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Code · REGISTER · 2007-01-05 · U.S. Nuclear Regulatory Commission (NRC) · Notices

Notices. Notice of pending NRC action to submit an information collection request to OMB and solicitation of public comment

13,353 words·~61 min read·/register/2007/01/05/06-9986·

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 7533-01-M NUCLEAR REGULATORY COMMISSION Agency Information Collection Activities: Proposed Collection; Comment Request AGENCY: U.S. Nuclear Regulatory Commission (NRC). ACTION: Notice of pending NRC action to submit an information collection request to OMB and solicitation of public comment. SUMMARY: The NRC is preparing a submittal to OMB for review of continued approval of information collections under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C.
Chapter 35). Information Pertaining to the Requirement To Be Submitted 1. *The title of the information collection:* Policy Statement for the “Criteria for Guidance of States and NRC in Discontinuance of NRC Regulatory Authority and Assumption Thereof By States Through Agreement,” Maintenance of Existing Agreement State Programs, Request for Information Through the Integrated Materials Performance Evaluation Program (IMPEP) Questionnaire, and Agreement State Participation in IMPEP. 2. *Current OMB approval number:* OMB 3150-0183. 3. *How often the collection is required:* There are four activities that occur under this collection:
Information collection activities required by the IMPEP questionnaire in preparation for an IMPEP review conducted no less frequently than every four years; while the following activities are all collected on an annual basis—policy statement addressing requirements for new Agreement States; participation by Agreement States in the IMPEP reviews; and annual requirements for Agreement States to maintain their programs. 4. *Who is required or asked to report:* 34 Agreement States who have signed Section 274b.
Agreements with NRC. 5. *The number of annual respondents:* 34. 6. *The number of hours needed annually to complete the requirement or request:* For States interested in becoming Agreement States: Approximately 4,300 hours. For Agreement State participation in 10 IMPEP reviews (7 Agreement States, 1 NRC Regional Office and 2 Follow-up reviews): 360 hours (an average of 36 hours per review). For maintenance of existing Agreement State programs: 255,600 hours (an average of approximately 7,517 hours per State for 34 Agreement States).
For Agreement State response to 7 IMPEP questionnaires annually: 371 hours (an average of 53 hours per program). The total number of hours expended annually is 260,631 hours. 7. *Abstract:* States wishing to become Agreement States are requested to provide certain information to the NRC as specified by the Commission's Policy Statement, “Criteria for Guidance of States and NRC in Discontinuance of NRC Regulatory Authority and Assumption Thereof By States Through Agreement.” Agreement States need to ensure that the Radiation Control Program under the Agreement remains adequate and compatible with the requirements of Section 274 of the Atomic Energy Act
(Act)and must maintain certain information. NRC conducts periodic evaluations through IMPEP to ensure that these programs are compatible with the NRC's program, meet the applicable parts of the Act, and are adequate to protect public health and safety. Submit, by March 6, 2007, comments that address the following questions; 1. Is the proposed collection of information necessary for the NRC to properly perform its functions? Does the information have practical utility? 2. Is the burden estimate accurate? 3. Is there a way to enhance the quality, utility, and clarity of the information to be collected? 4. How can the burden of the information collection be minimized, including the use of automated collection techniques or other forms of information technology? A copy of the draft supporting statement may be viewed free of charge at the NRC Public Document Room, One White Flint North, 11555 Rockville Pike, Room O-1 F21, Rockville, Maryland 20852. OMB clearance requests are available at the NRC World Wide Web site: *http://www.nrc.gov/public-involve/doc-comment/omb/index.html.* The document will be available on the NRC home page site for 60 days after the signature date of this notice. Comments and questions about the information collection requirements may be directed to the NRC Clearance Officer, Brenda Jo Shelton (T-5 F53), U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, by telephone at 301-415-7233, or by Internet electronic mail to *INFOCOLLECTS@NRC.GOV.* Dated at Rockville, Maryland, this 27th day of December 2006. For the Nuclear Regulatory Commission. Brenda Jo Shelton, NRC Clearance Officer, Office of Information Services. [FR Doc. E6-22584 Filed 1-4-07; 8:45 am] BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION [Docket No. 40-8964] Notice of Availability of Environmental Assessment and Finding of No Significant Impact for the Addition of the Reynolds Ranch Area to Power Resources, Inc's Smith Ranch/Highlands Uranium Project, Converse County, WY AGENCY: U.S. Nuclear Regulatory Commission. ACTION: Notice of availability. FOR FURTHER INFORMATION CONTACT: James Park, Environmental and Performance Assessment Directorate, Division of Waste Management and Environmental Protection, Office of Federal and State Materials and Environmental Management Programs, U.S. Nuclear Regulatory Commission, Washington, DC 20555. Telephone:
(301)415-5835; Fax number:
(301)415-5397; E-mail: *jrp@nrc.gov.* SUPPLEMENTARY INFORMATION: I. Introduction By letter dated January 14, 2005, Power Resources, Inc.
(PRI)submitted a request to amend its U.S. Nuclear Regulatory Commission
(NRC)Source Material License SUA-1548 for the Smith Ranch-Highland Uranium Project (SR-HUP), located in Converse County, Wyoming. PRI requested that the SR-HUP permit area be modified to include the Reynolds Ranch area, which encompasses approximately 8700 acres (3521 hectares) and is contiguous with the current northern boundary of the SR-HUP permit area. PRI desires to conduct in-situ leach uranium mining in the Reynolds Ranch area. PRI modified its amendment application by letter dated April 7, 2005. The NRC staff has prepared an Environmental Assessment
(EA)in support of its review of PRI's application in accordance with the requirements of 10 CFR part 51. Based on the EA, the NRC has concluded that a Finding of No Significant Impact (FONSI) is appropriate. II. EA Summary Background PRI's SR-HUP is a commercial in-situ leach
(ISL)uranium mining facility located in the South Powder River Basin, Converse County, Wyoming. The main office and Central Processing Plant complex is located at Smith Ranch, about 17 air miles (22 road miles) (27 air/35 road kilometers (km)) northeast of Glenrock, Wyoming, and 23 air miles (25 road miles) (37 air/40 road km) northwest of Douglas, Wyoming. NRC issued PRI's current NRC license for the SR-HUP (Source Material License SUA-1548) on August 18, 2003, as part of a license renewal process. Commercial ISL uranium production began at the Highland site in January 1988 and at the Smith Ranch site in June 1997. Under SUA-1548, PRI is authorized, through its ISL process, to produce up to 5.5 million pounds (2.5 million kilograms) per year of tri-uranium octoxide (U <sup>3</sup> O <sup>8</sup> ), also known as “yellowcake.” PRI's current annual production is less than half of this limit. Review Scope The NRC staff has reviewed PRI's request in accordance with the NRC's environmental protection regulations in 10 CFR part 51. Those regulations implement section 102(2) of the National Environmental Policy Act of 1969, as amended. The EA provides the results of the NRC staff's environmental review; the NRC staff's radiation safety review of PRI's request will be documented separately in a Safety Evaluation Report. The NRC staff has prepared the EA in accordance with NRC requirements in 10 CFR 51.21 and 51.30, and with the associated guidance in NRC report NUREG-1748, “Environmental Review Guidance for Licensing Actions Associated with Nuclear Material Safety and Safeguards Programs” (NRC, 2003). In 40 CFR 1508.9, the Council on Environmental Quality defines an EA as a concise public document that briefly provides sufficient evidence and analysis for determining whether to prepare an environmental impact statement or a FONSI. The NRC staff's review addressed the environmental impacts of PRI's currently-approved mining operations at the SR-HUP only insofar as such operations would be modified by the proposed mining at the Reynolds Ranch amendment area. Proposed Action PRI is proposing to modify its permit area boundary to accommodate the Reynolds Ranch area, and to conduct ISL operations within that area. As part of such operations, PRI would construct eight wellfields and a satellite ion-exchange facility for the recovery of uranium and for wellfield restoration following mining operations, and operate a deep disposal well for the disposal of liquid wastes. The ore deposits in the SR-HUP and Reynolds Ranch amendment area generally occur at depths of 450 feet (137 meters (m)) to 1000 feet (305 m) below the surface in long narrow trends varying from a few hundred to several thousand feet long and 20 to 300 feet (6 to 91 m) wide. The depth depends on the local topography, the dip of the formation, and the stratigraphic horizon. At the Reynolds Ranch amendment area, the shallower ore deposits are contained within the U/S-Sand, with the mineable ore in this sand occurring at approximate depths of 380 to 525 feet (116 to 160 m). Most of the remaining uranium mineralization at the Smith Ranch and Reynolds Ranch areas occurs in the O-Sand formation at depths of 700 to 900 feet (213 to 274 m). Following uranium recovery in each mining unit, PRI would restore ground-water conditions in the wellfield. Restoration techniques would involve ground-water sweep, clean water injection, and