[Federal Register Volume 67, Number 8 (Friday, January 11, 2002)]
[Notices]
[Pages 1523-1524]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-806]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-25357; 812-12746]


Capital One Financial Corporation, et al.; Notice of Application

January 7, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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Summary of Application: Applicants request an order to permit certain 
finance subsidiaries of Capital One Financial Corporation (``COFC'') to 
sell securities and use the proceeds to finance the business activities 
of COFC, and certain companies controlled by COFC (``Controlled 
Companies'').

Applicants: COFC; Capital One Capital II, Capital One Capital III and 
Capital One Capital IV (collectively, the ``COC Trusts''); and Capital 
One Capital II, LLC, Capital One Capital III, LLC and Capital One 
Capital IV, LLC (collectively, the ``COC LLCs'') (the COC Trusts and 
COC LLCs, collectively, the ``Finance Subsidiaries'').

Filing Dates: The application was filed on January 7, 2002.

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 applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on February 1, 2002 and should be accompanied by proof of 
service on 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 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. Applicants, John G. Finneran, Jr., Capital One Financial 
Corporation, Suite 1300, 2980 Fairview Park Drive, Falls Church, 
Virginia 22042-4525.

For Further Information Contact: Jaea F. Hahn, Senior Counsel (202) 
942-0614, or Janet M. Grossnickle, Branch Chief (202) 942-0564 (Office 
of Investment Company Regulation, Division of Investment Management).

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 Fifth Street NW, Washington, 
DC 20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. COFC, a Delaware corporation, is a company whose subsidiaries 
provide a variety of financial products and services to consumers. 
COFC's principal subsidiary, Capital One Bank (``Bank''), is a limited-
purpose Virginia state-chartered credit card bank offering credit card 
products. COFC also owns Capital One, F.S.B. (``Savings Bank''), a 
federally chartered savings bank, which is a member of the Federal Home 
Loan Bank System. The Bank has filed applications with the Board of 
Governors of the Federal Reserve System and the Bureau of Financial 
Institutions of the Virginia State Corporation Commission seeking to 
merge the Savings Bank with and into the Bank and to effect the 
conversion of the Bank into a Virginia state-chartered savings bank 
(the ``Merger and Conversion'').
    2. COFC will establish the COC Trusts as Delaware business trusts 
and will own all of the outstanding voting beneficial interests to be 
issued by the COC Trusts. The Bank will establish the COC LLCs as 
Delaware limited liability companies and will own all of the 
outstanding voting beneficial interests to be issued by the COC LLCs. 
Because the Bank is a wholly owned direct subsidiary of COFC, the COC 
LLCs will be indirect subsidiaries of COFC.
    3. The Finance Subsidiaries will be organized to engage in 
financing activities that will provide funds for use in the operations 
of COFC, the Bank, and other Controlled Companies. The Finance 
Subsidiaries' primary function will be to obtain funds through the 
offer and sale of their preferred beneficial interests (the ``Preferred 
Interests'') in U.S., European, and other overseas markets, and to 
apply the proceeds exclusively to finance the operations of COFC, the 
Bank and other Controlled Companies. Each COC Trust will hold the 
Preferred Interests of the related COC LLC which will be contributed to 
the COC Trust by COFC. Any issuance of a Finance Subsidiary's Preferred 
Interests will be guaranteed unconditionally (on a subordinated basis) 
by COFC with a guarantee that meets the requirements of rule 3a-5(a)(2) 
under the Act (the ``Guarantees''). The Guarantees provide each holder 
of Preferred Interests a direct right of action against COFC to enforce 
COFC's obligations under the applicable Guarantee without first 
proceeding against the applicable Finance Subsidiary. In accordance 
with rule 3a-5(a)(5) under the Act, at least 85% of any cash or cash 
equivalents raised by each Finance Subsidiary will be invested in or 
loaned to COFC or Controlled Companies as soon as practicable, but in 
no event later than six months after such Finance Subsidiary's receipt 
of such cash or cash equivalents. Additionally, after giving effect to 
the requested exemption, each Finance Subsidiary will meet the 
requirements of rule 3a-5(a)(6) under the Act.

Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act 
exempting each Finance Subsidiary from all provisions of the Act. Rule 
3a-5 under the Act provides an exemption from the Act for certain 
companies organized primarily to finance the business operations of 
their parent companies or companies controlled by their parent 
companies.

[[Page 1524]]

    2. Rule 3a-5(b)(3)(i) under the Act, in relevant part, defines a 
``company controlled by the parent company'' to mean any corporation, 
partnership, or joint venture that is not considered an investment 
company under section 3(a) of the Act, or that is excepted or exempted 
by order from the definition of investment company by section 3(b) or 
by the rules and regulations under section 3(a) of the Act. The Bank 
does not fit, and after the proposed Merger and Conversion still will 
not fit, within the definition of ``company controlled by the parent 
company'' because it derives its non-investment company status from 
section 3(c)(3) of the Act. Consequently, the outstanding securities of 
a COC LLC would be owned by a company that does not meet the 
requirements of rule 3a-5(b)(1)(i) under the Act. In addition, to the 
extent a Finance Subsidiary makes loans to or makes or holds 
investments in the Bank, that Finance Subsidiary would not meet the 
definition of a ``finance subsidiary'' under rule 3a-5 because it would 
be financing an entity that does not meet the definition of a company 
controlled by the parent company as required by rule 3a-5(b)(1)(ii) 
under the Act. The COC LLCs also do not fit within the definition of 
``company controlled by the parent company'' because they would, after 
giving effect to requested relief, be exempted by order under section 
6(c) of Act rather than by the rules or regulations under section 3(a) 
of the Act. Consequently, a COC Trust that holds or makes investments 
in securities of a COC LLC would not meet the requirement in rule 3a-
5(a)(6) under the Act.
    3. Applicants request exemptive relief to permit the Finance 
Subsidiaries to finance the operations of the Bank, which is excluded 
from the definition of investment company by virtue of section 3(c)(3), 
and to permit the Bank to own all outstanding voting ownership 
interests of each COC LLC. In addition, Applicants request exemptive 
relief to permit each Finance Subsidiary to make loans to or make or 
hold investments in a COC LLC that relies on an order issued under 
section 6(c) of the Act. Applicants state that neither the Bank nor the 
Finance Subsidiaries will engage primarily in investment company 
activities, and that each Finance Subsidiary's primary business purpose 
will be to engage in financing activities that will provide funds for 
COFC and the Bank.
    4. Section 6(c) of the Act, in pertinent part, provides that the 
Commission, by order upon application, may conditionally or 
unconditionally exempt any person, security or transaction, or any 
class or classes of persons, securities or transactions, from any 
provision or provisions of the Act 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. Applicants submit that its exemptive request 
meets the standards set out in section 6(c) of the Act.

Applicants' Condition

    Applicants agree that the order granting the requested relief will 
be subject to the following condition:
    Each Finance Subsidiary will comply with all of the provisions of 
rule 3a-5 under the Act, except: (1) the Bank will not meet the portion 
of the definition of ``company controlled by the parent company'' in 
rule 3a-5(b)(3)(i) under the Act solely because it is excluded from the 
definition of investment company under section 3(c)(3) of the Act; and 
(2) each Finance Subsidiary will be permitted to make loans to or make 
or hold investments in corporations, partnerships, and joint ventures 
that do not meet the portion of the definition of ``company controlled 
by the parent company'' in rule 3a(b)(3)(i) under the Act solely 
because (i) they are excluded from the definition of investment company 
under section 3(c)(3) of the Act or (ii) they are a COC LLC that does 
not meet the definition of ``company controlled by the parent company'' 
in rule 3a-5(b)(3)(i) under the Act solely because it is relying on an 
order issued under section 6(c) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-806 Filed 1-10-02; 8:45 am]
BILLING CODE 8010-01-P