15148 Federal Register / Vol. 77, No. 50 / Wednesday, March 14, 2012 / Notices 

1 15 U.S.C. 78l(h). 

2 15 U.S.C. 78l(g). 

3 17 CFR 240.12g5–1. Exchange Act Rule 12g–5 

states that: ‘‘For purposes of determining whether 

an issuer is subject to the provisions of sections 

12(g) and 15(d) of the Act, securities shall be 

deemed to be ‘held of record’ by each person who 

is identified as the owner of such securities on 

records of security holders maintained by or on 

behalf of the issuer,’’ which is subject to certain 

conditions set forth in Rule 12g–5. 

4 15 U.S.C. 78l(g)(1) and 17 CFR 240.12g–1. When 

Section 12(g) was enacted, the asset threshold was 

set at $1 million. The asset threshold has been 

increased on several occasions, most recently to $10 

million in 1996. See Relief From Reporting by Small 

Issuers, Release No. 34–37157 (May 1, 1996) [61 FR 

21353]. 

Company disposes of all of its interests 

in Ivy Hill. 

2. The Board will review at least 

annually the investment management 

business of the Company and Ivy Hill 

(including a review of transactions 

between the Company and any company 

controlled by the Company, on the one 

hand, and Ivy Hill and any company 

controlled by Ivy Hill, on the other 

hand) in order to determine whether the 

benefits derived by the Company 

warrant the continuation of the 

ownership by the Company of Ivy Hill 

and, if appropriate, will approve (by at 

least a majority of the Independent 

Directors) at least annually, such 

continuation. 

3. Except to the extent permitted 

pursuant to exemptive relief from the 

Commission, neither Ivy Hill (including 

members of its investment committee 

with respect to Covered Information (as 

defined below) received in their 

capacities as such) nor any persons 

controlled by Ivy Hill (‘‘Information 

Providers’’) will directly or indirectly 

provide Covered Information to ACM or 

any person affiliated with ACM (other 

than the Company and persons 

controlled by the Company and as 

necessary to be provided to ACM and 

the Administrator to provide advisory 

and administrative services to the 

Company and Ivy Hill). 

Covered Information means all 

information except information that: 

(i) Is generally available to the public; 

(ii) Is of the nature that Information 

Providers share with unaffiliated market 

participants at no cost and is not 

proprietary to the Information 

Providers; 

(iii) Information Providers have 

obtained from unaffiliated third parties, 

including but not limited to general 

market opinions and analyses, analyst 

reports and diligence reports, and that 

such third parties generally make 

available to others, including market 

participants in the ordinary course, at 

no cost; or 

(iv) Information Providers have 

obtained from, or are providing on 

behalf of, borrowers or potential 

borrowers or their advisors, and that 

such borrowers or advisors generally 

make available to unaffiliated market 

participants at no cost upon request. 

4. None of the Company, Ivy Hill or 

any entity controlled by Ivy Hill, will 

enter into any Covered Transaction, as 

defined below, unless a majority of the 

Independent Directors who have no 

financial interest in such Covered 

Transaction has approved it. A 

‘‘Covered Transaction’’ is any 

transaction involving the Company, Ivy 

Hill or any entity controlled by Ivy Hill 

other than the Funds, on the one hand, 

and any Fund in which ACM, any 

person affiliated with ACM (other than 

the Company or any entity controlled by 

the Company), any of their clients, or 

the Administrator, is invested, on the 

other hand, where such transaction 

would violate section 57(a) of the Act 

but for rule 57b–1 under the Act. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6190 Filed 3–13–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66541; File No. 81–937] 

Order Granting an Application of BF 

Enterprises, Inc. Under the Securities 

Exchange Act of 1934 

March 8, 2012. 

