ACAP Strategic Fund and SilverBay Capital Management LLC; Notice of Application, 75194-75197 [2014-29501]
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Federal Register / Vol. 79, No. 242 / Wednesday, December 17, 2014 / Notices
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exclusive voting rights with respect to
matters solely related to that Class.
3. Section 6(c) of the 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 the
Act, or from any rule under the Act, if
and to the extent 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 Act. Applicants
request an exemption under section 6(c)
from sections 18(c) and 18(i) to permit
the Fund to issue multiple Classes.
4. Applicants submit that the
proposed allocation of expenses and
voting rights among multiple classes is
equitable and will not discriminate
against any group or class of
shareholders. Applicants submit that
the proposed system would permit the
Fund to facilitate the distribution of
Classes through diverse distribution
channels and would provide investors
with a broader choice of shareholder
options. Applicants assert that the
proposed closed-end investment
company multiple class structure does
not raise the concerns underlying
section 18 of the Act to any greater
degree than open-end investment
companies’ multiple class structures
that are permitted by rule 18f–3 under
the Act. Applicants state the Fund will
comply with the provisions of rule 18f–
3 as if it were an open-end investment
company.
CDSCs
5. Applicants believe that the
requested relief meets the standards of
section 6(c) of the Act. Rule 6c–10
under the Act permits open-end
investment companies to impose
CDSCs, subject to certain conditions.
Applicants state that the Fund does not
anticipate imposing CDSCs and would
only do so in compliance with rule 6c–
10 under the Act as if that rule were
applied to closed-end investment
companies. The Fund also will make all
required disclosures in accordance with
the requirements of Form N–1A
concerning CDSCs. Applicants further
state that, in the event the Fund imposes
CDSCs, the Fund will apply the CDSCs
(and any waivers or scheduled
variations of the CDSCs) uniformly to all
shareholders in a given class and
consistently with the requirements of
rule 22d–1 under the Act.
Asset-Based Service and/or Distribution
Fees
6. Section 17(d) of the Act and rule
17d–1 under the Act prohibit an
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affiliated person of a registered
investment company or an affiliated
person of such person, acting as
principal, from participating in or
effecting any transaction in which such
registered company is a joint or a joint
and several participant unless the
Commission issues an order permitting
the transaction. In reviewing
applications submitted under section
17(d) and rule 17d–1, the Commission
considers whether the participation of
the investment company in a joint
enterprise or joint arrangement is
consistent with the provisions, policies
and purposes of the Act, and the extent
to which the participation is on a basis
different from or less advantageous than
that of other participants.
7. Rule 17d–3 under the Act provides
an exemption from section 17(d) and
rule 17d–1 to permit open-end
investment companies to enter into
distribution arrangements pursuant to
rule 12b–1 under the Act. Applicants
request an order under section 17(d) and
rule 17d–1 under the Act to permit the
Fund to impose Distribution Fees and/
or Service Fees. Applicants have agreed
to comply with rules 12b–1 and 17d–3
as if those rules applied to closed-end
investment companies.
Applicants’ Condition
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
Applicants will comply with the
provisions of rules 6c–10, 12b–1, 17d–
3, 18f–3 and 22d–1 under the Act, as
amended from time to time or replaced,
as if those rules applied to closed-end
management investment companies,
and will comply with the NASD
Conduct Rule 2830, as amended from
time to time, as if that rule applied to
all closed-end management investment
companies.
Notice of an application under
section 6(c) of the Investment Company
Act of 1940 (the ‘‘Act’’) for an
exemption from sections 18(c) and 18(i)
of the Act, under sections 6(c) and
23(c)(3) of the Act for an exemption
from rule 23c–3 under the Act, and for
an order pursuant to section 17(d) of the
Act and rule 17d–1 under the Act.
ACTION:
Applicants request an order to
permit certain registered closed-end
management investment companies to
issue multiple classes of shares and to
impose asset-based distribution fees and
early withdrawal charges (‘‘EWCs’’).
Applicants: ACAP Strategic Fund
(‘‘Initial Fund’’) and SilverBay Capital
Management LLC (‘‘Adviser’’).
SUMMARY:
Filing Dates: The application was
filed on July 15, 2014, and amended on
November 5, 2014 and December 8,
2014.
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 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
January 5, 2015 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 writing to the
Commission’s Secretary.
DATES:
Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090;
Applicants: 350 Madison Avenue, 9th
Floor, New York, NY 10017.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
ADDRESSES:
[FR Doc. 2014–29500 Filed 12–16–14; 8:45 am]
FOR FURTHER INFORMATION CONTACT:
BILLING CODE 8011–01–P
Courtney S. Thornton, Senior Counsel,
at (202) 551–6812, or David P. Bartels,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s Office).
