[Federal Register Volume 69, Number 212 (Wednesday, November 3, 2004)]
[Notices]
[Pages 64117-64118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2990]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26645; File No. 812-13046]


Asset Alliance Advisors, Inc. et al.; Notice of Application and 
Temporary Order

October 28, 2004.
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: Alternative Investment Partners, LLC 
(``AIP'') and Trust Advisors, LLC (``TA'') have received a temporary 
order exempting them from section 9(a) of the Act with respect to an 
injunction entered against Beacon Hill Asset Management LLC (``BHAM'') 
on October 28, 2004, until the Commission takes final action on an 
application for a permanent order. Applicants also have requested a 
permanent order.
    Applicants: Asset Alliance Advisors, Inc., (``Advisor''), Asset 
Alliance Corporation (``AAC''), AIP, and TA (together, the 
``Applicants'').\1\
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    \1\ Applicants request that any permanent order granted pursuant 
to the application also apply to any other company that is 
controlled by AAC within the meaning of section 2(a)(9) of the Act, 
except for BHAM and any company that is an affiliated person of BHAM 
by reason other than the company's being an affiliated person of AAC 
(together with Applicants, the ``Covered Companies'').
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    Filing Dates: The application was filed on November 26, 2003 and 
amended on October 28, 2004.
    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 22, 2004, 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: Advisor, AAC, AIP, and TA, 800 Third Avenue, 
New York, New York 10022.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 942-0574, or Annette Capretta, Branch Chief, 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. The Advisor, a Delaware corporation, intends to serve as 
investment adviser to BTOP50 CTA Index Fund (the ``Fund''), a newly 
formed investment company that has registered as a closed-end 
management investment company under the Act and has not yet commenced 
operations. The Advisor is registered as an investment adviser under 
the Investment Advisers Act of 1940 (``Advisers Act'') and is 
registered with the U. S. Commodity Futures Trading Commission and the 
National Futures Association as a commodity pool operator and a 
commodity-trading adviser. AIP is a Delaware limited liability company 
registered as an investment adviser under the Advisers Act. AIP serves 
as the investment adviser to Alpha Hedged Strategies Fund (``Alpha 
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 to Alpha Fund pursuant to an advisory contract. AAC wholly owns 
Asset Alliance Holding Corporation, which wholly owns the Advisor, owns 
75% of AIP, and owns 50% of TA. AAC also indirectly owns a 50% equity 
interest in BHAM.
    2. On October 28, 2004, the U.S. District Court for the Southern 
District of New York entered an order of injunction and other relief 
against BHAM (``Permanent Injunction'') in a matter brought by the 
Commission (the ``Action'').\2\ The transactions that are the

[[Page 64118]]

subject of the Action involved the alleged improper valuations of 
certain unregistered investment funds managed by BHAM, resulting in 
BHAM's alleged violation of the Federal securities laws. The Permanent 
Injunction enjoined BHAM, directly or through its agents, servants, 
employees, and attorneys from violating sections 17(a)(1), (2) and (3) 
of the Securities Act of 1933, section 10(b) of the Securities Exchange 
Act of 1934 and rule 10b-5 thereunder, and sections 206(1), (2) and (3) 
of the Advisers Act.
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    \2\ Securities and Exchange Commission v. Beacon Hill Asset 
Management, LLC, Case No. 02cv8855 (S.D.N.Y., filed Nov. 7, 2002). 
The U.S. District Court previously entered a preliminary injunction 
against BHAM enjoining BHAM from violating section 206(2) of the 
Advisers Act. Securities and Exchange Commission v. Beacon Hill 
Asset Management, LLC, Stipulation of Order Granting Preliminary 
Injunction and Other Relief, Case No. 02cv8855 (S.D.N.Y., Nov. 13, 
2002) (``Preliminary Injunction''). On December 18, 2002, AIP and TA 
received a permanent order exempting them from section 9(a) of the 
Act with respect to the Preliminary Injunction solely so they could 
continue providing services to the Alpha Fund. Alternative 
Investment Partners, LLC and Trust Advisors, LLC, Investment Company 
Release No. 25850 (Dec. 18, 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, taken together, sections 9(a)(2) and 
9(a)(3) have the effect of precluding them and any other company of 
which BHAM is an affiliated person, including any other subsidiary of 
AAC, from serving as investment adviser for any registered investment 
company or as principal underwriter for any registered open-end 
investment company.
    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 requesting temporary and permanent orders exempting them from the 
provisions of section 9(a) of the Act with respect to the Permanent 
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 their current or 
former officers, directors, or employees participated in or had any 
knowledge of the conduct underlying the Action. Applicants have not 
been the subject of any federal or state enforcement or other 
administrative or judicial disciplinary proceeding, nor has any of the 
Applicants been named as a defendant in any other action relating to 
the securities laws, except that AAC has been named as a defendant in 
three actions brought by investors in the unregistered investment funds 
formerly managed by BHAM.\3\
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    \3\ The actions were brought against BHAM, AAC, and others, and 
allege that AAC, as a control person of BHAM, aided and abetted 
BHAM's securities law violations.
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    4. Applicants state that the inability of AIP and TA to continue 
providing advisory services to the Alpha Fund would result in the Alpha 
Fund and its shareholders facing potentially severe hardships. 
Additionally, Applicants assert that if they were barred from providing 
investment advisory services to the Alpha Fund and other registered 
investment companies in the future, the effect on their businesses and 
employees would be severe.
    5. Applicants assert that the prohibition also would have a 
significant effect on the Advisor's business and employees. The Advisor 
has identified registered investment companies as an area in which it 
wishes to participate and has committed resources for that purpose, 
including engaging a portfolio manager and a financial, accounting and 
regulatory officer for the Fund.
    6. Applicants state that at the organizational meeting for the 
Fund, the Advisor discussed with the Fund's board of directors 
(``Board''), including the directors who are not interested persons as 
that term is defined in section 2(a)(19) of the Act, the BHAM 
situation, AAC's response to it, the Action and the requested exemptive 
order. Applicants state that the Board approved the investment 
management agreement with the Advisor, subject to the grant of the 
exemptive relief and requested a further update at the next Board 
meeting. Finally, Applicants state that the Advisor has provided and 
will continue to 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.
    7. 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 Alpha Fund regarding the Action and the reasons they believe 
relief pursuant to section 9(c) is appropriate. AIP and TA will provide 
the Alpha Fund with all information concerning the Action and the 
exemptive application necessary for the Alpha Fund to fulfill its 
disclosure and other obligations under the federal securities laws.

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

    By the Commission.
J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E4-2990 Filed 11-2-04; 8:45 am]
BILLING CODE 8010-01-P