Virtus Opportunities Trust, et al.; Notice of Application, 45179-45183 [2010-18894]
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80b–1 et seq.) Rule 204A–1, the Code of
Ethics Rule, requires investment
advisers registered with the Commission
to (i) Set forth standards of conduct
expected of advisory personnel
(including compliance with the federal
securities laws), (ii) safeguard material
nonpublic information about client
transactions, and (iii) require the
adviser’s ‘‘access persons’’ to report their
personal securities transactions,
including transactions in any mutual
fund managed by the adviser. The code
of ethics also requires access persons to
obtain the adviser’s approval before
investing in an initial public offering or
private placement. The code of ethics
also requires prompt reporting, to the
adviser’s chief compliance officer or
another person designated in the code of
ethics, of any violations of the code.
Finally, the code of ethics requires the
adviser to provide each supervised
person with a copy of the code and any
amendments, and require the
supervised persons to acknowledge, in
writing, their receipt of these copies.
The purposes of the information
collection requirements is: (i) To ensure
that advisers maintain codes of ethics
applicable to their supervised persons;
(ii) to provide advisers with information
about the personal securities
transactions of their access persons for
purposes of monitoring such
transactions; (iii) to provide advisory
clients with information with which to
evaluate advisers’ codes of ethics; and
(iv) to assist the Commission’s
examination staff in assessing the
adequacy of advisers’ codes of ethics
and assessing personal trading activity
by advisers’ supervised persons.
The respondents to this information
collection are investment advisers
registered with the Commission. The
Commission has estimated that
compliance with rule 204A–1 imposes a
burden of approximately 118 hours per
adviser annually for an estimated total
annual burden of 1,391,456 hours.
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 are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden of the collection of
information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
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through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
Please direct your written comments
to Charles Boucher, Director/CIO,
Securities and Exchange Commission,
C/O Shirley Martinson, 6432 General
Green Way, Alexandria, VA 22312; or
send an e-mail to:
PRA_Mailbox@sec.gov.
Dated: July 26, 2010.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–18896 Filed 7–30–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
29370; 812–13751]
Virtus Opportunities Trust, et al.;
Notice of Application
Date: July 27, 2010.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application to amend
a prior 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.
AGENCY:
Summary of Application: Applicants
request an order that would amend and
supersede (‘‘Amended Order’’) a prior
order that permits 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 (‘‘Prior Order’’).1
The Amended Order would subject
applicants to different conditions than
the Prior Order and delete a condition
of the Prior Order.
Applicants: (a) Virtus Opportunities
Trust (the ‘‘Trust’’), including the
1 Phoenix Life Insurance Co., et al., Investment
Company Act Release Nos. 27315 (May 8, 2006)
(notice) and 27388 (June 5, 2006) (order). The Prior
Order granted relief to the applicants and also to
Phoenix Life Insurance Company, PHL Variable
Insurance Company, Phoenix Life and Annuity
Company, Phoenix Variable Advisors, Inc. (‘‘PVA’’),
companies that were at the time affiliated with
Applicants, The Phoenix Edge Series Fund, a
registered investment company, and certain
registered open-end management investment
companies and their series advised by PVA or any
entity controlling, controlled by or under common
control with PVA.
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currently existing series and all future
series thereof; (b) any existing or future
registered open-end management
investment companies and any series
thereof that are part of the same ‘‘group
of investment companies,’’ as defined in
Section 12(d)(1)(G)(ii) of the Investment
Company Act of 1940, as amended (the
‘‘Act’’), as the Trust, and are or will be
advised by either Virtus Investment
Advisers, Inc. (‘‘VIA’’) (formerly Phoenix
Investment Counsel, Inc.) or any entity
controlling, controlled by or under
common control with VIA (together
with the series of the Trust, the ‘‘Virtus
Funds’’ or ‘‘Funds’’); and (c) VIA.
Filing Dates: The application was
filed on February 3, 2010, and amended
on July 20, 2010.
Hearing or Notification of Hearing: An
order granting the application will be
issued unless the Commission orders a
hearing. Interested persons may request
a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on August 20, 2010, 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, c/o Kevin J. Carr, Esq.,
Virtus Investment Advisers, Inc., 100
Pearl Street, Hartford, CT 06103.
FOR FURTHER INFORMATION CONTACT:
Emerson S. Davis, Sr., Senior Counsel,
at (202) 551–6868, or Julia Kim Gilmer,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Office of Investment Company
Regulation).
The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
SUPPLEMENTARY INFORMATION:
Applicants’ Representations
1. The Trust is a Delaware statutory
trust registered as an open-end
management investment company
under the Act, and currently offers
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eighteen Funds.2 Shares of the Funds
are offered directly to the public, but
may also be offered in the future to
insurance company separate accounts
(‘‘Separate Accounts’’) that fund variable
annuity contracts and variable life
insurance policies (collectively, the
‘‘Contracts’’) issued by insurance
companies that are not affiliates of the
Manager (defined below). The Separate
Accounts may be registered under the
Act (‘‘Registered Separate Accounts’’), or
unregistered thereunder (‘‘Unregistered
Separate Accounts’’ and together with
the Registered Separate Accounts, the
‘‘Separate Accounts’’). VIA is registered
as an investment adviser under the
Investment Advisers Act of 1940, as
amended and serves as investment
adviser to each Fund that is a series of
the Trust.
