[Federal Register Volume 89, Number 108 (Tuesday, June 4, 2024)]
[Notices]
[Pages 48002-48004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12207]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Advisers Act Release No. 6617; File No. 803-00265]


Jeffrey Management Company; Notice of Application

May 30, 2024.
AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice.

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    Notice of application for an exemptive order under the Investment 
Advisers Act of 1940 (the ``Advisers Act'').
    Applicant: Jeffrey Management Company (the ``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: The Applicant requests that the Commission 
issue an order declaring the Applicant 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 September 26, 2023, and 
amended on March 18, 2024, April 9, 2024 and April 22, 2024.
    Hearing or Notification of Hearing: An order granting the requested 
relief 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 June 24, 2024, 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

[[Page 48003]]

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]. Applicant: 
Jeffrey Management Company, c/o Kerry Houghton, at 
[email protected] and Dan L. Jaffe, Vorys, Sater, Seymour and 
Pease LLP, at [email protected].

FOR FURTHER INFORMATION CONTACT: Matthew Cook, Senior Counsel, or Marc 
Mehrespand, Branch Chief, at (202) 551-6825 (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 https://www.sec.gov/edgar/searchedgar/legacy/companysearch.html or by calling the SEC's Public Reference Room 
at (202) 551-8090.

Applicant's Representations

    1. In April 2017, Jeffrey LLC, a Delaware limited liability company 
(``Jeffrey LLC'') obtained an order from the Commission under Section 
6(c) of the Investment Company Act (the ``Investment Company Act'') 
exempting Jeffrey LLC from all provisions of the Investment Company Act 
and all rules and regulations thereunder.\1\ The Jeffrey LLC Order, in 
part, permitted Jeffrey LLC, a private investment company wholly owned 
and controlled by a single family, to exceed 100 beneficial owners. The 
family members at issue are the descendants of Joseph A. Jeffrey (1836-
1928) (``J.A. Jeffrey'').
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    \1\ Jeffrey LLC, Investment Company Act Release 32526 (March 7, 
2017) (notice), and Investment Company Act Release 32590 (April 4, 
2017) (order) (``Jeffrey LLC Order'').
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    2. At the same time, Jeffrey LLC's family office entities, Katahdin 
Asset Management LLC, a Delaware limited liability company 
(``Katahdin''), and The Jeffrey Company, an Ohio corporation (``TJC''), 
obtained exemptive orders from the Commission under Section 
202(a)(11)(H) of the Advisers Act.\2\ These exemptive orders were 
sought to permit each of Katahdin and TJC to advise Jeffrey LLC, which, 
once it exceeded the 100 beneficial owner limitation of Section 3(c)(1) 
of the Investment Company Act, would no longer meet the definition of 
Family Client under Rule 202(a)(11)(G)-1(d)(4) under the Advisers Act 
(the ``Family Office Rule''), without potentially losing their 
respective statuses as family offices for purposes of the Family Office 
Rule.\3\ In 2020, Katahdin underwent a statutory conversion (the 
``Conversion'') into Jeffrey Fiduciary Company, an Ohio Corporation and 
private trust company (``JFC'').\4\
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    \2\ Katahdin Asset Management LLC, Investment Advisers Act 
Release 4660 (March 7, 2017) (notice) and Investment Advisers Act 
Release 4680 (April 4, 2017) (order), and The Jeffrey Company, 
Investment Advisers Act Release 4659 (March 7, 2017) (notice) and 
Investment Advisers Act Release 4681 (April 4, 2017) (order).
    \3\ Unless otherwise defined herein, capitalized terms have the 
same meaning as defined in the Family Office Rule.
    \4\ The Applicant represents that, under applicable state law, 
the Conversion had the following effects, among others: (i) Katahdin 
was continued in JFC; (ii) Katahdin as a Delaware limited liability 
company ceased to exist; and (iii) all assets and liabilities of 
Katahdin continued in JFC. All of the Katahdin employees continued 
with JFC as well, such that JFC became the successor of Katahdin in 
law and in fact.
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    3. Each of Jeffrey LLC, JFC (as the successor by conversion to 
Katahdin) and TJC continues to meet all the conditions imposed under 
their respective exemptive orders.
    4. The Applicant, an Ohio corporation, was formed on September 7, 
2023 as an initial step in a proposed Restructuring (as defined below), 
involving management services provided by JFC to TJC and Jeffrey LLC. 
The Applicant is a wholly-owned subsidiary of TJC. The Applicant is 
governed by TJC, in TJC's capacity as the sole shareholder of the 
Applicant, and by the Applicant's sole corporate director and 
president.
    5. For business reasons, TJC's Board of Directors (the ``Board'') 
is proposing an affiliate restructuring in which all JFC employees 
would be transferred to the Applicant (the ``Restructuring''). As part 
of the Restructuring, all JFC employees would be transferred to the 
Applicant, which will provide certain services. Specifically, after the 
Restructuring, the Applicant would provide advisory and non-advisory 
services to Jeffrey LLC, TJC and JFC, with the Applicant's own 
employees, pursuant to management agreements and subject to the 
direction of the Board. The Applicant seeks an exemptive order to 
enable it to operate generally in the same manner as JFC currently 
operates.
    6. The Applicant represents that (i) each of the persons to be 
served by the Applicant would be a Family Client, i.e., the Applicant 
would have no investment advisory clients other than Family Clients as 
required by paragraph (b)(1) of the Family Office Rule (with the 
possible exception of Jeffrey LLC), (ii) the Applicant is wholly-owned 
by TJC, a Family Client, and is exclusively controlled by TJC, in TJC's 
capacity as the sole shareholder of the Applicant, and by the 
Applicant's sole corporate director and president, Kerry J. Houghton, a 
Family Member, as required by paragraph (b)(2) of the Family Office 
Rule, and (iii) the Applicant does not hold itself out to the public as 
an investment adviser as required by paragraph (b)(3) of the Family 
Office Rule.
    7. The Applicant represents that, once the Restructuring occurs, 
the Applicant would have a ``client'' (Jeffrey LLC) that, to the extent 
Jeffrey LLC has exceeded (or in the future exceeds) the 100 beneficial 
owner limitation of Section 3(c)(1) of the Investment Company Act, no 
longer would qualify as a Family Client.

