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curities so listed are fully comparable to “margin itation results from the requirement in Rule securities” for purposes of Rule 12d3-1 under the 12d3-1 that an eligible security of a securities 1940 Act.

company be a "margin security." Applicants will 2. As a further condition to the relief requested

comply with all requirements of Rule 12d3-1 and to assure the quality and liquidity of Appli

except with respect to the "margin security" cants' investments, Applicants will acquire only

requirement. The conditions proposed in this those equity securities (or in the case of convert

application are as rigorous, and in certain reible debt, debt convertible into equity securities)

spects more rigorous, than the standards applicaof foreign securities companies which meet cer

ble to a “margin security.” tain additional quality standards. These addi- 2. The primary concerns addressed by Section tional standards are collectively equal or superior 12(d)(3)-entrepreneurial risk of investing in seto the standards applicable to an OTC margin curities-related businesses structured as partstock. By limiting investments to equity se- nerships and potential conflicts of interests becurities listed on certain major foreign stock ex- tween an investment company's shareholders changes that in terms of quality and liquidity are and its investment adviser, underwriters or other comparable to the largest of the U.S. national brokers—are not relevant in Applicants' context. securities exchanges, and by imposing certain Applicants do not intend to purchase any general additional quality standards on the securities partnership interest in securities-related busithemselves, the proposed conditions exceed the nesses. Since Applicants' own shares are sold by quality standards applicable to a "margin se- its investment advisors or affiliates, the concern curity.”

that Applicants might purchase shares in a bro3. Applicants will purchase only those equity ker-dealer for selling the investment company's securities of foreign securities companies (or

shares is not relevant. debt convertible into such securities) that meet the quality standards outlined below:

3. The proposed conditions will assure that, in

terms of breadth of market, availability of invest(1) Daily quotations for both bid and asked

ment information, and character and permanence prices for the stock are continuously available to of the issuer, the securities in which Applicants the general public,

propose to invest will be fully comparable, and in (2) The stock has been publicly traded for at least many respects superior in quality, to securities six months;

that fall within the definition of "margin se

curities.” Further, the relief requested would al(3) The issuer or a predecessor in interest has

low them to invest in securities of foreign issuers been in existence for at least three years;

that derive more than 15% of their revenue from (4) The issuer has at least $10 million of capital, securities-related activities. Many foreign issuers surplus, and undivided profits;

are integrated companies, engaged in both fian(5) The issuer is required by exchange or govern

cial and non-financial services, or provide both mental regulation publicly to file (i) reports of any

securities-related and other financial services. important financial or structural corporate

Rule 12d3-1 was designed to give investment changes, (ii) semi-annual profit and loss state

companies greater flexibility with respect to inments, and (iii) annual reports of independently

vestments in securities-related businesses, that, audited assets and liabilities, profits and losses,

absent exemptive relief, are prohibited under and changes in financial position;

Section 12(d)(3) of the Act. Since securities of

foreign securities companies are generally not (6) The issuer must have a minimum market

traded in the United States, they are not within capitalization of $20 million; and

the technical definition of a “margin security.” (7) The equity securities must have (i) an average Investment companies with international sedaily trading volume of at least 500 shares and (ii) curities portfolios, therefore, are prevented from an average daily trading volume equal in value to investing in securities issued by foreign comat least $25,000.

panies engaged in securities-related activities. In

many instances, these types of companies comApplicants' Conclusions of Law:

prise a substantial portion of a country's financial 1. Rule 12d3-1 under the 1940 Act in effect limits sector because many foreign countries permit an investment company's ability to invest in se- banks and other financial institutions to engage in curities of foreign securities companies. This lim- securities-related activities.

For the Commission, by the Division of Invest- Francis served as a director of Equitable from ment Management, under delegated authority. January 1, 1988 to July 7, 1988.

Jonathan G. Katz On February 7, 1979, the Commission filed a civil
Secretary action against The Starr Broadcasting Group,

Inc. ("SBG”), a national bank, and nine individu

als who served or had served as SBG's board of INVESTMENT COMPANY ACT OF 1940

directors, including Francis, who had been a nonRelease No. IC-16692/December 14, 1988

officer director of SBG.' Francis, without admitFile No. 812-7160

ting or denying the allegations in the CommisTHE EQUITABLE LIFE ASSURANCE

sion's complaint, consented to the entry of an SOCIETY OF THE UNITED STATES and

injunction against him. The order, which was NORMAN C. FRANCIS; Notice of Filing of

