversely affect their
employees who are involved in these
activities.8
10. Applicants represent that: (1)
None of the current or former directors,
officers or employees of Applicants
(other than certain former personnel of
the Pleading Entity and GS&Co.9 who
were not involved in any of the Fund
Servicing Applicants’ Fund Servicing
Activities) engaged in the Conduct; (2)
no current or former employee of the
Pleading Entity or any Covered Person
who previously has been or who
subsequently may be identified by the
Pleading Entity or any U.S. or non-U.S.
regulatory or enforcement agencies as
having been responsible for the Conduct
will be an officer, director, or employee
of any Covered Person; (3) the identified
employees have had no, and will not
have any future, involvement in the
Covered Persons’ activities in any
capacity described in section 9(a) of the
Act; and (4) because the personnel of
Applicants (other than certain former
personnel of the Pleading Entity and
GS&Co.10 who were not involved in any
of the Fund Servicing Applicants’ Fund
Servicing Activities) did not engage in
the Conduct, shareholders of the Funds
were not affected any differently than if
those Funds had received services from
any other non-affiliated investment
adviser.
8 Applicants represent that GS&Co. acts as
transfer agent for most of the Funds. Although
GS&Co. would retain the authority to act in this
capacity even if it were prohibited under section
9(a) from engaging in Fund Servicing Activities,
Applicants represent that as a practical matter, it is
unlikely that the Funds would continue to retain
GS&Co. as transfer agent if GS&Co. were unable to
perform Fund Servicing Activities. Thus, GS&Co.
would likely lose another significant part of its
business. This would also adversely affect its
employees.
9 One of the employees most extensively involved
in and responsible for the Conduct (Leissner), was
employed by GS&Co. for approximately two months
immediately prior to his termination in February
2016. During this time, the employee had no
involvement in GS&Co.’s Fund Servicing Activities.
10 See paragraph 6, supra.
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11. Applicants have agreed that none
of GS Group, the Applicants or any of
the other Covered Persons will employ
the former employees of an affiliate of
the Pleading Entity or any other person
who subsequently may be identified by
the Pleading Entity or any U.S. or nonU.S. regulatory or enforcement agencies
as having been responsible for the
Conduct in any capacity without first
making a further application to the
Commission pursuant to section 9(c).
12. Applicants have also agreed that
GS Group and each Applicant and
Covered Person will adopt and
implement policies and procedures
reasonably designed to ensure
compliance with the terms and
conditions of the Orders granted under
section 9(c).
13. In addition, GS Group and each
Applicant and Covered Person will
comply in all material respects with the
material terms and conditions of the
Plea Agreement and with the material
terms of the DPA, the FRB Order, the
DFS Order, the SEC Order, the
Malaysian Settlement Agreement, the
U.K. Notices, the SFC Statement, the
Singapore Notice, the MAS Letter, and
any other orders issued by regulatory or
enforcement agencies addressing the
Conduct. Applicants note that in
connection with the DPA, GS Group
will represent that it has implemented
and will continue to implement a
compliance and ethics program
designed to prevent and detect
violations of the FCPA and other anticorruption laws throughout its
operations, including its subsidiaries. In
addition, GS Group will represent that
it has undertaken, and will continue to
undertake, a review of its existing
internal accounting controls, policies,
and procedures regarding compliance
with the FCPA and other anticorruption laws, and modify them
where necessary to ensure that it
maintains (i) an effective system of
internal accounting controls, and (ii) a
rigorous anti-corruption compliance
program designed to effectively detect
and deter violations of the FCPA and
other applicable anti-corruption laws.
The DPA will require GS Group to
provide an initial report to DOJ within
one year describing its remediation
efforts to date, and to undertake two
annual follow-up reviews and reports to
DOJ.11
14. Applicants further state that GS
Group and its affiliates have undertaken
certain other remedial measures, as
11 The required remedial steps with respect to GS
Group’s Corporate Compliance Program are
described in Attachment C to the DPA, and the
reporting requirements are described in Attachment
D to the DPA.
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18:26 Oct 26, 2020
Jkt 253001
described in greater detail in the
application. These remedial measures
include: Enhancing the scrutiny of
senior personnel in high-risk areas and
products, heightening the firm’s focus
on accountability when employee red
flags are identified, and taking steps to
ensure that employees are hearing about
compliance expectations from the firm’s
executive management. Applicants state
that GS Group has also been
strengthening processes to heighten
attention to potential red flags identified
by deal teams and committees,
increasing representation of the firm’s
control functions in key vetting groups
and committees, and reviewing
transactions earlier in the life cycle to
reduce the possibility that later
momentum in the deals could
inappropriately carry them over the line
for approval. Applicants also state that
the firm has been continually improving
its electronic surveillance to take
advantage of recent technological
advances and has increased its
commitment to spending on compliance
efforts and headcount in order to
maintain the efficacy of the
enhancements described above and to
continue improving the firm’s controls
and systems.
15. As a result of the foregoing, the
Applicants submit that absent relief, the
prohibitions of section 9(a) would be
unduly or disproportionately severe,
and that the Conduct did not constitute
conduct that would make it against the
public interest or protection of investors
to grant the exemption.
