SEC Division of Corporation Finance no-action letter: Gabelli Funds LLC

UNITED STATES gECURITIEg AND EXCHANGE COMMISEION WASHINGTON, D:C- ?0549 April24,2008 ."*"31'iii3l F,'.^."' Kevin P. N{cEnery, Esq. Wihner Cutler Fickering Hale and Dorr LLP 1875 Pennsylvania Ave,nue, N.W. Washington, D;C. 20006 Rel In the Matter of Grbelli Funds LLC, Admintstrativo Proceeding FiIe No. 3-f3019- Waiver Reqnest under Regulation A tnd Rule $0S of Regulation D Dear Mr- McEnery:
This is in response to your letter dated today, writte,n on behalf of Gabelli Funds LLC ("Gabelli Funds') and constituting an application for relief under Rule 26? of Regulation A and Rule SOs(bXzXiiiXC) of Regulation D under the Securities Act of 1933 ("Secrnities Acf). You requested relief ftom disquatifications from exelnptions available under Regulation A and RuIe 505 of Regulation D that may have arisen by virtne of the order entered today by the Secrrities and Exchange Commission under Section ?03(e) of the Investment Advisers Act of 1940 (Advisers Act!) in trn the Matter of Gabelli Funds LLC, Advisers Act Release No.2727 (the "Orderr'). The Order also was ente,red under Soction ?03(k) of the Advisers Act and Sections 9(b) and 9(f) of the Investrnent Company Act of 1940 ("Investme,nt Company Act'). It cenilred Gabelli Funds, ordered Gabeili Funds to cease and desist from comnritting or causing any violations and future violations of $ections 206(2) of the Advisers Aet, Section l7(d) of the Inve$ftnent Company Act and Invesfinent Co:npany Act Rule l7d'-1, and frorn aiding and abetting or causing any violations and future violations of
Section lz(dXlXBXi) of thp Investrnent Company Act. It firtlrcrordered Gabelli Funds to comply
with certain undertakings and pay disgorgement of $l l/000,000 and a civil money penalty of $5,000,000 For purposes of this letter, we have as$umed as facts the represe,rrtations st forth in your letter and the findings supporting enfry of the Order. We also have assumed tlmt Gelli Funds will comply with the Order. On the basis of your letter, I have detennined that you have made showings of good causF rmder Rule 262 and Rule s0s(bxzxiirxc) that it is not necessary under the circumstances to de'lry the exemptiors available under Regulation A and Rule 505 of Regulation D by reason of entry of the Order. Accordingly, pr,rrsuant to delegated authority, and withsut dete,r-mining whether or not any such disqualification ar-ose by virtue of entry of the Order, Gabelli Frmds is granted relief from any disqualification f,rom exemptions otherwise avcilable under Regulation A and Rule 505 of Regulation D that may have arisen as a result of entry of the Order. Very hnrly yours, Chief, O{fice of Small Business Policy

