Sent: Wednesday, November 23, 2005 8:38 AM
Subject: Relevance to Farmer Bros. of court decision on
investment company status
Copied below is the SEC's November 4, 2005
Litigation Release summarizing the court ruling that National Presto is an
"investment company" as defined in the Investment Company Act of 1940
("ICA"), requiring compliance with applicable SEC regulations. A copy of
the full decision has been posted on the Forum web site for Farmer Bros.
Co.:
The
National Presto case
has been observed as an expected precedent for SEC enforcement of ICA
compliance for situations in which a majority of a company's assets are
securities. The SEC was asked in a January
8, 2004 Forum letter to investigate
similar ICA compliance issues in relation to Farmer Bros.
Please let me know if you have any comments or
questions about the relevance of this court decision to the interests of
Farmer Bros. shareholders.
- GL
Gary Lutin
Lutin & Company
575 Madison Avenue, 10th Floor
New York, New York 10022
Tel: 212/605-0335
Fax: 212/605-0325
Email: gl@shareholderforum.com
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U.S. SECURITIES AND EXCHANGE
COMMISSION
Litigation Release No. 19458 /
November 4, 2005
SECURITIES AND EXCHANGE COMMISSION
V. NATIONAL PRESTO INDUSTRIES, INC., Civil Action No. 02 C 5027
(N.D. Ill. July 26, 2002)
The Securities and Exchange Commission (the "Commission") announced
that on October 31, 2005, the Honorable Charles R. Norgle of the United
States District Court for the Northern District of Illinois granted the
Commission's motion for summary judgment against National Presto
Industries, Inc. ("National Presto") located in Eau Claire, Wisconsin.
The Commission's first amended complaint (the "complaint") alleged that
since at least 1994, Presto has been operating as an unregistered
investment company in violation of Section 7(a) of the Investment
Company Act of 1940 (the "Investment Company Act"). The complaint sought
an order requiring National Presto to either register with the
Commission as an investment company or in the alternative, to
restructure its securities holdings or take such other steps such that
National Presto shall come into compliance with the Investment Company
Act. The complaint also sought an order of permanent injunction
enjoining National Presto from offering, selling or purchasing
securities or engaging in any business in interstate commerce while in
violation of Section 7 of the Investment Company Act.
Judge Norgle granted the Commission's motion for summary judgment and
denied National Presto's cross motion for summary judgment. Judge Norgle
ruled that National Presto was an investment company within the meaning
of Section 3(a)(1)(C) of the Investment Company Act and that no
statutory exemption applied to National Presto. Judge Norgle found that
investment securities as a percentage of National Presto's total assets
ranged from approximately 61% to 92% during the relevant time period and
that National Presto was not primarily engaged in a business other than
investing. Accordingly, National Presto was an investment company during
the relevant time period and should have been registered with the
Commission as an investment company and complied with the provisions of
the Investment Company Act. Judge Norgle directed the Commission to
submit a proposed Order requiring National Presto to comply with Section
7 of the Investment Company Act and a proposed Order of Permanent
Injunction by November 30, 2005.
http://www.sec.gov/litigation/litreleases/lr19458.htm
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