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[Federal Register Volume 63, Number 72 (Wednesday, April 15, 1998)]
[Notices]
[Pages 18468-18470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10026]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23108; 812-10812]

Sanford C. Bernstein Fund, Inc., et al.; Application

April 9, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for an order under section 17(d) of the 
Investment Company Act of 1940 (the ``Act'') and rule 17d-1.

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SUMMARY OF APPLICATION: Applicants request an order to permit certain 
registered open-end management investment companies to deposit their 
uninvested cash balances in a joint account to be used to enter into 
short-term investments.

APPLICANTS: Sanford C. Bernstein Fund, Inc. (the ``Fund''), and Sanford 
C. Bernstein & Co., Inc. (``Bernstein'').

FILING DATES: The application was filed on October 7, 1997 and amended 
on April 2, 1998. Applicants have agreed to file an amendment during 
the notice period, the substance of which is reflected in this notice.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the 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 May 4, 1998, 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, NW., Washington, DC 20549. 
Applicants, 767 Fifth Avenue, New York, NY 10153.

FOR FURTHER INFORMATION CONTACT:
Kathleen L. Knisely, Staff Attorney, at (202) 942-0517, or Nadya B. 
Roytblat, Assistant Director, at (202) 942-0564 (Division of Investment 
Management, Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
SEC's Public Reference Branch, 450 Fifth Street, NW., Washington, DC 
20549 (tel. 202-942-8090).

Applicants' Representations

    1. The Fund, organized as a Maryland corporation, is registered 
under the Act as an open-end management investment company. The Fund is 
a series company and currently has eleven portfolios 
(``Portfolios'').\1\
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    \1\ Applicants also request relief for all future portfolios of 
the Fund and for all future registered open-end management 
investment companies advised by Bernstein.
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    2. Bernstein, organized as a New York corporation, is an investment 
adviser registered under the Investment Advisers Act of 1940. Bernstein 
serves as the investment adviser to each Portfolio.
    3. Each of the Portfolios may have uninvested cash balances 
available. The amount of the cash balances, on any given day is a 
function of a number of factors, such as portfolio management 
decisions, shareholder purchases and redemptions, and settlement of 
trades on dates other than predicted. Each Portfolio is authorized by 
its investment policies and restrictions to invest a portion of its 
uninvested cash balances in short-term liquid assets, including 
commercial paper, repurchase agreements, daily variable rate demand 
notes, Treasury bills, United States government agency certificates, 
term bank deposits, certificates of deposits and bankers acceptances 
(``Short Term Investments''). The assets of the Portfolios are held by 
a bank custodian, which is not an affiliated person of either the Fund 
or Bernstein.
    4. Currently, Bernstein must purchase Short Term Investments 
separately on behalf of each Portfolio. Applicants believe that the 
separate purchasing of Short Term Investments results in certain 
inefficiencies, increased costs, and a limitation on the return. 
Applicants propose that the Portfolios deposit uninvested cash balances 
available on each trading day into a joint account (the ``Joint 
Account'') and that the daily balance of the Joint Account be invested 
in Short Term Investments. The sole function of the Joint Account will 
be to provide a convenient means of aggregating what otherwise would be 
one or more daily transactions for each Portfolio necessary to manage 
the Portfolio's respective daily uninvested cash balances.
    5. Bernstein will not charge any additional or separate fees for 
operating or advising the Joint Account and will have no monetary 
participation in the Joint Account. Bernstein will be responsible for 
investing Portfolio funds held in the Joint Account, establishing 
accounting and control procedures, and ensuring equal treatment of the 
Portfolios.
    6. Any repurchase agreements entered into through the Joint 
Accounts will comply with the terms of Investment Company Act Release 
No. 13005 (February 2, 1983). Applicants acknowledge that they have a 
continuing obligation to monitor the SEC's published statements on 
repurchase agreements and other Short Term Investments. Applicants 
represent that each Portfolio will conform its investments and adopt 
any appropriate systems and standards to comply with any future SEC 
guidelines with respect to any type of Short Term Investments.

