Claymore Securities, Inc. and Claymore Securities Defined Portfolios, Notice of Application, 55527-55530 [06-7998]

Download as PDF sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 71, No. 184 / Friday, September 22, 2006 / Notices to spend 6 hours per month in additional time to collect the data necessary to generate the reports, or 72 hours per year. With an estimated 302 market centers subject to Rule 605, the total data collection cost to comply with the monthly reporting requirement is estimated to be 21,744 hours per year. Rule 606 of Regulation NMS (‘‘Rule 606’’) (17 CFR 242.606), f/k/a Rule 11Ac1–6 (17 CFR 240.11Ac1–6), requires broker-dealers to prepare and disseminate quarterly order routing reports. Much of the information needed to generate these reports already should be collected by broker-dealers in connection with their periodic evaluations of their order routing practices. Broker-dealers must conduct such evaluations to fulfill the duty of best execution that they owe their customers. The collection of information obligations of Rule 606 applies to broker-dealers that route non-directed customer orders in covered securities. The Commission estimates that out of the currently 3120 broker-dealers that are subject to the collection of information obligations of Rule 606, clearing brokers bear a substantial portion of the burden of complying with the reporting and recordkeeping requirements of Rule 606 on behalf of small to mid-sized introducing firms. There currently are approximately 567 clearing brokers. In addition, there are approximately 1479 introducing brokers that receive funds or securities from their customers. Because at least some of these firms also may have greater involvement in determining where customer orders are routed for execution, they have been included, along with clearing brokers, in estimating the total burden of Rule 606. The Commission staff estimates that each firm significantly involved in order routing practices incurs an average burden of 40 hours to prepare and disseminate a quarterly report required by Rule 606, or a burden of 160 hours per year. With an estimated 2046 broker-dealers significantly involved in order routing practices, the total burden per year to comply with the quarterly reporting requirement in Rule 606 is estimated to be 327,360 hours. Rule 606 requires broker-dealers to respond to individual customer requests for information on orders handled by the broker-dealer for that customer. Clearing brokers generally bear the burden of responding to these requests. The Commission staff estimates that an average clearing broker incurs an annual burden of 400 hours (2000 responses × 0.2 hours/response) to prepare, disseminate, and retain responses to VerDate Aug<31>2005 20:37 Sep 21, 2006 Jkt 208001 customers required by Rule 606. With an estimated 567 clearing brokers subject to Rule 606, the total burden per year to comply with the customer response requirement in Rule 606 is estimated to be 226,800 hours. Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency’s estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, c/o Shirley Martinson, 6432 General Green Way, Alexandria, Virginia 22312, or send an e-mail to: PRA_Mailbox@sec.gov. Comments must be submitted within 60 days of this notice. Dated: September 14, 2006. Jill M. Peterson, Assistant Secretary. [FR Doc. 06–8000 Filed 9–21–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 27484; 812–13171] Claymore Securities, Inc. and Claymore Securities Defined Portfolios, Notice of Application September 18, 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), (B) and (C) of the Act and under sections 6(c) and 17(b) of the Act for an exemption from section 17(a) of the Act. AGENCY: Claymore Securities, Inc. (the ‘‘Depositor’’), and Claymore Securities Defined Portfolios (the ‘‘Trust’’), on behalf of itself and any existing and future series, and any future registered unit investment trust SUMMARY OF THE APPLICATION: PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 55527 (‘‘UIT’’) sponsored by the Depositor (or an entity controlling, controlled by or under common control with the Depositor) and their respective series (the future UITs, together with the Trust, are collectively the ‘‘Trusts,’’ the series of the Trusts are the ‘‘Series,’’ and the Trusts together with the Depositor are collectively, the (‘‘Applicants’’), request an order to permit each Series to acquire shares of registered investment companies or series thereof (the ‘‘Funds’’) both within and outside the same group of investment companies. APPLICANTS: The Depositor and the Trust. The application was filed on February 23, 2005 and amended on June 28, 2006 and September 1, 2006. FILING DATES: HEARING OR NOTIFICATION OF HEARING: An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission’s Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on October 24, 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. Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549– 10901; Applicants, 2455 Corporate West Drive, Lisle, Illinois 60532. ADDRESSES: FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at (202) 551–6876, or Nadya Roytblat, Assistant Director at (202) 551–6821 (Division of Investment Management, Office of Investment Company Regulation). 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, tel: (202) 551–5850. SUPPLEMENTARY INFORMATION: Applicants’ Representations 1. The Trust is a UIT registered under the Act. Each Series will be a series of a Trust and will offer units for sale to E:\FR\FM\22SEN1.SGM 22SEN1 55528 Federal Register / Vol. 71, No. 184 / Friday, September 22, 2006 / Notices the public (‘‘Units’’).1 Each Series will be created pursuant to a trust agreement which will incorporate by reference a master trust agreement between the Depositor and a financial institution that satisfies the criteria in section 26(a) of the Act (the ‘‘Trustee’’). The Depositor is a broker dealer registered under the Securities Exchange Act of 1934 and member of the National Association of Securities Dealers, Inc. (‘‘NASD’’). 