SEC Division of Corporation Finance no-action letter: American Skandia Investment Services, Inc.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
April 17,2009
Harry J. Weiss, Esq.

Wilmer Cutler Pickering Hale and DOff LLP

1875 Pennsylvania Avenue, NW

Washington, DC 20006

Re: In the Matter of American Skandia Investment Services, Inc.
Investment Advisers Act Release No. 2867
Waiver Request under Regulation A and Rule 505 of Regulation D Dear Mr. Weiss:
This responds to your letter dated April 17, 2009, written on behalfofAmerican Skandia Investment Services, Inc. ("ASISI"), and constituting an application for relief under Rule 262 ofRegulation A and Rule 505(b)(2)(iii)(C) ofRegulation D under the Securities Act of 1933. You requested relief from any disqualification from exemptions available under Regulation A and Rule 505 that may have arisen by reason ofthe administrative order entered under section 203(e) ofthe Investment Advisers Act of 1940 on April 17, 2009 by the Securities and Exchange Commission in In the Matter ofAmerican Skandia Investment Services, Incorporated, Release No. IA-2867 (the "Order"). Certain orders entered under section 203(e) result in such disqualification. The portion ofthe Order ordering ASISI to comply with certain undertakings, insofar as it was entered under section 203(e), may be such a provision. The Order also includes a cease-and￾desist order and imposes other remedial sanctions on ASISI, which do not result in disqualification under Rule 262 or Rule 505. For purposes ofthis letter, we have assumed, as facts, the representations set forth in your letter and the findings supporting entry ofthe Order. We also have assumed that ASISI will comply with the Order. On the basis of your letter, I have determined that you have made showings ofgood cause under Rule 262 and Rule 505 that it is not necessary under the circumstances to deny the exemptions available under Regulation A and Rule 505 by reason of entry ofthe Order.

Harry J. Weiss, Esq.

American Skandia Investment Services, Inc.

April 17, 2009

Accordingly, pursuant to delegated authority, and without determining whether or not any

such disqualification arose by virtue of entry ofthe Order, ASISI and other persons subject to

any disqualification from exemptions otherwise available under Regulation A and Rule 505

that arose by reason of entry ofthe Order are granted relieffrom such disqualification.

Very truly yours, si~rt~,;1~ Chief, Office ofSmall Business Policy

WILMERHALE

April 17,2009 Harry]. Weiss
+1 202 663 6993 (t)
By E-MAIL AND MESSENGER +1 202 663 6363 (f) harry.weiss@wilmerhale.com Gerald J. Laporte, Esq. Chief, Office of Small Business Policy Division of Corporate Finance u.s. Securities and Exchange Commission 100 F Street, N.E., 3rd Floor Washington, D.C. 20549-3628 Re: In the Matter of American Skandia, Inc. (C-03827-A) Dear Mr. Laporte:
This letter is submitted on behalf of our client, American Skandia Investment Services, Inc. ("ASlSI"), the settling respondent in administrative proceedings arising out ofthe above￾captioned investigation by the Securities and Exchange Commission (the "Commission,,).l ASISI hereby requests, pursuant to Rule 262 ofRegulation A and Rule 505(b)(2)(iii)(C) of Regulation D ofthe Commission promulgated under the Securities Act of 1933 (the "Securities Act"), waivers of any disqualifications from relying on exemptions under Regulation A and Rule 505 of Regulation D that may be applicable to ASISI and any ofthe issuers described below as a result ofthe entry of an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (the "Order"), which is described below. ASISI requests that these waivers be granted effective as ofApril 17, 2009, the date ofthe entry ofthe Order. It is our understanding that the Staff ofthe Chicago Regional Office does not object to the grant ofthe requested waivers. BACKGROUND The Staff ofthe Chicago Regional Office engaged in settlement discussions with ASISI in connection with the administrative proceedings arising out ofthe above-captioned investigation, which were brought pursuant to Sections 203(e) and 203(k) ofthe Investment Advisers Act of 1940 ("Advisers Act"). As a result of these discussions, ASISI submitted an executed Offer of Settlement (the "Offer") that was presented by the Staff to the Commission. In the Offer, solely for the purpose ofproceedings brought by or on behalf ofthe Commission or in which the Commission is a party, ASISI agreed to consent to the entry ofthe Order, without admitting or denying the findings contained therein (other than those relating to the jurisdiction ofthe Commission, which are admitted). The Order, which was entered on April 17,2009, concerns market-timing-related misconduct by ASISI as investment adviser to the ASISI now is known as AST Investment Services, Inc. Wilmer Cutler Pickering Hale and Dorr LLP, 1875 Pennsylvania Avenue NW; Washington, DC 20006 Beijing Berlin Boston Brussels Frankfurt London Los Angeles New York Oxford Palo Alto Waltham Washington

