BNY Mellon Funds Trust, et al.;, 55022-55026 [2014-21888]
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Federal Register / Vol. 79, No. 178 / Monday, September 15, 2014 / Notices
of No Significant Impact published on
July 23, 2014, 79 FR 42837).
IV. Conclusions
Accordingly, the Commission has
determined that, pursuant to 10 CFR
50.12(a), the exemptions are authorized
by law, will not present an undue risk
to the public health and safety, and are
consistent with the common defense
and security. Also, special
circumstances are present. Therefore,
the Commission hereby grants SCE
exemptions from the requirements of 10
CFR 50.82(a)(8)(i)(A) and 10 CFR
50.75(h)(2) to allow withdrawals from
the SONGS, Units 2 and 3 Trusts, for
irradiated fuel management and site
restoration activities without prior NRC
notification.
The exemptions are effective upon
issuance.
Dated at Rockville, Maryland, this 5th day
of September 2014.
For the Nuclear Regulatory Commission.
A. Louise Lund, Acting Director,
Division of Operating Reactor Licensing,
Office of Nuclear Reactor Regulation.
[FR Doc. 2014–21932 Filed 9–12–14; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31245; 812–14240]
BNY Mellon Funds Trust, et al.; Notice
of Application
September 9, 2014.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under section 12(d)(1)(J) of the
Investment Company Act of 1940 (the
‘‘1940 Act’’) for exemptions from
sections 12(d)(1)(A), (B), and (C) of the
1940 Act, under sections 6(c) and 17(b)
of the 1940 Act for an exemption from
sections 17(a)(1) and 17(a)(2) of the 1940
Act.
AGENCY:
Summary of the Application:
Applicants request an order that would
permit certain registered open-end
management investment companies that
operate as ‘‘funds of funds’’ to acquire
shares of certain registered open-end
management investment companies,
registered closed-end management
investment companies, ‘‘business
development companies,’’ as defined by
section 2(a)(48) of the 1940 Act
(‘‘business development companies’’),
and registered unit investment trusts
that are within or outside the same
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SUMMARY:
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group of investment companies as the
acquiring investment companies.
Applicants: BNY Mellon Funds Trust
(‘‘BNY Mellon Funds’’); Dreyfus BNY
Mellon Funds, Inc. (‘‘Dreyfus BNY
Mellon Funds’’); Dreyfus Premier
Investment Funds, Inc. (‘‘Premier
Investment Funds’’); Strategic Funds,
Inc. (‘‘Strategic Funds’’) (each an
‘‘Investment Company,’’ and
collectively, the ‘‘Investment
Companies’’); The Dreyfus Corporation
(‘‘Adviser’’); and MBSC Securities
Corporation (the ‘‘Distributor’’).
DATES: Filing Dates: The application
was filed on November 19, 2013, and
amended on April 10, 2014 and August
8, 2014.
Hearing or Notification of Hearing: An
order granting the application will be
issued unless the Commission orders a
hearing. Interested persons may request
a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on October 6, 2014, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. 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, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
Applicants, c/o Jeff Prusnofsky, Esq.,
The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166.
FOR FURTHER INFORMATION CONTACT:
David Joire, Senior Counsel, at (202)
551–6866, or Daniele Marchesani,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
‘‘Company’’ name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. Each Investment Company is an
open-end management investment
company that is registered under the
1940 Act and has multiple series which
pursue distinct investment objectives
and strategies. BNY Mellon Funds is
organized as a Massachusetts business
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trust. Dreyfus BNY Mellon Funds,
Premier Investment Funds and the
Strategic Funds are organized as
Maryland corporations.1
2. The Adviser, a New York
corporation, is a registered investment
adviser under the Investment Advisers
Act of 1940 and serves as the
investment adviser to each of the Funds
of Funds (as defined below).2 The
Distributor is a Broker (as defined
below) and serves as the existing Funds’
principal underwriter and distributor.
3. Applicants request relief to the
extent necessary to permit: (a) A Fund
(each, a ‘‘Fund of Funds,’’ and
collectively, the ‘‘Funds of Funds’’) to
acquire shares of registered open-end
management investment companies
(each an ‘‘Unaffiliated Open-End
Investment Company’’), registered
closed-end management investment
companies, business development
companies (each registered closed-end
management investment company and
each business development company,
an ‘‘Unaffiliated Closed-End Investment
Company’’ and, together with the
Unaffiliated Open-End Investment
Companies, the ‘‘Unaffiliated
Investment Companies’’), and registered
unit investment trusts (‘‘UITs’’) (the
‘‘Unaffiliated Trusts,’’ collectively with
the Unaffiliated Investment Companies,
the ‘‘Unaffiliated Funds’’), in each case,
that are not part of the same ‘‘group of
investment companies’’ as the Funds of
Funds; 3 (b) the Unaffiliated Funds, their
principal underwriters and any broker
or dealer registered under the Securities
Exchange Act of 1934 (the ‘‘1934 Act’’)
(‘‘Broker’’) to sell shares of such
Unaffiliated Funds to the Funds of
1 Applicants request that the order apply to each
existing and each future series of the Investment
Companies, and to each existing and future
registered open-end management investment
company or series thereof which is advised by the
Adviser or any entity controlling, controlled by or
under common control with the Adviser and which
is part of the ‘‘same group of investment
companies’’ (as defined in section 12(d)(1)(G)(ii) of
the Act) as the Investment Companies (each a
‘‘Fund’’ and collectively, ‘‘Funds’’). All entities that
currently intend to rely on the requested order are
named as applicants. Any other entity that relies on
the order in the future will comply with the terms
and conditions of the application.
2 All references to the term ‘‘Adviser’’ include
successors-in-interest to the Adviser. A successorin-interest is limited to an entity that results from
a reorganization into another jurisdiction or a
change in the type of business organization. BNY
Mellon Fund Advisers, a division of the Adviser,
is the investment adviser to the series of BNY
Mellon Funds and is deemed to be incorporated
within the term ‘‘Adviser’’ as used herein.
3 For purposes of the request for relief, the term
‘‘group of investment companies’’ means any two
or more registered investment companies, including
closed-end investment companies and business
development companies, that hold themselves out
to investors as related companies for purposes of
investment and investor services.
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Funds; (c) the Funds of Funds to acquire
shares of other registered investment
companies, including open-end
management investment companies and
series thereof, closed-end management
investment companies and UITs, as well
as business development companies (if
any), in the same group of investment
companies as the Funds of Funds
(collectively, the ‘‘Affiliated Funds,’’
and, together with the Unaffiliated
Funds, the ‘‘Underlying Funds’’); 4 and
(d) the Affiliated Funds, their principal
underwriters and any Broker to sell
shares of the Affiliated Funds to the
Funds of Funds.5 Applicants also
request an order under sections 6(c) and
17(b) of the 1940 Act to exempt
applicants from section 17(a) to the
extent necessary to permit Underlying
Funds organized as open-end
management investment companies and
UITs to sell their shares to Funds of
Funds and redeem their shares from
Funds of Funds.
Applicants’ Legal Analysis
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A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the 1940 Act,
in relevant part, prohibits a registered
investment company from acquiring
shares of an investment company if the
securities represent more than 3% of the
total outstanding voting stock of the
acquired company, more than 5% of the
total assets of the acquiring company,
or, together with the securities of any
other investment companies, more than
10% of the total assets of the acquiring
company. Section 12(d)(1)(B) of the
1940 Act prohibits a registered openend investment company, its principal
4 Certain of the Underlying Funds may be
registered under the 1940 Act as either UITs or
open-end management investment companies and
have obtained exemptions from the Commission
necessary to permit their shares to be listed and
traded on a national securities exchange at
negotiated prices and, accordingly, to operate as
exchange-traded funds (collectively, ‘‘ETFs’’ and
each, an ‘‘ETF’’). In addition, certain of the
Underlying Funds currently pursue, or may in the
future pursue, their investment objectives through
a master-feeder arrangement in reliance on section
12(d)(1)(E) of the 1940 Act. In accordance with
condition 12, a Fund of Funds may not invest in
an Underlying Fund that operates as a feeder fund
unless the feeder fund is part of the same ‘‘group
of investment companies’’ as its corresponding
master fund or the Fund of Funds. If a Fund of
Funds invests in an Affiliated Fund that operates
as a feeder fund and the corresponding master fund
is not within the same ‘‘group of investment
companies’’ as the Fund of Funds and Affiliated
Fund, the master fund would be an Unaffiliated
Fund for purposes of the application and its
conditions.
