SEC Division of Investment Management staff letter: World Financial Network National Bank

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May 28, 1996
POLJ .__
A VAIBl oS /2- sij c¡ ~ RESPONSE OF THE OFFICE OF CHIEF COUNSEL

DIVISION OF CORPORATION FINANCE

Re: World Financial Network National Bank ("WFNN")

Incoming Letter dated May 2, 1996

Based on the facts presented, the Division will not

recommend enforcement action to the Commission if WFNN, in

reliance on your opinion as counsel that registration is not

required, implements the WFNN Stock Purchase Plan and the WFNN

Savings and Retirement Plan as described without compliance with

the registration requirements of the Securities Act of 1933.

The Division of Investment Management has asked us to inform

you that, on the basis of the facts and representations in your

letter, it would not recommend enforcement action to the

Commission if WFNN offers the WFNN Stock Purchase Plan without

registering the plan under the Investment Company Act of 1940.

The Office of Chief Counsel of the Division of Market

Regulation has asked us to inform you of the following. You state that WFNN is a "bank" as defined in Section 3 (a) (6) of the Securities Exchange Act of 1934 ("Exchange Act"). Banks that

come within that definition are excluded from the definitions of

"broker" and "de~ler" in Sections 3 (a) (4) and 3 (a) (5) of the Exchange Act, respectively. Accordingly, the Division of Market

Regulation takes no position on the application of the .

broker-dealer registration requirements of Section 15 (a) of the

Exchange Act to WFNNB.

Because these positions are based upon the representations

made to the Divisions in your letter, it should be noted that any

different facts or conditions might require different _'l conclusions. Further, to the extent this response expresses the Divisions' positions on enforcement action, it does not purport to express any legal conclusions on the questions presented.

Sincerely, lJ~ 4-,:~
Mark W. Green

Special Counsel

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D.C. 20549

DIVISION OF
CORPORATION FINANCE

May 28, 1996

Howard J. Levine, Esq.

Seyfarth, Shaw, Fairweather & Geraldson

55 East Monroe Street, Suite 4200

Chicago, Illinois 60603 -5803

RE: World Financial Network National Bank

Dear Mr. Levine:
In regard to your letter of May 2, 1996 our response

thereto is attached to the enclosed photocopy of your

correspondence. By doing this, we avoid having to recite or

summarize the facts set forth in your letter.

" . Sincerely, ~-7;~
Mart in P. Dunn

,"

SEYFARTH, SHAW, FAIWETHER & GERALDSON
ATTRNYS AT LAW

8111 OONNCU AVE N.W. 55 EAST MONROE STREET - SUITE 4200 40 CAPITOL MA - SUITE 2350 WASHIGTN. DC ll SACR CA OliSl4-20 0221 oi24 CmcAGO. lLOIs 60603-5803 (9161 6158-828 FAX _ 8ll93 FAX (916) 1558-9 (312) 346-8000 ONE CEY :P. SUI 33 FAX (312) 269-8869 700 LOUIIAA STRE . SUIE 390 20 CEY PAR.EAT HOUBTON, TX 77002-2731 LO ANGEL OA 907-33 l7191llll 13101 2'.720 FAX (713) 225234 FAX 13101 201-6219 INATIONAL WR'S DIR DIA . 90 TH AVE AVE LOUIE 11. BOÎT 8 NE YORK NY 1ll7l 269-8909 1011 BRUSSEL BEIU . 1212 71 C312 TEONE f3 f2 647.60.211 FAX 1212 752-116 FAX l3 (2 64.70.71 101 CARN ST. SUI ll May 2, 1996 AlTE FI SA llCI OA 94_ MATRY. MATRY.. HA C411l 397:5123 BRUSSEL AN LIE, BELIUM FAX l4 397-69 OOLONE GER 1933 Act/2(3)

1933 Act/3(a)(2)

1934 Act/15(a)

VI FEDERA EXPRESS 1940 Act/3(a)

Chief Counsel Chief Counsel l-.'
Division of Corporation Finance Division of Investment Management Securities and Exchange Commission Securities and Exchange Commission

450 Fift Street, N. W. 450 Fifth Street, N. W.

Washington, D. C. 20549 Washington, D.C. 20549 "" G

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;:--"-, Division of ,Market Regulation \
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Securities'ând Exchange Commission .. -"' .,
450 Fift Street, N. W. ::¡
Washigton, D.C. 20549
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Re: The Limited, Inc.