16. To provide further assurance that
the exemptive relief being requested in
the application would be consistent
with the public interest and the
protection of the investors, the
Applicants agree that they will, as soon
as reasonably practical, with respect to
each of the Funds for which a Fund
Servicing Applicant is the primary
adviser, distribute to the boards of
directors or trustees of the Funds
(‘‘Board’’) written materials describing
the circumstances that led to the Plea
Agreement, as well as any effects on the
Funds and the application. The written
materials will include an offer to
discuss the materials at an in-person
meeting with the Board, including the
directors who are not ‘‘interested
persons’’ of the Funds as defined in
section 2(a)(19) of the Act and their
‘‘independent legal counsel’’ as defined
in rule 0–1(a)(6) under the Act, if any.
With respect to each of the Funds for
which a Fund Servicing Applicant is
not the primary investment adviser, the
relevant Fund Servicing Applicant will
provide such materials to the Fund’s
primary investment adviser and offer to
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Fmt 4703
Sfmt 4703
68109
discuss the materials with such primary
investment adviser. The Applicants
undertake to provide the Boards with all
information concerning the Plea
Agreement and the application as
necessary for those Funds to fulfill their
disclosure and other obligations under
the U.S. federal securities laws and will
provide them a copy of the Judgment as
entered by the District Court.
17. Certain Fund Servicing
Applicants, as well as certain of their
affiliates, have previously applied for
exemptive orders under section 9(c) of
the Act, as described in greater detail in
the application. Applicants, however,
note that none of the conduct
underlying the previous section 9(c)
orders granted to Fund Servicing
Applicants involved the provision of
Fund Servicing Activities.
Applicants’ Conditions
Applicants agree that any order
granted by the Commission pursuant to
the application will be subject to the
following conditions:
1. Any temporary exemption granted
pursuant to the application will be
without prejudice to, and will not limit
the Commission’s rights in any manner
with respect to, any Commission
investigation of, or administrative
proceedings involving or against,
Covered Persons, including, without
limitation, the consideration by the
Commission of a permanent exemption
from section 9(a) of the Act requested
pursuant to the application or the
revocation or removal of any temporary
exemptions granted under the Act in
connection with the application.
2. None of GS Group, the Applicants
or any of the other Covered Persons will
employ the former employees of an
affiliate of the Pleading Entity or any
other person who subsequently may be
identified by the Pleading Entity or any
U.S. or non-U.S. regulatory or
enforcement agencies as having been
responsible for the Conduct in any
capacity without first making a further
application to the Commission pursuant
to section 9(c).
3. GS Group and each Applicant and
Covered Person will adopt and
implement policies and procedures
reasonably designed to ensure that it
will comply with the terms and
conditions of the Orders within 60 days
of the date of the Permanent Order or,
with respect to condition four, such
later date or dates as may be
contemplated by the Plea Agreement,
the DPA, the FRB Order, the DFS Order,
the SEC Order, the Malaysian
Settlement Agreement, the U.K. Notices,
the SFC Statement, the Singapore
Notice, the MAS Letter or any other
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orders issued by regulatory or
enforcement agencies addressing the
Conduct.
4. GS Group and each Applicant and
Covered Person will comply in all
material respects with the material
terms and conditions of the Plea
Agreement and with the material terms
of the DPA, the FRB Order, the DFS
Order, the SEC Order, the Malaysian
Settlement Agreement, the U.K. Notices,
the SFC Statement, the Singapore
Notice, the MAS Letter and any other
orders issued by regulatory or
enforcement agencies addressing the
Conduct. In addition, within 30 days of
each anniversary of the Permanent
Order (until and including the third
such anniversary), GS Group will
submit a certification signed by its chief
executive officer and its global head of
regulatory affairs, confirming that the
Pleading Entity has complied with the
terms and conditions of the Plea
Agreement in all material respects and
that GS Group has complied with the
terms and conditions of the DPA in all
material respects. Each such
certification will be submitted to the
Chief Counsel of the Commission’s
Division of Investment Management
with a copy to the Chief Counsel of the
Commission’s Division of Enforcement.
5. Applicants will provide written
notification to the Chief Counsel of the
Commission’s Division of Investment
Management with a copy to the Chief
Counsel of the Commission’s Division of
Enforcement of a material violation of
the terms and conditions of the Orders
within 30 days of discovery of the
material violation. In addition, GS
Group will submit to the Chief Counsel
of the Commission’s Division of
Investment Management, with a copy to
the Chief Counsel of the Commission’s
Division of Enforcement, a copy of each
report submitted to the Department of
Justice pursuant to Paragraph 14 and
Attachments C and D of the DPA within
five days of the submission of each
report to the Department of Justice. GS
Group’s first such report will be signed
by its chief executive officer and global
head of regulatory affairs.
Temporary Order
The Commission has considered the
matter and finds that Applicants have
made the necessary showing to justify
granting a temporary exemption.
Accordingly,
It is hereby ordered, pursuant to
section 9(c) of the Act, that the
Applicants and any other Covered
Persons are granted a temporary
exemption from the provisions of
section 9(a), effective as the date of the
Guilty Plea, solely with respect to the
VerDate Sep<11>2014
18:26 Oct 26, 2020
Jkt 253001
Guilty Plea entered into pursuant to the
Plea Agreement, subject to the
representations and conditions in the
application, until the Commission takes
final action on their application for a
permanent order.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–23778 Filed 10–26–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–557, OMB Control No.
