[Federal Register Volume 78, Number 77 (Monday, April 22, 2013)]
[Notices]
[Pages 23800-23806]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-09344]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30465; 813-370]


JPMorgan Chase & Co., et al.; Notice of Application

April 16, 2013.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application to amend prior orders under sections 
6(b) and 6(e) of the Investment Company Act of 1940 (``Act'') granting 
an exemption from all provisions of the Act, except section 9, and 
sections 36 through 53, and the rules and regulations thereunder. With 
respect to sections 17 and 30 of the Act, and the rules and regulations 
thereunder, and rule 38a-1 under the Act, the exemption is limited as 
set forth in the application.

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SUMMARY OF APPLICATION: Applicants request an order to amend prior 
orders exempting certain limited partnerships and other entities formed 
for the benefit of eligible employees of JPMorgan Chase & Co. and its 
affiliates from certain provisions of the Act. Each partnership will be 
an ``employees' securities company'' within the meaning of section 
2(a)(13) of the Act.

APPLICANTS: JPMorgan Chase & Co. (the ``Company''); Chase Co-Invest 
June 2000 Partners, LP, Chase Co-Invest March 2000 Partners, LP, 
J.P.Morgan Chase Co-Invest Partners 2001 A-2, LP, J.P.Morgan Chase Co-
Invest Partners 2001 B-2, L.P., J.P.Morgan Chase Co-Invest Partners 
2002, LP, J.P.Morgan Chase Co-Invest Partners 2003, LP, J.P.Morgan 
Chase Co-Invest Partners 2004, LP, Sixty Wall Street Fund, L.P., 522 
Fifth Avenue Fund, L.P., OEP II Co-Investors, L.P., OEP III Co-
Investors, L.P., and Hambrecht & Quist Employee Venture Fund, L.P. 
(collectively, the ``Existing Partnerships''); The BSC Employee Fund, 
L.P., The BSC Employee Fund II, L.P., The BSC Employee Fund III, L.P., 
The BSC Employee Fund IV, L.P., The BSC Employee Fund V, L.P., The BSC 
Employee Fund VI, L.P., The BSC Employee Fund VII, L.P., The BSC 
Employee Fund VIII (Cayman), L.P., and Bear Stearns Health Innoventures

[[Page 23801]]

Employee Fund, L.P. (collectively, the ``Bear Stearns Partnerships'').

