80 FR 14189 - T. Rowe Price Associates, Inc. and T. Rowe Price International Ltd; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 52 (March 18, 2015)

Page Range		14189-14191
FR Document		2015-06110

Federal Register, Volume 80 Issue 52 (Wednesday, March 18, 2015)

[Federal Register Volume 80, Number 52 (Wednesday, March 18, 2015)]
[Notices]
[Pages 14189-14191]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2015-06110]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IA-4046/803-00224]

T. Rowe Price Associates, Inc. and T. Rowe Price International
Ltd; Notice of Application

March 12, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an exemptive order under Section 206A
of the Investment Advisers Act of 1940 (the ``Advisers Act'') and Rule
206(4)-5(e) thereunder.

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Applicant: T. Rowe Price Associates, Inc. (``TRPA'') and T. Rowe
Price International Ltd (``TRPIL'' and, together with TRPA, the
``Advisers'' or the ``Applicants'').
Relevant Advisers Act Sections: Exemption requested under Section
206A of the Advisers Act and Rule 206(4)-5(e) thereunder from Rule
206(4)-5(a)(1) under the Advisers Act.
Summary of Application: The Applicants request that the Commission
issue an order under Section 206A of the Advisers Act and Rule 206(4)-
5(e) thereunder exempting them from Rule 206(4)-5(a)(1) under the
Advisers Act to permit Applicants to receive compensation from certain
government entities for investment advisory services provided to the
government entities within the two-year period following a contribution
by a covered associate of the Applicants to an official of the
government entities.

DATES: Filing Dates: The application was filed on May 6, 2014, and an
amended and restated application was filed on October 29, 2014.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving 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 April 6, 2015, 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 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 writing to the Commission's Secretary.

ADDRESSES: Brent J. Fields, Secretary, Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants,
TRPA and TRPIL, T. Rowe Price Associates, Inc., 100 East Pratt Street,
Baltimore, Maryland 21202.

FOR FURTHER INFORMATION CONTACT: Kyle R. Ahlgren, Senior Counsel, or
Melissa R. Harke, Branch Chief, at (202) 551-6825 (Division of
Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the

[[Page 14190]]

application. The complete application may be obtained via the
Commission's Web site either at http://www.sec.gov/rules/iareleases.shtml or 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.

