Which Of The Following Are Characteristics Of Non-sec Registered Commercial Paper

Investment Company Act of 1940 - Section 3(c)(one)

ING Bank, N.V.

July viii, 2002

RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF INVESTMENT MANAGEMENT

Our Ref. No. 20019191717
ING Banking concern, N.5.
File No. 132-3

Your letter dated June 18, 2002, requests our assurance that nosotros would not recommend enforcement activeness to the Commission under Department seven of the Investment Company Act of 1940 ("1940 Human activity") against ING Bank, Due north.V. ("Bank") or certain commercial newspaper conduits organized by the Bank (individually, a "Conduit" and together, the "Conduits") if, as more than fully explained below, each Conduit does not register as an "investment company" under the 1940 Human activity, and each Conduit offers and sells its "brusque-term paper" (as defined in Section two(a)(38) of the 1940 Human activity¹) in an offering in the United states that is exempt from the registration requirements of the Securities Act of 1933 ("1933 Human action"), pursuant to Section 4(2) of that Human activity ("Onshore Private Offer"), while simultaneously offering and selling its curt-term newspaper in an offering outside of the United States in compliance with the provisions of Regulation S under the 1933 Act ("Offshore Public Offer").

BACKGROUND

You lot country that each Conduit is an asset-backed commercial paper vehicle whose activities are express to: (1) directly or indirectly purchasing, or making loans secured, supported or serviced by and repaid directly or indirectly from the proceeds of, discrete pools of and interests in accounts receivable, full general intangibles, chattel paper, securities and other financial avails that are originated, issued or held by eligible corporations or other entities; (2) funding and maintaining the funding of its loans through the issuance of commercial paper notes that run across the definition of "short-term paper" as divers in Section (2)(a)(38) of the 1940 Deed ("CP Notes"); and (3) engaging in other activities that are incidental to the foregoing. You state that each Conduit is organized as a corporation, limited liability company or business trust under the laws of a state of the United states of america.

Y'all state to engagement, each of the Conduits has sold its CP Notes just to commercial paper dealers acting every bit principals for their own accounts, in offerings that are exempt from the registration requirements of the 1933 Deed pursuant to Section four(2) of that Act.² You state farther that commercial dealers accept contemporaneously resold the CP Notes but to investors whom they reasonably believed to be "qualified institutional buyers" ("QIBs") within the significant of Rule 144A under the 1933 Human activity ("Rule 144A"), in transactions meeting the provisions of Rule 144A. You lot state that the Conduits also accept reserved the correct to sell the CP Notes, either direct or through commercial newspaper dealers acting as agents, to investors whom the Conduits reasonably believe to be "accredited investors" within the meaning of Rules 501(a)(1), (two), (three) or (7) of Regulation D under the 1933 Act, in transactions that are exempt from the registration requirements of the 1933 Human activity pursuant to Section 4(2) of the 1933 Deed. Additionally, you state that, with respect to an Onshore Private Offer, each Conduit has relied upon the exception from the definition of "investment company" that Section 3(c)(i) of the 1940 Act provides, which, among other things, requires that an issuer relying upon the exception is not making and does not soon propose to make a public offering of its securities.

You state that each Conduit now wishes to continue to carry its offering of CP Notes inside the U.s.a. in reliance upon the exemption from registration under the 1933 Human action pursuant to Section 4(2) of the 1933 Act^three while potentially conducting a simultaneous offering of its CP Notes to persons who are not "U.Southward. persons" within the meaning of Rule 902(k) of Regulation S in transactions that are not subject to registration under the 1933 Deed past virtue of Regulation S.⁴ Yous assert that each Conduit should be permitted to conduct an Onshore Private Offer simultaneously with an Offshore Public Offer without registering equally an investment company under the 1940 Act.

Assay

Section 3(c)(one) of the 1940 Human activity excepts from the definition of investment visitor, amid other things, any issuer of brusk-term paper,^five provided that such issuer "is non making and does non before long propose to make a public offering of its securities."⁶ Section iii(c)(1) is intended to except from regulation under the 1940 Act private companies in which there is no significant public interest and which are therefore not appropriate subjects of such regulation.^seven

You state that, if a Conduit's Offshore Public Offering is accounted to be a "public offer" for purposes of Department iii(c)(i) of the 1940 Human action,^eight the Conduit cannot continue to rely upon the Department iii(c)(ane) exception. You lot fence, however, that the public interest is not served by requiring a Conduit to annals under the 1940 Act if the Conduit offers and sells its short-term paper (i.eastward., the CP Notes) in a public offering outside of the United States in compliance with the provisions of Regulation S nether the 1933 Act. As discussed more fully below, y'all base of operations your argument upon the characteristics of the short-term paper that is issued past the Conduits, including that the brusk-term paper is issued in large denominations and is non-redeemable.

Section 5 of the 1933 Deed requires registration of each offer or sale of securities involving interstate commerce or use of the mails, unless an exemption is available. The Commission has traditionally taken the position that the registration requirements of Section v of the 1933 Act are primarily intended to protect Usa investors.⁹ Regulation S clarifies the extraterritorial application of the registration provisions of the 1933 Human action.¹⁰ Regulation South mostly provides that whatever offer or sale that occurs within the U.s.a. is bailiwick to Section 5 of the 1933 Human activity and any offer or sale that occurs outside of the United States is non subject to Section 5.^xi

Preliminary Note eight of Regulation Due south states that the regulation does non use to offers and sales of securities issued past open-end investment companies or unit investment trusts registered or required to be registered under the 1940 Act or closed-end investment companies required to be registered, just not registered, under the 1940 Act.¹² The primary reasons cited by the Committee for excluding sure investment companies from the telescopic of Regulation S include: (ane) ensuring "that prospective investors receive disclosure almost matters subject to substantive regulation under the 1940 Act (which in turn would effectuate the policies of the 1940 Act);" (2) addressing "the expectations of investors that the activities of a U.S. investment visitor subject to registration and regulation nether the 1940 Act would also be subject to [1933 Act] registration;" and (iii) with respect to open up-terminate investment companies and unit investment trusts, protecting "the U.S. securities markets as a whole past ensuring that strange investors will not seek redemptions which could require the auction of portfolio securities because of a afterward realization that they had been inadequately informed virtually their investment."¹³

