Tactical Allocation Services, LLC, et al.;, 63807-63810 [E6-18256]
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Federal Register / Vol. 71, No. 210 / Tuesday, October 31, 2006 / Notices
total value of U.S. imports of that
product. The ‘‘D’’ flag next to articles on
the list indicates articles that, based on
eight-month 2006 trade data, may be
eligible for a de minimis waiver because
the total value of imports of that article
from all countries is below $12 million.
The list published on the USTR Web
site is provided for informational
purposes only. The list is computergenerated and based on interim 2006
data, and may not include all articles
that may be affected by the GSP CNLs.
Regardless of whether or not an article
is included on the list, all
determinations and decisions regarding
the CNLs of the GSP program will
depend on full calendar year 2006
import data with respect to each GSPeligible article. Each interested party is
advised to conduct its own review of
2006 import data with regard to the
possible application of GSP CNLs.
Please see the notice announcing the
2006 GSP Review which was published
in the Federal Register on June 29, 2006
for further details on submitting a
petition for a CNL waiver.
Marideth J. Sandler,
Executive Director for the GSP Program,
Chairman, GSP Subcommittee of the Trade
Policy Staff Committee.
[FR Doc. E6–18304 Filed 10–30–06; 8:45 am]
BILLING CODE 3190–W7–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–27523; 812–13056]
Tactical Allocation Services, LLC, et
al.; Notice of Application
October 24, 2006.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under section 12(d)(1)(J) of the
Investment Company Act of 1940
(‘‘Act’’) for an exemption from sections
12(d)(1)(A) and (B) of the Act and under
sections 6(c) and 17(b) of the Act for an
exemption from section 17(a) of the Act.
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AGENCY:
Summary of Application: The order
would permit certain registered openend management investment companies
to acquire shares of other registered
open-end management investment
companies and unit investment trusts
(‘‘UITs’’) both within and outside the
same group of investment companies.
Applicants: Agile Funds, Inc. (the
‘‘Company’’), with respect to its
portfolio series (each a ‘‘Fund’’ and
collectively the ‘‘Funds’’), and Tactical
Allocation Services, LLC (the
‘‘Adviser’’).
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Filing Dates: The application was
filed on December 18, 2003 and
amended on October 20, 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. November 17, 2006, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit, or for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F
Street, NE, Washington, DC 20549–
1090; Applicants, Tactical Allocation
Services, LLC, and Agile Funds, Inc.,
4909 Pearl East Circle, Suite 300,
Boulder, Colorado 80301–6101.
FOR FURTHER INFORMATION CONTACT:
Nadya Roytblat, Assistant Director, at
(202) 551–6821 (Division of Investment
Management, Office of Investment
Company Regulation).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained for a fee at the Public
Reference Desk, U.S. Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–0102
(telephone (202) 551–5850).
Applicants’ Representations
1. The Company is a Maryland
corporation and an open-end
management investment company
registered under the Act. One Fund of
the Company is the Agile Multi-Strategy
Fund (the ‘‘Multi-Strategy Fund’’). The
Adviser, a Colorado limited liability
company, serves as investment adviser
to the Multi-Strategy Fund and is
registered under the Investment
Advisers Act of 1940.
2. Applicants request relief to permit:
(1) One or more Funds (including the
Multi-Strategy Fund, ‘‘Funds of Funds’’)
to acquire shares of: (a) Registered openend management investment companies
or UITs that are not part of the same
group of investment companies, as
defined in section 12(d)(1)(G)(ii) of the
Act, as the Fund of Funds (‘‘Other
Group Funds’’) 1 and the Other Group
1 The Other Group Funds may include UITs
(‘‘Other Group Trusts’’) and open-end management
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Funds to sell such shares to the Fund of
Funds; and (2) the Fund of Funds to
acquire shares of certain Funds that are
in the same group of investment
companies, as defined in section
12(d)(1)(G)(ii) of the Act, as the Fund of
Funds (the ‘‘Same Group Funds’’)
(together with the Other Group Funds,
the ‘‘Underlying Funds’’) and the Same
Group Funds to sell such shares to the
Fund of Funds. Applicants also apply
for an order pursuant to section 6(c) and
section 17(b) of the Act exempting
Applicants from section 17(a) of the Act
to the extent necessary to permit
purchases and redemptions by a Fund
of Funds of shares of the Underlying
Funds and to permit the Underlying
Funds to sell or redeem their shares in
transactions with the Fund of Funds.2
Applicants state that the requested relief
will enable investors to achieve a
diversified investment in a range of
Underlying Funds through a single
investment in a Fund of Funds.
Applicants’ Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act
prohibits a registered investment
company from acquiring shares of an
investment company if the securities
represent more than 3% of the total
outstanding voting stock of the acquired
company, more than 5% of the total
assets of the acquiring company, or,
together with the securities of any other
investment companies, more than 10%
of the total assets of the acquiring
company. Section 12(d)(1)(B) of the Act
prohibits a registered open-end
investment company, its principal
underwriter and any broker or dealer
from selling shares of the investment
company to any other investment
company if the sale will cause the
acquiring company to own more than
3% of the acquired company’s voting
stock, or if the sale will cause more than
10% of the acquired company’s voting
stock to be owned by investment
companies generally.
2. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
investment companies (‘‘Other Group Management
Companies’’) that have recieved exemptive relief to
sell their shares on a national securities exchange
at negotiated prices (‘‘EFTs’’). Shares of an ETF also
may be purchased from the EFT in large
aggregations by delivering a basket of specified
securities to the ETF, and large aggregations of
shares may be redeemed from an ETF in exchange
for a basket of specified securities (‘‘In-kind EFT
Purchases and Redemptions’’).
2 All existing investment companies that
currently intend to rely on the requested order are
named as applicants. Any other investment
company that relies on the order in the future will
comply with the terms and conditions of the order.
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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 the Funds
of Funds to acquire shares of
Underlying Funds and to permit the
Underlying Funds, their principal
underwriters and any broker or dealer to
sell shares of the Underlying Funds to
the Funds of Funds beyond the limits
set forth in sections 12(d)(1)(A) and (B)
of the Act.
3. Applicants state that the proposed
arrangement will not give rise to the
policy concerns underlying sections
12(d)(1)(A) and (B), which include
concerns about undue influence by a
fund of funds over underlying funds,
excessive layering of fees, and overly
complex fund structures. Accordingly,
applicants believe that the requested
exemption is consistent with the public
interest and the protection of investors.
4. Applicants state that the proposed
arrangement will not result in undue
influence by a Fund of Funds or its
affiliated persons over an Other Group
Fund. To limit the control that a Fund
of Funds may have over an Other Group
Fund, applicants propose a condition
prohibiting: (a) The Adviser and any
person controlling, controlled by or
under common control with the
Adviser, and any investment company
or any issuer that would be an
investment company but for section
3(c)(1) or 3(c)(7) of the Act that is
advised by the Adviser or any person
controlling, controlled by or under
common control with the Adviser
(collectively, the ‘‘Adviser Group’’), and
(b) any investment adviser to a Fund of
Funds that meets the definition of
section 2(a)(20)(B) of the Act (‘‘Subadviser’’), any person controlling,
controlled by or under common control
with the Sub-Adviser, and any
investment company or issuer that
would be an investment company but
for section 3(c)(1) or 3(c)(7) of the Act
(or portion of such investment company
or issuer) advised by the Sub-Adviser or
any person controlling, controlled by or
under common control with the SubAdviser (collectively, the ‘‘Subadviser
Group’’) from controlling an Other
Group Fund within the meaning of
section 2(a)(9) of the Act.
5. Applicants also propose conditions
to preclude a Fund of Funds and its
affiliated entities from taking advantage
of an Other Group Fund. Under
condition 2, no Fund of Funds or its
Adviser, Sub-Adviser, promoter,
principal underwriter or any person
controlling, controlled by or under
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common control with any of these
entities (each, a ‘‘Fund of Funds
Affiliate’’), will cause any existing or
potential investment by the Fund of
Funds in shares of an Other Group Fund
to influence the terms of any services or
transactions between the Fund of Funds
or a Fund of Funds Affiliate and the
Other Group Fund or its investment
adviser(s), sponsor, promoter, principal
underwriter and any person controlling,
controlled by or under common control
with any of these entities (each, an
‘‘Other Group Fund Affiliate’’).
Condition 5 precludes a Fund of Funds
and any Fund of Funds Affiliate (except
to the extent it is acting in its capacity
as an investment adviser to an Other
Group Management Company or
sponsor to an Other Group Underlying
Trust) from causing an Other Group
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 an officer, director,
member of an advisory board, Adviser,
Sub-Adviser, or employee of the Fund
of Funds, or a person of which any such
officer, director, member of an advisory
board, Adviser, Sub-Adviser, or
employee is an affiliated person (each,
an ‘‘Underwriting Affiliate,’’ except any
person whose relationship to the Other
Group Fund is covered by section 10(f)
of the Act is not an Underwriting
Affiliate). An offering of securities
during the existence of any
underwriting or selling syndicate of
which a principal underwriter is an
Underwriting Affiliate is an ‘‘Affiliated
Underwriting.’’
6. As an additional assurance that an
Other Group Management Company
understands the implications of an
investment by a Fund of Funds under
the requested order, prior to a Fund of
Funds’ investment in an Other Group
Management Company in excess of the
limit in section 12(d)(1)(A)(i), condition
8 requires that the Fund of Funds and
the Other Group Management Company
execute an agreement stating, without
limitation, that their boards of directors
or trustees and their investment advisers
understand the terms and conditions of
the order and agree to fulfill their
responsibilities under the order
(‘‘Participation Agreement). Applicants
note that an Other Group Fund (other
than an ETF whose shares are
purchased by a Fund of Funds in the
secondary market) will retain the right
to reject an investment by a Fund of
Funds.3
3 An Other Group Fund, including an EFT, would
retain its right to reject any initial investment by a
Fund of Funds in excess of the limit in section
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7. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. With respect
to investment advisory fees, applicants
state that, before approving any
investment advisory contract under
section 15 of the Act, the board of
directors or trustees (‘‘Board’’) of each
Fund of Funds, including a majority of
the directors or trustees who are not
‘‘interested persons,’’ as defined in
section 2(a)(19) of the Act
(‘‘Disinterested Directors’’), will find
that the investment advisory fees
charged under such contract are based
on services provided that are in addition
to, rather than duplicative of, services
provided under the advisory contract(s)
of any Underlying Fund in which the
Fund of Funds may invest.
