[Federal Register Volume 79, Number 129 (Monday, July 7, 2014)]
[Notices]
[Pages 38341-38343]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-15737]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-31140; 812-14327]
BNP Paribas S.A., et al.; Notice of Application and Temporary
Order
June 30, 2014.
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: Applicants have received a temporary order exempting them from
section 9(a) of the Act, with respect to guilty pleas entered on June
30, 2014 or shortly thereafter, by BNP Paribas S.A. (``BNPP'') in the
U.S. District Court for the Southern District of New York (``District
Court'') in connection with a plea agreement between BNPP and the U.S.
Department of Justice and the Office of the U.S. Attorney for the
Southern District of New York (together with the Department of Justice,
the ``DOJ''), and in the Supreme Court of the State of New York, County
of New York (``NY Supreme Court''), in connection with a plea agreement
between BNPP and the New York County District Attorney's Office
(``DANY''), until the Commission takes final action on an application
for a permanent order. Applicants have also applied for a permanent
order.
Applicants: Fischer Francis Trees & Watts, Inc. (``FFTW''), Bishop
Street Capital Management Corp. (``BSCM''), Impax Asset Management Ltd.
(``IAM''), and BNPP (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
BNPP 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'') with respect to any activity contemplated by
section 9(a) of the Act.
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Filing Date: The application was filed on June 30, 2014. Applicants
have agreed to file an amendment during the notice period, the
substance of which is reflected in this notice.
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 July 25, 2014, 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: Betty Whelchel, BNP
Paribas S.A., 787 Seventh Avenue, New York, NY 10019, with a copy to
Donald R. Crawshaw and Wendy M. Goldberg, Sullivan & Cromwell LLP, 125
Broad Street, New York, NY 10004.
FOR FURTHER INFORMATION CONTACT: Kieran G. Brown, Senior Counsel, at
(202) 551-6773 or Daniele Marchesani, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
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. BNPP is organized under the laws of France as a credit
institution and is a major global bank active in seventy-five countries
with key positions in its three main areas of activity: retail banking,
investment solutions and corporate and investment banking. FFTW and
BSCM are each indirect wholly-owned subsidiaries of BNPP. IAM is a
subsidiary of a company listed on the Alternative Investment Market of
the London Stock Exchange and BNPP indirectly owns 25.22% of such
company's shares. FFTW, a corporation formed under the laws of New
York, BSCM, a corporation formed under the laws of Hawaii, and IAM, a
limited liability company formed under the laws of the United Kingdom,
are each registered as an investment adviser under the Investment
Advisers Act of 1940. FFTW, BSCM and IAM serve as investment adviser
(as defined in section 2(a)(20) of the Act) to investment companies
registered under the Act or series of such companies (``Funds'') (such
activities, ``Fund Service Activities'').
2. On June 30, 2014, the DOJ filed a notice of intent to file a
one-count criminal information in the District Court and the DANY filed
a two-count criminal information in the NY Supreme Court, respectively
against BNPP. The DOJ's information, which was filed on July 1, 2014,
charged BNPP with conspiracy to commit an offense against the United
States in violation of Title 18, United States Code, Section 371, by
conspiring to violate the International Emergency Economic Powers Act
(``IEEPA''), codified at Title 50, United States Code, Section 1701 et
seq., and regulations issued thereunder, and the Trading with the Enemy
Act (``TWEA''), codified at Title 50, United States Code Appendix,
Section 1 et seq., and regulations issued thereunder. DANY's
information charged BNPP with the crime of falsifying business records
in the first degree, in violation of Penal Law Sec. 175.10, and
conspiracy in the fifth degree, in violation of Penal Law
[[Page 38342]]
Sec. 105.05(1). BNPP has agreed to resolve the action brought by DANY
through a plea agreement dated June 30, 2014, and the action brought by
the DOJ through a plea agreement to be entered in July 2014
(collectively, the ``Plea Agreements''). Under the Plea Agreements,
BNPP will plead guilty to the charges set out in the respective
informations. Applicants expect that the District Court and the NY
Supreme Court will enter judgments against BNPP that will require
remedies that are materially the same as set forth in the Plea
Agreements. Pursuant to the Plea Agreements, BNPP agreed to comply with
the undertakings described in the application and to pay substantial
criminal penalties and restitution.
