CWM Advisors, LLC, et al.; Notice of Application, 88300-88302 [2016-29301]
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88300
Federal Register / Vol. 81, No. 235 / Wednesday, December 7, 2016 / Notices
preceded immediately by prominent,
plain English disclosure containing
either: (a) An explanation of: (i) The
circumstances under which an
Applicant directly or indirectly may
engage in principal transactions; (ii) the
nature and significance of conflicts with
its client’s interests as a result of the
transactions; and (iii) how an Applicant
addresses those conflicts; or (b) a
statement explaining that the client is
consenting to principal transactions,
followed by a cross-reference to a
specific document provided to the client
containing the disclosure in (a)(i)–(iii)
above and to the specific page or pages
on which such disclosure is located;
provided, however, that if an Applicant
requires time to modify its electronic
systems to provide the specific page
cross-reference required by clause (b),
the Applicant may, while updating such
electronic systems, and for no more than
90 days from the date of the Order,
instead provide a cross-reference to a
specific document provided to the client
containing the disclosure in (a)(i)–(iii)
above and to the specific section in such
document in which such disclosure is
located. Transition provision: To the
extent that the Applicants obtained fully
informed written revocable consent
from an advisory client for purposes of
rule 206(3)–3T(a)(3) prior to December
31, 2016, the Applicants may rely on
this Order with respect to such client
without obtaining additional
prospective consent from such client.
5. The Applicants, prior to the
execution of each transaction in reliance
on this Order, will: (a) Inform the
advisory client, orally or in writing, of
the capacity in which they may act with
respect to such transaction; and (b)
obtain consent from the advisory client,
orally or in writing, to act as principal
for their own account with respect to
such transaction.
6. The Applicants will send a written
confirmation at or before completion of
each such transaction that includes, in
addition to the information required by
rule 10b–10 under the Exchange Act, a
conspicuous, plain English statement
informing the advisory client that the
Applicants: (a) Disclosed to the client
prior to the execution of the transaction
that the Applicants may be acting in a
principal capacity in connection with
the transaction and the client authorized
the transaction; and (b) sold the security
to, or bought the security from, the
client for its own account.
7. The Applicants will send to the
client, no less frequently than annually,
written disclosure containing a list of all
transactions that were executed in the
client’s account in reliance upon this
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Order, and the date and price of each
such transaction.
8. Each Applicant is a broker-dealer
registered under section 15 of the
Exchange Act and each account for
which the Applicants rely on this Order
is a brokerage account subject to the
Exchange Act, and the rules thereunder,
and the rules of the self-regulatory
organization(s) of which it is a member.
9. Each written disclosure required as
a condition to this Order will include a
conspicuous, plain English statement
that the client may revoke the written
consent referred to in Condition 4 above
without penalty at any time by written
notice to the Applicants in accordance
with reasonable procedures established
by the Applicants, but in all cases such
revocation must be given effect within
5 business days of the Applicants’
receipt thereof.
10. The Applicants will maintain
records sufficient to enable verification
of compliance with the conditions of
this Order. Such records will include,
without limitation: (a) Documentation
sufficient to demonstrate compliance
with each disclosure and consent
requirement under this Order; (b) in
particular, documentation sufficient to
demonstrate that, prior to the execution
of each transaction in reliance on this
Order, each Applicant informed the
relevant advisory client of the capacity
in which the Applicant may act with
respect to the transaction and that it
received the advisory client’s consent (if
the Applicant informs the client orally
of the capacity in which it may act with
respect to such transaction or obtains
oral consent, such records may, for
example, include recordings of
telephone conversations or
contemporaneous written notations);
and (c) documentation sufficient to
enable assessment of compliance by the
Applicants with sections 206(1) and (2)
of the Advisers Act in connection with
its reliance on this Order.3 In each case,
such records will be maintained and
preserved in an easily accessible place
for a period of not less than five years,
the first two years in an appropriate
office of the Applicants, and be
available for inspection by the staff of
the Commission.
11. The Applicants will adopt written
compliance policies and procedures
reasonably designed to ensure, and each
Applicant’s chief compliance officer
will monitor, the Applicant’s
3 For example, under sections 206(1) and (2), an
adviser may not engage in any transaction on a
principal basis with a client that is not consistent
with the best interests of the client or that
subrogates the client’s interests to the adviser’s
own. Cf. Investment Advisers Act Release No. 2106
(Jan. 31, 2003) (adopting Rule 206(4)–6).
