[Federal Register Volume 84, Number 103 (Wednesday, May 29, 2019)]
[Notices]
[Pages 24846-24852]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11205]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33492; 813-00391]
Tudor Investment Corporation and Tudor Employee Investment Fund
LLC
May 23, 2019.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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Notice of 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 and the rules and regulations
thereunder, except sections 9, 17, 30, and 36 through 53 of the Act,
and the rules and regulations thereunder (the ``Rules and
Regulations''). With respect to sections 17(a), (d), (e), (f), (g) and
(j) and 30(a), (b), (e), and (h) of the Act, and the Rules and
Regulations, and rule 38a-1 under
[[Page 24847]]
the Act, the exemption is limited as set forth in the application.
Summary of Application: Applicants request an order to exempt certain
limited partnerships, limited liability companies, business trusts or
other entities (``Funds'') formed for the benefit of eligible employees
of Tudor Investment Corporation (``Tudor'') and its affiliates from
certain provisions of the Act. Each series of a Fund will be an
``employees' securities company'' within the meaning of section
2(a)(13) of the Act.
Applicants: The Company and Tudor Employee Investment Fund LLC. The
requested order would supersede a prior order.\1\
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\1\ Tudor Employee Investment Fund LLC and Tudor Investment
Corporation, Investment Company Release Nos. 29409 (Sep. 3, 2010)
(notice) and 29449 (Sep. 29, 2010) (Order).
Filing Dates: The application was filed on December 1, 2017 and was
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amended on October 19, 2018, April 4, 2019, and May 14, 2019.
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 June 14, 2019, 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: 200 Elm Street,
Stamford, CT 06902.
FOR FURTHER INFORMATION CONTACT: Jennifer O. Palmer, Senior Counsel, at
(303) 844-1012, or Kaitlin C. Bottock, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's website by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicants' Representations
1. Tudor and its ``affiliates,'' as defined in rule 12b-2 under the
Securities Exchange Act of 1934 (the ``Exchange Act'') (collectively,
the ``Tudor Group,'' and each, a ``Tudor Group Entity''), have
organized Tudor Employee Investment Fund LLC, a Delaware limited
liability company (the ``Investment Fund'') and will in the future
organize limited partnerships, limited liability companies, business
trusts or other entities (each a ``Future Fund'' and, collectively with
the Investment Fund, the ``Funds'') as ``employees' securities
companies,'' as defined in section 2(a)(13) of the Act. The Funds are
intended to provide investment opportunities that are competitive with
those at other investment management and financial services firms and
to facilitate the recruitment and retention of high caliber
professionals.
2. The Investment Fund was formed on November 14, 2005 as a
Delaware limited liability company. Tudor currently serves as the
managing member and investment adviser to the Investment Fund. The
Investment Fund operates as a closed-end management investment company.
It seeks to achieve long-term capital appreciation through investment
in affiliated and non-affiliated private investment funds, which will
generally be exempt from registration under the Act pursuant to section
3(c)(1) or section 3(c)(7) of the Act and may also be funds not
primarily engaged in the business of investing, reinvesting, or trading
in securities, e.g., commodity pools.
3. A Future Fund may be structured as a domestic or offshore
limited or general partnership, limited liability company, corporation,
business trust or other entity. The Tudor Group may also form parallel
funds organized under the laws of various jurisdictions in order to
create the same investment opportunities for Eligible Employees
(defined below) in other jurisdictions. Interests in a Fund may be
issued in one or more series, each of which corresponds to particular
Fund investments (each, a ``Series''). In such event, each Series will
be an ``employees' securities company'' within the meaning of section
2(a)(13) of the Act. A Fund will operate as a management investment
company, and a particular Fund may operate as a ``diversified'' or
``non-diversified'' vehicle within the meaning of the Act. The
investment objectives and policies may vary from one Fund to the next.
4. The Tudor group will control each Fund within the meaning of
section 2(a)(9) of the Act. Each Fund has, or will have, a Tudor Group
Entity serving as a general partner, managing member or other such
similar entity that manages, operates and controls such Fund (a
``Manager''). The Manager will be responsible for the overall
management of the Fund. The same or a different Tudor Group Entity will
serve as investment adviser (``Investment Adviser'') to each Fund and
will be responsible for making all investment decisions on behalf of
the Fund.
