Federal Register / Vol. 76, No. 32 / Wednesday, February 16, 2011 / Notices 9057 

PROCEDURAL SCHEDULE

February 8, 2011 ................ Filing of Appeal. 

February 23, 2011 .............. Deadline for Postal Service to file administrative record in this appeal. 

March 7, 2011 .................... Deadline for notices to intervene (see 39 CFR 3001.111(b)). 

March 15, 2011 .................. Deadline for Petitioner’s Form 61 or initial brief in support of petition (see 39 CFR 3001.115(a) and (b)). 

April 4, 2011 ....................... Deadline for answering brief in support of Postal Service (see 39 CFR 3001.115(c)). 

April 19, 2011 ..................... Deadline for reply briefs in response to answering briefs (see 39 CFR 3001.115(d)). 

April 26, 2011 ..................... Deadline for motions by any party requesting oral argument; the Commission will schedule oral argument only 

when it is a necessary addition to the written filings (see 39 CFR 3001.116). 

June 7, 2011 ...................... Expiration of the Commission’s 120-day decisional schedule (see 39 U.S.C. 404(d)(5)). 

By the Commission. 

Ruth Ann Abrams, 

Acting Secretary. 

[FR Doc. 2011–3414 Filed 2–15–11; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

29577; 813–353] 

Capital International, Inc., et al.; Notice 

of Application 

February 10, 2011. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of application for an 

order under sections 6(b) and 6(e) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) granting an exemption from all 

provisions of the Act, except section 9, 

and sections 36 through 53, and the 

rules and regulations under the Act. 

With respect to sections 17 and 30 of the 

Act, and the rules and regulations 

thereunder, and rule 38a–1 under the 

Act, the exemption is limited as set 

forth in the application. 

SUMMARY OF APPLICATION: Applicants 

request an order to exempt certain 

limited partnerships and other entities 

(‘‘Partnerships’’) formed for the benefit 

of eligible employees of Capital 

International, Inc. (‘‘Capital’’) and its 

affiliates from certain provisions of the 

Act. Each Partnership will be an 

‘‘employees’ securities company’’ within 

the meaning of section 2(a)(13) of the 

Act. 

APPLICANTS: CGPE IV, L.P. (‘‘CGPE IV’’), 

CGPE V, L.P. (‘‘CGPE V’’), Capital 

International Investments IV, LLC (‘‘CII 

IV’’), Capital International Investments 

V, LLC (‘‘CII V’’), and Capital. 

DATES: Filing Dates: The application was 

filed on October 1, 2003 and amended 

on September 30, 2004, April 6, 2007, 

April 16, 2010, and February 1, 2011. 

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 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on March 7, 2011, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F 

Street, NE., Washington, DC 20549– 

1090; Applicants: Capital, 11100 Santa 

Monica Blvd., 15th Floor, Los Angeles, 

CA 90025–3384; CGPE IV, CGPE V, CII 

IV, and CII V, 6455 Irvine Center Drive, 

Irvine, CA 92618–4518. 

FOR FURTHER INFORMATION CONTACT: 

Christine Y. Greenlees, Senior Counsel, 

at (202) 551–6879, or Janet M. 

Grossnickle, Assistant Director, at (202) 

551–6821 (Division of Investment 

Management, Office of Investment 

Company Regulation). 

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 an applicant using the 

Company name box, at http:// 

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Applicants’ Representations 

1. Capital, a California corporation, is 

an indirect wholly-owned subsidiary of 

The Capital Group Companies, Inc., a 

holding company and one of the largest 

investment management firms in the 

world. Capital and its ‘‘affiliates,’’ as 

defined in rule 12b–2 under the 

Securities Exchange Act of 1934 (the 

‘‘Exchange Act’’), are referred to 

collectively as the ‘‘Capital Group’’ and 

each, a ‘‘Capital Group entity.’’ 

Investment management and related 

financial services are Capital 

International, Inc.’s only businesses. 

2. A Partnership will be structured as 

a limited partnership, limited liability 

company, business trust or other entity 

organized under the laws of the state of 

Delaware, another state, or of a 

jurisdiction outside the United States. 

Capital Group may also form parallel 

Partnerships organized under the laws 

of various jurisdictions in order to 

create the same investment 

opportunities for Eligible Employees (as 

defined below) in other jurisdictions. 

Interests in a Partnership (‘‘Interests’’) 

may be issued in one or more series, 

each of which corresponds to particular 

Partnership investments (each, a 

‘‘Series’’). Each Series will be an 

‘‘employees’ securities company’’ within 

the meaning of section 2(a)(13) of the 

Act. Each Partnership will operate as a 

closed-end management investment 

company, and a particular Partnership 

may operate as a diversified or nondiversified vehicle within the meaning 

of the Act. The Partnerships are 

intended to provide investment 

opportunities for Eligible Employees 

(defined below) that are competitive 

with those at other investment 

management and financial services 

firms and to facilitate the recruitment 

and retention of high caliber 

professionals. Capital Group will 

control each Partnership within the 

meaning of section 2(a)(9) of the Act. 

