[Federal Register Volume 84, Number 236 (Monday, December 9, 2019)]
[Notices]
[Pages 67318-67324]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26407]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33709; 813-00394]


Lazard Asset Management LLC and Lazard ESC Funds LLC

December 3, 2019.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of application for an order under sections 6(b) and 6(e) of 
the Investment Company Act of 1940 (the ``Act'') granting an exemption 
from all provisions of the Act and the rules and regulations 
thereunder, except sections 9, 17, 30, and 36 through 53 of the Act, 
and the rules and regulations thereunder (the ``Rules and 
Regulations''). With respect to sections 17(a), (d), (e), (f), (g) and 
(j) and 30(a), (b), (e), and (h) of the Act, and the Rules and 
Regulations, and rule 38a-1 under the Act, the exemption is limited as 
set forth in the application.

Summary of Application: Applicants request an order to exempt certain 
limited partnerships, limited liability companies, corporations, 
business or statutory trusts or other entities formed for the benefit 
of eligible employees of Lazard Asset Management LLC and its affiliates 
from certain provisions of the Act. Each series of a Fund will be an 
``employees' securities company'' within the meaning of section 
2(a)(13) of the Act.

Applicants: Lazard Asset Management LLC, a Delaware limited liability 
company (``LAM'') and Lazard ESC Funds LLC, a Delaware limited 
liability company.

Filing Dates: The application was filed on January 18, 2019 and was 
amended on June 20, 2019 and September 24, 2019.

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 December 30, 2019, 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: 30 Rockefeller Plaza, 
New York, NY 10112.

FOR FURTHER INFORMATION CONTACT: Kyle R. Ahlgren, Senior Counsel, at 
(202) 551-6857, or Holly L. Hunter-Ceci, Assistant Chief Counsel, at 
(202) 551-6825 (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 website by searching for the file number, or for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicants' Representations

    1. LAM and its ``affiliates'' within the meaning of rule 12b-2 
under the Securities Exchange Act of 1934 (the ``Exchange Act'') 
(collectively, ``Lazard''), have organized Lazard ESC Funds LLC, and 
may in the future organize limited partnerships, limited liability 
companies, business or statutory trusts or other entities or series of 
any of the foregoing as ``employees'

[[Page 67319]]

