80 FR 30301 - J.P. Morgan Chase & Co., et al.; Notice of Application and Temporary Order

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 101 (May 27, 2015)

Page Range		30301-30304
FR Document		2015-12755

Federal Register, Volume 80 Issue 101 (Wednesday, May 27, 2015)

[Federal Register Volume 80, Number 101 (Wednesday, May 27, 2015)]
[Notices]
[Pages 30301-30304]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2015-12755]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31613; File No. 812-14466]

J.P. Morgan Chase & Co., et al.; Notice of Application and
Temporary Order

May 20, 2015.
AGENCY: Securities and Exchange Commission (``Commission'')

ACTION: Temporary order and notice of application for a permanent
order under section 9(c) of the Investment Company Act of 1940
(``Act'').

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Summary of Application: Applicants have received a temporary order
(``Temporary Order'') exempting them from section 9(a) of the Act, with

[[Page 30302]]

respect to a guilty plea entered on May 20, 2015, by J.P. Morgan Chase
& Co. (``JPMC'' or the ``Settling Firm''), a Delaware corporation, in
the United States District Court for the District of Connecticut (the
``District Court'') in connection with a plea agreement (``Plea
Agreement'') between JPMC and the United States Department of Justice
(``DOJ''), until the Commission takes final action on an application
for a permanent order (the ``Permanent Order,'' and with the Temporary
Order, the ``Orders''). Applicants also have applied for a Permanent
Order.

Applicants: JPMC, J.P. Morgan Investment Management Inc. (``JPMIM''),
J.P. Morgan Institutional Investments, Inc. (``JPMII''), J.P. Morgan
Partners, LLC (``JPMP''); J.P. Morgan Private Investments Inc.
(``JPMPI''), J.P. Morgan Alternative Asset Management, Inc.
(``JPMAAM''); Bear Stearns Asset Management Inc. (``BSAM''); BSCGP Inc.
(``BSCGP''); Constellation Growth Capital LLC (``Constellation'');
Constellation Ventures Management II, LLC (``Constellation II''); JF
International Management Inc. (``JFIMI''); JPMorgan Distribution
Services, Inc. (``JPMDS''); OEP Co-Investors Management II, Ltd. (``OEP
II''); OEP Co-Investors Management III, Ltd. (``OEP III,'' and together
with OEP II, the ``OEP Entities''); Security Capital Research &
Management Incorporated (``Security Capital''); and Sixty Wall Street
Management Company, LLC (``Sixty Wall Management'', and together with
JPMIM, JPMII, JPMP, JPMPI, JPMAAM, BSAM, BSCGP, Constellation,
Constellation II, JFIMI, JPMDS, the OEP Entities, and Security Capital,
the ``Fund Servicing Applicants'') (each an ``Applicant'' and
collectively, the ``Applicants'').

Filing Date: The application was filed on May 20, 2015.

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 15, 2015, and should be accompanied by proof of service on
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 writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants: JPMC, JPMIM, JPMII,
JPMP, JPMPI, JPMAAM, BSAM, BSCGP, Constellation II and Sixty Wall
Management, 270 Park Avenue, New York, NY 10017; Constellation, 40 W.
57th Street, 32nd Floor, New York, NY 10019; JFIMI, 21st Floor, Chater
House, 8 Connaught Road Central, Hong Kong; JPMDS, 1111 Polaris
Parkway, Columbus, Ohio 43240; OEP II and OEP III, 270 Park Avenue,
10th Floor, New York, NY 10017; and Security Capital, 10 South Dearborn
Street, Suite 1400, Chicago, Illinois 60063.

FOR FURTHER INFORMATION CONTACT: Elizabeth G. Miller, Senior Counsel,
Vanessa M. Meeks, Senior Counsel, or Holly Hunter-Ceci, Branch Chief,
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 Web site by searching for the file number, or an
applicant using the Company name box, at http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.