geochemical stabilization of the aquifer with a reductant. The goal of groundwater restoration is to return the aquifer to the baseline conditions that existed prior to the start of uranium recovery; or, if approved, to a secondary standard of pre-mining “class of use.” Purpose and Need for the Proposed Action PRI currently conducts commercial-scale ISL uranium mining at the SR-HUP permit area. PRI is proposing to expand its mining operations and to conduct ISL mining in the Reynolds Ranch amendment area. This would enable PRI to continue to meet the current and future needs of its customers for U <sup>3</sup> O <sup>8</sup> that would be made eventually into fuel for commercially-operated nuclear power reactors. Alternatives to the Proposed Action No Action Alternative Under the “no action” alternative, PRI would continue to conduct ISL mining operations within the existing boundaries of the SR-HUP, but it would not be authorized to conduct such mining operations in the Reynolds Ranch area. Other Alternative In the southern Powder River Basin, where the SR-HUP facility is located, uranium ore has been mined via open pits and underground mining in the past. This activity occurred from 1970 to 1984 at the Exxon Highland facility, which is adjacent to the eastern edge of the SR-HUP permit area, and from the mid-1970s to 1986 at Union Pacific Resources—Bear Creek site, which is approximately 15 miles (24 km) northeast of the SR-HUP permit area. The environmental impacts associated with the recovery and processing of uranium ore obtained via open pit or underground mining are generally recognized as being considerably greater than those associated with in-situ leach mining. This is due predominantly to the need to access the uranium ore via open pits several hundred feet deep or via extensive underground mine workings, and to the conventional milling process, which generates a significant amount of waste relative to the amount of ore processed (roughly 95% of the ore is disposed as waste). Extensive mill tailings ponds are needed to dispose of these wastes. Therefore, although both open pit and underground mining of uranium has occurred near the Reynolds Ranch amendment area, these alternatives were not be considered further in this analysis. Environmental Impacts No-Action Alternative Under the no-action alternative, PRI would not be authorized to conduct ISL mining operations in the Reynolds Ranch area. PRI would continue to conduct such operations within the SR-HUP permit area. The Reynolds Ranch area would remain open to its current uses: Livestock grazing and wildlife use. Proposed Action The major potential environmental impacts associated with ISL uranium recovery are impacts to groundwater quality, air quality, and land use, radiological impacts, and impacts from waste disposal. ISL operations in the Reynolds Ranch area are not expected to impact local uses of surface or ground water. To the extent possible, PRI will use existing access roads in the area; however, it is expected that PRI will need to construct additional roads for its operations. Ephemeral drainages may be affected by this road construction, as well as by the construction of wells for production and monitoring. PRI would consider and implement erosion measures appropriate for the situation, potentially including crossing drainages at right angles; contouring and re-vegetation to stabilize soils; placement of hay bales; the use of diversion ditches, engineered culverts, and energy dissipaters to control runoff; and limiting travel within the drainage bottoms to necessary well construction and maintenance activities. With respect to ground water, while it is common to dramatically degrade the water quality within the mineralized zone during uranium recovery activities, this impact is localized and temporary ( *i.e.* , extending over the life of mining operations). Following mining, PRI is required to restore the affected groundwater to its pre-mining quality or if approved, to its pre-mining class-of-use. PRI submits the results of its restoration activities to the NRC and the State of Wyoming Department of Environmental Quality
(WDEQ)for final approval, prior to the termination of such activities. To date, the NRC staff has approved groundwater restoration activities at the SR-HUP site in 1987 for the R&D operations and in 2004 for the A-Wellfield during commercial operations. In addition, PRI's operations in the Reynolds Ranch area are not expected to affect local stock and domestic wells as these wells are completed in stratigraphic horizons above the zones planned for ISL mining. Pre-mining aquifer testing by PRI would ensure that confining layers are present to restrict the vertical movement of ISL leaching solutions and to restrict the influence of pumping in the deeper mining zones on water levels in the stratigraphically higher non-mining aquifers. The primary source of radiological impact to the environment from site operations is gaseous radon-222, which is released from the satellite facility and from the wellfields. The highest radon-222 concentration estimated was 1.1E-03 working level at a distance of 0.9 mi (1.5 km) ENE of the proposed satellite facility. This concentration is 4% of the 100 mrem/yr effluent concentration limit in 10 CFR part 20. The total annual effective dose was 27 mrem/yr at the unoccupied Mason House, and 4 mrem/yr at the Reynolds Ranch. Both of these dose values are well below the 10 CFR part 20 limit of 100 mrem/yr to members of the public. These concentrations and doses are from the mining operations anticipated during year 8 at the Reynolds Ranch area, which is when the highest doses would be expected, since in that year, PRI plans to have four of its anticipated eight wellfields in production and three other wellfields in restoration. Uranium recovered at Reynolds Ranch would be processed at the Smith Ranch central processing plant (CPP). For final yellowcake processing at the CPP, PRI employs a vacuum dryer that collects in a liquid condenser the dust and gas generated from drying. As a result, no particulates will be released to the environment. The main non-radiologic gaseous effluents that would be released from the operation of processing equipment in the CPP include gases such as CO <sup>2</sup> and hydrogen chloride. At the CPP, these gases are vented directly to the atmosphere where they are readily dispersed. With respect to land use, the primary impact would be the fencing off of approximately 325 acres (131 ha) of the 8704 acres (3521 ha) to exclude livestock until the completion of groundwater restoration and surface reclamation. These effects, however, would be limited, temporary, and reversible as the land would be returned to its former grazing use following post-recovery surface reclamation. Air quality would be impacted by the release of diesel emissions from drilling and construction equipment and from fugitive dust from construction activities and vehicle traffic. Diesel emissions would be minor and of short duration, and would be readily dispersed in the atmosphere. Fugitive dust generated from construction and drilling activity, as well as vehicle traffic on unpaved roads, would be localized and of short duration. Localized areas affected by the laying of pipelines and drilling of wells would be reclaimed, topsoiled, and re-seeded. PRI is required under license condition 9.6 of SUA-1548 to dispose of 11e.(2) byproduct materials generated by project operations at a licensed byproduct waste disposal site. Currently, PRI disposes of its radioactively-contaminated solid wastes at Pathfinder Mine Corp.'s Shirley Basin uranium mill site in eastern Wyoming. PRI will also send liquid wastes from its process down a planned deep disposal well permitted by WDEQ. Conclusion The NRC has reviewed the environmental impacts of the proposed action in accordance with the requirements of 10 CFR part 51. The NRC staff has determined that the addition of the Reynolds Ranch area to the SR-HUP operational area for the purpose of constructing and operating in-situ leach uranium mining units and supporting infrastructure, would not significantly affect the quality of the human environment. Therefore, an environmental impact statement
(EIS)is not warranted for the proposed action, and pursuant to 10 CFR Part 51.31, a FONSI is appropriate. Agencies and Persons Consulted The NRC staff consulted with other Federal and State agencies regarding the proposed action. These consultations were intended to afford these agencies the opportunity to comment on the proposed action, and to ensure that the requirements of Section 106 of the National Historic Preservation Act
(NHPA)and Section 7 of the Endangered Species Act
