[Federal Register Volume 91, Number 96 (Tuesday, May 19, 2026)]
[Notices]
[Pages 29244-29246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-10015]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-36155; File No. 812-16028]
U.S. Bancorp, et al.; Notice of Application and Temporary Order
May 15, 2026.
AGENCY: Securities and Exchange Commission (the ``Commission'').
ACTION: Temporary order and notice of application for a permanent order
under section 9(c) of the Investment Company Act of 1940 (the ``Act'').
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Summary of Application: Applicants (defined below) have applied for a
temporary order (the ``Temporary Order'') exempting Fund Servicing
Applicants (defined below) from section 9(a) of the Act with respect to
an injunction entered against BTIG, LLC on May 2, 2022, by the United
States District Court for the Southern District of New York (the
``District Court''), until the Commission takes final action on an
application for a permanent order exempting the Fund Servicing
Applicants and other Covered Persons (defined below) from section 9(a)
of the Act (the ``Permanent Order,'' and with the Temporary Order, the
``Requested Orders'').
Applicants: U.S. Bancorp Asset Management, Inc. (``USBAM''), U.S.
Bancorp Investments, Inc. (``USBI'', and together with USBAM, the
``Fund Servicing Applicants''), and BTIG, LLC (``BTIG'', and
collectively with the Fund Servicing Applicants, the ``Applicants'')
and U.S. Bancorp (``USB'').\1\
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\1\ USB is a party to the Application solely for purposes of
making the representations and agreeing to the conditions in the
Application that apply to it.
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Filing Date: The application was filed on May 15, 2026.
Hearing or Notification of Hearing: The Temporary Order will be
effective until such time as the Commission takes final action on the
application by issuing an order granting the requested relief, 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, if an email address is listed for the relevant Applicant below,
or personally or by mail, if a physical address is listed for the
relevant Applicant below. The email should include the file number
referenced above. Hearing requests should be received by the Commission
by 5:30 p.m. Eastern time, on June 9, 2026, and should be accompanied
by proof of service on the Applicants, in the form of an affidavit, or,
for lawyers, a certificate of service. Pursuant to rule 0-5 under the
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 who wish to
be notified of a hearing may request notification by emailing the
Commission's Secretary.
ADDRESSES: The Commission: [email protected]. Applicants:
Matthew Krush, U.S. Bancorp, 800 Nicollet Mall, Minneapolis, Minnesota
55402; Steven Druskin BTIG, LLC, 350 Bush Street, 9th Floor, San
Francisco, California 94104; Counsel: Frederick Wertheim, Sullivan &
Cromwell LLP, 125 Broad Street, New York, NY 10004; Dalia Blass,
Sullivan & Cromwell LLP, 1700 New York Avenue NW, Suite 700,
Washington, DC 20006; Scott A. Moehrke, P.C. and Nicole Dornbusch
Horowitz, Kirkland & Ellis LLP, 333 West Wolf Point Plaza, Chicago, IL
60654.
FOR FURTHER INFORMATION CONTACT: Jacob D. Krawitz, Senior Special
Counsel, or Kaitlin C. Bottock, Assistant Chief Counsel, at (202) 551-
6825 (Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a temporary order and a
summary of the application. The complete application may be obtained
via the Commission's website by searching for the file number at the
top of this document, or for an Applicant using the Company name search
field, on the SEC's EDGAR system. The SEC's EDGAR system may be
searched at https://www.sec.gov/search-filings. You may also call the
SEC's Office of Investor Education and Advocacy at (202) 551-8090.
Applicants' Representations
1. USB, an international banking and financial services corporation
headquartered in Minneapolis, Minnesota, is a financial holding company
and bank holding company under the Bank Holding Company Act of 1956, as
amended. USB and its subsidiaries provide a full range of financial
services, including lending and depository services, cash management,
capital markets, and trust and investment management services. USB and
its subsidiaries also engage in credit card services, merchant and ATM
processing, mortgage banking, insurance, brokerage and leasing.
2. USBAM, a Delaware corporation, is an investment adviser
registered under the Investment Advisers Act of 1940, as amended (the
``Advisers Act''). As of October 31, 2025, USBAM had approximately
$420.4 billion of regulatory assets under management, of which about
$188.8 billion related to its advisory activities for registered
investment companies.