5. Each of the Manager and the Investment Adviser will be an
investment adviser within the meaning of sections 9 and 36 of the Act
and subject to those sections. The Investment Adviser may be paid a
management fee for its services to a Fund. The Manager or Investment
Adviser may receive a performance-based fee or allocation (a ``Carried
Interest'') based on the net gains of the Fund's investments, in
addition to any amount allocable to the Manager's or Investment
Adviser's capital contribution.\2\ An Investment Adviser may also
receive compensation for acting as an investment adviser to an
Underlying Fund (as defined below). The Tudor Group will not receive
any management fees or other compensation at both the Fund level and
the Underlying Fund level with respect to a Fund's investment in an
Underlying Fund (so as to avoid duplication).
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\2\ If a Manager or Investment Adviser is registered under the
Investment Advisers Act of 1940 (``Advisers Act''), the Carried
Interest payable to it by a Fund will be pursuant to an arrangement
that complies with rule 205-3 under the Advisers Act. All or a
portion of the Carried Interest may be paid to individuals who are
officers, employees or stockholders of the Investment Adviser or its
affiliates. If the Manager or Investment Adviser is not required to
register under the Advisers Act, the Carried Interest payable to it
will comply with section 205(b)(3) of the Advisers Act (with such
Fund treated as though it were a business development company solely
for the purpose of that section).
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6. If the Manager or Investment Adviser elects to recommend that a
Fund enter into any side-by-side investment with an unaffiliated
entity, the Manager or Investment Adviser will be permitted to engage
as sub-investment adviser the unaffiliated entity (an ``Unaffiliated
Subadviser''), which will be responsible for the management of such
side-by-side investment.
7. Interests in the Funds will be offered in a transaction exempt
from registration under section 4(a)(2) of the Securities Act of 1933,
as amended (the ``1933 Act''), or Regulation D or Regulation S
promulgated thereunder, and will be sold only to Qualified
Participants, which term refers to: (i)
[[Page 24848]]
Eligible Employees (as defined below); (ii) Eligible Family Members (as
defined below); (iii) Eligible Investment Vehicles (as defined below);
and (iv) the Tudor Group. Prior to offering interests in a Fund to a
Qualified Participant, the Tudor Group must reasonably believe that the
Eligible Employee or Eligible Family Member will be capable of
understanding and evaluating the merits and risks of participation in a
Fund and that each such individual is able to bear the economic risk of
such participation and afford a complete loss of his or her investments
in the Fund.
8. The term ``Eligible Employees'' is defined as current or former
employees, officers and directors of the Tudor Group (including people
in administration, marketing and operations) and current consultants
engaged on retainer to provide services and professional expertise on
an ongoing basis to the Tudor Group (``Consultants'').\3\ The term
``Eligible Family Members'' is defined as spouses, parents, children,
spouses of children, brothers, sisters and grandchildren of Eligible
Employees, including step and adoptive relationships.\4\ The term
``Eligible Investment Vehicles'' is defined as: (i) A trust of which a
trustee, grantor and/or beneficiary is an Eligible Employee; \5\ (ii) a
partnership, corporation, or other entity controlled by an Eligible
Employee; and (iii) a trust or other entity established solely for the
benefit of Eligible Employees and/or Eligible Family Members. Each
Eligible Employee and Eligible Family Member will be an Accredited
Investor under rule 501(a)(5) or rule 501(a)(6) of Regulation D under
the 1933 Act, except that a maximum of 35 Eligible Employees who are
sophisticated investors but who are not Accredited Investors may become
investors in a Fund if each of them falls into one of the following
categories: (i) An Eligible Employee who (a) has a graduate degree in
business, law or accounting, (b) has a minimum of five years of
consulting, investment management, investment banking, legal or similar
business experience, and (c) had reportable income from all sources
(including any profit shares or bonus) of $100,000 in each of the two
most recent years immediately preceding the Eligible Employee's
admission as an investor of the Fund and has a reasonable expectation
of income from all sources of at least $140,000 in each year in which
the Eligible Employee will be committed to make investments in the
Fund; \6\ or (ii) Eligible Employees who are ``knowledgeable
employees'' as defined in rule 3c-5 under the Act, of the Fund (with
the Fund treated as though it were a ``covered company'' for purposes
of the rule).
