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February 9, 1994
File No.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
APPLICATION FOR AN EXEMPTIVE ORDER UNDER
SECTION 2(a)(7)
OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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ALLIANCE CAPITAL MANAGEMENT L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name of companies filing this application
and address of principal executive offices)
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David R. Brewer, Jr.
Senior Vice President and General Counsel
Alliance Capital Management Corporation
1345 Avenue of the Americas
New York, New York 10105
(212) 902-4074
(Name, address and telephone number of agent for service)
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Copies to:
Janet R. Zimmer, Esq.
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
212-547-1200
An application identical in form to this application, except for this cover page
and the signature and signature verification pages, is being filed on paper and
not electronically by The Equitable Companies Incorporated and The Equitable
Life Assurance Society of the United States.
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Application for an Exemptive Order Under
Section 2(a)(7) of the Public Utility
Holding Company Act of 1935
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Alliance Capital Management L.P. ("Alliance"), The Equitable Life
Assurance Society of the United States ("Equitable Life"), The Equitable
Companies Incorporated ("Equitable") and all of their direct and indirect
subsidiaries (collectively, the "Equitable Entities") hereby request an order
from the Securities and Exchange Commission (the "Commission") under Section
2(a)(7) of the Public Utility Holding Company Act of 1935 (the "Act") declaring
that each Equitable Entity is not a holding company with respect to Seagull
Energy Corporation ("Seagull") for purposes of the Act under the circumstances
described herein.
Information Concerning Seagull. The information contained in this
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application with respect to Seagull and transactions involving Seagull is based
solely upon the Application for Declaration of Non-Subsidiary Status Pursuant to
Section 2(a)(8) of the Act filed by Seagull with the Commission on December 29,
1993 (the "Section 2(a)(8) Application") and has not been independently
verified.
Seagull was incorporated in 1973 as a Texas corporation and was
wholly-owned by Houston Oil & Minerals Corporation ("HOM"). On March 12, 1991,
Seagull became an independent company as a result of the spin-off of its shares
to the shareholders of HOM. Seagull is a natural gas exploration and production
company whose operations are focused in three principal geographic regions: (a)
offshore Texas and Louisiana in the Gulf of Mexico, (b) in the Mid-Continent
Region located in western Oklahoma and the Texas Panhandle and (c) in the
Mid-South Region, which is located in eastern Texas, northern Louisiana, eastern
Oklahoma and western Arkansas. Seagull's other business segments are (i)
pipeline operations, which include natural gas supply, marketing and
transportation, pipeline transportation of hydrocarbon products and
petrochemicals, pipeline engineering, design, construction and operation, and
natural gas processing; and (ii) natural gas transmission and distribution
operations in Alaska.
On June 17, 1985, Seagull acquired all of the distribution assets of the
Alaskan natural gas distribution division of ENSTAR Corporation, generally known
as "ENSTAR
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Natural Gas Company" ("ENG"). ENG is a "gas utility company" within
the meaning of the Act, serving approximately 87,000 customers in South Central
Alaska, including the greater Anchorage metropolitan areas. Because Seagull
owns and operates ENG as a division of Seagull, rather than as a subsidiary,
Seagull became a "public utility company" within the meaning of the Act. When
Seagull purchased ENG, it also acquired all of the outstanding shares of Alaska
Pipeline Company, an Alaska corporation ("APC"). Seagull operates and manages
APC and ENG as a single operating unit. APC operates approximately 340 miles of
intrastate natural gas transmission pipelines in South Central Alaska. APC owns
no gas distribution assets.
For the fiscal year ended December 31, 1992, Seagull had consolidated
revenues of $238.8 million and earnings applicable to common stock of $6.7
million. For the nine months ended September 30, 1993, Seagull had consolidated
revenues of $271.9 million and earnings applicable to common stock of $14.75
million. As of September 30, 1993, Seagull had total assets of $1.1 billion.
Seagull's common stock is registered pursuant to Section 12(b) of the
Securities Exchange Act of 1934 (the "Exchange Act") and is listed for trading
on the New York Stock Exchange. Accordingly, Seagull is subject to the
informational requirements of the Exchange Act and in accordance therewith files
reports, proxy statements and other information with the Commission relating to
its business, financial position, results of operations and other matters.
