82 FR 11079 - General Electric Company and GE Capital International Holdings Limited; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 32 (February 17, 2017)

Page Range		11079-11081
FR Document		2017-03184

Federal Register, Volume 82 Issue 32 (Friday, February 17, 2017)

[Federal Register Volume 82, Number 32 (Friday, February 17, 2017)]
[Notices]
[Pages 11079-11081]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-03184]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32477; 812-14743]

General Electric Company and GE Capital International Holdings
Limited; Notice of Application

February 13, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (``Act'').

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Summary of Application: General Electric Company (``GE'') and GE
Capital International Holdings Limited (``European Holdco'') request an
order under section 6(c) of the Act exempting European Holdco from all
provisions of the Act during the period from the date of the requested
order to the earlier of (a) three years from such date and (b) the
completion of the sales process described in the application
(``Exemption Period'').

Applicants: GE and European Holdco.

Filing Dates: The application was filed on February 10, 2017.

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 applicant with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on March 10, 2017, and should be accompanied by proof of service
on applicant, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, 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: 299 Park Avenue, New
York, NY 10171.

FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at
(202) 551-6826, or Daniele Marchesani, Assistant Chief Counsel, at
(202) 551-6821 (Division of Investment Management, Chief Counsel's
Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or the
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicants' Representations

1. GE, a New York corporation, is one of the largest and most
diversified infrastructure and financial services corporations in the
world. Its products and services range from aircraft engines, power
generation, oil and gas production equipment and household appliances
to medical imaging, business and consumer financing, and industrial
products. Applicants state that GE is not an investment company as
defined in section 3(a) of the Act.
2. European Holdco, a UK limited company and a wholly-owned
subsidiary of GE, is the successor to the former General Electric
Capital Corporation (``Old GE Capital'') with respect to various
foreign businesses formerly held by Old GE Capital. European Holdco,
directly or through its majority-owned subsidiaries, engages in
financing activities primarily for mid-sized companies within the
industries in which GE provides its services.
3. On April 10, 2015, GE announced a plan to reduce the size of its
financial services businesses through the sale of most of the assets of
Old GE Capital over the next 24 months and to focus on the continued
investment and growth of GE's industrial businesses. As part of this
plan, Old GE Capital's businesses were reorganized principally into
European Holdco and a separate U.S. holding company (the
``Reorganization''), with the non-U.S. businesses being contributed to
European Holdco.\1\ The non-U.S. businesses transferred from Old GE
Capital to European Holdco include, among others, (i) banking, (ii)
equipment financing, (iii) inventory financing, (iv) factoring, (v)
automobile

[[Page 11080]]

leasing, and (vi) aircraft and aircraft engine leasing.
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\1\ As part of the plan to restructure and reduce the Old GE
Capital business, Old GE Capital formed a finance subsidiary
(``FinCo''), whose primary purpose is to finance the operations of
GE's foreign subsidiaries.
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4. Applicants assert that European Holdco is exempt from the Act
pursuant to section 3(c)(6), the same exemption Old GE Capital was able
to rely on prior to the Reorganization. Applicants state that in
complying with section 3(c)(6), European Holdco relies not only on
businesses described in sections 3(c)(3), (4), and (5), but also on
businesses other than investing, reinvesting, owning, holding, or
trading in securities. As such, to relying on section 3(c)(6), at least
25% of European Holdco's gross income (i.e., revenue) generally must be
derived from European Holdco's 3(c)(3), (4), and (5) businesses. GE has
calculated that, as of September 30, 2016, approximately 91% of
European Holdco's assets and 57% of its net income were derived from
its section 3(c)(3), (4), and (5) businesses and its other businesses
that are not investing, reinvesting, owning, holding, or trading in
securities, and approximately 36% of its revenue was derived from its
section 3(c)(3), (4), and (5) businesses. Applicants maintain that as
such, European Holdco was in compliance with section 3(c)(6) as of that
time.
5. Applicants state that GE intends over time to sell many of the
foreign businesses contributed to European Holdco as part of the
Reorganization, and would like to be able to manage this sales process
so as to maximize shareholder value, rather than in a manner necessary
to continuously comply with European Holdco's exemption under the Act.
GE has developed a plan for selling such businesses and expects that
the sales process will be mostly complete within two years, with
potentially some sales activity continuing into a third year.
Applicants state that the sales process may extend into a third year
given the tremendous complexity of GE's structure and the
Reorganization. At the conclusion of the sales process, GE expects that
European Holdco will not be an investment company pursuant to rule 3a-1
under the Act (or otherwise), as its anticipated remaining businesses
will involve significant amounts of assets that are not investment
securities for purposes of the Act (such as aircraft and aircraft
engines). Accordingly, applicants request an order of exemption for the
duration of the Exemption Period to permit GE to sell various
businesses without concern that it might cause European Holdco
inadvertently and temporarily to become an investment company under the
Act.