5 Applicants state that they do not believe that
investments in business development companies
present any particular considerations or concerns
that may be different from those presented by
investments in registered closed-end investment
companies.
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underwriter, and any Broker from
selling the investment company’s shares
to another investment company if the
sale will cause the acquiring company
to own more than 3% of the acquired
company’s voting stock, or if the sale
will cause more than 10% of the
acquired company’s voting stock to be
owned by investment companies
generally. Section 12(d)(1)(C) prohibits
an investment company from acquiring
any security issued by a registered
closed-end investment company if such
acquisition would result in the
acquiring company, any other
investment companies having the same
investment adviser, and companies
controlled by such investment
companies, collectively, owning more
than 10% of the outstanding voting
stock of the registered closed-end
investment company.
2. Section 12(d)(1)(J) of the 1940 Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Applicants request an exemption under
section 12(d)(1)(J) of the 1940 Act from
the limitations of sections 12(d)(1)(A),
(B) and (C) to the extent necessary to
permit: (i) The Funds of Funds to
acquire shares of Underlying Funds in
excess of the limits set forth in section
12(d)(1)(A) and (C) of the 1940 Act; and
(ii) the Underlying Funds, their
principal underwriters and any Broker
to sell shares of the Underlying Funds
to the Funds of Funds in excess of the
limits set forth in section 12(d)(1)(B) of
the 1940 Act.
3. Applicants state that the proposed
arrangement will not give rise to the
policy concerns underlying sections
12(d)(1)(A), (B), and (C), which include
concerns about undue influence by a
fund of funds over underlying funds,
excessive layering of fees, and overly
complex fund structures. Accordingly,
applicants believe that the requested
exemption is consistent with the public
interest and the protection of investors.
4. Applicants submit that the
proposed structure will not result in the
exercise of undue influence by a Fund
of Funds or its affiliated persons over
the Underlying Funds. Applicants assert
that the concern about undue influence
does not arise in connection with a
Fund of Funds’ investment in the
Affiliated Funds because they are part of
the same group of investment
companies. To limit the control a Fund
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of Funds or Fund of Funds Affiliate 6
may have over an Unaffiliated Fund,
applicants propose a condition
prohibiting the Adviser and any person
controlling, controlled by or under
common control with the Adviser, and
any investment company and any issuer
that would be an investment company
but for section 3(c)(1) or section 3(c)(7)
of the 1940 Act advised or sponsored by
the Adviser or any person controlling,
controlled by or under common control
with the Adviser (collectively, the
‘‘Group’’) from controlling (individually
or in the aggregate) an Unaffiliated Fund
within the meaning of section 2(a)(9) of
the 1940 Act. The same prohibition
would apply to any other investment
adviser within the meaning of section
2(a)(20)(B) of the 1940 Act to a Fund of
Funds (‘‘Sub-Adviser’’) and any person
controlling, controlled by or under
common control with the Sub-Adviser,
and any investment company or issuer
that would be an investment company
but for section 3(c)(1) or 3(c)(7) of the
1940 Act (or portion of such investment
company or issuer) advised or
sponsored by the Sub-Adviser or any
person controlling, controlled by or
under common control with the SubAdviser (collectively, the ‘‘Sub-Adviser
Group’’).
5. With respect to closed-end
Underlying Funds, applicants note that
although closed-end funds (including
business development companies) may
not be unduly influenced by a holder’s
right of redemption, closed-end
Underlying Funds may be unduly
influenced by a holder’s ability to vote
a large block of stock. To address this
concern, applicants submit that, with
respect to a Fund’s investment in an
Unaffiliated Closed-End Investment
Company, (i) each member of the Group
or Sub-Adviser Group that is an
investment company or an issuer that
would be an investment company but
for section 3(c)(1) or 3(c)(7) of the 1940
Act will vote its shares of the
Unaffiliated Closed-End Investment
Company in the manner prescribed by
section 12(d)(1)(E) of the 1940 Act and
(ii) each other member of the Group or
Sub-Adviser Group will vote its shares
of the Unaffiliated Closed-End
Investment Company in the same
proportion as the vote of all other
holders of the same type of such
6 A ‘‘Fund of Funds Affiliate’’ is the Adviser, any
Sub-Adviser, promoter or principal underwriter of
a Fund of Funds, as well as any person controlling,
controlled by or under common control with any
of those entities. An ‘‘Unaffiliated Fund Affiliate’’
is an investment adviser(s), sponsor, promoter or
principal underwriter of any Unaffiliated Fund or
any person controlling, controlled by or under
common control with any of those entities.
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Unaffiliated Closed-End Investment
Company’s shares. Applicants state that,
in this way, an Unaffiliated Closed-End
Investment Company will be protected
from undue influence by a Fund of
Funds through the voting of the
Unaffiliated Closed-End Investment
Company’s shares.
6. Applicants propose other
conditions to limit the potential for
undue influence over the Unaffiliated
Funds, including that no Fund of Funds
or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an
investment adviser to an Unaffiliated
Investment Company or sponsor to an
Unaffiliated Trust) will cause an
Unaffiliated Fund to purchase a security
in an offering of securities during the
existence of any underwriting or selling
syndicate of which a principal
underwriter is an Underwriting Affiliate
(‘‘Affiliated Underwriting’’).7
7. To further ensure that an
Unaffiliated Investment Company
understands the implications of a Fund
of Funds’ investment under the
requested exemptive relief, prior to its
investment in the shares of an
Unaffiliated Investment Company in
excess of the limit of section
12(d)(1)(A)(i) of the 1940 Act, a Fund of
Funds and the Unaffiliated Investment
Company will execute an agreement
stating, without limitation, that each of
their boards of directors or trustees
(each, a ‘‘Board’’) and their investment
advisers understand the terms and
conditions of the order and agree to
fulfill their responsibilities under the
order (the ‘‘Participation Agreement’’).
Applicants note that an Unaffiliated
Investment Company (including an ETF
or an Unaffiliated Closed-End
Investment Company) would also retain
its right to reject any initial investment
by a Fund of Funds in excess of the
limits in section 12(d)(1)(A)(i) of the
1940 Act by declining to execute the
Participation Agreement with the Fund
of Funds. In addition, an Unaffiliated
Investment Company (other than an ETF
or an Unaffiliated Closed-End
Investment Company whose shares are
purchased by a Fund of Funds in the
secondary market) will retain its right at
all times to reject any investment by a
Fund of Funds. Finally, subject solely to
the giving of notice to a Fund of Funds
7 An ‘‘Underwriting Affiliate’’ is a principal
underwriter in any underwriting or selling
syndicate that is an officer, director, trustee,
advisory board member, investment adviser, subadviser or employee of the Fund of Funds, or a
person of which any such officer, director, trustee,
investment adviser, sub-adviser, member of an
advisory board or employee is an affiliated person.
An Underwriting Affiliate does not include any
person whose relationship to an Unaffiliated Fund
is covered by section 10(f) of the 1940 Act.
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and the passage of a reasonable notice
period, an Unaffiliated Fund (including
an ETF or an Unaffiliated Closed-End
Investment Company) could terminate a
Participation Agreement with the Fund
of Funds.
