[Federal Register Volume 77, Number 144 (Thursday, July 26, 2012)]
[Notices]
[Pages 43873-43878]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-18241]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30143; 813-248]
P.E. Partners III, LLC, et al.; Notice of Application
July 20, 2012.
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 sections 9, 17, 30 and
36 through 53, and the rules and regulations under the Act (the ``Rules
and Regulations''). With respect to sections 17(a), (d), (f), (g), and
(j) of the Act, sections 30(a), (b), (e), and (h) of the Act and the
Rules and Regulations and rule 38a-1 under the Act, applicants request
a limited exemption as set forth in the application.
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Summary of the Application: Applicants request an order to exempt
certain limited liability companies formed for the benefit of eligible
employees of Latham & Watkins LLP and its affiliates from certain
provisions of the Act. Each limited liability company will be an
``employees' securities company'' within the meaning of section
2(a)(13) of the Act.
Applicants: P.E. Partners III, LLC, VP Fund Investments 2004, LLC, VP
Fund Investments 2006, LLC, VP Fund Investments 2008, LLC
(collectively, the ``Existing Funds''), and Latham & Watkins LLP
(``L&W'').
Filing Dates: The application was filed on March 24, 2000 and amended
on December 29, 2000, January 30, 2004, October 19, 2004, February 19,
2009, January 31, 2012 and July 11, 2012.
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 August 15, 2012 and should be accompanied by proof of service
on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090. Applicants, 355 South Grand
Avenue, Los Angeles, CA 90071.
FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Special 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
[[Page 43874]]
may be obtained via the Commission's Web site by searching for the file
number, or for an applicant using the Company name box, at http://www.sec.gov/search/seach.htm or by calling (202) 551-8090.
Applicants' Representations
1. L&W, a Delaware limited liability partnership, together with its
affiliated law partnerships, is an international law firm. Entities
controlling, controlled by, or under common control with L&W, including
any related law partnerships affiliated with L&W, are the ``L&W
Entities.''
2. The Existing Funds are Delaware limited liability companies
formed pursuant to limited liability company agreements. The applicants
may in the future offer additional pooled investment vehicles
substantially similar in all material respects (other than form of
organization, investment objective and strategy, and other differences
described in the application) to the same class of investors as those
investing in the Existing Funds (the ``Subsequent Funds'' and, together
with the Existing Funds, the ``Investment Funds''). The applicants
anticipate that each Subsequent Fund also will be structured as a
limited liability company, although a Subsequent Fund could be
structured as a domestic or offshore general partnership, limited
partnership or corporation. The operating agreements of the Investment
Funds are the ``Investment Fund Agreements.'' An Investment Fund may
include a single vehicle designed to issue interests in series. Each
Investment Fund will be an employees' securities company within the
meaning of section 2(a)(13) of the Act.
3. Each Existing Fund has been established to enable Eligible
Investors to participate in certain investment opportunities that come
to the attention of L&W, the L&W Entities or the Managing Members of
the Existing Fund. These opportunities may include investments in
operating businesses, separate accounts with registered or unregistered
investment advisers, investments in pooled investment vehicles such as
registered investment companies, investment companies exempt from
registration under the Act, commodity pools, and other securities
investments (each particular investment being referred to herein as an
``Investment''). Applicants submit that a substantial community of
interest exists among L&W, the L&W Entities and the Members of each
existing Investment Fund, given the purposes and operations of the
Investment Funds and the nature of the Eligible Investors participating
in the Investment Funds. L&W will ``control'' each Investment Fund
within the meaning of section 2(a)(9) of the Act.
