[Federal Register Volume 80, Number 194 (Wednesday, October 7, 2015)]
[Notices]
[Pages 60726-60730]
[FR Doc No: 2015-25465]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31856; File No. 812-14122]

Triton Pacific Investment Corporation, Inc., et al.; Notice of
Application

September 30, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under sections 17(d) and
57(i) of the Investment Company Act of 1940 (the ``Act'') and rule 17d-
1 under the Act to permit certain joint transactions otherwise
prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d-1
under the Act.

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Summary of Application:  Applicants request an order to permit certain
business development companies (``BDCs'') and closed-end management
investment companies to co-invest in portfolio companies with each
other and with affiliated investment funds.

Applicants:  Triton Pacific Investment Corporation, Inc. (the
``Company''), Triton Pacific Income & Growth Fund IV, LP (``Fund IV''),
Triton Pacific Platinum Fund IV, LP (``Platinum IV'' and, together with
Fund IV, the ``Existing Affiliated Private Funds''), TPCP Fund Manager
IV, LLC (the ``Fund Manager''), Triton Pacific Adviser, LLC (the ``BDC
Adviser''), Triton Pacific Capital Partners, LLC (``TPCP''), and Triton
Pacific Group, Inc. (``TPG'').

Filing Dates:  The application was filed on February 8, 2013, and
amended on May 17, 2013, July 15, 2013, December 18, 2013, June 12,
2014, November 25, 2014, May 28, 2015, and September 29, 2015.

Hearing or Notification of Hearing: An order granting the requested
relief 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 October 26, 2015, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, 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:  Brent J. Fields, Secretary, U.S. Securities and Exchange
Commission, 100 F St. NE., Washington, DC 20549-1090. Applicants: 10877
Wilshire Blvd., 12th Floor, Los Angeles, CA 90024.

FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-6873 or Mary Kay Frech, Branch Chief, at<PHONE_NUMBER>
(Chief Counsel's Office, Division of Investment Management).

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 for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling<PHONE_NUMBER>.

Applicants' Representations

    1. The Company, a Maryland corporation, is organized as a closed-
end management investment company that has elected to be regulated as a
BDC under section 54(a) of the Act. \1\ The Company's Objectives and
Strategies\2\ are to maximize total return by generating current income
from debt investments and long term capital appreciation from equity
investments. The Company invests primarily in debt and equity
investments in small and mid-sized private U.S. companies. The board of
directors of the Company (for any Regulated Fund, the ``Board'') is
comprised of five members, three of whom are not ``interested persons''
as defined in section 2(a)(19) of the Act (``Independent Directors'').
Craig Faggen (the ``Principal'') serves as a director on the Company's
Board and as the Company's chief executive officer. The Principal
controls TPG, TPCP, and the BDC Adviser.
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    \1\ Section 2(a)(48) defines a BDC to be any closed-end
investment company that operates for the purpose of making
investments in securities described in sections 55(a)(1) through
55(a)(3) of the Act and makes available significant managerial
assistance with respect to the issuers of such securities.
    \2\ ``Objectives and Strategies'' means a Regulated Fund's (as
defined below) investment objectives and strategies, as described in
the Regulated Fund's registration statement on Form N-2, other
filings the Regulated Fund makes with the Commission under the
Securities Act of 1933 (the ``Securities Act''), or under the
Securities Exchange Act of 1934, and the Regulated Fund's reports to
shareholders.
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    2. The Existing Affiliated Private Funds are parallel funds. Fund
IV is a Delaware limited partnership and Platinum IV is a Delaware
limited liability company. Each Existing Affiliated Private Fund would
be an investment company but for section 3(c)(1) or 3(c)(7) of the Act.
The investment strategy of each Existing Affiliated Private Fund is to
generate current income and capital appreciation by investing in small
and mid-sized private U.S. companies. The Existing Affiliated Private
Funds and the Company have similar investment strategies.
    3. The BDC Adviser, a Delaware limited liability company, is
registered as an investment adviser under the Investment Advisers Act
of 1940 (the ``Advisers Act''). The BDC Adviser serves as investment
adviser to the Company and the Existing Affiliated Private Funds.
    4. The Fund Manager, a Delaware limited liability company, is the
general partner of the Existing Affiliated Private Funds. TPCP, a
California limited liability company, is the managing member of the
Fund Manager. TPG, a California corporation, is the managing member of
TPCP.
    5. Applicants seek an order (``Order'') to permit one or more
Regulated Funds\3\ and/or one or more Affiliated Private Funds\4\ to
participate in the same investment opportunities through a proposed co-
investment program (the ``Co-Investment Program'') where such
participation would otherwise be prohibited under section 57(a)(4) and
rule 17d-1 by (a) co-investing with each other in securities issued by
issuers in private placement transactions in which an Adviser
negotiates terms in addition to price (``Co-Investment Program''); \5\
and (b) making additional investments in securities of such issuers,
including through the exercise of warrants, conversion privileges, and
other rights to purchase additional securities of the issuers
(``Follow-On Investments''). ``Co-Investment Transaction'' means any
transaction in which a Regulated Fund (or its Wholly-Owned Investment
Sub, as defined below) participated together with one or more other
Regulated Funds and/or one or more Affiliated Private Funds in reliance
on the requested Order. ``Potential Co-Investment Transaction'' means
any investment opportunity in which a Regulated Fund (or its Wholly-
Owned Investment Sub) could not participate together with one or more
other Regulated Funds and/or one or more Affiliated Private Funds
without obtaining and relying on the Order.\6\
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    \3\ ``Regulated Funds'' means the Company and any Future
Regulated Fund. ``Future Regulated Fund'' means any closed-end
management investment company (a) that is registered under the Act
or has elected to be regulated as BDC, (b) whose investment adviser
is an Adviser, and (c) that intends to participate in the Co-
Investment Program. The term ``Adviser'' means the BDC Adviser and
any future investment adviser that controls, is controlled by, or is
under common control with the BDC Adviser and is registered as an
investment adviser under the Advisers Act. All references to the
term ``Adviser'' include successors-in-interest to the Adviser. A
successor-in-interest is limited to an entity that results from a
reorganization into another jurisdiction or change in the type of
business organization.
    \4\ ``Affiliated Private Fund'' means the Existing Affiliated
Private Funds and any Future Affiliated Private Fund. ``Future
Affiliated Private Fund'' means any entity (a) whose investment
adviser is an Adviser, (b) that would be an investment company but
for section 3(c)(1) or 3(c)(7) of the Act, and (c) that intends to
participate in the Co-Investment Program.
    \5\ The term ``private placement transactions'' means
transactions in which the offer and sale of securities by the issuer
are exempt from registration under the Securities Act.
    \6\ All existing entities that currently intend to rely on the
Order have been named as applicants. Any other existing or future
entity that subsequently relies on the Order will comply with the
terms and conditions of the application.
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    6. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subs.\7\ Such a subsidiary
would be prohibited from investing in a Co-Investment Transaction with
any other Regulated Fund or Affiliated Private Fund because it would be
a company controlled by its parent Regulated Fund for purposes of
section 57(a)(4) and rule 17d-1. Applicants request that each Wholly-
Owned Investment Sub be permitted to participate in Co-Investment
Transactions in lieu of its parent Regulated Fund and that the Wholly-
Owned Investment Sub's participation in any such transaction be
treated, for purposes of the Order, as though the parent Regulated Fund
were participating directly. Applicants represent that this treatment
is justified because a Wholly-Owned Investment Sub would have no
purpose other than serving as a holding vehicle for the Regulated
Fund's investments and, therefore, no conflicts of interest could arise
between the Regulated Fund and the Wholly-Owned Investment Sub. The
Regulated Fund's Board would make all relevant determinations under the
conditions with regard to a Wholly-Owned Investment Sub's participation
in a Co-Investment Transaction, and the Regulated Fund's Board would be
informed of, and take into consideration, any proposed use of a Wholly-
Owned Investment Sub in the Regulated Fund's place. If the Regulated
Fund proposes to participate in the same Co-Investment Transaction with
any of its Wholly-Owned Investment Subs, the Board of the Regulated
Fund will also be informed of, and take into consideration, the
relative participation of the Regulated Fund and the Wholly-Owned
Investment Sub.
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    \7\ The term ``Wholly-Owned Investment Sub'' means an entity:
(i) That is wholly-owned by a Regulated Fund (with the Regulated
Fund at all times beneficially holding, directly or indirectly, 100%
of the voting and economic interests); (ii) whose sole business
purpose is to hold one or more investments on behalf of the
Regulated Fund; (iii) with respect to which the Regulated Fund's
Board has the sole authority to make all determinations with respect
to the entity's participation under the conditions of the
application; and (iv) that would be an investment company but for
section 3(c)(1) or 3(c)(7) of the Act.
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    7. When considering Potential Co-Investment Transactions for any
Regulated Fund, the Adviser will consider only the Objectives and
Strategies, investment policies, investment positions, capital
available for investment (``Available Capital''), and other pertinent
factors applicable to that Regulated Fund.\8\ The Adviser

