83 FR 19853 - 1112 Partners, LLC

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 87 (May 4, 2018)

[Federal Register Volume 83, Number 87 (Friday, May 4, 2018)]
[Notices]
[Pages 19853-19854]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-09559]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Advisers Act Release No. 4902/803-00239]


1112 Partners, LLC

May 1, 2018.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  Notice.

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    Notice of application for an exemptive order under section 
202(a)(11)(H) of the Investment Advisers Act of 1940 (``Advisers 
Act'').
    Applicant: 1112 Partners, LLC (the ``Applicant'').
    Relevant Advisers Act Sections: Exemption requested under section 
202(a)(11)(H) of the Advisers Act from section 202(a)(11) of the 
Advisers Act.
    Summary of Application: The Applicant requests that the Commission 
issue an order declaring it to be a person not within the intent of 
Section 202(a)(11) of the Advisers Act, which defines the term 
``investment adviser.''
    Filing Dates: The application was filed on January 17, 2017, and 
amended on May 8, 2017; September 15, 2017; and March 9, 2018.
    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 the 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 May 25, 2018, and should be accompanied by 
proof of service on the Applicant, in the form of an affidavit or, for 
lawyers, a certificate of service. Pursuant to Rule 0-5 under the 
Advisers Act, hearing requests should state the nature of the writer's 
interest, any facts bearing upon the desirability of a hearing on the 
matter, the reason for the request, and the issues contested. Persons 
may request notification of a hearing by writing to the Commission's 
Secretary.

ADDRESSES:  Secretary, Securities and Exchange Commission, 100 F Street 
NE, Washington, DC 20549. Applicant, 1112 Partners, LLC, c/o Ingrid R. 
Welch, Esq., Cozen O'Connor, One Liberty Place, 1650 Market Street, 
Suite 2800, Philadelphia, PA 19103.

FOR FURTHER INFORMATION CONTACT: James D. McGinnis, Senior Counsel, at 
(202) 551-3025 or Holly L. Hunter-Ceci, Assistant Chief Counsel, at 
(202) 551-6825 (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 website either at http://www.sec.gov/rules/iareleases.shtml or by calling (202) 551-8090.

Applicant's Representations:

    1. The Applicant is a recently-formed, multi-generational single-
family office that provides or intends to provide services to the 
family and descendants of William Render Ford. The Applicant is wholly-
owned by Family Clients and is exclusively controlled (directly and 
indirectly) by one or more Family Members and/or Family Entities in 
compliance with Rule 202(a)(11)(G)-1 (the ``Family Office Rule''). For 
purposes of the application, the term ``Ford Family'' means the lineal 
descendants of William Render Ford, their spouses or spousal 
equivalents, and all other persons and entities that qualify as 
``Family Clients'' as defined in paragraph (d)(4) of the Family Office 
Rule. Unless otherwise indicated, capitalized terms herein have the 
same meaning as defined in the Family Office Rule.
    2. The Applicant provides both advisory and non-advisory services 
(collectively, ``Services'') to members of the Ford Family. Any Service 
provided by the Applicant that relates to investment advice about 
securities or may otherwise be construed as advisory in nature is 
considered an ``Advisory Service.''
    3. Prior to forming the Applicant, David B. Ford, Jr. was 
associated with a third-party registered investment adviser (``RIA'') 
that for approximately eleven (11) years managed substantially all of 
the advisory accounts of the Ford Family managed or intended to be 
managed by the Applicant, and among these accounts were accounts of the 
Additional Family Clients (as defined below). Effective as of October 
1, 2016, David B. Ford, Jr.'s association with RIA was terminated. 
Commencing October 1, 2016, the advisory accounts of the Family Clients 
managed by RIA were transition to the Applicant.
    4. The Applicant represents that: (i) Each of the persons served by 
the Applicant is a Family Client (i.e., the Applicant has no investment 
advisory clients other than Family Clients as required by paragraph 
(b)(1) of the Family Office Rule); (ii) the Applicant is owned and 
controlled in a manner that complies in all respects with paragraph 
(b)(2) of the Family Office Rule; and (iii) the Applicant does not hold 
itself out to the public as an investment adviser as required by 
paragraph (b)(3) of the Family Office Rule. At the time of the 
application, the Applicant represents that Family Members account for 
approximately 100% of the natural persons to whom the Applicant 
provides Advisory Services.
    5. In addition to the Family Clients, the Applicant desires to 
provide Services (including Advisory Services) to the parents of a 
spouse of a lineal descendant of William Render Ford (``Parents-in-
Law''), the brother of a spouse of a lineal descendant of William 
Render Ford and his spouse and children (``Brother-in-Law'') and 
retirement plan accounts of the Parents-in-Law or Brother-in-Law 
(collectively, the ``Additional Family Clients'').
    6. The Additional Family Clients do not have an ownership interest 
in the Applicant. The Applicant represents that the assets beneficially 
owned by Family Members and/or Family Entities (excluding the 
Additional Family Clients) would make up at least 90% of the total 
assets for which the Applicant provides Advisory Services.
    7. The Applicant represents that the Parents-in-Law and Brother-in-
Law have important familial ties to and are an integral part of the 
Ford Family. The Applicant maintains that including the Additional 
Family Clients in the ``family'' simply recognizes and memorializes the 
familial ties and intra-familial relationships that already exist, and 
have existed for fifteen (15) years and that the inclusion of the 
Additional Family Clients as members of the Ford Family for which the 
Applicant may provide Services would be consistent with the existing 
familial relationship among the family members.