World Financial Network National Bank

WFNNB Stock Purchase Plan

WFNNB Savings and Retirement Plan

Dear Sir or Madam:
On behalf of The Limited, Inc. ("The Limited") and World Financial Network National

Bank ("WFNNB"), we respectfully request the staff of the Division of Corporation Finance to

advise that it wil not recommend any enforcement action to the Securities and Exchange

Commission (the "Commission") against either The Limited or WFNNB in the following

circumstances:

(i) If WFNNB offers its employees participation in the proposed World Financial . Network National Bank Stock Purchase Plan (the "WFNNB Stock Purchase Plan"), as described below, without registration of the interests in the WFNNB Stock Purchase Plan, or the shares of The Limited (" Limited Stock") acquired

thereunder, under the Securities Act of 1933, as amended (the "Securities Act"); and

¡. t t. ; "¡' .: C l:-~ ::" f :~': ~.-; i' Chief Counsel (, .
May 2, 1996 or pn,/ 9
Page 2 _'0 ¡i.'-i 1 Pi! I: 5.3

(ii) If WFNNB offers its employees participation in the proposed Wodd Financial Network National Bank Savings and Retirement Plan ("WFNNB Savings Plan"), as described below, without registration of the interests in the WFNNB Savings Act. / Plan, or the shares of Limited Stock acquired thereunder, under the Securities

We also request the staff of the Division of Investment Management to advise that it wil not recommend any enforcement action to the Commission if WFNNB operates the WFNNB Stock Purchase Plan as described herein without registration of the plan under thè'Investment Company Act of 1940, as amended (the "1940 Act"). h￾We furter request the staff of the Division of Market Regulation to advise that it wil not recommend any enforcement action to the Commission if WFNNB operates the WFNNB Stock Purchase Plan as described herein without registration of WFNNB as a "broker" or "dealer" under Section 15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). WF has delayed those aspects of the WF Stock Purchase Plan and the WF 'Savings Plan that are the subject of this request unti WF receives confirmation of its positions by the Commssion. As such, we respectfully request an expedited review of our application by the staffs of the respective Divisions, and appreciate in advance each staff's cooperation in this application.

1. The Companies

The Limited, a Delaware corporation, is a holding company with subsidiaries principally engaged in the purchase, distribution and sale of women's and men's apparel though retail and catalog sales. In fiscal 1994, The Limited had combined sales of over $7 bilion. The Limited employs approximately 110,000 employees across the United States. The Limited is subject to the reporting requirements of the Exchange Act, and the Limited Stock, par value $.50 per share, is registered with the Commission and traded on the New York Stock Exchange. As of January 28, 1994, The Limited had 357 milion shares of Limited Stock issued and outstanding with consolidated shareholder equity in excess of $2.7 bilion. One share of Limited Stock entitles its holder to one vote on matters The Limited brings before its shareholders. WFNNB is a national bankng association domiciled in and subject to the banking laws of the State 'of Ohio. Prior to February 1, 1996, WFNNB was a wholly-owned subsidiary of The Limited. WFNNB issues proprietary credit cards used in a variety of The Limited's businesses, extends credit to the individual customers of The Limited and processes credit card transactions for The Limited for a fee. As of January 28, 1995, WFNNB employed approximately 1800 employees principally located in Columbus, Ohio.

May 2, 1996

Effective February 1, 1996, The Limted sold 60 percent of the common shares of WFNNB to Welsh, Carson, Anderson & Stowe ("Welsh Carson"), an unrelated entity. It is planned that WFNNB wil soon be reorganed into separately incorporated entities. That portion of WFNNB that is a national ~anking association shall retain its charter and remain a national bankg association (which heteinafter shall remain called "WFNNB"). The remainig entities shall consist of a transaction processing company, a database marketing company, and a master trust company (the "Operational Affiiates"). The stock of WFNNB and the Operational Affiiates shall be 100% held by a parent holding company (the "Parent Company"). Welsh Carson wil hold 60 percent of the shares of the Parent Company, and The Limited. wil holc 40 percent of the shares of the Parent Company. .¡
2. The Plans

A. The Limited Stock Purchase Plan

The. Limited, though its wholly-owned subsidiary Limited Service Corporation,

maintains the Stock Purchase Plan for Associates of The Limited, Inc. (the "Limited Stock

Purchase l.lan"). Eligible employees of The Limited and its subsidiaries (including WFNNB, before the sale) may purchase Limited Stock under the Limited Stock Purchase Plan through voluntary payroll deduction. Purchases are made by Merril Lynch, Pierce, Fenner & Smith Incorporated ("Merril Lynch") in the open market at market prices pursuant to a servicing agreement between Merril Lynch and Limited Service Corporation. Merril Lynch establishes an account in the name of each participant to which is credited all Limited Stock purchased on behalf of that participant. The Limited Stock Purchase Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and is not a tax￾qualified retirement plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The Limited has fied a registration statement with the Commission on Form S-8 with respect to shares offered under the Limited Stock Purchase Plan. B. The WFNN Stock Purchase Plan As of February 1, 1996, the employees of WFNNB ceased participation in the Limited Stock Purchase Plan. WFNNB, however, proposes to establish the WFNNB Stock Purchase