3. Capital Group formed CGPE IV 

under the laws of the state of Delaware. 

CGPE IV invests concurrently with 

Capital International Private Equity 

Fund IV, L.P. (‘‘Fund IV’’) and other 

investors organized or managed by 

Capital Group or its designees that 

generally co-invest with Fund IV (the 

‘‘Fund IV Co-Investors’’) in various 

investment opportunities, described in 

the application. Capital Group formed 

CGPE V under the laws of the Cayman 

Islands. CGPE V invests concurrently 

with Capital International Private Equity 

Fund V, L.P. (‘‘Fund V’’) and other 

investors organized or managed by 

Capital Group or its designees that 

generally co-invest with Fund V (the 

‘‘Fund V Co-Investors’’) in various 

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9058 Federal Register / Vol. 76, No. 32 / Wednesday, February 16, 2011 / Notices 

1 If a General Partner or Investment Adviser is 

registered under the Advisers Act, the Carried 

Interest payable to it by a Partnership will be 

pursuant to an arrangement that complies with rule 

205–3 under the Advisers Act. If the General 

Partner or Investment Adviser is not required to 

register under the Advisers Act, the Carried Interest 

payable to it will comply with section 205(b)(3) of 

the Advisers Act, with the Partnership treated as a 

business development company solely for the 

purpose of that section. 

2A ‘‘Consultant’’ is a person or entity whom 

Capital Group has engaged on retainer to provide 

services and professional expertise on an ongoing 

basis as a regular consultant or as a business or legal 

adviser and who shares a community of interest 

with Capital Group and its employees. 

3 If such investment vehicle is an entity other 

than a trust, the term ‘‘settlor’’ will be read to mean 

a person who created such vehicle, alone or 

together with other Eligible Individuals, and 

contributed funds to such vehicle. 

4 ‘‘Audit’’ will have the meaning defined in rule 

1–02(d) of Regulation S–X. 

investment opportunities, described in 

the application. CGPE IV and CGPE V 

(collectively, the ‘‘Initial Partnerships’’) 

may also co-invest with each other as 

well as with Fund IV, Fund V, the Fund 

IV Co-Investors and the Fund V CoInvestors. The Initial Partnerships are 

organized as limited partnerships. 

4. Each Partnership will have a 

general partner, managing member or 

other such similar entity (a ‘‘General 

Partner’’). All potential investors in a 

Partnership will be ‘‘Limited Partners.’’ 

The General Partner will manage, 

operate, and control each Partnership 

and will have the authority to make all 

decisions regarding the acquisition, 

management and disposition of 

Partnership investments. A Capital 

Group entity will be a General Partner 

of each Partnership. The General Partner 

may be permitted to delegate certain of 

its responsibilities regarding the 

acquisition, management and 

disposition of Partnership investments 

to an Investment Adviser (as defined 

below). 

5. The General Partner or another 

entity will serve as investment adviser 

to a Partnership (the ‘‘Investment 

Adviser’’). The Investment Adviser will 

be (i) Registered as an investment 

adviser under the Investment Advisers 

Act of 1940 (the ‘‘Advisers Act’’), (ii) 

exempt from Advisers Act registration 

requirements by virtue of section 

203(b)(3) of the Advisers Act, or (iii) 

excluded from the definition of 

investment adviser under the Advisers 

Act because it is a bank or bank holding 

company, as defined in the Bank 

Holding Company Act of 1056, as 

amended, and does not serve or act as 

an investment adviser to a registered 

investment company. Any entity serving 

as Investment Adviser to any 

Partnership will be a Capital Group 

entity. 

6. If the Investment Adviser elects to 

recommend that a Partnership enter into 

any side-by-side investment with an 

unaffiliated entity, the Investment 

Adviser will be permitted to engage as 

sub-investment adviser the unaffiliated 

entity (an ‘‘Unaffiliated Subadviser’’), 

which will be responsible for the 

management of such side-by-side 

investment. An Investment Adviser may 

be paid a management fee, which will 

generally be determined as a percentage 

of the capital commitments of the 

Limited Partners. A General Partner or 

Investment Adviser may receive a 

performance-based fee (a ‘‘Carried 

Interest’’) based on the net gains of the 

Partnership’s investments in addition to 

any amount allocable to the General 

Partner’s or Investment Adviser’s capital 

contribution.1

7. Interests in a Partnership will be 

offered without registration in reliance 

on section 4(2) of the Securities Act of 

1933 (the ‘‘Securities Act’’), or 

Regulation D or Regulation S under the 

Securities Act, and will be sold only to 

‘‘Qualified Participants’’ (as defined 

below). Prior to offering Interests to an 

Eligible Individual (as defined below), a 

General Partner must reasonably believe 

that the Eligible Employee or Eligible 

Family Member will be capable of 

understanding and evaluating the merits 

and risks of participation in a 

Partnership and that each such 

individual is able to bear the economic 

risk of such participation and afford a 

complete loss of his or her investment. 