3235–0618]
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice to (i) www.reginfo.gov/public/do/
PRAMain and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission,
c/o Cynthia Roscoe, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: October 22, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–23751 Filed 10–26–20; 8:45 am]
BILLING CODE 8011–01–P
Submission for OMB Review;
Comment Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension:
Rule 173
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget this
request for extension of the previously
approved collection of information
discussed below.
Securities Act Rule 173 (17 CFR
230.173) provides a notice of
registration to investors who purchased
securities in a registered offering under
the Securities Act of 1933 (15 U.S.C. 77a
et seq.). A Rule 173 notice must be
provided by each underwriter or dealer
to each investor who purchased
securities from the underwriter or
dealer. The Rule 173 notice is not
publicly available. We estimate that it
takes approximately 0.0167 hour per
response to provide the information
required under Rule 173 and that the
information is filed by approximately
5,338 respondents approximately 43,546
times a year for a total of 232,448,548
responses. We estimate that the total
annual reporting burden for Rule 173 is
3,881,891 hours (0.0167 hours per
response × 232,448,548 responses).
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
PO 00000
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SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–1, OMB Control No. 3235–
0007]
Submission for OMB Review;
Comment Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–02736
Extension:
Rule 13e–3 (Schedule 13E–3)
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget this
request for extension of the previously
approved collection of information
discussed below.
Rule 13e–3 (17 CFR 240.13e–3) and
Schedule 13E–3 (17 CFR 240.13e–
100)—Rule 13e–3 prescribes the filing,
disclosure and dissemination
requirements in connection with a going
private transaction by an issuer or an
affiliate. Schedule 13E–3 provides
shareholders and the marketplace with
material information concerning a going
private transaction. The information
collected permits verification of
compliance with securities laws
requirements and ensures the public
availability and dissemination of the
collected information. This information
is made available to the public.
Information provided on Schedule 13E–
3 is mandatory. We estimate that
Schedule 13E–3 is filed by
approximately 77 issuers annually and
it takes approximately 137.42 hours per
response. We estimate that 25% of the
137.42 hours per response is prepared
by the filer for a total annual reporting
E:\FR\FM\27OCN1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 208 (Tuesday, October 27, 2020)]
[Notices]
[Pages 68105-68110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23778]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-34071; File No. 812-15172]
Goldman Sachs (Malaysia) Sdn. Bhd., et al.; Notice of Application
and Temporary Order
October 22, 2020.
AGENCY: Securities and Exchange Commission (``Commission'')
ACTION: Temporary order and notice of application for a permanent order
under section 9(c) of the Investment Company Act of 1940 (``Act'').
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Summary of Application: Applicants have received a temporary order
(``Temporary Order'') exempting them from section 9(a) of the Act, with
respect to a guilty plea entered on October 22, 2020 (``Guilty Plea''),
by Goldman Sachs (Malaysia) Sdn. Bhd. (the ``Pleading Entity'' or ``GS
Malaysia'') in the United States District Court for the Eastern
District of New York (the ``District Court'') in connection with a plea
agreement (``Plea Agreement'') between the Pleading Entity and the
United States Department of Justice (``DOJ''), until the Commission
takes final action on an application for a permanent order (the
``Permanent Order,'' and with the Temporary Order, the ``Orders'').
Applicants also have applied for a Permanent Order.
Applicants: GS Malaysia, Goldman Sachs & Co. LLC (``GS&Co.''),
Goldman Sachs Asset Management, L.P. (``GSAM''), Goldman Sachs Asset
Management International (``GSAMI'') and GS Investment Strategies, LLC
(``GSIS'' and collectively, the ``Applicants'').
Filing Date: The application was filed on October 22, 2020.
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 emailing the Commission's
Secretary at [email protected] and serving applicants with a
copy of the request, by email. Hearing requests should be received by
the Commission by 5:30 p.m. on November 16, 2020 and should be
accompanied by proof of service on the 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 emailing the Commission's Secretary at [email protected].
ADDRESSES: The Commission: [email protected]. Applicants: David
A. Markowitz, The Goldman Sachs Group, Inc., [email protected].
FOR FURTHER INFORMATION CONTACT: Kieran G. Brown, Senior Counsel, at
(202) 551-6773 or David J. Marcinkus, Branch Chief, at (202) 551-6821
[[Page 68106]]
(Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a temporary order and a
summary of the application. The complete application may be obtained
via the Commission's website by searching for the file number, or an
applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations:
1. The Pleading Entity is a Malaysia Sendirian Berhad (private
company limited by shares) that provides asset management and corporate
finance services to clients in Malaysia and is a wholly-owned indirect
subsidiary of Goldman Sachs Group, Inc. (``GS Group''). GS Group is a
bank holding company and a financial holding company regulated by the
Board of Governors of the Federal Reserve System (``FRB'').
2. GS&Co., a New York limited liability company, is registered as
an investment adviser under the Investment Advisers Act of 1940 (the
``Advisers Act'') and is a direct, wholly-owned subsidiary (as such
term is defined in the Act) of GS Group. GS&Co. is also registered as a
broker-dealer under the Securities Exchange Act of 1934 (the ``Exchange
Act''). GS&Co. serves as principal underwriter to the Funds \1\ and as
adviser to the ESCs (as defined below) listed in Part 1 of Appendix A
to the application.