FILING DATES:  The application was filed on February 8, 2008, and 
amended on May 29, 2008, October 29, 2008, April 8, 2011, July 24, 
2012, and January 18, 2013. Applicants have agreed to file an amendment 
during the notice period, the substance of which is reflected 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 May 13, 2013, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants, 
270 Park Avenue, New York, NY 10017.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 551-6879, or Dalia Osman Blass, Assistant Director, 
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 an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Company is a financial holding company and a Delaware 
corporation. The Company and its ``affiliates,'' as defined in rule 
12b-2 under the Securities Exchange Act of 1934 (the ``Exchange Act'') 
(each an ``Affiliate''), are referred to collectively as ``JPMorgan 
Chase.'' The Company is a leader in investment banking, financial 
services for consumers and businesses, financial transaction processing 
and asset management.
    2. The Existing Partnerships are operating in accordance with the 
terms and conditions of the Prior Orders.\1\ The Bear Stearns 
Partnerships were formed in reliance on an exemptive order issued by 
the Commission.\2\ The Existing Partnerships and the Bear Stearns 
Partnerships are closed to new investors. Applicants intend to offer 
additional investment vehicles identical in all material respects to 
the Existing Partnerships (other than specific investment terms, 
investment objectives and strategies and form of organization) (the 
``Partnerships''). The Existing Partnerships will continue to comply 
with the terms and conditions of the Prior Orders. Any Partnership 
formed after the date of the initial filing of the application and Bear 
Stearns Partnership formed in reliance on the BSC Order will comply 
with the terms and conditions of the requested order.\3\
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    \1\ The Prior Orders are: Chase Global Co-Invest Partners 1997, 
L.P. and The Chase Manhattan Corporation, Investment Company Act 
Release Nos. 23202 (May 21, 1998) (notice) and 23261 (June 17, 1998) 
(order), Hambrecht & Quist Employee Venture Fund, L.P., et al., 
Investment Company Act Release Nos. 23396 (August 21, 1998) (notice) 
and 23438 (September 16, 1998) (order), and Sixty Wall Street Fund, 
L.P., et al., Investment Company Act Release Nos. 23543 (November 
20, 1998) (notice) and 23601 (December 16, 1998) (order).
    \2\ The BSC Employee Fund, LP. and BSCGP Inc., Investment 
Company Act Release Nos. 22656 (May 7, 1997) (notice) and 22695 
(June 3, 1997) (order) (the ``BSC Order''). On March 16, 2008, the 
Company and The Bear Stearns Companies Inc. (now The Bear Stearns 
Companies LLC) (``Bear Stearns'') entered into an Agreement and Plan 
of Merger, as amended (the ``Merger Agreement''). The Merger 
Agreement provided that, upon the terms and subject to the 
conditions set forth in the Merger Agreement, a wholly-owned 
subsidiary of the Company would merge with and into Bear Stearns 
with Bear Stearns continuing as the surviving corporation and as a 
wholly-owned subsidiary of the Company (the ``Bear Stearns 
Transaction''). As a result of the Bear Stearns Transaction, the 
general partners of the Bear Stearns Partnerships are Affiliates of 
the Company.
    \3\ For purposes of this application, (i) a Bear Stearns 
Partnership will be considered a Partnership, (ii) any Bear Stearns 
Affiliate(s) acting as general partners(s) to a Bear Stearns 
Partnership will be considered a General Partner (as defined below), 
(iii) Eligible Employees (as defined below) of Bear Stearns and its 
Affiliates and their Qualified Participants (as defined below) will 
be considered Eligible Employees and Qualified Participants, 
respectively, and (iv) all references to JPMorgan Chase will be 
deemed to include Bear Stearns and its Affiliates.
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    3. The Partnerships will be established primarily for the benefit 
of highly compensated employees of JPMorgan Chase, as part of a program 
designed to create capital building opportunities that are competitive 
with those at other financial services firms and to facilitate the 
recruitment of high caliber professionals. These programs may be 
structured as different Partnerships, or as separate plans within the 
same Partnership. Each Partnership will be an ``employees' securities 
company'' within the meaning of section 2(a)(13) of the Act. Each of 
the Partnerships will operate as a diversified or non-diversified, 
closed-end investment company within the meaning of the Act. JPMorgan 
Chase will control the Partnerships within the meaning of section 
2(a)(9) of the Act.
    4. Each Partnership will have a general partner or manager that is 
an Affiliate of the Company (``General Partner''). The General Partner 
of each Partnership will manage, operate and control that Partnership. 
The General Partner will be authorized to delegate investment 
management responsibility to a JPMorgan Chase entity or to a committee 
of JPMorgan Chase employees, provided that the ultimate responsibility 
for and control of each Partnership remain with the General Partner. 
The General Partner will delegate management responsibility only to 
entities that control, are controlled by, or are under common control 
with JPMorgan Chase. Any JPMorgan Chase entity that is delegated the 
responsibility of making investment decisions for the Partnership will 
be registered as an investment adviser under the Investment Advisers 
Act of 1940 (the ``Advisers Act'') if required under applicable law. 
The General Partner, JPMorgan Chase, or any employees of the General 
Partner or JPMorgan Chase may be entitled to receive compensation or a 
performance-based fee (such as a ``carried interest'') \4\ based on the 
gains and losses of the investment program or of the Partnership's 
investment portfolio. All Partnership investments are referred to 
herein collectively as ``Portfolio Investments.''
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    \4\ A ``carried interest'' is an allocation to the General 
Partner, a Participant (as defined below) or the JPMorgan Chase 
entity acting as the investment adviser to a Partnership based on 
net gains in addition to the amount allocable to any such entity in 
proportion to its capital contributions. A General Partner, 
Participant or JPMorgan Chase entity that is registered as an 
investment adviser under the Advisers Act may charge a carried 
interest only if permitted by rule 205-3 under the Advisers Act. Any 
carried interest paid to a General Partner, Participant or JPMorgan 
Chase entity that is not registered under the Advisers Act also may 
be paid only if permitted by rule 205-3 under the Advisers Act as if 
such entity were registered under the Advisers Act.
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    5. Interests in the Partnerships (``Interests'') will be offered 
without registration in reliance on section 4(2) of the Securities Act 
of 1933 (the ``Securities Act'') or Regulation D under the Securities 
Act, and will be sold only (a) to Eligible Employees, (b) at the 
request of Eligible Employees and the discretion of the General 
Partner, to Qualified Participants of such Eligible Employees, or (c) 
to JP Morgan Chase entities, each as defined below. Prior to

[[Page 23802]]