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\3\ In order to participate in the Funds, Consultants must be
currently engaged by the Tudor Group and will be required to be
sophisticated investors who qualify as accredited investors
(``Accredited Investors'') under rule 501(a) of Regulation D. If a
Consultant is an entity (such as, for example, a law firm or
consulting firm), and the Consultant proposes to invest in the Fund
through a partnership, corporation or other entity that is
controlled by the Consultant, the individual participants in such
partnership, corporation or other entity will be limited to senior
level employees, members or partners of the Consultant who are
responsible for the activities of the Consultant or the activities
of the Consultant in relation to the Tudor Group and will be
required to qualify as Accredited Investors. In addition, such
entities will be limited to businesses controlled by individuals who
have levels of expertise and sophistication in the area of
investments in securities that are comparable to other Eligible
Employees who are employees, officers or directors of the Tudor
Group and who have an interest in maintaining an ongoing
relationship with the Tudor Group. The individuals participating
through such entities will belong to that class of persons who will
have access to the directors and officers of the Manager and its
affiliates and/or the officers of the Tudor Group responsible for
making investments for the Funds similar to the access afforded
other Eligible Employees who are employees, officers or directors of
the Tudor Group.
\4\ In order to ensure that a close nexus between the Qualified
Participants and the Tudor Group is maintained, the terms of each
governing document for a Fund will provide that any Eligible Family
Member participating in such Fund (either through direct beneficial
ownership of an interest or as an indirect beneficial owner through
an Eligible Investment Vehicle) cannot, in any event, be more than
two generations removed from an Eligible Employee.
\5\ The inclusion of partnerships, corporations, or other
entities controlled by an Eligible Employee in the definition of
``Eligible Investment Vehicle'' is intended to enable Eligible
Employees to make investments in the Funds through personal
investment vehicles for the purpose of personal and family
investment and estate planning objectives.
\6\ An Eligible Employee described in this category (i) will
only be permitted to invest in a Fund if such individual represents
and warrants that he or she will not commit in any year more than
10% of his or her income from all sources for the immediately
preceding year, in the aggregate, in a Fund and in all other Funds
in which that investor has previously invested.
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9. A Qualified Participant may purchase an interest through an
Eligible Investment Vehicle only if either (i) the investment vehicle
is an accredited investor, as defined in rule 501(a) of Regulation D
under the 1933 Act or (ii) the Eligible Employee is a settlor \7\ and
principal investment decision-maker with respect to the investment
vehicle. Eligible Investment Vehicles that are not Accredited Investors
will be counted in accordance with Regulation D toward the 35 non-
Accredited Investor limit discussed above.
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\7\ If such investment vehicle is an entity other than a trust,
the term ``settlor'' will be read to mean a person who created such
vehicle, alone or together with other eligible individuals, and
contributed funds to such vehicle.
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10. The terms of each Fund will be fully disclosed to each
Qualified Participant (or person making the investment on behalf of the
Qualified Participant) at the time the Qualified Participant is invited
to participate in the Fund. The Fund will send its investors an annual
financial statement in accordance with Rule 206(4)-2(b)(4)(i) under the
Advisers Act. The financial statement will be audited \8\ by
independent certified public accountants. In addition, as soon as
practicable after the end of each calendar year, a report will be sent
to each investor setting forth the information with respect such
investor's share of income, gains, losses, credits, and other items for
U.S. federal and state income tax purposes resulting from the operation
of the Fund during that year.
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\8\ ``Audit'' has the meaning defined in rule 1-02(d) of
Regulation S-X.
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11. Interests in a Fund will not be transferable except with the
express consent of the Manager, and then only to a Qualified
Participant. No sales load or similar fee of any kind will be charged
in connection with the sale of interests in a Fund.
12. A Fund may or may not offer investors the right to redeem their
interests at such times and subject to such conditions as are set forth
in the governing documents of the Fund. A Manager may have the right,
but not the obligation, to repurchase, redeem, cancel or transfer to
another Qualified Participant the interest of (i) an Eligible Employee
who ceases to be an employee, officer, director or current consultant
of any Tudor Group Entity for any reason or (ii) any Eligible Family
Member of any person described in clause (i). The governing documents
for each Fund will describe, if applicable, the amount that an investor
would receive upon repurchase, redemption, cancellation or transfer of
its interest.
