55660 Federal Register / Vol. 62, No. 207 / Monday, October 27, 1997 / Notices

1All existing entities that currently intend to rely

on the order have been named as applicants, and

any other existing or future entities that

subsequently rely on the order will comply with the

terms and conditions in the application.

2Section 2(a) (48) provides that a business

development company is any closed-end company

which is operated for the purpose of making

investments in securities described in section 55(a)

of the Act and makes available significant

managerial assistance with respect to the issuers of

these securities, and which elects BDC status under

section 54(a).

Notice of Exempt Preliminary Roll-Up

Communication, SEC File No. 270–396,

OMB Control No. 3235–0452

Industry Guides, SEC File No. 270–69,

OMB Control No. 3235–0069

Notice is hereby given that, pursuant

to the Paperwork Reduction Act of 1995

(44 U.S.C. 3501 et seq.) the Securities

and Exchange Commission

(‘‘Commission’’) is soliciting comments

on the collections of information

summarized below. The Commission

plans to submit these existing

collections of information to the Office

of Management and Budget for

extension and approval.

Rule 13e–3 and Schedule 13E–3

under the Securities Exchange Act of

1934 (‘‘Exchange Act’’), contains

requirements regarding going private

transactions by certain issuers or their

affiliates. Issuers or affiliates engaging in

a Rule 13e–3 transaction file a Schedule

13E–3 to disclose information to

security holders about the transaction.

Schedule 13E–3 results in an estimated

total annual reporting burden of 30,996

hours.

Form S–8 is used by registrants to

register employee benefit plan securities

under the Securities Act of 1933

(‘‘Securities Act’’). The form provides

information to the registrant’s

employees about the plan and registrant

that enables them to make informed

investment decisions. Form S–8 results

in an estimated total annual reporting

burden of 131,284 hours.

Regulation 14D applies to tender

offers subject to Section 14(d)(1) of the

Exchange Act, including, but not

limited to any tender offer for securities

of a class described in that section

which is made by an affiliate of the

issuer of such class. Regulation 14E

applies to any tender offer for securities

other than exempted securities.

Schedule 14D–1 contains disclosure

about tender offers subject to Section

14(d)(1) of the Exchange Act. Schedule

14D–9 contains disclosure about

solicitation/recommendation statements

with respect to certain tender offers. The

Regulations and Schedule result in an

estimated total annual reporting burden

of 129,656 hours.

A Notice of Exempt Preliminary RollUp Communication is required to be

filed by a person making such a

communication by Exchange Act Rules

14a–2(b)(4) and 14a–6(a). The Notice

provides public information regarding

ownership interests and any potential

conflicts of interest. The Notice results

in an estimated total annual reporting

burden of 1 hour.

The Industry Guides provide

guidelines for disclosure in documents

submitted by registrants in specified

industry groups such as oil and gas,

insurance, and mining. They do not

directly impose any reporting burden

and therefore are assigned a total annual

reporting burden of one reporting hour.

Written comments are invited on: (a)

whether the proposed collections of

information are necessary for the proper

performance of the functions of the

agency, including whether the

information will have practical utility;

(b) the accuracy of the agency’s estimate

of the burden of the collections of

information; (c) ways to enhance the

quality, utility, and clarity of the

information collected; and (d) ways to

minimize the burden of the collections

of information on respondents,

including through the use of automated

collection techniques or other forms of

information technology. Consideration

will be given to comments and

suggestions submitted in writing within

60 days of this publication.

Please direct your written comments

to Michael E. Bartell, Associate

Executive Director, Office of

Information Technology, Securities and

Exchange Commission, 450 5th Street,

NW, Washington DC 20549.

Dated: October 10, 1997.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–28306 Filed 10–24–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–22846; 812–10544]

Brantley Capital Corporation, et al.;

Notice of Application

October 21, 1997.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under sections 6(c) and 57(i) of

the Investment Company Act of 1940

(the ‘‘Act’’), and under rule 17d–1 under

the Act permitting certain joint

transactions otherwise prohibited by

section 57(a)(4) of the Act.

SUMMARY: Applicants request an order to

permit a business development

company to co-invest with certain

affiliates in portfolio companies.

APPLICANTS: Brantley Capital

Corporation (the ‘‘Company’’), Brantley

Capital Management, LLC (the

‘‘Investment Adviser’’), Brantley

Venture Partners II, LP (‘‘BVP II’’),

Brantley Venture Partners III, LP (‘‘BVP

III’’) (BVP II and BVP III, the ‘‘BVP

entities’’), and any entities currently or

in the future advised by the Investment

Adviser or by entities controlling,

controlled by, or under common control

with the Investment Adviser (together

with the BVP entities, ‘‘Company

Affiliates’’).1

FILING DATES: The application was filed

on March 6, 1997 and amended on

August 26, 1997, and on October 10,

1997. 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 applicants with a

copy of the request, personally or by

mail. Hearing requests should be

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

November 17, 1997, 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 SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, DC 20549.

