81 FR 89999 - Stifel, Nicolaus & Company, Inc., et al.; Notice of Application and Temporary Order
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 239 (December 13, 2016)
Federal Register Volume 81, Issue 239 (December 13, 2016)
| Page Range | 89999-90001 | |
| FR Document | 2016-29793 |
[Federal Register Volume 81, Number 239 (Tuesday, December 13, 2016)] [Notices] [Pages 89999-90001] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-29793] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. IC-32379; File No. 812-14721] Stifel, Nicolaus & Company, Inc., et al.; Notice of Application and Temporary Order December 6, 2016. 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''). ----------------------------------------------------------------------- Summary of Application: Applicants have received a temporary order (``Temporary Order'') exempting them from section 9(a) of the Act, with respect to an injunction entered against Stifel, Nicolaus & Company, Inc. (``Stifel Nicolaus'') on December 6, 2016 by the United States District Court for the Eastern District of Wisconsin (``Court''), in connection with a consent order between Stifel Nicolaus and the Commission, 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: Stifel Nicolaus, Choice Financial Partners, Inc. (``Choice''), 1919 Investment Counsel, LLC (``1919ic''), and Ziegler Capital Management, LLC (``ZCM'') (each an ``Applicant'' and collectively, the ``Applicants''). Filing Date: The application was filed on December 6, 2016. 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 January 3, 2017, 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: Stifel Nicolaus and Choice: One Financial Plaza, 501 North Broadway, St. Louis, MO 63102; 1919ic: One South Street, Suite 2500, Baltimore, MD 21202; ZCM: 70 West Madison Street, Suite 2400, Chicago, IL 60602. FOR FURTHER INFORMATION CONTACT: Kay-Mario Vobis, Senior Counsel, Vanessa Meeks, Senior Counsel, or Parisa Haghshenas, Branch Chief, at (202) 551-6821 (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. Stifel Nicolaus, a Missouri corporation, is a broker-dealer registered under the Securities Exchange Act of 1934 (the ``Exchange Act'') and an investment adviser registered under the Investment Advisers Act of 1940 (the ``Advisers Act''). Stifel Nicolaus is a wholly-owned subsidiary of Stifel Financial Corp. (``Stifel Financial''), a Delaware corporation. Stifel Financial is the ultimate parent company of each of the Applicants. 2. Choice, 1919ic, and ZCM are each a wholly-owned subsidiary of Stifel Financial and are each an investment adviser registered under the Advisers Act. Choice, a Missouri corporation, was organized in early 2007. 1919ic, a Maryland limited liability company, was acquired by Stifel Financial in 2014. ZCM, a Wisconsin limited liability company, was acquired by Stifel Financial in 2013. Choice, 1919ic, and ZCM each serve as investment adviser or investment sub-adviser to investment companies registered under the Act, or series of such companies (each a ``Fund'') and are collectively referred to as the ``Fund Servicing Applicants.'' 3. While no existing company of which Stifel Nicolaus is an affiliated person within the meaning of section 2(a)(3) of the Act (``Affiliated Person''), other than the Fund Servicing Applicants, currently serves as an investment adviser or depositor of any Fund, employees' securities company (``ESC'') or investment company that has elected to be treated as a business development company under the Act (``BDC''), or as a principal underwriter (as defined in section 2(a)(29) of the Act) for any open-end management investment company registered under the Act (``Open-End Fund''), unit investment trust registered under the Act (``UIT''), or face-amount certificate company registered under the Act (``FACC'') (such activities, ``Fund Servicing Activities''), Applicants request that any relief granted also apply to any existing company of which Stifel Nicolaus is an Affiliated Person and to any other company of which Stifel Nicolaus may become an Affiliated Person in the future (together with the Fund Servicing Applicants, the ``Covered Persons'') \1\ with respect to [[Page 90000]] any activity contemplated by section 9(a) of the Act. --------------------------------------------------------------------------- \1\ Stifel Nicolaus is a party to the application, but does not currently engage in, and will not engage in, any Fund Servicing Activities, and is not a Covered Person. --------------------------------------------------------------------------- 4. On August 10, 2011, the Commission filed a complaint, and on October 5, 2012, an amended complaint which superseded the original complaint (the ``Complaint'') in the Court captioned SEC v. Stifel Nicolaus & Co., Inc., et al. (the ``Action'').