[Federal Register: November 26, 2002 (Volume 67, Number 228)]
[Notices]
[Page 70782-70783]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26no02-92]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-25808; 812-12902]
Alternative Investment Partners, LLC and Trust Advisors, LLC;
Notice of Application
November 20, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Temporary order and notice of application under section 9(c) of
the Investment Company Act of 1940 (``Act'').
-----------------------------------------------------------------------
SUMMARY OF APPLICATION: Applicants have received a temporary order
exempting them from section 9(a) of the Act, with respect to a
securities-related preliminary injunction entered on November 13, 2002,
until the Commission takes final action on an application for a
permanent order. Applicants also have requested a permanent order.
APPLICANTS: Alternative Investment Partners, LLC (``AIP'') and Trust
Advisors, LLC (``TA'').
FILING DATE: The application was filed on November 19, 2002.
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 17, 2002, 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, Commission, 450 Fifth Street, NW., Washington, DC
20549-0609. Applicants: AIP, 142 Hardscrabble Lake Drive, Chappaqua, NY
10514; TA, 1375 Kings Highway East, Ste. 400, Fairfield, CT 07663.
FOR FURTHER INFORMATION CONTACT: John L. Sullivan, Senior Counsel, at
(202) 942-0681, or Michael W. Mundt, Senior Special Counsel, at (202)
942-0564 (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 for a fee at the
Commission's Public Reference Branch, 450 Fifth Street, NW.,
Washington, DC 20549-0102 (tel. 202-942-8090).
Applicants' Representations
1. AIP is a Delaware limited liability company registered as an
investment adviser under the Investment Advisers Act of 1940
(``Advisers Act''). AIP serves as the investment adviser to Alpha
Strategies I Fund (``Fund''), which is a series of AIP Alternative
Strategies Funds, an open-end management investment company registered
under the Act. TA, a Delaware limited liability company, is registered
as an investment adviser under the Advisers Act and serves as a
research consultant to AIP and the Fund with respect to the selection
and ongoing review of subadvisers for the Fund. Because the services
provided by TA may be characterized as investment advisory services,
applicants state that TA may be considered an investment adviser to the
Fund under section 2(a)(20) of the Act. Asset Alliance Corporation
(``AAC''), a Delaware corporation, states that it is a holding company
primarily engaged in the business of owning significant interests in
investment managers. AAC directly owns 50% of AIP and indirectly owns
50% of TA. AAC also indirectly owns 50% of Beacon Hill Asset Management
LLC (``BHAM'').
2. On November 13, 2002, the U.S. District Court for the Southern
District of New York entered an order of Preliminary Injunction and
Other Relief Against BHAM (``Preliminary Injunction'') in a matter
brought by the Commission (the ``Action'').\1\ The transactions that
are the subject of the Action involved the alleged improper valuations
of certain unregistered investment funds managed by BHAM, resulting in
BHAM's alleged violation of section 206(2) of the Advisers Act. The
[[Page 70783]]
Preliminary Injunction enjoined BHAM, directly or through its officers,
directors, agents and employees, from violating section 206(2).
---------------------------------------------------------------------------
\1\ Securities and Exchange Commission v. Beacon Hill Asset
Management, LLC, Stipulation of Order Granting Preliminary
Injunction and Other Relief Against Beacon Hill Asset Management,
Case No. 02cv8855 (S.D.N.Y., Nov. 13, 2002).
---------------------------------------------------------------------------
Applicants' Legal Analysis
1. Section 9(a)(2) of the Act, in relevant part, prohibits a person
who has been enjoined from engaging in or continuing any conduct or
practice in connection with the purchase or sale of a security from
acting, among other things, as an investment adviser or depositor of
any registered investment company or a principal underwriter for any
registered open-end investment company, registered unit investment
trust, or registered face-amount certificate company. Section 9(a)(3)
of the Act makes the prohibition in section 9(a)(2) applicable to a
company any affiliated person of which has been disqualified under the
provisions of section 9(a)(2). Section 2(a)(3) of the Act defines
``affiliated person'' to include any person directly or indirectly
controlling, controlled by, or under common control, with the other
person. Applicants state that BHAM is an affiliated person of the
applicants because BHAM and the applicants are under the common control
of AAC. Applicants state that, as a result of the Preliminary
Injunction, applicants may be subject to the prohibitions of section
9(a).
2. Section 9(c) of the Act provides that the Commission shall grant
an application for an exemption from the disqualification provisions of
section 9(a) if it is established that these provisions, as applied to
the applicants, are unduly or disproportionately severe or that the
applicants' conduct has been such as not to make it against the public
interest or the protection of investors to grant the application.
Applicants have filed an application pursuant to section 9(c) of the
Act seeking temporary and permanent orders exempting them from the
provisions of section 9(a) of the Act that might otherwise be operative
with respect to their provision of investment advisory services to the
Fund as a result of the Preliminary Injunction.
3. Applicants state that the prohibitions of section 9(a) as
applied to them would be unduly and disproportionately severe and that
the conduct of applicants has been such as not to make it against the
public interest or the protection of investors to grant the exemption
from section 9(a). Applicants state that none of the current or former
officers or employees of either of the applicants participated in or
had any knowledge of the conduct alleged to have constituted the
violations that resulted in the Action. In addition, neither applicant
has been the subject of any federal or state enforcement or other
administrative or judicial disciplinary proceeding, nor has either been
named as a defendant in any other action relating to the securities
laws. Applicants state that neither has ever previously applied for an
exemption pursuant to section 9(c) of the Act.
4. Applicants state that their inability to continue providing
advisory services to the Fund would result in the Fund and its
shareholders facing potentially severe hardships. Additionally,
applicants assert that if they were barred from providing investment
advisory services to the Fund, the effect on their businesses and
employees would be severe.
5. AIP and TA will distribute written materials, including an offer
to meet in person to discuss the materials, to the board of directors
of the Fund regarding the Action and the reasons they believe relief
pursuant to section 9(c) is appropriate. AIP and TA will provide the
Fund with all information concerning the Action and the exemptive
application necessary for the Fund to fulfill its disclosure and other
obligations under the federal securities laws.
Applicants' Condition
Applicants agree that the order granting the requested relief will
be subject to the following condition:
1. Any temporary exemption granted pursuant to the application
shall be without prejudice to, and shall not limit the Commission's
rights in any manner with respect to, any Commission investigation of,
or administrative proceedings involving or against, applicants or their
affiliated persons, including without limitation, the consideration by
the Commission of a permanent exemption from section 9(a) of the Act
requested pursuant to the application or the revocation or removal of
any temporary exemptions granted under the Act in connection with the
application.
Temporary Order
The Commission has considered the matter and finds that applicants
have made the necessary showing to justify granting of a temporary
exemption.
Accordingly, it is hereby ordered, pursuant to section 9(c) of the
Act, on the basis of the representations contained in the application,
that applicants be and hereby are temporarily exempted from the
provisions of section 9(a) of the Act with respect to their investment
advisory services to the Fund to the extent the provisions are
operative solely as a result of the Preliminary Injunction, subject to
the condition in the application, until the Commission takes final
action on an application for a permanent order.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-29944 Filed 11-25-02; 8:45 am]
BILLING CODE 8010-01-P