I 

BF Enterprises, Inc. (‘‘BF Enterprises’’ 

or the ‘‘company’’) has filed an 

application under Section 12(h) of the 

Securities Exchange Act of 1934 (the 

‘‘Exchange Act’’) 1 for a Commission 

order exempting the company from the 

requirement to register its common 

stock under Section 12(g) of the 

Exchange Act.2 Section 12(h) grants the 

Commission the authority to exempt by 

order, upon application of an interested 

person and after notice and opportunity 

for a hearing, any issuer from Section 

12(g) ‘‘if the Commission finds, by 

reason of the number of public 

investors, amount of trading interest in 

the securities, the nature and extent of 

the activities of the issuer, income or 

assets of the issuer, or otherwise, that 

such action is not inconsistent with the 

public interest or the protection of 

investors.’’ 

In its application, BF Enterprises 

states that it ‘‘was a reporting company 

under the Exchange Act until 2005 and 

terminated its Exchange Act registration 

pursuant to a Form 15 filed with the 

Commission on August 30, 2005 in 

connection with a reverse/forward stock 

split transaction,’’ which the company’s 

shareholders ‘‘approved * * * on July 

21, 2005 based upon a Schedule 13E–3 

filed with the Commission on March 31, 

2005 and as subsequently amended by 

the Company.’’ According to the 

application, a shareholder commenced 

litigation against the company in the 

Delaware Chancery Court in 2010 that 

ultimately resulted in that shareholder 

transferring its shares of the company’s 

common stock to 500 identical trusts 

before December 31, 2010, the last day 

of the company’s fiscal year. 

Under Section 12(g) of the Exchange 

Act and the Commission’s rules 

thereunder, an issuer is required to 

register a class of its equity securities if, 

at the end of the issuer’s fiscal year, the 

securities are ‘‘held of record’’ 3 by 500 

or more persons and the issuer has total 

assets exceeding $10 million.4

According to the application, BF 

Enterprises had total assets of $13.3 

million as of December 31, 2010. In 

addition, each of the 500 trust entities 

was identified as an owner of common 

stock on the records of security holders 

maintained by or on behalf of BF 

Enterprises. However, BF Enterprises 

contends that it should not be required 

to register its common stock under 

Section 12(g) and is seeking an 

exemptive order to that effect. 

Specifically, BF Enterprises asserts that 

exemptive relief would be consistent 

with the standards articulated in 

Section 12(h) because: (1) BF 

Enterprises has fewer than 85 total 

beneficial owners of its common stock, 

one of which has expressly stated that 

its shares are held indirectly through 

500 trust entities formed solely for the 

purpose of attempting to cause the 

company to register its common stock 

under Section 12(g) (the ‘‘BFE Trusts’’); 

(2) as of December 31, 2010, BF 

Enterprises had total assets of 

approximately $13.3 million and 2010 

annual net income of approximately 

$103,000; (3) BF Enterprises has a total 

of seven employees and its primary 

business comprises two parcels of real 

estate; and (4) there is no trading 

activity in, and an absence of any 

regular market for, BF Enterprises’ 

common stock. 

On May 12, 2011, the Commission 

issued a notice of the filing of the 

application to give any interested 

person an opportunity to ‘‘submit to the 

Commission in writing its views on any 

substantial facts bearing on the 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 50 / Wednesday, March 14, 2012 / Notices 15149 

5See Notice of an Application of BF Enterprises, 

Inc. under Section 12(h) of the Securities Exchange 

Act of 1934, Release No. 34–64479 (May 12, 2011) 

[76 FR 28482]. 

6Seven different commentators submitted the 

nine comment letters. The commentators were: 

Daniel F. Raider (June 6, 2011 and June 27, 2011) 

(‘‘Raider Letters’’); John D. Browning (June 16, 

2011) (‘‘Browning Letter’’); Jeremy Q. Zhu (June 16, 

2011) (‘‘Zhu Letter’’); Paul Blumenstein (June 16, 

2011 and Aug. 2, 2011) (‘‘Blumenstein Letters’’); 

John H. Norberg (June 15, 2011) (‘‘Norberg Letter’’); 

Joseph M. Sullivan (June 13, 2011) (‘‘Sullivan 

Letter’’); and James E. Mitchell (June 13, 2011) 

(‘‘Mitchell Letter’’). 

