Document ID: SEC-2014-2010-0001
Agency: sec
Document Type: Notice
Title: Applications and Temporary Orders: Banc of America Mortgage Securities, Inc., et al.
Posted Date: 2014-12-02T05:00Z

[Federal Register Volume 79, Number 231 (Tuesday, December 2, 2014)]
[Notices]
[Pages 71466-71468]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-28314]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31359; 812-14390

Banc of America Mortgage Securities, Inc., et al.; Notice of 
Application and Temporary Order

November 25, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Temporary order and notice of application for a permanent order 
under section 9(c) of the Investment Company Act of 1940 (``Act'').

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SUMMARY: Applicants have received a temporary order (the ``Temporary 
Order'') exempting them from section 9(a) of the Act, with respect to 
injunctions entered against Bank of America, N.A. (``BANA''), Merrill 
Lynch, Pierce, Fenner & Smith Incorporated (``Merrill Lynch''), and 
Banc of America Mortgage Securities, Inc. (``BOAMS,'' and, together 
with BANA and Merrill Lynch, the ``Respondents'') on November 25, 2014 
by the United States District Court for the Western District of North 
Carolina (the ``District Court'') until the Commission takes final 
action on an application for a permanent order (the ``Permanent 
Order,'' and with the Temporary Order, the ``Orders''). Applicants also 
have applied for a Permanent Order.
    Applicants: BofA Advisors, LLC (``BoA Advisors''), BofA 
Distributors, Inc. (``BoA Distributors''), KECALP Inc. (``KECALP''), 
Merrill Lynch Ventures, LLC (``Ventures''), Merrill Lynch Global 
Private Equity, Inc. (``MLGPE''), and Merrill Lynch Alternative 
Investments LLC (``MLAI'') (each, an ``Applicant'' and collectively, 
the ``Applicants''), and solely for purposes of agreeing to condition 3 
of the application, the Respondents.

DATES:  Filing Date: The application was filed on November 25, 2014.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on December 22, 2014, and should be accompanied by proof of 
service on 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 writing to the 
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090; Applicants: BOAMS, 21 North 
Tryon Street, Charlotte, NC 28255; BANA and Merrill Lynch, Bank of 
America Tower, One Bryant Park, New York, NY 10036; BoA Advisors and 
BoA Distributors, 100 Federal Street, Boston, MA 02110; KECALP and 
Ventures, 135 South LaSalle Street, Chicago, IL 60604; MLGPE, 135 South 
La Salle Street, Suite 811, Chicago, IL 60603; and MLAI, 4 World 
Financial Center, 250 Vesey Street, 11th Floor, New York, NY 10080.

FOR FURTHER INFORMATION CONTACT: David J. Marcinkus, Senior Counsel, at 
202-551-6882 or Mary Kay Frech, Branch Chief, at 202-551-6821 (Division 
of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a temporary order and 
summary of the application. The complete application may be obtained 
via the Commission's Web site by searching for the file number, or for 
an applicant using the Company name box, at http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.

Applicants' Representations

    1. Bank of America Corporation (``BAC''), a corporation organized 
under the laws of Delaware, is a publicly traded company headquartered 
in Charlotte, North Carolina. As noted below, each of the Respondents 
and each of the Applicants is a direct or indirect wholly-owned 
subsidiary of BAC. BANA is a nationally chartered banking association 
headquartered in Charlotte, North Carolina that conducts retail, trust 
and commercial banking operations. BANA is an indirect wholly-

[[Page 71467]]