Applicants' Representations

1. JPMC, a Delaware corporation, is a financial services holding
company whose businesses provide a broad range of financial services to
consumer and corporate customers. JPMC is also the ultimate parent of
each of the Fund Servicing Applicants. JPMC does not provide Fund
Service Activities (as defined below) to any Fund.\1\
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\1\ For purposes of the application, ``Funds'' refer to any
registered investment company, business development company, or ESC
for which a Covered Person serves, or may in the future serve, as an
investment adviser, sub-adviser, general partner or depositor, or
any registered open-end investment company, registered unit
investment trust or registered face amount certificate company for
which a Covered Person (as defined below) serves, or may in the
future serve, as principal underwriter.
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2. JPMIM, JPMPI, JPMAAM, JFIMI and Security Capital are registered
as investment advisers under the Investment Advisers Act of 1940, as
amended (the ``Advisers Act'') and serve as investment advisers or sub-
advisers to various Funds. JPMP and Sixty Wall Management are
registered as investment advisers under the Advisers Act and serve as
investment advisers or sub-advisers to ESCs. BSAM is registered as an
investment adviser under the Advisers Act and serves as general partner
that provides investment advisory services to various ESCs (as defined
below).\2\ BSCGP, Constellation II and the OEP Entities serve as
general partners that provide investment advisory services to various
ESCs. Constellation serves as a sub-adviser to various ESCs. JPMDS and
JPMII are registered as broker-dealers under the Securities Exchange
Act of 1934 and serve as principal underwriter to various Funds.
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\2\ Every Applicant that is a general partner that provides
investment advisory services to one or more ESCs believes, for
purposes of the application, that it is performing a function that
falls within the definition of ``investment adviser'' in section
2(a)(20) of the Act.
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3. Other than the Fund Servicing Applicants, no existing company of
which JPMC is an affiliated person currently serves as an investment
adviser (as defined in section 2(a)(20) of the Act), or depositor of
any Fund, employees' securities companies (as defined in section
2(a)(13) of the Act) subject to section 9 of the Act (``ESCs'') or
investment company that has elected to be treated as a business
development company under the Act, or principal underwriter for any
registered open-end company, unit investment trust under the Act
(``UIT''), or face-amount certificate company registered under the Act
(such activities, collectively, ``Fund Service Activities'').
Applicants request that any relief granted by the Commission also apply
to any other existing company of which JPMC is an affiliated person
within the meaning of section 2(a)(3) of the Act and to any other
company of which JPMC may become an affiliated person in the future
(together with the Applicants, the ``Covered Persons'').
4. On May 20, 2015, the DOJ filed a one-count criminal information
in the District Court charging JPMC with a one-count violation of the
Sherman Antitrust Act, 15 U.S.C. 1 (the ``Information''). The
Information charges that from July 2010 until at least January 2013,
JPMC, through one of its euro/U.S. dollar (``EUR/USD'') traders,
entered into and engaged in a conspiracy to fix, stabilize, maintain,
increase or decrease the price of, and rig bids and offers for, the
EUR/USD currency pair exchanged in the FX spot market by agreeing to
eliminate competition in the purchase and sale of the EUR/USD currency
pair in the U.S. and elsewhere (the ``Conduct''). The Conduct involved
near daily conversations, some of which were in code, in an exclusive
electronic chat room used by certain EUR/USD traders, including the
EUR/USD trader employed by JPMC.

[[Page 30303]]

5. JPMC has agreed to resolve the action brought through the Plea
Agreement presented to the District Court on May 20, 2015. Under the
Plea Agreement, JPMC agreed to enter a plea of guilty to the charge set
out in the Information (the ``Plea''). In addition, JPMC will make an
admission of guilt to the District Court. Applicants expect that the
District Court will enter a judgment against JPMC that will require
remedies that are materially the same as set forth in the Plea
Agreement. According to the Plea Agreement, JPMC agrees that the
District Court shall order a term of probation, which would include
certain conditions, as outlined in the application. Along with the DOJ,
the Board of Governors of the Federal Reserve System (``FRB''), the
Office of the Comptroller of the Currency (``OCC''), the U.S. Commodity
Futures Trading Commission (``CFTC''), and the United Kingdom Financial
Conduct Authority (``FCA'') have or have been conducting investigations
into the practices of JPMC and its direct and indirect subsidiaries
relating to FX trading. Specifically, the FRB entered a cease and
desist order on May 20, 2015 against JPMC concerning unsafe and unsound
banking practices relating to JPMC's FX business (``FRB Order''); the
OCC entered a cease and desist order on November 11, 2014 against
JPMorgan Chase Bank, N.A. (``JPMCB'') concerning deficiencies and
unsafe or unsound practices relating to JPMCB's wholesale FX business
(``OCC Order''); the CFTC entered a cease and desist order on November
11, 2014 against JPMCB relating to certain FX trading activities
(``CFTC Order''); and the FCA entered a warning notice on November 11,
2014 against JPMCB for failing to control business practices in its G10
spot FX trading operations (``FCA Order'').