7See, e.g., Browning Letter and Raider Letters. 

8See, e.g., Browning Letter; Raider Letters and 

Zhu Letter. 

9See, e.g., Raider Letter and Blumenstein Letters. 

10Sullivan Letter; Blumenstein Letters and Zhu 

Letter. 

11Blumenstein Letters. 

12Blumenstein Letters, Mitchell Letter and 

Norberg Letter. 

13Blumenstein Letters and Zhu Letter. 

14See, e.g., Sullivan Letter; Norberg Letter; and 

Blumenstein Letters. 

15Blumenstein Letters. 

16See, e.g., Sullivan Letter; Norberg Letter; and 

Blumenstein Letter. 

17Raider Letters and Blumenstein Letters. 

18Raider Letters; Blumenstein Letters; and 

Sullivan Letter (asserting that ‘‘[t]he Company’s 

stock has been continuously offered for purchase 

and sale by multiple market makers in the over the 

counter market since the Company’s deregistration 

became effective’’). 

19Report of Special Study of Securities Markets 

of the Securities and Exchange Commission, H.R. 

Doc. No. 88–95 (1963). 

20 Id. at 17, pt. 3. 

21 Id. 

22See SEC Chairman William Cary’s remarks in 

the Report of the Committee on Banking and 

Currency to Accompany S. 1642, S. Rep. No. 88– 

379 (1963) (‘‘Committee Report’’) at 52. 

23See On the Practice of Recording the 

Ownership of Securities in the Records of the Issuer 

in Other Than the Name of the Beneficial Owner 

of Such Securities, Final Report of the Securities 

and Exchange Commission (Dec. 3, 1976) at 53. 

24 17 CFR 240.12g5–1. 

25See Adoption of Rules 12g5–1 and 12g5–2 

Under the Securities Exchange Act of 1934, Release 

No. 34–7492 (Jan. 5, 1965) [30 FR 483]. 

application or the desirability of a 

hearing thereon.’’ 5 The Commission 

received nine comment letters on the 

application,6 some of which were from 

shareholders of BF Enterprises and all of 

which opposed the application. 

Commentators contended that the 

Commission should deny the 

application because the company’s 

shareholders have been harmed by the 

company’s decision to cease filing 

reports under the Exchange Act. Among 

other things, the commentators raised 

concerns about the company’s lack of 

transparency 7 and the detrimental effect 

of that lack of transparency on security 

holders, particularly in terms of 

liquidity 8 and accountability of 

management.9 Specifically, some 

commentators claimed that the 

company’s reverse/forward stock split 

transaction was unfair to shareholders 

by leaving them with few or no 

alternatives to achieving fair value for 

their investment, particularly when 

there is a concentration of share 

ownership in management.10 In the 

view of one of these commentators, it 

would have been fairer to shareholders 

if the company had chosen to go 

private—e.g., through a management 

buyout or sale to a third party—rather 

than ‘‘go dark.’’ 11 Commentators also 

expressed concern that the lack of 

publicly available information about the 

company may have resulted in the 

company repurchasing its common 

stock from the public at prices lower 

than those that would have been 

available in a more informed and liquid 

market.12 Others expressed concern 

about a perceived trend in companies 

‘‘going dark’’ and the negative impact 

this trend has on the capital markets 

generally.13

Some commentators urged the 

Commission to revise the definition of 

‘‘holder of record’’ to reflect the 

concentration of ownership of securities 

of current and former Exchange Act 

reporting companies in ‘‘street name,’’ 

