
[Federal Register Volume 77, Number 19 (Monday, January 30, 2012)]
[Notices]
[Pages 4587-4588]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-1890]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-29926; File No. 812-13994]


GE Asset Management Incorporated, et al.; Notice of Application 
and Temporary Order

January 24, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Temporary order and notice of application for a permanent order 
under section 9(c) of the Investment Company Act of 1940 (``Act'').

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    Summary of Application: Applicants have received a temporary order 
exempting them from section 9(a) of the Act, with respect to an 
injunction entered against GE Funding Capital Market Services, Inc. 
(``GE Funding CMS'') on January 23, 2012 by the United States District 
Court for the District of New Jersey (``Injunction'') until the 
Commission takes final action on an application for a permanent order. 
Applicants also have applied for a permanent order.
    Applicants: GE Asset Management Incorporated (``GEAM''), GE 
Investment Distributors, Inc. (``GEID'') and GE Funding CMS (each an 
``Applicant'' and collectively, the ``Applicants'').\1\
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    \1\ Applicants request that any relief granted pursuant to the 
application also apply to any other company of which GE Funding CMS 
is or may become an affiliated person within the meaning of section 
2(a)(3) of the Act (together with the Applicants, the ``Covered 
Persons'').
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    Filing Date: The application was filed on December 23, 2011, and 
amended on January 23, 2012.
    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 21, 2012, 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.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090; Applicants: GEAM and GEID, 1600 
Summer Street, Stamford, CT 06905 and GE Funding CMS, 201 High Ridge 
Road, Stamford, CT 06905.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at 
(202) 551-6811 or Daniele Marchesani, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a temporary order and 
summary of the application. The complete application may be obtained 
via the Commission's Web site by searching for the file number, or an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.

Applicants' Representations

    1. GE Funding CMS is a corporation organized under the laws of 
Delaware. GE Funding CMS does not currently serve as investment 
adviser, sub-adviser, or depositor of any registered investment 
company, business development company (``BDC''), or principal 
underwriter for any registered open-end investment company, registered 
unit investment trust (``UIT'') or registered face amount certificate 
company, or investment adviser of any employees' securities company, as 
defined in section 2(a)(13) of the Act (``ESC'') (``Fund Service 
Activities''). ``Funds'' refers to the registered investment companies, 
BDCs or ESCs for which a Covered Person provides Fund Service 
Activities. GE Funding CMS is an indirect, wholly-owned subsidiary of 
General Electric Company (``GE''), which also directly or indirectly 
wholly-owns the other Applicants. GE is a large and diversified 
technology, media and financial services company that serves customers 
in more than 100 countries.
    2. GEAM, a Delaware corporation, is registered as an investment 
adviser under the Investment Advisers Act of 1940, as amended 
(``Advisers Act''). GEAM serves as investment adviser or sub-adviser to 
a number of Funds. GEID is registered as a broker-dealer under the 
Securities Exchange Act of 1934, as amended (``Exchange Act''). GEID 
serves as principal underwriter to a number of Funds.
    3. On January 23, 2012, the United States District Court for the 
District of New Jersey entered a judgment, which included the 
Injunction, against GE Funding CMS (``Judgment'') in a matter brought 
by the Commission.\2\ The Commission alleged in the complaint 
(``Complaint'') that from August 1999 to September 2004, personnel of 
GE Funding CMS engaged in fraudulent practices and made 
misrepresentations and omissions in connection with bidding on 
municipal reinvestment instruments. The Complaint alleged that GE 
Funding CMS engaged in fraudulent practices, misrepresentations, and 
omissions that affected the prices of certain reinvestment instruments, 
deprived certain municipalities of a presumption that their 
reinvestment instruments were purchased at fair market value, and/or 
jeopardized the tax-exempt status of certain securities. Based on the 
alleged misconduct described above, the Complaint alleged that GE 
Funding CMS violated section 17(a) of the Securities Act of 1933. 
Without admitting or denying any of the allegations in the Complaint 
(other than those relating to the jurisdiction of the District Court 
over it and the subject matter, solely for purposes of this action), GE 
Funding CMS consented to the entry of the Injunction and other relief, 
including disgorgement, prejudgment interest, and a civil monetary 
penalty.
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    \2\ U.S. Securities and Exchange Commission v. GE Funding 
Capital Market Services, Inc., Case No. 2:11-cv-07465-WJM-MF (D.N.J. 
Dec. 23, 2011).