April ?4,2008 lil(/trupnHet-e
I{cvh P. McEscrt
+1 202 663 6596 {t)
+1 ?02 663 S3s3 (f) kevin.rncenery@wilmerhale.com Bv E-nmu, AiYr) MESSENcER Gerald J. Laporte, Esq. Chief Office of Small Business Policy Division of Corporation Finance U.S. Sectlrities and Exchange Commission 100 F Street, N.E., 3rd Floor Washinglon, D.C. 20549 -3 628 Re: In re Certain lvlutupl Fund Tradine Practices fNY-7220) Dear Mr. Laporte:
This letter is submitted on behalf of our client, Gabelli Funds, LLC ("Gabelli Funds'), the settling respondent in administrative proceedings arising out of the above-captioned investigation. Gabelli Funfu hereby requests, purswmt to Rule 262 of RegrrMon A and Rule sOs(bXzXiiiXC) of Regulation D of the Securities and Exchange Commission (the "Commis$ion") promulgated under the Securities Act of 1933 (the "Securities Act"), waivers of any disqualifications from relying on exemptions under Regulation A and Rule 505 of Regulation D that may be applicable to Gabelli Frurds and any of the issuers described below as a result of the entry of an Order Instituting Adminishative and Cease-and-Desist Proceedings, Making Findings, and Imposing Re,medial Sanctions and a Cease-and-Desist Order Pursuanto Sections 203(2) and 203(k) of,the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the Inveshnent Company Act of 1940 (the "Order"), which is also described below. Gabelli Funds requests that these waivers be granted effective upon the enhy of the Order. It is our understanding that the Division of Enforcement doen not object to the grant of the requested waivers. BACKGROTJND The Staffof the Division of En orcenrent engaged in settlement discussions with Gabelli Funds in connection with the administrative proceedings arising out of the above-captioned investigation, which were brought prrsuant to Sections 203(e) and 203(k) of the Inveshnent Advisers Act of 1940 ("Advisers Act") and Sections 9(b) and 9(f) of the Inveshnent Company Act of 1940 ("Company Act'r). As a result of these discussions, Gabelli Funds submitted an Offer of Settlement of Gabelli Frxrds LLC (the "Offer") that was pre$ented by the Staffto the Commission. \0filmer Cuder Pickering Hele and Dorr up, 1875 Pennsylvania Avenue N!9', rffashington, DC 20006 Ealtimore Beijing Berfin Bopton Erussels London Munidr New]brk Northern Virginia Oxford Palo Aho \ /af*ram Wsshingfton

'WILMERHAI-E
Gerald J. Laportg, Esq.
U.S. $ecurities and Exchange Commission
April24,2008
In the Offer, solely for the purpo$e of these pnoceedinss and any other proceedings brought by or on hehalf of the Commission or to which the Commission is a party, Gabelli Funds age€d to consento the entry of the Order, withorrt adtnitting or denyrng the findings contained therein (other than those relating to the jwisdiotion of the Commission, which are admitted). In the Order, which was entered today, the Commission made findings that Gabelli Funds, an invesfinent adviser to mutual funds, permitted a hedge fund investment manager based in the United Kingdom to market time a rnutual fimd man*ged by Gabelli Funds during a three-year period. The Order firrther found that, six months after the market timing started, Gabelli Funds allowed the hedge fund manager to increase its market-timing capacity in that mutual fund in exchange for the manager's investmenrt in a hedge fi.rnd advised by a Gabelli Frurds affiliate. [n addition, the Order found that Gabelli Funds financ.ially benefited from the market timing in that it eamed advisory fees from the U.K. manager's invesfonent in the timed mutual fund and from the U.K. manager's invesfinent in the affiliated:hedge fund. Finally' the Order found that, as a result of the conduct described therein, Gabelli Funds, an affiliated person of the tirned mutual fund, willfully; committed a non-scienter violation of Advisers Act Section 206(2); violated Company Act Section l7(d) and Company Aet Rule l7d-l; and aided snd abetted and caused repeated violations by the timed mutual fund of Company Act Section lz(dXlXBXi). Based on these findings, the Commission in its Order censured Oahelli Fundso ordered it to cease and desist from cornmitting or causing any violations and any future violations of
Section 2I6Q) of the Advisers Act, Section 17(d) of the Company Act and Cornpnny Act Rule
l7d-1, and aiding and abetting or causing any violations and any frrture violations of Section 12(dxlXB)(i) of the Company Act, ordered it to comply with the undertakings listed in the Order, and ordered it to pay disgorgernent of $11,000,000 end to pay a civil money penalty of $5,000,000. DISCUSSION Gabelli Funds understands thnt the entry of the Order may disqualify it and certain issuers from relying on the exemptions under Regulation A and Rule 505 of Regulation D promulgated under the Secruities Act from the registration requirernents of the Securities AcL insofar as the Order causes Gabelli Funds to be subject to an order of the Commission entered pursuant to
Section 203(e) of the Advisers Act. Gabelli Fmde is concemsd that, should it be deemd to be a
ge,neral parhrer, promoter, l0 percent or more bensficial owner of the equity secrrrities, or underwriter of the securities, of an "issuer" (a'telated issued') for purposes of Securities Act Rule 262(b[3), such related issuer would be prohibited from relying upon these offering exemptions. The Courmis-eio-n has the authority to waive the Regulations A and D exeruption diqqualifiaation$ upon a showing of good car$e that,such disqualificatiotx are nCIt necfissary under the circumstanses. See 17 C.F.R. $$ 230.262 and 230.505(bX?XiiiXC).