\2\ The Complaint alleged that in 2006, Stifel Nicolaus and David W. Noack, a Senior Vice President of Stifel Nicolaus and head of its Milwaukee office (``Noack''), violated the federal securities laws in connection with their recommendations that five school districts in eastern Wisconsin (the ``School Districts'') invest their own funds, together with funds borrowed by specially-created trusts (the ``OPEB Trusts''), in certain synthetic collateralized debt obligations (the ``CDO Investments'') in order to cover other post-employment benefits. In the aggregate, the School Districts invested their own funds--plus funds borrowed from Depfa Bank, plc (``Depfa Bank'')--for an aggregate $200 million of investments in the CDO Investments. In 2008, one of the School Districts contributed an additional $10 million to fund a collateral shortfall to Depfa Bank. The investments failed and the School Districts suffered a complete loss of their cash investment of $47.3 million in the aggregate. --------------------------------------------------------------------------- \2\ SEC v. Stifel Nicolaus & Co., Inc., et al., Case No. 11-CV- 755 (E.D. Wis.) (Aug. 10, 2011). --------------------------------------------------------------------------- 5. Stifel Nicolaus, Noack and the staff of the Division of Enforcement at the Commission have reached an agreement to settle the Action. As part of the agreement, the parties have submitted a consent of Defendant Stifel Nicolaus (the ``Consent'') that contains certain admitted facts and a form of a Final Judgment as to Defendants Stifel Nicolaus and Noack (the ``Final Judgment''),\3\ which has been entered by the Court. According to the Final Judgment, Stifel Nicolaus and Noack acted negligently by making material misstatements and omissions to the School Districts and by failing adequately to investigate the appropriateness of the CDO Investments and, further, that by engaging in those acts and admissions, Stifel Nicolaus and Noack violated the federal securities laws. The Final Judgment provides that Stifel Nicolaus and Noack are permanently restrained and enjoined from violating, directly or indirectly, sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 (the ``Injunction''). The Final Judgment provides for joint and several liability for disgorgement of $1.66 million plus prejudgment interest in the amount of $840,000 and civil penalties in the amount of $22 million against Stifel Nicolaus and $100,000 against Noack. --------------------------------------------------------------------------- \3\ SEC v. Stifel Nicolaus & Co., Inc., et al., Case No. 11-CV- 755 (E.D. Wis.) (Dec. 6, 2016). --------------------------------------------------------------------------- Applicants' Legal Analysis 1. Section 9(a)(2) of the Act, in relevant part, prohibits a person who has been enjoined from engaging in or continuing any conduct or practice in connection with the purchase or sale of a security, or in connection with activities as an underwriter, broker or dealer, from acting, among other things, as an investment adviser or depositor of any registered investment company or a principal underwriter for any Open-End Fund, UIT or FACC. Section 9(a)(3) of the Act makes the prohibition in section 9(a)(2) applicable 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. Applicants state that, taken together, sections 9(a)(2) and 9(a)(3) have the effect of precluding the Fund Servicing Applicants and Covered Persons from engaging in Fund Servicing Activities upon the entry of the Injunction against Stifel Nicolaus because Stifel Nicolaus is an Affiliated Person of each Fund Servicing Applicant and Covered Person. 2. Section 9(c) of the Act provides that, upon application, the Commission shall by order grant an exemption from the disqualification provisions of section 9(a) of the Act, either unconditionally or on an appropriate temporary or other conditional basis, to any person if that person establishes that: (a) The prohibitions of section 9(a), as applied to the person, are unduly or disproportionately severe or (b) 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 Fund Servicing Applicants and other Covered Persons from the disqualification provisions of section 9(a) of the Act. The Fund Servicing 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 state that the prohibitions of section 9(a) as applied to them would be unduly and disproportionately severe and 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 exemption from section 9(a). 4. Applicants state that the conduct described in the factual admissions contained in the Final Judgment (the ``Conduct'') did not involve any of the Fund Servicing Applicants performing Fund Servicing Activities or otherwise. Applicants also state that the Conduct did not involve any Fund with respect to which the Fund Servicing Applicants engaged in Fund Servicing Activities or their respective assets. In addition, Applicants state that the Conduct occurred from no earlier than late 2005 through the end of 2006 (the ``Period''). Applicants note that all the Fund Servicing Applicants were acquired or began activities (including Fund Servicing Activities) after the Period had concluded. 5. Applicants state that: (i) None of the current or former directors, officers or employees of the Fund Servicing Applicants had any involvement in the Conduct; (ii) the personnel who were involved in the Conduct (or who may be subsequently identified by the Applicants as having been responsible for or involved in the Conduct) have had no, and will not have any, involvement in providing Fund Servicing Activities and will not serve as an officer, director, or employee of any Covered Person providing Fund Servicing Activities; and (iii) because the personnel of the Fund Servicing Applicants did not have any involvement in the Conduct, shareholders of Funds were not affected any differently than if those Funds had received services from any other non-affiliated investment adviser or sub-adviser. 