Bear Stearns Asset Management, Inc., et al.; Notice of Application, 7768-7771 [E8-2399]

Download as PDF 7768 Federal Register / Vol. 73, No. 28 / Monday, February 11, 2008 / Notices 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. Comments should be directed to: R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, c/o Shirley Martinson, 6432 General Green Way, Alexandria, Virginia 22312; or comments may be sent by e-mail to: PRA_Mailbox@sec.gov. Comments must be submitted within 60 days of this notice. Dated: February 4, 2008. Florence E. Harmon, Deputy Secretary. [FR Doc. E8–2443 Filed 2–8–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request; Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549–0213 rwilkins on PROD1PC63 with NOTICES Extension: Rule 425; OMB Control No. 3235–0521; SEC File No. 270–462. 16:44 Feb 08, 2008 Jkt 214001 Dated: February 4, 2008. Florence E. Harmon, Deputy Secretary. [FR Doc. E8–2444 Filed 2–8–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 28143; 812–13352] Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget the request for extension of the previously approved collection of information discussed below. Rule 425 (17 CFR 230.425) under the Securities Act of 1933 (15 U.S.C. 77a et seq.) requires the filing of certain prospectuses and communications under Rule 135 (17 CFR 230.135) and Rule 165 (17 CFR 230.165) in connection with business combination transactions. The purpose of the rule is to permit more oral and written communications with shareholders about tender offers, mergers and other business combination transactions on a more timely basis, so long as the written communications are filed on the date of first use. The information provided under Rule 425 is made available to the public upon request. Also, the information provided under Rule 425 is mandatory. Approximately 3,700 issuers file communications under Rule 425 at an estimated .25 hours per response for a total of 925 annual burden hours. VerDate Aug<31>2005 An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Written comments regarding the above information should be directed to the following persons: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503 or send an e-mail to Alexander_T._Hunt@omb.eop.gov; and (ii) R. Corey Booth, Director/Chief Information Officer, Office of Information Technology, Securities and Exchange Commission, C/O Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312; or send e-mail to: PRA_Mailbox@sec.gov. Comments must be submitted to OMB within 30 days of this notice. Bear Stearns Asset Management, Inc., et al.; Notice of Application February 5, 2008. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application for an order under section 6(c) of the Investment Company Act of 1940 (‘‘Act’’) for an exemption from sections 2(a)(32), 5(a)(1) and 22(d) of the Act and rule 22c–1 under the Act. AGENCY: Bear Stearns Asset Management, Inc. (the ‘‘Advisor’’), ALPS Distributors, Inc. (the ‘‘Distributor’’), and Bear Stearns Active ETF Trust (the ‘‘Trust’’). SUMMARY OF APPLICATION: Applicants request an order that permits (a) series of certain open-end management investment companies to issue shares (‘‘ETS’’) redeemable in large aggregations only (‘‘Creation Unit Aggregations’’) and (b) secondary market transactions in ETS to occur at negotiated market prices. FILING DATES: The application was filed on December 21, 2006 and amended on August 8, 2007, September 14, 2007, November 5, 2007, December 10, 2007, APPLICANTS: PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 December 26, 2007, and January 14, 2008. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission’s Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on February 26, 2008, 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: Advisor and Trust, 237 Park Avenue, New York, New York 10017; Distributor, 1290 Broadway, Suite 1100, Denver, CO 80203. FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at (202) 551–6873, or Marilyn Mann, Branch Chief, 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 Commission’s Public Reference Desk, 100 F Street, NE., Washington, DC 20549–0102 (tel. 202–551–5850). Applicants’ Representations 1. The Trust is an open-end management investment company registered under the Act and formed as a Delaware statutory trust. The Trust is organized as a series fund with one initial series: Bear Stearns Current Yield Fund (the ‘‘Current Yield Fund’’). The investment objective of the Current Yield Fund will be to seek as high a level of current income as is consistent with the preservation of capital and liquidity by investing primarily in shortterm debt obligations, repurchase agreements and reverse repurchase agreements that meet certain minimum ratings requirements (or if unrated, that the Advisor determines are of comparable quality). The Current Yield Fund’s portfolio will have an average dollar-weighted maturity of approximately 180 days. 2. The Advisor plans to introduce future series of the Trust or of other open-end management investment E:\FR\FM\11FEN1.SGM 11FEN1 Federal Register / Vol. 73, No. 28 / Monday, February 11, 2008 / Notices rwilkins on PROD1PC63 with NOTICES companies (‘‘Future Funds’’). The Future Funds will invest primarily in investment grade fixed-income securities (or, if unrated, that the Advisor determines are of a comparable quality).1 Applicants request that the order apply to any such Future Funds. Any Future Fund will be (a) advised by the Advisor or an entity controlled by or under common control with the Advisor, and (b) comply with the terms and conditions of the application.2 The Current Yield Fund and Future Funds together are the ‘‘Funds.’’ Each Fund will operate as an actively-managed exchange-traded fund (‘‘ETF’’). 3. The Advisor, a New York corporation, is a wholly-owned subsidiary of The Bear Stearns Companies Inc., a holding company that through its subsidiaries (including its principal subsidiary, Bear, Stearns & Co., Inc.) is a United States investment banking, securities trading and brokerage firm serving U.S. and foreign corporations, governments, and institutional and individual investors. The Advisor is registered as an investment adviser under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’) and will serve as investment adviser to all the Funds. The Advisor may retain other investment advisers to act as ‘‘sub-advisors’’ to Future Funds (‘‘Subadvisors’’). Any Subadvisor will be registered under the Advisers Act. The Distributor, a brokerdealer registered under the Securities Exchange Act of 1934, will act as each Fund’s distributor and principal underwriter. 