8. Applicants state that the proposed
arrangement will not create an overly
complex fund structure. Applicants note
that an Underlying Fund will be
prohibited from acquiring securities of
any investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained
in section 12(d)(1)(A), except as may be
permitted by a Commission order
allowing an Underlying Fund to
purchase shares of an affiliated
investment company for short-term cash
management purposes or rule 12d–1
under the Act. Applicants also represent
that a Fund of Funds’ prospectus and
sales literature will contain concise,
‘‘plain English’’ disclosure designed to
inform investors of the unique
characteristics of the proposed Fund of
Funds structure, including, but not
limited to, its expense structure and the
additional expenses of investing in
Underlying Funds. Each Fund of Funds
also will comply with the disclosure
requirements adopted in Investment
Company Act Release No. 27399 (June
20, 2006).
B. Section 17(a)
1. Section 17(a) of the Act generally
prohibits sales or purchases of securities
between a registered investment
company and any affiliated person of
the company. Section 2(a)(3) of the Act
defines an ‘‘affiliated person’’ of another
person to include (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,
12(d)(1)(A)(i) of the Act by declining to execute the
Participation Agreement with the Fund of Funds.
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controlled by, or under common control
with the other person.
2. Applicants state that since the
Funds of Funds and the Same Group
Funds may be advised by the Adviser or
share common officers or directors, they
might be deemed to be under common
control and therefore affiliated persons
of one another. Applicants also state
that the Funds of Funds and the
Underlying Funds may be deemed to be
affiliated persons of one another if a
Fund of Funds acquires 5% or more of
an Underlying Fund’s outstanding
voting securities. In light of these
possible affiliations, section 17(a) could
prevent an Underlying Fund from
selling shares to and redeeming shares
from a Fund of Funds.4
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 reasonable and fair 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 transactions are fair and
reasonable and do not involve
overreaching. Applicants note that the
terms upon which an Underlying Fund
will sell its shares to or purchase its
shares from a Fund of Funds will be
based on the net asset value of the
Underlying Fund.5 Applicants state that
4 Applicants acknowledge that receipt of any
compensation by (a) an affiliated person of a Fund
of Funds, or an affiliated person of such person, for
the purchase by the Fund of Funds of shares of an
Underlying Fund or (b) an affiliated person of an
Underlying Fund, or an affiliated person of such
person, for the sale by the Underlying Fund of its
shares to a Fund of Funds is subject to section 17(e)
of the Act. The Participation Agreement also will
include this acknowledgment.
5 Applicants note that a Fund of Funds generally
would purchase and sell shares of an Underlying
Fund that operates as an ETF through secondary
market transactions at market prices rather than
through principal transactions with the Underlying
Fund at net asset value. Applicants would not rely
on the requested relief from section 17(a) for such
secondary market transactions. To the extent a
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the proposed transactions will be
consistent with the policies of each
Fund of Funds and Underlying Fund,
and with the general purposes of the
Act.
Applicants’ Conditions
Applicants agree that the order
granting the requested relief will be
subject to the following conditions:
1. The members of the Adviser Group
will not control (individually or in the
aggregate) an Other Group Fund within
the meaning of section 2(a)(9) of the Act.
The members of the Subadviser Group
will not control (individually or in the
aggregate) an Other Group 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
Other Group Fund, the Adviser Group
or the Subadviser Group, each in the
aggregate, becomes a holder of more
than 25% of the outstanding voting
securities of the Other Group Fund, it
will vote its shares of the Other Group
Fund in the same proportion as the vote
of all other holders of the Other Group
Fund’s shares. This condition does not
apply to the Subadviser Group with
respect to an Other Group Fund for
which the Subadviser or a person
controlling, controlled by, or under
common control with the Subadviser
acts as the investment adviser within
the meaning section 2(a)(20)(A) of the
Act (in the case of an Other Group
Management Company) or as the
sponsor (in the case of an Other Group
Trust).
2. No Fund of Funds or Fund of
Funds Affiliate will cause any existing
or potential investment by the Fund of
Funds in shares of an Other Group Fund
to influence the terms of any services or
transactions between the Fund of Funds
or a Fund of Funds Affiliate and the
Other Group Fund or an Other Group
Fund Affiliate.
