Document ID: SEC-2009-0408-0001
Agency: sec
Document Type: Notice
Title: Application and Temporary Order: UBS AG, et al.
Posted Date: 2009-03-26T04:00Z

[Federal Register: March 26, 2009 (Volume 74, Number 57)]
[Notices]               
[Page 13276-13278]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26mr09-119]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC--28652; 812-13645]

 
UBS AG, et al.; Notice of Application and Temporary Order

March 19, 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 UBS AG on March 19, 2009 by the United 
States District Court for the District of Columbia (``Injunction'') 
until the Commission takes final action on an application for a 
permanent order. Applicants also have applied for a permanent order.
    Applicants: UBS AG; UBS Financial Services Inc. (``UBSFS''); UBS 
Fund Advisor, L.L.C. (``UBSFA''); UBS Willow Management, L.L.C. (``UBS 
Willow''), UBS Eucalyptus Management, L.L.C., UBS Tamarack Management, 
L.L.C., UBS Juniper Management, L.L.C., and UBS Enso Management, L.L.C. 
(collectively, ``UBSFA Advisers''); UBS Global Asset Management 
(Americas) Inc. (``UBS Global AM Americas''); UBS Global Asset 
Management (US) Inc. (``UBS Global AM US''); and UBS IB Co-Investment 
2001 GP Limited (``ESC GP'') (collectively, ``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 UBS AG 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 March 19, 2009. 
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 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 April 13, 2009, 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: UBS AG and ESC GP, 
c/o UBS Investment Bank, 677 Washington Boulevard, Stamford, CT 06901; 
UBSFS, 1200 Harbor Boulevard, Weehawken, NJ 07086; UBSFA and UBSFA 
Advisers, 51 West 52nd Street, 23rd Floor, New York, NY 10019; UBS 
Global AM US, 51 West 52nd Street, 16th Floor, New York, NY 10019; UBS 
Global AM Americas, One North Wacker Drive, Chicago, IL 60606.

FOR FURTHER INFORMATION CONTACT: John Yoder, Senior Counsel, at 202-
551-6878, or Marilyn Mann, Branch Chief, at 202-551-6821 (Division of 
Investment Management, Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a temporary order and 
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. UBS AG is a company established under the laws of Switzerland 
that directly or through its subsidiaries provides global wealth 
management, securities and retail and commercial banking services. Each 
of the Applicants is either directly or indirectly controlled by UBS 
AG. UBS AG and ESC GP provide investment advisory services to 
employees' securities companies (``ESCs''), as defined in section 
2(a)(13) of the Act, which provide investment opportunities for highly 
compensated key employees, officers, directors and current consultants 
of UBS AG and its affiliates. UBSFS, UBSFA, UBSFA Advisers and UBS 
Global AM Americas are registered as investment advisers under the 
Investment Advisers Act of 1940 (``Advisers Act'') and currently serve 
as investment advisers to registered management investment companies 
(``Funds''). UBSFS is registered as a broker-dealer under the 
Securities Exchange Act of 1934

[[Page 13277]]

(``Exchange Act'') and acts as depositor and principal underwriter to 
various registered unit investment trusts (``UITs''). UBS Global AM US 
is registered as a broker-dealer under the Exchange Act and as an 
investment adviser under the Advisers Act and serves as principal 
underwriter to various open-end Funds.
    2. On March 19, 2009, the United States District Court for the 
District of Columbia entered a judgment, which included the Injunction, 
against UBS AG (``Judgment'') in a matter brought by the Commission.\2\ 
The Commission alleged in the complaint (``Complaint'') that UBS AG 
violated section 15(a) of the Exchange Act and section 203(a) of the 
Advisers Act by acting as an unregistered broker-dealer and investment 
adviser. The Complaint alleged that UBS AG, largely through individuals 
known as client advisers, used United States jurisdictional means to 
provide cross-border brokerage and investment advisory services to 
thousands of United States clients. The Complaint further alleged that 
this cross-border business was serviced primarily from Switzerland. The 
Complaint further alleged that at all times UBS AG was aware that it 
could provide these services to United States cross-border clients only 
through an entity registered with the Commission as a broker-dealer or 
investment adviser. Without admitting or denying any of the allegations 
in the Complaint, except as to jurisdiction, UBS AG consented to the 
entry of the Injunction, the payment of disgorgement and certain 
undertakings to take various remedial actions.
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    \2\ Securities and Exchange Commission v. UBS AG, Judgment as to 
UBS AG, 1:09-CV-00316 (D.D.C.) (entered March 19, 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 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, broker or dealer, 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 UBS AG 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 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 a temporary and permanent order exempting the Applicants 
and the other Covered Persons 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 the conduct of Applicants has been such as not to make 
it 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, sub-adviser or depositor to any registered 
investment company or ESC, or in the capacity of principal underwriter 
for any open-end Fund or UIT (``Fund Service Activities''). Applicants 
note that none of the current or former directors, officers, or 
employees of the Applicants (other than UBS AG) had any knowledge of, 
or had any involvement in, the conduct alleged in the Complaint. 
Applicants further state that the personnel at UBS AG who were involved 
in the violations alleged in the Complaint have had no and will not 
have any future involvement in Fund Service Activities.
    5. Applicants state that the inability of the Applicants to engage 
in Fund Service Activities would result in potentially severe financial 
hardships for the registered investment companies they serve and the 
registered investment companies' shareholders or unitholders. 
Applicants state that they will distribute 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 the 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 
Fund Service Activities to registered investment companies and ESCs, 
the effect on their businesses and employees would be severe. 
Applicants state that they have committed substantial resources to 
establishing an expertise in providing Fund Service Activities. 
Applicants further state that prohibiting them from providing Fund 
Service Activities would not only adversely affect their businesses, 
but would also adversely affect over 425 employees that are involved in 
those activities. Applicants also state that disqualifying UBS AG and 
ESC GP from continuing to provide investment advisory services to ESCs 
is not in the public interest or in furtherance of the protection of 
investors. Because the ESCs have been formed for the benefit of key 
employees, officers, directors and current consultants of UBS AG and 
its affiliates, it would not be consistent with the purposes of the ESC 
provisions of the Act to require another entity not affiliated with UBS 
AG to manage the ESCs. In addition, participants in the ESCs have 
subscribed for interests in the ESCs with the expectation that the ESCs 
would be managed by an affiliate of UBS AG.
    7. Applicants state that UBS AG and certain other Applicants have 
previously received orders under section 9(c), 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

[[Page 13278]]

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 March 
19, 2009, until the Commission takes final action on their application 
for a permanent order.

    By the Commission.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-6655 Filed 3-25-09; 8:45 am]