4. ETS of the Funds will be sold in Creation Unit Aggregations initially of 50,000 ETS. All orders to purchase Creation Unit Aggregations must be placed with the Distributor by or through a party that has entered into an agreement with the Distributor (‘‘Authorized Participant’’). An Authorized Participant must be a participant in the Depository Trust Company (‘‘DTC,’’ and such participant, ‘‘DTC Participant’’). Creation Unit Aggregations will be created and redeemed solely in cash at net asset value (‘‘NAV’’). Each Fund will sell and redeem Creation Unit Aggregations on each day required by section 22(e) of the Act (each such day, a ‘‘Business Day’’). 1 With respect to both the Current Yield Fund and the Future Funds, if a security satisfies the minimum rating requirement at the time of purchase and is subsequently downgraded below that rating, the Advisor will determine what action, including the sale of the security, is in the best interest of the applicable Fund and its shareholders. 2 All entities that currently intend to rely on the order are named as applicants. Any other entity that relies on the order in the future will comply with the terms and conditions of the application. VerDate Aug<31>2005 16:44 Feb 08, 2008 Jkt 214001 5. An investor purchasing a Creation Unit Aggregation from a Fund will be charged a fixed fee (‘‘Transaction Fee’’) to protect the continuing ETS holders against the possible dilutive transactional expenses in connection with the purchase of Creation Unit Aggregations. From time to time, a Fund may waive or modify the Transaction Fee. The exact amounts of the Transaction Fee will be determined separately for each Fund. The Transaction Fee relevant to each Fund will be fully disclosed in the prospectus (‘‘Prospectus’’) and the method of calculating that Transaction Fee will be fully disclosed in the statement of additional information of such Fund. All orders to purchase Creation Unit Aggregations will be placed with the Distributor by or through an Authorized Participant and it will be the Distributor’s responsibility to transmit such orders to the Trust. The Distributor also will be responsible for delivering the Prospectus to those persons purchasing Creation Unit Aggregations, and for maintaining records of both the orders placed with it and the acknowledgments furnished by it. In addition, the Distributor will maintain a record of the instructions given to the Trust to implement the delivery of ETS. 6. Purchasers of ETS in Creation Unit Aggregations may hold such ETS or may sell such ETS into the secondary market. ETS will be listed and traded on a national securities exchange as defined in section 2(a)(26) of the Act (‘‘Exchange’’). It is expected that one or more member firms of a listing Exchange will be designated to act as a specialist and maintain a market for ETS on the Exchange (the ‘‘Exchange Specialist’’). Prices of ETS trading on an Exchange will be based on the current bid/offer market.3 ETS sold in the secondary market will be subject to customary brokerage fees or commissions. 7. Applicants expect that purchasers of Creation Unit Aggregations will 3 The Exchange intends to disseminate every 15 seconds, during regular trading hours, through the facilities of the Consolidated Tape Association, the indicative intra-day value (‘‘IIV’’) of each Fund on a per-ETS basis. An independent third party calculator will calculate the IIV during the hours of trading on the Exchange by dividing (a) the sum of the estimated amount of cash held in the applicable Fund’s portfolio, the estimated amount of accrued interest owing to the applicable Fund and the estimated value of the securities held in the applicable Fund’s portfolio, minus the estimated amount of liabilities, as of the time of calculation by (b) the total number of outstanding ETS of the Fund. Applicants assert that the calculation and dissemination of IIV will allow for efficient arbitrage and thus avoid the possibility that significant deviations could develop between the market price of ETS and NAV. PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 7769 include institutional investors and arbitrageurs. The Exchange Specialist, in providing a fair and orderly secondary market for the ETS, also may purchase Creation Unit Aggregations for use in its market-making activities. Applicants expect that secondary market purchasers of ETS will include both institutional investors and retail investors.4 Applicants expect that the price at which the ETS trade will be disciplined by arbitrage opportunities created by the ability to continually purchase or redeem Creation Unit Aggregations at their NAV, which should ensure that the ETS will not trade at a material discount or premium in relation to their NAV. 8. ETS will not be individually redeemable, and owners of ETS may acquire those ETS from a Fund, or tender such ETS for redemption to the Fund, in Creation Unit Aggregations only. To redeem, an investor will have to accumulate enough ETS to constitute a Creation Unit Aggregation. Redemption orders must be placed by or through an Authorized Participant. A redeeming investor may pay a Transaction Fee, calculated in the same manner as a Transaction Fee payable in connection with purchases of Creation Unit Aggregations. 9. Neither the Trust nor any Fund will be advertised, marketed or otherwise held out as an ‘‘open-end investment company’’ or a ‘‘mutual fund.’’ Instead, each Fund will be marketed as an ‘‘actively-managed exchange-traded fund.’’ All marketing materials that describe the method of obtaining, buying or selling ETS, or refer to redeemability, will prominently disclose that ETS are not individually redeemable and that the owners of ETS may purchase or redeem ETS from a Fund in Creation Unit Aggregations only. The same approach will be followed in shareholder reports and other communications and investor educational materials issued or circulated in connection with the ETS. The Funds will provide copies of their annual and semi-annual shareholder reports to DTC Participants for distribution to beneficial owners of ETS. 10. The Funds’ Web site, which will be publicly available prior to the public offering of ETS, will include the Prospectus and other information about the Funds that is updated on a daily basis, including the reported mid-point of the bid-ask spread at the time of the calculation of NAV (‘‘Bid/Ask Price’’). 