2. Applicants request relief to permit a Series to invest in (a) registered investment companies or series thereof that are part of the same ‘‘group of investment companies’’ (as that term is defined in section 12(d)(1)(G) of the Act) as the Series (‘‘Affiliated Funds’’), and (b) registered investment companies or series thereof that are not part of the same group of investment companies as the Series (‘‘Unaffiliated Funds,’’ and together with the Affiliated Funds, the ‘‘Funds’’). An Unaffiliated Fund that is a UIT is referred to as an ‘‘Unaffiliated Underlying Trust.’’ An Unaffiliated Fund that is a closed-end or open-end management investment company is referred to as an ‘‘Unaffiliated Underlying Fund’’. Certain of the Funds may be ‘‘exchange-traded funds’’ that are registered under the Act as UITs or open-end management investment companies and have received exemptive relief to sell their shares on a national securities exchange or at negotiated prices (‘‘ETFs’’). Shares of closed-end Funds and ETFs will be deposited in a Series at prices which are based on the market value of the securities, as determined by an evaluator. The Depositor will not have discretion as to when portfolio securities of a Series will be sold, except that the Depositor is authorized to sell securities in extremely limited circumstances described in the Series’ prospectus. 3. Applicants state that the requested relief will benefit the holders of Units of a Series by providing investors with a professionally selected, diversified portfolio of registered investment company shares through a single investment vehicle. sroberts on PROD1PC70 with NOTICES Applicants’ Legal Analysis A. Section 12(d)(1) 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 (i) more than 3% of the total 1 All existing Trusts that currently intend to rely on the requested order are named as applicants. Any other Trust that relies on the order in the future will comply with the terms and conditions of the application. VerDate Aug<31>2005 20:37 Sep 21, 2006 Jkt 208001 outstanding voting stock of the acquired company (ii) more than 5% of the total assets of the acquiring company, or (iii) 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, its principal underwriter, and any broker or dealer from selling shares of the investment company to another investment company if the sale will cause (i) the acquiring company to own more than 3% of the acquired company’s voting stock, or (ii) more than 10% of the acquired company’s voting stock to be owned by investment companies. Section 12(d)(1)(C) prohibits an investment company, other investment companies having the same investment adviser, and companies controlled by such investment companies, from acquiring more than 10% of the outstanding voting stock of a registered closed-end management investment company. 2. Section 12(d)(1)(G) provides, in relevant part, that section 12(d)(1) will not apply to securities of a registered open-end investment company or UIT acquired by a registered UIT if the acquired company and the acquiring company are part of the same group of investment companies, provided that certain other requirements contained in section 12(d)(1)(G) are met. Applicants state that they may not rely on section 12(d)(1)(G) because a Series will invest in Unaffiliated Funds and other securities in addition to Affiliated Funds. 3. 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. Applicants seek an exemption under section 12(d)(1)(J) to permit a Series to acquire shares of a Fund and to permit a Fund to sell its shares to a Series beyond the limits set forth in sections 12(d)(1)(A), (B), and (C). 4. Applicants state that the proposed arrangement will not give rise to the policy concerns underlying sections 12(d)(1)(A), (B), and (C), which include concerns about undue influence by a fund of funds over underlying funds, excessive layering of fees, and overly complex fund structures. Accordingly, applicants believe that the requested exemption is consistent with the public interest and the protection of investors. 5. Applicants state that the concern about undue control does not arise with PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 respect to a Series’ investment in Affiliated Funds, as reflected in section 12(d)(1)(G) of the Act. Applicants also state that the proposed arrangement will not result in undue influence by a Series or its affiliates over Unaffiliated Funds. Applicants have agreed that (a) the Depositor, (b) any person controlling, controlled by or under common control with the Depositor, and (c) any investment company and any issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act, sponsored or advised by the Depositor (or any person controlling, controlled by or under common control with the Depositor) (collectively, the ‘‘Group’’) will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning section 2(a)(9) of the Act. Applicants also note that conditions 2, 3, 5 and 6 set forth below will address the concern about undue influence with respect to the Unaffiliated Funds. 6. As an additional assurance that an Unaffiliated Underlying Fund understands the implications of an investment by a Series under the requested order, prior to a Series’ investment in the Unaffiliated Underlying Fund in excess of the limit in Section 12(d)(1)(A)(i), the Series and the Unaffiliated Underlying Fund will execute an agreement stating, without limitation, that the Depositor and Trustee and the board of directors or trustees to the Unaffiliated Underlying Fund and the investment adviser(s) to the Unaffiliated Underlying Fund, understand the terms and conditions of the order and agree to fulfill their responsibilities under the order (‘‘Participation Agreement’’). Applicants note that an Unaffiliated Underlying Fund, including a closed-end Fund or an ETF, may choose to reject an investment from the Series by declining to execute the Participation Agreement. 