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American International Group, Inc. et al.; Notice of Application

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Start Preamble February 10, 2000.


Securities and Exchange Commission (“Commission”).


Notice of an application under section 6(c) of the Investment Company Act of 1940 (the “Act”) for an exemption from all provisions of the Act.


American International Group, Inc. (“AIG”), AIG Financial Products Corp. (“AIGFP”), AIG Matched Funding Corp. (“AIGMF”), AIG-FP Matched Funding Corp. (“AIGFPMF”).


Applicants request an order to permit AIGMF and AIGFPMF and certain future wholly-owned subsidiaries of AIG (collectively, the “Finance Subsidiaries”) to sell certain debt securities and use the proceeds to finance the business activities of AIGFP and companies controlled by AIGFP (together with AIGFP, “Controlled Companies”).


The application was filed on July 26, 1999. Applicants have Start Printed Page 7900agreed to file an amendment during the notice period, the substance of which is reflected in this notice.


An order granting the requested relief 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 March 6, 2000 and should be accompanied by proof of service on applicants, 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 may request notification of a hearing by writing to the Commission's Secretary.


Secretary, Commission, 450 5th Street, NW, Washington, DC 20549-0609. Applicants, c/o AIG Financial Products Corp., 100 Nyala Farm, Westport, CT 06880.

Start Further Info


Anu Dubey, Senior Counsel, at (202) 942-0687, or Michael Mundt, Branch Chief, at (202) 942-0564 (Division of Investment Management, Office of Investment Company Regulation).

End Further Info End Preamble Start Supplemental Information


The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, 450 5th Street, NW, Washington DC 20549-0102 (tel. 202-942-8090).

Applicants' Representations

1. AIG, a Delaware corporation, is a holding company that, through its subsidiaries, is primarily engaged in a broad range of insurance and insurance-related activities and financial services in the U.S. and abroad. AIGFP is a wholly-owned subsidiary of AIG, and each of the other Controlled Companies, except Banque AIG, is an indirect wholly-owned subsidiary of AIG. AIGFP currently complies with rule 3a-1 under the Act. Applicants state that AIGFP also is eligible to rely on section 3(c)(2) of the Act, because AIGFP is primarily engaged in the business of acting as a “market intermediary,” as defined in that section.

2. The Finance Subsidiaries were or will be established to provide financing to the Controlled Companies. Each of AIGMF and AIGFPMF is a Delaware corporation and a wholly-owned subsidary of AIGFP and an indirect wholly-owned subsidiary of AIG. Each of the Finance Subsidiaries issues debt securities and lends the proceeds of these borrowings to the Controlled Companies to help finance their operations. Certain of the Controlled Companies rely on certain provisions of section 3(c) of the Act for exclusion from regulation under the Act (“Subject Controlled Companies”). Any other Controlled Company whose activities a Finance Subsidiary finances will meet the definition of “company controlled by the parent company” in rule 3a-5 described below.

3. All borrowings by the Finance Subsidiaries are unconditionally guaranteed by AIG as to the payment of, as applicable, principal, interest, premium, dividends, liquidation preference, and sinking fund payments. In the event of any default in payment of these amounts, the holders of the securities may institute legal proceedings directly against AIG without first proceeding against the Finance Subsidiaries. Furthermore, any convertible or exchangeable securities issued by a Finance Subsidiary shall be convertible or exchangeable only for securities issued by AIG or for debt securities or non-voting preferred stock issued by the Finance Subsidiary.

4. Each Finance Subsidiary will invest in or loan at least 85% of any cash or cash equivalents raised by the Finance Subsidiary to the Controlled Companies as soon as practicable, but in no event later than six months after the Finance Subsidiary receives the cash or cash equivalents. If a Finance Subsidiary borrows amounts in excess of the amounts required by the Controlled Companies, the Finance Subsidiary will invest this excess in certain temporary investments pursuant to rule 3a-5 under the Act described below.

Applicants' Legal Analysis

1. Applicants request an order under section 6(c) of the Act exempting the Finance Subsidiaries from all provisions of the Act. Applicants state that rule 3a-5 under the Act provides an exemption from the definition of investment company for certain companies organized primarily to finance the business operations of their parent companies or companies controlled by their parent companies.

2. Rule 3a-5(b)(3)(i), in relevant part, defines a “company controlled by the parent company” to be a corporation, partnership, or joint venture that is not considered an investment company under section 3(a) of the Act, or that is excepted or exempted by order from the definition of investment company by section 3(b) or by the rules and regulations under section 3(a) of the Act. Applicants state that the Subject Controlled Companies may not qualify as “compan[ies] controlled by the parent company” under rule 3a-5(b)(3)(i) because they derive their non-investment company status from section 3(c)(2), 3(c)(3), 3(c)(4), 3(c)(5), or 3(c)(6) of the Act.

3. Applicants assert that none of the Subject Controlled Companies engages primarily in investment company activities. Applicants further state that if the Subject Controlled Companies were themselves to issue the debt obligations that are to be issued by the Finance Subsidiaries and use the proceeds for their own purposes, they would not be subject to regulation under the Act. AIG has chosen instead to use the Finance Subsidiaries as vehicles for this borrowing for reasons unrelated to the regulatory purposes of the Act.

4. Section 6(c) of the Act provides that the Commission may exempt any person, security or transaction, or any class or classes of persons securities or transactions, from any provision or provisions of the Act when 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. Applicants state that for the reasons given above, their request for exemptive relief meets the standards of section 6(c) of the Act.

Applicants' Condition

Applicants agree that the order granting the requested relief will be subject to the following condition:

The applicants will comply with all of the provisions of rule 3a-5 under the Act except that Subject Controlled Companies will not meet the portion of the definition of “company controlled by a parent company” in rule 3a-5(b)(3)(i) solely because they are excluded from the definition of investment company under section 3(c)(2), 3(c)(3), 3(c)(4), 3(c)(5), or 3(c)(6) of the Act, provided that any such entity excluded from the definition of investment company

(a) Under section 3(c)(5) of the Act will fall within section 3(c)(5)(A) or section 3(c)(5)(B) solely by reason of its holding of accounts receivable of either its own customers or of the customers of other Controlled Companies, or by reason of loans made by it to such Controlled Companies or customers, and

(b) Under section 3(c)(6) of the Act will not be engaged primarily, directly, or through majority-owned subsidiaries in one or more of the businesses described in section 3(c)(5) of the Act (except as ermitted in this condition).

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Start Printed Page 7901 For the Commission, by the Division of Investment Management, pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

End Signature End Supplemental Information

[FR Doc. 00-3657 Filed 2-15-00; 8:45 am]