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17f-1 under the Act prohibit 
an affiliated person of a registered investment company, or an 
affiliated person of such a person, from participating in any joint 
enterprise or arrangement in which the investment company is a 
participant, unless the SEC has issued an order authorizing the 
arrangement.
    2. Applicants believe that each Portfolio, by participating in the 
Joint Account, and Bernstein, by managing the Joint Account, could be 
deemed to be a ``joint participant'' in a transaction. In addition, the 
Joint Account could be deemed to be a ``joint enterprise or other joint 
arrangement'' within the meaning of rule 17d-1 under the Act.

[[Page 18469]]

    3. Applicants believe that the participating Portfolios may earn a 
higher return on investments through the Joint Account relative to 
rates they could earn individually because under certain market 
conditions, it is possible to negotiate a rate of return on large Short 
Term Investments which is greater than the rate of return which can be 
negotiated for smaller Short Term Investments. Applicants also contend 
that the Joint Account may reduce the potential for error by reducing 
the number of trade tickets which must be processed by the Fund's 
custodian bank and the Fund's accounting department.
    4. Applicants believe each Portfolio will participate in the Joint 
Account on the same basis as every other Portfolio in conformity with 
its investment objectives, policies, and restrictions. Applicants state 
that a Portfolio's investment in the Joint Account will not be subject 
to the claims of creditors, whether brought in bankruptcy, insolvency, 
or other legal proceeding. Applicants also state that each Portfolio's 
investment in any Short Term Investment purchased by the Joint Account 
will be limited to its interest in the Short Term Investment.
    6. For the reasons set forth above, applicants believe that 
granting the requested order is consistent with the provisions, 
policies, and purposes of the Act, and that the Portfolios' 
participation in the Joint Account will not be on a basis different 
from or less advantageous than that of any other participating 
Portfolio.