Applicants' Legal Analysis

1. Under section 3(a)(1)(C) of the Act, an issuer is an investment
company if it is engaged or proposes to engage in the business of
investing, reinvesting, owning, holding, or trading in securities, and
owns or proposes to acquire investment securities having a value
exceeding 40 percent of the value of such issuer's total assets
(exclusive of government securities and cash items) on an
unconsolidated basis. Section 3(a)(2) of the Act defines ``investment
securities'' to include all securities except government securities,
securities issued by employees' securities companies, and securities
issued by majority-owned subsidiaries of the owner that are not
investment companies and are not relying on the exception from the
definition of investment company in section 3(c)(1) or 3(c)(7) of the
Act.
2. Rule 3a-1 under the Act provides an exemption from the
definition of investment company if, on a consolidated basis with
wholly-owned subsidiaries, no more than 45% of an issuer's total assets
(exclusive of government securities and cash items) consist of, and no
more than 45% of its net income after taxes over the last four fiscal
quarters combined is derived from, securities other than: Government
securities, securities issued by employees' securities companies, and
securities of certain majority-owned subsidiaries and companies
controlled primarily by the issuer.
3. Applicants assert that although European Holdco's financing
businesses involve significant holdings of investment securities (such
as mortgages and equipment finance loans), European Holdco as currently
structured is not an investment company under section 3(c)(6) of the
Act, the same exemption Old GE Capital was able to rely on prior to the
Reorganization. However, applicants state that there could be times
during the process of selling European Holdco's businesses, depending
on the order in which the businesses are sold and the remaining mix of
businesses, when European Holdco would technically not satisfy section
3(c)(6), rule 3a-1, or any other exception from the definition of
``investment company,'' and thus may fall within the definition of
``investment company'' in section 3(a)(1)(C).
4. Rule 3a-2 under the Act generally provides that, for purposes of
sections 3(a)(1)(A) and 3(a)(1)(C), an issuer will not be deemed to be
engaged in the business of investing, reinvesting, owning, holding or
trading in securities for a period not to exceed one year if the issuer
has a bona fide intent to be engaged in a non-investment company
business. This enables the issuer to make an orderly transition to a
non-investment company business. Applicants state that the expected
length of the sales process may preclude European Holdco from relying
on rule 3a-2 because applicants cannot state that European Holdco has a
bona fide intent to be engaged primarily in a business other than
investing, reinvesting, owning, holding, or trading in securities
within one year.
5. Section 6(c) of the Act permits the Commission to exempt any
person from any provision of the Act, if and to the extent that 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 Act.
6. Applicants request an order under section 6(c) exempting
European Holdco from all provisions of the Act for the duration of the
Exemption Period. Applicants believe that the period of time requested
will provide GE with enough time to execute the sales plan in a manner
that maximizes economic value while ensuring that, at the end of the
Exemption Period, European Holdco will not be an investment company.
7. Applicants assert that as a result of GE's plan to reduce its
financial services businesses through the sale of foreign businesses
held by European Holdco, European Holdco may temporarily fall within
the statutory definition of an investment company, even though that
definition is not an accurate depiction of European Holdco's business.
Applicants assert that their officers will work diligently to bring
European Holdco into compliance with rule 3a-1 (or another exemption)
under the Act within three years. Applicants state that European
Holdco's transactions in securities will not be for speculative
purposes, but rather in furtherance of its business as a holding
company for certain international financial businesses of GE.
Applicants contend that registration under the Act would involve
unnecessary burden and expense for the applicants and GE's
shareholders, and would serve no regulatory purpose. For the reasons
discussed above, applicants assert that the requested relief under
section 6(c) of the Act is consistent with the protection of investors
and the purposes fairly intended by the policy and provisions of the
Act.

[[Page 11081]]

Applicants' Conditions

Applicants agree that the requested exemption will be subject to
the following conditions:
1. European Holdco will not engage in the trading of securities for
short-term speculative purposes;
2. European Holdco will not hold itself out as being engaged
primarily in the business of investing, reinvesting, or trading in
securities; and
3. European Holdco will have no securities outstanding while it is
relying on the order other than (i) guarantees of FinCo debt that is
also guaranteed by GE, (ii) debt securities (including commercial
paper) guaranteed by GE and (iii) securities held by European Holdco's
affiliates.
4. European Holdco will seek to decrease the percentage of its
total assets comprised of investment securities so as not to be an
investment company within the meaning of the Act and the rules and
regulations thereunder as soon as reasonably possible and in any event
within three years from the date of the requested order.

