Alliance Capital Management, L.P.; Notice of Application

[Federal Register Volume 64, Number 147 (Monday, August 2, 1999)]
[Notices]
[Pages 41978-41980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19719]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23920; 812-11696]


Alliance Capital Management, L.P.; Notice of Application

July 27, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for an order under sections 6(c) and 6(e) 
of the Investment Company Act of 1940 (the ``Act'') granting relief 
from all provisions of the Act, except sections 37 through 53 of the 
Act and the rules and regulations under those sections.

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SUMMARY OF APPLICATION: Applicant, alliance Capital Management L.P. 
(``Alliance Holding''), requests an order under sections 6(c) and 6(e) 
of the Act exempting it from all provisions of the Act, except sections 
37 through 53 of the Act and the rules and regulations under those 
sections.

FILING DATES: The application was filed on July 20, 1999.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a

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hearing by writing to the SEC's Secretary and serving applicant with a 
copy of the request, personally or by mail. Hearing requests should be 
received by the SEC by 5:30 p.m. on August 17, 1999, and should be 
accompanied by proof of service on applicant, in the form of an 
affidavit or, for lawyers, 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 SEC's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, N.W., Washington, DC 20549-0609. Applicant, Alliance Capital 
Management L.P., 1345 Avenue of the Americas, New York, NY 10105.

FOR FURTHER INFORMATION CONTACT: Susan K. Pascocello, Senior Counsel, 
at (202) 942-0674, or Nadya B. Roytblat, Assistant Director, at (202) 
942-0564 (Office of Investment Company Regulation, Division of 
Investment Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, DC 
20549-0102 (tel. (202) 942-8090).

Applicant's Representations

    1. Applicant is a limited partnership organized under the laws of 
Delaware, with its equity interests publicly traded in the form of 
units (``Units''). Applicant provides diversified investment management 
services to institutional clients and individual investors. Applicant's 
sole general partner and holder of a 1% general partnership interest is 
Alliance Capital Management Corporation (``ACMC''), a wholly owned 
indirect subsidiary of The Equitable Life Assurance Society of the 
United States (``Equitable Life''). Equitable Life also owns, directly 
and indirectly, approximately 57% of the applicant's outstanding Units. 
Applicant's remaining Units are public held. For tax and business 
purposes discussed below, applicant proposes to reorganize into a new 
partnership structure (the ``Reorganization'').
    2. Alliance Capital Management L.P. II (``Alliance Capital'') was 
formed as a Delaware private limited partnership in order to effect the 
Reorganization. Applicant will transfer its business to Alliance 
Capital, in exchange for equity interests in Alliance Capital 
(``Alliance Capital Units''). Immediately following the Reorganization, 
applicant's business activities will consist of holding Alliance 
Capital Units and engaging in related activities.\1\ Alliance Capital 
will not be an investment company under section 3(a) of the Act, nor 
will it rely on an exemption from the definition of investment company 
under section 3(c)(1) or 3(c)(7) of the Act. Alliance Capital Units 
will not be listed on an exchange and will be subject to significant 
transfer restrictions.
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    \1\ Such activities will include filing periodic reports with 
the SEC pursuant to the Securities Exchange Act of 1934, maintaining 
its New York Stock Exchange listing, holding shareholder meetings, 
and holding certain assets for which consents for assignment or 
transfer to Alliance Capital must be obtained. These assets consist 
of contracts, such as leases and service contracts, licenses, 
including those obtained from governments and regulatory 
authorities, and regulatory and other approvals necessary for the 
conduct of Alliance Capital's business.
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    3. Applicant states that after the Reorganization Alliance Capital 
will continue the business conducted by applicant prior to the 
Reorganization. Applicant also states that Equitable Life will have the 
same degree of control over, and the same ability to manage the 
business of, Alliance Capital, as it currently has with respect to 
applicant. Applicant further states that the reorganization will not 
result in any material change in the rights and benefits of its 
Unitholders. As a limited partner of Alliance Capital, applicant will 
be required to allow its Unitholders to vote on certain matters 
affecting Alliance Capital. Therefore, Unitholders will be allowed to 
vote with respect to Alliance Capital on those matters on which they 
currently vote with respect to applicant. As a result, applicant 
asserts that the Unitholders will be in substantially the same position 
following the Reorganization as they were prior to it.
    4. A majority of applicant's public Unitholders (excluding 
Equitable Life and its affiliates and applicant's management and 
employees) must approve the Reorganization. A proxy solicitation will 
be conducted for that purpose. If the Reorganization is approved, 
applicant will offer to all its Unitholders, pursuant to an exchange 
offer, a one-time election to exchange outstanding Units on a one-for-
one basis for Alliance Capital Units. Following the exchange offer, 
Equitable Life and its affiliates, other than applicant, will own 
approximately 55% of the Alliance Capital Units, and the remainder will 
be owned by applicant and any public Unitholders who accept the 
exchange offer. Applicant expects that it will own approximately 45% of 
Alliance Capital Units.
    5. Applicant states that the purpose of the Reorganization is to 
offer a choice to Unitholders who are willing to accept the transfer 
restrictions on the privately placed Alliance Capital Units so that 
they may receive higher distributions as Alliance Capital is a private 
partnership and will not be subject to an annual federal tax imposed on 
the gross business income of publicly traded partnerships. It also will 
give applicant greater flexibility to acquire businesses and raise 
capital in the future, since it will be able to offer the selling party 
or potential investor the choice of whether to receive publicly-traded 
Units, tax advantaged Alliance Capital Units or a combination of both.

