Document ID: SEC-2014-2181-0001
Agency: sec
Document Type: Notice
Title: Applications: Crestview Advisors, L.L.C.
Posted Date: 2014-12-29T05:00Z

[Federal Register Volume 79, Number 248 (Monday, December 29, 2014)]
[Notices]
[Pages 78112-78114]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-30277]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IA-3987/803-00217]

Crestview Advisors, L.L.C.; Notice of Application

December 19, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an exemptive order under Section 206A 
of the Investment Advisers Act of 1940 (the ``Advisers Act'') and Rule 
206(4)-5(e).

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    Applicant: Crestview Advisors, L.L.C. (``Applicant'').
    Relevant Advisers Act Sections: Exemption requested under section 
206A of the Advisers Act and rule 206(4)-5(e) from rule 206(4)-5(a)(1) 
under the Advisers Act.
    Summary of Application: Applicant requests that the Commission 
issue an order under section 206A of the Advisers Act and rule 206(4)-
5(e) exempting it from rule 206(4)-5(a)(1) under the Advisers Act to 
permit Applicant to receive compensation for investment advisory 
services provided to a government entity within the two-year period 
following a contribution by a covered associate of Applicant to an 
official of the government entity.
    Filing Dates: The application was filed on November 14, 2012, and 
amended and restated applications were filed on March 26, 2014, July 
11, 2014 and November 13, 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 Applicant 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 13, 2015, and should be accompanied by proof of

[[Page 78113]]

service on Applicant, in the form of an affidavit or, for lawyers, a 
certificate of service. Pursuant to rule 0-5 under the Advisers 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 may request 
notification of a hearing by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-1090. Applicant, Crestview Advisors, L.L.C., 
667 Madison Avenue, 10th Floor, New York, NY 10065.

FOR FURTHER INFORMATION CONTACT: Aaron T. Gilbride, Senior Counsel, at 
(202) 551-6906, or Melissa R. Harke, Branch Chief, at (202) 551-6722 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site either at http://www.sec.gov/rules/iareleases.shtml or 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.