4. Interests in an Investment Fund (``Interests'') will be offered
and sold in reliance upon the exemption from registration under section
4(2) of the Securities Act of 1933 (the ``Securities Act'') or pursuant
to Regulation D under the Securities Act. Interests in any Investment
Fund (other than short-term paper) will be offered only to L&W, L&W
Entities, or Eligible Investors. Eligible Investors include persons who
meet the following criteria: (a) Current or former partners of, or
lawyers employed by, or key administrative employees of, L&W or an L&W
Entity (``Eligible Employees''), the immediate family members of
Eligible Employees, which are parents, children, spouses of children,
spouses, and siblings, including step or adoptive relationships
(``Immediate Family Members''), and trusts or other entities or
arrangements the sole beneficiaries of which consist of Eligible
Employees or their Immediate Family Members, or the settlors and the
trustees of which consist of Eligible Employees or Eligible Employees
together with Immediate Family Members (``Eligible Trusts''); and (b)
who are ``accredited investors'' as that term is defined in Regulation
D under the Securities Act, or, in the case of Eligible Trusts, a
trust, entity or arrangement for which an Eligible Employee is a
settlor and principal investment decision-maker.\1\ L&W or any L&W
Entity that acquires Interests in an Investment Fund will be an
accredited investor. Prior to offering Interests to an Eligible
Employee or Immediate Family Member, the Managing Members (as defined
below) must reasonably believe that the Eligible Employee or Immediate
Family Member is a sophisticated investor capable of understanding and
evaluating the risks of participating in the Investment Fund without
the benefit of regulatory safeguards. The beneficial owners of an
Eligible Trust will be persons eligible to hold interests in employees'
securities companies as defined in section 2(a)(13) of the Act.
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\1\ If an Eligible Trust is an entity or arrangement other than
a trust, (a) the reference to ``settlor'' shall be construed to mean
a person who created the vehicle or arrangement, alone or together
with others, and also contributed funds or other assets to the
vehicle, and (b) the reference to ``trustee'' shall be construed to
mean a person who performs functions similar to those of a trustee.
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5. An Investment Fund will be managed by its Managing Members. The
Managing Members of an Investment Fund will consist of two or more
current or former partners of L&W or an L&W Entity, each of whom is a
member (``Member'') of the Investment Fund and serves as a managing
member or member of the management committee of the Investment Fund
(the ``Managing Members''). The Managing Members will register as
investment advisers under the Investment Advisers Act of 1940 (the
``Advisers Act'') if such registration is required under the Advisers
Act and the rules under the Advisers Act.
6. Each Investment Fund will have an administrator (the
``Administrator''). The Administrator may be an employee of L&W or an
L&W Entity, or the Managing Members may determine to engage a third
party to act as Administrator for the Investment Fund. The
Administrator will not recommend Investments or exercise investment
discretion. The only functions of the Administrator will be
ministerial.
7. The specific investment objectives and strategies for an
Investment Fund will be set forth in an informative memorandum relating
to the Interests being offered, and in the relevant Investment Fund
Agreement, and each Eligible Investor will receive a copy of the
informative memorandum and Investment Fund Agreement before making an
investment in the Investment Fund. The terms of an Investment Fund will
be disclosed to each Eligible Investor at the time the investor is
invited to participate in the Investment Fund.
8. The value of the Members' capital accounts will be determined at
such times as the Managing Members deem appropriate or necessary;
however, such valuation will be done at least annually at the
Investment Fund's fiscal year-end. The Managing Members will value the
assets held in a Member's capital account at the current market price
(closing price) in the case of marketable securities. All other
securities or assets will be valued at fair value.
9. Each Investment Fund will generally bear its own expenses. L&W
or any L&W Entity, as applicable, may be reimbursed by an Investment
Fund for reasonable and necessary out-of-pocket costs directly
associated with the organization and operation of the Investment Fund,
including administrative and overhead expenses. An Investment Fund may
pay L&W or an L&W Entity, as applicable, for the time spent by Managing
Members in discharging their duties, as managers of the Investment
Fund, at rates not more than the rates charged to clients of L&W or any
L&W Entity for services of such partners, and L&W or such L&W Entity
will be reimbursed for a portion of the
[[Page 43875]]
salary and fringe benefits paid by L&W or such L&W Entity to the
Administrator. No separate management fee will be charged to an
Investment Fund by the Managing Members or the Administrator, and no
compensation will be paid by an Investment Fund or its Members to the
Managing Members or the Administrator for their services in such
capacity, except to the extent provided above. Also, no fee of any kind
will be charged in connection with the sale of Interests in an
Investment Fund.
