[Federal Register Volume 85, Number 84 (Thursday, April 30, 2020)]
[Notices]
[Pages 24048-24049]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09141]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IA-5488/File No. 803-00246]
Edmunds Private Capital, LLC
April 24, 2020.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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Notice of application for an exemptive order under section
202(a)(11)(H) of the Investment Advisers Act of 1940 (``Advisers
Act'').
Applicant: Edmunds Private Capital, LLC (``Applicant'').
Relevant Advisers Act Sections: Exemption requested under section
202(a)(11)(H) of the Advisers Act from section 203(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.''
Filing Dates: The application was filed on April 13, 2018, and
amended on October 17, 2018, April 11, 2019, September 23, 2019,
December 19, 2019, and January 29, 2020.
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 emailing the Commission's
Secretary at [email protected] and serving the Applicant with a
copy of the request by email. Hearing requests should be received by
the Commission by 5:30 p.m. on May 19, 2020 and should be accompanied
by proof of service on the Applicant, in the form of an affidavit or,
for lawyers, a certificate of service. Pursuant to rule 0-5 under the
Advisers Act, hearing requests should state the nature of the writer's
interest, any facts bearing upon the desirability of a hearing on the
matter, the reason for the request, and the issues contested. Persons
may request notification of a hearing by emailing the Commission's
Secretary at [email protected].
ADDRESSES: The Commission: [email protected]. Applicants: S.
Brian Farmer, Esq., law.com">bfarmer@hf-law.com.
FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-3038 or Andrea Ottomanelli Magovern, 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 either at http://www.sec.gov/rules/iareleases.shtml or by calling (202) 551-8090.
Applicant's Representations
1. Applicant is a multi-generational single-family office that
provides services to the family and descendants of Henry Garnett
Chesley. Applicant is wholly-owned by Family Clients and is exclusively
controlled 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 ``Chesley Family'' means the
lineal descendants of Henry Garnett Chesley, their spouses or spousal
equivalents, and all other persons and entities that qualify as Family
Clients as defined in paragraph (d)(4) of the Family Office Rule.\1\
Capitalized terms herein have the same meaning as defined in the Family
Office Rule.
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\1\ Specifically, Applicant is wholly-owned and exclusively
controlled by Paul C. Edmunds II, a lineal descendant of Henry
Garnett Chesley.
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2. Applicant provides both advisory and non-advisory services
(collectively, the ``Services'') to members of the Chesley Family. Any
Service provided by Applicant that relates to investment advice about
securities or may otherwise be construed as advisory in nature is
considered an ``Advisory Service.''
3. Prior to forming Applicant, Paul C. Edmunds was associated with
a broker-dealer and afterwards a registered investment adviser
(``Predecessor RIA'') that for approximately 24 years managed
substantially all of the advisory accounts of the Chesley Family and
the accounts of the Additional Family Clients (as defined below).
Effective as of September, 2015, Paul C. Edmunds terminated his
association with the Predecessor RIA and formed Applicant. Commencing
October 1, 2015, the advisory accounts of the Family Clients and the
Additional Family Clients managed by the Predecessor RIA were
transitioned to Applicant.
4. Applicant represents that: (i) Each of the persons served by
Applicant is a Family Client, i.e., Applicant has no investment
advisory clients other than Family Clients as required by paragraph
(b)(1) of the Family Office Rule, with the limited exception that
Applicant provides Services to the Additional Family Clients (as
defined below), (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
Clients that are natural persons account for approximately 67% of the
natural persons to whom Applicant provides Advisory Services.
5. Applicant provides Services, including Advisory Services, to the
parents of the spouse of Paul C. Edmunds (the ``Additional Family
Clients''). The Additional Family Clients do not have an ownership
interest in Applicant. The assets owned by the Additional Family
Clients
[[Page 24049]]
represent approximately 11% of the Applicant's assets under management.
6. Applicant represents that the Additional Family Clients have
important familial ties to and are an integral part of the Chesley
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 over two decades, and that the inclusion of the
Additional Family Clients as members of the Chesley Family for which
Applicant provides services will be consistent with the existing
familial relationship among the Family Members.
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 Advisory Services to the
Additional Family Clients. Section 203(a) of the Advisers Act requires
investment advisers to register with the Commission. Absent relief,
upon reaching the required level of regulatory assets under management,
Applicant would be subject to registration with the Commission 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 Additional Family Clients were the parents of a lineal
descendent of Henry Garnett Chesley, rather than the parents of a
spouse of a lineal descendent of Henry Garnett Chesley, there would be
no question that each of them 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 are treated as, members of the
Chesley Family.
4. Mr. Edmunds has managed accounts for the Additional Family
Clients for 24 years. Applicant maintains that, from the perspective of
the Chesley Family, allowing Applicant to provide Services to the
Additional Family Clients is consistent with the family's previous
experience with investment management services provided by Mr. Edmunds
and the existing familial relationship among Family Members.
5. Applicant also submits that declaring Applicant to be a Family
Office under the Advisers Act is not contrary to the public interest.
Applicant states that the office is a private organization that was
formed to be the ``family office'' for the Chesley Family, and that the
office does not have any public clients. Applicant maintains that the
office's Services are exclusively tailored to the needs of the Chesley
Family and the Additional Family Clients. Applicant argues that the
provision of Advisory Services to the Additional Family Clients, who
have been receiving Advisory Services from Mr. Edmunds in the same
manner as Family Members for over 24 years, does not create any public
interest 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.
6. 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.
7. Applicant maintains that, based on its unusual circumstances--
providing Services to Family Clients and to the Additional Family
Clients who are relatives who have been considered and treated as
Family Members for 26 years and whose status as clients of Applicant
would not change the nature of Applicant's operations to that of a
commercial advisory business--an exemptive order is appropriate based
on Applicant's specific facts and circumstances.
8. 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. Applicant will offer and provide Advisory Services only to
Family Clients and to the Additional Family Clients, who generally will
be deemed to be, and be treated as if they are, Family Clients;
provided, however, that the Additional Family Clients will be deemed to
be, and treated as if they are, Family Members for purposes of
paragraph (b)(1) and for purposes of paragraph (d)(4)(vi) of the Family
Office Rule.
2. 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 seventy-five percent (75%) 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
the application.
For the Commission, by the Division of Investment Management,
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09141 Filed 4-29-20; 8:45 am]
BILLING CODE 8011-01-P