Applicant's Representations

    1. Applicant is a limited liability company organized in Delaware 
and registered with the Commission as an investment adviser under the 
Advisers Act. Applicant serves as investment adviser to a private 
equity fund (the ``Fund'') that is a ``covered investment pool,'' as 
defined in rule 206(4)-5 under the Advisers Act. One of the investors 
in the Fund is a public pension plan identified as a government entity 
with respect to the State of Texas (the ``Investor''). The investment 
decisions for the Investor are overseen by a board of trustees composed 
of nine members, all of whom are appointed by the Governor of Texas.
    2. On August 29, 2011, Jeffrey A. Marcus, a senior investment 
professional of the Applicant (the ``Contributor''), made a $2,500 
campaign contribution (the ``Contribution'') to the campaign of James 
Richard ``Rick'' Perry (the ``Official''), the Governor of Texas. The 
Contribution was given in connection with a fundraiser held in Colorado 
for the Official's Presidential campaign on or about August 25, 2011, 
which the Contributor attended (the ``Fundraiser''). At the time of the 
Contribution, the Official was a candidate for the federal office of 
President of the United States.
    3. Applicant represents that the amount of the Contribution, 
profile of the candidate, and characteristics of the campaign fall 
generally within the pattern of the Contributor's other political 
donations.
    4. Applicant represents that the Contributor has confirmed that he 
has not, at any time, had any contact with the Official regarding the 
Investor's investment activities with the Applicant.
    5. Applicant represents that since the date of the Contribution 
through the two-year period ended August 29, 2013, the Contributor's 
role with the Investor was limited to making a presentation to the 
Investor's representatives regarding the Applicant's media and 
communication portfolio companies. Applicant represents that the 
Contributor had no contact with any representative of the Investor 
outside of such presentation and no contact with any member of the 
board of trustees which oversees the investment decisions of the 
Investor. Applicant represents that since August 29, 2013, the 
Contributor has had similarly limited interaction with the Investor. 
Applicant represents that the Contributor was not involved in any 
discussions with the Investor regarding the Investor's decision to 
invest in the Fund.
    6. Applicant represents that the Investor made its first investment 
in the Fund in December 2007, and made its most recent investment in a 
successor fund complex in November 2013 (with an additional commitment 
in June 2014).
    7. Applicant represents that the Contributor did not solicit any 
other persons to make contributions to the Official's campaign and did 
not arrange any introductions to potential supporters.
    8. Applicant represents that the Contribution was discovered by 
Crestview's Compliance Department through the Contributor's voluntary 
disclosure in response to an annual certification, and that the 
Contributor obtained a full refund of the Contribution within one week 
after the Contribution was discovered. Applicant established an escrow 
account for the benefit of the Investor and deposited an amount equal 
to the sum of carried interest and management fees payable for the two 
years from the date of the Contribution.
    9. Applicant represents that it has taken steps designed to limit 
the Contributor's contact with representatives of the Investor 
following the Contribution for the duration of the two-year period 
beginning August 29, 2011. Applicant represents that the Contributor 
completed quarterly certifications beginning the quarter ended December 
31, 2012 through the quarter ended September 30, 2013 and has kept a 
log of any interactions with the investor.
    10. Applicant represents that while it is possible that the 
Contributor mentioned the Fundraiser in passing to a principal of the 
Applicant who also has a home in Colorado, neither the Contributor nor 
such principal recalls any such conversation. Applicant represents that 
such principal did not attend the Fundraiser and did not make any 
contribution to the Official. Applicant represents that at no time did 
any other of Applicant's officers, principals and employees have any 
knowledge that the Contribution had been made prior to its discovery by 
Crestview's Compliance Department in January 2012.
    11. Applicant represents that at all relevant times it had 
compliance procedures that have been more restrictive than is required 
under rule 206(4)-5. Applicant represents that its compliance 
procedures prohibit contributions, with no exceptions for de minimis 
contributions, to: (i) Politically connected individuals or entities 
with the intention of influencing such individuals or entities for 
business purposes; (ii) state, local or foreign government entities, 
officials, candidates, political parties or political action 
committees; and (iii) any national political candidates who hold a 
state or local office. Applicant represents that its compliance 
procedures also require pre-clearance of contributions to any national 
political candidate, party or action committee. Applicant represents 
that its compliance procedures apply to all of Applicant's officers, 
principals and employees and their covered family members. Applicant 
represents that all employees are required to certify their compliance 
on a periodic basis. Applicant represents that the Contributor failed 
to appreciate that contributions to federal candidates who held state 
or local office would trigger the prohibition on compensation under 
rule 206(4)-5 and were prohibited by the Applicant's policies.

Applicant's Legal Analysis

    1. Rule 206(4)-5(a)(1) under the Advisers Act prohibits a 
registered investment adviser from providing investment advisory 
services for compensation to a government entity within two years after 
a contribution to an official of the government entity is made by the 
investment adviser or any covered associate of the investment

[[Page 78114]]