noting that the current definition allows 

companies to deregister under the 

Exchange Act despite having beneficial 

owners well in excess of current 

thresholds.14 One commentator 

explained that company shareholders 

who purchased their shares on the open 

market ‘‘did so with the reasonable 

expectation that their shares would 

enjoy continued liquidity for so long as 

the Company’s business remained 

viable.’’ 15 This commentator argued 

that the purpose for establishing the 

BFE Trusts as owners of BF Enterprises 

common stock should not serve as 

grounds for granting the application 

when the company’s purpose in 

effecting the reverse/forward stock split 

was to cease filing Exchange Act 

reports. Some commentators urged the 

Commission not to provide the relief 

requested in the application, but, rather, 

to address the company’s arguments in 

the context of a reconsideration of how 

shareholders are counted and how many 

holders should trigger Exchange Act 

registration.16 Finally, certain of the 

commentators also disputed factual 

assertions in the application, claiming 

that the ‘‘market value’’ or ‘‘intrinsic 

value’’ of the company’s assets is in 

excess of $30 million 17 and that there 

is trading interest in the company’s 

common stock.18

II 

Section 12(g) was enacted in 1964 

following a study of the securities 

markets commissioned by Congress and 

conducted by the staff of the 

Commission in the early 1960s (the 

‘‘Special Study’’).19 In this study, the 

staff was asked to develop a 

recommendation for a standard for 

registration that would be both 

reasonably reliable and easily 

enforceable and cover issuers that are 

‘‘sufficiently significant from the point 

of view of the public interest to warrant 

the regulatory burden to be assumed by 

the Government and the compliance 

burden to be imposed on the issuers 

involved.’’ 20 Based on a balance of 

theoretical and practical considerations, 

the Special Study concluded that the 

holder of record test would be the most 

appropriate measure of public interest 

for imposing statutory disclosure 

requirements on issuers whose 

securities trade over-the-counter.21 The 

Commission added an asset test to avoid 

imposing Exchange Act reporting 

obligations on insubstantial issuers for 

which the burden of compliance would 

be disproportionate to the public 

interest served by public disclosure.22

The Commission subsequently noted 

that ‘‘[t]he shareholder-of-record criteria 

were intended to provide a certain and 

easily applied measure of public 

investor interest and to avoid the 

difficulties inherent in a standard based 

on the number of beneficial owners. 

Congress enacted Section 12(g) and 

15(d) on the assumption that there was 

a significant correlation between the 

number of recordholders and the 

number of underlying beneficial 

owners.’’ 23

Shortly after Congress enacted Section 

12(g) in 1964, the Commission adopted 

Exchange Act Rule 12g5–1 to define 

‘‘held of record’’ for purposes of Section 

12(g).24 This definition requires an 

issuer to count, as holders of record, 

only persons identified as owners on the 

record of security holders maintained by 

or on behalf of the issuer in accordance 

with accepted practice and subject to 

certain conditions. The Commission 

determined not to require issuers to 

count as holders of record the separate 

accounts in which securities are held by 

brokers, dealers, banks or their 

nominees for the benefit of other 

persons. The Commission explained 

that this would ‘‘have the effect of 

simplifying the process by which 

companies determine whether or not 

they are covered by [Section 12(g)].’’ 25

The Commission further stated that it 

would ‘‘determine in the light of 

experience whether inclusion of these 

accounts at a future date is necessary or 

appropriate to prevent circumvention of 

the [Exchange] Act and to achieve the 


srobinson on DSK4SPTVN1PROD with NOTICES
15150 Federal Register / Vol. 77, No. 50 / Wednesday, March 14, 2012 / Notices 

26 Id. 

27See Testimony on the Future of Capital 

Formation, by Mary L. Schapiro, Chairman, U.S. 

Securities and Exchange Commission, before the 

U.S. House of Representatives Committee on 

Oversight and Government Reform (May 10, 2011), 

available at http://www.sec.gov/news/testimony/ 

2011/ts051011mls.html. See also Testimony on 

Crowdfunding and Capital Formation, by Meredith 

B. Cross, Director, Division of Corporation Finance, 

U.S. Securities and Exchange Commission, before 

the Subcommittee on TARP, Financial Services and 

Bailouts of Public and Private Programs of the U.S. 