Plan to allow its employees and the employees of its Operational Affilates and Parent Company

the opportnity to continue purchasing Limited Stock through payroll deduction through Merril

Lynch. No securities of WFNNB, the Operational Affilates or the Parent Company, nor those of any pareñt or affilate thereof, wil be offered or sold under the WFNNB Stock Purchase Plan. WFNNB intends for the WFNNB Stock Purchase Plan to be effective as of February 1, 1996; however, WFNNB has delayed the WFNNB Stock Purchase Plan until the Commission

May 2, 1996 confir the positions taen in ths request. As is the case with the Limited Stock Purchase

Plan, the WFNNB Stock Purchase Plan is not subject to ERISA or tax-qualified under Section 401(a) of the Code. The terms of the WFNNB Stock Purchase Plan are substantially the same below. ' as the terms of the Limited Stock Purçhase Plan, with appropriate modifications, as set forth Participation in the WFNNB Stock Purchase Plan wil be voluntary. An eligible employee of WFNNB may paricipate in the WFNNB Stock Purchase Plan by delivering a completed enrollment form to WFNNB and specifying the amount to be witheld from his or her pay each payroll period. Payroll deductions may be increased, decreased or terminated by a participant at any time by written request to WFNNB. If a participant ceases to be an eligible ,; employee, payroll deductions and WFNNB Stock Purchase Plan contributions wil automatically cease. Upon the reorganiation ofWFNNB, the WFNNB Stock Purchase Plan wil continue to be offered to employees of WFNNB and its Operational Affiiates and Parent Company. Each pay period WFNNB wil withold from each participant's pay the amount specified by the participant. Once each month all participant contributions wil be combined and forwarded.toMerril Lynch for investment in Limited Stock. Within 35 days of the date of payroll deduction Merrll Lynch wil purchase shares of Limited Stock for the account of each participant for whom payroll deduction is made. All dividends paid by The Limited on Limited Stock held in each account wil be automatically reinvested by Merril Lynch within 30 days of the dividend payment date in additional shares of Limited Stock. There is no limit to the number of shares a participant may accumulate in his or her account. Merril Lynch wil purchase Limited Stock in the open market at such times and on such terms as to price, delivery and other matters as Merril Lynch determines. WFNNB wil exercise no control over the timing or quantity of Merril Lynch's purchases. Merril Lynch is prohibited under the terms of the WFNNB Stock Purchase Plan from purchasing Limited Stock in private transactions from The Limited or from any subsidiary or affiiate of The Limited. A participant wil at all times be the sole beneficial owner of the Limited Stock in his or her account. The participant may withdraw or sell shares of Limited Stock in his or her account at any time through an automated toll-free telephone number and Personal Identification Number ("PIN") system established by Merril Lynch. Participants may also direct withdrawals and sales by written request to Merril Lynch. Each participant may obtain a certificate representing any shares of Limited Stock in his or her account upon request to Merril Lynch. When a participant ceases payrõll deductions, the participant may but is not required to terminate his or her account. A participant may terminate his or her account at any time, including immediately following the establishment of an account, through the automated telephone PIN system or by written notice to Merril Lynch;
provided, that cancellation shall be effective for Limited Stock purchases next following the cancellation only if the cancellation order is received within a reasonable time

May 2, 1996

prior to the scheduled purchases. A participant may also invest money other than payroll