3. The Board of a Fund of Funds,
including a majority of the Disinterested
Directors, will adopt procedures
reasonably designed to assure that the
Adviser and any Subadviser to the Fund
of Funds are conducting the investment
program of the Fund of Funds without
taking into account any consideration
received by the Fund of Funds or a
Fund of Funds Affiliate from an Other
Group Fund or an Other Group Fund
Affiliate in connection with any services
or transactions.
4. Once an investment by a Fund of
Funds in the securities of an Other
Group Management Company exceeds
Fund of Funds engages in In-kind ETF Purchases
and Redemptions, Applicants request relief from
section 17(a) for these transactions.
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the limit in section 12(d)(1)(A)(i) of the
Act, the Board of the Other Group
Management Company, including a
majority of the Disinterested Directors,
will determine that any consideration
paid by the Other Group Management
Company to the Fund of Funds or a
Fund of Funds Affiliate in connection
with any services or transactions: (a) Is
fair and reasonable in relation to the
nature and quality of the services and
benefits received by the Other Group
Management Company; (b) is within the
range of consideration that the Other
Group Management Company 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 Other Group
Management Company and its
investment adviser(s), or any person
controlling, controlled by, or under
common control with such investment
adviser(s).
5. No Fund of Funds or Fund of
Funds Affiliate (except to the extent it
is acting in its capacity as an investment
adviser to an Other Group Management
Company or sponsor to an Other Group
Trust) will cause an Other Group Fund
to purchase a security in any Affiliated
Underwriting.
6. The Board of an Other Group
Management Company, including a
majority of the Disinterested Directors,
will adopt procedures reasonably
designed to monitor any purchases of
securities by the Other Group
Management Company in Affiliated
Underwritings, once an investment by a
Fund of Funds in the securities of the
Other Group Management Company
exceeds the limit of section
12(d)(1)(A)(i) of the Act, including any
purchases made directly from an
Underwriting Affiliate. The Board will
review these purchases periodically, but
no less frequently than annually, to
determine whether the purchases were
influenced by the investment by the
Fund of Funds in shares of the Other
Group Management Company. The
Board will consider, among other
things: (a) whether the purchases were
consistent with the investment
objectives and policies of the Other
Group Management Company; (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
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purchased by the Other Group
Management Company in Affiliated
Underwritings and the amount
purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board 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. The Other Group Management
Company 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 from an Affiliated
Underwriting occurred, the first two
years in an easily accessible place, a
written record of each purchase of
securities in Affiliated Underwritings
once an investment by a Fund of Funds
in the securities of an Other Group
Management Company 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
Other Group Management Company
were made.
8. Before investing in an Other Group
Management Company in excess of the
limit in section 12(d)(1)(A)(i) of the Act,
the Fund of Funds and the Other Group
Management Company will execute a
Participation Agreement stating,
without limitation, that their Boards and
their investment advisers understand
the terms and conditions of the order
and agree to fulfill their responsibilities
under the order. At the time of its
investment in shares of an Other Group
Management Company in excess of the
limit in section 12(d)(1)(A)(i), a Fund of
Funds will notify the Other Group
Management Company of the
investment. At such time, the Fund of
Funds will also transmit to the Other
Group Management Company a list of
the names of each Fund of Funds
Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the Other
Group Management Company of any
changes to the list as soon as reasonably
practicable after a change occurs. The
Other Group Management Company and
the Fund of Funds will maintain and
preserve a copy of the order, the
Participation Agreement, and the list
with any updated information for the
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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. Before approving any advisory
contract under section 15 of the Act, the
Board of each Fund of Funds, including
a majority of the Disinterested Directors,
will find that the advisory fees charged
under such advisory contract are based
on services provided that are in addition
to, rather than duplicative of, the
services provided under the advisory
contract(s) of any Underlying Fund in
which the Fund of Funds may invest.
These findings and their basis will be
recorded fully in the minute books of
the appropriate Fund of Funds.
10. The Adviser will waive fees
otherwise payable to it by the Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Other Group Management Company
under rule 12b–1 under the Act)
received from an Other Group
Management Company by the Adviser,
or an affiliated person of the Adviser,
other than any advisory fees paid to the
Adviser or its affiliated person by the
Other Group Management Company, in
connection with the investment by the
Fund of Funds in the Other Group
Management Company. Any Subadviser
will waive fees otherwise payable to the
Subadviser, directly or indirectly, by the
Fund of Funds in an amount at least
equal to any compensation received
from an Other Group Fund by the
Subadviser, or an affiliated person of the
Subadviser, other than any advisory fees
paid to the Subadviser or its affiliated
person by the Other Group Management
Company, in connection with the
investment by the Fund of Funds in the
Other Group Fund made at the direction
of the Subadviser. In the event that the
Subadviser waives fees, the benefit of
the waiver will be passed through to the
Fund of Funds.
11. Any sales charges and/or service
fees charged with respect to shares of a
Fund of Funds will not exceed the
limits applicable to a fund of funds as
set forth in NASD Conduct Rule 2830.
