[Federal Register Volume 64, Number 134 (Wednesday, July 14, 1999)]
[Notices]
[Pages 38047-38052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17882]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23892; 813-166]
CIBC World Markets Corp., Notice of Application
July 7, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order under sections 6(b) and 6(e)
of the Investment Company Act of 1940 (the ``Act'') granting an
exemption from all provisions of the Act, except section 9, certain
provisions of sections 17 and 30, sections 36 through 53, and the rules
and regulations under those sections.
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SUMMARY OF APPLICATION: Applicant, CIBC World Markets Corp. (``CIBC
WN''), requests an order to exempt certain entities formed for the
benefit of key employees of CIBC WM and its affiliates from certain
provisions of the Act, and to permit the funds to engage in certain
joint transactions. Each entity will be an ``employees' securities
company'' as defined in section 2(a)(13) of the Act.
FILING DATES: The application was filed on March 11, 1997 and amended
on February 27, 1998, and August 7, 1998. Applicant has agreed to file
an additional amendment, the substance of which is reflected in this
notice, during the notice period.
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 August 2, 1999,
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 requests, 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.
20549-0609. Applicant, One World Financial Center, 200 Liberty Street,
New York, NY 10281.
FOR FURTHER INFORMATION CONTACT: Mary T. Geffroy, Senior Counsel, at
(202) 942-0553, or Christine Y. Greenlees, 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, 450 Fifth Street, N.W., Washington,
D.C. 20549-0102 (tel. (202) 942-8090).
Applicant's Representations
1. Applicant, a Delaware corporation and subsidiary of The Canadian
Imperial Bank of Commerce, is a brokerage and investment banking
firm.\1\ Applicant is registered as an investment adviser under the
Investment Advisers Act of 1940 (``Advisers Act''). Applicant and its
affiliates, as defined in rule 12b-2 under the Securities Exchange Act
of 1934 (the ``Exchange Act''), are referred to in this notice
collectively as the ``CIBC WM Group.''
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\1\ Applicant was known as Oppenheimer & Co., Inc. until
November 4, 1997, when the stock of its parent, Oppenheimer
Holdings, was acquired by CIBC Wood Gundy Securities Corp., which
was then merged into Oppenheimer & Co., Inc.
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2. Applicant proposes to organize one or more limited partnerships,
limited liability companies, or other entities under the laws of the
state of Delaware or another state (each, a ``Partnership,'' and
collectively, the ``Partnerships'') for the benefit of certain key
employees. Each Partnership will be an ``employees' securities
company'' within the meaning of section 2(a)(13) of the Act, and will
operate as a closed-end management investment company. The goal of the
Partnerships is to create investment opportunities that are competitive
with those at other brokerage and investment banking firms for
employees and to facilitate the recruitment of high caliber employees.
Participation in a Partnership will be voluntary.
3. It is currently anticipated that the initial Partnership will be
a limited liability company and that an independent board of managers
(``Independent Board'') will have overall responsibility for its
operations. All of the members of the Independent Board will be
individuals who are not ``interested persons'' (as defined in section
2(a)(19) of the Act) of CIBC WM or any other entity in the CIBC WM
Group (collectively, a ``CIBC WM Company''). Applicant proposes to use
the independent board of managers structure so that the Partnerships
will not be considered ``subsidiaries'' of a CIBC WM Company for bank
regulatory purposes. Applicant states that the independent board of
managers structure will not undermine the community of interest between
the Partnerships and the CIBC WM Group. In the case of any General
Partner that is an Independent Board, the Board members will not be
eligible to purchase Interests (as defined below) in a Partnership.
