[Federal Register Volume 64, Number 197 (Wednesday, October 13, 1999)]
[Notices]
[Pages 55499-55502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26672]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. 24073; 812-11294]


MONY Life Insurance Company, et al.; Notice of Application

October 5, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of an application under sections 6(c) and 17(b) of the 
Investment Company Act of 1940 (the ``Act'') for an exemption from 
section 17(a) of the Act.

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SUMMARY OF APPLICATION: Applicants request an order that would permit 
certain registered open-end management investment companies to engage 
in principal transactions with a broker-dealer that is an affiliated 
person of an affiliated person of the investment companies.

APPLICANTS: MONY Life Insurance Company (``MONY''); The MONY Group Inc. 
(the ``Holding Company''); MONY Series Fund, Inc. (``MONY Series'' or a 
``Fund''); The Enterprise Group of Funds, Inc. (``Enterprise Group'' or 
a ``Fund''); Enterprise Accumulation Trust (``Enterprise Trust'' or a 
``Fund'', together with Enterprise Group, the ``Enterprise Funds,'' and 
together with Enterprise Group and MONY Series, the ``Funds''); MONY 
Life Insurance Company of America (``MONY America'' or an ``Adviser''); 
Enterprise Capital Management, Inc. (``Enterprise Capital'' or an 
``Adviser''); 1740 Advisers, Inc. (``1740 Advisers'' or an ``Adviser'' 
and together with MONY America and Enterprise Capital, the 
``Advisers''); the portfolios of the Funds (``Portfolios''); any 
Portfolio organized in the future; any registered open-end management 
investment company in the future advised by one of the Advisers or by a 
person controlling, controlled by or under common control with the 
Advisers; The Goldman Sachs Group, Inc.; and Goldman, Sachs & Co. 
(``Goldman Sachs''). \1\

    \1\ The term ``Goldman Sachs'' includes all entities now or in 
the future controlling, controlled by, or under common control (as 
defined in section 2(a)(9) of the Act) with Goldman, Sachs & Co. Any 
existing entity or future entity that in the future intends to rely 
on the requested order will do so only in accordance with the terms 
and conditions of the application.
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FILING DATES: The application was filed on September 4, 1998, and 
amended on December 1, 1998. Applicants have agreed to file an 
additional amendment, the substance of which is incorporated 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.

[[Page 55500]]

Interested persons may request a hearing by writing to the SEC's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the SEC by 5:30 p.m. 
on November 1, 1999 and should be accompanied by proof of service on 
the 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 issue contested. 
Persons who wish to be notified of a hearing may request notification 
by writing the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549-0609; Applicants: MONY, the Holding Company, MONY Series, MONY 
America and 1740 Advisers, 1740 Broadway, New York, N.Y. 10019; 
Enterprise Group, Enterprise Trust, and Enterprise Capital, Atlanta 
Financial Center, 3343 Peachtree Road, N.E., Suite 450, Atlanta, 
Georgia 30326-1022, Attn: Catherine McClellan, Esq.; and The Goldman 
Sachs Group, Inc. and Goldman Sachs, 85 Broad Street, New York, N.Y. 
10004, Attn: David J. Greenwald, Esq.

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 at the 
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 
20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. MONY is a stock life insurance company organized under the laws 
of New York and registered under the Investment Advisers Act of 1940 
(the ``Advisers Act''). MONY Series is an open-end management 
investment company registered under the Act and organized as a Maryland 
corporation. MONY Series currently consists of seven Portfolios. MONY 
America, an Arizona stock life insurance company, is registered under 
the Advisers Act and serves as investment adviser to the MONY Series. 
MONY America is a wholly-owned subsidiary of MONY.
    2. Enterprise Group is an open-end management investment company 
registered under the Act and organized as a Maryland corporation 
.Enterprise Group currently consists of seventeen Portfolios. 
Enterprise Trust is an open-end management investment company 
registered under the Act and organized as a Massachusetts business 
trust. Enterprise Trust currently consists of fourteen Portfolios. 
Shares of the portfolios of MONY Series and Enterprise Trust currently 
are sold to MONY America and MONY for allocation among their various 
accounts to fund benefits under certain life insurance contracts.
    3. Enterprise Capital, a wholly-owned subsidiary of MONY, is 
registered under the Advisers Act and serves as investment adviser to 
each Enterprise Fund. 1740 Advisers is registered under the Advisers 
Act and serves as subadviser to the Equity Income Fund of Enterprise 
Group and the Equity Income Portfolio of Enterprise Trust. 1740 
Advisers is a wholly-owned subsidiary of MONY.
    4. Goldman Sachs is an international investment banking 
organization. Goldman Sachs conducts most of its broker-dealer business 
in the United States through Goldman Sacs & Co., a broker-dealer 
registered under the Securities Exchange Act of 1934. Goldman, Sachs & 
Co. acts as a primary dealer in United States government securities and 
is a member of the major United States securities and commodities 
exchanges. Goldman Sachs is the sole general partner of certain private 
investment partnerships and employees' securities companies (the 
``Goldman Sachs Affiliates''). Goldman Sachs has an aggregate economic 
interest in the Goldman Sachs Affiliates of approximately 15.3%.
    5. On November 16, 1998, MONY converted from a mutual life 
insurance company to a stock life insurance company pursuant to a plan 
of reorganization (the ``demutualization''). Also on that date, the 
Holding Company, a Delaware corporation, completed a public offering of 
its common stock. Before the demutualization, the Goldman Sachs 
Affiliates had purchased warrants (the ``Warrants'') to purchase from 
the Holding Company 7% of its outstanding common stock. As a result of 
the demutualization and upon the future exercise of the Warrants by the 
Goldman Sachs Affiliates, the Goldman Sachs Affiliates could own up to 
7% of the outstanding common stock of the Holding Company.
    6. Applicants state that the Goldman Sachs Affiliates currently own 
no shares of Holding Company common stock. Applicants further state 
that the Goldman Sachs Affiliates have agreed, under the terms of a 
Determination of Non-Control from the State of New York Insurance 
Department (the ``NYID Order''), to notify the New York Insurance 
Department before exercising the Warrants or selling the Warrants or 
common stock underlying the Warrants. Applicants also state that under 
the NYID Order, Goldman Sachs is prohibited from acquiring, directly or 
indirectly, from any person, any additional securities issued by the 
Holding Company or any of its affiliates, except securities acquired in 
the ordinary course of Goldman Sachs' business as an underwriter, 
broker/dealer, investment manager, or investment adviser. Applicants 
state that Goldman Sachs does not own and will not acquire securities 
constituting in the aggregate 5% or more of the outstanding voting 
securities of the Holding Company, other than the securities that the 
Goldman Sachs Affiliates may acquire upon exercise of the Warrants.