securities companies'' (each, a ``Fund'' and together with series of 
Lazard ESC Funds LLC, the ``Funds''). The Funds are intended to provide 
investment opportunities that are competitive with those at other 
investment management and financial services firms and to facilitate 
the recruitment and retention of high caliber professionals.
    2. Lazard ESC Funds LLC was formed on January 23, 2019 as a 
Delaware limited liability company. LAM is the manager of Lazard ESC 
Funds LLC. The investment objectives and policies of each Fund and 
whether it will operate as a diversified or non-diversified vehicle may 
vary from Fund to Fund, and will be set forth in the informational 
memorandum and the governing documents relating to the specific Fund. 
Potential investments for the Funds may include a wide variety of U.S. 
and non-U.S. assets, including but not limited to, public and private 
debt and equity securities, real estate, equity, credit, and other 
financial assets. The Funds may invest either directly or indirectly 
through investments in limited partnerships and other investment pools 
(including pools that are exempt from registration in reliance on 
section 3(c)(1) or 3(c)(7) of the Act) and investments in registered 
investment companies. Investments may be made side by side with Lazard 
and Lazard-related investors and through investment pools (including 
Aggregation Vehicles) \1\ sponsored or managed by Lazard or an 
unaffiliated entity.
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    \1\ An ``Aggregation Vehicle'' is an investment pool sponsored 
or managed by Lazard or an unaffiliated entity that is formed solely 
for the purpose of permitting a Fund and Lazard and Lazard-related 
investors or Third Party Funds to collectively invest in other 
entities. A ``Third Party Fund'' is an investment fund organized 
primarily for the benefit of investors who are not affiliated with 
Lazard over which Lazard or an unaffiliated subadviser exercises 
investment discretion.
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    3. A Fund may be structured as a limited partnership, limited 
liability company, corporation, business or statutory trust or other 
entity, or series of any of the foregoing. A Fund may be organized 
inside the United States (under the laws of Delaware, or another state) 
or in a jurisdiction outside the United States. A Fund may be organized 
under the laws of a non-U.S. jurisdiction to address any tax, legal, 
accounting and/or regulatory considerations applicable to certain 
Eligible Employees (defined below) in other jurisdictions or the nature 
of the investment program. The investment objectives and policies of 
the Funds may vary from Fund to Fund. Each Fund will operate either as 
a closed-end or open-end management investment company, and a 
particular Fund may operate as a ``diversified'' or ``non-diversified'' 
vehicle, within the meaning of the Act. A Fund may be a partnership or 
corporation for U.S. federal income tax purposes, and a Fund that is a 
corporation for U.S. federal income tax purposes may elect to be 
treated as a regulated investment company. A Fund may serve as the 
master fund of one or more other Funds (such entities, ``Master 
Funds''). Interests in a Fund (``Interests'') may be issued in one or 
more series, each of which corresponds to particular Fund investments. 
In such event, each series will be an ``employees' securities company'' 
within the meaning of section 2(a)(13) of the Act.
    4. Lazard will control each Fund within the meaning of section 
2(a)(9) of the Act. Each Fund will have a general partner, managing 
member or other such similar entity (a ``General Partner'') that 
manages, operates and controls such Fund and will be responsible for 
the overall management of the Fund. The General Partner or another 
Lazard entity will serve as investment adviser (``Investment Adviser'') 
to each Fund.
    5. Each General Partner and Investment Adviser in managing a Fund 
is an ``investment adviser'' within the meaning of sections 9 and 36 of 
the Act, and is subject to those sections. The Investment Adviser may 
be paid a management fee for its services to a Fund. A General Partner 
or Investment Adviser may receive a performance-based fee or allocation 
(``Carried Interest'') based on the net gains of the Fund's investments 
or increase in the value of Interests, in addition to any amount 
allocable to the General Partner's or Investment Adviser's 
Interests.\2\
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    \2\ All or a portion of the Carried Interest may be paid to 
individuals who are officers, employees or stockholders of the 
General Partner or Investment Adviser or their ``affiliated 
persons,'' as defined in section 2(a)(3) of the Act.
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    6. If a General Partner determines that a Fund should enter into 
any side-by-side investment with an unaffiliated entity, the General 
Partner will be permitted to engage as sub-investment adviser the 
unaffiliated entity (an ``Unaffiliated Subadviser''), which will be 
responsible for the management of such side-by-side investment.
    7. With the exception of Plan Interest Holders (as defined below), 
all potential investors in a Fund (the ``Investors'') will be informed, 
among other things, that Interests in a Fund will be offered in a 
transaction exempt from registration under section 4(a)(2) of the 
Securities Act of 1933, as amended (the ``1933 Act''), or Regulation D 
or Regulation S promulgated thereunder, and will be sold only to 
Qualified Participants, which term refers to: (i) Eligible Employees 
(as defined below); (ii) at the request of Eligible Employees and the 
discretion of the General Partner, to Qualified Participants (as 
defined below) of such Eligible Employees; or (iii) Lazard.\3\ Prior to 
offering Interests to an Eligible Employee or an Eligible Family Member 
(as defined below), a General Partner must reasonably believe that the 
Eligible Employee or Eligible Family Member will be capable of 
understanding and evaluating the merits and risks of participation in a 
Fund and that each such individual is able to bear the economic risk of 
such participation and afford a complete loss of his or her investment 
in a Fund.
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    \3\ In order to qualify as a ``Qualified Participant,'' an 
individual or entity must (i) be an Eligible Family Member or 
Eligible Investment Vehicle of an Eligible Employee or Plan Interest 
Holder and (ii) if purchasing an Interest from a Fund, except as 
discussed below, come within the standards of an ``accredited 
investor'' under rule 501(a) of Regulation D.
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    8. In order to qualify as an ``Eligible Employee,'' (a) an 
individual must (i) be a current or former employee, officer or 
director or current Consultant \4\ of Lazard and (ii) except for 
certain individuals who meet the definition of ``knowledgeable 
employee'' in rule 3c-5(a)(4) under the Act as if the Funds were 
``Covered Companies'' within the meaning of the rule and a limited

[[Page 67320]]

