Investment Company Act of 1940: Delaware Investments Dividend & Income Fund, Inc., et al.,

[Federal Register: September 8, 2006 (Volume 71, Number 174)]

[Notices]

[Page 53140-53141]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr08se06-81]

SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27475; 812-12420]

Delaware Investments Dividend and Income Fund, Inc., et al., Notice of Intention To Rescind an Order

September 1, 2006. AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of the Commission's intention to rescind an order pursuant to section 38(a) of the Investment Company Act of 1940 (``Act'').

SUMMARY: On April 15, 2002, the Commission issued an order on an application filed by Delaware Investments Dividend and Income Fund, Inc. and Delaware Investments Global Dividend and Income Fund (together, the ``Applicants'') under section 6(c) of the Act granting an exemption from section 19(b) of the Act and rule 19b-1 under the Act (the ``Application'').\1\ On August 31, 2006, the Commission issued an order finding, among other things, that Delaware Service Company, Inc. (``DSC'') caused and aided and abetted the Applicants' violations of section 19(a) of the Act and rule 19a-1 under the Act and violated

[[Page 53141]]

section 34(b) of the Act by making a material misrepresentation to the Commission in the Application (``Order Finding Violations'').\2\ The Commission is issuing this notice of the Commission's intention to rescind the Exemptive Order on the basis of the Order Finding Violations.

\1\ Delaware Investments Dividend and Income Fund, Inc., et al., Investment Company Act Release Nos. 25465 (Mar. 18, 2002) (notice) and 25524 (Apr. 15, 2002) (``Exemptive Order'').

\2\ In the Matter of Delaware Service Company Inc., Release No. IC-27473, Administrative Proceeding File No. 3-12403 (August 31, 2006).

Hearing or Notification of Hearing: An order rescinding the Exemptive Order will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary. Hearing requests should be received by the Commission by 5:30 p.m. on September 25, 2006. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Commission, 100 F Street, NE., Washington, DC 20549-1090.

FOR FURTHER INFORMATION CONTACT: Nadya B. Roytblat, Assistant Director, at 202-551-6821 (Division of Investment Management, Office of Investment Company Regulation).

Background

1. Each Applicant is a closed-end investment company registered under the Act. The Exemptive Order granted each Applicant relief from section 19(b) of the Act and rule 19b-1 under the Act so that the Applicant may make up to twelve distributions of long-term capital gains in any one taxable year in accordance with the Applicants' distribution policy with respect to its common stock. Section 19(b) and rule 19b-1 generally limit to one the number of distributions of long- term capital gains that a registered investment company may make each year. The Exemptive Order was issued pursuant to the Commission's authority set forth in section 6(c) of the Act which provides, in relevant part, that the Commission, by order upon application, may exempt any person from any provision of the Act or any rule under the Act, if and to the extent that the exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act.

2. DSC, a Delaware corporation, provides accounting and administrative services to the Applicants. According to the Order Finding Violations, DSC was responsible for determining the amount and composition of the Applicants' distributions to shareholders; providing the Applicants' transfer agent, dividend disbursing agent, and custodian with information necessary to effect payment of dividends and distributions; and preparing and filing all reports and notices required by the Federal securities laws and regulations, including any notices required by section 19(a) of the Act.

3. Section 19(a) of the Act and rule 19a-1 under the Act make it unlawful for a registered investment company to pay any dividend or make any distribution in the nature of a dividend payment, wholly or partly, from any source other than net income unless such payment is accompanied by a written statement which adequately discloses the source of such payment (``section 19(a) notice''). According to the Order Finding Violations, from January 2000 through March 2004, the Applicants, among others, made distributions to their common shareholders that, in large part, were a return of the shareholders' capital, and none of the distributions was accompanied by the required section 19(a) notice. Thus, during the relevant time period, the Applicants failed to provide the section 19(a) notices required by the Act. The Order Finding Violations found that DSC caused and aided and abetted the Applicants' violations of section 19(a) and rule 19a-1.

4. The Order Finding Violations also found that the Exemptive Order was granted, in part, on the basis of a representation in the Application that the Applicants were providing the required 19(a) notices to their shareholders, but that the representation was an untrue statement of a material fact. The Application was prepared by DSC on behalf of the Applicants. The Order Finding Violations thus found that DSC violated section 34(b) of the Act. Section 34(b) of the Act, in relevant part, makes it unlawful for any person to make any untrue statement of a material fact in any application filed pursuant to the Act.

Legal Analysis

Section 38(a) of the Act states, in relevant part, that the Commission shall have authority to rescind an order as is necessary or appropriate to the exercise of the powers conferred upon the Commission elsewhere in the Act. The Commission issues orders under section 6(c) of the Act, such as the Exemptive Order, based on the representations, and subject to the terms and conditions, contained in the applications seeking the orders. If an application contains an untrue statement of a material fact, the Commission cannot properly exercise its power to make the findings required by section 6(c) of the Act.\3\ The Commission therefore believes that it is necessary and appropriate to the exercise of the powers conferred upon the Commission in section 6(c) of the Act to rescind the Exemptive Order on the basis of the Order Finding Violations.

\3\ The Commission also reiterates that any exemption provided by an order issued under the Act is available only to a person that complies with the terms and conditions set forth in the application based on which the exemption was granted.

By the Commission. Nancy M. Morris, Secretary. [FR Doc. E6-14879 Filed 9-7-06; 8:45 am]

BILLING CODE 8010-01-P