8. Applicants state that they do not
believe that the proposed arrangement
will result in excessive layering of fees.
The Board of each Fund of Funds,
including a majority of the trustees who
are not ‘‘interested persons’’ within the
meaning of section 2(a)(19) of the 1940
Act (the ‘‘Independent Board
Members’’), will find that the
management or advisory fees charged
under a Fund of Funds’ advisory
contract are based on services provided
that are in addition to, rather than
duplicative of, services provided under
the advisory contract(s) of any
Underlying Fund in which the Fund of
Funds may invest. In addition, the
Adviser will waive fees otherwise
payable to it by a Fund of Funds in an
amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Unaffiliated Investment Company under
rule 12b–1 under the 1940 Act) received
from an Unaffiliated Fund by the
Adviser, or an affiliated person of the
Adviser, other than any advisory fees
paid to the Adviser or an affiliated
person of the Adviser by the
Unaffiliated Investment Company, in
connection with the investment by the
Fund of Funds in the Unaffiliated Fund.
9. Applicants further state that any
sales charges and/or service fees
charged with respect to shares of a Fund
of Funds will not exceed the limits
applicable to funds of funds set forth in
rule 2830 of the Conduct Rules of the
NASD (‘‘NASD Conduct Rule 2830’’).8
10. Applicants submit that the
proposed arrangement will not create an
overly complex fund structure.
Applicants note that no Underlying
Fund will acquire securities of any other
investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the 1940 Act in excess of the limits
contained in section 12(d)(1)(A) of the
1940 Act, except in certain
circumstances identified in condition 12
below.
B. Section 17(a)
1. Section 17(a) of the 1940 Act
generally prohibits sales or purchases of
securities between a registered
investment company and any affiliated
person of the company. Section 2(a)(3)
8 Any references to NASD Conduct Rule 2830
include any successor or replacement Financial
Industry Regulatory Authority rule to NASD
Conduct Rule 2830.
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of the 1940 Act defines an ‘‘affiliated
person’’ of another person to include (a)
any person directly or indirectly
owning, controlling, or holding with
power to vote, 5% or more of the
outstanding voting securities of the
other person; (b) any person 5% or more
of whose outstanding voting securities
are directly or indirectly owned,
controlled, or held with power to vote
by the other person; and (c) any person
directly or indirectly controlling,
controlled by, or under common control
with the other person.
2. Applicants state that the Funds of
Funds and the Affiliated Funds may be
deemed to be under the common control
of the Adviser and, therefore, affiliated
persons of one another. Applicants also
state that the Funds of Funds and
Underlying Funds organized as openend management investment companies
and UITs may also be deemed to be
affiliated persons of one another if a
Fund of Funds owns 5% or more of the
outstanding voting securities of one or
more of such Underlying Funds.
Applicants state that the sale of shares
by Underlying Funds organized as openend management investment companies
and UITs to the Funds of Funds and the
purchase of those shares from the Funds
of Funds by such Underlying Funds
(through redemptions) could be deemed
to violate section 17(a).9
3. Section 17(b) of the 1940 Act
authorizes the Commission to grant an
order permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (i) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (ii) the
proposed transaction is consistent with
the policies of each registered
investment company concerned; and
(iii) the proposed transaction is
consistent with the general purposes of
the 1940 Act. Section 6(c) of the 1940
Act permits the Commission to exempt
any person or transactions from any
provision of the 1940 Act if such
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 1940 Act.
4. Applicants submit that the
proposed transactions satisfy the
standards for relief under sections 17(b)
9 Applicants acknowledge that receipt of any
compensation by (a) an affiliated person of a Fund
of Funds, or an affiliated person of such person, for
the purchase by the Fund of Funds of shares of an
Underlying Fund or (b) an affiliated person of an
Underlying Fund, or an affiliated person of such
person, for the sale by the Underlying Fund of its
shares to a Fund of Funds may be prohibited by
section 17(e)(1) of the 1940 Act. The Participation
Agreement also will include this acknowledgement.
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and 6(c) of the 1940 Act. Applicants
state that the terms of the transactions
are reasonable and fair and do not
involve overreaching. Applicants state
that the terms upon which an
Underlying Fund that is an open-end
investment company will sell its shares
to or purchase its shares from a Fund of
Funds will be based on the net asset
value of each such Underlying Fund.10
Applicants also state that the proposed
transactions will be consistent with the
policies of each Fund of Funds and any
Underlying Fund, and with the general
purposes of the 1940 Act.
Applicants’ Conditions
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A. Investments by Funds of Funds in
Underlying Funds
Applicants agree that the order
granting the requested relief to permit
Funds of Funds to invest in Underlying
Funds shall be subject to the following
conditions:
1. The members of the Group will not
control (individually or in the aggregate)
an Unaffiliated Fund within the
meaning of Section 2(a)(9) of the 1940
Act. The members of a Sub-Adviser
Group will not control (individually or
in the aggregate) an Unaffiliated Fund
within the meaning of Section 2(a)(9) of
the 1940 Act. With respect to a Fund’s
investment in an Unaffiliated ClosedEnd Investment Company, (i) each
member of the Group or Sub-Adviser
Group that is an investment company or
an issuer that would be an investment
company but for Section 3(c)(1) or
Section 3(c)(7) of the 1940 Act will vote
its shares of the Unaffiliated Closed-End
Investment Company in the manner
prescribed by Section 12(d)(1)(E) of the
1940 Act and (ii) each other member of
10 Applicants note that a Fund of Funds generally
would purchase and sell shares of an Underlying
Fund that operates as an ETF rather than through
principal transactions with the Underlying Fund.
Applicants nevertheless request relief from sections
17(a)(1) and (2) to permit each Fund of Funds that
is an affiliated person, or an affiliated person of an
affiliated person, as defined in section 2(a)(3) of the
1940 Act, of an ETF to purchase or redeem shares
from the ETF. Applicants are not seeking relief from
section 17(a) for, and the requested relief will not
apply to, transactions where an ETF could be
deemed an affiliated person, or an affiliated person
of an affiliated person, of a Fund of Funds because
an investment adviser to the ETF or an entity
controlling, controlled by or under common control
with the investment adviser to the ETF is also an
investment adviser to the Fund of Funds.
Applicants further note that a Fund of Funds will
purchase and sell shares of an Underlying Fund
that is a closed-end fund (including business
development companies) through secondary market
transactions at market prices rather than through
principal transactions with the closed-end fund (or
business development company). Accordingly,
applicants are not requesting section 17(a) relief
with respect to principal transactions with closedend funds (including business development
companies).
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the Group or Sub-Adviser Group will
vote its shares of the Unaffiliated
Closed-End Investment Company in the
same proportion as the vote of all other
holders of the same type of such
Unaffiliated Closed-End Investment
Company’s shares. If, as a result of a
decrease in the outstanding voting
securities of any other Unaffiliated
Fund, the Group or a Sub-Adviser
Group, each in the aggregate, becomes a
holder of more than 25% of the
outstanding voting securities of such
Unaffiliated Fund, then the Group or the
Sub-Adviser Group will vote its shares
of the Unaffiliated Fund in the same
proportion as the vote of all other
holders of the Unaffiliated Fund’s
shares. This condition will not apply to
a Sub-Adviser Group with respect to an
Unaffiliated Fund for which the SubAdviser or a person controlling,
controlled by or under common control
with the Sub-Adviser acts as the
investment adviser within the meaning
of Section 2(a)(20)(A) of the 1940 Act (in
the case of an Unaffiliated Investment
Company) or as the sponsor (in the case
of an Unaffiliated Trust).
2. No Fund of Funds or Fund of
Funds Affiliate will cause any existing
or potential investment by the Fund of
Funds in an Unaffiliated Fund to
influence the terms of any services or
transactions between the Fund of Funds
or a Fund of Funds Affiliate and the
Unaffiliated Fund or an Unaffiliated
Fund Affiliate.
