3748 Federal Register / Vol. 65, No. 15 / Monday, January 24, 2000 / Notices

4. Under the Director Plan, the

exercise price for Options will be the

fair market value of the applicant’s

stock, defined as the closing price on

the American Stock Exchange on the

date of grant. Options granted under the

Director Plan are exercisable for a

period of 10 years from the date of grant

or a shorter period as the Board may

establish. Options will become

exercisable, in accordance with the

vesting schedule prescribed in each

Eligible Director’s Option agreement. In

the event of death or permanent and

total disability of an Eligible Director

during the Director’s service,

unexercised Options will become

exercisable only during the period of

twelve months following the date of

death or disability. In the event of the

termination of an Eligible Director’s

directorship for a reason other than by

death or permanent and total disability,

an Option shall be exercisable only

during a period of thirty days following

the date of termination. The Options

will not be transferable except for

disposition by gift, will, intestacy, or

pursuant to a qualified domestic

relations order as defined by section

414(p) of the Internal Revenue Code of

1986, as amended.

5. Applicant’s officers and employees,

including any employee directors, are

eligible to receive stock options under

the Franklin Holding Corporation Stock

Incentive Plan (the ‘‘Employee Plan’’).

Eligible Directors are not eligible to

receive stock options under the

Employee Plan. The total number of

shares of common stock issuable under

the Director Plan and the Employee Plan

is 75,000 shares (30,000 shares under

the Director Plan and 45,000 shares

under the Employee Plan), representing

10.3% of the 730,588 shares of

applicant’s stock outstanding as of

December 31, 1999. Applicant has no

warrants, options or rights to purchase

its outstanding voting securities other

than those granted to its directors,

officers, and employees pursuant to the

Employee Plan and the Director Plan.

Applicant’s Legal Analysis

1. Section 63(3) of the Act permits a

BDC to sell its common stock at a price

below current net asset value upon the

exercise of any option issued in

accordance with section 61(a)(3) of the

Act. Section 61(a)(3)(B) of the Act

provides, in pertinent part, that a BDC

may issue to its non-employee directors

options to purchase its voting securities

pursuant to an executive compensation

plan, provided that: (a) the options

expire by their terms within ten years;

(b) the exercise price of the options is

not less than the current market value

of the underlying securities at the date

of the issuance of the options, or if no

market exists, the current net asset value

of the voting securities; (c) the proposal

to issue the options is authorized by the

BDC’s shareholders, and is approved by

order of the Commission upon

application; (d) the options are not

transferable except for disposition by

gift, will or intestacy; (e) no investment

adviser of the BDC receives any

compensation described in section

205(1) of the Investment Advisers Act of

1940, except to the extent permitted by

clause (A) or (B) of that section; and (f)

the BDC does not have a profit-sharing

plan as described in section 57(n) of the

Act.

2. In addition, section 61(a)(3) of the

Act provides that the amount of the

BDC’s voting securities that would

result from the exercise of all

outstanding warrants, options, and

rights at the time of issuance may not

exceed 25% of the BDC’s outstanding

voting securities, except that if the

amount of voting securities that would

result from the exercise of all

outstanding warrants, options, and

rights issued to the BDC’s directors,

officers, and employees pursuant to an

executive compensation plan would

exceed 15% of the BDC’s outstanding

voting securities, then the total amount

of voting securities that would result

from the exercise of all outstanding

warrants, options, and rights at the time

of issuance will not exceed 20% of the

outstanding voting securities of the

BDC.

3. Applicant represents that the terms

of the Director Plan meet all the

requirements of section 61(a)(3)(B) of

the Act. Applicant states in support of

the application that the Eligible

Directors are actively involved in the

oversight of applicant’s affairs and that

it relies on the judgment and experience

of the Board. Applicant also states that

the Eligible Directors provide guidance

and advice on financial and operational

issues, credit and loan policies, asset

valuation, and strategic direction, as

well as serve on committees. Applicant

believes that the Options to be granted

to the Eligible Directors provide

significant incentives for the Eligible

Directors to remain on the Board and to

devote their best efforts to the success

of applicant’s business and the

enhancement of shareholder value.

Applicant also states that the Options

will provide a means for the Eligible

Directors to increase their ownership

interests in applicant, thereby ensuring

close identification of their interests

with the interests of applicant’s

shareholders.