owned subsidiary of BAC. BOAMS, a corporation organized under the laws 
of Delaware, is a direct wholly-owned subsidiary of BANA. Merrill 
Lynch, a corporation organized under the laws of Delaware, is an 
indirect wholly-owned subsidiary of BAC. Merrill Lynch, directly and 
through its subsidiaries and affiliates, provides investment, 
financing, advisory, insurance, banking and related products and 
services, and is registered as a broker-dealer under the Securities 
Exchange Act of 1934, and as an investment adviser under the Investment 
Advisers Act of 1940 (the ``Advisers Act''). Merrill Lynch does not 
currently engage in Fund Service Activities (defined below), but it may 
do so in the future.
    2. Each of the Applicants serves either as investment adviser (as 
defined in section 2(a)(20) of the Act) to investment companies 
registered under the Act or series of such companies (``Funds'') or 
employees' securities companies (``ESCs''), or as principal underwriter 
(as defined in section 2(a)(29) of the Act) to open-end management 
investment companies registered under the Act (``Open-End Funds''). BoA 
Advisors, a limited liability company organized under the laws of 
Delaware, is registered as an investment adviser under the Advisers 
Act. BoA Advisors is a direct wholly-owned subsidiary of BofA Global 
Capital Management Group, LLC, which is in turn a direct wholly-owned 
subsidiary of BANA. BoA Distributors, a corporation organized under the 
laws of Massachusetts, is an indirect wholly-owned subsidiary of BoA 
Advisors. BoA Distributors is a limited purpose broker-dealer 
registered with the Commission. KECALP, a corporation organized under 
the laws of Delaware, is an indirect wholly-owned subsidiary of BAC. 
Ventures, a limited liability company organized under the laws of 
Delaware, is an indirect wholly-owned subsidiary of BAC. MLGPE, a 
corporation organized under the laws of Delaware, is registered as an 
investment adviser under the Advisers Act. MLGPE is an indirect wholly-
owned subsidiary of BAC. MLAI, a limited liability company organized 
under the laws of Delaware, is registered as an investment adviser 
under the Advisers Act. MLAI is an indirect wholly-owned subsidiary of 
BAC.
    3. While no existing company of which the Respondents is an 
``affiliated person'' within the meaning of section 2(a)(3) of the Act 
(``Affiliated Person''), other than the Applicants, currently serves as 
an investment adviser or depositor of any Fund or ESC or investment 
company that has elected to be treated as a business development 
company under the Act, or principal underwriter for any Open-End Fund, 
unit investment trust registered under the Act, or face-amount 
certificate company registered under the Act (such activities, 
collectively, (``Fund Service Activities''), Applicants request that 
any relief granted also apply to any existing company of which any of 
the Respondents is an Affiliated Person and to any other company of 
which any of the Respondents may become an Affiliated Person in the 
future (together with Applicants and Merrill Lynch, the ``Covered 
Persons'') with respect to any activity contemplated by section 9(a) of 
the Act.
    4. On August 6, 2013, the Commission filed a complaint (the 
``Complaint'') against the Respondents in the District Court in a civil 
action captioned Securities and Exchange Commission v. Bank of America, 
N.A., et al. (the ``BOAMS Action'').\1\ The Complaint alleges 
violations of sections 17(a)(2) and 17(a)(3) of the Securities Act of 
1933 (the ``Securities Act'') by Respondents arising out of an offering 
of prime residential mortgage-backed securities (``RMBS'') in 2008 
known as BOAMS 2008-A. The Complaint also alleges that Merrill Lynch 
and BOAMS violated section 5(b)(1) of the Securities Act by disclosing 
certain data regarding BOAMS 2008-A to some, but not all, investors, as 
well as by failing to file such data with the Commission.
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    \1\ The conduct alleged in the Complaint is referred to herein 
as the ``Conduct.''
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    5. In settlement of the BOAMS Action, Respondents submitted 
executed Consents of Defendants BANA, Merrill Lynch and BOAMS (the 
``Consents''). In the Consents, Respondents agreed to the entry of a 
final judgment, without admitting or denying the allegations contained 
in the Complaint (other than those relating to the jurisdiction of the 
District Court). On November 25, 2014 the District Court entered a 
judgment against Respondents (the ``Judgment'') \2\ that enjoined 
Respondents from violating, directly or indirectly, sections 17(a)(2), 
17(a)(3) and 5(b)(1) \3\ of the Securities Act (the ``Injunctions'').
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    \2\ Securities and Exchange Commission v. Bank of America, N.A., 
et al., Civil Action No. 3:13-cv-447 (W.D.N.C. Nov. 25, 2014).
    \3\ BANA was not named as a defendant in connection with the 
Commission's section 5(b)(1) claim and therefore did not consent to 
the entry of an injunction under that section.
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Applicants' Legal Analysis