(ESA)were met with respect to the proposed action. By letter dated April 10, 2006, the NRC staff provided a draft copy of the EA to the Casper, WY field office of the U.S. Bureau of Land Management (USBLM) for its review and comment. By electronic mail on April 24, 2006 and July 5, 2006, the USBLM provided comments on the draft EA. In its comments, the USBLM focused on land use and hydrology issues. The NRC staff revised the EA to address the USBLM's comments. The NRC staff also consulted with the WDEQ and the Wyoming Department of Transportation (WDOT). By letter dated April 10, 2006, the NRC staff provided a draft copy of the EA to the WDEQ for its review and comment. By phone conversation on August 15, 2006, the WDEQ provided its comments, requesting clarification of the post-mining groundwater restoration standards and of the groundwater transfer restoration process and provided some editorial comments. The NRC staff revised the EA to address the WDEQ's comments. In response to November 2005 information requests from the NRC staff, the WDOT provided traffic counts and accident data and analyses for the stretch of county road that borders the western boundary of the Reynolds Ranch area. With respect to the requirements of Section 7 of the ESA, the NRC staff consulted with the U.S. Fish and Wildlife Service, Mountain-Prairie Region (USFWS/MPR). By letter dated September 28, 2005, the USFWS/MPR provided a list of endangered and threatened species, as well as comments on migratory birds and wetlands and associated riparian areas. Based on the NRC staff's review, there are no endangered or threatened species, either plant or animal, nor is there critical habitat, in the Reynolds Ranch area. There is not expected to be an effect on any endangered or threatened species or critical habitat from ISL mining operations in the Reynolds Ranch area. Pursuant to the requirements of Section 106 of the NHPA, the NRC staff consulted with the Wyoming State Historic Preservation Office (WSHPO). By letter dated August 11, 2005, the NRC staff requested information from the WSHPO regarding cultural and historic properties that may be affected the proposed addition of the Reynolds Ranch area to the SR-HUP operational area. By return letter dated August 24, 2005, the WSHPO provided its concurrence that no historic properties would be adversely affected by the proposed action. III. Finding of No Significant Impact On the basis of the EA, the NRC staff has concluded that there are no significant environmental impacts from the addition of the Reynolds Ranch area to the SR-HUP operational area for the purpose of conducting ISL uranium mining. Therefore, the NRC staff has determined not to prepare an EIS. IV. Further Information Documents related to this action, including the application for amendment and supporting documentation, will be available electronically at the NRC's Electronic Reading Room at: *http://www.NRC.gov/reading-rm/adams.html.* From this site, you can access the NRC's Agencywide Document Access and Management System (ADAMS), which provides text and image files of NRC's public documents. The ADAMS accession numbers for the documents related to this notice are: Document date Description ADAMS accession No. 1/14/2005 PRI's license amendment request ML050390076 4/7/2005 PRI's response to NRC staff request for additional information ML51150034 8/11/2005 WSHPO concurrence on NRC staff determination of no adverse affect ML052200552 4/10/2006 NRC staff's transmittal of pre-decisional draft EA to USBLM and WDEQ ML060600176 ML060600191 4/24/2006 7/5/2006 USBLM comments on draft EA ML062580462 ML062610249 ML062610250 9/30/2006 NRC staff final EA for addition of the Reynolds Ranch amendment area ML062690386 If you do not have access to ADAMS or if there are problems in accessing the documents located in ADAMS, contact the NRC's Public Document Room
(PDR)Reference staff at 1-800-397-4209, 301-415-4737, or by e-mail to *pdr@nrc.gov.* These documents may also be viewed electronically on the public computers located at the NRC's PDR, O-1F21, One White Flint North, 11555 Rockville Pike, Rockville, MD 20852. The PDR reproduction contractor will copy documents for a fee. Dated at Rockville, Maryland this 15th day of December 2006. For the Nuclear Regulatory Commission. Scott C. Flanders, Director, Division of Waste Management and Environmental Protection, Office of Federal and State Materials and Environmental Management Programs. [FR Doc. E6-22583 Filed 1-4-07; 8:45 am] BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 27644; 812-13212] Deutsche Bank Trust Company Americas; Notice of Application December 28, 2006. AGENCY: Securities and Exchange Commission (“Commission”). ACTION: Notice of application for an order pursuant to section 6(c) of the Investment Company Act of 1940 (the “Act”) granting an exemption to issuers of asset-backed securities from certain requirements of Rule 3a-7(a)(4)(i) under the Act to enable the Applicant to act as trustee to those issuers and the issuers to rely on Rule 3a-7. Summary of Application: Applicant requests an order that would permit an issuer of asset-backed securities that is not registered as an investment company under the Act in reliance on Rule 3a-7 under the Act (an “Issuer”) to appoint Applicant to act as a trustee to the Issuer when Applicant is affiliated with an underwriter for the Issuer's securities. Applicant: Deutsche Bank Trust Company Americas. Filing Dates: The application was filed on July 7, 2005, and amended on December 21, 2006. Hearing or Notification of Hearing: An order granting the requested relief 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 22, 2007, and should be accompanied by proof of service on Applicant, 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, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549. Applicant: 60 Wall Street, New York, New York 10005. FOR FURTHER INFORMATION CONTACT: Susan I. Gault-Brown, Senior Counsel, at
(202)551-6869, or David W. Grim, Branch Chief, at
(202)551-6867 (Division of Investment Management, Office of Chief Counsel). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, Room 1580, 100 F Street, NE., Washington, DC 20549 (tel. 202-551-5850). Applicant's Representations 1. Applicant is a subsidiary of Deutsche Bank AG. 1 Deutsche Bank AG is a global financial services organization that engages in consumer finance, worldwide corporate banking, investment banking, corporate trust services, and asset management. Applicant is frequently selected to act as trustee to Issuers. 1 Applicant also requests that the order apply to an Issuer's appointment, now or in the future, of any other entity controlling, controlled by, or under common control (as defined in section 2(a)(9) of the Act) with Applicant as a trustee for an Issuer. Applicant represents that any other entity relying on this relief now or in the future will comply with the terms and conditions of the application. 2. An asset-backed securities transaction typically involves the transfer of assets by a seller, usually by a “sponsor,” to a special purpose corporate or trust entity that is established for the sole purpose of acting as the Issuer and is structured to be bankruptcy remote and the subsequent issuance of asset-backed securities (“ABS”) to investors by the Issuer (an “ABS Transaction”). 3. The parties to an ABS transaction enter into several transaction agreements that provide for the holding of the assets by the Issuer and define the rights and responsibilities of the parties to the transaction (“Transaction Documents”). The operative Transaction Document governing the trustee is referred to herein as the “Agreement.” 4. The sponsor of an ABS Transaction assembles the pool of assets by purchasing or funding them, describes them in the offering materials, and sells interests in the assets to investors. The sponsor determines the structure, drafts the documents, and prices the ABS Transaction. The sponsor selects the other parties to the ABS Transaction, including the underwriter, the servicer, and the trustee. 5. The servicer, either directly or through subservicers, manages the assets held by the Issuer. The servicer pays the income from the assets held by the Issuer over to the trustee, and the trustee uses the income, as instructed by the servicer and provided by the Agreement, to pay interest and principal on the ABS, to fund reserve accounts and purchases of additional assets, and to make other payments including fees owed to the trustee and other parties to the ABS Transaction. 6. The sponsor of an ABS Transaction selects the trustee. In selecting a trustee, the sponsor seeks to obtain customary trust administrative and related services for the Issuer at minimal cost. In some instances, other parties to an ABS Transaction may provide recommendations to a sponsor about potential trustees. Ratings agencies may influence the selection of a trustee. An underwriter for an ABS Transaction also may provide advice to the sponsor about trustee selection based on the underwriter's knowledge of the pricing and expertise offered by a particular trustee in light of the contemplated transaction. 7. If an underwriter affiliated with the Applicant recommends a trustee to a sponsor, both the underwriter's recommendation and any selection of the Applicant by the sponsor will be based upon customary market considerations of pricing and expertise, and the selection will result from an arms-length negotiation between the sponsor and the Applicant. Applicant will not price its services as trustee in a manner designed to facilitate its affiliate being named underwriter. 8. The trustee's role in an ABS Transaction is specifically defined by the Agreement, and under the Agreement the trustee is not expected or required to perform discretionary functions. The responsibilities of the trustee as set forth in the Agreement are narrowly circumscribed and limited to those expressly accepted by the trustee. The trustee negotiates the provisions applicable to it directly with the sponsor and is then appointed by and enters into the Agreement with the Issuer. 9. The trustee usually becomes involved in an ABS Transaction after the substantive economic terms have been negotiated between the sponsor and the underwriters. The trustee does not monitor any service performed by, or obligation of, an underwriter, whether or not the underwriter is affiliated with the trustee. In the unlikely event that the Applicant, in acting as trustee to an Issuer for which an affiliate acts as underwriter, becomes obligated to enforce any of the affiliated underwriter's obligations to the Issuer, the Applicant will resign as trustee for the Issuer consistent with the requirements of Rule 3a-7(a)(4)(i). In such an event, the Applicant will incur the costs associated with the Issuer's procurement of a successor trustee. 10. The sponsor selects one or more underwriters to purchase the Issuer's securities and resell them or to privately place them with buyers obtained by the underwriter. The sponsor enters into an underwriting agreement with the underwriter that sets forth the responsibilities of the underwriter with respect to the distribution of the ABS and includes representations and warranties regarding, among other things, the underwriter and the quality of the Issuer's assets. The obligations of the underwriter under the underwriting agreement are enforceable against the underwriter only by the sponsor. 