Frank Russell Investment Company, et al.; Notice of Application, 20738-20741 [E6-5974]
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20738
Federal Register / Vol. 71, No. 77 / Friday, April 21, 2006 / Notices
Office of Personnel Management.
Linda M. Springer,
Director.
[FR Doc. 06–3789 Filed 4–20–06; 8:45 am]
BILLING CODE 6325–38–P
RAILROAD RETIREMENT BOARD
Proposed Data Collection Available for
Public Comment and
Recommendations
SUMMARY: In accordance with the
requirement of section 3506 (c)(2)(A) of
the Paperwork Reduction Act of 1995
which provides opportunity for public
comment on new or revised data
collections, the Railroad Retirement
Board will publish periodic summaries
of proposed data collections.
Comments are invited on: (a) Whether
the proposed information collection is
necessary for the proper performance of
the functions of the agency, including
whether the information has practical
utility; (b) the accuracy of the RRB’s
estimate of the burden of the collection
of the information; (c) ways to enhance
the quality, utility, and clarity of the
information to be collected; and (d)
ways to minimize the burden related to
the collection of information on
respondents, including the use of
automated collection techniques or
other forms of information technology.
Title and purpose of information
collection:
Repayment of Debt: OMB 3220–0169.
When the Railroad Retirement Board
(RRB) determines that an overpayment
of Railroad Retirement Act (RRA) or
Railroad Unemployment Insurance Act
(RUIA) benefits has occurred, it initiates
prompt action to notify the annuitant of
the overpayment and to recover the
money owed the RRB. To effect
payment of a debt by credit card, the
RRB currently utilizes Form G–421f,
Repayment by Credit Card.
The RRB proposes no changes to
Form G–421f. One form is completed by
each respondent. Completion is
voluntary. RRB procedures pertaining to
benefit overpayment determinations and
the recovery of such benefits are
prescribed in 20 CFR parts 255 and 340.
The estimate of annual respondent
burden is as follows:
ESTIMATE OF ANNUAL RESPONDENT BURDEN
Annual responses
Estimated completion time (min)
G–421f .......................................................................................................................
300
5
25
Total ....................................................................................................................
..............................
300
25
Forms #(s)
Additional Information or Comments:
To request more information or to
obtain a copy of the information
collection justification, forms, and/or
supporting material, please call the RRB
Clearance Officer at (312) 751–3363 or
send an e-mail request to
Charles.Mierzwa@RRB.GOV. Comments
regarding the information collection
should be addressed to Ronald J.
Hodapp, Railroad Retirement Board, 844
North Rush Street, Chicago, Illinois
60611–2092 or send an e-mail to
Ronald.Hodapp@RRB.GOV. Written
comments should be received within 60
days of this notice.
Charles Mierzwa,
Clearance Officer.
[FR Doc. E6–6007 Filed 4–20–06; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–27288; 812–12931]
Frank Russell Investment Company, et
al.; Notice of Application
April 17, 2006.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under section 12(d)(1)(J) of the
Investment Company Act of 1940
(‘‘Act’’) for an exemption from sections
12(d)(1)(A) and (B) of the Act and under
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AGENCY:
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sections 6(c) and 17(b) of the Act for an
exemption from section 17(a) of the Act.
The order
would permit certain registered openend management investment companies
to acquire shares of other registered
open-end management investment
companies outside the same group of
investment companies.
APPLICANTS: Frank Russell Investment
Company (the ‘‘Trust’’), Frank Russell
Investment Management Company
(‘‘FRIMCo’’) and Russell Fund
Distributors (the ‘‘Distributor’’).
FILING DATE: The application was filed
on February 21, 2003, and amended on
April 3, 2006.
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 May 12, 2006, 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.
SUMMARY OF APPLICATION:
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Burden hours
Secretary, U.S. Securities
and Exchange Commission, 100 F
Street, NE., Washington, DC 20549–
1090; Applicants, 909 A Street, Tacoma,
WA 98402.
FOR FURTHER INFORMATION CONTACT: John
Yoder, Senior Counsel, at (202) 551–
6878, or Nadya Roytblat, Assistant
Director, at (202) 551–6821 (Division of
Investment Management, Office of
Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained for a fee at the Public
Reference Desk, U.S. Securities and
Exchange Commission, 100 F Street,
NE., Washington DC 20549–0102,
(telephone (202) 551–5850).
ADDRESSES:
Applicants’ Representations
1. The Trust is an open-end
management investment company
registered under the Act that is
comprised of 34 separate series (each, a
‘‘Fund’’, and together, the ‘‘Funds’’).
