[Federal Register Volume 78, Number 36 (Friday, February 22, 2013)]
[Notices]
[Pages 12372-12374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-04013]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-30383; 812-14105]
UBS AG, et al.; Notice of Application and Temporary Order
February 15, 2013.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Temporary order and notice of application for a permanent order
under section 9(c) of the Investment Company Act of 1940 (``Act'').
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Summary of Application: Applicants have received a temporary order
exempting them from section 9(a) of the Act, with respect to a guilty
plea entered on December 19, 2012, by UBS Securities Japan Co., Ltd.
(the ``Settling Firm'') in the U.S. District Court for the District of
Connecticut (``District Court'') in connection with a plea agreement
between the Settling Firm and the U.S. Department of Justice (``DOJ''),
until the Commission takes final action on an application for a
permanent order. Applicants have requested a permanent order.
Applicants: UBS AG; UBS IB Co-Investment 2001 GP Limited (``ESC
GP''); UBS Financial Services Inc. (``UBSFS''); UBS Alternative and
Quantitative Investments LLC (``UBS Alternative''); UBS Willow
Management, L.L.C. (``UBS Willow''), UBS Eucalyptus Management, L.L.C.
(``UBS Eucalyptus'') and UBS Juniper Management, L.L.C. (``UBS
Juniper'') (UBS Willow, UBS Eucalyptus, and UBS Juniper are referred to
collectively as ``UBS Alternative Managers''); UBS Global Asset
Management (Americas) Inc. (``UBS Global AM Americas''); UBS Global
Asset Management (US) Inc. (``UBS Global AM US''); and the Settling
Firm (each an ``Applicant'' and collectively, the ``Applicants'').\1\
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\1\ Applicants request that any relief granted pursuant to the
application also apply to any existing or future company of which
the Settling Firm is or may become an affiliated person within the
meaning of section 2(a)(3) of the Act (together with the Applicants,
the ``Covered Persons'').
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Filing Date: The application was filed on December 19, 2012, and
amended on January 31, 2013.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving Applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on March 12, 2013, and should be accompanied by proof of
service on Applicants, in the form of an affidavit, or for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants:
UBS AG, ESC-GP, and the Settling Firm, c/o UBS Investment Bank, 677
Washington Boulevard, Stamford, CT 06901; UBSFS, 1200 Harbor
[[Page 12373]]
Boulevard, Weehawken, NJ 07086; UBS Alternative, 677 Washington
Boulevard, Stamford, CT 06901; UBS Willow, UBS Eucalyptus, and UBS
Juniper, 299 Park Avenue, 29th Floor, New York, NY 10171; UBS Global AM
Americas, One North Wacker Drive, Chicago, IL 60606 and UBS Global AM
US, 1285 Avenue of the Americas, 12th Floor, New York, NY 10019.
FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at
(202) 551-6826 or Jennifer L. Sawin, Branch Chief, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a temporary order and a
summary of the application. The complete application may be obtained
via the Commission's Web site by searching for the file number, or an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicants' Representations
1. UBS AG, a company organized under the laws of Switzerland, is a
Swiss-based global financial services firm. UBS AG and its subsidiaries
provide global wealth management, securities and retail and commercial
banking services. Each of the other Applicants is either a direct or
indirect majority-owned or wholly-owned subsidiary of UBS AG. UBSFS is
a corporation organized under the laws of Delaware and provides a wide
range of wealth management services, including financial planning and
wealth management consulting, asset-based and advisory services and
transaction-based services, to clients in the United States and
throughout the world. UBSFS, UBS Alternative, UBS Alternative
Managers,\2\ and UBS Global AM Americas are investment advisers
registered under the Investment Advisers Act of 1940, and all but UBSFS
currently serve as investment advisers to registered management
investment companies (``Funds''). UBSFS and UBS Global AM US are
registered as broker-dealers under the Securities and Exchange Act of
1934 (``Exchange Act''). UBSFS is the co-principal underwriter to
various registered unit investment trusts. UBS Global AM US serves as
principal underwriter to various open-end Funds. UBS AG and ESC GP
provide investment advisory services to employees' securities companies
(``ESCs''), as defined in section 2(a)(13) of the Act, which provide
investment opportunities for highly compensated key employees, officer,
directors and current consultants of UBS AG and its affiliates.
Applicants (other than the Settling Firm) collectively serve as
investment adviser to Funds and ESCs, principal underwriter to open-end
Funds, and co-principal underwriter to registered unit investment
trusts (such activities, collectively, ``Fund Service Activities'').
