News & Events

Simpson Thacher recently represented Lehman Brothers Holdings Inc. (“Lehman”) in connection with no-action relief related to the transfer of its general partner interests in its employee securities companies (“ESCs”) to certain third-party advisers. The no-action relief will permit the ESCs to continue to operate without registering as investment companies under the 1940 Act by treating them as liquidating entities for purposes of that statute.

Lehman, prior to beginning its liquidation process, offered its employees the opportunity to invest in private funds indirectly through vehicles for which it served as general partner, and did not need to register such vehicles pursuant to an exemptive order granted in 1998. In connection with Lehman’s eventual liquidation, if Lehman transferred its general partner interests, the 1998 order could no longer be relied upon, as certain facts and representations would no longer be accurate. The ESCs would be forced to dissolve, at times that would be disadvantageous to the former Lehman employees who continue to hold such indirect fund interests.

The no-action relief provides that the SEC staff will not recommend enforcement action to the SEC against the ESCs (and their new general partners or third-party advisers) if the ESCs continue to operate in the manner described to the SEC staff in the Lehman no-action request in reliance on the exemption in Section 7 of the 1940 Act for companies that are engaged in “transactions which are merely incidental to the dissolution of an investment company.” The full text of the letter can be found here.

The Simpson Thacher team included Rajib Chanda and Lucie Enns (Registered Funds); and Glenn Sarno and Chi Shum (Funds).