Subsequently established Partnerships will be structured in the same
manner or, alternatively, a CIBC WM Company may act as general partner
(or functional equivalent with respect to any Partnership organized as
a limited liability company, business trust or other entity) of those
Partnerships. As used in this notice, the term ``General Partner''
refers to the Independent Board or a CIBC WM Company which acts as
general partner of a Partnership (or functional equivalent). The
General Partner will be responsible for the overall management of each
Partnership and will have the authority to make all decisions regarding
the acquisition, management and disposition of Partnership investments,
except that the General Partner may delegate certain of its
responsibilities regarding the acquisition, management and disposition
of Partnership investments to an Investment Adviser (as defined below);
provided, further, that if the General Partner is an Independent Board,
such Board will delegate all decisions regarding the acquisition,
management and disposition of
[[Page 38048]]
Partnership investments to an Investment Adviser. The General Partner
also may delegate administrative responsibilities to a CIBC WM Company
or to an unaffiliated third party administrator.
4. A. CIBC WM Company will serve as investment adviser to the
Partnerships. The investment adviser will either be: (a) Registered as
an investment adviser under the Advisers Act; (b) exempt from the
registration requirements of the Advisers Act by virtue of section
203(b)(3) of the Advisers Act; or (c) excluded from the definition of
investment adviser under the Advisers Act because it is a bank or a
bank holding company. The term ``Investment Adviser'' as used in this
notice refers to a CIBC WM Company which acts as investment adviser to
a Partnership. With respect to some or all Partnerships, the Investment
Adviser may delegate certain of its responsibilities to one or more
subadvisers, each of which will be a CIBC WM Company and registered
under the Advisers Act is required under applicable law; provided,
however, that if the Investment Adviser elects to enter into any side-
by-side investment with an unaffiliated entity, the Investment Adviser
will be permitted to engage as sub-investment adviser the entity
responsible for the management of such side-by-side investment.
5. In the case of certain Partnerships, the General Partner will
have the authority to terminate the agreement with the Investment
Adviser on 120 days' prior written notice to the Investment Adviser. In
the event that the General Partner terminates an agreement with an
Investment Adviser, the General Partner will: (a) cause the Partnership
to cease making new investment commitments; (b) cause the Partnership
to dissolve; or (c) appoint a replacement investment adviser with the
concurrent affirmative vote of at least a majority in interest of the
Limited Partners (or functional equivalent with respect to any
Partnership organized as a limited liability company, business trust or
other entity). If the replacement investment adviser is not a CIBC WM
Company, the Partnership will cease to rely upon the order granting the
requested relief and the General Partner will cause the Partnership to
register under the Act, unless it obtains such exemptive relief from
the Act as may be necessary. Each limited partnership agreement or
other organizational document of the Partnership (the ``Partnership
Agreement'') will provide that, in the event the General Partner gives
notice of termination to the Investment Adviser, the affirmative vote
of at least a majority in interest of the Limited Partners will be
effective to retain the Partnership's agreement with the Investment
Adviser in full force and effect. Each Partnership Agreement also will
provide that the Limited Partners may direct the Partnership to cease
making new investment commitments upon the affirmative vote of a
majority in interest of the Limited Partners.\2\
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\2\ The duration of a particular Partnership will be set forth
in its Partnership Agreement. Each Partnership may be dissolved
prior to its expiration upon the occurrence of the following events:
(i) the resignation, withdrawal, dissolution or bankruptcy of the
General Partner (or, where applicable, the resignation of the
members of the Independent Board), (ii) the insolvency or bankruptcy
of the Partnership, (iii) the sale of all or substantially all of
the Partnership's assets, (iv) the conversion of the Partnership to
corporate form pursuant to the terms of the applicable Partnership
Agreement, (v) a determination by the General Partner that it is in
the best interests of the Limited Partners to dissolve the
Partnership, or (vi) any other event requiring dissolution of the
Partnership under applicable law. Upon dissolution of a Partnership,
the Partnership's assets will be distributed in accordance with the
applicable Partnership Agreement.
