[Federal Register Volume 70, Number 80 (Wednesday, April 27, 2005)]
[Notices]
[Pages 21829-21831]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1988]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26838; 812-13182]


The PNC Financial Services Group, Inc., et al.; Notice of 
Application

April 21, 2005.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for a permanent order under section 9(c) 
of

[[Page 21830]]

the Investment Company Act of 1940 (the ``Act'').

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    Summary of Application: Applicants request a permanent order 
exempting them and any other company of which Riggs Bank N.A. (``Riggs 
Bank''), or its successors, is or hereafter becomes an affiliated 
person from section 9(a) of the Act, with respect to a plea agreement 
entered into on January 27, 2005 between Riggs Bank and the U.S. 
Attorney for the District of Columbia and the U.S. Department of 
Justice.
    Applicants: The PNC Financial Services Group, Inc. (``PNC''); 
BlackRock, Inc. (``BlackRock, Inc.''); BlackRock Financial Management, 
Inc. (``BlackRock Financial''); BlackRock International, Ltd. 
(``BlackRock International''); BlackRock Advisors, Inc. (``BlackRock 
Advisors''); BlackRock Institutional Management Corporation 
(``BlackRock Institutional''); BlackRock Capital Management, Inc. 
(``BlackRock Capital''); State Street Research & Management Company 
(``State Street''); J.J.B. Hilliard, W.L. Lyons, Inc. d/b/a Hilliard 
Lyons (``Hilliard Lyons''); PFPC Distributors, Inc. (``PFPC''); 
BlackRock Distributors, Inc. (``BlackRock Distributors''); Northern 
Funds Distributors, LLC (`` Northern Funds''); and ABN AMRO 
Distribution Services (USA), Inc. (``ABN'') (collectively, the 
``Applicants'').
    Filing Date: The application was filed on April 6, 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 May 12, 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: Drew J. Pfirrman, The PNC Financial Services 
Group, Inc., 249 Fifth Avenue, 21st Floor, Pittsburgh, PA 15222, and 
Richard Prins, Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times 
Square, New York, NY 10036.

FOR FURTHER INFORMATION CONTACT: Keith A. Gregory, Senior Counsel, at 
(202) 551-6815, or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(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) 551-8090).

Applicants' Representations

    1. PNC, a Pennsylvania corporation, is a diversified financial 
services company that operates through its subsidiaries in five major 
businesses engaged in regional community banking, wholesale banking, 
wealth management, asset management, and global fund processing. PNC's 
subsidiaries have approximately $354 billion of assets under management 
as of December 31, 2004. BlackRock, Inc., a Delaware corporation, is a 
majority-owned indirect subsidiary of PNC. BlackRock Advisors, 
BlackRock Financial, BlackRock Institutional, BlackRock International, 
BlackRock Capital, and State Street are each wholly-owned direct or 
indirect subsidiaries of BlackRock, Inc. BlackRock Advisors, BlackRock 
Financial, BlackRock Institutional, Blackrock International, BlackRock 
Capital, and State Street are registered under the Investment Advisers 
Act of 1940 (the ``Advisers Act'') and provide investment advisory 
services to registered investment companies (``Funds'').
    2. Hilliard Lyons, a wholly-owned indirect subsidiary of PNC, is a 
full service investment firm that is registered under the Advisers Act 
and is registered as a broker-dealer under the Securities Exchange Act 
of 1934 (the ``Exchange Act''). Hilliard Lyons provides investment 
advisory services and serves as principal underwriter for two open-end 
Funds. PFPC, a Massachusetts corporation, is a wholly-owned indirect 
subsidiary of PNC. BlackRock Distributors, ABN (both Delaware 
corporations), and Northern Funds (a Wisconsin limited liability 
company), each a wholly-owned direct subsidiary of PFPC, are registered 
as broker-dealers under the Exchange Act and serve as principal 
underwriters for various open-end Funds.
    3. On February 10, 2005, PNC and Riggs National Corporation 
(``Riggs National''), a Delaware corporation and parent of Riggs Bank, 
entered into a merger agreement (the ``Merger Agreement''). Under the 
terms of the Merger Agreement, Riggs National will merge into PNC on 
May 13, 2005 (``Merger''). Concurrently with the Merger, PNC Bank will 
acquire the assets and assume substantially all of the liabilities of 
Riggs Bank. Following the Merger, Riggs Bank either will be liquidated 
or merged into a non-bank subsidiary.
    4. On January 26, 2005, the United States Attorney for the District 
of Columbia (the ``U.S. Attorney'') filed an information (the 
``Information'') in the United States District Court for the District 
of Columbia alleging that from at least March 1999 through December 
2003 Riggs Bank failed to file timely or accurate suspicious activity 
reports (``SARs'') in violation of the Bank Secrecy Act. On January 27, 
2005, the U.S. Attorney and the U.S. Department of Justice and Riggs 
Bank entered into a plea agreement (the ``Plea Agreement''), under 
which Riggs Bank pled guilty to a single count of failing to file 
timely or accurate SARs.\1\ Riggs Bank agreed to pay a $16 million fine 
and agreed to a five-year period of corporate probation, which will 
terminate immediately upon the closing of a sale of Riggs Bank or any 
other change-of-control transaction. The individuals at Riggs National 
and at Riggs Bank who were identified as being responsible for the 
conduct underlying the Plea Agreement have either resigned or have been 
terminated.
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    \1\ In addition to the Plea Agreement, Riggs Bank was directly 
and indirectly subject to several other government actions related 
to the conduct that led to the filing of the Information. See In re 
Riggs Bank Nat'l Assn, No. 2003-79 (July 16, 2003), In re Riggs Bank 
N.A., No. 2004-43, AA-EC-04-54 (May 13, 2004), In re Riggs Bank 
N.A., No. 2004-44, AA-EC-04-55 (May 13, 2004), In re Riggs Bank 
N.A., No. 2005-1, AA-EC-04-54 (Jan. 27, 2005), In re Riggs Bank 
N.A., No. 2004-1 (May 13, 2004) and In re Riggs Nat'l Corp., Nos. 
04-011-B-HC & 04-011-B-EC (May 14, 2004).
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Applicants' Legal Analysis