Applicants' Legal Analysis

    1. Section 17(a) of the Act prohibits an affiliated person of a 
registered investment company, or an affiliated person of such person 
(``second-tier affiliate''), acting as principal, from knowingly 
selling to or purchasing from the company any security or other 
property. Section 2(a)(3) of the Act defines an ``affiliated person'' 
of another person to include: (a) any person directly or indirectly 
owning, controlling, or holding with power to vote 5% or more of the 
outstanding voting securities of the other person; (b) any person 5% or 
more of whose outstanding voting securities are directly or indirectly 
owned; and (c) any person directly or indirectly controlling, 
controlled by, or under common control with, the other person.
    2. Applicants state that each of the Advisers is an indirect 
wholly-owned subsidiary of the Holding Company, and the Goldman Sachs 
Affiliates have the right to acquire 7% of the outstanding common stock 
of the Holding Company. Upon exercise of the Warrants by the Goldman 
Sachs Affiliates in an amount that would result in Goldman Sachs 
holding more than 5% of the outstanding voting securities of the 
Holding Company, Goldman Sachs would become an affiliated person of the 
Holding Company, which is the parent corporation of MONY, which in turn 
owns 100 percent of each of the Advisers. Applicants state that, in 
such event, any principal transactions between a Portfolio and Goldman 
Sachs may be prohibited by section 17(a) of the Act.
    3. Section 17(b) of the Act authorizes the SEC to exempt a 
transaction from section 17(a) of the Act if evidence

[[Page 55501]]

establishes that: (a) the terms of the proposed transaction are 
reasonable and fair and do not involve overreaching on the part of any 
person; (b) the proposed transaction is consistent with the policy of 
each registered investment company concerned; and (c) the proposed 
transaction is consistent with the general purposes of the Act. Section 
6(c) of the Act permits the SEC to exempt any person, security, or 
transaction from any provision of the Act or any rule under the Act if 
and to the extent that the 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.
    4. Applicants request relief under sections 6(c) and 17(b) to 
permit the Portfolios to engage in principal transactions with Goldman 
Sachs. Applicants state that permitting the Portfolios to deal with 
Goldman Sachs would make it easier for the subadvisers to the 
Portfolios (``Portfolio Managers'') to achieve best price and 
execution. Applicants state that the requested exemption would apply 
only where Goldman Sachs is deemed to be a second-tier affiliate of a 
Portfolio solely because of the Goldman Sachs Affiliates' ownership 
interest in the Holding Company as a result of the exercise of the 
Warrants. Applicants submit that, for the reasons discussed below, the 
proposed transactions meet the standards set forth in sections 6(c) and 
17(b).
    5. Applicants submit that the primary purpose of section 17(a) is 
to prevent persons with the power to control an investment company from 
using that power to such persons' own pecuniary advantage (i.e., to 
prevent self-dealing). Applicants submit that the proposed transactions 
do not give rise to the abuse that section 17(a) was designed to 
prevent. Applicants state that, as a condition to the requested relief, 
Goldman Sachs will not control (within the meaning of section 2(a)(9) 
of the Act), directly or indirectly, the Holding Company, MONY, or the 
Advisers. Further, Goldman Sachs will not directly or indirectly 
consult with the Advisers or any other Portfolio Manager concerning the 
selection of Portfolio Managers or allocation of principal or brokerage 
transactions for any Portfolio, or in any way seek to influence the 
choice of broker or dealer for any Portfolio. Additionally, applicants 
represent that there is or will be no express or implied understanding 
between Goldman Sachs and the Advisers of any Fund that the Advisers 
will cause any Fund to enter into transactions with Goldman Sachs or 
give a preference to Goldman Sachs in effecting the transactions 
between the Funds and Goldman Sachs.
    6. Applicants state that Goldman Sachs' potential influence over 
the Holding Company is further limited by the terms of the NYID Order. 
Under the NYID Order, the Goldman Sachs Affiliates have agreed to 
certain limitations on their rights as shareholders of the Holding 
Company. The Goldman Sachs Affiliates also may nominate no more than 
one director to the Holding Company's 13-member board of directors (the 
``Board''). In addition, the Goldman Sachs Affiliates have agreed to 
vote their shares of common stock, in the Holding Company's discretion, 
either in accordance with the recommendation of the Board or in the 
same proportion as the holders of common stock who are not affiliated 
with either the Holding Company or Goldman Sachs.
    7. Applicants state that, as a condition to the requested relief, 
the boards of directors/trustees of the Funds (``Fund Boards''), 
including a majority of disinterested directors/trustees, will adopt 
certain procedures to ensure that the terms of the transactions between 
the Funds and Goldman Sachs are fair and reasonable and do not involve 
overreaching (the ``Procedures''). Applicants assert that the 
Procedures will require careful monitoring by the Fund Boards of 
securities transactions with Goldman Sachs.

