92226 Federal Register / Vol. 89, No. 225 / Thursday, November 21, 2024 / Notices 

1Applicant states that its 28 wholly-owned 

subsidiaries generally engage in sales and marketing 

or research and development (‘‘R&D’’) activities in 

their respective jurisdictions. 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the Board consents, the 

Commission will: 

(A) By order approve or disapprove 

such proposed rules; or 

(B) Institute proceedings to determine 

whether the proposed rules should be 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rules 

are consistent with the requirements of 

Title I of the Act. Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/pcaob); or 

• Send an email to rule-comments@

sec.gov. Please include PCAOB–2024– 

05 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Vanessa A. Countryman, Secretary, 

Securities and Exchange Commission, 

100 F Street NE, Washington, DC 

20549–1090. 

All submissions should refer to 

PCAOB–2024–05. This file number 

should be included on the subject line 

if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://www.sec.gov/ 

rules/pcaob). Copies of the submission, 

all subsequent amendments, all written 

statements with respect to the proposed 

rules that are filed with the 

Commission, and all written 

communications relating to the 

proposed rules between the Commission 

and any person, other than those that 

may be withheld from the public in 

accordance with the provisions of 5 

U.S.C. 552, will be available for website 

viewing and printing in the 

Commission’s Public Reference Room, 

100 F Street NE, Washington, DC 20549, 

on official business days between the 

hours of 10 a.m. and 3 p.m. Copies of 

such filing will also be available for 

inspection and copying at the principal 

office of the PCAOB. Do not include 

personal identifiable information in 

submissions; you should submit only 

information that you wish to make 

available publicly. 

We may redact in part or withhold 

entirely from publication submitted 

material that is obscene or subject to 

copyright protection. All submissions 

should refer to PCAOB–2024–05 and 

should be submitted on or before 

December 12, 2024. 

By the Commission. 

Vanessa A. Countryman. 

Secretary. 

[FR Doc. 2024–27247 Filed 11–20–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

35387; File No. 812–15188] 

Zscaler, Inc. 

November 15, 2024. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice. 

Notice of application for an order 

under Section 3(b)(2) of the Investment 

Company Act of 1940 (‘‘Act’’). 

APPLICANT: Zscaler, Inc. 

SUMMARY OF APPLICATION: Applicant 

seeks an order under Section 3(b)(2) of 

the Act declaring it to be primarily 

engaged in a business other than that of 

investing, reinvesting, owning, holding 

or trading in securities. Applicant states 

that it is in the business of providing, 

improving, and developing cloud 

security solutions to businesses. 

FILING DATES: The application was filed 

on December 28, 2020, and amended on 

May 11, 2021, July 28, 2021, January 6, 

2022, July 31, 2023, and September 13, 

2024. 

HEARING OR NOTIFICATION OF HEARING: 

An order granting the requested relief 

will be issued unless the Commission 

orders a hearing. Interested persons may 

request a hearing by emailing the 

Commission’s Secretary at SecretarysOffice@sec.gov and serving applicants 

with a copy of the request, by email if 

an email address is listed for the 

relevant Applicant below, or personally 

or by mail, if a physical address is listed 

for the relevant Applicant below. 

Hearing requests should be received by 

the Commission by 5:30 p.m. on 

December 10, 2024, and should be 

accompanied by proof of service on the 

applicants, in the form of an affidavit, 

or for lawyers, a certificate of service. 

Pursuant to rule 0–5 under the Act, 

hearing requests should state the nature 

of the writer’s interest, any facts bearing 

upon the desirability of a hearing on the 

matter, the reason for the request, and 

the issues contested. Persons who wish 

to be notified of a hearing may request 

notification by emailing the 

Commission’s Secretary at SecretarysOffice@sec.gov. 