Applicant's Representations

1. The Applicants are registered with the Commission as investment
advisers under the Advisers Act. T. Rowe Price Group, Inc. (``TRPG'')
is the parent company of both Applicants. The Applicants serve as
adviser or subadviser to companies that are registered with the
Commission as investment companies (``RICs'') under the Investment
Company Act of 1940 (the ``1940 Act''). In addition, TRPIL acts as an
adviser to the T. Rowe Price Trust Company (``TRPTC'') in connection
with assets of defined contribution and benefit plans of companies and
governmental entities that are invested in the Emerging Markets Equity
Trust Fund, a common trust fund exempt under Section 3(c)(11) of the
1940 Act and of which TRPTC is the Trustee (the ``Fund''). Certain
public pension plans that are government entities of Wisconsin (the
``Clients'') have selected a RIC as an investment option for
participants in participant-directed plans. One Client had been
invested in the Fund since 2003 but divested its investment by May
2012. The investment decisions for the Clients are overseen by boards
of trustees, and Gubernatorial appointees sit on these boards. Due to
this power of appointment, the Governor is an ``official'' of each
Client under Rule 206(4)-5(f)(6)(ii). The Governor, however, does not
sit on any Client's board or have any direct involvement in any
Client's investment decisions.
2. Applicants represent that Michael McGonigle (the
``Contributor'') is a Vice President of TRPG and TRPA. He has been a
director of credit research in the Fixed Income Division since 2010 and
is a member of the Fixed Income Steering Committee. In his role as a
director of credit research, he supervises approximately 15 research
analysts in TRPA and eight research analysts in TRPIL, some of whom may
occasionally meet with government entity clients or prospective
clients, or with consultants for prospective clients. The Contributor
is, therefore, a ``covered associate'' of TRPA and TRPIL, as defined in
Rule 206(4)-5(f)(2)(ii). The Advisers have identified only one meeting
with a Wisconsin government entity client at which an analyst
supervised by the Contributor was present since March 14, 2011, the
effective date of Rule 206(4)-5 (the ``Rule''). The Contributor has not
participated in any such meetings with any state or local government
entity client or prospective client of the Advisers since the effective
date of the Rule.
3. The recipient of the Contribution was Scott Walker (the
``Official''), the Governor of Wisconsin, who took office in January
2011. The Contribution was made on February 5, 2012 to the Official's
recall primary election campaign for the amount of $250 (the
``Contribution''). The Wisconsin Campaign Finance Information System
reported it as received by the campaign on February 26, 2012. Although
not entitled to vote in Wisconsin elections, the Contributor was
interested in the highly contentious and publicized recall election,
given his political views that are in line with those of the Official.
The Contributor remembers watching television coverage of the recall
election and receiving telephone solicitations for political
contributions during this time. To the best of the Contributor's
recollection, he made the Contribution pursuant to such a telephone
solicitation. The Contributor has never met the Official or dealt with
the Official in any capacity. The Contributor has never solicited or
coordinated any contributions for or on behalf of the Official. The
Contribution is consistent with other political contributions made by
the Contributor (which were made prior to the effective date of the
Rule).
4. Applicants represent that the Clients' relationship with the
Applicants pre-dates the Contribution. The Adviser's relationship with
one Client dates back to at least 2003 when the Client invested in the
Fund. This Client began withdrawing its investment from the Fund in
2011 and was fully divested in May 2012. The Clients with a RIC advised
by the Advisers began their relationship with the Advisers in 2005 and
2008.
5. Applicants represent that at no time did any employees of the
Applicants other than the Contributor have any knowledge of the
Contribution prior to the Applicants' legal department's discovery of
the Contribution. The Contribution was discovered in the course of
compliance testing by the Advisers' legal department on or around March
18, 2014. Subsequently, the Applicants and the Contributor obtained the
Official's agreement to return the full amount of the Contribution,
which was returned on May 1, 2014. After identifying the Contribution,
the Advisers established an escrow account and deposited in the account
an amount equal to the sum of all fees paid to the Advisers, directly
or indirectly, with respect to the Clients between February 5, 2012
through February 26, 2014. The Advisers have notified the Client
invested in the Fund, each affected RIC, and each Client that offers as
an investment option in a participant-directed plan an affected RIC
that is directly advised by the Advisers, of the Contribution and the
resulting two-year prohibition on compensation absent exemptive relief
from the Commission. The Advisers have informed such Clients and each
affected RIC that the fees attributable to the Clients since the date
of the Contribution through the two-year period were being placed in
escrow and that, absent exemptive relief from the Commission, those
fees would be distributed in a way that is permissible under applicable
laws and the Rule.
6. Applicants represent that the Advisers' policies and procedures
regarding pay-to-play (``Pay-to-Play Policies and Procedures'') in
place at the time of the Contribution required all employees to pre-
clear contributions to state and local officials and candidates.
Employees must annually certify their compliance with the Advisers'
Code of Ethics, which describes the Advisers' preclearance policy for
political contributions, through an Annual Verification Questionnaire
(the ``Questionnaire''). The Questionnaire requires employees to
certify their compliance with the Policy. The Contributor has completed
his annual online training and Questionnaire certification each year
since the effective date of the Rule. The legal department or specific
business units of the Advisers also occasionally send reminder emails
about the Policy. The Advisers have also started to include searches of
public Web sites for contributions made by employees, and it was in the
course of developing this testing program that the Contribution was
discovered by the Advisers.
7. Applicants represent that to the best of the Contributor's
recollection, the Contributor's violation of Applicant's Pay-to-Play
Policies and Procedures resulted from his simply forgetting to pre-
clear his contribution as required, due to his becoming impassioned
about the recall election while watching televised reports about it and
receiving a telephone solicitation while doing so. Applicants note that
on May 31, 2012, pursuant to the Advisers' policies and procedures, the
Contributor requested pre-clearance from Advisers' legal department to
make a contribution to the Official's campaign for the recall general
election and received permission to make a $150 contribution.