entered on September 4, 1979, permanently enApplication

joined Francis, while serving as an officer or

director of any publicly held reporting company, Notice is hereby given that The Equitable Life from causing such company to file reports with Assurance Society of the United States (“Equita- the Commission which contravene applicable reble”), 787 Seventh Avenue, New York, NY 10019, porting requirements of the Securities Exchange and Norman C. Francis (“Francis”), 7325 Pal- Act of 1934 and from obtaining or extending metto Street, New Orleans, LA 70125 (collec- credit in contravention of the margin rules of the tively, the “Applicants”) have filed an application Commission and the Federal Reserve Board. (“Application") requesting an order of the Commission pursuant to Section 9(c) of the Invest- Section 9(a)(2) of the Act applies to persons who, ment Company Act of 1940, as amended (the by reason of misconduct, have been enjoined “Act”). The requested order would grant Equita- from engaging in or continuing any conduct or ble, certain of its subsidiaries (Equico Securities, practice in connection with the purchase or sale Inc.; Equitable Capital Management Corpora- of any security. Section 9(a) prohibits these pertion; Wood, Struthers & Winthrop Management sons from serving or acting as an employee, Corporation; and any affected future subsidiary officer, director, member of an advisory board, (collectively, “The Equitable Subsidiaries”)), and investment adviser, or depositor of, or principal Francis a permanent exemption from the prohibi- underwriter for, a registered investment comtions of Sections 9(a)(2) and (3) of the Act, to the pany. Section 9(a)(3) extends these prohibitions extent that these prohibitions are applicable to to companies whose affiliated persons are subject the Applicants by virtue of an injunction entered

to the prohibitions of Section 9(a)(2). against Francis in 1979. Applicants request relief Section 9(c) of the Act authorizes the Commisonly to the extent necessary for Francis to serve sion to grant exemptions from the prohibitions of as a director of Equitable.

Section 9(a), either unconditionally or on an apThe Application states that Equitable is a New propriate temporary or other conditional basis. York mutual life insurance company, a registered Applications for exemption must establish that broker-dealer (under the Securities Exchange the prohibitions of Section 9(a) are unduly or Act of 1934), and a registered investment adviser disproportionately severe as applied to the appli(under the Investment Advisers Act of 1940). cant, or that the applicant's conduct has been Equitable is investment adviser, principal under- such as not to make it against the public interest writer and depositor for investment companies

or the protection of investors to grant the applicaand separate accounts (collectively, the “Ac

tion. counts”) that are registered under the Investment Because of the injunction entered against FranCompany Act. The Equitable Subsidiaries are cis, the provisions of Section 9(a) would preclude also, or may in the future be, investment advisers, his service as a director of Equitable unless the principal underwriters and/or depositors of en- relief requested pursuant to Section 9(c) of the tities registered under the Act. Francis is the Act in the Application is granted. The Applicants President of Xavier University of Louisiana, New submit that the prohibitions of Section 9(a) of the Orleans, Louisiana. The Application states that Act would be unduly and disproportionately se

1 SEC v. The Starr Broadcasting Group, Inc., Civil Action No. 79-0357 (D.D.C.).


vere as applied to them, and that Francis' con- necessary to permit Francis to serve as a director duct has been such as to make it not against the of Equitable. public interest or the protection of investors to

Applicants represent that they acknowledge, ungrant an exemption from its provisions.

derstand, and agree that the Commission's issuIn support of these contentions, Applicants sub- ance of the order requested by the Application mit that:

shall not prejudice nor limit the Commission's 1. Over eight years have passed since the entry rights in any manner with respect to any inof the injunction against Francis

. In that time, vestigation, enforcement action, or proceeding Francis has never been the subject of any other under Section 9(b) of the Act, based, in whole or enforcement action by any regulatory body and in part, upon conduct other than that giving rise has not, to his knowledge, been the subject of any

to the Application. governmental investigation involving violations

* * * of any laws.

Notice is further given that any interested person 2. At the time of the entry of the injunction, the may, not later than January 13, 1989, at 5:30 p.m., Commission acknowledged that Francis did not submit to the Commission in writing a request for benefit from the matters complained of and did a hearing on the Application, accompanied by a not prepare the reports that gave rise to the statement as to the nature of his or her interest, injunction.2

the reasons for such request, and the issues, if 3. By its terms, the injunction does not bar

any, of fact or law proposed to be controverted. Francis from acting as an affiliated person of an

Any such request should be addressed to: Secreinvestment adviser, depositor or principal under

tary, Securities and Exchange Commission, writer.