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compliance with the conditions of this
Order. Each Applicant’s chief
compliance officer will, on at least a
quarterly basis, conduct testing
reasonably sufficient to verify such
compliance. Such written policies and
procedures, monitoring and testing will
address, without limitation: (a)
Compliance by the Applicant with its
disclosure and consent requirements
under this Order; (b) the integrity and
operation of electronic systems
employed by the Applicant in
connection with its reliance on this
Order; (c) compliance by the Applicant
with its recordkeeping obligations under
this Order; and (d) whether there is any
evidence of the Applicant engaging in
‘‘dumping’’ in connection with its
reliance on this Order.4 Each
Applicant’s chief compliance officer
will document the frequency and results
of such monitoring and testing, and
each Applicant will maintain and
preserve such documentation in an
easily accessible place for a period of
not less than five years, the first two
years in an appropriate office of the
Applicant, and be available for
inspection by the staff of the
Commission.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2016–29300 Filed 12–6–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32375; 812–14685]
CWM Advisors, LLC, et al.; Notice of
Application
December 1, 2016.
Securities and Exchange
Commission (‘‘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, under
sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and
17(a)(2) of the Act, and under section
12(d)(1)(J) for an exemption from
sections 12(d)(1)(A) and 12(d)(1)(B) of
AGENCY:
4 See Report of the Securities and Exchange
Commission, Investment Trusts and Investment
Companies, H.R. Doc. No. 279, 76th Cong., 2d Sess.,
pt. 3, at 2581, 2589 (1939); Hearings on S. 3580
Before a Subcommittee of the Commission on
Banking and Currency, 76th Cong., 3d Sess. 209,
212–23 (1940); Hearings on S. 3580 Before the
Subcomm. of the Comm. on Banking and Currency,
76th Cong., 3d Sess. 322 (1940).
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Federal Register / Vol. 81, No. 235 / Wednesday, December 7, 2016 / Notices
asabaliauskas on DSK3SPTVN1PROD with NOTICES
the Act. The requested order would
permit (a) index-based series of certain
open-end management investment
companies (‘‘Funds’’) to issue shares
redeemable in large aggregations only
(‘‘Creation Units’’); (b) secondary market
transactions in Fund shares to occur at
negotiated market prices rather than at
net asset value (‘‘NAV’’); (c) certain
Funds to pay redemption proceeds,
under certain circumstances, more than
seven days after the tender of shares for
redemption; (d) certain affiliated
persons of a Fund to deposit securities
into, and receive securities from, the
Fund 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
Funds (‘‘Funds of Funds’’) to acquire
shares of the Funds.
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:
Summary of the Application
1. Applicants request an order that
would allow Funds to operate as index
exchange traded funds (‘‘ETFs’’).1 Fund
shares will be purchased and redeemed
at their NAV in Creation Units only. All
orders to purchase Creation Units and
all redemption requests will be placed
by or through an ‘‘Authorized
Participant’’, which will have signed a
participant agreement with a brokerdealer registered under the Securities
Exchange Act of 1934 (‘‘Exchange Act’’)
(together with any future distributor, the
Applicants: CWM Advisors, LLC
‘‘Distributor’’). Shares will be listed and
(‘‘CWM’’), a California limited liability
traded individually on a national
company registered as an investment
securities exchange, where share prices
adviser under the Investment Advisers
will be based on the current bid/offer
Act of 1940 and Northern Lights Fund
market. Any order granting the
Trust IV (‘‘Trust’’), a Delaware statutory requested relief would be subject to the
trust registered under the Act as an
terms and conditions stated in the
open-end management investment
application.
company with multiple series.
2. Each Fund will hold investment
Filing Dates: The application was
positions selected to correspond
filed on August 10, 2016.
generally to the performance of an
Hearing or Notification of Hearing: An Underlying Index. In the case of Selforder granting the requested relief will
Indexing Funds, an affiliated person, as
be issued unless the Commission orders defined in section 2(a)(3) of the Act
a hearing. Interested persons may
(‘‘Affiliated Person’’), or an affiliated
request a hearing by writing to the
person of an Affiliated Person (‘‘SecondCommission’s Secretary and serving
Tier Affiliate’’), of the Trust or a Fund,
applicants with a copy of the request,
of the Adviser, of any sub-adviser to or
personally or by mail. Hearing requests
promoter of a Fund, or of the Distributor
should be received by the Commission
will compile, create, sponsor or
by 5:30 p.m. on December 27, 2016 and
maintain the Underlying Index.2
should be accompanied by proof of
3. Shares will be purchased and
service on applicants, in the form of an
redeemed in Creation Units and
affidavit, or for lawyers, a certificate of
generally on an in-kind basis. Except
service. Pursuant to rule 0–5 under the
where the purchase or redemption will
Act, hearing requests should state the
include cash under the limited
nature of the writer’s interest, any facts
circumstances specified in the
bearing upon the desirability of a
1 Applicants request that the order apply to the
hearing on the matter, the reason for the
initial series of the Trust and any additional series
request, and the issues contested.
