Document ID: SEC-2008-1236-0001
Agency: sec
Document Type: Notice
Title: Prudential Financial, Inc., et al.; Notice of Application and Temporary Order
Posted Date: 2008-09-11T04:00Z

[Federal Register: September 11, 2008 (Volume 73, Number 177)]
[Notices]               
[Page 52892-52894]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11se08-98]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-28377; 812-13572]

 
Prudential Financial, Inc., et al.; Notice of Application and 
Temporary Order

September 5, 2008.
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 of Application:  Applicants have received a temporary order 
exempting them from section 9(a) of the Act, with respect to an 
injunction entered against Prudential Financial, Inc. (``Prudential'') 
on September 4, 2008 by the United States District Court for the 
District of New Jersey (``Injunction'') until the Commission takes 
final action on an application for a permanent order. Applicants also 
have applied for a permanent order.

Applicants:  Prudential, Prudential Investment Management, Inc. (``PIM, 
Inc.''), Prudential Investments LLC (``PI LLC''), The Prudential 
Insurance Company of America (``Prudential Insurance''), Jennison 
Associates LLC (``Jennison''), Prudential Bache Asset Management, Inc. 
(``Bache''), Quantitative Management Associates LLC (``QMA, LLC''), 
Pruco Securities, LLC (``Pruco''), AST Investment Services, Inc. (``AST 
Investment''), Prudential Annuities Distributors, Inc. (``PAD''), 
Prudential Investment Management Services LLC (``PIMS LLC''), Pruco 
Life Insurance Company (``Pruco Life''), Pruco Life Insurance Company 
of New Jersey (``Pruco Life NJ''), Prudential Annuities Life Assurance 
Corporation (``PALAC'') and Prudential Retirement Insurance and Annuity 
Company (``PRIAC'') (collectively, other than Prudential, the ``Fund 
Servicing Applicants'' and together with Prudential, the 
``Applicants'').\1\
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    \1\ Applicants request that any relief granted pursuant to the 
application also apply to any other company of which Prudential is 
or may become an affiliated person (together with the Applicants, 
the ``Covered Persons'').

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Filing Dates:  The application was filed on September 5, 2008.

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

[[Page 52893]]

should be received by the Commission by 5:30 p.m. on September 30, 
2008, 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 
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090; Applicants c/o Kathryn Quirk, 
Prudential Financial, Inc., 751 Broad Street, Newark, New Jersey 07102.

FOR FURTHER INFORMATION CONTACT: Keith A. Gregory, Senior Counsel, at 
202-551-6815 or Janet M. Grossnickle, Assistant Director, at 202-551-
6821 (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 
Commission's Public Reference Room, 100 F Street, NE., Washington, DC 
20549-1520 (tel. 202-551-5850).

