Investment Company Act of 1940 — Sections 2(a)(4), 2(a)(9) and 15(a)
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
IM Ref. No. 2009414941
Your letter dated April 14, 2009 requests our assurance that we would not recommend enforcement action to the Securities and Exchange Commission ("Commission") under section 15(a) of the Investment Company Act of 1940 ("Act") against Iridian Asset Management LLC ("Iridian") if Iridian continues to serve as the investment adviser to First Eagle Fund of America, Inc. (the "Fund") without shareholder approval under the extraordinary circumstances described in your letter. You state that Iridian is an indirect wholly owned subsidiary of the Governor and Company of the Bank of Ireland ("Bank"). By letter dated April 2, 2009, we granted similar relief under section 15(a) of the Act to Bank of Ireland Asset Management (U.S.) Limited, another wholly owned subsidiary of the Bank.1
You state that, as a result of the global financial turmoil, the Irish government announced on February 11, 2009 its agreement to specific terms to recapitalize the Bank ("Bank Recapitalization"). You state that, pursuant to the Bank Recapitalization, the Irish government will acquire newly issued securities that will give it 25% of the voting rights with respect to the appointment of directors of the Bank. You also state that the Bank Recapitalization gives the Irish government certain additional rights, such as a special right to directly appoint Bank directors and warrants to acquire a potentially larger equity interest in the Bank. You state that the Bank Recapitalization may have resulted in a change of control of Iridian, an assignment of Iridian's investment advisory agreement with the Fund ("Advisory Agreement") within the meaning of section 2(a)(4) of the Act, and an automatic termination of the Advisory Agreement pursuant to its terms and section 15(a)(4) of the Act.
You state that, prior to the completion of the Bank Recapitalization on March 31, 2009, the board of directors of the Fund ("Board"), including a majority of the disinterested directors, met in person and approved Iridian continuing to serve as investment adviser to the Fund under a written agreement on materially the same terms and conditions as the Advisory Agreement ("Continuance"). You state that the Continuance relates to emergency measures by the Irish government that are designed to reinforce the stability of Ireland's financial system and ensure that the capital ratios of major Irish banks would meet the current market expectations of international investors.
You also state that the Irish government's announcement of the Bank Recapitalization emphasized that the government does not intend to take control of the Bank. You state that the Bank Recapitalization will not result in any substantive changes to the terms of the Advisory Agreement or in the day-to-day personnel providing services under the Advisory Agreement. You state that the Bank and Iridian have advised the Fund's Board that the costs of soliciting proxies and holding shareholder votes on the Continuance outweigh any potential benefit to shareholders of taking such actions. You also state that the Fund will provide its shareholders with notice of the Bank Recapitalization by issuing a press release and posting that release on the Fund's website. You also state that the Fund will include information about the Bank Recapitalization in its next semi-annual or annual report to shareholders following the Bank Recapitalization.
Based on the facts and circumstances described in your letter, and in particular the circumstances surrounding the Irish government's action, we would not recommend enforcement action to the Commission under section 15(a) of the Act against Iridian if Iridian serves as the investment adviser to the Fund under a Continuance that has not been approved by the vote of a majority of the Fund's outstanding voting securities. Our conclusion is based solely on the facts, circumstances and representations set forth in your letter, and any different facts, circumstances or representations might require a different conclusion. This response expresses the staff’s position on enforcement action only and does not represent any legal conclusions regarding the matters discussed herein.
Stephan N. Packs
1 See Bank of Ireland Asset Management (U.S.) Ltd. (pub. avail. Apr. 2, 2009).
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