[Federal Register: August 1, 2003 (Volume 68, Number 148)]
[Notices]
[Page 45283-45284]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01au03-109]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-26141; 812-12991]
JF International Management Inc. et al.; Notice of Application
and Temporary Order
July 28, 2003.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Temporary order and notice of application for a permanent order
under section 9(c) of the Investment Company Act of 1940 (``Act'').
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Summary of Application: Applicants have received a temporary order
exempting them from section 9(a) of the Act, with respect to an
injunction entered against J.P. Morgan Chase & Co. (``JPMC'') on July
28, 2003 by the United States District Court for the Southern District
of Texas (the ``Injunction''), until the Commission takes final action
on an application for a permanent order. Applicants also have applied
for a permanent order.
Applicants: JF International Management Inc., J.P. Morgan Alternative
Asset Management, Inc., J.P. Morgan Fleming Asset Management (London)
Limited, J.P. Morgan Fleming Asset Management (USA) Inc., J.P. Morgan
Investment Management Inc., and Robert Fleming Inc. (together, the
``Applicants'').\1\
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\1\ Applicants request that any relief granted pursuant to the
application also apply to any other existing company of which JPMC
is an affiliated person within the meaning of section 2(a)(3) of the
Act and to any other company of which JPMC may become an affiliated
person in the future (together with Applicants, ``Covered
Persons'').
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Filing Dates: The application was filed on July 28, 2003.
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 August 25, 2003, 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, c/o Mark E. Segall, Esq., J.P. Morgan Chase &
Co., Legal Department, One Chase Manhattan Plaza, New York, NY 10081.
FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, or
Todd F. Kuehl, Branch Chief, at 202-942-0564 (Division of Investment
Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a temporary order and 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 (telephone 202-942-8090).
Applicants' Representations
1. JPMC is a holding company that, through its subsidiaries and
affiliates, provides investment, financing, advisory, banking and
related products and services on a global basis. JPMC is the ultimate
parent company of the Applicants, each of which is an investment
adviser registered under the Investment Advisers Act of 1940. Each
Applicant serves as investment adviser or sub-adviser to certain
registered investment companies (``Funds'').
2. On July 28, 2003, the United States District Court for the
Southern District of Texas entered the Injunction against JPMC in a
matter brought by the Commission.\2\ The Commission alleged in the
complaint (``Complaint'') that JPMC aided and abetted violations of
section 10(b) of the Securities Exchange Act of 1934 and rule 10b-5
thereunder by Enron Corp. (``Enron''). The alleged violations occurred
in connection with Enron's financial statement disclosure of
transactions with one or more affiliates of JPMC between 1997 and 2001.
Without admitting or denying any of the allegations in the Complaint,
except as to jurisdiction, JPMC consented to the entry of the
Injunction as well as the payment of disgorgement, civil penalties and
interest.
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\2\ Securities and Exchange Commission v. J.P. Morgan Chase &
Co., No. H-03-2877 (S.D. Tx. filed July 28, 2003).
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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
[[Page 45284]]
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 JPMC is an affiliated person of each of
the Applicants within the meaning of section 2(a)(3) of the Act.
Applicants state that, as a result of the Injunction, they would 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 exemption from the disqualification provisions of
section 9(a) if it is established that these provisions, as applied to
Applicants, are unduly or disproportionately severe or that 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) seeking a temporary and
permanent order exempting them from the disqualification provisions of
section 9(a) of the Act.
3. Applicants believe they meet the standards for exemption
specified in section 9(c). 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).
4. Applicants state that none of their current or former officers
or employees who are engaged in the provision of investment advisory
services to the Funds participated in any way in the conduct underlying
the Injunction. Certain Funds held securities issued by Enron at the
time of the conduct underlying the Injunction. Applicants state that as
far as they are aware, none of the officers, portfolio managers or any
other investment personnel employed by Applicants had any knowledge of
any non-public information relating to, or had any involvement in, the
conduct underlying the Injunction. Applicants further state that they
had, and continue to have, policies and procedures in place designed to
prohibit or restrict communications with other JPMC employees.
5. Applicants state that the inability to continue providing
advisory services to the Funds would result in potentially severe
hardships for the Funds and their shareholders. Applicants also state
that they have distributed, or will distribute as soon as reasonably
practical, written materials, including an offer to meet in person to
discuss the materials, to the boards of directors or trustees of the
Funds (the ``Boards''), including the directors who are ``interested
persons,'' as defined in section 2(a)(19) of the Act, of such Funds and
their independent legal counsel as defined in rule 0-1(a)(6) under the
Act, if any, regarding the Injunction, any impact on the Funds and the
application. Applicants will provide the Boards with all information
concerning the Injunction and the application that is necessary for the
Funds to fulfill their disclosure and other obligations under the
federal securities laws.
6. Applicants also assert that, if they were barred from providing
services to the Funds, the effect on their businesses and employees
would be severe. Applicants state that they have committed substantial
resources to establish an expertise in advising and subadvising Funds.
Applicants state that they have not received any orders under section
9(c) of the Act in the past. Applicants recently applied for an
exemption pursuant to section 9(c) of the Act for conduct relating to
certain research analysts' conflicts of interest.\3\
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\3\ J.P. Morgan Securities Inc. et al., File No. 812-12959.
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Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
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, 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 a temporary
exemption.
Accordingly, It is hereby ordered, pursuant to section 9(c) of the
Act, that Covered Persons are granted a temporary exemption from the
provisions of section 9(a), effective forthwith, solely with respect to
the Injunction, subject to the condition in the application, until the
date the Commission takes final action on an application for a
permanent order.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-19617 Filed 7-31-03; 8:45 am]
BILLING CODE 8010-01-P