[Federal Register Volume 69, Number 189 (Thursday, September 30, 2004)]
[Notices]
[Pages 58558-58560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-21880]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26620; 812-13124]


Deutsche Investment Management Americas, Inc., et al.; Notice of 
Application and Temporary Order

September 24, 2004.
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 
exempting them from section 9(a) of the Act, with respect to an 
injunction entered against Deutsche Bank Securities, Inc. (``DBSI'') on 
September 24, 2004 by the U.S. District Court for the Southern District 
of New York (the ``Federal Injunction''), until the earlier of the date 
the Commission takes action on an application for a permanent order, or 
two years from the date of the Federal Injunction. Applicants have 
requested a permanent order.

Applicants: DBSI, Deutsche Investment Management Americas, Inc., 
Deutsche Asset Management, Inc., Deutsche Asset Management 
International GMBH, Deutsche Asset Management Investment Services, 
Ltd., Investment Company Capital Corp., DB Investment Managers, Inc., 
Deutsche Investments Australia Limited, RREEF America, L.L.C., Deutsche 
Asset Management (Japan) Limited, Deutsche Asset Management (Asia) 
Limited, Deutsche Investment Trust Management Company Limited 
(collectively, the ``Advisers''), and Scudder Distributors, Inc. 
(``Scudder'') (together with the Advisers, the ``Applicants'').\1\
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    \1\ Applicants request that any relief granted pursuant to the 
application also apply to any other company of which DBSI is or 
hereafter becomes an affiliated person (included in the term 
Applicants).

Filing Dates: The application was filed on September 3, 2004. 
Applicants have agreed to file an amendment to the application during 
the notice period, the substance of which is reflected in this notice. 
Applicants also have agreed to file additional amendments to the 
application reflecting the issuance of each State Injunction (as 
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defined below).

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 October 19, 2004, 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, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicants: c/o Daniel O. Hirsch, Esq., Deutsche Asset 
Management/Scudder Investments, 1 South Street, Baltimore, MD 21202.

FOR FURTHER INFORMATION, CONTACT: Courtney S. Thornton, Senior Counsel, 
at (202) 942-0699, or Annette M. Capretta, Branch Chief, at 202-942-
0564 (Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a temporary order and a 
summary of the application. The complete application may be obtained 
for a fee at the Commission's Public Reference Branch, 450 Fifth 
Street, NW., Washington, DC 20549-0102 (telephone 202-942-8090).

Applicants' Representations

    1. Each of the Applicants is an indirect, wholly owned subsidiary 
of Deutsche Bank AG, a global financial services company that provides 
investment management, mutual fund, retail, private and commercial 
banking, investment banking, and insurance services. Collectively, the 
Advisers serve as investment advisers or subadvisers to approximately 
200 registered investment companies or series thereof (``Funds''). 
Scudder acts as the principal underwriter for all of the Funds.
    2. On September 24, 2004, the U.S. District Court for the Southern 
District of New York entered the Federal Injunction against DBSI in a 
matter

[[Page 58559]]

brought by the Commission.\2\ The Commission alleged in the complaint 
(``Complaint'') that DBSI violated section 17(b) of the Securities Act 
of 1933 (``Securities Act'') and certain Conduct Rules of the National 
Association of Securities Dealers (``NASD'') and Rules of the New York 
Stock Exchange (``NYSE'') (the NASD Conduct Rules and NYSE Rules 
together, the ``Exchange Rules'') by engaging in acts and practices 
that created or maintained inappropriate influence by DBSI's investment 
banking business (the ``Investment Banking Department'') over the 
research analysts in DBSI's research department (the ``Research 
Division''). The Commission also alleged in the Complaint that DBSI 
violated section 17(b) of the Securities Exchange Act of 1934 
(``Exchange Act'') by failing to timely produce e-mail that the 
Commission had sought to examine during its investigation of DBSI's 
research and investment banking practices. The Federal Injunction 
enjoined DBSI directly or through its officers, directors, agents and 
employees, from violating section 17(b) of the Securities Act, the 
Exchange Rules cited in the Complaint, and section 17(b) of the 
Exchange Act. Without admitting or denying the allegations in the 
Complaint, DBSI consented to the entry of the Federal Injunction as 
well as the payment of disgorgement and penalties and other equitable 
relief, including undertakings by DBSI to adopt and implement policies 
and procedures relating to certain research activities. Applicants 
state that DBSI expects to enter into settlement agreements relating to 
the activities referred to in the Complaint with certain state and 
territorial agencies, which may result in an injunction by a court of 
competent jurisdiction that is based on the same conduct and the same 
facts as the Complaint (each, a ``State Injunction,'' and, together 
with the Federal Injunction, the ``Injunctions''). Applicants request 
that this application cover any disqualifications of the Applicants 
under Section 9(a) of the Act resulting from the Injunctions.
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    \2\ Securities and Exchange Commission v. Deutsche Bank 
Securities, Inc., 04 CV 06909 (WHP) (S.D.N.Y., filed Aug. 26, 2004).
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Applicants' Legal Analysis