8. ‘‘Qualified Participants’’ are (a) 

current and former employees, officers, 

directors and current Consultants 2 of 

Capital Group (collectively, ‘‘Eligible 

Employees’’), (b) spouses, parents, 

children, spouses of children, brothers, 

sisters and grandchildren of Eligible 

Employees (‘‘Eligible Family Members’’ 

and, together with Eligible Employees 

who are natural persons, ‘‘Eligible 

Individuals’’), (c) trusts or other 

investment vehicles established solely 

for the benefit of Eligible Individuals 

(‘‘Eligible Investment Vehicles’’), and (d) 

Capital Group. Each Eligible Individual 

will be an ‘‘accredited investor’’ under 

rule 501(a)(5) or rule 501(a)(6) of 

Regulation D (‘‘Accredited Investor’’), 

except that a maximum of 35 Eligible 

Employees who are sophisticated 

investors but who are not Accredited 

Investors may become Limited Partners 

if each of them falls into one of the 

following two categories: (A) Eligible 

Employees who (i) have a graduate 

degree in business, law or accounting, 

(ii) have a minimum of five years of 

consulting, investment management, 

investment banking, legal or similar 

business experience, and (iii) had 

reportable income from all sources 

(including any profit shares or bonus) of 

$100,000 in each of the two most recent 

years immediately preceding the 

Eligible Employee’s admission as a 

Limited Partner and have a reasonable 

expectation of income from all sources 

of at least $140,000 in each year in 

which the Eligible Employee will be 

committed to make investments in a 

Partnership; or (B) Eligible Employees 

who are ‘‘knowledgeable employees,’’ as 

defined in rule 3c–5 of the Act, of the 

Partnership (with the Partnership 

treated as though it were a ‘‘covered 

company’’ for purposes of the rule). An 

Eligible Employee who is described in 

category (A) above will not be permitted 

to invest in any year more than 10% of 

his or her income from all sources for 

the immediately preceding year in the 

aggregate in a Partnership and in all 

other Partnerships in which that 

investor has previously invested. 

9. An Eligible Individual may 

purchase an Interest through an Eligible 

Investment Vehicle only if either (i) the 

investment vehicle is an ‘‘accredited 

investor,’’ as defined in rule 501(a) of 

Regulation D under the 1933 Act, or (ii) 

the Eligible Individual is a settlor 3 and 

principal investment decision-maker 

with respect to the investment vehicle. 

Eligible Investment Vehicles that are not 

accredited investors will be included in 

the 35 non-accredited investor limit 

discussed above. Any Capital Group 

entity or a Consultant entity will be an 

‘‘accredited investor’’ as defined in rule 

501(a) of Regulation D under the 1933 

Act. 

10. The terms of a Partnership will be 

disclosed to the Eligible Employees at 

the time they are offered the right to 

subscribe for Interests, and they will be 

furnished with a copy of the partnership 

agreement. A Partnership will send its 

Limited Partners an annual financial 

statement audited by independent 

accountants as soon as practicable after 

the end of its fiscal year.4 In addition, 

as soon as practicable after the end of 

each fiscal year of a Partnership, a 

report will be sent to each Limited 

Partner setting forth the information 

with respect to his or her share of 

income, gains, losses, credits, and other 

items for federal and state income tax 

purposes. 

11. Interests in the Partnerships will 

not be transferable except with the 

express consent of the General Partner, 

and then only to a Qualified Participant. 

All of the Partnerships will have only 

Qualified Participants as Limited 

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Partners. No sales load will be charged 

in connection with the sale of Interests. 

12. The General Partner may have the 

right to repurchase or cancel the Interest 

of an Eligible Employee who ceases to 

be an employee, officer, director, or 

current Consultant of any member of 

Capital Group for any reason. In the case 

of Interests held by a Consultant whose 

retainer has been terminated or has 

expired, such Interests will be subject to 

mandatory redemption or repurchase by 

Capital Group, or Capital Group may 

require the former Consultant to sell 

such Interests to an Eligible Investor. A 

Limited Partner, other than the Initial 

Partnerships for which no right to 

repurchase or cancellation exists, would 

receive upon repurchase or cancellation 

of its Interest, the lesser of (a) the 

amount actually paid by the Limited 

Partner to acquire the Interest plus 

interest, less any distributions, and (b) 

the fair market value of the Interest 

determined at the time of the repurchase 

or cancellation as determined in good 

faith by the General Partner. 

13. A Partnership may make 

investments side-by-side with Capital 

Group entities and through investment 

pools sponsored by or managed by a 

Capital Group entity or an unaffiliated 

entity. A Partnership may also co-invest 

directly in a company with Capital 

Group or an investment fund or separate 

account organized for the benefit of 

investors who are not affiliated with 

Capital Group over which a Capital 

Group entity or an Unaffiliated 

Subadviser exercises investment 

discretion (‘‘Third Party Funds’’). 

14. If Capital Group makes loans to 

any Partnership, the lender will be 

entitled to receive interest at a rate no 

less favorable to the borrower than the 

rate that could be obtained on an arm’s 

length basis. A Partnership will not 

borrow from any person if the 

borrowing would cause any person not 

named in section 2(a)(13) of the Act to 

own outstanding securities of the 

Partnership (other than short-term 

paper). Any indebtedness of a 

Partnership will be without recourse to 

the Limited Partners of the Partnership. 