Applicants' Legal Analysis

1. Section 9(a)(1) of the Act provides, in pertinent part, that a
person may not serve or act as, among other things, an investment
adviser or depositor of any investment company registered under the Act
or business development company or as a principal underwriter for any
registered open-end investment company, registered UIT, or registered
face-amount certificate company, or as investment adviser of an ESC if
the person ``within 10 years has been convicted of any felony or
misdemeanor . . . arising out of such person's conduct'' as a bank,
among other things. Section 2(a)(10) of the Act defines the term
``convicted'' to include a plea of guilty. Section 9(a)(3) of the Act
extends the prohibitions of section 9(a)(1) to a company, any
``affiliated person'' of which is disqualified under the provisions of
section 9(a)(1). ``Affiliated person'' is defined in section 2(a)(3) of
the Act to include, among others, any person directly or indirectly
controlling, controlled by, or under common control with, the other
person. Applicants state that JPMC is an affiliated person of the Fund
Servicing Applicants within the meaning of section 2(a)(3). Applicants
state that a guilty plea would result in a disqualification of such
Fund Servicing Applicants and other Covered Persons for ten years under
section 9(a) of the Act because JPMC would become the subject of a
conviction described in 9(a)(1).
2. Section 9(c) of the Act provides that, upon application, the
Commission shall by order grant a person an exemption from the
provisions of section 9(a), either unconditionally or on an appropriate
temporary or other conditional basis, if the person establishes that:
(1) The prohibitions of section 9(a), as applied to the person, are
unduly or disproportionately severe; or (2) the conduct of the person
has been such as not to make it against the public interest or the
protection of investors to grant the exemption. Applicants have filed
an application pursuant to section 9(c) seeking a Temporary Order and a
Permanent Order exempting the Applicants and other Covered Persons from
the disqualification provisions of section 9(a) of the Act. The
Applicants and other Covered Persons may, if the relief is 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.
3. Applicants believe they meet the standards for exemption
specified in section 9(c). Applicants assert that the prohibitions of
section 9(a), if applied to Covered Persons, would be unduly or
disproportionately severe, and that the conduct of JPMC is not such as
to make it against the public interest or the protection of investors
to issue the Orders. Applicants represent that the Conduct giving rise
to the Plea did not involve any of the Applicants acting in the
capacity of investment adviser, sub-adviser, or depositor for a Fund
(including as general partner providing investment advisory services to
ESCs) or principal underwriter for any registered open-end investment
company, registered UIT, or registered face amount certificate company.
Applicants further represent that the Conduct did not relate to the
Funds' management or distribution, and that the Conduct did not involve
any Fund or the assets of any Fund. Applicants also state that the
individual referenced in the Complaint as responsible for the Conduct
is no longer employed by JPMC or its affiliates. As a result of the
foregoing, Applicants assert that the conduct of Applicants has not
been such as to make it against the public interest or the protection
of investors to grant the application.
4. Applicants assert that their inability to continue to serve as
investment adviser or sub-adviser of the Funds (including as general
partner providing investment advisory services to ESCs) or principal
underwriter for the Funds that are registered open-end investment
companies would result in the Funds and their shareholders facing
potentially severe hardships. Applicants argue that neither the
protection of investors nor the public interest would be served by
permitting the section 9(a) disqualifications to apply to the
Applicants because those disqualifications would deprive the
shareholders of the Funds of the investment advisory or sub-advisory
and underwriting services (including as general partner providing
investment advisory services to ESCs) that shareholders expected the
Funds would receive when they decided to invest in the Funds.
Applicants also outline a number of other uncertainties,
inefficiencies, and expenses that they submit would result from the
prohibitions of section 9(a) and operate to the detriment of the
financial interests of the Funds and their shareholders.
5. Applicants further assert that the prohibitions of section 9(a)
would have an adverse effect on the Applicants, including their
employees, as outlined in the application. Applicants therefore assert
that the imposition of the section 9(a) disqualification on the Fund
Servicing Applicants would be unduly and disproportionately severe.
6. Applicants represent that: (i) None of the current or former
directors, officers or employees of the Fund Servicing Applicants had
any knowledge of, or had any involvement in, the Conduct; (ii) no
current or former employee of JPMC or of any other Covered Person who
previously has been or who subsequently may be identified by JPMC, or
any U.S. or non-U.S. regulatory or enforcement agencies as having been
responsible for the Conduct will have any involvement in providing Fund
Service Activities (including as general partners providing advisory
services to ESCs) or will be an officer, director, or employee of any
Applicant or of any other Covered Person; (iii) no employee of JPMC or
of any other Covered Person who was involved in the Conduct had any, or

