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Forum Report: Example of Right Way to Seek ICA Exemption

(August 25, 2006)

 

Sent: Friday, August 25, 2006 11:38 AM
Subject: Example of the right way to seek ICA exemption

 
Copied below is an article reporting an application by Google for an SEC order exempting the company from registration requirements under the Investment Company Act of 1940 ("ICA").  Though not stated in the article, it is assumed that the application follows the examples of companies such as Microsoft and Yahoo! to obtain exemptions under the provisions of Section 3(b)(2) of the ICA for temporary accumulations of funds.
 
The management of Farmer Bros. Co. has been encouraged to request a similar Section 3(b)(2) SEC determination of its investment company status, initially in a January 14, 2003 letter to each of the company's directors.  Management never responded, and there is no record of Farmer Bros. making such an application.
 
           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

 

The Wall Street Journal  

August 25, 2006

 
 

Google Asks SEC
For Exemption
From Trading Rule

By TONY COOKE
August 25, 2006; Page A2
 

Search-engine company Google Inc. has piled up so much cash that it is in danger of being mistaken for an investment fund.

The company, which wants to diversify its investment strategy but doesn't want to be regulated as a mutual fund, has asked the Securities and Exchange Commission to exempt it from regulations that can apply to a company with a lot of marketable securities on its balance sheet.

To that end, the Mountain View, Calif., company made a filing on July 20 to persuade the SEC that it exists not to make investments, but to conduct an "Internet and new media business."

Google's most recent quarterly balance sheet listed assets totaling $14.4 billion, including $4 billion in cash and $5.8 billion in marketable securities. Under the Investment Company Act of 1940, a company with more than 40% of its assets in certain types of securities is subject to different disclosure and operating rules.

"Google states that it is not in the business of investing, reinvesting, or trading in securities," the company told the SEC in the filing. Google, which reported $1.47 billion in net income for 2005, said that about 8% of that amount was investment income.

To help make its case, Google told the SEC that it will invest only for "bona fide business purposes" and won't invest "for short-term speculative purposes."

In the absence of an exemption, Google disclosed that its executives are authorized to create an investment mix for the company that ensures the 1940 investment-company law won't apply.

An SEC spokesman declined to discuss whether Google will receive the exemption, and a Google representative didn't return a call seeking comment.

Write to Tony Cooke at tony.cooke@dowjones.com1

  URL for this article:
http://online.wsj.com/article/SB115646222596645014.html

 
  Hyperlinks in this Article:
(1) mailto:tony.cooke@dowjones.com
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