You assert that the staff should apply the exterritorial approach envisioned past Regulation S to the offer and sale of CP Notes by the Conduits outside of the United States. You argue that purchasers of CP Notes pursuant to an Onshore Individual Offer or an Offshore Public Offer will receive sufficient disclosure regarding the applicability of the federal securities laws and volition not have the expectation that the activities of a Conduit are subject to registration and regulation nether the 1940 Act. In particular, you represent that each Conduit will, either direct or through commercial paper dealers or other persons who act equally agents in connection with the placement of its CP Notes or who purchase its CP Notes in a master chapters for resale to investors, provide each prospective CP Note investor (foreign and domestic) with an offering memorandum that discusses the material features of its CP Notes. Each such offering memorandum volition disclose on the cover page or within cover page thereof, in a prominent fashion, that the Conduit will non be regulated under the 1940 Act. Each such offering memorandum also will set forth the restrictions on the transfer of the CP Notes.

Further, y'all contend that the Commission's concerns relating to redemptions of shares of open-end investment companies do not employ to the Conduits because the CP Notes are not redeemable at the selection of the holders.^fourteen You as well land that the CP Notes will be issued in denominations of non less than $250,000, which y'all contend will ensure that the CP Notes are not of a blazon that would unremarkably be purchased by the general public.¹⁵ You argue that the CP Notes will not exist "mass merchandized" to large numbers of small investors from the public at big because of their relatively large denominations.^sixteen

Additionally, you assert that registration of the CP Notes that are offered pursuant to an Offshore Public Offering would impose a significant additional burden (east.g., registration costs) upon a Conduit that the Conduit would not otherwise suffer on account of its domestic activities lonely; that is, you lot state that a Conduit is not already registered nether the 1940 Human activity, and registration would be required only if an Offshore Public Offering is deemed to exist a "public offering" for purposes of Section 3(c)(one) of the 1940 Human activity.¹⁷ Finally, yous debate that it is hard and burdensome to bear a private offering of a Conduit's CP Notes in a foreign commercial paper marketplace in accordance with Department 4(2) of the 1933 Deed considering: (1) dealers in strange markets take not adult the regular practice of obtaining the types of representations and warranties from prospective investors that are necessary for an issuer to rely on the Section 4(2) exemption; and (2) investors in strange markets mostly are non accustomed to giving representations and warranties with respect to federal securities law matters other than with respect to their status as non-U.South. persons. You debate that, as a result, there is no significant public involvement in regulating a Conduit every bit an investment visitor.

Without necessarily agreeing with your legal assay, we would non recommend enforcement action to the Commission under Department 7 of the 1940 Deed against the Bank or a Conduit if the Conduit does not register equally an "investment company" under the 1940 Act, and the Conduit offers and sells its CP Notes in an offering in the United states that is exempt from the registration requirements of the 1933 Act, pursuant to Section iv(2) of that Act, while simultaneously offer and selling its CP Notes in an offering exterior of the United states in compliance with the provisions of Regulation Southward under the 1933 Act. This alphabetic character expresses the Division'south position on enforcement activity only and does non purport to express any legal conclusion on the issues presented. Our position is based upon the facts and representations set up forth in your alphabetic character, including your representations that each Offshore Public Offering will be conducted in compliance with Regulation S,¹⁸ and that each Conduit volition issue only "brusque-term newspaper," as that term is divers in Section 2(a)(38) of the 1940 Act, or it will limit to one hundred the number of beneficial owners of any security that the Conduit issues that is not short-term paper.^xix Any unlike facts or representations may crave a different conclusion.