[[Page 30304]]

will have any future, involvement in the Covered Persons' activities in
any capacity described in section 9(a) of the Act; and (iv) because the
personnel of the Fund Servicing Applicants did not have any involvement
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
assert that the conduct of Applicants has not been such as to make it
against the public interest or the protection of investors to grant the
requested exemption from section 9(a).
7. To provide further assurance that the exemptive relief being
requested herein would be consistent with the public interest and the
protection of investors, the Applicants undertake that they will, as
soon as reasonably practicable, distribute to the boards of directors
(``Boards'') of the Funds written materials describing the
circumstances that led to the Plea, any impact on the Funds and the
application. The written materials will include an offer to discuss the
materials at an in-person meeting with each Board for which the
Applicants provide Fund Service Activities (excluding for this purpose,
the ESCs), including the directors who are not ``interested persons''
of such Funds as defined in section 2(a)(19) of the Act and their
independent legal counsel as defined in rule 0-1(a)(6) under the Act.
The Applicants undertake to provide such Funds' Boards with the
information concerning the Plea Agreement and the application necessary
for those Funds to fulfill their disclosure and other obligations under
the federal securities laws and will provide them a copy of the Plea
Agreement as entered by the District Court.
8. Applicants further state that JPMC has implemented remedial
measures to protect against conduct similar to the Conduct, as outlined
in greater detail in the application. For example, JPMC has enhanced
governance through the development of a Macro Trading Business Control
Committee. JPMC has improved its compliance risk assessment to better
identify risks, including the types of risk identified during the FX
matters, through improvements to: (1) The risk assessment framework,
which includes more detailed guidance and procedures to enhance quality
and consistency of execution; (2) the risk assessment tool and process,
which includes improvements to compliance officers' ability to document
risk/control impact at a more granular level; and (3) qualitative data
collection to improve the qualitative information gathered by
Compliance, including about lessons from internal and external control
issues. JPMC has also developed a plan to improve monitoring and
surveillance, including, among other things, expanding transaction
surveillance across thirty-six currency pair benchmarks and
establishing a process whereby it reviews its electronic communication
lexicons and transaction surveillance scenarios and makes enhancements,
as appropriate, at least annually. JPMC has also identified
improvements in its internal audit function that it has taken or will
take, including the establishment of a team dedicated to the
identification of, and focus on, cross business issues and emerging
risks.
9. Applicants state that certain of the Applicants and their
affiliates have previously received an order under section 9(c) of the
Act, as the result of conduct that triggered section 9(a), as described
in greater detail in the application.

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
shall be without prejudice to, and shall 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 nor any of the other Covered Persons will
employ any of the current or former employees of the Settling Firm or
any Covered Person who previously has been or who subsequently may be
identified by the Settling Firm or any U.S. or non-U.S. regulatory or
enforcement agency as having been responsible for the Conduct, without
first making a further application to the Commission pursuant to
section 9(c).
3. Each Applicant and Covered Person will adopt and implement
policies and procedures reasonably designed to ensure that it will
comply with the terms and conditions of the Orders within 60 days of
the date of the Permanent Order or, with respect to condition 4, such
date as may be contemplated by the Plea Agreement, or the CFTC Order,
the OCC Order, the FRB Order, the FCA Order, or any other orders issued
by regulatory or enforcement agencies addressing the Conduct.
4. The Settling Firm will comply in all material respects with the
material terms and conditions of the Plea Agreement, the CFTC Order,
the OCC Order, the FRB Order, the FCA Order, or any other orders issued
by regulatory or enforcement agencies addressing the Conduct.
5. 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 any of the
Orders 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
Applicants and any other Covered Persons are granted a temporary
exemption from the provisions of section 9(a), solely with respect to
the guilty plea entered into pursuant to the Plea Agreement, subject to
the representations and conditions in the application, from May 20,
2015 until the Commission takes final action on their application for a
permanent order.

By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-12755 Filed 5-26-15; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 80, No. 101 / Wednesday, May 27, 2015 / Notices 30301