15. A Partnership will not acquire any 

security issued by a registered 

investment company if, immediately 

after the acquisition, the Partnership 

will own, in the aggregate, more than 

3% of the outstanding voting stock of 

the registered investment company. 

Applicants’ Legal Analysis 

1. Section 6(b) of the Act provides, in 

part, that the Commission will exempt 

employees’ securities companies from 

the provisions of the Act to the extent 

that the exemption is consistent with 

the protection of investors. Section 6(b) 

provides that the Commission will 

consider, in determining the provisions 

of the Act from which the company 

should be exempt, the company’s form 

of organization and capital structure, the 

persons owning and controlling its 

securities, the price of the company’s 

securities and the amount of any sales 

load, how the company’s funds are 

invested, and the relationship between 

the company and the issuers of the 

securities in which it invests. Section 

2(a)(13) defines an employees’ securities 

company, in relevant part, as any 

investment company all of whose 

securities (other than short-term paper) 

are beneficially owned (a) by current or 

former employees, or persons on 

retainer, of one or more affiliated 

employers, (b) by immediate family 

members of such persons, or (c) by such 

employer or employers together with 

any of the persons in (a) or (b). 

2. Section 7 of the Act generally 

prohibits investment companies that are 

not registered under section 8 of the Act 

from selling or redeeming their 

securities. Section 6(e) of the Act 

provides that, in connection with any 

order exempting an investment 

company from any provision of section 

7, certain provisions of the Act, as 

specified by the Commission, will be 

applicable to the company and other 

persons dealing with the company as 

though the company were registered 

under the Act. Applicants request an 

order under sections 6(b) and 6(e) of the 

Act exempting the Partnerships from all 

provisions of the Act, except section 9 

and sections 36 through 53 of the Act, 

and the rules and regulations under the 

Act. With respect to sections 17 and 30 

of the Act, and the rules and regulations 

thereunder, and rule 38a–1 under the 

Act, the exemption is limited as set 

forth in the application. 

3. Section 17(a) generally prohibits 

any affiliated person of a registered 

investment company, or any affiliated 

person of an affiliated person, acting as 

principal, from knowingly selling or 

purchasing any security or other 

property to or from the company. 

Applicants request an exemption from 

section 17(a) to permit: (a) A Capital 

Group entity or a Third Party Fund (or 

any affiliated person of such Third Party 

Fund), acting as principal, to engage in 

any transaction directly or indirectly 

with any Partnership or any company 

controlled by such Partnership; (b) a 

Partnership to invest in or engage in any 

transaction with any entity, acting as 

principal, (i) in which such Partnership, 

any company controlled by such 

Partnership, or any Capital Group entity 

or Third Party Fund has invested or will 

invest, or (ii) with which such 

Partnership, any company controlled by 

such Partnership, or any Capital Group 

entity or Third Party Fund is or will 

otherwise become affiliated; and (c) a 

Third Party Investor, acting as principal, 

to engage in any transaction directly or 

indirectly with any Partnership or any 

company controlled by such 

Partnership. The term ‘‘Third Party 

Investor’’ refers to any person or entity 

that is not a Capital Group entity or 

affiliated with Capital Group and is a 

partner or other investor in a Third 

Party Fund. 

4. Applicants submit that an 

exemption from section 17(a) is 

consistent with the purposes of the 

Partnerships and the protection of 

investors. Applicants state that the 

Limited Partners will be informed of the 

possible extent of the Partnership’s 

dealings with Capital Group and of the 

potential conflicts of interest that may 

exist. Applicants also state that, as 

professionals engaged in financial 

services businesses, the Limited 

Partners will be able to evaluate the 

risks associated with those dealings. 

Applicants assert that the community of 

interest among the Limited Partners and 

Capital Group will serve to reduce the 

risk of abuse. Applicants represent that 

the requested relief will not extend to 

any transactions between a Partnership 

and an Unaffiliated Subadviser or an 

affiliated person of an Unaffiliated 

Subadviser, or between a Partnership 

and any person who is not an employee, 

officer or director of the Capital Group 

or is an entity outside of the Capital 

Group and is an affiliated person of the 

Partnership as defined in section 

2(a)(3)(E) of the Act (‘‘Advisory Person’’) 

or any affiliated person of such a 

person. 

5. Section 17(d) of the Act and rule 

17d–1 under the Act prohibit any 

affiliated person of a registered 

investment company, or any affiliated 

person of such person, acting as 

principal, from participating in any joint 

arrangement with the company unless 

authorized by the Commission. 

Applicants request relief to permit 

affiliated persons of each Partnership, or 

affiliated persons of any of these 

persons, to participate in, or effect any 

transaction in connection with, any 

joint enterprise or other joint 

arrangement or profit-sharing plan in 

which the Partnership or a company 

controlled by the Partnership is a 

participant. Applicants acknowledge 

that the requested relief will not extend 

to any transaction in which an 

Unaffiliated Subadviser or an Advisory 

Person, or an affiliated person of either 

such person, has an interest, except in 

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9060 Federal Register / Vol. 76, No. 32 / Wednesday, February 16, 2011 / Notices 

connection with a Third Party Fund 

sponsored by an Unaffiliated 

Subadviser. 

