[Federal Register Volume 90, Number 38 (Thursday, February 27, 2025)]
[Notices]
[Pages 10839-10841]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-03171]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 35475; File No. 812-15674]
Marqeta, Inc.
February 24, 2025.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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Notice of application for an order under Section 3(b)(2) of the
Investment Company Act of 1940 (``Act'').
Applicant: Marqeta, Inc.
Summary of Application: Applicant seeks an order under Section 3(b)(2)
of the Act declaring it to be primarily engaged in a business other
than that of investing, reinvesting, owning, holding or trading in
securities. Applicant states that it is in the business of providing a
technology-based payment card issuing platform, along with related
services, to its customers.
Filing Dates: The application was filed on December 17, 2024.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by emailing the Commission's
Secretary at [email protected] and serving applicants with a
copy of the request, by email if an email address is listed for the
relevant Applicant below, or personally or by mail, if a physical
address is listed for the relevant Applicant below. Hearing requests
should be received by the Commission by 5:30 p.m. on March 21, 2025,
and should be accompanied by proof of service on the applicants, in the
form of an affidavit, or for lawyers, a certificate of service.
Pursuant to rule 0-5 under the Act, hearing requests should state the
nature of the writer's interest, any facts bearing upon the
desirability of a hearing on the matter, the reason for the request,
and the issues contested. Persons who wish to be notified of a hearing
may request notification by emailing the Commission's Secretary at
[email protected].
ADDRESSES: The Commission: [email protected]. Applicant:
Michael Milotich, Chief Financial Officer, Marqeta, Inc., at
[email protected]; Amy Caiazza, Esq., Wilson Sonsini Goodrich &
Rosati, P.C., at [email protected].
FOR FURTHER INFORMATION CONTACT: Adam Lovell, Senior Counsel, or Terri
G. Jordan, Branch Chief, at (202) 551-6825 (Division of Investment
Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. For Applicant's representations, legal analysis, and
conditions, please refer to Applicant's application, dated December 17,
2024, which may be obtained via the Commission's website by searching
for the file number at the top of this document, or for an Applicant
using the Company name search field, on the SEC's EDGAR system. The
SEC's EDGAR system may be searched at https://www.sec.gov/edgar/searchedgar/companysearch. You may also call the SEC's Office of
Investor Education and Advocacy at (202) 551-8090.
Applicant's Representations
1. Applicant states that it is a Delaware corporation formed in
2010 that, directly and through its wholly-owned subsidiaries,\1\ is
engaged in the business of operating a platform that allows customers
to create customized and innovative payment cards and to build more
configurable and flexible payment experiences through a highly
scalable, cloud-based payment infrastructure.
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\1\ Applicant states that its 9 wholly-owned subsidiaries (as of
September 30, 2024) generally conduct businesses that are integrally
related to Applicant's business and primarily engage in activities
that support Applicant in meeting its contractual obligations in
their respective jurisdictions.
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2. Applicant states that its business is highly capital intensive,
requires research and development activities (``R&D'') of new
technologies, and does not involve Applicant acquiring or retaining
significant ``hard'' operating assets. Applicant states that it
maintains significant cash reserves that it seeks to invest for
purposes of conserving capital and providing liquidity until the funds
are used in its payment card issuing platform and cloud-based
infrastructure business. As described more fully in the application,
Applicant states that it requires significant liquid capital primarily
to finance operations of the Applicant's payment card issuing platform
and cloud-based infrastructure business. Applicant states that it has
substantial costs related to providing its employees compensation and
benefits, acquiring and maintaining technology the Applicant purchases
or licenses from third parties, and accessing legal, compliance, audit,
and other professional services necessary to operating a public company
in the payments infrastructure industry. Applicant states that it also
needs to invest on an ongoing basis in capital expenditures.
3. Applicant states that it has financed operations primarily
through offerings of its equity securities, but ultimately seeks to
generate cash from its operations to support its business. Applicant
states that it seeks to preserve capital and maintain liquidity,
pending the use of such capital for its operations, by investing in
``Capital Preservation Instruments.'' \2\ To the extent that Applicant
may in the future make strategic investments in other companies as part
of its scaling efforts, Applicant states that such investments will not
be for speculative purposes.
