[Federal Register Volume 68, Number 200 (Thursday, October 16, 2003)]
[Notices]
[Pages 59648-59649]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-26098]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26205; 812-13023]


JF International Management Inc., et al.; Notice of Application 
and Temporary Order

October 8, 2003.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Temporary order and notice of application for a permanent order 
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 an 
injunction entered against J.P. Morgan Securities Inc. (``JPMSI'') on 
October 8, 2003 by the United States District Court for the District of 
Columbia (the ``Injunction''), until the Commission takes final action 
on an application for a permanent order. Applicants also have applied 
for a permanent order.
    Applicants: JF International Management Inc., J.P. Morgan 
Alternative Asset Management Inc., J.P. Morgan Fleming Asset Management 
(London) Limited, and J.P. Morgan Investment Management Inc. (together, 
the ``Applicants'').\1\
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    \1\ Applicants request that any relief granted pursuant to the 
application also apply to JPMSI and any other existing company of 
which JPMSI is an affiliated person within the meaning of section 
2(a)(3) of the Act and to any other company of which JPMSI may 
become an affiliated person in the future (together with Applicants, 
``Covered Persons'').
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    Filing Dates: The application was filed on October 1, 2003. 
Applicants have agreed to file an amendment during the notice period, 
the substance of which is reflected in this notice.
    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 November 3, 2003, 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, c/o Scott G. Campbell, Esq., J.P. Morgan Chase 
& Co., Legal Department, One Chase Manhattan Plaza, New York, NY 10081.

FOR FURTHER INFORMATION CONTACT: Keith A. Gregory, Senior Counsel, or 
Mary Kay Frech, Branch Chief, at 202-942-0564 (Division of Investment 
Management, Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a temporary order and 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 (telephone 202-942-8090).

Applicants' Representations

    1. Each Applicant is an investment adviser registered under the 
Investment Advisers Act of 1940 (the ``Advisers Act'') and an indirect 
subsidiary of J.P. Morgan Chase & Co. (``JPMC''), a holding company 
that, through its subsidiaries and affiliates, provides investment, 
financing, advisory, banking and related products and services on a 
global basis. JPMC also is the ultimate parent company of JPMSI. JPMSI, 
a Delaware corporation, is a full service investment-banking firm and 
is registered as a broker-dealer under the Securities Exchange Act of 
1934 (the ``Exchange Act'') and as an investment adviser under the 
Advisers Act. Each Applicant serves as investment adviser or sub-
adviser to certain registered investment companies (``Funds'').
    2. On October 8, 2003, the United States District Court for the 
District of Columbia entered the Injunction against JPMSI in a matter 
brought by the Commission.\2\ The Commission alleged

[[Page 59649]]

in the complaint (``Complaint'') that JPMSI violated Rule 101 of 
Regulation M under the Exchange Act by attempting to induce certain 
institutional customers to place orders for shares in the aftermarket 
for certain initial public offerings (``IPOs'') it underwrote during 
the restricted period of such IPOs. In addition, the Complaint alleged 
that JPMSI violated NASD Conduct Rule 2110 by persuading one or more 
institutional customers to take an allocation of a ``cold'' IPO by 
promising to reward the customer with an allocation of an upcoming 
``hot'' IPO. The alleged violations occurred in connection with certain 
IPOs underwritten by JPMSI from March 1999 through August 2000. Without 
admitting or denying any of the allegations in the Complaint, except as 
to jurisdiction, JPMSI consented to the entry of the Injunction as well 
as the payment of a civil penalty of $25 million.
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    \2\ Securities and Exchange Commission v. J.P. Morgan Securities 
Inc., Final Judgment Against J.P. Morgan Securities Inc., 03:CV 
02028 (ESH) (D.D.C., filed October 8, 2003).
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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 because JPMSI and the Applicants are 
under common control of JPMC, JPMSI is an ``affiliated person'' of each 
of the Applicants within the meaning of section 2(a)(3) of the Act. 
Applicants state that, as a result of the Injunction, they would 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 exemption from the disqualification provisions of 
section 9(a) if it is established that these provisions, as applied to 
Applicants, are unduly or disproportionately severe or that 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) seeking a temporary and 
permanent order exempting them from the disqualification provisions of 
section 9(a) of the Act.
    3. Applicants believe they meet the standards for exemption 
specified in section 9(c). 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).
    4. Applicants state that none of their officers or employees who 
are engaged in the provision of investment advisory services to the 
Funds participated in any way in the conduct underlying the Injunction. 
Applicants further state that the conduct underlying the Injunction did 
not involve any Funds.
    5. Applicants state that the inability to continue providing 
advisory services to the Funds would result in potentially severe 
hardships for the Funds and their shareholders. Applicants also state 
that they have distributed, or will distribute as soon as reasonably 
practical, written materials, including an offer to meet in person to 
discuss the materials, to the boards of directors or trustees of the 
Funds (the ``Boards''), including the directors who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act, of 
such Funds and their independent legal counsel as defined in rule 0-
1(a)(6) under the Act, if any, regarding the Injunction, any impact on 
the Funds, and the application. The Applicants will provide the Boards 
with all information concerning the Injunction and the application that 
is necessary for the Funds to fulfill their disclosure and other 
obligations under the federal securities laws.
    6. Applicants also assert that, if they were barred from providing 
services to the Funds, the effect on their businesses and employees 
would be severe. Applicants state that they have committed substantial 
resources to establish an expertise in advising and subadvising Funds. 
Applicants recently applied for, and received, an order of exemption 
pursuant to section 9(c) of the Act for conduct relating to Enron 
Corp.'s financial statement disclosure of transactions with affiliates 
of JPMC.\3\ In addition, Applicants recently applied for an exemption 
pursuant to section 9(c) of the Act for conduct relating to certain 
research analysts' conflicts of interest.\4\
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    \3\ JF International Management Inc., et al., Investment Company 
Act Release Nos. 26141 (July 28, 2003)(notice and temporary order) 
and 26168 (August 26, 2003)(permanent order).
    \4\ J.P. Morgan Securities Inc. et al., File No. 812-12959.
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Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:

    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, Covered 
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 a temporary 
exemption.
    Accordingly,
    It is hereby ordered, pursuant to section 9(c) of the Act, that 
Covered Persons are granted a temporary exemption from the provisions 
of section 9(a), effective forthwith, solely with respect to the 
Injunction, subject to the condition in the application, until the date 
the Commission takes final action on an application for a permanent 
order.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-26098 Filed 10-15-03; 8:45 am]
BILLING CODE 8010-01-P