4 ETS will be registered in book-entry form only. DTC or its nominee will be the registered owner of all outstanding ETS. DTC or DTC Participants will maintain records reflecting beneficial owners of ETS. E:\FR\FM\11FEN1.SGM 11FEN1 7770 Federal Register / Vol. 73, No. 28 / Monday, February 11, 2008 / Notices On each Business Day, before the commencement of trading in ETS on the Exchange, each Fund will disclose on its Web site the identities and quantities of the portfolio securities and other assets held by the Fund that will form the basis for the Fund’s calculation of NAV at the end of the Business Day.5 Applicants assert that the Web site disclosure of each Fund’s portfolio securities and other assets will provide a level of portfolio transparency that is substantially similar to that of indexbased ETFs. Applicants’ Legal Analysis 1. Applicants request an order under section 6(c) of the Act granting an exemption from sections 2(a)(32), 5(a)(1) and 22(d) of the Act and rule 22c–1 under the Act. 2. Section 6(c) of the Act provides that the Commission may exempt any person, security or transaction, or any class of persons, securities or transactions, from any provision of the Act, if and to the extent that 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. rwilkins on PROD1PC63 with NOTICES Sections 5(a)(1) and 2(a)(32) of the Act 3. Section 5(a)(1) of the Act defines an ‘‘open-end company’’ as a management investment company that is offering for sale or has outstanding any redeemable security of which it is the issuer. Section 2(a)(32) of the Act defines a redeemable security as any security, other than short-term paper, under the terms of which the holder, upon its presentation to the issuer, is entitled to receive approximately his proportionate share of the issuer’s current net assets, or the cash equivalent. Because ETS will not be individually redeemable, applicants request an order that would permit each Fund, as a series of an open-end management investment company, to issue ETS that are redeemable in Creation Unit Aggregations only. Applicants state that investors may purchase ETS in Creation Unit Aggregations from each Fund and redeem Creation Unit Aggregations from each Fund. Applicants further state that because the market price of ETS will be disciplined by arbitrage opportunities, investors should be able to sell ETS in 5 Applicants note that under accounting procedures followed by the Funds, trades made on the prior Business Day (‘‘T’’) will be booked and reflected in NAV on the current Business Day (‘‘T + 1’’). Accordingly, the Funds will be able to disclose at the beginning of the Business Day the portfolio that will form the basis for the NAV calculation at the end of the Business Day. VerDate Aug<31>2005 16:44 Feb 08, 2008 Jkt 214001 the secondary market at prices that do not vary substantially from their NAV. the market price of ETS and their NAV remains narrow. Section 22(d) of the Act and Rule 22c– 1 under the Act 4. Section 22(d) of the Act, among other things, prohibits a dealer from selling a redeemable security, which is currently being offered to the public by or through a principal underwriter, except at a current public offering price described in the prospectus. Rule 22c– 1 under the Act generally requires that a dealer selling, redeeming, or repurchasing a redeemable security do so only at a price based on its NAV. Applicants state that secondary market trading in ETS will take place at negotiated prices, not at a current offering price described in the Prospectus, and not at a price based on NAV. Thus, purchases and sales of ETS in the secondary market will not comply with section 22(d) of the Act and rule 22c–1 under the Act. Applicants request an exemption under section 6(c) from these provisions. 5. Applicants assert that the concerns sought to be addressed by section 22(d) of the Act and rule 22c–1 under the Act with respect to pricing are equally satisfied by the proposed method of pricing ETS. Applicants maintain that while there is little legislative history regarding section 22(d), its provisions, as well as those of rule 22c–1, appear to have been designed to (a) prevent dilution caused by certain risklesstrading schemes by principal underwriters and contract dealers, (b) prevent unjust discrimination or preferential treatment among buyers, and (c) assure an orderly distribution of investment company shares by eliminating price competition from dealers offering shares at less than the published sales price and repurchasing shares at more than the published redemption price. 6. Applicants believe that none of these purposes will be thwarted by permitting ETS to trade in the secondary market at negotiated prices. Applicants state that (a) secondary market trading in ETS does not involve the Funds as parties and cannot result in dilution of an investment in ETS, and (b) to the extent different prices exist during a given trading day, or from day to day, such variances occur as a result of thirdparty market forces, such as supply and demand. Therefore, applicants assert that secondary market transactions in ETS will not lead to discrimination or preferential treatment among purchasers. Finally, applicants contend that the proposed distribution system will be orderly because arbitrage activity will ensure that the difference between Applicants’ Conditions The applicants agree that any order of the Commission granting the requested relief will be subject to the following conditions: 1. Neither the Trust nor any of the Funds will be advertised or marketed as an open-end investment company or a mutual fund. Each Fund’s Prospectus will prominently disclose that the Fund is an ‘‘actively managed exchangetraded fund.’’ Each Prospectus also will prominently disclose that ETS are not individually redeemable and will disclose that owners of ETS may acquire those ETS from the Fund and tender those ETS for redemption to a Fund in Creation Unit Aggregations only. Any advertising material that describes the purchase or sale of Creation Unit Aggregations or refers to redeemability will prominently disclose that ETS are not individually redeemable and that owners of ETS may acquire those ETS from a Fund and tender those ETS for redemption to a Fund in Creation Unit Aggregations only. 2. Each Fund’s Prospectus will clearly disclose that, for purposes of the Act, ETS are issued by a registered investment company, and that the acquisition of ETS by investment companies and companies relying on sections 3(c)(1) or 3(c)(7) of the Act is subject to the restrictions of section 12(d)(1) of the Act, except as permitted by an exemptive order that permits registered investment companies to invest in a Fund beyond the limits in section 12(d)(1), subject to certain terms and conditions, including that the registered investment company enter into an agreement with the Fund regarding the terms of the investment. 