12. No Underlying Fund will acquire
securities of any other investment
company or company relying on section
3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section
12(d)(1)(A) of the Act, except as may be
permitted by a Commission order
allowing an Underlying Fund to
purchase shares of an affiliated
investment company for short-term cash
management purposes or rule 12d–1
under the Act.
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For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6–18256 Filed 10–30–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. PA–37; File No. S7–17–06]
Privacy Act of 1974: Establishment of
a New System of Records:
Photographic Files (SEC–54)
Securities and Exchange
Commission.
ACTION: Notice of the establishment of a
new system of records.
AGENCY:
SUMMARY: In accordance with the
requirements of the Privacy Act of 1974,
as amended, 5 U.S.C. 552a, the
Securities and Exchange Commission
gives notice of a proposed Privacy Act
system of records: ‘‘Photographic Files
(SEC–54).’’ This system of records will
contain a collection of photographic
materials, in print and electronic format,
related to Commission staff and events.
DATES: The new system will become
effective December 11, 2006 unless
further notice is given. The Commission
will publish a new notice if the effective
date is delayed to review comments or
if changes are made based on comments
received. To be assured of
consideration, comments should be
received on or before November 30,
2006.
Comments may be
submitted by any of the following
methods:
ADDRESSES:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/other.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number S7–17–06 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number S7–17–06. This file number
should be included on the subject line
if e-mail is used. To help us process and
review your comments more efficiently,
please use only one method. The
Commission will post all comments on
the Commission’s Internet Web site
E:\FR\FM\31OCN1.SGM
31OCN1
]]>Agencies
[Federal Register Volume 71, Number 210 (Tuesday, October 31, 2006)]
[Notices]
[Pages 63807-63810]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-18256]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-27523; 812-13056]
Tactical Allocation Services, LLC, et al.; Notice of Application
October 24, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under section 12(d)(1)(J) of
the Investment Company Act of 1940 (``Act'') for an exemption from
sections 12(d)(1)(A) and (B) of the Act and under sections 6(c) and
17(b) of the Act for an exemption from section 17(a) of the Act.
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Summary of Application: The order would permit certain registered
open-end management investment companies to acquire shares of other
registered open-end management investment companies and unit investment
trusts (``UITs'') both within and outside the same group of investment
companies.
Applicants: Agile Funds, Inc. (the ``Company''), with respect to
its portfolio series (each a ``Fund'' and collectively the ``Funds''),
and Tactical Allocation Services, LLC (the ``Adviser'').
Filing Dates: The application was filed on December 18, 2003 and
amended on October 20, 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. November 17, 2006, and should be accompanied by proof of
service on applicants, in the form of an affidavit, or for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE, Washington, DC 20549-1090; Applicants, Tactical Allocation
Services, LLC, and Agile Funds, Inc., 4909 Pearl East Circle, Suite
300, Boulder, Colorado 80301-6101.
FOR FURTHER INFORMATION CONTACT: Nadya Roytblat, Assistant Director, at
(202) 551-6821 (Division of Investment Management, Office of Investment
Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Public Reference Desk, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-0102 (telephone (202) 551-5850).
Applicants' Representations
1. The Company is a Maryland corporation and an open-end management
investment company registered under the Act. One Fund of the Company is
the Agile Multi-Strategy Fund (the ``Multi-Strategy Fund''). The
Adviser, a Colorado limited liability company, serves as investment
adviser to the Multi-Strategy Fund and is registered under the
Investment Advisers Act of 1940.
2. Applicants request relief to permit: (1) One or more Funds
(including the Multi-Strategy Fund, ``Funds of Funds'') to acquire
shares of: (a) Registered open-end management investment companies or
UITs that are not part of the same group of investment companies, as
defined in section 12(d)(1)(G)(ii) of the Act, as the Fund of Funds
(``Other Group Funds'') \1\ and the Other Group Funds to sell such
shares to the Fund of Funds; and (2) the Fund of Funds to acquire
shares of certain Funds that are in the same group of investment
companies, as defined in section 12(d)(1)(G)(ii) of the Act, as the
Fund of Funds (the ``Same Group Funds'') (together with the Other Group
Funds, the ``Underlying Funds'') and the Same Group Funds to sell such
shares to the Fund of Funds. Applicants also apply for an order
pursuant to section 6(c) and section 17(b) of the Act exempting
Applicants from section 17(a) of the Act to the extent necessary to
permit purchases and redemptions by a Fund of Funds of shares of the
Underlying Funds and to permit the Underlying Funds to sell or redeem
their shares in transactions with the Fund of Funds.\2\ Applicants
state that the requested relief will enable investors to achieve a
diversified investment in a range of Underlying Funds through a single
investment in a Fund of Funds.
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\1\ The Other Group Funds may include UITs (``Other Group
Trusts'') and open-end management investment companies (``Other
Group Management Companies'') that have recieved exemptive relief to
sell their shares on a national securities exchange at negotiated
prices (``EFTs''). Shares of an ETF also may be purchased from the
EFT in large aggregations by delivering a basket of specified
securities to the ETF, and large aggregations of shares may be
redeemed from an ETF in exchange for a basket of specified
securities (``In-kind EFT Purchases and Redemptions'').