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 part of a regular business, issues or 
promulgates analyses or reports concerning securities.''
    2. Absent the requested order, the Applicant would fall within the 
definition of ``investment adviser'' under Section 202(a)(11) of the 
Advisers Act. Although the Family Office Rule provides an exclusion 
from the definition of investment adviser, the Family Office Rule 
requires that all ``clients'' be Family Clients. Once the Restructuring 
occurs, however, the Applicant would have a ``client'' (Jeffrey LLC) 
that, to the extent it has exceeded (or in the future exceeds) the 100 
beneficial owner limitation of Section 3(c)(1) of the Investment 
Company Act, no longer would qualify as a Family Client. The Applicant 
does not qualify for any of the exemptions from registration as an 
investment adviser set forth in Section 203(b) of the Advisers Act and, 
because the Applicant has regulatory assets under management of more 
than $110 million, the Applicant is not prohibited from registering 
with the Commission under Section 203A(a) of the Advisers Act. 
Therefore, absent relief, the Applicant would be required to register 
as an investment adviser under Section 203(a) of the Advisers Act.
    3. The Applicant submits that, if the Restructuring occurs, the 
Applicant's clients will be TJC and JFC, each of which is a Family 
Client, in addition to Jeffrey LLC (which is already a client of JFC). 
The Applicant further submits