13. Among other assets, a Fund may invest in one or more pooled
investment vehicles (including private funds relying on sections
3(c)(1) and 3(c)(7) under the Act) sponsored by the Tudor Group or by
third parties (each, an ``Underlying Fund'').\9\ One Fund may also
invest in another Fund in a ``master-feeder'' or similar structure. A
Fund may also be operated as a parallel
[[Page 24849]]
fund making investments on a side-by-side basis with Tudor Group
entities.
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\9\ Applicants are not requesting any exemption from any
provision of the Act or any rule thereunder that may govern a Fund's
eligibility to invest in an Underlying Fund relying on section
3(c)(1) or 3(c)(7) of the Act or an Underlying Fund's status under
the Act.
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14. A Fund may co-invest in a portfolio company (or a pooled
investment vehicle) with a Tudor Group Entity or with an investment
fund or separate account organized primarily for the benefit of
investors who are not affiliated with the Tudor Group (``Third Party
Investors) and over which a Tudor Group Entity exercises investment
discretion or which is sponsored by a Tudor Group Entity (a ``Tudor
Group Third Party Fund''). Co-investments with a Tudor Group Entity or
with a Tudor Group Third Party Fund in a transaction in which the Tudor
Group's investment was made pursuant to a contractual obligation to a
Tudor Group Third Party Fund will not be subject to Condition 3 below.
All other side-by-side investments held by Tudor Group entities will be
subject to Condition 3.
15. If the Tudor Group makes loans to a Fund, the lender will be
entitled to receive interest, provided that the interest rate will be
no less favorable to the borrower than the rate obtainable on an arm's
length basis. The possibility of any such borrowings, as well as the
terms thereof, would be disclosed to Qualified Participants prior to
their investment in a Fund. Any indebtedness of the Fund will be the
debt of the Fund and without recourse to the investors. A Fund 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 Fund
(other than short-term paper). A Fund will not lend any funds to a
Tudor Group Entity.
16. A Fund will not acquire any security issued by a registered
investment company if immediately after such acquisition such Fund 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 that the Commission shall
exempt employees' securities companies from the provisions of the Act
if and to the extent that such 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 specified provisions of the Act shall
be applicable to such company, and to other persons in their
transactions and relations with such company, as though such company
were registered under the Act, if the Commission deems it necessary and
appropriate in the public interest or for the protection of investors.
Applicants submit that it would be appropriate in the public interest
and consistent with the protection of investors and the purposes fairly
intended by the policies and provisions of the Act for the Commission
to issue an order under sections 6(b) and 6(e) of the Act exempting the
Funds from all provisions of the Act and the rules and regulations
thereunder, except sections 9, 17, 30, and 36 through 53 of the Act,
and the Rules and Regulations. With respect to sections 17(a), (d),
(e), (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
such a person, acting as principal, from knowingly selling or
purchasing any security or other property to or from the investment
company. Applicants request an exemption from section 17(a) to the
extent necessary to (a) permit a Tudor Group Entity or a Tudor Group
Third Party Fund (or any affiliated person of such Tudor Group Entity
or Tudor Group Third Party Fund), or any affiliated person of a Fund
(or affiliated persons of such persons), acting as principal, to engage
in any transaction directly or indirectly with any Fund or any company
controlled by such Fund; and (b) to permit a Fund to invest or engage
in any transaction with any Tudor Group Entity, acting as principal,
(i) in which such Fund, any company controlled by such Fund or any
Tudor Group Entity or any Tudor Group Third Party Fund has invested or
will invest, or (ii) with which such Fund, any company controlled by
such Fund or any Tudor Group Entity or Tudor Group Third Party Fund is
or will become otherwise affiliated; and (c) permit a Third Party
Investor, acting as a principal, to engage in any transaction directly
or indirectly with a Fund or any company controlled by such Fund. The
transactions to which any Fund is a party will be effected only after a
determination by the Manager that the requirements of Conditions 1, 2
and 6 (set forth below) have been satisfied. Applicants, on behalf of
the Funds, represent that any transactions otherwise subject to section
17(a) of the Act, for which exemptive relief has not been requested,
would require approval of the Commission.
