[Federal Register Volume 70, Number 40 (Wednesday, March 2, 2005)]
[Notices]
[Pages 10156-10157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-827]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26775; 812-13168]


Boston Safe Advisors, Inc., et al.; Notice of Application and 
Temporary Order

February 24, 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 and other companies of which CIBC Mellon Trust Company 
(``CIBC Mellon'') is or becomes an affiliated person (``Covered 
Persons'') from section 9(a) of the Act with respect to a securities-
related injunction entered against CIBC Mellon on February 24, 2005 by 
the U.S. District Court for 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 
with respect to the Injunction.
    Applicants: Boston Safe Advisors, Inc., The Boston Company Asset 
Management LLC, Dreyfus Service Corporation (``Dreyfus Service''), The 
Dreyfus Corporation, Founders Asset Management LLC, Franklin Portfolio 
Associates LLC, Mellon Capital Management Corporation, Mellon Equity 
Associates LLP, Mellon Funds Distributor, L.P. (``Mellon Funds''), 
Newton Capital Management Limited, Pareto Partners and Standish Mellon 
Asset Management Company LLC (together, ``Applicants,'' included in the 
term Covered Persons).
    Filing Date: The application was filed on February 17, 2005.
    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 21, 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, Mellon Financial Corporation, One Mellon 
Center, 500 Grant Center, Pittsburgh, Pennsylvania 15258-0001.

FOR FURTHER INFORMATION, CONTACT: Shannon Conaty, Attorney-Adviser, or 
Todd F. Kuehl, Branch Chief, at (202) 551-6809 (Division of Investment 
Management, Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a temporary order and a 
summary of the application for a permanent order. 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. CIBC Mellon, a Canadian corporation, is engaged in the business 
of providing transfer agent and corporate trust services. Applicants 
(other than Dreyfus Service and Mellon Funds) serve as investment 
adviser or sub-adviser for one or more registered investment companies 
(``Funds''). Dreyfus Service and Mellon Funds act as the depositor or 
principal underwriter for certain Funds.
    2. On February 24, 2005, the U.S. District Court for the District 
of Columbia entered the Injunction against CIBC Mellon in a matter 
brought by the Commission.\1\ The Commission alleged in the complaint 
(``Complaint'') that CIBC Mellon violated sections 5(a)(1) and (2) of 
the Securities Act of 1933, sections 10(b), 15(a) and 17A of the 
Securities Exchange Act of 1934 (``Exchange Act'') and rule 10b-5 under 
the Exchange Act. The Complaint alleged that CIBC Mellon participated 
in a fraudulent scheme to promote, distribute and sell the stock of a 
now defunct Canadian telecommunications company by supplying the 
perpetrators of the scheme with a virtually limitless supply of 
purportedly ``free trading'' stock and that CIBC Mellon failed to 
register with the Commission as a transfer agent and as a broker-
dealer. The Injunction enjoined CIBC Mellon, its agents, servants, 
employees, attorneys and all persons in active concert or in 
participation with them from violating the provisions of the federal 
securities laws cited in the Complaint. Without admitting or denying 
the allegations in the Complaint, CIBC Mellon consented to the entry of 
the Injunction as well as the payment of disgorgement and penalties and 
other equitable relief.
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    \1\ Securities and Exchange Commission v. CIBC Mellon Trust 
Company, 1:05CV0333 (D.D.C., filed February 24, 2005) (the 
``Action'').
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Applicants' Legal Analysis

    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 
CIBC Mellon is an affiliated person of the Applicants within the 
meaning of section 2(a)(3) of the Act. Applicants state that the entry 
of the Injunction would result in Applicants being subject to the 
disqualification provisions of section 9(a) of the Act.
    1. 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

[[Page 10157]]

filed an application pursuant to section 9(c) seeking a temporary and 
permanent order exempting the Covered Persons from the disqualification 
provisions of section 9(a) of the Act.
    2. 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).
    3. The Applicants state that the alleged violations giving rise to 
the Injunction did not involve any of the Applicants or any Fund. The 
Applicants also state that no current or former officer or employee of 
any of the Applicants participated in any way in the conduct giving 
rise to the Injunction. Additionally, Applicants state that the 
personnel at CIBC Mellon who were involved in the conduct that forms 
the basis for the Injunction have had no involvement in providing 
advisory, sub-advisory or principal underwriting services to the Funds. 
Applicants state that CIBC Mellon does not serve, nor has it served, as 
transfer agent to any Fund or as trustee to any registered unit 
investment trust.
    4. 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, 
regarding the Injunction, any impact on the Funds, and this 
application. Applicants will provide the Boards with all information 
concerning the Injunction and this application that is necessary for 
the Funds to fulfill their disclosure and other obligations under the 
federal securities laws.
    5. Applicants state that the inability to continue providing 
advisory and sub-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. Applicants state that they have committed substantial 
resources to establish an expertise in advising and underwriting Funds.
    6. A predecessor to Covered Persons, The Boston Company Advisors, 
Inc., previously was subject to an injunction that triggered section 
9(a) and received an exemption under section 9(c).\2\
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    \2\ E.F. Hutton & Company Inc, et al., Investment Company Act 
Release Nos. 16401 (May 16, 1988)(notice) and 17036 (Jun. 30, 
1989)(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, 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 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 Commission takes final action on an application for a 
permanent order.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-827 Filed 3-1-05; 8:45 am]
BILLING CODE 8010-01-P