House of Representatives, Committee on Oversight 

and Government Reform (Sept. 15, 2011), available 

at http://www.sec.gov/news/testimony/2011/ 

ts091511mbc.html. 

28Committee Report at 63. 

29 Id. 

30The Senate Committee observed: ‘‘Under the 

Investment Company Act of 1940, Congress set 100 

shareholders as the standard for measuring the 

public interest. Such inclusive coverage might, 

however, create a burden on issuers and the 

Commission unwarranted by the number of 

investors protected, the size of companies affected, 

and other factors bearing on the public interest. 

Unlike the Securities Act, which requires filing 

only on the occasion of an offering, the Exchange 

Act requires at least annual filings. It is therefore 

necessary on purely practical grounds to limit in 

some manner the number of issuers required to 

comply, so that the flow of reports and proxy 

statements will be manageable from the regulatory 

standpoint and not disproportionately burdensome 

on issuers in relation to the national public interest 

to be served.’’ Committee Report at 19. 

31See, e.g., In the Matter of The National Dollar 

Stores, Ltd., Admin. Proc. File No. 3–1212, 81–79 

(Sept. 11, 1968) (explaining that ‘‘the criteria [set 

forth in Section 12(h)] are designed merely to 

provide us with guidelines in considering the basic 

tests’’ of whether an exemption is not inconsistent 

with the public interest or the protection of 

investors; and concluding that limited, conditional 

relief warranted ‘‘under the circumstances’’); In the 

Matter of Lake Ontario Concrete Limited, Admin. 

Proc. File No. 3–2615 (May 23, 1973) (where 

Commission recognized ‘‘unusual combination of 

circumstances’’ in granting limited exemption); and 

In the Matter of Multi Benefit Realty Fund, et al., 

Admin. Proc. File No. 3–4400 (Mar. 11, 1976) 

(where four partnerships with aggregate assets of 

$183 million and 5,600 limited partners denied 

exemption despite lack of trading interest in 

applicants’ securities and purported sophistication 

of investors because those factors ‘‘outweighed’’ by 

the applicants’ size and by the number of investors 

involved, with Commission specifically noting 

‘‘[t]hough significant, trading interest is not the sole 

consideration to be looked at in these matters’’). 

32Special Study at 17. 

33Raider Letters; Blumenstein Letters; and 

Browning Letter. 

34Blumenstein Letters. 

35See, e.g., Raider Letters (explaining that, due to 

the company deregistering under the Exchange Act, 

‘‘it is no surprise that there is only limited interest 

in trading Company stock’’). 

36Specifically, in 2009, there were 11 trades on 

six days on volume of 6,446 shares; in 2010, there 

were 22 trades on nine days on volume of 13,200 

shares; and in 2011, there were 14 trades on eight 

days on volume of 7,127 shares. 

37The Commission determined that there was an 

‘‘absence of a regular market for the [issuer’s] stock’’ 

and a ‘‘relatively small number of transactions 

effected’’ in the stock where there were only four 

bid and one ask quotations for the shares for a oneyear period (followed by a cessation of published 

quotations), and a total of 107 sales, involving 

12,117 shares, were effected over a 27-month 

period. In the Matter of Security Savings and Loan, 

intended coverage on a uniform and 

acceptable basis.’’ 26 The Commission 

currently is undertaking such an 

assessment.27

Congress added the exemptive 

authority in Section 12(h) of the 

Exchange Act to provide the 

Commission with ‘‘flexibility in the 

administration’’ of Section 12(g) and 

other reporting provisions of the 

Exchange Act applicable to securities 

traded in the over-the-counter market.28

To this end, Congress provided the 

Commission with ‘‘ample authority to 

modify, and provide exemptions from, 

the statutory requirements for different 

issuers on the basis of the number of 

shareholders, trading interest in their 

securities, nature and extent of their 

business activities, income, asset size, or 

other relevant considerations.’’ 29

Congress also recognized that strict 

application of numerical triggers may 

not, in all cases, be consistent with its 

desire to balance the public benefits of 

reporting with its burdens on reporting 

companies, particularly smaller 

companies.30

The Commission balances the factors 

in Section 12(h), with no single criterion 

alone serving as the basis for granting an 

exemption; rather, the criteria set forth 

in Section 12(h) serve as ‘‘guidelines’’ 

