[Federal Register Volume 60, Number 241 (Friday, December 15, 1995)]
[Notices]
[Pages 64458-64459]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30527]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-21588; 812-9632]
Wellington Underwriting plc; Notice of Application
December 8, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (``Act'').
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APPLICANT: Wellington Underwriting plc.
RELEVANT ACT SECTION: Exemption requested under Section 6(c).
SUMMARY OF APPLICATION: Applicant, a United Kingdom company engaged in
the business of insurance, seeks an order granting it a conditional
exemption from all provisions of the Act. Because of its listing on the
London Stock Exchange as an ``investment company,'' Applicant seeks to
clarify its status prior to a proposed offer and sale of its American
Depositary Shares in the United States to assure that it will not be
required to register as an investment company under the Act.
FILING DATES: The application was filed on June 16, 1995, and amended
on October 17, 1995. Counsel for Applicant has agreed to file a further
amendment during the notice period, the substance of which is
incorporated herein.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
Applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on January 2, 1996,
and should be accompanied by proof of service on the 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 may request
notification of a hearing by writing to the Secretary of the SEC.
ADDRESSES: Secretary, SEC, 450 Fifth Street NW., Washington, DC 20549.
Applicant, 2 Minster Court, Mincing Lane, London, EC3R 7FB, England.
FOR FURTHER INFORMATION CONTACT:
H.R. Hallock, Jr., Special Counsel, at (202) 942-0564 or C. David
Messman, Branch Chief, at (202) 942-0564 (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 from
the SEC's Public Reference Branch.
Applicant's Representations
1. Applicant, a public holding company incorporated under the laws
of England and Wales, was formed for the purpose of allowing investors
to participate with limited liability in underwriting insurance risks
at Lloyd's of London (``Lloyd's''). Applicant underwrites at Lloyd's
through five wholly-owned subsidiaries (the ``Subsidiaries''). The
Subsidiaries have received approval from Lloyd's as ``Corporate
Members,'' i.e., corporations acting as insurance underwriters through
syndicates at Lloyd's. The only securities which the Applicant will own
are those of the Subsidiaries.
2. On November 23, 1994, Applicant completed a placement of
17,250,000 Ordinary Shares. This included a private placement in the
United States of 127,094 American Depository Shares (representing
1,270,940 Ordinary Shares) to eleven ``accredited investors'' within
the meaning of Regulation D under the Securities Act of 1933 (the
``1933 Act''). The balance of Applicant's Ordinary Shares were placed
with 76 holders outside the United States.
3. Applicant's shares are traded on the London Stock Exchange
(``LSE''), where Applicant is listed as an ``investment company.'' To
be listed on the LSE, an issuer must have three years of audited
financial statements unless it lists as an ``investment company.'' \1\
Applicant sought to be listed under this category in order to
facilitate an immediate listing on the LSE which otherwise would not
have been possible for a new issuer. Applicant is not otherwise treated
as an investment company in the United Kingdom.
\1\ To qualify as an ``investment company'' under LSE rules, no
more than 20% of the Applicant's assets on a consolidated basis may
be invested in the securities of any one company--including its own
subsidiaries, and the Applicant must be a passive investor and not
control the companies in which it invests, other than companies
through which it invests (i.e., the Subsidiaries).
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4. The Subsidiaries commenced operations on January 1, 1995,
engaging exclusively in the insurance business of acting as Corporate
Members of syndicates underwriting insurance at Lloyd's. The
Subsidiaries underwrite insurance at Lloyd's through syndicates managed
by Wellington Underwriting Agencies Limited, a wholly-owned subsidiary
of Wellington Underwriting Holdings Limited. Pursuant to the LSE
Listing Rules and the rules of the Council of Lloyd's (the
``Council''), the central body that regulates the affairs of the
Lloyd's market, the Subsidiaries will not transact any other business.
5. The Subsidiaries are regulated in the U.K. as insurance
companies, not investment companies. Because they are Corporate Members
of Lloyd's, the Subsidiaries must comply with various provisions of the
U.K. Insurance Companies Act 1982 and are subject to oversight by the
Secretary of State for Trade and Industry. Most notably, U.K.
regulation focuses on solvency, the fundamental principle of insurance
regulation, by requiring audited statements and actuarial certificates
for Members' accounts, trust funds for premiums, and margins of
solvency. The British Department of Trade and Industry also has
significant powers to regulate the market and affairs of Members in the
event that either Lloyd's underwriters taken as a whole or any Member
fails to satisfy regulatory requirements. These powers include, among
others, the ability to regulate the investment and custody of assets at
Lloyd's, to limit (or terminate) the writing of insurance, and to
direct the actions of the Council or other persons at Lloyd's.