of the Trust, and any other open-end management
Persons who wish to be notified of a
investment company or series thereof, that may be
hearing may request notification by
created in the future (each, included in the term
writing to the Commission’s Secretary.
‘‘Fund’’), each of which will operate as an ETF and
will track a specified index comprised of domestic
ADDRESSES: Secretary, Securities and
equity and/or fixed income securities
Exchange Commission, 100 F Street NE., or foreign‘‘Underlying Index’’). Any Fund will (a)
(each, an
Washington, DC 20549–1090;
be advised by CWM or an entity controlling,
Applicants: CWM Advisors, LLC, 650
controlled by, or under common control with CWM
(each, an ‘‘Adviser’’) and (b) comply with the terms
San Benito St, Ste. 130, Hollister, CA
and conditions of the application.
95023; Northern Lights Fund Trust IV,
2 Each Self-Indexing Fund will post on its Web
17605 Wright Street, Omaha, NE 68130. site the identities and quantities of the investment
positions that will form the basis for the Fund’s
FOR FURTHER INFORMATION CONTACT:
calculation of its NAV at the end of the day.
Vanessa M. Meeks, Senior Counsel, or
Applicants believe that requiring Self-Indexing
Parisa Haghshenas, Branch Chief, at
Funds to maintain full portfolio transparency will
(202) 551–6825 (Division of Investment
help address, together with other protections,
conflicts of interest with respect to such Funds.
Management, Chief Counsel’s Office).
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88301
application, purchasers will be required
to purchase Creation Units by
depositing specified instruments
(‘‘Deposit Instruments’’), and
shareholders redeeming their shares
will receive specified instruments
(‘‘Redemption Instruments’’). The
Deposit Instruments and the
Redemption Instruments will each
correspond pro rata to the positions in
the Fund’s portfolio (including cash
positions) except as specified in the
application.
4. Because shares will not be
individually redeemable, applicants
request an exemption from section
5(a)(1) and section 2(a)(32) of the Act
that would permit the Funds to register
as open-end management investment
companies and issue shares that are
redeemable in Creation Units only.
5. Applicants also request an
exemption from section 22(d) of the Act
and rule 22c–1 under the Act as
secondary market trading in shares will
take place at negotiated prices, not at a
current offering price described in a
Fund’s prospectus, and not at a price
based on NAV. Applicants state that (a)
secondary market trading in shares does
not involve a Fund as a party and will
not result in dilution of an investment
in shares, and (b) to the extent different
prices exist during a given trading day,
or from day to day, such variances occur
as a result of third-party market forces,
such as supply and demand. Therefore,
applicants assert that secondary market
transactions in shares will not lead to
discrimination or preferential treatment
among purchasers. Finally, applicants
represent that share market prices will
be disciplined by arbitrage
opportunities, which should prevent
shares from trading at a material
discount or premium from NAV.
6. With respect to Funds that effect
creations and redemptions of Creation
Units in kind and that are based on
certain Underlying Indexes that include
foreign securities, applicants request
relief from the requirement imposed by
section 22(e) in order to allow such
Funds to pay redemption proceeds
within fourteen calendar days following
the tender of Creation Units for
redemption. Applicants assert that the
requested relief would not be
inconsistent with the spirit and intent of
section 22(e) to prevent unreasonable,
undisclosed or unforeseen delays in the
actual payment of redemption proceeds.
7. Applicants request an exemption to
permit Funds of Funds to acquire Fund
shares beyond the limits of section
12(d)(1)(A) of the Act; and the Funds,
and any principal underwriter for the
Funds, and/or any broker or dealer
registered under the Exchange Act, to
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88302
Federal Register / Vol. 81, No. 235 / Wednesday, December 7, 2016 / Notices
asabaliauskas on DSK3SPTVN1PROD with NOTICES
sell shares to Funds of Funds beyond
the limits of section 12(d)(1)(B) of the
Act. The application’s terms and
conditions are designed to, among other
things, help prevent any potential (i)
undue influence over a Fund through
control or voting power, or in
connection with certain services,
transactions, and underwritings, (ii)
excessive layering of fees, and (iii)
overly complex fund structures, which
are the concerns underlying the limits
in sections 12(d)(1)(A) and (B) of the
Act.