4. Applicant submits that the terms of

the Director Plan are fair and reasonable

and do not involve overreaching of

applicant or its shareholders. Applicant

states that the number of voting

securities that would result from the

exercise of all Options issued or

issuable to the directors, officer, and

employees under the Director Plan and

the Employee Plan is 75,000 shares, or

10.3% of the company’s outstanding

stock, which is below the percentage

limitations in the Act. Applicant asserts

that, given the small amount of common

stock issuable upon the exercise of

Options under the Director Plan, the

exercise of Options would not have a

substantial dilutive effect on the net

asset value of the applicant’s stock.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–1635 Filed 1–21–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IA–1851/803–140]

Ibbotson Associates, Inc.; Notice of

Application

January 18, 2000.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of Application for

Exemption under the Investment

Advisers Act of 1940 (‘‘Advisers Act’’).

APPLICANT: Ibbotson Associates, Inc.

RELEVANT ADVISERS ACT SECTIONS:

Exemption requested under section

203A(c) from section 203A(a).

SUMMARY OF APPLICATION: Applicant

requests an order to permit it to register

with the SEC as an investment adviser.

FILING DATES: The application was filed

on August 2, 1999, and amended on

December 8, 1999.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving applicant with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

February 14, 2000, and should be

accompanied by proof of service on

applicant, in the form of an affidavit or,

for lawyers, a certificate of service.

Hearing requests should state the nature

of the writer’s interest, the reason for the

Federal Register / Vol. 65, No. 15 / Monday, January 24, 2000 / Notices 3749

1 15 U.S.C. 80b–3a(a)(1).

2 15 U.S.C. 80b–3a(a)(2).

3 15 U.S.C. 80b–3a(c).

4S. Rep. No. 293, 104th Cong. 2d Sess. (1996) at

4.

5 Id.

6 Id. at 5.

7See 17 CFR 275.203A–2(b).

8See 17 CFR 275.203A–3(a)(1).

request, and the issues contested.

Persons may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 5th

Street, N.W., Washington, D.C. 20549–

0609. Applicant, Ibbotson Associates,

Inc., 225 North Michigan Avenue, Suite

700, Chicago, Illinois 60601–7676.

FOR FURTHER INFORMATION CONTACT:

Karen L. Goldstein, Attorney, at (202)

942–0646 or Jennifer L. Sawin, Special

Counsel, at (202) 942–0716 (Division of

Investment Management, Task Force on

Investment Adviser Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the SEC’s

Public Reference Branch.

Applicant’s Representations

1. Applicant is an Illinois corporation

with its principal place of business in

Chicago, Illinois. Until July 8, 1997,

Applicant was registered as an

investment adviser with the SEC.

Applicant is currently registered as an

investment adviser in California, Illinois

and New York.

2. Applicant provides services

predominantly to institutional clients

such as pension plans, pension

consultants, investment advisers,

broker-dealers, insurance companies

and banks. None of Applicant’s current

clients are natural persons.

3. Applicant provides a wide range of

services to its clients; these services

include portfolio strategy design, asset

allocation, assessment of investor risk

tolerance and financial engineering,

corporate finance, client specific

research and educational programs.

Applicant also assists institutional

clients by designing model asset

allocation portfolios or by designing a

questionnaire for institutions to use in

determining model portfolio allocations

for their individual investor clients.

Applicant’s institutional clients,

however, are responsible for their

individual investor clients.

Applicant’s Legal Analysis

1. On October 11, 1996, the National

Securities Markets Improvement Act of

1996 was enacted. Title III of the Act,

the Investment Advisers Supervision

Coordination Act (‘‘Coordination Act’’),

added new section 203A to the Advisers

Act. Under section 203A(a)(1),1 an

investment adviser that is regulated or

required to be regulated as an

investment adviser in the state in which

it maintains its principal office and

place of business is prohibited from

registering with the SEC unless the

investment adviser (i) has assets under

management of not less than $25

million or (ii) is an investment adviser

to an investment company registered

under the Investment Company Act of

1940 (‘‘Investment Company Act’’).

Section 203A(a)(2) defines the phrase

‘‘assets under management’’ as the

‘‘securities portfolios with respect to

which an investment adviser provides

continuous and regular supervisory or

management services.’’ 2

2. Applicant states that it does not

qualify for registration as an investment

adviser with the SEC. Applicant states

that it does not have $25 million or

more in assets under management, does

not serve as an investment adviser to an

investment company registered under

the Investment Company Act, and does

not qualify for an exemption from the

prohibition on SEC registration as

provided in rule 203A–2 under the

Advisers Act.