[[Page 14191]]

As noted above, however, the Contributor did not disclose the
Contribution to the Applicants and the Applicants had no knowledge of
the Contribution when the Contributor received approval for the May 31,
2012 contribution for the recall general election.

Applicant's Legal Analysis

1. Rule 206(4)-5(a)(1) under the Advisers Act prohibits a
registered investment adviser from providing investment advisory
services for compensation to a government entity within two years after
a contribution to an official of the government entity is made by the
investment adviser or any covered associate of the investment adviser.
Each Client is a ``government entity,'' as defined in rule 206(4)-
5(f)(5), the Contributor is a ``covered associate'' as defined in rule
206(4)-5(f)(2), and the Official is an ``official'' as defined in rule
206(4)-5(f)(6). Rule 206(4)-5(c) provides that when a government entity
invests in a covered investment pool, the investment adviser to that
covered investment pool is treated as providing advisory services
directly to the government entity. The RICs and the Funds are ``covered
investment pools,'' as defined in rule 206(4)-5(f)(3).
2. Section 206A of the Advisers Act grants the Commission the
authority to ``conditionally or unconditionally exempt any person or
transaction . . . from any provision or provisions of [the Advisers
Act] or of any rule or regulation thereunder, if and to the extent that
such exemption is necessary or appropriate in the public interest and
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of [the Advisers Act].''
3. Rule 206(4)-5(e) provides that the Commission may exempt an
investment adviser from the prohibition under Rule 206(4)-5(a)(1) upon
consideration of the factors listed below, among others:
(1) Whether the exemption is necessary or appropriate in the public
interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Advisers
Act;
(2) Whether the investment adviser: (i) Before the contribution
resulting in the prohibition was made, adopted and implemented policies
and procedures reasonably designed to prevent violations of the rule;
and (ii) prior to or at the time the contribution which resulted in
such prohibition was made, had no actual knowledge of the contribution;
and (iii) after learning of the contribution: (A) Has taken all
available steps to cause the contributor involved in making the
contribution which resulted in such prohibition to obtain a return of
the contribution; and (B) has taken such other remedial or preventive
measures as may be appropriate under the circumstances;
(3) Whether, at the time of the contribution, the contributor was a
covered associate or otherwise an employee of the investment adviser,
or was seeking such employment;
(4) The timing and amount of the contribution which resulted in the
prohibition;
(5) The nature of the election (e.g., federal, state or local); and
(6) The contributor's apparent intent or motive in making the
contribution which resulted in the prohibition, as evidenced by the
facts and circumstances surrounding such contribution.
4. The Applicants request an order pursuant to section 206A and
rule 206(4)-5(e), exempting them from the two-year prohibition on
compensation imposed by rule 206(4)-5(a)(1) with respect to investment
advisory services provided to the Clients within the two-year period
following the Contribution.
5. The Applicants submit that the exemption is necessary and
appropriate in the public interest and consistent with the protection
of investors and the purposes fairly intended by the policy and
provisions of the Act. The Applicants further submit that the other
factors set forth in Rule 206(4)-5 similarly weigh in favor of granting
an exemption to the Applicants to avoid consequences disproportionate
to the violation. The Applicants note that causing the Advisers to
serve without compensation for a two-year period could result in a
financial loss that is approximately 24,000 times the amount of the
Contribution.
6. The Applicants represent that neither the Advisers nor the
Contributor sought to interfere with the Clients' merit-based selection
process for advisory services, nor did they seek to negotiate higher
fees or greater ancillary benefits than would be achieved in arms'-
length transactions. The Applicants note that the Advisers'
relationship with the Clients pre-date the Contribution, and that one
Client divested its investment in the Fund shortly after the
Contribution. The Applicants represent that they have no reason to
believe that the Contribution undermined the integrity of the market
for advisory services or resulted in a violation of the public trust in
the process for awarding contracts.
7. The Applicants note that the Advisers adopted and implemented
pay-to-play policies and procedures on the Rule's effective date, March
14, 2011 that are fully compliant with the Rule's requirements. The
Applicants further note that the Advisers began developing compliance
testing that includes random searches of public campaign databases for
contributions by employees. The Applicants represent that at no time
did any employees of the Advisers other than the Contributor have any
actual knowledge that the Contribution had been made prior to its
discovery by the Advisers in March 2014. The Applicants further
represent that the Advisers and the Contributor obtained the Official's
agreement to return the Contribution, which was subsequently returned,
and the Advisers established an escrow account for all fees
attributable to the Clients' relationships with the Advisers accrued
between February 5, 2012 and February 26, 2014.
8. The Applicants state that the Contributor's apparent intent in
making the Contribution was not to influence the selection or retention
of the Advisers, and that the Contribution was consistent with prior
political donations made by the Contributor in support of other
candidates who share the political views of the Official.
9. The Applicants represent that the Contributor has had no direct
contact or involvement with any of the Clients, and that the
Contributor's only indirect involvement with one of the Clients was
through a single meeting at which a research analyst who reported to
the Contributor met with the Client.

