Securities and Exchange Commission (“Commission”).
Temporary order and notice of application under section 9(c) of the Investment Company Act of 1940 (“Act”).
Summary of Application: Applicants have received a temporary order exempting them and other entities of which Credit Suisse First Boston Corporation (“CSFB”) is or becomes an affiliated person from section 9(a) of the Act, with respect to a securities-related injunction entered into on January 29, 2002, until the Commission takes final action on an application for a permanent order. Applicants also have requested a permanent order.
Applicants: CSFB, Credit Suisse Asset Management, LLC (“CSAM Americas”), Credit Suisse Asset Management Securities, Inc. (“CSAM Securities”), Credit Suisse Asset Management Limited (“CSAM London”), and Credit Suisse First Boston, Inc. (“CSFBI”).
Filing Date: The application was filed on January 30, 2002.
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 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 February 25, 2002, 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 who wish to be notified of a hearing may request notification by writing to the Commission's Secretary.
Secretary, Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. Applicants, CSFB and CSFBI, Eleven Madison Avenue, New York, NY 10010-3629; CSAM Americas and CSAM Securities, 466 Lexington Avenue, New York, NY 10017-3147; CSAM London, Beaufort House, 15 St. Botolph Street, London (England), United Kingdom EC3A 7JJ.Start Further Info
FOR FURTHER INFORMATION, CONTACT:
John L. Sullivan, Senior Counsel, at (202) 942-0681, or Michael W. Mundt, Senior Special Counsel, 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 Fifth Street, NW, Washington, DC 20549-0102 (tel. 202-942-8090).
1. CSFB, a Massachusetts corporation, is a full service investment banking firm and is registered as a broker-dealer under the Securities Exchange Act of 1934 (“Exchange Act”) and as an investment adviser under the Start Printed Page 5625Investment Advisers Act of 1940 (“Advisers Act”). CSAM Americas, a Delaware limited liability company, is registered as an investment adviser under the Advisers Act. CSAM Securities, a New York corporation, is registered as a broker-dealer under the Exchange Act. CSAM London, a corporation organized under the laws of England and Wales, is registered as an investment adviser under the Advisers Act. CSFB, CSAM Americas, and CSAM Securities are indirect wholly owned subsidiaries of CSFBI, which is an indirect wholly owned subsidiary of Credit Suisse Group (“Group”) that functions as the holding company for most of the Group's US investment banking and asset management operations. CSAM London and CSFB are indirect subsidiaries of Credit Suisse First Boston. CSAM Americas and CSAM London currently serve as investment advisers (in some case, as subadvisers) to a number of registered open-end and closed-end management investment companies, and CSAM Securities currently serves as principal underwriter to a number of registered open-end management investment companies (together, such investment companies are “Funds”).
2. On January 29, 2002, the U.S. District Court for the District of Columbia entered a Final Judgment of Permanent Injunction and Other Relief (“Final Judgment”) in a matter brought by the Commission. The Commission alleged that CSFB allocated “hot” initial public offerings (“IPOs”) to customers willing to pay higher than normal commissions to CSFB and violated section 17(a) of the Exchange Act, rule 17a-3 under the Exchange Act, and Conduct Rules 2110 and 2330 of the National Association of Securities Dealers, Inc. (“NASD”). The Final Judgment, among other things, enjoined CSFB, directly or through its officers, directors, agents, and employees, from violating section 17(a), rule 17a-3, and NASD Conduct Rules 2110 and 3220. Additionally, the Final Judgment ordered CSFB to pay disgorgement of $70 million, pay a civil penalty of $30 million, and comply with certain undertakings, including an undertaking to adopt and implement certain policies and procedures relating to the allocation of IPO shares.
Applicants' Legal Analysis
1. Section 9(a)(2) of the Act, in relevant part, prohibits a person who has been enjoined from engaging in or continuing any conduct or practice in connection with the purchase or sale of a security from acting, among other things, as an investment adviser or depositor of any registered investment company or a principal underwriter for any registered open-end investment company, registered unit investment trust, or registered face-amount certificate company. Section 9(a)(3) of the Act makes the prohibition in section 9(a)(2) applicable to a company any affiliated person of which has been disqualified under the provisions of section 9(a)(2). Applicants state that, as a result of the Final Judgment, applicants may be subject to the prohibitions of section 9(a).
2. Section 9(c) of the Act provides that the Commission shall grant an application for an exemption from the disqualification provisions of section 9(a) if it is established that these provisions, as applied to the applicants, are unduly or disproportionately severe or that the applicants' conduct has been such as not to make it against the public interest or the protection of investors to grant the application. Applicants have filed an application pursuant to section 9(c) of the Act seeking temporary and permanent orders exempting the Covered Persons from the provisions of section 9(a) of the Act.