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\1\ The term ``Funds'' as used herein refers to any registered
investment company, employees' securities company or investment
company that has elected to be treated as a business development
company under the Act for which a Covered Person (as defined below)
currently or in the future serves as an investment adviser (as
defined in section 2(a)(20) of the Act) or depositor, or any
registered open-end investment company, registered unit investment
trust, or registered face-amount certificate company for which a
Covered Person currently or in the future serves as principal
underwriter (as defined in section 2(a)(29) of the Act).
---------------------------------------------------------------------------
3. GSAM, a New York limited partnership, is registered as an
investment adviser under the Advisers Act and is a wholly-owned
indirect subsidiary of GS Group. GSAM serves as an adviser or
subadviser to the Funds listed in Part 2 of Appendix A to the
application.
4. GSAMI, a United Kingdom limited company, is registered as an
investment adviser under the Advisers Act and is a wholly-owned
indirect subsidiary of GS Group. GSAMI serves as an adviser or
subadviser to the Funds listed in Part 3 of Appendix A to the
application.
5. GSIS, a Delaware limited liability company, is registered as an
investment adviser under the Advisers Act and is a wholly-owned
indirect subsidiary of GS Group. GSIS serves as an adviser to the ESCs
listed in Part 4 of Appendix A to the application.
6. While no existing company of which the Pleading Entity is an
``affiliated person'' within the meaning of section 2(a)(3) of the Act
(``Affiliated Person''), other than GSIS, GS&Co., GSAM and GSAMI
(together, the ``Fund Servicing Applicants''), currently serves as an
investment adviser (as defined in section 2(a)(20) of the Act) or
depositor of any registered investment company, employees' securities
company (``ESC''), or investment company that has elected to be treated
as a business development company under the Act, or as principal
underwriter (as defined in section 2(a)(29) of the Act) for any
registered open-end investment company (``Open-End Fund''), registered
unit investment trust (``UIT''), or registered face-amount certificate
company (``FACC'') (such activities performed on behalf of such
persons, collectively ``Fund Servicing Activities''), Applicants
request that any relief granted by the Commission pursuant to the
application also apply to any other current or future Affiliated Person
of the Pleading Entity other than GS Group (together with the Fund
Servicing Applicants, the ``Covered Persons'') with respect to any
activity contemplated by section 9(a) of the Act.\2\
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\2\ Covered Persons may, if the Order is granted, in the future
act in any of the capacities contemplated by section 9(a) of the Act
subject to the applicable terms and conditions of the Orders. GS
Group, the ultimate parent of the Pleading Entity, does not and will
not serve as an investment adviser, depositor or principal
underwriter to any registered investment company as it is not a
Covered Person.
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7. On October 22, 2020, the DOJ filed a criminal information (the
``Information'') in the District Court charging the Pleading Entity
with one count of conspiracy to commit offenses against the United
States, in violation of Title 18, United States Code, Section 371, that
is, to violate the anti-bribery provisions of the Foreign Corrupt
Practices Act of 1977 (``FCPA''), as amended, see Title 15, United
States Code, Sections 78dd-1 and 78dd-3. According to the Statement of
Facts that served as the basis for the Plea Agreement (the ``Statement
of Facts''), between 2009 and 2014, the GS Group (together with its
wholly-owned subsidiaries and affiliated entities, the ``Company''),
through certain of its agents and employees, including Tim Leissner
(``Leissner'') \3\ and Roger Ng (``Ng''),\4\ knowingly and willfully
conspired with others to provide payments and other things of value to
or for the benefit of foreign officials to induce the officials to
influence the decisions of 1Malaysia Development Berhad (``1MDB''), a
sovereign development company wholly owned by the Government of
Malaysia, International Petroleum Investment Company (``IPIC'') (an
investment fund wholly owned by the Government of Abu Dhabi), and Aabar
Investments PJS (a subsidiary of IPIC) to obtain and retain business
for the Company (the ``Conduct''), as further described in the
application, in violation of the FCPA. Leissner, Ng, and another
employee of the Company referred to in the Statement of Facts as
Employee 1 (``Employee 1''), also used the connections of an outside
individual involved in the Conduct (Jho Low) to obtain and retain
business for the Company and, in turn, concealed that individual's
involvement in the deals from certain other employees and agents of the
Company.\5\ In connection with the Plea, the Company expects to enter
into a deferred prosecution agreement with DOJ (the ``DPA'').
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\3\ From November 2006 to February 2016, Leissner was a
Participating Managing Director of the Company and, from 2011 to
2016, held various senior positions in the Company's investment
banking division in Asia and served on the board of directors of GS
Malaysia.
\4\ From 2010 to 2014, Ng was a Managing Director of the Company
and, for part of that time, served as Head of Investment Banking
for, and was on the board of directors of, GS Malaysia.
\5\ Employee 1 is no longer employed by any Company affiliate.
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8. Pursuant to the Plea Agreement, the Pleading Entity entered the
Guilty Plea on October 22, 2020 in the District Court to the charge set
out in the Information. Applicants state that, according to the Plea
Agreement, the Pleading Entity agrees as follows: First, the Pleading
Entity shall cooperate fully with the DOJ and the United States
Attorney's Office for the Eastern District of New York (collectively,
the ``Offices'') in any and all matters relating to the conduct
described in the Plea Agreement and the Statement of Facts and other
conduct under investigation by the Offices or any other component of
the DOJ at any time during the term of the DPA (the ``Term'') until the
later of the date upon which all investigations and prosecutions
arising out of such conduct are concluded or the end of the Term.
