[Federal Register Volume 60, Number 228 (Tuesday, November 28, 1995)]
[Notices]
[Pages 58700-58702]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28929]



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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21525; 812-9694]


Pitcairn Group L.P.; Notice of Application

November 20, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for exemption under the Investment 
Company Act of 1940 (the ``Act'').

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APPLICANT: Pitcairn Group, L.P.

RELEVANT ACT SECTION: Order requested under section 6(c) for an 
exemption from all provisions of the Act.

SUMMARY OF APPLICATION: Applicant is a privately-held investment 
company substantially owned and controlled by one family and certain 
persons and entities affiliated with, or otherwise related to, members 
of that family. Applicant seeks an exemption from all provisions of the 
Act.

FILING DATES: The application was filed on July 28, 1995, and amended 
on October 10, 1995 and November 13, 1995.

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 December 19, 
1995 and should be accompanied by proof of service on 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 SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549; Applicant, Suite 3000, One Pitcairn Place, 165 Township Line 
Road, Jenkintown, Pennsylvania 19046.

FOR FURTHER INFORMATION CONTACT: Marc Duffy, Senior Attorney, at (202) 
942-0565, 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 is available for a fee at the 
SEC's Public Reference Branch.

Applicant's Representations

    1. Applicant, a Delaware limited partnership that elected to be 
regulated as a business development company under section 54 of the 
Act, was organized in 1986 as a vehicle for private investments for the 
Pitcairn family. Applicant was capitalized with assets derived from the 
liquidation of the Pitcairn Company, a Delaware corporation formed in 
1923 by members of the Pitcairn family (the ``Family'') to hold and 
manage the estate of John Pitcairn, one of the founders of Pittsburgh 
Plate Glass Company. Limited partnership interests (``Units'') in 
applicant were distributed to the former shareholders of the Pitcairn 
Company.
    2. Over 97% of the Units are held by or for the benefit of Family 
members, related trusts, and Family-Related Organizations (as defined 
below).\1\ Approximately 22.7% of the Units are owned directly by 
individual Family members and 69.4% are held in various irrevocable 
trusts crated between the years 1923 and 1979 primarily by John 
Pitcairn's three sons and their spouses for the benefit of their 
descendants. In addition, 5.6% of the Units are owned directly by eight 
religious organizations, academic institutions of foundations created 
or affiliated with and supported by the Family (the ``Family-Related 
Organizations'').\2\ None of the individuals, trust, or Family-Related 

[[Page 58701]]
Organizations currently owns in excess of 10% of the Units.\3\

    \1\ The Units are registered under section 12 of the Securities 
Exchange Act of 1934 (the ``1934 Act''), although there are fewer 
than 300 holders of record, so Pitcairn Group can maintain its 
election to be treated as a business development company under 
section 54 of the Act. If the SEC grants the relief requested by 
this application, applicant intends to deregister the Units under 
section 12(g)(4) of the 1934 Act.
    \2\ All of the Family-Related Organizations that own Units were 
shareholders of the Pitcairn Company and had received that stock as 
the result of gifts from Family members over many years.
    \3\ Applicants believe that the actual number of individual 
beneficial owners (excluding Family-Related Organizations) who have 
an economic interest in Units, either directly or as an income 
beneficiary of trusts, could be deemed to be 148.
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    3. Applicant has three general partners. Two of these are 
individual members of the Family, who have served since inception. The 
third general partner is Pitcairn Company (``Pitco''), applicant's 
managing general partner since April 17, 1990.
    4. Pitco, a Pennsylvania corporation wholly-owned by applicant, is 
a registered investment adviser and serves as investment adviser to 
applicant. Pitco (directly, and through its wholly-owned subsidiary 
Pitcairn Trust Company) provides advisory, management, supervisory, and 
administrative services to applicant (subject to the supervision of the 
individual general partners of applicant). Applicant has no employees 
of its own.
    5. Pitcairn Trust Company (``Trustco'') is a state chartered trust 
company. Trustco primarily serves as co-trustee of personal trusts 
created by and for the benefit of members of the Family. Trustco 
maintains a staff of professional investment managers to oversee direct 
investments by trust accounts. Trustco provides income tax planning and 
administration, financial planning, trust and estate administration, 
asset allocation, investment advice, and miscellaneous financial 
services to Family members.
    6. There are currently nine members of the board of directors of 
Pitco: six are Family members who beneficially own limited partnership 
interests in applicant; one is the President of Pitco (who, as a non-
Family director, is elected annually by the Board of Directors); and 
the remaining two are non-Family. There are currently nine members of 
the board of directors of Trustco: six are Family members; two are non-
Family senior officers of Trustco; and one is a retired, non-Family 
former senior officer of a subsidiary of The Pitcairn Company.
    7. Representation of the boards of Pitco and Trustco historically 
has been drawn from all three lines of descendants of John Pitcairn, 
ensuring that the views of each line are heard and that the Family's 
collective interests are served. In 1990, the Family adopted a Family 
Governance Structure Charter (the ``Charter'') that defines the role of 
Family leaders, as directors of Pitco, in establishing policies and 
overall direction for the Family entities and communicating information 
directly to Family members.\4\