10. Within 120 days after the end of its fiscal year, or as soon as
practicable thereafter, each Investment Fund will send its Members an
annual report regarding its operations. The annual report of the
Investment Fund will contain financial statements audited by an
independent accounting firm. For purposes of this requirement,
``audit'' has the meaning defined in rule 1-02(d) of Regulation S-X.
The Investment Fund will maintain a file containing any financial
statements and other information received from the issuers of the
Investments held by the Investment Fund, and will make such file
available for inspection by its Members in accordance with its
Investment Fund Agreement. Each Investment Fund, within 90 days or as
soon as practicable after the end of each tax year of the Investment
Fund, will transmit a report to each Member setting out information
with respect to that Member's distributive share of income, gains,
losses, credits and other items for federal income tax purposes,
resulting from the operation of the Investment Fund during that year.
11. Members will not be entitled to redeem their Interests in an
Investment Fund. A Member will be permitted to transfer his or her
Interest only with the express consent of the Managing Members, which
may be withheld in the discretion of the Managing Members, and then
only to L&W, an L&W Entity or an Eligible Investor. A Member will not
be subject to removal except for good cause as determined by the
Managing Members, or if the Managing Members, in their discretion, deem
such withdrawal to be in the best interest of the Investment Fund. The
Interests of a Member who is no longer eligible to own interests in an
employees' securities company as defined in section 2(a)(13) of the Act
will be repurchased, subject to the minimum payment provisions
described below. The Managing Members do not currently intend to
require any Member to withdraw.\2\ Upon repurchase or cancellation of a
Member's Interest, the Managing Members will at a minimum pay to the
Member the lesser of: (a) The amount actually paid by the Member to
acquire the Interest plus interest less prior distributions; and (b)
the fair market value of the Interest as determined at the time of
repurchase or cancellation by the Managing Members. If a Member ceases
to be a partner or employee of L&W or any L&W Entity, such Member will
continue to be a Member of the Investment Fund, although with the
consent of the Managing Members such Member may be permitted to assign
the unfunded portion of his or her Capital Commitment (as defined
below) to other Eligible Investors and/or be paid for his Interest as
described above. The terms of any repurchase or cancellation will apply
equally to any Immediate Family Member of, or Eligible Trust related
to, an Eligible Employee.
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\2\ The following circumstances, among others, could warrant the
withdrawal of a Member: if a Member ceases to be an Eligible
Investor or is no longer deemed to be able to bear the economic risk
of investment in the Investment Fund, adverse tax consequences were
to inure to the Investment Fund were a particular Member to remain,
or a situation in which the continued membership of the Member would
violate applicable law or regulations. In addition, a Member may
have its Interest redeemed due to its failure to make a capital
contribution or other required payments.
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12. Each Member will commit to contribute a fixed amount of capital
as part of the capital of an Investment Fund (``Capital Commitment'').
To provide flexibility in connection with an Investment Fund's
obligation to contribute capital to fund an Investment, and the
associated obligation of the Members to make capital contributions with
respect to their Capital Commitments, an Investment Fund Agreement may
provide that the Investment Fund may engage in borrowings in connection
with such funding of Investments. All borrowings by an Investment Fund
with respect to the funding of Investments will be non-recourse to the
Members, but may be secured by a pledge of the Members' respective
capital accounts and unfunded Capital Commitments. The Investment Funds
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 any outstanding
securities of the Investment Fund (other than short-term paper). If L&W
or an L&W Entity makes a loan to an Investment Fund, it (as lender)
will be entitled to receive interest, provided that the rate will be no
less favorable to the Investment Fund than the rate that could be
obtained on an arm's length basis. An Investment Fund will not lend any
funds to L&W or an L&W Entity. If L&W or an L&W Entity extends a loan
to an Eligible Investor in respect of any Investment Fund, the loan
will be made at an interest rate no less favorable than that which
could be obtained on an arm's length basis. Loans will not be extended
or arranged if otherwise prohibited by law, including the Sarbanes-
Oxley Act of 2002.