offering an Interest to an Eligible Employee, the General Partner must 
reasonably believe that each Eligible Employee that is required to make 
an investment decision with respect to whether or not to participate in 
a Partnership, or to request that a related Qualified Participant be 
permitted to participate, will be a sophisticated investor capable of 
understanding and evaluating the risks of participating in the 
Partnership without the benefit of regulatory safeguards. Participation 
in a Partnership will be voluntary. The term ``Partners'' refers to all 
partners or members of, or other investors in the Partnerships, and the 
term ``Participants'' refers to all partners or members of, or other 
investors in the Partnerships other than the General Partner.
    6. Only those employees of JPMorgan Chase who qualify as ``Eligible 
Employees'' will be able to participate in the Partnerships. In order 
to qualify as an ``Eligible Employee,'' (a) an individual must (i) be a 
current or former employee or current Consultant (as defined below) of 
JPMorgan Chase and (b) except for certain individuals who manage the 
day-to-day affairs of the Partnership in question (``Managing 
Employees'') \5\ and a limited number of other employees of JPMorgan 
Chase \6\ (collectively, ``Non-Accredited Investors''), meet the 
standards of an ``accredited investor'' under in rule 501(a)(5) or 
501(a)(6) of Regulation D, or (b) an entity must (i) be a current 
Consultant of JPMorgan Chase \7\ and (ii) meet the standards of an 
``accredited investor under rule 501(a) of Regulation D. A Partnership 
may not have more than 35 Non-Accredited Investors. It is anticipated 
that, at the sole discretion of the General Partner, Consultants of 
JPMorgan Chase may be offered the opportunity to participate in the 
Partnerships.\8\
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    \5\ A Managing Employee may invest in a Partnership if he or she 
meets the definition of ``knowledgeable employee'' in rule 3c-
5(a)(4) under the Act with the Partnership treated as though it were 
a ``Covered Company'' for purposes of the rule.
    \6\ Such employees must meet the sophistication requirements set 
forth in rule 506(b)(2)(ii) of Regulation D under the Securities Act 
and may be permitted to invest his or her own funds in the 
Partnership if, at the time of the employee's investment in a 
Partnership, he or she (a) has a graduate degree in business, law or 
accounting, (b) has a minimum of five years of consulting, 
investment banking or similar business experience, and (c) has had 
reportable income from all sources of at least $100,000 in each of 
the two most recent years and a reasonable expectation of income 
from all sources of at least $140,000 in each year in which such 
person will be committed to make investments in a Partnership. In 
addition, such an employee will not be permitted to invest in any 
year more than 10% of his or her income from all sources for the 
immediately preceding year in the aggregate in such Partnership and 
in all other Partnerships in which he or she has previously 
invested.
    \7\ A ``Consultant'' is a person or entity whom JPMorgan Chase 
has engaged on retainer to provide services and professional 
expertise on an ongoing basis as a regular consultant or as a 
business or legal advisor to JPMorgan Chase and who shares a 
community of interest with JPMorgan Chase and JPMorgan Chase 
employees.
    \8\ In order to participate in the Partnerships, Consultants 
will be required to be sophisticated investors who qualify as 
``accredited investors'' under rule 501(a)(5) or 501(a)(6) of 
Regulation D (if a Consultant is an individual) or, if not an 
individual, meet the standards of an ``accredited investor'' under 
rule 501(a) of Regulation D. Qualified Participants (as defined 
below) of Consultants may invest in a Partnership.
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    7. In the discretion of the General Partner and at the request of 
an Eligible Employee, Interests may be assigned by such Eligible 
Employee, or sold directly by the Partnership, to a Qualified 
Participant of an Eligible Employee. In order to qualify as a 
``Qualified Participants'' an individual or entity must (a) be an 
Eligible Family Member or Qualified Investment Vehicle (in each case as 
defined below), respectively, of an Eligible Employee, and (b) if 
purchasing an Interest from a Partnership, come within one of the 
categories of an ``accredited Investor'' under rule 501(a) of 
Regulation D. An ``Eligible Family Member'' is a spouse, parent, child, 
spouse of child, brother, sister or grandchild of an Eligible Employee, 
including step and adoptive relationships. A ``Qualified Investment 
Vehicle'' is (a) a trust of which the trustee, grantor and/or 
beneficiary is an Eligible Employee, (b) a partnership, corporation or 
other entity controlled by an Eligible Employee, or (c) a trust or 
other entity established solely for the benefit of an Eligible Employee 
or Eligible Family Members of an Eligible Employee.\9\
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    \9\ The inclusion of partnerships, corporations, or other 
entities that are controlled by Eligible Employees who are 
individuals in the definition of ``Qualified Investment Vehicle'' is 
intended to enable these individuals to make investments in the 
Partnerships through personal investment vehicles over which they 
exercise investment discretion or other investment vehicles the 
management or affairs of which they otherwise control. In the case 
of a partnership, corporation, or other entity controlled by a 
Consultant, individual participants will be limited to senior level 
employees, members, or partners of the Consultant who are 
responsible for the activities of the Consultant, will be required 
to qualify as ``accredited investors'' under rule 501(a)(5) or 
501(a)(6) of Regulation D and will have access to the directors and 
officers of the General Partner.
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    8. The terms of a Partnership will be fully disclosed to each 
Eligible Employee, and, if applicable, to a Qualified Participant, at 
the time they are invited to participate in the Partnership. Each 
Eligible Employee and their Qualified Participants will be furnished 
with offering materials, including a copy of the partnership agreement 
or other organizational document (the ``Partnership Agreement'') for 
the relevant Partnership. Each Partnership will send its Partners 
annual financial statements within 120 days after the end of the fiscal 
year of such Partnership, or as soon as practicable thereafter. The 
annual financial statements of each Partnership will be audited by 
independent certified public accountants,\10\ except under certain 
circumstances in the case of Partnerships formed to make a single 
Portfolio Investment.\11\ As soon as practicable after the end of each 
tax year of a Partnership, a report will be transmitted to each Partner 
showing such Partner's share of income, gains, losses, credits, 
deductions, and other tax items for U.S. federal income tax purposes, 
resulting from the Partnership's operations during that year.
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    \10\ ``Audit'' will have the meaning defined in rule 1-02(d) of 
Regulation S-X.
    \11\ In such cases, audited financial statements will be 
prepared for either the Partnership or the entity that is the 
subject of the Portfolio Investment. Where a Partnership is formed 
to make a single investment, that investment will not be an entity 
relying on section 3(c)(7) of the Act.
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    9. Interests in each Partnership will be non-transferable except 
with the prior written consent of the General Partner, and, in any 
event, no person or entity will be admitted into a Partnership as a 
Participant unless such person is (a) an Eligible Employee, (b) a 
Qualified Participant of an Eligible Employee, or (c) a JPMorgan Chase 
entity. The Interests in the Partnerships will be sold without a sales 
load.
    10. An Eligible Employee's interest in a Partnership may be subject 
to repurchase or cancellation if: (a) The Eligible Employee's 
relationship with JPMorgan Chase is terminated for cause; (b) a former 
Eligible Employee becomes employed by, or a partner in, consultant to 
or otherwise joins any firm that the General Partner determines, in its 
reasonable discretion, to be competitive with any business of JPMorgan 
Chase; or (c) the Eligible Employee voluntarily resigns his or her 
employment with JPMorgan Chase or otherwise has his or her employment 
terminated for any other reason. Upon repurchase or cancellation, the 
General Partner will pay to the Eligible Employee at least the lesser 
of (a) the amount actually paid by the Eligible Employee to acquire the 
Interest (less prior distributions, plus interest), and (b) the fair 
market value of the Interest as determined at the time of repurchase or 
cancellation by the

