[Federal Register Volume 66, Number 198 (Friday, October 12, 2001)]
[Notices]
[Pages 52159-52160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-25698]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25205; 812-12016]


Firstmark Corp.; Notice of Application.

October 5, 2001.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION:  Notice of an application for an order under section 6(c) of 
the Investment Company Act of 1940 (the ``Act'').

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SUMMARY OF THE APPLICATION: Firstmark Corp. (``Applicant'') requests an 
order exempting it from all provisions of the Act until the earlier of 
one year from the date the requested order is issued or the date it no 
longer may be deemed to be an investment company.

FILING DATES: The application was filed on March 3, 2000 and amended on 
October 2, 2001.

Hearing or Notification of Hearing:

    An order granting the application 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 October 31, 2001 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 who wish to be notified of a 
hearing may request notification by writing to the Commission's 
Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicant, Three James Center, 7th Floor, 1051 Eash Cary 
Street, Richmond, VA 23219.

FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel, 
at (202) 942-0714, or Michael W. Mundt, 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 Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (telephone (202) 942-8090).

[[Page 52160]]

Applicant's Representations

    1. Applicant is a Maine corporation formed in 1982. Most recently, 
Applicant through wholly-owned subsidiaries, was engaged primarily in 
the title insurance business and related services. On December 2, 1998, 
Applicant executed a stock purchase agreement (``Agreement'') under 
which Applicant and its wholly-owned subsidiary, Southern Capital 
Acquisition Corporation (``SCAC''), would sell its principal operating 
subsidiary, Investor Southern Corporation (``ISC''), to Old Guard 
Group, Inc., a Pennsylvania corporation (the ``Asset Sale''). Prior to 
the Asset Sale, Applicant's board of directors (``Board'') adopted a 
resolution, effective December 15, 1998, declaring Applicant's intent 
to become engaged primarily in non-investment company businesses 
following the consummation of the Asset Sale. The Board reaffirmed this 
intent on March 1, 2000.
    2. As a result of the Asset Sale, which occurred on March 5, 1999, 
Applicant, through SCAC, received $6,750,000, and the right to receive 
certain additional cash payments in 2000, 2001, and 2002, if the pre-
tax net income of ISC and its subsidiaries in the fiscal years ending 
December 31, 1999, 2000, and 2001, reached targeted goals.\1\ Applicant 
states that it invested its cash from the Asset Sale in a money market 
fund registered under the Act (``Invested Proceeds'') to preserve its 
value pending application of such assets to an acquisition of or merger 
with an operating business. As of March 31, 2001, the balance of the 
Invested Proceeds was $4,248,000 or 84.9% of Applicant's total assets 
(exclusive of U.S. Government securities and cash items) on an 
unconsolidated basis (and approximately 92.5% on a consolidated basis). 
Applicant also states that as of March 31, 2001, the remaining 
investments of Applicant and its two wholly-owned subsidiaries, SCAC 
and QFAN Marketing Services, Inc. (each, a ``Subsidiary''), included 
real estate, shares of two money market funds registered under the Act, 
other marketable securities, and stamps and artwork (``Other 
Investments''), totaling approximately $261,515, $6,998, $25,719, and 
$9,209, respectively. Applicant states that the Other Investments 
predate the Asset Sale, and that Applicant is in the process of 
liquidating the Other Investments, except for the investments in the 
money market funds.
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    \1\ Applicant received an earn-out payment in the amount of 
$167,683 for the fiscal year ending December 31, 1999.
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Applicant's Legal Analysis

    1. Under section 3(a)(1)(C) of the Act, an issuer is an investment 
company if it is engaged or proposes to engage in the business of 
investing, reinvesting, owning, holding or trading in securities, and 
owns or proposes to acquire investment securities having a value 
exceeding 40 per cent of the value of such issuer's total assets 
(exclusive of government securities and cash items) on an 
unconsolidated basis. Section 3(a)(2) of the Act defines ``investment 
securities'' to include all securities except government securities, 
securities which are issued by employees' securities companies, and 
securities issued by majority-owned subsidiaries of the owner which are 
not investment companies, and are not relying on the exception from the 
definition of investment company in section 3(c)(1) or 3(c)(7) of the 
Act.
    2. Applicant states that the Invested Proceeds and Other 
Investments may constitute ``investment securities'' within the meaning 
of section 3(a)(2) of the Act. Applicant states that because the 
Invested Proceeds and Other Investments represent more than 40% of its 
total assets (exclusive of government securities and cash items) on an 
unconsolidated basis, Applicant may be an investment company within the 
meaning of section 3(a)(1)(C) of the Act. Rule 3a-2 under the Act 
generally provides that, for purposes of section 3(a)(1)(C), an issuer 
will not be deemed to be engaged in the business of investing, 
reinvesting, owning, holding or trading in securities for a period not 
to exceed one year if the issuer has a bona fide intent to be engaged 
in a non-investment company business. Applicant states that it relied 
on the one-year ``transient'' investment company exception under rule 
3a-2 for the period ending March 5, 2000.
    3. Section 6(c) of the Act permits the Commission to exempt any 
person, security, or transaction from any provision of 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. Applicant requests an exemption under section 6(c) from all 
provisions of the Act until the earlier of one year from the date the 
requested order is issued or such time as Applicant would no longer be 
required to register as an investment company under the Act. Applicant 
believes that within this period it will be able to complete an 
acquisition of or a merger with a new operating business.
    5. Applicant states that since the Asset Sale, it has devoted 
substantial effort to acquire or merge with an unaffiliated business. 
Applicant believes that the inability to consummate an acquisition or 
merge was largely due to certain civil litigation matters involving the 
Applicant as a result of the conduct of Applicant's previous 
management. Applicant states that all litigation matters have now been 
resolved, and the payment in settlement of claims has been drawn from 
Invested Proceeds. Applicant states that it continues to hold the 
Invested Proceeds to preserve the value of assets while it pursues 
possible acquisitions or mergers, and it has not engaged in any 
speculation or trading of securities. Applicant contends that 
registration under the Act would involve unnecessary burden and expense 
for Applicant and its stockholders and would serve no regulatory 
purpose. Applicant thus asserts that the requested relief is consistent 
with the protection of investors and the purposes fairly intended by 
the policy and provisions of the Act.

Applicant's Conditions

    Applicant agrees that the requested exemption will be subject to 
the following conditions:
    1. Applicant will not purchase or otherwise acquire (directly or 
through a Subsidiary) any securities other than short-term U.S. 
Government securities, certificates of deposit, commercial paper rated 
A-1/P-1, and shares of registered money market funds; except that 
Applicant may acquire equity securities of an issuer that is not an 
investment company as defined in section 3(a) of the Act or is relying 
on an exclusion from the definition of investment company under section 
3(c) of the Act other than section 3(c)(1) or 3(c)(7), in connection 
with the acquisition of an operating business as evidenced by a 
resolution approved by Applicant's Board.
    2. Applicant will not hold itself out as being engaged in the 
business of investing, reinvesting, owning, holding or trading in 
securities.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-25698 Filed 10-11-01; 8:45 am]
BILLING CODE 8010-01-M