[Federal Register Volume 77, Number 61 (Thursday, March 29, 2012)]
[Notices]
[Pages 19039-19041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-7519]
[[Page 19039]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30007; 813-228]
Jefferies Employees Special Opportunities Partners, LLC, et al.;
Notice of Application
March 23, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under sections 6(b) and
6(e) of the Investment Company Act of 1940 (the ``Act'') granting an
exemption from all provisions of the Act, except sections 9, 17, 30 and
36 through 53, and the rules and regulations under the Act (the ``Rules
and Regulations''). With respect to sections 17(a), (d), (f), (g), and
(j) of the Act, sections 30(a), (b), (e), and (h) of the Act and the
Rules and Regulations and rule 38a-1 under the Act, applicants request
a limited exemption as set forth in the application.
-----------------------------------------------------------------------
SUMMARY: Summary of the Application: Applicants request an order to
exempt a limited liability company formed for the benefit of eligible
employees of Jefferies Group, Inc. and its affiliates from certain
provisions of the Act. The limited liability company is an ``employees'
securities company'' within the meaning of section 2(a)(13) of the Act.
Applicants: Jefferies Employees Special Opportunities Partners, LLC
(``JESOP''), Jefferies Special Opportunities Advisers, LLC (the
``Investment Manager'') and Jefferies & Company, Inc. (the ``Managing
Member'').
DATES: Filing Dates: The application was filed on January 20, 2000 and
amended on January 6, 2004, October 17, 2008, January 9, 2012, January
11, 2012 and March 16, 2012.
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 April 17, 2012 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, 520 Madison Avenue,
12th Floor, New York, New York 10022.
FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Special Counsel, at
(202) 551-6813 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 via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/seach.htm or by calling (202) 551-8090.
Applicants' Representations
1. JESOP is a Delaware limited liability company and is an
employees' securities company within the meaning of section 2(a)(13) of
the Act. Interests in JESOP (``Interests'') were offered to (i) current
and former employees, officers, directors, and consultants of the
Jefferies Group, (ii) spouses, parents, children, spouses of children,
siblings, and grandchildren of such persons, (iii) trusts and other
investment vehicles used or created by such persons, and (iv) the
Managing Member and certain other Jefferies Entities. Jefferies Group,
Inc. and its ``affiliates,'' as defined in rule 12b-2 under the
Securities Exchange Act of 1934 (the ``Exchange Act''), are referred to
collectively as ``Jefferies Group'' and individually as a ``Jefferies
Entity.'' Interests were not registered under the Securities Act of
1933 (``Securities Act'') in reliance on section 4(2) of the Securities
Act or Regulation D under the Securities Act and were sold only to
``accredited investors'' within the meaning of rule 501(a) of
Regulation D. JESOP is not currently offering Interests and will not do
so in the future, nor will it make capital calls on existing Interest
holders (``Members'').
2. JESOP will terminate on March 29, 2013 (the ``Termination'') and
its term will not be extended unless at that time it is able to rely on
section 3(c)(1) of the Act. The chief compliance officer of JESOP or
the Investment Manager will certify to the Office of Investment Company
Regulation of the Division of Investment Management every six months
beginning from the date six months following the date of the requested
order until March 29, 2013 that JESOP is in compliance with the terms
and conditions of the requested order, as reflected in the application
and this notice.
3. JESOP is controlled by the Managing Member, within the meaning
of section 2(a)(9) of the Act. The Investment Manager serves as
investment adviser to JESOP. JESOP currently owns only (i) Series E
Interests of Jefferies High Yield Holdings, LLC (``Holdings''), the
sole member of Jefferies High Yield Trading, LLC, a registered broker-
dealer, (ii) ``eligible securities,'' as defined in rule 2a-7 under the
Act (``Eligible Securities''), (iii) shares of money market funds
registered under the Act, and (iv) cash (collectively, ``Permitted
Instruments''). JESOP will not hold any assets other than Permitted
Instruments.
Applicants' Legal Analysis
1. Section 6(b) of the Act provides, in part, that the Commission
will exempt employees' securities companies from the provisions of the
Act to the extent that the exemption is consistent with the protection
of investors. Section 2(a)(13) defines an employees' securities company
as any investment company all of whose securities (other than short-
term paper) are beneficially owned (a) by current or former employees,
or persons on retainer, of one or more affiliated employers, (b) by
immediate family members of such persons, or (c) by such employer or
employers together with any of the persons in (a) or (b).
2. Section 7 of the Act generally prohibits investment companies
that are not registered under section 8 of the Act from selling or
redeeming their securities. Section 6(e) of the Act provides that, in
connection with any order exempting an investment company from any
provision of section 7, certain provisions of the Act, as specified by
the Commission, will be applicable to the company and other persons
dealing with the company as though the company were registered under
the Act. Applicants request an order under sections 6(b) and 6(e) of
the Act exempting applicants from all provisions of the Act, except
sections 9, 17, 30, 36 through 53, and the Rules and Regulations. With
respect to sections 17(a), (d), (f), (g) and (j) and 30(a), (b), (e)
and (h) of the Act and the Rules and Regulations, and rule 38a-1 under
the Act, applicants request a limited exemption as set forth in the
application.
