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