[Federal Register Volume 79, Number 129 (Monday, July 7, 2014)]
[Notices]
[Pages 38338-38339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-15795]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. IA-3866/803-00213]


Gruss & Co. Inc.; Notice of Application

July 1, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an exemptive order under section 
202(a)(11)(H) of the Investment Advisers Act of 1940 (``Advisers 
Act'').

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    Applicant: Gruss & Co. Inc. (``Applicant'').
    Relevant Advisers Act Sections: Exemption requested under section 
202(a)(11)(H) of the Advisers Act from section 202(a)(11) of the 
Advisers Act.
    Summary of Application: Applicant requests that the Commission 
issue an order declaring it to be a person not within the intent of 
section 202(a)(11) of the Advisers Act, which defines the term 
``investment adviser.''

DATES: Filing Dates: The application was filed on March 23, 2012, and 
amended on March 4, 2014, and April 22, 2014.
    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 Applicant with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on July 28, 2014 and should be accompanied by proof of 
service on Applicant, 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 may request notification of a hearing by writing to 
the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549. Applicant, Gruss & Co. Inc., c/o Martin E. 
Lybecker, Perkins Coie LLP, Suite 600, 700 Thirteenth Street NW., 
Washington, DC 20005.

FOR FURTHER INFORMATION CONTACT: Vanessa M. Meeks, Senior Counsel, at 
(202) 551-6806 or Melissa R. Harke, Branch Chief, at (202) 551-6722 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
SEC's Public Reference Branch, 100 F Street NE., Washington, DC 20549-
0102 (telephone (202) 551-5850).

Applicant's Representations

    1. Applicant is a multi-generational single-family office that 
provides services to the family and descendants of Joseph S. Gruss. 
Applicant is wholly-owned by Family Clients and is exclusively 
controlled (directly or indirectly) by one or more Family Members and/
or Family Entities in compliance with rule 202(a)(11)(G)-1 (``Family 
Office Rule''). For purposes of the application, the term ``Gruss 
Family'' means the lineal descendants of Joseph S. Gruss, their 
spouses, and all of the persons and entities that qualify as Family 
Clients as defined in paragraph (d)(4) of the Family Office Rule. 
Capitalized terms have the same meaning as defined in the Family Office 
Rule.
    2. Applicant provides both advisory and non-advisory services 
(collectively, the ``Services''). Any Service provided by the Applicant 
that relates to investment advice about securities or may otherwise be 
construed as advisory in nature is considered an ``Advisory Service.''
    3. Applicant represents that: (i) Other than the exception 
discussed in representation 4 below, each of the persons served by the 
Applicant is a Family Client, i.e., Applicant has no clients other than 
Family Clients as required by paragraph (b)(1) of the Family Office 
Rule, (ii) Applicant is owned and controlled in a manner that complies 
in all respects with paragraph (b)(2) of the Family Office Rule, and 
(iii) Applicant does not hold itself out to the public as an investment 
adviser as required by paragraph (b)(3) of the Family Office Rule. At 
the time of the application, Applicant represents that Family Members 
account for approximately 79 percent of the natural persons to whom the 
Applicant provides Advisory Services.
    4. Applicant provides Services to two sisters of a spouse of a 
lineal descendant of Joseph S. Gruss and each sister's respective 
spouse and children (collectively, the ``Additional Family Clients'').
    5. The Additional Family Clients do not have an ownership interest 
in the Applicant. Applicant represents that the assets beneficially 
owned by Family Members and/or Family Entities (excluding the 
Additional Family Clients' Family Entities) make up at least 75 percent 
of the total assets for which the Applicant provides Advisory Services.
    6. Applicant represents that each of the Additional Family Clients 
has important familial ties to and is an integral part of the Gruss 
Family. Applicant maintains that including the Additional Family 
Clients in the ``family'' simply recognizes and memorializes the 
familial ties and intra-familial relationships that already exist, and 
have existed for at least 14 years while the assets of the Additional 
Family Clients were managed by the Gruss Family.

