Federal Register / Vol. 72, No. 63 / Tuesday, April 3, 2007 / Notices 15919 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

27770; 813–264] 

Silas Partners I, LLC et al.; Notice of 

Application 

March 27, 2007. 

AGENCY: Securities and Exchange 

Commission (SEC). 

ACTION: Notice of an 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 and 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 

investment funds formed for the benefit 

of eligible current and former employees 

of Winston & Strawn LLP and its 

affiliates from certain provisions of the 

Act. Each fund will be an ‘‘employees’’

securities company’’ as defined in 

section 2(a)(13) of the Act. 

APPLICANTS: Silas Partners I, LLC (the 

‘‘Investment Fund’’) and Winston & 

Strawn LLP (together with any business 

organization that results from a 

reorganization of Winston & Strawn LLP 

into a different type of business 

organization or into an entity organized 

under the laws of another jurisdiction, 

the ‘‘Firm’’). 

FILING DATES: The application was filed 

on April 24, 2000 and amended on 

March 16, 2007. Applicants have agreed 

to file an amendment during the notice 

period, the substance of which is 

reflected in this notice. 

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 April 23, 2007 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, Securities and 

Exchange Commission, 100 F St., NE., 

Washington, DC 20549–1090. 

Applicants, 35 West Wacker Drive, 

Chicago, IL 60601. 

FOR FURTHER INFORMATION CONTACT: Jean 

Minarick, Senior Counsel, at (202) 551–

6811, or Nadya Roytblat, 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 for a fee at the 

Commission’s Public Reference Branch, 

100 F St., NE., Washington, DC 20549–

0102 (tel. 202–551–5850). 

Applicants’ Representations 

1. The Firm is a law firm organized 

as an Illinois limited liability 

partnership. The Firm 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 ‘‘Winston Group’’

and individually as a ‘‘Winston Entity.’’

The shareholders of the Firm are 

referred to as ‘‘Partners.’’

2. The Investment Fund is a Delaware 

limited liability company. The 

applicants may in the future offer 

additional pooled investment vehicles 

identical in all material respects to the 

Investment Fund (other than investment 

objectives and strategies) (the 

‘‘Subsequent Funds’’) (together, the 

Investment Fund and the Subsequent 

Funds are referred to as the ‘‘Funds’’). 

The applicants anticipate that each 

Subsequent Fund will also be structured 

as a limited liability company, although 

a Subsequent Fund could be structured 

as a limited partnership, corporation, 

trust or other business organization 

formed as an ‘‘employees’’ securities 

company’’ within the meaning of the 

section 2(a)(13) of the Act. The Funds 

will operate as non-diversified, closedend management investment 

companies. The Funds will be 

established to enable the Partners and 

certain employees of Winston Group to 

participate in certain investment 

opportunities that come to the attention 

of Winston Group. Participation as 

investors in the Funds will allow the 

Eligible Investors, as defined below, to 

diversify their investments and to have 

the opportunity to participate in 

investments that might not otherwise be 

available to them or that might be 

beyond their individual means. 

3. A group of Eligible Investors, as 

defined below, appointed by the Firm, 

who are current or retired Partners of 

the Firm (the ‘‘Managers’’) will manage 

the Funds. The Funds will have one or 

more investment committees 

(‘‘Investment Committees’’), each 

member of which shall be a current 

Partner. The Managers shall appoint the 

members of each Investment Committee. 

The Managers or any person involved in 

the operation of the Funds will register 

as investment advisers if required under 

the Investment Advisers Act of 1940, or 

the rules under that Act. 