11. The underwriter may assist the sponsor in the organization of an Issuer by providing advice, based on its expertise in ABS Transactions, on the structuring and marketing of the ABS. This advice may relate to the risk tolerance of investors, the type of collateral, the predictability of the payment stream, the process by which payments are allocated and down-streamed to investors, the way that credit losses may affect the trust and the return to investors, whether the collateral represents a fixed set of specific assets or accounts, and the use of forms of credit enhancements to transform the risk-return profile of the underlying collateral. Any involvement of an underwriter in the organization of an Issuer that occurs is limited to helping determine the assets to be pooled, helping establish the terms of the ABS to be underwritten, and providing the sponsor with a warehouse line of credit with which to purchase the pool assets. 12. As noted above, an underwriter may provide advice to a sponsor regarding the sponsor's selection of a trustee for the Issuer; however, an underwriter's role in structuring a transaction would not extend to determining the obligations of a trustee, and the underwriter is not a party to the Agreement. 13. The underwriter is not a party to any of the Transaction Documents and, except for arrangements involving credit or credit enhancement for an Issuer or remarketing agent activities, typically has no role in the operation of the Issuer after its issuance of securities. The Applicant represents that although an underwriter typically may provide credit or credit enhancement for an Issuer or engage in remarketing agent activities, an underwriter affiliated with the Applicant will not so provide or so engage. Applicant's Legal Analysis 1. Applicant requests an order under Section 6(c) of the Act granting an exemption from certain requirements of Rule 3a-7 under the Act. 2. Section 6(c) of the Act gives the Commission the authority to exempt any person or transaction or any class of persons or transactions from any provision of the Act, or from any rule thereunder, if and to the extent such exemption is necessary or appropriate in the public interest; is consistent with the protection of investors; and the purposes fairly intended by the policy and provisions of the Act. 3. Rule 3a-7 provides Issuers that would otherwise fall within the definition of investment company under Section 3(a) of the Act with an exclusion from the definition of investment company. In adopting Rule 3a-7, the Commission stated that it intended to “remove an unnecessary barrier to the use and development of structured financings.” 2 2 Exclusion from the Definition of Investment Company for Structured Financings, Investment Company Act Release No. 19105, 52 SEC Docket 2573 (November 19, 1992) (the “Adopting Release”) at 2573. 4. Under Rule 3a-7, an Issuer that meets certain conditions is deemed not to be an investment company under Section 3(a) of the Act. One of Rule 3a-7's conditions, set forth in paragraph (a)(4)(i), requires, among other things, that the Issuer appoint a trustee that is not affiliated with the Issuer or with any person involved in the organization or operation of the Issuer (the “Independent Trustee Requirement”). Applicant states that the phrase “person involved in the organization or operation of the Issuer” includes an underwriter, and Rule 3a-7(a)(4)(i) therefore prohibits an Issuer from appointing a trustee that is affiliated with an underwriter. 5. Applicant requests exemptive relief from Rule 3a-7(a)(4)(i) to the extent necessary to permit an Issuer to appoint the Applicant as a trustee to the Issuer when the Applicant is affiliated with an underwriter involved in the organization of the Issuer. 6. Applicant submits that the requested exemptive relief from the Independent Trustee Requirement is necessary and appropriate in the public interest; is consistent with the protection of investors; and the purposes fairly intended by the policy and provisions of the Act for the following three reasons:
(1)Due to changes in the banking industry;
(2)due to the timing and nature of the roles of the trustee and the underwriter; and
(3)because the requested relief is consistent with the policies and purposes underlying the Independent Trustee Requirement and Rule 3a-7. Changes in the Banking Industry 7. Applicant states that consolidation within the financial industry that occurred throughout the 1990's as a result of bank mergers and sales and related acquisitions of trustee servicing businesses by banks has resulted in a significant decrease in recent years in the number of bank trustees providing services to Issuers. Applicant states that economic and other business factors have also contributed to the trend toward fewer banks offering corporate trust services. Applicant states that bank consolidation has been accompanied by the expansion of banks into investment banking. Applicant states that banks and bank affiliates are now significant participants in securities underwriting, particularly for ABS Transactions. 8. Applicant states that due to these banking industry changes, most trustees that provide services to Issuers, including the Applicant, have affiliations with underwriters to Issuers. Applicant states that, as a result, when, as is frequently the case, an affiliate of Applicant is selected to underwrite ABS in an ABS Transaction, Rule 3a-7(a)(4)(i)'s Independent Trustee Requirement generally prevents Applicant from serving as trustee for the Issuer. 9. Applicant states that the Independent Trustee Requirement therefore imposes an unnecessary regulatory limitation on trustee selection and causes market distortions by leading to the selection of trustees for reasons other than customary market considerations of pricing and expertise. Applicant states that this result is disadvantageous to the ABS market and to ABS investors and that exemptive relief therefore is necessary and appropriate in the public interest. Timing and Nature of the Roles of the Trustee and the Underwriter 10. Applicant submits that due to the nature and timing of the roles of the trustee and the underwriter, Applicant's affiliation with an underwriter would not result in a conflict of interest or possibility of overreaching that could harm investors. 11. Applicant states that the trustee's role begins with the Issuer's issuance of its securities, and the trustee performs its role over the life of the Issuer. Applicant states that, in contrast, the underwriter is chosen early in the ABS Transaction process, may help to structure the ABS Transaction, distributes the Issuer's securities to investors, and generally has no further role subsequent to the distribution of the Issuer's securities. Applicant submits that, consequently, given the nature and timing of their respective roles in an ABS Transaction, an ABS trustee does not monitor the distribution of securities or any other activity performed by underwriters and there is no opportunity for a trustee and an affiliated underwriter to act in concert to benefit themselves at the expense of holders of the ABS either prior to or after the closing of the ABS Transaction. 12. Applicant states that the trustee is neither expected nor required to exercise discretion or judgment. Applicant states that the trustee of the Issuer has virtually no discretion to pursue anyone in any regard other than preserving and realizing on the assets. Applicant states that trustees are not required to pursue securities law or fraud claims on behalf of debt holders and may often be foreclosed from such enforcement because debt holders may have different and conflicting rights. 13. For all of these reasons, Applicant submits that exemptive relief is therefore appropriate and consistent with the protection of investors. Consistent With Policies and Purposes Underlying the Independent Trustee Requirement and the Rule 14. Applicant submits that the concerns underlying the Independent Trustee Requirement are not implicated if the trustee for an Issuer is independent of the sponsor, servicer, and credit enhancer for the Issuer, but is affiliated with an underwriter for the Issuer, because, in that situation, no single entity would act in all capacities in the issuance of the ABS and the operation of an Issuer. Applicant states that Applicant would continue to act as an independent party safeguarding the assets of an Issuer regardless of an affiliation with an underwriter of the ABS. Applicant submits that, in addition, the concern that affiliation could lead to a trustee monitoring the activities of an affiliate also is not implicated by a trustee's affiliation with an underwriter, because, in practice, a trustee for an Issuer does not monitor the distribution of securities or any other activity performed by underwriters. 15. Applicant submits that exemptive relief permitting the participation of the Applicant and an affiliated underwriter in an ABS Transaction would be consistent with the broader purposes of Rule 3a-7, because in adopting Rule 3a-7, the Commission intended that, consistent with investor protection, the Rule not hamper the growth and development of the structured finance market. Applicant submits that the requested exemption would allow the selection of a trustee for an ABS Transaction based on the trustee's qualification, rather than technical regulatory restriction, and therefore would alleviate unnecessary market distortions that result from the current Independent Trustee Requirement. Applicant's Conditions Applicant agrees that any order granting the requested relief will be subject to the following conditions:
(1)Applicant will not be affiliated with any person involved in the organization or operation of the Issuer in an ABS Transaction other than the underwriter.