7. Applicants do not believe that the proposed arrangement will involve excessive layering of fees. Applicants state that any sales charges and/or service fees (as those terms are defined in Rule 2830 of the Conduct Rules of the NASD, Inc. (‘‘NASD Conduct Rules’’)) charged with respect to Units of a Series will not exceed the limits applicable to a fund of funds as set forth in Rule 2830 of the NASD Conduct Rules.2 In addition, the Trustee or Depositor will waive fees otherwise payable to it by the Series in an amount at least equal to any compensation (including fees paid pursuant to any plan adopted by an 2 With respect to purchasing closed-end Funds or ETF shares, a Series may incur the customary brokerage commissions associated with purchasing any equity security on the secondary market. E:\FR\FM\22SEN1.SGM 22SEN1 Federal Register / Vol. 71, No. 184 / Friday, September 22, 2006 / Notices Unaffiliated Underlying Fund under rule 12b–1 under the Act) received from an Unaffiliated Fund by the Trustee or Depositor, or an affiliated person of the Trustee or Depositor, other than any advisory fees paid to the Trustee or Depositor or its affiliated person by an Unaffiliated Underlying Fund, in connection with the investment by the Series in the Unaffiliated Fund. 8. Applicants state that the proposed arrangement will not create an overly complex fund structure. Applicants note that 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). Applicants also represent that a Series’ prospectus and sales literature will contain concise, ‘‘plain English’’ disclosure designed to inform investors of the unique characteristics of the trust of funds structure, including, but not limited to, its expense structure and the additional expenses of investing in Funds.3 sroberts on PROD1PC70 with NOTICES B. Section 17(a) of the Act 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 (a) any person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of the other person; (b) any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the other person; and (c) any person directly or indirectly controlling, controlled by, or under common control with the other person. 2. Applicants state that a Series and an Affiliated Fund might be deemed to be under the common control of the Depositor or an entity controlling, controlled by, or under common control with the Depositor. Applicants also state that a Series and a Fund might become ‘‘affiliated persons’’ if the Series acquires more than 5% of the Fund’s outstanding voting securities. The sale or redemption by a Fund of its shares to or from a Series therefore could be deemed to be a principal transaction prohibited by section 17(a) of the Act.4 3 Each Series also will comply with the disclosure requirements concerning aggregate costs of investing in the Funds set forth in the Investment Company Act Release No. 27399 by the compliance date set forth therein. 4 Applicants note that shares of an ETF would be purchased and sold generally through secondary market transactions at market prices rather than VerDate Aug<31>2005 20:37 Sep 21, 2006 Jkt 208001 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 person 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. 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 proposed 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 openend Funds and Funds that are UITs will be based on the net asset values of the Funds. Further, Applicants state that shares of ETFs and closed-end Funds will be purchased at market prices. Finally, Applicants state that the proposed transactions will be consistent with the policies of each Series and Fund, and with the general purposes of the Act. Applicants’ Conditions Applicants agree that the requested order will be subject to the following conditions: 1. The members of the Group will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. If, as a result of a decrease in the outstanding voting securities of an Unaffiliated Fund, the Group, in the aggregate, becomes a holder of more than 25% of the outstanding voting securities of the Unaffiliated Fund, the Group will vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund’s shares. 2. No Series or its Depositor, promoter, principal underwriter, or any person controlling, controlled by, or through principal transactions with the ETF at net asset value. Applicants will not rely on the requested relief from section 17(a) for such secondary market transactions. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 55529 under common control with any of those entities (each, a ‘‘Series Affiliate’’) will cause any existing or potential investment by the Series in an Unaffiliated Fund to influence the terms of any services or transactions between the Series or Series Affiliate and the Unaffiliated Fund or its investment adviser(s), sponsor, promoter, principal underwriter, or any person controlling, controlled by, or under common control with any of those entities. 3. Once an investment by a Series in the securities of an Unaffiliated Underlying Fund exceeds the limit in section 12(d)(1)(A)(i) of the Act, the board of directors or trustees of the Unaffiliated Underlying Fund, including a majority of the disinterested board members, will determine that any consideration paid by the Unaffiliated Underlying Fund to the Series or Series Affiliate in connection with any services or transactions: (a) Is fair and reasonable in relation to the nature and quality of the services and benefits received by the Unaffiliated Underlying Fund; (b) is within the range of consideration that the Unaffiliated Underlying 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 an Unaffiliated Underlying Fund and its investment adviser(s), or any person controlling, controlled by, or under common control with such investment adviser(s). 