
[Federal Register Volume 77, Number 87 (Friday, May 4, 2012)]
[Notices]
[Pages 26585-26587]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-10756]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30056; 812-13793]


Steel Partners Holdings L.P.; Notice of Application

April 27, 2012.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under sections 6(c) and 45(a) of the 
Investment Company Act of 1940 (``Act'').

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    Summary of Application: Steel Partners Holdings L.P. (``SPH'') 
requests an order under section 6(c) of the Act exempting it from all 
provisions of the Act until the earlier of one year from the date that 
the requested order is issued or the date that it no longer may be 
deemed to be an investment company. SPH also seeks an order under 
section 45(a) of the Act granting confidential treatment with respect 
to certain supplemental material submitted to the Commission 
(``Supplemental Material'').
    Applicant: SPH.
    Filing Dates: The application was filed on July 8, 2010, and 
amended on October 12, 2010, and March 14, 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 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 May 22, 2012, 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 who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES:  Elizabeth M. Murphy, Secretary, U.S. Securities and 
Exchange Commission, 100 F Street NE., Washington, DC 20549-1090; 
Applicant: 590 Madison Avenue, 32nd Floor, New York, NY 10022.

FOR FURTHER INFORMATION CONTACT:  Steven I. Amchan, Senior Counsel, at 
(202) 551-6826, or Jennifer L. Sawin, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or the 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.
    Applicant's Representations:
    1. SPH, a Delaware limited partnership whose principal executive 
offices are in New York, is a global diversified holding company 
engaged in multiple businesses through various subsidiaries and 
controlled companies. SPH seeks to actively improve the business 
operations of its companies and foster growth and increase long-term 
corporate value for shareholders and stakeholders. SPH's companies are 
generally viewed by SPH as long-term holdings and SPH expects to 
realize value through its operation of the companies rather than 
through the sale of its holdings in the companies. SPH's predecessor, 
WebFinancial Corporation (formerly Rose's Holdings, Inc.)

[[Page 26586]]

(``WebFinancial''), was a Delaware Corporation formed in 1997 as a 
holding company for Rose's Stores, Inc. In 1997, WebFinancial sold 
Rose's Stores, Inc. and, in 1998, WebFinancial became the owner of a 
100% interest in WebBank, a Utah industrial loan bank. SPH became the 
successor of WebFinancial by a merger on December 31, 2008. SPH was a 
narrow financial holding company engaged in the business of banking 
from the time of its acquisition of WebBank in 1998 until July 14, 
2009.
    2. Prior to December 2008, Steel Partners II was a private 
investment partnership, which indirectly owned 85% of SPH. During the 
market disruptions in 2008 and early 2009, Steel Partners II received a 
substantial number of redemption requests from investors. Because many 
of its holdings represented interests in operating businesses which 
were either privately held or publicly traded but with very low trading 
volume, applicant states that Steel Partners II temporarily suspended 
redemptions and sought a solution that assured that all investors would 
be treated fairly and equally. A plan was implemented on July 14, 2009, 
and July 15, 2009, that (i) effectively, entitled each Steel Partners 
II investor to a pro rata distribution of Steel Partners II's assets 
and (ii) the option to either: (A) exchange their distribution for SPH 
common units; or (B) receive their distribution in-kind (the 
``Implementing Transactions''). While a majority of the number of 
investors in Steel Partners II opted to receive SPH common units, 
investors representing a majority of the capital of Steel Partners II 
opted to receive their distribution of Steel Partners II's assets in-
kind; therefore, SPH did not retain majority or controlling interests 
in several of Steel Partners II's former holdings.
    3. Since July 15, 2009, SPH's management has worked diligently to 
restructure its holdings to fall outside of the definition of an 
investment company by: (i) Acquiring, maintaining or increasing 
holdings in majority owned or primarily controlled companies engaged in 
non-investment company or excepted businesses; and (ii) decreasing or 
eliminating holdings in non-controlled companies and companies engaged 
in an investment company business. As a result of these efforts, SPH 
has significantly decreased its holdings in companies of which it held 
less than 25% interests, while increasing holdings in wholly-owned, 
majority owned and primarily-controlled companies such that, as noted 
below, SPH meets the asset test of rule 3a-1 as of December 31, 2011. 
However, SPH was unable to fully implement necessary changes to its 
asset mix during the rule 3a-2 period due to, among other things, 
restrictions imposed by state corporate and federal securities laws, 
certain tax ramifications and a lack of willing buyers or sellers of 
securities due, in part, to recent, unusual market conditions, all of 
which were beyond SPH's reasonable control.
    4. Applicant states that the total value of SPH's interests in 
majority-owned subsidiaries, on an unconsolidated basis, has increased 
sixteen-fold from approximately $11.0 million (or 2.5% of SPH's total 
assets, excluding government securities and cash items) on July 15, 
2009, to approximately $176.7 million (or 36.5% of SPH's total assets, 
excluding government securities and cash items) on December 31, 2011. 
Consolidated with its wholly-owned subsidiaries, SPH's interests in 
primarily-controlled companies, excluding its interest in a subsidiary 
that has become a majority-owned subsidiary, have increased seven-fold 
from approximately $21.7 million (4.7% of SPH's total assets, excluding 
government securities and cash items) on July 15, 2009, to 
approximately $167.6 million (33.2% of SPH's total assets, excluding 
government securities and cash items) as of December 31, 2011.
    Applicant's Legal Analysis:

Section 6(c) of the Act

    1. Under section 3(a)(1)(C) of the Act, an issuer is an investment 
company if it 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 percent of the value of such issuer's total assets 
(exclusive of government securities and cash items) on an 
unconsolidated basis. Section 3(a)(2) of the Act defines ``investment 
securities'' to include all securities except government securities, 
securities issued by employees' securities companies, and securities 
issued by majority-owned subsidiaries of the owner that are not 
investment companies and are not relying on the exception from the 
definition of investment company in section 3(c)(1) or 3(c)(7) of the 
Act.
    2. Rule 3a-1 under the Act provides an exemption from the 
definition of investment company if, on a consolidated basis with 
wholly-owned subsidiaries, no more than 45% of an issuer's total assets 
(exclusive of government securities and cash items) consist of, and no 
more than 45% of its net income after taxes over the last four fiscal 
quarters combined is derived from, securities other than: government 
securities, securities issued by employees' securities companies, and 
securities of certain majority-owned subsidiaries and companies 
controlled primarily by the issuer.
    3. SPH states that, as a result of the Implementing Transactions, 
investment securities represented more than 40% of its total assets 
(exclusive of government securities and cash items) on an 
unconsolidated basis. SPH further states that it is not currently able 
to rely on rule 3a-1 under the Act because the asset sales necessary to 
bring SPH in compliance with the rule's asset test produced bad income 
for purposes of the rule's income test.
    4. Rule 3a-2 under the Act generally provides that, for purposes of 
sections 3(a)(1)(A) and 3(a)(1)(C), an issuer will not be deemed to be 
engaged in the business of investing, reinvesting, owning, holding or 
trading in securities for a period not to exceed one year if the issuer 
has a bona fide intent to be engaged in a non-investment company 
business. This enables the issuer to make an orderly transition to a 
non-investment company business. SPH began relying on rule 3a-2 under 
the Act on July 14, 2009.
    5. Section 6(c) of the Act permits the Commission to exempt any 
person from any provision of the Act, if and to the extent that 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.
    6. SPH requests an exemption under section 6(c) from all provisions 
of the Act until the earlier of one year from the date that the 
requested order is issued or such time as SPH is no longer deemed to be 
an investment company. SPH believes that within the period covered by 
the requested order, it will be able to complete its transition and 
establish itself as a non-investment business.
    7. SPH asserts that as a result of the plan implemented to address 
Steel Partners II's investor redemption requests, SPH arguably fell 
within the statutory definition of an investment company, even though 
that definition is not an accurate depiction of SPH's business. SPH 
states that since invoking the non-exclusive safe harbor provided by 
rule 3a-2, SPH's officers have worked diligently to return to a non-
investment, diversified holding company business, but have found the 
process taking longer than expected due to factors beyond SPH's 
reasonable control. SPH asserts that SPH's transactions in securities 
have not been

[[Page 26587]]

for speculative purposes, but have been in the furtherance of its 
business as a diversified holding company. SPH contends that 
registration under the Act would involve unnecessary burden and expense 
for SPH and its unitholders and would serve no regulatory purpose. For 
the reasons discussed above, SPH asserts that the requested relief 
under section 6(c) of the Act is consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of the Act.

Section 45(a) of the Act

    1. Section 45(a) provides that information contained in any 
application filed with the Commission under the Act shall be made 
available to the public, unless the Commission finds that public 
disclosure is neither necessary nor appropriate in the public interest 
or for the protection of investors. SPH requests an order under section 
45(a) of the Act granting confidential treatment to the information in 
the Supplemental Material.
    2. SPH submits that the information disclosed in the application is 
sufficient to fully apprise any interested member of the public of the 
basis for the relief requested under section 6(c) of the Act. SPH 
states that the public will be able to see various data reflecting the 
progress SPH has made in its transition to non-investment company 
business and its intention to complete such transition by the 
expiration of the requested exemption. SPH submits that based on such 
information, any interested person will be able to assess SPH's 
intention and ability to pursue a non-investment company business 
strategy and its prospects for achieving non-investment company status 
by the end of the requested one year exemption.
    3. SPH states that it has valid business reasons for not wanting to 
make public information that relates to its future business plans, 
including its intention with regard to transactions in securities of 
certain companies. SPH asserts that the public disclosure of such 
information, much of which relates to publicly traded securities, could 
affect the prices and markets for such securities (for example, by 
allowing those who view this information to ``front run'' SPH's 
intended transactions) in a way that would severely burden SPH's 
transition to non-investment company business. For these reasons, SPH 
submits that public disclosure of the Supplemental Material is neither 
necessary nor appropriate in the public interest or for the protection 
of investors.
    Applicant's Conditions:
    SPH agrees that the requested exemption will be subject to the 
following conditions:
    1. SPH will continue to be engaged primarily in a non-investment 
company business and to seek to decrease the percentage of its total 
assets comprised of investment securities so as not to be an investment 
company within the meaning of the Act and the rules and regulations 
thereunder as soon as reasonably possible and in any event within one 
year from the date of the requested order.
    2. SPH will not engage in the trading of securities for short-term 
speculative purposes.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-10756 Filed 5-3-12; 8:45 am]
BILLING CODE 8011-01-P