Applicants, 20600 Chagrin Blvd., Suite

1150, Cleveland, OH 44122.

FOR FURTHER INFORMATION CONTACT:

Lisa McCrea, Attorney Adviser (202)

942–0562, or Mercer E. Bullard, Branch

Chief, (202) 942–0564 (Office of

Investment Company Regulation,

Division of Investment Management).

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, 450 5th Street

N.W., Washington, DC 20549 (tel. 202–

942–8090).

Applicants’ Representations

1. The Company, a Maryland

corporation, is a non-diversified closedend investment company that has

elected to be regulated as a business

development company (a ‘‘BDC’’) under

the Act.2 The Company filed a

registration statement on Form N–2 that

became effective on November 26, 1996.

2. The Company was formed to invest

primarily in the equity securities and
Federal Register / Vol. 62, No. 207 / Monday, October 27, 1997 / Notices 55661

equity-linked debt securities of private

companies, and makes available

significant managerial assistance to the

issuers of such securities. The Company

seeks to enable its stockholders to

participate in investments not typically

available to the public due to the private

nature of a substantial majority of the

Company’s portfolio companies, the size

of the financial commitment often

required in order to participate in such

investments, or the experience, skill and

time commitment required to identify

and take advantage of these investment

opportunities.

3. At June 30, 1997, the Company had

total assets valued at $40 million, which

was primarily invested in short-term

U.S. government securities pending

investment in portfolio companies. The

Company intends to invest a portion of

its assets in equity securities of postventure small-cap public companies. A

post-venture company is a company that

has received venture capital or private

equity financing either (a) during the

early stages of the company’s business

or the early stages of the development

of a new product or service, or (b) as

part of a restructuring or recapitalization

of the company. The Company intends

to limit its post-venture investments to

companies which within the prior 10

years have received an investment of

venture or private equity capital, have

sold or distributed securities to venture

or private equity capital investors, or

have completed an initial public

offering of equity securities.

4. The Company’s investment

objective is the realization of long-term

capital appreciation in the value of its

investments. In addition, whenever

feasible in light of market conditions

and the cash flow characteristics of the

issuers of the securities in which it

invests (collectively, the ‘‘portfolio

companies’’), the Company will seek to

provide an element of current income

primarily from interest, dividends and

fees paid by its portfolio companies.

5. The BVP entities are venture capital

limited partnerships not registered

under the Act in reliance on sections

3(c)(1) and/or 3(c)(7) of the Act. The

BVP entities, during the period from

1981 through 1996, in the aggregate

have made investments in 32 small

businesses, each with up to $20 million

in annual revenue, either as part of

early-stage financings, expansion

financings, acquisition or buyout

financings or special situations. The

BVP entities generally have made

venture capital investments similar to

the investments to be made by the

Company in private companies.

6. BVP II, a Delaware limited

partnership, has committed capital of

approximately $30 million from 14

limited partners representing primarily

corporate and public pension funds

which has been fully invested in 15

portfolio companies. Although its

committed capital is fully invested, BVP

II may elect to reinvest from time to

time, rather than to distribute

immediately, the cash proceeds from the

harvest of existing investments prior to

its scheduled final distribution in April

2000. The sole general partner of the

controlling general partner and two

other general partners of the Delaware

limited partnership which is BVP II’s

managing general partner are executive

officers of the Company and are

principals of the Investment Adviser.

7. BVP III, a Delaware limited

partnership, has committed capital of

approximately $60 million from 16

limited partners representing primarily

corporate and public pension funds.

The committed capital currently is less

than 40% invested in 9 portfolio

companies. BVP III is not scheduled for

final distribution until December 2003.

The sole general partner of the

controlling general partner and two

other general partners of the Delaware

limited partnership which is BVP III’s

managing general partner are executive

officers of the Company and principals

of the Investment Adviser.

8. The Investment Adviser is

registered with the SEC as an

investment adviser under the

Investment Advisers Act of 1940. The

Investment Adviser was named

originally as ‘‘Brantley Capital

Management, Ltd.’’, and organized

originally as a Delaware corporation on

February 9, 1995. The Investment

Adviser was reorganized as a Delaware

limited liability company on November

25, 1996. The Investment Adviser is

privately owned by its members,

including certain executive officers of

the Company who are principals of the

Investment Adviser. The Investment

Adviser currently provides investment

advisory services solely to the

Company. However, certain of the

Investment Adviser’s principals are also

principals of several management

companies organized as limited

partnerships, each of which is the

managing general partner in one of the

BVP entities.