number of other employees of Lazard \5\ (collectively, ``Non-Accredited 
Investors''), meet the standards of an ``accredited investor'' under 
rule 501(a)(5) or (a)(6) of Regulation D, or (b) an entity must (i) be 
a current Consultant of Lazard and (ii) meet the standards of an 
``accredited investor'' under rule 501(a) of Regulation D. No Fund will 
sell its Interests to more than 35 Non-Accredited Investors under 
Regulation D.
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    \4\ The term ``Consultant'' is defined as a person or entity who 
Lazard has engaged to provide services and professional expertise on 
an ongoing basis as regular consultants or business or legal 
advisors to Lazard. In order to participate in the Funds, 
Consultants must be currently engaged by Lazard and will be required 
to be sophisticated investors who qualify as accredited investors 
under rule 501(a) of Regulation D. If a Consultant is an entity 
(such as, for example, a law firm or consulting firm), and the 
Consultant proposes to invest in the Fund through a partnership, 
corporation or other entity that is controlled by the Consultant, 
the individual participants in such partnership, corporation or 
other entity will be limited to senior level employees, members or 
partners of the Consultant who are responsible for the activities of 
the Consultant or the activities of the Consultant in relation to 
Lazard and will be required to qualify as ``accredited investors'' 
under rule 501(a) of Regulation D. In addition, such entities will 
be limited to businesses controlled by individuals who have levels 
of expertise and sophistication in the area of investments in 
securities that are comparable to other Eligible Employees who are 
employees, officers or directors of Lazard and who have an interest 
in maintaining an ongoing relationship with Lazard. The individuals 
participating through such entities will belong to that class of 
persons who will have access to the directors and officers of the 
General Partner or the directors and officers of Lazard, as 
applicable, responsible for making investments for the Funds similar 
to the access afforded Eligible Employees who are employees, 
officers or directors of Lazard.
    \5\ Such employees must meet the sophistication requirements set 
forth in rule 506(b)(2)(ii) of Regulation D under the 1933 Act and 
may be permitted to invest his or her own funds in the Fund if, at 
the time of the employee's investment in a Fund, he or she (a) has a 
graduate degree in business, law or accounting, (b) has a minimum of 
five years of consulting, investment banking or similar business 
experience, and (c) has had reportable income from all sources of at 
least $100,000 in each of the two most recent years and a reasonable 
expectation of income from all sources of at least $140,000 in each 
year in which such person will be committed to make investments in a 
Fund. In addition, such an employee will not be permitted to invest 
in any year more than 10% of his or her income from all sources for 
the immediately preceding year in the aggregate in such Fund and in 
all other Funds in which he or she has previously invested.
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    9. An ``Eligible Family Member'' is a spouse, parent, child, spouse 
of child, brother, sister or grandchild of an Eligible Employee or Plan 
Interest Holder, including step and adoptive relationships. An 
``Eligible Investment Vehicle'' is (a) a trust of which the trustee, 
grantor and/or beneficiary is an Eligible Employee or Plan Interest 
Holder, (b) a partnership, corporation or other entity controlled by an 
Eligible Employee or Plan Interest Holder, or (c) a trust or other 
entity established solely for the benefit of an Eligible Employee or 
Plan Interest Holder and/or one or more Eligible Family Members of an 
Eligible Employee or Plan Interest Holder.
    10. Certain employees of Lazard may also receive Interests as part 
of an employee benefit plan without payment in order to reward and 
retain these employees (each, a ``Plan Interest Holder''). The Funds 
will not register Interests awarded to Plan Interest Holders under the 
1933 Act in reliance on an opinion of counsel that the awards of 
Interests are not sales within the meaning of section 2(a)(3) of the 
1933 Act. No relief from the provisions of the 1933 Act is requested by 
the Applicants with respect to the award of Interests to Plan Interest 
Holders. Plan Interest Holders will not be required to meet the 
sophistication and salary requirements to which Eligible Employees are 
subject.
    11. An Eligible Employee or Eligible Family Member may purchase 
Interests through an Eligible Investment Vehicle only if either (i) the 
investment vehicle is an ``accredited investor'' as defined in rule 
501(a) of Regulation D, or (ii) the applicable Eligible Employee or 
Eligible Family Member is a settlor \6\ and principal investment 
decision-maker with respect to the investment vehicle. Eligible 
