```

[Federal Register Volume 89, Number 225 (Thursday, November 21, 2024)]
[Notices]
[Pages 92241-92243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27229]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 35388; File No. 812-15654]

Figure Certificate Company (``Applicant'')

November 15, 2024.
AGENCY: Securities and Exchange Commission (``Commission'' or ``SEC'').

ACTION: Notice.

-----------------------------------------------------------------------

    Notice of application for an order under section 28(c) of the 
Investment Company Act of 1940 (the ``Act'').

Summary of Application:  Applicant seeks an order pursuant to section 
28(c) of the Act approving certain proposed custodial arrangements.

Applicants:  Figure Certificate Company.

Filing Dates:  The application was filed on November 7, 2024 and 
amended and restated on November 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 on any application by emailing 
the SEC's Secretary at [email protected] and serving the 
Applicant with a copy of the request by email, if an email address is 
listed for the Applicant below, or personally or by mail, if a physical 
address is listed for the Applicant below. Hearing requests should be 
received by the Commission by 5:30 p.m. on December 11, 2024 and should 
be accompanied by proof of service on the Applicant, 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 [email protected].

ADDRESSES: The Commission: [email protected]. Applicant: 
[email protected].

FOR FURTHER INFORMATION CONTACT: Taylor Evenson, Senior Counsel, or 
Robert S. Shapiro, Assistant Director, 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 amended and restated 
application, dated November 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 the Applicant using the Company name search 
field, on the SEC's EDGAR system. The SEC's EDGAR system may be 
searched at, http://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, a Delaware corporation, intends to register under the 
Act as a face-amount certificate company and operate as a registered 
face-amount certificate company. Applicant currently intends to offer 
two types of face-amount certificates registered under the Securities 
Act of 1933, face-amount certificates of the installment type (the 
``Installment Certificates'') and fully-paid certificates (the 
``Transferrable Certificates'' and, together with the Installment 
Certificates, the ``Certificates''). Applicant states that it does not 
contemplate, or seek approval for, custodial arrangements under which 
Applicant would deposit and maintain reserves associated with any face-
amount certificates other than the Installment Certificates and 
Transferrable Certificates. Applicant represents that both types of 
Certificates will be issued and the fully-paid Certificates will be 
transferable using blockchain technology and, as a result, both types 
of Certificates will be ``digital assets.'' Applicant further 
represents that, although the Certificates will be digital assets, 
Applicant will not accept or hold any assets that are digital assets 
other than as necessary to destroy Certificates that have been 
surrendered.
    2. The Certificates are interest-bearing debt securities. The 
Certificates entitle the Certificate holder to receive, at maturity, 
the face-amount of the Certificate and interest credited thereon, less 
applicable expenses or fees. To meet its payment obligations, Applicant 
is required to maintain a minimum amount of reserves in ``qualified 
investments'' as defined in Section 28(b) of the Act (``Reserves'').
    3. Applicant proposes to enter into custodial arrangements, from 
time to time, with one or more banks as defined in Section 2(a)(5) of 
the Act, that possess the qualifications required by Section 26(a) of 
the Act for trustees of unit investment trusts (``Custodians''). 
Applicant seeks an order approving the Applicant's proposed custodial 
arrangements under which the Applicant will (i) deposit and maintain, 
with one or more Custodians, the Reserves associated with the 
Certificates, pursuant to Section 28(c) of the Act, and (ii) enter into 
custody agreements (``Custodial Agreements''), the substantive portions 
of which will not vary in any material respects from those contained in 
the form of agreement attached to the application as Attachment 1 (the 
``Form of Agreement''). Under the requested order, Applicant would be 
free to employ or terminate the Custodians from time to time in its 
sole discretion.
    4. Under the proposed custodial arrangements, one or more of the 
Custodians would be responsible for maintaining the safekeeping of all 
of Applicant's assets, including the aggregate amount that Applicant 
must maintain as Reserves pursuant to Section 28(a) of the Act. The 
Custodian would (i) maintain Applicant's Assets in compliance with 
Section 17(f) of the Act and the rules thereunder as though Section 
17(f) and the rules thereunder were applicable to a face-amount 
certificate company and (ii) maintain Applicant's Reserves to ensure 
the Applicant meets its payment obligations under the terms and 
conditions of any outstanding Certificate. If the Applicant were to 
default on any obligation under a Certificate, the Custodian would be 
authorized to cure such default by liquidating so much of the assets 
held by it as necessary to discharge Applicant's obligations. The 
Custodian also would perform the duties and functions typically 
performed by a custodian, such as securities registration and delivery, 
income collection, periodic reporting, payment of monies, and other 
safekeeping and processing functions.

Applicant's Legal Analysis

    1. Section 28(c) provides that ``[t]he Commission shall by rule, 
regulation, or order, in the public interest or for the protection of 
investors, require a registered face-amount certificate

[[Page 92242]]

company to deposit and maintain, upon such terms and conditions as the 
Commission shall prescribe and as are appropriate for the protection of 
investors, with one or more institutions having the qualifications of 
paragraph (1) of Section 26(a) for a trustee of a unit investment 
trust, all or any part of the investments maintained by such company as 
certificate reserve requirements under the provisions of subsection (b) 
hereof.''
    2. Applicant states that the Form of Agreement contains numerous 
provisions designed to maintain and safeguard its assets, including 
provisions governing the (i) holding, segregation, registration, 
depositing, and delivery of securities and (ii) the payment of monies 
and maintenance of bank accounts, as well as (iii) provisions 
establishing procedures to cure any defaults by the Applicant on its 
obligations under the Certificates and procedures for periodic 
reporting and inspection of the assets. Applicant further states that, 
although tailored for the specific activities of a face-amount 
certificate company, these provisions are similar to those contained in 
custody agreements between registered open-end management investment 
companies and their custodians.