deductions. though his or her account, which may be used at the paricipant's direction for any securities transactions permitted by Merril, Lynch; however, tranactions other than purchases of Limited Stock are considered transactions solely between the participant and Merril Lynch, and do not obligate WFNNB in any 1lanner. Merril Lynch wil forward each participant in the WFNNB Stock Purchase Plan copies of each proxy statement, annual report and other communication sent by The Limited to its shareholders. Each participant wil have the right to vote all shares of Limited Stoèk held in his or her account. Participants wil receive monthy, quarterly and annual statements summarizing all transactions in his or her account and written confirations for each purchase or sale of .; shares held in his or her account. WFNNB may terminate the WFNNB Stock Purchase Plan at any time. A participant's account in the WFNNB Stock Purchase Plan wil terminate upon the participant's termination of employment with WFNNB, or upon the termination of the WFNNB Stock Purchase Plan. On termination of the paricipant's account, the participant may request that Merril Lynch (i) convert th~. account to a regular brokerage account with Merril Lynch, (ii) issue the participant stock certificates representing the shares of Limited Stock held in the account, or (iii) sell the shares of Limited Stock and issue the participant a check in the amount of the sale proceeds. WFNNB wil pay Merrll Lynch all fees, expenses and commissions relating to the establishment of each participant's account and to purchases of Limited Stock under the WFNNB Stpck Purchase Plan. The participant wil pay Merril Lynch all fees, expenses and commissions relating to (i) the conversion of an account to a regular brokerage account, (ii) the withdrawal of any investment from the account, (iii) the sale of Limited Stock in the account, (iv) the purchase of Limited Stock other than with dividends or Limited Stock Purchase Plan payroll deductions, and (v) the purchase or sale of any security other than Limited Stock.
C. The Limited Savings Plan

The Limited also maintains The Limited, Inc. Savings and Retirement Plan (the "Limited Savings Plan"), a defined contribution plan subject to ERISA and qualified under Section 401(a) of the Code, which contains a cash or deferred arrangement that meets the requirements of
Section 401(k) of the Code. All eligible employees of The Limited and its subsidiaries
(including WFNNB, prior to the sale) are eligible to participate in the Limited Savings Plan. The Limited Savings Plan maintains a number of investment alternatives for its participants, including a fund consisting solely of Limited Stock (the "Limited Stock Fund"). Participants are entitled to direct that salary deferral contributions be invested in the Limited Stock Fund. By the terms of the Limited Savings Plan, all cash dividends paid on Limited Stock

May 2, 1996

in the Limited Stock Fund are automatically reinvested in shares of Limited Stock. The Limited has fied with the Commission a registration statement on Form S-8 with respect to purchases of Limited Stock and participation interests in the Limited Savings Plan. D. The WFNN Savings Plan In advance of the sale of the WFNNB shares to Welsh Carson, WFNNB established the WFNNB Savings Plan, effective Januar 1, 1996. Paricipation of WFNNB employees in the Limited Savings Plan ceased as of December 31, 1995, and participation in the WFNNB Savings Plan automatically began for those employees on Januar 1, 1996. The investment funds offered ,,,' participants under th~ WFNNB Savings Plan wil be the same funds as those offered participants of the Limited Savings Plan, except that, as explained below, no new employee or employer contributions wil be invested in the Limited Stock Fund established under the WFNNB Savings Plan, and no amount may be transferred to the Limited Stock Fund from other investment funds. Accounts of WFNNB employees in the Limited Savings Plan wil be transferred to the WFNNB Savings Plan following the March 31, 1996 valuation of Limited Savings Plan accounts. )VFNNB employees may not elect to receive a distribution of any portion of their Limited Savings Plan account. That portion of the accounts of WFNNB employees invested in the Limited Stock Fund under the Limted Savings Plan wil be transferred to a Limited Stock Fund maintained by the WFNNB Savings Plan. The transferred portion of the Limited Stock Fund wil be transferred in kind in shares of Limited Stock. Upon transfer, participants in the WFNNB Savings Plan wil be offered the same investment options as are offered under the Limited Savings Plan, with the following exceptions:
(i) During the transfer process, participants may not allocate any transferred amount

into the Limited Stock Fund in the WFNNB Savings Plan that was not invested in the Limited Stock Fund in the Limited Savings Plan immediately before the transfer; (ii) After the transfer and for the duration of the WFNNB Savings Plan, participants

may not transfer any amounts into the Limited Stock Fund from any other investment fund; and (iii) Participants may not allocate any future salary deferral or matching contributions

for investment in the Limited Stock Fund.
WFNNB participants may, however, elect to transfer amounts from the Limited Stock Fund to other funds from time to time to the extent permitted under the terms of the WFNNB Savings Plan.

SEYFARTH, SHAW, FAIRWEATHER & GERALDSON

May 2, 1996

The terms of the WFNNB Savings Plan provide for mandatory reinvestment in Limited Stock of dividends earned on Limted Stock held in the Limited Stock Fund, though the increase in holdings in Limited Stock though dividend reinvestment wil be inignificant. No securities

of WFNNB or any parent or affiiate wil be offered or sold at this time under the WFNNB Savings Plan.
3. Registration Under the Securities Act