13. An Investment Fund will not acquire any security issued by a
registered investment company if immediately after the acquisition, the
Investment Fund would own more than 3% of the total 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, the disposition
of the proceeds of any sales of the company's securities, 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) of the Act 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 applicants from all provisions of the Act, except
sections 9, 17, 30, 36 through 53, and the Rules and Regulations. With
respect to sections 17(a), (d), (f), (g) and (j) and 30(a), (b), (e)
and (h) of the Act and the Rules and
[[Page 43876]]
Regulations, and rule 38a-1 under the Act, applicants request a limited
exemption as set forth in the application.
3. Section 17(a) of the Act 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 an
Investment Fund: to invest in or participate as a selling security-
holder in a principal transaction with one or more affiliated persons
(as defined in section 2(a)(3) of the Act) of an Investment Fund
(``First-Tier Affiliates'') and affiliated persons of such First-Tier
Affiliates (``Second-Tier Affiliates,'' and together with First-Tier
Affiliates, ``Affiliates'').
4. Applicants submit that the exemptions sought from section 17(a)
are consistent with the purposes of the Act and the protection of
investors. Applicants state that the Members will be informed in an
Investment Fund's offering materials of the possible extent of the
dealings by such Investment Fund and any portfolio company with L&W,
any L&W Entity or any affiliated person thereof. Applicants also state
that, as experienced professionals acting on behalf of financial
services businesses, the Members will be able to evaluate the risks
associated with such dealings. Applicants assert that the community of
interest among the Managing Members, the Members, L&W and the L&W
Entities will serve to reduce the risk of abuse in transactions
involving an Investment Fund and L&W, any L&W Entity or any affiliated
person thereof.
5. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
any affiliated person of a registered investment company, or any
affiliated person of such person, acting as principal, from
participating in any joint arrangement with the registered investment
company unless authorized by the Commission. Applicants request an
exemption from section 17(d) and rule 17d-1 to the extent necessary to
permit an Investment Fund to engage in transactions in which an
Affiliate participates as a joint or a joint and several participant
with such Investment Fund.
6. Joint transactions in which an Investment Fund could participate
might include the following: (a) A joint investment by one or more
Investment Funds in a security in which L&W or an L&W Entity, or
another Investment Fund, is a joint participant or plans to become a
participant; (b) a joint investment by one or more Investment Funds in
another Investment Fund; and (c) a joint investment by one or more
Investment Funds in a security in which an Affiliate is an investor or
plans to become an investor, including situations in which an Affiliate
has a partnership or other interest in, or compensation arrangements
with, such issuer, sponsor or offeror.
7. Applicants assert that compliance with section 17(d) and rule
17d-1 would cause an Investment Fund to forego investment opportunities
simply because a Member, L&W, an L&W Entity or other affiliated persons
of the Investment Fund, L&W or the L&W Entities also had or
contemplated making a similar investment. In addition, because
attractive investment opportunities of the types considered by an
Investment Fund 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 an Investment Fund may be unable to take
advantage except as a co-participant with other persons, including
Affiliates. Applicants believe that the flexibility to structure co-
and joint investments in the manner described above will not involve
abuses of the type section 17(d) and rule 17d-1 were designed to
prevent. Applicants acknowledge that any transactions subject to
section 17(d) and rule 17d-1 for which exemptive relief has not been
requested in the application would require specific approval by the
Commission.
8. Section 17(f) of the Act designates the entities that may act as
investment company custodians, and rule 17f-2 under the Act allows an
investment company to act as self-custodian. Applicants request an
exemption to permit the following exceptions from the requirements of
rule 17f-2: (i) Compliance with paragraph (b) of the rule may be
achieved through safekeeping in the locked files of L&W or an L&W
Entity; (ii) for the purposes of the rule, (A) employees of L&W or an
L&W Entity will be deemed employees of the Investment Funds, (B) the
Administrator and the Managing Members of an Investment Fund will be
deemed to be the officers of the Investment Funds (except that an
Administrator that is an unaffiliated third party will not be
considered an officer of the Investment Funds), and (C) the Managing
Members of an Investment Fund will be deemed to be the board of
directors of the Investment Fund; and (iii) instead of the verification
procedure under paragraph (f) of the rule, verification will be
effected quarterly by two persons who are either Managing Members or
employees of L&W or an L&W Entity, each of whom shall have sufficient
knowledge, sophistication and experience in business matters to perform
such examination. Applicants expect that many of the Investment Funds'
Investments will be evidenced only by partnership agreements or similar
documents. Such instruments are most suitably kept in the files of the
Investment Funds, where they can be referred to as necessary.