Investment Vehicles that are not accredited investors will be counted 
in accordance with Regulation D toward the 35 Non-Accredited Investor 
limit discussed above.
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    \6\ If such investment vehicle is an entity other than a trust, 
the term ``settlor'' will be read to mean a person who created such 
vehicle, alone or together with other Eligible Employees and/or 
Eligible Family Members, and contributed funds to such vehicle.
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    12. The terms of each Fund will be fully disclosed to each Eligible 
Employee and, if a Qualified Participant of such Eligible Employee is 
required to make an investment decision with respect to whether or not 
to participate in a Fund, to such Qualified Participant, at the time 
such Eligible Employee or Qualified Participant is invited to 
participate in the Fund, or to a Plan Interest Holder at the time he or 
she receives an Interest. A Fund will send its investors an annual 
financial statement within 120 days after the end of each fiscal year 
end of the Fund, or as soon as practicable after the end of the Fund's 
fiscal year. The annual financial statement will be audited \7\ by an 
independent certified public accountant. In addition, as soon as 
practicable after the end of each fiscal year of a Fund, a report will 
be sent to each investor setting forth the information with respect 
such investor's share of income, gains, losses, credits, and other 
items for U.S. federal and state income tax purposes resulting from the 
operation of the Fund during that year.
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    \7\ ``Audit'' has the meaning defined in rule 1-02(d) of 
Regulation S-X.
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    13. Interests in a Fund will be non-transferable except with the 
prior written consent of the General Partner, and, in any event, no 
person or entity will be admitted into the Fund as an investor unless 
such person is (i) an Eligible Employee, (ii) a Plan Interest Holder, 
(iii) a Qualified Participant, or (iv) Lazard. No sales load or similar 
fee of any kind will be charged in connection with the sale of 
Interests.
    14. A General Partner may have the right, but not the obligation, 
to repurchase, cancel, or transfer to another Qualified Participant the 
Interests of (i) an Eligible Employee who ceases to be an employee, 
officer, director or Consultant of Lazard for any reason or (ii) any 
Qualified Participant of any person described in clause (i). The 
governing documents for each Fund will describe, if applicable, the 
amount that an investor would receive upon repurchase, cancellation or 
transfer of its Interests.
    15. Among other assets, the Funds may invest either directly or 
indirectly through investments in limited partnerships and other 
investment pools (including pools that are exempt from registration in 
reliance on section 3(c)(1) or 3(c)(7) of the Act) and investments in 
registered investment companies. Investments may be made side by side 
with Lazard and Lazard-related investors and through investment pools 
(including Aggregation Vehicles) sponsored or managed by Lazard or an 
unaffiliated entity.
    16. A Fund may co-invest in a portfolio company with one or more of 
Lazard and/or a separate account for the benefit of clients, or an 
investment fund organized primarily for the benefit of investors, in 
either case, who are not affiliated with Lazard over which Lazard or an 
Unaffiliated Subadviser exercises investment discretion (``Third Party 
Funds''). Side-by-side investments held by a Third Party Fund, or by 
Lazard in a transaction in which Lazard's investment was made pursuant 
to a contractual obligation to a Third Party Fund, will not be subject 
to the restrictions contained in Condition 3. All other side-by-side 
investments held by Lazard will be subject to the restrictions 
contained in Condition 3.
    17. If Lazard makes loans to a Fund, the lender will be entitled to 
receive interest, provided that the interest rate will be no less 
favorable to the borrower than the rate obtainable on an arm's length 
basis. The possibility of any such borrowings, as well as the terms 
thereof, would be disclosed to investors prior to their investment in a 
Fund. Any indebtedness of the Fund will be the debt of the Fund and 
without recourse to the investors. A Fund will not borrow from any 
person if the borrowing would cause any person not named in section 
2(a)(13) of the Act to own securities of the Fund (other than short-
term paper). A Fund will not lend any funds to Lazard.
    18. A Fund will not purchase or otherwise acquire any security 
issued by a registered investment company if, immediately after such 
purchase or acquisition, the Fund would own more than 3% of the 
outstanding voting stock of the registered investment company unless 
such purchase or acquisition is permitted under the applicable rules 
and regulations or any applicable exemption.