expects that any portfolio company that is an appropriate investment
for a Regulated Fund should also be an appropriate investment for one
or more other Regulated Funds and/or one or more Affiliated Private
Funds, with certain exceptions based on Available Capital or
diversification.\9\
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    \8\ ``Available Capital'' consists solely of liquid assets not
held for permanent investment, including cash, amounts that can
currently be drawn from lines of credit, and marketable securities
held for short-term purposes. In addition, for the Affiliated
Private Funds, Available Capital would include bona fide uncalled
capital commitments that can be called by the settlement date of the
Co-Investment Transaction.
    \9\ The Regulated Funds, however, will not be obligated to
invest, or co-invest, when investment opportunities are referred to
them.
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    8. Other than pro rata dispositions and Follow-On Investments as
provided in conditions 7 and 8, and after making the determinations
required in conditions 1 and 2(a), the Adviser will present each
Potential Co-Investment Transaction and the proposed allocation to the
directors of the Board eligible to vote under section 57(o) of the Act
(``Eligible Directors''), and the ``required majority,'' as defined in
section 57(o) of the Act (``Required Majority'')\10\ will approve each
Co-Investment Transaction prior to any investment by the participating
Regulated Fund.
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    \10\ In the case of a Regulated Fund that is a registered
closed-end fund, the directors that make up the Required Majority
will be determined as if the Regulated Fund were a BDC subject to
section 57(o).
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    9. With respect to the pro rata dispositions and Follow-On
Investments provided in conditions 7 and 8, a Regulated Fund may
participate in a pro rata disposition or Follow-On Investment without
obtaining prior approval of the Required Majority if, among other
things: (i) The proposed participation of each Regulated Fund and
Affiliated Private Fund in such disposition or Follow-On Investment is
proportionate to its outstanding investments in the issuer immediately
preceding the disposition or Follow-On Investment, as the case may be;
and (ii) the Board of the Regulated Fund has approved that Regulated
Fund's participation in pro rata dispositions and Follow-On Investments
as being in the best interests of the Regulated Fund. If the Board does
not so approve, any such disposition or Follow-On Investment will be
submitted to the Regulated Fund's Eligible Directors. The Board of any
Regulated Fund may at any time rescind, suspend or qualify its approval
of pro rata dispositions and Follow-On Investments with the result that
all dispositions and/or Follow-On Investments must be submitted to the
Eligible Directors.
    10. No Independent Director of a Regulated Fund will have a direct
or indirect financial interest in any Co-Investment Transaction, other
than through share ownership in one of the Regulated Funds, including
any interest in securities of a company whose securities are acquired
in the Co-Investment Transaction.
    11. Under condition 14, if an Adviser, the Principal, any person
controlling, controlled by, or under common control with the Adviser or
the Principal, and the Affiliated Private Funds (collectively, the
``Holders'') own in the aggregate more than 25% of the outstanding
voting securities of the Company or another a Regulated Fund
(``Shares''), then the Holders will vote such Shares as directed by an
independent third party when voting on matters specified in the
condition. Applicants believe that this condition will ensure that the
Independent Directors will act independently in evaluating the Co-
Investment Program, because the ability of an Adviser or the Principal
to influence the Independent Directors by a suggestion, explicit or
implied, that the Independent Directors can be removed will be limited
significantly. Applicants represent that the Independent Directors will
evaluate and approve any such voting trust or proxy adviser, taking
into accounts its qualifications, reputation for independence, cost to
the shareholders, and other factors that they deem relevant.

Applicants' Legal Analysis

    1. Section 57(a)(4) of the Act prohibits certain affiliated persons
of a BDC from participating in joint transactions with the BDC or a
company controlled by a BDC in contravention of rules as prescribed by
the Commission. Under section 57(b)(2) of the Act, any person who is
directly or indirectly controlling, controlled by, or under common
control with a BDC is subject to section 57(a)(4). Applicants submit
that each of the Regulated Funds and Affiliated Private Funds could be
deemed to be a person related to each Regulated Fund in a manner
described by section 57(b) by virtue of being under common control.
Section 57(i) of the Act provides that, until the Commission prescribes
rules under section 57(a)(4), the Commission's rules under section
17(d) of the Act applicable to registered closed-end investment
companies will be deemed to apply to transactions subject to section
57(a)(4). Because the Commission has not adopted any rules under
section 57(a)(4), rule 17d-1 also applies to joint transactions with
Regulated Funds that are BDCs. Section 17(d) of the Act and rule 17d-1
under the Act are applicable to Regulated Funds that are registered
closed-end investment companies.
    2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
affiliated persons of a registered investment company from
participating in joint transactions with the company unless the
Commission has granted an order permitting such transactions. In
passing upon applications under rule 17d-1, the Commission considers
whether the company's participation in the joint transaction is
consistent with the provisions, policies, and purposes of the Act and
the extent to which such participation is on a basis different from or
less advantageous than that of other participants.
    3. Applicants state that in the absence of the requested relief,
the Regulated Funds would be, in some circumstances, limited in their
ability to participate in attractive and appropriate investment
opportunities. Applicants believe that the proposed terms and
conditions will ensure that the Co-Investment Transactions are
consistent with the protection of each Regulated Fund's shareholders
and with the purposes intended by the policies and provisions of the
Act. Applicants state that the Regulated Funds' participation in the
Co-Investment Transactions will be consistent with the provisions,
policies, and purposes of the Act and on a basis that is not different
from or less advantageous than that of other participants.

Applicants' Conditions

    Applicants agree that any Order granting the requested relief shall
be subject to the following conditions:
    1. Each time an Adviser considers a Potential Co-Investment
Transaction for the Affiliated Private Funds or another Regulated Fund
that falls within a Regulated Fund's then-current Objectives and
Strategies, the Adviser will make an independent determination of the
appropriateness of the investment for the Regulated Fund in light of
the Regulated Fund's then-current circumstances.
    2. (a) If the Adviser deems a Regulated Fund's participation in any
Potential Co-Investment Transaction to be appropriate for the Regulated
Fund, the Adviser will then determine an appropriate level of
investment for the Regulated Fund.
    (b) If the aggregate amount recommended by the applicable Adviser
to be invested by the applicable Regulated Fund in the Potential Co-
Investment Transaction, together with the amount proposed to be
invested by

