
[Federal Register Volume 78, Number 205 (Wednesday, October 23, 2013)]
[Notices]
[Pages 63253-63255]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24771]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IA-3693/803-00215]


Davidson Kempner Capital Management LLC; Notice of Application

October 17, 2013.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an exemptive order under Section 206A 
of the Investment Advisers Act of 1940 (the ``Advisers Act'') and Rule 
206(4)-5(e) thereunder.

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Applicant:  Davidson Kempner Capital Management LLC (``Applicant'').

Relevant Advisers Act Sections:  Exemption requested under section 206A 
of the Advisers Act and rule 206(4)-5(e) thereunder from rule 206(4)-
5(a)(1) under the Advisers Act.
Summary of Application:  Applicant requests that the Commission issue 
an order under section 206A of the Advisers Act and rule 206(4)-5(e) 
thereunder exempting it from rule 206(4)-5(a)(1) under the Advisers Act 
to permit Applicant to receive compensation from three government 
entities for investment advisory services provided to the government 
entities within the two-year period following a contribution by a 
covered associate of Applicant to an official of the government 
entities.

DATES: Filing Dates: The application was filed on October 16, 2012, and 
an amended and restated application was filed on July 5, 2013.

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 November 12, 2013, 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.

ADDRESSES:  Elizabeth M. Murphy, Secretary, Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicant, 
Davidson Kempner Capital Management LLC, c/o Shulamit Leviant, 65 East 
55th Street, 19th Floor, New York, New York 10022.

FOR FURTHER INFORMATION CONTACT: Melissa S. Gainor, Senior Counsel, or 
Sarah A. Buescher, Branch Chief, at (202) 551-6787 (Investment Adviser 
Regulation Office, Division of Investment Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
SEC's Public Reference Branch, 100 F Street NE., Washington, DC 20549-
0102 (telephone (202) 551-5850).

Applicant's Representations

    1. Applicant is a limited liability company registered with the 
Commission as an investment adviser under the Advisers Act. Applicant 
serves as investment adviser to Davidson Kempner Institutional 
Partners, L.P. (the ``Fund''), an issuer excluded from the definition 
of investment company pursuant to section 3(c)(7) of the Investment 
Company Act of 1940. Three of the investors in the Fund (the 
``Clients'') are Ohio public pension plans. The investment decisions 
for each Client are overseen by a board of between 9 and 11 trustees 
that includes one individual appointed by the Ohio State Treasurer.
    2. On May 22, 2011, Anthony Yoseloff, a managing member and senior 
investment professional of Applicant (the ``Contributor''), made a 
contribution of $2,500 (the ``Contribution'') to the federal senate 
campaign of Joshua Mandel, the Ohio State Treasurer (the ``Official''). 
The Contributor's wife also made a contribution for the same amount. 
Applicant represents that the amount of the Contribution, profile of 
the candidate and characteristics of the campaign are consistent with 
the pattern of the Contributor's other political contributions.
    3. Applicant represents that the Contributor did not solicit any 
persons

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to make contributions to the Official's campaign, and that the 
executive managing member of Applicant was informed of the 
Contributor's plan to meet with the Official, but never learned that 
the Contributor made the Contribution.
    4. Applicant represents that each Client's relationship with the 
Applicant pre-dates the Contribution and only one investment made by 
the Clients occurred after the contribution. The Applicant also 
represents that it took steps designed to limit the Contributor's 
contact with each Client and each Client's representatives during the 
duration of the two-year compensation time out. Applicant represents 
that the Contributor's role with the Clients was limited to making 
substantive presentations to the Client's representatives regarding the 
investment strategy for which the Contributor is a manager. Applicant 
represents that the Contributor had no contact with any representative 
of a Client outside of those presentations, and no contact with any 
member of a Client's board. No member of a Client's board serving at 
the time of the Contribution was appointed by the Official.
    5. Applicant represents that at no time did any employees of the 
Adviser other than the Contributor have any knowledge of the 
Contribution prior to its discovery by the Adviser on November 2, 2011. 
The Contribution was discovered by the Adviser's compliance department 
during compliance testing that included random testing of campaign 
contribution databases for the names of employees. After discovery of 
the Contribution, the Adviser and Contributor obtained the Official's 
agreement to return the full amount of the Contribution, which was 
subsequently returned. An escrow account was established and all fees 
paid from the Clients' capital accounts in the Fund for the two-year 
period beginning on May 22, 2011 were deposited in the account. 
Applicant represents that it notified each Client of the Contribution 
and resulting two-year prohibition on compensation absent exemptive 
relief from the Commission.
    6. The Adviser's policies and procedures regarding pay-to-play 
(``Pay-to-Play Policies and Procedures'') were initially adopted and 
implemented in August 2009 and required covered employees of the 
Adviser to pre-clear contributions to state and local office incumbents 
(including state and local officials running for federal office) and 
candidates. Applicant represents that the Contributor's violation of 
Applicant's Pay-to-Play Policies and Procedures resulted from his 
mistaken belief that all contributions to federal campaigns were 
permissible and exempt from Pay-to-Play Policies and Procedures. After 
learning of the Contributor's misunderstanding, Applicant represents 
that it revised its Pay to Play Policies and Procedures to require 
covered employees of the Adviser to pre-clear all campaign 
contributions to avoid similar misunderstandings by covered associates.