the Judgment as entered by the District Commission’s Division of Investment the Federal Register on April 14, 2015.4
Court. Management with a copy to the Chief The Commission has received one
13. Applicants state that the Settling Counsel of the Commission’s Division of comment letter on the proposed rule
Firm and the other Applicants have Enforcement of a material violation of change.5
previously received exemptive orders the terms and conditions of any of the Section 19(b)(2) of the Act 6 provides
under section 9(c) of the Act, as the Orders within 30 days of discovery of that, within 45 days of the publication
result of conduct that triggered section the material violation. of notice of the filing of a proposed rule
9(a), as described in greater detail in the change, or within such longer period up
application. Temporary Order to 90 days as the Commission may
Applicants’ Conditions The Commission has considered the designate if it finds such longer period
matter and finds that Applicants have to be appropriate and publishes its
Applicants agree that any order made the necessary showing to justify reasons for so finding or as to which the
granted by the Commission pursuant to granting a temporary exemption. self-regulatory organization consents,
the application will be subject to the Accordingly, the Commission shall either approve the
following conditions: It is hereby ordered, pursuant to proposed rule change, disapprove the
1. Any temporary exemption granted section 9(c) of the Act, that the proposed rule change, or institute
pursuant to the application shall be Applicants and any other Covered proceedings to determine whether the
without prejudice to, and shall not limit Persons are granted a temporary proposed rule change should be
the Commission’s rights in any manner exemption from the provisions of disapproved. The Commission is
with respect to, any Commission section 9(a), solely with respect to the extending this 45-day time period. The
investigation of, or administrative guilty plea entered into pursuant to the Commission finds that it is appropriate
proceedings involving or against, Plea Agreement, subject to the to designate a longer period within
Covered Persons, including, without representations and conditions in the which to take action on the proposed
limitation, the consideration by the application, from May 20, 2015 until the rule change so that it has sufficient time
Commission of a permanent exemption Commission takes final action on their to consider the proposed rule change.
from section 9(a) of the Act requested application for a permanent order. Accordingly, the Commission,
pursuant to the application or the pursuant to Section 19(b)(2) of the Act,7
revocation or removal of any temporary By the Commission.
Jill M. Peterson,
designates July 13, 2015, as the date by
exemptions granted under the Act in which the Commission shall either
connection with the application. Assistant Secretary.
approve or disapprove or institute
2. Except as set forth in Section III.E. [FR Doc. 2015–12754 Filed 5–26–15; 8:45 am]
proceedings to determine whether to
of the application, neither the BILLING CODE 8011–01–P disapprove the proposed rule change
Applicants nor any of the other Covered (File Number SR–NYSEMKT–2015–23).
Persons will employ any of the current
or former employees of the Settling Firm SECURITIES AND EXCHANGE For the Commission, by the Division of
or any other Covered Person who COMMISSION Trading and Markets, pursuant to delegated
authority.8
previously have been or who
[Release No. 34–75004; File No. SR– Robert W. Errett,
subsequently may be identified by the
NYSEMKT–2015–23] Deputy Secretary.
Settling Firm or any U.S. or non-U.S.
regulatory or enforcement agency as [FR Doc. 2015–12688 Filed 5–26–15; 8:45 am]
Self-Regulatory Organizations; NYSE
having been responsible for the MKT LLC; Notice of Designation of a BILLING CODE 8011–01–P
Conduct, without first making a further Longer Period for Commission Action
application to the Commission pursuant on a Proposed Rule Change Adopting
to section 9(c). SECURITIES AND EXCHANGE
a Principles-Based Approach To
3. Each Applicant and Covered Person COMMISSION
Prohibit the Misuse of Material
will adopt and implement policies and Nonpublic Information by Specialists [Release No. IC–31613; File No. 812–14466]
procedures reasonably designed to and e-Specialists by Deleting Rule
ensure that it will comply with the 927.3NY and Section (f) of Rule J.P. Morgan Chase & Co., et al.; Notice
terms and conditions of the Orders 927.5NY of Application and Temporary Order
within 60 days of the date of the
Permanent Order or, with respect to May 20, 2015. May 20, 2015.
condition 4, such date as may be On March 26, 2015, NYSE MKT LLC AGENCY: Securities and Exchange
contemplated by the Plea Agreement, or (the ‘‘Exchange’’) filed with the Commission (‘‘Commission’’)
the CFTC Order, the Fed-CTDOB Order, Securities and Exchange Commission ACTION: Temporary order and notice of
the FCA Order, the FINMA Order, or (the ‘‘Commission’’), pursuant to application for a permanent order under
any other orders issued by regulatory or Section 19(b)(1) 1 of the Securities section 9(c) of the Investment Company
enforcement agencies addressing the Exchange Act of 1934 (the ‘‘Act’’) 2 and Act of 1940 (‘‘Act’’).
Conduct. Rule 19b–4 thereunder,3 a proposed rule
4. The Settling Firm will comply in change to delete Exchange Rule SUMMARY OF APPLICATION: Applicants
all material respects with the material 927.3NY and section (f) of Rule 927.5NY have received a temporary order
terms and conditions of the Plea to adopt a principles-based approach to (‘‘Temporary Order’’) exempting them
from section 9(a) of the Act, with
mstockstill on DSK4VPTVN1PROD with NOTICES

Agreement, with the material terms of prohibit the misuse of material
the CFTC Order, the Fed-CTDOB Order, nonpublic information by Specialists 4 See Securities Exchange Act Release No. 74677
the FCA Order, the FINMA Order, or and e-Specialists. The proposed rule (Apr. 8, 2015), 80 FR 20049 (Apr. 14, 2015).
any other orders issued by regulatory or change was published for comment in 5 See letter from Peter D. Selman, Goldman Sachs
enforcement agencies addressing the & Co., to Commission, dated May 5, 2015.
Conduct. 1 15 U.S.C. 78s(b)(1). 6 15 U.S.C. 78s(b)(2).