the other participating Regulated Funds and Affiliated Private Funds,
collectively in the same transaction, exceeds the amount of the
investment opportunity, the investment opportunity will be allocated
among them pro rata based on each participating party's Available
Capital, up to the amount proposed to be invested by each. The
applicable Adviser will provide the Eligible Directors of each
participating Regulated Fund with information concerning each
participating party's Available Capital to assist the Eligible
Directors with their review of the Regulated Fund's investments for
compliance with these allocation procedures.
    (c) After making the determinations required in conditions 1 and
2(a), the applicable Adviser will distribute written information
concerning the Potential Co-Investment Transaction (including the
amount proposed to be invested by each participating Regulated Fund and
the Affiliated Private Funds) to the Eligible Directors of each
participating Regulated Fund for their consideration. A Regulated Fund
will co-invest with one or more Regulated Funds and/or one or more
Affiliated Private Funds only if, prior to the Regulated Fund's
participation in the Potential Co-Investment Transaction, a Required
Majority concludes that:
    (i) the terms of the Potential Co-Investment Transaction, including
the consideration to be paid, are reasonable and fair to the Regulated
Fund and its shareholders and do not involve overreaching in respect of
the Regulated Fund or its shareholders on the part of any person
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (A) the interests of the shareholders of the Regulated Fund; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by other Regulated Funds or the Affiliated
Private Funds would not disadvantage the Regulated Fund, and
participation by the Regulated Fund would not be on a basis different
from or less advantageous than that of other Regulated Funds or the
Affiliated Private Funds; provided that, if any other Regulated Fund or
the Affiliated Private Funds, but not the Regulated Fund itself, gains
the right to nominate a director for election to a portfolio company's
board of directors or the right to have a board observer or any similar
right to participate in the governance or management of the portfolio
company, such event will not be interpreted to prohibit the Required
Majority from reaching the conclusions required by this condition
(2)(c)(iii), if:
    (A) the Eligible Directors will have the right to ratify the
selection of such director or board observer, if any;
    (B) the Adviser agrees to, and does, provide, periodic reports to
the Regulated Fund's Board with respect to the actions of the director
or the information received by the board observer or obtained through
the exercise of any similar right to participate in the governance or
management of the portfolio company; and
    (C) any fees or other compensation that the Affiliated Private
Funds or any Regulated Fund or any affiliated person of the Affiliated
Private Funds or any Regulated Fund receives in connection with the
right of the Affiliated Private Funds or the Regulated Fund to nominate
a director or appoint a board observer or otherwise to participate in
the governance or management of the portfolio company will be shared
proportionately among the participating Affiliated Private Funds (who
each may, in turn, share its portion with its affiliated persons) and
the participating Regulated Funds in accordance with the amount of each
party's investment; and
    (iv) the proposed investment by the Regulated Fund will not benefit
the Advisers, the Affiliated Private Funds or the other Regulated Funds
or any affiliated person of any of them (other than the parties to the
Co-Investment Transaction), except (A) to the extent permitted by
condition 13, (B) to the extent permitted by section 17(e) or 57(k) of
the Act, as applicable, (C) indirectly, as a result of an interest in
the securities issued by one of the parties to the Co-Investment
Transaction, or (D) in the case of fees or other compensation described
in condition 2(c)(iii)(C).
    3. Each Regulated Fund has the right to decline to participate in
any Potential Co-Investment Transaction or to invest less than the
amount proposed.
    4. The applicable Adviser will present to each Regulated Fund's
Board, on a quarterly basis, a record of all investments in Potential
Co-Investment Transactions made by any of the other Regulated Funds or
the Affiliated Private Funds during the preceding quarter that fell
within the Regulated Fund's then-current Objectives and Strategies that
were not made available to the Regulated Fund, and an explanation of
why the investment opportunities were not offered to the Regulated
Fund. All information presented to the Regulated Fund's Board pursuant
to this condition will be kept for the life of the Regulated Fund and
at least two years thereafter, and will be subject to examination by
the Commission and its staff.
    5. Except for Follow-On Investments made in accordance with
condition 8,\11\ a Regulated Fund will not invest in reliance on the
Order in any issuer in which another Regulated Fund or Affiliated
Private Fund or any affiliated person of another Regulated Fund or
Affiliated Private Fund is an existing investor.
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    \11\ This exception only applies to Follow-On Investments by a
Regulated Fund in issuers in which that Regulated Fund already holds
investments.
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    6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of
securities to be purchased, settlement date, and registration rights
will be the same for each participating Regulated Fund and Affiliated
Private Fund. The grant to any Affiliated Private Fund or another
Regulated Fund, but not the Regulated Fund, of the right to nominate a
director for election to a portfolio company's board of directors, the
right to have an observer on the board of directors or similar rights
to participate in the governance or management of the portfolio company
will not be interpreted so as to violate this condition 6, if
conditions 2(c)(iii)(A), (B) and (C) are met.
    7. (a) If any Affiliated Private Fund or any Regulated Fund elects
to sell, exchange or otherwise dispose of an interest in a security
that was acquired in a Co-Investment Transaction, the applicable
Advisers will:
    (i) notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed disposition at the earliest
practical time; and
    (ii) formulate a recommendation as to participation by each
Regulated Fund in the disposition.
    (b) Each Regulated Fund will have the right to participate in such
disposition on a proportionate basis, at the same price and on the same
terms and conditions as those applicable to the participating
Affiliated Private Funds and Regulated Funds.
    (c) A Regulated Fund may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of each Regulated Fund and each Affiliated Private Fund
in such disposition is proportionate to its outstanding investments in
the issuer immediately preceding the disposition; (ii) the Regulated
Fund's Board has approved as being in the best interests of the
Regulated Fund the ability to participate in such dispositions on a pro
rata basis

(as described in greater detail in the application); and (iii) the
Regulated Fund's Board is provided on a quarterly basis with a list of
all dispositions made in accordance with this condition. In all other
cases, the Adviser will provide its written recommendation as to the
Regulated Fund's participation to the Eligible Directors, and the
Regulated Fund will participate in such disposition solely to the
extent that a Required Majority determines that it is in the Regulated
Fund's best interests.
    (d) Each Affiliated Private Fund and each Regulated Fund will bear
their own expenses in connection with any such disposition.
    8. (a) If any Affiliated Private Fund or any Regulated Fund desires
to make a Follow-On Investment in a portfolio company whose securities
were acquired in a Co-Investment Transaction, the applicable Advisers
will:
    (i) notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed transaction at the earliest
practical time; and
    (ii) formulate a recommendation as to the proposed participation,
including the amount of the proposed Follow-On Investment, by each
Regulated Fund.
    (b) A Regulated Fund may participate in such Follow-On Investment
without obtaining prior approval of the Required Majority if: (i) The
proposed participation of each Regulated Fund and each Affiliated
Private Fund in such investment is proportionate to its outstanding
investments in the issuer immediately preceding the Follow-On
Investment; and (ii) the Regulated Fund's Board has approved as being
in the best interests of the Regulated Fund the ability to participate
in Follow-On Investments on a pro rata basis (as described in greater
detail in the application). In all other cases, the Adviser will
provide its written recommendation as to the Regulated Fund's
participation to the Eligible Directors, and the Regulated Fund will
participate in such Follow-On Investment solely to the extent that a
Required Majority determines that it is in the Regulated Fund's best
interests.
    (c) If, with respect to any Follow-On Investment:
    (i) the amount of the opportunity is not based on the Regulated
Funds' and the Affiliated Private Funds' outstanding investments
immediately preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the applicable Adviser to
be invested by each Regulated Fund in the Follow-On Investment,
together with the amount proposed to be invested by the participating
Affiliated Private Funds in the same transaction, exceeds the amount of
the opportunity, then the amount invested by each such party will be
allocated among them pro rata based on each party's Available Capital,
up to the amount proposed to be invested by each.
    (d) The acquisition of Follow-On Investments as permitted by this
condition will be considered a Co-Investment Transaction for all
purposes and subject to the other conditions set forth in the
application.
    9. The Independent Directors of each Regulated Fund will be
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including
investments made by other Regulated Funds or the Affiliated Private
Funds that the Regulated Fund considered but declined to participate
in, so that the Independent Directors may determine whether all
investments made during the preceding quarter, including investments
that the Regulated Fund considered but declined to participate in,
comply with the conditions of the Order. In addition, the Independent
Directors will consider at least annually the continued appropriateness
for the Regulated Fund of participating in new and existing Co-
Investment Transactions.
    10. Each Regulated Fund will maintain the records required by
section 57(f)(3) of the Act as if each of the Regulated Funds were a
BDC and each of the investments permitted under these conditions were
approved by the Required Majority under section 57(f).
    11. No Independent Director of a Regulated Fund will also be a
director, general partner, managing member or principal, or otherwise
an ``affiliated person'' (as defined in the Act), of any of the
Affiliated Private Funds.
    12. The expenses, if any, associated with acquiring, holding or
disposing of any securities acquired in a Co-Investment Transaction
(including, without limitation, the expenses of the distribution of any
such securities registered for sale under the Securities Act) will, to
the extent not payable by the Advisers under their investment advisory
agreements with the Regulated Funds and the Affiliated Private Funds,
be shared by the Regulated Funds and the Affiliated Private Funds in
proportion to the relative amounts of the securities held or be
acquired or disposed of, as the case may be.
    13. Any transaction fee (including break-up or commitment fees but
excluding broker's fees contemplated by section 17(e) or 57(k) of the
Act, as applicable) received in connection with a Co-Investment
Transaction will be distributed to the participating Regulated Funds
and the Affiliated Private Funds on a pro rata basis based on the
amounts they invested or committed, as the case may be, in such Co-
Investment Transaction. If any transaction fee is to be held by an
Adviser pending consummation of the transaction, the fee will be
deposited into an account maintained by the Adviser at a bank or banks
having the qualifications prescribed in section 26(a)(1) of the Act,
and the account will earn a competitive rate of interest that will also
be divided pro rata among the participating Regulated Funds and the
Affiliated Private Funds based on the amounts they invest in such Co-
Investment Transaction. None of the Affiliated Private Funds, the
Advisers, the other Regulated Funds, or any affiliated person of the
Regulated Funds or the Affiliated Private Funds will receive additional
compensation or remuneration of any kind as a result of or in
connection with a Co-Investment Transaction (other than (a) in the case
of the Regulated Funds and the Affiliated Private Funds, the pro rata
transaction fees described above and fees or other compensation
described in condition 2(c)(iii)(C) and (b) in the case of an Adviser,
investment advisory fees paid in accordance with the respective
agreements between the Adviser and the Regulated Funds or the
Affiliated Private Funds).
    14. If the Holders own in the aggregate more than 25% of the
outstanding Shares of a Regulated Fund, then the Holders will vote such
Shares as directed by an independent third party (such as the trustee
of a voting trust or a proxy adviser) when voting on (1) the election
of directors; (2) the removal of one or more directors; or (3) any
matters requiring approval by the vote of a majority of the outstanding
voting securities, as defined in section 2(a)(42) of the Act.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-25465 Filed 10-6-15; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 82, Number 236 (Monday, December 11, 2017)]
[Notices]
[Page 58195]
[FR Doc No: 2017-26533]