4. Interests in the Funds (‘‘Interests’’) 

will be offered without registration in 

reliance on section 4(2) of the Securities 

Act of 1933 (the ‘‘Securities Act’’) or 

Regulation D under the Securities Act, 

or any successor rule, and will be sold 

solely to Eligible Investors. Eligible 

Investors consist of ‘‘Eligible 

Employees,’’ ‘‘Qualified Investment 

Vehicles,’’ ‘‘Immediate Family 

Members,’’ each as defined below, and 

Winston Entities. The term ‘‘Fund 

Investors’’ refers to Eligible Investors 

who invest in the Funds. Prior to 

offering Interests in a Fund to an 

individual, the Managers must 

reasonably believe that the individual is 

a sophisticated investor capable of 

understanding and evaluating the risks 

of participating in the Fund without the 

benefit of regulatory safeguards. An 

‘‘Eligible Employee’’ is a person who is, 

at the time of investment, a current or 

former Partner of the Firm or an 

employee of the Winston Group who (a) 

meets the standards of an ‘‘accredited 

investor’’ set forth in rule 501(a)(5) or 

rule 501(a)(6) of Regulation D under the 

Securities Act, or (b) is one of 35 or 

fewer Partners or employees of the 

Winston Group who meets certain 

requirements (‘‘Category 2 investors’’). 

5. Each Category 2 investor will be a 

Partner or an employee of the Winston 

Group, who meets the sophistication 

requirements set forth in rule 

506(b)(2)(ii) of Regulation D under the 

Securities Act and who (a) has a 

graduate degree, has a minimum of 3 

years of business and/or professional 

experience, has had compensation of at 

least $150,000 in the preceding 12 

month period, and has a reasonable 

expectation of compensation of at least 

$150,000 in each of the 2 immediately 

succeeding 12 month periods, or (b) is 

a ‘‘knowledgeable employee,’’ as 

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

the Fund (with the Fund treated as 

though it were a ‘‘Covered Company’’

for purposes of the rule). In addition, a 

Category 2 investor qualifying under (a) 

above will not be permitted to invest in 

any calendar or fiscal year (as 

determined by the Firm) more than 10% 

of his or her income from all sources for 

the immediately preceding calendar or 

fiscal year in one or more Funds. 


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15920 Federal Register / Vol. 72, No. 63 / Tuesday, April 3, 2007 / Notices 

1 If a Qualified Investment Vehicle is an entity 

other than a trust, (a) the reference to ‘‘settlor’’ shall 

be construed to mean a person who created the 

vehicle, alone or together with others, and who 

contributed funds or other assets to the vehicle, and 

(b) the reference to ‘‘trustee’’ shall be construed to 

mean a person who performs functions similar to 

those of a trustee. 

6. A Qualified Investment Vehicle is 

a trust or other entity the sole 

beneficiaries of which are Eligible 

Employees or their Immediate Family 

Members or the settlors and trustees of 

which consist of Eligible Employees or 

Eligible Employees together with 

Immediate Family Members. Immediate 

Family Members include any parent, 

child, spouse of a child, spouse, brother 

or sister, and includes any step and 

adoptive relationships. A Qualified 

Investment Vehicle must be either (a) an 

accredited investor as defined in rule 

501(a) of Regulation D or (b) an entity 

for which an Eligible Employee is a 

settlor and principal investment 

decision-maker and counted toward the 

35 non-accredited Fund Investors.1

7. Each Fund may issue its Interests 

in series (each, a ‘‘Series’’ and 

collectively, the ‘‘Series’’) with new 

Series of Interests being offered from 

time to time. Each Series will represent 

an interest in some or all of those Fund 

investments made by the Fund during a 

specified period of time (the 

‘‘Investment Period’’). 

8. The terms of a Fund will be fully 

disclosed in the private placement 

memorandum of the Fund, and each 

Eligible Investor will receive a private 

placement memorandum and the Fund’s 

limited liability company agreement (or 

other organizational documents) prior to 

his or her investment in the Fund. Each 

Fund will send its Fund Investors 

annual reports, which will contain 

audited financial statements with 

respect to those Series in which the 

Fund Investor has Interests, as soon as 

practicable after the end of each fiscal 

year. In addition, as soon as practicable 

after the end of each fiscal year, the 

Funds will send a report to each Fund 

Investor setting forth such tax 

information as shall be necessary for the 

preparation by the Fund Investor of his 

or her federal and state tax returns. 