For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03184 Filed 2-16-17; 8:45 am]
BILLING CODE 8011-01-P

11080 Federal Register / Vol. 82, No. 32 / Friday, February 17, 2017 / Notices

leasing, and (vi) aircraft and aircraft Applicants’ Legal Analysis issuer has a bona fide intent to be
engine leasing. 1. Under section 3(a)(1)(C) of the Act, engaged in a non-investment company
4. Applicants assert that European an issuer is an investment company if business. This enables the issuer to
Holdco is exempt from the Act pursuant it is engaged or proposes to engage in make an orderly transition to a non-
to section 3(c)(6), the same exemption the business of investing, reinvesting, investment company business.
Old GE Capital was able to rely on prior owning, holding, or trading in Applicants state that the expected
to the Reorganization. Applicants state securities, and owns or proposes to length of the sales process may preclude
that in complying with section 3(c)(6), acquire investment securities having a European Holdco from relying on rule
European Holdco relies not only on value exceeding 40 percent of the value 3a–2 because applicants cannot state
businesses described in sections 3(c)(3), of such issuer’s total assets (exclusive of that European Holdco has a bona fide
(4), and (5), but also on businesses other government securities and cash items) intent to be engaged primarily in a
than investing, reinvesting, owning, on an unconsolidated basis. Section business other than investing,
holding, or trading in securities. As 3(a)(2) of the Act defines ‘‘investment reinvesting, owning, holding, or trading
such, to relying on section 3(c)(6), at securities’’ to include all securities in securities within one year.
least 25% of European Holdco’s gross except government securities, securities
5. Section 6(c) of the Act permits the
income (i.e., revenue) generally must be issued by employees’ securities
Commission to exempt any person from
derived from European Holdco’s 3(c)(3), companies, and securities issued by
majority-owned subsidiaries of the any provision of the Act, if and to the
(4), and (5) businesses. GE has
owner that are not investment extent that the exemption is necessary
calculated that, as of September 30,
companies and are not relying on the or appropriate in the public interest and
2016, approximately 91% of European
exception from the definition of consistent with the protection of
Holdco’s assets and 57% of its net
income were derived from its section investment company in section 3(c)(1) investors and the purposes fairly
3(c)(3), (4), and (5) businesses and its or 3(c)(7) of the Act. intended by the policy and provisions of
other businesses that are not investing, 2. Rule 3a–1 under the Act provides the Act.
reinvesting, owning, holding, or trading an exemption from the definition of 6. Applicants request an order under
in securities, and approximately 36% of investment company if, on a section 6(c) exempting European Holdco
its revenue was derived from its section consolidated basis with wholly-owned from all provisions of the Act for the
3(c)(3), (4), and (5) businesses. subsidiaries, no more than 45% of an duration of the Exemption Period.
Applicants maintain that as such, issuer’s total assets (exclusive of Applicants believe that the period of
European Holdco was in compliance government securities and cash items) time requested will provide GE with
with section 3(c)(6) as of that time. consist of, and no more than 45% of its enough time to execute the sales plan in
net income after taxes over the last four
5. Applicants state that GE intends a manner that maximizes economic
fiscal quarters combined is derived
over time to sell many of the foreign value while ensuring that, at the end of
from, securities other than: Government
businesses contributed to European the Exemption Period, European Holdco
securities, securities issued by
Holdco as part of the Reorganization, employees’ securities companies, and will not be an investment company.
and would like to be able to manage this securities of certain majority-owned 7. Applicants assert that as a result of
sales process so as to maximize subsidiaries and companies controlled GE’s plan to reduce its financial services
shareholder value, rather than in a primarily by the issuer. businesses through the sale of foreign
manner necessary to continuously 3. Applicants assert that although businesses held by European Holdco,
comply with European Holdco’s European Holdco’s financing businesses European Holdco may temporarily fall
exemption under the Act. GE has involve significant holdings of within the statutory definition of an
developed a plan for selling such investment securities (such as mortgages investment company, even though that
businesses and expects that the sales and equipment finance loans), European definition is not an accurate depiction
process will be mostly complete within Holdco as currently structured is not an of European Holdco’s business.
two years, with potentially some sales investment company under section Applicants assert that their officers will
activity continuing into a third year. 3(c)(6) of the Act, the same exemption work diligently to bring European
Applicants state that the sales process Old GE Capital was able to rely on prior Holdco into compliance with rule 3a–1
may extend into a third year given the to the Reorganization. However,
tremendous complexity of GE’s (or another exemption) under the Act
applicants state that there could be
structure and the Reorganization. At the within three years. Applicants state that
times during the process of selling
conclusion of the sales process, GE European Holdco’s transactions in
European Holdco’s businesses,
expects that European Holdco will not securities will not be for speculative
depending on the order in which the
be an investment company pursuant to purposes, but rather in furtherance of its
businesses are sold and the remaining
rule 3a–1 under the Act (or otherwise), mix of businesses, when European business as a holding company for
as its anticipated remaining businesses Holdco would technically not satisfy certain international financial
will involve significant amounts of section 3(c)(6), rule 3a–1, or any other businesses of GE. Applicants contend
assets that are not investment securities exception from the definition of that registration under the Act would
for purposes of the Act (such as aircraft ‘‘investment company,’’ and thus may involve unnecessary burden and
and aircraft engines). Accordingly, fall within the definition of ‘‘investment expense for the applicants and GE’s
applicants request an order of company’’ in section 3(a)(1)(C). shareholders, and would serve no
mstockstill on DSK3G9T082PROD with NOTICES