A. The WFNN Stock Purchase Plan t.... It is our opinion that neither shars of Limited Stock nor participation interests in the WFNNB Stock Purchase Plan need to be registered under the Securities Act with respect to the WFNNB Stock Purchase Plan. We believe that the operation of the WFNNB Stock Purchase Plan wil not involve an "offer to sell," an "offer for sale" or a "solicitation of an offer to buy" Limited Stock within the meaning of Section 2(3) of the Securities Act, and that interests under the WFNNB Stock Purchase Plan wil not constitute a separate "security" as defined in Section 2(1) of the 1933 Act. Even if the operation of the WFNNB Stock Purchase Plan were deemed to constitgte such an "offer," we believe the tranactions in Limited Stock effected through the WFNNB Stock Purchase Plan as described herein are exempt from registration under Section 4(1) of the Securities Act in that they would be transactions by a person other than an issuer, underwriter or dealer. Consequently, registration under the Securities Act should not be

required in respect of the WFNNB Stock Purchase Plan.
The WFNNB Stock Purchase Plan wil operate within the parameters and criteria for open market stock purchase plans set fort in Securities Act Release No. 4790 (July 13, 1965) and Securities Act Release No. 6188 (Februar 1, 1980), as well as the "no action" positions taken in Capitol American Financial Corporation, 1995 WL 527729 (S.E.C.) (September 7, 1995), American Brands, Inc., 1992 WL386667 (S,E.C.) (Dec~mber23, 1992) and Ageon USA, Incorporated, 1992 WL 36910 (S.E.C.) (February 21, 1992). The Commission issued Release

No. 4790 to answer questions with respect to the need to register employer securities purchased in the open market through employee stock purchase plans , We recognize that because of The Limited's minority interest in WFNNB that employees of WFNNB may not be deemed 1 However, the Commission recognized in issuing Release No. 4790 employees of The Limited.

1 We believe WFNNB is a subsidiar and an affliate of Welsh Carson under the Securities Act, and not a subsidiary or affiiate of The Limited. Rule 405 of the Securities Act defines a "parent" of a person as an affiiate controllng such person directly or indirectly through one or more intermediaries. "Affiiate" is defined in Rule 405 as a person that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such person specified. Finally, "control" is defined in Rule 405 as the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through (continued.. .)

May 2, 1996

that certin stock purchase plan should not need to register even though the plans involve

purchases of securities "by persons who are not techncally employees of the issuer or an affiiate." 17 CFR 231.4790.2

WFNNB's involvement in the' WFNNB Stock Purchase Plan wil be limited to the following functions: (i) announçing the existence of the WFNNB Stock Purchase Plan in its orientation programs for newly hied employees only (in conjunction with explanations on all WFNNB benefit programs), and providing appropriate enrollment and payroll deduction forms, the names and addresses of its employees available to Merril Lynèh for direct communication by Merril Lynch to WFNNB employees, and/or mailng to its employees literature concerng the WFNNB Stock Purchase Plan (not more than twice each calendar year); ,; (ii) makng

(ii) makg payroll deductions at the request of the participants and remitting the funds to Merril Lynch; and (iv) paying brokerage commssions on purchases of Limited Stock and

monthy expenses of Merril Lynch for bookkeeping and custodial services.
Participation in the WFNNB Stock Purchase Plan wil involve minial differences from acquisitions of securities in ordinary brokerage transactions, and the rights and obligations of participants and Merril Lynch wil be consistent with the ordinary broker-client relationship. Payroll deductions wil be invested in Limited Stock and participants in the WFNNB Stock Purchase Plan wil acquire all rights of ownership in such shares, including the normal rights of voting, possession and sale. WFNNB wil not make recommendations as to whether any employees should participate in the WFNNB Stock Purchase Plan or purchase shares of Limited Stock. WFNNB wil not advance funds to any participant for purchases nor make contributions to the WFNNB Stock Purchase Plan for such purchases. All these functions are traditional to 1 (. . . continued) the ownership of voting securities, by contract, or otherwise. In applying these definitions, it is clear that Welsh Carson is the parent of WFNNB under Rule 405. As a 60 percent majority shareholder, Welsh Carson can nominate the majority of the Board of Directors and can directly exercise control over the management and policies of WFNNB. The Limited, as a miority shareholder of WFNNB, has no' direct or indirect control over the management or policy of WFNNB. 2 Although not stated in Release No. 4790, one reason for this may have been that such non-employees were nonetheless famliar with the issuer and were in a position to regularly receive information. about the issuer. The staff of the Commssion has provided this reasoning in no-action letters with respect to extending Form S-8 registration protection to employees of companies that did not have a clear parent-subsidiar relationship under Rule
405. Valero -Energy Corporation, 1989 WL 245539 (S.E.C.) (Januar 31, 1989); HealthVest/Healthcare

International, 1987 WL 108486 (S.E.C.) (October 14, 1987); Colonial BancGroup, Incorporated, 1987 WL 107442 (S.E.C.) (Januar 12, 1987). In the case of employees of WFNNB (including those of the planed Operational

Affiiates), they are largely former employees of The Limited and regularly provide commercial services for The Limited. The Limited is also a 40 percent shareholder of WFNNB and has Board representation consistent with this share ownership. To the extent employee familarity with an issuer is a criterion for utilzing Release No.4 790, we believe that such familarity exists with respect to WFNNB employees.