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6. Interests in the Partnerships (``Interests'') will be offered
without registration in reliance on section 4(2) of the Securities Act
of 1933 (the ``Securities Act'') or Regulation D under the Securities
Act, and will be sold without a sales load or similar fee. Interests
will be sold only to ``Limited Partners,'' which will be: (a) current
or former key employees, officers, directors, partners and persons on
retainer of the CIBC WM Group (``Eligible Employees''); (b) spouses,
parents, children, spouses of children, brothers, sisters and
grandchildren of Eligible Employees (``Qualified Family Members''); or
(c) trusts or other investment vehicles established for the benefit of
Eligible Employees or Qualified Family members (``Qualified Investment
Vehicles'' and, collectively with Qualified Family Members, ``Qualified
Participants''). Interests will not be transferable except with the
express consent of the General Partner and then only to Eligible
Employees or Qualified Participants.
7. Prior to offering Interests to an Eligible Employee or Qualified
Family Member, a CIBC WM Company must reasonably believe that the
Eligible Employee or Qualified Family Member will be capable of
understanding and evaluating the merits and risks of participation in
the Partnership. Eligible Employees will be professionals engaged in
various aspects of the investment banking or financial services
business, or in related administrative, financial, accounting, legal or
operational activities.
8. Eligible Employees and Qualified Family Members must be
``accredited investors'' meeting the income requirements set forth in
rule 501(a)(6) of Regulation D under the Securities Act, except that a
maximum of 35 Eligible Employees who are sophisticated investors but
who do not meet the definition of an accredited investor may become
Limited Partners of a Partnership if each such Eligible Employee falls
into one of the following categories: (a) Eligible Employees who (i)
have a graduate degree in business, law or accounting, (ii) have a
minimum of five years of consulting, investment banking or similar
business experience, and (iii) will have had reportable income from all
sources (including any profit shares or bonus) in the calendar year
immediately preceding the Eligible Employee's admission as a Limited
Partner in excess of $120,000 and will have a reasonable expectation of
reportable income of at least $150,000 in the years in which the
Eligible Employee invests in a Partnership. In addition, an Eligible
Employee in this category (a) will not be permitted to invest in any
year more than 10% of his or her income from all sources for the
immediately preceding year in the aggregate in the Partnership and in
all other Partnerships in which he has previously invested; or (b)
Eligible Employees who have primary responsibility for operating the
Partnership. These responsibilities include identifying, investigating,
structuring, negotiating, and monitoring investments for the
Partnership, communicating with the Limited Partners, maintaining the
books and records of the partnership, and making recommendations with
respect to investment decisions by the Investment Adviser. Each
Eligible Employee in this category (b) will: (i) be closely involved
with and knowledgeable with respect to the Partnership's affairs, (ii)
be an officer or employee of a CIBC WM Company, and (iii) have had
reportable income from all sources (including any profit shares or
bonus) in the calendar year immediately preceding the Eligible
Employee's admission as a Limited Partner in excess of $120,000 and
will have a reasonable expectation of reportable income of at least
$150,000 in the years in which the Eligible Employee invests in the
Partnership. Qualified Investment Vehicles must meet the standards for
an ``accredited investor'' under rule 501(a) of Regulation D.
9. The terms of each Partnership will be disclosed to the Eligible
Employees
[[Page 38049]]
at the time they are offered the right to subscribe for Interests in
the Partnerships, at which time the Eligible Employees will be
furnished with a copy of the Partnership Agreement. The Partnership
Agreement will set forth in full the terms applicable to a Limited
Partner's investment in the Partnership.
10. A CIBC WM Company may purchase Interests, which it may offer to
new Eligible Employees joining the CIBC WM Group after the closing of
the Partnership or which it may award to Eligible Employees as a bonus
or similar compensation. A CIBC WM Company will acquire these Interests
in the same manner of payment, at the same time, and at the same price
as Interests purchased by the Limited Partners. A CIBC WM Company may
sell the Interests it has so acquired to any Eligible Employee or
Qualified Participant at any time during the life of the Partnership at
a price no greater than the net asset value of the Interests on the
previous appraisal date as defined in the Partnership Agreement after
the date of sale.
