Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change Relating to the Listing and Trading of the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF, 6503-6506 [2011-2457]
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Federal Register / Vol. 76, No. 24 / Friday, February 4, 2011 / Notices
Act,44 for approving the proposed rule
change, as amended, prior to the 30th
day after the date of publication in the
Federal Register. The changes proposed
in Amendment No. 1 do not raise novel
regulatory concerns. Moreover,
accelerating approval of this proposal
should benefit investors by providing
customers with the immediate option to
select an all public arbitration panel for
all cases. Accordingly, the Commission
finds that good cause exists to approve
the proposal, as modified by
Amendment No. 1, on an accelerated
basis.
VI. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
srobinson on DSKHWCL6B1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–FINRA–2010–053 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–FINRA–2010–053. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
44 15
U.S.C. 78s(b)(2).
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16:05 Feb 03, 2011
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also will be available for inspection and
copying at the principal office of
FINRA. All comments received will be
posted without change; the Commission
does not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–FINRA–2010–053 and
should be submitted on or before
February 25, 2011.
VII. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,45 that the
proposed rule change (SR–FINRA–
2010–053), as modified by Amendment
No. 1, be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.46
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–2492 Filed 2–3–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63802; File No. SR–
NYSEArca–2010–118]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change Relating to the
Listing and Trading of the SiM
Dynamic Allocation Diversified Income
ETF and SiM Dynamic Allocation
Growth Income ETF
January 31, 2011.
I. Introduction
On December 15, 2010, NYSE Arca,
Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade the following
Managed Fund Shares under NYSE Arca
Equities Rule 8.600: SiM Dynamic
Allocation Diversified Income ETF and
SiM Dynamic Allocation Growth
Income ETF. The proposed rule change
was published for comment in the
Federal Register on December 28,
2010.3 The Commission received no
comments on the proposal. This order
45 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 63587
(December 21, 2010), 75 FR 81697 (‘‘Notice’’).
46 17
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6503
grants approval of the proposed rule
change.
II. Description of the Proposal
The Exchange proposes to list and
trade the shares (‘‘Shares’’) of the SiM
Dynamic Allocation Diversified Income
ETF and SiM Dynamic Allocation
Growth Income ETF (each a ‘‘Fund’’ and,
collectively, ‘‘Funds’’) under NYSE Arca
Equities Rule 8.600. The Shares will be
offered by AdvisorShares Trust
(‘‘Trust’’), a statutory trust organized
under the laws of the State of Delaware
and registered with the Commission as
an open-end management investment
company.4 The investment advisor to
the Funds is AdvisorShares
Investments, LLC (‘‘Advisor’’), and
Strategic Income Management, LLC
(‘‘Sub-Advisor’’ or ‘‘SiM’’) serves as
investment sub-advisor to the Funds.
Foreside Fund Services, LLC is the
principal underwriter and distributor of
the Funds’ Shares. The Bank of New
York Mellon Corporation
(‘‘Administrator’’) serves as the
administrator, custodian, transfer agent,
and fund accounting agent for the
Funds. Each Fund is an actively
managed exchange-traded fund (‘‘ETF’’)
and thus does not seek to replicate the
performance of a specified index, but
uses an active investment strategy to
meet its investment objective.
Accordingly, the Sub-Advisor manages
each Fund’s portfolio in accordance
with each Fund’s investment objective.
SiM Dynamic Allocation Diversified
Income ETF
This Fund’s objective is to provide
total return, consisting primarily of
reinvestment and growth of income
with some long-term capital
appreciation. The Fund is considered a
‘‘fund-of-funds’’ that will seek to achieve
its investment objective by primarily
investing in other ETFs that offer
diversified exposure to various
investment types (equities, bonds, etc.),
global regions, countries, styles (market
capitalization, value, growth, etc.) or
sectors, and exchange-traded products
(‘‘ETPs,’’ and, together with ETFs,
‘‘Underlying ETPs’’) including, but not
limited to, exchange-traded notes
(‘‘ETNs’’), exchange-traded currency
trusts, and closed-end funds.5
4 The Trust is registered under the Investment
Company Act of 1940 (‘‘1940 Act’’). On October 14,
2010, the Trust filed with the Commission PostEffective Amendment No. 13 to Form N–1A under
the Securities Act of 1933 (15 U.S.C. 77a) and under
the 1940 Act relating to the Funds (File Nos. 333–
157876 and 811–22110) (‘‘Registration Statement’’).
5 Underlying ETPs, which will be listed on a
national securities exchange, include: Investment
Company Units (as described in NYSE Arca
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The Fund will seek to offer the
potential for total return from a high
level of income and a low level of
capital growth, with exposure to a low
level of principal risk. The Fund,
through its investments in the
Underlying ETPs, generally will invest
at least 60% of its net assets in domestic
and international fixed-income funds.
The Fund will allocate its assets among
Underlying ETPs in accordance with the
Sub-Advisor’s outlook for the economy,
the financial markets, and the relative
market valuations of the Underlying
ETPs. The Fund will sell interests or
reduce investment exposure among
market segments or Underlying ETPs, if
appropriate, when the Sub-Advisor’s
fundamental and quantitative factors
indicate a low relative strength of such
market segments and that such market
segments are likely to underperform the
market as a whole.