SEYFARTH, SHAW. FAIRWEATHER & GERALDSON

May 2, 1996

dividend reinvestment and employee stock purchase plans that operate in accordance with Release No. 4790.

The Limited wil have no role in the adminstration of the WFNNB Stock Purchase Plan or the processing of tranactions, and,WFNNB's involvement wil be limited to that described above to permit payroll deductions for paricipants and to forward deducted funds together with a list of .contributing employees to Merril Lynch to enable Merril Lynch to effect the transactions. In addition, neither The Limited, WFNNB nor any of their respective affiliates wil supply Limited Stock to Merril for purchase by participants under theWFNNB Stock Purchase Plan., and neither The Limted, WFNNB nor their respective affiliates wil be eligible to sell (or purchase) such securities though the WFNNB Stock Purchase Plan. Merril Lynch wil be the primary source of contact for individuals seeking information about the WFNNB Stock Purchase Plan and wil establish and maintain all aspects of the account and processing relationship with participants. Other than for basic enrollment information, inquiries received by WFNNB wil be referred to Merril Lynch for response. In receipt of a request from such an inquirer, WFNNB wil provide the inquirer the appropriate enrollment and payroll d~,duction forms. Thereafter, WFNNB wil refer the individual to Merril Lynch for furter information. The adminstration of the WFNNB Stock Purchase Plan wil not involve

generalized mailngs by anyone other than Merril Lynch. to anyone other than a current employee of WFNNB (and the Operational Affiiates and Parent Company), though WFNNB may make isolated mailngs of requested enrollment materials to any employee who makes a specific unsolicited request. Similarly, no orders wil be processed on behalf of any employee under the WFNNB Stock Purchase Plan that. is not a current employee of WFNNB (or the Operational Affiiates or Parent Company). All resulting orders wil be processed only in normal and ordinary trading transactions over the open market. Even if Release No. 4790 is not available under the facts set fort above, we nonetheless believe that transactions under the WFNNB Stock Purchase Plan wil not be made by an "issuer, underwriter or dealer" under the Securities Act and therefore would be exempt from registration under Section 4(1) of the Securities Act. As described herein, WFNNB should not be considered an issuer of the Limited Stock, nor a parent, subsidiary of affiiate of the issuer. Nor is WFNNB an "underwriter" or "dealer" within the meanig of Sections 2(11) or 2(12) of the Securities Act. It is our opinion that WFNNB is not offering any securities under the WFNNB Stock Purchase Plan, nor is WFNNB purchasing, directly or indirectly, any securities from The Limited for distribution or otherwise, and it is not engaged in part or all of its time in the business of offering, buying or otherwise trading in securities of another issuer.

SEYFARTH, SHAW, FAIRWEATHER & GERALDSON

May 2, 1996
B. The WFNN Savings Plan

In our opinon, the operation of the WFNNB Savings Plan does not require registration of the Limited Stock purchased under, or the paricipation interests in, the WFNNB Savings Plan. In Securities Act Release No. 6188, 45 F.R. 8960, the Commission stated that interests in an employee benefit plan were securties that must be registered under the Securities Act unless the plan met the exemption requirements of Section 3 (a) (2) of the Securities Act. Section 3(a)(2) provides an exemption from registration for interests in a plan that meets the requirements for qualification under Section 401 of the Code and under which employee contributions may not be used to purchase securities of the employer or its affilate.
Section 3(a)(2) of the Securities Act exempts the WFNNB Savings Plan from registration
on several counts. The WFNNB Savings Plan wil not offer the purchase or sale of any employer security or that of a parent, subsidiary or affilate. The Limited is not the "parent" or an "affiiate" of WFNNB within the meanig of Rule 405, Rule 405 defines the "parent" of a person as an affilate controllng that person directly or indirectly through one or more intermediaries. An "affiliate" of a person is defined in Rule 405 as an entity that directly or indirectly i.1hough one or more intermediaries, controls, is controlled by or is under common control with that person. The Limited holds a minority interest in WFNNB. Welsh Carson is the sole majority shareholder of WFNNB with the abilty to direct and control the management and policy WFNNB. Although The Limted is a customer of WFNNB, WFNNB intends to further market its credit and database marketing services to other customers and may acquire other credit service companies unrelated to The LiIited and its subsidiaries. As The Limited is not an affiiate of WFNNB within the meanig of Rule 405, we believe the Limited Stock held under the WFNNB Savings Plan wil not be the security of a parent, subsidiary or affiiate of WFNNB. In addition, participants in the WFNNB Savings Plan may not increase their allocation or place future contributions for investment in the Limited Stock Fund. The only voluntary investment decisions the participants may make are whether to transfer any portion of their current account balance invested in the Limited Stock Fund to another investment fund offered under the WFNNB Savings Plan. The only new purchases of Limited Stock wil be due to mandatory dividend reinvestment in Limited Stock. In our view, this dividend reinvestment feature does not require the Limited