(1InaEnFIrur
Gerald J. Laporte, Esq.
U.S. Secwities and Exchange Commission
April24,2008
Gabelli Funds requests that the Cornrnission waive any disqualifinns effects that the Order may have under Regulation A and Rule 505 of Regulation D with respsst to Snbelli Funds or related issuers on the following grounds;
l. Gabelli Frmds's conduct addressed in the Order does not pertain to Regulation A
or D.
2. The disqualification of issuers with which Gabelli Funds is associated in one of
the capacities listed above from relying on the exernptiwu under Regulations A and Rule 505 of Regulation D would be unduly and disproportionately sev€re grven the ndlrre of the violations addressed in the Order and the extent to which disqualificntion may affect the business operations of such related issuers by impairing their ability to issue securities prrflr4nt tq these exemptions to raise new capital or for other purmses. In addition, the disqualification of related issuers from the regulatory exanptions may place Gabelli Funds or thoss issuer$ at a competitive disadvantage with respect to third parties that rnight seek to invest in securities that rely on the regulatory exemptions.
3. The disqualification of related issuers from the exemptions uuden Regulation A
and Rule 505 of Regiltation D also would be unduly and disproportionately severe, given that:. (a) the Order relates to activity that will be addressed in the adminishative proceedings; and (b) Gabelli Funds must pay a sigpificant civil money penatrty pursuant to the Order, along with disgorgement. In light of the grounds for relief discussed above, we believe that digqualifications are not necessary, in the public interest, or for the protection of investors, and that Gabelli Funds has shown good cause that relief should be granted. Accordingly, wo respecdfully urge the Commission to waive, effective upon the entry of re Order, the disqualification provisions in Regulation A and Rule 505 of Regulation D to the extent they may be ap'plicable to Gabelli Funds and related issuers as a result of the entry of the'Order.' I We note in support of this request that the Commission has granted relief undor Rule 262 of Regulation A and Rule 505(b)(2XiiiXC) of Regulation D in the past for similarrea+ons. ,See e.g., Sybari+ Clubs Int'l, [nc., S.E.C. No-Action Letter (pub. avail. JuIy l, 1996); The Coopo-r'Cogpanies, Inc., S.E.C. No-Action Letter (pub. avail. Dec. 20, 1994); Michigpn N+t'l Corp., S.E.C. No-Action Letter (pub. avail Dec. 17, 1993); Ge,lreral Electrie Co., S.E.C. No-Action Letter (pub. avail. lvlay 24, 1988); see also Prudential Securities Inc., S.E.C. No-Action l,etter (pub. avail. JuIy 10, 2003); Credit Suiese First Boston Corporation, S.E.C, No-Action Letter (pub. avail. Jan. 29, 2002); Dain Rauscher, Incorporate{ S.E C. No-Action ltter (pub. avail. Sept 27, ?001); Legg Mason Wood Walker, Incorporated, S.E.C. No-Action

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]UtrJLMERFIAIE
Gerald J. Laporte, Esq.
U.S. Secrrrities and Exchange Commission
April24,2008
+*++
If you have any questions regarding this requast, please contact rne at the above-listed number. Sincerely, tu!ru Kevin P. McEnery Letter (pub. avail. June I l, 2001); Prudential Securities Int., S.E.C. No-Action l,etter (prrb. avail. Jan 29, 200r).