2. The Prior Order permits Funds
(each a ‘‘Fund of Funds’’) to invest in: (a)
Other Funds in the same group of
investment companies as the Fund of
Funds (‘‘Affiliated Funds’’); and/or (b)
registered open-end management
investment companies (‘‘Unaffiliated
Management Companies’’) and UITs
(‘‘Unaffiliated Trusts’’) 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 (‘‘Unaffiliated Funds,’’ and
together with the Affiliated Funds, the
‘‘Underlying Funds’’). The Prior Order
also permits the Underlying Funds,
their principal underwriters, and any
broker or dealer registered under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) to sell shares of an
Underlying Fund to a Fund of Funds.
Certain of the Unaffiliated Funds may
be ‘‘exchange-traded funds’’ that are
registered under the Act as UITs or
open-end management investment
companies and have received exemptive
relief to sell their shares on a national
securities exchange at negotiated prices
(‘‘ETFs’’). Any investment adviser to a
Fund of Funds that meets the definition
of section 2(a)(20)(A) of the Act is
referred to as a ‘‘Manager.’’
3. The Amended Order would amend
and supersede the Prior Order by
deleting condition 2, which prohibited
a Fund of Funds or its Manager, subadviser, promoter, principal underwriter
and any person controlling, controlled
by or under common control with any
of these entities (each, a ‘‘Fund of Funds
Affiliate’’) from receiving from an
Unaffiliated Fund or its investment
adviser(s), sponsor, promoter, principal
2 All entities that currently intend to rely on the
Amended Order are named as applicants. Any other
entity that relies on the Amended Order in the
future will comply with the terms and conditions
of the application.
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underwriter and any person controlling,
controlled by or under common control
with any of these entities (each, an
‘‘Unaffiliated Fund Affiliate’’) any
consideration in connection with any
services, transactions or the investment
by the Fund of Funds in the Unaffiliated
Fund. The Amended Order will subject
applicants to certain other conditions
governing the payment of such
consideration consistent with recent
Commission precedent.
4. Each Fund of Funds may also make
investments in securities or instruments
that are not issued by registered
investment companies and that are
consistent with its investment objective,
including money market instruments.
Applicants state that the requested relief
will provide an efficient and simple
method of allowing investors to create a
comprehensive asset allocation
program.
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 the shares of the investment
company to another investment
company if the sale will cause the
acquiring company to own more than
3% of the acquired company’s voting
stock, or if the sale will cause more than
10% of the acquired company’s voting
stock to be owned by investment
companies generally.
2. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities or transactions, from
any 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) of the Act from the
limitations of sections 12(d)(1)(A) and
(B) of the Act to the extent necessary 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 registered under the Exchange
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Act to sell shares of the Underlying
Funds to the Funds of Funds.
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 continues to be consistent
with the public interest and the
protection of investors.
4. Applicants state that the proposed
structure will not result in the exercise
of undue influence by a Fund of Funds
or its affiliated persons over the
Underlying Funds. The concern about
undue influence does not arise in
connection with a Fund of Funds’
investment in the Affiliated Funds since
they are part of the same group of
investment companies. To limit the
control a Fund of Funds or its affiliated
persons may have over an Unaffiliated
Fund, applicants remain subject to a
condition prohibiting: (a) A Manager
and any person controlling, controlled
by or under common control with such
Manager, and any investment company
and any issuer that would be an
investment company but for section
3(c)(1) or section 3(c)(7) of the Act
advised or sponsored by the Manager or
any person controlling, controlled by or
under common control with the
Manager (collectively, a ‘‘Group’’); and
(b) any other investment adviser within
the meaning of section 2(a)(20)(B) of the
Act to a Fund of Funds (a ‘‘SubAdviser’’), any person controlling,
controlled by or under common control
with a 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, a ‘‘Sub-Adviser
Group’’) from controlling (individually
or in the aggregate) an Unaffiliated Fund
within the meaning of section 2(a)(9) of
the Act.
5. Applicants further state that
proposed condition 2 precludes a Fund
of Funds or a Fund of Funds Affiliate
from taking advantage of an Unaffiliated
Fund with respect to transactions
between a Fund of Funds or a Fund of
Funds Affiliate, and the Unaffiliated
Fund or an Unaffiliated Fund Affiliate.
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 Unaffiliated Management
Company or sponsor to an Unaffiliated
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Trust) will cause an Unaffiliated Fund
to purchase a security in an offering of
securities during the existence of any
underwriting or selling syndicate of
which a principal underwriter is an
officer, director, trustee, advisory board
member, investment adviser, SubAdviser, or employee of the Fund of
Funds, or a person of which any such
officer, director, trustee, advisory board
member, investment adviser, SubAdviser, or employee is an affiliated
person (each, an ‘‘Underwriting
Affiliate,’’ except any person whose
relationship to the Unaffiliated Fund is
covered by section 10(f) of the Act is not
an Underwriting Affiliate). An offering
of securities during the existence of any
underwriting or selling syndicate of
which a principal underwriter is an
Underwriting Affiliate is an ‘‘Affiliated
Underwriting.’’