ADDRESSES: The Commission: 

Secretarys-Office@sec.gov. Applicant: 

Remo Canessa, Chief Financial Officer, 

and Robert Schlossman, Esq., Chief 

Legal Officer, Zscaler, Inc., at Treasury@

zscaler.com; Kevin R. Bettsteller, Esq., 

at kbettsteller@gibsondunn.com. 

FOR FURTHER INFORMATION CONTACT: 

Adam Lovell, Senior Counsel, or Terri 

G. Jordan, Branch Chief, at (202) 551– 

6825 (Division of Investment 

Management, Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. For Applicant’s 

representations, legal analysis, and 

conditions, please refer to Applicant’s 

fifth amended and restated application, 

dated September 13, 2024, which may 

be obtained via the Commission’s 

website by searching for the file number 

at the top of this document, or for an 

Applicant using the Company name 

search field, on the SEC’s EDGAR 

system. The SEC’s EDGAR system may 

be searched at https://www.sec.gov/ 

edgar/searchedgar/legacy/ 

companysearch.html. You may also call 

the SEC’s Public Reference Room at 

(202) 551–8090. 

Applicant’s Representations 

1. Applicant states that it is a 

Delaware corporation formed in 2007 

that, directly and through its whollyowned subsidiaries,1 is engaged in the 

business of providing, improving, and 

developing cloud security solutions to 

businesses. 

2. Applicant states that its business is 

highly capital intensive, requires R&D of 

new technologies, and does not involve 

the Applicant acquiring or retaining 

significant ‘‘hard’’ operating assets. 

Applicant states that it maintains 

significant cash reserves that it seeks to 

invest for purposes of conserving capital 

and providing liquidity until the funds 

are used in its cloud-based services and 

technology business. As described more 

fully in the application, Applicant states 

that it requires significant liquid capital 

primarily to: (i) fund R&D for new 

products and services, (ii) advance the 

commercialization of its business, (iii) 

otherwise fund its operations, and (iv) 

make other capital expenditures in 

keeping with the growth of the 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 89, No. 225 / Thursday, November 21, 2024 / Notices 92227 

2As used in Applicant’s application, Capital 

Preservation Instruments refers collectively to any 

cash items and securities that are held for the 

purpose of conserving Applicant’s capital and 

liquidity until they are used by Applicant to 

support its business (as such business is described 

in Applicant’s application). Such holdings are 

liquid (i.e., can be readily sold), earn competitive 

market returns and present a low level of credit 

risk, including short-term investment grade 

securities, Government securities (as defined in 

Section 2(a)(16) of the Act), securities of moneymarket funds registered under the Act, and other 

cash items; but excluding investments in equity or 

speculative instruments. 

3Tonopah Mining Company of Nevada, 26 SEC 

426, 427 (1947). 

Applicant’s cloud-based services and 

technology business. 

3. Applicant states that it has financed 

operations primarily through offerings 

of its debt and equity securities, but 

ultimately seeks to generate cash from 

its operations to support its business. 

Applicant states that it seeks to preserve 

capital and maintain liquidity, pending 

the use of such capital for its operations, 

by investing in ‘‘Capital Preservation 

Instruments.’’ 2 Applicant states that it 

may in the future make strategic 

investments in ‘‘other investments’’ 

consistent with Rule 3a–8. Applicant 

states that such securities will not be 

acquired for speculative purposes. 

Applicant’s Legal Analysis 

1. Applicant seeks an order under 

Section 3(b)(2) of the Act declaring that 

it is primarily engaged in a business 

other than that of investing, reinvesting, 

owning, holding or trading in securities 

and therefore is not an investment 

company as defined in the Act. 