Washington, D.C. 20549. A copy of such request

shall be served personally or by mail upon Appli4. Francis has fully complied with the terms of cants at the addresses stated above. Proof of such the injunction.

service (by affidavit or, in the case of an attorney, 5. The Accounts have not been the subject of by certificate) shall be filed contemporaneously any enforcement action by any regulatory body.

with the request. As provided by Rule 0-5 of the

Rules and Regulations promulgated under the 6. Equitable has not been the subject of any Act, an order disposing of the Application herein enforcement action under the Federal securities

will be issued as of course following said date laws.

unless the Commission orders a hearing upon 7. The allegations of the complaint do not relate request or upon the Commission's own motion. to the activities of Equitable or of the Accounts, Persons who request a hearing, or advice as to or to any of Francis' activities in relation to whether a hearing is ordered, will receive any Equitable or to the Accounts. Francis was not notices and orders issued in this matter, including affiliated with Equitable at the time the activities the date of the hearing (if ordered) and any alleged in the complaint took place.

postponement thereof. 8. When Francis was elected a director of Equi- By the Commission. table neither he nor Equitable was aware of the

Jonathan G. Katz need for an exemption under Section 9(a) of the

Secretary Act. Based upon the foregoing, Applicants request INVESTMENT COMPANY ACT OF 1940 that the Commission, pursuant to Section 9(c) of Release No. IC-16693/December 14, 1988 the Act, grant the Applicants a permanent ex

811-3900 emption from the provisions of Section 9(a) to the extent applicable as a result of the injunction Oppenheimer Challenger Fund; Application for entered against Francis in 1979 and to the extent Deregistration

2 The Commission's litigation release states that the principal allegation against Francis in the complaint was that, while he did not benefit from the alleged transactions and while he did not personally prepare the reports of SBG filed

with the Commission, he had a responsibility as a director to be sure that such reports complied with applicable federal securities laws.

Action: Notice of Application for Deregistration 1986. In connection with the reorganization to a under the Investment Company Act of 1940 (the business trust, Articles of Transfer were filed “1940 Act”).

January 31, 1986 with the Maryland State DepartApplicant: Oppenheimer Challenger Fund (“Ap- ment of Assessments and Taxation. Applicant plicant")

filed its Articles of Dissolution in Maryland on

April 6, 1987.
Relevant 1940 Act Sections: Deregistration under
Section 8(f).

2. On November 7, 1983, Applicant filed a Noti

fication of Registration pursuant to Section 8(b) Summary of Application: Applicant seeks an of the 1940 Act on Form N-8A and filed a registraorder declaring that it has ceased to be an invest- tion statement under the 1940 Act on Form ment company subject to the 1940 Act.

N-1A. The registration statement became effecFiling Date: The application on Form N-8f was tive on January 5, 1984. Applicant also registered filed on October 11, 1988, and an amendment was under the Securities Act of 1933 an indefinite filed on December 12, 1988.

number of shares of common stock. Applicant's

initial public offering commenced January 5, Hearing or Notification of Hearing: If no hearing

1984. is ordered, the application will be granted. Any interested person may request a hearing on the

3. At a meeting on December 3, 1987, the Board application, or ask to be notified if a hearing is of Trustees of the Applicant unanimously ordered. Any requests must be received by the adopted and recommended to the shareholders SEC by 5:30 p.m. on January 9, 1989. Request a of Applicant that they approve a series of transachearing in writing, giving the nature of your inter- tions pursuant to a plan of reorganization est, the reason for the request, and the issues you whereby Oppenheimer OTC Fund (“OTC contest. Serve the Applicants with the request, Fund”) would acquire all of the assets of Applieither personally or by mail, and also send it to

cant in exchange for shares of OTC Fund. Chalthe Secretary of the SEC, along with proof of lenger and OTC have similar investment objecservice by affidavit, or, for lawyers, by certificate. tives and policies. In reaching the decision, the Request notification of the date of a hearing by Board noted the disparity in net assets between writing to the Secretary of the SEC.

the two funds, Applicant having approximately Addresses: Secretary, SEC, 450 5th Street, N.W., approximately $25.3 million in net assets. Be

$2.6 million in net assets and OTC Fund having Washington, D.C. 20549; Applicant: Op- cause Applicant does not have the economies of penheimer Challenger Fund: Two World Trade

scale enjoyed by a larger fund, its expenses had Center, New York, New York 10048-0669.

increased markedly in relation to average net For Further Information Contact: Bibb L. assets. That situation was expected to worsen as Strench, Staff Attorney, (202) 272-2856 or Karen the number of outstanding shares of Applicant L. Skidmore, Branch Chief, (202) 272-3023, Of- diminished. Challenger's Board had determined fice of Investment Company Regulation.

that the reorganization would not result in a Supplementary Information: The following is a

direct or indirect increase in the management fee, summary of the application; proper terms are

even though OTC has a Distribution Plan purthose defined in the application. The complete

suant to Rule 126-1 of the Act and Challenger

does not. application is available for a fee from either the SEC's Public Reference Branch in person, or the 4. On January 4, 1988, an OTC Fund prospectus SEC's commercial copier (800) 231-3282 (in and a proxy statement from Applicant, declared Maryland (301) 258-4300).