=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY

[EPA-R05-OAR-2017-0277; FRL-9971-62-Region 5]

Adequacy Status of the Metro-East St. Louis, Illinois 2008 Ozone
Standard Nonattainment Area for the Submitted Maintenance Plan for
Transportation Conformity Purposes

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of finding of adequacy.

-----------------------------------------------------------------------

SUMMARY: In this notice, the Environmental Protection Agency (EPA) is
notifying the public that we find the motor vehicle emissions budgets
(MVEBs) for volatile organic compounds (VOCs) and oxides of
nitrogen (NOX) in the Illinois portion of the St. Louis area
(Madison, Monroe and St. Clair Counties or ``Metro-East area''), 2008
Ozone Standard nonattainment area adequate for use in transportation
conformity determinations. Illinois submitted a 2008 Ozone Standard
maintenance plan for the Metro-East area on May 8, 2017. As a result of
this finding of adequacy, the MVEBs from the submitted maintenance plan
must be used by state and Federal agencies in determining whether
proposed transportation projects conform to the SIP as required by the
Clean Air Act.

DATES: This finding is applicable December 26, 2017.

FOR FURTHER INFORMATION CONTACT: Michael Leslie, Environmental
Engineer, Control Strategies Section (AR-18J), Air Programs Branch, Air
and Radiation Division, United States Environmental Protection Agency,
Region 5, 77 West Jackson Boulevard, Chicago, Illinois 60604, (312)
353-6680, [email protected].

SUPPLEMENTARY INFORMATION: Throughout this document, whenever ``we'',
``us'' or ``our'' is used, we mean EPA.

Background

    Today's notice is an announcement of a finding that we have already
made. On September 26, 2017, EPA sent a letter to the Illinois
Environmental Protection Agency, stating that the 2030 MVEBs contained
in the maintenance plan for the 2008 Ozone Standard for Metro-East area
are adequate for transportation conformity purposes. EPA announced
receipt of these MVEBs on its transportation conformity Web site, and
did not receive any comments during the public comment period. The
finding of adequacy is available at EPA's conformity Web site: https://www.epa.gov/state-and-local-transportation/adequacy-review-state-implementation-plan-sip-submissions-conformity.
    The 2030 MVEBs, in tons per day (tpd), for VOCs and NOX
for the Metro-East St. Louis, Illinois area are as follows:

------------------------------------------------------------------------
                                                    NOX (tpd)     VOCs
                       Year                                      (tpd)
------------------------------------------------------------------------
2030..............................................     16.68       9.05
------------------------------------------------------------------------

    Transportation conformity is required by section 176(c) of the
Clean Air Act. EPA's conformity rule requires that transportation
plans, programs, and projects conform to state air quality
implementation plans and establishes the criteria and procedures for
determining whether they conform. Conformity to a State Implementation
Plan (SIP) means that transportation activities will not produce new
air quality violations, worsen existing violations, or delay timely
attainment of the national ambient air quality standards.
    The criteria by which we determine whether a SIP's MVEBs are
adequate for transportation conformity purposes are outlined in 40 CFR
93.118(e)(4). Please note that an adequacy review is separate from
EPA's completeness review, and is also a separate action from EPA's
evaluation of and decision whether to approve a proposed SIP revision.

    Authority:  42 U.S.C. 7401-7671q.

    Dated: November 17, 2017.
Robert A. Kaplan,
Acting Regional Administrator, Region 5.
[FR Doc. 2017-26533 Filed 12-8-17; 8:45 am]
 BILLING CODE 6560-50-P


[Federal Register Volume 80, Number 139 (Tuesday, July 21, 2015)]
[Notices]
[Page 43158]
[FR Doc No: 2015-17827]

=======================================================================
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DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

[Docket Number FRA-2015-0049]

Petition for Waiver of Compliance

    In accordance with part 211 of Title 49 Code of Federal Regulations
(CFR), this document provides the public notice that by a document
dated May 6, 2015, Iowa River Railroad Inc. (IARR) has petitioned the
Federal Railroad Administration (FRA) for a waiver of compliance from
certain provisions of the Federal railroad safety regulations contained
at 49 CFR 223.11--Requirements for existing locomotives. FRA assigned
the petition Docket Number FRA-2015-0049.
    IARR of Steamboat Rock, IA, has petitioned for a permanent waiver
of compliance for one locomotive, CANX 1236, from the requirements of
the railroad safety glazing standards at 49 CFR part 223 that require
certified glazing in all windows. In June 2006, IARR acquired the
dormant rail-banked track between Milepost 212.0 at or near Steamboat
Rock and Milepost 201.46 at or near Ackley, IA, a distance of 10.54
miles, from the North Central Railway Association, Inc. This rail-
banked track, all of which is in a rural area, has been rehabilitated,
and the line, designated as yard limits, is currently in use. The main
products handled by IARR include ethanol, grain, and chemicals/
fertilizers. The railroad interchanges with the Chicago Central and
Pacific Railroad (owned by Canadian National Railway) at Ackley.
    The locomotive is an EMD SW1200 diesel switcher locomotive (weight,
230,000 pounds) built by General Motors Electro-Motive Division (EMD)
in 1956. Power is provided by an EMD 567C 12-cylinder engine that
generates 1,200 horsepower (895 kW). The switcher uses the traditional
carbody and rounded-cab roof-line. The existing safety glazing in the
locomotive is in good condition. IARR states that there has been no
history of glazing-related accidents or injuries during its operations
since 2006. The expense of retrofitting the locomotive to comply with
FRA safety glazing standards is financially burdensome, and IARR is,
therefore, requesting the waiver of the regulation at 49 CFR 223.11 for
its locomotive listed above.
    A copy of the petition, as well as any written communications
concerning the petition, is available for review online at
www.regulations.gov and in person at the U.S. Department of
Transportation's (DOT) Docket Operations Facility, 1200 New Jersey
Avenue SE., W12-140, Washington, DC 20590. The Docket Operations
Facility is open from 9 a.m. to 5 p.m., Monday through Friday, except
Federal Holidays.
    Interested parties are invited to participate in these proceedings
by submitting written views, data, or comments. FRA does not anticipate
scheduling a public hearing in connection with these proceedings since
the facts do not appear to warrant a hearing. If any interested party
desires an opportunity for oral comment, they should notify FRA, in
writing, before the end of the comment period and specify the basis for
their request.
    All communications concerning these proceedings should identify the
appropriate docket number and may be submitted by any of the following
methods:
     Web site: http://www.regulations.gov. Follow the online
instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: Docket Operations Facility, U.S. Department of
Transportation, 1200 New Jersey Avenue SE., W12-140, Washington, DC
20590.
     Hand Delivery: 1200 New Jersey Avenue SE., Room W12-140,
Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal Holidays.
    Communications received by September 4, 2015 will be considered by
FRA before final action is taken. Comments received after that date
will be considered as far as practicable.
    Anyone is able to search the electronic form of any written
communications and comments received into any of our dockets by the
name of the individual submitting the comment (or signing the document,
if submitted on behalf of an association, business, labor union, etc.).
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the
public to better inform its processes. DOT posts these comments,
without edit, including any personal information the commenter
provides, to www.regulations.gov, as described in the system of records
notice (DOT/ALL-14 FDMS), which can be reviewed at www.dot.gov/privacy.
    See also http://www.regulations.gov/#!privacyNotice for the privacy
notice of regulations.gov or interested parties may review DOT's
complete Privacy Act Statement in the Federal Register published on
April 11, 2000 (65 FR 19477).