    3. Application asserts that its discretion to employ and terminate 
the Custodians is consistent with the protection of investors and the 
public interest. Applicant states that it may add or change the 
Custodians for many reasons, including, but not limited to: (i) the 
availability of superior or specialized services through other 
Custodians, (ii) dissatisfaction with the quality of a Custodian's 
services, (iii) fee increases or the availability of comparable 
services from other Custodians at more competitive rates, (iv) changes 
in a Custodian's management, location, financial condition, or methods 
of operation, (v) regulatory developments or actions affecting the 
ability or qualification of a Custodian to serve as such, or (vi) a 
determination by a Custodian to cease offering its services.
    4. Applicant also asserts that the process by which it will select 
and retain the Custodians is consistent with the protection of 
investors and the public interest. Applicant represents that, before 
entering into a Custodial Agreement, Applicant will request and 
consider relevant information regarding the Custodian, including, 
without limitation, information about its ability to provide the 
services required by Applicant's operations and the Act, its experience 
in providing such or similar services to other investment companies, 
the resources it intends to make available to Applicant in providing 
such services, the fees it intends to charge Applicant for such 
services, its internal controls, its ability to protect the assets 
entrusted to it, and its financial condition.

Applicant's Conditions

    Applicant agrees that any order granted by the Commission pursuant 
to the application will be subject to the following conditions:
    1. Before entering into a Custodial Agreement with a qualified 
custodian, Applicant will request and consider relevant information 
regarding the Custodian. Applicant's officers and/or investment 
advisers, as appropriate, will perform the above inquiry and will 
present their findings to the Board (as defined below).
    2. Applicant shall only enter into a Custodial Agreement if (1) its 
substantive portions do not vary in any material respects from those 
contained in the Form of Agreement; and (2) that Custodial Agreement is 
approved by its board of directors (``Board''), including a majority of 
directors who are not an ``interested persons'' as defined in Section 
2(a)(19) of the Act (``Disinterested Directors'').
    3. The continuance of a Custodial Agreement shall be subject to 
annual review and reapproval by the Board, including a majority of the 
Disinterested Directors, to determine whether the quality of services 
provided by the Custodian remains satisfactory and the fees are 
reasonably competitive.
    4. Each Custodial Agreement shall contain provisions to maintain 
and safeguard Applicant's Assets, including provisions governing the 
(i) holding, segregation, depositing, and delivery of securities, (ii) 
the payment of monies, and (iii) establishing of procedures to cure any 
defaults by Applicant on its obligations under the Certificates and 
procedures for periodic reporting and inspection of the Assets.
    5. Applicant shall establish and maintain procedures to cure any 
defaults by Applicant on its obligations under the Certificates and 
procedures for periodic reporting and inspection of Applicant's Assets.
    6. Applicant shall comply with Section 17(f) of the Act and the 
rules thereunder as if it were a registered management investment 
company.
    7. Applicant shall obtain an amended order from the SEC prior to 
entry into a Custodial Agreement containing substantive provisions that 
vary in any material respects from those contained in the Form of 
Agreement.
    8. Applicant shall comply with the Bank Secrecy Act (31 U.S.C 
Sec. Sec.  5311 et seq) and the rules thereunder, including 31 CFR 
1024.210, 31 CFR 1024.220 and 31 CFR 1010.230, as if it were a 
registered open-end management investment company.
    9. Any advisory agreement entered into between Applicant and an 
adviser shall provide that the adviser will provide quarterly reports 
to the Board stating, as of the last day of the preceding quarter:
    (a) the aggregate value of assets on deposit with the Custodian,
    (b) the aggregate value of assets identified by Applicant as 
qualifying investments on deposit with the Custodian, and
    (c) the aggregate amount of reserves, as governed by Section 
28(a)(2) of the Act, required to be maintained by Applicant in respect 
of all outstanding Certificates.
    The first quarterly report every year shall be made and certified 
by an independent public accountant and the others shall be verified by 
the adviser's chief compliance officer or his or her delegate.
    10. Any advisory agreement entered into between the Applicant and 
an adviser shall provide that the adviser's compliance program shall 
include procedures for generating monthly reports of:
    (a) the aggregate value of Applicant's assets on deposit with the 
Custodian;
    (b) the aggregate value of assets identified by Applicant as 
qualifying investments on deposit with the Custodian; and
    (c) the aggregate amount of reserves, as governed by Section 
28(a)(2) of the Act, required to be maintained by Applicant in respect 
of all outstanding Certificates; and for the review of such monthly 
reports by the adviser's chief compliance officer or his or her 
delegate.
    11. Any advisory agreement entered into between Applicant and an 
adviser shall provide that if, at any time, it is determined by the 
adviser's chief compliance officer or his or her delegate that the 
amount of Applicant's qualified investments on deposit with the 
Custodian is less than the required reserves, as governed by Section 
28(a)(2) of the Act, the adviser and/or Applicant shall notify the SEC 
in writing of such deficiency promptly upon ascertaining such fact.
    12. In the event Applicant were to default on any obligation under 
a Certificate, Custodian would be authorized, at the instruction of the 
Board or a court of competent jurisdiction, to cure the default as

[[Page 92243]]

necessary to discharge Applicant's obligations. In connection with any 
such default, the Applicant shall notify the SEC in writing of such 
default promptly upon ascertaining that a default has occurred.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-27229 Filed 11-20-24; 8:45 am]
BILLING CODE 8011-01-P
```