[[Page 23803]]

General Partner. The terms of any repurchase or cancellation will apply 
equally to any Qualified Participant of an Eligible Employee.
    11. It is possible that an investment program may be structured in 
which a Partnership will co-invest in a portfolio company (or a pooled 
investment vehicle) with JPMorgan Chase or an investment fund or 
separate account, organized primarily for the benefit of investors who 
are not affiliated with JPMorgan Chase, over which a JPMorgan Chase 
entity exercises investment discretion or which is sponsored by a 
JPMorgan Chase entity (a ``JPMorgan Chase Third Party Fund''). It is 
also possible that an investment program may be structured in which a 
Partnership will invest in an investment fund or pooled investment 
vehicle for which entities or persons unaffiliated with JPMorgan Chase 
are the sponsors or investment advisers (a ``Third Party Sponsored 
Fund''). Any JPMorgan Chase entity's (other than a JPMorgan Chase Third 
Party Fund's) co-investment in a Third Party Sponsored Fund will be 
subject to the restrictions contained in condition 3 below. The General 
Partner will not delegate management and investment discretion for the 
Partnership to the sponsor of the Third Party Sponsored Fund.
    12. If a General Partner elects to recommend that a Partnership 
enter into any side-by-side investment with an unaffiliated entity 
(including a Third Party Sponsored Fund), the General Partner will be 
permitted to engage as a sub-investment adviser the unaffiliated entity 
(an ``Unaffiliated Subadviser''), which will be responsible for the 
management of such side-by-side investment. If an Unaffiliated 
Subadviser is entitled to receive a carried interest, it may also act 
as an additional General Partner of a Partnership solely in order to 
address certain tax issues relating to such carried interest. In all 
such instances, however, a JPMorgan Chase entity will also be a General 
Partner of the Partnership and will have exclusive responsibility for 
making the determinations required to be made by the General Partner 
under the requested order. No Unaffiliated Subadviser will beneficially 
own any outstanding securities of any Partnership.
    13. Subject to the terms of the applicable Partnership Agreement, a 
Partnership will be permitted to enter into transactions involving (a) 
a JPMorgan Chase entity, (b) a portfolio company, (c) any Participant 
or person or entity affiliated with a Participant, (d) a JPMorgan Chase 
Third Party Fund, or (e) any person or entity who is not affiliated 
with JPMorgan Chase and is a partner or other investor in a JPMorgan 
Chase Third Party Fund or a Third Party Sponsored Fund (a ``Third Party 
Investor'').
    14. If the General Partner or a JPMorgan Chase entity makes a loan 
to a Partnership, the loan would bear interest at a rate no less 
favorable than the rate obtainable in an arm's length transaction. Any 
indebtedness of a Partnership will be without recourse to the 
Participants. A Partnership will not borrow from any person if the 
borrowing would cause any person not named in section 2(a)(13) of the 
Act to own securities of the Partnership (other than short term paper).
    15. A Partnership will not acquire any security issued by a 
registered investment company if, immediately after such acquisition, 
the Partnership will own more than 3% of the outstanding voting stock 
of the registered investment company.