Second, at the request of the Offices, the Pleading Entity shall also
cooperate fully with other domestic or foreign law enforcement and
regulatory authorities and agencies, as well as the Multilateral
Development Banks in any investigation of the Pleading Entity, GS
Group, or any of its present or former officers, directors, employees,
agents, and
[[Page 68107]]
consultants, or any other party, in any and all matters relating to the
conduct described in the Plea Agreement and the Statement of Facts and
any other conduct under investigation by the Offices or any other
component of the DOJ. Third, should the Pleading Entity learn during
the Term of any evidence or any allegations of conduct that may
constitute a violation of the money laundering laws that involve the
employees or agents of the Pleading Entity, or should the Pleading
Entity learn of any evidence or allegation of conduct that may
constitute a violation of the FCPA's anti-bribery or accounting
provisions had the conduct occurred within the jurisdiction of the
United States, the Pleading Entity shall promptly report such evidence
or allegation to the Offices. Fourth, the Pleading Entity agrees that
any fine imposed by the District Court will be due and payable as
specified in Paragraph 19 of the Plea Agreement, and that any
restitution imposed by the District Court will be due and payable in
accordance with the District Court's order. Finally, the Pleading
Entity agrees to commit no further crimes and to work with GS Group in
fulfilling GS Group's obligations under the DPA.
9. The Applicants expect that the District Court will enter a
judgment against the Pleading Entity (the ``Judgment'') that will
require remedies that are materially the same as set forth in the Plea
Agreement. The individuals referenced in the Information as responsible
for the Conduct are no longer employed by the Pleading Entity or any of
its affiliates.
10. On October 22, 2020, the SEC instituted cease-and-desist
proceedings against GS Group relating to the Conduct (the ``SEC
Order''). In anticipation of the institution of those proceedings, GS
Group submitted an Offer of Settlement consenting to the entry of such
order, which the Commission has accepted. The SEC Order includes
findings that GS Group violated the following sections of the Exchange
Act: Section 30A (the anti-bribery provisions of the FCPA), section
13(b)(2)(A) (the books and records provision of the FCPA), and section
13(b)(2)(B) (requiring Exchange Act registered companies to devise and
maintain a sufficient system of internal accounting controls).\6\
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78m(b)(2)(A), 78m(b)(2)(B), and 78dd-1.
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11. GS Group and its affiliates have entered into settlement
agreements with other U.S. and non-U.S. regulatory or enforcement
agencies related to the Conduct. The Board of Governors of the Federal
Reserve System (``FRB'') entered a cease and desist order and order of
assessment of a civil monetary penalty (the ``FRB Order'') on October
22, 2020 against GS Group concerning unsafe and unsound banking
practices relating to the 1MDB transactions that resulted from
deficient policies, procedures and controls. The New York State
Department of Financial Services (``DFS'') entered into a consent order
(the ``DFS Order'') on October 22, 2020 with GS Group as the parent
company of Goldman Sachs Bank USA (``GS Bank'') (which operates in New
York State and is licensed and regulated by the DFS) to settle DFS'
investigations into alleged violations of New York banking law arising
out of GS Bank's investments in 1MDB-related instruments. GS Group
entered into a Settlement Agreement with the Government of Malaysia and
1MDB (the ``Malaysian Settlement Agreement'') on August 18, 2020 to
resolve all criminal and regulatory proceedings in Malaysia involving
the Company, including pending criminal proceedings against
subsidiaries of GS Group and certain of their current and former
directors, relating to the 1MDB transactions and the Conduct. On
October 22, 2020, the U.K. Financial Conduct Authority and the U.K.
Prudential Regulation Authority each entered a warning notice
(together, the ``U.K. Notices'') against Goldman Sachs International
(``GSI''), an indirect wholly owned subsidiary of GS Group, relating to
GSI's failure to assess and manage the risks associated with the 1MDB
transactions, properly record how GSI committees assessed and managed
those risks and respond appropriately to allegations of bribery. The
Hong Kong Securities and Futures Commission issued a Statement of
Disciplinary Action (the ``SFC Statement'') against Goldman Sachs
(Asia) L.L.C. (``GS Asia''), an indirect wholly owned subsidiary of GS
Group, on October 22, 2020, relating to GS Asia's failure to properly
examine and address red flags in connection with the 1MDB transactions
and to diligently supervise its senior personnel in connection with
their participation in the 1MDB transactions. On October 22, 2020, the
Singapore Commercial Affairs Department, at the direction of the
Singapore Attorney General's Chambers, issued a Notice of Conditional
Warning against Goldman Sachs (Singapore) Pte, an indirect wholly owned
subsidiary of GS Group (``GS Singapore''), relating to the Conduct (the
``Singapore Notice''). On October 22, 2020, the Monetary Authority of
Singapore (the ``MAS'') issued a letter of direction (the ``MAS
Letter'') requiring GS Singapore to appoint an independent auditor to
review the effectiveness and sustainability of the remedial measures
implemented by GS Singapore following the MAS' inspection.
Applicants' Legal Analysis
1. Section 9(a)(1) of the Act provides, in pertinent part, that a
person may not serve or act as an investment adviser or depositor of
any registered investment company or as principal underwriter for any
Open-End Fund, UIT, or FACC, if such person within ten years has been
convicted of any felony or misdemeanor, including those arising out of
such person's conduct as a broker, dealer or bank. Section 2(a)(10) of
the Act defines the term ``convicted'' to include a plea of guilty.