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31372; File No. 812–14333]
ACAP Strategic Fund and SilverBay
Capital Management LLC; Notice of
Application
December 11, 2014.
Securities and Exchange
Commission (‘‘Commission’’).
AGENCY:
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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.
SUPPLEMENTARY INFORMATION:
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Applicants’ Representations
1. The Initial Fund is a Delaware
statutory trust that is registered under
the Act as a non-diversified, closed-end
management investment company. The
Initial Fund’s investment objective is to
achieve maximum capital appreciation.
The Initial Fund pursues this objective
by investing its assets primarily in
equity securities of U.S. and foreign
companies that the Adviser believes are
well positioned to benefit from demand
for their products or services, including
companies that can innovate or grow
rapidly relative to their peers in their
markets. The Initial Fund also pursues
its objective by effecting short sales of
securities when the Adviser believes
that the market price of a security is
above its estimated intrinsic or
fundamental value.
2. The Adviser is a Delaware limited
liability company and is registered as an
investment adviser under the
Investment Advisers Act of 1940. The
Adviser serves as investment adviser to
the Initial Fund.
3. Applicants seek an order to permit
the Initial Fund to issue multiple classes
of shares, each having its own fee and
expense structure, and to impose EWCs
and asset-based distribution fees with
respect to certain classes.
4. Applicants request that the order
also apply to any continuously-offered
registered closed-end management
investment company that has been
previously organized or that may be
organized in the future for which the
Adviser or any entity controlling,
controlled by, or under common control
with the Adviser, or any successor in
interest to any such entity,1 acts as
investment adviser and which operates
as an interval fund pursuant to rule
23c–3 under the Act or provides
periodic liquidity with respect to its
shares pursuant to rule 13e–4 under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) (each a ‘‘Future
Fund,’’ and together with the Initial
Fund, the ‘‘Funds’’).2
5. The Initial Fund is currently
making a continuous public offering of
its common shares following the
effectiveness of its initial registration
statement. Applicants state that
additional offerings by any Fund relying
on the order may be on a private
placement or public offering basis.
1 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.
2 Any Fund relying on this relief in the future will
do so in a manner consistent with the terms and
conditions of the application. Applicants represent
that each entity presently intending to rely on the
requested relief is listed as an applicant.
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Shares of the Funds will not be listed on
any securities exchange nor quoted on
any inter-dealer quotation system.
Applicants do not expect there to be a
secondary trading market for shares of
the Funds. The minimum initial
investment in the Initial Fund by an
investor is $100,000, subject to
reduction at the discretion of an
investor’s broker, dealer, or other
financial intermediary, but not below
$50,000. Shares of the Initial Fund may
be purchased only by investors who
certify to the Initial Fund or its agents
that they have a net worth (in the case
of a natural person or with assets held
jointly with a spouse) of more than $2
million, excluding the value of the
primary residence of such person and
any debt secured by such property (up
to the current market value of the
residence).
6. If the requested relief is granted, the
Initial Fund intends to redesignate its
common shares as ‘‘Class A Shares’’ and
anticipates commencing a continuous
offering of Class W Shares. The Initial
Fund’s Class A Shares will be subject to
a front-end sales load based on the
amount invested and will also be
subject to a shareholder servicing fee
and other expenses. The Initial Fund’s
Class W Shares will be subject to other
expenses, but will not be subject to an
asset-based distribution fee. Currently,
Class A Shares and Class W Shares will
not be subject to an EWC. However,
applicants state that Class A Shares and
other classes may, in the future, be
subject to an EWC. Shares that are not
subject to an EWC when purchased will
not subsequently be subject to an EWC.
7. Applicants state that, from time to
time, the Initial Fund may create
additional classes of shares, the terms of
which may differ from the Class A and
Class W Shares in the following
respects: (i) The amount of fees
permitted by different distribution
plans; (ii) voting rights with respect to
a distribution plan of a class; (iii)
different class designations; (iv) the
impact of any class expenses directly
attributable to a particular class of
shares allocated on a class basis as
described in the application; (v) any
differences in dividends and net asset
value resulting from differences in fees
under a distribution plan or in class
expenses; (vi) any EWC or other sales
load structure; and (vii) exchange or
conversion privileges of the classes as
permitted under the Act.
8. Applicants state that the Initial
Fund has adopted a fundamental policy
to repurchase a specified percentage of
its shares (no less than 5%) at net asset
value on a quarterly basis. Such
repurchase offers will be conducted
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75195
pursuant to rule 23c–3 under the Act.
Each of the other Funds will likewise
adopt fundamental investment policies
in compliance with rule 23c–3 and
make quarterly repurchase offers to its
shareholders or provide periodic
liquidity with respect to its shares
pursuant to rule 13e–4 under the
Exchange Act.3 Any repurchase offers
made by the Funds will be made to all
holders of shares of each such Fund.