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 6(b) provides that the Commission will consider, 
in determining the provisions of the Act from which the company should 
be exempt, the company's form of organization and capital structure, 
the persons owning and controlling its securities, the price of the 
company's securities and the amount of any sales load, how the 
company's funds are invested, and the relationship between the company 
and the issuers of the securities in which it invests. Section 2(a)(13) 
defines an employees' securities company, in relevant part, 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 the Partnerships from all the provisions of the Act, 
except section 9, and sections 36 through 53, and the rules and 
regulations under the Act. With respect to sections 17 and 30 of the 
Act, and the rules and regulations thereunder, and rule 38a-1 under the 
Act, the exemption is limited as set forth in the application.
    3. Section 17(a) 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 other property to or from the company. 
Applicants request an exemption from section 17(a) of the Act to permit 
a JPMorgan Chase entity or a Third Party Fund (or any ``affiliated 
person,'' as defined in the Act, of any such entity or Third Party 
Fund), acting as principal, to purchase or sell securities or other 
property to or from any Partnership or any company controlled by such 
Partnership. Applicants state that the relief is requested to permit 
each Partnership the flexibility to deal with its Portfolio Investments 
in the manner the General Partner deems most advantageous to all 
Participants, including borrowing funds from a JPMorgan Chase entity, 
restructuring its investments, having its investments redeemed, 
tendering such Partnership's securities or negotiating options or 
implementing exit strategies with respect to its investments. 
Applicants state the requested exemption is sought to ensure that a 
JPMorgan Chase Third Party Fund or a Third Party Investor will not 
directly or indirectly become subject to a burden, restriction, or 
other adverse effect by virtue of a Partnership's participation in an 
investment opportunity.
    4. Applicants believe an exemption from section 17(a) is consistent 
with the policy of each Partnership and the protection of investors and 
necessary to promote the basic purpose of such Partnership. Applicants 
state that the Participants in each Partnership will be fully informed 
of the possible extent of such Partnership's dealings with JPMorgan 
Chase, and, as successful professionals employed in investment and 
financial planning, will be able to understand and evaluate the 
attendant risks. Applicants assert that the community of interest among 
the Participants in each Partnership, on the one hand, and JPMorgan 
Chase, on the other hand, is the best insurance against any risk of 
abuse. Applicants, on behalf of the Partnerships, acknowledge that any 
transactions otherwise subject to

[[Page 23804]]