    Issued in Washington, DC, on July 14, 2015.
Ron Hynes,
Director, Office of Technical Oversight.
[FR Doc. 2015-17827 Filed 7-20-15; 8:45 am]
BILLING CODE 4910-06-P


[Federal Register Volume 83, Number 128 (Tuesday, July 3, 2018)]
[Notices]
[Pages 31236-31237]
[FR Doc No: 2018-14283]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83543; File No. SR-NYSEArca-2013-107]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting an
Extension to Limited Exemptions From Rule 612(c) of Regulation NMS In
Connection With the Exchange's Retail Liquidity Programs Until December
31, 2018

June 28, 2018.
    On December 23, 2013, the Securities and Exchange Commission
(``Commission'') issued an order pursuant to its authority under Rule
612(c) of Regulation NMS (``Sub-Penny Rule'') \1\ that granted NYSE
Arca, Inc. (``Exchange'') a limited exemption from the Sub-Penny Rule
in connection with the operation of the Exchange's Retail Liquidity
Program (the ``Program'').\2\ The limited exemption was granted
concurrently with the Commission's approval of the Exchange's proposal
to adopt its Program for a one-year pilot term.\3\ The exemption was
granted coterminous with the effectiveness of the pilot Program; both
the pilot Program and exemption are scheduled to expire on June 30,
2018.\4\
---------------------------------------------------------------------------

    \1\ 17 CFR 242.612(c).
    \2\ See Securities Exchange Act Release No. 71176 (December 23,
2013), 78 FR 79524 (December 30, 2013) (SR-NYSEArca-2013-107)
(``Order'').
    \3\ See id.
    \4\ On March 19, 2015, the Exchange requested an extension of
the exemption for the Program. See letter from Martha Redding,
Senior Counsel and Assistant Secretary, to Brent J. Fields,
Secretary, Commission, dated March 19, 2015. The pilot period for
the Program was extended until September 30, 2015. See Securities
Exchange Act Release No. 74572 (Mar. 24, 2015), 80 FR 16705 (Mar.
30, 2015) (SR-NYSEArca-2015-22). On September 17, 2015, the Exchange
requested another extension of the exemption for the Program. See
letter from Martha Redding, Senior Counsel and Assistant Secretary,
to Brent J. Fields, Secretary, Commission, dated September 17, 2015.
The pilot period for the Program was extended until March 31, 2016.
See Securities Exchange Act Release Nos. 75994 (Sept. 28, 2015), 80
FR 59834 (Oct. 2, 2015) (SR-NYSEArca-2015-84) and 77236 (Feb. 25,
2016), 81 FR 10943 (Mar. 2, 2016) (SR-NYSEArca-2016-30). On March
17, 2016, the Exchange requested another extension of the exemption
for the Program. See letter from Martha Redding, Senior Counsel and
Assistant Secretary, to Brent J. Fields, Secretary, Commission,
dated March 17, 2016. The pilot period for the Program was extended
until August 31, 2016. See Securities Exchange Act Release No. 77425
(Mar. 23, 2016), 81 FR 17523 (Mar. 29, 2016) (SR-NYSEArca-2016-47).
On August 8, 2016, the Exchange requested another extension of the
exemption for the Program. See Letter from Martha Redding, Associate
General Counsel and Assistant Secretary, to Brent J. Fields,
Secretary, Commission, dated August 8, 2016. The pilot period for
the Program was extended until December 31, 2016. See Securities
Exchange Act Release No. 78601 (Aug. 17, 2016), 81 FR 57632 (Aug.
23, 2016) (SR-NYSEArca-2016-113). On November 28, 2016, the Exchange
requested another extension of the exemption for the program. See
Letter from Martha Redding, Associate General Counsel and Assistant
Secretary, to Brent J. Fields, Secretary, Commission, dated November
28, 2016. The pilot period for the Program was extended until June
30, 2017. See Securities Exchange Act Release No. 79495 (Dec. 7,
2016), 81 FR 90033 (Dec. 13, 2016) (SR-NYSEArca-2016-157). On May
23, 2017, the Exchange requested another extension of the exemption
for the program. See Letter from Martha Redding, Associate General
Counsel and Assistant Secretary, to Brent J. Fields, Secretary,
Commission, dated May 23, 2017. The pilot period for the Program was
extended until December 31, 2017. See Securities Exchange Act
Release No. 80851 (June 2, 2017), 82 FR 26722 (June 8, 2017) (SR-
NYSEArca-2017-63). On November 30, 2017, the Exchange requested
another extension of the exemption to the program. See Letter from
Martha Redding, Assistant Secretary, NYSE, to Brent J. Fields,
Secretary, Commission, dated November 30, 2017. The pilot period for
the Program was extended until June 30, 2018. See Securities
Exchange Act Release No. 82289 (December 11, 2017), 82 FR 59677
(December 15, 2017) (SR-NYSEArca-2017-137).
---------------------------------------------------------------------------

    The Exchange now seeks to extend the exemptions until December 31,
2018.\5\ The Exchange's request was made in conjunction with an
immediately effective filing that extends

the operation of the Program through the same date.\6\ In its request
to extend the exemption, the Exchange notes that the participation in
the Program has increased more recently with additional Retail
Liquidity Providers. Accordingly, the Exchange has asked for additional
time to both allow for additional opportunities for greater
participation in the Program and allow for further assessment of the
results of such participation. For this reason and the reasons stated
in the Order originally granting the limited exemptions, the Commission
finds that extending the exemption, pursuant to its authority under
Rule 612(c) of Regulation NMS, is appropriate in the public interest
and consistent with the protection of investors.
---------------------------------------------------------------------------

    \5\ See Letter from Martha Redding, Associate General Counsel
and Assistant Secretary, NYSE to Brent J. Fields, Secretary,
Commission, dated June 14, 2018.
    \6\ See SR-NYSEArca-2018-46.
---------------------------------------------------------------------------

    Therefore, it is hereby ordered that, pursuant to Rule 612(c) of
Regulation NMS, the Exchange is granted a limited exemption from Rule
612 of Regulation NMS that allows it to accept and rank orders priced
equal to or greater than $1.00 per share in increments of $0.001, in
connection with the operation of its Retail Liquidity Program, until
December 31, 2018.
    The limited and temporary exemption extended by this Order is
subject to modification or revocation if at any time the Commission
determines that such action is necessary or appropriate in furtherance
of the purposes of the Securities Exchange Act of 1934. Responsibility
for compliance with any applicable provisions of the Federal securities
laws must rest with the persons relying on the exemptions that are the
subject of this Order.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(83).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14283 Filed 7-2-18; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 77, Number 194 (Friday, October 5, 2012)]
[Notices]
[Page 60975]
[FR Doc No: 2012-24601]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice of Filings 1

    Take notice that the Commission received the following electric
rate filings:

    Docket Numbers: ER12-2129-001.
    Applicants: Midwest Independent Transmission System.
    Description: 09-26-12 Schedule 1 Compliance Filing to be effective
8/28/2012.
    Filed Date: 9/26/12.
    Accession Number: 20120926-5060.
    Comments Due: 5 p.m. ET 10/17/12.