    1. Section 9(a)(1) of the Act provides, in pertinent part, that a 
person may not serve or act as an investment adviser or depositor of 
any registered investment company or a principal underwriter for any 
registered open-end investment company or registered unit investment 
trust, if such person within ten years has been convicted of any felony 
or misdemeanor arising out of such person's conduct, as, among other 
things, a bank. Section 2(a)(10) of the Act defines the term 
``convicted'' to include a plea of guilty. Section 9(a)(3) of the Act 
extends the prohibitions of section 9(a)(1) to a company any affiliated 
person of which is disqualified under the provisions of section 
9(a)(1). ``Affiliated person'' is defined in section 2(a)(3) of the Act 
to include, among

[[Page 21831]]

others, any person directly or indirectly controlling, controlled by, 
or under common control with, the other person. Sections 9(a)(1) and 
9(a)(3) would, upon the closing of the Merger, have the effect of 
precluding the Applicants, and any other company of which Riggs Bank is 
or during the next ten years becomes an affiliated person, from serving 
as investment adviser, depositor or a principal underwriter for any 
Funds.
    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) of the Act if it is established that these provisions, as 
applied to the applicants, are unduly or disproportionately severe or 
that the conduct of the applicants has been such as not to make it 
against the public interest or the protection of investors to grant the 
exemption. In light of the Plea Agreement and the Merger Agreement, 
Applicants seek an order exempting them and any other company of which 
Riggs Bank, or its successors, is or hereafter becomes an affiliated 
person (together with the Applicants, the ``Covered Persons'') from the 
provisions of section 9(a) of the Act with respect to the Plea 
Agreement.
    3. Applicants state that the prohibitions of section 9(a), as 
applied to the Covered Persons, would be unduly and disproportionately 
severe and that it would not be against the public interest or the 
protection of investors to grant an exemption from section 9(a). 
Applicants state that prohibiting them from providing services to the 
Funds would not only adversely affect their businesses, but also their 
employees. Applicants state that neither they nor any of their current 
or former officers, directors or employees had any involvement in the 
conduct underlying the Plea Agreement. All of the conduct occurred and 
ceased before the Merger Agreement, when the Applicants had no 
affiliation with the parties to the Plea Agreement. Following the 
Merger, no former employee of Riggs Bank who previously has been or who 
subsequently may be identified by PNC or any federal or state agency or 
court as having been responsible for the conduct underlying the Plea 
Agreement will be an officer, director or employee of any of the 
Applicants or any of the other Covered Persons. Applicants assert that 
the provisions of section 9(a) should not apply to the Applicants, who 
have taken no part in the misconduct underlying the Plea Agreement and 
are subject to section 9(a) solely because of the Merger Agreement.
    4. Applicants have distributed, or will distribute, written 
materials, including an offer to meet in person to discuss the 
materials, to the boards of directors or trustees of the Funds for 
which Applicants provide services as investment adviser or principal 
underwriter, 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 Plea Agreement and the 
reasons applicants believe relief pursuant to section 9(c) is 
appropriate. Applicants undertake to provide the Funds with all the 
information concerning the Plea Agreement and the application necessary 
for the Funds to fulfill their disclosure and other obligations under 
the federal securities laws. Applicants also state that they have not 
previously applied for an exemption pursuant to section 9(c) of the 
Act.

Applicants' Condition

    Applicants agree that any order granting the requested relief shall 
be subject to the following condition:
    Neither the Applicants nor any of the other Covered Persons will 
employ any of the former employees of Riggs Bank who previously have 
been or who subsequently may be identified by PNC or any federal or 
state agency or court as having been responsible for the conduct 
underlying the Plea Agreement, in any capacity, without first making 
further application to the Commission pursuant to section 9(c) of the 
Act.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1988 Filed 4-26-05; 8:45 am]
BILLING CODE 8010-01-P