9. Applicants represent that any assetbased service and distribution fees for
each class of shares will comply with
the provisions of NASD Rule 2830(d)
(‘‘NASD Sales Charge Rule’’).4
Applicants also represent that each
Fund will disclose in its prospectus the
fees, expenses and other characteristics
of each class of shares offered for sale
by the prospectus, as is required for
open-end multiple class funds under
Form N–1A. As is required for open-end
funds, each Fund will disclose its
expenses in shareholder reports, and
disclose any arrangements that result in
breakpoints in or elimination of sales
loads in its prospectus.5 In addition,
applicants will comply with applicable
enhanced fee disclosure requirements
for funds of funds, including registered
funds of hedge funds.6
10. Each of the Funds will comply
with any requirements that the
Commission or FINRA may adopt
regarding disclosure at the point of sale
and in transaction confirmations about
the costs and conflicts of interest arising
out of the distribution of open-end
investment company shares, and
regarding prospectus disclosure of sales
loads and revenue sharing
arrangements, as if those requirements
applied to the Fund. In addition, each
Fund will contractually require that any
distributor of the Fund’s shares comply
3 Applicants submit that rule 23c–3 and
Regulation M under the Exchange Act permit an
interval fund to make repurchase offers to
repurchase its shares while engaging in a
continuous offering of its shares pursuant to Rule
415 under the Securities Act of 1933.
4 Any reference to the NASD Sales Charge Rule
includes any successor or replacement rule that
may be adopted by the Financial Industry
Regulatory Authority (‘‘FINRA’’).
5 See Shareholder Reports and Quarterly Portfolio
Disclosure of Registered Management Investment
Companies, Investment Company Act Release No.
26372 (Feb. 27, 2004) (adopting release) (requiring
open-end investment companies to disclose fund
expenses in shareholder reports); and Disclosure of
Breakpoint Discounts by Mutual Funds, Investment
Company Act Release No. 26464 (June 7, 2004)
(adopting release) (requiring open-end investment
companies to provide prospectus disclosure of
certain sales load information).
6 Fund of Funds Investments, Investment
Company Act Rel. Nos. 26198 (Oct. 1 2003)
(proposing release) and 27399 (Jun. 20, 2006)
(adopting release). See also Rules 12d1–1, et seq. of
the Act.
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Federal Register / Vol. 79, No. 242 / Wednesday, December 17, 2014 / Notices
with such requirements in connection
with the distribution of such Fund’s
shares.
11. Each Fund will allocate all
expenses incurred by it among the
various classes of shares based on the
net assets of the Fund attributable to
each class, except that the net asset
value and expenses of each class will
reflect distribution fees, service fees,
and any other incremental expenses of
that class. Expenses of the Fund
allocated to a particular class of shares
will be borne on a pro rata basis by each
outstanding share of that class.
Applicants state that each Fund will
comply with the provisions of rule 18f–
3 under the Act as if it were an openend investment company.
12. Applicants state that each Fund
may impose an EWC on shares
submitted for repurchase that have been
held less than a specified period and
may waive the EWC for certain
categories of shareholders or
transactions to be established from time
to time. Applicants state that each of the
Funds will apply the EWC (and any
waivers or scheduled variations of the
EWC) uniformly to all shareholders in a
given class and consistently with the
requirements of rule 22d–1 under the
Act as if the Funds were open-end
investment companies.
13. Each Fund operating as an interval
fund pursuant to rule 23c–3 under the
Act may offer its shareholders an
exchange feature under which the
shareholders of the Fund may, in
connection with the Fund’s periodic
repurchase offers, exchange their shares
of the Fund for shares of the same class
of (i) registered open-end investment
companies or (ii) other registered
closed-end investment companies that
comply with rule 23c–3 under the Act
and continuously offer their shares at
net asset value, that are in the Fund’s
group of investment companies
(collectively, ‘‘Other Funds’’). Shares of
a Fund operating pursuant to rule 23c–
3 that are exchanged for shares of Other
Funds will be included as part of the
amount of the repurchase offer amount
for such Fund as specified in rule 23c–
3 under the Act. Any exchange option
will comply with rule 11a–3 under the
Act, as if the Fund were an open-end
investment company subject to rule
11a–3. In complying with rule 11a–3,
each Fund will treat an EWC as if it
were a contingent deferred sales load
(‘‘CDSL’’).
Applicants’ Legal Analysis
Multiple Classes of Shares
1. Section 18(c) of the Act provides,
in relevant part, that a closed-end
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investment company may not issue or
sell any senior security if, immediately
thereafter, the company has outstanding
more than one class of senior security.
Applicants state that the creation of
multiple classes of shares of the Funds
may be prohibited by section 18(c), as
a class may have priority over another
class as to payment of dividends
because shareholders of different classes
would pay different fees and expenses.