5. Applicants will provide written 2 15 U.S.C. 78a. 7 Id.

notification to the Chief Counsel of the 3 17 CFR 240.19b–4. 8 17 CFR 200.30–3(a)(31).

VerDate Sep<11>2014 16:45 May 26, 2015 Jkt 235001 PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 E:\FR\FM\27MYN1.SGM 27MYN1

Federal Register / Vol. 80, No. 101 / Wednesday, May 27, 2015 / Notices 30303

5. JPMC has agreed to resolve the which is disqualified under the as responsible for the Conduct is no
action brought through the Plea provisions of section 9(a)(1). ‘‘Affiliated longer employed by JPMC or its
Agreement presented to the District person’’ is defined in section 2(a)(3) of affiliates. As a result of the foregoing,
Court on May 20, 2015. Under the Plea the Act to include, among others, any Applicants assert that the conduct of
Agreement, JPMC agreed to enter a plea person directly or indirectly controlling, Applicants has not been such as to make
of guilty to the charge set out in the controlled by, or under common control it against the public interest or the
Information (the ‘‘Plea’’). In addition, with, the other person. Applicants state protection of investors to grant the
JPMC will make an admission of guilt to that JPMC is an affiliated person of the application.
the District Court. Applicants expect Fund Servicing Applicants within the 4. Applicants assert that their
that the District Court will enter a meaning of section 2(a)(3). Applicants inability to continue to serve as
judgment against JPMC that will require state that a guilty plea would result in investment adviser or sub-adviser of the
remedies that are materially the same as a disqualification of such Fund Funds (including as general partner
set forth in the Plea Agreement. Servicing Applicants and other Covered providing investment advisory services
According to the Plea Agreement, JPMC Persons for ten years under section 9(a) to ESCs) or principal underwriter for the
agrees that the District Court shall order of the Act because JPMC would become Funds that are registered open-end
a term of probation, which would the subject of a conviction described in investment companies would result in
include certain conditions, as outlined 9(a)(1). the Funds and their shareholders facing
in the application. Along with the DOJ, 2. Section 9(c) of the Act provides potentially severe hardships. Applicants
the Board of Governors of the Federal that, upon application, the Commission argue that neither the protection of
Reserve System (‘‘FRB’’), the Office of shall by order grant a person an investors nor the public interest would
the Comptroller of the Currency exemption from the provisions of be served by permitting the section 9(a)
(‘‘OCC’’), the U.S. Commodity Futures section 9(a), either unconditionally or disqualifications to apply to the
Trading Commission (‘‘CFTC’’), and the on an appropriate temporary or other Applicants because those
United Kingdom Financial Conduct conditional basis, if the person disqualifications would deprive the
Authority (‘‘FCA’’) have or have been establishes that: (1) The prohibitions of shareholders of the Funds of the
conducting investigations into the section 9(a), as applied to the person, investment advisory or sub-advisory
practices of JPMC and its direct and are unduly or disproportionately severe; and underwriting services (including as
indirect subsidiaries relating to FX or (2) the conduct of the person has general partner providing investment
trading. Specifically, the FRB entered a been such as not to make it against the advisory services to ESCs) that
cease and desist order on May 20, 2015 public interest or the protection of shareholders expected the Funds would
against JPMC concerning unsafe and investors to grant the exemption. receive when they decided to invest in
unsound banking practices relating to Applicants have filed an application the Funds. Applicants also outline a
JPMC’s FX business (‘‘FRB Order’’); the pursuant to section 9(c) seeking a number of other uncertainties,
OCC entered a cease and desist order on Temporary Order and a Permanent inefficiencies, and expenses that they
November 11, 2014 against JPMorgan Order exempting the Applicants and submit would result from the
Chase Bank, N.A. (‘‘JPMCB’’) concerning other Covered Persons from the prohibitions of section 9(a) and operate
deficiencies and unsafe or unsound disqualification provisions of section to the detriment of the financial
practices relating to JPMCB’s wholesale 9(a) of the Act. The Applicants and interests of the Funds and their
FX business (‘‘OCC Order’’); the CFTC other Covered Persons may, if the relief shareholders.
entered a cease and desist order on is granted, in the future act in any of the 5. Applicants further assert that the
November 11, 2014 against JPMCB capacities contemplated by section 9(a) prohibitions of section 9(a) would have
relating to certain FX trading activities of the Act subject to the applicable an adverse effect on the Applicants,
(‘‘CFTC Order’’); and the FCA entered a terms and conditions of the Orders. including their employees, as outlined
warning notice on November 11, 2014 3. Applicants believe they meet the in the application. Applicants therefore
against JPMCB for failing to control standards for exemption specified in assert that the imposition of the section
business practices in its G10 spot FX section 9(c). Applicants assert that the 9(a) disqualification on the Fund
trading operations (‘‘FCA Order’’). prohibitions of section 9(a), if applied to Servicing Applicants would be unduly
Covered Persons, would be unduly or and disproportionately severe.
Applicants’ Legal Analysis disproportionately severe, and that the 6. Applicants represent that: (i) None
1. Section 9(a)(1) of the Act provides, conduct of JPMC is not such as to make of the current or former directors,
in pertinent part, that a person may not it against the public interest or the officers or employees of the Fund
serve or act as, among other things, an protection of investors to issue the Servicing Applicants had any
investment adviser or depositor of any Orders. Applicants represent that the knowledge of, or had any involvement
investment company registered under Conduct giving rise to the Plea did not in, the Conduct; (ii) no current or former
the Act or business development involve any of the Applicants acting in employee of JPMC or of any other
company or as a principal underwriter the capacity of investment adviser, sub- Covered Person who previously has
for any registered open-end investment adviser, or depositor for a Fund been or who subsequently may be
company, registered UIT, or registered (including as general partner providing identified by JPMC, or any U.S. or non-
face-amount certificate company, or as investment advisory services to ESCs) or U.S. regulatory or enforcement agencies
investment adviser of an ESC if the principal underwriter for any registered as having been responsible for the
person ‘‘within 10 years has been open-end investment company, Conduct will have any involvement in
mstockstill on DSK4VPTVN1PROD with NOTICES