3. BNPP will enter into a Cease and Desist Order Issued Upon
Consent with the Board of Governors of the Federal Reserve System (the
``Federal Reserve'') and the French Authorit[eacute] de Contr[ocirc]le
Prudentiel et de R[eacute]solution (the ``ACPR'') to resolve certain
findings in connection with the conduct underlying the Plea Agreements
(including the conduct described in any of the exhibits to the Plea
Agreements) (the ``Conduct'') by the Federal Reserve and the ACPR (the
``Federal Reserve/ACPR Order'').
4. BNPP will enter into an Order to Cease and Desist and Order of
Assessment of a Civil Money Penalty Issued Upon Consent with the
Federal Reserve to resolve certain findings related to the Conduct by
the Federal Reserve (the ``Federal Reserve CMP Order'').
5. BNPP will enter into a Consent Order related to the Conduct with
the New York State Department of Financial Services (``DFS'') with
respect to falsifying business records and certain clearing activities
(the ``DFS Order'').
6. BNPP also will enter into a Consent Order related to the Conduct
with the United States Department of the Treasury's Office of Foreign
Asset Control (the ``OFAC Order'').
7. Nine individuals who have been identified as having been
responsible for the Conduct are current employees of BNPP or a Covered
Person due to certain legal requirements imposed by Swiss or French
law, as applicable. These individuals are not and will not be active
and will not be involved in the operations of any Applicant or Covered
Person. All but two of the individuals identified as having been
responsible for the Conduct that remain employees of BNPP or a Covered
Person will have either resigned, retired, or been terminated no later
than December 31, 2014. The remaining two employees are inactive and
will be terminated when Swiss law permits. All other employees of BNPP
and any Covered Person who were identified as having been responsible
for the Conduct have either resigned or been terminated.
8. BNPP has agreed to lawfully undertake the following pursuant to
the Plea Agreements: (1) BNPP has agreed to pay a monetary penalty in
the amount of $8.8336 billion; (2) BNPP has agreed that any compliance
consultant or monitor imposed by the Federal Reserve or DFS will submit
every report it produces to each of the Federal Reserve, the DFS, and
DANY; (3) BNPP has agreed to enhance its compliance policies and
procedures with regard to U.S. sanctions laws and regulations; (4) BNPP
has agreed to abide by the Federal Reserve/ACPR Order, the Federal
Reserve CMP Order, and the DFS Order; and (5) BNPP has agreed to
truthfully and completely disclose any information requested and
completely and fully cooperate with DANY, the Federal Bureau of
Investigation, the Internal Revenue Service Criminal Investigation and
any other governmental agency designated by the DOJ or DANY.
Additionally, BNPP is undertaking ongoing remediation efforts to
strengthen its internal controls, making structural changes to its
Compliance and Group Financial Security (``GFS'') department and
reviewing its business to ensure best practices with respect to U.S.
dollar clearing and payment flows. These steps include upgrading their
transaction filtering tools and streamlining alert management
procedures. In addition, BNPP will physically transfer part of its GFS
function from Paris to New York, and will operate the U.S. compliance
function as a U.S. person. All BNPP majority-owned subsidiaries and
branches have been instructed to implement a process for the direction
of all U.S. dollar clearing transactions through BNPP's New York
branch.
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, an investment adviser, a broker or dealer, or a bank. 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 BNPP is an
affiliated person of each of the other Applicants within the meaning of
section 2(a)(3). Applicants state that the Plea Agreements would result
in a disqualification of each Applicant for ten years under section
9(a) of the Act because BNPP 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 orders exempting the Applicants and other
Covered Persons from the disqualification provisions of section 9(a) of
the Act.