Brent J. Fields
Senior Counsel

________________________________

^one	Section 2(a)(38) of the 1940 Human activity, in part, defines "short-term newspaper" every bit including "any notation . . . payable on demand or having a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof payable on need or having a maturity likewise limited . . . ."
^two	Yous represent that no Conduit has conducted a public offering of CP Notes. Phone conversation betwixt Brent J. Fields of the staff and Brian Thou. Kaplowitz of Sidley Austin Brown & Forest LLP on June 19, 2002.
ⁱⁱⁱ	You admit our position in Stars & Stripes GNMA (pub. avail. Apr. 17, 1986), i.eastward., "unless an offering complies with rule 506 under the 1933 Human activity, nosotros will not, as a matter of policy, upshot a no-action or interpretative letter of the alphabet on the question of whether an offer is not a public offering for purposes of [S]ection 3(c)(one) of the 1940 Act," and you do non ask us to agree with your conclusion that an Onshore Individual Offering is not a "public offering" for purposes of Department three(c)(1) of the 1940 Act. You state that, for purposes of our response, we should assume that an Onshore Individual Offer is not a "public offering" for purposes of Section 3(c)(ane) of the 1940 Act.
⁴	Yous state that, for purposes of your letter, an Offshore Public Offering is an offering that, if conducted in the Us, would not exist exempt from registration under the 1933 Act pursuant to the provisions of Section 4(2) of the 1933 Act. You country that you believe that a Conduit's Onshore Private Offering of CP Notes should not be "integrated" with its Offshore Public Offering, provided that the Conduit complies with the provisions of Rule 506 of Regulation D under the 1933 Act in connection with the Onshore Private Offer and the applicable provisions of Regulation Southward under the 1933 Deed with respect to its Offshore Public Offering. See Preliminary Notation 7 to Regulation D nether the 1933 Deed ("Regulation S may be relied upon for [securities offered and sold outside the United States] even if coincident offers and sales are made in accord with Regulation D inside the United States.").
^v	See supra note 1 (definition of "curt-term newspaper" in Department 2(a)(38) of the 1940 Act).
^half-dozen	If an issuer issues securities other than curt-term paper, Section three(c)(1) imposes an additional limitation that no more than one hundred persons may beneficially own the issuer's outstanding securities (other than short-term newspaper). Yous represent that, if a Conduit issues securities other than short-term paper, the Conduit will limit the number of beneficial owners of such securities to no more than ane hundred.
⁷	See Small Business organization Investment Incentive Act of 1980, H. Rep. No. 1341, 96^th Cong., two^nd Sess. (1980), reprinted in 1980 U.S.C.C.A.North. 4800, at 4817.
⁸	We have taken the position that the term "public offering" in Section 3(c)(1) of the 1940 Human action has the same pregnant that information technology has nether Department iv(ii) of the 1933 Act. Encounter Continental Bank (pub. avail. Sept. 2, 1982).
^nine	Run across Securities Act Release No. 4708 (July ix, 1964) ("Registration of Foreign Offerings by Domestic Issuers; Registration of Underwriters of Strange Offerings equally Broker-Dealers") ("Release No. 4708").
^ten	See Securities Act Release No. 6863 (Apr. 24, 1990) (Regulation S Adopting Release) ("Release No. 6863"). See too Release No. 4708. The Commission stated in Release No. 6863 that Release No. 4708 should not be relied upon commencing after the ninetieth day following publication of Release No. 6863 in the Federal Register.
^xi	See Release No. 6863.
¹²	In Release No. 6863, the Commission solicited comment regarding whether to extend the application of Regulation S to offers and sales of securities issued by registered open-end investment companies and unit investment trusts, and, if so, the method past which to accomplish such extension. To date, the Commission has not taken any action on this upshot.
¹³	Id. See besides Securities Act Release No. 6779, at § III. (June 10, 1988) (Regulation Southward Proposing Release); Securities Act Release No. 5068 (June 23, 1970) ("Release No. 5068") ("Guidelines Concerning the Applicability of the Federal Securities Laws to the Offer and Sale Outside the The states of Shares of Registered Open-End Investment Companies") (noting that, unlike the treatment of non-investment company securities, registration under the 1933 Act for open-end investment company securities offered and sold away is both logical and appropriate). In Release No. 5068, the Commission also noted that: (1)"[r]egistered open up-end investment companies are continually `in registration' so that registration under the [1933 Act] of the shares sold abroad would non impose an additional brunt upon them;" and (2)"[o]pen-end investment company shares, unlike for the most part other corporate securities, are vigorously merchandized away to large numbers of small investors from the public at large."
^xiv	You correspond that the CP Notes will not be face-amount certificates of the installment type, periodic payment plan certificates or redeemable securities equally divers in Sections 2(a)(15), (27), and (32) of the 1940 Act, respectively. Yous state that the CP Notes issued by a Conduit may, under sure circumstances, be redeemable at the option of such Conduit, but the CP Notes are not redeemable at the choice of any holder thereof prior to maturity.
¹⁵	Phone conversation betwixt Brent J. Fields of the staff and Brian M. Kaplowitz of Sidley Austin Dark-brown & Wood LLP on June 19, 2002.
¹⁶	See supra annotation 13.
¹⁷	See supra annotation 13. Telephone chat between Brent J. Fields of the staff and Brian M. Kaplowitz of Sidley Austin Dark-brown & Wood LLP on June 19, 2002.
¹⁸	Nosotros limited no view regarding whether a Conduit's issuance of short-term newspaper, pursuant to an Offshore Public Offering as described in your alphabetic character would, in fact, run across the provisions of Regulation S under the 1933 Deed.
^nineteen	Run into supra note 6. Telephone conversation between Brent J. Fields of the staff and Brian M. Kaplowitz of Sidley Austin Brown & Wood LLP on June 19, 2002.

Incoming Letter:

June 18, 2002

No Action Request Under Section 7 of the Investment Company Act of 1940, equally amended

BY FEDERAL EXPRESS

Function of Chief Counsel
Division of Investment Management
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Attention: Douglas J. Scheidt

Ladies and Gentlemen:

On behalf of our clients, ING Banking company, N.V. (the "Banking company") and certain "commercial paper conduits" organized past the Banking concern as described below (each, a "Conduit" and together, the "Conduits"), we hereby submit our request that the staff of the Division of Investment Direction (the "Staff") of the Securities and Exchange Committee (the "Committee") will not recommend that the Commission take enforcement activeness confronting the Bank or the Conduits nether Section 7 of the Investment Company Deed of 1940, as amended (the "1940 Act"), if each such Conduit does not register as an "investment visitor" nether the 1940 Act and offers and sells its "brusque-term paper" (as defined in Section 2(a)(38) of the 1940 Act) in an ongoing private offering within the United States in transactions exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), by virtue of Section 4(2) thereof, while simultaneously offering and selling its short-term newspaper in an ongoing offering outside the United States in transactions not subject field to registration under the Securities Human action by virtue of Regulation South thereunder ("Regulation S"), nether the circumstances described beneath.

FACTS

The Bank and the Conduits have advised us every bit follows:

The Conduits

Each Conduit is an asset-backed commercial paper vehicle whose activities are limited to (i) directly or indirectly purchasing, or making loans secured, supported or serviced by and repaid straight or indirectly from the proceeds of, detached pools of and interests in accounts receivable, general intangibles, chattel paper, securities and other financial assets originated, issued or held past eligible corporations or other entities ("Purchased Avails"); (ii) funding and maintaining the funding of its Purchased Assets through the issuance of commercial paper notes ("CP Notes"); and (three) engaging in other activities incidental to the foregoing. Each Conduit is organized as a corporation, express liability company or business trust nether the laws of a state of the United States. Each Conduit shortly is excepted from the definition of investment company nether the 1940 Human activity by virtue of Section 3(c)(i) thereof, described in more detail below. Accordingly, if a Conduit in the future problems securities other than the CP Notes or other brusk-term paper it will limit the number of beneficial owners of such securities to no more than i hundred.

The CP Notes

The CP Notes have maturities at the fourth dimension of issuance and on any renewal not exceeding nine months, exclusive of days of grace. Thus, CP Notes are "brusk-term paper" within the meaning of Section 2(a)(38) of the 1940 Deed.