    \4\ The Charter sets forth the process for selecting the 
candidates for the board of directors of Pitco. A nominating 
committee proposes candidates for election to Pitco's board of 
directors. Any other Family member may run for a board position 
after receiving the endorsement of three Family members. A straw 
vote of Unit holders is taken and the results, which are only 
advisory, are relayed to applicant's general partners. Applicant's 
general partners then elect the Family member directors of Pitco. 
Non-Family directors of Pitco are selected annually by applicant's 
individual general partners, after considering the views of the 
Family directors. The directors of Pitco, in turn, elect the 
directors of Trustco.
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    8. Applicant's Units have never been offered or sold to the public. 
During the past nine years (except for the redemption of Unites by 
applicant and transfers in connection therewith), Units have been 
transferred solely to Family members and/or related trusts. Since 1986, 
there have been only eight sales between Unit holders. There is no 
trading market for the Units.
    9. In May, 1995, applicant made a private offering of additional 
Units to replace capital used to redeem approximately 39% of the 
outstanding limited partnership interests of a portion of the Family 
that no longer wished to be clients or owners of applicant and its 
related entities.\5\ Applicant raised approximately $5.3 million from 
existing Family members and from trusts that benefit descendants of 
John Pitcairn.

    \5\ See Investment Company Act Release Nos. 20982 (March 31, 
1995) (notice) and 21031 (April 26, 1995) (order).
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    10. The ownership of Units is likely to remain entirely within the 
Family for three reasons. First, the terms of governing trust 
instruments are exclusively for the benefit of present and/or future 
generations of Family members (subject to the rule against 
perpetuities). Second, the Units are not freely transferable. Limited 
partners only can sell or otherwise dispose of their Units or portion 
thereof pursuant to the terms of the partnership agreement. Third, the 
admission of new (substitute) limited partners requires the consent of 
Pitco as the managing general partner, regardless of whether the 
transfer results from a voluntary transfer or assignment, from death, 
or by operation of law. Inasmuch as Pitco effectively is controlled by 
the Family, the Family controls, and will continue to control, access 
to membership in applicant.
    11. To ensure that Units will remain Family-controlled and 
privately-owned, a majority in interest of applicant's limited partners 
have approved an amendment to the partnership agreement to provide for 
a future restriction on the transferability of Units. The amendment 
provides that the consent of Pitco, as managing general partner, must 
be withheld for any transfer or assignment of Units to other than 
Family members, trusts for their benefit, their estates, any entity 
wholly-owned by one or more of them, or to any partner of record as of 
October 13, 1995 (the ``Permitted Transferees'') unless (i) Pitco in 
its sole and absolute discretion, grants its consent and (ii) the 
proposed transfer or assignment does not result in greater than 10% of 
the Units being owned directly or indirectly by or for the benefit of 
persons who are not Permitted Transferees. The amendment was approved 
at a meeting held on November 10, 1995 (the ``Partnership 
Meeting'').\6\ Applicant believes that this amendment will be effective 
in maintaining its essentially private nature.