11. If a Limited Partner terminates employment with a CIBC WM
Company or is in bankruptcy, the Interests may be acquired by a CIBC WM
Company, or by any Eligible Employee or Qualified Participant
designated by a CIBC WM Company. If a CIBC WM Company does not exercise
the right to acquire the Interest, it will continue to be held by the
Limited Partner. In addition, in the event of a Limited Partner's
death, total disability or adjudication of incompetence, the Limited
Partner or a representative of the Limited Partner may have the right,
during an established time period following the occurrence of any of
those events, to tender the Limited Partner's Interest to a CIBC WM
Company or any Eligible Employee or Qualified Participant designated by
a CIBC WM Company for mandatory purchase (subject to applicable banking
regulations) by a CIBC WM Company or any Eligible Employee or Qualified
Participant designated by a CIBC WM Company.
12. If an investment program provides for vesting, an Eligible
Employee's Interest at the beginning of the program will be treated as
``unvested,'' and ``vesting'' will occur either: (a) through the
passage of time; or (b) upon the occurrence of a specified event. The
termination of an Eligible Employee's employment will not affect the
Eligible Employee's rights with respect to the vested portion of the
Interest, unless certain specified events disclosed in the relevant
Partnership Agreement occur, including the termination of employment
for cause. The portion of an Eligible Employee's Interest that is
``unvested'' at the time of the Eligible Employee's termination of
employment, and the portion that is vested in the event the specified
events disclosed in the relevant Partnership Agreement occur, may be
subject to repurchase by a CIBC WM Company or reallocation to other
Limited Partners in the relevant Partnership.
13. Upon repurchase or reallocation of a former Eligible Employee's
unvested or vested Interest, a CIBC WM Company will, at a minimum, pay
the Eligible Employee the lesser of: (a) the amount actually paid by
the Eligible Employee; or (b) the fair market value of the Interest, as
determined in good faith by a CIBC WM Company. The terms of any
repurchase or cancellation will apply equally to any Qualified
Participant of an Eligible Employee.
14. An Investment Adviser may be paid an advisory fee for its
services to a particular Partnership, which may be determined as a
percentage of assets under management or aggregate commitments. In
addition, an Investment Adviser may be entitled to a performance-based
fee based on the Partnership's net gains (``carried interest'').\3\ In
the case of a Partnership in which the General Partner is an
Independent Board, the Board members may receive compensation for their
services from either the Partnership or a CIBC WM Company.
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\3\ Any ``carried interest'' charged by a registered investment
adviser will be structured to comply with section 205 of the
Advisers Act.
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15. It is anticipated that a CIBC WM Company may contribute capital
to each Partnership in an amount equal to at least 1% of the aggregate
amount of capital contributed by the Limited Partners. A CIBC WM
Company also may undertake to contribute additional capital to a
Partnership, which may be in an amount representing some multiple of
the aggregate amount of capital contributed by the Limited Partners.
With respect to a specified portion of the capital contribution of a
CIBC WM Company (``Non-Allocable Portion''), a CIBC WM Company may
receive, instead of a pro rata allocation of profits and losses, a
cumulative return. The cumulative return may be equal to its Applicable
Rate (as defined below) with respect to, and expenses incurred in
connection with, the Non-Allocable Portion (the ``Return''), or some
other reasonable return which may be less than its pro rata allocation
of profits. The Return generally will be allocable annually out of
Partnership profits and will be payable to a CIBC WM Company when
profits are realized by the Partnership, or to the extent not
previously paid, upon the liquidation of the Partnership.