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\2\ As used in Applicant's application, Capital Preservation
Instruments refers collectively to any cash items and securities
that are held for the purpose of conserving Applicant's capital and
liquidity until they are used by Applicant to support its business
(as such business is described in Applicant's application). Such
holdings are liquid (i.e., can be readily sold), earn competitive
market returns and present a low level of credit risk, including
short-term investment grade securities, Government securities (as
defined in Section 2(a)(16) of the Act), securities of money-market
funds registered under the Act, and other cash items; but excluding
investments in equity or speculative instruments.
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Applicant's Legal Analysis
1. Applicant seeks an order under Section 3(b)(2) of the Act
declaring that it is primarily engaged in a business other than that of
investing, reinvesting, owning, holding or trading in securities and
therefore is not an investment company as defined in the Act.
2. Section 3(a)(1)(A) of the Act defines the term ``investment
company'' to include an issuer that is or holds itself out as being
engaged primarily, or proposes to engage primarily, in the business of
investing, reinvesting or trading in securities. Section 3(a)(l)(C) of
the Act further defines an investment company as an issuer that is
engaged or proposes to engage in the business of investing,
reinvesting, owning, holding or trading in securities, and owns or
proposes to acquire investment securities having a value in excess of
40% of the value of the issuer's total assets (exclusive of Government
securities and cash items) on an unconsolidated basis. Section 3(a)(2)
of the Act defines ``investment securities'' to include all securities
except Government securities, securities issued by employees'
securities companies, and securities issued by majority-owned
subsidiaries of the owner which (a) are not investment companies and
(b) are not relying on the exclusions from the definition of investment
company in Section 3(c)(1) or Section 3(c)(7) of the Act. Applicant
states that it has never been, is not now, and does not propose to be,
primarily engaged in the business of investing, reinvesting, owning,
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holding, or trading in securities. The Applicant states that it
currently holds investment securities amounting to less than 40% of its
total assets (exclusive of Government securities and cash items), but
that its need for liquid capital to conduct its business means that it,
in part, makes investments in certain securities exceeding 40% of the
Company's total assets (exclusive of Government securities and cash
items) on an unconsolidated basis. Applicant states that it therefore
may be an ``investment company'' pursuant to Section 3(a)(l)(C) of the
Act absent an exclusion or exemption.
3. Section 3(b)(2) of the Act provides that, notwithstanding
Section 3(a)(l)(C) of the Act, the Commission may issue an order
declaring an issuer to be primarily engaged in a business other than
that of investing, reinvesting, owning, holding, or trading in
securities directly, through majority-owned subsidiaries, or controlled
companies conducting similar types of businesses. Applicant requests an
order under Section 3(b)(2) of the Act declaring that it is primarily
engaged in a business other than that of investing, reinvesting,
owning, holding or trading in securities, and therefore is not an
investment company as defined in the Act.
4. In determining whether an issuer is ``primarily engaged'' in a
non-investment company business under Section 3(b)(2) of the Act, the
Commission considers the following factors: (a) the company's
historical development, (b) its public representations of policy, (c)
the activities of its officers and directors, (d) the nature of its
present assets, and (e) the sources of its present income.\3\
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\3\ Tonopah Mining Company of Nevada, 26 SEC 426, 427 (1947).
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5. Applicant submits that it satisfies the criteria for issuance of
an order under Section 3(b)(2) of the Act because Applicant is
primarily engaged in the business of providing a technology-based
payment card issuing platform, along with related services, and is not
in the business of investing, reinvesting, owning, holding or trading
in securities.
a. Historical Development. Applicant states that, since its
founding in 2010, Applicant has operated in the payment card issuing
and cloud-based infrastructure business. Applicant's business has
focused on the development of related products and services.
b. Public Representations of Policy. Applicant states that it has
consistently represented that it is engaged in the business of
providing a technology-based payment card issuing platform. Applicant
further states that it has never held and does not now hold itself out
as an investment company within the meaning of the Act or as engaging
in the business of investing, reinvesting, owning, holding, or trading
in securities. Applicant submits that its public representations make
clear that shareholders invest in the Applicant's securities with the
expectation of realizing gains from Applicant's development and sale of
its suite of technology-based payment card programs and services and
not from returns on an investment portfolio.
c. Activities of Officers and Directors. Applicant represents that
its officers and directors spend substantially all of their time
overseeing the Applicant's business of operating its payment card
issuing platform and cloud-based infrastructure business. Applicant
states that its cash management activities are managed internally by
its Chief Accounting Officer and externally by two investment managers,
whose activities are supervised by the Chief Accounting Officer.