9. Fund Investors will be permitted to 

transfer their Interests only with the 

express consent of the Managers. The 

Managers do not anticipate giving such 

consent. Any such transfer must be to 

another Eligible Investor. No fee of any 

kind will be charged in connection with 

the sale of Interests. 

10. The Managers may require a Fund 

Investor to withdraw from a Fund if: (a) 

A Fund Investor ceases to be an Eligible 

Investor; (b) a Fund Investor is no longer 

deemed to be able to bear the economic 

risk of investment in a Fund; (c) adverse 

tax consequences were to inure to the 

Fund were a particular Fund Investor to 

remain; or (d) the continued 

membership of the Fund Investor would 

violate applicable law or regulations. In 

addition, the Firm reserves the right to 

impose vesting provisions on a Fund 

Investor’s investments in a Fund. In an 

investment program that provides for 

vesting provisions, all or a portion of a 

Fund Investor’s Interests will be treated 

as unvested, and vesting will occur 

through the passage of a specified 

period of time. After the end of a Series’

Investment Period, to the extent a Fund 

Investor’s Interests become ‘‘vested,’’

the termination of such Fund Investor’s 

association or employment with the 

Firm will not affect the Fund Investor’s 

rights with respect to the vested 

Interests. Following the Investment 

Period, any portion of a Fund Investor’s 

Interests that are unvested at the time of 

the termination of a Fund Investor’s 

association or employment with the 

Firm may be subject to repurchase or 

cancellation by the Fund. Upon any 

repurchase or cancellation of all or a 

portion of a Fund Investor’s Interests, a 

Fund will at a minimum pay to the 

Fund Investor the lesser of (a) the 

amount actually paid by the Fund 

Investor to acquire the Interests less the 

amount of any distributions received by 

that Fund Investor from the Fund (plus 

interest at or above the prime rate, as 

determined by the Managers) and (b) the 

fair market value of the Interests 

determined at the time of repurchase or 

cancellation, as determined in good 

faith by the Managers. Any interest 

owed to a Fund Investor pursuant to (a) 

above will begin to accrue at the end of 

the Investment Period. 

11. The Firm may be reimbursed by 

a Fund for reasonable and necessary 

out-of-pocket costs directly associated 

with the organization and operation of 

the Funds, including administrative and 

overhead expenses. There will be no 

allocation of any of the Firm’s operating 

expenses to a Fund. In addition, the 

Firm may allocate to a Series any outof-pocket expenses specifically 

attributable to the organization and 

operation of that Series. No separate 

management fee will be charged to a 

Fund by the Managers for their services. 

12. The Funds may borrow from 

Winston Group, a Partner, or a bank or 

other financial institution, provided that 

a Fund 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 Fund (other than short-term paper). 

Any borrowings by a Fund will be nonrecourse other than to the Winston 

Group. If a Winston Entity or a Partner 

makes a loan to the Funds, the interest 

rate on the loan will be no less favorable 

to the Funds than the rate that could be 

obtained on an arm’s length basis. 

13. No Fund will acquire any security 

issued by a registered investment 

company if immediately after the 

acquisition the Fund would own 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 as any investment company 

all of whose securities (other than shortterm 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) 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 Funds 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. 

3. Section 17(a) generally prohibits 

any affiliated person of a registered 

investment company, or any affiliated 

person of an affiliated person, acting as 


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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 Fund to: (a) 

Purchase, from the Firm or any affiliated 

person thereof, securities or interests in 

properties previously acquired for the 

account of the Firm or any affiliated 

person thereof; (b) sell, to the Firm or 

any affiliated person thereof, securities 

or interests in properties previously 

acquired by the Funds; (c) invest in 

companies, partnerships or other 

investment vehicles offered, sponsored 

or managed by the Firm or any affiliated 

person thereof; and (d) purchase 

interests in any company or other 

investment vehicle (i) in which the Firm 

owns 5% or more of the voting 

securities, or (ii) that otherwise is an 

affiliated person of the Fund (or an 

affiliated person of such a person) or an 

affiliated person of the Firm. 