4. Applicants submit that an exemption from section 17(a) is
consistent with the policy of each Fund and the protection of
investors. Applicants state that the investors in each Fund will have
been fully informed of the possible extent of such Fund's dealings with
the Tudor Group and of the potential conflicts of interest that may
exist. Applicants also state that, as professionals employed in the
investment management and securities businesses, or in administrative,
financial, accounting, legal, sales, marketing, risk management or
operational activities related thereto, the investors will be able to
understand and evaluate the attendant risks. Applicants assert that the
community of interest among the investors in each Fund, on the one
hand, and the Tudor Group, on the other hand, is the best insurance
against any risk of abuse. Applicants acknowledge that the requested
relief will not extend to any transactions between a Fund and an
Unaffiliated Subadviser or an affiliated person of the Unaffiliated
Subadviser, or between a Fund and any person who is not an employee,
officer or director of the Tudor Group or is an entity outside of the
Tudor Group and is an affiliated person of the Fund 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 thereunder prohibit any
affiliated person or principal underwriter of a registered investment
company, or any affiliated person of such a person or principal
underwriter, acting as principal, from participating in any joint
arrangement with the company unless authorized by the Commission.
Applicants request an exemption from section 17(d) and rule 17d-1 to
the
[[Page 24850]]
extent necessary to permit affiliated persons of each Fund, or
affiliated persons of any of such persons, to participate in, or effect
any transaction in connection with, any joint enterprise or other joint
arrangement or profit-sharing plan in which such Fund or a company
controlled by such Fund is a participant. The exemption would permit,
among other things, co-investments by each Fund, Tudor Group Third
Party Fund and individual members or employees, officers, directors or
consultants of the Tudor Group making their own individual investment
decisions apart from the Tudor Group. 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
prevent each Fund from achieving a principal purpose, which is to
provide a vehicle for Eligible Employees (and other permitted
investors) to co-invest with the Tudor Group or, to the extent
permitted by the terms of the Fund, with other employees, officers,
directors or consultants of the Tudor Group or Tudor Group entities or
with an Tudor Group Third Party Fund. Applicants further contend that
compliance with section 17(d) would cause a Fund to forego investment
opportunities simply because an investor in such Fund or other
affiliated person of such Fund also had, or contemplated making, a
similar investment. Applicants submit that it is likely that suitable
investments will be brought to the attention of a Fund because of its
affiliation with the Tudor Group's large capital resources and
investment management experience, and that attractive investment
opportunities of the types considered by a Fund often require each
participant in the transaction to make funds available in an amount
that may be substantially greater than those the Fund would
independently be able to provide. Applicants contend that, as a result,
a Fund's access to such opportunities may have to be through co-
investment 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. In addition, Applicants represent that
any transactions otherwise subject to section 17(d) of the Act and rule
17d-1 thereunder, for which exemptive relief has not been requested,
would require approval by the Commission.
7. Co-investments with a Tudor Group Entity or with a Tudor Group
Third Party Fund in a transaction in which the Tudor Group's investment
was made pursuant to a contractual obligation to a Tudor Group Third
Party Fund will not be subject to Condition 3 below. Applicants believe
that the interests of the Eligible Employees participating in a Fund
will be adequately protected in such situations because the Tudor Group
is likely to invest a portion of its own capital in Tudor Group Third
Party Fund investments, either through such Tudor Group Third Party
Fund or on a side-by-side basis (which Tudor Group investments will be
subject to substantially the same terms as those applicable to such
Tudor Group Third Party Fund, except as otherwise disclosed in the
governing documents of the relevant Fund). Applicants assert that if
Condition 3 were to apply to the Tudor Group's investment in these
situations, the Tudor Group Third Party Fund would be indirectly
burdened by the requirements of Condition 3. Applicants further assert
that the relationship of a Fund to a Tudor Group Third Party Fund is
fundamentally different from such Fund's relationship to the Tudor
Group. Applicants contend that the focus of, and the rationale for, the
protections contained in the requested relief are to protect the Funds
from any overreaching by the Tudor Group in the employer/employee
context, whereas the same concerns are not present with respect to the
Funds vis-[agrave]-vis the investors in a Tudor Group Third Party Fund.