FRIMCo, a Washington corporation, is
registered as an investment adviser
under the Investment Advisers Act of
1940 (‘‘Advisers Act’’) and serves as
investment adviser to the Funds.
2. Applicants request relief to permit
registered open-end management
investment companies that are not part
of the same ‘‘group of investment
companies,’’ as that term is defined in
section 12(d)(1)(G)(ii) of the Act, as the
Trust (each, a ‘‘Fund of Funds’’), to
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acquire shares of the Funds in excess of
the limits in section 12(d)(1)(A) of the
Act and the Funds, any principal
underwriter for a Fund, and any broker
or dealer, to sell shares of the Funds to
the Funds of Funds in excess of the
limits in section 12(d)(1)(B) of the Act.
Each Fund of Funds will be advised by
an investment adviser that meets the
definition in section 2(a)(20)(A) of the
Act (‘‘Fund of Funds Adviser’’). Certain
Funds of Funds also may be advised by
investment adviser(s) that meet the
definition in section 2(a)(20)(B) of the
Act (each, a ‘‘Fund of Funds
Subadvisor’’). Applicants request that
the relief apply to: (a) Each registered
open-end management investment
company or series thereof that currently
or subsequently is part of the same
‘‘group of investment companies,’’
within the meaning of section
12(d)(1)(G)(ii) of the Act, as the Trust
and that is advised by FRIMCo (also
included in the term ‘‘Funds’’), their
principal underwriters and any brokers
and dealers; and (b) each Fund of Funds
that enters into a participation
agreement (‘‘Participation Agreement’’)
with a Fund to purchase shares of the
Fund.1 Applicants state that the Funds
will offer efficient access to FRIMCo’s
‘‘multi-style, multi-manager’’ approach
to Funds of Funds pursuing a range of
asset allocation and diversification
objectives.
Applicants’ Legal Analysis
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A. Sections 12(d)(1)(A) and (B) of the
Act
1. Section 12(d)(1)(A) of the Act
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 Act
prohibits a registered open-end
investment company, any principal
underwriter, and any broker or dealer
from selling shares of the investment
company 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
1 All investment companies that currently intend
to rely on the requested order are named as
applicants. Any other investment company that
relies on the order in the future will comply with
the terms and conditions of the application.
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stock to be owned by investment
companies generally.
2. 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 provisions of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Applicants seek an exemption under
section 12(d)(1)(J) to permit a Fund of
Funds to acquire shares of the Funds
and the Funds to sell their shares to the
Fund of Funds beyond the limits set
forth in section 12(d)(1)(A) of that Act
and the Funds, any principal
underwriter for a Fund, and any broker
or dealer, to sell shares of the Funds to
the Funds of Funds in excess of the
limits in section 12(d)(1)(B) of the Act.
3. Applicants state that the proposed
arrangement will adequately address the
policy concerns underlying sections
12(d)(1)(A) and (B), 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 state that the proposed
arrangement will not result in undue
influence by a Fund of Funds or its
affiliates over the Funds. To limit the
influence that a Fund of Funds may
have over a Fund, applicants propose a
condition prohibiting a Fund of Funds’
Advisory Group (as defined below) and
a Fund of Funds’ Subadvisory Group (as
defined below) from controlling a Fund
within the meaning of section 2(a)(9) of
the Act. To limit further the potential
for undue influence over the Funds,
applicants propose conditions 2 through
7, stated below, to preclude a Fund of
Funds and its affiliated entities from
taking advantage of a Fund with respect
to transactions between the entities and
to ensure the transactions will be on an
arm’s length basis. A Fund of Funds’
Advisory Group is any Fund of Funds
Adviser, any person controlling,
controlled by, or under common control
with a Fund of Funds 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 Act
that is advised by a Fund of Funds
Adviser or any person controlling,
controlled by, or under common control
with a Fund of Funds Adviser. A Fund
of Funds’ Subadvisory Group is any
Fund of Funds Subadvisor, any person
controlling, controlled by, or under
common control with a Fund of Funds
Subadvisor, and any investment
company or issuer that would be an
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investment company but for section
3(c)(1) or 3(c)(7) of the Act (or portion
of such investment company or issuer)
advised by the Fund of Funds
Subadvisor or any person controlling,
controlled by, or under common control
with the Funds of Funds Subadvisor.