9. Applicants request an order under

section 57(i) of the Act and under rule

17d–1 to permit the Company and

Company Affiliates to co-invest in

portfolio companies.

Applicants’ Legal Analysis

1. Section 57(a)(4) of the Act prohibits

certain affiliated persons from

participating in a joint transaction with

a BDC in contravention of rules as

prescribed by the SEC. Under section

57(b)(1) of the Act, persons who are

affiliated persons of the directors or

officers of a BDC within the meaning of

section 2(a)(3)(C) of the Act are subject

to section 57(a)(4). Under section

2(a)(3)(C), an affiliated person of another

person includes any person directly or

indirectly controlled by such other

person.

2. Section 57(i) of the Act provides

that, until the SEC prescribes rules

under section 57(a)(4), the SEC’s rules

under sections 17(a) and 17(d) of the

Act applicable to closed-end investment

companies shall be deemed to apply to

sections 57(a) and 57(d). Because the

SEC has not adopted any rules under

section 57(a)(4), rule 17d–1 applies.

3. Rule 17d–1 under the Act generally

prohibits affiliated persons of an

investment company from entering into

joint transactions with the company

without prior SEC authorization. In

passing upon applications under rule

17d–1(b), the SEC will consider whether

the participation by the BDC in such

joint transaction is consistent with the

provisions, policies, and purposes of the

Act and the extent to which such

participation is on a basis different from

or less advantageous than that of other

participants.

4. Applicants state that, because the

BVP entities may be deemed to be under

common control with the Investment

Adviser through the common ownership

of the BVP entities’ respective managing

general partners with the Investment

Adviser and also through the common

identity of certain principals of the BVP

entities’ managing general partners and

the Investment Adviser, the BVP entities

may be persons affiliated with the

Company under section 57(b) of the Act

and therefore may be prohibited by

section 57(a)(4) of the Act and rule 17d–

1 from participating in the proposed coinvestment program without exemptive

relief.

5. Applicants expect that coinvestment in portfolio companies by

the Company and Company Affiliates

will increase favorable investment

opportunities for the Company.

Applicants state that an investment

company that makes venture capital

investments typically limits its

participation in any one transaction to

a specific dollar amount. Applicants

state that, when the Investment

identifies venture capital investment

opportunities requiring larger capital

commitments, it must seek the

participation of other venture capital

entities. Applicants believe that the

availability of the Company Affiliates as

investing partners of the Company may
55662 Federal Register / Vol. 62, No. 207 / Monday, October 27, 1997 / Notices

alleviate that necessity in certain

circumstances.

6. The Investment Adviser believes

that it will be advantageous for the

Company to co-invest with the

investment objectives, policies, and

restrictions of the Company. The

Investment Adviser also believes that

co-investment by the Company and the

Company Affiliates will provide the

opportunity for achieving greater

diversification and exercising greater

influence on the portfolio companies in

which the Company and Company

Affiliates co-invest.

7. Applicants submit that the formula

for the allocation of co-investment

opportunities among the Company on

the one hand and the Company

Affiliates on the other and the advance

approvals of the required majority

(within the meaning of section 57(o) of

the Act) of directors of the Company, as

provided in condition 1 below, will

ensure that the Company will be treated

fairly. Applicants also contend that the

conditions to which the requested relief

will be subject are designed to ensure

that principals of the Investment

Adviser would not be able to favor the

Company Affiliates over the Company

through the allocation of investment

opportunities among them.

Applicants’ Conditions

Applicants agree that the requested

order shall be subject to the following

conditions:

1. (a) To the extent that the Company

is considering new investments, the

Investment Adviser will review

investment opportunities on behalf of

the Company, including investments

being considered on behalf of any

Company Affiliate. The Investment

Adviser will determine whether an

investment being considered on behalf

of a Company Affiliate (‘‘Company

Affiliate Investment’’) is eligible for

investment by the Company.

(b) If the Investment Adviser deems a

Company Affiliate Investment eligible

for the Company (a ‘‘co-investment

opportunity’’), the Investment Adviser

will determine what it considers to be

an appropriate amount that the

Company should invest. When the

aggregate amount recommended for the

Company and that sought by a Company

Affiliate exceeds the amount of the coinvestment opportunity, the amount

invested by the Company shall be based

on the ratio of the net assets of the

Company to the aggregate net assets of

the Company and the Company Affiliate

seeking to make the investment.