    \6\ The effectiveness of the amendment is dependent upon the SEC 
granting the relief requested by this application.
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    12. At the Partnership Meeting, a majority in interest of 
applicant's limited partners approved the withdrawal of applicant's 
election to be treated as a business development company. If the SEC 
grants the relief requested by this application, applicant will 
withdraw its election to be regulated as a business development company 
under the Act.

Applicant's Legal Analysis

    1. Prior to 1986, applicant relied on section 3(c)(1) of the Act 
for an exemption from registration under the Act. Section 3(c)(1) 
excepts from the definition of ``investment company'' any issuer whose 
outstanding securities are beneficially owned by not more than 100 
persons and which is not making, and does not presently propose to 
make, a public offering of its securities. With the increase in Family 
members so that applicant's beneficial owners exceeded 100, however, 
applicant could no longer rely on the exemption and elected business 
development company status under the Act.
    2. A business development company is a closed-end investment 
company whose principal activity is investing in and providing 
managerial assistance to small, growing businesses. As a business 
development company, applicant must invest 70 percent of its assets 
primarily in ``eligible portfolio companies'' as defined in section 
2(a)(46) of the Act.
    3. Applicant has found that continued compliance with the 
obligations imposed on business development companies is burdensome. In 
addition 

[[Page 58702]]
to the time and costs associated with 1934 Act reporting obligations 
necessitated by applicant's status as a business development company, 
the investment limitations in section 55 of the Act make it difficult 
to achieve adequate diversification of investments by applicant in 
privately held companies or partnerships.
    4. Applicant asserts that section 3(c)(1) evidences the intention 
of Congress to exclude ``private'' investment companies from the 
purview of the Act. Under section 6(c) of the Act the SEC may exempt 
private investment companies that have more than 100 beneficial 
owners.\7\ Applicant contends that its request for a conditional order 
under section 6(c) is consistent with relief granted to other private 
investment companies substantially owned and controlled by a single 
family.\8\ Applicant asserts that it is a private investment vehicle 
not intended to be within the scope of the Act and that the protections 
of the Act are not necessary for investors in family-sponsored 
enterprises such as applicant.

    \7\ See Maritime Corporation. 9 SEC 906, 909 (1941).
    \8\ See, e.g., Bessemer Securities Corporation, Investment 
Company Act Release Nos. 18529 (Feb. 5, 1992) (notice) and 18594 
(March 3, 1992) (order); Richardson Corporation, Investment Company 
Act Release Nos. 16566 (Sept. 22, 1988) (notice) and 16606 (Oct. 21, 
1988) (order); and 5600, Inc., Investment Company Act Release Nos. 
16004 (Sept. 25, 1987) (notice) and 16067 (Oct. 21, 1987) (Order).
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    5. Section 6(c) provides that the SEC may exempt any person, 
security, or transaction from any provision of the Act, if and to the 
extent that such exemption is necessary or 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. 
Applicant believes that the requested exemption meets these standards.

Applicant's Conditions

    Applicant agrees that the order granting the requested relief shall 
be subject to the following conditions:
    1. Applicant will continue to provide each investor annual 
financial statements audited by an accounting firm of recognized 
national standing.
    2. Applicant, through its managing general partner, shall neither 
admit as a new investor, nor permit the assignment or transfer of any 
interest therein to any individual or entity, if such admission, 
assignment or transfer would cause applicant to fail to be 90% owned by 
or for the benefit of Family members, trusts for their benefit, their 
estates, any entity wholly-owned by them, and Family-Related 
Organizations.
    3. Applicant shall not have as a general partner a person or entity 
other than Pitco, a Family member, an entity controlled directly or 
indirectly by Family members, or an affiliated person of applicant.
    4. Applicant shall not knowingly make available to any broker or 
dealer registered under the 1934 Act any financial information 
concerning applicant for the purpose of knowingly enabling such broker 
or dealer to initiate any regular trading market in any Units.
    5. Pursuant to section 54(c) of the Act, applicant will file a 
notification of withdrawal of election to be subject to sections 55 
through 65 of the Act, as soon as practical (but in no event later than 
120 days) after receiving the order requested by this application.

For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-28929 Filed 11-27-95; 8:45 am]
BILLING CODE 8010-01-M