3. USBI, a Delaware corporation, is a broker-dealer and FINRA
member registered under the Securities Exchange Act of 1934, as amended
(the ``Exchange Act'') and an investment adviser registered under
Advisers Act, as well as a municipal securities broker and a municipal
securities dealer subject to the rules of the Municipal Securities
Rulemaking Board.
4. BTIG, a Delaware limited liability company, is a broker-dealer
and FINRA member registered under the Exchange Act. BTIG's key business
lines include institutional equity and fixed income sales and trading,
investment banking, research and strategy, outsource trading, and prime
brokerage.
5. BTIG does not serve as an investment adviser or depositor of any
registered investment company (a
[[Page 29245]]
``RIC''), employee securities company (an ``ESC'') or business
development company (a ``BDC''),\2\ or as principal underwriter for any
open-end management investment company registered under the Act (an
``Open-End Fund''), registered unit investment trust (a ``UIT''), or
registered face-amount certificate company (a ``FACC'') (such
activities, collectively, ``Fund Servicing Activities'').\3\ Applicants
request that any relief granted by the Commission also apply, subject
to the same terms and conditions specified in the application, to USB,
USBAM, USBI, and any entity that may become an Affiliated Person of USB
at any time in the future (together with the Applicants, the ``Covered
Persons'') \4\ with respect to any activity contemplated by Section
9(a) of the Act.\5\
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\2\ Neither BDCs nor ESCs are specifically mentioned in section
9 but are nonetheless required to comply with its requirements by
virtue of section 59 of the Act (for BDCs) and the terms of
applicable exemptive relief (for ESCs).
\3\ The term ``Fund'' or ``Funds'' refers to any RIC, ESC, BDC,
UIT or FACC for which a Covered Person currently provides, or may in
the future provide, Fund Servicing Activities.
\4\ BTIG is an Applicant but does not and will not serve as
investment adviser, depositor or principal underwriter to any
registered investment company and is not a Covered Person.
\5\ Covered Persons may, if the Orders are granted, in the
future act in any of the capacities contemplated by Section 9(a) of
the Act subject to the applicable terms and conditions of the
Orders.
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6. On May 19, 2021, the Commission filed a complaint (the
``Complaint'') in Securities and Exchange Commission v. BTIG, LLC Case
No. 21-cv-4521 (S.D.N.Y.) (the ``Action'') in the District Court,
charging BTIG with violating Rules 200(g) and 203(b)(1) of Regulation
SHO. The Complaint alleged the following: Regulation SHO regulates the
short selling of securities and is designed, in part, to protect
investors by restricting naked short selling and reducing failures to
deliver. From December 2016 through July 2017, BTIG marked as ``long''
or ``short exempt'' over 90 equity sale orders from a single hedge fund
customer in violation of Rule 200(g) of Regulation SHO. The customer
had indicated that it was ``long'' the securities in question. BTIG's
customer was not ``long'' the shares of stock and was not ``deemed to
own'' the shares of stock sold at the moment the sale orders were
entered and was therefore ``short'' the stock at the time of each of
those sale orders. Accordingly, BTIG should have marked its customer's
sale orders as ``short.'' BTIG was not entitled to simply rely on its
customer's representations concerning order marking and was obligated
to independently verify that its customer was, in fact, long, before
marking the trades. On each of these occasions, BTIG also failed to
borrow and locate shares before executing these short sales. As a
result of its conduct, BTIG violated the order marking and locate
requirements of Rules 200(g) and 203(b)(1) of Regulation SHO (the
``Conduct''). The Applicants state that only a small fraction of BTIG's
equity trading and sales group's hundreds of employees were involved
with the single customer whose sale orders resulted in the Conduct.
7. After the filing of the Complaint, BTIG agreed to a settlement,
under which BTIG submitted an executed written consent (the
``Consent''). Pursuant to the Consent, BTIG consented to the entry of a
final judgment, without admitting or denying the allegations in the
Complaint (except as to jurisdiction).