Stock purc~ased under the WFNNB Savings Plan, or in the participation interests in the WFNNB Savings Plan, to be registered under the Securities Act. This is consistent with the position the Commission has previously taken in McDonnell Douglas Corporation, 1990 WL 287067 (S.E.C.) (September 13, 1990), Schlumberger, Limited, 1988 WL 234295 (S.E.C.) (May 4, 1988), Illnois Power Co" 1985 WL 55444 (S,E,C,) (June 17, 1985), and Emery Air Freight Corp., 1982 WL 30478 (S.E.C.) (November 26, 1982) (mandatory dividend reinvestment

SEYFARTH. SHAW. FAIRWEATHER & GERALDS ON
May 2, 1996

features alone do not require registration). The dividend reinvestment feature is automatic and not made under any investment decision by a participant. Also, the amount of Limited Stock purchased with reinvested dividends wil be insignificant. As of October 31, 1995, the Limited Savings Plan held approximately 4,076,100 shares of Limited Stock in the Limited Stock Fund, which is approximately 1.1 % of the 357,000;000 shares of outstanding Limited Stock. Only a small portion of the shares held in the Limited Stock Fund were purchased though reinvested dividends.
C. The Limited

The Limited is not the parent or an affliate of WFNNB within the meaning of Rule 405. .; The Limited wil be a minority shareholder without either direct or indirect control over WFNNB. Accordingly, we are of the opinion that The Limited wil have no registration obligation with respect to shares of Limited Stock purchased under either the WFNNB Stock Purchase Plan or the WFNNB Savings Plan. We hereby request that the staff of the Division of Corporation Finance confirm that it wil not recommend to the Commission that it take enforcement action against either The Limited or WFNNB if (i) the WFNNB Stock Purchase Plan is operated as proposed herein without registration of participation interests under the WFNNB Stock Purchase Plan, or the purchase of Limited Stock acquired thereunder, under the Securities Act, or (ii) the WFNNB Savings Plan is operated as proposed herein without registration of participation interests in the WFNNB Savings Plan, or the purchase öf Limited Stock acquired thereunder, under the Securities Act. Should the staff believe it cannot take the requested "no action" position, we respectfully request the opportnity to discuss the matter by telephone or in a conference prior to issuance of the staff's letter.
4. Registration under the 1940 Act.

We are of the opinion that the WFNNB Stock Purchase Plan wil not constitute an "investment company" within the meaning of Section 3 of the 1940 Act, that interests in the WFNNB Stock Purchase Plan wil not constitute separate "securities" within the meaning of
Section 2(a)(36) of the 1940 Act, and therefore registration of the WFNNB Stock Purchase Plan
is not required under the 1940 Act. The staff of the Division of Investment Management has stated that interests in a dividend reinvestment plan wil not be considered separate securities and the plan wil_not be deemed an investment company required to be registered under the 1940 Act if the plan is operated in a manner consistent with the guidelines set forth in Lucky Stores, Inc., 1974 WL 10236 (S.E.C.) (July 6, 1974). The Commission applied these guidelines to stock purchase plans in First Arkansas Bankstock Corp., 1977 WL 11189 (S.E.C.) (September 8,
1977) .

SEYFARTH, SHAW, FAIRWEATHER & GERALDSON

May 2, 1996

We believe the terms of the WFNNB Stock Purchase Plan meet the conditions of Lucky Stores with respect to both shares purchased with payroll deductions and dividend reinvestment, as.follows:
(i) Except where necessary to comply with federal securities laws, payroll deductions, participant contributions and dividends are invested promptly by Merrll Lynch for the plan and, in any event:
(a) With respect to payroll deductions and participant contributions, within 35

days of the date of payroll deduction or contribution, as applicable; and " (b) With respect to dividends, within 30 days of the dividend payment date.