Seagull is authorized to issue 100,000,000 shares of common stock, par
value $.10 per share, which is the only class of outstanding voting securities
of the Company. As of December 15, 1993, 36,051,847 shares of the common stock
of Seagull were issued and outstanding. As of the same date, there were
approximately 2,946 holders of record of Seagull common stock. As of December
15, 1993, 3,600,024 shares had been reserved for issuance under the Company's
employee and director stock option plans. With the possible exception of shares
issued upon the exercise of employee and director stock options, the Equitable
Entities are aware of no additional shares of common stock that have been issued
since such date.
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Each share of Seagull's common stock has the same rights and privileges
as every other share. The holders of common stock are entitled to one vote for
each share held and are not permitted to cumulate their votes in electing
directors. The holders of a majority of the outstanding shares of common stock
constitute a quorum for shareholder meetings of Seagull. Two-thirds of all the
outstanding shares are required for approval of mergers or similar transactions.
A total of 10,123,610, 11,120,662 and 15,472,695 shares of Seagull common stock
were represented at its 1991, 1992 and 1993 Annual Meetings of Shareholders,
representing 90%, 87% and 86%, respectfully, of the shares then outstanding.
Information Concerning the Equitable Entities. With respect to the
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Equitable Entities, Seagull's stock is held solely by accounts of subsidiaries
of Equitable, including certain separate accounts of Equitable Life, a New York
stock life insurance company and an investment adviser registered under the
Investment Advisers Act of 1940 (the "Advisers Act"), and certain client
accounts of Alliance, an investment adviser registered under the Advisers Act.
As of February 4, 1994, the Equitable Entities may be deemed to directly or
indirectly own, control, or hold with the power to vote 5,418,700 shares or
approximately 15.0% of the common stock of Seagull. Certain separate accounts
of Equitable Life in the aggregate own 611,800 shares (1.7%) of Seagull.
Alliance exercises investment discretion over 4,806,900 shares (13.3%) owned by
approximately 110 of its advisory client accounts; of those shares, it also has
voting discretion over 3,609,300 shares (10.0%) of Seagull.
As an investment adviser, Alliance provides investment advisory services
to corporate employee benefit plans subject to the Employee Retirement Income
Security Act of 1974 ("ERISA"), public employee retirement systems, investment
companies and separate accounts registered under the Investment Company Act of
1940 (the "Investment Company Act"), foundations, endowment funds, tax-exempt
organizations, and other institutional investors and individuals (collectively,
the "client accounts"). Alliance currently manages on a discretionary or
non-discretionary basis approximately $115 billion in assets for its client
accounts as of December 31, 1993. No single client account or client of
Alliance owns 5% or more of Seagull's outstanding stock. Alliance Capital
Management Corporation is the sole general partner of, and the owner of a 1%
general partnership interest in Alliance, a Delaware limited
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partnership, and is an indirect wholly-owned subsidiary of Equitable Life,
which is a wholly-owned subsidiary of Equitable, a holding company of which 49%
of the common stock is owned by AXA, a French insurance holding company. In
turn, a group of five French mutual insurance companies (AXA Assurances I.A.R.D.
Mutuelle, AXA Assurances Vie Mutuelle, Alpha Assurances I.A.R.D. Mutuelle, Alpha
Assurances Vie Mutuelle, Uni Europe Assurance Mutuelle, collectively, the
"Mutuelles AXA"), own directly or indirectly approximately 50% of the voting
power of AXA.
Applicability of the Act. Section 2(a)(7)(A) of the Act provides that
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a "holding company" is:
any company which directly or indirectly owns, controls, or holds with
power to vote, 10 per centum or more of the outstanding voting
securities of public-utility company or of a company which is a holding
company by virtue of [Section 2(a)(7)] unless the Commission, as herein-
after provided [in Section 2(a)(7)], by order declares such company not
to be a holding company. . .
Absent an exemption, a holding company is subject to the various registration,
investment and other restrictions of the Act.
Absent relief from the Act, one or more of the Equitable Entities might
be deemed to be a "holding company" under the Act by virtue of having to
aggregate shares of Seagull owned by them with the shares of Seagull held for
the account of investment advisory clients over which Alliance has investment or
voting discretion, or both./1/ Section 2(a)(7) of the Act provides that the
Commission shall issue an order declaring that a company is not a holding
company if the Commission finds that the company:
(i) does not, either alone or pursuant to an arrangement or
understanding with one or more other persons, directly or indirectly
control a public-utility or holding company either through one or more
intermediary persons or by any means or device whatsoever, (ii) is not
an intermediary company through which such control is exercised, and
(iii)
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1. Relief is not being requested with respect to shares of Seagull held in the
separate accounts managed by Equitable Life, which total less than 2.0% of
Seagull's stock.