16. A CIBC WM Company may lend money to a Partnership at an
interest rate that is the lowest rate that applicant determines is
permissible under applicable banking regulations (the ``Applicable
Rate''), provided that the Applicable Rate will be no less favorable
than the rate obtainable on an arm's length basis. A CIBC WM Company
may, in its sole discretion, adopt the method for determining the
calculation of the Applicable Rate. Any indebtedness of the Partnership
will be the debt of the Partnership and without recourse to the Limited
Partners. Applicant states that the Partnership will retain the right
to require the payment of any unfunded capital contributions from the
Limited Partners for any appropriate Partnership purpose, including the
payment of Partnership indebtedness, and will be permitted to assign
this right to any lender to the Partnership.
17. Partnerships may co-invest with or through investment vehicles
sponsored and/or managed by a CIBC WM Company or by unaffiliated
entities.
18. A Partnership will not purchase or otherwise acquire any
security issued by a registered investment company if, immediately
after the purchase or acquisition, the Partnership will own in the
aggregate more than 3% of the total outstanding voting stock of the
registered investment company.
19. As soon as practicable after the end of the fiscal year of each
Partnership, each Partnership will send audited annual financial
statements to its Limited Partners. In addition, each Partnership will
send a report to its Limited Partners setting forth tax information
necessary for the preparation of tax returns.
Applicant's Legal Analysis
1. Section 6(b) of the Act provides that the SEC will exempt
employees' securities companies from the provisions of the Act to the
extent that the exemption is consistent with the protection of
investors. Section 6(b) further provides that the SEC will consider, in
determining the provisions of the Act from which the company should be
exempt, the company's form of organization and capital structure, the
persons owning and controlling its securities, the price of the
company's securities and the amount of any sales load, how the
company's funds are invested, and the relationship between the company
and the issuers of the securities in which it invests. Section
[[Page 38050]]
2(a)(13) defines an employees' securities company, in relevant part, as
any investment company all of whose securities are beneficially owned
by (i) current or former employees, or persons on retainer, of one or
more affiliated employers, (ii) immediate family members of those
persons or employers, or (iii) the employer or employers together with
any of the persons in (i) or (ii).
2. Section 7 of the Act generally prohibits investment companies
that are not registered under section 8 from selling or redeeming their
securities. Section 6(e) provides that, in connection with any order
exempting an investment company from any provision of section 7,
certain provisions of the Act, as specified by the SEC, will be
applicable to the company and other persons dealing with the company as
though that company was registered under the Act.
3. Applicant requests an order under sections 6(b) and 6(e) of the
Act exempting the Partnerships from all provisions of the Act, except
section 9, certain provisions of sections 17 and 30, sections 36
through 53, and the rules and regulations under those sections.
4. Section 17(a) of the Act generally prohibits any affiliated
person of a registered investment company, or any affiliated person of
that person, acting as prinicpal, from knowingly selling to or
purchasing any security or other property from that company. Applicant
requests an exemption from section 17(a) to permit each Partnership to:
(a) purchase portfolio investments from or sell portfolio securities to
CIBC WM, or any other affiliated person of a Partnership, or an
affiliated person of that person (``collectively, Affiliated
Entities''), on a principal basis; (b) purchase interests or property
in a company or other investment vehicle in which CIBC WM, or an
Affiliated Entity, already owns securities, or, where such company or
other investment vehicle is otherwise affiliated with CIBC WM or a
Partnership; (c) sell, put or tender, or grant options in securities or
interests in a company or other investment vehicle back to that entity,
where that entity is affiliated with CIBC WM or an Affiliated Entity;
(d) participate as a selling security holder in a public offering that
is underwritten by CIBC WM or an Affiliated Entity or in which CIBC WM
or an Affiliated Entity acts as a member of the underwriting or selling
group; (e) invest in companies, partnerships or other investment
vehicles offered, sponsored or managed by CIBC WM or an Affiliated
Entity (collectively, ``CIBC WM Sponsored Vehicles''), or to purchase
securities from CIBC WM Sponsored Vehicles; (f) invest in securities
of, or lend money to, entities with which CIBC WM or an Affiliated
Entity has performed investment banking or other services and from
which they may have received fees; and (g) purchase securities that are
underwritten by CIBC WM or an Affiliated Entity (including a member of
a selling group) on terms at least as favorable to the Partnership as
those offered to investors other than affiliated persons of CIBC WM.
