Document ID: SEC-2013-0387-0001
Agency: sec
Document Type: Notice
Title: Applications and Temporary Orders: UBS AG, et al.
Posted Date: 2013-02-22T05:00Z

[Federal Register Volume 78, Number 36 (Friday, February 22, 2013)]
[Notices]
[Pages 12372-12374]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-04013]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-30383; 812-14105]

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

February 15, 2013.
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 a guilty 
plea entered on December 19, 2012, by UBS Securities Japan Co., Ltd. 
(the ``Settling Firm'') in the U.S. District Court for the District of 
Connecticut (``District Court'') in connection with a plea agreement 
between the Settling Firm and the U.S. Department of Justice (``DOJ''), 
until the Commission takes final action on an application for a 
permanent order. Applicants have requested a permanent order.
    Applicants: UBS AG; UBS IB Co-Investment 2001 GP Limited (``ESC 
GP''); UBS Financial Services Inc. (``UBSFS''); UBS Alternative and 
Quantitative Investments LLC (``UBS Alternative''); UBS Willow 
Management, L.L.C. (``UBS Willow''), UBS Eucalyptus Management, L.L.C. 
(``UBS Eucalyptus'') and UBS Juniper Management, L.L.C. (``UBS 
Juniper'') (UBS Willow, UBS Eucalyptus, and UBS Juniper are referred to 
collectively as ``UBS Alternative Managers''); UBS Global Asset 
Management (Americas) Inc. (``UBS Global AM Americas''); UBS Global 
Asset Management (US) Inc. (``UBS Global AM US''); and the Settling 
Firm (each an ``Applicant'' and collectively, the ``Applicants'').\1\
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    \1\ Applicants request that any relief granted pursuant to the 
application also apply to any existing or future company of which 
the Settling Firm is or may become an affiliated person within the 
meaning of section 2(a)(3) of the Act (together with the Applicants, 
the ``Covered Persons'').
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    Filing Date: The application was filed on December 19, 2012, and 
amended on January 31, 2013.
    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 March 12, 2013, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants: 
UBS AG, ESC-GP, and the Settling Firm, c/o UBS Investment Bank, 677 
Washington Boulevard, Stamford, CT 06901; UBSFS, 1200 Harbor

[[Page 12373]]

Boulevard, Weehawken, NJ 07086; UBS Alternative, 677 Washington 
Boulevard, Stamford, CT 06901; UBS Willow, UBS Eucalyptus, and UBS 
Juniper, 299 Park Avenue, 29th Floor, New York, NY 10171; UBS Global AM 
Americas, One North Wacker Drive, Chicago, IL 60606 and UBS Global AM 
US, 1285 Avenue of the Americas, 12th Floor, New York, NY 10019.