2. Section 18(i) of the Act provides
that each share of stock issued by a
registered management investment
company will be a voting stock and
have equal voting rights with every
other outstanding voting stock.
Applicants state that multiple classes of
shares of the Funds may violate section
18(i) of the Act because each class
would be entitled to exclusive voting
rights with respect to matters solely
related to that class.
3. Section 6(c) of the 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 the
Act, or from any rule thereunder, if and
to the extent 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 Act. Applicants
request an exemption under section 6(c)
from sections 18(c) and 18(i) to permit
the Funds to issue multiple classes of
shares.
4. Applicants submit that the
proposed allocation of expenses and
voting rights among multiple classes is
equitable and will not discriminate
against any group or class of
shareholders. Applicants submit that
the proposed arrangements would
permit a Fund to facilitate the
distribution of its shares and provide
investors with a broader choice of
shareholder services. Applicants assert
that the proposed closed-end
investment company multiple class
structure does not raise the concerns
underlying section 18 of the Act to any
greater degree than open-end
investment companies’ multiple class
structures that are permitted by rule
18f–3 under the Act. Applicants state
that each Fund will comply with the
provisions of rule 18f–3 as if it were an
open-end investment company.
Early Withdrawal Charges
1. Section 23(c) of the Act provides,
in relevant part, that no registered
closed-end investment company will
purchase securities of which it is the
issuer, except: (a) On a securities
exchange or other open market; (b)
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pursuant to tenders, after reasonable
opportunity to submit tenders given to
all holders of securities of the class to
be purchased; or (c) under other
circumstances as the Commission may
permit by rules and regulations or
orders for the protection of investors.
2. Rule 23c–3 under the Act permits
a registered closed-end investment
company (an ‘‘interval fund’’) to make
repurchase offers of between five and
twenty-five percent of its outstanding
shares at net asset value at periodic
intervals pursuant to a fundamental
policy of the interval fund. Rule 23c–
3(b)(1) under the Act provides that an
interval fund may deduct from
repurchase proceeds only a repurchase
fee, not to exceed two percent of the
proceeds, that is paid to the interval
fund and is reasonably intended to
compensate the fund for expenses
directly related to the repurchase.
3. Section 23(c)(3) provides that the
Commission may issue an order that
would permit a closed-end investment
company to repurchase its shares in
circumstances in which the repurchase
is made in a manner or on a basis that
does not unfairly discriminate against
any holders of the class or classes of
securities to be purchased.
4. Applicants request relief under
section 6(c), discussed above, and
section 23(c)(3) from rule 23c–3 to the
extent necessary for the Funds to
impose EWCs on shares of the Funds
submitted for repurchase that have been
held for less than a specified period.
5. Applicants state that the EWCs they
intend to impose are functionally
similar to CDSLs imposed by open-end
investment companies under rule 6c–10
under the Act. Rule 6c–10 permits openend investment companies to impose
CDSLs, subject to certain conditions.
Applicants note that rule 6c–10 is
grounded in policy considerations
supporting the employment of CDSLs
where there are adequate safeguards for
the investor and state that the same
policy considerations support
imposition of EWCs in the interval fund
context. In addition, applicants state
that EWCs may be necessary for the
distributor to recover distribution costs.
Applicants represent that any EWC
imposed by the Funds will comply with
rule 6c–10 under the Act as if the rule
were applicable to closed-end
investment companies. The Funds will
disclose EWCs in accordance with the
requirements of Form N–1A concerning
CDSLs. Applicants further state that the
Funds will apply the EWC (and any
waivers or scheduled variations of the
EWC) uniformly to all shareholders in a
given class and consistently with the
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believe that the requested relief meets
the standards of section 6(c) of the Act.
Asset-Based Distribution Fees
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requirements of rule 22d–1 under the
Act.
Applicants’ Condition
1. Section 17(d) of the Act prohibits
an affiliated person of a registered
investment company or an affiliated
person of such person, acting as
principal, from participating in or
effecting any transaction in connection
with any joint enterprise or joint
arrangement in which the investment
company participates in contravention
of Commission regulations. Rule 17d–1
provides that no joint transaction
covered by the rule may be effected
unless the Commission issues an order
permitting the transaction. In reviewing
applications submitted under section
17(d) and rule 17d–1, the Commission
considers whether the participation of
the investment company in a joint
enterprise or joint arrangement is
consistent with the provisions, policies
and purposes of the Act, and the extent
to which the participation is on a basis
different from or less advantageous than
that of other participants.