[[Page 67321]]

Applicants' Legal Analysis

    1. Section 6(b) of the Act provides that the Commission shall 
exempt employees' securities companies from the provisions of the Act 
if and to the extent that such exemption is consistent with the 
protection of investors. Section 6(b) provides that the Commission will 
consider, in determining the provisions of the Act from which the 
company should be exempt, the company's form of organization and 
capital structure, the persons owning and controlling its securities, 
the price of the company's securities and the amount of any sales load, 
how the company's funds are invested, and the relationship between the 
company and the issuers of the securities in which it invests. Section 
2(a)(13) defines an employees' securities company, in relevant part, as 
any investment company all of whose securities (other than short-term 
paper) are beneficially owned (a) by current or former employees, or 
persons on retainer, of one or more affiliated employers, (b) by 
immediate family members of such persons, or (c) by such employer or 
employers together with any of the persons in (a) or (b).
    2. Section 7 of the Act generally prohibits investment companies 
that are not registered under section 8 of the Act from selling or 
redeeming their securities. Section 6(e) of the Act provides that in 
connection with any order exempting an investment company from any 
provision of section 7, certain specified provisions of the Act shall 
be applicable to such company, and to other persons in their 
transactions and relations with such company, as though such company 
were registered under the Act, if the Commission deems it necessary and 
appropriate in the public interest or for the protection of investors. 
Applicants submit that it would be appropriate in the public interest 
and consistent with the protection of investors and the purposes fairly 
intended by the policies and provisions of the Act for the Commission 
to issue an order under sections 6(b) and 6(e) of the Act exempting the 
Funds from all provisions of the Act and the rules and regulations 
thereunder, except sections 9, 17, 30, and 36 through 53 of the Act, 
and the Rules and Regulations. With respect to sections 17(a), (d), 
(e), (f), (g) and (j) and 30(a), (b), (e), and (h) of the Act, and the 
Rules and Regulations, and rule 38a-1 under the Act, Applicants request 
a limited exemption as set forth in the application.
    3. Section 17(a) of the Act generally prohibits any affiliated 
person of a registered investment company, or any affiliated person of 
such a person, acting as principal, from knowingly selling or 
purchasing any security or other property to or from the investment 
company. Applicants request an exemption from section 17(a) to the 
extent necessary to (a) permit Lazard or a Third Party Fund (or any 
``affiliated person,'' as defined in the Act, of Lazard or a Third 
Party Fund), acting as a principal, to purchase or sell securities or 
other property to or from any Fund or any company controlled by such 
Fund; and (b) permit a Fund to invest in or engage in any transaction 
with Lazard, acting as principal, (i) in which such Fund, any company 
controlled by such Fund or Lazard or any Third Party Fund has invested 
or will invest, or (ii) with which such Fund, any company controlled by 
such Fund or Lazard or any Third Party Fund is or will become otherwise 
affiliated. The transactions to which any Fund is a party will be 
effected only after a determination by the General Partner that the 
requirements of Conditions 1, 2 and 6 below have been satisfied. 
Lazard, on behalf of the Funds, represents that any transactions 
otherwise subject to section 17(a) of the Act, for which exemptive 
relief has not been requested, would require approval of the 
Commission.
    4. Applicants submit that an exemption from section 17(a) is 
consistent with the policy of each Fund and the protection of 
investors. Applicants state that the investors in each Fund will have 
been fully informed of the possible extent of such Fund's dealings with 
Lazard and of the potential conflicts of interest that may exist. 
Applicants also state that, as professionals employed in the investment 
management and securities businesses, or in administrative, financial, 
accounting, legal, sales, marketing, risk management or operational 
activities related thereto, the investors will be able to understand 
and evaluate the risks associated with those dealings. Applicants 
assert that the community of interest among the investors in each Fund 
and Lazard will serve to reduce the risk of abuse in transactions 
involving Lazard. Applicants acknowledge that the requested relief will 
not extend to any transactions between a Fund and an Unaffiliated 
Subadviser or an affiliated person of an Unaffiliated Subadviser, or 
between a Fund and any person who is not an employee, officer or 
director of Lazard or is an entity outside of Lazard and is an 
affiliated person of the Fund as defined in section 2(a)(3)(E) of the 
Act (an ``Advisory Person'') or any affiliated person of such person.
    5. Section 17(d) of the Act and rule 17d-1 thereunder prohibit any 
affiliated person or principal underwriter of a registered investment 
company, or any affiliated person of such a person or principal 
underwriter, acting as principal, from participating in any joint 
arrangement with the company unless authorized by the Commission. 
Applicants request an exemption from section 17(d) and rule 17d-1 to 
the extent necessary to permit affiliated persons of each Fund, or 
affiliated persons of any of such persons, to participate in, or effect 
any transaction in connection with, any joint enterprise or other joint 
arrangement or profit-sharing plan in which such Fund or a company 
controlled by such Fund is a participant. The exemption would permit, 
among other things, co-investments by the Funds, Third Party Funds and 
individual members or employees, officers, directors or Consultants of 
Lazard making their own individual investment decisions apart from 
Lazard. Applicants acknowledge that the requested relief will not 
extend to any transaction in which an Unaffiliated Subadviser or an 
Advisory Person or an affiliated person of either such person has an 
interest, except in connection with a Third Party Fund sponsored by an 
Unaffiliated Subadviser.
    6. The Applicants submit that investments will be made by a Fund 
because of its affiliation with Lazard. The Applicants also submit that 
the types of investment opportunities often considered by a Fund 
require each participant in the transaction to make funds available in 
an amount that may be substantially greater than what a Fund (including 
its Eligible Employees, Plan Interest Holders and Qualified 
Participants) may be able to make available on its own. The Applicants 
contend that, as a result, the only way in which a Fund (and thus its 
Eligible Employees, Plan Interest Holders and Qualified Participants) 
may be able to participate in these opportunities is to co-invest with 
Lazard. The Applicants note that each Fund will be primarily organized 
for the benefit of Eligible Employees as an incentive for them to 
remain with Lazard and for the generation and maintenance of goodwill. 
The Applicants believe that, if co-investments with Lazard are 
prohibited, the appeal of the Funds would be significantly diminished. 
The Applicants assert that Eligible Employees wish to participate in 
such co-investment opportunities because they believe that (i) the 
resources of Lazard enable it to analyze investment