Section 9(a)(3) of the Act extends the prohibitions of section 9(a)(1)
to a company, any affiliated person of which has been disqualified
under the provisions of section 9(a)(1). Section 2(a)(3) of the Act
defines ``affiliated person'' to include, among others, any person
directly or indirectly controlling, controlled by, or under common
control with, the other person. The Pleading Entity is an Affiliated
Person of each of the other Applicants within the meaning of section
2(a)(3) of the Act. Therefore, the Applicants state that the Plea
Agreement would result in a disqualification of each Fund Servicing
Applicant for ten years under section 9(a)(3) were they to act in any
of the capacities listed in section 9(a), by effect of a conviction
described in section 9(a)(1).
2. Section 9(c) of the Act provides that: ``[t]he Commission shall
by order grant [an] application [for relief from the prohibitions of
subsection 9(a)], either unconditionally or on an appropriate temporary
or other conditional basis, if it is established [i] that the
prohibitions of subsection 9(a), as applied to such person, are unduly
or disproportionately severe or [ii] that the conduct of such person
has been such as not to make it against the public interest or the
protection of investors to grant such application.'' Applicants have
filed an application pursuant to section 9(c) seeking a Temporary Order
and a Permanent Order exempting the Fund Servicing Applicants and other
Covered Persons from the disqualification provisions of section 9(a) of
the Act. The Covered Persons may, if the Orders are granted, in the
future act in any of the capacities contemplated by section 9(a) of the
Act subject to the applicable terms and conditions of the Orders.
[[Page 68108]]
3. Applicants believe they meet the standards for exemption
specified in section 9(c). Applicants assert that (i) the scope of the
misconduct was limited and did not involve any of the Applicants acting
as an investment adviser, depositor or principal underwriter for any
Fund, or any Fund with respect to which the Fund Servicing Applicants
engage in Fund Servicing Activities, (ii) application of the statutory
bar would impose significant hardships on the Funds and their
shareholders, (iii) the prohibitions of section 9(a), if applied to the
Fund Servicing Applicants, would be unduly or disproportionately severe
and (iv) the Conduct did not constitute conduct that would make it
against the public interest or protection of investors to grant the
exemption from section 9(a).
4. Applicants represent that the Conduct did not involve any of
Applicants acting in the capacity as an investment adviser, depositor
or principal underwriter for any Fund. Applicants represent that the
Conduct similarly did not involve any Fund with respect to which the
Fund Servicing Applicants engage in Fund Servicing Activities.\7\
Instead, the Applicants state that the Conduct occurred primarily as a
result of the actions of a few employees. As discussed above, the
individuals referenced in the Information as responsible for the
Conduct are no longer employed by the Pleading Entity or any of its
affiliates.
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\7\ The Pleading Entity does not engage, has not engaged, and
will not engage in in any of the capacities contemplated by section
9(a) of the Act.
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5. Applicants acknowledge that the Conduct also reflected failures
of GS Group control functions and that the Company's control functions
and committees should have done more to follow up on red flags. The
application states that five employees identified in the Statement of
Facts as having been involved in these failures are employed by
affiliates of the Pleading Entity that are not Covered Persons.
Applicants represent, however, that none of these five employees has
been, or will in the future be, employed by a Covered Person relying on
the Orders or otherwise involved in the Fund Servicing Activities.
6. Applicants state that one of the employees discussed above was
employed by a Fund Servicing Applicant before the 1MDB bond
transactions, but was employed by an affiliate that is not a Fund
Servicing Applicant at the time of the 1MDB bond transactions.
Applicants state that this employee did not engage in the Conduct.
Applicants further state that, after the 1MDB bond transactions were
completed, the employee became aware of and failed to escalate
information and concerns about bribery related to the bond
transactions. Applicants state that this individual currently serves as
a manager or director of a Fund Servicing Applicant and has had, and in
the future will have, no day-to-day involvement in Fund Servicing
Activities. Applicants state that this individual's role includes
oversight of that Fund Servicing Applicant commensurate with the
responsibilities of a manager or director.
7. Applicants state that GS Group is committed to promoting a
general culture of compliance, including continuing to implement
significant changes in connection with its relevant practices and
controls, as summarized below and described in more detail in the
application. Applicants assert that, in light of the limited scope of
the Conduct, it would be unduly and disproportionately severe to impose
a section 9(a) disqualification on the Fund Servicing Applicants.
Applicants assert that the conduct of the Applicants has not been such
to make it against the public interest or the protection of investors
to grant the exemption from section 9(a).
8. Applicants assert that neither the protection of investors nor
the public interest would be served by permitting the section 9(a)
disqualifications to apply to the Fund Servicing Applicants because
those disqualifications would deprive the Fund of the advisory or sub-
advisory and underwriting services that shareholders expected the Funds
would receive when they decided to invest in the Funds. Applicants also
assert that the prohibitions of section 9(a) could operate to the
financial detriment of the Funds and their shareholders, including by
causing the Funds to spend time and resources to engage substitute
advisers, subadvisers, and principal underwriters, which would be an
unduly and disproportionately severe consequence given that the Conduct
did not involve any of the Fund Servicing Activities.