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. UBS AG, a company organized under the laws of Switzerland, is a 
Swiss-based global financial services firm. UBS AG and its subsidiaries 
provide global wealth management, securities and retail and commercial 
banking services. Each of the other Applicants is either a direct or 
indirect majority-owned or wholly-owned subsidiary of UBS AG. UBSFS is 
a corporation organized under the laws of Delaware and provides a wide 
range of wealth management services, including financial planning and 
wealth management consulting, asset-based and advisory services and 
transaction-based services, to clients in the United States and 
throughout the world. UBSFS, UBS Alternative, UBS Alternative 
Managers,\2\ and UBS Global AM Americas are investment advisers 
registered under the Investment Advisers Act of 1940, and all but UBSFS 
currently serve as investment advisers to registered management 
investment companies (``Funds''). UBSFS and UBS Global AM US are 
registered as broker-dealers under the Securities and Exchange Act of 
1934 (``Exchange Act''). UBSFS is the co-principal underwriter to 
various registered unit investment trusts. UBS Global AM US serves as 
principal underwriter to various open-end Funds. 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, officer, 
directors and current consultants of UBS AG and its affiliates. 
Applicants (other than the Settling Firm) collectively serve as 
investment adviser to Funds and ESCs, principal underwriter to open-end 
Funds, and co-principal underwriter to registered unit investment 
trusts (such activities, collectively, ``Fund Service Activities'').
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    \2\ UBS Alternative is also managing member of the UBS 
Alternative Managers.
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    2. On December 19, 2012, the Fraud Section of the Criminal Division 
of the DOJ filed a one-count criminal information (the ``Information'') 
in the District Court charging wire fraud, in violation of Title 18, 
United States Code, Sections 1343 and 2. The Information charges that 
between approximately 2006 and at least 2009, the Settling Firm engaged 
in a scheme to defraud counterparties to interest rate derivatives 
trades executed on its behalf by secretly manipulating benchmark 
interest rates to which the profitability of those trades was tied. The 
Information charges that, in furtherance of this scheme, on or about 
February 25, 2009, the Settling Firm committed wire fraud in violation 
of Title 18, United States Code, Sections 1343 and 2 by transmitting, 
or causing the transmission of: (i) An electronic chat between a 
derivatives trader employed by the Settling Firm and a broker employed 
at an interdealer brokerage firm; (ii) a subsequent submission for the 
London InterBank Offered Rate for Japanese Yen (``Yen LIBOR'') to 
Thomson Reuters; and (iii) a subsequent publication of a Yen LIBOR rate 
through international and interstate wires.
    3. Pursuant to a plea agreement (the ``Plea Agreement''), the 
Settling Firm entered a plea of guilty (the ``Guilty Plea'') on 
December 19, 2012, in the District Court. In the Plea Agreement, the 
Settling Firm agreed to a fine of $100 million and other remedies. 
Applicants expect that the District Court will enter a judgment against 
the Settling Firm (the ``Judgment'') that will require remedies that 
are materially the same as set forth in the Plea Agreement. In 
addition, UBS AG has entered into a non-prosecution agreement with DOJ, 
dated December 18, 2012 (the ``Non-Prosecution Agreement''), relating 
to submissions of the Yen LIBOR and other benchmark interest rates. In 
the Non-Prosecution Agreement, UBS AG has agreed to, among other 
things: (i) Provide full cooperation with DOJ and any other law 
enforcement or government agency designated by DOJ until the conclusion 
of all investigations and prosecutions arising out of the conduct 
described in the Non-Prosecution Agreement; (ii) strengthen its 
internal controls as required by certain other U.S. and non-U.S. 
regulatory agencies that have addressed the misconduct described in the 
Non-Prosecution Agreement; and (iii) the payment of $500 million, which 
includes amounts incurred by the Settling Firm for criminal penalties 
arising from the Judgment. The individuals at the Settling Firm and any 
other Covered Person who were identified by the Settling Firm, UBS AG 
or any U.S. or non-U.S. regulatory or enforcement agencies as being 
responsible for the conduct underlying the Plea Agreement (including 
the conduct described in any of the Exhibits thereto) (the ``Conduct'') 
have either resigned or have been terminated.

Applicants' Legal Analysis

    1. Section 9(a)(1) of the Act provides, in pertinent part, that a 
person may not serve or act as an investment adviser or depositor of 
any registered investment company or a principal underwriter for any 
registered open-end investment company or registered unit investment 
trust, if such person within ten years has been convicted of any felony 
or misdemeanor arising out of such person's conduct, as, among other 
things, a broker or dealer. Section 2(a)(10) of the Act defines the 
term ``convicted'' to include a plea of guilty. Section 9(a)(3) of the 
Act extends the prohibitions of section 9(a)(1) to a company any 
affiliated person of which has been disqualified under the provisions 
of section 9(a)(1). 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 the Settling Firm is an affiliated person 
of each of the other Applicants within the meaning of section 2(a)(3). 
Applicants state that the guilty plea would result in a 
disqualification of each Applicant for ten years under section 9(a) of 
the Act because the Settling Fund would become the subject of a 
conviction described in 9(a)(1).
    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) if it is established that these provisions, as applied to 
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 
temporary and permanent