Applicants' Representations

    1. Prudential, through its subsidiaries and affiliates, offers a 
wide array of financial products and services, including life 
insurance, annuities, mutual funds, pension and retirement-related 
services and administration, investment management, real estate 
brokerage and relocation services. Each of the Fund Servicing 
Applicants is an indirect wholly owned subsidiary of Prudential. PIM, 
Inc., PI LLC, Jennison, QMA, LLC and AST Investment (collectively, 
``Adviser Applicants'') are investment advisers registered under the 
Investment Advisers Act of 1940 (``Advisers Act'') that provide 
investment management and advisory services to certain registered 
investment companies (``Funds''). Bache is an investment adviser 
registered under the Advisers Act and plans to provide advisory 
services to Funds in the near future. Pruco, PAD, and PIMS LLC are 
broker-dealers registered under the Securities Exchange Act of 1934 
(``Exchange Act'') and serve as a principal underwriter to open-end 
Funds and Funds that are unit investment trusts (``UITs''). Prudential 
Insurance, Pruco Life, Pruco Life NJ, PALAC and PRIAC serve as 
depositors for registered separate accounts, all of which are Funds.
    2. On September 4, 2008, the United States District Court for the 
District of New Jersey entered the Injunction against Prudential in a 
matter brought by the Commission.\2\ The Commission alleged in the 
complaint (``Complaint'') that Prudential violated sections 13(a), 
13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and rules 12b-20, 13a-
1, 13a-11 and 13a-13 under the Exchange Act, in connection with 
Prudential's accounting and public reporting practices. The Complaint 
relates to Prudential's inaccurate recording of income for 2000, 2001, 
and 2002 in the consolidated financial statements included in its 
periodic and other filings for the years 2001, 2002 and 2003. The 
inaccuracies in the financial statements related to recorded income 
from a series of purported reinsurance contracts entered into from 1997 
to 2002 between the General Reinsurance Company and two former property 
and casualty subsidiaries of Prudential. The Complaint alleged that 
Prudential violated the financial reporting, books and records, and 
internal controls provisions of the Exchange Act. Without admitting or 
denying any of the allegations in the Complaint, except as to 
jurisdiction, Prudential consented to the entry of the Injunction.
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    \2\ Securities and Exchange Commission v. Prudential Financial, 
Inc., Final Judgment on Consent Against Defendant Prudential 
Financial, Inc. 08-cv-03916 (PGS) (D.N.J. Sept. 4, 2008).
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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 affiliated person of any insurance 
company, from acting, among other things, as an investment adviser or 
depositor of any registered investment company or a principal 
underwriter for any registered open-end investment company, registered 
unit investment trust, or registered face-amount certificate company. 
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, any 
person directly or indirectly controlling, controlled by, or under 
common control, with the other person and any person directly or 
indirectly owning, controlling, or holding with the power to vote, 5 
percent or more of the outstanding voting securities of such other 
person. Applicants state that Prudential is an affiliated person of 
each of the other Applicants within the meaning of section 2(a)(3). 
Applicants state that, as a result of the Injunction, they would be 
subject to the prohibitions of section 9(a).
    2. Section 9(c) of the Act provides that the Commission shall grant 
an application for an exemption from the disqualification provisions of 
section 9(a) of the Act if it is established that these provisions, as 
applied to Applicants, are unduly or disproportionately severe or that 
the conduct of the Applicants 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 temporary and permanent orders exempting them from the 
disqualification provisions of section 9(a).
    3. Applicants believe that they meet the standards for exemption 
specified in section 9(c). Applicants state that the prohibitions of 
section 9(a) as applied to them would be unduly and disproportionately 
severe and that it would not be against the public interest or the 
protection of investors to grant the requested exemption from section 
9(a).
    4. Applicants state that the alleged conduct giving rise to the 
Injunction did not involve any of the Applicants acting in the capacity 
of investment adviser, subadviser, depositor or principal underwriter 
for any Fund. Applicants note that none of the current or former 
directors, officers, or employees of the Applicants (other than 
Prudential itself) had any involvement in the conduct alleged in the 
Complaint. Applicants further state that the personnel at Prudential 
who were involved in the violations alleged in the complaint have had 
no and will not have any future involvement in providing advisory, 
subadvisory, depository, or underwriting services to Funds. In 
addition, Applicants represent that no Fund to which any Fund Servicing 
Applicant provides investment advisory, depository or underwriting 
services bought or held any securities issued by Prudential during the 
period covered by the Complaint, other than with respect to index funds 
and routine trade errors that were promptly corrected.
    5. Applicants state that their inability to continue to provide 
advisory and underwriting services to the Funds and to serve as 
depositor to Funds would result in potentially severe hardships for the 
Funds and their shareholders. Applicants state that they will 
distribute

[[Page 52894]]

written materials, including an offer to meet in person to discuss the 
materials, to the boards of directors of the Funds (the ``Boards''), 
including the directors who are not ``interested persons,'' as defined 
in section 2(a)(19) of the Act, of such Funds, and their independent 
legal counsel as defined in rule 0-1(a)(6) under the Act, if any, 
regarding the Injunction, any impact on the Funds, and the application. 
Applicants state that they will provide the Boards with all information 
concerning the Injunction and the application that is necessary for the 
Funds to fulfill their disclosure and other obligations under the 
federal securities laws.
    6. Applicants also state that, if they were barred from providing 
services to the Funds, the effect on their businesses and employees 
would be severe. Applicants state that they have committed substantial 
resources to establish an expertise in advising, subadvising, and 
distributing the Funds, and acting as a depositor to registered 
separate accounts. Applicants further state that prohibiting them from 
providing advisory and distribution services or acting as a depositor 
to the registered separate accounts would not only adversely affect 
their businesses, but would also adversely affect over 2000 employees 
that are involved in those activities. Applicants state that they have 
not previously applied for an exemptive order under section 9(c) of the 
Act. Applicants state that an affiliate of Prudential previously 
obtained an order under section 9(c) of the Act.\3\
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    \3\ In the Matter of Prudential Securities Incorporated, 
Investment Company Act Rel. Nos. 18031 (Mar. 6, 1991) (notice) and 
18096 (Apr. 15, 2005) (order).
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Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Any temporary exemption granted pursuant to the application shall 
be without prejudice to, and shall 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.

Temporary Order

    The Commission has considered the matter and finds that the 
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 Injunction, subject to the condition in the application, from 
September 5, 2008, until the Commission takes final action on their 
application for a permanent order.

    By the Commission.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E8-21143 Filed 9-10-08; 8:45 am]

BILLING CODE 8010-01-P