8. Applicants request an exemption
from sections 17(a)(1) and 17(a)(2) of the
Act to permit persons that are Affiliated
Persons, or Second Tier Affiliates, of the
Funds, solely by virtue of certain
ownership interests, to effectuate
purchases and redemptions in-kind. The
deposit procedures for in-kind
purchases of Creation Units and the
redemption procedures for in-kind
redemptions of Creation Units will be
the same for all purchases and
redemptions and Deposit Instruments
and Redemption Instruments will be
valued in the same manner as those
investment positions currently held by
the Funds. Applicants also seek relief
from the prohibitions on affiliated
transactions in section 17(a) to permit a
Fund to sell its shares to and redeem its
shares from a Fund of Funds, and to
engage in the accompanying in-kind
transactions with the Fund of Funds.3
The purchase of Creation Units by a
Fund of Funds directly from a Fund will
be accomplished in accordance with the
policies of the Fund of Funds and will
be based on the NAVs of the Funds.
9. Section 6(c) of the Act permits the
Commission to exempt any persons or
transactions from any provision of the
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 Act. Section 12(d)(1)(J) 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 section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
3 The requested relief would apply to direct sales
of shares in Creation Units by a Fund to a Fund of
Funds and redemptions of those shares. Applicants,
moreover, are not seeking relief from section 17(a)
for, and the requested relief will not apply to,
transactions where a Fund could be deemed an
Affiliated Person, or a Second-Tier Affiliate, of a
Fund of Funds because an Adviser or an entity
controlling, controlled by or under common control
with an Adviser provides investment advisory
services to that Fund of Funds.
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Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Brent J. Fields,
Secretary.
[FR Doc. 2016–29301 Filed 12–6–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79445; File No. SR–
NYSEArca–2016–152]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposal to
Change Representation Regarding
Investments by PowerShares DB Trust
Issued Receipts Listed Under
Commentary .02 to NYSE Arca Equities
Rule 8.200
December 1, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 18, 2016, NYSE Arca, Inc.
(the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to change a
representation regarding investments by
the following issues, which are
currently listed on the Exchange under
Commentary .02 to NYSE Arca Equities
Rule 8.200 (Trust Issued Receipts):
PowerShares DB Commodity Index
Tracking Fund; PowerShares DB Energy
Fund; PowerShares DB Oil Fund;
PowerShares DB Precious Metals Fund;
1 15
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
PO 00000
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PowerShares DB Gold Fund;
PowerShares DB Silver Fund;
PowerShares DB Base Metals Fund;
PowerShares DB Agriculture Fund;
PowerShares DB G10 Currency Harvest
Fund; PowerShares DB US Dollar Index
Bullish Fund; and PowerShares DB US
Dollar Index Bearish Fund. The
proposed rule change is available on the
Exchange’s Web site at www.nyse.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
self-regulatory organization 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 those 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange currently lists and
trades shares of the following securities
under Commentary .02 to NYSE Arca
Equities Rule 8.200 (Trust Issued
Receipts): PowerShares DB Commodity
Index Tracking Fund; PowerShares DB
Energy Fund; PowerShares DB Oil
Fund; PowerShares DB Precious Metals
Fund; PowerShares DB Gold Fund;
PowerShares DB Silver Fund;
PowerShares DB Base Metals Fund;
PowerShares DB Agriculture Fund;
PowerShares DB G10 Currency Harvest
Fund; PowerShares DB US Dollar Index
Bullish Fund; and PowerShares DB US
Dollar Index Bearish Fund (each a
‘‘Fund’’ and, collectively, the
‘‘Funds’’).4
4 The Shares of each Fund represent beneficial
ownership interests in the Fund’s net assets, as
described in the registration statements for the
Funds. See the following registration statements on
Form S–3 or Form S–1 under the Securities Act of
1933: (1) Registration statement on Form S–3ASR,
PowerShares DB Commodity Index Tracking Fund
(No. 333–203054, dated March 27, 2015); (2)
registration statement on Form S–3, PowerShares
DB G10 Currency Harvest Fund (No. 333–192126,
December 6, 2013); (3) registration statement on
Form S–3ASR, PowerShares DB US Dollar Index
Bullish Fund (No. 333–207089–01, September 23,
2015); (4) registration statement on Form S–1,
PowerShares DB US Dollar Index Bearish Fund (No.