    Docket Numbers: ER12-2424-001.
    Applicants: Public Service Company of New Mexico.
    Description: Public Service Company of New Mexico submits tariff
filing per 35: Compliance Filing to submit Title Page to be effective
10/7/2012.
    Filed Date: 9/25/12.
    Accession Number: 20120925-5172.
    Comments Due: 5 p.m. ET 10/16/12.

    Docket Numbers: ER12-2529-000.
    Applicants: KODE Novus II, LLC.
    Description: Supplement to Market-Based Rate Application of KODE
Novus II, LLC under ER12-2529.
    Filed Date: 9/26/12.
    Accession Number: 20120926-5012.
    Comments Due: 5 p.m. ET 10/10/12.

    Docket Numbers: ER12-2682-000.
    Applicants: Midwest Independent Transmission System Operator, Inc.
    Description: The Midwest Independent Transmission System Operator,
Inc. submits Pro Forma Tariff Sheets Including Proposed Module B-1 to
the MISO Tariff.
    Filed Date: 9/24/12.
    Accession Number: 20120924-5182.
    Comments Due: 5 p.m. ET 11/8/12.

    Docket Numbers: ER12-2683-000.
    Applicants: Entergy Operating Companies.
    Description: Entergy Operating Companies submits Pro Forma
Ancillary Services Tariff and Notice of Cancellation for Open Access
Transmission Tariff.
    Filed Date: 9/24/12.
    Accession Number: 20120925-0201.
    Comments Due: 5 p.m. ET 11/8/12.

    Docket Numbers: ER12-2684-000.
    Applicants: Southwestern Electric Power Company.
    Description: SWEPCO-AECC Potter FA to be effective 8/31/2012.
    Filed Date: 9/25/12.
    Accession Number: 20120925-5158.
    Comments Due: 5 p.m. ET 10/16/12.

    Docket Numbers: ER12-2685-000.
    Applicants: Meadow Creek Project Company LLC.
    Description: Certificate of Concurrence to be effective 9/17/2012.
    Filed Date: 9/25/12.
    Accession Number: 20120925-5169.
    Comments Due: 5 p.m. ET 10/16/12.

    Docket Numbers: ER12-2686-000.
    Applicants: Tucson Electric Power Company.
    Description: RS No. 322, APS RS No. 260, Perrin Ranch LGIA, 0.0.0
to be effective 10/21/2011.
    Filed Date: 9/25/12.
    Accession Number: 20120925-5171.
    Comments Due: 5 p.m. ET 10/16/12.

    Docket Numbers: ER12-2687-000.
    Applicants: Pacific Gas and Electric Company.
    Description: Western WDT Amendment for Cost of Ownership and Meter
Reading Charges to be effective 10/1/2012.
    Filed Date: 9/26/12.
    Accession Number: 20120926-5000.
    Comments Due: 5 p.m. ET 10/17/12.

    Docket Numbers: ER12-2688-000.
    Applicants: Pacific Gas and Electric Company.
    Description: KMPUD Engineering Agreement Amendment to be effective
9/27/2012.
    Filed Date: 9/26/12.
    Accession Number: 20120926-5002.
    Comments Due: 5 p.m. ET 10/17/12.

    Docket Numbers: ER12-2689-000.
    Applicants: Hot Spring Power Company, LLC.
    Description: Notice of Cancellation to be effective 9/27/2012.
    Filed Date: 9/26/12.
    Accession Number: 20120926-5021.
    Comments Due: 5 p.m. ET 10/17/12.

    Docket Numbers: ER12-2690-000.
    Applicants: ISO New England Inc.,New England Power Pool
Participants Comm.
    Description: Wind Resource Dispatch Rules to be effective 12/1/
2012.
    Filed Date: 9/26/12.
    Accession Number: 20120926-5030.
    Comments Due: 5 p.m. ET 10/17/12.

    Docket Numbers: ER12-2691-000.
    Applicants: Alabama Power Company.
    Description: AMEA NITSA Filing to be effective 9/1/2012.
    Filed Date: 9/26/12.
    Accession Number: 20120926-5082.
    Comments Due: 5 p.m. ET 10/17/12.

    Docket Numbers: ER12-2692-000.
    Applicants: Simpson Tacoma Kraft Company, LLC.
    Description: Amendment of Pending Filing 1 to be effective 8/7/
2012.
    Filed Date: 9/26/12.
    Accession Number: 20120926-5086.
    Comments Due: 5 p.m. ET 10/17/12.

    Docket Numbers: ER12-309-005.
    Applicants: Midwest Independent Transmission System Operator, Inc.
    Description: 9-26-2012 Attachment X QR3 Compliance Filing to be
effective 1/1/2012.
    Filed Date: 9/26/12.
    Accession Number: 20120926-5061.
    Comments Due: 5 p.m. ET 10/17/12.

    The filings are accessible in the Commission's eLibrary system by
clicking on the links or querying the docket number.
    Any person desiring to intervene or protest in any of the above
proceedings must file in accordance with Rules 211 and 214 of the
Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5
p.m. Eastern time on the specified comment date. Protests may be
considered, but intervention is necessary to become a party to the
proceeding.
    eFiling is encouraged. More detailed information relating to filing
requirements, interventions, protests, service, and qualifying
facilities filings can be found at: http://www.ferc.gov/docs-filing/efiling/filing-req.pdf. For other information, call<PHONE_NUMBER>
(toll free). For TTY, call<PHONE_NUMBER>.

    Dated: September 26, 2012.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2012-24601 Filed 10-4-12; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 86, Number 215 (Wednesday, November 10, 2021)]
[Rules and Regulations]
[Pages 62473-62475]
[FR Doc No: 2021-24525]

=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 275

[Release No. IA-5904]

Performance-Based Investment Advisory Fees

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Securities and Exchange Commission (``Commission'' or
``SEC'') is adopting amendments to the rule under the Investment
Advisers Act of 1940 (``Advisers Act'') that permits investment
advisers to charge performance-based compensation to ``qualified
clients.'' The rule defines ``qualified client'' with reference to
specific dollar amount thresholds, which are required to be adjusted
every five years to account for the effects of inflation. These
amendments replace specific dollar amount thresholds in the rule's
``qualified client'' definition with references to the Commission's
``most recent order,'' as defined by the amended rule, containing the
specific dollar amount thresholds adjusted for inflation.

DATES: The amendments are effective on November 10, 2021.

FOR FURTHER INFORMATION CONTACT: Matthew Cook, Senior Counsel, at (202)
551-6787 or [email protected], Investment Adviser Regulation Office,
Division of Investment Management, Securities and Exchange Commission,
100 F Street NE, Washington, DC 20549-8549.