and the Commission looks at the 

particular circumstances of each matter 

to determine whether an exemption 

meets the standards in Section 12(h).31

We address each of the factors below. 

Number of shareholders: The 

company asserts, and the commentators 

do not dispute, that the company had 

fewer than 85 beneficial holders of its 

common stock and, excluding the BFE 

Trusts, fewer than 25 holders of record 

of its common stock as of December 31, 

2010. It also is undisputed that the only 

reason why BF Enterprises would be 

deemed to have 500 or more record 

holders is the action of a single 

beneficial owner to create 500 trusts and 

to transfer ownership of shares of BF 

Enterprises’ common stock to those 

trusts for the sole purpose of attempting 

to cause the company to register its 

common stock under Section 12(g). It is 

further undisputed that this shareholder 

is the only beneficiary of these trusts. 

In our view, this increase in the 

number of owners appearing on the 

company’s books does not reflect a 

growth in public holders that requires 

the protections of Exchange Act 

reporting; nor is this increase 

‘‘sufficiently significant from the point 

of view of the public interest to warrant 

the regulatory burden to be assumed by 

the Government and the compliance 

burden to be imposed on the [issuer] 

involved.’’ 32 Further, imposing 

Exchange Act reporting obligations on 

BF Enterprises solely because of the 

creation of, and deposit of company 

shares into, the BFE Trusts would not 

result in an increase in ‘‘the number of 

investors protected’’ by such reporting, 

as Congress used that phrase in the 

Committee Report. As such, requiring 

the company to report under the 

Exchange Act does not advance the 

public policy underlying the Exchange 

Act’s reporting provisions. 

Trading interest in the securities: In 

its application, BF Enterprises asserts 

that ‘‘there is no trading activity in, and 

an absence of any regular market for, the 

Company’s securities.’’ While some 

commentators disputed the unqualified 

nature of this statement, they 

acknowledged that the company’s stock 

does not trade frequently.33 Indeed, 

legal counsel representing the 

shareholder who created the BFE Trusts 

acknowledged that, ‘‘[i]n 2010, there 

were only a few reported trades, and, to 

Leeward’s knowledge, there have been 

no reported trades in 2011.’’ 34 However, 

all of these commentators asserted that 

the level of trading interest in BF 

Enterprises’ stock depends to some 

extent upon the availability of its 

financial information and news.35

While we are mindful that the 

shareholders of BF Enterprises may 

benefit in the ways they explained in 

their comment letters if the company 

were to resume Exchange Act 

reporting—e.g., increased transparency, 

greater market liquidity, enhanced 

management accountability—we also 

must consider the burden of Exchange 

Act reporting on an entity such as BF 

Enterprises and whether there is 

currently sufficient trading interest to 

warrant the compliance burden to be 

imposed. While we recognize that, with 

more information, there may be more 

trading interest, it does not appear to us 

that there currently exists sufficient 

trading interest that would justify 

imposing the compliance burdens of 

Exchange Act reporting on the 

company. 