5. As an additional assurance that a
Fund of Funds understands the
implications of an investment by the
Fund of Funds under the requested
order, each Fund of Funds and Fund
will execute a Participation Agreement
(prior to an investment in the shares of
the Fund in excess of the limits of
section 12(d)(1)(A) of the Act) stating
that their boards of directors or trustees
(‘‘Boards’’) and their investment
advisers understand the terms and
conditions of the order and agree to
fulfill their responsibilities under the
order. Applicants note that a Fund may
choose to reject an investment from the
Fund of Funds.
6. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. Applicants
state that the Board of the Fund of
Funds, including a majority of the
directors or trustees who are not
‘‘interested persons,’’ as such term is
defined in section 2(a)(19) of the Act
(‘‘Disinterested Directors’’), will find
that the investment advisory fees
charged under any investment advisory
agreements are based on services
provided that will be in addition to,
rather than duplicative of, services
provided under the investment advisory
agreement(s) of any Fund in which the
Fund of Funds may invest. In addition,
among other things, a Fund of Funds
Adviser will waive fees otherwise
payable to it by a Fund of Funds in an
amount at least equal to any
compensation received by the Fund of
Funds Adviser, or an affiliated person of
the Fund of Funds Adviser, from the
Funds in connection with the
investment by the Fund of Funds in the
Fund. Applicants also 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 a fund of funds set forth
in NASD Conduct Rule 2830.
7. Applicants state that the proposed
arrangement will not create an overly
complex fund structure. Applicants note
a Fund will be prohibited from
acquiring securities of any investment
company or company relying on section
3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section
12(d)(1)(A), except to the extent
permitted by an exemptive order that
allows the Fund to purchase shares of
an affiliated money market fund for
short-term cash management purposes.
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Federal Register / Vol. 71, No. 77 / Friday, April 21, 2006 / Notices
B. Section 17(a)
1. Section 17(a) of the 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 Act
defines an ‘‘affiliated person’’ of another
person to include 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.
2. Applicants state that a Fund of
Funds and a Fund might become
affiliated persons if the Fund of Funds
acquires 5% or more of the Fund’s
outstanding voting securities. In light of
this possible affiliation, section 17(a)
could prevent a Fund from selling
shares to and redeeming shares from the
Fund of Funds.
3. 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.
Section 6(c) of the Act permits the
Commission to exempt any class of
persons or transactions from any
provisions 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.
4. Applicants submit that the
proposed transactions satisfy the
standards for relief under sections 17(b)
and 6(c) of the Act. Applicants state that
the terms of the transactions are fair and
reasonable and do not involve
overreaching. Applicants note that the
consideration paid for the sale and
redemption of shares of the Funds will
be based on the net asset values of the
Funds. Applicants state that the
proposed transactions will be consistent
with the policies of each Fund of Funds
as set forth in each Fund of Funds’
registration statement, the policies of
each Fund, and with the general
purposes of the Act.
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Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. The members of a Fund of Funds’
Advisory Group will not control
(individually or in the aggregate) a Fund
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within the meaning of section 2(a)(9) of
the Act. The members of a Fund of
Funds’ Subadvisory Group will not
control (individually or in the aggregate)
a Fund within the meaning of section
2(a)(9) of the Act. If, as a result of a
decrease in the outstanding voting
securities of a Fund, the Fund of Funds’
Advisory Group or the Fund of Funds’
Subadvisory Group, each in the
aggregate, becomes a holder of more
than 25 percent of the outstanding
voting securities of a Fund, it will vote
its shares of the Fund in the same
proportion as the vote of all other
holders of the Fund’s shares. This
condition does not apply to the Fund of
Funds’ Subadvisory Group with respect
to a Fund for which the Fund of Funds
Subadvisor or a person controlling,
controlled by, or under common control
with the Fund of Funds Subadvisor acts
as the investment adviser within the
meaning of section 2(a)(20)(A) of the
Act.
2. No Fund of Funds or Fund of
Funds Advisor, Fund of Funds
Subadvisor, promoter, or principal
underwriter for a Fund of Funds, or any
person controlling, controlled by or
under common control with any of
those entities (‘‘Fund of Funds
Affiliate’’) will cause any existing or
potential investment by the Fund of
Funds in shares of a Fund to influence
the terms of any services or transactions
between the Fund of Funds or a Fund
of Funds Affiliate and the Fund or the
investment adviser(s), promoter or
principal underwriter of a Fund, or any
person controlling, controlled by, or
under common control with any of
those entities (‘‘Fund Affiliate’’).
3. The Board of a Fund of Funds,
including a majority of the Disinterested
Directors, will adopt procedures
reasonably designed to assure that the
Fund of Funds Adviser and any Fund of
Funds Subadvisor are conducting the
investment program of the Fund of
Funds without taking into account any
consideration received by the Fund of
Funds or a Fund of Funds Affiliate from
a Fund or a Fund Affiliate in connection
with any services or transactions.