    1. Section 9(a)(2) of the Act, in relevant part, prohibits a person 
who has been enjoined from engaging in or continuing any conduct or 
practice in connection with the purchase or sale of a security, or in 
connection with activities as an underwriter, from performing Fund 
Service Activities. Section 9(a)(3) of the Act makes the prohibition in 
section 9(a)(2) applicable to a company, any Affiliated Person of which 
has been disqualified under the provisions of section 9(a)(2). Section 
2(a)(3) of the Act defines ``affiliated person'' to include, among 
others: (a) Any person directly or indirectly owning, controlling, or 
holding with power to vote, five per centum or more of the outstanding 
voting securities of such other person; (b) any person five per centum 
or more of whose outstanding voting securities are directly or 
indirectly owned, controlled, or held with power to vote, by such other 
person; and (c) any person directly or indirectly controlling, 
controlled by, or under common control, with the other person. 
Applicants state that, taken together, sections 9(a)(2) and 9(a)(3) 
would have the effect of precluding Applicants and Covered Persons from 
engaging in Fund Service Activities upon the entry of the Injunctions 
because the Respondents are Affiliated Persons of each Applicant and 
Covered Person.
    2. Section 9(c) of the Act provides that, upon application, the 
Commission shall by order grant an exemption from the disqualification 
provisions of section 9(a) of the Act, either unconditionally or on an 
appropriate temporary or other conditional basis, to any person if that 
person establishes that: (i) The prohibitions of section 9(a), as 
applied to the person, are unduly or disproportionately severe or (ii) 
the conduct of the person has been such as not to make it against the 
public interest or the protection of investors to grant the exemption. 
Applicants have filed an application pursuant to section 9(c) seeking a 
Temporary Order and a Permanent Order exempting them and other Covered 
Persons from the disqualification provisions of section 9(a) of the 
Act. The Applicants and other Covered Persons may, if the relief is 
granted, in the future act in any of the capacities contemplated by 
section 9(a) of the Act subject to the conditions of the Temporary 
Order and the Permanent Order.
    3. Applicants believe they meet the standard for exemption 
specified in section 9(c) of the Act. Applicants state that the 
prohibitions of section 9(a) as applied to them would be unduly and 
disproportionately severe and that the conduct of Applicants has been 
such as not to make it against the public interest

[[Page 71468]]