Applicant states that none of its executive officers, other than the
Chief Accounting Officer, spend more than 1% of their time monitoring
Capital Preservation Instruments on behalf of the Applicant. In
addition, of the Applicant's 771 employees (as of December 31, 2023),
Applicant states that six employees, including the Chief Accounting
Officer, spend time on matters relating to the management of
Applicant's Capital Preservation Instruments. Applicant states that
none of its officers, directors or employees spends or proposes to
spend more than 1% of his or her time to the management of Capital
Preservation Instruments on behalf of Applicant.
d. Nature of Assets. Applicant states that, as of September 30,
2024, it held approximately $48.6 million in interests in money market
funds; $199.2 million in Treasury bills; $207.0 million in U.S.
Government securities; $16.6 million in commercial paper; $10.5 million
in investment-grade asset-backed securities; $49.3 million in
investment-grade corporate debt securities; and $22.0 million in
certificates of deposit; in each case on an unconsolidated basis.
Applicant states that it uses its Capital Preservation Instruments to
finance its continued operations in connection with the development of
Applicant's platform. Applicant states, however, that as of December
31, 2023, the Applicant held none of the value of its assets in
investment securities that are not Capital Preservation Instruments,
and Applicant's investment securities other than any deemed to be
Capital Preservation Instruments do not and will not exceed 10% of its
total assets in the future.
e. Sources of Income and Revenue. Applicant represents that since
its inception it has carried net operating losses. Applicant states
that it does, however, derive income from its investment securities.
Applicant states that a review of its current source of revenues
provides a more accurate review of its operating company status,
particularly given the upward trend in recognizing substantially
increased revenues due to increasing demand for Applicant's services.
Applicant states that it recognizes substantially all of its revenues
from interchange fees and other fees received for its transactional
services and for services related to platform access, fraud monitoring,
and dispute resolution. Applicant states that its revenues for the
fiscal years ended December 31, 2020, 2021, 2022, and 2023 were $290.3
million, $517.2 million, $740.8 million, and $676.2 million,
respectively, on an unconsolidated basis. By contrast, Applicant states
that its net investment income in its fiscal years of 2021, 2022, and
2023 was $0.6 million, $8.6 million, and $9 million, respectively.
Applicant states that substantially all such income was derived from
Capital Preservation Instruments.\4\ Applicant states that if net
investment income were compared to its revenue, it would be less than
7.5% of revenue for the fiscal nine months ended September 30, 2024,
and 6.5% of revenue for the fiscal year ended December 31, 2023.
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\4\ Applicant states that it has made investments in non-Capital
Preservation Instruments only twice, each time in the same third-
party private company. Applicant sold both positions in the fourth
quarter of 2022 at an aggregate price of $25.7 million, which
represented approximately 3% of net revenue generated by Applicant
in 2022.
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For the fiscal nine months ended September 30, 2024, Applicant
states that it earned $27.8 million of net investment income, a
decrease compared to $30.7 million for the nine months ended September
30, 2023. Applicant states that this nonetheless represents less than
7.5% of revenue for the nine months ended September 30, 2024. Applicant
states that the decrease in net investment income is due to the
decrease in interest rates in the fixed income markets.
7. Applicant asserts that its historical development, its public
representations of policy, the activities of its officers and
directors, the nature of its assets and its sources of revenue and
income, as discussed in the application, demonstrate that it is engaged
primarily in a business other than that of
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investing, reinvesting, owning, holding or trading securities.
Applicant thus asserts that it satisfies the criteria for issuing an
order under Section 3(b)(2) of the Act.
Applicant's Conditions
Applicant agrees that an order granted pursuant to the application
will be subject to the following conditions:
1. Applicant will continue to use its accumulated cash and
securities to support its primary business (as such business is
described in this Application);
2. Applicant will refrain from investing or trading in securities
for speculative purposes; and
3. No more than 10% of Applicant's total assets will consist of
investment securities other than Capital Preservation Instruments (as
such capitalized term is defined in Applicant's Application). For
purposes of this condition, ``total assets'' excludes cash items
(including securities issued by money market funds registered under the
Act) and Government securities (as defined in Section 2(a)(16) of the
Act). This percentage is to be determined on an unconsolidated basis,
except that Applicant should consolidate its financial statements with
the financial statements of any of its wholly-owned subsidiaries.
For the Commission, by the Division of Investment Management,
under delegated authority.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-03171 Filed 2-26-25; 8:45 am]
BILLING CODE 8011-01-P