    1. Section 9(a)(2) of the Act, in relevant part, prohibits a person 
who has been enjoined from engaging in or continuing any conduct or 
practice in connection with the purchase or sale of a security from 
acting, among other things, as an investment adviser or depositor of 
any registered investment company or a principal underwriter for any 
registered open-end investment company, registered UIT or registered 
face-amount certificate company. Section 9(a)(3) of the Act makes the 
prohibition in section 9(a)(2) applicable to a company, any affiliated 
person of which has been disqualified under the provisions of section 
9(a)(2). Section 2(a)(3) of the Act defines ``affiliated person'' to 
include any person directly or indirectly controlling, controlled by, 
or under common control with, the other person. Applicants state that 
DBSI is an affiliated person of each of the other Applicants within the 
meaning of section 2(a)(3) of the Act. Applicants further state that 
the entry of the Injunctions would result in Applicants being subject 
to the disqualification provisions of section 9(a) of the Act.
    2. Section 9(c) of the Act provides that the Commission shall grant 
an application for exemption from the disqualification provisions of 
section 9(a) if it is established that these provisions, as applied to 
Applicants, are unduly or disproportionately severe or that the 
Applicants' conduct has been such as not to make it against the public 
interest or the protection of investors to grant the application. 
Applicants have filed an application pursuant to section 9(c) seeking a 
temporary and permanent order exempting them from the disqualification 
provisions of section 9(a) of the Act.
    3. Applicants believe they meet the standard for exemption 
specified in section 9(c). Applicants state that the prohibitions of 
section 9(a) as applied to them would be unduly and disproportionately 
severe and that the conduct of Applicants has been such as not to make 
it against the public interest or the protection of investors to grant 
the exemption from section 9(a).
    4. Applicants state that the conduct giving rise to the Injunctions 
did not involve any of the Applicants acting in the capacity of 
investment adviser, subadviser, depositor, or principal underwriter for 
a Fund. Applicants state that the Complaint did not expressly reference 
the conduct of any current or former employee of any of the Applicants 
who is or was involved in providing advisory, subadvisory or 
underwriting services to the Funds advised or underwritten by 
Applicants.\3\ While the Advisers' portfolio managers had access to 
research reports issued by the Research Division, there is no 
indication that the portfolio managers relied on these research reports 
more than any other data that would have been considered by the 
portfolio managers in making investment decisions for the Funds. 
Although some of the Funds held securities in their portfolios at the 
time that DBSI issued research reports concerning the issuers of such 
securities, as far as the Advisers are aware, none of the officers, 
portfolio managers, or any other investment personnel employed by the 
Advisers had any knowledge of any non-public information relating to, 
or had any involvement in, the conduct underlying the Final Judgment. 
In addition, each of the Applicants that serve as an investment adviser 
or subadviser to Funds has adopted policies regarding information 
barriers (the ``Policies'') designed to protect the Funds from certain 
conflicts of interest that may arise between portfolio managers and 
other employees of DBSI. The Policies, which were in effect at the time 
of the conduct described in the Complaint, restrict communications 
between portfolio managers and certain other employees of DBSI.
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    \3\ The Complaint also refers to general practices regarding the 
relationship between the Investment Banking Department and Research 
Division of DBSI. It is possible that one or more current or former 
personnel of the Applicants who is or was involved in providing 
advisory, subadvisory or underwriting services to the Funds was at 
some time involved in investment banking or research activities.
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    5. The Applicants will distribute written materials, including an 
offer to meet in person to discuss the materials, to the board of 
directors or trustees of each Fund (each, a ``Board''), including the 
directors who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act, of the Fund, and their independent legal counsel, 
if any, regarding the Federal Injunction, any impact on the Funds, and 
this application.\4\ The Applicants will provide the Boards with all 
information concerning the Injunctions and this application that is 
necessary for the Funds to fulfill their disclosure and other 
obligations under the federal securities laws.
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    \4\ Applicants state that they will advise the Boards of any 
State Injunctions that are issued.
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    6. Applicants state that the inability to continue providing 
advisory services to the Funds and the inability to continue serving as 
principal underwriter to the Funds would result in potentially severe 
hardships for the Funds and their shareholders. Applicants also assert 
that, if they were barred from providing services to the Funds, the 
effect on their businesses and employees would be severe. The 
Applicants state that they have committed substantial resources to 
establish an expertise in advising and

[[Page 58560]]

distributing the Funds. Bankers Trust Company and its affiliates 
previously received an exemption under section 9(c) as the result of 
conduct that triggered section 9(a), as described in greater detail in 
the application.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:

    Any temporary exemption granted pursuant to the application 
shall be without prejudice to, and shall not limit the Commission's 
rights in any manner with respect to, any Commission investigation 
of, or administrative proceedings involving or against, Applicants, 
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.

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 are granted a temporary exemption from the provisions of 
section 9(a), effective forthwith, solely with respect to the 
Injunctions, subject to the condition in the application, until the 
date the Commission takes final action on their application for a 
permanent order or, if earlier, September 24, 2006.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-21880 Filed 9-29-04; 8:45 am]
BILLING CODE 8010-01-P