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
Applicants acting as an investment adviser or depositor of any Fund,
employees' securities company, or business development company or as
principal underwriter for any open-end management investment company,
unit investment trust, or face amount certificate company registered
under the Act. The Conduct similarly did not involve any Fund with
respect to which Applicants engaged in Fund Service Activities.\2\
Applicants further assert that (i) none of the current or former
directors, officers or employees of the Applicants (other than certain
personnel of BNPP who were not involved in any of the Applicants' Fund
Service Activities) had involvement in the Conduct; (ii) except as
noted above, no current or former employee of BNPP or any Covered
Person who previously has been or who subsequently may be
[[Page 38343]]
identified by BNPP 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 FFTW, BSCM, or IAM, or of 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 BNPP who
were not involved in any of the Applicants' Fund Service Activities)
did not have any involvement in the Conduct, shareholders of the Funds
were not affected any differently than if those Funds had received
services from any other non-affiliated investment adviser.
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\2\ BNPP does not engage, has not engaged, and will not engage
in Fund Service Activities.
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5. Except as discussed above, Applicants have agreed that neither
they nor any of the other Covered Persons will employ any of the
current or former employees of BNPP or any Covered Person who
previously have been or who subsequently may be identified by BNPP or
any U.S. or non-U.S. regulatory or enforcement agencies as having been
responsible for the Conduct in any capacity without first making a
further application to the Commission pursuant to section 9(c).
Applicants also have agreed that each Applicant (and any Covered Person
that acts in any capacity described in section 9(a) of the Act) will
adopt and implement policies and procedures reasonably designed to
ensure compliance with the terms and conditions of the order granted
under section 9(c). In addition, BNPP has agreed to comply in all
material respects with the material terms and conditions of the Plea
Agreements and the material terms of the Federal Reserve/ACPR Order,
the Federal Reserve CMP Order, the DFS Order and the OFAC Order, all of
which are described more fully in the application.
6. Applicants further represent that the inability of FFTW, BSCM,
and IAM 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
trustees/directors of the Funds, 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 Plea Agreements, any
impact on the Funds, and the application. The Applicants will provide
the Funds with all information concerning the Plea Agreements and the
application that is necessary for the Funds to fulfill their disclosure
and other obligations under the federal securities laws.
7. Applicants also state that, if FFTW, BSCM, and IAM were barred
from providing Fund Service Activities to the Funds, the effect on
their business and employees would be severe.
8. Applicants state that none of the Applicants and none of their
affiliates previously have received orders under section 9(c).
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 will
be without prejudice to, and will 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. Except as set out in the second paragraph on Section IV.E. of
the application, neither the Applicants nor any of the other Covered
Persons will employ any of the current or former employees of BNPP or
any Covered Person who previously have been or who subsequently may be
identified by BNPP or any U.S. or non-U.S. regulatory or enforcement
agencies as having been responsible for the Conduct in any capacity
without first making a further application to the Commission pursuant
to section 9(c).
3. Each Applicant and Covered Person will adopt and implement
policies and procedures reasonably designed to ensure that it will
comply with the terms and conditions of the requested orders within 60
days of the date on which any permanent order is granted or, with
respect to condition four, such later date as may be contemplated by
the Federal Reserve/ACPR Order, the Federal Reserve CMP Order, the DFS
Order or the OFAC Order.
4. BNPP will comply in all material respects with the material
terms and conditions of the Plea Agreements and with the material terms
of the Federal Reserve/ACPR Order, the Federal Reserve CMP Order, the
DFS Order and the OFAC Order.
5. Applicants will provide written notification to the Chief
Counsel of the Commission's Division of Investment Management, with a
copy to the Chief Counsel of the Commission's Division of Enforcement,
of a material violation of the terms and conditions of the requested
orders within 30 days of discovery of the material violation.
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 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 guilty pleas entered into pursuant to the Plea
Agreements, subject to the representations and conditions in the
application, until the date the Commission takes final action on their
application for a permanent order.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-15737 Filed 7-3-14; 8:45 am]
BILLING CODE 8011-01-P