Applicants will comply with all other provisions of rule 17f-2.
9. 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 of a registered investment
company (``disinterested directors'') take certain actions and give
certain approvals relating to fidelity bonding. Applicants request an
exemption from the requirement, contained in rule 17g-1, that a
majority of the ``directors'' of the Investment Funds who are not
``interested persons'' of the respective Investment Funds (as defined
in the Act) take certain actions and make certain approvals concerning
bonding and request instead that such actions and approvals be taken by
the Managing Members, regardless of whether any of them is deemed to be
an interested person of the Investment Funds. Each Managing Member will
be an interested person of the Investment Funds.
10. The Investment Funds 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 relating to the
provisions of notices to the board of directors. Applicants also
request an exemption from the requirements of rule 17g-1(j)(3) that the
Investment Funds have a majority of disinterested directors, that those
disinterested directors select and nominate any other disinterested
directors, and that any legal counsel for those disinterested directors
be independent legal counsel. Applicants believe that the filing
requirements of rule 17g-1 are burdensome and unnecessary as applied to
the Investment Funds. The Managing Members will maintain the materials
otherwise required to be filed with the Commission by rule 17g-1(g) and
the applicants agree that all such material will be subject to
examination by the Commission and its staff. The Managing Members will
designate a person to maintain the records otherwise required to be
filed with the Commission under
[[Page 43877]]
paragraph (g) of the rule. The Investment Funds will comply with all
other requirements of rule 17g-1. The fidelity bond of the Investment
Funds will cover the Administrator, the Managing Members, and all
employees of L&W or any L&W Entity who have access to the securities or
funds of the Investment Funds.
11. Applicants request an exemption from the requirements,
contained in section 17(j) of the Act and rule 17j-1 under the Act,
that every registered investment company adopt a written code of ethics
and every ``access person'' of such registered investment company
report to the investment company with respect to transactions in any
security in which such access person has, or by reason of the
transaction acquires, any direct or indirect beneficial ownership in
the security. Applicants request an exemption from the requirements in
rule 17j-1, with the exception of rule 17j-1(b), because they are
burdensome and unnecessary as applied to the Investment Funds and
because the exemption is consistent with the policy of the Act.
Requiring the Investment Funds to adopt a written code of ethics and
requiring access persons to report each of their securities
transactions would be time-consuming and expensive and would serve
little purpose in light of, among other things, the community of
interest among the Members of the Investment Fund and the Managing
Members by virtue of their common association with L&W or an L&W
Entity. Accordingly, the requested exemption is consistent with the
purposes of the Act because the dangers against which section 17(j) and
rule 17j-1 are intended to guard are not present in the case of the
Investment Funds.
12. Applicants request an exemption from the requirements in
sections 30(a), 30(b), and 30(e) of the Act, and the Rules and
Regulations 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 Investment Funds and would entail
administrative and legal costs that outweigh any benefit to the
Members. Applicants request exemptive relief to the extent necessary to
permit the Investment Funds to report annually to their Members.
Applicants also request an exemption from section 30(h) of the Act to
the extent necessary to exempt the Administrator, the Managing Members,
any 10 percent shareholder, and any other person who may be deemed to
be an officer, director, member of an advisory board, or otherwise
subject to section 30(h), from filing Forms 3, 4 and 5 under section 16
of the Securities Exchange Act of 1934 (``Exchange Act'') with respect
to their ownership of Interests in the Investment Funds. Applicants
assert that, because there is no trading market for Interests and the
transfer of Interests is severely restricted, these filings are
unnecessary for the protection of investors and burdensome to those
required to make them.
