Document ID: SEC-2011-1957-0001
Agency: sec
Document Type: Notice
Title: Applications: Wells Fargo Bank, N.A., et al.
Posted Date: 2011-12-15T05:00Z

[Federal Register Volume 76, Number 241 (Thursday, December 15, 2011)]
[Notices]
[Pages 78052-78054]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-32169]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-29881; 812-13987]

Wells Fargo Bank, N.A., et al.; Notice of Application and 
Temporary Order

December 9, 2011.
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: 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 Wells Fargo Bank, N.A. (``Wells Fargo 
Bank'') on December 9, 2011 by the United States District Court for the 
District of New Jersey (``Injunction'') until the Commission

[[Page 78053]]

takes final action on an application for a permanent order. Applicants 
also have applied for a permanent order. Applicants: Wells Fargo Bank, 
First International Advisors, LLC (``First International''), 
Metropolitan West Capital Management, LLC (``Metropolitan West''), 
Golden Capital Management, LLC (``Golden Capital''), Alternative 
Strategies Brokerage Services, Inc. (``Alternative Strategies 
Brokerage''), Alternative Strategies Group, Inc. (``Alternative 
Strategies''), Wells Fargo Funds Management, LLC (``WF Funds 
Management''), Wells Capital Management Incorporated (``Wells Capital 
Management''), Peregrine Capital Management, Inc. (``Peregrine''), 
Galliard Capital Management, Inc. (``Galliard''), Nelson Capital 
Management (``Nelson''), and Wells Fargo Funds Distributor, LLC (``WF 
Funds Distributor'') (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 company of which Wells Fargo 
Bank 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 8, 2011 and two 
amendments were filed on December 9, 2011.
    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 3, 2012, 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: Wells Fargo Bank, 
101 North Phillips Avenue, Sioux Falls, SD 57104; First International, 
30 Fenchurch Street, London, England, UK EC3M 3BD; Metropolitan West, 
610 Newport Center Drive, Suite 1000, Newport Beach, CA 92660; Golden 
Capital, 5 Resource Square, Suite 400, 10715 David Taylor Drive, 
Charlotte, NC 28262; Alternative Strategies Brokerage, 401 South Tryon 
Street, Charlotte, NC 28288; Alternative Strategies, 401 South Tryon 
Street, TH3, Charlotte, NC 28288; WF Funds Management and WF Funds 
Distributor, 525 Market Street, 12th Floor, San Francisco, CA 94105; 
Wells Capital Management, 525 Market Street, 10th Floor, San Francisco, 
CA 94105; Peregrine, 800 LaSalle Avenue, Suite 1850, Minneapolis, MN 
55402; Galliard, 800 LaSalle Avenue, Suite 1100, Minneapolis, MN 55402; 
and Nelson, 1860 Embarcadero Road, 140, Palo Alto, CA 94303.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at 
(202) 551-6811 or Daniele Marchesani, 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 
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. Wells Fargo Bank is a national banking association. On March 20, 
2010, Wachovia Bank, N.A. (``Wachovia Bank'') merged with and into 
Wells Fargo Bank. Wells Fargo Bank is registered as an investment 
adviser under the Investment Advisers Act of 1940, as amended (the 
``Advisers Act'') and serves as an investment adviser to a Fund (as 
defined below). No existing company of which Wells Fargo Bank is an 
affiliated person (other than the Applicants) currently serves as 
investment adviser, sub-adviser, or depositor of any registered 
investment company or business development company (``BDC'') or 
principal underwriter for any registered open-end investment company, 
registered unit investment trust (``UIT''), or registered face amount 
certificate company, or investment adviser of any employees' securities 
company, as defined in section 2(a)(13) of the Act (``ESC'') (``Fund 
Service Activities''). ``Funds'' refers to the registered investment 
companies, BDCs or ESCs for which a Covered Person provides Fund 
Service Activities. Wells Fargo & Company (``Wells Fargo'') directly 
owns 37.51% of Wells Fargo Bank and indirectly owns the remainder. 
Through its direct and indirect subsidiaries, Wells Fargo, a registered 
financial holding company and bank holding company under the Bank 
Holding Company Act of 1956, as amended, offers banking, brokerage, 
advisory and other financial services to institutional and individual 
customers worldwide. Wells Fargo also is the ultimate parent of the 
other Applicants, who, as direct or indirect subsidiaries of the same 
ultimate parent, are under common control with Wells Fargo Bank.
    2. First International, Metropolitan West, Golden Capital, 
Alternative Strategies, WF Funds Management, Wells Capital Management, 
Peregrine, Galliard and Nelson are registered as investment advisers 
under the Advisers Act and serve as investment advisers or sub-advisers 
to various Funds. Alternative Strategies Brokerage and WF Funds 
Distributor are registered as broker-dealers under the Securities 
Exchange Act of 1934, as amended and each serves as principal 
underwriter to various Funds.
    3. On December 9, 2011, the United States District Court for the 
District of New Jersey entered a judgment, which included the 
Injunction, against Wells Fargo Bank (``Judgment'') in a matter brought 
by the Commission.\2\ The Commission alleged in the complaint 
(``Complaint'') that from at least 1997 through at least 2005, Wachovia 
Bank engaged in fraudulent practices and made misrepresentations and 
omissions in connection with bidding on and sale of municipal 
reinvestment instruments. The Complaint alleged that these fraudulent 
practices, misrepresentations, and omissions affected the prices of 
certain reinvestment instruments, deprived certain municipalities of a 
presumption that their reinvestment instruments were purchased at fair 
market value, and/or jeopardized the tax-exempt status of certain 
securities. Based on the alleged misconduct described above, the 
Complaint alleged that Wachovia Bank violated section 17(a) of the 
Securities Act of 1933. Without admitting or denying any of the 
allegations in the Complaint (other than those relating to the 
jurisdiction of the District Court over it and the subject matter, 
solely for purposes of this action), Wells Fargo Bank consented to the 
entry of the Injunction and other relief, including disgorgement and 
civil monetary penalties.
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    \2\ U.S. Securities and Exchange Commission v. Wells Fargo Bank, 
N.A., Case No. 2:11-cv-07135-WJM-MF (D.N.J. Dec. 9, 2011).
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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