6. To further assure that an
Unaffiliated Management Company
understands the implications of an
investment by a Fund of Funds under
the requested Amended Order, prior to
its investment in an Unaffiliated
Management Company in excess of the
limit in section 12(d)(1)(A)(i), a Fund of
Funds and Unaffiliated Management
Company will execute an agreement
stating, without limitation, that their
boards of directors or trustees and their
investment advisers understand the
terms and conditions of the Amended
Order and agree to fulfill their
responsibilities under the Amended
Order (‘‘Participation Agreement’’).
Applicants note that an Unaffiliated
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
7. Applicants state that they do not
believe that the proposed arrangement
will involve excessive layering of fees.
To assure that the investment advisory
fees are not duplicative, applicants state
that, prior to reliance on the requested
order and subsequently in connection
with the approval of 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 (‘‘Independent
Trustees’’), will find that the advisory
fees charged under a Fund of Fund’s
advisory contract(s) are based on
services provided that are in addition to,
3 An Unaffiliated Fund, including an ETF, 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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rather than duplicative of, services
provided pursuant to any Underlying
Fund’s advisory contract(s). Applicants
further state that a Manager will waive
fees otherwise payable to it by a Fund
of Funds in an amount at least equal to
any compensation (including fees
received pursuant to any plan adopted
by an Unaffiliated Fund pursuant to rule
12b–1 under the Act) received from an
Unaffiliated Fund by the Manager, or an
affiliated person of the Manager, other
than any advisory fees paid to the
Manager or an affiliated person of the
Manager by the Unaffiliated Fund, in
connection with the investment by the
Fund of Funds in the Unaffiliated Fund.
8. Applicants state that with respect
to Registered Separate Accounts that
invest in a Fund of Funds, no sales load
will be charged at the Fund of Funds
level or at the Underlying Fund level.
Other sales charges and service fees, as
defined in Rule 2830 of the Conduct
Rules of the National Association of
Securities Dealers (‘‘NASD Conduct Rule
2830’’), if any, will only be charged at
the Fund of Funds level or at the
Underlying Fund level, not both. With
respect to other investments in a Fund
of Funds, any sales charges and/or
service fees charged with respect to
shares of a Fund of Funds will not
exceed the limits applicable to funds of
funds set forth in NASD Conduct Rule
2830.4
9. Applicants represent that each
Fund of Funds will represent in the
Participation Agreement that no
insurance company sponsoring a
Registered Separate Account funding
variable insurance contracts will be
permitted to invest in the Fund of
Funds unless the insurance company
has certified to the Fund of Funds that
the aggregate of all fees and charges
associated with each contract that
invests in the Fund of Funds, including
fees and charges at the Separate
Account, Fund of Funds, and
Underlying Fund levels, will be
reasonable in relation to the services
rendered, the expenses expected to be
incurred, and the risks assumed by the
insurance company.
10. 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 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), except
4 Any references to any NASD Conduct Rule
include any successor or replacement rule of the
Financial Industry Regulatory Authority, Inc.
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in certain circumstances identified in
condition 12 below.
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,
controlled by, or under common control
with the other person.
2. Applicants state that the Funds of
Funds and the Affiliated Funds might
be deemed to be under common control
of the Manager, and therefore affiliated
persons of one another. Applicants also
state that the Funds of Funds and the
Underlying Funds might 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.5
3. Section 17(b) of the Act authorizes
the Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
Section 6(c) of the Act permits the
Commission to exempt any person or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act.
5 Applicants acknowledge that receipt of
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 may be prohibited by
section 17(e)(1) of the Act. The Participation
Agreement also will include this acknowledgement.
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4. Applicants submit that the
proposed arrangement satisfies the
standards for relief under sections 17(b)
and 6(c) of the Act as the terms of the
arrangement are fair and reasonable and
do not involve overreaching. Applicants
state 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 each Underlying Fund.6
Applicants also state that the proposed
structure 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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Applicants’ Conditions
Applicants agree that any Amended
Order granting the requested relief shall
be subject to the following conditions:
1. The members of a Group will not
control (individually or in the aggregate)
an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act.
The members of a Sub-Adviser Group
will not control (individually or in the
aggregate) an Unaffiliated Fund within
the meaning of section 2(a)(9) of the Act.
If, as a result of a decrease in the
outstanding voting securities of an
Unaffiliated Fund, a Group or a SubAdviser Group, each in the aggregate,
becomes a holder of more than 25% of
the outstanding voting securities of the
Unaffiliated Fund, it (except for any
member of the Group or the SubAdviser Group that is a Separate
Account) will vote its shares of the
Unaffiliated Fund in the same
proportion as the vote of all other
holders of the Unaffiliated Fund’s
shares. This condition will not apply to
a Sub-Adviser Group with respect to an
Unaffiliated Fund for which the SubAdviser or a person controlling,
controlled by, or under common control
with the Sub-Adviser acts as the
investment adviser within the meaning
of section 2(a)(20)(A) of the Act (in the
case of an Unaffiliated Management
Company) or as the sponsor (in the case
of an Unaffiliated Trust).
A Registered Separate Account will
seek voting instructions from its
Contract holders and will vote its shares
of an Unaffiliated Fund in accordance
with the instructions received and will
vote those shares for which no
6 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. A Fund of Funds
could seek to transact in ‘‘creation units’’ directly
with an ETF pursuant to the requested Section 17(a)
relief.