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does not, directly or indirectly, exercise (either alone or pursuant to
an arrangement or understanding with one or more persons) such a
controlling influence over the management or policies of any public-
utility or holding company as to make it necessary or appropriate in the
public interest or for the protection of investors or consumers that the
applicant be subject to the obligations, duties, and liabilities
imposed in this title upon holding companies.
In addition, Pursuant to Section 20 of the Act, the Commission has the authority
to issue orders as it may deem necessary or appropriate to carry out the
provisions of the Act.
As set forth in detail below, the Equitable Entities believe that an
exemption from the Act is justified with respect to Seagull shares that are
owned by clients of the Equitable Entities as to which an Equitable Entity,
either solely or with another entity, exercises investment or voting discretion,
or both, but as to which none of the Equitable Entities has any pecuniary
interest. None of the Equitable Entities has any current intention of
attempting to exercise control over Seagull as a result of the power to exercise
investment or voting discretion over shares held in client accounts.
Accordingly, regulation under the Act is not justified. Secondly, the powers
conferred upon Alliance as a discretionary investment manager, including the
power to vote shares, are analogous to the powers conferred on broker-dealers
and banks, whose activities are subject to exemptions from the Act with respect
to shares over which they may have investment discretion as described below.
Thirdly, the Equitable Entities are subject to extensive regulation in their
business, and the public policies of the Act would not be served by subjecting
the Equitable Entities to additional regulation under the Act.
1. Lack of Control. The Equitable Entities do not in fact exercise
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control over Seagull or exert a controlling influence over the management or
policies of Seagull. The Equitable Entities have reported their ownership of
Seagull's common stock on Schedule 13G in December 1993. Pursuant to Rule 13d-
1(b)(1)(i) under the Exchange Act, a person may not report its beneficial
ownership using Schedule 13G (as opposed to the more detailed Schedule 13D)
unless "such person has acquired such securities in the ordinary course of his
business and not
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with the effect of changing or influencing the control of the issuer, nor in
connection with or as a participant in any transaction having such purpose or
effect." The Equitable Entities have certified in their Schedule 13G that they
meet this criterion.
Alliance's business is to manage investment assets on behalf of its
clients. Alliance does not "own" the securities acquired for its investment
advisory clients. All rights to dividend income, capital appreciation and other
economic indicia of ownership of those securities accrue to the client and not
Alliance. Moreover, Alliance has no authority to obtain custody or possession
of the funds or securities of its investment advisory clients and does not hold
those securities as owners of record. The Seagull shares are owned by more than
110 client advisory accounts of Alliance. As noted above, no single client
account of Alliance owns 5% or more of Seagull's shares. As of February 4,
1994, client accounts over which Alliance has only investment discretion own in
the aggregate 1,197,600 shares (3.3%) of Seagull's stock. Alliance exercises
investment discretion and voting authority with respect to an additional
3,609,300 shares (10.0%) of Seagull's stock.
With respect to all of those accounts, including those over which
Alliance has voting discretion, Alliance is subject to general fiduciary
obligations to its clients under state laws and Federal statutes, such as the
Advisers Act, ERISA (governing U.S. corporate employee benefit plans), and the
Investment Company Act (governing investment companies). These laws preclude
Alliance from acting other than solely in the best interests of its client. As
a result, its fiduciary obligations require that Alliance act in the interests
of its clients rather than in its own interests when exercising any
discretionary voting authority Alliance may have over clients' securities, when
determining whether to dispose of those securities, or when exercising any other
investment decisions within its discretion with respect to those securities.
Although, in some instances, clients' objectives may be to acquire a
controlling position in a company, it is not normally the business of Alliance
to acquire control of companies for clients. Moreover, Alliance would violate
its fiduciary obligations to use discretionary powers to exercise control or
exert a controlling influence over management or policies of a public-utility
company or a holding company in any manner inconsistent with a client's
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best interests. Alliance has no incentive to do so because it has no direct
economic interest in the clients' securities. In addition, it is generally
inconsistent with its business as an investment adviser for Alliance to become
involved in the management of a public-utility company. The prime business of
Alliance is to provide superior investment performance for its clients and
thereby achieve maximum profitability through the receipt of increased advisory
fees. It, therefore, is necessary that Alliance retain maximum flexibility in
connection with its investments for clients.