6. Applicants submit that applying section 9(a) to bar the Fund Servicing Applicants or other Covered Persons, who were not involved in the Conduct, from serving Funds and their shareholders in the absence of improper practices relating to their Fund Servicing Activities would be unduly or disproportionately severe. Applicants state that the section 9(a) disqualification could result in substantial costs to the Funds to which the Fund Servicing Applicants provide investment advisory services, and such Funds' operations would be disrupted, as they sought to engage new advisers or sub-advisers. Applicants assert that these effects would be unduly severe given the Fund Servicing Applicants' lack of involvement in the Conduct. Moreover, Applicants state that Stifel [[Page 90001]] Nicolaus has taken remedial actions to address the Conduct, as outlined in the application. Thus, Applicants believe that granting the exemption from section 9(a), as requested, would be consistent with the public interest and the protection of investors. 7. Applicants state that the inability of the Fund Servicing Applicants to continue to provide investment advisory services to Funds would result in those Funds and their shareholders facing unduly and disproportionately severe hardships. Applicants assert that uncertainty caused by prohibiting the Fund Servicing Applicants from continuing to serve the Funds in an advisory capacity would disrupt investment strategies and could result in significant net redemptions of shares of the Funds, which would frustrate efforts to manage effectively the Funds' assets and could increase the Funds' expense ratios to the detriment of non-redeeming shareholders. In addition, although a suitable successor investment adviser or sub-adviser could replace the Fund Servicing Applicants, Applicants state that disqualifying the Fund Servicing Applicants could result in substantial costs to the Funds and others because of the need to obtain shareholder approvals of new investment advisory agreements with the new adviser or sub-adviser. 8. Applicants state that if the Fund Servicing Applicants were barred under section 9(a) of the Act from engaging in Fund Servicing Activities, and were unable to obtain the requested exemption, the effect on their businesses and employees would be unduly and disproportionately severe because they have committed substantial capital and other resources to establishing an expertise in advising the Funds. Applicants further state that prohibiting the Fund Servicing Applicants from engaging in Fund Servicing Activities would not only adversely affect their businesses, but would also adversely affect their employees who are involved in those activities. Applicants state that the vast majority of these employees working for the Fund Servicing Applicants were not part of the Stifel Financial organization until after the Conduct had concluded in 2006. Applicants state that many of these employees would likely seek alternative employment and would encounter significant difficulty and/or delay in doing so. 9. Applicants state that they will distribute to the boards of trustees of the Funds (the ``Boards'') written materials describing the circumstances that led to the Injunction and 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 of the Fund, 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. Applicants state they will provide the Boards with the information concerning the Injunction and the application that is necessary for those Funds to fulfill their disclosure and other obligations under the federal securities laws and will provide them a copy of the Final Judgment entered by the Court. 10. Applicants state that none of the Applicants has previously applied for an exemptive order under section 9(c) of the Act. 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. 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. 3. Stifel Nicolaus will comply with the terms and conditions of the Consent. 4. 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 Orders and Consent 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 and any other Covered Persons are granted a temporary exemption from the provisions of section 9(a), solely with respect to the Injunction, subject to the representations and conditions in the application, from December 6, 2016, until the Commission takes final action on their application for a permanent order. By the Commission. Brent J. Fields, Secretary. [FR Doc. 2016-29793 Filed 12-12-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 239 / Tuesday, December 13, 2016 / Notices 89999
ESTIMATE OF ANNUAL RESPONDENT BURDEN
Annual re- Time Burden
Form No. sponses (minutes) (hours)
G–19–F ........................................................................................................................................ 900 8 120
Total ...................................................................................................................................... 900 ........................ 120
Additional Information or Comments: (‘‘ZCM’’) (each an ‘‘Applicant’’ and Investment Advisers Act of 1940 (the
To request more information or to collectively, the ‘‘Applicants’’). ‘‘Advisers Act’’). Stifel Nicolaus is a
obtain a copy of the information FILING DATE: The application was filed wholly-owned subsidiary of Stifel
collection justification, forms, and/or on December 6, 2016. Financial Corp. (‘‘Stifel Financial’’), a
supporting material, contact Dana HEARING OR NOTIFICATION OF HEARING: An Delaware corporation. Stifel Financial is
Hickman at (312) 751–4981 or order granting the application will be the ultimate parent company of each of
Dana.Hickman@RRB.GOV. Comments issued unless the Commission orders a the Applicants.
