[Federal Register Volume 70, Number 28 (Friday, February 11, 2005)]
[Notices]
[Pages 7314-7315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-577]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26749; 812-13160]


Morgan Stanley AIP GP LP, et al.; Notice of Application and 
Temporary Order

February 4, 2005.
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 Morgan Stanley & Co. Incorporated 
(``MS&Co.'') on February 4, 2005 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:  Morgan Stanley AIP GP LP, Morgan Stanley Asset & 
Investment Trust Management Co., Limited, Morgan Stanley Investment 
Advisors Inc., Morgan Stanley Investment Management Company, Morgan 
Stanley Investment Management Inc., Morgan Stanley Investment 
Management Limited, Van Kampen Advisors Inc., and Van Kampen Asset 
Management (together, the ``Advisers''); MS&Co., Morgan Stanley 
Distribution, Inc., Morgan Stanley Distributors Inc., Morgan Stanley DW 
Inc., and Van Kampen Funds Inc. (together, the ``Underwriters''); 
Morgan Stanley Capital Partners III, Inc., Morgan Stanley Global 
Emerging Markets, Inc., Morgan Stanley Venture Capital III, Inc., MSDW 
Capital Partners IV, Inc., MSDW OIP Investors, Inc., MSDW Real Estate 
Special Situations II Manager, L.L.C., MSDW Venture Partners IV, Inc., 
MSREF II, Inc., MSREF III, Inc., MSREF IV, L.L.C., MSREF V, L.L.C. and 
MSVP 2002, Inc. (together, ``ESC Managers'' and, with the Advisers and 
Underwriters, 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 MS&Co. is or 
becomes an affiliated person in the future (together with 
Applicants, ``Covered Persons'').

Filing Dates:  The application was filed on January 25, 2005 and 
amended on January 26, 2005. Applicants have agreed to file another 
amendment during the notice period, the substance of which is reflected 
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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 March 1, 2005, 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 Barry Funk, Esq., Morgan Stanley, 1221 
Avenue of the Americas, 22nd Floor, New York, NY 10020.

FOR FURTHER INFORMATION, CONTACT: John Yoder, Attorney-Adviser, 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 a direct or indirect subsidiary of Morgan 
Stanley, a Delaware corporation. Morgan Stanley is a publicly held 
global financial services company that, through its subsidiaries and 
affiliates, provides investment, financing, advisory, insurance, 
banking and related products and services. MS&Co., a Delaware 
corporation, is a global financial services 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 Investment Advisers Act 
of 1940. MS&Co. serves as principal underwriter for, and the other 
Applicants serve as investment adviser, subadviser, depositor or 
principal underwriter for, numerous registered investment companies 
(``Funds''). The ESC Managers serve as the general partner or 
investment adviser to certain employees' securities companies operating 
pursuant to Commission orders (included in the term ``Funds'').\2\
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    \2\ Morgan Stanley Capital Investors, L.P., Investment Company 
Act Release Nos. 24340 (Mar. 17, 2000) (notice) and 24389 (Apr. 12, 
2000) (order); Morgan Stanley Venture Investors, L.P., Investment 
Company Act Release Nos. 20206 (Apr. 8, 1994) (notice) and 20276 
(May 4, 1994) (order).
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    2. On February 4, 2005, the United States District Court for the 
District of Columbia entered the Injunction against MS&Co. in a matter 
brought by the Commission.\3\ The Commission alleged in the complaint 
(``Complaint'') that MS&Co. violated Rule 101 of Regulation M under the 
Exchange Act by attempting to induce certain customers to place orders 
for shares in the aftermarket for certain initial public offerings 
(``IPOs'') it underwrote during the restricted period of such IPOs. The 
alleged violations occurred in connection with certain IPOs 
underwritten by MS&Co. from March 1999 through November 2000. Without 
admitting or denying any of the allegations in the Complaint, except as 
to jurisdiction, MS&Co. consented to the entry of the Injunction as 
well as the payment of a civil penalty of $40 million.
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    \3\ Securities and Exchange Commission v. Morgan Stanley & Co. 
Incorporated, Final Judgment Against Morgan Stanley & Co. 
Incorporated, 05:CV 00166 (HHK) (D.D.C., filed February 4, 2005) 
(``Final Judgment'').
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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

[[Page 7315]]

common control with, the other person. Applicants state that MS&Co. is 
an affiliated person of each of the other 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, depositor or 
underwriting 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 and the inability to continue serving as 
principal underwriter or depositor 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 is 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 or 
trustees who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act, of the 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.\4\ 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.
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    \4\ With respect to Funds that are unit investment trusts 
(``UITs''), Applicants will provide written notification to the 
trustee for each of the UITs concerning the Injunction, any impact 
on the UITs, and the application, and will provide any other related 
information that may be requested by the trustee.
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    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 over more than thirty years to establish an expertise in 
advising and underwriting Funds. Applicants recently applied for an 
exemption pursuant to section 9(c) of the Act for conduct relating to 
certain research analysts' conflicts of interest.\5\ In addition, Dean 
Witter Reynolds Inc., the predecessor of Morgan Stanley DW Inc., 
previously sought and received an exemption under section 9(c) of the 
Act.\6\
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    \5\ Morgan Stanley Investment Advisers Inc., Investment Company 
Act Release No. 26236 (Oct. 31, 2003) (notice and temporary order).
    \6\ Dean Witter Reynolds Inc., Investment Company Act Release 
Nos. 17887 (Nov. 29, 1990) (notice and temporary order) and 18119 
(Apr. 29, 1991) (permanent order).
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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. E5-577 Filed 2-10-05; 8:45 am]
BILLING CODE 8010-01-P