2. Section 3(a)(1)(A) of the Act defines 

the term ‘‘investment company’’ to 

include an issuer that is or holds itself 

out as being engaged primarily, or 

proposes to engage primarily, in the 

business of investing, reinvesting or 

trading in securities. Section 3(a)(l)(C) of 

the Act further defines an investment 

company as an issuer that is engaged or 

proposes to engage in the business of 

investing, reinvesting, owning, holding 

or trading in securities, and owns or 

proposes to acquire investment 

securities having a value in excess of 

40% of the value of the issuer’s total 

assets (exclusive of Government 

securities and cash items) on an 

unconsolidated basis. Section 3(a)(2) of 

the Act defines ‘‘investment securities’’ 

to include all securities except 

Government securities, securities issued 

by employees’ securities companies, 

and securities issued by majority-owned 

subsidiaries of the owner which (a) are 

not investment companies and (b) are 

not relying on the exclusions from the 

definition of investment company in 

Section 3(c)(1) or Section 3(c)(7) of the 

Act. Applicant states that it has never 

been, is not now, and does not propose 

to be, primarily engaged in the business 

of investing, reinvesting, owning, 

holding, or trading in securities. The 

Applicant states that it currently holds 

investment securities amounting to less 

than 40% of its total assets (exclusive of 

Government securities and cash items), 

but that its need for liquid capital to 

conduct its business means that it, in 

part, makes investments in certain 

securities exceeding 40% of the 

Company’s total assets (exclusive of 

Government securities and cash items) 

on an unconsolidated basis. Applicant 

states that it therefore may be an 

‘‘investment company’’ pursuant to 

Section 3(a)(l)(C) of the Act absent an 

exclusion or exemption. 

3. Rule 3a–8 under the Act provides 

an exclusion from the definition of 

investment company if, among other 

factors, a company’s R&D expenses are 

a substantial percentage of its total 

expenses for the last four fiscal quarters 

combined. While Applicant states that it 

believes that it complies with the 

conditions of Rule 3a–8, Applicant 

states that it has concerns over (a) 

whether compliance is practical in light 

of changes to the Company’s overall 

expenses in connection with the 

increase of customer subscriptions and 

support services, and (b) whether R&D 

expenses, while substantial in absolute 

terms, may not always be considered 

substantial as a ratio of overall 

expenses. Although Applicant states 

that it anticipates R&D expenses to 

increase in absolute terms, such 

expenses are not anticipated to increase 

proportionately with Applicant’s overall 

expenses, particularly given increases in 

expenses related to sales and marketing, 

the administration of a rapidly 

expanding employee base, and other 

administrative expenses. Applicant 

states that its R&D expenses have 

fluctuated between 21% and 25% of 

total expenses over the past six years, 

and Applicant expects R&D expenses to 

decrease relative to total expenses over 

time. 

4. Section 3(b)(2) of the Act provides 

that, notwithstanding Section 3(a)(l)(C) 

of the Act, the Commission may issue 

an order declaring an issuer to be 

primarily engaged in a business other 

than that of investing, reinvesting, 

owning, holding, or trading in securities 

directly, through majority-owned 

subsidiaries, or controlled companies 

conducting similar types of businesses. 

Applicant requests an order under 

Section 3(b)(2) of the Act declaring that 

it is primarily engaged in a business 

other than that of investing, reinvesting, 

owning, holding or trading in securities, 

and therefore is not an investment 

company as defined in the Act. 

5. In determining whether an issuer is 

‘‘primarily engaged’’ in a noninvestment company business under 

Section 3(b)(2) of the Act, the 

Commission considers the following 

factors: (a) the company’s historical 

development, (b) its public 

representations of policy, (c) the 

activities of its officers and directors, (d) 

the nature of its present assets, and (e) 

the sources of its present income.3

6. Applicant submits that it satisfies 

the criteria for issuance of an order 

under Section 3(b)(2) of the Act because 

Applicant is primarily engaged in the 

business of providing, improving, and 

developing cloud security solutions to 

businesses and is not in the business of 

investing, reinvesting, owning, holding 

or trading in securities. 

a. Historical Development. Applicant 

states that, since its inception in 2007, 

Applicant has actively engaged in the 

business of developing and providing 

cloud-based information security 

solutions. Applicant’s business has 

focused on the development of new 

such products. 

b. Public Representations of Policy. 