We note that, according to 

otcquote.com, 47 trades, covering fewer 

than 27,000 shares, in the company’s 

common stock were effectuated in the 

over-the-counter market during the 

three-year period from January 1, 2009 

through December 31, 2011.36 This 

trading activity is of a level that the 

Commission has determined in the past 

militates toward granting exemptive 

relief under Section 12(h).37 That the 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 50 / Wednesday, March 14, 2012 / Notices 15151 

Admin. Proc. File Nos. 3–2511, 81–100 (Aug. 25, 

1971). The Commission characterized trading 

interest as ‘‘inconsequential,’’ ‘‘virtually dormant’’ 

and ‘‘insignificant’’ where there was an average of 

five over-the counter transactions per month for a 

total monthly trading volume of 600 to 700 shares, 

when compared to 441,700 shares of the same class 

traded in one year on the Toronto Stock Exchange. 

In the Matter of Lake Ontario Cement Limited, 

Admin. Proc. File No. 3–2615 (81–99) (May 23, 

1973). 

38Blumenstein Letters (explaining that ‘‘[t]he 

Company acknowledged in its information 

statement regarding the Reverse Split that a ‘public 

market * * * would cease to exist’ for its shares 

following the transaction.’’) 

39Raider Letters. 

40The application states that the company has a 

total of seven employees. Compare In the Matter of 

Multi Benefit Realty Fund, et al., Admin. Proc. File 

No. 3–4400 (Mar. 11, 1976) (where Commission 

found relevant in assessing this factor that the 

investment at issue was ‘‘more complex than those 

in most securities’’ because it involved limited 

partnership interests in ‘‘highly-leveraged, taxoriented real estate speculations’’). 

41The Commission characterized the applicant’s 

income as ‘‘limited’’ where it had ‘‘gross operating 

income of $446,888 and net income, after dividends 

on savings accounts and federal income taxes, of 

$16,988.’’ In the Matter of Security Savings and 

Loan, Admin. Proc. File Nos. 3–2511, 81–100 (Aug. 

25, 1971). See also In the Matter of Orchard Supply 

Building Co., Admin. Proc. File No. 3–789; 81–41 

(May 1, 1967) (finding retail sales of over $3.5 

million to be ‘‘substantial’’ and recognizing that the 

‘‘impact of those sales on interstate commerce 

cannot be immaterial’’ where applicant engaged in 

the operation of three diversified hardware stores in 

the City of San Jose, California). 

42For example, under Section 10(b) of the 

Exchange Act and Rule 10b–5 under the Exchange 

Act, a privately-held company may be liable for 

material misrepresentations or materially 

misleading omissions when repurchasing securities 

from its shareholders. See, e.g., Smith v. Duff and 

Phelps, Inc., 891 F.2d 1567, 1574 (11th Cir.1990) 

(holding that closely-held company had duty to 

disclose to retiring employee negotiations with 

prospective stock purchaser). 

43See, e.g., Browning Letter. 

44See, e.g., Blumenstein Letters (arguing that 

‘‘[a]lthough the Commission would only be granting 

relief to one company, investors in OTC stocks may 

take the granting of such an exemption as an 

indication that they should be wary of investing in 

any OTC company that is susceptible of going 

dark’’). 

45 17 CFR 200.30–1(e)(7). 

primary reason for the low level of 

trading may be the company’s decision 

to effect the reverse/forward stock split 

and ‘‘go dark’’ does not, in our view, 

negatively impact an application under 

Section 12(h) where, as here, an issuer 

accomplishes deregistration after notice 

to its shareholders, including notice of 

the negative impact on the market for 

the issuer’s securities.38 Further, we 

note that the Exchange Act does not 

require reporting companies to facilitate 

or maintain a market for their securities: 

Exchange listing is purely voluntary as 

is qualifying for quotation on the OTC 

Bulletin Board. 

