[Federal Register Volume 67, Number 228 (Tuesday, November 26, 2002)]
[Notices]
[Pages 70782-70783]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-29944]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-25808; 812-12902]


Alternative Investment Partners, LLC and Trust Advisors, LLC; 
Notice of Application

November 20, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Temporary order and notice of application under section 9(c) of 
the Investment Company Act of 1940 (``Act'').

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SUMMARY OF APPLICATION: Applicants have received a temporary order 
exempting them from section 9(a) of the Act, with respect to a 
securities-related preliminary injunction entered on November 13, 2002, 
until the Commission takes final action on an application for a 
permanent order. Applicants also have requested a permanent order.

APPLICANTS: Alternative Investment Partners, LLC (``AIP'') and Trust 
Advisors, LLC (``TA'').

FILING DATE: The application was filed on November 19, 2002.

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 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 December 17, 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: AIP, 142 Hardscrabble Lake Drive, Chappaqua, NY 
10514; TA, 1375 Kings Highway East, Ste. 400, Fairfield, CT 07663.

FOR FURTHER INFORMATION CONTACT: John L. Sullivan, Senior Counsel, at 
(202) 942-0681, or Michael W. Mundt, Senior Special Counsel, 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 Fifth Street, NW., 
Washington, DC 20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. AIP is a Delaware limited liability company registered as an 
investment adviser under the Investment Advisers Act of 1940 
(``Advisers Act''). AIP serves as the investment adviser to Alpha 
Strategies I Fund (``Fund''), which is a series of AIP Alternative 
Strategies Funds, an open-end management investment company registered 
under the Act. TA, a Delaware limited liability company, is registered 
as an investment adviser under the Advisers Act and serves as a 
research consultant to AIP and the Fund with respect to the selection 
and ongoing review of subadvisers for the Fund. Because the services 
provided by TA may be characterized as investment advisory services, 
applicants state that TA may be considered an investment adviser to the 
Fund under section 2(a)(20) of the Act. Asset Alliance Corporation 
(``AAC''), a Delaware corporation, states that it is a holding company 
primarily engaged in the business of owning significant interests in 
investment managers. AAC directly owns 50% of AIP and indirectly owns 
50% of TA. AAC also indirectly owns 50% of Beacon Hill Asset Management 
LLC (``BHAM'').
    2. On November 13, 2002, the U.S. District Court for the Southern 
District of New York entered an order of Preliminary Injunction and 
Other Relief Against BHAM (``Preliminary Injunction'') in a matter 
brought by the Commission (the ``Action'').\1\ The transactions that 
are the subject of the Action involved the alleged improper valuations 
of certain unregistered investment funds managed by BHAM, resulting in 
BHAM's alleged violation of section 206(2) of the Advisers Act. The

[[Page 70783]]

Preliminary Injunction enjoined BHAM, directly or through its officers, 
directors, agents and employees, from violating section 206(2).
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    \1\ Securities and Exchange Commission v. Beacon Hill Asset 
Management, LLC, Stipulation of Order Granting Preliminary 
Injunction and Other Relief Against Beacon Hill Asset Management, 
Case No. 02cv8855 (S.D.N.Y., Nov. 13, 2002).
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Applicants' Legal Analysis

    1. Section 9(a)(2) of the Act, in relevant part, prohibits a person 
who has been enjoined from engaging in or continuing any conduct or 
practice in connection with the purchase or sale of a security from 
acting, among other things, as an investment adviser or depositor of 
any registered investment company or a principal underwriter for any 
registered open-end investment company, registered unit investment 
trust, or registered face-amount certificate company. Section 9(a)(3) 
of the Act makes the prohibition in section 9(a)(2) applicable to a 
company any affiliated person of which has been disqualified under the 
provisions of section 9(a)(2). Section 2(a)(3) of the Act defines 
``affiliated person'' to include any person directly or indirectly 
controlling, controlled by, or under common control, with the other 
person. Applicants state that BHAM is an affiliated person of the 
applicants because BHAM and the applicants are under the common control 
of AAC. Applicants state that, as a result of the Preliminary 
Injunction, applicants may be subject to the prohibitions of section 
9(a).
    2. Section 9(c) of the Act provides that the Commission shall grant 
an application for an exemption from the disqualification provisions of 
section 9(a) if it is established that these provisions, as applied to 
the applicants, are unduly or disproportionately severe or that the 
applicants' conduct has been such as not to make it against the public 
interest or the protection of investors to grant the application. 
Applicants have filed an application pursuant to section 9(c) of the 
Act seeking temporary and permanent orders exempting them from the 
provisions of section 9(a) of the Act that might otherwise be operative 
with respect to their provision of investment advisory services to the 
Fund as a result of the Preliminary Injunction.
    3. Applicants state that the prohibitions of section 9(a) as 
applied to them would be unduly and disproportionately severe and that 
the conduct of applicants has been such as not to make it against the 
public interest or the protection of investors to grant the exemption 
from section 9(a). Applicants state that none of the current or former 
officers or employees of either of the applicants participated in or 
had any knowledge of the conduct alleged to have constituted the 
violations that resulted in the Action. In addition, neither applicant 
has been the subject of any federal or state enforcement or other 
administrative or judicial disciplinary proceeding, nor has either been 
named as a defendant in any other action relating to the securities 
laws. Applicants state that neither has ever previously applied for an 
exemption pursuant to section 9(c) of the Act.
    4. Applicants state that their inability to continue providing 
advisory services to the Fund would result in the Fund and its 
shareholders facing potentially severe hardships. Additionally, 
applicants assert that if they were barred from providing investment 
advisory services to the Fund, the effect on their businesses and 
employees would be severe.
    5. AIP and TA will distribute written materials, including an offer 
to meet in person to discuss the materials, to the board of directors 
of the Fund regarding the Action and the reasons they believe relief 
pursuant to section 9(c) is appropriate. AIP and TA will provide the 
Fund with all information concerning the Action and the exemptive 
application necessary for the Fund to fulfill its disclosure and other 
obligations under the federal securities laws.

Applicants' Condition

    Applicants agree that the order granting the requested relief will 
be subject to the following condition:
    1. Any temporary exemption granted pursuant to the application 
shall be without prejudice to, and shall not limit the Commission's 
rights in any manner with respect to, any Commission investigation of, 
or administrative proceedings involving or against, applicants or their 
affiliated persons, including without limitation, the consideration by 
the Commission of a permanent exemption from section 9(a) of the Act 
requested pursuant to the application or the revocation or removal of 
any temporary exemptions granted under the Act in connection with the 
application.

Temporary Order

    The Commission has considered the matter and finds that applicants 
have made the necessary showing to justify granting of a temporary 
exemption.
    Accordingly, it is hereby ordered, pursuant to section 9(c) of the 
Act, on the basis of the representations contained in the application, 
that applicants be and hereby are temporarily exempted from the 
provisions of section 9(a) of the Act with respect to their investment 
advisory services to the Fund to the extent the provisions are 
operative solely as a result of the Preliminary Injunction, subject to 
the condition in the application, until the Commission takes final 
action on an application for a permanent order.

    By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-29944 Filed 11-25-02; 8:45 am]
BILLING CODE 8010-01-P