\2\ All existing investment companies that currently intend to
rely on the requested order are named as applicants. Any other
investment company that relies on the order in the future will
comply with the terms and conditions of the order.
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Applicants' Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act prohibits a registered investment
company from acquiring shares of an investment company if the
securities represent more than 3% of the total outstanding voting stock
of the acquired company, more than 5% of the total assets of the
acquiring company, or, together with the securities of any other
investment companies, more than 10% of the total assets of the
acquiring company. Section 12(d)(1)(B) of the Act prohibits a
registered open-end investment company, its principal underwriter and
any broker or dealer from selling shares of the investment company to
any other investment company if the sale will cause the acquiring
company to own more than 3% of the acquired company's voting stock, or
if the sale will cause more than 10% of the acquired company's voting
stock to be owned by investment companies generally.
2. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt any person, security, or
[[Page 63808]]
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 the
Funds of Funds to acquire shares of Underlying Funds and to permit the
Underlying Funds, their principal underwriters and any broker or dealer
to sell shares of the Underlying Funds to the Funds of Funds beyond the
limits set forth in sections 12(d)(1)(A) and (B) of the Act.
3. Applicants state that the proposed arrangement will not give
rise to the policy concerns underlying sections 12(d)(1)(A) and (B),
which include concerns about undue influence by a fund of funds over
underlying funds, excessive layering of fees, and overly complex fund
structures. Accordingly, applicants believe that the requested
exemption is consistent with the public interest and the protection of
investors.
4. Applicants state that the proposed arrangement will not result
in undue influence by a Fund of Funds or its affiliated persons over an
Other Group Fund. To limit the control that a Fund of Funds may have
over an Other Group Fund, applicants propose a condition prohibiting:
(a) The Adviser and any person controlling, controlled by or under
common control with the Adviser, and any investment company or any
issuer that would be an investment company but for section 3(c)(1) or
3(c)(7) of the Act that is advised by the Adviser or any person
controlling, controlled by or under common control with the Adviser
(collectively, the ``Adviser Group''), and (b) any investment adviser
to a Fund of Funds that meets the definition of section 2(a)(20)(B) of
the Act (``Sub-adviser''), any person controlling, controlled by or
under common control with the Sub-Adviser, and any investment company
or issuer that would be an investment company but for section 3(c)(1)
or 3(c)(7) of the Act (or portion of such investment company or issuer)
advised by the Sub-Adviser or any person controlling, controlled by or
under common control with the Sub-Adviser (collectively, the
``Subadviser Group'') from controlling an Other Group Fund within the
meaning of section 2(a)(9) of the Act.
5. Applicants also propose conditions to preclude a Fund of Funds
and its affiliated entities from taking advantage of an Other Group
Fund. Under condition 2, no Fund of Funds or its Adviser, Sub-Adviser,
promoter, principal underwriter or any person controlling, controlled
by or under common control with any of these entities (each, a ``Fund
of Funds Affiliate''), will cause any existing or potential investment
by the Fund of Funds in shares of an Other Group Fund to influence the
terms of any services or transactions between the Fund of Funds or a
Fund of Funds Affiliate and the Other Group Fund or its investment
adviser(s), sponsor, promoter, principal underwriter and any person
controlling, controlled by or under common control with any of these
entities (each, an ``Other Group Fund Affiliate''). Condition 5
precludes a Fund of Funds and any Fund of Funds Affiliate (except to
the extent it is acting in its capacity as an investment adviser to an
Other Group Management Company or sponsor to an Other Group Underlying
Trust) from causing an Other Group 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 an officer,
director, member of an advisory board, Adviser, Sub-Adviser, or
employee of the Fund of Funds, or a person of which any such officer,
director, member of an advisory board, Adviser, Sub-Adviser, or
employee is an affiliated person (each, an ``Underwriting Affiliate,''
except any person whose relationship to the Other Group Fund is covered
by section 10(f) of the Act is not an Underwriting Affiliate). An
offering of securities during the existence of any underwriting or
selling syndicate of which a principal underwriter is an Underwriting
Affiliate is an ``Affiliated Underwriting.''
6. As an additional assurance that an Other Group Management
Company understands the implications of an investment by a Fund of
Funds under the requested order, prior to a Fund of Funds' investment
in an Other Group Management Company in excess of the limit in section
12(d)(1)(A)(i), condition 8 requires that the Fund of Funds and the
Other Group Management Company execute an agreement stating, without
limitation, that their boards of directors or trustees and their
investment advisers understand the terms and conditions of the order
and agree to fulfill their responsibilities under the order
(``Participation Agreement). Applicants note that an Other Group Fund
(other than an ETF whose shares are purchased by a Fund of Funds in the
secondary market) will retain the right to reject an investment by a
Fund of Funds.\3\
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\3\ An Other Group Fund, including an EFT, would retain its
right to reject any initial investment by a Fund of Funds in excess
of the limit in section 12(d)(1)(A)(i) of the Act by declining to
execute the Participation Agreement with the Fund of Funds.