(c) Following the making of the

determinations referred to in (a) and (b),

the Investment Adviser will distribute

written information concerning all coinvestment opportunities to the

Company’s directors who are not

‘‘interested persons’’ as defined under

section 2(a) (19) of the Act

(‘‘Independent Directors’’). The

information will include the amount the

Company Affiliate proposes to invest.

(d) Information regarding the

Investment Adviser’s preliminary

determinations will be reviewed by the

Company’s Independent Directors. The

Company will co-invest with a

Company Affiliate only if a required

majority (as defined in section 57(o) of

the Act) (‘‘Required Majority’’) of the

Company’s Independent Directors

conclude, prior to the acquisition of the

investment, that:

(i) The terms of the transaction,

including the consideration to be paid,

are reasonable and fair to the

shareholders of the Company and do not

involve overreaching of the Company or

such shareholders on the part of any

person concerned;

(ii) The transaction is consistent with

the interests of shareholders of the

Company and is consistent with the

Company’s investment objectives and

policies as recited in filings made by the

Company under the Securities Act of

1933, as amended, its registration

statement and reports filed under the

Securities Exchange Act of 1934, as

amended, and its reports to

shareholders;

(iii) The investment by the Company

Affiliate would not disadvantage the

Company, and that participation by the

Company would not be on a basis

different from or less advantageous than

that of the Company Affiliate; and

(iv) The proposed investment by the

Company will not benefit the

Investment Adviser or any affiliated

entity thereof, other than the Company

Affiliate making the coinvestment,

except to the extent permitted pursuant

to sections 17(e) and 57(k) of the Act.

(e) The Company has the right to

decline to participate in the coinvestment opportunity or purchase less

than its full allocation.

2. The Company will not make an

investment for is portfolio if any

Company Affiliate, the Investment for

its portfolio if any Company Affiliate,

the Investment Adviser, or a person

controlling, controlled by, or under

common control with the Investment

Adviser is an existing investor in such

issuer, with the exception of a followon investment that complies with

condition number 5.

3. For any purchase of securities by

the Company in which a Company

Affiliate is a joint participant, the terms,

conditions, price, class of securities,

settlement date, and registration right

shall be the same for the Company and

the Company Affiliate.

4. If a Company Affiliate elects to sell,

exchange, or otherwise dispose of an

interest in a security that is also held by

the Company, the Investment Adviser

will notify the Company of the proposed

disposition at the earliest practical time

and the Company will be given the

opportunity to participate in the

disposition on a proportionate basis, at

the same price and on the same terms

and conditions as those applicable to

the Company Affiliate. The Investment

Adviser will formulate a

recommendation as to participation by

the Company in the proposed

disposition, and provide a written

recommendation to the Company’s

Independent Directors. The Company

will participate in the disposition to the

extent that a Required Majority of its

Independent Directors determine that it

is in the Company’s best interest. Each

of the Company and the Company

Affiliate will bear its own expenses

associated with any such disposition of

a portfolio security.

5. If a Company Affiliate desires to

make a ‘‘follow-on’’ investment (i.e., an

additional investment in the same

entity) in a portfolio company whose

securities are held by the Company or

to exercise warrants or other rights to

purchase securities of the issuer, the

Investment Adviser will notify the

Company of the proposed transaction at

the earliest practical time. The

Investment Adviser will formulate a

recommendation as to the proposed

participation by the Company in a

follow-on investment and provide the

recommendation to the Company’s

Independent Directors along with notice

of the total amount of the follow-on

investment. The Company’s

Independent Directors will make their

own determination with respect to

follow-on investment. To the extent that

the amount of a follow-on investment

opportunity is not based on the amount

of the Company’s and the Company

Affiliate’s initial investments, the

relative amount of investment by the

Company Affiliate and the Company

will be based on the ratio of the

Company’s remaining funds available

for investment to the aggregate of the

Company’s and the Company Affiliate’s

remaining funds available for

investment. The Company will

participate in the investment to the

extent that a Required Majority of its

Independent Directors determine that it

is in the Company’s best interest. The

acquisition of follow-on investments as

permitted by this condition will be
Federal Register / Vol. 62, No. 207 / Monday, October 27, 1997 / Notices 55663

1Congress intended that exchanges have the

primary responsibility for the formulation and

enforcement of the regulation of exchange market

making. See Report of the Senate Banking, Housing

and Urban Affairs Committee, Senate Report No.

94–75, April 14, 1975, to accompany S. 249, at p.

