[Federal Register Volume 68, Number 215 (Thursday, November 6, 2003)]
[Notices]
[Pages 62844-62846]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27982]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26243; 812-12968]


Credit Suisse First Boston LLC, et al.; Notice of Application and 
Temporary Order

October 31, 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 Credit Suisse First Boston LLC (``CSFB'') on 
October 31, 2003 by the U.S. District Court for the Southern District 
of New York (the ``Federal Injunction''), until the earlier of the date 
the Commission takes action on an application for a permanent order, or 
two years from the date of the Federal Injunction. Applicants have 
requested a permanent order.
    Applicants: CSFB; Credit Suisse Asset Management, LLC (``CSAM 
Americas''); Credit Suisse Asset Management Securities, Inc.; Credit 
Suisse Asset Management Limited, a corporation organized under the laws 
of England and Wales (``CSAM London''); Credit Suisse Asset Management 
(Australia) Limited (``CSAM Australia''); Credit Suisse Asset 
Management Limited, a Japanese company (``CSAM Japan''); Merchant 
Capital Inc. (``Merchant''); Credit Suisse First Boston (Bermuda) 
Limited (``CSFB Bermuda''); and DLJ LBO Plans Management Corporation 
(``LBO Plans'') (together, the ``Applicants'').\1\
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    \1\ Applicants request that any relief granted pursuant to the 
application also apply to any other company of which CSFB is or 
hereafter becomes an affiliated person (included in the term 
Applicants).
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    Filing Dates: The application was filed on April 29, 2003. 
Applicants have agreed to file an amendment to the application during 
the notice period, the substance of which is reflected in this notice. 
Applicants also have agreed to file amendments to the application 
reflecting the issuance of each State Injunction (as defined below).
    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 25, 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: CSFB, Merchant, CSFB Bermuda, and LBO Plans, 
Eleven Madison Avenue, New York, NY 10010-3629; CSAM Americas and 
Credit Suisse Asset Management Securities, Inc., 466 Lexington Avenue, 
New York, NY 10017-3147; CSAM London, Beaufort House, 15 St. Botolph 
Street, London (England), United Kingdom EC3A 7JJ; CSAM Australia, 
Level 32 Gateway, 1 Macquarie Place, Sydney 2001, Australia; and CSAM 
Japan, Shiroyama JT Trust Tower, 3-1, Toranomon 4-Chome, Minato-Ku, 
Tokyo 105-6025 Japan.

FOR FURTHER INFORMATION CONTACT: Julia Kim Gilmer, Senior Counsel, at 
(202) 942-0528, or Annette Capretta, Branch Chief, at 202-942-0564 
(Division of Investment Management, Office of Investment Company 
Regulation).

[[Page 62845]]