3. Applicant notes that section

203A(c) of the Advisers Act authorizes

the SEC to permit an investment adviser

to register with the SEC if prohibiting

registration would be ‘‘unfair, a burden

on interstate commerce, or otherwise

inconsistent with the purposes of

[section 203A].’’ 3

4. Applicant argues that prohibiting it

from registering as an investment

adviser with the SEC would be

inconsistent with the purposes of

section 203A. Applicant submits that

Congress intended section 203A to

divide responsibility for regulating

investment advisers between the SEC

and the states; the states should be

responsible for regulating advisers

‘‘whose activities are likely to be

concentrated in their home state,’’ and

‘‘larger advisers, with national

businesses’’ should be regulated by the

Commission and ‘‘be subject to national

rules.’’ 4 Applicant asserts that Congress

chose the ‘‘assets under management’’

requirement as a rough guide for this

division, on the theory that investment

advisers with $25 million or more of

assets under management are likely to

be national investment advisers that

should be regulated by the SEC, while

investment advisers managing less than

$25 million in assets are likely to be

smaller advisers that should be subject

to the local rules of the states.

5. Applicant submits that Congress

recognized that the ‘‘assets under

management’’ requirement does not

precisely differentiate national

investment advisers from local

investment advisers, and that some

national investment advisers may not

qualify for SEC registration under the

test formulated by Congress. Applicant

states that Congress acknowledged that

‘‘the definition of ‘assets under

management’ * * * may, in some cases,

exclude firms with a national or

multistate practice from being able to

register with the SEC.’’ 5 Applicant

further states that Congress intended the

SEC to use its exemptive authority

under section 203A(c) to remedy any

unfairness, burdens or inconsistencies

caused by the assets under management

requirement by permitting, ‘‘where

appropriate, the registration of such

firms with the [SEC].’’ 6

6. Applicant argues that it engages in

a large, national investment advisory

business of the type Congress

contemplated when it provided the SEC

exemptive authority under section

203A(c). Applicant asserts that by

providing services to institutional

clients across the country, its activities,

like those of pension consultants

exempted by SEC rule from the

prohibition on SEC registration,7 have a

direct effect on billions of dollars of

assets under management at the nation’s

investment companies, investment

advisers, broker-dealers, insurance

companies, banks, and other

institutional investors.

7. Applicant submits further that it is

inconsistent with the purposes of

section 203A for a state to regulate

investment advisers whose activities

involve little or no traditional state

interest. Applicant notes that, in section

203A, Congress preserved the states’

ability to regulate certain investment

adviser representatives of advisers

registered with the SEC. Applicant

further notes that under the SEC’s

definition of investment adviser

representative,8 only personnel who

work principally with individual, rather

than institutional, clients are subject to

state regulation. Applicant argues that

this definition recognizes that,

consistent with Congress’ intent in the

Coordination Act, the states’ primary

interest is in oversight of representatives

who have an individual, not an

institutional, clientele. Applicant

submits that in fashioning this

definition, the SEC noted its belief that

distinguishing between retail and other

clients was consistent with the intent of

3750 Federal Register / Vol. 65, No. 15 / Monday, January 24, 2000 / Notices

9See 17 CFR 275.203A–3(a)(3)(i)

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

2 17 CFR 240.19b–4.

3Letter from Scott Van Hatten, Amex, to Richard

Strasser, Assistant Director, Division of Market

Regulation (‘‘Division’’), Commission, dated June

11, 1999 (‘‘Amendment No. 1’’). The Exchange

originally filed the proposed rule change under

Section 19(b)(3)(A) of the Act. Pursuant to

Commission staff’s request, the Exchange refiled the

proposed rule change under Section 19(b)(2) of the

Act.

4Letter from Scott Van Hatten, Amex, to Nancy

Sanow, Assistant Director, Division, Commission,

dated December 1, 1999 (‘‘Amendment No. 2’’).

Amendment No. 2 states that the exchange will

issue a circular prior to trading any new index

warrant pursuant to Rule 19b–4(e) to (i) highlight

specific risks associated with warrants on new

indexes and remind members that index warrants

are direct obligations of the issuer, which are not

subject to a clearing house guarantee, (ii) clarify that

index warrants may only be sold to accounts

approved for standardized options trading, and (iii)

clarify that the Exchange’s options suitability

standards apply to index warrants. Amendment No.

2 also states that Amex Rules 1100 through 1110,

which govern issuer eligibility, margin

requirements, discretionary accounts, supervision

of accounts, position and exercise limits, reportable

positions, and trading halts and suspensions, will

apply to index warrants. Finally, Amendment No.

