IM No-Action Letter as to (Non) Investment Company Owning Shares in Operating Company

The Division of Investment Management stated that it would not recommend enforcement under the Investment Company Act ("'40 Act") against Linn Energy, LLC ("LINN") or Linn Co, LLC ("LinnCo"), if LinnCo operates in the manner described in the letter below without registering with the SEC as an investment company under the '40 Act.

LINN is a Delaware limited liability that is an independent oil and natural gas company; LinnCo is a Delaware limited liability company created by LINN. The only purpose of LinnCo is to provide non-U.S. investors with a tax-efficient method of holding shares in Linn. Because LinnCo's principal asset would be the securities of Linn, and LinnCo would not control Linn, LinnCo would literally fit within the definition of an "investment company" under Section 3(a) of the 1940 Act. However, the relationship between LinnCo and Linn was essentially structured so that investors in LinnCo would have (except for the better tax treatment) the same rights as they would have had they invested in Linn directly. In short, the SEC staff agreed that the investors in LinnCo were effectively holders of Linn shares and that, as Linn is an operating company, there was no need to require registration of LinnCo.

Cross-Reference(s): Investment Company Act Sec. 3(a) (Definition of "Investment Company"); 7(a).

View letter in full here (links externally to SEC website).