
[Federal Register Volume 82, Number 32 (Friday, February 17, 2017)]
[Notices]
[Pages 11079-11081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-03184]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32477; 812-14743]


General Electric Company and GE Capital International Holdings 
Limited; Notice of Application

February 13, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (``Act'').

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Summary of Application:  General Electric Company (``GE'') and GE 
Capital International Holdings Limited (``European Holdco'') request an 
order under section 6(c) of the Act exempting European Holdco from all 
provisions of the Act during the period from the date of the requested 
order to the earlier of (a) three years from such date and (b) the 
completion of the sales process described in the application 
(``Exemption Period'').

Applicants: GE and European Holdco.

Filing Dates: The application was filed on February 10, 2017.

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 March 10, 2017, 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: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090; Applicants: 299 Park Avenue, New 
York, NY 10171.

FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at 
(202) 551-6826, or Daniele Marchesani, Assistant Chief Counsel, at 
(202) 551-6821 (Division of Investment Management, Chief Counsel's 
Office).

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.

Applicants' Representations

    1. GE, a New York corporation, is one of the largest and most 
diversified infrastructure and financial services corporations in the 
world. Its products and services range from aircraft engines, power 
generation, oil and gas production equipment and household appliances 
to medical imaging, business and consumer financing, and industrial 
products. Applicants state that GE is not an investment company as 
defined in section 3(a) of the Act.
    2. European Holdco, a UK limited company and a wholly-owned 
subsidiary of GE, is the successor to the former General Electric 
Capital Corporation (``Old GE Capital'') with respect to various 
foreign businesses formerly held by Old GE Capital. European Holdco, 
directly or through its majority-owned subsidiaries, engages in 
financing activities primarily for mid-sized companies within the 
industries in which GE provides its services.
    3. On April 10, 2015, GE announced a plan to reduce the size of its 
financial services businesses through the sale of most of the assets of 
Old GE Capital over the next 24 months and to focus on the continued 
investment and growth of GE's industrial businesses. As part of this 
plan, Old GE Capital's businesses were reorganized principally into 
European Holdco and a separate U.S. holding company (the 
``Reorganization''), with the non-U.S. businesses being contributed to 
European Holdco.\1\ The non-U.S. businesses transferred from Old GE 
Capital to European Holdco include, among others, (i) banking, (ii) 
equipment financing, (iii) inventory financing, (iv) factoring, (v) 
automobile

[[Page 11080]]

leasing, and (vi) aircraft and aircraft engine leasing.
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    \1\ As part of the plan to restructure and reduce the Old GE 
Capital business, Old GE Capital formed a finance subsidiary 
(``FinCo''), whose primary purpose is to finance the operations of 
GE's foreign subsidiaries.
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    4. Applicants assert that European Holdco is exempt from the Act 
pursuant to section 3(c)(6), the same exemption Old GE Capital was able 
to rely on prior to the Reorganization. Applicants state that in 
complying with section 3(c)(6), European Holdco relies not only on 
businesses described in sections 3(c)(3), (4), and (5), but also on 
businesses other than investing, reinvesting, owning, holding, or 
trading in securities. As such, to relying on section 3(c)(6), at least 
25% of European Holdco's gross income (i.e., revenue) generally must be 
derived from European Holdco's 3(c)(3), (4), and (5) businesses. GE has 
calculated that, as of September 30, 2016, approximately 91% of 
European Holdco's assets and 57% of its net income were derived from 
its section 3(c)(3), (4), and (5) businesses and its other businesses 
that are not investing, reinvesting, owning, holding, or trading in 
securities, and approximately 36% of its revenue was derived from its 
section 3(c)(3), (4), and (5) businesses. Applicants maintain that as 
such, European Holdco was in compliance with section 3(c)(6) as of that 
time.
    5. Applicants state that GE intends over time to sell many of the 
foreign businesses contributed to European Holdco as part of the 
Reorganization, and would like to be able to manage this sales process 
so as to maximize shareholder value, rather than in a manner necessary 
to continuously comply with European Holdco's exemption under the Act. 
GE has developed a plan for selling such businesses and expects that 
the sales process will be mostly complete within two years, with 
potentially some sales activity continuing into a third year. 
Applicants state that the sales process may extend into a third year 
given the tremendous complexity of GE's structure and the 
Reorganization. At the conclusion of the sales process, GE expects that 
European Holdco will not be an investment company pursuant to rule 3a-1 
under the Act (or otherwise), as its anticipated remaining businesses 
will involve significant amounts of assets that are not investment 
securities for purposes of the Act (such as aircraft and aircraft 
engines). Accordingly, applicants request an order of exemption for the 
duration of the Exemption Period to permit GE to sell various 
businesses without concern that it might cause European Holdco 
inadvertently and temporarily to become an investment company under the 
Act.

Applicants' Legal Analysis

    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. Applicants assert that although European Holdco's financing 
businesses involve significant holdings of investment securities (such 
as mortgages and equipment finance loans), European Holdco as currently 
structured is not an investment company under section 3(c)(6) of the 
Act, the same exemption Old GE Capital was able to rely on prior to the 
Reorganization. However, applicants state that there could be times 
during the process of selling European Holdco's businesses, depending 
on the order in which the businesses are sold and the remaining mix of 
businesses, when European Holdco would technically not satisfy section 
3(c)(6), rule 3a-1, or any other exception from the definition of 
``investment company,'' and thus may fall within the definition of 
``investment company'' in section 3(a)(1)(C).
    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. Applicants state that the expected 
length of the sales process may preclude European Holdco from relying 
on rule 3a-2 because applicants cannot state that European Holdco has a 
bona fide intent to be engaged primarily in a business other than 
investing, reinvesting, owning, holding, or trading in securities 
within one year.
    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. Applicants request an order under section 6(c) exempting 
European Holdco from all provisions of the Act for the duration of the 
Exemption Period. Applicants believe that the period of time requested 
will provide GE with enough time to execute the sales plan in a manner 
that maximizes economic value while ensuring that, at the end of the 
Exemption Period, European Holdco will not be an investment company.
    7. Applicants assert that as a result of GE's plan to reduce its 
financial services businesses through the sale of foreign businesses 
held by European Holdco, European Holdco may temporarily fall within 
the statutory definition of an investment company, even though that 
definition is not an accurate depiction of European Holdco's business. 
Applicants assert that their officers will work diligently to bring 
European Holdco into compliance with rule 3a-1 (or another exemption) 
under the Act within three years. Applicants state that European 
Holdco's transactions in securities will not be for speculative 
purposes, but rather in furtherance of its business as a holding 
company for certain international financial businesses of GE. 
Applicants contend that registration under the Act would involve 
unnecessary burden and expense for the applicants and GE's 
shareholders, and would serve no regulatory purpose. For the reasons 
discussed above, applicants assert 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.

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Applicants' Conditions

    Applicants agree that the requested exemption will be subject to 
the following conditions:
    1. European Holdco will not engage in the trading of securities for 
short-term speculative purposes;
    2. European Holdco will not hold itself out as being engaged 
primarily in the business of investing, reinvesting, or trading in 
securities; and
    3. European Holdco will have no securities outstanding while it is 
relying on the order other than (i) guarantees of FinCo debt that is 
also guaranteed by GE, (ii) debt securities (including commercial 
paper) guaranteed by GE and (iii) securities held by European Holdco's 
affiliates.
    4. European Holdco will 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 three years from the date of the requested order.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-03184 Filed 2-16-17; 8:45 am]
 BILLING CODE 8011-01-P