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7. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. With respect to investment advisory
fees, applicants state that, before approving any investment advisory
contract under section 15 of the Act, the board of directors or
trustees (``Board'') of each Fund of Funds, including a majority of the
directors or trustees who are not ``interested persons,'' as defined in
section 2(a)(19) of the Act (``Disinterested Directors''), will find
that the investment advisory fees charged under such contract are based
on services provided that are in addition to, rather than duplicative
of, services provided under the advisory contract(s) of any Underlying
Fund in which the Fund of Funds may invest.
8. Applicants state that the proposed arrangement will not create
an overly complex fund structure. Applicants note that an Underlying
Fund will be prohibited from acquiring securities of any investment
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in
excess of the limits contained in section 12(d)(1)(A), except as may be
permitted by a Commission order allowing an Underlying Fund to purchase
shares of an affiliated investment company for short-term cash
management purposes or rule 12d-1 under the Act. Applicants also
represent that a Fund of Funds' prospectus and sales literature will
contain concise, ``plain English'' disclosure designed to inform
investors of the unique characteristics of the proposed Fund of Funds
structure, including, but not limited to, its expense structure and the
additional expenses of investing in Underlying Funds. Each Fund of
Funds also will comply with the disclosure requirements adopted in
Investment Company Act Release No. 27399 (June 20, 2006).
B. Section 17(a)
1. Section 17(a) of the Act generally prohibits sales or purchases
of securities between a registered investment company and any
affiliated person of the company. Section 2(a)(3) of the Act defines an
``affiliated person'' of another person to include (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,
[[Page 63809]]
controlled by, or under common control with the other person.
2. Applicants state that since the Funds of Funds and the Same
Group Funds may be advised by the Adviser or share common officers or
directors, they might be deemed to be under common control and
therefore affiliated persons of one another. Applicants also state that
the Funds of Funds and the Underlying Funds may be deemed to be
affiliated persons of one another if a Fund of Funds acquires 5% or
more of an Underlying Fund's outstanding voting securities. In light of
these possible affiliations, section 17(a) could prevent an Underlying
Fund from selling shares to and redeeming shares from a Fund of
Funds.\4\
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\4\ Applicants acknowledge that receipt of any compensation by
(a) an affiliated person of a Fund of Funds, or an affiliated person
of such person, for the purchase by the Fund of Funds of shares of
an Underlying Fund or (b) an affiliated person of an Underlying
Fund, or an affiliated person of such person, for the sale by the
Underlying Fund of its shares to a Fund of Funds is subject to
section 17(e) of the Act. The Participation Agreement also will
include this acknowledgment.
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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 reasonable
and fair 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 transactions are fair and
reasonable and do not involve overreaching. Applicants note that the
terms upon which an Underlying Fund will sell its shares to or purchase
its shares from a Fund of Funds will be based on the net asset value of
the Underlying Fund.\5\ Applicants state that the proposed transactions
will be consistent with the policies of each Fund of Funds and
Underlying Fund, and with the general purposes of the Act.
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\5\ Applicants note that a Fund of Funds generally would
purchase and sell shares of an Underlying Fund that operates as an
ETF through secondary market transactions at market prices rather
than through principal transactions with the Underlying Fund at net
asset value. Applicants would not rely on the requested relief from
section 17(a) for such secondary market transactions. To the extent
a Fund of Funds engages in In-kind ETF Purchases and Redemptions,
Applicants request relief from section 17(a) for these transactions.
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Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions:
1. The members of the Adviser Group will not control (individually
or in the aggregate) an Other Group Fund within the meaning of section
2(a)(9) of the Act. The members of the Subadviser Group will not
control (individually or in the aggregate) an Other Group 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 Other Group Fund,
the Adviser Group or the Subadviser Group, each in the aggregate,
becomes a holder of more than 25% of the outstanding voting securities
of the Other Group Fund, it will vote its shares of the Other Group
Fund in the same proportion as the vote of all other holders of the
Other Group Fund's shares. This condition does not apply to the
Subadviser Group with respect to an Other Group Fund for which the
Subadviser or a person controlling, controlled by, or under common
control with the Subadviser acts as the investment adviser within the
meaning section 2(a)(20)(A) of the Act (in the case of an Other Group
Management Company) or as the sponsor (in the case of an Other Group
Trust).
2. No Fund of Funds or Fund of Funds Affiliate will cause any
existing or potential investment by the Fund of Funds in shares of an
Other Group Fund to influence the terms of any services or transactions
between the Fund of Funds or a Fund of Funds Affiliate and the Other
Group Fund or an Other Group Fund Affiliate.