[[Page 67322]]

opportunities to an extent that Eligible Employees would not be able to 
duplicate, (ii) investments recommended by Lazard will not be generally 
available to investors even of the financial status of the Eligible 
Employees, and (iii) Eligible Employees will be able to pool their 
investment resources, thus achieving greater diversification of their 
individual investment portfolios.
    7. Applicants assert that the flexibility to structure co-
investments and joint investments will not involve abuses of the type 
section 17(d) and rule 17d-1 were designed to prevent. In addition, 
Applicants represent that any transactions otherwise subject to section 
17(d) of the Act and rule 17d-1 thereunder, for which exemptive relief 
has not been requested, would require approval by the Commission.
    8. Co-investments with Third Party Funds, or by Lazard pursuant to 
a contractual obligation to a Third Party Fund, will not be subject to 
Condition 3 below. The Applicants note that it is common for a Third 
Party Fund to require that Lazard invest its own capital in Third Party 
Fund investments and that Lazard's investments be subject to 
substantially the same terms as those applicable to the Third Party 
Fund. The Applicants believe that it is important that the interests of 
the Third Party Fund take priority over the interests of the Funds and 
that the Third Party Fund not be burdened or otherwise affected by 
activities of the Funds. In addition, the Applicants assert that the 
relationship of a Fund to a Third Party Fund is fundamentally different 
from a Fund's relationship to Lazard. The Applicants contend that the 
focus of, and the rationale for, the protections contained in the 
requested relief are to protect the Funds from any overreaching by 
Lazard in the employer/employee context, whereas the same concerns are 
not present with respect to the Funds vis-[agrave]-vis a Third Party 
Fund.
    9. Section 17(e) of the Act and rule 17e-1 thereunder limit the 
compensation an affiliated person may receive when acting as agent or 
broker for a registered investment company. Applicants request an 
exemption from section 17(e) to permit Lazard (including the General 
Partner) that acts as an agent or broker to receive placement fees, 
advisory fees, brokerage fees or other compensation from a Fund in 
connection with the purchase or sale by the Fund of securities, 
provided that the fees or other compensation are deemed ``usual and 
customary.'' Applicants state that for purposes of the application, 
fees or other compensation that are charged or received by Lazard will 
be deemed ``usual and customary'' only if (i) the Fund is purchasing or 
selling securities with other unaffiliated third parties, including 
Third Party Funds, (ii) the fees or other compensation being charged to 
the Fund (directly or indirectly) are also being charged to the 
unaffiliated third parties, including Third Party Funds, and (iii) the 
amount of securities being purchased or sold by the Fund (directly or 
indirectly) does not exceed 50% of the total amount of securities being 
purchased or sold by the Fund (directly or indirectly) and the 
unaffiliated third parties, including Third Party Funds. Applicants 
state that compliance with section 17(e) would prevent a Fund from 
participating in transactions in where the Fund is being charged lower 
fees than unaffiliated third parties also participating in the 
transaction. Applicants assert that the concerns of overreaching and 
abuse that section 17(e) and rule 17e-1 were designed to prevent are 
alleviated by the conditions that ensure that the fees or other 
compensation paid by a Fund to Lazard are those negotiated at arm's 
length with unaffiliated third parties.
    10. Rule 17e-1(b) under the Act requires that a majority of 
directors who are not ``interested persons'' (as defined in section 
2(a)(19) of the Act) take actions and make approvals regarding 
commissions, fees, or other remuneration. Rule 17e-1(c) under the Act 
requires each Fund to comply with the fund governance standards defined 
in rule 0-1(a)(7) under the Act. Applicants request an exemption from 
rule 17e-1(b) to the extent necessary to permit each Fund to comply 
with rule 17e-1(b) without having a majority of the directors of the 
General Partner who are not ``interested persons'' take actions and 
make determinations as set forth in paragraph (b) of the rule and 
without having to satisfy the standards set forth in paragraph (c) of 
the rule. Applicants state that because all the directors or other 
governing body of a General Partner will be affiliated persons, without 
the relief requested, a Fund could not comply with rule 17e-1. 
Applicants represent that each Fund will comply with rule 17e-1(b) by 
having a majority of the directors (or members of a comparable body) of 
the Fund or its General Partner take such actions and make such 
approvals as are set forth in the rule. Applicants state that each Fund 
will otherwise comply with rule 17e-1.
    11. Section 17(f) of the Act provides that the securities and 
similar investments of a registered management investment company must 
be placed in the custody of a bank, a member of a national securities 
exchange or the company itself in accordance with Commission rules. 
Rule 17f-1 under the Act specifies the requirements that must be 
satisfied for a registered management investment company to maintain 
custody of its securities and similar investments with a company that 
is a member of a national securities exchange. The Applicants request 
relief from section 17(f) of the Act and subsections (a), (b) (to the 
extent such subsection refers to contractual requirements), (c) and (d) 
of rule 17f-1 under the Act to the extent necessary to permit Lazard to 
act as custodian for a Fund without a written contract. Applicants 
contend that since there is a close association between a Fund and 
Lazard, requiring a detailed written contract would expose the Fund to 
unnecessary burden and expense. The Applicants also request relief from 
the requirement in paragraph (b)(4) of the rule that an independent 
accountant periodically verify the Fund's assets held by the custodian. 
The Applicants believe that, because of the community of interest 
between Lazard and the Funds and the existing requirement for an 
independent audit, compliance with this requirement would be 
unnecessary. Except as set forth above, a Fund relying on rule 17f-1 
will otherwise comply with the provisions of the rule.
    12. Rule 17f-2 under the Act specifies the requirements that must 
be satisfied for a registered management investment company to act as a 
custodian of its own investments. Applicants request relief from 
section 17(f) and rule 17f-2 to permit the following exceptions from 
the requirements of rule 17f-2: (i) A Fund's investments may be kept in 
the locked files of Lazard or the General Partner or the Investment 
Adviser; (ii) for purposes of paragraph (d) of the rule, (a) employees 
of the General Partner (or Lazard) will be deemed to be employees of 
the Funds, (b) officers or managers of the General Partner (or Lazard) 
will be deemed to be officers of the Fund, and (c) the General Partner 
or its board of directors will be deemed to be the board of directors 
of the Fund; and (iii) in place of the verification procedure under 
paragraph (f) of the rule, verification will be effected quarterly by 
two employees, each of whom will have sufficient knowledge, 
sophistication and experience in business matters to perform such 
examination. With respect to certain Funds, some of their investments 
may be evidenced only by partnership agreements, participation 
agreements or similar documents, rather than by negotiable certificates 
that could be misappropriated. The Applicants

[[Page 67323]]