Applicants' Conditions

    Applicants agree that the order granting the requested relief will 
be subject to the following conditions:
    1. Goldman Sachs will not control the Holding Company, MONY, or the 
Advisers, directly or indirectly, within the meaning of section 2(a)(9) 
of the Act.
    2. Goldman Sachs will not directly or indirectly consult with the 
Advisers or any other Portfolio Manager concerning the selection of 
Portfolio Managers or allocation of principal or brokerage transactions 
for any Portfolio, or in any way seek to influence the choice of broker 
or dealer for any Portfolio.
    3. The Fund Boards, including a majority of disinterested 
directors/trustees, will approve procedures permitting principal 
transactions between the Funds and Goldman Sachs and will no less 
frequently than quarterly: (a) review any transactions effected with 
Goldman Sachs on a principal basis, including the terms of each 
transaction, and (b) compare the volume of transactions effected with 
Goldman Sachs with the volume of transactions effected with Goldman 
Sachs prior to Goldman Sachs' becoming an affiliated person of the 
Holding Company. Such procedures will provide: (a) for an internal 
approach reasonably designed to ensure that the consideration paid or 
received by a Portfolio in principal transactions with Goldman Sachs 
will be reasonable and fair and that the conditions of the order 
requested herein will be met; and (b) on a quarterly basis, that each 
Adviser will provide to each Fund Board a report listing principal 
transactions entered into on behalf of a Portfolio with Goldman Sachs, 
including the name and amount of the security, the price, the identity 
of other dealers, if any, with whom the transaction could have been 
effected, and a brief explanation of why the transaction was effected 
with Goldman Sachs. The Fund Boards, including a majority of the 
disinterested directors/trustees, as frequently as will appear 
appropriate and no less frequently than annually, will review the 
procedures to ascertain their continued appropriateness. In approving 
and reapproving the procedures, the Fund Boards, including a majority 
of the disinterested directors/trustees, must determine that the 
procedures are fair and reasonable and in the best interest of each 
Fund and its shareholders.
    4. Each Fund will: (a) maintain and preserve permanently in an 
easily accessible place a written copy of the procedures and conditions 
followed in connection with principal transactions with Goldman Sachs 
as principal; and (b) maintain and preserve for a period not less than 
six years from the end of the fiscal year in which any such 
transactions occurred, the first two years in an easily accessible 
place, a written record of each such transaction setting forth a 
description of the security purchased or sold, that the entity on the 
other side of the transaction was Goldman Sachs and the terms of the 
transaction, and the information or materials upon which the 
determination was made that each principal transaction was made in 
accordance with the procedures and conditions set forth in the 
application.
    5. The legal departments of the Advisers will prepare guidelines 
for personnel of the Advisers to make certain that transactions 
effected pursuant to this order comply with the conditions to this 
order, and that Goldman Sachs and the Advisers generally maintain an 
arm's length relationship. The legal departments of the Advisers will 
periodically monitor the activities of the Advisers to make certain 
that the conditions to this order are adhered to.

[[Page 55502]]

    6. The requested order will remain in effect only so long as the 
NYID Order remains in effect. If the NYID Order is amended or modified, 
applicants will not rely on the requested order without seeking 
assurance from the staff of the Division of Investment Management that 
the requested order will remain in effect.
    7. No existing or future registered investment company will rely on 
the requested order until the company's board of directors/trustees, 
including a majority of the disinterested directors/trustees, has 
approved the company's participation in the transactions permitted 
under the order and has determined that such participation by the 
company is in the best interests of the company and its shareholders. 
The minutes of the meeting of the company's board of directors/trustees 
at which this determination is made will reflect the reasons for the 
director's/trustees' determination.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-26672 Filed 10-12-99; 8:45 am]
BILLING CODE 8010-01-M