Document ID: SEC-2009-1802-0001
Agency: sec
Document Type: Notice
Title: Application and Temporary Order: Investools Inc., et al.
Posted Date: 2009-12-23T05:00Z

[Federal Register: December 23, 2009 (Volume 74, Number 245)]
[Notices]               
[Page 68290-68291]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23de09-97]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-29093; File No. 812-13728]

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

December 16, 2009.

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 Investools Inc. (``Investools'') on December 
16, 2009 by the United States District Court for the District of 
Columbia (the ``Injunction''), until the Commission takes final action 
on an application for a permanent order. Applicants also have applied 
for a permanent order.

Applicants: Investools, Amerivest Investment Management, LLC 
(``Amerivest''), and TDAM USA Inc. (``TDAM USA'') (collectively, other 
than Investools, the ``Fund Servicing Applicants,'' and together with 
Investools, 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 Investools is 
or hereafter may become an affiliated person within the meaning of 
section 2(a)(3) of the Act (together with the Applicants, the 
``Covered Persons'').

Filing Date: The application was filed on December 11, 2009, and 
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amended on December 11, 2009 and December 16, 2009.

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 January 11, 2010, 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: Investools, 13947 
S. Minuteman Dr., Draper, UT 84020; Amerivest, 1005 North Ameritrade 
Place, Bellevue, NE 68005; and TDAM USA, 161 Bay Street, 35th Floor, TD 
Canada Trust Tower, Toronto, Ontario, Canada M5J 2T2.

FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at 
(202) 551-6826, or Jennifer L. Sawin, Branch Chief, at (202) 551-6821, 
(Division of Investment Management, Office of Investment Company 
Regulation).

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

Applicants' Representations

    1. Investools and Amerivest are indirect, wholly-owned subsidiaries 
of TD AMERITRADE Holding Corporation (``TD Ameritrade Holding''). The 
Toronto-Dominion Bank (``TD Bank'') owns approximately 45% of the 
outstanding common stock of TD Ameritrade Holding. TDAM USA is a 
direct, wholly-owned subsidiary of TD Bank. Investools was acquired by 
TD Ameritrade Holding in June 2009 as part of TD Ameritrade Holding's 
acquisition of thinkorswim Group, Inc. Investools does not provide, and 
no existing company of which Investools is an affiliated person (other 
than the Fund Servicing Applicants) currently provides, Fund Service 
Activities to any registered investment company.\2\
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    \2\ ``Fund Service Activities'' refers to serving or acting in 
the capacity of employee, officer, director, member of an advisory 
board, investment adviser, or depositor of any registered investment 
company, or principal underwriter for any registered open-end 
company, registered unit investment trust, or registered face-amount 
certificate company. Any registered investment company to which a 
Covered Person provides Fund Service Activities is a ``Fund.''
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    2. The Fund Servicing Applicants are registered as investment 
advisers under the Investment Advisers Act of 1940 and provide 
investment advisory or sub-advisory services to Funds.
    3. On December 16, 2009, the United States District Court for the 
District of Columbia entered a judgment against Investools 
(``Judgment'') in a matter brought by the Commission.\3\ The Commission 
alleged in the complaint (``Complaint'') that Defendants Michael J. 
Drew (``Drew'') and Eben D. Miller (``Miller''), employees of 
Investools, committed fraud during sales presentations at workshops 
held by Investools. The Complaint also alleged that while Investools 
had compliance policies requiring speakers to have proof of the 
validity of success claims, it did not require Drew, Miller, or other 
speakers to provide it with substantiating documentation after learning 
they were claiming that their securities trading was tremendously 
profitable. The Complaint alleges that Investools is liable as a 
controlling person under section 20(a) of the Securities Exchange Act 
of 1934 (``Exchange Act'') for violations by its speakers of section 
10(b) of the Exchange Act and rule 10b-5

[[Page 68291]]

thereunder. Without admitting or denying the allegations in the 
Complaint, except as to jurisdiction, Investools consented to the entry 
of the Judgment that included, among other things, the entry of the 
Injunction.
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    \3\ Securities and Exchange Commission v. Investools Inc., 
Michael J. Drew and Eben D. Miller, Final Judgment as to Defendant 
Investools Inc., 09 Civ. 02343 (D.D.C. December 16, 2009).
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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, among other things, engaging in or 
continuing any conduct or practice in connection with the purchase or 
sale of a security 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. Applicants state that 
Investools is an affiliated person of each of the Fund Servicing 
Applicants within the meaning of section 2(a)(3) of the Act. Applicants 
state that the entry of the Injunction results in Applicants being 
subject to the disqualification provisions of section 9(a) of the Act.
    2. Section 9(c) of the Act provides that the Commission shall grant 
an application for exemption from the disqualification provisions of 
section 9(a) of the Act if it is established that these provisions, as 
applied to the Applicants, are unduly or disproportionately severe or 
that the Applicants' conduct 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 and permanent order exempting them and Covered 
Persons from the disqualification provisions of section 9(a) of the 
Act.
    3. Applicants believe 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 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 from section 9(a).
    4. Applicants state that the alleged conduct giving rise to the 
Injunction did not involve any of the Applicants providing Fund Service 
Activities to any registered investment company and that the alleged 
conduct occurred prior to TD Ameritrade Holding's acquisition of 
thinkorswim Group, Inc. when the Fund Servicing Applicants were not 
affiliated persons of Investools. Applicants also state that none of 
the current or former directors, officers, or employees of the Fund 
Servicing Applicants had any knowledge of, or participation in, the 
violative conduct alleged in the Complaint. Applicants further state 
that the personnel at Investools who were involved in the violations 
alleged in the Complaint have had no, and will not have any future, 
involvement in providing Fund Service Activities to Funds.
    5. Applicants state that the inability of the Fund Servicing 
Applicants to continue to serve as investment adviser or sub-adviser to 
the Funds would result in potential hardship for the Funds and their 
shareholders. Applicants will distribute to the boards of directors of 
the Funds (``Boards''), as soon as reasonably practicable and to the 
extent not already completed, written materials regarding the Judgment, 
any impact on the Funds, and the application. These materials will 
include an offer to meet in person to discuss the materials with each 
Board, including the directors who are not ``interested persons,'' as 
defined in section 2(a)(19) of the Act, of the Fund, and their 
independent legal counsel as defined in rule 0-1(a)(6) under the Act, 
if any. Applicants state they will provide each Board with all 
information concerning the Judgment 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 the Fund Servicing Applicants 
were barred from providing investment advisory services to the Funds, 
the effect on their businesses and employees would be severe. 
Applicants state that the Fund Servicing Applicants have committed 
substantial capital and other resources to establish an expertise in 
advising and sub-advising Funds. Applicants further state that 
prohibiting the Applicants from engaging in Fund Service Activities 
would not only adversely affect their businesses, but would also 
adversely affect approximately 52 employees who are actively involved 
in those activities.
    7. Applicants previously have received exemptions under section 
9(c) as the result of conduct that triggered section 9(a) as described 
in greater detail in the application.

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 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 
December 16, 2009, until the Commission takes final action on their 
application for a permanent order.

By the Commission.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-30428 Filed 12-22-09; 8:45 am]

BILLING CODE 8011-01-P