Applicant's Legal Analysis

    1. Section 202(a)(11) of the Advisers Act defines the term 
``investment adviser'' to mean ``any person who, for compensation, 
engages in the business of advising others, either directly or through 
publications or writings, as to the value of securities or as to the 
advisability of investing in, purchasing, or selling securities, or 
who, for compensation and as a part of a regular business, issues or 
promulgates analyses or reports concerning securities . . . . ''
    2. Applicant falls within the definition of an investment adviser 
under section 202(a)(11). The Family Office Rule provides an exclusion 
from the definition of investment adviser for which the Applicant would 
be eligible but for the provision of Services to the Additional Family 
Clients. Section 203(a) of the Advisers Act requires investment 
advisers to register with the Commission. Because the Applicant has 
regulatory assets under management of more than $100 million, it is not 
prohibited from registering with the Commission under section 203A(a) 
of the Advisers Act. Therefore, absent relief, Applicant would be 
required to register under section 203(a) of the Advisers Act.
    3. Applicant submits that its relationship with the Additional 
Family Clients does not change the nature of the office into that of a 
commercial advisory firm. In support of this argument, Applicant notes 
that if the sisters were sisters of a lineal descendent of Joseph S. 
Gruss, rather than the sisters of a spouse of a lineal descendent, 
there would be no question that each of the persons presently being 
served by the office would be a Family Member. Applicant states that in 
requesting the order, the office is not attempting to expand its 
operations or engage in any level of commercial activity to which the 
Advisers Act is designed to apply. Indeed, although the Additional 
Family Clients do not fall within the definition of Family Member, they 
are considered to be, and treated as, members of the Gruss Family, and 
the number of natural persons who are not Family Members as a 
percentage of the total natural persons to whom the office would 
provide Advisory Services if relief were granted would be only

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approximately 21 percent. Applicant maintains that, from the 
perspective of the Gruss Family, Applicant seeks to continue providing 
Advisory Services exclusively to members of a single family.
    4. Applicant also submits that there is no public interest in 
requiring the Applicant to be registered under the Advisers Act. 
Applicant states that the office is a private organization that was 
formed to be the ``family office'' for the Gruss Family, and that the 
office does not have any public clients. Applicant maintains that the 
office's Advisory Services are tailored exclusively to the needs of the 
Gruss Family and the Additional Family Clients. Applicant argues that 
the presence of the Additional Family Clients, who have been receiving 
Advisory Services from the office for 14 years, does not create any 
public interest that would require the office to be registered under 
the Advisers Act that is different in any manner than the 
considerations that apply to a ``family office'' that complies in all 
respects with the Family Office Rule.
    5. Applicant argues that, although the Family Office Rule largely 
codified the exemptive orders that the Commission had previously issued 
before the enactment of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, the Commission recognized in proposing the rule that 
the exact representations, conditions, or terms contained in every 
exemptive order could not be captured in a rule of general 
applicability. The Commission noted that family offices would remain 
free to seek a Commission exemptive order to advise an individual or 
entity that did not meet the proposed family client definition, and 
that certain situations may raise unique conflicts and issues that are 
more appropriately addressed through an exemptive order process where 
the Commission can consider the specific facts and circumstances, than 
through a rule of general applicability. Applicant maintains that its 
unusual circumstances--providing Services to Family Clients and to the 
Additional Family Clients for the past 14 years--have not changed the 
nature of the office's operations into that of a commercial advisory 
business, and that an exemptive order is appropriate based on the 
Applicant's specific facts and circumstances.
    6. For the foregoing reasons, Applicant requests an order declaring 
it to be a person not within the intent of section 202(a)(11) of the 
Advisers Act. Applicant submits that the order is necessary and 
appropriate, in the public interest, consistent with the protection of 
investors, and consistent with the purposes fairly intended by the 
policy and provisions of the Advisers Act.

Applicant's Conditions

    1. The Applicant will offer and provide Advisory Services only to 
Family Clients and to the Additional Family Clients, who will be deemed 
to be, and treated as if each were, a Family Client; provided, however, 
that the Additional Family Clients will be deemed to be, and treated as 
if they were, Family Members for purposes of paragraph (b)(1) and for 
purposes of paragraph (d)(4)(vi) of the Family Office Rule.
    2. The Applicant will at all times be wholly-owned by Family 
Clients and exclusively controlled (directly or indirectly) by one or 
more Family Members and/or Family Entities (excluding the Additional 
Family Clients' Family Entities) as defined in paragraph (d)(5) of the 
Family Office Rule.
    3. At all times the assets beneficially owned by Family Members 
and/or Family Entities (excluding the Additional Family Clients' Family 
Entities) will account for at least 75 percent of the assets for which 
Applicant provides Advisory Services.
    4. Applicant will comply with all the terms for exclusion from the 
definition of investment adviser under the Advisers Act set forth in 
the Family Office Rule except for the limited exception requested by 
this application.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-15795 Filed 7-3-14; 8:45 am]
BILLING CODE 8011-01-P