Applicant states that it has consistently 

represented that it is engaged in the 

business of providing a cloud-based 

suite of information security solutions. 

Applicant further states that it has never 

held and does not now hold itself out 

as an investment company within the 

meaning of the Act or as engaging in the 

business of investing, reinvesting, 

owning, holding, or trading in 

securities. Applicant submits that its 

public representations make clear that 

shareholders invest in the Applicant’s 

securities with the expectation of 

realizing gains from Applicant’s 

development and sale of its suite of 

cloud security solutions and not from 

returns on an investment portfolio. 

c. Activities of Officers and Directors. 

Applicant represents that its officers 

and directors spend substantially all of 

their time overseeing the Applicant’s 

business of providing its cloud platform 

to customers. Applicant states that its 

cash management activities are managed 

internally by its Chief Financial Officer 

and externally by an investment 

manager, whose activities are 

supervised by the Chief Financial 

Officer. Applicant states that none of its 

executive officers, other than the Chief 

Financial Officer, spend time 

monitoring cash balances and managing 

short-term investment securities. In 

addition, of the Applicant’s 6,342 

employees (as of October 31, 2023), 

Applicant states that fewer than five 


lotter on DSK11XQN23PROD with NOTICES1
92228 Federal Register / Vol. 89, No. 225 / Thursday, November 21, 2024 / Notices 

4Applicant states that one of its subsidiaries 

holds investment securities. 

5Applicant states that it intends to calculate this 

percentage by consolidating its financial statements 

with the financial statements of its wholly-owned 

subsidiaries (but not with any majority-owned 

subsidiaries that may be acquired in the future). 

6Applicant states that is has not, and does not 

expect to, earn investment income from strategic 

investments. 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 100046 

(May 1, 2024), 89 FR 38203 (May 7, 2024) 

(‘‘Notice’’). Comments received on the proposed 

rule change are available at: https://www.sec.gov/ 

comments/sr-finra-2024-007/srfinra2024007.htm. 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 100305 

(June 10, 2024), 89 FR 50644 (June 14, 2024). The 

Commission designated August 5, 2024, as the date 

by which the Commission shall approve or 

disapprove, or institute proceedings to determine 

whether to disapprove, the proposed rule change. 

6 15 U.S.C. 78s(b)(2)(B). 

employees spend time on matters 

relating to the management of 

Applicant’s investment securities. 

Applicant states that none of its officers, 

directors or employees spends or 

proposes to spend of his or her time to 

the management of Capital Preservation 

Instruments on behalf of Applicant. 

d. Nature of Assets. Applicant states 

that, as of October 31, 2023, Applicant’s 

investment securities constituted 

approximately 30.1% of its total assets 

(excluding Government securities and 

cash items) on an unconsolidated basis.4

Furthermore, Applicant states that as of 

October 31, 2023, 100% of its 

investment securities consist of Capital 

Preservation Instruments. Applicant 

states that it uses its Capital 

Preservation Instruments to finance its 

continued operations in connection 

with the development of the Company’s 

software. Applicant states that it may in 

the future make strategic investments in 

‘‘other investments’’ consistent with 

Rule 3a–8. Applicant states, however, 

that no more than 10% of its total assets 

(exclusive of Government securities and 

cash items, including securities issued 

by money market funds registered under 

the Act) will consist of investment 

securities other than Capital 

Preservation Instruments.5 Applicant 

states that it uses current assets, 

including its Capital Preservation 

Instruments, to finance its continued 

R&D program and operations in 

connection with the development of the 

Applicant’s software. 

e. Sources of Income and Revenue. 