2 states that the Exchange’s enhanced surveillance

procedures will continue to apply to surveillance of

index warrants traded pursuant to Rule 19b–4(e).

5See Securities Exchange Act Release No. 40761

(Dec. 8, 1998), 63 FR 70952 (Dec. 22, 1998).

6Amex Rule 900C defines ‘‘Stock Index Industry

Group’’ as a stock index group relating to a stock

index which reflects representative stock market

values or prices of a particular industry or related

industries (also referred to as a ‘‘narrow based

index’’).

7The Commission granted approval to list and

trade narrow-based index warrants pursuant to

Section 19(b)(3)(A) in Securities Exchange Act

Release No. 37007 (March 21, 1996), 61 FR 14165

(March 29, 1996).

Congress as reflected in the

Coordination Act.

8. Applicant argues that it is the type

of investment adviser that Congress

intended the Commission to consider

exempting under section 203A(c).

Applicant states that it provides services

predominantly to institutions and that it

believes that its business will remain

predominantly institutional. Applicant

will not market its services to individual

investors, and in no case will it have (i)

more than five clients who are natural

persons (other than certain ‘‘excepted

persons,’’ as that term is defined in rule

203A–3, paragraph (a)(3)(i) under the

Advisers Act 9) or (ii) more than ten

percent of its clients who are natural

persons (other than certain excepted

persons).

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–1634 Filed 1–21–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

Sunshine Act Meeting

FEDERAL REGISTER CITATION OF PREVIOUS

ANNOUNCEMENT: [65 FR 2656, January

18, 2000]

STATUS: Closed Meeting.

PLACE: 450 Fifth Street, N.W.,

Washington, D.C.

DATE PREVIOUSLY ANNOUNCED: January

18, 2000.

CHANGE IN THE MEETING: Cancellation of

Meeting.

The closed meeting scheduled for

Thursday, January 20, 2000 at 11:00

a.m., has been canceled.

At times, changes in Commission

priorities require alterations in the

scheduling of meeting items. For further

information and to ascertain what, if

any, matters have been added, deleted

or postponed, please contact:

The Office of the Secretary at (202)

942–7070.

Dated: January 20, 2000.

Jonathan G. Katz,

Secretary.

[FR Doc. 00–1753 Filed 1–20–00 3:47 pm]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

(Release No. 34–42342; File No. SR–Amex–

99–21)

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the American Stock Exchange LLC

Amending Section 106 of the Amex

Company Guide

DATE: January 14, 2000.

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on June 10,

1999, the American Stock Exchange LLC

(‘‘Amex’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by the Amex. The Exchange

filed Amendments No. 1 3 and No. 2 4 to

the proposed rule change on June 14,

1999 and December 1, 1999,

respectively. The Commission is

publishing this notice to solicit

comments on the proposed rule change,

as amended, from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to amend

Section 106 of the Amex Company

Guide to provide for the trading of

narrow-based stock index warrants

pursuant to new Rule 19b–4(e) 5 under

the Act.

II. Self-Regulatory Organization’s

Statement of the Propose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

self-regulatory organization included

statements concerning the purpose of,

and basis for, the proposed rule change

and discussed any comments it received

on the proposed rule change. The text

of these statements may be examined at

the places specified in Item IV below.

The Amex has prepared summaries, set

forth in sections A, B, and C below, of

the most significant aspects of such

statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The Exchange proposes to amend

Section 106 of the Amex Company

Guide to provide for the trading of stock

index industry group warrants 6

pursuant to new Rule 19b–4(e) under

the Act. Section 106 of the Amex

Company Guide currently authorizes

the Exchange to trade warrants on a

stock index industry group pursuant to

Section 19(b)(3)(A) of the Act provided

that the index meets the generic criteria

set forth in Commentary .02 to Amex

Rule 901C.7 As discussed in the

Commission release adopting new Rule

19b–4(e), however, the Exchange would

no longer be required to submit,

pursuant to new Rule 19b–4(e) under

the Act, a proposed rule change to trade

warrants on a new stock index industry

group provided the index meets the

generic criteria set forth in Commentary

.02 to Amex Rule 901C.

In its release adopting new Rule 19b–

4(e), the Commission noted that in order

to rely on the amendment and not

submit filings pursuant to Section

19(b)(3)(A) for warrants that satisfy the

criteria of Rule 901C, a self-regulatory

organization would be required to

submit a proposed rule change for

Commission approval to eliminate the

Section 19(b)(3)(A) rule filing