4. Once an investment by a Fund of
Funds in the securities of a Fund
exceeds the limit in section
12(d)(1)(A)(i) of the Act, the Board of
the Fund, including a majority of the
trustees who are not ‘‘interested
persons,’’ as such term is defined in
section 2(a)(19) of the Act
(‘‘Disinterested Trustees’’), will
determine that any consideration paid
by the Fund to the 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
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nature and quality of the services and
benefits received by the Fund; (b) is
within the range of consideration that
the Fund 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 a Fund 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 a Fund) will cause a Fund to
purchase a security during the existence
of an underwriting or selling syndicate
in which a principal underwriter is an
officer, director, member of an advisory
board, Fund of Funds Adviser, Fund of
Funds Subadvisor, or employee of the
Fund of Funds, or a person of which
any such officer, director, member of an
advisory board, Fund of Funds Adviser,
Fund of Funds Subadvisor or employee
is an affiliated person (‘‘Underwriting
Affiliate’’ except that any person whose
relationship to a Fund is covered by
section 10(f) of the Act is not an
Underwriting Affiliate). An offering of
securities during the existence of an
underwriting or selling syndicate of
which a principal underwriter is an
Underwriting Affiliate is an ‘‘Affiliated
Underwriting.’’
6. The Board of a Fund, including a
majority of the Disinterested Trustees,
will adopt procedures reasonably
designed to monitor any purchases of
securities by the Fund in an Affiliated
Underwriting once an investment by a
Fund of Funds in the securities of the
Fund exceeds the limit of section
12(d)(1)(A)(i) of the Act, including any
purchases made directly from an
Underwriting Affiliate. The Board 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 shares of the Fund.
The Board shall consider, among other
things, (i) whether the purchases were
consistent with the investment
objectives and policies of the Fund; (ii)
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 (iii)
whether the amount of securities
purchased by the Fund in Affiliated
Underwritings and the amount
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purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board shall take any appropriate actions
based on its review, including, if
appropriate, the institution of
procedures designed to assure that
purchases of securities in Affiliated
Underwritings are in the best interest of
shareholders.
7. The Fund shall 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 shall maintain
and preserve for a period of not less
than six years from the end of the fiscal
year in which any purchase from an
Affiliated Underwriting occurred, the
first two years in an easily accessible
place, a written record of each purchase
of securities in Affiliated Underwritings
once an investment by a Fund of Funds
in the securities of a Fund exceeds the
limit in section 12(d)(1)(A)(i) of the Act,
setting forth from whom the securities
were acquired, the identity of the
underwriting syndicate’s members, the
terms of the purchase, and the
information or materials upon which
the Board’s determinations were made.
8. Before investing in shares of a Fund
in excess of the limits in section
12(d)(1)(A), each Fund of Funds and
Fund 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 a Fund in excess of the limit
in section 12(d)(1)(A)(i), a Fund of
Funds will notify the Fund of the
investment. At such time, the Fund of
Funds will also transmit to the Fund a
list of the names of each Fund of Funds
Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the Fund of
any changes to the list of the names as
soon as reasonably practicable after a
change occurs. The Fund and the Fund
of Funds will maintain and preserve a
copy of the order, the 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. Prior to approving any advisory
contract under section 15 of the Act, the
Board of each Fund of Funds, including
a majority of the Disinterested Directors,
will find that the advisory fees charged
under such advisory contract are based
on services provided that will be in
addition to, rather than duplicative of,
the services provided under the
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advisory contract(s) of any Fund in
which the Fund of Funds may invest.
These findings and their basis will be
recorded fully in the minute books of
the appropriate Fund of Funds.
10. A Fund of Funds Adviser will
waive fees otherwise payable to it by the
Fund of Funds in an amount at least
equal to any compensation (including
fees received pursuant to any plan
adopted by a Fund under rule 12b–1
under the Act) received from a Fund by
the Fund of Funds Adviser, or an
affiliated person of the Fund of Funds
Adviser, other than any advisory fees
paid to the Fund of Funds Adviser or its
affiliated person by the Fund, in
connection with the investment by the
Fund of Funds in the Fund. Any Fund
of Funds Subadvisor will waive fees
otherwise payable to the Fund of Funds
Subadvisor, directly or indirectly, by the
Fund of Funds in an amount at least
equal to any compensation received
from a Fund by the Fund of Funds
Subadvisor, or an affiliated person of
the Fund of Funds Subadvisor, other
than any advisory fees paid to the Fund
of Funds Subadvisor or its affiliated
person by the Fund, in connection with
the investment by the Fund of Funds in
the Fund made at the direction of the
Fund of Funds Subadvisor. In the event
that the Fund of Funds Subadvisor
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 a fund of funds as
set forth in NASD Conduct Rule 2830.