8. Section 17(e) of the Act and rule 17e-1 thereunder 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 Tudor Group Entity (including
the Manager) that acts as an agent or broker to receive placement fees,
advisory fees, or other compensation from a Fund in connection with the
purchase or sale by the Fund of securities, provided that the 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 Tudor Group Entity will be deemed to be
``usual and customary'' only if (i) the Fund is purchasing or selling
securities alongside other unaffiliated third parties, Tudor Group
Third Party Funds or Third Party Investors who are also similarly
purchasing or selling securities, (ii) the fees or other compensation
being charged to the Fund are also being charged to the unaffiliated
third parties, Tudor Group Third Party Funds or Third Party Investors,
and (iii) the amount of securities being purchased or sold by the Fund
does not exceed 50% of the total amount of securities being purchased
or sold by the Fund and the unaffiliated third parties, Tudor Group
Third Party Funds or Third Party Investors. Applicants state that
compliance with section 17(e) would prevent a Fund from participating
in a transaction in which the Tudor Group, for other business reasons,
does not wish to appear as if the Fund is being treated in a more
favorable manner (by being charged lower fees) than other third parties
also participating in the transaction. Applicants assert that the
concerns of overreaching and abuse that section 17(e) and rule 17e-1
were designed to prevent are alleviated by the conditions that ensure
that (i) the fees or other compensation paid by a Fund to a Tudor Group
Entity are those negotiated at arm's length with unaffiliated third
parties and (ii) the unaffiliated third parties have as great or
greater interest as the Fund in the transactions as a whole.
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 Fund to comply with the fund governance standards defined
in rule 0-1(a)(7) under the Act. Applicants request an exemption from
rule 17e-1(b) to the extent necessary to permit each Fund to comply
with rule 17e-1(b) without the necessity of having a majority of the
directors of the Fund who are not ``interested persons'' take such
actions and make such approvals as are set forth in rule 17(e)-1(b).
Applicants note that in the event that all the directors of the Manager
will be affiliated persons, a Fund could not comply with rule 17(e)-
1(b) without the relief requested. Applicants represent that in such an
event, the Fund will comply with rule 17e-1(b) by having a majority of
the directors (or members of a comparable body) of the Fund or its
Manager take such actions and make such approvals as are set forth in
rule 17e-1(b). Applicants state that each Fund will otherwise comply
with all other requirements of rule 17e-1(b). Applicants further
request an exemption from rule 17(e)-1(c) to the extent necessary to
permit each Fund to comply with rule 17e-1 without the necessity of
having a majority of the
[[Page 24851]]
directors of the Fund be ``disinterested persons'' as set forth in rule
17e-1(c). Applicants note that in the event that all the directors of
the Manager will be affiliated persons, a Fund could not comply with
rule 17e-1 without the relief requested. Applicants represent that each
Fund will otherwise comply with all other requirements of rule 17e-
1(c).
10. Section 17(f) of the Act provides that the securities and
similar investments of a registered management investment company must
be placed in the custody of a bank, a member of a national securities
exchange or the company itself in accordance with Commission rules.
Rule 17f-2 under the Act specifies the requirements that must be
satisfied for a registered management investment company to act as a
custodian of its own investments. Applicants request relief from
section 17(f) and rule 17f-2 to permit the following exceptions from
the requirements of rule 17f-2: (a) A Fund's investments may be kept in
the locked files of the Manager or the Investment Adviser for purposes
of paragraph (b) of the rule; (b) for purposes of paragraph (d) of the
rule, (i) employees of Tudor Group or its affiliates (including the
Manager) will be deemed to be employees of the Funds, (ii) officers or
managers of the Manager of a Fund will be deemed to be officers of the
Fund and (iii) the Manager of a Fund or its board of directors will be
deemed to be the board of directors of the Fund; and (c) in place of
the verification procedure under rule 17f-2(f), verification will be
effected quarterly by two employees of the Manager who are also
employees of the Tudor Group responsible for the administrative, legal
and/or compliance functions for funds managed or sponsored by the Tudor
Group and who have specific knowledge of custody requirements, policies
and procedures of the Funds. Applicants expect that, with respect to
certain Funds, many of their investments will be evidenced only by
partnership agreements, participation agreements or similar documents,
rather than by negotiable certificates that could be misappropriated.
