Zscaler is asking for relief because he believes that if he complied with the conditions of the asset test, in particular without (in accordance with GAAP) considering the value of its intangible assets, including internally generated intellectual property, it would jeopardize its ability to prudently invest significant cash flow.

Since its inception, Zscaler has, directly and through its wholly owned subsidiaries, primarily engaged in the business of providing its platform to customers. Zscaler does not believe that it is currently, or has ever been, primarily engaged in the business of investing, reinvesting, owning, holding or trading in securities. However, Zscaler invests a significant portion of its cash in capital preservation investments, which are investment securities for the purpose of asset testing. As noted above, based on its current investment strategy of investing in capital preservation investments, as of October 31, 2021, the value of Zscaler’s investment securities was approximately 32.7% of the value. of the total assets of Zscaler (excluding Government securities and cash items), on an unconsolidated basis, without taking into account certain assets measured at fair value that are not recognized in Zscaler’s balance sheet , including a significant amount of internally generated intellectual property. As at October 31, 2021, 98.5% of Zscaler’s investment securities, on a consolidated basis, and 99.7% of Zscaler’s investment securities, on an unconsolidated basis, were in the form of investments of preservation of capital. In order to be competitive and innovate successfully, Zscaler needs capital to fund its research and development, secure its intellectual property, grow its business, conduct its normal sales and marketing activities, acquire and retain customers, and market. its offers. Due to Zscaler’s need to maintain substantial liquid capital, Zscaler has determined that it is in accordance with prudent investment management principles to maintain substantial investments in capital preservation investments rather than hold all of its liquid assets as as government securities and treasury items.

Further, although Zscaler determined that it would be exempt from the definition of an investment company under Article 3 (b) (1) (because it is primarily engaged, directly and through its 100% subsidiaries, in no investment company), it is possible that third parties will question its status as an investment company on the basis of its consolidated balance sheet prepared in accordance with GAAP. Zscaler is required to publicly disclose its balance sheet and is a public company subject to Section 13 of the Securities and Exchange Act of 1934, as amended (the ??Trade Law??). In addition, Zscaler may be required to provide an unqualified opinion that it does not meet the definition of “investment company”? under the 1940 law, which it might not be able to do unless it keeps a disproportionate amount of its liquidity in government securities and cash with minimal return on investment.

Zscaler therefore submits this request for an order in accordance with section 3 (b) (2) declaring that it is primarily engaged in an activity other than that of investing, reinvesting, owning, holding or dealing in securities, and therefore that Zscaler is excluded from the definition of an “investment company”. in Article 3 (a) (1).


Section 3 (b) (2) of the 1940 Act authorizes the SEC to make an order declaring that an issuer is primarily engaged in any activity other than investing, reinvesting, owning, holding or trading. trade securities, either directly or through majority-owned subsidiaries or through controlled companies carrying out similar types of activities.

Zscaler qualifies for such an order because its activity consists of providing customers with access to its Platform. The Platform and the activities directly linked to the Platform constitute almost all of the Company’s activities. Accordingly, Zscaler is not primarily engaged in the investment, reinvestment, holding, holding and trading of securities and will continue to be primarily engaged in the business of providing clients with access to its platform. .

The company’s need for liquid capital to conduct its business means that it makes, in part, investments in capital preservation investments, and that in the future these capital preservation investments may form a significant part of the business. the total assets of the company. (excluding government securities and cash items) on a consolidated or non-consolidated basis. This, combined with any future funding, means that the Company may not be able to pass the asset test at some point without sacrificing its ability to prudently manage its cash by investing in capital preservation investments.

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