12. No Fund will acquire securities of
any investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except
to the extent permitted by an exemptive
order that allows the Fund to purchase
shares of an affiliated money market
fund for short-term cash management
purposes.
13. The Boards of any Fund of Funds
and of any Fund will satisfy the fund
governance standards as defined in rule
0–1(a)(7) under the Act by the later of
(i) the compliance date for the rule or
(ii) the date on which the Fund of Funds
and the Fund execute a Participation
Agreement.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–5974 Filed 4–20–06; 8:45 am]
BILLING CODE 8010–01–P
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53639; File No. SR–NYSE–
2006–16]
Self-Regulatory Organizations; New
York Stock Exchange, Inc. (n/k/a New
York Stock Exchange LLC); Notice of
Filing of Proposed Rule Change and
Amendment No. 1 Thereto Relating to
the Proposal To List and Trade IndexLinked Securities of Barclays Bank
PLC Linked to the Performance of the
Dow Jones-AIG Commodity Index
Total
April 12, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 2 thereunder,
notice is hereby given that on March 6,
2006, the New York Stock Exchange,
Inc. (n/k/a New York Stock Exchange
LLC) (‘‘NYSE’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II and III below, which Items
have been prepared by the Exchange.
On March 27, 2006, NYSE filed
Amendment No. 1 to the proposed rule
change.3 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 NYSE is proposing to list and
trade notes issued by Barclays Bank PLC
(‘‘Barclays’’) linked to the performance
of the Dow Jones-AIG Commodity Index
Total Return (‘‘Index’’) (‘‘DJ–AIG Notes’’
or ‘‘Notes’’). The text of the proposed
rule change is available on the NYSE’s
Web site (https://www.nyse.com), at the
NYSE’s Office of the Secretary, and at
the Commission’s public reference
room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Bases for, the Proposed Rule
Change
In its filing with the Commission, the
NYSE included statements concerning
the purpose of and basis for the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 In amendment No. 1, the Exchange notes its
proposed Supplementary Material to Rule 1301B in
SR–NYSE–2006–17, which sets forth guidelines for
specialists applicable to this product. The Exchange
also makes clarifying and technical changes to this
proposal in Amendment No. 1.
2 17
E:\FR\FM\21APN1.SGM
21APN1
]]>Agencies
[Federal Register Volume 71, Number 77 (Friday, April 21, 2006)]
[Notices]
[Pages 20738-20741]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-5974]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-27288; 812-12931]
Frank Russell Investment Company, et al.; Notice of Application
April 17, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under section 12(d)(1)(J) of
the Investment Company Act of 1940 (``Act'') for an exemption from
sections 12(d)(1)(A) and (B) of the Act and under sections 6(c) and
17(b) of the Act for an exemption from section 17(a) of the Act.
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Summary of Application: The order would permit certain registered open-
end management investment companies to acquire shares of other
registered open-end management investment companies outside the same
group of investment companies.
Applicants: Frank Russell Investment Company (the ``Trust''), Frank
Russell Investment Management Company (``FRIMCo'') and Russell Fund
Distributors (the ``Distributor'').
Filing Date: The application was filed on February 21, 2003, and
amended on April 3, 2006.
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 May 12, 2006, 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, 909 A Street,
Tacoma, WA 98402.
FOR FURTHER INFORMATION CONTACT: John Yoder, Senior Counsel, at (202)
551-6878, or Nadya Roytblat, Assistant Director, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Public Reference Desk, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington DC 20549-0102, (telephone (202) 551-5850).
Applicants' Representations
1. The Trust is an open-end management investment company
registered under the Act that is comprised of 34 separate series (each,
a ``Fund'', and together, the ``Funds''). FRIMCo, a Washington
corporation, is registered as an investment adviser under the
Investment Advisers Act of 1940 (``Advisers Act'') and serves as
investment adviser to the Funds.