At the time of issuance, CP Notes are rated by at to the lowest degree two of Standard & Poor'due south Ratings Grouping ("S&P"), Moody'due south Investors Service, Inc. ("Moody's") and Fitch Ratings, Inc. ("Fitch"), as follows: at least A-2, if rated past Southward&P; P-2, if rated by Moody's; and F-2, if rated past Fitch.

CP Notes are issued in denominations of non less than $250,000.^ane

The CP Notes issued by a Conduit may, under certain circumstances, be redeemable at the selection of such Conduit, but are not redeemable at the option of any holder thereof prior to maturity.²

Current Manner of Offering of CP Notes

To engagement, the Conduits accept sold their CP Notes just to commercial paper dealers, acting equally principals for their own accounts, in transactions exempt from the registration requirements of the Securities Human action pursuant to Section 4(2) thereof, and such commercial dealers accept contemporaneously resold such CP Notes to investors whom they reasonably believed to be "qualified institutional buyers" ("QIBs") inside the significant of Dominion 144A under the Securities Act ("Rule 144A"), in transactions coming together the requirements of Rule 144A. The Conduits, withal, have reserved the right to sell their CP Notes, either directly or through commercial paper dealers acting equally their agents, to investors whom the Conduits reasonably believe to exist "accredited investors" inside the meaning of Rules 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Human action ("Institutional Accredited Investors"), in transactions exempt from the registration requirements of the Securities Act pursuant to Section four(two) thereof.

Proposed Manner of Offer of CP Notes

Each Conduit now wishes to continue to comport its offer of CP Notes within the United states in reliance on the exemption from registration under the Securities Act provided past Section 4(2) thereof ("Onshore Individual Offering"),³ while potentially conducting a simultaneous offer of its CP Notes to persons that are not "U.S. persons" inside the significant of Dominion 902(1000) of Regulation S ("U.S. Persons") in transactions that are non field of study to registration under the Securities Act past virtue of Regulation South ("Offshore Public Offering").^iv

It is expected that, if the Staff grants the "no action" relief requested in this letter of the alphabet, the Conduits, to the extent they wish to offer and sell their CP Notes to or for the account or benefit of U.S. Persons, usually will sell such CP Notes to commercial paper dealers, interim equally principals for their own accounts, in transactions meeting the requirements of Section iv(ii) of the Securities Act, and that such commercial newspaper dealers will contemporaneously resell such CP Notes to U.S. Persons whom they reasonably believe to be QIBs in transactions meeting the requirements of Rule 144A. The Conduits, still, will retain the flexibility to sell their CP Notes, either straight or through commercial newspaper dealers interim equally their agents, to U.S. Persons whom the Conduits reasonably believe to exist Institutional Accredited Investors, in transactions meeting the requirements of Section 4(2) of the Securities Human action.

Similarly, if the Staff grants the "no action" relief requested in this letter, it is expected that the Conduits, to the extent they wish to offer and sell their CP Notes to persons who are not U.South. Persons, normally will sell such CP Notes to commercial newspaper dealers, acting as principals for their own accounts, in transactions meeting the requirements of Rule 903 of Regulation S or Section 4(2) of the Securities Act, and that such commercial paper dealers will contemporaneously resell such CP Notes to persons whom they reasonably believe are non U.S. Persons^v in transactions meeting the requirements of Regulation S. The Conduits, however, will reserve the right to sell their CP Notes, either direct or through commercial paper dealers acting as their agents, to persons whom the Conduits reasonably believe are not U.S. Persons, in transactions meeting the requirements of Rule 903 of Regulation S.

Each Conduit will, either directly or through commercial newspaper dealers or other persons who human action equally its agents in connection with the placement of its CP Notes or who buy its CP Notes in a principal capacity for resale to investors (each such person who acts as agent or principal, a "Dealer"), provide each prospective CP Notation investor (strange and domestic) with an offer memorandum that discusses the cloth features of its CP Notes. Each such offering memorandum will disclose on the cover page or inside embrace folio thereof, in a prominent fashion, that such Conduit will not be subject area to regulation under the 1940 Deed. Each such offering memorandum will likewise set forth the restrictions on transfer of the related CP Notes, as described beneath.

Reason for Proposed Manner of Offer of CP Notes

From time to time, the discount or interest rates in respect of commercial paper may be more attractive for a borrower in foreign commercial newspaper markets than in the U.S. market place, or the borrower may take other legitimate business reasons for issuing debt in foreign commercial paper markets. Therefore, each Conduit wishes to have the maximum flexibility to access foreign commercial paper markets from fourth dimension to time. Each Conduit has been advised, however, that while a private offer of its CP Notes in foreign commercial paper markets conducted in accordance with Section 4(2) of the Securities Deed is possible (and has been done on rare occasion), it is much more hard and crushing to apply Section four(2) procedures offshore than information technology is in the U.S. because (1) dealers in strange markets take non adult the regular practice of obtaining the types of representations and warranties from prospective investors necessary for an issuer to rely on the Section 4(two) exemption and (2) investors in foreign markets generally are non accustomed to giving representations and warranties with respect to U.Southward. federal securities police matters other than with respect to their status as non-U.Southward. Persons. Appropriately, the Conduits wish to have the flexibility to issue and sell their CP Notes offshore pursuant to the provisions of Regulation S.⁶ Those offerings may be either in book-entry form or with physical certificates, and may consist of registered or bearer notes.

Transfers of CP Notes

As noted earlier, each Conduit will, either directly or through Dealers, provide each prospective CP Note investor (strange and domestic) with an offering memorandum that discusses the material features of its CP Notes, including the restrictions on transfer of the CP Notes. These restrictions are described below.

CP Notes Initially Sold to non-U.S. Persons. The offer memorandum relating to each issue of CP Notes that is offered and sold to non-U.S. Persons in reliance on Rule 903 of Regulation S will prominently disclose - and each certificate representing such CP Notes will prominently country - that:

such CP Notes accept not been registered under the Securities Human activity, the securities laws of any state of the U.s.a. or the securities laws of any other jurisdiction and may non be reoffered, resold, pledged, exchanged or otherwise transferred unless registered pursuant to, or in transactions exempt from or not subject to the registration requirements of, the Securities Human action and any other applicable securities laws;
such CP Notes may not exist reoffered, resold, pledged, exchanged or otherwise transferred except: (i) in accord with the requirements of Regulation S⁷ or (2) in a transaction that is exempt from the registration requirements of the Securities Act pursuant to Rule 144A (or Sections four(1) or four(3) of the Securities Act);^viii
each transferor of CP Notes must inform each person to whom information technology transfers CP Notes of the restrictions on transfer described higher up; and
the Conduit will not be discipline to regulation under the 1940 Act.