For the Commission, by the Division of Investment Management,
under delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015-06110 Filed 3-17-15; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 80, No. 52 / Wednesday, March 18, 2015 / Notices 14189

competitive standing in the financial Paper Comments the Investment Advisers Act of 1940
markets. • Send paper comments in triplicate (the ‘‘Advisers Act’’) and Rule 206(4)–
The Exchange notes that it operates in to Brent J. Fields, Secretary, Securities 5(e) thereunder.
a highly competitive market in which and Exchange Commission, 100 F Street
market participants can readily favor Applicant: T. Rowe Price Associates,
NE., Washington, DC 20549. Inc. (‘‘TRPA’’) and T. Rowe Price
competing venues. In such an All submissions should refer to File
environment, the Exchange must International Ltd (‘‘TRPIL’’ and, together
Number SR–NYSEArca–2015–13. This with TRPA, the ‘‘Advisers’’ or the
continually review, and consider file number should be included on the
adjusting, its fees and credits to remain ‘‘Applicants’’).
subject line if email is used. To help the Relevant Advisers Act Sections:
competitive with other exchanges. For Commission process and review your
the reasons described above, the Exemption requested under Section
comments more efficiently, please use 206A of the Advisers Act and Rule
Exchange believes that the proposed only one method. The Commission will
rule change reflects this competitive 206(4)–5(e) thereunder from Rule
post all comments on the Commission’s 206(4)–5(a)(1) under the Advisers Act.
environment. Internet Web site (http://www.sec.gov/ Summary of Application: The
C. Self-Regulatory Organization’s rules/sro.shtml). Copies of the Applicants request that the Commission
Statement on Comments on the submission, all subsequent issue an order under Section 206A of
Proposed Rule Change Received From amendments, all written statements the Advisers Act and Rule 206(4)–5(e)
Members, Participants or Others with respect to the proposed rule thereunder exempting them from Rule
change that are filed with the 206(4)–5(a)(1) under the Advisers Act to
No written comments were solicited Commission, and all written
or received with respect to the proposed permit Applicants to receive
communications relating to the compensation from certain government
rule change. proposed rule change between the entities for investment advisory services
III. Date of Effectiveness of the Commission and any person, other than provided to the government entities
Proposed Rule Change and Timing for those that may be withheld from the within the two-year period following a
Commission Action public in accordance with the contribution by a covered associate of
provisions of 5 U.S.C. 552, will be the Applicants to an official of the
The foregoing rule change is effective
available for Web site viewing and government entities.
upon filing pursuant to Section
printing in the Commission’s Public
19(b)(3)(A) of the Act 8 and DATES: Filing Dates: The application was
Reference Room, 100 F Street NE.,
subparagraph (f)(2) of Rule 19b–4 Washington, DC 20549, on official filed on May 6, 2014, and an amended
thereunder,9 because it establishes a business days between the hours of and restated application was filed on
due, fee, or other charge imposed by the 10:00 a.m. and 3:00 p.m. Copies of such October 29, 2014.
Exchange. filing also will be available for Hearing or Notification of Hearing: An
At any time within 60 days of the inspection and copying at the principal order granting the application will be
filing of such proposed rule change, the office of the Exchange. All comments issued unless the Commission orders a
Commission summarily may received will be posted without change; hearing. Interested persons may request
temporarily suspend such rule change if the Commission does not edit personal a hearing by writing to the
it appears to the Commission that such identifying information from Commission’s Secretary and serving
action is necessary or appropriate in the submissions. You should submit only Applicants with a copy of the request,
public interest, for the protection of information that you wish to make personally or by mail. Hearing requests
investors, or otherwise in furtherance of available publicly. All submissions should be received by the Commission
the purposes of the Act. If the should refer to File Number SR– by 5:30 p.m. on April 6, 2015, and
Commission takes such action, the NYSEArca–2015–13 and should be should be accompanied by proof of
Commission shall institute proceedings submitted on or before April 8, 2015. service on the Applicants, in the form
under Section 19(b)(2)(B) of the Act 10 to of an affidavit or, for lawyers, a
determine whether the proposed rule For the Commission, by the Division of certificate of service. Pursuant to Rule
Trading and Markets, pursuant to delegated
change should be approved or 0–5 under the Advisers Act, hearing
authority.11
disapproved. requests should state the nature of the
Brent J. Fields,
writer’s interest, any facts bearing upon
IV. Solicitation of Comments Secretary. the desirability of a hearing on the
Interested persons are invited to [FR Doc. 2015–06125 Filed 3–17–15; 8:45 am] matter, the reason for the request, and
submit written data, views and BILLING CODE 8011–01–P the issues contested. Persons may
arguments concerning the foregoing, request notification of a hearing by
including whether the proposed rule writing to the Commission’s Secretary.
change is consistent with the Act. SECURITIES AND EXCHANGE
ADDRESSES: Brent J. Fields, Secretary,
Comments may be submitted by any of COMMISSION
Securities and Exchange Commission,
the following methods: [Release No. IA–4046/803–00224] 100 F Street NE., Washington, DC
Electronic Comments 20549–1090. Applicants, TRPA and
T. Rowe Price Associates, Inc. and T. TRPIL, T. Rowe Price Associates, Inc.,
• Use the Commission’s Internet Rowe Price International Ltd; Notice of 100 East Pratt Street, Baltimore,
comment form (http://www.sec.gov/ Application Maryland 21202.
mstockstill on DSK4VPTVN1PROD with NOTICES