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\2\ UBS Alternative is also managing member of the UBS
Alternative Managers.
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2. On December 19, 2012, the Fraud Section of the Criminal Division
of the DOJ filed a one-count criminal information (the ``Information'')
in the District Court charging wire fraud, in violation of Title 18,
United States Code, Sections 1343 and 2. The Information charges that
between approximately 2006 and at least 2009, the Settling Firm engaged
in a scheme to defraud counterparties to interest rate derivatives
trades executed on its behalf by secretly manipulating benchmark
interest rates to which the profitability of those trades was tied. The
Information charges that, in furtherance of this scheme, on or about
February 25, 2009, the Settling Firm committed wire fraud in violation
of Title 18, United States Code, Sections 1343 and 2 by transmitting,
or causing the transmission of: (i) An electronic chat between a
derivatives trader employed by the Settling Firm and a broker employed
at an interdealer brokerage firm; (ii) a subsequent submission for the
London InterBank Offered Rate for Japanese Yen (``Yen LIBOR'') to
Thomson Reuters; and (iii) a subsequent publication of a Yen LIBOR rate
through international and interstate wires.
3. Pursuant to a plea agreement (the ``Plea Agreement''), the
Settling Firm entered a plea of guilty (the ``Guilty Plea'') on
December 19, 2012, in the District Court. In the Plea Agreement, the
Settling Firm agreed to a fine of $100 million and other remedies.
Applicants expect that the District Court will enter a judgment against
the Settling Firm (the ``Judgment'') that will require remedies that
are materially the same as set forth in the Plea Agreement. In
addition, UBS AG has entered into a non-prosecution agreement with DOJ,
dated December 18, 2012 (the ``Non-Prosecution Agreement''), relating
to submissions of the Yen LIBOR and other benchmark interest rates. In
the Non-Prosecution Agreement, UBS AG has agreed to, among other
things: (i) Provide full cooperation with DOJ and any other law
enforcement or government agency designated by DOJ until the conclusion
of all investigations and prosecutions arising out of the conduct
described in the Non-Prosecution Agreement; (ii) strengthen its
internal controls as required by certain other U.S. and non-U.S.
regulatory agencies that have addressed the misconduct described in the
Non-Prosecution Agreement; and (iii) the payment of $500 million, which
includes amounts incurred by the Settling Firm for criminal penalties
arising from the Judgment. The individuals at the Settling Firm and any
other Covered Person who were identified by the Settling Firm, UBS AG
or any U.S. or non-U.S. regulatory or enforcement agencies as being
responsible for the conduct underlying the Plea Agreement (including
the conduct described in any of the Exhibits thereto) (the ``Conduct'')
have either resigned or have been terminated.
Applicants' Legal Analysis
1. Section 9(a)(1) of the Act provides, in pertinent part, that a
person may not serve or act as an investment adviser or depositor of
any registered investment company or a principal underwriter for any
registered open-end investment company or registered unit investment
trust, if such person within ten years has been convicted of any felony
or misdemeanor arising out of such person's conduct, as, among other
things, a broker or dealer. Section 2(a)(10) of the Act defines the
term ``convicted'' to include a plea of guilty. Section 9(a)(3) of the
Act extends the prohibitions of section 9(a)(1) to a company any
affiliated person of which has been disqualified under the provisions
of section 9(a)(1). Section 2(a)(3) of the Act defines ``affiliated
person'' to include, among others, any person directly or indirectly
controlling, controlled by, or under common control with, the other
person. Applicants state that the Settling Firm is an affiliated person
of each of the other Applicants within the meaning of section 2(a)(3).
Applicants state that the guilty plea would result in a
disqualification of each Applicant for ten years under section 9(a) of
the Act because the Settling Fund would become the subject of a
conviction described in 9(a)(1).
2. Section 9(c) of the Act provides that the Commission shall grant
an application for exemption from the disqualification provisions of
section 9(a) if it is established that these provisions, as applied to
Applicants, are unduly or disproportionately severe or that the
Applicants' conduct has been such as not to make it against the public
interest or the protection of investors to grant the exemption.
Applicants have filed an application pursuant to section 9(c) seeking
temporary and permanent
[[Page 12374]]
orders exempting the Applicants and the other Covered Persons from the
disqualification provisions of section 9(a) of the Act. On December 19,
2012, Applicants received a temporary conditional order from the
Commission exempting them from section 9(a) of the Act with respect to
the Guilty Plea from December 19, 2012, until the Commission takes
final action on an application for a permanent order or, if earlier,
February 15, 2013.