3. The Web site for the Funds, which is and will be publicly accessible at no charge, will contain the following information, on a per-ETS basis, for each Fund: (a) The prior Business Day’s NAV and the Bid/Ask Price, and a calculation of the premium or discount of the Bid/Ask Price against such NAV; and (b) data in chart format displaying the frequency distribution of discounts and premiums of the Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters (or for the life of the Fund, if shorter). 4. The Prospectus and annual report for each Fund will also include: (a) the information listed in condition 3(b), (i) in the case of the Prospectus, for the most recently completed year (and the most recently completed quarter or quarters, as applicable) and (ii) in the PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 E:\FR\FM\11FEN1.SGM 11FEN1 Federal Register / Vol. 73, No. 28 / Monday, February 11, 2008 / Notices case of the annual report, for the immediately preceding five years, as applicable; and (b) the cumulative total return and the average annual total return based on NAV and Bid/Ask Price, calculated on a per ETS basis for one-, five- and ten-year periods (or life of the Fund). 5. As long as the Funds operate in reliance on the requested order, ETS will be listed on an Exchange. 6. On each Business Day, before the commencement of trading in ETS on each Fund’s Exchange, the Fund will disclose on its Web site the identities and quantities of the portfolio securities and other assets held by the Fund that will form the basis for the Fund’s calculation of NAV at the end of the Business Day. 7. The requested order will expire on the effective date of any Commission rule under the Act that provides relief permitting the operation of actively managed exchange-traded funds. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Florence E. Harmon, Deputy Secretary. [FR Doc. E8–2399 Filed 2–8–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 28146; 812–13485] Barclays Global Fund Advisors, et al.; Notice of Application February 6, 2008. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application for an order under section 6(c) of the Investment Company Act of 1940 (‘‘Act’’) for an exemption from sections 2(a)(32), 5(a)(1) and 22(d) of the Act and rule 22c–1 under the Act, and under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and (a)(2) of the Act. AGENCY: Barclays Global Fund Advisors (the ‘‘Adviser’’), iShares Trust (the ‘‘Trust’’) and SEI Investments Distribution Co. (the ‘‘Distributor’’). SUMMARY OF APPLICATION: Applicants request an order that permits: (a) Series of certain open-end management investment companies to issue shares (‘‘Shares’’) redeemable in large aggregations only (‘‘Creation Units’’); (b) secondary market transactions in Shares to occur at negotiated market prices; and (c) certain affiliated persons of the series rwilkins on PROD1PC63 with NOTICES APPLICANTS: VerDate Aug<31>2005 16:44 Feb 08, 2008 Jkt 214001 to deposit foreign currency and money market securities into, and receive foreign currency and money market securities from, the series in connection with the purchase and redemption of Creation Units. FILING DATES: The application was filed on January 25, 2008. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in this notice. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission’s Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on February 26, 2008, 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: Adviser and Trust, c/o Barclays Global Investors, N.A., 45 Fremont Street, San Francisco, CA 94105; Distributor, One Freedom Valley Drive, Oaks, PA 19456. FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at (202) 551–6817, or Michael W. Mundt, 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 Commission’s Public Reference Desk, 100 F Street, NE., Washington, DC 20549–0102 (tel. 202–551–5850). Applicants’ Representations 1. The Trust, an open-end management investment company registered under the Act, is organized as a Delaware statutory trust and as a series fund with multiple series. The Trust will offer two new series that will invest substantially all of their assets in foreign money market securities: iShares Euro Currency Fund and iShares Pound Sterling Currency Fund (each a ‘‘New Fund’’). Each New Fund will seek to preserve capital and maintain stability of principal by investing in short-term PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 7771 securities that are denominated in the specified local currency and have remaining maturities of sixty days or less (‘‘Portfolio Securities’’). Applicants state each New Fund is designed to decrease in value when the value of the U.S. dollar increases relative to the applicable local currency and increase in value when the value of the U.S. dollar falls relative to the applicable local currency. While the value of each New Fund’s Portfolio Securities is expected to be relatively constant in local currency terms, a New Fund’s net asset value (‘‘NAV’’) will be expressed in U.S. dollars. Because of this, fluctuations in the per Share NAV of each New Fund will be caused by fluctuations in the exchange rate between U.S. dollars and the applicable local currency. 2. The Trust plans to offer future series that will hold money market securities denominated in a different local currency than the New Funds (‘‘Future Funds’’). Applicants request that the order apply to any such Future Funds. Any Future Fund will be (a) advised by the Adviser, and (b) comply with the terms and conditions of the order. The New Funds and the Future Funds together are the ‘‘New Funds.’’ Each New Fund will operate as an actively-managed exchange-traded fund. 3. The Adviser, a California corporation, is registered as an investment adviser under the Investment Advisers Act of 1940 (‘‘Advisers Act’’) and will serve as investment adviser to each New Fund. The Distributor, a Pennsylvania corporation, is registered under the Securities Exchange Act of 1934 (‘‘Exchange Act’’) and serves as principal underwriter and distributor for the New Funds. 4. Shares of the New Funds will be sold in Creation Units of 25,000 or more. All orders to purchase Creation Units must be placed with the Distributor by or through an ‘‘Authorized Participant,’’ an entity that has entered into an agreement with the Distributor and that is a participant in the Depository Trust Company (‘‘DTC,’’ and such participant, ‘‘DTC Participant’’). Shares of each New Fund will be sold in Creation Units in exchange for a designated amount of the applicable local currency (the ‘‘Currency Deposit’’). Each New Fund reserves the right to permit or require the substitution of an amount of securities denominated in the applicable local currency (‘‘Deposit Securities,’’ together with the Currency Deposit, the ‘‘Fund Deposit’’) to replace E:\FR\FM\11FEN1.SGM 11FEN1