2. Rule 17d–3 under the Act provides
an exemption from section 17(d) and
rule 17d–1 to permit open-end
investment companies to enter into
distribution arrangements pursuant to
rule 12b–1 under the Act. Applicants
request an order under section 17(d) and
rule 17d–1 under the Act to the extent
necessary to permit the Fund to impose
asset-based distribution fees. Applicants
have agreed to comply with rules 12b–
1 and 17d–3 as if those rules applied to
closed-end investment companies,
which they believe will resolve any
concerns that might arise in connection
with a Fund financing the distribution
of its shares through asset-based
distribution fees.
For the reasons stated above,
applicants submit that the exemptions
requested under section 6(c) are
necessary and appropriate in the public
interest and are consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the Act. Applicants further
submit that the relief requested
pursuant to section 23(c)(3) will be
consistent with the protection of
investors and will insure that applicants
do not unfairly discriminate against any
holders of the class of securities to be
purchased. Finally, applicants state that
the Funds’ institution of asset-based
distribution fees is consistent with the
provisions, policies and purposes of the
Act and does not involve participation
on a basis different from or less
advantageous than that of other
participants. Applicants therefore
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
Each Fund relying on the order will
comply with the provisions of rules 6c–
10, 12b–1, 17d–3, 18f–3, 22d–1, and,
where applicable, 11a–3 under the Act,
as amended from time to time, as if
those rules applied to closed-end
management investment companies,
and will comply with the NASD Sales
Charge Rule, as amended from time to
time, as if that rule applied to all closedend management investment
companies.
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For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–29501 Filed 12–16–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73813; File No. SR–BATS–
2014–063]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Related to Fees for Use
of BATS Exchange, Inc.
75197
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange filed a proposal to
amend the fee schedule applicable to
Members 5 and non-members of the
Exchange pursuant to BATS Rules
15.1(a) and (c). Changes to the fee
schedule pursuant to this proposal are
effective upon filing.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
December 11, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
1, 2014, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange has designated the proposed
rule change as one establishing or
changing a member due, fee, or other
charge imposed by the Exchange under
Section 19(b)(3)(A)(ii) of the Act 3 and
Rule 19b–4(f)(2) thereunder,4 which
renders the proposed rule change
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
The Exchange proposes to modify its
fee schedule effective immediately in
order to adopt pricing for ROOC orders,
to adopt pricing for orders that execute
pursuant to Rule 11.24, titled ‘‘Opening
Process for Non-BATS-Listed
Securities,’’ to adjust the requirements
to achieve Tier 3 of the Cross-Asset
Step-Up Tiers, and to amend pricing for
and add two additional tiers to the
NBBO Setter program, as described
below.
ROOC
The Exchange recently filed a rule
change to adopt a new routing strategy,
ROOC, which provides that orders
entered on the Exchange may be
designated for participation in the
opening, re-opening (following a halt
suspension or pause), or closing process
(collectively, an ‘‘Auction’’) of a primary
listing market other than the Exchange
if received before the opening/re-
1 15
2 17
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
5 A Member is defined as ‘‘any registered broker
or dealer that has been admitted to membership in
the Exchange.’’ See Exchange Rule 1.5(n).
E:\FR\FM\17DEN1.SGM
17DEN1
]]>Agencies
[Federal Register Volume 79, Number 242 (Wednesday, December 17, 2014)]
[Notices]
[Pages 75194-75197]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29501]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31372; File No. 812-14333]
ACAP Strategic Fund and SilverBay Capital Management LLC; Notice
of Application
December 11, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from sections 18(c)
and 18(i) of the Act, under sections 6(c) and 23(c)(3) of the Act for
an exemption from rule 23c-3 under the Act, and for an order pursuant
to section 17(d) of the Act and rule 17d-1 under the Act.
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SUMMARY: Applicants request an order to permit certain registered
closed-end management investment companies to issue multiple classes of
shares and to impose asset-based distribution fees and early withdrawal
charges (``EWCs'').
Applicants: ACAP Strategic Fund (``Initial Fund'') and SilverBay
Capital Management LLC (``Adviser'').
DATES: Filing Dates: The application was filed on July 15, 2014, and
amended on November 5, 2014 and December 8, 2014.
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 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 January 5, 2015 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 writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants: 350 Madison Avenue,
9th Floor, New York, NY 10017.
FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel,
at (202) 551-6812, or David P. Bartels, 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.
[[Page 75195]]
Applicants' Representations
1. The Initial Fund is a Delaware statutory trust that is
registered under the Act as a non-diversified, closed-end management
investment company. The Initial Fund's investment objective is to
achieve maximum capital appreciation. The Initial Fund pursues this
objective by investing its assets primarily in equity securities of
U.S. and foreign companies that the Adviser believes are well
positioned to benefit from demand for their products or services,
including companies that can innovate or grow rapidly relative to their
peers in their markets. The Initial Fund also pursues its objective by
effecting short sales of securities when the Adviser believes that the
market price of a security is above its estimated intrinsic or
fundamental value.