3. Section 17(a) of the Act generally prohibits any affiliated
person of a registered investment company, or any affiliated person of
an affiliated person, acting as principal, from knowingly selling or
purchasing any security or
[[Page 19040]]
other property to or from the company. Applicants request an exemption
from section 17(a) to permit Holdings, in connection with the
Termination, to engage in any principal transaction directly or
indirectly with JESOP.
4. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
any affiliated person of a registered investment company, or any
affiliated person of such person, acting as principal, from
participating in any joint arrangement with the registered investment
company unless authorized by the Commission. Applicants request an
exemption from section 17(d) and rule 17d-1 to the extent necessary to
permit JESOP to engage in any transactions in which an Affiliated Co-
Investor, or an affiliated person of such person, is a participant,
solely in connection with the Termination. The requested exemption
would permit JESOP to redeem its Series E Interests in Holdings at or
about the same time that another Jefferies Entity is redeeming another
series of interests in Holdings. The term ``Affiliated Co-Investor''
with respect to JESOP means any person who is (a) an ``affiliated
person'' (as defined in section 2(a)(3) of the Act) of JESOP; (b) a
Jefferies Entity; (c) an officer, director, or employee of a Jefferies
Entity or the Jefferies Group; or (d) an entity in which a Jefferies
Entity acts as general partner, or has a similar capacity to control
the sale or disposition of the entity's securities.
5. Section 17(f) of the Act designates the entities that may act as
investment company custodians, and rule 17f-2 under the Act allows an
investment company to act as self-custodian. Applicants request an
exemption to permit the following exceptions from the requirements of
rule 17f-2: (i) Compliance with paragraph (b) of the rule may be
achieved through safekeeping in the locked files or secure server of a
Jefferies Entity; (ii) for the purposes of paragraph (d) of the rule,
(A) employees of the Managing Member or a designated affiliate of the
Managing Member will be deemed to be employees of JESOP, (B) officers
of the Managing Member or a designated affiliate of the Managing Member
will be deemed to be officers of JESOP, and (C) the Managing Member or
a designated affiliate of the Managing Member will be deemed to be the
board of directors of JESOP; and (iii) instead of the verification
procedure under paragraph (f) of the rule, verification will be
effected quarterly by two employees of the Managing Member or a
designated affiliate of the Managing Member.
6. Section 17(g) and rule 17g-1 generally require the bonding of
officers and employees of a registered investment company who have
access to its securities or funds. Rule 17g-1 requires that a majority
of directors who are not interested persons of a registered investment
company (``disinterested directors'') take certain actions and give
certain approvals relating to fidelity bonding. Paragraph (g) of rule
17g-1 sets forth certain materials relating to the fidelity bond that
must be filed with the Commission and certain notices relating to the
fidelity bond that must be given to each member of the investment
company's board of directors. Paragraph (h) of rule 17g-1 provides that
an investment company must designate one of its officers to make the
filings and give the notices required by paragraph (g). Paragraph (j)
of rule 17g-1 exempts a joint insured bond provided and maintained by
an investment company and one or more other parties from section 17(d)
of the Act and the rules thereunder. Rule 17g-1(j)(3) requires that the
board of directors of an investment company satisfy the fund governance
standards defined in rule 0-l(a)(7).
7. Applicants request an exemption from rule 17g-1(d), (e) and (g)
to the extent necessary to permit the Managing Member or its affiliates
to act and approve as required by the rule, rather than a majority of
the disinterested directors of JESOP or of the Managing Member. JESOP
will comply with all other requirements of rule 17g-1, except that
JESOP requests an exemption from the requirements of rule 17g-1(g) and
(h) relating to the filing of copies of fidelity bonds and related
information with the Commission and relating to the provisions of
notices to the board of directors, and an exemption from the
requirements of rule 17g-1(j)(3) that JESOP comply with the fund
governance standards defined in rule 0-1(a)(7). The Managing Member or
an affiliate of the Managing Member will maintain the materials
otherwise required to be filed with the Commission by rule 17g-1(g) and
agrees that all such material will be subject to examination by the
Commission and its staff. The Managing Member will designate a person
to maintain the records otherwise required to be filed with the
Commission under paragraph (g) of the rule.
8. Applicants request an exemption from the requirements, contained
in section 17(j) of the Act and rule 17j-1 under the Act, that every
registered investment company adopt a written code of ethics and every
``access person'' of such registered investment company report to the
investment company with respect to transactions in any security in
which such access person has, or by reason of the transaction acquires,
any direct or indirect beneficial ownership in the security. Applicants
request an exemption from the requirements in rule 17j-1, with the
exception of the antifraud provisions of rule 17j-1(b), because they
are burdensome and unnecessary and would serve little purpose in light
of the community of interest among Members by virtue of their common
association with the Jefferies Group.
