Securities and Exchange Commission (“Commission”).
Notice of an application pursuant to section 2(a)(9) of the Investment Company Act of 1940 (the “Act”).
Safeguard Scientifics, Inc. (“Safeguard”).
SUMMARY OF APPLICATION:
Applicant requests an order declaring that it controls Internet Capital Group, Inc. (“ICG”) within the meaning of the Act notwithstanding that it owns less than 25% of the voting securities of ICG.
The application was filed on February 25, 2000.
HEARING OR NOTIFICATION OF HEARING:
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 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 21, 2000 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 may request notification of a hearing by writing to the Commission's Secretary.
Secretary, Commission, 450 5th Street, NW, Washington, DC 20549-0609. Safeguard, 435 Devon Park Drive, Building 800, Wayne, Pennsylvania 19087.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Ann Dubey, Senior Counsel, at (202) 942-0687, or Nadya Roytblat, Assistant Director, 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).
1. Safeguard, a Pennsylvania corportaion, states that it is actively engaged in the internet infrastructure business through a core group of companies. Safeguard was relying on rule 3a-1 under the Act. Rule 3a-1 provides an exemption from the definition of investment company if, among other things, no more than 45% of a company's total assets consist of, and no more than 45% of its net income over the last four quarters is derived from, securities other than shares of majority-owned subsidiaries and companies primarily controlled by it. Since August, 1999, Safeguard has been relying on rule 3a-2 under the Act, which provides a one-year exemption from the definition of investment company for certain transient investment companies.
2. Safeguard previously owned more than 25% of the voting securities of ICG. Safeguard states that ICG is an internet company actively engaged in business-to-business electronic commerce through a network of partner companies. ICG and Safeguard have had a historic relationship. ICG was formed by two Safeguard executives in 1996. Safeguard originally owned 33% of ICG's voting securities, an ownership position that began to decline as ICG needed additional financing. Safeguard states that its interest in ICG has been diluted since August, 1999 due to the exercise of options, and ICG's additional private and public offerings. Safeguard also sold approximately 4.8% of its shares in ICG to Safeguard's shareholders through a subscription program. Safeguard states that currently it owns approximately 14% of ICG's common stock. Safeguard states that its interest in ICG constitutes a substantial portion of Safeguard's total assets.
Applicant's Legal Analysis
1. Safeguard requests an order under section 2(a)(9) of the Act declaring that it controls ICG. Section 2(a)(9) defines “control” as the power to exercise a controlling influence over the management or policies of a company. Section 2(a)(9) also provides that a person who does not own more than 25% of a company's voting securities is presumed not to control the company. Section 2(a)(9) further provides that this presumption may be rebutted by evidence but continues until a determination to the contrary is made by the Commission.
2. Safeguard states that currently it owns 13.93% of ICG's outstanding voting securities. Safeguard has been since ICG's inception, and continues to be, ICG's largest single shareholder.  Safeguard also states that its officers are directors occupy three out of eight seats on ICG's board of directors. These directors include a Vice President of Safeguard and the Vice Chairman of the Board of Safeguard (who serves as the Chairman of ICG's board of directors). The Safeguard director on the ICG Board serves as President and Chief Executive Officer of ICG.
3. Safeguard also states that it has a team of its employees assigned to actively assist ICG in its management, operations and finances. Safeguard states that it also assists ICG, among other things, in structuring and negotiating business alliances, forming general corporate and marketing strategies, conducting financial accounting, locating and evaluating financing vehicles, recruiting board members and structuring employee option plans.
4. Safeguard asserts that, as a result of its status as the largest single shareholder of ICG and its significant representation on ICG's board of directors, Safeguard is able to exercise, and exercises, a controlling influence over the management and operations of ICG within the meaning of section 2(a)(9) of the Act. Thus, Safeguard states that it has made a showing sufficient for Start Printed Page 11617a finding under section 2(a)(9) of the Act that it controls ICG.Start Signature
For the Commission, by the Division of Investment Management, pursuant to delegated authority.
Jonathan G. Katz,
1. Safeguard states that it does not seek an order or request the Commission to determine whether Safeguard primarily controls ICG for purposes of section 3(a) of the Act or rule 3a-1 under the Act, or otherwise determine whether Safeguard is an investment company under the Act.Back to Citation
2. Safeguard states that the only other known shareholder owning more then 5% of ICG's voting stock is Comcast ICG, Inc., which owns approximately 9.3%.Back to Citation
[FR Doc. 00-5181 Filed 3-2-00; 8:45 am]
BILLING CODE 8010-01-M