15. Section 11(b) of the Exchange Act and Exchange

Act Rule 11b–1 codify that policy. In fact, certain

of the obligations imposed on CBOE market-makers

by CBOE rules are mandated by Rule 11b–1.

2Exchange Act Rule 11b–1(a)(2)(v) requires to

CBOE to have procedures ‘‘to provide for effective

and systematic surveillance of the activities’’ of its

market-makers.

subject to the other conditions in the

application.

6. The Company’s Independent

Directors will review quarterly all

information concerning co-investment

opportunities during the preceding

quarter to determine whether the

conditions in the application were

complied with.

7. The Company will maintain the

records required by section 57(f)(3) of

the Act as if each of the investments

permitted under these conditions were

approved by the Company’s

Independent Directors under section

57(f).

8. No Independent Director of the

Company will be a director or general

partner of any Company Affiliate with

which the Company co-invests.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–28365 Filed 10–24–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39261; File No. SR–CBOE–

97–50]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Inc. to Relating to ‘‘Go Along’’ Orders

October 20, 1997.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on September 25,

1997, the Chicago Board Options

Exchange, Inc. (‘‘CBOE’’ 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 selfregulatory organization. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to issues a

regulatory circular which would

establish the representation of ‘‘go

along’’ orders on the floor of the

Exchange as a violation of just and

equitable principles of trade pursuant to

Exchange Rule 4.1. The text of the

proposed rule change is available at the

Office of the Secretary, CBOE and at the

Commission.

II. Self-Regulatory Organization’s

Statement of the Purpose 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 self-regulatory organization 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 Purposes of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The purpose of the proposed rule

change is to prohibit floor brokers from

representing or executing ‘‘go along’’

orders (as further described below) on

the floor of the Exchange. The

representation or execution of such

orders will be considered an act

inconsistent with just and equitable

principles of trade pursuant to Exchange

Rule 4.1. The Exchange proposes to set

forth the prohibition against the

representation of ‘‘go along’’ orders in a

regulatory circular describing the types

of conduct which would be considered

to be violative of just and equitable

principles of trade.

Definition of ‘‘Go Along’’ Orders:

Generally, a ‘‘go along’’ order, or a ‘‘not

held with the crowd’’ order, is an order

that instructs a floor broker to bid or

offer (as appropriate for the type of

order) at the price established by the

other participants in the trading crowd.

Generally, the customer will specify

whether the order is to buy or sell, the

number of contracts, the series, and the

strike price. Typically, the floor broker

will be instructed to buy when the

majority of the of the market-makers

participating on a trade are selling.

These orders often are placed by marketmaking firms as a side business, by

upstairs broker-dealers who want to

participate in ‘‘market making,’’ and by

specialists on other exchanges. These

orders are entered in both multiplytraded and singly listed option classes.

As proposed, such an order would be

prohibited even if the bid or offer does

not match exactly the price established

by the other participants in the trading

crowd as long as the customer has given

the broker discretion to determine what

to bid or offer based upon the prices

established by the other participants.

Rationale for the Prohibition Against

‘‘Go Along Orders’’: The Exchange

believes that the continued

representation of this class of orders on

the floor of the Exchange poses a serious

threat to the continued viability of the

CBOE market-maker system, as

explained below.

The execution of ‘‘go along’’ orders

provides a disincentive to the

transaction of a market-making business

and thus, threatens the continued

viability of the market-making system.

The CBOE believes its market-marker

system has, since its inception,

provided liquid, deep, fair, and reliable

markets for hundreds of option classes

in thousands of different series. These

liquid markets are brought about

through the efforts of numerous marketmakers who are willing to take on

various affirmative obligations in

exchange for the opportunity to stand in

a trading crowd and trade with and

against other market participants. The

various affirmative obligations are

established by Exchange rules,1

including Rule 8.7 which, among other

things, requires market-makers to

‘‘engage * * * in dealings for his own

account when there exists, or it is

reasonably anticipated that there will

exist, a lack of price continuity, a

temporary disparity between the supply

of and demand for a particular option

contract, or a temporary distortion of the

price relationships between option

contracts of the same class.’’ Rule 8.7.03

imposes distribution of activity

requirements on market-markers. Rule

8.51 obligates market-makers to honor

disseminated market quotes. In addition

to being required to meet the above

obligations, CBOE market-makers are

subject to plenary oversight and

regulation by the CBOE.2 In short, the

system of affirmative obligations and

oversight embodied in CBOE Rules

subjects market-makers to a great deal of

responsibility, in order to assure the

quality and liquidity of the CBOE

markets.

The CBOE believes that ‘‘go along’’

orders interfere with this obligationopportunity trade-off of Exchange

market-making. Essentially, those