assert that, for such a Fund, these instruments are most suitably kept 
in the files of Lazard, the General Partner or the Investment Adviser, 
where they can be referred to as necessary. The Applicants state that 
they will comply with all other provisions of rule 17f-2.
    13. Section 17(g) of the Act and rule 17g-1 thereunder generally 
require the bonding of officers and employees of a registered 
investment company who have access to its securities or funds. Rule 
17g-1 requires that a majority of directors who are not ``interested 
persons'' of a registered investment company take certain actions and 
give certain approvals relating to fidelity bonding. Among other 
things, the rule also requires that the board of directors of an 
investment company relying on the rule satisfy the fund governance 
standards defined in rule 0-1(a)(7). Applicants request an exemption 
from rule 17g-1 to the extent necessary to permit the General Partner's 
board of directors or other governing body, who may be deemed 
interested persons, to take actions and make determinations as set 
forth in the rule. The Applicants also request an exemption from the 
requirements of: (i) Paragraph (g) of rule 17g-1 relating to the filing 
of copies of fidelity bonds and related information with the Commission 
and the provision of notices to the board of directors; (ii) paragraph 
(h) of the rule relating to the appointment of a person to make the 
filings and provide the notices required by paragraph (g); and (iii) 
paragraph (j)(3) of the rule relating to compliance with the fund 
governance standards set forth in rule 0-1(a)(7) under the Act. 
Applicants state that because all directors or other governing body of 
the General Partner will be affiliated persons, a Fund could not comply 
with rule 17g-1 without the requested relief. Applicants contend that 
the filing requirements are burdensome and unnecessary as applied to 
the Funds and represent that the applicable General Partner will 
maintain the materials otherwise required to be filed with the 
Commission by paragraph (g) of rule 17g-1 and agree that all such 
materials will be subject to examination by the Commission and its 
staff. Applicants submit that no purpose would be served in complying 
with the requirements of the rule related to filing information with 
the Commission. Applicants represent that the Funds will comply with 
all other requirements of rule 17g-1.
    14. Section 17(j) of the Act and rule 17j-1 require that every 
registered investment company adopt a written code of ethics that 
contains provisions reasonably necessary to prevent ``access persons'' 
from violating the anti-fraud provisions of the rule. Under rule 17j-1, 
the investment company's access persons must report to the investment 
company with respect to transactions in any security in which the 
access person has, or by reason of the transaction acquires, any direct 
or indirect beneficial ownership in such security. Applicants request 
an exemption from section 17(j) and the provisions of rule 17j-1, 
except for the antifraud provisions of paragraph (b), because they 
assert that these requirements are unnecessarily burdensome as applied 
to the Funds. The relief requested will extend only to Lazard and is 
not requested with respect to any Unaffiliated Subadviser or Advisory 
Person.
    15. Sections 30(a), (b) and (e) of the Act and the rules thereunder 
generally require that registered investment companies prepare and file 
with the Commission and mail to their shareholders certain periodic 
reports and financial statements. Applicants contend that the forms 
prescribed by the Commission for periodic reports have little relevance 
to the Funds and would entail administrative and legal costs that 
outweigh any benefit to the investors. Applicants request relief under 
sections 30(a), (b) and (e) to the extent necessary to permit each Fund 
to report annually to its investors in the manner described in the 
application. Section 30(h) of the Act requires that every officer, 
director, member of an advisory board, investment adviser or affiliated 
person of an investment adviser of a closed-end investment company be 
subject to the same duties and liabilities as those imposed upon 
similar classes of persons under section 16(a) of the Exchange Act. 
Applicants request an exemption from section 30(h) of the Act to the 
extent necessary to exempt the General Partner of each Fund, members of 
the General Partner, any board of managers or directors or committee of 
Lazard's employees to whom the General Partner may delegate its 
functions, and any other persons who may be deemed to be members of an 
advisory board of a Fund, or any other persons otherwise subject to 
section 30(h), from filing Forms 3, 4, and 5 under section 16(a) of the 
Exchange Act with respect to their ownership interests in the Fund. 
Applicants assert that, because there will be no trading market and the 
transfers of Interests are severely restricted, these filings are 
unnecessary for the protection of investors and burdensome to those 
required to make them.
    16. Rule 38a-1 requires registered investment companies to adopt, 
implement and periodically review written policies reasonably designed 
to prevent violation of the federal securities laws and to appoint a 
chief compliance officer. Applicants represent that each Fund will 
comply with rule 38a-1(a), (c) and (d), except that (i) since the Fund 
does not have a board of directors, the board of directors or other 
governing body of the General Partner will fulfill the responsibilities 
assigned to the Fund's board of directors under the rule, and (ii) 
since the board of directors or other governing body of the General 
Partner does not have any disinterested members, (a) approval by a 
majority of the disinterested board members required by rule 38a-1 will 
not be obtained, and (b) the Funds will comply with the requirement in 
rule 38a-1(a)(4)(iv) that the chief compliance officer meet with the 
independent directors by having the chief compliance officer meet with 
the board of directors or other governing body of the General Partner 
as constituted Applicants represent that each Fund will adopt written 
policies and procedures reasonably designed to prevent violations of 
the terms and conditions of the application, will appoint a chief 
compliance officer and will comply with the terms and conditions of the 
application.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Each proposed transaction involving a Fund otherwise prohibited 
by section 17(a) or section 17(d) of the Act and rule 17d-1 under the 
Act to which a Fund is a party (the ``Section 17 Transactions'') will 
be effected only if the applicable General Partner determines that (i) 
the terms of the Section 17 Transaction, including the consideration to 
be paid or received, are fair and reasonable to the Investors of the 
Fund and do not involve overreaching of the Fund or its investors on 
the part of any person concerned, and (ii) the Section 17 Transaction 
is consistent with the interests of the Investors, the Fund's 
organizational documents and the Fund's reports to its Investors.\8\ In 
addition, the applicable General Partner will record and preserve a 
description of all Section 17 Transactions, the General Partner's 
findings, the information or materials upon which the findings are 
based and