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instructions were received in the same
proportion as the shares for which
instructions were received. An
Unregistered Separate Account will
either: (i) Vote its shares of the
Unaffiliated Fund in the same
proportion as the vote of all other
holders of the Unaffiliated Fund’s
shares; or (ii) seek voting instructions
from its Contract holders and vote its
shares in accordance with the
instructions received and vote those
shares for which no instructions were
received in the same proportion as the
shares for which instructions were
received.
2. No Fund of Funds or Fund of
Funds Affiliate will cause any existing
or potential investment by the Fund of
Funds in an Unaffiliated Fund to
influence the terms of any services or
transactions between the Fund of Funds
or a Fund of Funds Affiliate and the
Unaffiliated Fund or an Unaffiliated
Fund Affiliate.
3. The Board of each Fund of Funds,
including a majority of the Independent
Trustees, will adopt procedures
reasonably designed to assure that the
Manager and any Sub-Adviser are
conducting the investment program of
the Fund of Funds without taking into
account any consideration received by
the Fund of Funds or Fund of Funds
Affiliate from an Unaffiliated Fund or
an Unaffiliated Fund Affiliate in
connection with any services or
transactions.
4. Once an investment by a Fund of
Funds in the securities of an
Unaffiliated Management Company
exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of
the Unaffiliated Management Company,
including a majority of the Independent
Trustees, will determine that any
consideration paid by the Unaffiliated
Management Company to a 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
Unaffiliated Management Company; (b)
is within the range of consideration that
the Unaffiliated 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
Unaffiliated Management Company and
its investment adviser(s), or any person
controlling, controlled by, or under
common control with such investment
adviser(s).
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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 Unaffiliated Management
Company or sponsor to an Unaffiliated
Trust) will cause an Unaffiliated Fund
to purchase a security in any Affiliated
Underwriting.
6. The Board of an Unaffiliated
Management Company, including a
majority of the Independent Trustees,
will adopt procedures reasonably
designed to monitor any purchases of
securities by the Unaffiliated
Management Company in an Affiliated
Underwriting once an investment by a
Fund of Funds in the securities of the
Unaffiliated 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 of the
Unaffiliated Management Company 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 the Unaffiliated
Management Company. The Board of
the Unaffiliated Management Company
will consider, among other things: (a)
Whether or not the purchases were
consistent with the investment
objectives and policies of the
Unaffiliated 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 or not the amount of securities
purchased by the Unaffiliated
Management Company in Affiliated
Underwritings and the amount
purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board of the Unaffiliated Management
Company 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 interest of
shareholders.
7. Each Unaffiliated 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
E:\FR\FM\02AUN1.SGM
02AUN1
erowe on DSK5CLS3C1PROD with NOTICES
Federal Register / Vol. 75, No. 147 / Monday, August 2, 2010 / Notices
years in an easily accessible place, a
written record of each purchase of
securities in an Affiliated Underwriting
once an investment by a Fund of Funds
in the securities of an Unaffiliated
Management Company exceeds the limit
of section 12(d)(1)(A)(i) of the Act,
setting forth the: (a) Party from whom
the securities were acquired; (b) identity
of the underwriting syndicate’s
members; (c) terms of the purchase; and
(d) information or materials upon which
the determinations of the Board of the
Unaffiliated Management Company
were made.
8. Prior to its investment in shares of
an Unaffiliated Management Company
in excess of the limit set forth in section
12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Fund will
execute a Participation 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. At the time of its
investment in shares of an Unaffiliated
Management Company in excess of the
limit set forth in section 12(d)(1)(A)(i),
a Fund of Funds will notify the
Unaffiliated Management Company of
the investment. At such time, the Fund
of Funds will also transmit to the
Unaffiliated Management Company a
list of the names of each Fund of Funds
Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the
Unaffiliated Management Company of
any changes to the list as soon as
reasonably practicable after a change
occurs. The Unaffiliated 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 Independent Trustees,
shall find that the advisory fees charged
under the advisory 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. Such
finding, and the basis upon which the
finding was made, will be recorded fully
in the minute books of the appropriate
Fund of Funds.
10. Each Manager will waive fees
otherwise payable to it by a Fund of
Funds in an amount at least equal to any
compensation (including fees received
VerDate Mar<15>2010
15:04 Jul 30, 2010
Jkt 220001
pursuant to any plan adopted by an
Unaffiliated Fund pursuant to rule 12b–
1 under the Act) received from an
Unaffiliated Fund by the Manager, or an
affiliated person of the Manager, other
than any advisory fees paid to the
Manager or its affiliated person by the
Unaffiliated Fund, in connection with
the investment by the Fund of Funds in
the Unaffiliated Fund. Any Sub-Adviser
will waive fees otherwise payable to the
Sub-Adviser, directly or indirectly, by
the Fund of Funds in an amount at least
equal to any compensation received by
the Sub-Adviser, or an affiliated person
of the Sub-Adviser, from an Unaffiliated
Fund, other than any advisory fees paid
to the Sub-Adviser or its affiliated
person by the Unaffiliated Fund, in
connection with the investment by the
Fund of Funds in the Unaffiliated 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. With respect to Registered
Separate Accounts that invest in a Fund
of Funds, no sales load will be charged
at the Fund of Funds level or at the
Underlying Fund level. Other sales
charges and service fees, as defined in
NASD Conduct Rule 2830, if any, will
only be charged at the Fund of Funds
level or at the Underlying Fund level,
not both. With respect to other
investments in a Fund of Funds, any
sales charges and/or service fees
charged with respect to shares of a Fund
of Funds will not exceed the limits
applicable to funds of funds 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 to the
extent that such Underlying Fund: (a)
Receives securities of another
investment company as a dividend or as
a result of a plan of reorganization of a
company (other than a plan devised for
the purpose of evading section 12(d)(1)
of the Act); or (b) acquires (or is deemed
to have acquired) securities of another
investment company pursuant to
exemptive relief from the Commission
permitting such Underlying Fund to: (i)
Acquire securities of one or more
investment companies for short-term
cash management purposes, or (ii)
engage in interfund borrowing and
lending transactions.