4. The Trustee or Depositor will waive fees otherwise payable to it by the Series in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Underlying Fund under rule 12b–1 under the Act) received from an Unaffiliated Fund by the Trustee or Depositor, or an affiliated person of the Trustee or Depositor, other than any advisory fees paid to the Trustee or Depositor or its affiliated person by an Unaffiliated Underlying Fund, in connection with the investment by a Series in the Unaffiliated Fund. 5. No Series or Series Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Underlying Fund or sponsor to an Unaffiliated Underlying Trust) will cause an Unaffiliated Fund to purchase a security in an offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is the Depositor or a person of which the Depositor is an affiliated person (each, an ‘‘Underwriting Affiliate,’’ except any E:\FR\FM\22SEN1.SGM 22SEN1 sroberts on PROD1PC70 with NOTICES 55530 Federal Register / Vol. 71, No. 184 / Friday, September 22, 2006 / Notices person whose relationship to the Unaffiliated 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 an Unaffiliated Underlying Fund, including a majority of the disinterested board members, will adopt procedures reasonably designed to monitor any purchases of securities by the Unaffiliated Underlying Fund in an Affiliated Underwriting once an investment by a Series in the securities of the Unaffiliated Underlying 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 of the Unaffiliated Underlying Fund will review these purchases periodically, but no less frequently than annually, to determine whether the purchases were influenced by the investment by the Series in the Unaffiliated Underlying Fund. The board of the Unaffiliated Underlying Fund will consider, among other things: (a) Whether the purchases were consistent with the investment objectives and policies of the Unaffiliated Underlying Fund; (b) how the performance of securities purchased in an Affiliated Underwriting compares to the performance of comparable securities purchased during a comparable period of time in underwritings other than Affiliated Underwritings or to a benchmark such as a comparable market index; and (c) whether the amount of securities purchased by the Unaffiliated Underlying Fund in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The board of the Unaffiliated Underlying Fund will 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 interests of shareholders. 7. An Unaffiliated Underlying Fund will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase in an Affiliated Underwriting occurred, the first two years in an easily accessible place, a written record of each purchase of securities in Affiliated Underwritings once an investment by a Series in the VerDate Aug<31>2005 20:37 Sep 21, 2006 Jkt 208001 securities of the Unaffiliated Underlying Fund exceeds the limit of 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 determinations of the board of the Unaffiliated Underlying Fund were made. 8. Before investing in an Unaffiliated Underlying Fund in excess of the limit in section 12(d)(1)(A)(i), each Series and the Unaffiliated Underlying Fund will execute a Participation Agreement stating, without limitation, that the Depositor and Trustee and the board of directors or trustees of the Unaffiliated Underlying Fund and the investment adviser(s) to the Unaffiliated Underlying Fund, understand the terms and conditions of the order and agree to fulfill their responsibilities under the order. At the time of its investment in shares of an Unaffiliated Underlying Fund in excess of the limit in section 12(d)(1)(A)(i), a Series will notify the Unaffiliated Underlying Fund of the investment. At such time, the Series also will transmit to the Unaffiliated Underlying Fund a list of the names of each Series Affiliate and Underwriting Affiliate. The Series will notify the Unaffiliated Underlying Fund of any changes to the list of names as soon as reasonably practicable after a change occurs. The Unaffiliated Underlying Fund and the Series will maintain and preserve a copy of the order, the Participation Agreement, and the list with any updated information for the duration of the investment, and for a period of not less than six years thereafter, the first two years in an easily accessible place. 9. Any sales charges and/or service fees charged with respect to Units of a Series will not exceed the limits applicable to a fund of funds as set forth in Rule 2830 of the Conduct Rules of the NASD. 10. 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. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Jill M. Peterson, Assistant Secretary. [FR Doc. 06–7998 Filed 9–21–06; 8:45 am] BILLING CODE 8010–01–P PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54467; File No. SR–BSE– 2006–37] Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change, and Amendments No. 1 and No. 2 Thereto, To Re-Establish the Market Opening Pilot Program September 18, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on September 1, 2006, the Boston Stock Exchange, Inc. (‘‘BSE’’ or ‘‘Exchange’’) 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 BSE. On September 8, 2006, the BSE filed Amendment No. 1 to the proposed rule change. On September 12, 2006, the BSE withdrew Amendment No. 1. On September 12, 2006, the BSE filed Amendment No. 2 to the proposed rule change.3 Pursuant to Section 19(b)(3)(A) of the Act 4 and Rule 19b–4(f)(6) thereunder,5 the BSE has designated this proposal as ‘‘non-controversial,’’ which renders the proposed rule change effective immediately upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The BSE is proposing to amend its rules to extend from September 1, 2006 to August 6, 2007 the pilot program related to market opening procedures on the Boston Options Exchange facility (‘‘BOX’’). That pilot program expired on August 6, 2006.6 The only change to the pilot program is an extension of the effective date from September 1, 2006 to August 6, 2007. The BSE does not 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 In Amendment No. 2 the BSE requested the Commission waive the 5-day pre-filing notice requirement and 30-day operative date delay contained in Rule 19b–4(f)(6)(iii), and made additional clarifications to the proposal. 4 15 U.S.C. 78s(b)(3)(A). 5 17 CFR 240.19b–4(f)(6). 6 The BSE filed another proposed rule, SR–BSE– 2006–36, to retroactively re-establish the market opening procedures pilot program for the time period August 6, 2006 through September 1, 2006. 2 17 E:\FR\FM\22SEN1.SGM 22SEN1