6. Applicants assert that compliance 

with section 17(d) would cause the 

Partnership to forego attractive 

investment opportunities simply 

because a Limited Partner, the General 

Partner or any other affiliated person of 

the Partnership (or any affiliate of the 

affiliated person) made a similar 

investment. Applicants also submit that 

the types of investment opportunities 

considered by a Partnership often 

require each investor to make funds 

available in an amount that may be 

substantially greater than what a 

Partnership may be able to make 

available on its own. Applicants 

contend that, as a result, the only way 

in which a Partnership may be able to 

participate in these opportunities may 

be to co-invest with other persons, 

including its affiliates. Applicants assert 

that the flexibility to structure coinvestments and joint investments will 

not involve abuses of the type section 

17(d) and rule 17d–1 were designed to 

prevent. 

7. Co-investments with Third Party 

Funds, or by a Capital Group entity 

pursuant to a contractual obligation to a 

Third Party Fund, will not be subject to 

condition 3 below. Applicants note that 

it is common for a Third Party Fund to 

require that Capital Group invest its 

own capital in Third Party Fund 

investments, and that Capital Group 

investments be subject to substantially 

the same terms as those applicable to 

the Third Party Fund. Applicants 

believe it is important that the interests 

of the Third Party Fund take priority 

over the interests of the Partnerships, 

and that the Third Party Fund not be 

burdened or otherwise affected by 

activities of the Partnerships. In 

addition, applicants assert that the 

relationship of a Partnership to a Third 

Party Fund is fundamentally different 

from a Partnership’s relationship to 

Capital Group. Applicants contend that 

the focus of, and the rationale for, the 

protections contained in the requested 

relief are to protect the Partnerships 

from any overreaching by Capital Group 

in the employer/employee context, 

whereas the same concerns are not 

present with respect to the Partnerships 

vis-a-vis a Third Party Fund. 

8. Section 17(e) of the Act and rule 

17e–1 under the Act limit the 

compensation an affiliated person may 

receive when acting as agent or broker 

for a registered investment company. 

Applicants request an exemption from 

section 17(e) to permit a Capital Group 

entity (including the General Partner) 

that acts as an agent or broker to receive 

placement fees, advisory fees, or other 

compensation from a Partnership in 

connection with the purchase or sale by 

the Partnership of securities, provided 

that the fees or other compensation are 

deemed ‘‘usual and customary.’’ 

Applicants state that for purposes of the 

application, fees or other compensation 

that are charged or received by a Capital 

Group entity will be deemed ‘‘usual and 

customary’’ only if (a) The Partnership is 

purchasing or selling securities with 

other unaffiliated third parties, 

including Third Party Funds, (b) the 

fees or compensation being charged to 

the Partnership are also being charged to 

the unaffiliated third parties, including 

Third Party Funds, and (c) the amount 

of securities being purchased or sold by 

the Partnership does not exceed 50% of 

the total amount of securities being 

purchased or sold by the Partnership 

and the unaffiliated third parties, 

including Third Party Funds. 

Applicants assert that, because Capital 

Group does not wish to appear to be 

favoring the Partnerships, compliance 

with section 17(e) would prevent a 

Partnership from participating in 

transactions where the Partnership is 

being charged lower fees than 

unaffiliated third parties. Applicants 

assert that the fees or other 

compensation paid by a Partnership to 

a Capital Group entity will be the same 

as those negotiated at arm’s length with 

unaffiliated third parties. 

9. Rule 17e–1(b) under the Act 

requires that a majority of directors who 

are not ‘‘interested persons’’ (as defined 

in section 2(a)(19) of the Act) take 

actions and make approvals regarding 

commissions, fees, or other 

remuneration. Rule 17e–1(c) under the 

Act requires each investment company 

relying on the rule to satisfy the fund 

governance standards defined in rule 0– 

1(a)(7) under the Act (the ‘‘Fund 

Governance Standards’’). Applicants 

request an exemption from rule 17e–1 to 

the extent necessary to permit each 

Partnership to comply with the rule 

without having a majority of the 

directors of the General Partner who are 

not interested persons take actions and 

make determinations as set forth in 

paragraph (b) of the rule, and without 

having to satisfy the standards set forth 

in paragraph (c) of the rule. Applicants 

state that because all the directors of the 

General Partner will be affiliated 

persons, without the relief requested, a 

Partnership could not comply with rule 

17e–1. Applicants state that each 

Partnership will comply with rule 17e– 

1 by having a majority of the directors 

of the General Partner take actions and 

make approvals as set forth in the rule. 

Applicants state that each Partnership 

will otherwise comply with rule 17e–1. 

10. Section 17(f) of the Act designates 

the entities that may act as investment 

company custodians, and rule 17f–1 

under the Act imposes certain 

requirements when the custodian is a 

member of a national securities 

exchange. Applicants request an 

exemption from section 17(f) and rule 

17f–1 to permit a Capital Group entity 

to act as custodian of Partnership assets 

without a written contract. Applicants 

also request an exemption from the rule 

17f–1(b)(4) requirement that an 

independent accountant periodically 

verify the assets held by the custodian. 

