[Federal Register Volume 78, Number 155 (Monday, August 12, 2013)]
[Notices]
[Pages 48918-48920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-19409]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30644; 812-14176]


Wells Fargo Bank, N.A., et al.; Notice of Application and 
Temporary Order

August 6, 2013.
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 effective July 15, 2013, entered against Wells Fargo Bank, 
N.A. (``Wells Fargo Bank'') by the United States District Court for the 
Northern District of California, until the Commission takes final 
action on an application for a permanent order. Applicants have 
requested a permanent order.

Applicants: Wells Fargo Bank, Alternative Strategies Brokerage 
Services, Inc. (``Alternative Strategies Brokerage''), Alternative 
Strategies Group, Inc. (``Alternative Strategies''), First 
International Advisors, LLC (``First International''), Galliard Capital 
Management, Inc. (``Galliard''), Golden Capital Management, LLC 
(``Golden Capital''), Metropolitan West Capital Management, LLC 
(``Metropolitan West''), Peregrine Capital Management, Inc. 
(``Peregrine''), Wells Capital Management Incorporated (``Wells Capital 
Management''), Wells Fargo Funds Distributor, LLC (``WF Funds 
Distributor''), and Wells Fargo Funds Management, LLC (``WF Funds 
Management'') (each an ``Applicant'' and collectively, 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 Wells Fargo 
Bank is or may become an affiliated person within the meaning of 
section 2(a)(3) of the Act (together with the Applicants, the 
``Covered Persons'').

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DATES: Filing Date: The application was filed on July 12, 2013.

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 September 3, 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: 
Wells Fargo Bank, 101 North Phillips Avenue, Sioux Falls, SD 57104; 
Alternative Strategies Brokerage and Alternative Strategies, 401 South 
Tryon Street, TH 3, 5th Floor, Charlotte, NC 28202; First 
International, 30 Fenchurch Street, London, England, UK EC3M 3BD; 
Galliard, 800 LaSalle Avenue, Suite 1100, Minneapolis, MN 55402; Golden 
Capital, 5 Resource Square, Suite 400, 10715 David Taylor Drive, 
Charlotte, NC 28262; Metropolitan West, 610 Newport Center Drive, Suite 
1000, Newport Beach, CA 92660; Peregrine, 800 LaSalle Avenue, Suite 
1850, Minneapolis, MN 55402; West Capital Management, 525 Market 
Street, 10th Floor, San Francisco, CA 94105; and WF Funds Distributor 
and WF Funds Management, 525 Market Street, 12th Floor, San Francisco, 
CA 94105.

FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at 
(202) 551-6873 or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Exemptive Applications).

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. Wells Fargo Bank is a national banking association wholly-owned, 
directly and indirectly, by Wells Fargo & Company (``Wells Fargo''). 
Through its direct and indirect subsidiaries, Wells Fargo, a registered 
financial holding company and bank holding company under the Bank 
Holding Company Act of 1956, as amended, offers banking, brokerage, 
advisory and other financial services to institutional and individual 
customers worldwide. Wells Fargo also is the ultimate parent of the 
other Applicants, who, as direct or indirect, majority-owned or wholly-
owned, subsidiaries of the same ultimate parent, are, or may be 
considered to be, under common control with Wells Fargo Bank.
    2. Abbot Downing Investment Advisors and Wells Capital Management 
Singapore, each a separately identifiable department within Wells Fargo 
Bank and each registered as an investment adviser under the Investment 
Advisers Act of 1940 (``Advisers Act''), serve as investment advisers 
to one or more Funds (as defined below). Alternative

[[Page 48919]]

