[Federal Register Volume 68, Number 215 (Thursday, November 6, 2003)]
[Notices]
[Pages 62857-62858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27983]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26245; 812-12963]


UBS Securities L.L.C., 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 UBS Securities L.L.C. (f/k/a UBS Warburg 
L.L.C.) (``UBS Securities'') 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:  UBS Securities; UBS Financial Services Inc.; UBS Fund 
Advisor, L.L.C., UBS Aspen Management, L.L.C., UBS Willow Management, 
L.L.C., UBS Eucalyptus Management, L.L.C., UBS Tamarack Management, 
L.L.C., UBS Juniper Management, L.L.C., UBS Redwood/Sequoia Management, 
L.L.C. (``UBSFS Entities''); UBS Global Asset Management (NY) Inc., UBS 
Global Asset Management (US) Inc., UBS Global Asset Management 
(Americas) Inc. (``American Global AM Entities''); DSI International; 
UBS Global Asset Management International Ltd.; GAM International 
Management Ltd.; GAM (USA), Inc.; and GAM Services, Inc. (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 UBS Securities 
is or hereafter becomes an affiliated person (included in the term 
Applicants).

Filing Dates:  The application was filed on April 28, 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 
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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: UBS Securities, 299 Park Avenue, New York, NY 
10171; UBS Financial Services Inc., 1285 Avenue of the Americas, New 
York, NY 10019; UBSFS Entities, 1285 Avenue of the Americas, New York, 
NY 10019; American Global AM Entities, 51 West 52nd Street, New York, 
NY 10019; DSI International, 3001 Merritt 7, Suite 201, Norwalk, CT 
06851; UBS Global Asset Management International, Ltd., 21 Lombard 
Street, London EC3V 9AH, United Kingdom; GAM International Management 
Ltd., 12 St. James's Place, London SW1A INX, United Kingdom; GAM (USA) 
Inc. and GAM Services, Inc., 135 East 57th Street, New York, NY 10022.

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).

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. UBS Securities, 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 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 UBS 
Securities in a matter brought by the Commission.\3\ The Commission 
alleged in the complaint (``Complaint'') that UBS Securities violated 
section 17(b) of the Securities Act of 1933 (the ``Securities Act''), 
and certain Conduct Rules of the National Association of Securities 
Dealers (``NASD'') and Rules of the New York Stock Exchange (``NYSE'') 
(the NASD Conduct Rules and NYSE Rules together, the ``Exchange 
Rules'') by engaging in acts and practices that created or maintained 
inappropriate influence by UBS Securities' investment banking business 
over the research analysts in UBS Securities' research department. The 
Federal Injunction enjoined UBS Securities directly or through its 
officers, directors, agents and employees, from violating section 17(b) 
of the Securities Act and the Exchange Rules cited in the Complaint. 
Without admitting or denying the allegations in the Complaint, UBS 
Securities consented to the entry of the Federal Injunction as well as 
the payment of disgorgement and penalties and other equitable relief, 
including undertakings by UBS Securities to adopt and implement 
policies and procedures relating to certain research activities. 
Applicants state that UBS Securities 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. UBS Warburg, L.L.C., 
03 CV 2943 (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

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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 
UBS Securities 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 or 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 prepared by UBS Securities employees, 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 UBS Securities (or its 
predecessor) 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 Final Judgment. In 
addition, each of the Applicants that serve as an investment adviser or 
sub-adviser to Funds has adopted policies regarding information 
barriers (the ``Policies'') designed to protect the Funds from any 
conflict of interest that may arise between portfolio managers and 
other employees of UBS Securities. The Policies, which were in effect 
at the time of the conduct described in the Complaint, restrict 
communications between portfolio managers and certain other employees 
of UBS Securities.
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    \4\ The complaint also refers to general practices regarding 
investment banking and research activities. It is possible that one 
or more current or former officers or employees of an Applicant, who 
is or was involved in providing advisory, sub-advisory or 
underwriting services to the Funds, was at some time involved in 
investment banking or research activities.
    \5\ Applicants state that they acted as investment adviser, 
principal underwriter, or depositor to a Fund whose portfolio 
securities were selected based primarily on a list of recommended 
securities compiled by USB Securities.
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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 or trustees 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, 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 advise the Boards of any State Injunctions 
that are entered.
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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. Certain 
affiliated persons of UBS Securities 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.
Jill Peterson,
Assistant Secretary.
[FR Doc. 03-27983 Filed 11-5-03; 8:45 am]
BILLING CODE 8010-01-P