Applicants state that, because of the 

community of interest between Capital 

Group and the Partnerships and the 

existing requirement for an independent 

audit, compliance with this requirement 

would be unnecessary. Applicants will 

comply with all other requirements of 

rule 17f–1. 

11. Applicants also request an 

exemption from rule 17f–2 to permit the 

following exceptions from the 

requirements of rule 17f–2: (a) A 

Partnership’s investments may be kept 

in the locked files of the General 

Partner; (b) for purposes of paragraph 

(d) of the rule, (i) Employees of the 

General Partner (or Capital Group) will 

be deemed to be employees of the 

Partnerships, (ii) officers or managers of 

the General Partner of a Partnership (or 

Capital Group) will be deemed to be 

officers of the Partnership and (iii) the 

General Partner of a Partnership or its 

board of directors will be deemed to be 

the board of directors of a Partnership 

and (c) in place of the verification 

procedure under paragraph (f) of the 

rule, verification will be effected 

quarterly by two employees of the 

General Partner (or Capital Group). 

Applicants expect that with respect to 

certain Partnerships, some of their 

investments may be evidenced only by 

partnership agreements, participation 

agreements or similar documents, rather 

than by negotiable certificates that could 

be misappropriated. Applicants assert 

that for such a Partnership, these 

instruments are most suitably kept in 

the files of the General Partner, where 

they can be referred to as necessary. 

12. Section 17(g) of the Act and rule 

17g–1 under the Act generally require 

the bonding of officers and employees of 

a registered investment company who 

have access to its securities or funds. 

Rule 17g–1 requires that a majority of 

directors who are not interested persons 

take certain actions and give certain 

approvals relating to fidelity bonding. 

The rule also requires that the board of 

directors of an investment company 

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Federal Register / Vol. 76, No. 32 / Wednesday, February 16, 2011 / Notices 9061 

5Each Partnership will preserve the accounts, 

books and other documents required to be 

maintained in an easily accessible place for the first 

two years. 

relying on the rule satisfy the Fund 

Governance Standards. Applicants 

request relief to permit the General 

Partner’s board of directors, who may be 

deemed interested persons, to take 

actions and make determinations as set 

forth in the rule. Applicants state that, 

because all directors of the General 

Partner will be affiliated persons, a 

Partnership could not comply with rule 

17g–1 without the requested relief. 

Specifically, each Partnership will 

comply with rule 17g–1 by having a 

majority of the General Partner’s 

directors take actions and make 

determinations as set forth in rule 17g– 

1. Applicants also request an exemption 

from the requirements of paragraph (g) 

of rule 17g–1 relating to the filing of 

copies of fidelity bonds and related 

information with the Commission and 

the provision of notices to the board of 

directors, paragraph (h) of rule 17g–1 

relating to the appointment of a person 

to make the filings and provide the 

notices required by paragraph (g), and 

paragraph (j)(3) of rule 17g–1 relating to 

compliance with the Fund Governance 

Standards. Applicants state that the 

Partnerships will comply with all other 

requirements of rule 17g–1. 

13. Section 17(j) of the Act and 

paragraph (b) of rule 17j–1 under the 

Act make it unlawful for certain 

enumerated persons to engage in 

fraudulent or deceptive practices in 

connection with the purchase or sale of 

a security held or to be acquired by a 

registered investment company. Rule 

17j–1 also requires that every registered 

investment company adopt a written 

code of ethics and that every access 

person of a registered investment 

company report personal securities 

transactions. Applicants request an 

exemption from the provisions of rule 

17j–1, except for the anti-fraud 

provisions of paragraph (b), because 

they are unnecessarily burdensome as 

applied to the Partnerships. The relief 

requested will only extend to Capital 

Group entities and is not requested with 

respect to any Unaffiliated Subadviser 

or Advisory Person. 

14. Applicants request an exemption 

from the requirements in sections 30(a), 

30(b), and 30(e) of the Act, and the rules 

under those sections, that registered 

investment companies prepare and file 

with the Commission and mail to their 

shareholders certain periodic reports 

and financial statements. Applicants 

contend that the forms prescribed by the 

Commission for periodic reports have 

little relevance to the Partnerships and 

would entail administrative and legal 

costs that outweigh any benefit to the 

Limited Partners. Applicants request 

exemptive relief to the extent necessary 

to permit each Partnership to report 

annually to its Limited Partners. 

Applicants also request an exemption 

from section 30(h) of the Act to the 

extent necessary to exempt the General 

Partner of each Partnership, members of 

the General Partner or any board of 

managers or directors or committee of 

Capital Group employees to whom the 

General Partner may delegate its 

functions, and any other persons who 

may be deemed to be members of an 

advisory board of a Partnership, from 

filing Forms 3, 4, and 5 under section 

16(a) of the Exchange Act with respect 

to their ownership of Interests in the 

Partnership. Applicants assert that, 

because there will be no trading market 

and the transfers of Interests will be 

severely restricted, these filings are 

unnecessary for the protection of 

investors and burdensome to those 

required to make them. 