2. The Adviser is a Delaware limited liability company and is
registered as an investment adviser under the Investment Advisers Act
of 1940. The Adviser serves as investment adviser to the Initial Fund.
3. Applicants seek an order to permit the Initial Fund to issue
multiple classes of shares, each having its own fee and expense
structure, and to impose EWCs and asset-based distribution fees with
respect to certain classes.
4. Applicants request that the order also apply to any
continuously-offered registered closed-end management investment
company that has been previously organized or that may be organized in
the future for which the Adviser or any entity controlling, controlled
by, or under common control with the Adviser, or any successor in
interest to any such entity,\1\ acts as investment adviser and which
operates as an interval fund pursuant to rule 23c-3 under the Act or
provides periodic liquidity with respect to its shares pursuant to rule
13e-4 under the Securities Exchange Act of 1934 (``Exchange Act'')
(each a ``Future Fund,'' and together with the Initial Fund, the
``Funds'').\2\
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\1\ 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.
\2\ Any Fund relying on this relief in the future will do so in
a manner consistent with the terms and conditions of the
application. Applicants represent that each entity presently
intending to rely on the requested relief is listed as an applicant.
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5. The Initial Fund is currently making a continuous public
offering of its common shares following the effectiveness of its
initial registration statement. Applicants state that additional
offerings by any Fund relying on the order may be on a private
placement or public offering basis. Shares of the Funds will not be
listed on any securities exchange nor quoted on any inter-dealer
quotation system. Applicants do not expect there to be a secondary
trading market for shares of the Funds. The minimum initial investment
in the Initial Fund by an investor is $100,000, subject to reduction at
the discretion of an investor's broker, dealer, or other financial
intermediary, but not below $50,000. Shares of the Initial Fund may be
purchased only by investors who certify to the Initial Fund or its
agents that they have a net worth (in the case of a natural person or
with assets held jointly with a spouse) of more than $2 million,
excluding the value of the primary residence of such person and any
debt secured by such property (up to the current market value of the
residence).
6. If the requested relief is granted, the Initial Fund intends to
redesignate its common shares as ``Class A Shares'' and anticipates
commencing a continuous offering of Class W Shares. The Initial Fund's
Class A Shares will be subject to a front-end sales load based on the
amount invested and will also be subject to a shareholder servicing fee
and other expenses. The Initial Fund's Class W Shares will be subject
to other expenses, but will not be subject to an asset-based
distribution fee. Currently, Class A Shares and Class W Shares will not
be subject to an EWC. However, applicants state that Class A Shares and
other classes may, in the future, be subject to an EWC. Shares that are
not subject to an EWC when purchased will not subsequently be subject
to an EWC.
7. Applicants state that, from time to time, the Initial Fund may
create additional classes of shares, the terms of which may differ from
the Class A and Class W Shares in the following respects: (i) The
amount of fees permitted by different distribution plans; (ii) voting
rights with respect to a distribution plan of a class; (iii) different
class designations; (iv) the impact of any class expenses directly
attributable to a particular class of shares allocated on a class basis
as described in the application; (v) any differences in dividends and
net asset value resulting from differences in fees under a distribution
plan or in class expenses; (vi) any EWC or other sales load structure;
and (vii) exchange or conversion privileges of the classes as permitted
under the Act.
8. Applicants state that the Initial Fund has adopted a fundamental
policy to repurchase a specified percentage of its shares (no less than
5%) at net asset value on a quarterly basis. Such repurchase offers
will be conducted pursuant to rule 23c-3 under the Act. Each of the
other Funds will likewise adopt fundamental investment policies in
compliance with rule 23c-3 and make quarterly repurchase offers to its
shareholders or provide periodic liquidity with respect to its shares
pursuant to rule 13e-4 under the Exchange Act.\3\ Any repurchase offers
made by the Funds will be made to all holders of shares of each such
Fund.
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\3\ Applicants submit that rule 23c-3 and Regulation M under the
Exchange Act permit an interval fund to make repurchase offers to
repurchase its shares while engaging in a continuous offering of its
shares pursuant to Rule 415 under the Securities Act of 1933.
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9. Applicants represent that any asset-based service and
distribution fees for each class of shares will comply with the
provisions of NASD Rule 2830(d) (``NASD Sales Charge Rule'').\4\
Applicants also represent that each Fund will disclose in its
prospectus the fees, expenses and other characteristics of each class
of shares offered for sale by the prospectus, as is required for open-
end multiple class funds under Form N-1A. As is required for open-end
funds, each Fund will disclose its expenses in shareholder reports, and
disclose any arrangements that result in breakpoints in or elimination
of sales loads in its prospectus.\5\ In addition, applicants will
comply with applicable enhanced fee disclosure requirements for funds
of funds, including registered funds of hedge funds.\6\
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\4\ Any reference to the NASD Sales Charge Rule includes any
successor or replacement rule that may be adopted by the Financial
Industry Regulatory Authority (``FINRA'').