Applicants' Conditions

    Applicants agree that the requested order shall be subject to the 
following conditions:
    1. The Joint Account will be established on behalf of the 
Portfolios with the custodian as a separate cash account into which the 
Portfolios may deposit daily all or a portion of their uninvested cash 
balances. The Joint Account will not be distinguishable from any other 
accounts maintained by the Portfolios with the custodian except that 
monies from the various Portfolios will be deposited in the Joint 
Account on a commingled basis. The Joint Account will not have any 
separate existence with the indicia of a separate legal entity. The 
sole function of the Joint Account will be to provide a convenient and 
productive way of aggregating individual transactions that would 
otherwise require daily management and investment by each Portfolio of 
its uninvested cash balances.
    2. Cash in the Joint Account will be invested in one or more of the 
following Short Term Investments, as determined by Bernstein: (a) 
Commercial paper, repurchase agreements ``collateralized fully'' (as 
that term is defined in rule 2a-7 under the Act), Treasury bills, 
United States government agency certificates, term bank deposits, 
certificates of deposit and bankers' acceptances, in each case having 
remaining maturities of 60 days or less as calculated in accordance 
with rule 2a-7 under the Act; and (b) daily variable rate demand notes 
with demand features providing for maturities of 30 days or less. Any 
Short Term Investment must be an ``Eligible Security'' within the 
meaning of rule 2a-7 under the Act. No Portfolio will be permitted to 
invest in the Joint Account unless the Short Term Investments in the 
Joint Account will comply with the investment policies and guidelines 
of that Portfolio.
    3. All assets held by the Joint Account will be valued on an 
amortized cost basis to the extent permitted by applicable SEC 
releases, letters, or orders.
    4. Each Portfolio valuing its net assets based on amortized cost in 
reliance upon rule 2a-7 under the Act will use the average maturity of 
the instrument(s) in the Joint Account (determined on a dollar-weighted 
basis) for the purpose of computing its average portfolio maturity with 
respect to the portion of its assets held in the Joint Account on that 
day.
    5. To assure that there will be no opportunity for one Portfolio to 
use any part of a balance of the Joint Account credited to another 
Portfolio, no Portfolio will be allowed to create a negative balance in 
the Joint account for any reason. Each Portfolio would be permitted to 
draw down its entire balance at any time, provided Bernstein determines 
that such draw down would have no significant adverse impact on any 
other Portfolio participating in the Joint Account. Each Portfolio's 
decision to invest in the Joint Account would be solely at its option, 
and no Portfolio will be obligated to invest in the Joint Account or to 
maintain any minimum balance in the Joint Account. In addition, each 
Portfolio will retain the sole rights of ownership of any of its 
assets, including interest payable on such assets, invested in the 
Joint Account.
    6. Bernstein will administer, manage, and invest the cash balance 
in the Joint Account in accordance with and as part of its duties under 
existing, or any future, investment advisory contracts with the Fund 
and/or Portfolios. Bernstein will not collect any additional or 
separate fee for advising or managing the Joint Account.
    7. The administration of the Joint Account will be within the 
fidelity bond coverage maintained for the Portfolios as required by 
section 17(g) of the Act and rule 17g-1 under the Act.
    8. The Fund's board of directors (``Board'') will adopt procedures 
for each of the Portfolios pursuant to which the Joint Account will 
operate, which procedures will be reasonably designed to provide that 
the requirements of this application will be met. The Board will make 
and approve such changes that it deems necessary to ensure that such 
procedures are followed. In addition, the Board will evaluate annually 
the Joint Account arrangements to determine whether the Joint Account 
has been operated in accordance with the adopted procedures, and shall 
continue the Fund's continued participation in the Joint Account only 
if there is a reasonable likelihood that the Joint Account would 
benefit the Fund and its shareholders.
    9. Each Portfolio's investment in the Joint Account will be 
documented daily on the books of the Fund and on the books of each 
Portfolio. Each Portfolio, through Bernstein and/or its custodian, will 
maintain records (in conformity with section 31 of the Act and rules 
thereunder) documenting for any given day, the Portfolio's aggregate 
investment in the Joint Account and its pro rata share of each 
investment made through the Joint Account.
    10. Each Portfolio will participate in the Joint Account on the 
same basis as every other Portfolio in conformity with its respective 
fundamental investment objectives, policies, and restrictions. Any 
future registered open-end management investment companies that are 
advised by Bernstein and Portfolios that participate in the Joint 
Account would be required to do so on the same terms and conditions as 
the existing Fund and Portfolios.
    11. Each investment made through the Joint Account will satisfy the 
investment criteria of each Portfolio participating in the joint 
investment.
    12. Not every Portfolio participating in the Joint Account will 
necessarily have its cash invested in every Short Term Investment held 
in the Joint Account. However, to the extent a Portfolio's cash is 
applied to particular Short Term Investments made through the Joint 
Account, the Portfolio will participate in and own a proportionate 
share of such investment, and the income earned or accrued thereon, 
based upon the percentage of such investment purchased with monies 
contributed by the Portfolio.

[[Page 18470]]

    13. Investments held in a Joint Account generally will not be sold 
prior to maturity except: (a) If Bernstein believes that the investment 
no longer presents minimal credit risk; (b) if, as a result of credit 
downgrading or otherwise, the investment no longer satisfies the 
investment criteria of all Portfolios participating in the investment; 
or (c) if the counterparty defaults. A Portfolio may, however, sell its 
fractional portion of an investment in the Joint Account prior to the 
maturity of an investment in such account if the cost of the 
transaction would not aversely affect the other Portfolios 
participating in the Joint Account. In no case would an early 
termination by less than all participating Portfolios be permitted if 
it would reduce the principal amount or yield received by other 
Portfolios participating in the Joint Account or otherwise adversely 
affect the other participating Portfolios. Each Portfolio participating 
in the Joint Account will be deemed to have consented to such sale and 
partition of the investment in such account.
    14. Short Term Investments held through the Joint Account with a 
remaining maturity of more than seven days, as calculated pursuant to 
rule 2a-7 under the Act, will be considered illiquid and subject to the 
restriction that the Portfolio may not invest more than 15% (or such 
other percentage as set forth by the SEC from time to time) of its net 
assets in illiquid securities and any similar restrictions set forth in 
the Portfolio's investment restrictions and policies, if Bernstein 
cannot sell the instrument, or the Portfolio's fractional interest in 
such instrument, pursuant to the preceding condition.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-10026 Filed 4-14-98; 8:45 am]
BILLING CODE 8010-01-M
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