or the protection of investors to grant the exemption from section 
9(a).
    4. Applicants state that the Conduct did not involve any of the 
Applicants engaging in Fund Service Activities.\4\ Applicants also 
state that the Conduct did not involve any Fund or ESC with respect to 
which Applicants engaged in Fund Service Activities. In addition, 
Applicants state that none of the Funds or ESCs with respect to which 
Applicants provide Fund Service Activities purchased or held BOAMS 
2008-A.
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    \4\ Applicants state that none of the Respondents currently 
serve in any of the capacities described in section 9(a) of the Act, 
and BANA and BOAMS will not do so in the future. Merrill Lynch has 
engaged in Fund Service Activities in the past (although it ceased 
doing so by the end of 2010), and it may do so in the future.
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    5. Applicants and Respondents state that (a) none of the current 
directors, officers or employees of Applicants had any involvement in 
the Conduct; (b) none of the current directors, officers or employees 
of Respondents had any responsibility for the Conduct; (c) no current 
or former employee of Respondents who previously has been or who 
subsequently may be identified by Respondents or any U.S. regulatory or 
enforcement agencies as having been responsible for the Conduct will be 
an officer, director or employee of any Covered Person; and (d) the 
employees of Respondents who were identified as having been responsible 
for the Conduct have had no, and will not have any involvement in the 
provision of Fund Service Activities on behalf of Applicants or other 
Covered Persons. Applicants assert that because the personnel of 
Applicants did not have any involvement in the Conduct, shareholders of 
the Funds and ESCs were not affected any differently than if those 
Funds and ESCs had received services from any investment adviser or 
principal underwriter that was not affiliated with Respondents.
    6. Applicants submit that section 9(a) should not operate to bar 
them from serving the Funds or ESCs and their shareholders in the 
absence of improper activities relating to their Fund Service 
Activities. Applicants state that the section 9(a) disqualification 
would result in material economic losses for the Funds and ESCs to 
which Applicants provide Funds Service Activities, and such Funds' 
operations would be disrupted, as they sought to engage new advisers 
and distributors. Applicants assert that these effects would be unduly 
severe given the Applicants' lack of involvement in the Conduct. 
Moreover, Applicants state that the Respondents have taken remedial 
actions to address the Conduct, as outlined in the application. Thus, 
Applicants believe that granting the exemption from section 9(a), as 
requested, would be consistent with the public interest and the 
protection of investors.
    7. Applicants state that (a) inability of the Adviser Applicants 
\5\ to continue providing investment advisory services to Funds would 
result in the Funds and their shareholders facing potential hardship 
and (b) the inability of BoA Distributors to continue to serve as 
principal underwriters to the Open-End Funds would similarly result in 
potential hardship to the Open-End Funds and their shareholders. 
Applicants state that they will distribute to the board of trustees/
directors of the Funds (the ``Boards'') written materials describing 
the circumstances alleged in the BOAMS Action and any impact on the 
Funds, and the application. The written materials will include an offer 
to discuss the materials at an in-person meeting with each Board for 
which Applicants provide Fund Service Activities, including the 
directors who are not ``interested persons'' of the Fund as defined in 
section 2(a)(19) of the Act, and their independent legal counsel as 
defined in rule 0-1(a)(6) under the Act. Applicants state that they 
will provide the Boards with the information concerning the BOAMS 
Action and the application that is necessary for those Funds to fulfill 
their disclosure and other obligations under the federal securities 
laws and will provide them a copy of the Judgment as entered by the 
District Court.
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    \5\ The ``Adviser Applicants'' are BoA Advisors, KECALP, 
Ventures, MLGPE, and MLAI.
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    8. Applicants state that if the Applicants were barred under 
section 9(a) of the Act from engaging in Fund Service Activities and 
were unable to obtain the requested exemption, the effect on their 
businesses and employees would be severe because they have committed 
substantial capital and other resources to establishing an expertise in 
the provision of Fund Service Activities. Applicants further state that 
prohibiting them from providing Fund Service Activities would not only 
adversely affect their business, but would also adversely affect their 
employees who are involved in those activities. Applicants state that 
many of these employees could experience significant difficulties in 
finding alternative fund-related employment.
    9. Applicants state that Applicants and certain other affiliated 
persons of Applicants have previously received orders under section 
9(c) of the Act, as the result of conduct that triggered section 9(a), 
as described in greater detail in the application.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Any temporary exemption granted pursuant to the application will 
be without prejudice to, and will not limit the Commission's rights in 
any manner with respect to, any Commission investigation of, or 
administrative proceedings involving or against, Covered Persons, 
including, without limitation, the consideration by the Commission of a 
permanent exemption from section 9(a) of the Act requested pursuant to 
the application or the revocation or removal of any temporary 
exemptions granted under the Act in connection with the application.
    2. Each Applicant and Covered Person will adopt and implement 
policies and procedures reasonably designed to ensure that it will 
comply with the terms and conditions of the Orders within 60 days of 
the date of the Permanent Order.
    3. Respondents will comply in all material respects with the 
material terms and conditions of the Orders.
    4. Applicants will provide written notification to the Chief 
Counsel of the Commission's Division of Investment Management with a 
copy to the Chief Counsel of the Commission's Division of Enforcement 
of a material violation of the terms and conditions of the Orders and 
the Judgment within 30 days of discovery of the material violation.

Temporary Order

    The Commission has considered the matter and finds that Applicants 
have made the necessary showing to justify granting a temporary 
exemption.
    Accordingly,
    It is hereby ordered, pursuant to section 9(c) of the Act, that 
Applicants and any other Covered Persons are granted a temporary 
exemption from the provisions of section 9(a), solely with respect to 
the Injunctions, subject to the representations and conditions in the 
application, from November 25, 2014, until the Commission takes final 
action on their application for a permanent order.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-28314 Filed 12-1-14; 8:45 am]
BILLING CODE 8011-01-P