\5\ See Shareholder Reports and Quarterly Portfolio Disclosure
of Registered Management Investment Companies, Investment Company
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring
open-end investment companies to disclose fund expenses in
shareholder reports); and Disclosure of Breakpoint Discounts by
Mutual Funds, Investment Company Act Release No. 26464 (June 7,
2004) (adopting release) (requiring open-end investment companies to
provide prospectus disclosure of certain sales load information).
\6\ Fund of Funds Investments, Investment Company Act Rel. Nos.
26198 (Oct. 1 2003) (proposing release) and 27399 (Jun. 20, 2006)
(adopting release). See also Rules 12d1-1, et seq. of the Act.
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10. Each of the Funds will comply with any requirements that the
Commission or FINRA may adopt regarding disclosure at the point of sale
and in transaction confirmations about the costs and conflicts of
interest arising out of the distribution of open-end investment company
shares, and regarding prospectus disclosure of sales loads and revenue
sharing arrangements, as if those requirements applied to the Fund. In
addition, each Fund will contractually require that any distributor of
the Fund's shares comply
[[Page 75196]]
with such requirements in connection with the distribution of such
Fund's shares.
11. Each Fund will allocate all expenses incurred by it among the
various classes of shares based on the net assets of the Fund
attributable to each class, except that the net asset value and
expenses of each class will reflect distribution fees, service fees,
and any other incremental expenses of that class. Expenses of the Fund
allocated to a particular class of shares will be borne on a pro rata
basis by each outstanding share of that class. Applicants state that
each Fund will comply with the provisions of rule 18f-3 under the Act
as if it were an open-end investment company.
12. Applicants state that each Fund may impose an EWC on shares
submitted for repurchase that have been held less than a specified
period and may waive the EWC for certain categories of shareholders or
transactions to be established from time to time. Applicants state that
each of the Funds will apply the EWC (and any waivers or scheduled
variations of the EWC) uniformly to all shareholders in a given class
and consistently with the requirements of rule 22d-1 under the Act as
if the Funds were open-end investment companies.
13. Each Fund operating as an interval fund pursuant to rule 23c-3
under the Act may offer its shareholders an exchange feature under
which the shareholders of the Fund may, in connection with the Fund's
periodic repurchase offers, exchange their shares of the Fund for
shares of the same class of (i) registered open-end investment
companies or (ii) other registered closed-end investment companies that
comply with rule 23c-3 under the Act and continuously offer their
shares at net asset value, that are in the Fund's group of investment
companies (collectively, ``Other Funds''). Shares of a Fund operating
pursuant to rule 23c-3 that are exchanged for shares of Other Funds
will be included as part of the amount of the repurchase offer amount
for such Fund as specified in rule 23c-3 under the Act. Any exchange
option will comply with rule 11a-3 under the Act, as if the Fund were
an open-end investment company subject to rule 11a-3. In complying with
rule 11a-3, each Fund will treat an EWC as if it were a contingent
deferred sales load (``CDSL'').
Applicants' Legal Analysis
Multiple Classes of Shares
1. Section 18(c) of the Act provides, in relevant part, that a
closed-end investment company may not issue or sell any senior security
if, immediately thereafter, the company has outstanding more than one
class of senior security. Applicants state that the creation of
multiple classes of shares of the Funds may be prohibited by section
18(c), as a class may have priority over another class as to payment of
dividends because shareholders of different classes would pay different
fees and expenses.
2. Section 18(i) of the Act provides that each share of stock
issued by a registered management investment company will be a voting
stock and have equal voting rights with every other outstanding voting
stock. Applicants state that multiple classes of shares of the Funds
may violate section 18(i) of the Act because each class would be
entitled to exclusive voting rights with respect to matters solely
related to that class.
3. Section 6(c) of the 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 the Act, or from any
rule thereunder, if and to the extent 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 Act. Applicants request an exemption under section
6(c) from sections 18(c) and 18(i) to permit the Funds to issue
multiple classes of shares.
4. Applicants submit that the proposed allocation of expenses and
voting rights among multiple classes is equitable and will not
discriminate against any group or class of shareholders. Applicants
submit that the proposed arrangements would permit a Fund to facilitate
the distribution of its shares and provide investors with a broader
choice of shareholder services. Applicants assert that the proposed
closed-end investment company multiple class structure does not raise
the concerns underlying section 18 of the Act to any greater degree
than open-end investment companies' multiple class structures that are
permitted by rule 18f-3 under the Act. Applicants state that each Fund
will comply with the provisions of rule 18f-3 as if it were an open-end
investment company.