exemption for the duration of the 4. Rule 3a–2 under the Act generally regulatory purpose. For the reasons
Exemption Period to permit GE to sell provides that, for purposes of sections discussed above, applicants assert that
various businesses without concern that 3(a)(1)(A) and 3(a)(1)(C), an issuer will the requested relief under section 6(c) of
it might cause European Holdco not be deemed to be engaged in the the Act is consistent with the protection
inadvertently and temporarily to business of investing, reinvesting, of investors and the purposes fairly
become an investment company under owning, holding or trading in securities intended by the policy and provisions of
the Act. for a period not to exceed one year if the the Act.

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Federal Register / Vol. 82, No. 32 / Friday, February 17, 2017 / Notices 11081

Applicants’ Conditions charge imposed by the Exchange under will be assessed by the Exchange to each
Applicants agree that the requested Section 19(b)(3)(A)(ii) of the Act 3 and Member for all options transactions
exemption will be subject to the Rule 19b–4(f)(2) thereunder,4 which executed and cleared, or simply cleared,
following conditions: renders the proposed rule change by the Member, that are cleared by OCC
1. European Holdco will not engage in effective upon filing with the in the ‘‘customer’’ range, regardless of
the trading of securities for short-term Commission. The Commission is the exchange on which the transaction
speculative purposes; publishing this notice to solicit occurs.7 The ORF will be collected
2. European Holdco will not hold comments on the proposed rule change indirectly from Members through their
itself out as being engaged primarily in from interested persons. clearing firms by OCC on behalf of the
the business of investing, reinvesting, or Exchange.
I. Self-Regulatory Organization’s
trading in securities; and The ORF also will be charged for
Statement of the Terms of Substance of
3. European Holdco will have no transactions that are not executed by a
the Proposed Rule Change
securities outstanding while it is relying Member but are ultimately cleared by a
on the order other than (i) guarantees of The Exchange filed a proposal to Member. In the case where a non-
FinCo debt that is also guaranteed by amend the fee schedule applicable to Member executes a transaction and a
GE, (ii) debt securities (including Members 5 and non-Members of the Member clears the transaction, the ORF
commercial paper) guaranteed by GE Exchange pursuant to Exchange Rules will be assessed to the Member who
and (iii) securities held by European 15.1(a) and (c) to adopt an Options clears the transaction. In the case where
Holdco’s affiliates. Regulatory Fee (‘‘ORF’’). a Member executes a transaction and
4. European Holdco will seek to The text of the proposed rule change another Member clears the transaction,
decrease the percentage of its total is available at the Exchange’s Web site the ORF will be assessed to the Member
assets comprised of investment at www.batstrading.com, at the who clears the transaction.
securities so as not to be an investment principal office of the Exchange, and at Clearing members, however, are
company within the meaning of the Act the Commission’s Public Reference distinguished from executing
and the rules and regulations Room. participants because they remain
thereunder as soon as reasonably II. Self-Regulatory Organization’s identified to the Exchange regardless of
possible and in any event within three Statement of the Purpose of, and the identity of the initiating executing
years from the date of the requested Statutory Basis for, the Proposed Rule participant, their location, and the
order. Change market center on which they execute
transactions. Therefore, the Exchange
For the Commission, by the Division of In its filing with the Commission, the
Investment Management, under delegated
believes it is more efficient for the
Exchange included statements operation of the Exchange and for the
authority.
concerning the purpose of and basis for marketplace as a whole to assess the
Eduardo A. Aleman, the proposed rule change and discussed ORF to clearing members.
Assistant Secretary. any comments it received on the The Exchange believes it is