Agencies

[Federal Register Volume 71, Number 184 (Friday, September 22, 2006)]
[Notices]
[Pages 55527-55530]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-7998]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27484; 812-13171]


Claymore Securities, Inc. and Claymore Securities Defined 
Portfolios, Notice of Application

September 18, 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), (B) and (C) 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 THE APPLICATION: Claymore Securities, Inc. (the 
``Depositor''), and Claymore Securities Defined Portfolios (the 
``Trust''), on behalf of itself and any existing and future series, and 
any future registered unit investment trust (``UIT'') sponsored by the 
Depositor (or an entity controlling, controlled by or under common 
control with the Depositor) and their respective series (the future 
UITs, together with the Trust, are collectively the ``Trusts,'' the 
series of the Trusts are the ``Series,'' and the Trusts together with 
the Depositor are collectively, the (``Applicants''), request an order 
to permit each Series to acquire shares of registered investment 
companies or series thereof (the ``Funds'') both within and outside the 
same group of investment companies.

APPLICANTS: The Depositor and the Trust.

FILING DATES: The application was filed on February 23, 2005 and 
amended on June 28, 2006 and September 1, 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 October 24, 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 20549-10901; Applicants, 2455 Corporate 
West Drive, Lisle, Illinois 60532.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 551-6876, 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, tel: (202) 551-5850.

Applicants' Representations

    1. The Trust is a UIT registered under the Act. Each Series will be 
a series of a Trust and will offer units for sale to

[[Page 55528]]

the public (``Units'').\1\ Each Series will be created pursuant to a 
trust agreement which will incorporate by reference a master trust 
agreement between the Depositor and a financial institution that 
satisfies the criteria in section 26(a) of the Act (the ``Trustee''). 
The Depositor is a broker dealer registered under the Securities 
Exchange Act of 1934 and member of the National Association of 
Securities Dealers, Inc. (``NASD'').
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    \1\ All existing Trusts that currently intend to rely on the 
requested order are named as applicants. Any other Trust that relies 
on the order in the future will comply with the terms and conditions 
of the application.
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    2. Applicants request relief to permit a Series to invest in (a) 
registered investment companies or series thereof that are part of the 
same ``group of investment companies'' (as that term is defined in 
section 12(d)(1)(G) of the Act) as the Series (``Affiliated Funds''), 
and (b) registered investment companies or series thereof that are not 
part of the same group of investment companies as the Series 
(``Unaffiliated Funds,'' and together with the Affiliated Funds, the 
``Funds''). An Unaffiliated Fund that is a UIT is referred to as an 
``Unaffiliated Underlying Trust.'' An Unaffiliated Fund that is a 
closed-end or open-end management investment company is referred to as 
an ``Unaffiliated Underlying Fund''. Certain of the Funds may be 
``exchange-traded funds'' that are registered under the Act as UITs or 
open-end management investment companies and have received exemptive 
relief to sell their shares on a national securities exchange or at 
negotiated prices (``ETFs''). Shares of closed-end Funds and ETFs will 
be deposited in a Series at prices which are based on the market value 
of the securities, as determined by an evaluator. The Depositor will 
not have discretion as to when portfolio securities of a Series will be 
sold, except that the Depositor is authorized to sell securities in 
extremely limited circumstances described in the Series' prospectus.
    3. Applicants state that the requested relief will benefit the 
holders of Units of a Series by providing investors with a 
professionally selected, diversified portfolio of registered investment 
company shares through a single investment vehicle.