Early Withdrawal Charges
1. Section 23(c) of the Act provides, in relevant part, that no
registered closed-end investment company will purchase securities of
which it is the issuer, except: (a) On a securities exchange or other
open market; (b) pursuant to tenders, after reasonable opportunity to
submit tenders given to all holders of securities of the class to be
purchased; or (c) under other circumstances as the Commission may
permit by rules and regulations or orders for the protection of
investors.
2. Rule 23c-3 under the Act permits a registered closed-end
investment company (an ``interval fund'') to make repurchase offers of
between five and twenty-five percent of its outstanding shares at net
asset value at periodic intervals pursuant to a fundamental policy of
the interval fund. Rule 23c-3(b)(1) under the Act provides that an
interval fund may deduct from repurchase proceeds only a repurchase
fee, not to exceed two percent of the proceeds, that is paid to the
interval fund and is reasonably intended to compensate the fund for
expenses directly related to the repurchase.
3. Section 23(c)(3) provides that the Commission may issue an order
that would permit a closed-end investment company to repurchase its
shares in circumstances in which the repurchase is made in a manner or
on a basis that does not unfairly discriminate against any holders of
the class or classes of securities to be purchased.
4. Applicants request relief under section 6(c), discussed above,
and section 23(c)(3) from rule 23c-3 to the extent necessary for the
Funds to impose EWCs on shares of the Funds submitted for repurchase
that have been held for less than a specified period.
5. Applicants state that the EWCs they intend to impose are
functionally similar to CDSLs imposed by open-end investment companies
under rule 6c-10 under the Act. Rule 6c-10 permits open-end investment
companies to impose CDSLs, subject to certain conditions. Applicants
note that rule 6c-10 is grounded in policy considerations supporting
the employment of CDSLs where there are adequate safeguards for the
investor and state that the same policy considerations support
imposition of EWCs in the interval fund context. In addition,
applicants state that EWCs may be necessary for the distributor to
recover distribution costs. Applicants represent that any EWC imposed
by the Funds will comply with rule 6c-10 under the Act as if the rule
were applicable to closed-end investment companies. The Funds will
disclose EWCs in accordance with the requirements of Form N-1A
concerning CDSLs. Applicants further state that the Funds will apply
the EWC (and any waivers or scheduled variations of the EWC) uniformly
to all shareholders in a given class and consistently with the
[[Page 75197]]
requirements of rule 22d-1 under the Act.
Asset-Based Distribution Fees
1. Section 17(d) of the Act prohibits an affiliated person of a
registered investment company or an affiliated person of such person,
acting as principal, from participating in or effecting any transaction
in connection with any joint enterprise or joint arrangement in which
the investment company participates in contravention of Commission
regulations. Rule 17d-1 provides that no joint transaction covered by
the rule may be effected unless the Commission issues an order
permitting the transaction. In reviewing applications submitted under
section 17(d) and rule 17d-1, the Commission considers whether the
participation of the investment company in a joint enterprise or joint
arrangement is consistent with the provisions, policies and purposes of
the Act, and the extent to which the participation is on a basis
different from or less advantageous than that of other participants.
2. Rule 17d-3 under the Act provides an exemption from section
17(d) and rule 17d-1 to permit open-end investment companies to enter
into distribution arrangements pursuant to rule 12b-1 under the Act.
Applicants request an order under section 17(d) and rule 17d-1 under
the Act to the extent necessary to permit the Fund to impose asset-
based distribution fees. Applicants have agreed to comply with rules
12b-1 and 17d-3 as if those rules applied to closed-end investment
companies, which they believe will resolve any concerns that might
arise in connection with a Fund financing the distribution of its
shares through asset-based distribution fees.
For the reasons stated above, applicants submit that the exemptions
requested under section 6(c) are necessary and appropriate in the
public interest and are consistent with the protection of investors and
the purposes fairly intended by the policy and provisions of the Act.
Applicants further submit that the relief requested pursuant to section
23(c)(3) will be consistent with the protection of investors and will
insure that applicants do not unfairly discriminate against any holders
of the class of securities to be purchased. Finally, applicants state
that the Funds' institution of asset-based distribution fees is
consistent with the provisions, policies and purposes of the Act and
does not involve participation on a basis different from or less
advantageous than that of other participants. Applicants therefore
believe that the requested relief meets the standards of section 6(c)
of the Act.
Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
Each Fund relying on the order will comply with the provisions of
rules 6c-10, 12b-1, 17d-3, 18f-3, 22d-1, and, where applicable, 11a-3
under the Act, as amended from time to time, as if those rules applied
to closed-end management investment companies, and will comply with the
NASD Sales Charge Rule, as amended from time to time, as if that rule
applied to all closed-end management investment companies.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29501 Filed 12-16-14; 8:45 am]
BILLING CODE 8011-01-P