[FR Doc. 2017–03184 Filed 2–16–17; 8:45 am] proposed rule change. The text of these appropriate to charge the ORF only to
BILLING CODE 8011–01–P statements may be examined at the transactions that clear as customer at the
places specified in Item IV below. The OCC. The Exchange believes that its
Exchange has prepared summaries, set broad regulatory responsibilities with
SECURITIES AND EXCHANGE forth in Sections A, B, and C below, of respect to a Member’s activities
COMMISSION the most significant parts of such supports applying the ORF to
[Release No. 34–80025; File No. SR– statements. transactions cleared but not executed by
BatsEDGX–2017–04] a Member. The Exchange’s regulatory
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the responsibilities are the same regardless
Self-Regulatory Organizations; Bats of whether a Member executes a
EDGX Exchange, Inc.; Notice of Filing Statutory Basis for, the Proposed Rule
Change transaction or clears a transaction
and Immediate Effectiveness of a executed on its behalf. The Exchange
Proposed Rule Change To Adopt 1. Purpose regularly reviews all such activities,
Option Regulatory Fees as They Relate including performing surveillance for
The Exchange proposes to modify its
to the Equity Options Platform position limit violations, manipulation,
fee schedule applicable to its equity
February 13, 2017. options platform (‘‘EDGX Options’’) to front-running, contrary exercise advice
Pursuant to Section 19(b)(1) of the adopt an ORF in the amount of $0.0004
per contract side.6 The per-contract ORF Securities Exchange Act Release No. 78745
Securities Exchange Act of 1934 (the (September 1, 2016), 81 FR 62185 (September 8,
‘‘Act’’),1 and Rule 19b–4 thereunder,2 2016) (SR–BatsEDGX–2016–48). The Commission
3 15 U.S.C. 78s(b)(3)(A)(ii).
notice is hereby given that on January later issued an order suspending and [sic] SR–
4 17 CFR 240.19b–4(f)(2).
30, 2017, Bats EDGX Exchange, Inc. (the BatsEDGX–2016–33 and instituted proceedings to
5 The term ‘‘Member’’ is defined as ‘‘any determine whether to approve or disapprove the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the registered broker or dealer that has been admitted proposed rule change asking whether the [sic] ‘‘a
Securities and Exchange Commission to membership in the Exchange.’’ See Exchange sufficient regulatory nexus exists between the
(the ‘‘Commission’’) the proposed rule Rule 1.5(n). Exchange and a non-Member to justify imposition
change as described in Items I, II, and 6 The Exchange notes that it previously proposed of the ORF on such non-Member.’’ See Securities
to adopt an ORF of $0.0002 per contract in August Exchange Act Release No. 78850 (September 15,
mstockstill on DSK3G9T082PROD with NOTICES

III below, which Items have been 2016 which would have been assessed to each 2016), 81 FR 64963 (September 21, 2016). On
prepared by the Exchange. The Member and non-Member for all options January 10, 2017, the Exchange withdrew SR–Bats–
Exchange has designated the proposed transactions cleared by OCC in the ‘‘customer’’ EDGX–2016–33. The Exchange also proposes in this
rule change as one establishing or range, regardless of the exchange on which the filing to remove text from its fee schedule adopted
transaction occurred. See Securities Exchange Act in SR–BatsEDGX–2016–48 which delayed the
changing a member due, fee, or other Release No. 78452 (August 1, 2016), 81 FR 51951 implementation of SR–Bats–EDGX–2016–33 until
(August 5, 2016) (SR–BatsEDGX–2016–33). The February 1, 2017.
1 15 U.S.C. 78s(b)(1). Exchange then filed to delay the implementation of 7 The Exchange also proposes to insert a colon
2 17 CFR 240.19b–4. SR–BatsEDGX–2016–33 until February 1, 2017. See after the title ‘‘Options Regulatory Fee’’.

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Document Created: 2017-02-17 00:28:52
Document Modified: 2017-02-17 00:28:52

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 an application under section 6(c) of the Investment Company Act of 1940 (``Act'').
Dates		The application was filed on February 10, 2017.
Contact		Steven I. Amchan, Senior Counsel, at (202) 551-6826, or Daniele Marchesani, Assistant Chief Counsel, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation		82 FR 11079