Applicants' Legal Analysis

A. Section 12(d)(1) 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 (i) more than 3% of the total outstanding voting 
stock of the acquired company (ii) more than 5% of the total assets of 
the acquiring company, or (iii) 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, its principal underwriter, and 
any broker or dealer from selling shares of the investment company to 
another investment company if the sale will cause (i) the acquiring 
company to own more than 3% of the acquired company's voting stock, or 
(ii) more than 10% of the acquired company's voting stock to be owned 
by investment companies. Section 12(d)(1)(C) prohibits an investment 
company, other investment companies having the same investment adviser, 
and companies controlled by such investment companies, from acquiring 
more than 10% of the outstanding voting stock of a registered closed-
end management investment company.
    2. Section 12(d)(1)(G) provides, in relevant part, that section 
12(d)(1) will not apply to securities of a registered open-end 
investment company or UIT acquired by a registered UIT if the acquired 
company and the acquiring company are part of the same group of 
investment companies, provided that certain other requirements 
contained in section 12(d)(1)(G) are met. Applicants state that they 
may not rely on section 12(d)(1)(G) because a Series will invest in 
Unaffiliated Funds and other securities in addition to Affiliated 
Funds.
    3. 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. Applicants seek an exemption under section 
12(d)(1)(J) to permit a Series to acquire shares of a Fund and to 
permit a Fund to sell its shares to a Series beyond the limits set 
forth in sections 12(d)(1)(A), (B), and (C).
    4. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 12(d)(1)(A), (B), and 
(C), which include concerns about undue influence by a fund of funds 
over underlying funds, excessive layering of fees, and overly complex 
fund structures. Accordingly, applicants believe that the requested 
exemption is consistent with the public interest and the protection of 
investors.
    5. Applicants state that the concern about undue control does not 
arise with respect to a Series' investment in Affiliated Funds, as 
reflected in section 12(d)(1)(G) of the Act. Applicants also state that 
the proposed arrangement will not result in undue influence by a Series 
or its affiliates over Unaffiliated Funds. Applicants have agreed that 
(a) the Depositor, (b) any person controlling, controlled by or under 
common control with the Depositor, and (c) any investment company and 
any issuer that would be an investment company but for section 3(c)(1) 
or 3(c)(7) of the Act, sponsored or advised by the Depositor (or any 
person controlling, controlled by or under common control with the 
Depositor) (collectively, the ``Group'') will not control (individually 
or in the aggregate) an Unaffiliated Fund within the meaning section 
2(a)(9) of the Act. Applicants also note that conditions 2, 3, 5 and 6 
set forth below will address the concern about undue influence with 
respect to the Unaffiliated Funds.
    6. As an additional assurance that an Unaffiliated Underlying Fund 
understands the implications of an investment by a Series under the 
requested order, prior to a Series' investment in the Unaffiliated 
Underlying Fund in excess of the limit in Section 12(d)(1)(A)(i), the 
Series and the Unaffiliated Underlying Fund will execute an agreement 
stating, without limitation, that the Depositor and Trustee and the 
board of directors or trustees to the Unaffiliated Underlying Fund and 
the investment adviser(s) to the Unaffiliated Underlying Fund, 
understand the terms and conditions of the order and agree to fulfill 
their responsibilities under the order (``Participation Agreement''). 
Applicants note that an Unaffiliated Underlying Fund, including a 
closed-end Fund or an ETF, may choose to reject an investment from the 
Series by declining to execute the Participation Agreement.
    7. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. Applicants state that any sales 
charges and/or service fees (as those terms are defined in Rule 2830 of 
the Conduct Rules of the NASD, Inc. (``NASD Conduct Rules'')) charged 
with respect to Units of a Series will not exceed the limits applicable 
to a fund of funds as set forth in Rule 2830 of the NASD Conduct 
Rules.\2\ In addition, the Trustee or Depositor will waive fees 
otherwise payable to it by the Series in an amount at least equal to 
any compensation (including fees paid pursuant to any plan adopted by 
an