SUPPLEMENTARY INFORMATION: The Commission is adopting amendments to 17
CFR 275.205-3 (rule 205-3) under the Advisers Act.\1\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 80b. Unless otherwise noted, all references to
statutory sections are to 15 U.S.C. 80b of the United States Code,
at which the Advisers Act is codified, and all references to rules
under the Advisers Act, including rule 205-3, are to title 17, part
275 of the Code of Federal Regulations [17 CFR part 275].
---------------------------------------------------------------------------

I. Background

    Section 205(a)(1) of the Advisers Act generally prohibits an
investment adviser registered or required to be registered with the
Commission from entering into, extending, renewing, or performing any
investment advisory contract that provides for compensation to the
adviser based on a share of capital gains on, or capital appreciation
of, the funds of a client.\2\ Congress restricted these compensation
arrangements (also known as performance compensation or performance
fees) in 1940 to protect advisory clients from fee arrangements it
believed could encourage advisers to engage in speculative trading
practices while managing client funds in order to realize or increase
advisory fees.\3\ Congress subsequently authorized the Commission to
exempt any advisory contract from the performance fee prohibition if
the contract is with any person that the Commission determines does not
need the protections of this restriction.\4\ Rule 205-3 under the
Advisers Act exempts an investment adviser from the prohibition against
charging a client performance fees when the client is a ``qualified
client.'' \5\ A qualified client includes a client that has at least a
certain dollar amount in assets under management with the adviser
immediately after entering into the advisory contract (``assets-under-
management test''), and a client that the adviser reasonably believes,
immediately prior to entering into the contract, had a net worth of
more than a certain dollar amount (``net worth test'').\6\
---------------------------------------------------------------------------

    \2\ 15 U.S.C. 80b-5(a)(1).
    \3\ See Exemption to Allow Registered Investment Advisers to
Charge Fees Based Upon a Share of Capital Gains Upon or Capital
Appreciation of a Client's Account, Investment Advisers Act Release
No. 996 (Nov. 14, 1985) [50 FR 48556 (Nov. 26, 1985)] (``1985
Adopting Release''), at Section I.A and footnote 3.
    \4\ Section 205(e) of the Advisers Act. Section 205(e) provides
that the Commission may determine that persons do not need the
protections of section 205(a)(1) on the basis of such factors as
``financial sophistication, net worth, knowledge of and experience
in financial matters, amount of assets under management,
relationship with a registered investment adviser, and such other
factors as the Commission determines are consistent with [section
205].''
    \5\ 1985 Adopting Release, supra footnote 3. The exemption
applies to the entrance into, performance, renewal, and extension of
advisory contracts. See rule 205-3(a).
    \6\ Rule 205-3(d)(1)(i) through (ii). The dollar amount
thresholds of the assets-under-management and net worth tests were
$500,000 and $1 million, respectively, when the Commission adopted
rule 205-3 in 1985. See 1985 Adopting Release, supra footnote 3. In
1998, the Commission amended rule 205-3 to, among other things,
revise the dollar amounts of the assets-under-management test and
net worth test to adjust for the effects of inflation since 1985
(the amounts were adjusted to $750,000 and $1.5 million,
respectively). See Exemption To Allow Investment Advisers To Charge
Fees Based Upon a Share of Capital Gains Upon or Capital
Appreciation of a Client's Account, Investment Advisers Act Release
No. 1731 (July 15, 1998) [63 FR 39022 (July 21, 1998)]. These dollar
amount thresholds were subsequently adjusted to account for the
effects of inflation by Commission orders in 2011, 2016 and 2021, as
discussed infra footnotes 9, 11, and 12 and accompanying text.
---------------------------------------------------------------------------

    The Dodd-Frank Wall Street Reform and Consumer Protection Act
(``Dodd-Frank Act'') \7\ amended section 205(e) of the Advisers Act to
provide that, by July 21, 2011, and every five years thereafter, the
Commission shall, by order, adjust for the effects of inflation the
dollar amount thresholds included in rules issued under section 205(e),
rounded to the nearest multiple of $100,000.\8\ In 2011, the Commission
issued an order to revise the dollar amount thresholds of the assets-
under-management and net worth tests to $1,000,000 and $2,000,000,
respectively.\9\ In 2012, the Commission amended rule 205-3 to codify
the dollar amount thresholds in the 2011 Order and, among other

amendments, to add a new paragraph (e) that states that the Commission
will issue an order on or about May 1, 2016, and approximately every
five years thereafter, adjusting for inflation the dollar amount
thresholds of the assets-under-management and net worth tests of the
rule.\10\
---------------------------------------------------------------------------

    \7\ Public Law 111-203, 124 Stat. 1376 (2010).
    \8\ See section 418 of the Dodd-Frank Act (requiring the
Commission to issue an order every five years revising dollar amount
thresholds in a rule that exempts a person or transaction from
section 205(a)(1) of the Advisers Act if the dollar amount threshold
was a factor in the Commission's determination that the person does
not need the protections of that section).
    \9\ Order Approving Adjustment for Inflation of the Dollar
Amount Tests in Rule 205-3 under the Investment Advisers Act of
1940, Investment Advisers Act Release No. 3236 (July 12, 2011) [76
FR 41838 (July 15, 2011)] (``2011 Order'').
    \10\ Rule 205-3(d) and (e). See Investment Adviser Performance
Compensation, Investment Advisers Act Release No. 3372 (Feb. 15,
2012) [77 FR 10358 (Feb. 22, 2012)]. Rule 205-3(e) also specifies
the methodology and price index on which inflation adjustments must
be based.
---------------------------------------------------------------------------

    Since then, the Commission has twice issued orders adjusting for
the effects of inflation the dollar amount thresholds in accordance
with rule 205-3(e). In 2016, the Commission issued an order increasing
the dollar amount threshold of the net worth test (to $2,100,000) and
maintaining the dollar amount threshold of the assets-under management
test (at $1,000,000).\11\ On June 17, 2021, the Commission issued an
order, effective as of August 16, 2021, increasing the dollar amount
threshold of the assets-under-management test from $1,000,000 to
$1,100,000 and the dollar amount threshold of the net worth test from
$2,100,000 to $2,200,000.\12\
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    \11\ Order Approving Adjustment for Inflation of the Dollar
Amount Tests in Rule 205-3 under the Investment Advisers Act of
1940, Investment Advisers Act Release No. 4421 (June 14, 2016) [81
FR 39985 (June 20, 2016)] (``2016 Order'').
    \12\ Order Approving Adjustment for Inflation of the Dollar
Amount Tests in Rule 205-3 under the Investment Advisers Act of
1940, Investment Advisers Act Release No. 5756 (June 17, 2021) [86
FR 32993 (June 23, 2021)] (``2021 Order''). Both the 2016 Order and
the 2021 Order stated that to the extent that contractual
relationships were entered into prior to the order's effective date,
the adjustments to the dollar amount thresholds would not generally
apply retroactively to such contractual relationships, subject to
the transition rules of rule 205-3, which are described infra
footnote 14.
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II. Discussion

A. Amendments to Rule 205-3

    We are adopting amendments to rule 205-3 to replace the specific
dollar amount thresholds in the rule's net worth and assets-under-
management tests with references to the ``most recent order'' issued by
the Commission containing the specific dollar amount thresholds
adjusted for inflation. We define ``most recent order'' in the rule to
mean ``the most recently issued Commission order in accordance with
paragraph (e) of this section and as published in the Federal
Register.'' \13\
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    \13\ Such orders are published in the Federal Register, but are
also available on the SEC's website at www.sec.gov/rules/other.shtml. See, e.g., 2021 Order, supra footnote 12. Publication
of the orders on the website may precede publication in the Federal
Register.
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    As discussed above, the Commission is required to issue an order
every five years adjusting for inflation the dollar amount thresholds
of the assets-under-management and net worth tests of the rule. By
amending the rule to refer to the ``most recent order'' for the dollar
amount thresholds in the rule's ``qualified client'' tests, the rule
will reference the most recently issued and published adjusted dollar
amounts,\14\ and more directly tie the relevant amount to the mechanism
by which it is established (i.e., the order).
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    \14\ The effective dates of the adjustments are specified in the
``most recent order'' and are subject to the transition provisions
of the rule. See, e.g., 2021 Order, supra footnote 12. The
transition provisions state, for example, that if a registered
investment adviser entered into a contract and satisfied the
conditions of rule 205-3 that were in effect when the contract was
entered into, the adviser will be considered to satisfy the
conditions of the rule; if, however, a natural person or company
that was not a party to the contract becomes a party, the conditions
of the rule in effect at the time such natural person or company
becomes a party will apply to that person or company. See rule 205-
3(c)(1) through (3).
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    We are also adopting an amendment to rule 205-3 to update from
``May 1, 2016'' to ``May 1, 2026'' the reference point of a specific
date in paragraph (e). Paragraph (e) currently provides that the dollar
amount thresholds of the assets-under-management and net worth tests
will be adjusted for inflation by Commission order ``issued on or about
May 1, 2016 and approximately every five years thereafter.'' \15\ By
amending the rule to refer to a date in the future, the rule will
establish clearly the next expected date for issuance of a Commission
order, while retaining the five-year period between such orders that
was established by the Commission in 2012. We believe that referring in
the rule text to a specific date will be useful to market participants
in determining approximately when the Commission will issue and the
Federal Register will publish an order for purposes of the amended
rule's definition of ``most recent order.''
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    \15\ Rule 205-3(e).
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B. Procedural and Other Matters