WILMERHALE

Gerald J. Laporte, Esq.
April 17, 2009
American Skandia Trust ("AST") portfolios (hereafter referred to as "sub-accounts") that serve as funding vehicles for variable annuities issued by American Skandia Life Assurance Corporation ("ASLAC"). The Order found that, from at least January 2000 through in or around September 2003, ASISI accommodated widespread market timing in certain AST sub-accounts.2 The Order also found that during said period ASISI negligently failed to investigate credible complaints from the investment advisers hired to sub-advise certain ofthe sub-accounts that market timing was having a detrimental effect and negligently failed to inform the AST Board of Trustees of such complaints. In addition, the Order found that as a result ofASISI's conduct, the AST Board ofTrustees lacked information to give informed consideration to whether the sub￾accounts had adequate policies and procedures in place with respect to market-timing and as to whether performance in certain sub-accounts was adversely affected by market-timing. As a result ofsuch conduct, the Order found that ASISI willfully violated Section 206(2) of the Advisers Act by engaging in transactions, practices, or courses ofbusiness that operated or would operate as a fraud or deceit upon clients or prospective clients. The Order censured ASISI and ordered ASISI to: cease and desist from committing or causing any violations and any future violations of Section 206(2) ofthe Advisers Act; comply with ASISI's undertakings set forth in the Order;3 and pay disgorgement of $34 million and a civil money penalty of $34 million. DISCUSSION ASISI understands that the entry ofthe Order may disqualify it, affiliated entities, and other issuers from certain exemptions under Regulation A and Rule 505 ofRegulation D promulgated under the Securities Act, insofar as the Order causes ASISI to be subject to an order ofthe Commission entered pursuant to Section 203(e) ofthe Advisers Act. ASISI is concerned that, should it be deemed to be a general partner, promoter, or underwriter ofthe securities, of an "issuer" for the purposes of Securities Act Rule 262(b)(3), ASISI, its issuer affiliates, and other issuers with which it is associated in one ofthose listed capacities and which rely upon or may rely upon these offering exemptions when issuing securities would be prohibited from doing so. The Commission has the authority to waive the Regulations A and D exemption disqualifications upon a showing of good cause that such disqualifications are not necessary under the circumstances. See 17 C.F.R. §§ 230.262 and 230.505(b)(2)(iii)(C). ASISI requests that the Commission waive any disqualifying effects that the Order may have under Regulation A and Rule 505 of Regulation D with respect to ASISI, its issuer affiliates, or third-party issuers on the following grounds:
ASISI became an indirect subsidiary ofPrudential Financial, Inc. ("PFI") on May 1, 2003. Thus, most of the alleged misconduct described in the Order occurred before PFI acquired ASISI. The Order requires ASISI to comply with its undertaking, among others, to undergo a compliance review by a third party, who is not an interested person ofASISI and who must issue a report of its findings and recommendations concerning ASISI's supervisory, compliance, and other policies and procedures designed to prevent and detect breaches of fiduciary duty, breaches ofthe code of ethics, and federal securities law violations by ASISI and its employees. 2

WILMERHALE

Gerald J. Laporte, Esq.
April 17,2009

1. ASISI's conduct addressed in the Order does not pertain to Regulation A or D.
2. The disqualification ofASISI, any of its issuer affiliates, or third-party issuers
   with which it is associated in one ofthe capacities listed above from relying on the exemptions under Regulation A and Rule 505 of Regulation D would be unduly and disproportionately severe given the nature ofthe violation addressed in the Order and the extent to which disqualification may affect the business operations ofASISI, its issuer affiliates, or such third￾party issuers by impairing their ability to issue securities pursuant to these exemptions to raise new capital or for other purposes. In addition, the disqualification ofASISI, its issuer affiliates, or third-party issuers from the regulatory exemptions may place ASISI or those issuers at a competitive disadvantage with respect to third parties that might seek to invest in securities that rely on the regulatory exemptions.
3. The disqualification ofASISI, any ofits issuer affiliates, or third-party issuers
   from the exemptions under Regulation A and Rule 505 of Regulation D also would be unduly and disproportionately severe, given that: (a) the Order relates to activity that will be addressed in the administrative proceedings; and (b) ASISI must pay a significant civil money penalty pursuant to the Order, along with disgorgement. In light ofthe grounds for relief discussed above, we believe that disqualification is not necessary, in the public interest, or for the protection ofinvestors, and that ASISI has shown good cause that relief should be granted. Accordingly, we respectfully urge the Commission to waive, effective as ofApril 17, 2009, the disqualification provisions in Regulation A and Rule 505 of Regulation D to the extent they may be applicable to ASISI, any affiliated issuers, and certain third-party issuers described above, as a result ofthe entry ofthe Order.4 We note in support of this request that the Commission has granted relief under Rule 262 of Regulation A and Rule 505(b)(2)(iii)(C) of Regulation D for similar reasons. See, e.g., Sybaris Clubs Int'l, Inc., S.E.C. No-Action Letter (pub. avail. July 1, 1996); The Cooper Companies, Inc., S.E.C. No-Action Letter (pub. avail. Dec. 20, 1994); Michigan Nat'l Corp., S.E.C. No-Action Letter (pub. avail Dec. 17, 1993); General Electric Co., S.E.C. No-Action Letter (pub. avail. May 24, 1988); see also Prudential Securities Inc., S.E.C. No-Action Letter (pub. avail. July 10, 2003); Credit Suisse First Boston Corporation, S.E.C. No-Action Letter (pub. avail. Jan. 29, 2002); Dain Rauscher, Incorporated, S.E.C. No-Action Letter (pub. avail. Sept 27,2001); Legg Mason Wood Walker, Incorporated, S.E.C. No-Action Letter (pub. avail. June 11,2001); Prudential Securities Inc., S.E.C. No-Action Letter (pub. avail. Jan 29, 2001). 4

WILMERHALE
Gerald J. Laporte, Esq.
April 17, 2009
If you have any questions regarding this request, please contact me at 202-663-6993. Very truly yours,