Applicant's Legal Analysis

    1. Rule 206(4)-5(a)(1) under the Advisers Act prohibits a 
registered investment adviser from providing investment advisory 
services for compensation to a government entity within two years after 
a contribution to an official of the government entity is made by the 
investment adviser or any covered associate of the investment adviser. 
Each Client is a ``government entity,'' as defined in rule 206(4)-
5(f)(5), the Contributor is a ``covered associate'' as defined in rule 
206(4)-5(f)(2), and the Official is an ``official'' as defined in rule 
206(4)-5(f)(6). Rule 206(4)-5(c) provides that when a government entity 
invests in a covered investment pool, the investment adviser to that 
covered investment pool is treated as providing advisory services 
directly to the government entity. The Fund is a ``covered investment 
pool,'' as defined in rule 206(4)-5(f)(3)(ii).
    2. Section 206A of the Advisers Act grants the Commission the 
authority to ``conditionally or unconditionally exempt any person or 
transaction . . . from any provision or provisions of [the Advisers 
Act] or of any rule or regulation thereunder, if and to the extent that 
such 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 Advisers Act].''
    3. Rule 206(4)-5(e) provides that the Commission may exempt an 
investment adviser from the prohibition under Rule 206(4)-5(a)(1) upon 
consideration of the factors listed below, among others:
    (1) Whether 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 Advisers 
Act;
    (2) Whether the investment adviser: (i) Before the contribution 
resulting in the prohibition was made, adopted and implemented policies 
and procedures reasonably designed to prevent violations of the rule; 
and (ii) prior to or at the time the contribution which resulted in 
such prohibition was made, had no actual knowledge of the contribution; 
and (iii) after learning of the contribution: (A) Has taken all 
available steps to cause the contributor involved in making the 
contribution which resulted in such prohibition to obtain a return of 
the contribution; and (B) has taken such other remedial or preventive 
measures as may be appropriate under the circumstances;
    (3) Whether, at the time of the contribution, the contributor was a 
covered associate or otherwise an employee of the investment adviser, 
or was seeking such employment;
    (4) The timing and amount of the contribution which resulted in the 
prohibition;
    (5) The nature of the election (e.g., federal, state or local); and
    (6) The contributor's apparent intent or motive in making the 
contribution which resulted in the prohibition, as evidenced by the 
facts and circumstances surrounding such contribution.
    4. Applicant requests an order pursuant to section 206A and rule 
206(4)-5(e) thereunder, exempting it from the two-year prohibition on 
compensation imposed by rule 206(4)-5(a)(1) with respect to investment 
advisory services provided to the Clients within the two-year period 
following the Contribution.
    5. Applicant submits that the exemption is necessary and 
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. Applicant further submits that the other factors 
set forth in rule 206(4)-5(e) similarly weigh in favor of granting an 
exemption to the Applicant to avoid consequences disproportionate to 
the violation.
    6. Applicant states that each Client determined to invest with 
Applicant and established those advisory relationships on an arms' 
length basis free from any improper influence as a result of the 
Contribution. In support of this argument, Applicant notes that each 
Client's relationship with the Applicant pre-dates the Contribution and 
only one investment made by the Clients occurred after the 
contribution. Furthermore, the Official's influence on each Client is 
limited, as was the Contributor's contact with each Client's 
representatives. Applicant also argues that the interests of the 
Clients are best served by allowing the Applicant and its Clients to 
continue their relationship uninterrupted.
    7. Applicant notes that it adopted and implemented Pay-to-Play 
Policies and Procedures compliant with the rule's

[[Page 63255]]

requirements and it implemented compliance testing procedures prior to 
the date of the Contribution. Applicant further represents that at no 
time did any employees of Applicant other than the Contributor have any 
knowledge that the Contribution had been made prior to discovery by the 
Applicant in November 2011. After learning of the Contribution, 
Applicant and the Contributor obtained the Official's agreement to 
return the Contribution, which was subsequently returned, and the 
Applicant set up an escrow account for all fees charged to the Clients' 
capital accounts in the Fund for the two-year period beginning May 22, 
2011.
    8. Applicant states that the Contributor's apparent intent in 
making the Contribution was not to influence the selection or retention 
of Applicant. Applicant represents that the amount of the Contribution, 
profile of the candidate and characteristics of the campaign are 
consistent with the pattern of the Contributor's other substantial 
political donations. Applicant notes that the Contributor failed to 
appreciate that contributions to federal candidates who held state or 
local office could trigger the prohibition on compensation under Rule 
206(4)-5 or that such contributions were subject to the Applicant's 
Pay-to-Play Policies and Procedures. Applicant represents that the 
Contributor had no contact with any representative of the Clients (or 
their boards) outside of making limited substantive presentations to 
the Clients' representatives and consultants about the investment 
strategy he manages and that the Applicant took steps designed to limit 
such contact during the duration of the two-year time out on 
compensation.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24771 Filed 10-22-13; 8:45 am]
BILLING CODE 8011-01-P