effective by the Commission on January 4, 1988,

was mailed to shareholders of Applicant in conApplicants' Representations:

nection with the solicitation by Applicant's 1. Applicant, a Massachusetts business trust, is

Board of Trustees for purposes of voting on the registered under the 1940 Act as a open-end, non- proposed reorganization. On January 21, 1988, a diversified management investment company. Special Meeting of Shareholders of the Applicant Applicant initially organized as a Maryland cor

was held at which a majority of shareholders poration on September 1, 1983 under the name approved the reorganization. "Oppenheimer Retirement Fund, Inc." and re- 5. As of January 31, 1988, Applicant's aggregate organized to a Massachusetts business trust pur- net assets were $848,633. On that date, all of suant to a Declaration of Trust dated January 7, Applicants' net assets (including all portfolio securities, were transferred OTC Fund pursuant to tion as an investment company if this Order is a reorganization in exchange for 55,763 shares of granted. OTC Fund which resulted in OTC Fund adding to

For the Commission, by the Division of Investits gross assets all of the assets (net of any liability ment Management, under delegated authority. for portfolio securities purchased but not settled) of Applicant and Applicant's shareholders own

Jonathan G. Katz ing shares of OTC Fund. In essence, a share

Secretary holder of Applicant who voted his shares in favor of the reorganization elected to redeem his shares

INVESTMENT COMPANY ACT OF 1940 at net asset value per share and reinvest the

Release No. IC-16694/December 15, 1988 proceeds in shares of OTC Fund at no sales charge and without recognition of taxable gain or

811-3945 and 811-4785 loss. No gain or loss or taxable income was In the Matter of recognized by either Applicant or OTC Fund.

PRINCIPAL PRESERVATION TAX-EXEMPT The cost basis and holding period of the shares of each shareholder of Applicant carried over to the

FUND, INC. shares of OTC Fund which each shareholder

PRINCIPAL PRESERVATION TAX-EXEMPT acquired; and the holding period and cost basis of

PORTFOLIOS, INC. Applicant for its assets transferred to OTC Fund

215 North Main Street carried over to OTC Fund. No brokerage com

West Bend, WI 53095 missions were paid in the exchange.

ORDER DECLARING THAT APPLICANTS 6. The expenses associated with carrying out the

HAVE CEASED TO BE INVESTMENT reorganization totaled $1900, consisting of $500

COMPANIES for the deregistration of Applicant and $1400 in Principal Preservation Tax-Exempt Fund, Inc. other fees, including legal, accounting, printing, and Principal Preservation Tax-Exempt Porttransfer agency, filing and proxy solicitations. folios, Inc. (collectively, “Applicants”), each regApplicant's liabilities, which consisted primarily istered under the Investment Company Act of of an anticipated tax obligation (see below), ac- 1940 (the “1940 Act") as an open-end, diversified crued but unpaid normal operating expenses (ex- management investment company, filed a sepacluding the cost of any portfolio securities pur- rate application on June 22, 1988 for an order of chased but not yet settled), and the amount, if the Commission, pursuant to Section 8(f) of the any, required to satisfy any properly submitted 1940 Act, declaring that each Applicant has unpaid redemption requests were accrued or paid ceased to be an investment company. by Applicant in the ordinary course of business

On November 17, 1988, notices (Investment on or prior to the effectiveness of the reorganiza

Company Act Release Nos. 16640 and 16641) tion. Failure to qualify as a RIC resulted in a $1200 tax liability (accrued and paid by Challenger)November 25, 1988, Applicants filed separate

were issued of the filing of the applications. On which was subsequently refunded as a result of

letters to correct certain typographical errors in Challenger's ordinary loss incurred during the

their application. The notices gave interested persame period.

sons an opportunity to request a hearing, and 7. As of the time of filing the application, Appli- stated that an order disposing of each application cant had no securityholders. No assets have been would be issued as of course unless a hearing retained by Applicant and no liabilities remain should be ordered. No request for a hearing has outstanding. Applicant is not a party to any litiga- been filed, and the Commission has not ordered a tion or administrative proceedings. It is not pres- hearing ently engaged in, nor does it propose to engage in,

The matter having been considered, it is found, any business activities other than those neces

on the basis of the information stated in the sary for the winding up of its affairs.

applications, that Applicants have ceased to be 8. Applicant is current on its required filings, investment companies. Accordingly, including its N-SAR filing.

IT IS ORDERED, pursuant to Section 8(f) of the 9. Applicant will notify the proper Massachu- 1940 Act, that each Applicant's registration under setts authorities of its dissolution and deregistra- the 1940 Act shall forthwith cease to be in effect.

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