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[[Page 4588]]

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, or in 
connection with activities as an underwriter, broker or dealer, 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 UIT, or registered 
face-amount certificate company or as investment adviser of an ESC. 
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). Section 2(a)(3) 
of the Act defines ``affiliated person'' to include, among others, any 
person directly or indirectly controlling, controlled by, or under 
common control, with the other person. Applicants state that GE Funding 
CMS is an affiliated person of each of the other Applicants within the 
meaning of section 2(a)(3) of the Act. Applicants state that, as a 
result of the Injunction, they would be subject to the prohibitions of 
section 9(a) of the Act.
    2. Section 9(c) of the Act provides that the Commission shall grant 
an application for exemption from the disqualification provisions of 
section 9(a) of the Act if it is established that these provisions, as 
applied to the Applicants, are unduly or disproportionately severe or 
that the conduct of the Applicants has been such as not to make it 
against the public interest or the protection of investors to grant the 
exemption. Applicants have filed an application pursuant to section 
9(c) seeking a temporary and permanent order exempting them and other 
Covered Persons from the disqualification provisions of section 9(a).
    3. Applicants believe they meet the standard for exemption 
specified in section 9(c). Applicants state that the prohibitions of 
section 9(a) as applied to them would be unduly and disproportionately 
severe and that the conduct of the 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).
    4. Applicants state that the alleged conduct giving rise to the 
Injunction did not involve any of the Applicants engaging in Fund 
Service Activities. Applicants state that to the best of their 
knowledge none of the current or former directors, officers, or 
employees of the Applicants (other than GE Funding CMS) that were 
involved in providing Fund Service Activities had any knowledge of or 
had any involvement in the violative conduct alleged in the Complaint. 
Applicants further represent that the personnel of GE Funding CMS who 
had any responsibility for, or involvement in, the violations alleged 
in the Complaint are no longer employed by GE Funding CMS and have had 
no, and in the present or future will not have any, involvement in 
providing Fund Service Activities to the Funds.
    5. Applicants state that the inability of the Applicants to engage 
in Fund Service Activities would result in potentially severe financial 
hardships for the Funds they serve and the Funds' shareholders. 
Applicants state that they will distribute written materials, including 
an offer to meet in person to discuss the materials, to the boards of 
directors of the Funds (excluding for this purpose the ESCs) (the 
``Boards''), including the directors who are not ``interested 
persons,'' as defined in section 2(a)(19) of the Act, of such Funds, 
and their independent legal counsel as defined in rule 0-1(a)(6) under 
the Act, if any, describing the circumstances that led to the 
Injunction, any impact on the Funds, and the application. Applicants 
state that they will provide the Boards with the information concerning 
the Injunction and the application that is necessary for the Funds to 
fulfill their disclosure and other obligations under the federal 
securities laws.
    6. Applicants also state that, if they were barred from providing 
Fund Service Activities to registered investment companies and ESCs, 
the effect on their businesses and employees would be severe. 
Applicants state that they have committed substantial resources to 
establish an expertise in providing Fund Service Activities. Applicants 
further state that prohibiting them from providing Fund Service 
Activities would not only adversely affect their businesses, but would 
also adversely affect approximately 460 employees that are involved in 
those activities. Applicants also state that disqualifying certain 
Applicants from continuing to provide investment advisory services to 
ESCs is not in the public interest or in furtherance of the protection 
of investors. Because the ESCs have been formed for the benefit of key 
employees, officers, and directors of GE and its affiliates, it would 
not be consistent with the purposes of the ESC provisions of the Act to 
require another entity not affiliated with GE to manage the ESCs. In 
addition, participating employees of GE and its affiliates likely 
subscribed for interests in the ESCs with the expectation that the ESCs 
would be managed by GEAM.
    7. Applicants state that Applicants and certain other affiliated 
persons of the Applicants have previously received orders under section 
9(c) of the Act, as the result of conduct that triggered section 9(a), 
as described in greater detail in the application.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    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, Covered Persons, 
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.

Temporary Order

    The Commission has considered the matter and finds that the 
Applicants have made the necessary showing to justify granting a 
temporary exemption.
    Accordingly,
    It is hereby ordered, pursuant to section 9(c) of the Act, that 
Applicants and any other Covered Persons are granted a temporary 
exemption from the provisions of section 9(a), solely with respect to 
the Injunction, subject to the condition in the application, from 
January 23, 2012, until the Commission takes final action on their 
application for a permanent order.

    By the Commission.
Elizabeth M. Murphy,
 Secretary.
[FR Doc. 2012-1890 Filed 1-27-12; 8:45 am]
BILLING CODE 8011-01-P