9. Applicants request an exemption from the requirements in
sections 30(a), 30(b), and 30(e) of the Act, and the rules under those
sections, that registered investment companies prepare and file with
the Commission and mail to their shareholders certain periodic reports
and financial statements. Applicants request exemptive relief to the
extent necessary to permit JESOP to report annually to its Members.
Applicants also request an exemption from section 30(h) of the Act to
the extent necessary to exempt the Managing Member, the Investment
Manager, and any other persons who are subject to section 30(h), from
filing Forms 3, 4 and 5 under section 16 of the Exchange Act with
respect to their ownership of Interests.
10. Rule 38a-1 requires investment companies to adopt, implement
and periodically review written policies and procedures reasonably
designed to prevent violation of the federal securities laws and to
appoint a chief compliance officer. JESOP will comply with rule 38a-
1(a), (c) and (d), except that (i) because JESOP does not have a board
of directors, the board of directors of the Managing Member will
fulfill the responsibilities assigned to JESOP's board of directors
under the rule, and (ii) because the board of directors of the Managing
Member does not have any disinterested members, approval by a majority
of the disinterested board members required by rule 38a-1 will not be
obtained and (iii) since the board of directors of the Managing Member
does not have any disinterested members, JESOP will comply with the
requirement in rule 38a-1(a)(4)(iv) that the chief compliance officer
meet with the disinterested directors by having the chief compliance
officer meet with the board of directors of the Managing Member as
constituted.
Applicants' Conditions
Applicants agree that the requested order will be subject to the
following conditions:
1. Each proposed transaction otherwise prohibited by section 17(a)
or section 17(d) and rule 17d-1 to which
[[Page 19041]]
JESOP is a party (each a ``Section 17 Transaction'') will be effected
only if the Investment Manager determines that:
(a) The terms of the Section 17 Transaction, including the
consideration to be paid or received, are fair and reasonable to the
Members of JESOP and do not involve overreaching of JESOP or its
Members on the part of any person concerned;
(b) the Section 17 Transaction is consistent with the interests of
the Members of JESOP, JESOP's constitutive documents, and JESOP's
reports to its Members; and
(c) the Section 17 Transaction is undertaken only in connection
with the Termination.
The Investment Manager will record and preserve a description of all
Section 17 Transactions, its findings, the information or materials
upon which its findings are based, and the basis therefor. All such
records will be maintained for the life of JESOP, and at least six
years thereafter, and will be subject to examination by the Commission
and its staff. All such records will be maintained in an easily
accessible place for at least the first two years after such a
transaction.
2. If JESOP makes purchases or sales from or to an entity
affiliated with JESOP because an officer, director or employee of the
Jefferies Group either: (a) Serves as an officer, director, general
partner or investment adviser of the entity, or (b) has a 5% or more
investment in the entity, such individual will not participate in
JESOP's determination of whether or not to effect the purchase or sale.
Any such purchase or sale will be made only in connection with the
Termination.
3. The Investment Manager will adopt, and periodically review and
update, procedures designed to ensure that reasonable inquiry is made,
prior to the consummation of any Section 17 Transaction, that (a) the
Section 17 Transaction is only effected to facilitate the Termination,
and (b) the possible involvement in the Section 17 Transaction of any
affiliated person or promoter of or principal underwriter for JESOP or
any affiliated person of such person, promoter or principal
underwriter, is made in accordance with these conditions.
4. The Investment Manager will not invest the funds of JESOP in any
securities other than Series E Interests of Holdings, shares of money
market funds registered under the Act, and ``eligible securities,'' as
that term is defined in rule 2a-7 under the Act.
5. The Managing Member will send, or cause to be sent, to each
person who was a Member in JESOP at any time during the fiscal year
then ended, JESOP's financial statements audited by independent
accountants. At the end of each fiscal year, as of that year end, the
Managing Member will make or have a valuation made of all the assets of
JESOP. In addition, within 90 days after the end of each fiscal year of
JESOP, or as soon as practicable thereafter, the Managing Member of
JESOP shall send, or cause to be sent, a report to each person who was
a Member at any time during the fiscal year then ended, setting forth
such tax information as shall be necessary for the preparation by the
Member of his or her federal and state income tax returns, and a report
of the investment activities of JESOP during such fiscal year.
6. JESOP, the Managing Member and the Investment Manager will
maintain and preserve, for the life of JESOP and at least six years
thereafter, such accounts, books, and other documents as constitute the
record forming the basis for the audited financial statements and
annual reports of JESOP to be sent to the Members, and agree that all
such records will be subject to examination by the Commission and its
staff. All such records will be maintained in an easily accessible
place for at least the first two years.
7. The requested relief will terminate on March 29, 2013 and after
that date JESOP will not rely on any Commission rule under the Act that
provides relief permitting the operation of employees' securities
companies as such term is defined in section 2(a)(13) of the Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-7519 Filed 3-28-12; 8:45 am]
BILLING CODE 8011-01-P