333–193224, March 14, 2014); (5) registration
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]]>Agencies
[Federal Register Volume 81, Number 235 (Wednesday, December 7, 2016)]
[Notices]
[Pages 88300-88302]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29301]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 32375; 812-14685]
CWM Advisors, LLC, et al.; Notice of Application
December 1, 2016.
AGENCY: Securities and Exchange Commission (``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, under sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under
section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and
12(d)(1)(B) of
[[Page 88301]]
the Act. The requested order would permit (a) index-based series of
certain open-end management investment companies (``Funds'') to issue
shares redeemable in large aggregations only (``Creation Units''); (b)
secondary market transactions in Fund shares to occur at negotiated
market prices rather than at net asset value (``NAV''); (c) certain
Funds to pay redemption proceeds, under certain circumstances, more
than seven days after the tender of shares for redemption; (d) certain
affiliated persons of a Fund to deposit securities into, and receive
securities from, the Fund 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 Funds (``Funds of Funds'') to
acquire shares of the Funds.
-----------------------------------------------------------------------
Applicants: CWM Advisors, LLC (``CWM''), a California limited
liability company registered as an investment adviser under the
Investment Advisers Act of 1940 and Northern Lights Fund Trust IV
(``Trust''), a Delaware statutory trust registered under the Act as an
open-end management investment company with multiple series.
Filing Dates: The application was filed on August 10, 2016.
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 December 27, 2016 and should be accompanied by proof of
service on 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, Securities and Exchange Commission, 100 F Street
NE., Washington, DC 20549-1090; Applicants: CWM Advisors, LLC, 650 San
Benito St, Ste. 130, Hollister, CA 95023; Northern Lights Fund Trust
IV, 17605 Wright Street, Omaha, NE 68130.
FOR FURTHER INFORMATION CONTACT: Vanessa M. Meeks, Senior Counsel, or
Parisa Haghshenas, Branch Chief, at (202) 551-6825 (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.
Summary of the Application
1. Applicants request an order that would allow Funds to operate as
index exchange traded funds (``ETFs'').\1\ Fund shares will be
purchased and redeemed at their NAV in Creation Units only. All orders
to purchase Creation Units and all redemption requests will be placed
by or through an ``Authorized Participant'', which will have signed a
participant agreement with a broker-dealer registered under the
Securities Exchange Act of 1934 (``Exchange Act'') (together with any
future distributor, the ``Distributor''). Shares will be listed and
traded individually on a national securities exchange, where share
prices will be based on the current bid/offer market. Any order
granting the requested relief would be subject to the terms and
conditions stated in the application.
---------------------------------------------------------------------------
\1\ Applicants request that the order apply to the initial
series of the Trust and any additional series of the Trust, and any
other open-end management investment company or series thereof, that
may be created in the future (each, included in the term ``Fund''),
each of which will operate as an ETF and will track a specified
index comprised of domestic or foreign equity and/or fixed income
securities (each, an ``Underlying Index''). Any Fund will (a) be
advised by CWM or an entity controlling, controlled by, or under
common control with CWM (each, an ``Adviser'') and (b) comply with
the terms and conditions of the application.
---------------------------------------------------------------------------
2. Each Fund will hold investment positions selected to correspond
generally to the performance of an Underlying Index. In the case of
Self-Indexing Funds, an affiliated person, as defined in section
2(a)(3) of the Act (``Affiliated Person''), or an affiliated person of
an Affiliated Person (``Second-Tier Affiliate''), of the Trust or a
Fund, of the Adviser, of any sub-adviser to or promoter of a Fund, or
of the Distributor will compile, create, sponsor or maintain the
Underlying Index.\2\
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\2\ Each Self-Indexing Fund will post on its Web site the
identities and quantities of the investment positions that will form
the basis for the Fund's calculation of its NAV at the end of the
day. Applicants believe that requiring Self-Indexing Funds to
maintain full portfolio transparency will help address, together
with other protections, conflicts of interest with respect to such
Funds.
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3. Shares will be purchased and redeemed in Creation Units and
generally on an in-kind basis. Except where the purchase or redemption
will include cash under the limited circumstances specified in the
application, purchasers will be required to purchase Creation Units by
depositing specified instruments (``Deposit Instruments''), and
shareholders redeeming their shares will receive specified instruments
(``Redemption Instruments''). The Deposit Instruments and the
Redemption Instruments will each correspond pro rata to the positions
in the Fund's portfolio (including cash positions) except as specified
in the application.