convicted of any felony or misdemeanor registered UIT, or registered face providing Fund Service Activities
. . . arising out of such person’s amount certificate company. Applicants (including as general partners providing
conduct’’ as a bank, among other things. further represent that the Conduct did advisory services to ESCs) or will be an
Section 2(a)(10) of the Act defines the not relate to the Funds’ management or officer, director, or employee of any
term ‘‘convicted’’ to include a plea of distribution, and that the Conduct did Applicant or of any other Covered
guilty. Section 9(a)(3) of the Act extends not involve any Fund or the assets of Person; (iii) no employee of JPMC or of
the prohibitions of section 9(a)(1) to a any Fund. Applicants also state that the any other Covered Person who was
company, any ‘‘affiliated person’’ of individual referenced in the Complaint involved in the Conduct had any, or

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30304 Federal Register / Vol. 80, No. 101 / Wednesday, May 27, 2015 / Notices

will have any future, involvement in the the qualitative information gathered by the CFTC Order, the OCC Order, the
Covered Persons’ activities in any Compliance, including about lessons FRB Order, the FCA Order, or any other
capacity described in section 9(a) of the from internal and external control orders issued by regulatory or
Act; and (iv) because the personnel of issues. JPMC has also developed a plan enforcement agencies addressing the
the Fund Servicing Applicants did not to improve monitoring and surveillance, Conduct.
have any involvement in the Conduct, including, among other things, 4. The Settling Firm will comply in
shareholders of the Funds were not expanding transaction surveillance all material respects with the material
affected any differently than if the across thirty-six currency pair terms and conditions of the Plea
Funds had received services from any benchmarks and establishing a process Agreement, the CFTC Order, the OCC
other non-affiliated investment adviser whereby it reviews its electronic Order, the FRB Order, the FCA Order,
or principal underwriter. Applicants communication lexicons and or any other orders issued by regulatory
assert that the conduct of Applicants transaction surveillance scenarios and or enforcement agencies addressing the
has not been such as to make it against makes enhancements, as appropriate, at Conduct.
the public interest or the protection of least annually. JPMC has also identified 5. Applicants will provide written
investors to grant the requested improvements in its internal audit notification to the Chief Counsel of the
exemption from section 9(a). function that it has taken or will take, Commission’s Division of Investment
7. To provide further assurance that including the establishment of a team Management with a copy to the Chief
the exemptive relief being requested dedicated to the identification of, and Counsel of the Commission’s Division of
herein would be consistent with the focus on, cross business issues and Enforcement of a material violation of
public interest and the protection of emerging risks. the terms and conditions of any of the
investors, the Applicants undertake that 9. Applicants state that certain of the Orders within 30 days of discovery of
they will, as soon as reasonably Applicants and their affiliates have the material violation.
practicable, distribute to the boards of previously received an order under
directors (‘‘Boards’’) of the Funds section 9(c) of the Act, as the result of Temporary Order
written materials describing the conduct that triggered section 9(a), as The Commission has considered the
circumstances that led to the Plea, any described in greater detail in the matter and finds that Applicants have
impact on the Funds and the application. made the necessary showing to justify
application. The written materials will granting a temporary exemption.
Applicants’ Conditions
include an offer to discuss the materials Accordingly,
at an in-person meeting with each Board Applicants agree that any order It is hereby ordered, pursuant to
for which the Applicants provide Fund granted by the Commission pursuant to section 9(c) of the Act, that the