2. Applicants request relief to permit registered open-end
management investment companies that are not part of the same ``group
of investment companies,'' as that term is defined in section
12(d)(1)(G)(ii) of the Act, as the Trust (each, a ``Fund of Funds''),
to
[[Page 20739]]
acquire shares of the Funds in excess of the limits in section
12(d)(1)(A) of the Act and the Funds, any principal underwriter for a
Fund, and any broker or dealer, to sell shares of the Funds to the
Funds of Funds in excess of the limits in section 12(d)(1)(B) of the
Act. Each Fund of Funds will be advised by an investment adviser that
meets the definition in section 2(a)(20)(A) of the Act (``Fund of Funds
Adviser''). Certain Funds of Funds also may be advised by investment
adviser(s) that meet the definition in section 2(a)(20)(B) of the Act
(each, a ``Fund of Funds Subadvisor''). Applicants request that the
relief apply to: (a) Each registered open-end management investment
company or series thereof that currently or subsequently is part of the
same ``group of investment companies,'' within the meaning of section
12(d)(1)(G)(ii) of the Act, as the Trust and that is advised by FRIMCo
(also included in the term ``Funds''), their principal underwriters and
any brokers and dealers; and (b) each Fund of Funds that enters into a
participation agreement (``Participation Agreement'') with a Fund to
purchase shares of the Fund.\1\ Applicants state that the Funds will
offer efficient access to FRIMCo's ``multi-style, multi-manager''
approach to Funds of Funds pursuing a range of asset allocation and
diversification objectives.
---------------------------------------------------------------------------
\1\ All investment companies that currently intend to rely on
the requested order are named as applicants. Any other investment
company that relies on the order in the future will comply with the
terms and conditions of the application.
---------------------------------------------------------------------------
Applicants' Legal Analysis
A. Sections 12(d)(1)(A) and (B) of the Act
1. Section 12(d)(1)(A) of the Act 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 Act prohibits a
registered open-end investment company, any principal underwriter, and
any broker or dealer from selling shares of the investment company 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.
2. 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 provisions of section
12(d)(1) if the exemption is consistent with the public interest and
the protection of investors. Applicants seek an exemption under section
12(d)(1)(J) to permit a Fund of Funds to acquire shares of the Funds
and the Funds to sell their shares to the Fund of Funds beyond the
limits set forth in section 12(d)(1)(A) of that Act and the Funds, any
principal underwriter for a Fund, and any broker or dealer, to sell
shares of the Funds to the Funds of Funds in excess of the limits in
section 12(d)(1)(B) of the Act.
3. Applicants state that the proposed arrangement will adequately
address the policy concerns underlying sections 12(d)(1)(A) and (B),
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 state that the proposed arrangement will not result
in undue influence by a Fund of Funds or its affiliates over the Funds.
To limit the influence that a Fund of Funds may have over a Fund,
applicants propose a condition prohibiting a Fund of Funds' Advisory
Group (as defined below) and a Fund of Funds' Subadvisory Group (as
defined below) from controlling a Fund within the meaning of section
2(a)(9) of the Act. To limit further the potential for undue influence
over the Funds, applicants propose conditions 2 through 7, stated
below, to preclude a Fund of Funds and its affiliated entities from
taking advantage of a Fund with respect to transactions between the
entities and to ensure the transactions will be on an arm's length
basis. A Fund of Funds' Advisory Group is any Fund of Funds Adviser,
any person controlling, controlled by, or under common control with a
Fund of Funds 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 Act
that is advised by a Fund of Funds Adviser or any person controlling,
controlled by, or under common control with a Fund of Funds Adviser. A
Fund of Funds' Subadvisory Group is any Fund of Funds Subadvisor, any
person controlling, controlled by, or under common control with a Fund
of Funds Subadvisor, and any investment company or issuer that would be
an investment company but for section 3(c)(1) or 3(c)(7) of the Act (or
portion of such investment company or issuer) advised by the Fund of
Funds Subadvisor or any person controlling, controlled by, or under
common control with the Funds of Funds Subadvisor.
5. As an additional assurance that a Fund of Funds understands the
implications of an investment by the Fund of Funds under the requested
order, each Fund of Funds and Fund will execute a Participation
Agreement (prior to an investment in the shares of the Fund in excess
of the limits of section 12(d)(1)(A) of the Act) stating that their
boards of directors or trustees (``Boards'') and their investment
advisers understand the terms and conditions of the order and agree to
fulfill their responsibilities under the order. Applicants note that a
Fund may choose to reject an investment from the Fund of Funds.
6. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. Applicants state that the Board of
the Fund of Funds, including a majority of the directors or trustees
who are not ``interested persons,'' as such term is defined in section
2(a)(19) of the Act (``Disinterested Directors''), will find that the
investment advisory fees charged under any investment advisory
agreements are based on services provided that will be in addition to,
rather than duplicative of, services provided under the investment
advisory agreement(s) of any Fund in which the Fund of Funds may
invest. In addition, among other things, a Fund of Funds Adviser will
waive fees otherwise payable to it by a Fund of Funds in an amount at
least equal to any compensation received by the Fund of Funds Adviser,
or an affiliated person of the Fund of Funds Adviser, from the Funds in
connection with the investment by the Fund of Funds in the Fund.
Applicants also 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 a fund of funds set forth in NASD Conduct Rule
2830.
7. Applicants state that the proposed arrangement will not create
an overly complex fund structure. Applicants note a Fund will be
prohibited from acquiring securities of any investment company or
company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section 12(d)(1)(A), except to the extent
permitted by an exemptive order that allows the Fund to purchase shares
of an affiliated money market fund for short-term cash management
purposes.
[[Page 20740]]
B. Section 17(a)
1. Section 17(a) of the 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 Act defines an
``affiliated person'' of another person to include 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.
2. Applicants state that a Fund of Funds and a Fund might become
affiliated persons if the Fund of Funds acquires 5% or more of the
Fund's outstanding voting securities. In light of this possible
affiliation, section 17(a) could prevent a Fund from selling shares to
and redeeming shares from the Fund of Funds.
3. 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. Section
6(c) of the Act permits the Commission to exempt any class of persons
or transactions from any provisions 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.
4. Applicants submit that the proposed transactions satisfy the
standards for relief under sections 17(b) and 6(c) of the Act.
Applicants state that the terms of the transactions are fair and
reasonable and do not involve overreaching. Applicants note that the
consideration paid for the sale and redemption of shares of the Funds
will be based on the net asset values of the Funds. Applicants state
that the proposed transactions will be consistent with the policies of
each Fund of Funds as set forth in each Fund of Funds' registration
statement, the policies of each Fund, and with the general purposes of
the Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The members of a Fund of Funds' Advisory Group will not control
(individually or in the aggregate) a Fund within the meaning of section
2(a)(9) of the Act. The members of a Fund of Funds' Subadvisory Group
will not control (individually or in the aggregate) a Fund within the
meaning of section 2(a)(9) of the Act. If, as a result of a decrease in
the outstanding voting securities of a Fund, the Fund of Funds'
Advisory Group or the Fund of Funds' Subadvisory Group, each in the
aggregate, becomes a holder of more than 25 percent of the outstanding
voting securities of a Fund, it will vote its shares of the Fund in the
same proportion as the vote of all other holders of the Fund's shares.
This condition does not apply to the Fund of Funds' Subadvisory Group
with respect to a Fund for which the Fund of Funds Subadvisor or a
person controlling, controlled by, or under common control with the
Fund of Funds Subadvisor acts as the investment adviser within the
meaning of section 2(a)(20)(A) of the Act.
2. No Fund of Funds or Fund of Funds Advisor, Fund of Funds
Subadvisor, promoter, or principal underwriter for a Fund of Funds, or
any person controlling, controlled by or under common control with any
of those entities (``Fund of Funds Affiliate'') will cause any existing
or potential investment by the Fund of Funds in shares of a Fund to
influence the terms of any services or transactions between the Fund of
Funds or a Fund of Funds Affiliate and the Fund or the investment
adviser(s), promoter or principal underwriter of a Fund, or any person
controlling, controlled by, or under common control with any of those
entities (``Fund Affiliate'').
3. The Board of a Fund of Funds, including a majority of the
Disinterested Directors, will adopt procedures reasonably designed to
assure that the Fund of Funds Adviser and any Fund of Funds Subadvisor
are conducting the investment program of the Fund of Funds without
taking into account any consideration received by the Fund of Funds or
a Fund of Funds Affiliate from a Fund or a Fund Affiliate in connection
with any services or transactions.
4. Once an investment by a Fund of Funds in the securities of a
Fund exceeds the limit in section 12(d)(1)(A)(i) of the Act, the Board
of the Fund, including a majority of the trustees who are not
``interested persons,'' as such term is defined in section 2(a)(19) of
the Act (``Disinterested Trustees''), will determine that any
consideration paid by the Fund to the 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 Fund; (b) is within the range of
consideration that the Fund 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 a Fund 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 a Fund)
will cause a Fund to purchase a security during the existence of an
underwriting or selling syndicate in which a principal underwriter is
an officer, director, member of an advisory board, Fund of Funds
Adviser, Fund of Funds Subadvisor, or employee of the Fund of Funds, or
a person of which any such officer, director, member of an advisory
board, Fund of Funds Adviser, Fund of Funds Subadvisor or employee is
an affiliated person (``Underwriting Affiliate'' except that any person
whose relationship to a Fund is covered by section 10(f) of the Act is
not an Underwriting Affiliate). An offering of securities during the
existence of an underwriting or selling syndicate of which a principal
underwriter is an Underwriting Affiliate is an ``Affiliated
Underwriting.''