regarding the information collection hearing. Interested persons may request 2. Choice, 1919ic, and ZCM are each
should be addressed to Brian Foster, a hearing by writing to the a wholly-owned subsidiary of Stifel
Railroad Retirement Board, 844 North Commission’s Secretary and serving Financial and are each an investment
Rush Street, Chicago, Illinois 60611– Applicants with a copy of the request, adviser registered under the Advisers
1275 or emailed to Brian.Foster@ personally or by mail. Hearing requests Act. Choice, a Missouri corporation, was
RRB.GOV. Written comments should be should be received by the Commission organized in early 2007. 1919ic, a
received within 60 days of this notice. by 5:30 p.m. on January 3, 2017, and Maryland limited liability company,
Brian Foster, should be accompanied by proof of was acquired by Stifel Financial in
service on Applicants, in the form of an 2014. ZCM, a Wisconsin limited
Records Officer.
affidavit, or for lawyers, a certificate of liability company, was acquired by
[FR Doc. 2016–29904 Filed 12–12–16; 8:45 am]
service. Pursuant to rule 0–5 under the Stifel Financial in 2013. Choice, 1919ic,
BILLING CODE 7905–01–P and ZCM each serve as investment
Act, hearing requests should state the
nature of the writer’s interest, any facts adviser or investment sub-adviser to
bearing upon the desirability of a investment companies registered under
SECURITIES AND EXCHANGE hearing on the matter, the reason for the the Act, or series of such companies
COMMISSION request, and the issues contested. (each a ‘‘Fund’’) and are collectively
Persons who wish to be notified of a referred to as the ‘‘Fund Servicing
[Release No. IC–32379; File No. 812–14721] Applicants.’’
hearing may request notification by
writing to the Commission’s Secretary. 3. While no existing company of
Stifel, Nicolaus & Company, Inc., et al.;
ADDRESSES: Secretary, U.S. Securities which Stifel Nicolaus is an affiliated
Notice of Application and Temporary
and Exchange Commission, 100 F Street person within the meaning of section
Order
NE., Washington, DC 20549–1090; 2(a)(3) of the Act (‘‘Affiliated Person’’),
December 6, 2016. Applicants: Stifel Nicolaus and Choice: other than the Fund Servicing
AGENCY: Securities and Exchange One Financial Plaza, 501 North Applicants, currently serves as an
Commission (‘‘Commission’’). Broadway, St. Louis, MO 63102; 1919ic: investment adviser or depositor of any
ACTION: Temporary order and notice of One South Street, Suite 2500, Baltimore, Fund, employees’ securities company
application for a permanent order under MD 21202; ZCM: 70 West Madison (‘‘ESC’’) or investment company that has
section 9(c) of the Investment Company Street, Suite 2400, Chicago, IL 60602. elected to be treated as a business
Act of 1940 (‘‘Act’’). development company under the Act
FOR FURTHER INFORMATION CONTACT: Kay-
(‘‘BDC’’), or as a principal underwriter
Mario Vobis, Senior Counsel, Vanessa
SUMMARY OF APPLICATION: Applicants (as defined in section 2(a)(29) of the
Meeks, Senior Counsel, or Parisa
have received a temporary order Act) for any open-end management
Haghshenas, Branch Chief, at (202) 551–
(‘‘Temporary Order’’) exempting them investment company registered under
6821 (Division of Investment
from section 9(a) of the Act, with the Act (‘‘Open-End Fund’’), unit
Management, Chief Counsel’s Office).