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. CSFB, a Delaware limited liability company, is a full service 
investment banking firm, engaged in securities underwriting, sales and 
trading, investment banking, financial advisory services, and 
investment research services. Certain Applicants serve as investment 
adviser or sub-adviser for one or more registered investment companies 
(``Funds''). Certain Applicants act as the depositor or principal 
underwriter for Funds.\2\
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    \2\ Any registered unit investment trusts (``UIT'') or 
registered face amount certificate company for which Applicants may 
serve as principal underwriter or depositor are also included in the 
defined term Funds.
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    2. On October 31, 2003, the U.S. District Court for the Southern 
District of New York entered the Federal Injunction against CSFB in a 
matter brought by the Commission.\3\ The Commission alleged in the 
complaint (``Complaint'') that CSFB violated sections 15(c) and 17(a) 
of the Securities Exchange Act of 1934 (``Exchange Act'') and rules 
15c1-2 and 17a-3 under the Exchange Act, and certain Conduct Rules of 
the National Association of Securities Dealers (``NASD'') and Rules of 
the New York Stock Exchange (``NYSE'') by engaging in acts and 
practices that created or maintained inappropriate influence by CSFB's 
investment banking business over the research analysts in CSFB's 
research department. The Federal Injunction enjoined CSFB directly or 
through its officers, directors, agents and employees, from violating 
sections 15(c) and 17(a) of the Exchange Act and the specific rules 
cited in the Complaint. Without admitting or denying the allegations in 
the Complaint, CSFB consented to the entry of the Federal Injunction as 
well as the payment of disgorgement and penalties and other equitable 
relief, including undertakings by CSFB to adopt and implement policies 
and procedures relating to certain research activities. Applicants 
state that CSFB expects to enter into settlement agreements relating to 
the activities referred to in the Complaint with certain state and 
territorial agencies which may result in an injunction by a court of 
competent jurisdiction that is based on the same conduct and the same 
facts as the Complaint (each, a ``State Injunction,'' and, together 
with the Federal Injunction, the ``Injunctions''). Applicants request 
that this application cover any disqualifications of the Applicants 
under Section 9(a) resulting from the Injunctions.
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    \3\ Securities and Exchange Commission v. Credit Suisse First 
Boston LLC, f/k/a Credit Suisse First Boston Corporation, 03 CV 2946 
(WHP) (S.D.N.Y., filed April 28, 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 UIT 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 
CSFB is an affiliated person of each of the other Applicants within the 
meaning of section 2(a)(3) of the Act. Applicants further state that 
the entry of the Injunctions would result in Applicants being subject 
to the disqualification provisions of section 9(a) of the Act.
    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 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) 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 standard 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 the conduct giving rise to the Injunctions 
did not involve any of the Applicants acting in the capacity of 
investment adviser, sub-adviser, depositor, or principal underwriter 
for a Fund. Applicants state that the Complaint did not expressly 
reference the conduct of any current or former employee of any of the 
Applicants who is or was involved in providing advisory, sub-advisory 
or underwriting services to the Funds advised or underwritten by 
Applicants.\4\ While the Applicants' portfolio managers had access to 
research reports issued by CSFB's research analysts, there is no 
indication that the portfolio managers relied on these research reports 
more than any other data that would have been considered by the 
portfolio managers in making investment decisions for the Funds, except 
as noted in the application.\5\ Although some of the Funds held 
securities in their portfolios at the time that CSFB issued research 
reports concerning the issuers of such securities, as far as Applicants 
are aware, none of the officers, portfolio managers, or any other 
investment personnel employed by the Applicants made any investment 
decisions based on any non-public information relating to the conduct 
underlying the Judgment. In addition, CSFB had policies regarding 
information barriers between CSAM Americas and other employees of CSFB 
that were designed to restrict communications between CSAM Americas and 
other employees of CSFB. These information barriers, which were in 
effect at the time of the complaint, together with other policies of 
the Applicants, are designed to protect the Funds from conflicts of 
interest between portfolio managers and certain employees of CSFB.
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    \4\ The Complaint also refers to general practices regarding the 
relationship between the investment banking and research departments 
of CSFB. It is possible that one or more current or former officers 
or employees of an Applicants who is or was involved in providing 
advisory, sub-advisory or underwriting services to the Funds was at 
some time an officer or employee of the investment banking or 
research department of CSFB.
    \5\ Applicants state that they acted as investment adviser, 
principal underwriter, or depositor to a Fund whose portfolio 
securities were selected based primarily on research conducted by 
equity research analysts employed by CSFB, or its predecessor.
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    5. The Applicants will distribute written materials, including an 
offer to meet in person to discuss the materials, to the board of 
directors or trustees of each Fund (each, a ``Board''), including the 
directors who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act, of the Fund, and their independent legal counsel, 
if any,

[[Page 62846]]

regarding the Federal Injunction, any impact on the Funds, and this 
application.\6\ The Applicants will provide the Boards with all 
information concerning the Injunctions and this application that is 
necessary for the Funds to fulfill their disclosure and other 
obligations under the federal securities laws.
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    \6\ Applicants will notify the Boards of the issuance of any 
State Injunctions.
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    6. Applicants state that the inability to continue providing 
advisory services to the Funds and the inability to continue serving as 
principal underwriter to the Funds would result in potentially severe 
hardships for the Funds and their shareholders. Applicants also assert 
that, if they were barred from providing services to the Funds, the 
effect on their businesses and employees would be severe. The 
Applicants state that they have committed substantial resources to 
establish an expertise in advising and distributing Funds. Certain 
affiliated persons of CSFB previously have received exemptions under 
section 9(c) as the result of conduct that triggered section 9(a) as 
described in greater detail in the application.

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, Applicants, 
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 the 
Applicants are granted a temporary exemption from the provisions of 
section 9(a), effective forthwith, solely with respect to the 
Injunctions, subject to the condition in the application, until the 
date the Commission takes final action on their application for a 
permanent order or, if earlier, October 31, 2005.

By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-27982 Filed 11-5-03; 8:45 am]
BILLING CODE 8010-01-P