5. Applicant submits that an exemption from section 17(a) is
consistent with the protection of investors. Applicant states that the
Limited Partners will have been fully informed of the possible extent
of the Partnership's investment with affiliated persons and will be
able to evaluate the attendant risks. Applicant asserts that the
community of interest among the Limited Partners and the CIBC WM Group
will provide the best protection against any risk of abuse.
6. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
any affiliated person or principal underwriter of a registered
investment company, or any affiliated person of that person or
underwriter, acting as principal, from participating in any joint
arrangement with the company unless authorized by the SEC. Rule 17d-1
under the Act permits the SEC to approve a proposed joint transaction
covered by the terms of section 17(d). In determining whether to
approve a transaction, the SEC is to consider whether participation of
the investment company in the arrangement is consistent with the
provisions, policies, and purposes of the Act and the extent to which
the company's participation is on a basis different from or less
advantageous than that of other participants.
7. Applicant requests relief to permit affiliated persons of each
Partnership or affiliated persons of any of those persons, to
participate in any joint arrangement in which the Partnership is a
participant. Applicant submits that the flexibility to structure co-
investments and joint investments in the manner described in the
application will not involve abuses of the type section 17(d) and rule
17d-1 were designed to prevent. Applicant further states that the
concern that permitting joint investments with CIBC WM or another CIBC
WM affiliated person on the one hand, and a Partnership on the other,
might lead to disadvantageous treatment of the Partnership will be
mitigated by the fact that CIBC WM is acutely concerned with its
relationship with the key employees who invest in the Partnerships.
Applicant also asserts that, in light of CIBC WM's purpose of
establishing the Partnerships to reward Eligible Employees and to
attract highly qualified personnel to CIBC WM, it is unlikely that an
affiliated co-investor will enter into a transaction with a Partnership
with the intent of disadvantaging the Partnership. Applicant also
states that any investment by a Partnership made concurrently with an
affiliated co-investor will on the same terms as the investment by the
affiliated co-investor.
8. Section 17(f) of the Act designates the entities that may act as
custodians of investment company assets. Rule 17f-1 imposes certain
requirements when the custodian is a member of a national securities
exchange. Applicant requests an exemption from section 17(f) and rule
17f-1 to the extent necessary to permit a CIBC WM Company to act as
custodian of Partnership assets without a written contract, as would be
required by rule 17f-1(a). Applicant also requests an exemption from
the requirement in rule 17f-1(b)(4) that an independent account
periodically verify the assets held by the custodian. Applicant states
that, because of the community of interest between the Partnerships and
the CIBC WM Group and the existing requirement for an independent
annual audit, compliance with these requirements would be unnecessarily
burdensome and expensive. The Partnerships will comply with all other
requirements of rule 17f-1.
9. Section 17(g) of the Act and rule 17g-1 under the Act generally
require the bonding of officers and employees of a registered
investment company who have access to its securities or funds. Rule
17g-1 requires that a majority of directors who are not interested
persons take certain actions and give certain approvals relating to
fidelity bonding. In the case of any Partnership for which a CIBC WM
Company is the General Partner, applicant requests exemptive relief to
permit the General Partner, applicant requests exemptive relief to
permit the General Partner's board of directors or similar body (the
``Board''), who may be deemed interested persons, to take actions and
make determinations set forth in the rule. Applicant states that,
because all of the members of the Board will be interested persons,
applicant could not comply with rule 17g-1 without the requested
relief. Specifically, each Partnership will comply with rule 17g-1 by
having a majority of the directors of the Board take actions and make
determinations as are set forth in rule 17g-1. Applicant states that
each Partnership will comply
[[Page 38051]]
with all other requirements of rule 17g-1.
