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[Federal Register Volume 74, Number 157 (Monday, August 17, 2009)]
[Notices]
[Pages 41464-41466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-19625]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-28845; File No. 812-13680]

GE Asset Management Incorporated and GE Investment Distributors, 
Inc.; Notice of Application and Temporary Order

August 11, 2009.
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 General Electric Company (``GE'') on August 
11, 2009 by the United States District Court for the District of 
Connecticut (``Injunction''), until the Commission takes final action 
on an application for a permanent order. Applicants also have applied 
for a permanent order.
    Applicants: GE Asset Management Incorporated (``GEAM'') and GE 
Investment Distributors, Inc. (``GEID'', collectively with GEAM, 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 GE is or may 
become an affiliated person (together with the Applicants, the 
``Covered Persons'').
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    Filing Date: The application was filed on August 4, 2009, and 
amended on August 11, 2009.
    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 September 8, 2009, 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

[[Page 41465]]

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: 3001 Summer Street, 
Stamford, CT 06904-7900.

FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, at (202) 551-
6812, or Mary Kay Frech, Branch Chief, at (202) 551-6821, (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 
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. GE is a large diversified technology, media, and financial 
services company. GEAM, a Delaware corporation, is a direct, wholly-
owned subsidiary of GE. GEAM is registered as an investment adviser 
under the Investment Advisers Act of 1940 and serves as investment 
adviser to a number of registered investment companies (``Funds''), 
including employees' securities companies (``ESCs'').\2\ GEID is, 
through GEAM, an indirect, wholly-owned subsidiary of GE. GEID is 
registered as a broker-dealer under the Securities Exchange Act of 1934 
and is a member of the Financial Industry Regulatory Authority, Inc. 
GEID serves as principal underwriter to a number of Funds.
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    \2\ The ESCs, as defined in section 2(a)(13) of the Act, are 
open-end management investment companies registered under the Act 
and provide investment opportunities for certain employees, 
officers, and directors of GEAM and its affiliates, and other 
eligible participants.
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    2. On August 11, 2009, the United States District Court for the 
District of Connecticut entered a final judgment, which included the 
Injunction, against GE (``Judgment'') in a matter brought by the 
Commission.\3\ The Commission alleged in the complaint (``Complaint'') 
that, in 2002 and 2003, high level GE accounting executives or other 
finance personnel approved accounting that was not in compliance with 
generally accepted accounting principles so as to increase earnings or 
revenues or to avoid reporting negative financial results. Without 
admitting or denying the allegations in the Complaint, except as to 
jurisdiction, GE consented to the entry of the Judgment that included, 
among other things, the entry of the Injunction, and a civil penalty of 
$50 million.
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    \3\ Securities and Exchange Commission v. General Electric 
Company, Final Judgment as to General Electric Company, 3:09 CV 1235 
(RNC) (D. Conn. Aug. 11, 2009).
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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, among other things, engaging in or 
continuing any conduct or practice in connection with the purchase or 
sale of a security, or in connection with activities as an underwriter, 
broker or dealer, 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 unit investment trust 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, among 
others, any person directly or indirectly controlling, controlled by, 
or under common control with, the other person. Applicants state that 
GE is an affiliated person of each of the Applicants within the meaning 
of section 2(a)(3) of the Act. Applicants state that the entry of the 
Injunction results 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 
the 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 exemption. 
Applicants have filed an application pursuant to section 9(c) seeking a 
temporary and permanent order exempting them and other Covered Persons 
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 the 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 alleged conduct giving rise to the 
Injunction did not involve either of the Applicants acting in the 
capacity of investment adviser, subadviser or depositor for any Fund or 
as principal underwriter for any Fund, and no such Funds bought or held 
any securities issued by GE during the period of misconduct alleged in 
the Complaint, other than with respect to index funds. Applicants also 
state that none of the current or former directors, officers, or 
employees of the Applicants had any responsibility for, or involvement 
in, the violative conduct alleged in the Complaint. Applicants further 
state that the personnel at GE who had any responsibility for, or 
involvement in, the violations alleged in the Complaint have had no, 
and will not have any future, involvement in providing investment 
advisory, subadvisory, or underwriting services to the Funds.
    5. Applicants state that their inability to continue to provide 
investment advisory, subadvisory and underwriting services to the Funds 
would result in potential hardship for the Funds and their 
shareholders. Applicants state that they will, as soon as reasonably 
practical, distribute written materials, including an offer to meet in 
person to discuss the materials, to the boards of directors of the 
Funds (``Boards'') for which the Applicants serve as investment 
adviser, investment subadviser or principal underwriter, including the 
directors who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act, of such Funds, and their independent legal counsel 
as defined in rule 0-1(a)(6) under the Act, relating to the 
circumstances that led to the Injunction, any impact on the Funds, and 
the application. Applicants state they will provide the Boards with all 
information concerning the Judgment and the application that is 
necessary for the Funds to fulfill their disclosure and other 
obligations under the Federal securities laws.
    6. Applicants also state that, if they were barred from providing 
services to the Funds, the effect on their businesses and employees 
would be severe. Applicants state that they have committed substantial 
resources to establishing expertise in providing advisory and 
distribution services to Funds. Applicants further state that 
prohibiting them from providing such services would not only adversely 
affect their businesses, but would also adversely affect about 500 
employees who are involved in those activities.
    7. A predecessor of one of the Applicants previously received an 
exemption under section 9(c) as the result of conduct that triggered 
section

[[Page 41466]]

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, 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.

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 
GEAM and GEID and any other Covered Persons are granted a temporary 
exemption from the provisions of section 9(a), solely with respect to 
the Injunction, subject to the condition in the application, from 
August 11, 2009, until the Commission takes final action on their 
application for a permanent order.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-19625 Filed 8-14-09; 8:45 am]
BILLING CODE 8010-01-P
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