3. Applicants believe they meet the standard for exemption
specified in section 9(c). Applicants state that the prohibitions of
section 9(a) as applied to them would be unduly and disproportionately
severe and that the conduct of Applicants has been such as not to make
it against the public interest or the protection of investors to grant
the exemption from section 9(a).
4. Applicants assert that the Conduct did not involve any of the
Applicants' Fund Service Activities, and that the Settling Firm does
not serve in any of the capacities described in section 9(a) of the
Act. Additionally, Applicants assert that the Conduct did not involve
any Fund or ESC with respect to which the Applicants provided Fund
Service Activities, or the assets of any such Fund or ESC. Applicants
further assert that (i) none of the current or former directors,
officers or employees of the Applicants (other than certain personnel
of the Settling Firm and UBS AG who were not involved in any of the
Applicants' Fund Service Activities) had any knowledge of, or had any
involvement in, the Conduct; (ii) no former employee of the Settling
Firm or any other Covered Person who previously has been or who
subsequently may be identified by the Settling Firm, UBS AG or any U.S.
or non-U.S. regulatory or enforcement agencies as having been
responsible for the Conduct will be an officer, director, or employee
of any Applicant or any other Covered Person; (iii) those identified
employees have had no, and will not have any future, involvement in the
Covered Persons' activities in any capacity described in section 9(a)
of the Act; and (iv) because the personnel of the Applicants (other
than certain personnel of the Settling Firm and UBS AG who were not
involved in any of the Applicants' Fund Service Activities) did not
have any involvement in the Conduct, shareholders of those RICs and
ESCs were not affected any differently than if those RICs and ESCs had
received services from any other non-affiliated investment adviser or
principal underwriter. Applicants have agreed that neither they nor any
of the other Covered Persons will employ any of the former employees of
the Settling Firm or any other Covered Person who previously have been
or who subsequently may be identified by the Settling Firm, UBS AG or
any U.S. or non-U.S. regulatory or enforcement agency as having been
responsible for the Conduct in any capacity without first making a
further application to the Commission pursuant to section 9(c).
5. Applicants further represent that the inability of the
Applicants (other than the Settling Firm) to continue providing Fund
Service Activities would result in potential hardships for both the
Funds and their shareholders. Applicants state that they will
distribute written materials, including an offer to meet in person to
discuss the materials, to the board of directors of each Fund,
including the directors who are not ``interested persons,'' as defined
in section 2(a)(19) of the Act, of such Fund, and their independent
legal counsel as defined in rule 0-1(a)(6) under the Act, if any,
regarding the Guilty Plea, any impact on the Funds, and the
application. The Applicants will provide the Funds with all information
concerning the Plea Agreement and the application that is necessary for
the Funds to fulfill their disclosure and other obligations under the
federal securities laws.
6. Applicants also state that, if they (other than the Settling
Firm) were barred from providing Fund Service Activities to Funds, the
effect on their businesses and employees would be severe. The
Applicants state that they have committed substantial capital and
resources to establishing expertise in advising and sub-advising Funds
and in support of their principal underwriting business.
7. Applicants state that several Applicants and certain of their
affiliates have previously received orders under section 9(c), as
described in greater detail in the application.
Applicants' Conditions
Applicants agree that any order granted by the Commission pursuant
to the application will be subject to the following conditions:
1. Any temporary exemption granted pursuant to the application
shall be without prejudice to, and shall not limit the Commission's
rights in any manner with respect to, any Commission investigation of,
or administrative proceedings involving or against, Covered Persons,
including, without limitation, the consideration by the Commission of a
permanent exemption from section 9(a) of the Act requested pursuant to
the application or the revocation or removal of any temporary
exemptions granted under the Act in connection with the application.
2. Neither the Applicants nor any of the other Covered Persons will
employ any of the former employees of the Settling Firm or any other
Covered Person who previously have been or who subsequently may be
identified by the Settling Firm, UBS AG or any U.S. or non-U.S.
regulatory or enforcement agency as having been responsible for the
Conduct in any capacity without first making a further application to
the Commission pursuant to section 9(c).
Temporary Order
The Commission has considered the matter and finds that Applicants
have made the necessary showing to justify granting a temporary
exemption.
Accordingly,
It is hereby ordered, pursuant to section 9(c) of the Act, that the
Applicants and the other Covered Persons are granted a temporary
exemption from the provisions of section 9(a), effective forthwith,
solely with respect to the Guilty Plea, subject to the conditions in
the application, until the date the Commission takes final action on
their application for a permanent order.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-04013 Filed 2-21-13; 8:45 am]
BILLING CODE 8011-01-P