3. The Board of a Fund of Funds, including a majority of the
Disinterested Directors, will adopt procedures reasonably designed to
assure that the Adviser and any Subadviser to the Fund of Funds are
conducting the investment program of the Fund of Funds without taking
into account any consideration received by the Fund of Funds or a Fund
of Funds Affiliate from an Other Group Fund or an Other Group Fund
Affiliate in connection with any services or transactions.
4. Once an investment by a Fund of Funds in the securities of an
Other Group Management Company exceeds the limit in section
12(d)(1)(A)(i) of the Act, the Board of the Other Group Management
Company, including a majority of the Disinterested Directors, will
determine that any consideration paid by the Other Group Management
Company to the Fund of Funds or a Fund of Funds Affiliate in connection
with any services or transactions: (a) Is fair and reasonable in
relation to the nature and quality of the services and benefits
received by the Other Group Management Company; (b) is within the range
of consideration that the Other Group Management Company 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 Other Group
Management Company and its investment adviser(s), or any person
controlling, controlled by, or under common control with such
investment adviser(s).
5. No Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Other Group Management Company or sponsor to an Other Group Trust) will
cause an Other Group Fund to purchase a security in any Affiliated
Underwriting.
6. The Board of an Other Group Management Company, including a
majority of the Disinterested Directors, will adopt procedures
reasonably designed to monitor any purchases of securities by the Other
Group Management Company in Affiliated Underwritings, once an
investment by a Fund of Funds in the securities of the Other Group
Management Company exceeds the limit of section 12(d)(1)(A)(i) of the
Act, including any purchases made directly from an Underwriting
Affiliate. The Board will review these purchases periodically, but no
less frequently than annually, to determine whether the purchases were
influenced by the investment by the Fund of Funds in shares of the
Other Group Management Company. The Board will consider, among other
things: (a) whether the purchases were consistent with the investment
objectives and policies of the Other Group Management Company; (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
[[Page 63810]]
purchased by the Other Group Management Company in Affiliated
Underwritings and the amount purchased directly from an Underwriting
Affiliate have changed significantly from prior years. The Board 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. The Other Group Management Company 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 from an Affiliated Underwriting occurred, the first two years
in an easily accessible place, a written record of each purchase of
securities in Affiliated Underwritings once an investment by a Fund of
Funds in the securities of an Other Group Management Company 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 Other Group
Management Company were made.
8. Before investing in an Other Group Management Company in excess
of the limit in section 12(d)(1)(A)(i) of the Act, the Fund of Funds
and the Other Group Management Company will execute a Participation
Agreement stating, without limitation, that their Boards and their
investment advisers understand the terms and conditions of the order
and agree to fulfill their responsibilities under the order. At the
time of its investment in shares of an Other Group Management Company
in excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds will
notify the Other Group Management Company of the investment. At such
time, the Fund of Funds will also transmit to the Other Group
Management Company a list of the names of each Fund of Funds Affiliate
and Underwriting Affiliate. The Fund of Funds will notify the Other
Group Management Company of any changes to the list as soon as
reasonably practicable after a change occurs. The Other Group
Management Company and the Fund of Funds 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. Before approving any advisory contract under section 15 of the
Act, the Board of each Fund of Funds, including a majority of the
Disinterested Directors, will find that the advisory fees charged under
such advisory contract are based on services provided that are in
addition to, rather than duplicative of, the services provided under
the advisory contract(s) of any Underlying Fund in which the Fund of
Funds may invest. These findings and their basis will be recorded fully
in the minute books of the appropriate Fund of Funds.
10. The Adviser will waive fees otherwise payable to it by the Fund
of Funds in an amount at least equal to any compensation (including
fees received pursuant to any plan adopted by an Other Group Management
Company under rule 12b-1 under the Act) received from an Other Group
Management Company by the Adviser, or an affiliated person of the
Adviser, other than any advisory fees paid to the Adviser or its
affiliated person by the Other Group Management Company, in connection
with the investment by the Fund of Funds in the Other Group Management
Company. Any Subadviser will waive fees otherwise payable to the
Subadviser, directly or indirectly, by the Fund of Funds in an amount
at least equal to any compensation received from an Other Group Fund by
the Subadviser, or an affiliated person of the Subadviser, other than
any advisory fees paid to the Subadviser or its affiliated person by
the Other Group Management Company, in connection with the investment
by the Fund of Funds in the Other Group Fund made at the direction of
the Subadviser. In the event that the Subadviser waives fees, the
benefit of the waiver will be passed through to the Fund of Funds.
11. Any sales charges and/or service fees charged with respect to
shares of a Fund of Funds will not exceed the limits applicable to a
fund of funds as set forth in NASD Conduct Rule 2830.
12. No Underlying Fund will acquire securities of any other
investment company or company relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained in section 12(d)(1)(A) of the
Act, except as may be permitted by a Commission order allowing an
Underlying Fund to purchase shares of an affiliated investment company
for short-term cash management purposes or rule 12d-1 under the Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Nancy M. Morris,
Secretary.
[FR Doc. E6-18256 Filed 10-30-06; 8:45 am]
BILLING CODE 8011-01-P