section 17(a) of the Act, for which exemptive relief has not been 
requested, would require approval of the Commission. Applicants further 
acknowledge that the requested relief will not extend to any 
transactions between a Partnership and an Unaffiliated Subadviser or an 
affiliated person of the Unaffiliated Subadviser, or between a 
Partnership and any person who is not an employee, officer or director 
of JPMorgan Chase or is an entity outside of JPMorgan Chase and is an 
affiliated person of the Partnership as defined in Section 2(a)(3)(E) 
of the Act (``Advisory Person'') or any affiliated person of such 
person.
    5. 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 company unless 
authorized by the Commission. Applicants request relief to permit 
affiliated persons of each Partnership, or affiliated persons of any of 
these persons, to participate in, or effect any transaction in 
connection with, any joint enterprise or other joint arrangement or 
profit-sharing plan in which a Partnership or a company controlled by 
the Partnership is a participant. The exemption requested would permit, 
among other things, co-investments by each Partnership and by 
individual members or employees, officers, directors, or Consultants of 
JPMorgan Chase making their own individual investment decisions apart 
from JPMorgan Chase. Applicants acknowledge that the requested relief 
will not extend to any transaction in which an Unaffiliated Subadviser 
or an Advisory Person or an affiliated person of either has an 
interest.
    6. Applicants assert that compliance with section 17(d) would cause 
a Partnership to forego investment opportunities simply because a 
Participant in such Partnership or other affiliated person of such 
Partnership (or any affiliate of such a person) also had, or 
contemplated making, a similar investment. Applicants further assert 
that attractive investment opportunities of the types considered by a 
Partnership often require each participant in the transaction to make 
available funds in an amount that may be substantially greater than 
those that may be available to such Partnership alone. Applicants 
contend that, as a result, the only way in which a Partnership may be 
able to participate in such opportunities may be to co-invest with 
other persons, including its affiliates. Applicants assert that the 
flexibility to structure co-investments and joint investments will not 
involve abuses of the type section 17(d) and rule 17d-1 were designed 
to prevent.
    7. Applicants state that side-by-side investments held by a 
JPMorgan Chase Third Party Fund, or by a JPMorgan Chase entity in a 
transaction in which the JPMorgan Chase investment was made pursuant to 
a contractual obligation to a JPMorgan Chase Third Party Fund, will not 
be subject to condition 3 below. All other side-by-side investments 
held by JPMorgan Chase entities will be subject to condition 3 below. 
Applicants assert that in structuring a JPMorgan Chase Third Party 
Fund, it is common for the unaffiliated investors of such fund to 
require that JPMorgan Chase invest its own capital in Third Party Fund 
investments, either through the Third Party Fund or on a side-by-side 
basis, and that such JPMorgan Chase investments be subject to 
substantially the same terms as those applicable to the Third Party 
Fund's investments. Applicants state that it is important that the 
interests of the JPMorgan Chase Third Party Fund take priority over the 
interests of the Partnerships, and that the activities of the JPMorgan 
Chase Third Party Fund not be burdened or otherwise affected by 
activities of the Partnerships. Applicants also state that the 
relationship of a Partnership to a JPMorgan Chase Third Party Fund is 
fundamentally different from such Partnership's relationship to 
JPMorgan Chase. Applicants contend that the focus of, and the rationale 
for, the protections contained in the application are to protect the 
Partnerships from any overreaching by JPMorgan Chase in the employer/
employee context, whereas the same concerns are not present with 
respect to the Partnerships vis-[agrave]-vis the investors of a 
JPMorgan Chase Third Party Fund.
    8. Section 17(e) of the Act and rule 17e-1 under the Act limit the 
compensation an affiliated person may receive when acting as agent or 
broker for a registered investment company. Applicants request an 
exemption from section 17(e) to permit a JPMorgan Chase entity 
(including the General Partner), acting as an agent or broker, to 
receive placement fees, advisory fees, or other compensation from a 
Partnership in connection with the purchase or sale by the Partnership 
of securities, provided that such placement fees, advisory fees, or 
other compensation are deemed ``usual and customary.'' Applicants state 
that for purposes of the application, fees or other compensation that 
are charged or received by a JPMorgan Chase entity will be deemed 
``usual and customary'' only if (a) the Partnership is purchasing or 
selling securities with other unaffiliated third parties, including 
JPMorgan Chase Third Party Funds or Third Party Investors who are also 
similarly purchasing or selling securities, (b) the fees or 
compensation being charged to the Partnership are also being charged to 
the unaffiliated third parties, including JPMorgan Chase Third Party 
Funds or Third Party Investors, and (c) the amount of securities being 
purchased or sold by the Partnership does not exceed 50% of the total 
amount of securities being purchased or sold by the Partnership and the 
unaffiliated third parties, including JPMorgan Chase Third Party Funds 
or Third Party Investors. Applicants assert that, because JPMorgan 
Chase does not wish to appear to be favoring the Partnerships, 
compliance with section 17(e) would prevent a Partnership from 
participating in transactions where the Partnership is being charged 
lower fees than unaffiliated third parties. Applicants assert that the 
fees or other compensation paid by a Partnership to a JPMorgan Chase 
entity will be the same as those negotiated at arm's length with 
unaffiliated third parties.
    9. Rule 17e-1(b) under the Act requires that a majority of 
directors who are not ``interested persons'' (as defined in section 
2(a)(19) of the Act) take actions and make approvals regarding 
commissions, fees, or other remuneration. Rule 17e-1(c) under the Act 
requires each investment company relying on the rule to satisfy the 
fund governance standards defined in rule 0-1(a)(7) under the Act. 
Applicants request an exemption from rule 17e-1 to the extent necessary 
to permit each Partnership to comply with the rule without having a 
majority of the directors of the General Partner who are not interested 
persons take actions and make approvals as set forth in paragraph (b) 
of the rule, and without having to satisfy the standards set forth in 
paragraph (c) of the rule. Applicants state that because all the 
directors of the General Partner will be affiliated persons, without 
the relief requested, a Partnership could not comply with rule 17e-1. 
Applicants state that each Partnership will comply with rule 17e-1 by 
having a majority of the directors of the General Partner take actions 
and make approvals as set forth in the rule. Applicants state that each 
Partnership will otherwise comply with rule 17e-1.
    10. Section 17(f) of the Act designates the entities that may act 
as investment company custodians, and rule 17f-1 under the Act imposes 
certain requirements when the custodian is a

[[Page 23805]]