Service Activities (excluding for this the application will be subject to the Applicants and any other Covered
purpose, the ESCs), including the following conditions: Persons are granted a temporary
directors who are not ‘‘interested 1. Any temporary exemption granted exemption from the provisions of
persons’’ of such Funds as defined in pursuant to the application shall be section 9(a), solely with respect to the
section 2(a)(19) of the Act and their without prejudice to, and shall not limit guilty plea entered into pursuant to the
independent legal counsel as defined in the Commission’s rights in any manner Plea Agreement, subject to the
rule 0–1(a)(6) under the Act. The with respect to, any Commission representations and conditions in the
Applicants undertake to provide such investigation of, or administrative application, from May 20, 2015 until the
Funds’ Boards with the information proceedings involving or against, Commission takes final action on their
concerning the Plea Agreement and the Covered Persons, including, without application for a permanent order.
application necessary for those Funds to limitation, the consideration by the
Commission of a permanent exemption By the Commission.
fulfill their disclosure and other
obligations under the federal securities from section 9(a) of the Act requested Jill M. Peterson,
laws and will provide them a copy of pursuant to the application or the Assistant Secretary.
the Plea Agreement as entered by the revocation or removal of any temporary [FR Doc. 2015–12755 Filed 5–26–15; 8:45 am]
District Court. exemptions granted under the Act in BILLING CODE 8011–01–P
8. Applicants further state that JPMC connection with the application.
has implemented remedial measures to 2. Neither the Applicants nor any of
protect against conduct similar to the the other Covered Persons will employ SECURITIES AND EXCHANGE
Conduct, as outlined in greater detail in any of the current or former employees COMMISSION
the application. For example, JPMC has of the Settling Firm or any Covered
enhanced governance through the Person who previously has been or who Proposed Collection; Comment
development of a Macro Trading subsequently may be identified by the Request
Business Control Committee. JPMC has Settling Firm or any U.S. or non-U.S. Upon Written Request, Copies Available
improved its compliance risk regulatory or enforcement agency as From: Securities and Exchange
assessment to better identify risks, having been responsible for the Commission, Office of FOIA Services,
including the types of risk identified Conduct, without first making a further 100 F Street NE., Washington, DC
during the FX matters, through application to the Commission pursuant 20549–2736
improvements to: (1) The risk to section 9(c).
assessment framework, which includes 3. Each Applicant and Covered Person Extension:
Form N–3, OMB Control No. 3235–0316,
mstockstill on DSK4VPTVN1PROD with NOTICES

more detailed guidance and procedures will adopt and implement policies and
procedures reasonably designed to SEC File No. 270–281.
to enhance quality and consistency of
execution; (2) the risk assessment tool ensure that it will comply with the Notice is hereby given that, pursuant
and process, which includes terms and conditions of the Orders to the Paperwork Reduction Act of 1995
improvements to compliance officers’ within 60 days of the date of the (44 U.S.C. 3501 et seq.), the Securities
ability to document risk/control impact Permanent Order or, with respect to and Exchange Commission (the
at a more granular level; and (3) condition 4, such date as may be ‘‘Commission’’) is soliciting comments
qualitative data collection to improve contemplated by the Plea Agreement, or on the collection of information

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Document Created: 2015-12-15 15:35:50
Document Modified: 2015-12-15 15:35:50

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		Temporary order and notice of application for a permanent order under section 9(c) of the Investment Company Act of 1940 (``Act'').
Dates		The application was filed on May 20, 2015.
Contact		Elizabeth G. Miller, Senior Counsel, Vanessa M. Meeks, Senior Counsel, or Holly Hunter-Ceci, Branch Chief, at (202) 551-6825 (Division of Investment Management, Chief Counsel's Office).
FR Citation		80 FR 30301