3. The Board of each Fund of Funds,
including a majority of the Independent
Board Members, will adopt procedures
reasonably designed to ensure that its
Adviser and any Sub-Adviser to the
Fund of Funds are conducting the
investment program of the Fund of
Funds without taking into account any
consideration received by the Fund of
Funds or Fund of Funds Affiliate from
an Unaffiliated Investment Company or
Unaffiliated Trust or any Unaffiliated
Fund Affiliate of such Unaffiliated
Investment Company or Unaffiliated
Trust in connection with any services or
transactions.
4. Once an investment by a Fund of
Funds in the securities of an
Unaffiliated Investment Company
exceeds the limit of Section
12(d)(1)(A)(i) of the 1940 Act, the Board
of the Unaffiliated Investment
Company, including a majority of the
Independent Board Members, will
determine that any consideration paid
by the Unaffiliated Investment Company
to a Fund of Funds or a Fund of Funds
Affiliate in connection with any services
or transactions: (a) Is fair and reasonable
in relation to the nature and quality of
the services and benefits received by the
PO 00000
Frm 00071
Fmt 4703
Sfmt 4703
55025
Unaffiliated Investment Company; (b) is
within the range of consideration that
the Unaffiliated Investment Company
would be required to pay to another
unaffiliated entity in connection with
the same services or transactions; and
(c) does not involve overreaching on the
part of any person concerned. This
condition does not apply with respect to
any services or transactions between an
Unaffiliated Investment Company and
its investment adviser(s), or any person
controlling, controlled by, or under
common control with such investment
adviser(s).
5. No Fund of Funds or Fund of
Funds Affiliate (except to the extent it
is acting in its capacity as an investment
adviser to an Unaffiliated Investment
Company or sponsor to an Unaffiliated
Trust) will cause an Unaffiliated Fund
to purchase a security in any Affiliated
Underwriting.
6. The Board of an Unaffiliated
Investment Company, including a
majority of the Independent Board
Members, will adopt procedures
reasonably designed to monitor any
purchases of securities by the
Unaffiliated Investment Company in an
Affiliated Underwriting once an
investment by a Fund of Funds in the
securities of the Unaffiliated Investment
Company exceeds the limit of Section
12(d)(1)(A)(i) of the 1940 Act, including
any purchases made directly from an
Underwriting Affiliate. The Board of the
Unaffiliated Investment Company will
review these purchases periodically, but
no less frequently than annually, to
determine whether the purchases were
influenced by the investment by the
Fund of Funds in the Unaffiliated
Investment Company. The Board of the
Unaffiliated Investment Company will
consider, among other things: (a)
Whether the purchases were consistent
with the investment objectives and
policies of the Unaffiliated Investment
Company; (b) how the performance of
securities purchased in an Affiliated
Underwriting compares to the
performance of comparable securities
purchased during a comparable period
of time in underwritings other than
Affiliated Underwritings or to a
benchmark such as a comparable market
index; and (c) whether the amount of
securities purchased by the Unaffiliated
Investment Company in Affiliated
Underwritings and the amount
purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board of the Unaffiliated Investment
Company will take any appropriate
actions based on its review, including,
if appropriate, the institution of
procedures designed to assure that
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Federal Register / Vol. 79, No. 178 / Monday, September 15, 2014 / Notices
purchases of securities in Affiliated
Underwritings are in the best interests
of shareholders.
7. Each Unaffiliated Investment
Company will maintain and preserve
permanently, in an easily accessible
place, a written copy of the procedures
described in the preceding condition,
and any modifications to such
procedures, and will maintain and
preserve for a period of not less than six
years from the end of the fiscal year in
which any purchase in an Affiliated
Underwriting occurred, the first two
years in an easily accessible place, a
written record of each purchase of
securities in an Affiliated Underwriting
once an investment by a Fund of Funds
in the securities of an Unaffiliated
Investment Company exceeds the limit
of Section 12(d)(1)(A)(i) of the 1940 Act,
setting forth (1) the party from whom
the securities were acquired, (2) the
identity of the underwriting syndicate’s
members, (3) the terms of the purchase,
and (4) the information or materials
upon which the determinations of the
Board of the Unaffiliated Investment
Company were made.
8. Prior to its investment in shares of
an Unaffiliated Investment Company in
excess of the limit set forth in Section
12(d)(1)(A)(i) of the 1940 Act, the Fund
of Funds and the Unaffiliated
Investment Company will execute a
Participation Agreement stating,
without limitation, that their Boards and
their investment advisers understand
the terms and conditions of the order
and agree to fulfill their responsibilities
under the order. At the time of its
investment in shares of an Unaffiliated
Investment Company in excess of the
limit set forth in Section 12(d)(1)(A)(i),
a Fund of Funds will notify the
Unaffiliated Investment Company of the
investment. At such time, the Fund of
Funds will also transmit to the
Unaffiliated Investment Company a list
of the names of each Fund of Funds
Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the
Unaffiliated Investment Company of any
changes to the list as soon as reasonably
practicable after a change occurs. The
Unaffiliated Investment Company and
the Fund of Funds will maintain and
preserve a copy of the order, the
Participation Agreement, and the list
with any updated information for the
duration of the investment and for a
period of not less than six years
thereafter, the first two years in an
easily accessible place.
9. Before approving any advisory
contract under Section 15 of the 1940
Act, the Board of each Fund of Funds,
including a majority of the Independent
Board Members, shall find that the
VerDate Mar<15>2010
17:10 Sep 12, 2014
Jkt 232001
advisory fees charged under the
advisory contract are based on services
provided that are in addition to, rather
than duplicative of, services provided
under the advisory contract(s) of any
Underlying Fund in which the Fund of
Funds may invest. Such finding, and the
basis upon which the finding was made,
will be recorded fully in the minute
books of the appropriate Fund of Funds.
10. The Adviser will waive fees
otherwise payable to it by a Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Unaffiliated Investment Company
pursuant to Rule 12b–1 under the 1940
Act) received from an Unaffiliated Fund
by the Adviser, or an affiliated person
of the Adviser, other than any advisory
fees paid to the Adviser or its affiliated
person by the Unaffiliated Investment
Company, in connection with the
investment by the Fund of Funds in the
Unaffiliated Fund. Any Sub-Adviser
will waive fees otherwise payable to the
Sub-Adviser, directly or indirectly, by
the Fund of Funds in an amount at least
equal to any compensation received by
the Sub-Adviser, or an affiliated person
of the Sub-Adviser, from an Unaffiliated
Fund, other than any advisory fees paid
to the Sub-Adviser or its affiliated
person by the Unaffiliated Investment
Company, in connection with the
investment by the Fund of Funds in the
Unaffiliated Fund made at the direction
of the Sub-Adviser. In the event that the
Sub-Adviser waives fees, the benefit of
the waiver will be passed through to the
Fund of Funds.
11. Any sales charges and/or service
fees charged with respect to shares of a
Fund of Funds will not exceed the
limits applicable to funds of funds set
forth in NASD Conduct Rule 2830.
12. No Underlying Fund will acquire
securities of any other investment
company or company relying on Section
3(c)(1) or Section 3(c)(7) of the 1940 Act,
in excess of the limits contained in
Section 12(d)(1)(A) of the 1940 Act,
except to the extent that such
Underlying Fund: (a) Acquires such
securities in compliance with Section
12(d)(1)(E) of the 1940 Act and either is
an Affiliated Fund or is in the same
‘‘group of investment companies’’ as its
corresponding master fund; (b) receives
securities of another investment
company as a dividend or as a result of
a plan of reorganization of a company
(other than a plan devised for the
purpose of evading Section 12(d)(1) of
the 1940 Act); (c) acquires (or is deemed
to have acquired) securities of another
investment company pursuant to
exemptive relief from the Commission
permitting such Underlying Fund to
PO 00000
Frm 00072
Fmt 4703
Sfmt 4703
engage in inter-fund borrowing and
lending transactions; or (d) acquires
securities of one or more investment
companies for short-term cash
management purposes.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–21888 Filed 9–12–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31246; 812–14322]
Validea Capital Management, LLC, et
al.; Notice of Application
September 9, 2014.