(2)Applicant's relationship to an affiliated underwriter will be disclosed in writing to all parties involved in an ABS Transaction, including the rating agencies and the ABS securities holders.
(3)An underwriter affiliated with Applicant will not be involved in the operation of an Issuer, and its involvement in the organization of an Issuer will extend only to determining the assets to be pooled, assisting in establishing the terms of the ABS to be underwritten, and providing the sponsor with a warehouse line of credit with which to purchase the pool assets.
(4)An affiliated person of Applicant, including an affiliated underwriter, will not provide credit or credit enhancement to an Issuer if Applicant serves as trustee to the Issuer.
(5)An underwriter affiliated with Applicant will not engage in any remarketing agent activities, including involvement in any auction process in which ABS interest rates, yields, or dividends are reset at designated intervals in any ABS Transaction for which Applicant serves as trustee to the Issuer.
(6)All of an affiliated underwriter's contractual obligations pursuant to the underwriting agreement will be enforceable by the sponsor.
(7)Consistent with the requirements of Rule 3a-7(a)(4)(i), Applicant will resign as trustee for the Issuer if Applicant becomes obligated to enforce any of an affiliated underwriter's obligations to the Issuer.
(8)Applicant will not price its services as trustee in a manner designed to facilitate its affiliate being named underwriter. By the Commission. Jill M. Peterson, Assistant Secretary. [FR Doc. E6-22609 Filed 1-4-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 27612; 813-356] Opal Private Equity Fund, L.P. et al.; Notice of Application December 27, 2006. AGENCY: Securities and Exchange Commission (“Commission”). ACTION: Notice of an application for an order under sections 6(b) and 6(e) of the Investment Company Act of 1940 (the “Act”) granting an exemption from all provisions of the Act, except section 9 and sections 36 through 53, and the rules and regulations under the Act. With respect to sections 17 and 30 of the Act, and the rules and regulations thereunder, and rule 38a-1 under the Act, the exemption is limited as set forth in the application. Summary of the Application: Applicants request an order to exempt certain investment funds formed for the benefit of eligible current and former employees of Schottenstein, Zox & Dunn Co., L.P.A., and its affiliates from certain provisions of the Act. Each fund will be an “employees’ securities company” as defined in section 2(a)(13) of the Act. Applicants: Opal Private Equity Fund, LP (the “Investment Fund”) and Schottenstein, Zox & Dunn Co., L.P.A. (together with any business organization that results from a reorganization of Schottenstein, Zox & Dunn Co., L.P.A., into a different type of business organization or into an entity organized under the laws of another jurisdiction, “SZD”). Filing Dates: The application was filed on December 30, 2004 and amended on December 22, 2006. 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 22, 2007 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, Securities and Exchange Commission, 100 F St., NE., Washington, DC 20549-9303. Applicants, 250 West St., Columbus, Ohio 43215-5020. FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Senior Counsel, at
(202)551-6813, or Mary Kay Frech, Branch Chief, at
(202)551-6821, (Division of Investment Management, Office of Investment Company Regulation). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, 100 F St., NE., Washington, DC 20549-0102 (tel. 202-551-5850). Applicants' Representations 1. SZD is a law firm incorporated under the laws of the State of Ohio as a legal professional association. SZD and its “affiliates,” as defined in rule 12b-2 under the Securities Exchange Act of 1934 (the “Exchange Act”), are referred to collectively as the “SZD Group” and individually as a “SZD entity.” The shareholders of SZD are referred to as “Principals.” 2. The Investment Fund is a Delaware limited partnership. The applicants may in the future offer additional pooled investment vehicles identical in all material respects to the Investment Fund (other than investment objectives and strategies) (the “Subsequent Funds”) (together, the Investment Fund and the Subsequent Funds are referred to as the “Funds”). The applicants anticipate that each Subsequent Fund will also be structured as a limited partnership, although a Subsequent Fund could be structured as a limited liability company, corporation, trust or other business organization formed as an “employees’ securities company” within the meaning of section 2(a)(13) of the Act. The Funds will operate as non-diversified, closed-end management investment companies. The Funds will be established to enable the Principals and certain attorney employees of SZD Group to participate in certain investment opportunities that come to the attention of SZD Group. Participation as investors in the Funds will allow the Eligible Investors, as defined below, to diversify their investments and to have the opportunity to participate in investments that might not otherwise be available to them or that might be beyond their individual means. 3. Opal Private Equity, Inc., a wholly-owned subsidiary of SZD, will serve as the general partner (the “General Partner”) of each Fund. The Funds will have one or more investment committees (“Investment Committees”), each member of which shall be a Principal. The General Partner or SZD shall appoint the members of each Investment Committee. The General Partner or any person involved in the operation of the Funds will register as an investment adviser if required under the Investment Advisers Act of 1940, or the rules under that Act. 4. Interests in the Funds (“Interests”) will be offered without registration in reliance on section 4(2) of the Securities Act of 1933 (the “Securities Act”), Regulation D under the Securities Act or rule 701 under the Securities Act, or any successor rule, and will be sold solely to Eligible Investors. Eligible Investors consist of “Eligible Employees,” “Qualified Investment Vehicles,” each as defined below, and SZD entities. The term “Fund Investors” refers to Eligible Investors who invest in the Funds. Prior to offering Interests in a Fund to an individual, the General Partner must reasonably believe that the individual is a sophisticated investor capable of understanding and evaluating the risks of participating in the Fund without the benefit of regulatory safeguards. An “Eligible Employee” is a person who is, at the time of investment, a current Principal of SZD or lawyer employed by SZD who
(a)meets the standards of an “accredited investor” set forth in rule 501(a)(5) or rule 501(a)(6) of Regulation D under the Securities Act,
(b)is one of 35 or fewer lawyers employed by SZD who meets certain requirements (“Category 2 investors”), or
(c)is a lawyer employed by SZD who purchases Interests pursuant to an offering under rule 701 under the Securities Act (“rule 701”) (“Category 3 investors”). 5. Each Category 2 investor will be a lawyer employed by SZD, who meets the sophistication requirements set forth in rule 506(b)(2)(ii) of Regulation D under the Securities Act 1 and who
(a)has a minimum of 3 years of business and/or professional experience, has had compensation of at least $150,000 in the preceding 12 month period, and has a reasonable expectation of compensation of at least $150,000 in each of the 2 immediately succeeding 12 month periods, or
(b)is a “knowledgeable employee,” as defined in rule 3c-5 under the Act, of the Fund (with the Fund treated as though it were a “Covered Company” for purposes of the rule). In addition, a Category 2 investor qualifying under
(a)above will not be permitted to invest in any calendar or fiscal year (as determined by SZD) more than 10% of his or her income from all sources for the immediately preceding calendar or fiscal year in one or more Funds. 1 Some or all Category 2 investors may purchase their Interests in an offering under rule 701 rather than under Regulation D. 6. Each Category 3 investor will be a lawyer employed by SZD who reasonably expects to have compensation of at least $120,000 in the next 12 months and who has a reasonable expectation of compensation of at least $150,000 in each of the 2 immediately succeeding 12 month periods. In addition, any Category 3 investor who is not a Principal will not be permitted to invest in any calendar or fiscal year (as determined by SZD) more than 10% (or 5%, if he or she has been employed as a lawyer for less than 3 years) of his or her reasonably expected income from all sources for that year in one or more Funds. Category 3 investors will purchase Interests pursuant to an offering under rule 701. Prior to receiving a subscription agreement from any potential Fund Investor pursuant to an offering in reliance on rule 701, SZD will make available at no charge to potential Fund Investors the services of an independent third party (“Financial Consultant”) qualified to provide advice concerning the appropriateness of investing in a Fund. 7. A Qualified Investment Vehicle is a trust or other entity the sole beneficiaries of which are Eligible Employees or their Immediate Family Members or the settlors and trustees of which consist of Eligible Employees or Eligible Employees together with Immediate Family Members. 2 Immediate Family Members include any parent, child, spouse of a child, spouse, brother or sister, and includes any step and adoptive relationships. A Qualified Investment Vehicle must be either
(a)an accredited investor as defined in rule 501(a) of Regulation D or