4. Applicants state that an exemption 

from section 17(a) is consistent with the 

protection of investors and the purposes 

of the Act. Applicants state that the 

Fund Investors will be informed in the 

Fund’s private placement memorandum 

of the possible extent of the Fund’s 

dealings with the Firm or any affiliated 

person thereof. Applicants also state 

that, as financially sophisticated 

professionals, Fund Investors will be 

able to evaluate the attendant risks. 

Applicants assert that the community of 

interest among the Fund Investors and 

the Firm will provide the best 

protection against any risk of abuse. 

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

17d–1 under the Act prohibit any 

affiliated person or principal 

underwriter of a registered investment 

company, or any affiliated person of an 

affiliated person or principal 

underwriter, 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 

Fund, or affiliated persons of any of 

these persons, to participate in any joint 

arrangement in which the Fund is a 

participant. Joint transactions in which 

a Fund may participate could include 

the following: (a) An investment by one 

or more Funds in a security in which 

the Firm or its affiliated person, or 

another Fund, is a participant, or with 

respect to which the Firm or an 

affiliated person is entitled to receive 

fees (including, but not limited to, legal 

fees, placement fees, investment 

banking fees, brokerage commissions, or 

other economic benefits or interests); (b) 

an investment by one or more Funds in 

an investment vehicle sponsored, 

offered or managed by the Firm; and (c) 

an investment by one or more Funds in 

a security in which an affiliate is or may 

become a participant. 

6. Applicants state that compliance 

with section 17(d) would cause the 

Funds to forego investment 

opportunities simply because a Fund 

Investor, the Firm or other affiliates of 

the Fund also had made or 

contemplated making a similar 

investment. In addition, because 

investment opportunities of the types 

considered by the Funds often require 

that each participant make available 

funds in an amount that may be 

substantially greater than that available 

to the investor alone, there may be 

certain attractive opportunities of which 

a Fund may be unable to take advantage 

except as a co-participant with other 

persons, including affiliates. Applicants 

note that, in light of the Firm’s purpose 

of establishing the Funds so as to 

reward Eligible Investors and to attract 

highly qualified personnel to the Firm, 

the possibility is minimal that an 

affiliated party investor will enter into 

a transaction with a Fund with the 

intent of disadvantaging the Fund. 

Finally, applicants contend that the 

possibility that a Fund may be 

disadvantaged by the participation of an 

affiliate in a transaction will be 

minimized by compliance with the 

lockstep procedures described in 

condition 4 below. 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. Section 17(f) of the Act designates 

the entities that may act as investment 

company custodians, and rule 17f–2 

allows an investment company to act as 

self-custodian, subject to certain 

requirements. Applicants request an 

exemption from section 17(f) and rule 

17f–2 to permit the following exceptions 

from the requirements of rule 17f–2: (a) 

A Fund’s investments may be kept in 

the locked files of the Firm or of a 

Partner; (b) for purposes of paragraph 

(d) of the rule, (i) employees of the Firm 

will be deemed employees of the Funds, 

(ii) the Managers of a Fund will be 

deemed to be officers of the Fund; and 

(iii) the Managers of a Fund will be 

deemed to be the board of directors of 

the Fund; and (c) in place of the 

verification procedures under paragraph 

(f) of the rule, verification will be 

effected quarterly by two employees of 

the Firm. Applicants assert that the 

securities held by the Funds are most 

suitably kept in the Firm’s files, where 

they can be referred to as necessary. 

8. Section 17(g) and rule 17g–1 

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 

(‘‘disinterested directors’’) take certain 

actions and give certain approvals 

relating to fidelity bonding. Paragraph 

(g) of rule 17g–1 sets forth certain 

materials relating to the fidelity bond 

that must be filed with the Commission 

and certain notices relating to the 

fidelity bond that must be given to each 

member of the investment company’s 

board of directors. Paragraph (h) of rule 

17g–1 provides that an investment 

company must designate one of its 

officers to make the filings and give the 

notices required by paragraph (g). 