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
45183
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–18894 Filed 7–30–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62572; File No. SR–
NYSEAmex–2010–72]
Self-Regulatory Organizations; NYSE
Amex LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Deleting Rule 123G—
NYSE Amex Equities and Adopting
New Rule 5290—NYSE Amex Equities
to Correspond With Rule Changes
Filed by the Financial Industry
Regulatory Authority, Inc.
July 26, 2010.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on July 19,
2010, NYSE Amex LLC (the ‘‘Exchange’’
or ‘‘NYSE Amex’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to delete Rule
123G—NYSE Amex Equities and adopt
new Rule 5290—NYSE Amex Equities
to correspond with rule changes filed by
the Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) and approved
by the Commission.4 The text of the
proposed rule change is available at the
Exchange, at the Commission’s Public
Reference Room, on the Commission’s
Web site at https://www.sec.gov, and at
https://www.nyse.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
1 15
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 See Securities Exchange Act Release No. 61071
(November 30, 2009), 74 FR 64109 (December 7,
2009) (order approving SR–FINRA–2009–067).
2 15
E:\FR\FM\02AUN1.SGM
02AUN1
]]>Agencies
[Federal Register Volume 75, Number 147 (Monday, August 2, 2010)]
[Notices]
[Pages 45179-45183]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-18894]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29370; 812-13751]
Virtus Opportunities Trust, et al.; Notice of Application
Date: July 27, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application to amend a prior 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.
-----------------------------------------------------------------------
Summary of Application: Applicants request an order that would
amend and supersede (``Amended Order'') a prior order that permits
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 (``Prior Order'').\1\ The Amended Order
would subject applicants to different conditions than the Prior Order
and delete a condition of the Prior Order.
---------------------------------------------------------------------------
\1\ Phoenix Life Insurance Co., et al., Investment Company Act
Release Nos. 27315 (May 8, 2006) (notice) and 27388 (June 5, 2006)
(order). The Prior Order granted relief to the applicants and also
to Phoenix Life Insurance Company, PHL Variable Insurance Company,
Phoenix Life and Annuity Company, Phoenix Variable Advisors, Inc.
(``PVA''), companies that were at the time affiliated with
Applicants, The Phoenix Edge Series Fund, a registered investment
company, and certain registered open-end management investment
companies and their series advised by PVA or any entity controlling,
controlled by or under common control with PVA.
---------------------------------------------------------------------------
Applicants: (a) Virtus Opportunities Trust (the ``Trust''),
including the currently existing series and all future series thereof;
(b) any existing or future registered open-end management investment
companies and any series thereof that are part of the same ``group of
investment companies,'' as defined in Section 12(d)(1)(G)(ii) of the
Investment Company Act of 1940, as amended (the ``Act''), as the Trust,
and are or will be advised by either Virtus Investment Advisers, Inc.
(``VIA'') (formerly Phoenix Investment Counsel, Inc.) or any entity
controlling, controlled by or under common control with VIA (together
with the series of the Trust, the ``Virtus Funds'' or ``Funds''); and
(c) VIA.
Filing Dates: The application was filed on February 3, 2010, and
amended on July 20, 2010.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on August 20, 2010, 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, c/o Kevin J. Carr,
Esq., Virtus Investment Advisers, Inc., 100 Pearl Street, Hartford, CT
06103.
FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel,
at (202) 551-6868, or Julia Kim Gilmer, 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 via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at https://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. The Trust is a Delaware statutory trust registered as an open-
end management investment company under the Act, and currently offers
[[Page 45180]]
eighteen Funds.\2\ Shares of the Funds are offered directly to the
public, but may also be offered in the future to insurance company
separate accounts (``Separate Accounts'') that fund variable annuity
contracts and variable life insurance policies (collectively, the
``Contracts'') issued by insurance companies that are not affiliates of
the Manager (defined below). The Separate Accounts may be registered
under the Act (``Registered Separate Accounts''), or unregistered
thereunder (``Unregistered Separate Accounts'' and together with the
Registered Separate Accounts, the ``Separate Accounts''). VIA is
registered as an investment adviser under the Investment Advisers Act
of 1940, as amended and serves as investment adviser to each Fund that
is a series of the Trust.
---------------------------------------------------------------------------
\2\ All entities that currently intend to rely on the Amended
Order are named as applicants. Any other entity that relies on the
Amended Order in the future will comply with the terms and
conditions of the application.