In addition, the offering memorandum (and any document representing such CP Notes) volition disembalm that any transferee of such CP Notes volition be deemed to have represented to the Conduit that: (i) it caused such CP Notes in a transaction meeting the requirements of Regulation S⁹ or (2) it caused such CP Notes in a transaction exempt from the registration requirements of the Securities Act pursuant to Rule 144A (or Sections four(1) or four(iii) of the Securities Human activity).

CP Notes Initially Sold to U.S. Persons. The offer memorandum relating to each issue of CP Notes that is offered and sold to U.Due south. Persons will prominently disclose - and each such CP Annotation (whether in book-entry grade or physical certificated form) will prominently state - that:

such CP Notes take not been registered under the Securities Human activity, the securities laws of any land of the U.s.a. or the securities laws of any other jurisdiction and may not be reoffered, resold, pledged, exchanged or otherwise transferred unless registered pursuant to, or in transactions exempt from or not subject to the registration requirements of, the Securities Deed and any other applicable securities laws;
such CP Notes may not be reoffered, resold, pledged, exchanged or otherwise transferred except: (i) to a person the transferor reasonably believes to exist a QIB, in a transaction coming together the requirements of Dominion 144A (in which case the transferor must inform the transferee that the transfer is being made in reliance on Rule 144A) or (ii) in a transaction not subject to registration under the Securities Human action pursuant to Regulation Southward or exempt from registration under the Securities Deed pursuant to Sections iv(1) or 4(3) thereof;¹⁰
each transferor of CP Notes must inform each person to whom it transfers CP Notes of the restrictions on transfer described in a higher place; and
the Conduit will non be subject to regulation under the 1940 Act.

In addition, the offer memorandum (and any certificate representing such CP Notes) will disclose that any transferee of such CP Notes volition be deemed to have represented to the Conduit that: (one) information technology is a QIB that is aware that the related auction, pledge, substitution or other transfer was made in reliance on Rule 144A or (two) it caused such CP Notes in a transaction not subject to registration under the Securities Human action pursuant to Regulation Due south or exempt from registration nether the Securities Act pursuant to Sections iv(1) or 4(3) thereof.

Dealer Participation in Transfers of CP Notes. Each Dealer will be required to agree with each Conduit that, to the extent information technology is requested by a holder of CP Notes to place a potential transferee of such CP Notes, or otherwise engages in the offer or sale of CP Notes subsequent to the initial sale and delivery thereof, information technology will do so in a style that complies with the restrictions on transfer applicable to such CP Notes and volition evangelize (or crusade to exist delivered) a re-create of such Conduit'due south offer memorandum to the prospective transferee at or prior to the time of the completion of the transfer.

Result PRESENTED

Section 3(c)(1) of the 1940 Act excludes from the definition of "investment company" whatsoever issuer whose outstanding securities (other than "brusk-term paper" as defined in Section 2(a)(38) of the 1940 Act) are beneficially endemic by not more than 100 persons (sectional of "knowledgeable employees" as defined in Rule 3c-v under the 1940 Act), provided the issuer is not making and does not soon propose to brand a "public offer" of its securities. Section 3(c)(1) is intended to except from regulation as an investment company private companies in which there is no meaning public involvement.^xi

The 1940 Act does not define the term "public offering" for purposes of Section iii(c)(i). Although the Staff has concluded that an offering conducted in accord with Section 4(2) of the Securities Act will not be considered a "public offering" within the meaning of Section 3(c)(ane) of the 1940 Act, information technology has not, to our noesis, expressly addressed the issue of whether an Offshore Public Offer by a U.Southward. issuer of securities such as CP Notes constitutes a "public offering" for purposes of Department three(c)(one). Of course, if an Offshore Public Offering constitutes a "public offer" for purposes of Section 3(c)(one), an issuer that wishes to rely on Section iii(c)(one) may non engage in such an offering.

For the reasons fix forth below, we do non believe that the public interest is served by requiring the Conduits to register nether the 1940 Act if they offer and sell CP Notes in Offshore Public Offerings in compliance with the provisions of Regulation S. Put another way, we believe a Conduit should be permitted to conduct an Onshore Individual Offering simultaneously with an Offshore Public Offer without registering every bit an investment visitor under the 1940 Act.

LEGAL ANALYSIS

For the reasons fix forth beneath, we believe that: (1) permitting the Conduits to engage in Offshore Public Offerings of investment-form, large-denomination, non-redeemable CP Notes would be consistent with the policies underlying Section iii(c)(i) of the 1940 Human action, and (2) denying the Conduits the correct to engage in such offerings would non serve any valid regulatory purpose and would in fact be counterproductive.

As discussed more fully beneath, nosotros are aware that, although the Committee traditionally has taken the position that the registration requirements of Section 5 of the Securities Act are primarily intended to protect U.s.a. investors, it has also traditionally drawn a distinction between offshore sales of securities issued by non-investment company issuers, on the one hand, and investment company issuers, on the other paw. We are also enlightened of the Committee'south position that information technology has a greater involvement in regulating offshore offerings of U.S. issuers than offshore offerings of offshore issuers.¹² For the reasons set forth below, notwithstanding, we believe that the policy considerations behind these positions, which by their terms apply specifically to the registration of securities nether the Securities Act and not to the issuers of such securities under the 1940 Act, practise not lead to the decision that a individual investment visitor organized in the United states (an "Onshore Private Fund") that wishes to brand an Offshore Public Offer of its securities should be required to annals as an investment company under the 1940 Act, at least where the Offshore Public Offer involves investment-class, big-denomination, non-redeemable CP Notes.