3. Applicants state that the prohibitions of section 9(a) as applied to the Covered Persons would be unduly and disproportionately severe and that the conduct of applicants has been such as not to make it against the public interest or the protection of investors to grant the exemption from section 9(a). Applicants state that the matters forming the basis of the Final Judgment did not involve any registered investment companies. Applicants state that no current or former employee of any of the applicants who is or was involved in providing advisory or underwriting services to registered investment companies advised or underwritten by the applicants was involved in the conduct resulting in the Final Judgment. CSFB also will adopt and implement certain policies and procedures, as required in the Final Judgment, regarding allocation of IPO shares.
4. CSAM Americas, CSAM London, and CSAM Securities will distribute written materials, including an offer to meet in person to discuss the materials, to the boards of directors or trustees of the Funds regarding the Final Judgment and the reasons they believe relief pursuant to section 9(c) is appropriate. CSAM Americas, CSAM London, and CSAM Securities will provide the Funds with all information concerning the Final Judgment and the exemptive application necessary for those Funds to fulfill their disclosure and other obligations under the federal securities laws.
5. Applicants assert that the inability of CSAM Americas and CSAM London to continue providing advisory services to the Funds and the inability of CSAM Securities to continue to serve as principal underwriter to Funds would result in potentially severe hardships for the Funds and their shareholders. Applicants also assert that if they were prohibited from providing services to registered investment companies, the effect on their businesses and employees would be severe.
6. Applicants note that they have previously received exemptive orders pursuant to section 9(c) of the Act. In 1986, The First Boston Corporation (“FBC,” a former name of CSFB) became subject to a permanent injunction arising out of a violation of section 10(b) of the Exchange Act and rule 10b-5 under the Exchange Act involving purchases for its own account of certain securities while in possession of material nonpublic information (“1986 Injunction”). The Commission issued orders under section 9(c) with respect to the 1986 Injunction. In 1975, Credit Suisse (currently known as Credit Suisse First Boston) became subject to a permanent injunction arising out of violations of various provisions of the federal securities laws in connection with the distribution of unregistered gold-related securities (“1975 Injunction”). The Commission issued orders under section 9(c) with respect to the 1975 Injunction. Applicants do not believe that the existence of these prior Start Printed Page 5626violations should preclude them from obtaining the requested relief.
Applicants agree that the order granting the requested relief will be subject to the following condition:
1. Any temporary exemption granted pursuant to the application shall be without prejudice to, and shall not limit the Commission's rights in any manner with respect to, any Commission investigation of, or administrative proceedings involving or against, applicants, including without limitation, the consideration by the Commission of a permanent exemption from section 9(a) of the Act requested pursuant to the application or the revocation or removal of any temporary exemptions granted under the Act in connection with the application.
The Commission has considered the matter and finds that applicants have made the necessary showing to justify granting of a temporary exemption.
Accordingly, it is hereby ordered, under section 9(c), that the Covered Persons are granted a temporary exemption from the provisions of section 9(a), effective forthwith, solely with respect to the Final Judgment, subject to the condition in the application, until the Commission takes final action on an application for a permanent order.Start Signature
By the Commission.
Margaret H. McFarland,
1. Applicants request that any relief granted pursuant to the application also apply to any other entity of which CSFB is or hereafter becomes an affiliated person (together with the applicants, the “Covered Persons”).Back to Citation
2. Securities and Exchange Commission v. Credit Suisse First Boston Corporation, Final Judgment of Permanent Injunction and Other Relief as to Credit Suisse First Boston Corporation, 02 Civ. 00090 (RWR) (D.D.C., Jan. 29, 2002).Back to Citation
3. Securities and Exchange Commission v. The First Boston Corporation, Final Judgment of Permanent Injunction and Other Relief as to The First Boston Corporation, 86 Civ. 3524 (S.D.N.Y. May 5, 1986).Back to Citation
4. See, e.g., First Boston Asset Management Corporation, et al., Investment Company Act Release Nos. 15086 (May 5, 1986) (notice and temporary order) and 15221 (July 24, 1986) (permanent order).Back to Citation
5. Securities and Exchange Commission v. American Institute Counselors, Inc., et al., Final Judgment of Permanent Injunction and Other Relief as to American Institute Counselors, Inc., et al., 75 Civ. 1965 (D.D.C. Nov. 25, 1975).Back to Citation
6. See, e.g., First Boston Corporation, Investment Company Act Release Nos. 12867 (Dec. 3, 1982) (notice and temporary order) and 12928 (Dec. 27, 1982) (permanent order).Back to Citation
[FR Doc. 02-2794 Filed 2-5-02; 8:45 am]
BILLING CODE 8010-01-P