Securities and Exchange
Commission (the ‘‘Commission’’).
ACTION: Notice of an application for an
order under section 6(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from sections
2(a)(32), 5(a)(1), 22(d) and 22(e) of the
Act and rule 22c–1 under the Act, and
under sections 6(c) and 17(b) of the Act
for an exemption from sections 17(a)(1)
and (2) of the Act, and under section
12(d)(1)(J) for an exemption from
sections 12(d)(1)(A) and (B) of the Act.
AGENCY:
Applicants: ETF Series Solutions (the
‘‘Trust’’), Validea Capital Management,
LLC (‘‘Validea’’), and Quasar
Distributors, LLC (‘‘Quasar’’).
Summary of Application: Applicants
request an order that permits: (a)
Actively-managed series of the Trust to
issue shares (‘‘Shares’’) redeemable in
large aggregations only (‘‘Creation
Units’’); (b) secondary market
transactions in Shares to occur at
negotiated market prices; (c) certain
series to pay redemption proceeds,
under certain circumstances, more than
seven days after the tender of Creation
Units for redemption; (d) certain
affiliated persons of the series to deposit
securities into, and receive securities
from, the series in connection with the
purchase and redemption of Creation
Units; and (e) certain registered
management investment companies and
unit investment trusts outside of the
same group of investment companies as
the series to acquire Shares.
DATES: Filing Dates: The application was
filed on June 16, 2014, and amended on
September 8, 2014.
Hearing or Notification of Hearing: An
order granting the requested relief will
be issued unless the Commission orders
E:\FR\FM\15SEN1.SGM
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]]>Agencies
[Federal Register Volume 79, Number 178 (Monday, September 15, 2014)]
[Notices]
[Pages 55022-55026]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-21888]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31245; 812-14240]
BNY Mellon Funds Trust, et al.; Notice of Application
September 9, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under section 12(d)(1)(J)
of the Investment Company Act of 1940 (the ``1940 Act'') for exemptions
from sections 12(d)(1)(A), (B), and (C) of the 1940 Act, under sections
6(c) and 17(b) of the 1940 Act for an exemption from sections 17(a)(1)
and 17(a)(2) of the 1940 Act.
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SUMMARY: Summary of the Application: Applicants request an order that
would permit certain registered open-end management investment
companies that operate as ``funds of funds'' to acquire shares of
certain registered open-end management investment companies, registered
closed-end management investment companies, ``business development
companies,'' as defined by section 2(a)(48) of the 1940 Act (``business
development companies''), and registered unit investment trusts that
are within or outside the same group of investment companies as the
acquiring investment companies.
Applicants: BNY Mellon Funds Trust (``BNY Mellon Funds''); Dreyfus
BNY Mellon Funds, Inc. (``Dreyfus BNY Mellon Funds''); Dreyfus Premier
Investment Funds, Inc. (``Premier Investment Funds''); Strategic Funds,
Inc. (``Strategic Funds'') (each an ``Investment Company,'' and
collectively, the ``Investment Companies''); The Dreyfus Corporation
(``Adviser''); and MBSC Securities Corporation (the ``Distributor'').
DATES: Filing Dates: The application was filed on November 19, 2013,
and amended on April 10, 2014 and August 8, 2014.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on October 6, 2014, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. 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, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090. Applicants, c/o Jeff Prusnofsky,
Esq., The Dreyfus Corporation, 200 Park Avenue, New York, New York
10166.
FOR FURTHER INFORMATION CONTACT: David Joire, Senior Counsel, at (202)
551-6866, or Daniele Marchesani, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the ``Company'' name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicants' Representations
1. Each Investment Company is an open-end management investment
company that is registered under the 1940 Act and has multiple series
which pursue distinct investment objectives and strategies. BNY Mellon
Funds is organized as a Massachusetts business trust. Dreyfus BNY
Mellon Funds, Premier Investment Funds and the Strategic Funds are
organized as Maryland corporations.\1\
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\1\ Applicants request that the order apply to each existing and
each future series of the Investment Companies, and to each existing
and future registered open-end management investment company or
series thereof which is advised by the Adviser or any entity
controlling, controlled by or under common control with the Adviser
and which is part of the ``same group of investment companies'' (as
defined in section 12(d)(1)(G)(ii) of the Act) as the Investment
Companies (each a ``Fund'' and collectively, ``Funds''). All
entities that currently intend to rely on the requested order are
named as applicants. Any other entity that relies on the order in
the future will comply with the terms and conditions of the
application.
---------------------------------------------------------------------------
2. The Adviser, a New York corporation, is a registered investment
adviser under the Investment Advisers Act of 1940 and serves as the
investment adviser to each of the Funds of Funds (as defined below).\2\
The Distributor is a Broker (as defined below) and serves as the
existing Funds' principal underwriter and distributor.
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\2\ All references to the term ``Adviser'' include successors-
in-interest to the Adviser. A successor-in-interest is limited to an
entity that results from a reorganization into another jurisdiction
or a change in the type of business organization. BNY Mellon Fund
Advisers, a division of the Adviser, is the investment adviser to
the series of BNY Mellon Funds and is deemed to be incorporated
within the term ``Adviser'' as used herein.
---------------------------------------------------------------------------
3. Applicants request relief to the extent necessary to permit: (a)
A Fund (each, a ``Fund of Funds,'' and collectively, the ``Funds of
Funds'') to acquire shares of registered open-end management investment
companies (each an ``Unaffiliated Open-End Investment Company''),
registered closed-end management investment companies, business
development companies (each registered closed-end management investment
company and each business development company, an ``Unaffiliated
Closed-End Investment Company'' and, together with the Unaffiliated
Open-End Investment Companies, the ``Unaffiliated Investment
Companies''), and registered unit investment trusts (``UITs'') (the
``Unaffiliated Trusts,'' collectively with the Unaffiliated Investment
Companies, the ``Unaffiliated Funds''), in each case, that are not part
of the same ``group of investment companies'' as the Funds of Funds;
\3\ (b) the Unaffiliated Funds, their principal underwriters and any
broker or dealer registered under the Securities Exchange Act of 1934
(the ``1934 Act'') (``Broker'') to sell shares of such Unaffiliated
Funds to the Funds of
[[Page 55023]]
Funds; (c) the Funds of Funds to acquire shares of other registered
investment companies, including open-end management investment
companies and series thereof, closed-end management investment
companies and UITs, as well as business development companies (if any),
in the same group of investment companies as the Funds of Funds
(collectively, the ``Affiliated Funds,'' and, together with the
Unaffiliated Funds, the ``Underlying Funds''); \4\ and (d) the
Affiliated Funds, their principal underwriters and any Broker to sell
shares of the Affiliated Funds to the Funds of Funds.\5\ Applicants
also request an order under sections 6(c) and 17(b) of the 1940 Act to
exempt applicants from section 17(a) to the extent necessary to permit
Underlying Funds organized as open-end management investment companies
and UITs to sell their shares to Funds of Funds and redeem their shares
from Funds of Funds.
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\3\ For purposes of the request for relief, the term ``group of
investment companies'' means any two or more registered investment
companies, including closed-end investment companies and business
development companies, that hold themselves out to investors as
related companies for purposes of investment and investor services.
\4\ Certain of the Underlying Funds may be registered under the
1940 Act as either UITs or open-end management investment companies
and have obtained exemptions from the Commission necessary to permit
their shares to be listed and traded on a national securities
exchange at negotiated prices and, accordingly, to operate as
exchange-traded funds (collectively, ``ETFs'' and each, an ``ETF'').