[[Page 55529]]

Unaffiliated Underlying Fund under rule 12b-1 under the Act) received 
from an Unaffiliated Fund by the Trustee or Depositor, or an affiliated 
person of the Trustee or Depositor, other than any advisory fees paid 
to the Trustee or Depositor or its affiliated person by an Unaffiliated 
Underlying Fund, in connection with the investment by the Series in the 
Unaffiliated Fund.
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    \2\ With respect to purchasing closed-end Funds or ETF shares, a 
Series may incur the customary brokerage commissions associated with 
purchasing any equity security on the secondary market.
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    8. Applicants state that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that 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). Applicants also represent 
that a Series' prospectus and sales literature will contain concise, 
``plain English'' disclosure designed to inform investors of the unique 
characteristics of the trust of funds structure, including, but not 
limited to, its expense structure and the additional expenses of 
investing in Funds.\3\
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    \3\ Each Series also will comply with the disclosure 
requirements concerning aggregate costs of investing in the Funds 
set forth in the Investment Company Act Release No. 27399 by the 
compliance date set forth therein.
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B. Section 17(a) of the Act

    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 (a) any person 
directly or indirectly owning, controlling, or holding with power to 
vote, 5% or more of the outstanding voting securities of the other 
person; (b) any person 5% or more of whose outstanding voting 
securities are directly or indirectly owned, controlled, or held with 
power to vote by the other person; and (c) any person directly or 
indirectly controlling, controlled by, or under common control with the 
other person.
    2. Applicants state that a Series and an Affiliated Fund might be 
deemed to be under the common control of the Depositor or an entity 
controlling, controlled by, or under common control with the Depositor. 
Applicants also state that a Series and a Fund might become 
``affiliated persons'' if the Series acquires more than 5% of the 
Fund's outstanding voting securities. The sale or redemption by a Fund 
of its shares to or from a Series therefore could be deemed to be a 
principal transaction prohibited by section 17(a) of the Act.\4\
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    \4\ Applicants note that shares of an ETF would be purchased and 
sold generally through secondary market transactions at market 
prices rather than through principal transactions with the ETF at 
net asset value. Applicants will not rely on the requested relief 
from section 17(a) for such secondary market transactions.
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    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 person 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.
    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 proposed 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 
open-end Funds and Funds that are UITs will be based on the net asset 
values of the Funds. Further, Applicants state that shares of ETFs and 
closed-end Funds will be purchased at market prices. Finally, 
Applicants state that the proposed transactions will be consistent with 
the policies of each Series and Fund, and with the general purposes of 
the Act.

Applicants' Conditions

    Applicants agree that the requested order will be subject to the 
following conditions:
    1. The members of the Group will not control (individually or in 
the aggregate) an Unaffiliated Fund within the meaning of section 
2(a)(9) of the Act. If, as a result of a decrease in the outstanding 
voting securities of an Unaffiliated Fund, the Group, in the aggregate, 
becomes a holder of more than 25% of the outstanding voting securities 
of the Unaffiliated Fund, the Group will vote its shares of the 
Unaffiliated Fund in the same proportion as the vote of all other 
holders of the Unaffiliated Fund's shares.
    2. No Series or its Depositor, promoter, principal underwriter, or 
any person controlling, controlled by, or under common control with any 
of those entities (each, a ``Series Affiliate'') will cause any 
existing or potential investment by the Series in an Unaffiliated Fund 
to influence the terms of any services or transactions between the 
Series or Series Affiliate and the Unaffiliated Fund or its investment 
adviser(s), sponsor, promoter, principal underwriter, or any person 
controlling, controlled by, or under common control with any of those 
entities.
    3. Once an investment by a Series in the securities of an 
Unaffiliated Underlying Fund exceeds the limit in section 
12(d)(1)(A)(i) of the Act, the board of directors or trustees of the 
Unaffiliated Underlying Fund, including a majority of the disinterested 
board members, will determine that any consideration paid by the 
Unaffiliated Underlying Fund to the Series or Series Affiliate in 
connection with any services or transactions: (a) Is fair and 
reasonable in relation to the nature and quality of the services and 
benefits received by the Unaffiliated Underlying Fund; (b) is within 
the range of consideration that the Unaffiliated Underlying 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 an 
Unaffiliated Underlying Fund and its investment adviser(s), or any 
person controlling, controlled by, or under common control with such 
investment adviser(s).
    4. The Trustee or Depositor will waive fees otherwise payable to it 
by the Series in an amount at least equal to any compensation 
(including fees received pursuant to any plan adopted by an 
Unaffiliated Underlying Fund under rule 12b-1 under the Act) received 
from an Unaffiliated Fund by the Trustee or Depositor, or an affiliated 
person of the Trustee or Depositor, other than any advisory fees paid 
to the Trustee or Depositor or its affiliated person by an Unaffiliated 
Underlying Fund, in connection with the investment by a Series in the 
Unaffiliated Fund.
    5. No Series or Series Affiliate (except to the extent it is acting 
in its capacity as an investment adviser to an Unaffiliated Underlying 
Fund or sponsor to an Unaffiliated Underlying Trust) will cause an 
Unaffiliated Fund to purchase a security in an offering of securities 
during the existence of any underwriting or selling syndicate of which 
a principal underwriter is the Depositor or a person of which the 
Depositor is an affiliated person (each, an ``Underwriting Affiliate,'' 
except any