member of a national securities exchange. Applicants request an 
exemption from section 17(f) and rule 17f-1 to permit a JPMorgan Chase 
entity to act as custodian without a written contract. Applicants also 
request an exemption from the rule 17f-1(b)(4) requirement that an 
independent accountant periodically verify the assets held by the 
custodian. Applicants state that, given the community of interest of 
all the parties involved and the existing requirement for an 
independent audit, compliance with the rule's requirement would be 
unnecessary. Each Partnership will otherwise comply with the provisions 
of rule 17f-1.
    11. Rule 17f-2 under the Act specifies requirements that must be 
satisfied for a registered management investment company to act as 
custodian of its own investments. Applicants request an exemption from 
rule 17f-2 to permit the following exceptions from the requirements of 
rule 17f-2: (a) A Partnership's investments may be kept in the locked 
files of the General Partner (or a JPMorgan Chase entity) for purposes 
of paragraph (b) of the rule; (b) for purposes of paragraph (d) of the 
rule, (i) employees of the General Partner (or a JPMorgan Chase entity) 
will be deemed to be employees of the Partnerships, (ii) officers or 
managers of the General Partner of a Partnership (or a JPMorgan Chase 
entity) will be deemed to be officers of the Partnership, and (iii) the 
General Partner of a Partnership (or a JPMorgan Chase entity) or its 
board of directors will be deemed to be the board of directors of the 
Partnership; and (c) in place of the verification procedure under 
paragraph (f) of the rule, verification will be effected quarterly by 
two employees of the General Partner (or a JPMorgan Chase entity) each 
of whom shall have sufficient knowledge, sophistication and experience 
in business matters to perform such examination. Applicants expect that 
some of the Partnerships' investments may be evidenced only by 
partnership agreements, participation agreements or similar documents, 
rather than by negotiable certificates that could be misappropriated. 
Applicants assert that these instruments are most suitably kept in the 
files of the General Partner (or a JPMorgan Chase entity), where they 
can be referred to as necessary. Applicants will comply with all other 
provisions of rule 17f-2.
    12. Section 17(g) of the Act and rule 17g-1 under the Act 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 take certain actions and give certain approvals relating to 
fidelity bonding. The rule also requires that the board of directors of 
an investment company relying on the rule satisfy the fund governance 
standards, as defined in rule 0-1(a)(7). Applicants request relief to 
permit the General Partner, who may be deemed to be an interested 
person, to take actions and make approvals as set forth in the rule. 
Applicants state that, because the General Partner will be an 
interested person of the Partnerships, the Partnerships could not 
comply with rule 17g-1 without the requested relief. Applicants also 
request an exemption from the requirements of rule 17g-l(g) and (h) 
relating to the filing of copies of fidelity bonds and related 
information with the Commission and the provision of notices to the 
board of directors and an exemption from the requirements of rule 17g-
1(j)(3) relating to compliance with the fund governance standards. The 
Partnerships will comply with all other requirements of rule 17g-1.
    13. Section 17(j) of the Act and paragraph (b) of rule 17j-1 under 
the Act make it unlawful for certain enumerated persons to engage in 
fraudulent or deceptive practices in connection with the purchase or 
sale of a security held or to be acquired by a registered investment 
company. Rule 17j-1 also requires that every registered investment 
company adopt a written code of ethics and that every access person of 
a registered investment company report personal securities 
transactions. Applicants request an exemption from the provisions of 
rule 17j-1, except for the anti-fraud provisions of paragraph (b), 
because they are burdensome and unnecessary as applied to the 
Partnerships. The relief requested will extend only to entities within 
JPMorgan Chase and is not requested with respect to any Unaffiliated 
Subadviser or Advisory Person.
    14. 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 contend that the forms prescribed 
by the Commission for periodic reports have little relevance to a 
Partnership and would entail administrative and legal costs that 
outweigh any benefit to the Participants in such Partnership. 
Applicants request relief to the extent necessary to permit each 
Partnership to report annually to its Participants. Applicants also 
request relief from the requirements of section 30(h), to the extent 
necessary to exempt the General Partner of each Partnership, directors 
and officers of the General Partner and any other persons who may be 
deemed members of an advisory board or investment adviser (and 
affiliated persons thereof) of such Partnership from filing Forms 3, 4 
and 5 under Section 16 of the Exchange Act with respect to their 
ownership of Interests in such Partnership. Applicants believe that, 
because there will be no trading market and the transfers of Interests 
will be severely restricted, these filings are unnecessary for the 
protection of investors and burdensome to those required to make them.
    15. Rule 38a-1 requires investment companies to adopt, implement 
and periodically review written policies reasonably designed to prevent 
violation of the federal securities laws and to appoint a chief 
compliance officer. Applicants state that each Partnership will comply 
with rule 38a-1(a), (c) and (d), except that (a) since the Partnership 
does not have a board of directors, the board of directors (or similar 
body) of the General Partner will fulfill the responsibilities assigned 
to the Partnership's board of directors under the rule, (b) since the 
board of directors of the General Partner 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 (c) 
since the board of directors of the General Partner does not have any 
disinterested directors, the Partnerships will comply with the 
requirement in rule 38a-1(a)(4)(iv) that the chief compliance officer 
meet with the independent directors by having the chief compliance 
officer meet with the board of directors of the General Partner as 
constituted.