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that, in the event Jeffrey LLC were to exceed the 100 beneficial owner 
limitation of Section 3(c)(1) of the Investment Company Act, the 
Applicant's relationship with Jeffrey LLC would not change the nature 
of the Applicant into that of a commercial advisory firm. In support of 
this argument, the Applicant notes that Jeffrey LLC would continue to 
be held entirely by Family Clients, and the Applicant would continue 
not to hold itself out to the public as an investment adviser. The 
Applicant represents that Jeffrey LLC would continue to be managed and 
controlled by TJC, which in turn is managed by the Board, a majority of 
the members of which are Family Members.
    4. The Applicant states that, in requesting the order, the 
Applicant is not attempting to expand its operations or engage in any 
level of commercial activity to which the Advisers Act is designed to 
apply. Further, Jeffrey LLC has received from the Commission an order 
exempting Jeffrey LLC from all of the provisions of the Investment 
Company Act and all rules and regulations thereunder, under conditions 
that include: (a) that interests in Jeffrey LLC have not been and will 
not be offered or sold to the public, and that Jeffrey LLC will neither 
admit as a new investor, nor permit the assignment or transfer of any 
interest in Jeffrey LLC to, any individual or entity that is not a 
Family Client; (b) Jeffrey LLC at all times will be controlled by 
Family Members and/or ``family entities'' (as defined under the Family 
Office Rule) that are Family Clients; and (c) a majority of the board 
of directors of Jeffrey LLC will consist of Family Members, with 
limited exception.
    5. The Applicant also submits that there is no public interest in 
requiring the Applicant to be registered under the Advisers Act. The 
Applicant is a private organization that was formed to be the new 
``family office'' for the descendants of J.A. Jeffrey. If the 
Restructuring occurs, the Applicant's sole clients will be Jeffrey LLC, 
TJC and JFC; and the Applicant will have no clients other than Family 
Clients. The Applicant represents that such services would not change 
or be affected in the event Jeffrey LLC were to exceed the 100 
beneficial owner limitation of Section 3(c)(1) of the Investment 
Company Act. In addition, the provision of the advisory services 
described above to the Family Clients described above does not create 
any public interest that would require the Applicant to be registered 
under the Advisers Act that is different in any manner from the 
considerations that apply to a ``family office'' that complies in all 
respects with the Family Office Rule.
    6. The 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 Family Office 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 stated that certain issues would be 
more appropriately addressed through an application seeking an 
exemptive order than through a rule of general applicability.
    7. The Applicant notes that, in addition to the exemptive orders 
issued to Katahdin and TJC, the Commission has issued other orders 
subsequent to the adoption of the Family Office Rule, and that each of 
those orders treated the applicant as a Family Office even though the 
applicant was providing advisory services to persons who did not fall 
within the definition of ``Family Client.'' The Applicant states that, 
in this case, the Restructuring would move the locus of the principal 
family office to a new entity, the Applicant, without changing any of 
the material facts that were the subject of the order issued to 
Katahdin (as well as the order issued to TJC). Specifically, the 
Applicant will provide services to one or more Family Clients that are 
currently Family Clients for which Katahdin's successor, JFC, provides 
services, except that (a) the Applicant also will provide services to 
JFC (a Family Client) and (b) one of the Applicant's clients, Jeffrey 
LLC, relies, or may rely, on the Jeffrey LLC Order.
    8. For the foregoing reasons, the Applicant requests an order 
declaring it to be a person not within the intent of Section 202(a)(11) 
of the Advisers Act. The 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 services only to: (i) 
Jeffrey LLC, which will generally be deemed to be, and treated as if it 
were, a Family Client, and (ii) other Family Clients.
    2. The Applicant at all times will be wholly owned by Family 
Clients and exclusively controlled (directly or indirectly) by one or 
more Family Members and/or Family Entities as defined in paragraph 
(d)(5) of the Family Office Rule.
    3. Jeffrey LLC at all times will be wholly owned by Family Clients.
    4. At all times the assets beneficially owned by Family Members 
and/or Family Entities (including assets beneficially owned by Family 
Members and/or Family Entities indirectly through Jeffrey LLC) will 
account for at least 75% of the assets for which the Applicant provides 
services.
    5. The 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.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-12207 Filed 6-3-24; 8:45 am]
BILLING CODE 8011-01-P