[[Page 55530]]

person whose relationship to the Unaffiliated 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 an Unaffiliated Underlying Fund, including a 
majority of the disinterested board members, will adopt procedures 
reasonably designed to monitor any purchases of securities by the 
Unaffiliated Underlying Fund in an Affiliated Underwriting once an 
investment by a Series in the securities of the Unaffiliated Underlying 
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 
of the Unaffiliated Underlying Fund will review these purchases 
periodically, but no less frequently than annually, to determine 
whether the purchases were influenced by the investment by the Series 
in the Unaffiliated Underlying Fund. The board of the Unaffiliated 
Underlying Fund will consider, among other things: (a) Whether the 
purchases were consistent with the investment objectives and policies 
of the Unaffiliated Underlying Fund; (b) how the performance of 
securities purchased in an Affiliated Underwriting compares to the 
performance of comparable securities purchased during a comparable 
period of time in underwritings other than Affiliated Underwritings or 
to a benchmark such as a comparable market index; and (c) whether the 
amount of securities purchased by the Unaffiliated Underlying Fund in 
Affiliated Underwritings and the amount purchased directly from an 
Underwriting Affiliate have changed significantly from prior years. The 
board of the Unaffiliated Underlying Fund will 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 interests of shareholders.
    7. An Unaffiliated Underlying Fund will maintain and preserve 
permanently in an easily accessible place a written copy of the 
procedures described in the preceding condition, and any modifications 
to such procedures, and will maintain and preserve for a period of not 
less than six years from the end of the fiscal year in which any 
purchase in an Affiliated Underwriting occurred, the first two years in 
an easily accessible place, a written record of each purchase of 
securities in Affiliated Underwritings once an investment by a Series 
in the securities of the Unaffiliated Underlying Fund exceeds the limit 
of 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 determinations of the board of the Unaffiliated 
Underlying Fund were made.
    8. Before investing in an Unaffiliated Underlying Fund in excess of 
the limit in section 12(d)(1)(A)(i), each Series and the Unaffiliated 
Underlying Fund will execute a Participation Agreement stating, without 
limitation, that the Depositor and Trustee and the board of directors 
or trustees of the Unaffiliated Underlying Fund and the investment 
adviser(s) to the Unaffiliated Underlying Fund, understand the terms 
and conditions of the order and agree to fulfill their responsibilities 
under the order. At the time of its investment in shares of an 
Unaffiliated Underlying Fund in excess of the limit in section 
12(d)(1)(A)(i), a Series will notify the Unaffiliated Underlying Fund 
of the investment. At such time, the Series also will transmit to the 
Unaffiliated Underlying Fund a list of the names of each Series 
Affiliate and Underwriting Affiliate. The Series will notify the 
Unaffiliated Underlying Fund of any changes to the list of names as 
soon as reasonably practicable after a change occurs. The Unaffiliated 
Underlying Fund and the Series will maintain and preserve a copy of the 
order, the Participation Agreement, and the list with any updated 
information for the duration of the investment, and for a period of not 
less than six years thereafter, the first two years in an easily 
accessible place.
    9. Any sales charges and/or service fees charged with respect to 
Units of a Series will not exceed the limits applicable to a fund of 
funds as set forth in Rule 2830 of the Conduct Rules of the NASD.
    10. 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.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 06-7998 Filed 9-21-06; 8:45 am]
BILLING CODE 8010-01-P