Agencies

[Federal Register Volume 73, Number 28 (Monday, February 11, 2008)]
[Notices]
[Pages 7768-7771]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-2399]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28143; 812-13352]


Bear Stearns Asset Management, Inc., et al.; Notice of 
Application

February 5, 2008.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940 (``Act'') for an exemption from sections 
2(a)(32), 5(a)(1) and 22(d) of the Act and rule 22c-1 under the Act.

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Applicants: Bear Stearns Asset Management, Inc. (the ``Advisor''), ALPS 
Distributors, Inc. (the ``Distributor''), and Bear Stearns Active ETF 
Trust (the ``Trust'').

Summary of Application: Applicants request an order that permits (a) 
series of certain open-end management investment companies to issue 
shares (``ETS'') redeemable in large aggregations only (``Creation Unit 
Aggregations'') and (b) secondary market transactions in ETS to occur 
at negotiated market prices.

Filing Dates: The application was filed on December 21, 2006 and 
amended on August 8, 2007, September 14, 2007, November 5, 2007, 
December 10, 2007, December 26, 2007, and January 14, 2008.

Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on February 26, 2008, 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: Advisor and Trust, 
237 Park Avenue, New York, New York 10017; Distributor, 1290 Broadway, 
Suite 1100, Denver, CO 80203.

FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at 
(202) 551-6873, or Marilyn Mann, Branch Chief, 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 
Commission's Public Reference Desk, 100 F Street, NE., Washington, DC 
20549-0102 (tel. 202-551-5850).