respect to an injunction entered against investment trust registered under the
SUPPLEMENTARY INFORMATION: The Act (‘‘UIT’’), or face-amount certificate
Stifel, Nicolaus & Company, Inc. (‘‘Stifel following is a temporary order and a
Nicolaus’’) on December 6, 2016 by the company registered under the Act
summary of the application. The (‘‘FACC’’) (such activities, ‘‘Fund
United States District Court for the complete application may be obtained
Eastern District of Wisconsin (‘‘Court’’), Servicing Activities’’), Applicants
via the Commission’s Web site by request that any relief granted also
in connection with a consent order searching for the file number, or an
between Stifel Nicolaus and the apply to any existing company of which
applicant using the Company name box, Stifel Nicolaus is an Affiliated Person
Commission, until the Commission at http://www.sec.gov/search/
takes final action on an application for and to any other company of which
search.htm, or by calling (202) 551– Stifel Nicolaus may become an
a permanent order (the ‘‘Permanent
pmangrum on DSK3GDR082PROD with NOTICES
8090. Affiliated Person in the future (together
Order,’’ and with the Temporary Order,
the ‘‘Orders’’). Applicants also have Applicants’ Representations with the Fund Servicing Applicants, the
applied for a Permanent Order. ‘‘Covered Persons’’) 1 with respect to
1. Stifel Nicolaus, a Missouri
APPLICANTS: Stifel Nicolaus, Choice corporation, is a broker-dealer registered 1 Stifel Nicolaus is a party to the application, but
Financial Partners, Inc. (‘‘Choice’’), 1919 under the Securities Exchange Act of does not currently engage in, and will not engage
Investment Counsel, LLC (‘‘1919ic’’), 1934 (the ‘‘Exchange Act’’) and an in, any Fund Servicing Activities, and is not a
and Ziegler Capital Management, LLC investment adviser registered under the Covered Person.
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![Federal Register / Vol. 81, No. 239 / Tuesday, December 13, 2016 / Notices 90001
Nicolaus has taken remedial actions to materials will include an offer to Covered Persons are granted a
address the Conduct, as outlined in the discuss the materials at an in-person temporary exemption from the
application. Thus, Applicants believe meeting with each Board of the Fund, provisions of section 9(a), solely with
that granting the exemption from including the directors who are not respect to the Injunction, subject to the
section 9(a), as requested, would be ‘‘interested persons’’ of such Funds as representations and conditions in the
consistent with the public interest and defined in section 2(a)(19) of the Act, application, from December 6, 2016,
the protection of investors. and their independent legal counsel as until the Commission takes final action
7. Applicants state that the inability of defined in rule 0–1(a)(6) under the Act. on their application for a permanent
the Fund Servicing Applicants to Applicants state they will provide the order.
continue to provide investment advisory Boards with the information concerning By the Commission.
services to Funds would result in those the Injunction and the application that Brent J. Fields,
Funds and their shareholders facing is necessary for those Funds to fulfill
unduly and disproportionately severe Secretary.
their disclosure and other obligations
hardships. Applicants assert that [FR Doc. 2016–29793 Filed 12–12–16; 8:45 am]
under the federal securities laws and
uncertainty caused by prohibiting the will provide them a copy of the Final BILLING CODE 8011–01–P
Fund Servicing Applicants from Judgment entered by the Court.
continuing to serve the Funds in an 10. Applicants state that none of the
advisory capacity would disrupt Applicants has previously applied for SECURITIES AND EXCHANGE
investment strategies and could result in an exemptive order under section 9(c) of COMMISSION
significant net redemptions of shares of the Act. [Release No. 34–79491; File No. SR–FICC–
the Funds, which would frustrate efforts 2016–007]
to manage effectively the Funds’ assets Applicants’ Conditions
and could increase the Funds’ expense Applicants agree that any order Self-Regulatory Organizations; Fixed
ratios to the detriment of non-redeeming granted by the Commission pursuant to Income Clearing Corporation; Notice of
shareholders. In addition, although a the application will be subject to the Filing of Proposed Rule Change To
suitable successor investment adviser or following conditions: Implement a Change to the
sub-adviser could replace the Fund 1. Any temporary exemption granted Methodology Used in the MBSD VaR
Servicing Applicants, Applicants state pursuant to the application shall be Model
that disqualifying the Fund Servicing without prejudice to, and shall not limit
Applicants could result in substantial December 7, 2016.