Applicants' Conditions

    Applicants agree that any order granting the requested relief 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 a Partnership is a party (the 
``Section 17 Transactions'') will be effected only if the General 
Partner determines that:
    (a) The terms of the Section 17 Transaction, including the 
consideration to be paid or received, are fair and reasonable to the 
Participants of the participating Partnership and do not involve 
overreaching of such Partnership or its Participants on the part of any 
person concerned, and
    (b) the Section 17 Transaction is consistent with the interests of 
the Participants of the participating Partnership, such Partnership's

[[Page 23806]]

organizational documents and such Partnership's reports to its 
Participants.
    In addition, the General Partner will record and will preserve a 
description of all Section 17 Transactions, the General Partner's 
findings and the information or materials upon which the General 
Partner's findings are based and the basis for the findings. All such 
records will be maintained for the life of the Partnership and at least 
six years thereafter, and will be subject to examination by the 
Commission and its staff. Each Partnership will preserve the accounts, 
books and other documents required to be maintained in an easily 
accessible place for the first two years.
    2. The General Partner 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, with respect 
to the possible involvement in the transaction of any affiliated person 
or promoter of or principal underwriter for such Partnership, or any 
affiliated person of such a person, promoter or principal underwriter.
    3. The General Partner will not make on behalf of a Partnership any 
investment in which a Co-Investor (as defined below) has acquired or 
proposes to acquire the same class of securities of the same issuer, 
where the investment involves a joint enterprise or other joint 
arrangement within the meaning of rule 17d-1 in which such Partnership 
and the Co-Investor are participants, unless any such Co-Investor, 
prior to disposing of all or part of its investment, (a) gives such 
General Partner sufficient, but not less than one day's, notice of its 
intent to dispose of its investment, and (b) refrains from disposing of 
its investment unless the participating Partnership holding such 
investment has the opportunity to dispose of its investment prior to or 
concurrently with, on the same terms as, and on a pro rata basis with, 
the Co-Investor. The term ``Co-Investor'' with respect to any 
Partnership means any person who is: (a) An ``affiliated person'' (as 
defined in section 2(a)(3) of the Act) of such Partnership (other than 
a JPMorgan Chase Third Party Fund); (b) a JPMorgan Chase entity; (c) an 
officer, director or partner of a JPMorgan Chase entity; or (d) an 
entity (other than a JPMorgan Chase Third Party Fund) in which the 
General Partner acts as a general partner or has a similar capacity to 
control the sale or other disposition of the entity's securities. The 
restrictions contained in this condition, however, shall not be deemed 
to limit or prevent the disposition of an investment by a Co-Investor: 
(a) To its direct or indirect wholly-owned subsidiary, to any company 
(a ``Parent'') of which such Co-Investor is a direct or indirect 
wholly-owned subsidiary, or to a direct or indirect wholly-owned 
subsidiary of its Parent; (b) to immediate family members of such Co-
Investor, including step and adoptive relationships, or to a trust or 
other investment vehicle established for any such immediate family 
member; or (c) when the investment is comprised of securities that are 
(i) listed on any exchange registered as a national securities exchange 
under section 6 of the 1934 Act; (ii) NMS stocks pursuant to section 
11A(a)(2) of the 1934 Act and rule 600(b) of Regulation NMS thereunder; 
(iii) government securities as defined in section 2(a)(16) of the Act 
or other securities that meet the definition of ``Eligible Security'' 
in rule 2a-7 under the Act; or (iv) listed on or traded on any foreign 
securities exchange or board of trade that satisfies regulatory 
requirements under the law of the jurisdiction in which such foreign 
securities exchange or board of trade is organized similar to those 
that apply to a national securities exchange or a national market 
system for securities.
    4. Each Partnership and its General Partner will maintain and 
preserve, for the life of such Partnership and at least six years 
thereafter, such accounts, books, and other documents as constitute the 
record forming the basis for the audited financial statements that are 
to be provided to the Participants in such Partnership, and each annual 
report of such Partnership required to be sent to such Participants, 
and agree that all such records will be subject to examination by the 
Commission and its staff. Each Partnership will preserve the accounts, 
books and other documents required to be maintained in an easily 
accessible place for the first two years.
    5. The General Partner of each Partnership will send to each 
Participant in that Partnership, at any time during the fiscal year 
then ended, Partnership financial statements audited by such 
Partnership's independent accountants, except in the case of a 
Partnership formed to make a single Portfolio Investment. In such 
cases, the partnership may send unaudited financial statements, but 
each Participant will receive financial statements of the single 
Portfolio Investment audited by such entity's independent accountants. 
At the end of each fiscal year, the General Partner will make a 
valuation or have a valuation made of all of the assets of the 
Partnership as of such fiscal year end in a manner consistent with 
customary practice with respect to the valuation of assets of the kind 
held by the Partnership. In addition, within 120 days after the end of 
each fiscal year of each Partnership or as soon as practicable 
thereafter, the General Partner will send a report to each person who 
was a Participant at any time during the fiscal year then ended, 
setting forth such tax information as shall be necessary for the 
preparation by the Participant of his, her or its U.S. federal and 
state income tax returns and a report of the investment activities of 
the Partnership during that fiscal year.
    6. If a Partnership makes purchases or sales from or to an entity 
affiliated with the Partnership by reason of an officer, director or 
employee of JPMorgan Chase (a) serving as an officer, director, general 
partner or investment adviser of the entity, or (b) having a 5% or more 
investment in the entity, such individual will not participate in the 
Partnership's determination of whether or not to effect the purchase or 
sale.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-09344 Filed 4-19-13; 8:45 am]
BILLING CODE 8011-01-P