In addition, certain of the Underlying Funds currently pursue, or
may in the future pursue, their investment objectives through a
master-feeder arrangement in reliance on section 12(d)(1)(E) of the
1940 Act. In accordance with condition 12, a Fund of Funds may not
invest in an Underlying Fund that operates as a feeder fund unless
the feeder fund is part of the same ``group of investment
companies'' as its corresponding master fund or the Fund of Funds.
If a Fund of Funds invests in an Affiliated Fund that operates as a
feeder fund and the corresponding master fund is not within the same
``group of investment companies'' as the Fund of Funds and
Affiliated Fund, the master fund would be an Unaffiliated Fund for
purposes of the application and its conditions.
\5\ Applicants state that they do not believe that investments
in business development companies present any particular
considerations or concerns that may be different from those
presented by investments in registered closed-end investment
companies.
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Applicants' Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the 1940 Act, in relevant part, prohibits
a registered investment company from acquiring shares of an investment
company if the securities represent more than 3% of the total
outstanding voting stock of the acquired company, more than 5% of the
total assets of the acquiring company, or, together with the securities
of any other investment companies, more than 10% of the total assets of
the acquiring company. Section 12(d)(1)(B) of the 1940 Act prohibits a
registered open-end investment company, its principal underwriter, and
any Broker from selling the investment company's shares to another
investment company if the sale will cause the acquiring company to own
more than 3% of the acquired company's voting stock, or if the sale
will cause more than 10% of the acquired company's voting stock to be
owned by investment companies generally. Section 12(d)(1)(C) prohibits
an investment company from acquiring any security issued by a
registered closed-end investment company if such acquisition would
result in the acquiring company, any other investment companies having
the same investment adviser, and companies controlled by such
investment companies, collectively, owning more than 10% of the
outstanding voting stock of the registered closed-end investment
company.
2. Section 12(d)(1)(J) of the 1940 Act provides that the Commission
may exempt any person, security, or transaction, or any class or
classes of persons, securities or transactions, from any provision of
section 12(d)(1) if the exemption is consistent with the public
interest and the protection of investors. Applicants request an
exemption under section 12(d)(1)(J) of the 1940 Act from the
limitations of sections 12(d)(1)(A), (B) and (C) to the extent
necessary to permit: (i) The Funds of Funds to acquire shares of
Underlying Funds in excess of the limits set forth in section
12(d)(1)(A) and (C) of the 1940 Act; and (ii) the Underlying Funds,
their principal underwriters and any Broker to sell shares of the
Underlying Funds to the Funds of Funds in excess of the limits set
forth in section 12(d)(1)(B) of the 1940 Act.
3. Applicants state that the proposed arrangement will not give
rise to the policy concerns underlying sections 12(d)(1)(A), (B), and
(C), which include concerns about undue influence by a fund of funds
over underlying funds, excessive layering of fees, and overly complex
fund structures. Accordingly, applicants believe that the requested
exemption is consistent with the public interest and the protection of
investors.
4. Applicants submit that the proposed structure will not result in
the exercise of undue influence by a Fund of Funds or its affiliated
persons over the Underlying Funds. Applicants assert that the concern
about undue influence does not arise in connection with a Fund of
Funds' investment in the Affiliated Funds because they are part of the
same group of investment companies. To limit the control a Fund of
Funds or Fund of Funds Affiliate \6\ may have over an Unaffiliated
Fund, applicants propose a condition prohibiting the Adviser and any
person controlling, controlled by or under common control with the
Adviser, and any investment company and any issuer that would be an
investment company but for section 3(c)(1) or section 3(c)(7) of the
1940 Act advised or sponsored by the Adviser or any person controlling,
controlled by or under common control with the Adviser (collectively,
the ``Group'') from controlling (individually or in the aggregate) an
Unaffiliated Fund within the meaning of section 2(a)(9) of the 1940
Act. The same prohibition would apply to any other investment adviser
within the meaning of section 2(a)(20)(B) of the 1940 Act to a Fund of
Funds (``Sub-Adviser'') and any person controlling, controlled by or
under common control with the Sub-Adviser, and any investment company
or issuer that would be an investment company but for section 3(c)(1)
or 3(c)(7) of the 1940 Act (or portion of such investment company or
issuer) advised or sponsored by the Sub-Adviser or any person
controlling, controlled by or under common control with the Sub-Adviser
(collectively, the ``Sub-Adviser Group'').
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\6\ A ``Fund of Funds Affiliate'' is the Adviser, any Sub-
Adviser, promoter or principal underwriter of a Fund of Funds, as
well as any person controlling, controlled by or under common
control with any of those entities. An ``Unaffiliated Fund
Affiliate'' is an investment adviser(s), sponsor, promoter or
principal underwriter of any Unaffiliated Fund or any person
controlling, controlled by or under common control with any of those
entities.
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5. With respect to closed-end Underlying Funds, applicants note
that although closed-end funds (including business development
companies) may not be unduly influenced by a holder's right of
redemption, closed-end Underlying Funds may be unduly influenced by a
holder's ability to vote a large block of stock. To address this
concern, applicants submit that, with respect to a Fund's investment in
an Unaffiliated Closed-End Investment Company, (i) each member of the
Group or Sub-Adviser Group that is an investment company or an issuer
that would be an investment company but for section 3(c)(1) or 3(c)(7)
of the 1940 Act will vote its shares of the Unaffiliated Closed-End
Investment Company in the manner prescribed by section 12(d)(1)(E) of
the 1940 Act and (ii) each other member of the Group or Sub-Adviser
Group will vote its shares of the Unaffiliated Closed-End Investment
Company in the same proportion as the vote of all other holders of the
same type of such
[[Page 55024]]
Unaffiliated Closed-End Investment Company's shares. Applicants state
that, in this way, an Unaffiliated Closed-End Investment Company will
be protected from undue influence by a Fund of Funds through the voting
of the Unaffiliated Closed-End Investment Company's shares.
6. Applicants propose other conditions to limit the potential for
undue influence over the Unaffiliated Funds, including that no Fund of
Funds or Fund of Funds Affiliate (except to the extent it is acting in
its capacity as an investment adviser to an Unaffiliated Investment
Company or sponsor to an Unaffiliated Trust) will cause an Unaffiliated
Fund to purchase a security in an offering of securities during the
existence of any underwriting or selling syndicate of which a principal
underwriter is an Underwriting Affiliate (``Affiliated
Underwriting'').\7\
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\7\ An ``Underwriting Affiliate'' is a principal underwriter in
any underwriting or selling syndicate that is an officer, director,
trustee, advisory board member, investment adviser, sub-adviser or
employee of the Fund of Funds, or a person of which any such
officer, director, trustee, investment adviser, sub-adviser, member
of an advisory board or employee is an affiliated person. An
Underwriting Affiliate does not include any person whose
relationship to an Unaffiliated Fund is covered by section 10(f) of
the 1940 Act.
---------------------------------------------------------------------------
7. To further ensure that an Unaffiliated Investment Company
understands the implications of a Fund of Funds' investment under the
requested exemptive relief, prior to its investment in the shares of an
Unaffiliated Investment Company in excess of the limit of section
12(d)(1)(A)(i) of the 1940 Act, a Fund of Funds and the Unaffiliated
Investment Company will execute an agreement stating, without
limitation, that each of their boards of directors or trustees (each, a
``Board'') and their investment advisers understand the terms and
conditions of the order and agree to fulfill their responsibilities
under the order (the ``Participation Agreement''). Applicants note that
an Unaffiliated Investment Company (including an ETF or an Unaffiliated
Closed-End Investment Company) would also retain its right to reject
any initial investment by a Fund of Funds in excess of the limits in
section 12(d)(1)(A)(i) of the 1940 Act by declining to execute the
Participation Agreement with the Fund of Funds. In addition, an
Unaffiliated Investment Company (other than an ETF or an Unaffiliated
Closed-End Investment Company whose shares are purchased by a Fund of
Funds in the secondary market) will retain its right at all times to
reject any investment by a Fund of Funds. Finally, subject solely to
the giving of notice to a Fund of Funds and the passage of a reasonable
notice period, an Unaffiliated Fund (including an ETF or an
Unaffiliated Closed-End Investment Company) could terminate a
Participation Agreement with the Fund of Funds.