Alliance, Equitable Life and Equitable will not be used as
intermediaries to control Seagull. The Equitable Entities are all financial
services companies or holding companies and provide diversified financial
services to their clients. None of those entities, in the normal course of
business, would be engaged in controlling a public-utility or holding company.
Furthermore, no entity other than Alliance or its client in fact exercises any
control over the investment discretion or voting decisions made by Alliance on
behalf of the client's accounts.
As indicated by Seagull in the Section 2(a)(8) Application, the
Equitable Entities have not sought to, nor do they, have any representatives on
Seagull's Board of Directors or any committees thereof. No officer or director
of any Equitable Entity serves on Seagull's Board of Directors. None of the
Equitable Entities has any arrangement or understanding with Seagull concerning
the election of any such person to the Board of Directors of Seagull. Moreover,
none of the transactions between Seagull and the Equitable Entities or their
affiliates described in the Section 2(a)(8) Application are of the type that
would indicate the Equitable Entities control or exercise a controlling
influence over Seagull or that regulation under the Act is required.
2. Exemption for Broker-Dealers and Banks. An exemption for Alliance
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from the provisions of the Act with respect to shares of Seagull held by
Alliance's discretionary client accounts would be consistent with the
Commission's rules exempting certain banks and broker-dealers from the
provisions of the Act applicable to holding companies. Regulation 250.4
provides an exemption for broker-dealers from the provisions of the Act who
might otherwise be holding companies with respect to public-utility stocks,
provided the stock is not beneficially owned
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by the broker-dealer and is subject to any voting instruction that may be given
by customers. Regulation 250.3 provides an exemption for banks that, among
other things, hold or acquire public utility stocks in the ordinary course of
their business as a fiduciary. Like a broker-dealer or bank, Alliance, as an
investment adviser, does not have economic beneficial ownership of the
securities held on behalf of its client. Although Alliance might have greater
investment or voting discretion with respect to its clients' securities than a
broker-dealer, Alliance is subject to fiduciary obligations that restrict its
ability to vote the securities in other than the best interests of its clients
and, like a broker-dealer, could be required to vote according to specific
instructions given by a client. For the above reasons, the shares of Seagull
that are held in Alliance's client accounts should not be included in the amount
attributed to the Equitable Entities for purposes of determining whether the
Equitable Entities are holding companies under the Act./2/
3. Public Policy. Section 1(b) of the Act indicates that the
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principal abuse to which the Act is directed is the unregulated control of
public-utility companies in such areas as capital raising, accounting practices,
rates and other charges, business expansion, and efficiency of services. The
businesses of the Equitable Entities and their affiliates are not that of
exercising control or influence over a public-utility or holding company in
these areas. As a result, it is not necessary or appropriate in the public
interest or for the protection of investors or consumers that Equitable and its
subsidiaries be subject to regulation under the Act in these circumstances.
Subjecting Equitable Life and its subsidiaries to regulation under the
Act would be detrimental to the public interest and to the interests of
investors in various respects. First, the Act would impose duplicative and
inconsistent regulation on Equitable Life, which is regulated under state
insurance laws, the Exchange Act and the Advisers Act, and on Alliance which is
regulated by the Commission under the Advisers Act. Since the scheme of
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2. We note that the staff of the Commission has granted no-action relief under
the Act to an investment manager that did not ordinarily exercise voting
discretion with respect to shares held in client accounts. See Harris
Associates, Inc. (May 31, 1985). ---
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regulation under the Act generally is incompatible with the business of an
investment adviser, to avoid the Act's restrictions Alliance would be required
to limit its investment advice to discretionary client accounts with respect to
Seagull stock. This limitation would act to the detriment of the clients of
Alliance who would thereby be precluded from receiving the full benefit of
Alliance's advisory services.
Granting the order exempting the Equitable Entities from the provisions
of the Act with respect to Seagull would be consistent with Commission rules
exempting certain banks and broker-dealers from the provisions of the Act. As
described above, Regulation 250.4 provides an exemption for broker-dealers and
Regulation 250.3 provides an exemption for banks under circumstances similar to
that described in this Application.