Paragraph (j) of rule 17g–1 exempts a 

joint insured bond provided and 

maintained by an investment company 

and one or more other parties from 

section 17(d) of the Act and the rules 

thereunder. Rule 17g–1(j)(3) requires 

that the board of directors of an 

investment company satisfy the fund 

governance standards defined in rule 0–

1(a)(7). 

9. Applicants request an exemption 

from section 17(g) and rule 17g–1 to the 

extent necessary to permit each Fund to 

comply with rule 17g–1 without the 

necessity of having a majority of the 

disinterested directors take such action 

and make such approvals as are set forth 

in the rule. Specifically, each Fund will 

comply by having the Managers take 

such actions and make such approvals 

as are set forth in rule 17g–1. Applicants 

state that, because the Managers will be 

interested persons of the Fund, a Fund 

could not comply with rule 17g–1 

without the requested relief. Applicants 

also request an exemption from the 

requirements of rule 17g–1(g) and (h) 

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 and 

from the requirements of rule 17g–

1(j)(3). Applicants believe the filing 

requirements are burdensome and 

unnecessary as applied to the Funds. 

The Managers will maintain the 

materials otherwise required to be filed 

with the Commission by rule 17g–1(g) 

and agree that all such material will be 

subject to examination by the 

Commission and its staff. The Managers 

will designate a person to maintain the 

records otherwise required to be filed 

with the Commission under paragraph 

(g) of the rule. Applicants also state that 

the notices otherwise required to be 

given to the board of directors would be 

unnecessary as the Funds will not have 

boards of directors. The Funds will 


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comply with all other requirements of 

rule 17g–1. 

10. Section 17(j) and paragraph (b) of 

rule 17j–1 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 requirements of rule 

17j–1, except for the anti-fraud 

provisions of paragraph (b), because 

they are unnecessarily burdensome as 

applied to the Funds. 

11. Applicants request an exemption 

from the requirements in sections 30(a), 

30(b) and 30(e), 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 Funds and would 

entail administrative and legal costs that 

outweigh any benefit to the Fund 

Investors. Applicants request exemptive 

relief to the extent necessary to permit 

each Fund to report annually to its Fund 

Investors. Applicants also request an 

exemption from section 30(h) to the 

extent necessary to exempt the 

Managers of each Fund and any other 

persons who may be deemed members 

of an advisory board of a Fund from 

filing Forms 3, 4 and 5 under section 16 

of the Exchange Act with respect to 

their ownership of Interests in the Fund. 

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. 

12. Rule 38a–1 requires investment 

companies to adopt, implement and 

periodically review written policies and 

procedures reasonably designed to 

prevent violation of the federal 

securities laws and to appoint a chief 

compliance officer. The Funds will 

comply with rule 38a–1(a), (c) and (d), 

except that (a) since the Funds do not 

have boards of directors, the Managers 

will fulfill the responsibilities assigned 

to a Fund’s board of directors under the 

rule, and (b) since the Managers are not 

disinterested persons of the Funds, 

approval by a majority of the 

disinterested board members required 

by rule 38a–1 will not be obtained. 

Applicants’ Conditions 

The applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 

1. Each proposed transaction to which 

a Fund is a party otherwise prohibited 

by section 17(a) or section 17(d) and 

rule 17d–1 (each, a ‘‘Section 17 

Transaction’’) will be effected only if the 

Managers determine that: (a) The terms 

of the Section 17 Transaction, including 

the consideration to be paid or received, 

are fair and reasonable to the Fund 

Investors of the participating Fund and 

do not involve overreaching of the Fund 

or its Fund Investors on the part of any 

person concerned; and (b) the Section 

17 Transaction is consistent with the 

interests of the Fund Investors of the 

participating Fund, the Fund’s 

organizational documents and the 

Fund’s reports to its Fund Investors. 

In addition, the Managers will record 

and preserve a description of such 

Section 17 Transactions, their findings, 

the information or materials upon 

which their findings are based and the 

basis therefor. All such records will be 

maintained for the life of a Fund and at 

least six years thereafter, and will be 

subject to examination by the 

Commission and its staff. All such 

records will be maintained in an easily 

accessible place for at least the first two 

years. 

