[Federal Register Volume 74, Number 245 (Wednesday, December 23, 2009)]
[Notices]
[Pages 68290-68291]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-30428]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-29093; File No. 812-13728]
Investools Inc., et al.; Notice of Application and Temporary
Order
December 16, 2009.
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 Investools Inc. (``Investools'') on December
16, 2009 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: Investools, Amerivest Investment Management, LLC
(``Amerivest''), and TDAM USA Inc. (``TDAM USA'') (collectively, other
than Investools, the ``Fund Servicing Applicants,'' and together with
Investools, 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 Investools is
or hereafter may become an affiliated person within the meaning of
section 2(a)(3) of the Act (together with the Applicants, the
``Covered Persons'').
Filing Date: The application was filed on December 11, 2009, and
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amended on December 11, 2009 and December 16, 2009.
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 January 11, 2010, 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, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090; Applicants: Investools, 13947
S. Minuteman Dr., Draper, UT 84020; Amerivest, 1005 North Ameritrade
Place, Bellevue, NE 68005; and TDAM USA, 161 Bay Street, 35th Floor, TD
Canada Trust Tower, Toronto, Ontario, Canada M5J 2T2.
FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at
(202) 551-6826, or Jennifer L. Sawin, Branch Chief, at (202) 551-6821,
(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
via the Commission's Web site by searching for the file number, or an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicants' Representations
1. Investools and Amerivest are indirect, wholly-owned subsidiaries
of TD AMERITRADE Holding Corporation (``TD Ameritrade Holding''). The
Toronto-Dominion Bank (``TD Bank'') owns approximately 45% of the
outstanding common stock of TD Ameritrade Holding. TDAM USA is a
direct, wholly-owned subsidiary of TD Bank. Investools was acquired by
TD Ameritrade Holding in June 2009 as part of TD Ameritrade Holding's
acquisition of thinkorswim Group, Inc. Investools does not provide, and
no existing company of which Investools is an affiliated person (other
than the Fund Servicing Applicants) currently provides, Fund Service
Activities to any registered investment company.\2\
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\2\ ``Fund Service Activities'' refers to serving or acting in
the capacity of employee, officer, director, member of an advisory
board, investment adviser, or depositor of any registered investment
company, or principal underwriter for any registered open-end
company, registered unit investment trust, or registered face-amount
certificate company. Any registered investment company to which a
Covered Person provides Fund Service Activities is a ``Fund.''
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2. The Fund Servicing Applicants are registered as investment
advisers under the Investment Advisers Act of 1940 and provide
investment advisory or sub-advisory services to Funds.
3. On December 16, 2009, the United States District Court for the
District of Columbia entered a judgment against Investools
(``Judgment'') in a matter brought by the Commission.\3\ The Commission
alleged in the complaint (``Complaint'') that Defendants Michael J.
Drew (``Drew'') and Eben D. Miller (``Miller''), employees of
Investools, committed fraud during sales presentations at workshops
held by Investools. The Complaint also alleged that while Investools
had compliance policies requiring speakers to have proof of the
validity of success claims, it did not require Drew, Miller, or other
speakers to provide it with substantiating documentation after learning
they were claiming that their securities trading was tremendously
profitable. The Complaint alleges that Investools is liable as a
controlling person under section 20(a) of the Securities Exchange Act
of 1934 (``Exchange Act'') for violations by its speakers of section
10(b) of the Exchange Act and rule 10b-5
[[Page 68291]]
thereunder. Without admitting or denying the allegations in the
Complaint, except as to jurisdiction, Investools consented to the entry
of the Judgment that included, among other things, the entry of the
Injunction.
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\3\ Securities and Exchange Commission v. Investools Inc.,
Michael J. Drew and Eben D. Miller, Final Judgment as to Defendant
Investools Inc., 09 Civ. 02343 (D.D.C. December 16, 2009).
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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, among other things, 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, among
others, any person directly or indirectly controlling, controlled by,
or under common control with, the other person. Applicants state that
Investools is an affiliated person of each of the Fund Servicing
Applicants within the meaning of section 2(a)(3) of the Act. Applicants
state that the entry of the Injunction results 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) of the Act 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
exemption. Applicants have filed an application pursuant to section
9(c) seeking a temporary and permanent order exempting them and Covered
Persons 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 the 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 alleged conduct giving rise to the
Injunction did not involve any of the Applicants providing Fund Service
Activities to any registered investment company and that the alleged
conduct occurred prior to TD Ameritrade Holding's acquisition of
thinkorswim Group, Inc. when the Fund Servicing Applicants were not
affiliated persons of Investools. Applicants also state that none of
the current or former directors, officers, or employees of the Fund
Servicing Applicants had any knowledge of, or participation in, the
violative conduct alleged in the Complaint. Applicants further state
that the personnel at Investools who were involved in the violations
alleged in the Complaint have had no, and will not have any future,
involvement in providing Fund Service Activities to Funds.
5. Applicants state that the inability of the Fund Servicing
Applicants to continue to serve as investment adviser or sub-adviser to
the Funds would result in potential hardship for the Funds and their
shareholders. Applicants will distribute to the boards of directors of
the Funds (``Boards''), as soon as reasonably practicable and to the
extent not already completed, written materials regarding the Judgment,
any impact on the Funds, and the application. These materials will
include an offer to meet in person to discuss the materials with each
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 as defined in rule 0-1(a)(6) under the Act,
if any. Applicants state they will provide each Board with all
information concerning the Judgment and the application that is
necessary for the Funds to fulfill their disclosure and other
obligations under the federal securities laws.
6. Applicants also state that, if the Fund Servicing Applicants
were barred from providing investment advisory services to the Funds,
the effect on their businesses and employees would be severe.
Applicants state that the Fund Servicing Applicants have committed
substantial capital and other resources to establish an expertise in
advising and sub-advising Funds. Applicants further state that
prohibiting the Applicants from engaging in Fund Service Activities
would not only adversely affect their businesses, but would also
adversely affect approximately 52 employees who are actively involved
in those activities.
7. Applicants 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, 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
Applicants and any other Covered Persons are granted a temporary
exemption from the provisions of section 9(a), solely with respect to
the Injunction, subject to the condition in the application, from
December 16, 2009, until the Commission takes final action on their
application for a permanent order.
By the Commission.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-30428 Filed 12-22-09; 8:45 am]
BILLING CODE 8011-01-P