Applicants' Representations

    1. The Trust is an open-end management investment company 
registered under the Act and formed as a Delaware statutory trust. The 
Trust is organized as a series fund with one initial series: Bear 
Stearns Current Yield Fund (the ``Current Yield Fund''). The investment 
objective of the Current Yield Fund will be to seek as high a level of 
current income as is consistent with the preservation of capital and 
liquidity by investing primarily in short-term debt obligations, 
repurchase agreements and reverse repurchase agreements that meet 
certain minimum ratings requirements (or if unrated, that the Advisor 
determines are of comparable quality). The Current Yield Fund's 
portfolio will have an average dollar-weighted maturity of 
approximately 180 days.
    2. The Advisor plans to introduce future series of the Trust or of 
other open-end management investment

[[Page 7769]]

companies (``Future Funds''). The Future Funds will invest primarily in 
investment grade fixed-income securities (or, if unrated, that the 
Advisor determines are of a comparable quality).\1\ Applicants request 
that the order apply to any such Future Funds. Any Future Fund will be 
(a) advised by the Advisor or an entity controlled by or under common 
control with the Advisor, and (b) comply with the terms and conditions 
of the application.\2\ The Current Yield Fund and Future Funds together 
are the ``Funds.'' Each Fund will operate as an actively-managed 
exchange-traded fund (``ETF'').
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    \1\ With respect to both the Current Yield Fund and the Future 
Funds, if a security satisfies the minimum rating requirement at the 
time of purchase and is subsequently downgraded below that rating, 
the Advisor will determine what action, including the sale of the 
security, is in the best interest of the applicable Fund and its 
shareholders.
    \2\ All entities that currently intend to rely on the order are 
named as applicants. Any other entity that relies on the order in 
the future will comply with the terms and conditions of the 
application.
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    3. The Advisor, a New York corporation, is a wholly-owned 
subsidiary of The Bear Stearns Companies Inc., a holding company that 
through its subsidiaries (including its principal subsidiary, Bear, 
Stearns & Co., Inc.) is a United States investment banking, securities 
trading and brokerage firm serving U.S. and foreign corporations, 
governments, and institutional and individual investors. The Advisor is 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (the ``Advisers Act'') and will serve as investment adviser to 
all the Funds. The Advisor may retain other investment advisers to act 
as ``sub-advisors'' to Future Funds (``Subadvisors''). Any Subadvisor 
will be registered under the Advisers Act. The Distributor, a broker-
dealer registered under the Securities Exchange Act of 1934, will act 
as each Fund's distributor and principal underwriter.
    4. ETS of the Funds will be sold in Creation Unit Aggregations 
initially of 50,000 ETS. All orders to purchase Creation Unit 
Aggregations must be placed with the Distributor by or through a party 
that has entered into an agreement with the Distributor (``Authorized 
Participant''). An Authorized Participant must be a participant in the 
Depository Trust Company (``DTC,'' and such participant, ``DTC 
Participant''). Creation Unit Aggregations will be created and redeemed 
solely in cash at net asset value (``NAV''). Each Fund will sell and 
redeem Creation Unit Aggregations on each day required by section 22(e) 
of the Act (each such day, a ``Business Day'').
    5. An investor purchasing a Creation Unit Aggregation from a Fund 
will be charged a fixed fee (``Transaction Fee'') to protect the 
continuing ETS holders against the possible dilutive transactional 
expenses in connection with the purchase of Creation Unit Aggregations. 
From time to time, a Fund may waive or modify the Transaction Fee. The 
exact amounts of the Transaction Fee will be determined separately for 
each Fund. The Transaction Fee relevant to each Fund will be fully 
disclosed in the prospectus (``Prospectus'') and the method of 
calculating that Transaction Fee will be fully disclosed in the 
statement of additional information of such Fund. All orders to 
purchase Creation Unit Aggregations will be placed with the Distributor 
by or through an Authorized Participant and it will be the 
Distributor's responsibility to transmit such orders to the Trust. The 
Distributor also will be responsible for delivering the Prospectus to 
those persons purchasing Creation Unit Aggregations, and for 
maintaining records of both the orders placed with it and the 
acknowledgments furnished by it. In addition, the Distributor will 
maintain a record of the instructions given to the Trust to implement 
the delivery of ETS.
    6. Purchasers of ETS in Creation Unit Aggregations may hold such 
ETS or may sell such ETS into the secondary market. ETS will be listed 
and traded on a national securities exchange as defined in section 
2(a)(26) of the Act (``Exchange''). It is expected that one or more 
member firms of a listing Exchange will be designated to act as a 
specialist and maintain a market for ETS on the Exchange (the 
``Exchange Specialist''). Prices of ETS trading on an Exchange will be 
based on the current bid/offer market.\3\ ETS sold in the secondary 
market will be subject to customary brokerage fees or commissions.
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    \3\ The Exchange intends to disseminate every 15 seconds, during 
regular trading hours, through the facilities of the Consolidated 
Tape Association, the indicative intra-day value (``IIV'') of each 
Fund on a per-ETS basis. An independent third party calculator will 
calculate the IIV during the hours of trading on the Exchange by 
dividing (a) the sum of the estimated amount of cash held in the 
applicable Fund's portfolio, the estimated amount of accrued 
interest owing to the applicable Fund and the estimated value of the 
securities held in the applicable Fund's portfolio, minus the 
estimated amount of liabilities, as of the time of calculation by 
(b) the total number of outstanding ETS of the Fund. Applicants 
assert that the calculation and dissemination of IIV will allow for 
efficient arbitrage and thus avoid the possibility that significant 
deviations could develop between the market price of ETS and NAV.
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    7. Applicants expect that purchasers of Creation Unit Aggregations 
will include institutional investors and arbitrageurs. The Exchange 
Specialist, in providing a fair and orderly secondary market for the 
ETS, also may purchase Creation Unit Aggregations for use in its 
market-making activities. Applicants expect that secondary market 
purchasers of ETS will include both institutional investors and retail 
investors.\4\ Applicants expect that the price at which the ETS trade 
will be disciplined by arbitrage opportunities created by the ability 
to continually purchase or redeem Creation Unit Aggregations at their 
NAV, which should ensure that the ETS will not trade at a material 
discount or premium in relation to their NAV.
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    \4\ ETS will be registered in book-entry form only. DTC or its 
nominee will be the registered owner of all outstanding ETS. DTC or 
DTC Participants will maintain records reflecting beneficial owners 
of ETS.
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    8. ETS will not be individually redeemable, and owners of ETS may 
acquire those ETS from a Fund, or tender such ETS for redemption to the 
Fund, in Creation Unit Aggregations only. To redeem, an investor will 
have to accumulate enough ETS to constitute a Creation Unit 
Aggregation. Redemption orders must be placed by or through an 
Authorized Participant. A redeeming investor may pay a Transaction Fee, 
calculated in the same manner as a Transaction Fee payable in 
connection with purchases of Creation Unit Aggregations.
    9. Neither the Trust nor any Fund will be advertised, marketed or 
otherwise held out as an ``open-end investment company'' or a ``mutual 
fund.'' Instead, each Fund will be marketed as an ``actively-managed 
exchange-traded fund.'' All marketing materials that describe the 
method of obtaining, buying or selling ETS, or refer to redeemability, 
will prominently disclose that ETS are not individually redeemable and 
that the owners of ETS may purchase or redeem ETS from a Fund in 
Creation Unit Aggregations only. The same approach will be followed in 
shareholder reports and other communications and investor educational 
materials issued or circulated in connection with the ETS. The Funds 
will provide copies of their annual and semi-annual shareholder reports 
to DTC Participants for distribution to beneficial owners of ETS.
    10. The Funds' Web site, which will be publicly available prior to 
the public offering of ETS, will include the Prospectus and other 
information about the Funds that is updated on a daily basis, including 
the reported mid-point of the bid-ask spread at the time of the 
calculation of NAV (``Bid/Ask Price'').