[[Page 64459]]
6. At the present time, the Applicant's shares are beneficially
owned by fewer than one hundred persons in the United States, and the
Applicant is not making, and does not presently propose to make, a
public offering of its securities in the United States. The Applicant
intends, however, to raise additional capital, which may include
another offering of American Depository Shares to additional United
States investors through a further private placement.
Applicant's Legal Analysis
1. Section 3(a)(1) defines ``investment company'' to mean, as here
relevant, any issuer that holds itself out as being engaged primarily
in the business of investing or trading in securities. Because the
Applicant is listed on the LSE as an ``investment company,'' it
arguably has held itself out as an investment company within the
meaning of section 3(a)(1).\2\
\2\ The Applicant's assets consist entirely of securities of the
wholly-owned Subsidiaries, which in turn hold assets in the form of
a Lloyd's deposit that is invested in securities. Thus, the
Subsidiaries, and consequently the Applicant itself, would be deemed
investment companies under section 3(a)(3), except for, as discussed
below, the Subsidiaries' status as foreign insurance companies under
rule 3a-6.
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2. Applicant requests an exemption from all provisions of the Act
pursuant to section 6(c). Section 6(c) provides, as here relevant, that
the SEC, by order upon application, may exempt any person from any
provisions of the Act or of any rule thereunder, if and to the extent
that such exemption is appropriate in the public interest and
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act.
3. Applicant submits that the requested relief meets the exemptive
standards established by section 6(c). It asserts primarily that it is
engaged through the Subsidiaries in the business of an insurance
company, and does not operate as an investment company for purposes of
the Act. In this regard, even though the Applicant's memorandum of
association gives it the power to carry on the business of both an
investment company and an insurance business, it is not treated as an
investment company under the U.K. Companies Act or as an investment
trust for tax purposes. Similarly, the Applicant is not treated as a
collective investment scheme or an authorized unit trust scheme under
the U.K. Financial Services Act or as an undertaking for collective
investment in transferable securities (``UCITS'') under directives of
the European Union. In addition, the daily trading price of the
Applicant's shares on the LSE is quoted in the Financial Times under
the caption ``Insurance'' and not ``Investment Trusts.'' While the 1994
prospectus for the Applicant's shares introduced it as an investment
company, the stated purpose of the offering was to enable investors to
underwrite insurance with limited liability through Lloyd's syndicates
managed by Wellington Underwriting Agencies Limited. Based on the
foregoing, Applicant argues that the Act's purpose would not be served
by applying it to the Applicant merely because it is listed, for
reasons of convenience, as an investment company on the LSE.
4. Applicant also submits that exemptive relief would be consistent
with the purposes intended by specific policies and provisions of the
Act. Section 3(c)(3) of the Act excludes from the definition of
``investment company'' domestic insurance companies. Rule 3a-6 provides
that foreign insurance companies are also not subject to the provisions
of the Act. Applicant represents that its Subsidiaries fall within the
requirements of rule 3a-6.\3\ Applicant notes that United States
holding companies for insurance companies are excepted from the
definition of investment company by section 3(c)(6). Because of its
status as a holding company whose only operations are the ownership of
the Subsidiaries, the Applicant is a foreign insurance company holding
company. The SEC, upon adopting rule 3a-6, made it clear that foreign
insurance company holding companies should be treated under the Act on
the same basis as United States insurance company holding companies.\4\
\3\ Rule 3a-6 defines ``foreign insurance company'' as an
insurance company organized under the laws of another country that
is regulated as such by that country's government, that is engaged
predominantly in writing or reinsuring insurance agreements of the
type specified in section 3(a)(8) of the 1933 Act, and that is not
operated for purposes of evading the provisions of the Act.
Applicant intends to rely on an opinion of counsel to the effect
that its Subsidiaries are exempt from registration under the Act
because they are foreign insurance companies within the meaning of
the rule. Applicant does not request SEC review or approval of
counsel's opinion, and acknowledges that the SEC takes no position
as to its availability.
\4\ See Investment Company Act Release No. 18381 (Oct. 29,
1991).
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Applicant's Conditions
Applicant agrees that any order of the SEC granting the exemptive
relief requested by the application may be made subject to the
following conditions:
1. No Subsidiary will be an ``investment company'' as defined by
the Act.
2. Applicant will continue to operate, either directly or
indirectly, only in the business of insurance.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-30527 Filed 12-14-95; 8:45 am]
BILLING CODE 8010-01-M