---------------------------------------------------------------------------
2. The Prior Order permits Funds (each a ``Fund of Funds'') to
invest in: (a) Other Funds in the same group of investment companies as
the Fund of Funds (``Affiliated Funds''); and/or (b) registered open-
end management investment companies (``Unaffiliated Management
Companies'') and UITs (``Unaffiliated Trusts'') 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 (``Unaffiliated
Funds,'' and together with the Affiliated Funds, the ``Underlying
Funds''). The Prior Order also permits the Underlying Funds, their
principal underwriters, and any broker or dealer registered under the
Securities Exchange Act of 1934 (``Exchange Act'') to sell shares of an
Underlying Fund to a Fund of Funds. Certain of the Unaffiliated Funds
may be ``exchange-traded funds'' that are registered under the Act as
UITs or open-end management investment companies and have received
exemptive relief to sell their shares on a national securities exchange
at negotiated prices (``ETFs''). Any investment adviser to a Fund of
Funds that meets the definition of section 2(a)(20)(A) of the Act is
referred to as a ``Manager.''
3. The Amended Order would amend and supersede the Prior Order by
deleting condition 2, which prohibited a Fund of Funds or its Manager,
sub-adviser, promoter, principal underwriter and any person
controlling, controlled by or under common control with any of these
entities (each, a ``Fund of Funds Affiliate'') from receiving from an
Unaffiliated 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
``Unaffiliated Fund Affiliate'') any consideration in connection with
any services, transactions or the investment by the Fund of Funds in
the Unaffiliated Fund. The Amended Order will subject applicants to
certain other conditions governing the payment of such consideration
consistent with recent Commission precedent.
4. Each Fund of Funds may also make investments in securities or
instruments that are not issued by registered investment companies and
that are consistent with its investment objective, including money
market instruments. Applicants state that the requested relief will
provide an efficient and simple method of allowing investors to create
a comprehensive asset allocation program.
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 the shares of the investment company
to another investment company if the sale will cause the acquiring
company to own more than 3% of the acquired company's voting stock, or
if the sale will cause more than 10% of the acquired company's voting
stock to be owned by investment companies generally.
2. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt any person, security, or transaction, or any class or classes of
persons, securities or transactions, from any 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) of the Act from the limitations of sections 12(d)(1)(A) and
(B) of the Act to the extent necessary 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 registered under
the Exchange Act to sell shares of the Underlying Funds to the Funds of
Funds.
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 continues to be consistent with the public interest and the
protection of investors.
4. Applicants state that the proposed structure will not result in
the exercise of undue influence by a Fund of Funds or its affiliated
persons over the Underlying Funds. The concern about undue influence
does not arise in connection with a Fund of Funds' investment in the
Affiliated Funds since they are part of the same group of investment
companies. To limit the control a Fund of Funds or its affiliated
persons may have over an Unaffiliated Fund, applicants remain subject
to a condition prohibiting: (a) A Manager and any person controlling,
controlled by or under common control with such Manager, and any
investment company and any issuer that would be an investment company
but for section 3(c)(1) or section 3(c)(7) of the Act advised or
sponsored by the Manager or any person controlling, controlled by or
under common control with the Manager (collectively, a ``Group''); and
(b) any other investment adviser within the meaning of section
2(a)(20)(B) of the Act to a Fund of Funds (a ``Sub-Adviser''), any
person controlling, controlled by or under common control with a 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, a ``Sub-Adviser Group'')
from controlling (individually or in the aggregate) an Unaffiliated
Fund within the meaning of section 2(a)(9) of the Act.
5. Applicants further state that proposed condition 2 precludes a
Fund of Funds or a Fund of Funds Affiliate from taking advantage of an
Unaffiliated Fund with respect to transactions between a Fund of Funds
or a Fund of Funds Affiliate, and the Unaffiliated Fund or an
Unaffiliated Fund Affiliate. 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 Unaffiliated Management Company or sponsor to
an Unaffiliated
[[Page 45181]]
Trust) will cause an Unaffiliated Fund to purchase a security in an
offering of securities during the existence of any underwriting or
selling syndicate of which a principal underwriter is an officer,
director, trustee, advisory board member, investment adviser, Sub-
Adviser, or employee of the Fund of Funds, or a person of which any
such officer, director, trustee, advisory board member, investment
adviser, Sub-Adviser, or employee is an affiliated person (each, an
``Underwriting Affiliate,'' except any person whose relationship to the
Unaffiliated Fund is covered by section 10(f) of the Act is not an
Underwriting Affiliate). An offering of securities during the existence
of any underwriting or selling syndicate of which a principal
underwriter is an Underwriting Affiliate is an ``Affiliated
Underwriting.''
6. To further assure that an Unaffiliated Management Company
understands the implications of an investment by a Fund of Funds under
the requested Amended Order, prior to its investment in an Unaffiliated
Management Company in excess of the limit in section 12(d)(1)(A)(i), a
Fund of Funds and Unaffiliated Management Company will execute an
agreement stating, without limitation, that their boards of directors
or trustees and their investment advisers understand the terms and
conditions of the Amended Order and agree to fulfill their
responsibilities under the Amended Order (``Participation Agreement'').
Applicants note that an Unaffiliated 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 Unaffiliated Fund, including an ETF, 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.
---------------------------------------------------------------------------
7. Applicants state that they do not believe that the proposed
arrangement will involve excessive layering of fees. To assure that the
investment advisory fees are not duplicative, applicants state that,
prior to reliance on the requested order and subsequently in connection
with the approval of 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
(``Independent Trustees''), will find that the advisory fees charged
under a Fund of Fund's advisory contract(s) are based on services
provided that are in addition to, rather than duplicative of, services
provided pursuant to any Underlying Fund's advisory contract(s).