Offshore Offerings of Investment Company Securities

In Securities Act Release No. 4708 (July nine, 1964) ("Release 4708"),¹³ the Commission noted that, because of the broad definition of the term "interstate commerce," the registration requirements of Department 5 of the Securities Deed might be construed to apply to well-nigh every offering of securities made past a United States issuer, fifty-fifty an offering fabricated exterior the geographic territory of the Usa. In the Commission's view, all the same, the registration requirements were primarily intended to protect American investors. Appropriately, the Commission reaffirmed its policy of non taking enforcement action against domestic issuers for failure to register securities distributed outside the territory of the United States to foreign nationals just -- even though the means or instrumentalities of "interstate commerce" may have been involved in the offering -- so long every bit the distribution was effected in a manner designed to effect in the securities coming to rest outside the Us.

In Securities Human activity Release No. 5608 (June 23, 1970) ("Release 5608"), the Committee stated that, for purposes of applying the general principles articulated in Release No. 4708, information technology was necessary to distinguish between offshore sales of investment company securities and offshore sales of non-investment company securities. In the erstwhile example, applying the registration requirements of the Securities Act was both "logical and advisable," for two master reasons. Start, every bit registered open-stop investment companies are continually "in registration" under the Securities Act, requiring registration of their offshore sales would not impose a significant additional brunt on them. Second, open-end investment company shares were vigorously merchandized abroad to big numbers of small investors from the public at large, unlike securities of typical industrial or operating companies.

In Securities Act Release 6779 (June ten, 1988), the Committee, in proposing Regulation South, reaffirmed the "historical distinction" between offshore public offerings of investment company and non-investment visitor shares, and concluded that the "safe harbor" contemplated to exist provided past the new regulation should non exist fabricated bachelor to investment companies required to annals under the 1940 Human activity. Building on the full general principles articulated in Release 5608, the Committee refined the rationale for its continuing adherence to the "historical distinction:"

A U.S. investment company that, using whatsoever means of interstate commerce, sold its shares to foreigners by and large would be required to register nether the 1940 Act. By and large, under applicative Commission rules and forms, a registered investment company will file one registration statement to satisfy both the 1940 Act and Securities Act registration requirements, and will provide investors with a prospectus that includes information most matters subject to substantive regulation under the 1940 Act. Requiring registration under the Securities Act for offers and sales of securities of such companies effectuates the policies of the 1940 Act, by ensuring that prospective investors receive this data. In addition, information technology may be reasonable to assume that investors would expect the activities of a U.S. investment company subject to registration and regulation under the 1940 Act to be subject to Securities Act registration as well. Investment companies organized in the U.s.a. and directed to strange investors typically invest in the securities of U.S. issuers. Thus, an investor in such an investment company in issue chooses to invest in the U.S. majuscule markets by obtaining the services of the U.South. managing director of that investment company. Finally, with respect to mutual funds and unit investment trusts, requiring Securities Human action disclosure at the point of sale helps to protect the U.S. securities markets equally a whole past ensuring that strange investors will not seek redemptions which could require the sale of portfolio securities considering of a later realization that they had been inadequately informed nigh their investment.

In adopting Regulation S in 1990, the Commission, upon further reflection, concluded that the "historical distinction" should non utilize to offerings of shares of airtight-cease, equally opposed to open-cease, investment companies.¹⁴ In the Commission's view, offerings of shares of closed-end investment companies in public offerings away did non pose risks to U.S. investors of the blazon associated with offshore public offerings of shares of open up-end investment companies. The Commission agreed with commentators that closed-finish investment companies should be entitled to have advantage of the "safe harbor" provided past Regulation Southward because: (i) the Commission's business organization regarding redemptions is non applicative to offerings of closed-end funds, which do not issue redeemable securities; (2) closed-stop fund offerings have more than in common with offerings of industrial issuers than offerings of mutual funds; (iii) the substantive rules nether the Securities Act governing the registration of offerings by closed-end funds should be similar to those governing industrial visitor offerings; and (4) the offer documents for offshore sales would contain adequate disclosures due to the applicability of the antifraud provisions of the federal securities laws. Accordingly, as adopted, Regulation S would be available for all investment companies, other than (one) open-end investment companies and unit investment trusts registered or required to be registered under the 1940 Act and (2) closed-end investment companies required to be registered, but non registered, under the 1940 Deed.

We believe that, like offshore public offerings of shares of registered closed-cease investment companies, Offshore Public Offerings of investment grade, large-denomination, non-redeemable commercial paper by Onshore Individual Funds have more in common with offerings of commercial paper past industrial issuers than offerings of shares of open-end investment companies, and do not pose risks to U.S. investors of the type associated with offshore public offerings of shares of open-end investment companies. In this regard, since the commercial paper is non redeemable at the option of the holders, the Commission'south concerns relating to redemptions of shares of open-end funds do not apply.

Next, given the relatively high minimum denominations of the commercial paper, information technology is evident that while, as a technical matter, information technology may exist "publicly offered" for purposes of the Securities Deed, it will non be "mass merchandized" in the manner in which shares of registered open-cease funds are typically merchandized. Similarly, Onshore Individual Funds offering such notes would appear to retain the grapheme of the type of company that Section 3(c)(one) was intended to exclude from 1940 Act regulation. Additionally, the CP Notes at the time of issuance will be rated "investment class" by at to the lowest degree ii rating agencies.¹⁵ Finally, an Onshore Private Fund that makes utilise of U.S. jurisdictional means to offer commercial paper in Offshore Public Offerings will be discipline to the same anti-fraud provisions that apply to its Onshore Private Offerings of such newspaper. Under these circumstances, nosotros practice not believe that the "historical distinction" should exist applied in a manner that would permit an investment company organized outside the United states (an "Offshore Investment Fund") to simultaneously engage in an Onshore Private Offering and Offshore Public Offer of investment class, large-denomination, not-redeemable commercial paper without registration nether the 1940 Act,¹⁶ only would deny that privilege to an Onshore Private Fund.