2. If purchases or sales are made by 

a Fund from or to an entity affiliated 

with the Fund by reason of a Partner or 

employee of the Winston Group (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 

Fund’s determination of whether or not 

to effect the purchase or sale. 

3. The Managers 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 Funds, or 

any affiliated person of such a person, 

promoter, or principal underwriter. 

4. The Managers will not make on 

behalf of a Fund any investment in 

which a Co-Investor, as defined below, 

has or proposes to acquire the same 

class of securities of the same issuer, 

where the investment involves a joint 

enterprise or other joint arrangement 

within the meaning of rule 17d–1 in 

which the Fund and the Co-Investor are 

participants, unless any such CoInvestor, prior to disposing all or part of 

its investment, (a) gives the Managers 

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 

participating Fund holding such 

investment has the opportunity to 

dispose of its investment prior to or 

concurrently with, on the same terms as, 

and on a pro rata basis with the CoInvestor. The term ‘‘Co-Investor’’ with 

respect to any Fund means any person 

who is (a) an ‘‘affiliated person’’ (as 

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

the Fund; (b) the Winston Group; (c) a 

Partner, lawyer, or employee of the 

Winston Group; (d) an investment 

vehicle offered, sponsored, or managed 

by the Firm or an affiliated person of the 

Firm; or (e) an entity in which a 

Winston 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 a CoInvestor: (a) To its direct or indirect 

wholly-owned subsidiary, to any 

company (a ‘‘parent’’) of which the CoInvestor is a direct or indirect whollyowned subsidiary, or to a direct or 

indirect wholly-owned subsidiary of its 

parent; (b) to Immediate Family 

Members of the Co-Investor or a trust 

established for any such Immediate 

Family Member; (c) when the 

investment is comprised of securities 

that are listed on a national securities 

exchange registered under section 6 of 

the Exchange Act; or (d) when the 

investment is comprised of securities 

that are national market system 

securities pursuant to section 11A(a)(2) 

of the Exchange Act and rule 11Aa2–1 

thereunder. 

5. The Managers of each Fund will 

send to each person who was a Fund 

Investor in such Fund at any time 

during the fiscal year then ended 

audited financial statements of the Fund 

and with respect to those Series in 

which the Fund Investor held Interests. 

At the end of each fiscal year, the 

Managers will make a valuation or have 

a valuation made of all of the assets of 

the Series as of the fiscal year end in a 

manner consistent with customary 

practice with respect to the valuation of 

assets of the kind held by the Fund. In 

addition, as soon as practicable after the 

end of each fiscal year of each Fund, the 

Managers of the Fund shall send a 

report to each person who was a Fund 

Investor at any time during the fiscal 

year then ended, setting forth such tax 

information as shall be necessary for the 

preparation by the Fund Investor of his 


ycherry on PROD1PC64 with NOTICES
Federal Register / Vol. 72, No. 63 / Tuesday, April 3, 2007 / Notices 15923 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 55240 

(February 5, 2007), 72 FR 6624. 

4Amendment No. 2 is a technical amendment, 

which revises the proposal to reflect the 

implementation of Amex’s Auction and Electronic 

Market Integration (‘‘AEMI’’) platform and 

corresponding adoption of Rules 1000–AEMI and 

1000A–AEMI, which replace former Amex rules 

1000 and 1000A. As such, it is not subject to notice 

and comment. 

5 17 CFR 240.19b–4(e). 

6PDRs and index fund shares are registered 

investment companies under the Investment 

Company Act of 1940 and are referred to in this 

filing as exchange traded funds (‘‘ETFs’’). 

7 17 CFR 240.19b–4(e). 

8See Commentary .03(b)(i) to Amex Rule 1000–

AEMI and Commentary .02(b)(i) to Amex Rule 

1000A–AEMI. 

9 17 CFR 240.19b–4(e). 

10 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f). 

11 15 U.S.C. 78f. 

12 15 U.S.C. 78f(b)(5). 

or her federal and state income tax 

returns and a report of the investment 

activities of such Fund during such 

year. 