Applicants further state that a Manager will waive fees otherwise
payable to it by a Fund of Funds in an amount at least equal to any
compensation (including fees received pursuant to any plan adopted by
an Unaffiliated Fund pursuant to rule 12b-1 under the Act) received
from an Unaffiliated Fund by the Manager, or an affiliated person of
the Manager, other than any advisory fees paid to the Manager or an
affiliated person of the Manager by the Unaffiliated Fund, in
connection with the investment by the Fund of Funds in the Unaffiliated
Fund.
8. Applicants state that with respect to Registered Separate
Accounts that invest in a Fund of Funds, no sales load will be charged
at the Fund of Funds level or at the Underlying Fund level. Other sales
charges and service fees, as defined in Rule 2830 of the Conduct Rules
of the National Association of Securities Dealers (``NASD Conduct Rule
2830''), if any, will only be charged at the Fund of Funds level or at
the Underlying Fund level, not both. With respect to other investments
in a Fund of Funds, any sales charges and/or service fees charged with
respect to shares of a Fund of Funds will not exceed the limits
applicable to funds of funds set forth in NASD Conduct Rule 2830.\4\
---------------------------------------------------------------------------
\4\ Any references to any NASD Conduct Rule include any
successor or replacement rule of the Financial Industry Regulatory
Authority, Inc.
---------------------------------------------------------------------------
9. Applicants represent that each Fund of Funds will represent in
the Participation Agreement that no insurance company sponsoring a
Registered Separate Account funding variable insurance contracts will
be permitted to invest in the Fund of Funds unless the insurance
company has certified to the Fund of Funds that the aggregate of all
fees and charges associated with each contract that invests in the Fund
of Funds, including fees and charges at the Separate Account, Fund of
Funds, and Underlying Fund levels, will be reasonable in relation to
the services rendered, the expenses expected to be incurred, and the
risks assumed by the insurance company.
10. 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 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),
except in certain circumstances identified in condition 12 below.
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, controlled by, or under common control with the
other person.
2. Applicants state that the Funds of Funds and the Affiliated
Funds might be deemed to be under common control of the Manager, and
therefore affiliated persons of one another. Applicants also state that
the Funds of Funds and the Underlying Funds might 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.\5\
---------------------------------------------------------------------------
\5\ Applicants acknowledge that receipt of 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 may be prohibited
by section 17(e)(1) of the Act. The Participation Agreement also
will include this acknowledgement.
---------------------------------------------------------------------------
3. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
it finds that (a) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (b) the proposed transaction is consistent with the policies
of each registered investment company involved; and (c) the proposed
transaction is consistent with the general purposes of the Act. Section
6(c) of the Act permits the Commission to exempt any person or
transactions from any provision of the Act if such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act.
[[Page 45182]]
4. Applicants submit that the proposed arrangement satisfies the
standards for relief under sections 17(b) and 6(c) of the Act as the
terms of the arrangement are fair and reasonable and do not involve
overreaching. Applicants state 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 each Underlying Fund.\6\
Applicants also state that the proposed structure will be consistent
with the policies of each Fund of Funds and Underlying Fund, and with
the general purposes of the Act.
---------------------------------------------------------------------------
\6\ 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. A Fund of
Funds could seek to transact in ``creation units'' directly with an
ETF pursuant to the requested Section 17(a) relief.
---------------------------------------------------------------------------
Applicants' Conditions
Applicants agree that any Amended Order granting the requested
relief shall be subject to the following conditions:
1. The members of a Group will not control (individually or in the
aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9)
of the Act. The members of a Sub-Adviser Group will not control
(individually or in the aggregate) an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act. If, as a result of a decrease in
the outstanding voting securities of an Unaffiliated Fund, a Group or a
Sub-Adviser Group, each in the aggregate, becomes a holder of more than
25% of the outstanding voting securities of the Unaffiliated Fund, it
(except for any member of the Group or the Sub-Adviser Group that is a
Separate Account) will vote its shares of the Unaffiliated Fund in the
same proportion as the vote of all other holders of the Unaffiliated
Fund's shares. This condition will not apply to a Sub-Adviser Group
with respect to an Unaffiliated Fund for which the Sub-Adviser or a
person controlling, controlled by, or under common control with the
Sub-Adviser acts as the investment adviser within the meaning of
section 2(a)(20)(A) of the Act (in the case of an Unaffiliated
Management Company) or as the sponsor (in the case of an Unaffiliated
Trust).
A Registered Separate Account will seek voting instructions from
its Contract holders and will vote its shares of an Unaffiliated Fund
in accordance with the instructions received and will vote those shares
for which no instructions were received in the same proportion as the
shares for which instructions were received. An Unregistered Separate
Account will either: (i) Vote its shares of the Unaffiliated Fund in
the same proportion as the vote of all other holders of the
Unaffiliated Fund's shares; or (ii) seek voting instructions from its
Contract holders and vote its shares in accordance with the
instructions received and vote those shares for which no instructions
were received in the same proportion as the shares for which
instructions were received.
