[Federal Register Volume 65, Number 43 (Friday, March 3, 2000)]
[Notices]
[Pages 11616-11617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-5181]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24317, 812-11984]


Safeguard Scientifics, Inc.; Notice of Application

February 25, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application pursuant to section 2(a)(9) of the 
Investment Company Act of 1940 (the ``Act'').

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APPLICANT: Safeguard Scientifics, Inc. (``Safeguard'').

SUMMARY OF APPLICATION: Applicant requests an order declaring that it 
controls Internet Capital Group, Inc. (``ICG'') within the meaning of 
the Act notwithstanding that it owns less than 25% of the voting 
securities of ICG.

FILING DATE: The application was filed on February 25, 2000.

HEARING OR NOTIFICATION OF HEARING: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicant with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on March 21, 2000 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 Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 5th Street, NW, Washington, DC 
20549-0609. Safeguard, 435 Devon Park Drive, Building 800, Wayne, 
Pennsylvania 19087.

FOR FURTHER INFORMATION CONTACT: Ann Dubey, Senior Counsel, at (202) 
942-0687, or Nadya Roytblat, Assistant Director, 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 
Commission's Public Reference Branch, 450 5th Street, NW, Washington, 
DC 20549-0102 (tel. 202-942-8090).

Applicant's Representations

    1. Safeguard, a Pennsylvania corportaion, states that it is 
actively engaged in the internet infrastructure business through a core 
group of companies. Safeguard was relying on rule 3a-1 under the Act. 
Rule 3a-1 provides an exemption from the definition of investment 
company if, among other things, no more than 45% of a company's total 
assets consist of, and no more than 45% of its net income over the last 
four quarters is derived from, securities other than shares of 
majority-owned subsidiaries and companies primarily controlled by it. 
Since August, 1999, Safeguard has been relying on rule 3a-2 under the 
Act, which provides a one-year exemption from the definition of 
investment company for certain transient investment companies.
    2. Safeguard previously owned more than 25% of the voting 
securities of ICG. Safeguard states that ICG is an internet company 
actively engaged in business-to-business electronic commerce through a 
network of partner companies. ICG and Safeguard have had a historic 
relationship. ICG was formed by two Safeguard executives in 1996. 
Safeguard originally owned 33% of ICG's voting securities, an ownership 
position that began to decline as ICG needed additional financing. 
Safeguard states that its interest in ICG has been diluted since 
August, 1999 due to the exercise of options, and ICG's additional 
private and public offerings. Safeguard also sold approximately 4.8% of 
its shares in ICG to Safeguard's shareholders through a subscription 
program. Safeguard states that currently it owns approximately 14% of 
ICG's common stock. Safeguard states that its interest in ICG 
constitutes a substantial portion of Safeguard's total assets.

Applicant's Legal Analysis

    1. Safeguard requests an order under section 2(a)(9) of the Act 
declaring that it controls ICG.\1\ Section 2(a)(9) defines ``control'' 
as the power to exercise a controlling influence over the management or 
policies of a company. Section 2(a)(9) also provides that a person who 
does not own more than 25% of a company's voting securities is presumed 
not to control the company. Section 2(a)(9) further provides that this 
presumption may be rebutted by evidence but continues until a 
determination to the contrary is made by the Commission.
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    \1\ Safeguard states that it does not seek an order or request 
the Commission to determine whether Safeguard primarily controls ICG 
for purposes of section 3(a) of the Act or rule 3a-1 under the Act, 
or otherwise determine whether Safeguard is an investment company 
under the Act.
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    2. Safeguard states that currently it owns 13.93% of ICG's 
outstanding voting securities. Safeguard has been since ICG's 
inception, and continues to be, ICG's largest single shareholder. \2\ 
Safeguard also states that its officers are directors occupy three out 
of eight seats on ICG's board of directors. These directors include a 
Vice President of Safeguard and the Vice Chairman of the Board of 
Safeguard (who serves as the Chairman of ICG's board of directors). The 
Safeguard director on the ICG Board serves as President and Chief 
Executive Officer of ICG.
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    \2\ Safeguard states that the only other known shareholder 
owning more then 5% of ICG's voting stock is Comcast ICG, Inc., 
which owns approximately 9.3%.
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    3. Safeguard also states that it has a team of its employees 
assigned to actively assist ICG in its management, operations and 
finances. Safeguard states that it also assists ICG, among other 
things, in structuring and negotiating business alliances, forming 
general corporate and marketing strategies, conducting financial 
accounting, locating and evaluating financing vehicles, recruiting 
board members and structuring employee option plans.
    4. Safeguard asserts that, as a result of its status as the largest 
single shareholder of ICG and its significant representation on ICG's 
board of directors, Safeguard is able to exercise, and exercises, a 
controlling influence over the management and operations of ICG within 
the meaning of section 2(a)(9) of the Act. Thus, Safeguard states that 
it has made a showing sufficient for

[[Page 11617]]

a finding under section 2(a)(9) of the Act that it controls ICG.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 00-5181 Filed 3-2-00; 8:45 am]
BILLING CODE 8010-01-M