10. Section 17(j) of the Act and paragraph (a) of rule 17j-1 under
the Act prohibit certain enumerated persons from engaging in fraudulent
or deceptive practices in connection with the purchase or sale of a
security held or to be acquired by a registered investment company.
Rule 17j-1 also requires that every registered investment company adopt
a written code of ethics and that every access person of a registered
investment company report personal securities transactions. Applicant
requests an exemption from these provisions of rule 17j-1 because they
are unnecessarily burdensome as applied to the Partnerships. Applicant
will remain subject to rule 17j-1(a).
11. Applicant requests an exemption from the requirements of
sections 30(a), 30(b), and 30(e) of the Act, and the rules under those
sections. These provisions require registered investment companies to
prepare and file with the SEC and mail to their shareholders certain
periodic reports and financial statements. Applicant contends that the
forms prescribed by the SEC for periodic reports have little relevance
to the Partnerships and would entail administrative and legal costs
that outweigh any benefit to the Limited Partners. Applicant requests
exemptive relief to the extent necessary to permit each Partnership to
report annually to its Limited Partners. Applicant also requests an
exemption from section 30(h) of the Act to the extent necessary to
exempt the General Partner (including any of its members) of each
Partnership from filing Forms 3, 4 and 5 under section 16(a) of the
Exchange Act with respect to their ownership of Interests in the
Partnership. Applicant asserts that, because there will be no trading
market for the Interests and the transfer of Interests will be severely
restricted, these filings are unnecessary for the protection of
investors and burdensome to those required to make them.
Applicant's Conditions
Applicant agrees that the order granting the requested relief will
be subject to the following conditions:
1. Each proposed transaction otherwise prohibited by section 17(a)
or section 17(d) and rule 17d-1 (the ``Section 17 Transactions'') will
be effected only if the Investment Adviser determines that: (a) the
terms of the transaction, including the consideration to be paid or
received, are fair and reasonable to the Limited Partners and do not
involve overreaching of the Partnership or its Limited Partners on the
part of any person concerned; and (b) the transaction is consistent
with the interests of the Limited Partners, the Partnership's
organizational documents, and the Partnership's reports to its Limited
Partners. In addition, the Investment Adviser will record and preserve
a description of the Section 17 Transactions, the Investment Adviser's
findings, the information or materials upon which the Investment
Adviser's findings are based, and the basis for those findings. These
records will be maintained for the life of the Partnership and at least
two years thereafter, and will be subject to examination by the SEC and
its staff.\4\
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\4\ Each Partnership will preserve the accounts, books and other
documents required to be maintained in an easily accessible place
for the first two years.
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2. In connection with the Section 17 Transactions, the Investment
Adviser will adopt, and periodically review and update, procedures
designed to ensure that reasonable inquiry is made, prior to the
consummation of the transaction, with respect to the possible
involvement in the transaction of any affiliated person or promoter of
or principal underwriter for the Partnerships, or any affiliated person
of that person, promoter, or principal underwriter.