6. The Board of a Fund, including a majority of the Disinterested
Trustees, will adopt procedures reasonably designed to monitor any
purchases of securities by the Fund in an Affiliated Underwriting once
an investment by a Fund of Funds in the securities of the Fund exceeds
the limit of section 12(d)(1)(A)(i) of the Act, including any purchases
made directly from an Underwriting Affiliate. The Board 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 shares of the Fund. The Board shall consider,
among other things, (i) whether the purchases were consistent with the
investment objectives and policies of the Fund; (ii) 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
(iii) whether the amount of securities purchased by the Fund in
Affiliated Underwritings and the amount
[[Page 20741]]
purchased directly from an Underwriting Affiliate have changed
significantly from prior years. The Board shall take any appropriate
actions based on its review, including, if appropriate, the institution
of procedures designed to assure that purchases of securities in
Affiliated Underwritings are in the best interest of shareholders.
7. The Fund shall 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
shall maintain and preserve for a period of not less than six years
from the end of the fiscal year in which any purchase from an
Affiliated Underwriting occurred, the first two years in an easily
accessible place, a written record of each purchase of securities in
Affiliated Underwritings once an investment by a Fund of Funds in the
securities of a Fund exceeds the limit in section 12(d)(1)(A)(i) of the
Act, setting forth from whom the securities were acquired, the identity
of the underwriting syndicate's members, the terms of the purchase, and
the information or materials upon which the Board's determinations were
made.
8. Before investing in shares of a Fund in excess of the limits in
section 12(d)(1)(A), each Fund of Funds and Fund 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 a Fund in excess of the
limit in section 12(d)(1)(A)(i), a Fund of Funds will notify the Fund
of the investment. At such time, the Fund of Funds will also transmit
to the Fund a list of the names of each Fund of Funds Affiliate and
Underwriting Affiliate. The Fund of Funds will notify the Fund of any
changes to the list of the names as soon as reasonably practicable
after a change occurs. The Fund and the Fund of Funds will maintain and
preserve a copy of the order, the 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. Prior to approving any advisory contract under section 15 of the
Act, the Board of each Fund of Funds, including a majority of the
Disinterested Directors, will find that the advisory fees charged under
such advisory contract are based on services provided that will be in
addition to, rather than duplicative of, the services provided under
the advisory contract(s) of any Fund in which the Fund of Funds may
invest. These findings and their basis will be recorded fully in the
minute books of the appropriate Fund of Funds.
10. A Fund of Funds Adviser will waive fees otherwise payable to it
by the Fund of Funds in an amount at least equal to any compensation
(including fees received pursuant to any plan adopted by a Fund under
rule 12b-1 under the Act) received from a Fund by the Fund of Funds
Adviser, or an affiliated person of the Fund of Funds Adviser, other
than any advisory fees paid to the Fund of Funds Adviser or its
affiliated person by the Fund, in connection with the investment by the
Fund of Funds in the Fund. Any Fund of Funds Subadvisor will waive fees
otherwise payable to the Fund of Funds Subadvisor, directly or
indirectly, by the Fund of Funds in an amount at least equal to any
compensation received from a Fund by the Fund of Funds Subadvisor, or
an affiliated person of the Fund of Funds Subadvisor, other than any
advisory fees paid to the Fund of Funds Subadvisor or its affiliated
person by the Fund, in connection with the investment by the Fund of
Funds in the Fund made at the direction of the Fund of Funds
Subadvisor. In the event that the Fund of Funds Subadvisor 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 a
fund of funds as set forth in NASD Conduct Rule 2830.
12. No Fund will acquire securities of any investment company or
company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section 12(d)(1)(A) of the Act, except to the
extent permitted by an exemptive order that allows the Fund to purchase
shares of an affiliated money market fund for short-term cash
management purposes.
13. The Boards of any Fund of Funds and of any Fund will satisfy
the fund governance standards as defined in rule 0-1(a)(7) under the
Act by the later of (i) the compliance date for the rule or (ii) the
date on which the Fund of Funds and the Fund execute a Participation
Agreement.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-5974 Filed 4-20-06; 8:45 am]
BILLING CODE 8010-01-P