13. Rule 38a-1 requires investment companies to adopt, implement
and periodically review written policies reasonably designed to prevent
violation of the federal securities laws and to appoint a chief
compliance officer. Each Investment Fund will comply with rule 38a-
1(a), (c) and (d), except that (i) the Managing Members of each
Investment Fund will fulfill the responsibilities assigned to the board
of directors under the rule, and (ii) because all Managing Members
would be considered interested persons of the Investment Funds,
approval by a majority of the disinterested board members required by
rule 38a-1 will not be obtained. In addition, the Investment Funds will
comply with the requirement in rule 38a-1(a)(4)(iv) that the chief
compliance officer meet with the disinterested directors by having the
chief compliance officer meet with the Managing Members.
Applicants' Conditions
The applicants agree that any order granting the requested relief
will be subject to the following conditions:
1. Each proposed transaction, to which an Investment Fund is a
party, otherwise prohibited by section 17(a) or section 17(d) and rule
17d-1 (the ``Section 17 Transactions'') will be effected only if the
Managing Members determine that: (a) The terms of the Section 17
Transaction, including the consideration to be paid or received, are
fair and reasonable to Members of the Investment Fund and do not
involve overreaching of the Investment Fund or its Members on the part
of any person concerned; and (b) the Section 17 Transaction is
consistent with the interests of the Members of the Investment Fund,
the Investment Fund's organizational documents and the Investment
Fund's reports to its Members.
In addition, the Administrator will record and preserve a
description of such Section 17 Transactions, the findings of the
Managing Members, the information or materials upon which their
findings are based and the basis therefor. All such records will be
maintained for the life of the Investment Fund and at least six 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 an Investment Fund from or to
an entity affiliated with the Investment Fund by reason of a Managing
Member (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 Investment
Fund's determination of whether or not to effect the purchase or sale.
3. The Managing Members 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 Investment Fund, or any
affiliated person of such a person, promoter, or principal underwriter.
4. The Managing Members will not purchase for an Investment 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 Investment
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
Investment Fund holding such investment 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 Investment 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 an Investment Fund means any person who is: (a) An
affiliated person of the Investment Fund; (b) L&W and any L&W Entity;
(c) a current or former partner, lawyer employed by or key
administrative employee of L&W or an L&W Entity; (d) a company in which
the Administrator, a Managing Member, L&W or an L&W Entity acts as an
officer, director, or general partner, or has a similar capacity to
control the sale or disposition of the company's securities;
[[Page 43878]]
or (e) an investment vehicle offered, sponsored, or managed by L&W or
an affiliated person of L&W.
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 the benefit of any such 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; (d) when the investment is comprised of securities
that are NMS stocks pursuant to section 11A(a)(2) of the Exchange Act
and rule 600(a) of Regulation NMS thereunder; (e) when the investment
is comprised of securities that are listed on or traded on any foreign
securities exchange or board of trade that satisfies regulatory
requirements under the law of the jurisdiction in which such foreign
securities exchange or board of trade is organized similar to those
that apply to a national securities exchange or a national market
system of securities; or (f) when the investment is comprised of
securities that are government securities as defined in section
2(a)(16) of the Act.
5. An Investment Fund will send, within 120 days after the end of
its fiscal year, or as soon as practicable thereafter, to each Member
who had an interest in the Investment Fund at any time during the
fiscal year then ended, reports and information regarding the
Investments, including financial statements for such Investment Fund
audited by an independent accounting firm. The Managing Members will
make a valuation or have a valuation made of all of the assets of an
Investment Fund as of each fiscal year end. In addition, within 90 days
after the end of each tax year of the Investment Fund or as soon as
practicable thereafter, the Investment Fund shall send a report to each
person who was a Member at any time during the fiscal year then ended,
setting forth such tax information as shall be necessary for the
preparation by the Member of his or her federal and state income tax
returns and a report of the investment activities of the Investment
Fund during such year.
6. An Investment Fund will maintain and preserve, for the life of
the Investment Fund and at least six years thereafter, such accounts,
books, and other documents as constitute the record forming the basis
for the audited financial statements and annual reports of the
Investment Fund to be provided to its Members, and agrees 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.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-18241 Filed 7-25-12; 8:45 am]
BILLING CODE 8011-01-P