[[Page 78054]]

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 BDC or a principal 
underwriter for any registered open-end investment company, registered 
UIT, or registered face-amount certificate company or as investment 
adviser of an ESC. 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 
Wells Fargo Bank is an affiliated person of each of the other 
Applicants within the meaning of section 2(a)(3) of the Act. Applicants 
state that, as a result of the Injunction, they would be subject to the 
prohibitions 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 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 them and other 
Covered Persons from the disqualification provisions of section 9(a).
    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 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 engaging in Fund 
Service Activities. Applicants also state (i) None of the current or 
former directors, officers, or employees of the Applicants (other than 
Wells Fargo Bank) had any knowledge of, or had any involvement in, the 
conduct alleged in the Complaint to have constituted the violations 
that provided a basis for the Injunction; (ii) the personnel at Wells 
Fargo Bank who were involved in the conduct that constituted the 
violations that provided a basis for the Injunction have had no, and 
will not have any future, involvement in providing Fund Service 
Activities to the Funds on behalf of the Applicants or other Covered 
Persons; and (iii) because the personnel of the Applicants (other than 
Wells Fargo Bank) did not have any involvement in the alleged 
misconduct, shareholders of Funds that received Fund Service Activities 
from the Applicants were not affected any differently than if those 
Funds had received services from any other non-affiliated investment 
adviser, depositor or principal underwriter.
    5. Applicants state that the inability of the Applicants to engage 
in Fund Service Activities would result in potentially severe financial 
hardships for the Funds they serve and the Funds' shareholders. 
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 such Funds, and their independent legal counsel as defined in 
rule 0-1(a)(6) under the Act, if any, describing the circumstances that 
led to the Injunction, any impact on the Funds, and the application. 
Applicants state that they will provide the Boards with the 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, BDCs and 
ESCs, the effect on their businesses and employees would be severe. 
Applicants state that they have committed substantial resources to 
establish 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 more than 1600 employees that are involved in 
those activities.
    7. Applicants state that Applicants and certain other affiliated 
persons of the Applicants have previously received orders under section 
9(c) of the Act, 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 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 
December 9, 2011, until the Commission takes final action on their 
application for a permanent order.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-32169 Filed 12-14-11; 8:45 am]
BILLING CODE 8011-01-P