rules/sro.shtml); or
March 12, 2015. FOR FURTHER INFORMATION CONTACT: Kyle
• Send an email to rule-comments@
sec.gov. Please include File Number SR– AGENCY: Securities and Exchange R. Ahlgren, Senior Counsel, or Melissa
NYSEArca–2015–13 on the subject line. Commission (‘‘Commission’’). R. Harke, Branch Chief, at (202) 551–
ACTION: Notice of application for an 6825 (Division of Investment
8 15 U.S.C. 78s(b)(3)(A). exemptive order under Section 206A of Management, Chief Counsel’s Office).
9 17 CFR 240.19b–4(f)(2). SUPPLEMENTARY INFORMATION: The
10 15 U.S.C. 78s(b)(2)(B). 11 17 CFR 200.30–3(a)(12). following is a summary of the

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Document Created: 2018-02-21 09:39:51
Document Modified: 2018-02-21 09:39:51

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
Action		Notice of application for an exemptive order under Section 206A of the Investment Advisers Act of 1940 (the ``Advisers Act'') and Rule 206(4)-5(e) thereunder.
Dates		Filing Dates: The application was filed on May 6, 2014, and an amended and restated application was filed on October 29, 2014.
Contact		Kyle R. Ahlgren, Senior Counsel, or Melissa R. Harke, Branch Chief, at (202) 551-6825 (Division of Investment Management, Chief Counsel's Office).
FR Citation		80 FR 14189