Nature and extent of business 

activities, income and asset size: In its 

application, BF Enterprises asserts that 

it had total assets of $13.3 million as of 

December 31, 2010. BF Enterprises also 

states that is a ‘‘real estate developer 

whose primary business comprises two 

properties: a real estate development in 

suburban Tampa, Florida, and an office 

building in Tempe, Arizona’’ with its 

assets ‘‘consisting primarily of real 

estate, mortgage loans receivable and 

cash and cash equivalents.’’ One 

commentator has disputed BF 

Enterprises’ statement that its total 

assets as of December 31, 2010 

amounted to $13.3 million and its 2010 

annual net income was approximately 

$103,000.39 Specifically, this 

commentator estimates the company’s 

assets at more than $30 million and 

questions the net income amount given 

total revenues in 2010 of approximately 

$2.7 million. However, even if this 

commentator is correct, it is undisputed 

that BF Enterprises’ assets exceed the 

Section 12(g) asset threshold of $10 

million as of December 31, 2010. 

It is relevant, nevertheless, that the 

securities at issue and the company’s 

operations are not of a particularly 

complex nature, given the type and 

nature of the company’s assets and its 

small workforce.40 In particular, BF 

Enterprises’ assets and income are 

clearly not ‘‘substantial’’ and the 

company’s operations are ‘‘limited’’ 

under Commission precedent.41

Other factors: Several commentators 

expressed their concern that a company 

‘‘going dark’’ can repurchase their 

securities from stranded shareholders at 

very substantial discounts to intrinsic 

value. While an illiquid market can 

result in a market price lower than that 

available in a more liquid market, we 

note that the antifraud provisions of the 

federal securities laws apply to 

company repurchases from its 

shareholders.42 Accordingly, while the 

availability of current Exchange Act 

information about a company may 

benefit its shareholders who seek to sell 

their shares into a public market, 

shareholders of all companies—whether 

or not subject to Exchange Act 

reporting—are protected against fraud in 

connection with their sales or purchases 

of company stock. 

Commentators also expressed a 

general concern about the ability of 

public companies to ‘‘go dark’’ 43 and 

the potentially negative impact an 

exemption in this matter would have on 

the over-the-counter markets 

generally.44 However, the act of ‘‘going 

dark’’ is not itself grounds for denying 

the application. The appropriate 

thresholds for ‘‘going dark’’ generally 

are a subject for study and broad public 

input and therefore more appropriately 

handled through rulemaking. 

III 

Having considered the application 

and the comment letters, we find that 

the requested exemption is not 

inconsistent with the public interest or 

the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Exchange Act, for 

the following reasons: 

(1) As of December 31, 2010, the 

company had fewer than 85 beneficial 

owners of its common stock and, 

excluding the BFE Trusts, fewer than 25 

holders of record of its common stock; 

(2) The BFE Trusts have only one 

beneficiary, who has expressly stated 

that its shares are held indirectly 

through 500 trust entities formed solely 

for the purpose of attempting to cause 

the company to register its common 

stock under Section 12(g); 

(3) There currently appears to be 

extremely limited trading interest in BF 

Enterprises’ common stock, although we 

recognize that this may be due, in part, 

to the company having ceased filing 

reports under the Exchange Act; 

(4) The limited nature and extent of 

BF Enterprises’ business activities; and 

(5) Repurchases by the company of its 

securities are subject to certain antifraud provisions of the federal securities 

laws, including Section 10(b) of the 

Exchange Act and Rule 10b–5 

thereunder. 

Accordingly, it is ordered, that 

pursuant to Section 12(h) of the 

Exchange Act, BF Enterprises is hereby 

exempted from the requirement to 

register its common stock under Section 

12(g) of the Exchange Act, effective 

immediately; and 

It is further ordered, that this 

exemption shall remain in effect only 

for so long as counting each of the BFE 

Trusts as a separate ‘‘holder of record’’ 

for purposes of Section 12(g) would be 

the sole reason for the number of 

holders of record of BF Enterprises’ 

common stock to equal or exceed 500. 

For the Commission, by the Division of 

Corporation Finance, pursuant to delegated 

authority.45

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–6067 Filed 3–13–12; 8:45 am] 

BILLING CODE 8011–01–P 


srobinson on DSK4SPTVN1PROD with NOTICES