Question
From:(redacted)
Sent:Friday, September 07, 2007 11:16 AM
To:Verne, B. Michael
Cc:(redacted)
Subject:Question re: 802.51
Hi,Mike
We are hoping to get your help with regard to theapplicability of the foreign issuer exemption contained in 16 C.F.R. 802.51 particularly what constitutes sales in or into the U.S. - basedon the following facts:
Company A, a U.S. person, is acquiring slightly less than a 25%interest in the voting securities of Company B, a foreign person which is itsown ultimate parent entity, for a purchase price in excess of $59.8 million.Assume that the size of parties test is met. Also assume that Company B'sassets together with those of its controlled entities located in the U.S. areless than $59.8 million.
Company B, which operates in the investmentmanagement and financial services business, has a number of subsidiaries: (i)Subsidiary B1 is a U.S. corporation which is registered as an investmentadviser with the Securities and Exchange Commission ("SEC"); (ii)Subsidiary B2 is a U.S. Corporation and a member of FINRA (f/k/a NASD) which isregistered with the SEC as a broker-dealer, and (iii) Subsidiary B3 isincorporated outside of the U.S. and its headquarters address and only officesare outside of the U.S., though it is registered with the SEC as an investmentadviser.
Subsidiary B1 provides investment advisory servicesto mutual funds, institutional and individual clients based in the U.S. andCanada and receives an advisory fee in return (the "B1 Revenues").Subsidiary B2 earns minimal revenues (the `B2 Revenues), and primarily existsonly for sales and marketing purposes within the U.S. Despite the fact that allinvestment decisions with respect to portfoliosmanaged by Subsidiary B1 are made outside of the U.S., we believe that thetotality of the B1 Revenues lessthan $25 million in 2006 would be deemed to be sales in or into the U.S. forpurposes of 16 C.F.R. 802.51. Similarly, we believe that, by virtue of Subsidiary B2's being a U.S.establishment, any B2 Revenues in 2006 would be counted as sales in or into theU.S. for purposes of determining whether the limitation set forth in 16 C.F.R. 802.51 is crossed. Please let us know if you disagree.
Theharder question is with respect to the revenues of Subsidiary B3. Although thisentity primarily provides investment advisory services to foreign clients,there are likely some U.S. clients which invest in the offshore pooledinvestment vehicles advised by Subsidiary B3 (either directly or through a U.S. feeder fund, which feeder funds are administered bythird parties not under the control ofCompany B). All investment decisions with respect to such pooled investmentvehicles are made outside of the U.S., no funds flow through a controlled U.S.establishment of Company B, and the offshore pooled investment vehicles investprimarily in non-U.S. securities. Do you agree that any such advisory revenueswould not be deemed to be U.S. sales for purposes of 16 C.F.R. 802.51?