Applicant's Legal Analysis

    1. Section 3(a)(1)(C) of the Act defines ``investment company'' to 
include any issuer which 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% of the value of that issuer's total assets 
(exclusive of Government securities and cash items) on an 
unconsolidated basis. Under section 3(a)(2), ``investment securities'' 
includes all securities except (i) Government securities and (ii) 
securities issued by (a) employees' securities companies or (b) certain 
majority-owned subsidiaries.
    2. Applicant states that its primary asset will be Alliance Capital 
Units. Alliance Capital will not be a majority-owned subsidiary of 
applicant, and therefore the Alliance Capital Units owned by applicant 
may be ``investment securities'' as defined in section 3(a)(2) of the 
Act. As the Alliance Capital Units will constitute virtually all of the 
assets of applicant, applicant may be deemed to be an investment 
company under section 3(a)(1)(C) of the Act.
    3. Section 6(c) of the Act provides, in part, that the SEC may 
exempt any person from any provision of the Act or any rule under the 
Act if and to the extent 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. 
Section 6(e) permits the SEC to require companies exempted from the 
registration requirements of the Act to comply with certain specified 
provisions of the Act as though the company were a registered 
investment company. Applicant requests an order under sections 6(c) and 
6(e) exempting it from all provisions of the Act, except section 37 
through 53 of the Act and the

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rules and regulations under those sections.
    4. Applicant contends that there are legitimate business reasons 
for the Reorganization. Applicant also states that, following the 
Reorganization, applicant will function solely as a holding company for 
Alliance Capital Units. Alliance Capital Units will be subject to very 
significant transfer restrictions.\2\ Applicant states that its 
activities will be limited to holding Alliance Capital Units and 
engaging in activities necessitated by its status as a publicly-held 
holding company. Accordingly, applicant asserts that its business 
following the Reorganization will not entail the types of risk to 
public investors that the Act was designed to mitigate.
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    \2\ In general, the amended partnership agreement of Alliance 
Capital will permit Alliance Capital Units, including those which 
will be held by applicant, to be transferred only with the written 
consent of Equitable Life and ACMC. A business entity, such as 
applicant, may transfer a block of units representing more than 2% 
of the outstanding Alliance Capital Units without the consent of 
ACMC, provided that it has received the written consent of Equitable 
Life and a written opinion of counsel to the effect that Alliance 
Capital will not be treated as a publicly-traded partnership for tax 
purposes as a result of the transfer. Either Equitable Life or ACMC 
may withhold its consent to transfer in its sole discretion.
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Applicant's Conditions

    Applicant agrees that the order granting the requested relief will 
be subject to the following conditions:
    1. Applicant will not hold itself out as being engaged in the 
business of investing, reinvesting, or trading in securities.
    2. Applicant will not require any investment securities, as that 
term is defined in section 3(a)(2) of the Act, except for: (a) Alliance 
Capital Units and (b) for cash management purposes, certificates of 
deposit, banker's acceptances and time deposits maturing within 180 
days from the date of acquisition thereof, and shares of money market 
funds. Applicant will not acquire these short-term securities for 
speculative purposes but solely to obtain a reasonable return while 
preserving capital. Applicant may acquire other investment securities 
provided that (i) the acquisition is in connection with the purchase of 
any business, assets or property, (ii) applicant simultaneously with 
the purchase contributes the investment securities to Alliance Capital, 
(iii) applicant contributes any remaining portion of the purchased 
business, assets or property to Alliance Capital as soon as 
practicable, (iv) the value of the consideration received by applicant 
from Alliance Capital in connection with its contribution to Alliance 
Capital equals the fair value of the business, assets or property 
contributed to Alliance Capital and (v) any investment securities 
received by applicant from Alliance Capital in connection with 
applicant's contribution to Alliance Capital will be either Alliance 
Capital Units or investment securities of the type specified in clause 
(b) of the first sentence of this condition.

    For the SEC, by the Division of Investment Management, pursuant 
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-19719 Filed 7-30-99; 8:45 am]
BILLING CODE 8010-01-M