4. Because shares will not be individually redeemable, applicants
request an exemption from section 5(a)(1) and section 2(a)(32) of the
Act that would permit the Funds to register as open-end management
investment companies and issue shares that are redeemable in Creation
Units only.
5. Applicants also request an exemption from section 22(d) of the
Act and rule 22c-1 under the Act as secondary market trading in shares
will take place at negotiated prices, not at a current offering price
described in a Fund's prospectus, and not at a price based on NAV.
Applicants state that (a) secondary market trading in shares does not
involve a Fund as a party and will not result in dilution of an
investment in shares, and (b) to the extent different prices exist
during a given trading day, or from day to day, such variances occur as
a result of third-party market forces, such as supply and demand.
Therefore, applicants assert that secondary market transactions in
shares will not lead to discrimination or preferential treatment among
purchasers. Finally, applicants represent that share market prices will
be disciplined by arbitrage opportunities, which should prevent shares
from trading at a material discount or premium from NAV.
6. With respect to Funds that effect creations and redemptions of
Creation Units in kind and that are based on certain Underlying Indexes
that include foreign securities, applicants request relief from the
requirement imposed by section 22(e) in order to allow such Funds to
pay redemption proceeds within fourteen calendar days following the
tender of Creation Units for redemption. Applicants assert that the
requested relief would not be inconsistent with the spirit and intent
of section 22(e) to prevent unreasonable, undisclosed or unforeseen
delays in the actual payment of redemption proceeds.
7. Applicants request an exemption to permit Funds of Funds to
acquire Fund shares beyond the limits of section 12(d)(1)(A) of the
Act; and the Funds, and any principal underwriter for the Funds, and/or
any broker or dealer registered under the Exchange Act, to
[[Page 88302]]
sell shares to Funds of Funds beyond the limits of section 12(d)(1)(B)
of the Act. The application's terms and conditions are designed to,
among other things, help prevent any potential (i) undue influence over
a Fund through control or voting power, or in connection with certain
services, transactions, and underwritings, (ii) excessive layering of
fees, and (iii) overly complex fund structures, which are the concerns
underlying the limits in sections 12(d)(1)(A) and (B) of the Act.
8. Applicants request an exemption from sections 17(a)(1) and
17(a)(2) of the Act to permit persons that are Affiliated Persons, or
Second Tier Affiliates, of the Funds, solely by virtue of certain
ownership interests, to effectuate purchases and redemptions in-kind.
The deposit procedures for in-kind purchases of Creation Units and the
redemption procedures for in-kind redemptions of Creation Units will be
the same for all purchases and redemptions and Deposit Instruments and
Redemption Instruments will be valued in the same manner as those
investment positions currently held by the Funds. Applicants also seek
relief from the prohibitions on affiliated transactions in section
17(a) to permit a Fund to sell its shares to and redeem its shares from
a Fund of Funds, and to engage in the accompanying in-kind transactions
with the Fund of Funds.\3\ The purchase of Creation Units by a Fund of
Funds directly from a Fund will be accomplished in accordance with the
policies of the Fund of Funds and will be based on the NAVs of the
Funds.
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\3\ The requested relief would apply to direct sales of shares
in Creation Units by a Fund to a Fund of Funds and redemptions of
those shares. Applicants, moreover, are not seeking relief from
section 17(a) for, and the requested relief will not apply to,
transactions where a Fund could be deemed an Affiliated Person, or a
Second-Tier Affiliate, of a Fund of Funds because an Adviser or an
entity controlling, controlled by or under common control with an
Adviser provides investment advisory services to that Fund of Funds.
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9. Section 6(c) of the Act permits the Commission to exempt any
persons or transactions from any provision of the 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 Act. Section 12(d)(1)(J) 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 section 12(d)(1) if the exemption
is consistent with the public interest and the protection of investors.
Section 17(b) of the Act authorizes the Commission to grant an order
permitting a transaction otherwise prohibited by section 17(a) if it
finds that (a) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (b) the proposed transaction is consistent with the policies
of each registered investment company involved; and (c) the proposed
transaction is consistent with the general purposes of the Act.
For the Commission, by the Division of Investment Management,
under delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2016-29301 Filed 12-6-16; 8:45 am]
BILLING CODE 8011-01-P