(ii) No special fees or charges are imposed other than reasonable transaction fees

charged by Merril Lynch, which are paid by WFNNB on behalf of participants; (ii) The benefit of any reduced brokerage commission charges, if any, would be

passed on, pro rata, to participating shareholders; (iv) Merril Lynch passes any proxy solicitation materials on to participating shareholders and votes proxies of shares held in its custody only in accordance with instructions of participating shareholders;

(v) Each participating shareholder has the right to receive certificates for his whole shares held in his or her account at Merril Lynch. In this connection, each participant is able to make a blanket request that certificates be issued to him after every purchase, unless Merril Lynch demonstrates that such blanket requests would lead to a proliferation of certificates and would be unduly burdensome administratively; and (vi) Participant shareholders are able to terminate participation in the WFNNB Stock Purchase Plan at any time, subject to giving notice some reasonable time prior to the dividend payment date. In Ameribanc, Inc., 1982 WL 30469 (S.E.C.) (September 18, 1982), the Commission indicated that because of limited resources it would no longer respond to requests for no-action or interpretative advice under the 1940 Act regarding dividend reinvestment or stock purchase plans that meet the conditions of Lucky Stores, unless the request specifically points out how a particular plan deviates from the standards previously aiiounced by the Commission or raises unique or novel issues under the federal securities laws. We believe the WFNNB Stock Purchase Plan meets the criteria of Lucky Stores and does not raise unique or novel questions,

SEYFARTH, SHAW, FAIRWEATHER & GERALDSON

May 2, 1996

with the following exception. Under the WFNNB Stock Purchase Plan, employees of WFNNB may purchase common shares of The Limited. Under Lucky Stores, First Arkansas Bankstock Corp. , Ameribanc, Inc. and similar letters, the employer and sponsor of the stock purchase plan was also the issuer of the securities purchased by employees under the plan. Consequently, we request interpretive advice from the staff of the Division of Investment Management that purchases of Limited Stock under the WFNNB Stock Purchase Plan wil not cause the WFNNB Stock Purchase Plan to be an "investment company" under Section 3(a) of the 1940 Act, and request that the staff confir that it wil not recommend that the Commission take enforcement action if the proposed WFNNB Stock Purchase Plan is operated as proposed l-; herein without registration under the 1940 Act. Should the staff believe it cannot take the requested "no action" position, we respectfully request he opportnity to discuss the matter by telephone or in a conference prior to issuance of the staff's letter,
5. Section 15(b) of the Exchange Act

In our view, WFNNB's involvement in the proposed WFNNB Stock Purchase Plan wil not causeWFNNB to be a "broker" or "dealer" as defined in Sections 3(a)(4) or 3(a)(5) of the Exchange Act. WFNNB is a bankng institution organized under the laws of the United States within the meaning of Section 3(a)(6)(A) of the Exchange Act. As s'uch, WFNNB is excluded from the definitions of "broker" and "dealer" in Sections 3(a)(4) and 3(a)(5) of the Exchange Act. In addition, neither The Limited nor WFNNB receives any compensation from purchases or sales of Limited Stock under the WFNNB Stock Purchase Plan, nor does either hold or maintain the funds, securities or accounts of the plan participants. Merril Lynch maintains the accounts for all plan participants, and participants may sell or withdraw their shares of Limited Stock from their accounts without restriction. Therefore, WFNNB should riot be required by
Section 15(a) of the Exchange Act to register as such under Section 15(b) of the Exchange Act.
We hereby request the staff of the Division of Market Regulation to confirm that it wil not recommend that the Commission take any enforcement action againt WFNNB or any of WFNNB's officers, directors or employees under Section 15(a) of the Exchange Act for the failure to register as a "broker" or "dealer" under Section 15(b) of the Exchange Act. We have enclosed for your fies copies of the proposed WFNNB Stock Purchase Plan (attached as Exhibit A) and the proposed WFNNB Savings Plan (attached as Exhibit B), which are incorpor!lted by reference and made part of this request.

SEYFARTH, SHAW, FAIRWEATHER & GERALDSON

May 2, 1996

Should you have any questions regarding the matters discussed herein or desire furter iilormation, please telephone me at (312) 269-8909.

v.ery truly yours,
SEYFARTH, SHAW, FAIRWEATHER & GERALDSON
By: !-tW4~74 / ~
Howard J. Levine
,;
HJL:PCM:jr cc: Mark Green, Esq.

Division of Corporation Finance
Paula Jensen, Esq.

Bai:bara Endres, Esq.
Division of Market Regulation
Natalie Bej, Esq.

Division of Investment Management
4058088.i