15. Rule 38a–1 requires investment 

companies to adopt, implement and 

periodically review written policies 

reasonably designed to prevent violation 

of the federal securities law and to 

appoint a chief compliance officer. Each 

Partnership will comply will rule 38a– 

1(a), (c) and (d), except that (a) since the 

Partnership does not have a board of 

directors, the board of directors of the 

General Partner will fulfill the 

responsibilities assigned to the 

Partnership’s board of directors under 

the rule, (b) since the board of directors 

of the General Partner does not have any 

disinterested members, approval by a 

majority of the disinterested board 

members required by rule 38a–1 will 

not be obtained, and (c) since the board 

of directors of the General Partner does 

not have any disinterested members, the 

Partnerships will comply with the 

requirement in rule 38a–1(a)(4)(iv) that 

the chief compliance officer meet with 

the independent directors by having the 

chief compliance officer meet with the 

board of directors of the General Partner 

as constituted. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 

1. Each proposed transaction 

involving a Partnership otherwise 

prohibited by section 17(a) or section 

17(d) of the Act and rule 17d–1 under 

the Act to which a Partnership is a party 

(the ‘‘Section 17 Transactions’’) will be 

effected only if the General Partner 

determines that: 

(a) the terms of the Section 17 

Transaction, including the 

consideration to be paid or received, are 

fair and reasonable to the Limited 

Partners of the Partnership and do not 

involve overreaching of the Partnership 

or its Limited Partners on the part of any 

person concerned; and 

(b) the Section 17 Transaction is 

consistent with the interests of the 

Limited Partners, the Partnership’s 

organizational documents and the 

Partnership’s reports to its Limited 

Partners. 

In addition, the General Partner of the 

Partnership will record and preserve a 

description of all Section 17 

Transactions, the General Partner’s 

findings, the information or materials 

upon which the findings are based and 

the basis for the findings. All such 

records will be maintained for the life 

of the Partnership and at least six years 

thereafter and will be subject to 

examination by the Commission and its 

staff.5

2. The General Partner of each 

Partnership will adopt, and periodically 

review and update, procedures designed 

to ensure that reasonable inquiry is 

made, prior to the consummation of any 

Section 17 Transaction, with respect to 

the possible involvement in the 

transaction of any affiliated person or 

promoter of or principal underwriter for 

the Partnership or any affiliated person 

of such person, promoter or principal 

underwriter. 

3. The General Partner of each 

Partnership will not invest the funds of 

the Partnership in any investment in 

which an ‘‘Affiliated Co-Investor’’ (as 

defined below) has acquired or proposes 

to acquire the same class of securities of 

the same issuer and where the 

investment transaction involves a joint 

enterprise or other joint arrangement 

within the meaning of rule 17d–1 in 

which the Partnership and an Affiliated 

Co-Investor are participants, unless any 

such Affiliated Co-Investor, prior to 

disposing of all or part of its investment, 

(a) gives the General Partner sufficient, 

but not less than one day’s, notice of its 

intent to dispose of its investment; and 

(b) refrains from disposing of its 

investment unless the Partnership has 

the opportunity to dispose of the 

Partnership’s investment prior to or 

concurrently with, on the same terms as, 

and pro rata with the Affiliated CoInvestor. The term ‘‘Affiliated CoInvestor’’ with respect to any 

Partnership means any person who is: 

(a) An ‘‘affiliated person’’ (as such term 

is defined in section 2(a)(3) of the Act) 

of the Partnership (other than a Third 

Party Fund); (b) Capital Group; (c) an 

officer or director of Capital Group; or 

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9062 Federal Register / Vol. 76, No. 32 / Wednesday, February 16, 2011 / Notices 

6Each Partnership will preserve the accounts, 

books and other documents required to be 

maintained in an easily accessible place for the first 

two years. 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 63256 

(November 5, 2010), 75 FR 69503 (‘‘Notice’’). 4See Letters from Gary S. Sheller, CFP, Sheller 

Financial Services, dated November 24, 2010 

(‘‘Sheller Letter’’); and Michael S. Nichols, PhD, 

Principal/Financial Advisor, Cutter Advisors 

Group, dated November 29, 2010 (‘‘Cutter Letter’’). 

5See Securities Exchange Act Release No. 63582 

(December 21, 2010), 75 FR 81704 (December 28, 

2010). 

6See Letter to Elizabeth M. Murphy, Secretary, 

Commission, from Stephanie M. Dumont, Senior 

Vice President and Director of Capital Markets 

Policy, FINRA, dated January 24, 2011 (‘‘FINRA 

Response Letter’’). 

7See FINRA Rule 6140(h) and (i). 

8See FINRA Rule 6140(h). 

9See FINRA Rule 6140(h) and (i). 

(d) an entity (other than a Third Party 

Fund) in which a Capital Group entity 

acts as a general partner or has a similar 

capacity to control the sale or other 

disposition of the entity’s securities. 