WHEREFORE, for the reasons set forth above, the Equitable Entities
respectfully request that the Commission issue an order as requested in the
introduction to this application.
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SIGNATURE
Alliance Capital Management L.P. has caused this application to be duly
signed on its behalf by its authorized officer in the City of New York and State
of New York, on the 8th day of February, 1994.
Alliance Capital Management L.P.
[SEAL] By: Alliance Capital Management
Corporation, its General Partner
By: /s/ David R. Brewer, Jr.
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Name: David R. Brewer, Jr.
Title: Senior Vice President
and General Counsel
ATTEST
/s/ Mark R. Manley
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Name: Mark R. Manley
Title: Vice President
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VERIFICATION
COUNTY OF NEW YORK (S)
(S)
(S)
STATE OF NEW YORK (S)
The undersigned, being duly sworn, deposes and says that he has duly
executed the attached application dated February 8, 1994, for and on behalf of
Alliance Capital Management L.P. ("Alliance"), that he is Senior Vice President
and General Counsel of Alliance Capital Management Corporation, the general
partner of Alliance, and that all action by shareholders, directors, and other
bodies necessary to authorize deponent to execute and file such application has
been taken. Deponent further says that he is familiar with such application,
and the contents thereof, and that the facts therein set forth are true to the
best of his knowledge, information and belief.
/s/ David R. Brewer, Jr.
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Name: David R. Brewer, Jr.
Title: Senior Vice President
and General Counsel
Subscribed and sworn to before me, a notary public, this 8th day of February,
1994.
My commission expires: 8/17/94
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/s/ Eileen Beirne
--------------------------------
Notary Public, State of New York
No. 5000592
Qualified in Suffolk County
Commission Expires Agusut 17, 1994
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EXHIBIT A
Proposed Notice of Application for an
Exemptive Order Under Section 2(a)(7) of
the Public Utility Holding Company Act of 1935
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Notice is hereby given that The Equitable Companies Incorporated
("Equitable"), 787 Seventh Avenue, New York, New York, 10019, a holding company,
The Equitable Life Assurance Society of the United States ("Equitable Life"),
787 Seventh Avenue, New York, New York 10019, a New York mutual life insurance
company, and Alliance Capital Management L.P. ("Alliance"), 1345 Avenue of the
Americas, New York, New York 10105, an indirect wholly-owned investment
advisory subsidiary of Equitable Life, (collectively, the "Equitable Entities"),
have filed an application for an order under Section 2(a)(7) of the Public
Utility Holding Company Act of 1935 (the "Act") declaring that each Equitable
Entity is not a holding company with respect to Seagull Energy Corporation
("Seagull") for purposes of the Act under the circumstances described below.
The following is a summary of the application. The complete application
may be obtained for a fee at the SEC's Public Reference Branch.
1. Alliance Capital Management L.P. ("Alliance"), The Equitable Life
Assurance Society of the United States ("Equitable Life"), The Equitable
Companies Incorporated ("Equitable") and all of their direct and indirect
subsidiaries (collectively, the "Equitable Entities") hereby request an order
from the Securities and Exchange Commission (the "Commission") under Section
2(a)(7) of the Public Utility Holding Company Act of 1935 (the "Act") declaring
that each Equitable Entity is not a holding company with respect to Seagull
Energy Corporation ("Seagull") for purposes of the Act under the circumstances
described herein. The information contained in this application with respect to
Seagull and transactions involving Seagull is based solely upon the Application
for Declaration of Non-Subsidiary Status Pursuant to Section 2(a)(8) of the Act
filed by Seagull with the Commission on December 29, 1993 (the "Section 2(a)(8)
Application") and has not been independently verified.
2. Seagull was incorporated in 1973 as a Texas corporation and
was wholly-owned by Houston Oil & Minerals
<PAGE>
Corporation ("HOM"). On March 12, 1991, Seagull became an independent company
as a result of the spin-off of its shares to the shareholders of HOM. Seagull
is a natural gas exploration and production company. On June 17, 1985, Seagull
acquired all of the distribution assets of the Alaskan natural gas distribution
division of ENSTAR Corporation, generally known as "ENSTAR Natural Gas Company"
("ENG"). ENG is a "gas utility company" within the meaning of the Act, serving
approximately 87,000 customers in South Central Alaska, including the greater
Anchorage metropolitan areas. Because Seagull owns and operates ENG as a
division of Seagull, rather than as a subsidiary, Seagull became a "public
utility company" within the meaning of the Act.