8. On May 2, 2022, the District Court entered a judgment in the
Action (the ``Judgment''), enjoining BTIG from violating Rules 200(g)
and 203(b)(1) of Regulation SHO, under the Exchange Act. Furthermore,
pursuant to the Judgment, BTIG was required to disgorge $315,048, pay
$64,258 in prejudgment interest, and pay a civil penalty of $315,048.
As a result, BTIG is currently disqualified from serving in the
capacities specified in Section 9(a)(2) of the Act.
9. Applicants state that on January 12, 2026, Condor Trading, LP,
the parent company of BTIG USB, Project Falon Merger Subsidiary L.P., a
direct wholly owned subsidiary of USB, and CT Equity Rep, LLC entered
into an Agreement and Plan of Merger (the ``Transaction''). Applicants
contend that upon the consummation of the Transaction, BTIG will become
an indirect wholly owned subsidiary of USB and therefore an
``affiliated person'' within the meaning of section 2(a)(3) of the Act
(an ``Affiliated Person'') of each Fund Servicing Applicant.\6\
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\6\ 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.
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Applicants' Legal Analysis
1. Section 9(a)(2) of the Act provides, in pertinent part, that a
person may not serve or act as an investment adviser or depositor of
any RIC or as principal underwriter for any Open-End Fund, UIT, or
FACC, if such person ``. . . by reason of any misconduct, is
permanently or temporarily enjoined by order, judgment, or decree of
any court of competent jurisdiction from acting as an underwriter,
broker, dealer, investment adviser, municipal securities dealer,
government securities broker, government securities dealer, bank,
transfer agent, credit rating agency, or entity or person required to
be registered under the Commodity Exchange Act . . . or from engaging
in or continuing any conduct or practice in connection with any such
activity or in connection with the purchase or sale of any security.''
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.
2. Section 9(c) of the Act provides that: ``[t]he Commission shall
by order grant [an] application [for relief from the prohibitions of
subsection 9(a)], either unconditionally or on an appropriate temporary
or other conditional basis, if it is established [i] that the
prohibitions of subsection [9](a), as applied to such person, are
unduly or disproportionately severe or [ii] that the conduct of such
person has been such as not to make it against the public interest or
protection of investors to grant such application.'' Applicants have
filed an application pursuant to section 9(c) seeking a Temporary Order
and a Permanent Order exempting Fund Servicing Applicants and other
Covered Persons from the disqualification provisions of section 9(a) of
the Act. The Covered Persons may, if the Requested Orders are granted,
in the future act in any of the capacities contemplated by section 9(a)
of the Act subject to the applicable terms and conditions of the
Requested Orders.
3. Applicants believe they meet the standards for exemption
specified in section 9(c). Applicants assert that: (i) should the
prohibitions of section 9(a) apply, which would result in the
Applicants being unable to consummate the Transaction, the impact would
be unduly or disproportionately severe, and (ii) that the Conduct did
not constitute conduct that would make it against the public interest
or protection of investors to grant the exemption.
4. Applicants state that the Conduct was confined solely to a small
fraction of the employees in BTIG's equity trading and sales group and
occurred over eight years before the date of the Application, and
before BTIG's contemplated affiliation with USB and the Fund Servicing
Applicants. Applicants further note that as USB and the Fund Servicing
Applicants are currently not affiliated with BTIG, none
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of the current or former directors, officers or employees of USB or the
Fund Servicing Applicants had any involvement in the Conduct.
5. Applicants state that assuming USB would consummate the
Transaction without the grant of the requested Orders, the Fund
Servicing Applicants would be barred under Section 9(a) from providing
Fund Servicing Activities, and the effect on their respective
businesses and employees would be unduly severe. The Applicants state
that each of the Fund Servicing Applicants has committed substantial
capital and other resources to establishing expertise in advising the
Funds and underwriting the securities of Funds with a view to
continuing and expanding their businesses, which are considered
strategically important.
6. Applicants state that given the severity of the impact, an
express condition to closing the Transaction is that the Applicants
receive relief under section 9(c) of the Act. Applicants further assert
that absent the grant of this Order, the Applicants would not
consummate the Transaction, which is strategically important to USB.