Applicant represents that since its 

inception it has carried net operating 

losses. Applicant states that it does, 

however, derive income from its 

investment securities. Applicant states 

that a review of its current source of 

revenues provides a more accurate 

review of its operating company status, 

particularly, given the upward trend in 

recognizing substantially increased 

revenues due to sales of new 

subscriptions. Applicant states that it 

recognizes substantially all of its 

revenues from fees based on 

subscriptions and support. Applicant 

states that its revenues for the fiscal 

years ended July 31, 2020, 2021, 2022, 

and 2023 were $431.3 million, $673.1 

million, $1,090.9 million, and $1,671 

million, respectively, on an 

unconsolidated basis. By contrast, 

Applicant states that its net investment 

income in its fiscal years of 2021, 2022, 

and 2023 was $2.8 million, $4.6 million, 

and $60.5 million, respectively. 

Applicant states that all such income 

was derived from Capital Preservation 

Instruments.6 Applicant states that if net 

investment income were compared to its 

revenue, it would be less than 4% of 

revenue for the fiscal year ended July 

31, 2023, and equal to less than 0.5% of 

revenue for the fiscal year ended July 

31, 2022. 

For the fiscal three months ended 

October 31, 2023, Applicant states that 

it earned $25.9 million of net 

investment income, an increase 

compared to $7.9 million for the first 

three months ended October 31, 2022. 

Applicant states that this nonetheless 

represents less than 5.5% of revenue for 

the three months ended October 31, 

2023. Applicant states that the increase 

in net investment income is due to the 

increase in interest rates in the fixed 

income markets. 

7. Applicant asserts that its historical 

development, its public representations 

of policy, the activities of its officers 

and directors, the nature of its assets 

and its sources of revenue and income, 

as discussed in the application, 

demonstrate that it is engaged primarily 

in a business other than that of 

investing, reinvesting, owning, holding 

or trading securities. Applicant thus 

asserts that it satisfies the criteria for 

issuing an order under Section 3(b)(2) of 

the Act. 

Applicant’s Conditions 

Applicant agrees that an order granted 

pursuant to the application will be 

subject to the following conditions: 

1. Applicant will continue to use its 

accumulated cash and securities to 

support its primary business (as such 

business is described in this 

Application); 

2. Applicant will refrain from 

investing or trading in securities for 

speculative purposes; and 

3. No more than 10% of Applicant’s 

total assets will consist of investment 

securities other than Capital 

Preservation Instruments (as such 

capitalized term is defined in 

Applicant’s application). For purposes 

of this condition, total assets excludes 

cash items (including securities issued 

by money market funds registered under 

the Act) and Government securities (as 

defined in Section 2(a)(16) of the Act). 

This percentage is to be determined on 

an unconsolidated basis, except that 

Applicant should consolidate its 

financial statements with the financial 

statements of any wholly-owned 

subsidiaries. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

J. Matthew DeLesDernier, 

Deputy Secretary. 

[FR Doc. 2024–27158 Filed 11–20–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101645; File No. SR– 

FINRA–2024–007] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Partial 

Amendment No. 1 to Proposed Rule 

Change To Adopt the FINRA Rule 6500 

Series (Securities Lending and 

Transparency Engine (SLATETM)) 

November 15, 2024. 

I. Introduction 

On May 1, 2024, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and 

Rule 19b–4 thereunder,2 a proposed rule 

change (SR–FINRA–2024–007) to adopt 

the new FINRA Rule 6500 Series 

(Securities Lending and Transparency 

Engine (SLATETM)) to (1) require 

reporting of securities loans; and (2) 

provide for the public dissemination of 

loan information. The proposed rule 

change was published for comment in 

the Federal Register on May 7, 2024.3

On June 10, 2024, pursuant to Section 

19(b)(2) of the Act,4 the Commission 

designated a longer period within which 

to approve the proposed rule change, 

disapprove the proposed rule change, or 

institute proceedings to determine 

whether to disapprove the proposed 

rule change.5 On August 5, 2024, the 

Commission instituted proceedings 

under Section 19(b)(2)(B) of the Act 6 to 


lotter on DSK11XQN23PROD with NOTICES1