3. Seagull's common stock is registered pursuant to Section
12(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and is listed
for trading on the New York Stock Exchange. Seagull is authorized to issue
100,000,000 shares of common stock, par value $.10 per share, which is the only
class of outstanding voting securities of the Company. As of December 15, 1993,
36,051,847 shares of the common stock of Seagull were issued and outstanding.
As of the same date, there were approximately 2,946 holders of record of Seagull
common stock. As of December 15, 1993, 3,600,024 shares had been reserved for
issuance under the Company's employee and director stock option plans. With the
possible exception of shares issued upon the exercise of employee and director
stock options, the Equitable Entities are aware of no additional shares of
common stock that have been issued since such date. Each share of Seagull's
common stock has the same rights and privileges as every other share. The
holders of common stock are entitled to one vote for each share held and are not
permitted to cumulate their votes in electing directors.
4. With respect to the Equitable Entities, Seagull's stock is held solely by
accounts of subsidiaries of Equitable, including certain separate accounts of
Equitable Life, a New York stock life insurance company and an investment
adviser registered under the Investment Advisers Act of 1940 (the "Advisers
Act"), and certain client accounts of Alliance, an investment adviser registered
under the Advisers Act. As of February 4, 1994, the Equitable Entities may be
deemed to directly or indirectly own, control, or hold with the power to vote
5,418,700 shares or approximately 15.0% of the common stock of Seagull. Certain
separate accounts of Equitable Life in the aggregate own 611,800 shares (1.7%)
of Seagull. Alliance exercises investment discretion
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over 4,806,900 shares (13.3%) owned by approximately 110 of its advisory client
accounts; of those shares, it also has voting discretion over 3,609,300 shares
(10.0%) of Seagull.
5. As an investment adviser, Alliance provides investment advisory services
to corporate employee benefit plans subject to the Employee Retirement Income
Security Act of 1974 ("ERISA"), public employee retirement systems, investment
companies and separate accounts registered under the Investment Company Act of
1940 (the "Investment Company Act"), foundations, endowment funds, tax-exempt
organizations, and other institutional investors and individuals (collectively,
the "client accounts"). Alliance currently manages on a discretionary or
non-discretionary basis approximately $115 billion in assets for its client
accounts as of December 31, 1993. No single client account or client of
Alliance owns 5% or more of Seagull's outstanding stock. Alliance Capital
Management Corporation is the sole general partner of, and the owner of a 1%
general partnership interest in Alliance, a Delaware limited partnership, and is
an indirect wholly-owned subsidiary of Equitable Life, which is a wholly owned
subsidiary of Equitable, a holding company of which 49% of the common stock is
owned by AXA, a French insurance holding company. In turn, a group of five
French mutual insurance companies (AXA Assurances I.A.R.D. Mutuelle, AXA
Assurances Vie Mutuelle, Alpha Assurances I.A.R.D. Mutuelle, Alpha Assurances
Vie Mutuelle, Uni Europe Assurance Mutuelle, collectively, the "Mutuelles AXA"),
own directly or indirectly approximately 50% of the voting power of AXA.
6. The Equitable Entities believe that an exemption from the
Act is justified with respect to Seagull shares that are owned by clients of the
Equitable Entities as to which an Equitable Entity, either solely or with
another entity, exercises investment or voting discretion, or both, but as to
which none of the Equitable Entities has any pecuniary interest. None of the
Equitable Entities has any current intention of attempting to exercise control
over Seagull as a result of the power to exercise investment or voting
discretion over shares held in client accounts. Accordingly, regulation under
the Act is not justified. Secondly, the powers conferred upon Alliance as a
discretionary investment manager, including the power to vote shares, are
analogous to the powers conferred on broker-dealers and banks, whose activities
are subject to exemptions from the Act with respect to shares over which they
may have investment discretion as described below.
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Thirdly, the Equitable Entities are subject to extensive regulation in their
business, and the public policies of the Act would not be served by subjecting
the Equitable Entities to additional regulation under the Act.
