[Federal Register Volume 76, Number 93 (Friday, May 13, 2011)]
[Notices]
[Pages 28118-28120]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-11750]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-29666; 812-13902]
UBS AG., et al.; Notice of Application and Temporary Order
May 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 of Application: Applicants have received a temporary order
exempting them from section 9(a) of the Act, with respect to an
injunction entered against UBS Financial Services Inc. (``UBSFS'') on
May 6, 2011 by the United States District Court for the District of New
Jersey (``Injunction'') until the Commission takes final action on an
application for a permanent order. Applicants also have applied for a
permanent order.
Applicants: UBSFS; UBS AG; UBS IB Co-Investment 2001 GP Limited (``ESC
GP''); UBS Alternative and Quantitative Investment LLC (``UBS
Alternative''); UBS Willow Management, L.L.C. (``UBS Willow''), UBS
Eucalyptus Management, L.L.C. (``UBS Eucalyptus'') and UBS Juniper
Management, L.L.C. (``UBS Juniper'') (UBS Willow, UBS Eucalyptus, and
UBS Juniper are referred to collectively as ``UBS Alternative
Managers''); UBS Global Asset Management (Americas) Inc. (``UBS Global
AM Americas''); and UBS Global Asset Management (US) Inc. (``UBS Global
AM US'') (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 other company of which USBFS is or may
become an affiliated person (together with the applicants, the
``Covered Persons'').
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DATES: Filing Dates: The application was filed on May 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 June 3, 2011, 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: UBSFS, 1200 Harbor
Boulevard, Weehawken, NJ 07086; UBS AG and ESC-GP, c/o UBS Investment
Bank, 677 Washington Boulevard, Stamford, CT 06901; UBS Alternative,
677 Washington Boulevard, Stamford, CT 06901; UBS Willow, UBS
Eucalyptus, and UBS Juniper, 299 Park Avenue, 29th Floor, New York, NY
10171; UBS Global AM Americas, One North Wacker Drive, Chicago, IL
60606 and UBS Global AM US, 1285 Avenue of the Americas, 12th Floor,
New York, NY 10019.
FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at
202-551-6811 or Daniele Marchesani, Branch Chief, at 202-551-6821
(Division of Investment Management,
[[Page 28119]]
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. UBS AG, a company organized under the laws of Switzerland, is a
Swiss-based global financial services firm. UBS AG and its subsidiaries
provide global wealth management, securities and retail and commercial
banking services. Each of the Applicants is either directly or
indirectly controlled by UBS AG. UBSFS is a corporation organized under
the laws of Delaware and provides a wide range of wealth management
services, including financial planning and wealth management
consulting, asset-based and advisory services and transaction-based
services, to clients in the United States and throughout the world.
UBSFS, UBS Alternative, UBS Alternative Managers,\2\ and UBS Global AM
Americas are investment advisers registered under the Investment
Advisers Act of 1940, and all but UBSFS currently serve as investment
advisers to registered management investment companies (``Funds'').
UBSFS and UBS Global AM US are registered as broker-dealers under the
Securities and Exchange Act of 1934 (``Exchange Act''). UBS Global AM
US serves as principal underwriter to various open-end Funds. UBS AG
and ESC GP provide investment advisory services to employees'
securities companies (``ESCs''), as defined in section 2(a)(13) of the
Act, which provide investment opportunities for highly compensated key
employees, officers, directors and current consultants of UBS AG and
its affiliates.
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\2\ UBS Alternative is managing member of UBS Alternative
Managers.
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2. On May 6, 2011, the United States District Court for the
District of New Jersey entered a judgment, which included the
Injunction, against UBSFS (``Judgment'') in a matter brought by the
Commission.\3\ The Commission alleged in the complaint (``Complaint'')
that UBSFS violated section 15(c) of the Exchange Act on account of the
conduct of certain former employees of UBSFS with respect to the
temporary investment of proceeds of tax-exempt municipal securities in
reinvestment products such as guaranteed investment contracts,
repurchase agreements, and forward purchase agreements. Beginning in
2000 and continuing through 2004, the former employees are alleged to
have participated in conduct in connection with the competitive bidding
for these products that involved the steering of business to UBSFS and
the submission of purposefully non-winning bids in UBSFS's capacity as
a reinvestment provider, and the steering of business to other firms in
the UBSFS's capacity as a bidding agent. Without admitting or denying
any of the allegations in the Complaint, UBSFS consented to the entry
of the Injunction and other equitable relief, including certain
undertakings.