[[Page 7770]]

On each Business Day, before the commencement of trading in ETS on the 
Exchange, each Fund will disclose on its Web site the identities and 
quantities of the portfolio securities and other assets held by the 
Fund that will form the basis for the Fund's calculation of NAV at the 
end of the Business Day.\5\ Applicants assert that the Web site 
disclosure of each Fund's portfolio securities and other assets will 
provide a level of portfolio transparency that is substantially similar 
to that of index-based ETFs.
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    \5\ Applicants note that under accounting procedures followed by 
the Funds, trades made on the prior Business Day (``T'') will be 
booked and reflected in NAV on the current Business Day (``T + 1''). 
Accordingly, the Funds will be able to disclose at the beginning of 
the Business Day the portfolio that will form the basis for the NAV 
calculation at the end of the Business Day.
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Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act 
granting an exemption from sections 2(a)(32), 5(a)(1) and 22(d) of the 
Act and rule 22c-1 under the Act.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction, or any class of persons, 
securities or transactions, from any provision of the Act, if and to 
the extent that 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.

Sections 5(a)(1) and 2(a)(32) of the Act

    3. Section 5(a)(1) of the Act defines an ``open-end company'' as a 
management investment company that is offering for sale or has 
outstanding any redeemable security of which it is the issuer. Section 
2(a)(32) of the Act defines a redeemable security as any security, 
other than short-term paper, under the terms of which the holder, upon 
its presentation to the issuer, is entitled to receive approximately 
his proportionate share of the issuer's current net assets, or the cash 
equivalent. Because ETS will not be individually redeemable, applicants 
request an order that would permit each Fund, as a series of an open-
end management investment company, to issue ETS that are redeemable in 
Creation Unit Aggregations only. Applicants state that investors may 
purchase ETS in Creation Unit Aggregations from each Fund and redeem 
Creation Unit Aggregations from each Fund. Applicants further state 
that because the market price of ETS will be disciplined by arbitrage 
opportunities, investors should be able to sell ETS in the secondary 
market at prices that do not vary substantially from their NAV.