7. The Equitable Entities do not in fact exercise control over Seagull or
exert a controlling influence over the management or policies of Seagull. As
indicated by Seagull in the Section 2(a)(8) Application, the Equitable Entities
have not sought to, nor do they, have any representatives on Seagull's Board of
Directors or any committees thereof. No officer or director of any Equitable
Entity serves on Seagull's Board of Directors. None of the Equitable Entities
has any arrangement or understanding with Seagull concerning the election of any
such person to the Board of Directors of Seagull.
8. Alliance's business is to manage investment assets on behalf of its
clients. Alliance does not "own" the securities acquired for its investment
advisory clients. All rights to dividend income, capital appreciation and other
economic indicia of ownership of those securities accrue to the client and not
Alliance. As of February 4, 1994, client accounts over which Alliance has only
investment discretion own in the aggregate 1,197,600 shares (3.3%) of Seagull's
stock. Alliance exercises investment discretion and voting authority with
respect to an additional 3,609,300 shares (10.0%) of Seagull's stock. With
respect to all of those accounts, including those over which Alliance has voting
discretion, Alliance is subject to general fiduciary obligations to its clients
under state laws and Federal statutes, such as the Advisers Act, ERISA
(governing U.S. corporate employee benefit plans), and the Investment Company
Act (governing investment companies). These laws preclude Alliance from acting
other than solely in the best interests of its client.
9. Although, in some instances, clients' objectives may be to acquire a
controlling position in a company, it is not normally the business of Alliance
to acquire control of companies for clients. Moreover, Alliance would violate
its fiduciary obligations to use discretionary powers to exercise control or
exert a controlling influence over management or policies of a public-utility
company or a holding company in any manner inconsistent with a client's best
interests. Alliance has no incentive to do so because it has no direct economic
interest in the clients' securities. In addition, it is generally inconsistent
with
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its business as an investment adviser for Alliance to become involved in the
management of a public-utility company.
10. Alliance, Equitable Life and Equitable will not be used as
intermediaries to control Seagull. The Equitable Entities are all financial
services companies or holding companies and provide diversified financial
services to their clients. None of those entities, in the normal course of
business, would be engaged in controlling a public-utility or holding company.
Furthermore, no entity other than Alliance or its client in fact exercises any
control over the investment discretion or voting decisions made by Alliance on
behalf of the client's accounts.
11. An exemption for Alliance from the provisions of the Act with respect to
shares of Seagull held by Alliance's discretionary client accounts would be
consistent with the Commission's rules exempting certain banks and
broker-dealers from the provisions of the Act applicable to holding companies.
Like a broker-dealer or bank, Alliance, as an investment adviser, does not have
economic beneficial ownership of the securities held on behalf of its client.
Although Alliance might have greater investment or voting discretion with
respect to its clients' securities than a broker-dealer, Alliance is subject to
fiduciary obligations that restrict its ability to vote the securities in other
than the best interests of its clients and, like a broker-dealer, could be
required to vote according to specific instructions given by a client.
12. The businesses of the Equitable Entities and their affiliates are not
that of exercising control or influence over a public-utility or holding
company. As a result, it is not necessary or appropriate in the public
interest or for the protection of investors or consumers that Equitable and its
subsidiaries be subject to regulation under the Act in these circumstances.
Subjecting Equitable Life and its subsidiaries to regulation under the Act would
be detrimental to the public interest and to the interests of investors in
various respects. First, the Act would impose duplicative and inconsistent
regulation on Equitable Life, which is regulated under state insurance laws, the
Exchange Act and the Advisers Act, and on Alliance which is regulated by the
Commission under the Advisers Act. Since the scheme of regulation under the Act
generally is incompatible with the business of an investment adviser, to avoid
the Act's restrictions Alliance would be required to limit its investment advice
to discretionary client accounts
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with respect to Seagull stock. This limitation would act to the detriment of
the clients of Alliance who would thereby be precluded from receiving the full
benefit of Alliance's advisory services.
Interested persons wishing to comment or request a hearing on the
Application should submit their views in writing by , 1994, to the
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Secretary, Securities and Exchange Commission, Washington, D.C. 20549 and serve
a copy on the relevant Applicants at the addresses specified above. Proof of
service (by affidavit or, in case of an attorney at law, by certificate) should
be filed with the request. Any request for hearing shall identify specifically
the issues of fact or law that are disputed. A person who so requests will be
notified of any hearing, if ordered, and will receive a copy of any notice or
order issued in the matter. After said date, the Application, as filed, may be
granted.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
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