Applicants further state that the inability of the Fund Servicing
Applicants to continue providing Fund Servicing Activities would result
in the Funds and their shareholders (i) being deprived of the advisory
or underwriting services that they have received for many years and
(ii) potentially facing substantial costs, including costs related to
identifying suitable successors, holding meetings of the Funds' boards
of directors, and soliciting shareholders to approve new advisory and/
or underwriting agreements. Applicants contend that if the Transaction
does not close due to the failure to obtain the relief requested
herein, USB will not achieve the anticipated strategic benefits
associated with the consummation of the Transaction.
7. Applicants argue that the Conduct was of limited scope and
duration. Applicants assert that Conduct involved trading by one BTIG
customer, who has not been a customer of BTIG since August 2017, and
pertained to only two issuers. The alleged Conduct concerned the
accuracy of the sale order markings at the time the sales were ordered
and the resulting failure to borrow or locate shares being sold short.
Applicants state that only a small fraction of BTIG's equity trading
and sales group's hundreds of employees were involved with the single
customer whose sale orders resulted in the Conduct. Applicants note
that the Conduct involved nearly 160 million shares of stock in total,
more than $250 million in value, during a period where BTIG was
executing trades for an average of 75 million shares per day with a
notional value of over $1.8 billion per day across its equity trading
department.
8. Applicants assert that in the time since the Conduct occurred,
BTIG has enhanced its training, employee education, compliance efforts,
and trading supervisory procedures specifically in an effort to prevent
any future Regulation SHO violations. Applicants further state that
BTIG's remedial efforts in connection with the Conduct have been and
will continue to be focused on all of the departments involved in the
sale orders at issue in the Conduct.
9. Applicants state that: (i) none of the current or former
directors, officers or employees of the Applicants (other than certain
current and former personnel of BTIG who were not, are not, and will
not be involved in Fund Servicing Activities) had any involvement in
the Conduct; (ii) no person who has been or who subsequently may be
identified by the Applicants or any U.S. or non-U.S. regulatory or
enforcement agencies as having been responsible for the Conduct (other
than certain current and former personnel of BTIG who were not, are
not, and will not be involved in Fund Servicing Activities) will be an
officer, director, or employee of an Applicant or of any Covered Person
providing Fund Servicing Activities; (iii) no persons who otherwise
were involved in the Conduct (other than certain current and former
personnel of BTIG who were not, are not, and will not be involved in
Fund Servicing Activities) have had, and will have any future,
involvement in the Applicants' or Covered Persons' activities in any
capacity described in Section 9(a) of the Act; and (iv) because the
directors, officers and employees of USB and the Fund Servicing
Applicants did not engage in the Conduct, shareholders of the Funds
were not affected any differently than if the Funds had received
services from any other non-affiliated investment adviser or principal
underwriter.
Applicants' Conditions
Applicants agree that any order granted by the Commission pursuant
to the application will be subject to the following conditions:
1. Any temporary exemption granted pursuant to the Application will
be without prejudice to, and will 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.
2. Neither the Applicants, USB, nor any of the other Covered
Persons will employ any person to provide Fund Servicing Activities who
previously has been or who subsequently may be identified by the
Applicants or any U.S. or non-U.S. regulatory or enforcement agencies
as having been responsible for the Conduct in any capacity without
first making a further application to the Commission pursuant to
Section 9(c).
3. Each Applicant, USB, and any other Covered Person will adopt and
implement policies and procedures reasonably designed to ensure that it
will comply with the terms and conditions of the requested Orders
within 60 days of the date of the Permanent Order.
4. The material terms of the Judgment will be complied with in all
material respects.
5. The Applicants will provide written notification to the Chief
Counsel of the Commission's Division of Investment Management with a
copy to the Chief Counsel of the Commission's Division of Enforcement
of a material violation of the terms and conditions of the requested
Orders and Judgment within 30 days of discovery of the material
violation.
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
Fund Servicing Applicants are granted a temporary exemption from the
provisions of section 9(a), effective as the date of this order, solely
with respect to the Judgment, subject to the representations and
conditions in the application, until the Commission takes final action
on the Applicants' application for a permanent order.
By the Commission.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2026-10015 Filed 5-18-26; 8:45 am]
BILLING CODE 8011-01-P