3. The Investment Adviser will not invest the funds of any
Partnerships in any investment in which an ``Affiliated Co-Investor''
(as defined below) has acquired or proposes to acquire the same class
of securities of the same issuer, where the investment involves a joint
enterprise or other joint arrangement within the meaning of rule 17d-1
in which the Partnership and an Affiliated Co-Investor are
participants, unless the Affiliated Co-Investor, prior to disposing of
all or part of its investment: (a) gives the Investment Adviser
sufficient, but not less than one day's, notice of its intent to
dispose of its investment; and (b) refrains from disposing of its
investment unless the Partnership has the opportunity to dispose of the
Partnership's investment prior to, or concurrently with, on the same
terms as, and pro rata with, the Affiliated Co-Investor. The term
``Affiliated Co-Investor'' means any person who is: (i) an ``affiliated
person'' (as that term is defined in the Act) of the Partnership; (ii)
CIBC WM or a CIBC WM Company; (iii) an officer or director of CIBC WM
or CIBC WM Company; (iv) a company, partnership, or other investment
vehicle offered, sponsored, or managed by CIBC WM or a CIBC WM Company;
(v) any entity with respect to which CIBC WM or a CIBC WM Company
provides management, investment management or similar services as
manager, investment manager, or general partner or in a similar
capacity, for which it may receive compensation, including without
limitation, management fees, performance fees, carried interests
entitling it to share disproportionately in income and capital gains or
similar compensation; or (vi) a company in which an officer, director,
or member of the General Partner acts as an officer, director, or
General Partner, or has a similar capacity to control the sale or other
disposition of the company's securities. The restrictions contained in
this condition, however, will not be deemed to limit or prevent the
disposition of an investment by an Affiliated Co-Investor: (i) To its
direct or indirect wholly-owned subsidiary, to any company (a
``Parent'') of which the Affiliated Co-Investor is a direct or indirect
wholly-owned subsidiary, or to a direct or indirect wholly-owned
subsidiary of its Parent; (ii) to Qualified Family Members of the
Affiliated Co-Investor or a trust established for any Affiliated Co-
Investor or any such family member; (iii) when the investment is
comprised of securities that are listed on any exchange registered as a
national securities exchange under section 6 of the Exchange Act; (iv)
when the investment is comprised of securities that are national market
system securities pursuant to section 11A(a)(2) of the Exchange Act and
rule 11Aa2-1 under that Act; (v) when the securities are government
securities as defined in section 2(a)(16) of the Act; (vi) when the
investment is comprised of securities that are listed on or traded on
any foreign securities exchange or board of trade that satisfies
regulatory requirements under the law of the jurisdiction in which the
foreign securities exchange or board of trade is organized similar to
those that apply to a national securities exchange or a national market
system for securities, or (vii) when any entity with respect to which
CIBC WM or a CIBC WM Company provides management, investment
management, or similar services as manager, investment manager, or
general partner or in a similar capacity, if CIBC WM or such entity
does not have the actual investment discretion over the sale or
disposition of the entity's securities.
4. Each Partnership and its General Partner and Investment Adviser
will maintain and preserve, for the life of the Partnership and at
least two years thereafter, the accounts, books, and
[[Page 38052]]
other documents that constitute the record forming the basis for the
audited financial statements that are to be provided to the Limited
Partners, and each annual report of the Partnership required by the
terms of the applicable Partnership Agreement to be sent to the Limited
Partners, and agree that these records will be subject to examination
by the SEC and its staff.\5\
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\5\ Each Partnership will preserve the accounts, books and other
documents required to be maintained in an easily accessible place
for the first two years.
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5. The General Partner will send or cause to be sent to each
Limited Partner who had an interest in the Partnership, at any time
during the fiscal year then ended, Partnership financial statements
audited by the Partnership's independent accountants. At the end of
each fiscal year,the General Partner will make or cause to be made a
valuation made of all of the assets of the Partnership as of the fiscal
year end in a manner consistent with customary practice with respect to
the valuation of assets of the kind held by the Partnership. In
addition, as soon as practicable after the end of each fiscal year of
each Partnership, the General Partner will send or cause to be sent a
report to each person who was a Limited Partner at any time during the
fiscal year then ended, setting forth the tax information necessary for
the preparation by the Limited Partners of their federal and state
income tax returns, and a report of the investment activities of the
Partnership during that year.
6. In any case where purchases or sales are made by a Partnership
from or to an entity affiliated with the Partnership by reason of a 5%
or more investment in the entity by a CIBC WM Group director, officer,
or employee, that individual will not participate in the Investment
Adviser's determination of whether or not to effect the purchase or
sale.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-17882 Filed 7-13-99; 8:45 am]
BILLING CODE 8010-01-M