(b)an entity for which an Eligible Employee is a settlor and principal investment decision-maker. 3 2 A Qualified Investment Vehicle is not permitted to participate in a rule 701 offering. SZD or the General Partner may, however, in their discretion and in compliance with rule 701, permit an Eligible Employee who purchases Interests in the Fund in a rule 701 offering to transfer some or all of those Interests to a Qualified Investment Vehicle. 3 If a Qualified Investment Vehicle is an entity other than a trust, the reference to “settlor” shall be construed to mean a person who created the vehicle, alone or together with others, and who contributed funds or other assets to the vehicle. 8. Each Fund may issue its Interests in series (each, a “Series’ and collectively, the “Series”) with new Series of Interests being offered from time to time. Each Series may be further divided into two or more separate classes (each, a “Class”), having such terms and conditions as the General Partner may establish. Each Series will represent an interest in some or all of those Fund investments made by the Fund during a specified period of time (the “Investment Period”). Following the end of a Series' Investment Period, no new investments will be made for that Series, although following a Series' Investment Period additional money may be contributed to an existing investment. 9. In order to comply with the requirements of rule 701, at the beginning of each Investment Period, the Fund will accept capital contributions or irrevocable commitments for the relevant Series from those Eligible Investors investing pursuant to Regulation D (the “Regulation D Investors”), and then prepare a balance sheet as required by rule 701. The Fund may then receive and accept subscription agreements, and thereafter accept capital contributions or commitments for that Series from those Eligible Investors investing pursuant to rule 701 (the “Rule 701 Investors”). The capital contributions and commitments of the Rule 701 Investors, in the aggregate, will not exceed 15% of the total amount of capital contributions and irrevocable commitments received from the Regulation D Investors. Because the capital commitments of the Rule 701 Investors may be funded, in whole or in part, through periodic payroll deductions, the Rule 701 Investors may from time to time contribute money prior to the time the Fund is able to invest that money. It currently is anticipated that any such amounts will be placed in a separate bank or escrow account, pending the delivery of the money to the Fund for investment or other authorized purposes. No more than approximately 13% ( *i.e.* , 15% of the total amount of capital contributions and irrevocable commitments received from the Regulation D Investors) of all Fund investments and other authorized expenditures for each Series will at any time be paid for out of money contributed to the Fund by Rule 701 Investors. 10. The terms of a Fund will be fully disclosed in the private placement memorandum of the Fund, and each Eligible Investor will receive a private placement memorandum and the Fund's limited partnership agreement (or other organizational documents) prior to his or her investment in the Fund. Each Fund will send its Fund Investors annual reports, which will contain audited financial statements with respect to those Series in which the Fund Investor has Interests, as soon as practicable after the end of each fiscal year. In addition, as soon as practicable after the end of each fiscal year, the Funds will send a report to each Fund Investor setting forth such tax information as shall be necessary for the preparation by the Fund Investor of his or her federal and state tax returns. 11. Fund Investors will be permitted to transfer their Interests only by operation of law, to a receiver or trustee in bankruptcy for that Fund Investor, to the Fund Investor's estate in the event of his or her death, or with the express consent of the General Partner. The General Partner does not anticipate giving such consent. No person may become a transferee or substitute Fund Investor unless that person is a member of one of the classes of persons listed in section 2(a)(13) of the Act, except that a legal representative or executor may hold an Interest in order to settle the estate of a decedent or bankrupt or for similar purposes. No fee of any kind will be charged in connection with the sale of Interests. 12. A Fund Investor's Interests may be subject to repurchase or cancellation if:
(a)The Fund Investor ceases to be an Eligible Investor;
(b)the Fund Investor is no longer deemed to be able to bear the economic risk of investment in a Fund;
(c)adverse tax consequences were to inure to the Fund were a particular Fund Investor to remain; or
(d)the continued membership of the Fund Investor would violate applicable law or regulations. In addition, SZD reserves the right to impose vesting provisions on a Fund Investor's investments in a Fund. In an investment program that provides for vesting provisions, all or a portion of a Fund Investor's Interests will be treated as unvested, and vesting will occur through the passage of a specified period of time. To the extent a Fund Investor's Interests become “vested,” the termination of such Fund Investor's association or employment with SZD will not affect the Fund Investor's rights with respect to the vested Interests. If a Fund Investor's employment with SZD terminates because of
(a)death,
(b)total and permanent disability as defined by SZD's group insurance policy or
(c)retirement from the practice of law upon or after such Fund Investor attaining the age of fifty-five (each a “Qualifying Termination”), then such Fund Investor shall be fully vested in his or her Interests in the Fund. If a Fund Investor's employment with SZD terminates for reasons other than a Qualifying Termination, then such Fund Investor's Interests that are unvested shall be subject to repurchase or cancellation. Upon any repurchase or cancellation of all or a portion of a Fund Investor's Interests, a Fund will at a minimum pay to the Fund Investor the lesser of
(a)the amount actually paid by the Fund Investor to acquire the Interests less the amount of any distributions received by that Fund Investor from the Fund (plus interest at or above the prime rate, as determined by the General Partner) and
(b)the fair market value of the Interests determined at the time of repurchase or cancellation, as determined in good faith by the General Partner. Any interest owed to a Fund Investor pursuant to
(a)above will begin to accrue at the end of the Investment Period. 13. With respect to any Interests that have vested, the terminated Fund Investor will have the right to elect
(a)to continue as a Fund Investor, or
(b)to have the fair market value, as determined in good faith by the General Partner, of such terminated Fund Investor's Interests determined as of the date of termination. If the election described in
(b)of the preceding sentence is made, the value of the vested Interests of the terminated Fund Investor shall be deemed to have been repurchased by the relevant Series of the Fund and payment shall be made to the terminated Fund Investor in five consecutive annual payments, with interest at or above the prime rate, as determined by the General Partner, unless the General Partner determines to postpone payment until a liquidity event takes place allowing the Fund to make payment of the terminated Fund Investor. In no event will the terminated Fund Investor be paid later than the date that all Fund Investors in the Series receive their liquidating distribution. The General Partner may accelerate any payments due to a terminated Fund Investor. The General Partner has the right to amend the limited partnership agreement to allow for less restrictive vesting terms. 14. SZD may be reimbursed by a Fund for reasonable and necessary out-of-pocket costs directly associated with the organization and operation of the Funds. There will be no allocation of any of SZD's operating expenses to a Fund. In addition, SZD may allocate to a Series any out-of-pocket expenses specifically attributable to the organization and operation of that Series. No separate management fee will be charged to a Fund by the General Partner, and no compensation will be paid by a Fund or by Fund Investors to the General Partner for its services. 15. SZD may in its discretion advance funds to Eligible Investors for the purpose of making their capital contributions. SZD currently expects that no interest will be charged on such loans, but SZD reserves the right to charge interest on such loans in the future. The interest rate charged on such loans will not exceed the prime rate. 16. The Funds may borrow from SZD Group, Principals, or a bank or other financial institution, provided that a Fund will not borrow from any person if the borrowing would cause any person not named in section 2(a)(13) of the Act to own outstanding securities of the Fund (other than short-term paper). Any borrowings by a Fund will be non-recourse other than to SZD or an SZD entity. If SZD or an SZD entity or a Principal makes a loan to the Funds, the interest rate on the loan will be no less favorable to the Funds than the rate that could be obtained on an arm's length basis. 17. No Fund will acquire any security issued by a registered investment company if immediately after the acquisition the Fund would own more than 3% of the outstanding voting stock of the registered investment company. Applicants' Legal Analysis 1. Section 6(b) of the Act provides, in part, that the Commission will exempt employees' securities companies from the provisions of the Act to the extent that the exemption is consistent with the protection of investors. Section 6(b) provides that the Commission will consider, in determining the provisions of the Act from which the company should be exempt, the company's form of organization and capital structure, the persons owning and controlling its securities, the price of the company's securities and the amount of any sales load, how the company's funds are invested, and the relationship between the company and the issuers of the securities in which it invests. Section 2(a)(13) defines an employees' securities company as any investment company all of whose securities (other than short-term paper) are beneficially owned
(a)by current or former employees, or persons on retainer, of one or more affiliated employers,
(b)by immediate family members of such persons, or
(c)by such employer or employers together with any of the persons in
(a)or (b). 2. Section 7 of the Act generally prohibits investment companies that are not registered under section 8 of the Act from selling or redeeming their securities. Section 6(e) provides that, in connection with any order exempting an investment company from any provision of section 7, certain provisions of the Act, as specified by the Commission, will be applicable to the company and other persons dealing with the company as though the company were registered under the Act. Applicants request an order under sections 6(b) and 6(e) of the Act exempting the Funds from all provisions of the Act, except section 9 and sections 36 through 53, and the rules and regulations under the Act. With respect to sections 17 and 30 of the Act, and the rules and regulations thereunder, and rule 38a-1 under the Act, the exemption is limited as set forth in the application. 3. Section 17(a) generally prohibits any affiliated person of a registered investment company, or any affiliated person of an affiliated person, acting as principal, from knowingly selling or purchasing any security or other property to or from the company. Applicants request an exemption from section 17(a) to permit a Fund to:
(a)Purchase, from SZD or any affiliated person thereof, securities or interests in properties previously acquired for the account of SZD or any affiliated person thereof;
(b)sell, to SZD or any affiliated person thereof, securities or interests in properties previously acquired by the Funds; and
(c)purchase interests in any company or other investment vehicle
(i)in which SZD owns 5% or more of the voting securities, or
(ii)that otherwise is an affiliated person of the Fund (or an affiliated person of such a person) or an affiliated person of SZD. 4. Applicants state that an exemption from section 17(a) is consistent with the protection of investors and the purposes of the Act. Applicants state that the Fund Investors will be informed in the Fund's private placement memorandum of the possible extent of the Fund's dealings with SZD or any affiliated person thereof. Applicants also state that, as financially sophisticated professionals, Fund Investors will be able to evaluate the attendant risks. Applicants assert that the community of interest among the Fund Investors and SZD will provide the best protection against any risk of abuse. 5. Section 17(d) of the Act and rule 17d-1 under the Act prohibit any affiliated person or principal underwriter of a registered investment company, or any affiliated person of an affiliated person or principal underwriter, acting as principal, from participating in any joint arrangement with the company unless authorized by the Commission. Applicants request relief to permit affiliated persons of each Fund, or affiliated persons of any of these persons, to participate in any joint arrangement in which the Fund is a participant. Joint transactions in which a Fund may participate could include the following:
(a)an investment by one or more Funds in a security in which SZD or its affiliated person, or another Fund, is a participant, or with respect to which SZD or an affiliated person is entitled to receive fees (including, but not limited to, legal fees, placement fees, investment banking fees, brokerage commissions, or other economic benefits or interests); and
(b)an investment by one or more Funds in a security in which an affiliate is or may become a participant. 6. Applicants state that strict compliance with section 17(d) would cause the Funds to forego investment opportunities simply because a Fund Investor, SZD or other affiliates of the Fund also had made or contemplated making a similar investment. In addition, because investment opportunities of the types considered by the Funds often require that each participant make available funds in an amount that may be substantially greater than that available to the investor alone, there may be certain attractive opportunities of which a Fund may be unable to take advantage except as a co-participant with other persons, including affiliates. Applicants note that, in light of SZD's purpose of establishing the Funds so as to reward Eligible Investors and to attract highly qualified personnel to SZD, the possibility is minimal that an affiliated party investor will enter into a transaction with a Fund with the intent of disadvantaging the Fund. Finally, applicants contend that the possibility that a Fund may be disadvantaged by the participation of an affiliate in a transaction will be minimized by compliance with the lockstep procedures described in condition 4 below. Applicants assert that the flexibility to structure co-investments and joint investments will not involve abuses of the type section 17(d) and rule 17d-1 were designed to prevent. 7. Section 17(f) of the Act designates the entities that may act as investment company custodians, and rule 17f-2 allows an investment company to act as self-custodian, subject to certain requirements. Applicants request an exemption from section 17(f) and rule 17f-2 to permit the following exceptions from the requirements of rule 17f-2:
(a)A Fund's investments may be kept in the locked files of SZD or of a Principal;
(b)for purposes of paragraph
(d)of the rule,
(i)employees of SZD will be deemed employees of the Funds,
(ii)officers of the General Partner and the General Partner of a Fund will be deemed to be officers of the Fund, and
(iii)the General Partner of a Fund will be deemed to be the board of directors of the Fund; and
(c)in place of the verification procedure under paragraph
(f)of the rule, verification will be effected quarterly by two employees of SZD. Applicants assert that the securities held by the Funds are most suitably kept in SZD's files, where they can be referred to as necessary. 8. Section 17(g) and rule 17g-1 generally require the bonding of officers and employees of a registered investment company who have access to its securities or funds. Rule 17g-1 requires that a majority of directors who are not interested persons (“disinterested directors”) take certain actions and give certain approvals relating to fidelity bonding. Paragraph
(g)of rule 17g-1 sets forth certain materials relating to the fidelity bond that must be filed with the Commission and certain notices relating to the fidelity bond that must be given to each member of the investment company's board of directors. Paragraph
(h)of rule 17g-1 provides that an investment company must designate one of its officers to make the filings and give the notices required by paragraph (g). Paragraph
(j)of rule 17g-1 exempts a joint insured bond provided and maintained by an investment company and one or more other parties from section 17(d) of the Act and the rules thereunder. Rule 17g-1(j)(3) requires that the board of directors of an investment company satisfy the fund governance standards defined in rule 0-1(a)(7). Applicants request an exemption from section 17(g) and rule 17g-1 to the extent necessary to permit each Fund to comply with rule 17g-1 without the necessity of having a majority of the disinterested directors take such action and make such approvals as are set forth in the rule. Specifically, each Fund will comply with rule 17g-1 by having the General Partner take such actions and make such approvals as are set forth in rule 17g-1. Applicants state that, because the General Partner will be an interested person of the Fund, a Fund could not comply with rule 17g-1 without the requested relief. Applicants also request an exemption from the requirements of rule 17g-1(g) and
(h)relating to the filing of copies of fidelity bonds and related information with the Commission and the provision of notices to the board of directors and from the requirements of rule 17g-1(j)(3). Applicants believe the filing requirements are burdensome and unnecessary as applied to the Funds. The General Partner will maintain the materials otherwise required to be filed with the Commission by rule 17g-1(g) and agree that all such material will be subject to examination by the Commission and its staff. The General Partner will designate a person to maintain the records otherwise required to be filed with the Commission under paragraph
(g)of the rule. Applicants also state that the notices otherwise required to be given to the board of directors would be unnecessary as the Funds will not have boards of directors. The Funds will comply with all other requirements of rule 17g-1. 9. Section 17(j) and paragraph
(b)of rule 17j-1 make it unlawful for certain enumerated persons to engage in fraudulent or deceptive practices in connection with the purchase or sale of a security held or to be acquired by a registered investment company. Rule 17j-1 also requires that every registered investment company adopt a written code of ethics and that every access person of a registered investment company report personal securities transactions. Applicants request an exemption from the requirements of rule 17j-1, except for the anti-fraud provisions of paragraph (b), because they are unnecessarily burdensome as applied to the Funds. 10. Applicants request an exemption from the requirements in sections 30(a), 30(b) and 30(e), and the rules under those sections, that registered investment companies prepare and file with the Commission and mail to their shareholders certain periodic reports and financial statements. Applicants contend that the forms prescribed by the Commission for periodic reports have little relevance to the Funds and would entail administrative and legal costs that outweigh any benefit to the Fund Investors. Applicants request exemptive relief to the extent necessary to permit each Fund to report annually to its Fund Investors. Applicants also request an exemption from section 30(h) to the extent necessary to exempt the General Partner of each Fund and any other persons who may be deemed members of an advisory board of a Fund from filing Forms 3, 4 and 5 under section 16 of the Exchange Act with respect to their ownership of Interests in the Fund. Applicants assert that, because there will be no trading market and the transfers of Interests will be severely restricted, these filings are unnecessary for the protection of investors and burdensome to those required to make them. 11. Rule 38a-1 requires investment companies to adopt, implement and periodically review written policies and procedures reasonably designed to prevent violation of the federal securities laws and to appoint a chief compliance officer. The Funds will comply with rule 38a-1(a),
(c)and (d), except that
(a)since the Funds do not have boards of directors, the board of directors of the General Partner will fulfill the responsibilities assigned to a Fund's board of directors under the rule, and
(b)since the board of directors of the General Partner does not have any disinterested members, approval by a majority of the disinterested board members required by rule 38a-1 will not be obtained. Applicants' Conditions The applicants agree that any order granting the requested relief will be subject to the following conditions: Fund Operations 1. Each proposed transaction to which a Fund is a party otherwise prohibited by section 17(a) or section 17(d) and rule 17d-1 (each, a “Section 17 Transaction”) will be effected only if the General Partner determines that:
(a)The terms of the Section 17 Transaction, including the consideration to be paid or received, are fair and reasonable to the Fund Investors of the participating Fund and do not involve overreaching of the Fund or its Fund Investors on the part of any person concerned; and
(b)the Section 17 Transaction is consistent with the interests of the Fund Investors of the participating Fund, the Fund's organizational documents and the Fund's reports to its Fund Investors. In addition, the General Partner will record and preserve a description of such Section 17 Transactions, its findings, the information or materials upon which its findings are based and the basis therefor. All such records will be maintained for the life of a Fund and at least five years thereafter, and will be subject to examination by the Commission and its staff. All such records will be maintained in an easily accessible place for at least the first two years. 2. If purchases or sales are made by a Fund from or to an entity affiliated with the Fund by reason of a Principal or employee of the SZD Group
(a)serving as an officer, director, general partner or investment adviser of the entity, or
(b)having a 5% or more investment in the entity, such individual will not participate in the Fund's determination of whether or not to effect the purchase or sale. 3. The General Partner will adopt, and periodically review and update, procedures designed to ensure that reasonable inquiry is made, prior to the consummation of any Section 17 Transaction, with respect to the possible involvement in the transaction of any affiliated person or promoter of or principal underwriter for the Funds, or any affiliated person of such a person, promoter, or principal underwriter. 4. The General Partner will not make on behalf of a Fund any investment in which a Co-Investor, as defined below, has or proposes to acquire the same class of securities of the same issuer, where the investment involves a joint enterprise or other joint arrangement within the meaning of rule 17d-1 in which the Fund and the Co-Investor are participants, unless any such Co-Investor, prior to disposing of all or part of its investment,
(a)gives the General Partner sufficient, but not less than one day's, notice of its intent to dispose of its investment, and
(b)refrains from disposing of its investment unless the participating Fund holding such investment has the opportunity to dispose of its investment prior to or concurrently with, on the same terms as, and on a *pro rata* basis with the Co-Investor. The term “Co-Investor” with respect to any Fund means any person who is
(a)an “affiliated person” (as defined in section 2(a)(3) of the Act) of the Fund;
(b)the SZD Group;
(c)a Principal, lawyer, or employee of the SZD Group;
(d)an investment vehicle offered, sponsored, or managed by SZD or an affiliated person of SZD; or
(e)an entity in which an SZD entity acts as a general partner or has a similar capacity to control the sale or other disposition of the entity's securities. The restrictions contained in this condition, however, shall not be deemed to limit or prevent the disposition of an investment by a Co-Investor:
(a)To its direct or indirect wholly-owned subsidiary, to any company (a “parent”) of which the Co-Investor is a direct or indirect wholly-owned subsidiary, or to a direct or indirect wholly-owned subsidiary of its parent;
(b)to Immediate Family Members of the Co-Investor or a trust established for any such Immediate Family Member;
(c)when the investment is comprised of securities that are listed on a national securities exchange registered under section 6 of the Exchange Act; or
(d)when the investment is comprised of securities that are national market system securities pursuant to section 11A(a)(2) of the Exchange Act and rule 11Aa2-1 thereunder. 5. The General Partner of each Fund will send to each person who was a Fund Investor in such Fund at any time during the fiscal year then ended audited financial statements with respect to those Series in which the Fund Investor held Interests. At the end of each fiscal year, the General Partner will make a valuation or have a valuation made of all of the assets of the Fund as of the fiscal year end in a manner consistent with customary practice with respect to the valuation of assets of the kind held by the Fund. In addition, as soon as practicable after the end of each fiscal year of each Fund, the General Partner of the Fund shall send a report to each person who was a Fund Investor at any time during the fiscal year then ended, setting forth such tax information as shall be necessary for the preparation by the Fund Investor of his or her federal and state income tax returns and a report of the investment activities of such Fund during such year. 6. Each Fund and the General Partner will maintain and preserve, for the life of each Series of that Fund and at least five years thereafter, such accounts, books, and other documents as constitute the record forming the basis for the audited financial statements and annual reports of such Series to be provided to its Fund Investors, and agree that all such records will be subject to examination by the Commission and its staff. All such records will be maintained in an easily accessible place for at least the first two years. Compliance With Rule 701 7. Prior to receiving a subscription agreement from any potential Fund Investor pursuant to an offering in reliance on rule 701, SZD will make available at no charge to potential Fund Investors the services of a Financial Consultant qualified to provide advice concerning the appropriateness of investing in a Fund. Specifically, the Financial Consultant will hold one or more group meetings with potential Fund Investors at which the Financial Consultant will discuss the risks and other considerations relevant to determining whether to invest in a Fund. The Financial Consultant also will be available to the group of potential Fund Investors to answer general questions regarding an investment in the Fund. In addition, potential Fund Investors will be given the opportunity to submit relevant questions and issues to the Financial Consultant in advance of the group meetings, so that the Financial Consultant can address those questions and issues at the meetings. SZD will not need to reveal the specific investments made by any Fund to the Financial Consultant, as long as the investment objectives, risk characteristics and other material information about the Fund of the type that would be disclosed in the offering documents for the Fund is made available to the Financial Consultant. 8. SZD will at all times control each Fund, within the meaning of rule 405 under the Securities Act. In this regard, SZD will, either directly or through a wholly-owned subsidiary, be the General Partner of the Fund, own at least 95% of the voting Interests of the Fund, and make all investment and other operational decisions for the Fund. 9. SZD or a wholly-owned subsidiary will own not less than 5% of the economic Interests issued each year by the Fund, and (as discussed above) at least 95% of the voting Interests of the Fund. In addition, SZD and its Principals, directly or through Qualified Investment Vehicles, together will own at least 80% of the economic Interests of each Series. 10. SZD prepares its financial statements on a modified cash basis, and does not consolidate the Fund's financial statements with its own. If, however, SZD prepared its financial statements in accordance with GAAP, it would consolidate the Fund's financial statements with its own. 11. SZD, when offering Interests pursuant to rule 701 under the Securities Act, will issue Interests in each Series in compliance with rule 701(d)(2), 4 and will comply with all applicable requirements of rule 701(e). 5 4 If SZD relies on rule 701(d)(2)(ii), it will not sell pursuant to rule 701, during any consecutive 12-month period, Interests in the Fund if the sales price of those Interests exceeds 15% of the total assets of the Fund. 5 In order to comply with the requirements of rule 701, at the beginning of each Investment Period the Fund will accept capital contributions or irrevocable commitments from Regulation D Investors for the relevant Series, and then prepare a balance sheet as required by rule 701. The Fund may then receive and accept subscription agreements, and thereafter accept capital contributions or commitments, from Rule 701 Investors for that Series, which in the aggregate will not exceed 15% of the total amount of capital contributions and irrevocable commitments received from Regulation D Investors. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Jill M. Peterson, Assistant Secretary. [FR Doc. E6-22605 Filed 1-4-07; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [File No. 500-1] In the Matter of Cosmetic Center, Inc., Impax Laboratories, Inc., Phoenix Waste Services Company, Inc., and Telynx, Inc.; Order of Suspension of Trading December 29, 2006. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Cosmetic Center, Inc., because it has not filed any periodic reports since the period ended September 26, 1998. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Impax Laboratories, Inc., because it has not filed any periodic reports since the period ended September 30, 2004. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Phoenix Waste Services Company, Inc., because it has not filed any periodic reports since the period ended October 31, 2002. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Telynx, Inc., because it has not filed any periodic reports since the period ended October 31, 2004. The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed companies. *Therefore, it is ordered* , pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in securities of the above-listed companies is suspended for the period from 9:30 a.m. est on December 29, 2006, through 11:59 p.m. est on January 16, 2007. By the Commission. Nancy M. Morris, Secretary. [FR Doc. 06-9986 Filed 12-29-06; 11:32 am]
Connectionstraces to 2
3 references not yet in our index
  • 10 CFR 51
  • 40 CFR 1508.9
  • 10 CFR 20
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Notice of pending NRC action to submit an information collection request to OMB and solicitation of public comment
C.F.R.§ 51.21
C.F.R.§ 51.31
Cite10 CFR 51
Cite40 CFR 1508.9
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