2. No Fund of Funds or Fund of Funds Affiliate will cause any
existing or potential investment by the Fund of Funds in an
Unaffiliated Fund to influence the terms of any services or
transactions between the Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
3. The Board of each Fund of Funds, including a majority of the
Independent Trustees, will adopt procedures reasonably designed to
assure that the Manager and any Sub-Adviser are conducting the
investment program of the Fund of Funds without taking into account any
consideration received by the Fund of Funds or Fund of Funds Affiliate
from an Unaffiliated Fund or an Unaffiliated Fund Affiliate in
connection with any services or transactions.
4. Once an investment by a Fund of Funds in the securities of an
Unaffiliated Management Company exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Management
Company, including a majority of the Independent Trustees, will
determine that any consideration paid by the Unaffiliated Management
Company to a 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 Unaffiliated Management Company; (b) is within the
range of consideration that the Unaffiliated 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
Unaffiliated 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
Unaffiliated Management Company or sponsor to an Unaffiliated Trust)
will cause an Unaffiliated Fund to purchase a security in any
Affiliated Underwriting.
6. The Board of an Unaffiliated Management Company, including a
majority of the Independent Trustees, will adopt procedures reasonably
designed to monitor any purchases of securities by the Unaffiliated
Management Company in an Affiliated Underwriting once an investment by
a Fund of Funds in the securities of the Unaffiliated 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 of the Unaffiliated Management Company 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 the Unaffiliated Management Company. The Board of
the Unaffiliated Management Company will consider, among other things:
(a) Whether or not the purchases were consistent with the investment
objectives and policies of the Unaffiliated 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 or not the amount of securities purchased by the
Unaffiliated Management Company in Affiliated Underwritings and the
amount purchased directly from an Underwriting Affiliate have changed
significantly from prior years. The Board of the Unaffiliated
Management Company 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 interest of shareholders.
7. Each Unaffiliated 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
[[Page 45183]]
years in an easily accessible place, a written record of each purchase
of securities in an Affiliated Underwriting once an investment by a
Fund of Funds in the securities of an Unaffiliated Management Company
exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth
the: (a) Party from whom the securities were acquired; (b) identity of
the underwriting syndicate's members; (c) terms of the purchase; and
(d) information or materials upon which the determinations of the Board
of the Unaffiliated Management Company were made.
8. Prior to its investment in shares of an Unaffiliated Management
Company in excess of the limit set forth in section 12(d)(1)(A)(i) of
the Act, the Fund of Funds and the Unaffiliated Fund will execute a
Participation 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. At the time of its investment in
shares of an Unaffiliated Management Company in excess of the limit set
forth in section 12(d)(1)(A)(i), a Fund of Funds will notify the
Unaffiliated Management Company of the investment. At such time, the
Fund of Funds will also transmit to the Unaffiliated Management Company
a list of the names of each Fund of Funds Affiliate and Underwriting
Affiliate. The Fund of Funds will notify the Unaffiliated Management
Company of any changes to the list as soon as reasonably practicable
after a change occurs. The Unaffiliated 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
Independent Trustees, shall find that the advisory fees charged under
the advisory 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. Such finding, and the basis upon which the finding was
made, will be recorded fully in the minute books of the appropriate
Fund of Funds.
10. Each Manager will waive fees otherwise payable to it by a Fund
of Funds in an amount at least equal to any compensation (including
fees received pursuant to any plan adopted by an Unaffiliated Fund
pursuant to rule 12b-1 under the Act) received from an Unaffiliated
Fund by the Manager, or an affiliated person of the Manager, other than
any advisory fees paid to the Manager or its affiliated person by the
Unaffiliated Fund, in connection with the investment by the Fund of
Funds in the Unaffiliated Fund. Any Sub-Adviser will waive fees
otherwise payable to the Sub-Adviser, directly or indirectly, by the
Fund of Funds in an amount at least equal to any compensation received
by the Sub-Adviser, or an affiliated person of the Sub-Adviser, from an
Unaffiliated Fund, other than any advisory fees paid to the Sub-Adviser
or its affiliated person by the Unaffiliated Fund, in connection with
the investment by the Fund of Funds in the Unaffiliated Fund made at
the direction of the Sub-Adviser. In the event that the Sub-Adviser
waives fees, the benefit of the waiver will be passed through to the
Fund of Funds.
11. With respect to Registered Separate Accounts that invest in a
Fund of Funds, no sales load will be charged at the Fund of Funds level
or at the Underlying Fund level. Other sales charges and service fees,
as defined in NASD Conduct Rule 2830, if any, will only be charged at
the Fund of Funds level or at the Underlying Fund level, not both. With
respect to other investments in a Fund of Funds, any sales charges and/
or service fees charged with respect to shares of a Fund of Funds will
not exceed the limits applicable to funds of funds 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 to the extent that such Underlying Fund: (a) Receives
securities of another investment company as a dividend or as a result
of a plan of reorganization of a company (other than a plan devised for
the purpose of evading section 12(d)(1) of the Act); or (b) acquires
(or is deemed to have acquired) securities of another investment
company pursuant to exemptive relief from the Commission permitting
such Underlying Fund to: (i) Acquire securities of one or more
investment companies for short-term cash management purposes, or (ii)
engage in interfund borrowing and lending transactions.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18894 Filed 7-30-10; 8:45 am]
BILLING CODE 8010-01-P