9. Applicants assert that if the Fund Servicing Applicants were
barred under section 9(a) from providing investment advisory services
to the Funds and were unable to obtain the requested exemption, the
effect on their businesses and employees would be severe. Applicants
state that the Fund Servicing Applicants have committed substantial
capital and other resources to establishing expertise in advising and
sub-advising Funds with a view to continuing and expanding this
business, which Applicants consider strategically important. Similarly,
Applicants represent that if GS&Co. were barred under section 9(a) from
continuing to provide underwriting services to the Funds and were
unable to obtain the requested exemption, the effect on its current
business and employees would be significant. GS&Co. has committed
capital and other resources to establish expertise in underwriting the
securities of the Funds and to establish distribution arrangements for
Fund shares. Applicants further state that prohibiting the Fund
Servicing Applicants from engaging in Fund Servicing Activities would
not only adversely affect their business, but would also adversely
affect their employees who are involved in these activities.\8\
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\8\ Applicants represent that GS&Co. acts as transfer agent for
most of the Funds. Although GS&Co. would retain the authority to act
in this capacity even if it were prohibited under section 9(a) from
engaging in Fund Servicing Activities, Applicants represent that as
a practical matter, it is unlikely that the Funds would continue to
retain GS&Co. as transfer agent if GS&Co. were unable to perform
Fund Servicing Activities. Thus, GS&Co. would likely lose another
significant part of its business. This would also adversely affect
its employees.
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10. Applicants represent that: (1) None of the current or former
directors, officers or employees of Applicants (other than certain
former personnel of the Pleading Entity and GS&Co.\9\ who were not
involved in any of the Fund Servicing Applicants' Fund Servicing
Activities) engaged in the Conduct; (2) no current or former employee
of the Pleading Entity or any Covered Person who previously has been or
who subsequently may be identified by the Pleading Entity or any U.S.
or non-U.S. regulatory or enforcement agencies as having been
responsible for the Conduct will be an officer, director, or employee
of any Covered Person; (3) the identified employees have had no, and
will not have any future, involvement in the Covered Persons'
activities in any capacity described in section 9(a) of the Act; and
(4) because the personnel of Applicants (other than certain former
personnel of the Pleading Entity and GS&Co.\10\ who were not involved
in any of the Fund Servicing Applicants' Fund Servicing Activities) did
not engage in the Conduct, shareholders of the Funds were not affected
any differently than if those Funds had received services from any
other non-affiliated investment adviser.
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\9\ One of the employees most extensively involved in and
responsible for the Conduct (Leissner), was employed by GS&Co. for
approximately two months immediately prior to his termination in
February 2016. During this time, the employee had no involvement in
GS&Co.'s Fund Servicing Activities.
\10\ See paragraph 6, supra.
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[[Page 68109]]
11. Applicants have agreed that none of GS Group, the Applicants or
any of the other Covered Persons will employ the former employees of an
affiliate of the Pleading Entity or any other person who subsequently
may be identified by the Pleading Entity or any U.S. or non-U.S.
regulatory or enforcement agencies as having been responsible for the
Conduct in any capacity without first making a further application to
the Commission pursuant to section 9(c).
12. Applicants have also agreed that GS Group and each Applicant
and Covered Person will adopt and implement policies and procedures
reasonably designed to ensure compliance with the terms and conditions
of the Orders granted under section 9(c).
13. In addition, GS Group and each Applicant and Covered Person
will comply in all material respects with the material terms and
conditions of the Plea Agreement and with the material terms of the
DPA, the FRB Order, the DFS Order, the SEC Order, the Malaysian
Settlement Agreement, the U.K. Notices, the SFC Statement, the
Singapore Notice, the MAS Letter, and any other orders issued by
regulatory or enforcement agencies addressing the Conduct. Applicants
note that in connection with the DPA, GS Group will represent that it
has implemented and will continue to implement a compliance and ethics
program designed to prevent and detect violations of the FCPA and other
anti-corruption laws throughout its operations, including its
subsidiaries. In addition, GS Group will represent that it has
undertaken, and will continue to undertake, a review of its existing
internal accounting controls, policies, and procedures regarding
compliance with the FCPA and other anti-corruption laws, and modify
them where necessary to ensure that it maintains (i) an effective
system of internal accounting controls, and (ii) a rigorous anti-
corruption compliance program designed to effectively detect and deter
violations of the FCPA and other applicable anti-corruption laws. The
DPA will require GS Group to provide an initial report to DOJ within
one year describing its remediation efforts to date, and to undertake
two annual follow-up reviews and reports to DOJ.\11\
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\11\ The required remedial steps with respect to GS Group's
Corporate Compliance Program are described in Attachment C to the
DPA, and the reporting requirements are described in Attachment D to
the DPA.
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14. Applicants further state that GS Group and its affiliates have
undertaken certain other remedial measures, as described in greater
detail in the application. These remedial measures include: Enhancing
the scrutiny of senior personnel in high-risk areas and products,
heightening the firm's focus on accountability when employee red flags
are identified, and taking steps to ensure that employees are hearing
about compliance expectations from the firm's executive management.
Applicants state that GS Group has also been strengthening processes to
heighten attention to potential red flags identified by deal teams and
committees, increasing representation of the firm's control functions
in key vetting groups and committees, and reviewing transactions
earlier in the life cycle to reduce the possibility that later momentum
in the deals could inappropriately carry them over the line for
approval. Applicants also state that the firm has been continually
improving its electronic surveillance to take advantage of recent
technological advances and has increased its commitment to spending on
compliance efforts and headcount in order to maintain the efficacy of
the enhancements described above and to continue improving the firm's
controls and systems.
