Investment Company Act of 1940 — Section 3(c)(1) and 3(c)(7)
The Townsend Group, Inc.

July 9, 2008

Based on the facts and representations in your letter dated February 27, 2008, we cannot assure you that we would not recommend enforcement action to the Securities and Exchange Commission under section 7 of the Investment Company Act of 1940, as amended (the "1940 Act"), against the 3(c)(1) Plus Fund (as defined in your letter) if the 3(c)(1) Plus Fund proceeds as described in your letter¹ without registering under the 1940 Act. This position is consistent with the Division's long-standing views on this issue.²

Endnotes

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¹ You propose that the 3(c)(1) Plus Fund would combine the separate exclusions from the definition of investment company available in sections 3(c)(1) and 3(c)(7) of the 1940 Act. Therefore, under your proposal, the 3(c)(1) Plus Fund would have more than 100 investors, and not all of these investors would be qualified purchasers.

² In 1992, the Division recommended to Congress that the 1940 Act be amended to include a new exclusion for private investment companies that were comprised entirely of qualified purchasers. The Division considered whether section 3(c)(1) of the 1940 Act should be amended to permit an unlimited amount of sophisticated investors, so long as the private investment company had no more than 100 other investors. However, the Division rejected this approach, noting that "the 100 investor limit in the current private investment company exception reasonably reflects the point at which federal regulatory concerns are raised if any unsophisticated investors are involved… In comparison, pools owned exclusively by sophisticated investors do not present these concerns, regardless of the number of investors" (see Protecting Investors: A Half Century of Investment Company Regulation, Division of Investment Management 115-116 (May 1992)).

Incoming Letter

The Incoming Letter is in Acrobat format.

http://www.sec.gov/divisions/investment/noaction/2008/townsendgroup070908-sec7.htm