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\3\ Securities and Exchange Commission v. UBS Financial Services
Inc., Case No. 11-cv-2539-WJM (D. N.J. May 6, 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 a security, or in
connection with activities as an underwriter, broker or dealer, from
acting, among other things, as an investment adviser or depositor of
any registered investment company or a principal underwriter for any
registered open-end investment company, registered unit investment
trust, or registered face-amount certificate company. Section 9(a)(3)
of the Act makes the prohibition in section 9(a)(2) applicable to a
company, any affiliated person of which has been disqualified under the
provisions of section 9(a)(2). Section 2(a)(3) of the Act defines
``affiliated person'' to include, among others, any person directly or
indirectly controlling, controlled by, or under common control, with
the other person. Applicants state that UBSFS is an affiliated person
of each of the other Applicants within the meaning of section 2(a)(3).
Applicants state that, as a result of the Injunction, they would be
subject to the prohibitions of section 9(a).
2. Section 9(c) of the Act provides that the Commission shall grant
an application for exemption from the disqualification provisions of
section 9(a) of the Act if it is established that these provisions, as
applied to Applicants, are unduly or disproportionately severe or that
the conduct of the Applicants has been such as not to make it against
the public interest or the protection of investors to grant the
exemption. Applicants have filed an application pursuant to section
9(c) seeking a temporary and permanent order exempting the Applicants
and the other Covered Persons from the disqualification provisions of
section 9(a).
3. Applicants believe that they meet the standards for exemption
specified in section 9(c). Applicants state that the prohibitions of
section 9(a) as applied to them would be unduly and disproportionately
severe and that the conduct of Applicants has been such as not to make
it against the public interest or the protection of investors to grant
the requested exemption from section 9(a).
4. Applicants state that the alleged conduct giving rise to the
Injunction did not involve any of the Applicants acting as an
investment adviser or depositor of any registered investment company or
ESC, or principal underwriter for any open-end Fund, registered unit
investment trust or registered face-amount certificate company (``Fund
Service Activities''). Applicants note that (i) none of the current or
former directors, officers, or employees of the Applicants (other than
UBSFS) had any knowledge of, or had any involvement in, the conduct
alleged in the Complaint; and (ii) the personnel at UBSFS who were
involved in the violations alleged in the Complaint are no longer
employed by UBSFS. Applicants further note that the business unit in
which the former employees were employed was closed by UBSFS in June
2008. Applicants state that the personnel at UBSFS who were involved in
the violations alleged in the Complaint have had no and will not have
any future involvement in the Covered Persons' activities in any
capacity described in section 9(a) of the Act.
5. Applicants state that the inability of the Applicants to engage
in Fund Service Activities would result in potentially severe financial
hardships for the registered investment companies they serve and the
registered investment companies' shareholders or unitholders.
Applicants state that they will distribute written materials, including
an offer to meet in person to discuss the materials, to the boards of
directors of the Funds (the ``Boards''), including the directors who
are not ``interested persons,'' as defined in section 2(a)(19) of the
Act, of such Funds, and their independent legal counsel as defined in
rule 0-1(a)(6) under the Act, if any, regarding the Injunction, any
impact on the Funds, and the application. Applicants state that they
will provide the Boards with all information concerning the Injunction
and the application that is necessary for the Funds to fulfill their
disclosure and other obligations under the federal securities laws.
[[Page 28120]]
6. Applicants also state that, if they were barred from providing
Fund Service Activities to registered investment companies and ESCs,
the effect on their businesses and employees would be severe.
Applicants state that they have committed substantial resources to
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 approximately 550 employees that are involved in
those activities. Applicants also state that disqualifying UBS AG and
ESC GP from continuing to provide investment advisory services to ESCs
is not in the public interest or in furtherance of the protection of
investors. Because the ESCs have been formed for the benefit of key
employees, officers, directors and current consultants of UBS AG and
its affiliates, it would not be consistent with the purposes of the ESC
provisions of the Act to require another entity not affiliated with UBS
AG to manage the ESCs. In addition, participants in the ESCs have
subscribed for interests in the ESCs with the expectation that the ESCs
would be managed by an affiliate of UBS AG.
7. Applicants state that Applicants and certain other affiliated
persons of UBSFS 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 May
6, 2011, until the Commission takes final action on their application
for a permanent order.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11750 Filed 5-12-11; 8:45 am]
BILLING CODE 8011-01-P