Applicants assert that for such a Fund, these instruments are most
suitably kept in the files of the Manager or its Investment Adviser,
where they can be referred to as necessary. Applicants represent that
they will comply with all other provisions of rule 17f-2, including the
recordkeeping requirements of paragraph (e).
11. Section 17(g) of the Act and rule 17g-1 thereunder 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 take certain actions and
give certain approvals relating to fidelity bonding. Among other
things, the rule also requires that the board of directors of an
investment company relying on the rule satisfy the fund governance
standards defined in rule 0-1(a)(7). Applicants request an exemption
from rule 17g-1 to the extent necessary to permit a Fund to comply with
rule 17g-1 by having the Manager of the Fund take such actions and make
such approvals as are set forth in rule 17g-1. Applicants state that in
the event all the directors of the Manager will be affiliated persons,
a Fund could not comply with rule 17g-1 without the requested relief.
Applicants also request 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 the provision of notices to
the board of directors and from the requirements of rule 17g-1(j)(3).
Applicants contend that the filing requirements are burdensome and
unnecessary as applied to the Funds and represent that the Manager of
each Fund will designate a person to maintain the records otherwise
required to be filed with the Commission under rule 17g-1(g).
Applicants further contend that the notices otherwise required to be
given to the board of directors will be unnecessary as the Funds
typically will not have boards of directors. Applicants represent that,
to the extent a Fund does have a board of directors, such notices will
be delivered in compliance with rule 17g-1. Applicants represent that
each Fund will comply with all other requirements of rule 17g-1.
12. Section 17(j) of the Act and rule 17j-1 require that every
registered investment company adopt a written code of ethics that
contains provisions reasonably necessary to prevent ``access persons''
from violating the anti-fraud provisions of the rule. Under rule 17j-1,
the investment company's access persons must report to the investment
company with respect to transactions in any security in which the
access person has, or by reason of the transaction acquires, any direct
or indirect beneficial ownership in such security. Applicants request
an exemption from section 17(j) and the provisions of rule 17j-1
(except for the anti-fraud provisions of rule 17j-1(b)) because they
assert that these requirements are burdensome and unnecessary as
applied to the Funds. The relief requested will extend only to entities
within the Tudor Group and is not requested with respect to any
Unaffiliated Subadviser or Advisory Person.
13. Sections 30(a), (b) and (e) of the Act and the rules thereunder
generally require 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 Fund and would entail administrative and legal costs that outweigh
any benefit to the investors in such Fund. Applicants request relief
under sections 30(a), (b) and (e) to the extent necessary to permit
each Fund to report annually to its investors in the manner described
in the application. Section 30(h) of the Act requires that every
officer, director, member of an advisory board, investment adviser or
affiliated person of an investment adviser of a closed-end investment
company be subject to the same duties and liabilities as those imposed
upon similar classes of persons under section 16(a) of the Exchange
Act. Applicants request an exemption from section 30(h) of the Act to
the extent necessary to exempt the Manager of each Fund, directors and
officers of the Manager and any other persons who may be deemed members
of an advisory board or investment adviser (and affiliated persons
thereof) of such Fund from filing Forms 3, 4, and 5 with respect to
their ownership of interests in such Fund under section 16 of the
Exchange Act. Applicants assert that, because there will be no trading
market and the transfers of interests are severely restricted, these
filings are unnecessary for the protection of investors and burdensome
to those required to make them.
14. Rule 38a-1 requires registered 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. Each Fund will comply will rule 38a-1(a), (c)
and (d), except that: (i) To the extent the Fund does not have a board
of directors, the board of directors of the Manager will fulfill the
responsibilities assigned to the Fund's board of directors under the
rule; (ii) to the extent the board of directors of the Manager 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) to the extent
[[Page 24852]]
the board of directors of the Manager does not have any independent
members, the Funds 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 Manager as constituted. Applicants represent that each
Fund has adopted written policies and procedures reasonably designed to
prevent violations of the terms and conditions of the application, has
appointed a chief compliance officer and is otherwise in compliance
with the terms and conditions of the application.