8. Applicants state that they do not believe that the proposed
arrangement will result in excessive layering of fees. The Board of
each Fund of Funds, including a majority of the trustees who are not
``interested persons'' within the meaning of section 2(a)(19) of the
1940 Act (the ``Independent Board Members''), will find that the
management or advisory fees charged under a Fund of Funds' advisory
contract are based on services provided that are in addition to, rather
than duplicative of, services provided under the advisory contract(s)
of any Underlying Fund in which the Fund of Funds may invest. In
addition, the Adviser will waive fees otherwise payable to it by a Fund
of Funds in an amount at least equal to any compensation (including
fees received pursuant to any plan adopted by an Unaffiliated
Investment Company under rule 12b-1 under the 1940 Act) received from
an Unaffiliated Fund by the Adviser, or an affiliated person of the
Adviser, other than any advisory fees paid to the Adviser or an
affiliated person of the Adviser by the Unaffiliated Investment
Company, in connection with the investment by the Fund of Funds in the
Unaffiliated Fund.
9. Applicants further state that any sales charges and/or service
fees charged with respect to shares of a Fund of Funds will not exceed
the limits applicable to funds of funds set forth in rule 2830 of the
Conduct Rules of the NASD (``NASD Conduct Rule 2830'').\8\
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\8\ Any references to NASD Conduct Rule 2830 include any
successor or replacement Financial Industry Regulatory Authority
rule to NASD Conduct Rule 2830.
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10. Applicants submit that the proposed arrangement will not create
an overly complex fund structure. Applicants note that no Underlying
Fund will acquire securities of any other investment company or company
relying on section 3(c)(1) or 3(c)(7) of the 1940 Act in excess of the
limits contained in section 12(d)(1)(A) of the 1940 Act, except in
certain circumstances identified in condition 12 below.
B. Section 17(a)
1. Section 17(a) of the 1940 Act generally prohibits sales or
purchases of securities between a registered investment company and any
affiliated person of the company. Section 2(a)(3) of the 1940 Act
defines an ``affiliated person'' of another person to include (a) any
person directly or indirectly owning, controlling, or holding with
power to vote, 5% or more of the outstanding voting securities of the
other person; (b) any person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held with
power to vote by the other person; and (c) any person directly or
indirectly controlling, controlled by, or under common control with the
other person.
2. Applicants state that the Funds of Funds and the Affiliated
Funds may be deemed to be under the common control of the Adviser and,
therefore, affiliated persons of one another. Applicants also state
that the Funds of Funds and Underlying Funds organized as open-end
management investment companies and UITs may also be deemed to be
affiliated persons of one another if a Fund of Funds owns 5% or more of
the outstanding voting securities of one or more of such Underlying
Funds. Applicants state that the sale of shares by Underlying Funds
organized as open-end management investment companies and UITs to the
Funds of Funds and the purchase of those shares from the Funds of Funds
by such Underlying Funds (through redemptions) could be deemed to
violate section 17(a).\9\
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\9\ Applicants acknowledge that receipt of any compensation by
(a) an affiliated person of a Fund of Funds, or an affiliated person
of such person, for the purchase by the Fund of Funds of shares of
an Underlying Fund or (b) an affiliated person of an Underlying
Fund, or an affiliated person of such person, for the sale by the
Underlying Fund of its shares to a Fund of Funds may be prohibited
by section 17(e)(1) of the 1940 Act. The Participation Agreement
also will include this acknowledgement.
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3. Section 17(b) of the 1940 Act authorizes the Commission to grant
an order permitting a transaction otherwise prohibited by section 17(a)
if it finds that (i) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (ii) the proposed transaction is consistent with the
policies of each registered investment company concerned; and (iii) the
proposed transaction is consistent with the general purposes of the
1940 Act. Section 6(c) of the 1940 Act permits the Commission to exempt
any person or transactions from any provision of the 1940 Act if such
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 1940 Act.
4. Applicants submit that the proposed transactions satisfy the
standards for relief under sections 17(b)
[[Page 55025]]
and 6(c) of the 1940 Act. Applicants state that the terms of the
transactions are reasonable and fair and do not involve overreaching.
Applicants state that the terms upon which an Underlying Fund that is
an open-end investment company will sell its shares to or purchase its
shares from a Fund of Funds will be based on the net asset value of
each such Underlying Fund.\10\ Applicants also state that the proposed
transactions will be consistent with the policies of each Fund of Funds
and any Underlying Fund, and with the general purposes of the 1940 Act.
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\10\ Applicants note that a Fund of Funds generally would
purchase and sell shares of an Underlying Fund that operates as an
ETF rather than through principal transactions with the Underlying
Fund. Applicants nevertheless request relief from sections 17(a)(1)
and (2) to permit each Fund of Funds that is an affiliated person,
or an affiliated person of an affiliated person, as defined in
section 2(a)(3) of the 1940 Act, of an ETF to purchase or redeem
shares from the ETF. Applicants are not seeking relief from section
17(a) for, and the requested relief will not apply to, transactions
where an ETF could be deemed an affiliated person, or an affiliated
person of an affiliated person, of a Fund of Funds because an
investment adviser to the ETF or an entity controlling, controlled
by or under common control with the investment adviser to the ETF is
also an investment adviser to the Fund of Funds. Applicants further
note that a Fund of Funds will purchase and sell shares of an
Underlying Fund that is a closed-end fund (including business
development companies) through secondary market transactions at
market prices rather than through principal transactions with the
closed-end fund (or business development company). Accordingly,
applicants are not requesting section 17(a) relief with respect to
principal transactions with closed-end funds (including business
development companies).
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Applicants' Conditions
A. Investments by Funds of Funds in Underlying Funds
Applicants agree that the order granting the requested relief to
permit Funds of Funds to invest in Underlying Funds shall be subject to
the following conditions:
1. The members of the Group will not control (individually or in
the aggregate) an Unaffiliated Fund within the meaning of Section
2(a)(9) of the 1940 Act. The members of a Sub-Adviser Group will not
control (individually or in the aggregate) an Unaffiliated Fund within
the meaning of Section 2(a)(9) of the 1940 Act. With respect to a
Fund's investment in an Unaffiliated Closed-End Investment Company, (i)
each member of the Group or Sub-Adviser Group that is an investment
company or an issuer that would be an investment company but for
Section 3(c)(1) or Section 3(c)(7) of the 1940 Act will vote its shares
of the Unaffiliated Closed-End Investment Company in the manner
prescribed by Section 12(d)(1)(E) of the 1940 Act and (ii) each other
member of the Group or Sub-Adviser Group will vote its shares of the
Unaffiliated Closed-End Investment Company in the same proportion as
the vote of all other holders of the same type of such Unaffiliated
Closed-End Investment Company's shares. If, as a result of a decrease
in the outstanding voting securities of any other Unaffiliated Fund,
the Group or a Sub-Adviser Group, each in the aggregate, becomes a
holder of more than 25% of the outstanding voting securities of such
Unaffiliated Fund, then the Group or the Sub-Adviser Group will vote
its shares of the Unaffiliated Fund in the same proportion as the vote
of all other holders of the Unaffiliated Fund's shares. This condition
will not apply to a Sub-Adviser Group with respect to an Unaffiliated
Fund for which the Sub-Adviser or a person controlling, controlled by
or under common control with the Sub-Adviser acts as the investment
adviser within the meaning of Section 2(a)(20)(A) of the 1940 Act (in
the case of an Unaffiliated Investment Company) or as the sponsor (in
the case of an Unaffiliated Trust).