[[Page 67324]]

the basis for the findings. All such records will be maintained for the 
life of the Fund and at least six years thereafter and will be subject 
to examination by the Commission and its staff.\9\
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    \8\ If a Fund invests through an Aggregation Vehicle and such 
investment is a Section 17 Transaction, this condition will apply 
with respect to both the investment in the Aggregation Vehicle and 
any investment by the Aggregation Vehicle of Fund assets.
    \9\ Each Fund will preserve the accounts, books and other 
documents required to be maintained in an easily accessible place 
for the first two years.
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    2. The General Partner of each Fund will adopt, and periodically 
review and update, procedures designed to ensure that reasonable 
inquiry is made, prior to the consummation of any Section 17 
Transaction, with respect to the possible involvement in the 
transaction of any affiliated person or promoter of or principal 
underwriter for the Fund or any affiliated person of such person, 
promoter or principal underwriter.
    3. The General Partner of each Fund will not invest the funds of 
the Fund in any investment in which an Affiliated Co-Investor (as 
defined below) has acquired or proposes to acquire the same class of 
securities of the same issuer and where the investment transaction 
involves a joint enterprise or other joint arrangement within the 
meaning of rule 17d-1 in which the Fund and an Affiliated Co-Investor 
are participants (each such investment, a ``Rule 17d-1 Investment''), 
unless any such Affiliated Co-Investor, prior to disposing of all or 
part of its investment, (i) gives the General Partner sufficient, but 
not less than one day's, notice of its intent to dispose of its 
investment, and (ii) refrains from disposing of its investment unless 
the Fund has the opportunity to dispose of the Fund's investment prior 
to or concurrently with, on the same terms as and pro rata with, the 
Affiliated Co-Investor.\10\ The term ``Affiliated Co-Investor'' with 
respect to any Fund means any person who is (i) an ``affiliated 
person'' (as such term is defined in section 2(a)(3) of the Act) of the 
Fund (other than a Third Party Fund), (ii) Lazard, (iii) an officer or 
director of Lazard, (iv) an Eligible Employee, or (v) an entity (other 
than a Third Party Fund) in which Lazard acts as a general partner or 
has a similar capacity to control the sale or other disposition of the 
entity's securities. The restrictions contained in this condition, 
however, shall not be deemed to limit or prevent the disposition of an 
investment by an Affiliated Co-Investor (i) to its direct or indirect 
wholly owned subsidiary, to any company (a ``Parent'') of which the 
Affiliated Co-Investor is a direct or indirect wholly owned subsidiary 
or to a direct or indirect wholly owned subsidiary of its Parent, (ii) 
to immediate family members of the Affiliated Co-Investor or a trust or 
other investment vehicle established for any Affiliated Co-Investor or 
any such immediate family member, or (iii) when the investment is 
comprised of securities that are (a) listed on a national securities 
exchange registered under section 6 of the Exchange Act, (b) NMS stocks 
pursuant to section 11A(a)(2) of the Exchange Act and rule 600(a) of 
Regulation NMS thereunder, (c) government securities as defined in 
section 2(a)(16) of the Act or other securities that meet the 
definition of ``Eligible Security'' in rule 2a-7 under the Act, or (d) 
listed or traded on any foreign securities exchange or board of trade 
that satisfies regulatory requirements under the law of the 
jurisdiction in which such foreign securities exchange or board of 
trade is organized similar to those that apply to a national securities 
exchange or a national market system for securities.
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    \10\ If a Fund invests in a Rule 17d-1 Investment through an 
Aggregation Vehicle, the requirements of clauses (i) and (ii) of 
this sentence shall apply to both the Affiliated Co-Investor's 
disposition of such Rule 17d-1 Investment and, if the Affiliated Co-
Investor also holds a Rule 17d-1 Investment through such Aggregation 
Vehicle, its disposition of all or part of its investment in the 
Aggregation Vehicle.
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    4. Each Fund and its General Partner will maintain and preserve, 
for the life of each Fund and at least six years thereafter, such 
accounts, books and other documents constituting the record forming the 
basis for the audited financial statements that are to be provided to 
the investors in the Fund, and each annual report of the Fund required 
to be sent to the investors, and agree that all such records will be 
subject to examination by the Commission and its staff.\11\
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    \11\ Each fund will preserve the accounts, books, and other 
documents required to be maintained in an easily accessible place 
for the first two years.
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    5. Within 120 days after the end of each fiscal year of each Fund, 
or as soon as practicable thereafter, the General Partner of each Fund 
will send to each Investor having an Interest in the Fund at any time 
during the fiscal year then ended Fund financial statements audited by 
the Fund's independent accountants. At the end of each fiscal year, the 
General Partner will make or cause to be made a valuation of all of the 
assets of the Fund as of such fiscal year end in a manner consistent 
with customary practice with respect to the valuation of assets of the 
kind held by the Fund. In addition, within 120 days after the end of 
each fiscal year of each Fund (or as soon as practicable thereafter) 
the General Partner will send a report to each person who was an 
Investor at any time during the fiscal year then ended, setting forth 
such tax information as shall be necessary for the preparation by the 
Investor of that person's federal and state income tax returns and a 
report of the investment activities of the Fund during that fiscal 
year.
    6. If a Fund makes purchases or sales from or to an entity 
affiliated with the Fund by reason of an officer, director or employee 
of Lazard (i) serving as an officer, director, general partner, manager 
or investment adviser of the entity (other than an entity that is an 
Aggregation Vehicle), or (ii) having a 5% or more investment in the 
entity, such individual will not participate in the Fund's 
determination of whether or not to effect the purchase or sale.

     For the Commission, by the Division of Investment Management, 
under delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-26407 Filed 12-6-19; 8:45 am]
 BILLING CODE 8011-01-P