Regulation of Offshore Offerings of Domestic Versus Offshore Issuers

In Securities Act Release No. 7516 (March 23, 1998) ("Release No. 7516"), the Commission published its views on the application of the registration requirements of the U.Due south. federal securities laws to the use of Internet Web sites to disseminate offering and solicitation materials for offshore sales of securities and investment services. In that release, the Commission distinguished between offshore sales by domestic issuers and offshore sales by foreign issuers, based on its determination that it has a greater interest in regulating the quondam. That conclusion was based on the post-obit 3 premises:

the substantial contacts that a U.S. issuer has with the United States justifies the practice of more extensive regulatory jurisdiction over its securities-related activities;
there is a strong likelihood that securities of U.S. issuers initially offered and sold offshore will enter the U.Due south. trading markets; and
investors, including offshore investors, have a much greater expectation that securities offerings past domestic issuers will be subject field to the U.S. securities laws.

For the reasons set forth beneath, we believe that, in the context of Offshore Public Offerings of investment-grade, large-denomination, non-redeemable commercial paper by Onshore Private Funds in the circumstances described above, these bounds either do not employ or are sufficiently addressed by the terms of the commercial paper and the manner in which it is offered and sold.

Beginning, an Offshore Investment Fund may engage in an Offshore Public Offering still that it has accessed investors in the U.S. markets and conducts substantially all of its operational and certain of its offering activities from inside the United states.¹⁷ As a issue, the contacts that an Offshore Investment Fund may accept with the United states of america are but as substantial as the contacts that an Onshore Individual Fund may take with the United states of america. Under these circumstances, information technology is difficult to encounter a sound policy justification for subjecting an Onshore Private Fund to more all-encompassing regulation simply past reason of that fact that is legally organized under the laws of a U.S. jurisdiction. To practise so would impose additional burdens on Onshore Private Funds such every bit the Conduits that they would not otherwise endure on account of domestic action washed.

Side by side, the Conduits take advised u.s.a. that: (i) CP Notes will non be transferable except in denominations of not less than $250,000; (2) in light of their relatively short maturities, CP Notes are non expected to exist frequently transferred; and (3) in light of the fact that an extensive secondary market for CP Notes is not probable to develop, it is highly likely that most persons who wish to transfer CP Notes will enlist the services of a Dealer for the purpose of identifying potential transferees. Each Dealer, in plough, will exist required to hold with each Conduit that, to the extent it is requested by a holder of CP Notes to place a potential transferee of such CP Notes, or otherwise engages in the offering or sale of CP Notes subsequent to the initial sale and commitment thereof, it will practise so in a manner that complies with the restrictions on transfer applicable to such CP Notes - restrictions designed to ensure that transferees of CP Notes are the very types of persons who could have purchased such CP Notes from a Conduit in transactions exempt from registration under the Securities Act pursuant to Department 4(ii) thereof or Rule 144A or Regulation S thereunder. Under these circumstances, the Conduits believe that the danger of a "public" flowback into the United States of CP Notes initially sold in Offshore Public Offerings is minimal.

Finally, each Conduit will, either directly or through a Dealer, provide each prospective CP Note investor (foreign or domestic) with an offer memorandum that discloses, in a prominent fashion on the cover folio or within cover page thereof, that such Conduit will not be field of study to regulation under the 1940 Human action. Each certificate representing the CP Notes volition prominently brand the same disclosure. In improver, each Dealer volition exist required to concord with each Conduit that, to the extent it is requested by a holder of CP Notes to identify a potential transferee of such CP Notes, or otherwise engages in the offering or auction of CP Notes subsequent to the initial auction and commitment thereof, it will deliver (or cause to be delivered) a copy of such Conduit's offering memorandum to the prospective transferee at or prior to the time of the completion of the transfer. Nether these circumstances, and in light of the fact that most transfers of CP Notes are likely to exist made through Dealers, the Conduits do not believe that offshore investors, whatever more than onshore investors, could reasonably expect to be afforded the protections provided past the 1940 Deed, even though they may be purchasing the securities of a U.S. issuer. Consequently, we believe that the Staff should apply the extraterritorial arroyo of Regulation S to the offering and sale of CP Notes past the Conduits outside the United States.

Request FOR RELIEF

For the reasons set along to a higher place, nosotros hereby request that the Staff assure the Bank and the Conduits that the Staff would not recommend enforcement action against them under Section seven of the 1940 Act if the Conduits do non register equally investment companies under the 1940 Act and the Conduits offer and sell short-term paper as defined in Section 2(a)(38) of the 1940 Act in Onshore Private Offerings while simultaneously offering such securities in Offshore Public Offerings pursuant to Regulation Southward under the Securities Act.

Please note that we are not requesting relief that would permit any Conduit to accept more 100 beneficial owners of its securities (other than curt-term paper). As CP Notes constitute short-term paper within the meaning of Section 2(a)(38) of the 1940 Deed, the 100 beneficial owner limitation contained in Department 3(c)(1) does not apply to holders of CP Notes.¹⁸

In accordance with the provisions of Securities Act Release No. 6269 (December 5, 1980), we have enclosed herewith seven boosted copies of this "no action" asking.

Delight experience gratis to call the undersigned of this part at (212) 906-2126 if yous accept any questions or require additional data.