6. Each Fund and the Managers of 

each Fund will maintain and preserve, 

for the life of each Series of that Fund 

and at least six years thereafter, such 

accounts, books and other documents as 

constitute the record forming the basis 

for the audited financial statements and 

annual reports of such Series to be 

provided to its Fund Investors, and 

agree that all such records will be 

subject to examination by the 

Commission and its staff. All such 

records will be maintained in an easily 

accessible place for at least the first two 

years. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–6081 Filed 4–2–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold the following 

meeting during the week of April 2, 

2007: 

An Open Meeting will be held on 

Wednesday, April 4, 2007 at 10 a.m. in 

the Auditorium, Room L–002. 

The subject matter of the Open 

Meeting scheduled for Wednesday, 

April 4, 2007 will be: 

The Commission will consider its 

staff’s approach to (1) the Public 

Company Accounting Oversight Board’s 

(‘‘PCAOB’’) Proposed Auditing 

Standard—An Audit of Internal Control 

Over Financial Reporting That Is 

Integrated with An Audit of Financial 

Statements; and (2) the PCAOB’s 

Proposed Auditing Standard—

Considering and Using the Work of 

Others in an Audit. 

Commissioner Casey, as duty officer, 

determined that no earlier notice thereof 

was possible. 

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) 

551–5400. 

Dated: March 29, 2007. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–6124 Filed 4–2–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55544; File No. SR–Amex–

2007–07] 

Self-Regulatory Organizations; 

American Stock Exchange LLC; Order 

Approving a Proposed Rule Change 

Revising Existing Rules for Portfolio 

Depositary Receipts and Index Fund 

Shares 

March 27, 2007. 

I. Introduction 

On January 11, 2007, the American 

Stock Exchange LLC (‘‘Amex’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposal to revise its 

existing rules for portfolio depositary 

receipts (Amex Rule 1000–AEMI) and 

index fund shares (Amex Rule 1000A–

AEMI) to eliminate the methodology 

standards for eligible indexes. On 

January 25, 2007, the Amex submitted 

Amendment No. 1 to the proposed rule 

change. The proposed rule change, as 

modified by Amendment No. 1, was 

published for comment in the Federal 

Register on February 12, 2007 for a 15- 

day comment period.3 The Commission 

received no comments regarding the 

proposal. On March 14, 2007, Amex 

filed Amendment No. 2 to the proposed 

rule change.4 This order approves the 

proposed rule change, as amended. 

II. Description of the Proposal 

The purpose of this proposed rule 

change is to amend Amex’s existing 

generic listing standards pursuant to 

Rule 19b–4(e) under the Act 5 for 

portfolio depositary receipts (‘‘PDRs’’) 

and index fund shares 6 to eliminate the 

requirement that an eligible index be 

calculated and weighted following a 

specified methodology. 

The Exchange currently has generic 

listing standards (within the meaning of 

Rule 19b–4(e) under the Act 7), which 

permit the listing and trading of various 

qualifying ETFs subject to the 

procedures contained in Rule 19b–4(e). 

The existence of generic listing 

standards allows qualifying ETFs to list 

or trade without the need to file a rule 

change for each security. The generic 

listing standards for ETFs presently 

provide that eligible indexes be 

calculated based on the market 

capitalization, modified market 

capitalization, price, equal-dollar, or 

modified equal-dollar weighting 

methodology.8 The proposed rule 

change would eliminate this standard, 

and, as a result, the Exchange would no 

longer consider index methodology in 

its review of an ETF’s eligibility for 

listing and trading pursuant to Rule 

19b–4(e) under the Act.9

III. Discussion 

After careful consideration, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange 10 and, in 

particular, the requirements of Section 6 

of the Act.11 Specifically, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,12 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

As the market for ETFs has grown, the 

variety of weighting and calculation 

methodologies for underlying indexes 

has also expanded, limiting the 

applicability of Amex’s current generic 

ETF listing standards. The Commission 

believes that the proposed elimination 

of index methodology from its generic 


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