The Applicant's Legal Analysis

    1. Section 202(a)(11) of the Advisers Act defines the term 
``investment adviser'' to mean ``any person who, for compensation, 
engages in the business of advising others, either directly or through 
publications or writings, as to the value of securities or as to the 
advisability of investing in, purchasing, or selling securities, or 
who, for compensation and as part of a regular business, issues or 
promulgates analyses or reports concerning securities. . . .''
    2. The Applicant falls within the definition of an investment 
adviser

[[Page 19854]]

under Section 202(a)(11). The Family Office Rule provides an exclusion 
from the definition of investment adviser for which the Applicant would 
be eligible but for the provision of Services to the Additional Family 
Clients. Section 203(a) of the Advisers Act requires investment 
advisers to register with the SEC. Because the Applicant has regulatory 
assets under management of more than $100 million, it is not prohibited 
from registering with Commission under Section 203A(a) of the Advisers 
Act. Therefore, absent relief, the Applicant would be required to 
register under Section 203(a) of the Advisers Act.
    3. The Applicant submits that its proposed relationship with the 
Additional Family Clients does not change the nature of the office into 
that of a commercial advisory firm. In support of this argument, the 
Applicant notes that if the Parents-in-Law and Brother-in-Law were the 
parents and sibling, respectively of a lineal descendant, rather than 
the parents and sibling, respectively, of a spouse of a lineal 
descendant, there would be no question that each of them would be a 
Family Member, and their retirement assets would similarly fall within 
the definition of Family Client. The Applicant states that in 
requesting the order, the office is not attempting to expand its 
operations or engage in any level of commercial activity to which the 
Advisers Act is designed to apply. Although the Additional Family 
Clients do not fall within the definition of Family Member, the 
Applicant represents that the Additional Family Clients for the last 
fifteen (15) years and to this day were and continue to be considered 
and treated as members of the Ford Family, and that prior to forming 
the Applicant, the RIA had for some time provided services to the 
Additional Family Clients. Additionally, the Applicant represents that 
the number of natural persons who are not Family Members as a 
percentage of the total natural persons to whom the office would 
provide Advisory Services if relief were granted would be less than 9%. 
From the perspective of the Ford Family, allowing the Applicant to 
provide Services to the Additional Family Clients is consistent with 
the family's previous experience with investment management services 
provided by the RIA and the existing family relationship among family 
members.
    4. The Applicant also submits that there is no public interest in 
requiring the Applicant to be registered under the Advisers Act. The 
Applicant states that the office is a private organization that was 
formed to be the ``family office'' for the Ford Family, and that the 
office does not have any public clients. The Applicant maintains that 
the office's Advisory Services are exclusively tailored to the needs of 
the Ford Family and the Additional Family Clients. The Applicant argues 
that the provision of Advisory Services to the Additional Family 
Clients, who have been receiving Advisory Services from the RIA in the 
same manner as other family members for eleven (11) years, does not 
create any public interest that would require the office to be 
registered under the Advisers Act that is different in any manner than 
the considerations that apply to a ``family office'' that complies in 
all respects with the Family Office Rule.
    5. The Applicant argues that, although the Family Office Rule 
largely codified the exemptive orders that the Commission had 
previously issued before the enactment of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, the Commission recognized in 
proposing the rule that the exact representations, conditions, or terms 
contained in every exemptive order could not be captured in a rule of 
general applicability. The Commission noted that family offices would 
remain free to seek a Commission exemptive order to advise an 
individual or entity that did not meet the proposed family client 
definition, and that certain situations may raise unique conflicts and 
issues that are more appropriately addressed through an exemptive order 
process where the Commission can consider the specific facts and 
circumstances, than through a rule of general applicability.
    6. The Applicant maintains that, based on its unusual 
circumstances--desiring to provide Services to certain Additional 
Family Clients who are relatives that have been considered and treated 
as family members for fifteen (15) years and whose status as clients of 
the office would not change the nature of the office's operations to 
that of a commercial advisory business--an exemptive order is 
appropriate based on the Applicant's specific facts and circumstances.
    7. For the foregoing reasons, the Applicant requests an order 
declaring it to be a person not within the intent of Section 202(a)(11) 
of the Advisers Act. The Applicant submits that the order is necessary 
and appropriate, in the public interest, consistent with the protection 
of investors, and consistent with the purposes fairly intended by the 
policy and provisions of the Advisers Act.

The Applicant's Conditions

    1. The Applicant will offer and provide Advisory Services only to 
Family Clients and to the Additional Family Clients, who generally will 
be deemed to be, and be treated as if they were, Family Clients; 
provided, however, that the Additional Family Clients will be deemed to 
be, and treated as if they were, Family Members for purposes of 
paragraph (b)(1) and for purposes of paragraph (d)(4)(vi) of the Family 
Office Rule.
    2. The Applicant will at all times be wholly owned by Family 
Clients and exclusively controlled (directly or indirectly) by one or 
more Family Members and/or Family Entities (excluding the Additional 
Family Clients' Family Entities) as defined in paragraph (d)(5) of the 
Family Office Rule.
    3. At all times the assets beneficially owned by Family Members 
and/or Family Entities (excluding the Additional Family Clients' Family 
Entities) will account for at least 90% of the assets for which the 
Applicant provides Advisory Services.
    4. The Applicant will comply with all the terms for exclusion from 
the definition of investment adviser under the Advisers Act set forth 
in the Family Office Rule except for the limited exception requested by 
this Application.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-09559 Filed 5-3-18; 8:45 am]
 BILLING CODE 8011-01-P