15. As a result of the foregoing, the Applicants submit that absent
relief, the prohibitions of section 9(a) would be unduly or
disproportionately severe, and that the Conduct did not constitute
conduct that would make it against the public interest or protection of
investors to grant the exemption.
16. To provide further assurance that the exemptive relief being
requested in the application would be consistent with the public
interest and the protection of the investors, the Applicants agree that
they will, as soon as reasonably practical, with respect to each of the
Funds for which a Fund Servicing Applicant is the primary adviser,
distribute to the boards of directors or trustees of the Funds
(``Board'') written materials describing the circumstances that led to
the Plea Agreement, as well as any effects on the Funds and the
application. The written materials will include an offer to discuss the
materials at an in-person meeting with the Board, including the
directors who are not ``interested persons'' of the Funds as defined in
section 2(a)(19) of the Act and their ``independent legal counsel'' as
defined in rule 0-1(a)(6) under the Act, if any. With respect to each
of the Funds for which a Fund Servicing Applicant is not the primary
investment adviser, the relevant Fund Servicing Applicant will provide
such materials to the Fund's primary investment adviser and offer to
discuss the materials with such primary investment adviser. The
Applicants undertake to provide the Boards with all information
concerning the Plea Agreement and the application as necessary for
those Funds to fulfill their disclosure and other obligations under the
U.S. federal securities laws and will provide them a copy of the
Judgment as entered by the District Court.
17. Certain Fund Servicing Applicants, as well as certain of their
affiliates, have previously applied for exemptive orders under section
9(c) of the Act, as described in greater detail in the application.
Applicants, however, note that none of the conduct underlying the
previous section 9(c) orders granted to Fund Servicing Applicants
involved the provision of Fund Servicing Activities.
Applicants' Conditions
Applicants agree that any order granted by the Commission pursuant
to the application will be subject to the following conditions:
1. Any temporary exemption granted pursuant to the application will
be without prejudice to, and will not limit the Commission's rights in
any manner with respect to, any Commission investigation of, or
administrative proceedings involving or against, Covered Persons,
including, without limitation, the consideration by the Commission of a
permanent exemption from section 9(a) of the Act requested pursuant to
the application or the revocation or removal of any temporary
exemptions granted under the Act in connection with the application.
2. None of GS Group, the Applicants or any of the other Covered
Persons will employ the former employees of an affiliate of the
Pleading Entity or any other person who subsequently may be identified
by the Pleading Entity or any U.S. or non-U.S. regulatory or
enforcement agencies as having been responsible for the Conduct in any
capacity without first making a further application to the Commission
pursuant to section 9(c).
3. GS Group and each Applicant and Covered Person will adopt and
implement policies and procedures reasonably designed to ensure that it
will comply with the terms and conditions of the Orders within 60 days
of the date of the Permanent Order or, with respect to condition four,
such later date or dates as may be contemplated by the Plea Agreement,
the DPA, the FRB Order, the DFS Order, the SEC Order, the Malaysian
Settlement Agreement, the U.K. Notices, the SFC Statement, the
Singapore Notice, the MAS Letter or any other
[[Page 68110]]
orders issued by regulatory or enforcement agencies addressing the
Conduct.
4. GS Group and each Applicant and Covered Person will comply in
all material respects with the material terms and conditions of the
Plea Agreement and with the material terms of the DPA, the FRB Order,
the DFS Order, the SEC Order, the Malaysian Settlement Agreement, the
U.K. Notices, the SFC Statement, the Singapore Notice, the MAS Letter
and any other orders issued by regulatory or enforcement agencies
addressing the Conduct. In addition, within 30 days of each anniversary
of the Permanent Order (until and including the third such
anniversary), GS Group will submit a certification signed by its chief
executive officer and its global head of regulatory affairs, confirming
that the Pleading Entity has complied with the terms and conditions of
the Plea Agreement in all material respects and that GS Group has
complied with the terms and conditions of the DPA in all material
respects. Each such certification will be submitted to the Chief
Counsel of the Commission's Division of Investment Management with a
copy to the Chief Counsel of the Commission's Division of Enforcement.
5. Applicants will provide written notification to the Chief
Counsel of the Commission's Division of Investment Management with a
copy to the Chief Counsel of the Commission's Division of Enforcement
of a material violation of the terms and conditions of the Orders
within 30 days of discovery of the material violation. In addition, GS
Group will submit to the Chief Counsel of the Commission's Division of
Investment Management, with a copy to the Chief Counsel of the
Commission's Division of Enforcement, a copy of each report submitted
to the Department of Justice pursuant to Paragraph 14 and Attachments C
and D of the DPA within five days of the submission of each report to
the Department of Justice. GS Group's first such report will be signed
by its chief executive officer and global head of regulatory affairs.
Temporary Order
The Commission has considered the matter and finds that Applicants
have made the necessary showing to justify granting a temporary
exemption.
Accordingly,
It is hereby ordered, pursuant to section 9(c) of the Act, that the
Applicants and any other Covered Persons are granted a temporary
exemption from the provisions of section 9(a), effective as the date of
the Guilty Plea, solely with respect to the Guilty Plea entered into
pursuant to the Plea Agreement, subject to the representations and
conditions in the application, until the Commission takes final action
on their application for a permanent order.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23778 Filed 10-26-20; 8:45 am]
BILLING CODE 8011-01-P