Very truly yours,

Brian M. Kaplowitz

NY1 5197832v5

Enclosures

___________________________________

¹	For purposes of this alphabetic character, the term "large-denomination" should be construed to refer to denominations of not less than $250,000.
ⁱⁱ	For purposes of this letter, the term "non-redeemable" should be construed to hateful that the CP Notes are non redeemable prior to their maturity past the holders thereof. The CP Notes will not be face-corporeality certificates of the installment type, periodic payment plan certificates or redeemable securities as defined in Sections 2(a)(15), (27), and (32) of the 1940 Act, respectively.
³	We are aware that, equally a matter of policy, the Staff will not give assurance that an offer non conducted pursuant to the requirements of Rule 506 of Regulation D will non be considered a "public offering" for purposes of Department 3(c)(1) of the 1940 Act. Encounter, eastward.thousand., Hellmold Associates, Inc. (pub. avail. June 4, 1993); Stars & Stripes GNMA (pub. avail. April. 17, 1986). Accordingly, we are not asking the Staff to concur with our conclusion that Onshore Individual Offerings are not "public offerings" for purposes of Section 3(c)(1) of the 1940 Act. Instead, we ask that the Staff presume, in determining whether to grant the "no activeness" relief requested in this letter, that Onshore Individual Offerings are not "public offerings" for purposes of Department iii(c)(1) of the 1940 Human activity, and we sympathize that, if the Staff determines to grant such relief, information technology volition be conditioned on that assumption.
⁴	For purposes of this letter, an "Offshore Public Offering" should be construed to hateful an offering that, if conducted in the Usa, would non be exempt from registration under the Securities Deed pursuant to the provisions of Section 4(two) thereof. We believe that, under the Securities Act, a Conduit'south Onshore Private Offering of CP Notes should non be "integrated" with its Offshore Public Offering of CP Notes (provided, of course, that such Conduit complies with the applicable provisions of Rule 506 in connection with its Onshore Private Offering and the applicable provisions of Regulation S in connection with its Offshore Public Offering). Cf. Preliminary Note 7 to Regulation D, which expressly provides that Regulation South may be relied upon in connection with offers and sales fabricated outside the Us even if ancillary offers and sales are made in accord with Regulation D within the United States.
⁵	For this purpose, the dealer will hold to act as agent of the Conduit, all the same that it has purchased CP Notes from the Conduit for such dealer'southward own account, as master.
^six	Further, in guild to avoid "fill-in withholding" for U.s.a. federal income tax purposes, the Conduits may in certain cases rely on a Treasury Regulation with requirements similar to those found in Regulation South. Come across, Treas. Reg. § 1.6049-5(b)(10)(i). This regulation incorporates by cross reference sure of the so-chosen "TEFRA D" requirements of Treasury Regulation §1.163-v(c)(2)(i)(D), including a requirement that neither the issuer nor the distributor of the obligation offer or sell the obligation during the "restricted period" (as divers in Treasury Regulation §ane.163-five(c)(2)(i)(D)(7)) to a person who is inside the United States or its possessions or to a U.s. person (every bit defined for United States federal income tax purposes). The regulation as well requires that (i) payments on the obligation be made outside the U.s.; (ii) the face amount of the obligation be non less than $500,000; (iii) the obligation have a maturity (at issue) of 183 days or less; and (iv) the obligation incorporate the following statement (or a like argument having the same effect): "By accepting this obligation, the holder represents and warrants that it is not a The states person (other than an exempt recipient described in section 6049(b)(4) of the Internal Revenue Code and regulations thereunder) and that it is not acting for or on behalf of a U.s. person (other than an exempt recipient described in section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder)." Treas. Reg. § 1.6049-v(b)(10)(i). If the Conduits tin rely on Regulation S in connection with offshore offers and sales of CP Notes, they volition be able to use many of the same investor representations in order to comply both with Regulation S and the applicable Treasury Regulation.
⁷	In the instance of CP Notes in bearer form, the requirement that transfers exist made in accord with the provisions of Regulation S volition also be accompanied by a requirement that all resales be fabricated to persons who are not U.S. Persons (unless a Conduit expressly permits otherwise in the case of any item transfer).
⁸	Although the Conduits expect that most if not all transfers of CP Notes sold in Offshore Public Offerings will exist made in transactions that come across the requirements of Regulation South, they wish to preserve the flexibility to permit other transfers to the extent such transfers are exempt from or not subject to registration nether the Securities Human activity. For example, the Conduits may wish to let transfers of such CP Notes to be made to QIBs in transactions meeting the requirements of Rule 144A, or to Institutional Accredited Investors in transactions that are exempt from registration under Sections 4(1) or 4(3) of the Securities Deed.
^ix	In the case of CP Notes in bearer form, the transferee will besides exist deemed to accept represented to the Conduit that it is not a U.Southward. Person (unless such Conduit has expressly permitted such transfer).
^x	Although the Conduits await that most if not all transfers of CP Notes sold in Onshore Private Offerings will be made to QIBs in transactions that run across the requirements of Rule 144A, they wish to preserve the flexibility to permit other transfers to the extent such transfers are exempt from or not subject to registration under the Securities Act. For example, the Conduits may wish to let transfers of CP Notes sold in Onshore Private Offerings to be made in transactions meeting the requirements of Regulation Due south, or to Institutional Accredited Investors in transactions that are exempt from registration under Sections 4(ane) or 4(3) of the Securities Deed.
¹¹	Run across Hearings on South.3580, Earlier a Subcommittee of the Senate Committee on Banking and Currency, 76th Cong., 3d Sess. at 179-lxxx(1939) (statement of David Schenker).
¹²	Encounter, east.yard., Securities Act Release No. 7516 (March 23, 1998).
^xiii	Release 4708, of course, has been substantially superseded by Regulation South. The release, however, serves as necessary background for the discussion that follows.
¹⁴	See, Securities Deed Release No. 6863 (April 24, 1990), notes 151-153 and accompanying text..
¹⁵	Thus, in the view of those rating agencies, the CP Notes will pose for investors less risk than lower rated securities.
^sixteen	See, east.g., Touche Remnant & Co. (pub. avail. Aug. 27, 1984); Goodwin, Procter & Hoar (Feb. 28, 1997).
¹⁷	Run across, e.g., Goodwin, Procter & Hoar (pub. avail. Oct. 5, 1998); Wilmer, Cutler & Pickering (pub. avail. Oct. v, 1998).
¹⁸	We also note that we are not seeking relief from the prohibitions confronting "general solicitation" and "full general advertising" applicable to Onshore Private Offerings made in reliance on Section 4(two) of the Securities Act. In this regard, the Conduits take advised united states that they will not make offers or sales of CP Notes through the facilities of the Earth Broad Web except in accordance with applicable Commission interpretations set forth in Securities Act Release No. 7516 (March 23, 1998), as such interpretations may be modified from time to time by the Committee or supplemented from time to time past the Commission'due south staff.