[[Page 12374]]

orders exempting the Applicants and the other Covered Persons from the 
disqualification provisions of section 9(a) of the Act. On December 19, 
2012, Applicants received a temporary conditional order from the 
Commission exempting them from section 9(a) of the Act with respect to 
the Guilty Plea from December 19, 2012, until the Commission takes 
final action on an application for a permanent order or, if earlier, 
February 15, 2013.
    3. Applicants believe they meet the standard 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 exemption from section 9(a).
    4. Applicants assert that the Conduct did not involve any of the 
Applicants' Fund Service Activities, and that the Settling Firm does 
not serve in any of the capacities described in section 9(a) of the 
Act. Additionally, Applicants assert that the Conduct did not involve 
any Fund or ESC with respect to which the Applicants provided Fund 
Service Activities, or the assets of any such Fund or ESC. Applicants 
further assert that (i) none of the current or former directors, 
officers or employees of the Applicants (other than certain personnel 
of the Settling Firm and UBS AG who were not involved in any of the 
Applicants' Fund Service Activities) had any knowledge of, or had any 
involvement in, the Conduct; (ii) no former employee of the Settling 
Firm or any other Covered Person who previously has been or who 
subsequently may be identified by the Settling Firm, UBS AG or any U.S. 
or non-U.S. regulatory or enforcement agencies as having been 
responsible for the Conduct will be an officer, director, or employee 
of any Applicant or any other Covered Person; (iii) those identified 
employees have had no, and will not have any future, involvement in the 
Covered Persons' activities in any capacity described in section 9(a) 
of the Act; and (iv) because the personnel of the Applicants (other 
than certain personnel of the Settling Firm and UBS AG who were not 
involved in any of the Applicants' Fund Service Activities) did not 
have any involvement in the Conduct, shareholders of those RICs and 
ESCs were not affected any differently than if those RICs and ESCs had 
received services from any other non-affiliated investment adviser or 
principal underwriter. Applicants have agreed that neither they nor any 
of the other Covered Persons will employ any of the former employees of 
the Settling Firm or any other Covered Person who previously have been 
or who subsequently may be identified by the Settling Firm, UBS AG or 
any U.S. or non-U.S. regulatory or enforcement agency as having been 
responsible for the Conduct in any capacity without first making a 
further application to the Commission pursuant to section 9(c).
    5. Applicants further represent that the inability of the 
Applicants (other than the Settling Firm) to continue providing Fund 
Service Activities would result in potential hardships for both the 
Funds and their shareholders. Applicants state that they will 
distribute written materials, including an offer to meet in person to 
discuss the materials, to the board of directors of each Fund, 
including the directors who are not ``interested persons,'' as defined 
in section 2(a)(19) of the Act, of such Fund, and their independent 
legal counsel as defined in rule 0-1(a)(6) under the Act, if any, 
regarding the Guilty Plea, any impact on the Funds, and the 
application. The Applicants will provide the Funds with all information 
concerning the Plea Agreement 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 (other than the Settling 
Firm) were barred from providing Fund Service Activities to Funds, the 
effect on their businesses and employees would be severe. The 
Applicants state that they have committed substantial capital and 
resources to establishing expertise in advising and sub-advising Funds 
and in support of their principal underwriting business.
    7. Applicants state that several Applicants and certain of their 
affiliates have previously received orders under section 9(c), as 
described in greater detail in the application.

Applicants' Conditions

    Applicants agree that any order granted by the Commission pursuant 
to the application will be subject to the following conditions:
    1. 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.
    2. Neither the Applicants nor any of the other Covered Persons will 
employ any of the former employees of the Settling Firm or any other 
Covered Person who previously have been or who subsequently may be 
identified by the Settling Firm, UBS AG or any U.S. or non-U.S. 
regulatory or enforcement agency as having been responsible for the 
Conduct in any capacity without first making a further application to 
the Commission pursuant to section 9(c).

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 the 
Applicants and the other Covered Persons are granted a temporary 
exemption from the provisions of section 9(a), effective forthwith, 
solely with respect to the Guilty Plea, subject to the conditions in 
the application, until the date the Commission takes final action on 
their application for a permanent order.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-04013 Filed 2-21-13; 8:45 am]
BILLING CODE 8011-01-P