    Under the Administrative Procedure Act (``APA''), notice of
proposed rulemaking is not required: (1) For interpretive rules,
general statements of policy, or rules of agency organization,
procedure, or practice; or (2) when the agency for good cause finds
(and incorporates the finding and a brief statement of reasons therefor
in the rules issued) that notice and public procedure thereon are
impracticable, unnecessary, or contrary to the public interest.\16\
Given that the amendments to rule 205-3 do not substantively change the
methodology for calculating the dollar amount thresholds or the amount
of those thresholds, and instead merely add a reference in the rule to
the Commission's ``most recent order'' adjusting the dollar amount
thresholds and update the reference point of a specific date in
paragraph (e), the Commission finds that good cause exists to dispense
with public notice and comment pursuant to the notice and comment
provisions of the APA. In accordance with the APA, the Commission also
finds that there is good cause to establish an effective date less than
30 days after publication of rule 205-3.\17\ The Commission finds there
is good cause for the amendments to rule 205-3 to take effect upon
publication in the Federal Register because the current rule's dollar
thresholds do not conform to the dollar thresholds adopted pursuant to
the most recent order. The Commission believes that establishing an
effective date less than 30 days after publication of rule 205-3 is
necessary to remove the outdated dollar thresholds in the rule by
making the text consistent with the thresholds adopted pursuant to the
most recent order. Furthermore, the amendments to rule 205-3 under the
Advisers Act do not contain any ``collection of information''
requirements as defined by the Paperwork Reduction Act of 1995, as
amended (``PRA'').\18\ Accordingly, the PRA is not applicable.
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    \16\ 5 U.S.C. 553(b). The amendments to rule 205-3 do not
require analysis under the Regulatory Flexibility Act (``RFA'') 5
U.S.C. 601(2) (for purposes of RFA analysis, the term ``rule''
generally means any rule for which the agency publishes a general
notice of proposed rulemaking). In addition, pursuant to the
Congressional Review Act, the Office of Information and Regulatory
Affairs has designated the amendments to rule 205-3 as not a ``major
rule'' as defined by 5 U.S.C. 804(2). See 5 U.S.C. 801 et seq.
    \17\ 5 U.S.C. 553(d)). This finding also satisfies the
requirements of 5 U.S.C. 808(2), allowing the amendment to rule 205-
3 to become effective notwithstanding the requirement of 5 U.S.C.
801 (if a Federal agency finds that notice and public comment are
impracticable, unnecessary or contrary to the public interest, a
rule shall take effect at such time as the federal agency
promulgating the rule determines). Therefore, the amendments to rule
205-3 shall take effect on November 10, 2021.
    \18\ 44 U.S.C. 3501-3520.
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III. Economic Analysis

    The Commission is sensitive to the economic effects that could
result from the amendments to rule 205-3. Investment advisers who
charge, or may charge, performance fees and clients who meet, or may
meet, the definition of ``qualified client'' in the rule could be
affected by the amendments. As of August 2021, of the approximately
14,543 investment advisers registered with the Commission, 5,251 (36%)

currently report that they are compensated with performance-based
fees.\19\
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    \19\ This analysis is based on adviser responses to Item 5.E.6
of Part 1A on Form ADV. This Item requests that an adviser note
whether it receives performance-based fees.
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    We do not, however, expect that the amendments to rule 205-3 will
result in substantial costs or benefits to these market participants.
As described above, rule 205-3 currently references specific dollar
amount thresholds in the rule's net worth and assets-under-management
tests in paragraph (d)(1) and, separately, specifies that these
thresholds will be adjusted for the effects of inflation by order of
the Commission in paragraph (e). The amendments replace the specific
dollar amount thresholds with references to the ``most recent order''
issued by the Commission containing the specific dollar amount
thresholds adjusted for inflation, consistent with existing paragraph
(e) of the rule. The amendments do not themselves change the dollar
amount thresholds used in the definition, and, as a result, will not
have any effect on the number of clients that meet the rule's
definition of ``qualified client.'' Further, we do not believe the
amendments will affect the number of advisers charging clients
performance fees. The amendments also update the date from ``May 1,
2016'' to ``May 1, 2026'' in paragraph (e) to indicate when the next
adjustment will occur, with future adjustments every five years
thereafter, although this update does not reflect any change in process
or timing from the existing rule.
    The amendments to rule 205-3 could help investment advisers and
clients more easily identify the current thresholds in the ``qualified
client'' definition to the extent that the text of rule 205-3 is
inconsistent with the most recent order issued by the Commission or to
the extent that investment advisers and clients are unaware of such
inconsistency. Relatedly, the updated date in paragraph (e) may help
investment advisers and clients more easily determine approximately
when the Commission will next issue an order and set expectations for
future changes. These effects could incrementally reduce compliance
costs; however, we do not expect any such reductions to be substantial.
    Similarly, we do not expect any changes to efficiency, competition,
or capital formation in the investment adviser industry as a result of
the amendments to rule 205-3. While the amendments may make the
identification of ``qualified clients'' incrementally easier by
clarifying that the current thresholds in the ``qualified client''
definition may be found in the most recent order issued by the
Commission, we do not believe that these changes will substantially
affect an adviser's ability to identify ``qualified clients'' or raise
capital from such clients.

IV. Statutory Authority

    The Commission is adopting amendments to rule 205-3 under the
Advisers Act pursuant to the authority set forth in section 205(e) of
the Investment Advisers Act of 1940 [15 U.S.C. 80b-5(e)].

List of Subjects in 17 CFR Part 275

    Reporting and recordkeeping requirements, Securities.

Text of Rules

    For the reasons set out in the preamble, title 17, chapter II of
the Code of Federal Regulations is amended as follows:

PART 275--RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940

0
1. The authority citation for part 275 continues to read, in part, as
follows:

    Authority: 15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-
2(a)(17), 80b-3, 80b-4, 80b-4a, 80b-6(4), 80b-6a, and 80b-11, unless
otherwise noted.
* * * * *
    Section 275.205-3 is also issued under 15 U.S.C. 80b-5(e).
* * * * *

0
2. Section 275.205-3 is amended by:
0
a. Revising paragraphs (d)(1)(i) and (d)(1)(ii)(A) introductory text;
0
b. Adding paragraph (d)(5); and
0
c. Revising paragraph (e) introductory text.
    The revisions and addition read as follows:

Sec.  275.205-3  Exemption from the compensation prohibition of section
205(a)(1) for investment advisers.

* * * * *
    (d) * * *
    (1) * * *
    (i) A natural person who, or a company that, immediately after
entering into the contract has, under the management of the investment
adviser, at least the applicable dollar amount specified in the most
recent order;
    (ii) * * *
    (A) Has a net worth (together, in the case of a natural person,
with assets held jointly with a spouse) of more than the applicable
dollar amount specified in the most recent order. For purposes of
calculating a natural person's net worth:
* * * * *
    (5) The term most recent order means the most recently issued
Commission order in accordance with paragraph (e) of this section and
as published in the Federal Register.
    (e) Inflation adjustments. Pursuant to section 205(e) of the Act,
the dollar amounts referenced in paragraphs (d)(1)(i) and (d)(1)(ii)(A)
of this section shall be adjusted, by order of the Commission, issued
on or about May 1, 2026, and approximately every five years thereafter.
The adjusted dollar amounts established in such orders shall be
computed by:
* * * * *

    By the Commission.

    Dated: November 4, 2021.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021-24525 Filed 11-9-21; 8:45 am]
BILLING CODE 8011-01-P