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) of the Act and rule 17d-1 thereunder to which a Fund
is a party (the ``Section 17 Transactions'') will be effected only if
the 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 Fund and the investors and do not involve
overreaching of such Fund or its investors on the part of any person
concerned; and (b) the Section 17 Transaction is consistent with the
interests of the Fund and the investors, such Fund's organizational
documents and such Fund's reports to its investors.
In addition, the Manager will record and preserve a description of
all Section 17 Transactions, the Manager's findings, the information or
materials upon which the findings are based and the basis for such
findings. All such records will be maintained for the life of the Fund
and at least six years thereafter, and will be subject to examination
by the Commission and its staff.\10\
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\10\ Each Fund will preserve the accounts, books and other
documents required to be maintained in an easily accessible place
for the first two years.
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2. The 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, with respect to the
possible involvement in the transaction of any affiliated person or
promoter of or principal underwriter for such Fund, or any affiliated
person of such a person, promoter or principal underwriter.
3. The Manager will not cause the funds of any Fund to be invested
in 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 the Fund
and a Co-Investor are participants, unless prior to such investment any
such Co-Investor agrees, prior to disposing of all or part of its
investment, to (a) give the Manager sufficient, but not less than one
day's, notice of its intent to dispose of its investment; and (b)
refrain from disposing of its investment unless the Fund has the
opportunity to dispose of the Fund's 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 Fund
means any person who is: (a) An ``affiliated person'' (as defined in
section 2(a)(3) of the Act) of the Fund (other than a Tudor Group Third
Party Fund); (b) the Tudor Group (except when a Tudor Group Entity co-
invests with a Fund and a Tudor Group Third Party Fund pursuant to a
contractual obligation to the Tudor Group Third Party Fund); (c) an
officer or director of a Tudor Group Entity; or (d) an entity (other
than a Tudor Group Third Party Fund) in which the Tudor Group acts as
general partner or has 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 the 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 the Co-Investor, including step or
adoptive relationships, or a trust or other investment vehicle
established for any Co-Investor or any such family member; or (c) when
the investment is comprised of securities that are (i) listed on a
national securities exchange registered under section 6 of the Exchange
Act, (ii) NMS stocks, pursuant to section 11A(a)(2) of the Exchange Act
and rule 600(a) of Regulation NMS thereunder, (iii) government
securities as defined in section 2(a)(16) of the Act, (iv) ``Eligible
Securities'' as defined in rule 2a-7 under the Act, or (v) listed 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 Fund and its Manager will maintain and preserve, for the
life of such Fund 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
investors in such Fund, and each annual report of such Fund required to
be sent to such investors, and agree that all such records will be
subject to examination by the Commission and its staff.\11\
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\11\ Each Fund will preserve the accounts, books and other
documents required to be maintained in an easily accessible place
for the first two years.
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5. Within 120 days after the end of each fiscal year of each Fund,
or as soon as practicable thereafter, the Manager of each Fund will
send to each investor in such Fund who had an interest in any capital
account of the Fund, at any time during the fiscal year then ended,
Fund financial statements audited by the Fund's independent
accountants, except in the case of a Fund formed to make a single
portfolio investment. In such cases, financial statements may be
unaudited, in which event each investor will receive financial
statements of the single portfolio investment audited by such entity's
independent accountants. At the end of each fiscal year and at other
times as necessary in accordance with customary practice, the Manager
will make a valuation or cause a valuation to be made of all of the
assets of the Fund as of the fiscal year end. In addition, as soon as
practicable after the end of each tax year of a Fund, the Manager of
such Fund will send a report to each person who was an investor in such
Fund at any time during the fiscal year then ended, setting forth such
tax information as shall be necessary for the preparation by the
investor of his, her or its U.S. federal and state income tax returns
and a report of the investment activities of the Fund during that
fiscal year.
6. If a Fund makes purchases or sales from or to an entity
affiliated with the Fund by reason of an officer, director or employee
of the Tudor Group (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
Fund's determination of whether or not to effect the purchase or sale.
For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-11205 Filed 5-28-19; 8:45 am]
BILLING CODE 8011-01-P