2. No Fund of Funds or Fund of Funds Affiliate will cause any
existing or potential investment by the Fund of Funds in an
Unaffiliated Fund to influence the terms of any services or
transactions between the Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
3. The Board of each Fund of Funds, including a majority of the
Independent Board Members, will adopt procedures reasonably designed to
ensure that its Adviser and any Sub-Adviser to the Fund of Funds are
conducting the investment program of the Fund of Funds without taking
into account any consideration received by the Fund of Funds or Fund of
Funds Affiliate from an Unaffiliated Investment Company or Unaffiliated
Trust or any Unaffiliated Fund Affiliate of such Unaffiliated
Investment Company or Unaffiliated Trust in connection with any
services or transactions.
4. Once an investment by a Fund of Funds in the securities of an
Unaffiliated Investment Company exceeds the limit of Section
12(d)(1)(A)(i) of the 1940 Act, the Board of the Unaffiliated
Investment Company, including a majority of the Independent Board
Members, will determine that any consideration paid by the Unaffiliated
Investment Company to a Fund of Funds or a Fund of Funds Affiliate in
connection with any services or transactions: (a) Is fair and
reasonable in relation to the nature and quality of the services and
benefits received by the Unaffiliated Investment Company; (b) is within
the range of consideration that the Unaffiliated Investment Company
would be required to pay to another unaffiliated entity in connection
with the same services or transactions; and (c) does not involve
overreaching on the part of any person concerned. This condition does
not apply with respect to any services or transactions between an
Unaffiliated Investment Company and its investment adviser(s), or any
person controlling, controlled by, or under common control with such
investment adviser(s).
5. No Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Unaffiliated Investment Company or sponsor to an Unaffiliated Trust)
will cause an Unaffiliated Fund to purchase a security in any
Affiliated Underwriting.
6. The Board of an Unaffiliated Investment Company, including a
majority of the Independent Board Members, will adopt procedures
reasonably designed to monitor any purchases of securities by the
Unaffiliated Investment Company in an Affiliated Underwriting once an
investment by a Fund of Funds in the securities of the Unaffiliated
Investment Company exceeds the limit of Section 12(d)(1)(A)(i) of the
1940 Act, including any purchases made directly from an Underwriting
Affiliate. The Board of the Unaffiliated Investment Company will review
these purchases periodically, but no less frequently than annually, to
determine whether the purchases were influenced by the investment by
the Fund of Funds in the Unaffiliated Investment Company. The Board of
the Unaffiliated Investment Company will consider, among other things:
(a) Whether the purchases were consistent with the investment
objectives and policies of the Unaffiliated Investment Company; (b) how
the performance of securities purchased in an Affiliated Underwriting
compares to the performance of comparable securities purchased during a
comparable period of time in underwritings other than Affiliated
Underwritings or to a benchmark such as a comparable market index; and
(c) whether the amount of securities purchased by the Unaffiliated
Investment Company in Affiliated Underwritings and the amount purchased
directly from an Underwriting Affiliate have changed significantly from
prior years. The Board of the Unaffiliated Investment Company will take
any appropriate actions based on its review, including, if appropriate,
the institution of procedures designed to assure that
[[Page 55026]]
purchases of securities in Affiliated Underwritings are in the best
interests of shareholders.
7. Each Unaffiliated Investment Company will maintain and preserve
permanently, in an easily accessible place, a written copy of the
procedures described in the preceding condition, and any modifications
to such procedures, and will maintain and preserve for a period of not
less than six years from the end of the fiscal year in which any
purchase in an Affiliated Underwriting occurred, the first two years in
an easily accessible place, a written record of each purchase of
securities in an Affiliated Underwriting once an investment by a Fund
of Funds in the securities of an Unaffiliated Investment Company
exceeds the limit of Section 12(d)(1)(A)(i) of the 1940 Act, setting
forth (1) the party from whom the securities were acquired, (2) the
identity of the underwriting syndicate's members, (3) the terms of the
purchase, and (4) the information or materials upon which the
determinations of the Board of the Unaffiliated Investment Company were
made.
8. Prior to its investment in shares of an Unaffiliated Investment
Company in excess of the limit set forth in Section 12(d)(1)(A)(i) of
the 1940 Act, the Fund of Funds and the Unaffiliated Investment Company
will execute a Participation Agreement stating, without limitation,
that their Boards and their investment advisers understand the terms
and conditions of the order and agree to fulfill their responsibilities
under the order. At the time of its investment in shares of an
Unaffiliated Investment Company in excess of the limit set forth in
Section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated
Investment Company of the investment. At such time, the Fund of Funds
will also transmit to the Unaffiliated Investment Company a list of the
names of each Fund of Funds Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the Unaffiliated Investment Company of any
changes to the list as soon as reasonably practicable after a change
occurs. The Unaffiliated Investment Company and the Fund of Funds will
maintain and preserve a copy of the order, the Participation Agreement,
and the list with any updated information for the duration of the
investment and for a period of not less than six years thereafter, the
first two years in an easily accessible place.
9. Before approving any advisory contract under Section 15 of the
1940 Act, the Board of each Fund of Funds, including a majority of the
Independent Board Members, shall find that the advisory fees charged
under the advisory contract are based on services provided that are in
addition to, rather than duplicative of, services provided under the
advisory contract(s) of any Underlying Fund in which the Fund of Funds
may invest. Such finding, and the basis upon which the finding was
made, will be recorded fully in the minute books of the appropriate
Fund of Funds.
10. The Adviser will waive fees otherwise payable to it by a Fund
of Funds in an amount at least equal to any compensation (including
fees received pursuant to any plan adopted by an Unaffiliated
Investment Company pursuant to Rule 12b-1 under the 1940 Act) received
from an Unaffiliated Fund by the Adviser, or an affiliated person of
the Adviser, other than any advisory fees paid to the Adviser or its
affiliated person by the Unaffiliated Investment Company, in connection
with the investment by the Fund of Funds in the Unaffiliated Fund. Any
Sub-Adviser will waive fees otherwise payable to the Sub-Adviser,
directly or indirectly, by the Fund of Funds in an amount at least
equal to any compensation received by the Sub-Adviser, or an affiliated
person of the Sub-Adviser, from an Unaffiliated Fund, other than any
advisory fees paid to the Sub-Adviser or its affiliated person by the
Unaffiliated Investment Company, in connection with the investment by
the Fund of Funds in the Unaffiliated Fund made at the direction of the
Sub-Adviser. In the event that the Sub-Adviser waives fees, the benefit
of the waiver will be passed through to the Fund of Funds.
11. Any sales charges and/or service fees charged with respect to
shares of a Fund of Funds will not exceed the limits applicable to
funds of funds set forth in NASD Conduct Rule 2830.
12. No Underlying Fund will acquire securities of any other
investment company or company relying on Section 3(c)(1) or Section
3(c)(7) of the 1940 Act, in excess of the limits contained in Section
12(d)(1)(A) of the 1940 Act, except to the extent that such Underlying
Fund: (a) Acquires such securities in compliance with Section
12(d)(1)(E) of the 1940 Act and either is an Affiliated Fund or is in
the same ``group of investment companies'' as its corresponding master
fund; (b) receives securities of another investment company as a
dividend or as a result of a plan of reorganization of a company (other
than a plan devised for the purpose of evading Section 12(d)(1) of the
1940 Act); (c) acquires (or is deemed to have acquired) securities of
another investment company pursuant to exemptive relief from the
Commission permitting such Underlying Fund to engage in inter-fund
borrowing and lending transactions; or (d) acquires securities of one
or more investment companies for short-term cash management purposes.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21888 Filed 9-12-14; 8:45 am]
BILLING CODE 8011-01-P