the Commission’s rights in any manner
costs to the Funds and others because of with respect to, any Commission Pursuant to Section 19(b)(1) of the
the need to obtain shareholder investigation of, or administrative Securities Exchange Act of 1934
approvals of new investment advisory proceedings involving or against, (‘‘Act’’),1 and Rule 19b–4 thereunder,2
agreements with the new adviser or sub- Covered Persons, including without notice is hereby given that on November
adviser. limitation, the consideration by the 23, 2016, the Fixed Income Clearing
8. Applicants state that if the Fund Commission of a permanent exemption Corporation (‘‘FICC’’) filed with the
Servicing Applicants were barred under from section 9(a) of the Act requested Securities and Exchange Commission
section 9(a) of the Act from engaging in pursuant to the application or the (‘‘Commission’’) the proposed rule
Fund Servicing Activities, and were revocation or removal of any temporary change as described in Items I, II and III
unable to obtain the requested exemptions granted under the Act in below, which Items have been prepared
exemption, the effect on their connection with the application. primarily by FICC.3 The Commission is
businesses and employees would be 2. Each Applicant and Covered Person publishing this notice to solicit
unduly and disproportionately severe will adopt and implement policies and comments on the proposed rule change
because they have committed procedures reasonably designed to from interested persons.
substantial capital and other resources ensure that it will comply with the I. Clearing Agency’s Statement of the
to establishing an expertise in advising terms and conditions of the Orders Terms of Substance of the Proposed
the Funds. Applicants further state that within 60 days of the date of the Rule Change
prohibiting the Fund Servicing Permanent Order.
Applicants from engaging in Fund 3. Stifel Nicolaus will comply with The proposed rule change would
Servicing Activities would not only the terms and conditions of the Consent. change the methodology that FICC uses
adversely affect their businesses, but 4. Applicants will provide written in the Mortgage-Backed Securities
would also adversely affect their notification to the Chief Counsel of the Division’s (‘‘MBSD’’) value-at-risk
employees who are involved in those Commission’s Division of Investment (‘‘VaR’’) model from one that employs a
activities. Applicants state that the vast Management with a copy to the Chief full revaluation approach to one that
majority of these employees working for Counsel of the Commission’s Division of would employ a sensitivity approach, as
the Fund Servicing Applicants were not Enforcement of a material violation of described in greater detail below.4
part of the Stifel Financial organization the terms and conditions of the Orders The proposed rule change also
until after the Conduct had concluded and Consent within 30 days of consists of amendments to the MBSD
in 2006. Applicants state that many of discovery of the material violation. 1 15 U.S.C. 78s(b)(1).
these employees would likely seek
alternative employment and would Temporary Order 2 17 CFR 240.19b–4.
3 FICC also filed this proposal as an advance
pmangrum on DSK3GDR082PROD with NOTICES
encounter significant difficulty and/or The Commission has considered the notice pursuant to Section 802(e)(1) of the Payment,
delay in doing so. matter and finds that Applicants have Clearing, and Settlement Supervision Act of 2010
9. Applicants state that they will made the necessary showing to justify and Rule 19b–4(n)(1) under the Act. 15 U.S.C.
distribute to the boards of trustees of the granting a temporary exemption. 5465(e)(1) and 17 CFR 240.19b–4(n)(1). See File No.
Funds (the ‘‘Boards’’) written materials SR–FICC–2016–801.
Accordingly, 4 Capitalized terms used herein and not defined
describing the circumstances that led to It is hereby ordered, pursuant to shall have the meaning assigned to such terms in
the Injunction and any impact on the section 9(c) of the Act, that the Fund the MBSD Clearing Rules (‘‘MBSD Rules’’) available
Funds, and the application. The written Servicing Applicants and any other at www.dtcc.com/legal/rules-and-procedures.aspx.
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Document Created: 2016-12-13 02:44:03
Document Modified: 2016-12-13 02:44:03
| 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 December 6, 2016. | |
| Contact | Kay-Mario Vobis, Senior Counsel, Vanessa Meeks, Senior Counsel, or Parisa Haghshenas, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office). | |
| FR Citation | 81 FR 89999 |
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