Strategies, First International, Galliard, Golden Capital, Metropolitan 
West, Peregrine, Wells Capital Management, and WF Funds Management are 
registered as investment advisers under the Advisers Act and serve as 
investment advisers or sub-advisers to various Funds. Alternative 
Strategies Brokerage and WF Funds Distributor are registered as broker-
dealers under the Securities Exchange Act of 1934, and each serves as 
principal underwriter to various Funds. ``Fund'' means any registered 
investment company, including a registered unit investment trust 
(``UIT'') or registered face amount certificate company, as well as any 
business development company (``BDC'') or employees' securities company 
(``ESC''). ``Fund Servicing Activities'' means acting as an adviser, 
sub-adviser or depositor to Funds, or principal underwriter for any 
registered open-end investment company, UIT, registered face amount 
company or ESC.
    3. On May 14, 2013, the United States District Court for the 
Northern District of California issued an order (the ``Court Order'') 
in a certified consumer class action under Section 17200 of the 
California Business and Professions Code relating to a Wells Fargo Bank 
bookkeeping device known as ``high-to-low'' posting.\2\ The plaintiffs 
in the class action alleged that Wells Fargo Bank, without adequate 
disclosure to account holders, posted debit card transactions received 
each day for payment beginning with the highest amount and ending with 
the lowest amount (i.e., high-to-low), which could have the effect of 
increasing the number of items posting into overdraft and, therefore, 
increased overdraft fees.\3\ While the plaintiffs' challenge to the 
practice of high-to-low posting and to the adequacy of the bank's 
disclosures was found to be preempted by the National Bank Act, Wells 
Fargo Bank was found liable under the California law for making 
misleading statements regarding the practice.\4\ The Court Order 
enjoined Wells Fargo Bank from making or disseminating, or permitting 
to be made or disseminated, any false or misleading representations 
relating to the posting order of debit-card purchases, checks, and ACH 
transactions in its customer bank accounts (the ``Injunction''). The 
Court Order set July 15, 2013, as the effective date of the Injunction.
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    \2\ Gutierrez v. Wells Fargo Bank, N.A., Case No. C 07-05923 WHA 
(N.D. Cal., May 14, 2013) (granting in part and denying in part 
motion for judgment following remand).
    \3\ Id.
    \4\ Id. at 3 (citing Gutierrez v. Wells Fargo Bank, N.A., 704 
F.3d 712, 725-730 (9th Cir. 2012)).
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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 acting as a bank, or from engaging in or 
continuing any conduct or practice in connection with such activity, 
from acting, among other things, as an investment adviser or depositor 
of any registered investment company, or as a principal underwriter for 
any registered open-end investment company, UIT or registered face-
amount certificate company. Section 9(a)(3) of the Act extends the 
prohibitions of section 9(a)(2) 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 Wells Fargo Bank is, or may be considered to be, under common 
control with and therefore an affiliated person of each of the other 
Applicants. Applicants state that the Injunction may result in 
Applicants being subject to the disqualification provisions of section 
9(a) of the Act because Wells Fargo Bank is enjoined from engaging in 
or continuing certain conduct and/or practices in connection with its 
banking activity.\5\
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    \5\ Applicants believe that the conduct and/or practices covered 
by the Injunction could be deemed to be in connection with Wells 
Fargo Bank's banking activity.
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    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) if it is established that these provisions, as applied to 
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 
temporary and permanent orders exempting the Applicants and the other 
Covered Persons from the disqualification provisions of section 9(a) of 
the Act. On July 15, 2013, Applicants received a temporary conditional 
order from the Commission exempting them from section 9(a) of the Act 
with respect to the Injunction from July 15, 2013 until the Commission 
takes final action on an application for a permanent order or, if 
earlier, September 13, 2013.
    3. Applicants believe they meet the standard for exemption 
specified in section 9(c). Applicants state that the prohibitions of 
section 9(a) as applied to them would be unduly and disproportionately 
severe and that the conduct of Applicants has been such as not to make 
it against the public interest or the protection of investors to grant 
the exemption from section 9(a).
    4. Applicants state that the conduct giving rise to the Injunction 
did not involve any of the Applicants acting in their capacity as 
investment adviser, sub-adviser, or principal underwriter for Funds. 
Applicants also state that the alleged conduct giving rise to the 
Injunction did not involve any Fund or the assets of any Fund for which 
they provided Fund Servicing Activities. Applicants further state that 
to the best of their reasonable knowledge: (i) none of the Applicants' 
(other than certain of Wells Fargo Bank's) current or former directors, 
officers or employees had any knowledge of, or had any involvement in, 
the conduct alleged in the Court Order that provided a basis for the 
Injunction; (ii) the personnel who were involved in the violations have 
had no involvement in, and will not have any future involvement in, 
providing advisory, sub-advisory, depository or underwriting services 
to Funds; and (iii) because the personnel of the Applicants involved in 
Fund Servicing Activities did not have any involvement in the alleged 
misconduct, shareholders of Funds that received investment advisory, 
depository and principal underwriting services from the Applicants were 
not affected any differently than if those Funds had received services 
from any other non-affiliated investment adviser, depositor or 
principal underwriter.
    5. Applicants further represent that the inability of Applicants to 
continue providing Fund Servicing Activities would result in 
potentially severe financial hardships for both the Funds and their 
shareholders. Applicants state that they will distribute written 
materials, including an offer to meet in person to discuss the 
materials, to the board of directors of each Fund, including the 
directors who are not ``interested persons,'' as defined in section 
2(a)(19) of the Act, of such Fund, and their independent legal counsel 
as defined in rule 0-1(a)(6) under the Act, if any, regarding the 
Injunction, any impact on the Funds, and the application. The 
Applicants will provide the Funds with all information concerning the 
Injunction and the application that is necessary for the Funds to 
fulfill their disclosure and other obligations under the federal 
securities laws.
    6. Applicants also assert that, if the Applicants were barred from 
engaging in Fund Servicing Activities, the effect

[[Page 48920]]

on their businesses and employees would be severe. The Applicants state 
that they have committed substantial capital and resources to 
establishing expertise in advising and sub-advising Funds and in 
support of their principal underwriting business.
    7. Applicants state that several Applicants and certain of their 
affiliates have previously received orders under section 9(c), as 
described in greater detail in the application.

Applicants' Condition

    Applicants agree that any order granted by the Commission pursuant 
to the application 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 the 
Applicants and the other Covered Persons are granted a temporary 
exemption from the provisions of section 9(a), effective forthwith, 
solely with respect to the Injunction, subject to the condition in the 
application, until the date the Commission takes final action on their 
application for a permanent order.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-19409 Filed 8-9-13; 8:45 am]
BILLING CODE 8011-01-P