adviser. The Investor is a ``government entity,'' as defined in rule 
206(4)-5(f)(5), the Contributor is a ``covered associate'' as defined 
in rule 206(4)-5(f)(2), and the Official is an ``official'' as defined 
in rule 206(4)-5(f)(6). Rule 206(4)-5(c) provides that when a 
government entity invests in a covered investment pool, the investment 
adviser to that covered investment pool is treated as providing 
advisory services directly to the government entity. The Fund is a 
``covered investment pool,'' as defined in rule 206(4)-5(f)(3)(ii).
    2. Section 206A of the Advisers Act grants the Commission the 
authority to ``conditionally or unconditionally exempt any person or 
transaction . . . from any provision or provisions of [the Advisers 
Act] or of any rule or regulation thereunder, if and to the extent that 
such exemption is necessary or appropriate in the public interest and 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of [the Advisers Act].''
    3. Rule 206(4)-5(e) provides that the Commission may exempt an 
investment adviser from the prohibition under rule 206(4)-5(a)(1) upon 
consideration of the factors listed below, among others:
    (1) Whether the exemption is necessary or appropriate in the public 
interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Advisers 
Act;
    (2) Whether the investment adviser: (i) Before the contribution 
resulting in the prohibition was made, adopted and implemented policies 
and procedures reasonably designed to prevent violations of the rule; 
and (ii) prior to or at the time the contribution which resulted in 
such prohibition was made, had no actual knowledge of the contribution; 
and (iii) after learning of the contribution: (A) Has taken all 
available steps to cause the contributor involved in making the 
contribution which resulted in such prohibition to obtain a return of 
the contribution; and (B) has taken such other remedial or preventive 
measures as may be appropriate under the circumstances;
    (3) Whether, at the time of the contribution, the contributor was a 
covered associate or otherwise an employee of the investment adviser, 
or was seeking such employment;
    (4) The timing and amount of the contribution which resulted in the 
prohibition;
    (5) The nature of the election (e.g., federal, state or local); and
    (6) The contributor's apparent intent or motive in making the 
contribution which resulted in the prohibition, as evidenced by the 
facts and circumstances surrounding such contribution.
    4. Applicant requests an order pursuant to section 206A and rule 
206(4)-5(e), exempting it from the two-year prohibition on compensation 
imposed by rule 206(4)-5(a)(1) with respect to investment advisory 
services provided to the Investor within the two-year period following 
the Contribution.
    5. Applicant submits that the exemption is necessary and 
appropriate in the public interest and consistent with the protection 
of investors and the purposes fairly intended by the policy and 
provisions of the Advisers Act. Applicant further submits that the 
other factors set forth in rule 206(4)-5(e) similarly weigh in favor of 
granting an exemption to the Applicant to avoid consequences 
disproportionate to the violation.
    6. Applicant states that the relationship with the Investor pre-
dates the Contribution and that the Investor did not make an additional 
commitment to the Fund subsequent to the Contribution (although the 
Applicant notes that the Investor made an investment in a successor 
fund managed by the Applicant 22 months following the return of the 
Contribution). Applicant states that the Contribution was made three 
and a half years after the Investor's investment in the Fund and at a 
time when the Investor was not contemplating any investment-related 
decisions with respect to the Applicant. Applicant notes that it 
established and maintains its relationships with the Applicant on an 
arms'-length basis free from any improper influence as a result of the 
Contribution.
    7. Applicant states that at all relevant times it had policies 
which were fully compliant with, and more rigorous than, rule 206(4)-
5's requirements at the time of the Contribution. Applicant further 
states that at no time did Applicant or any employees of Applicant, 
other than the Contributor, have any knowledge that the Contribution 
had been made prior to its discovery by Crestview's Compliance 
Department in January 2012. After learning of the Contribution, 
Applicant and the Contributor took all available steps to obtain a 
return of the Contribution, which was returned within one week of 
discovery, and an escrow account was set up for the Investor and a sum 
equal to the carried interest and all fees charged to the Investor's 
capital account in the Fund since the date of the Contribution were 
deposited by Applicant in the escrow account for immediate return to 
the Investor should an exemptive order not be granted.
    8. Applicant states that the Contributor's apparent intent in 
making the Contribution was not to influence the selection or retention 
of the Applicant. Applicant states that the Contributor has a long-
standing history of supporting the Official. The amount of the 
Contribution, profile of the candidate, and characteristics of the 
campaign fall generally within the pattern of the Contributor's other 
political donations. Applicant further states, as discussed above, that 
the Contributor has confirmed that he has not, at any time, had any 
contact with the Official regarding the Investor's investment 
activities with the Applicant, and apart from requesting in January 
2012 that his Contribution be returned, the Contributor's contact with 
the Official concerning campaign contributions was limited to the 
fundraising event at which the Contribution was made. Applicant further 
states that since the date of the Contribution, the Contributor's role 
with the Investor was limited to making a presentation to the 
Investor's representatives regarding the Applicant's media and 
communication portfolio companies.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-30277 Filed 12-24-14; 8:45 am]
BILLING CODE 8011-01-P