[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