Section 22(d) of the Act and Rule 22c-1 under the Act

    4. Section 22(d) of the Act, among other things, prohibits a dealer 
from selling a redeemable security, which is currently being offered to 
the public by or through a principal underwriter, except at a current 
public offering price described in the prospectus. Rule 22c-1 under the 
Act generally requires that a dealer selling, redeeming, or 
repurchasing a redeemable security do so only at a price based on its 
NAV. Applicants state that secondary market trading in ETS will take 
place at negotiated prices, not at a current offering price described 
in the Prospectus, and not at a price based on NAV. Thus, purchases and 
sales of ETS in the secondary market will not comply with section 22(d) 
of the Act and rule 22c-1 under the Act. Applicants request an 
exemption under section 6(c) from these provisions.
    5. Applicants assert that the concerns sought to be addressed by 
section 22(d) of the Act and rule 22c-1 under the Act with respect to 
pricing are equally satisfied by the proposed method of pricing ETS. 
Applicants maintain that while there is little legislative history 
regarding section 22(d), its provisions, as well as those of rule 22c-
1, appear to have been designed to (a) prevent dilution caused by 
certain riskless-trading schemes by principal underwriters and contract 
dealers, (b) prevent unjust discrimination or preferential treatment 
among buyers, and (c) assure an orderly distribution of investment 
company shares by eliminating price competition from dealers offering 
shares at less than the published sales price and repurchasing shares 
at more than the published redemption price.
    6. Applicants believe that none of these purposes will be thwarted 
by permitting ETS to trade in the secondary market at negotiated 
prices. Applicants state that (a) secondary market trading in ETS does 
not involve the Funds as parties and cannot result in dilution of an 
investment in ETS, and (b) to the extent different prices exist during 
a given trading day, or from day to day, such variances occur as a 
result of third-party market forces, such as supply and demand. 
Therefore, applicants assert that secondary market transactions in ETS 
will not lead to discrimination or preferential treatment among 
purchasers. Finally, applicants contend that the proposed distribution 
system will be orderly because arbitrage activity will ensure that the 
difference between the market price of ETS and their NAV remains 
narrow.

Applicants' Conditions

    The applicants agree that any order of the Commission granting the 
requested relief will be subject to the following conditions:
    1. Neither the Trust nor any of the Funds will be advertised or 
marketed as an open-end investment company or a mutual fund. Each 
Fund's Prospectus will prominently disclose that the Fund is an 
``actively managed exchange-traded fund.'' Each Prospectus also will 
prominently disclose that ETS are not individually redeemable and will 
disclose that owners of ETS may acquire those ETS from the Fund and 
tender those ETS for redemption to a Fund in Creation Unit Aggregations 
only. Any advertising material that describes the purchase or sale of 
Creation Unit Aggregations or refers to redeemability will prominently 
disclose that ETS are not individually redeemable and that owners of 
ETS may acquire those ETS from a Fund and tender those ETS for 
redemption to a Fund in Creation Unit Aggregations only.
    2. Each Fund's Prospectus will clearly disclose that, for purposes 
of the Act, ETS are issued by a registered investment company, and that 
the acquisition of ETS by investment companies and companies relying on 
sections 3(c)(1) or 3(c)(7) of the Act is subject to the restrictions 
of section 12(d)(1) of the Act, except as permitted by an exemptive 
order that permits registered investment companies to invest in a Fund 
beyond the limits in section 12(d)(1), subject to certain terms and 
conditions, including that the registered investment company enter into 
an agreement with the Fund regarding the terms of the investment.
    3. The Web site for the Funds, which is and will be publicly 
accessible at no charge, will contain the following information, on a 
per-ETS basis, for each Fund: (a) The prior Business Day's NAV and the 
Bid/Ask Price, and a calculation of the premium or discount of the Bid/
Ask Price against such NAV; and (b) data in chart format displaying the 
frequency distribution of discounts and premiums of the Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters (or for the life of the Fund, if shorter).
    4. The Prospectus and annual report for each Fund will also 
include: (a) the information listed in condition 3(b), (i) in the case 
of the Prospectus, for the most recently completed year (and the most 
recently completed quarter or quarters, as applicable) and (ii) in the

[[Page 7771]]

case of the annual report, for the immediately preceding five years, as 
applicable; and (b) the cumulative total return and the average annual 
total return based on NAV and Bid/Ask Price, calculated on a per ETS 
basis for one-, five- and ten-year periods (or life of the Fund).
    5. As long as the Funds operate in reliance on the requested order, 
ETS will be listed on an Exchange.
    6. On each Business Day, before the commencement of trading in ETS 
on each Fund's Exchange, the Fund will disclose on its Web site the 
identities and quantities of the portfolio securities and other assets 
held by the Fund that will form the basis for the Fund's calculation of 
NAV at the end of the Business Day.
    7. The requested order will expire on the effective date of any 
Commission rule under the Act that provides relief permitting the 
operation of actively managed exchange-traded funds.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-2399 Filed 2-8-08; 8:45 am]
BILLING CODE 8011-01-P
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