The restrictions contained in this 

condition, however, shall not be 

deemed to limit or prevent the 

disposition of an investment by an 

Affiliated Co-Investor (a) To its direct or 

indirect wholly-owned subsidiary, to 

any company (a ‘‘Parent’’) of which the 

Affiliated Co-Investor is a direct or 

indirect wholly-owned subsidiary or to 

a direct or indirect wholly-owned 

subsidiary of its Parent, (b) to immediate 

family members of the Affiliated CoInvestor or a trust or other investment 

vehicle established for any Affiliated 

Co-Investor or any such immediate 

family member, or (c) when the 

investment is comprised of securities 

that are (i) listed on a national securities 

exchange registered under section 6 of 

the Exchange Act, (ii) NMS stocks 

pursuant to section 11A(a)(2) of the 

Exchange Act and rule 600(a) of 

Regulation NMS thereunder, (iii) 

government securities as defined in 

section 2(a)(16) of the Act or other 

securities that meet the definition of 

‘‘Eligible Security’’ in rule 2a–7 under 

the Act, or (iv) listed or traded on any 

foreign securities exchange or board of 

trade that satisfies regulatory 

requirements under the law of the 

jurisdiction in which such foreign 

securities exchange or board of trade is 

organized similar to those that apply to 

a national securities exchange or a 

national market system for securities. 

4. Each Partnership and its General 

Partner will maintain and preserve, for 

the life of each Series of the Partnership 

and at least six years thereafter, such 

accounts, books and other documents 

constituting the record forming the basis 

for the audited financial statements that 

are to be provided to the Limited 

Partners in the Partnership, and each 

annual report of the Partnership 

required to be sent to the Limited 

Partners, and agree that all such records 

will be subject to examination by the 

Commission and its staff.6

5. The General Partner of each 

Partnership will send to each Limited 

Partner having an Interest in the 

Partnership at any time during the fiscal 

year then ended, Partnership financial 

statements audited by the Partnership’s 

independent accountants with respect 

to those Series in which the Limited 

Partner had an Interest. At the end of 

each fiscal year, the General Partner will 

make or cause to be made a valuation 

of all of the assets of the Partnership as 

of such fiscal year end in a manner 

consistent with customary practice with 

respect to the valuation of assets of the 

kind held by the Partnership. In 

addition, as soon as practicable after the 

end of each fiscal year of the 

Partnership, the General Partner will 

send a report to each person who was 

a Limited Partner at any time during the 

fiscal year then ended, setting forth such 

tax information as shall be necessary for 

the preparation by the Limited Partner 

of that partner’s federal and state 

income tax returns and a report of the 

investment activities of the Partnership 

during that fiscal year. 

6. If a Partnership makes purchases or 

sales from or to an entity affiliated with 

the Partnership by reason of an officer, 

director or employee of a Capital Group 

entity (a) serving as an officer, director, 

general partner or investment adviser of 

the entity, or (b) having a 5% or more 

investment in the entity, such 

individual will not participate in the 

Partnership’s determination of whether 

or not to effect the purchase or sale. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–3494 Filed 2–15–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63885; File No. SR–FINRA– 

2010–055] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Disapproving 

Proposed Rule Change To Amend 

FINRA Rule 6140 (Other Trading 

Practices) 

February 10, 2011. 

I. Introduction 

On October 29, 2010, Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend FINRA Rule 6140, Other Trading 

Practices. The proposed rule change was 

published for comment in the Federal 

Register on November 12, 2010.3 The 

Commission received two comments on 

the proposal.4 On December 21, 2010, 

the Commission extended the time 

period in which to either approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether to 

disapprove the proposed rule change, to 

February 10, 2011.5 On January 24, 

2011, FINRA submitted a response letter 

to the comments.6 This order 

disapproves the proposed rule change. 

II. Description of the Proposal 

FINRA Rule 6140 provides that 

FINRA members may, but are not 

obligated to, accept stop orders in NMS 

stocks, as that term is defined in Rule 

600(b)(47) of Regulation NMS.7 In 

addition, FINRA Rule 6140 provides 

that a stop order becomes a market 

order, or a stop limit order becomes a 

limit order, when a transaction takes 

place at or above the stop price (in the 

case of a buy stop order) or at or below 

the stop price (in the case of a sell stop 

order).8 Thus, under FINRA Rule 6140, 

a stop order cannot be triggered by the 

publication of a quotation at the stop 

price, but only by a transaction.9 FINRA 

proposes to eliminate these provisions 

governing the handling of stop orders in 

their entirety. 

In support of its proposal to eliminate 

entirely from its rules those provisions 

governing the handling of stop orders, 

FINRA states that its members believe 

quotations may be a better indicator of 

the current price of a security than 

transactions, and have requested that 

FINRA provide members the flexibility 

to determine whether the trigger of a 

stop order will be based on transactions 

or quotations at the stop price. FINRA 

represents that its rules do not typically 

define the parameters of the various 

order types that members may accept 

and that FINRA believes that members 

should have the ability to define the 

triggering event for stop orders as well 

as to design their systems consistent 

with such determination. In addition, 

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