Under normal market conditions, the
Fund’s portfolio will generally:
• Invest up to 85% of its assets in
Underlying ETPs that hold fixed-income
securities as well as cash equivalents;
• Not invest more than 40% of its net
assets in Underlying ETPs that primarily
hold equity securities; and
• Invest up to 20% of its assets in any
single Underlying ETP.
The Fund’s portfolio may temporarily
exceed these percentage ranges for short
periods without notice, and the SubAdvisor, due to certain market
conditions, may alter the percentage
ranges when it deems appropriate.
In general, the Fund will seek to offer
investors the potential for total return
from a low to medium level of income
and a medium to high level of capital
growth, while exposing them to a
medium to high level of principal risk.
The Fund, through its investments in
the Underlying ETPs, generally will
invest at least 60% of its net assets in
domestic and international equity
funds. The Fund will allocate its assets
among Underlying ETPs in accordance
with the Sub-Advisor’s outlook for the
economy, the financial markets, and the
relative market valuations of the
Underlying ETPs. The Fund will sell
interests or reduce investment exposure
among market segments or Underlying
ETPs when the Sub-Advisor’s
fundamental and quantitative factors
indicate a low relative strength of such
market segments and that such market
segments are likely to underperform the
market as a whole.
The Fund’s portfolio will generally:
• Invest up to 85% of its assets in
Underlying ETPs that hold equity
securities as well as cash equivalents;
• Not invest more than 40% of its net
assets in Underlying ETPs that primarily
hold fixed-income securities; and
• Invest up to 20% of its assets in any
single Underlying ETP.
The Fund’s portfolio may temporarily
exceed these percentage ranges for short
periods without notice, and the SubAdvisor, due to certain market
conditions, may alter the percentage
ranges when it deems appropriate.
SiM Dynamic Allocation Growth Income
ETF
Other Investments
srobinson on DSKHWCL6B1PROD with NOTICES
This Fund’s objective is to provide
total return, consisting primarily of
long-term capital appreciation with
some reinvestment and growth of
income. The Fund is considered a
‘‘fund-of-funds’’ that will seek to achieve
its investment objective by primarily
investing in Underlying ETPs that offer
diversified exposure to various
investment types (equities, bonds, etc.),
global regions, countries, styles (market
capitalization, value, growth, etc.) or
sectors, and ETPs including, but not
limited to, ETNs, exchange-traded
currency trusts, and closed-end funds.
Equities Rule 5.2(j)(3)); Index-Linked Securities (as
described in NYSE Arca Equities Rule 5.2(j)(6));
Portfolio Depositary Receipts (as described in NYSE
Arca Equities Rule 8.100); Trust Issued Receipts (as
described in NYSE Arca Equities Rule 8.200);
Commodity-Based Trust Shares (as described in
NYSE Arca Equities Rule 8.201); Currency Trust
Shares (as described in NYSE Arca Equities Rule
8.202); Commodity Index Trust Shares (as described
in NYSE Arca Equities Rule 8.203); Trust Units (as
described in NYSE Arca Equities Rule 8.500);
Managed Fund Shares (as described in NYSE Arca
Equities Rule 8.600); and closed-end funds.
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The Funds and the Underlying ETPs
may invest in equity securities
representing ownership interests in a
company or partnership and that consist
of common stocks, preferred stocks,
warrants to acquire common stock,
securities convertible into common
stock, and investments in master limited
partnerships.6 The Funds may enter into
repurchase agreements, which may be
deemed to be loans, with financial
institutions, and reverse repurchase
agreements as part of the Funds’
investment strategy. The Funds may
also invest in U.S. government
securities, U.S. Treasury zero-coupon
bonds, and shares of real estate
investment trusts, which are pooled
investment vehicles that primarily
invest in real estate or real estate-related
loans. To respond to adverse market,
economic, political, or other conditions,
the Funds may invest 100% of their
total assets, without limitation, in high6 The Funds will hold only equity securities
traded in the United States on registered exchanges.
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
quality short-term debt securities and
money market instruments.
Additional details regarding the Trust,
Shares, and the Funds, including,
among other things, investment
strategies, risks, creations and
redemptions of Shares, fees, portfolio
holdings disclosure policies,
distributions, taxes, the calculation of
the net asset value (‘‘NAV’’),
dissemination and availability of key
information about the Funds, trading
halts, trading rules, surveillance, and
the Information Bulletin can be found in
the Notice and the Registration
Statement, as applicable.7
III. Discussion and Commission
Findings
After careful consideration, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.8 In
particular, the Commission finds that
the proposed rule change is consistent
with the requirements of Section 6(b)(5)
of the Act,9 which requires, among other
things, that the Exchange’s rules be
designed to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in facilitating transactions in securities,
to remove impediments to, and perfect
the mechanism of, a free and open
market and a national market system,
and, in general, to protect investors and
the public interest. The Commission
notes that it has approved the listing
and trading of other similar Managed
Fund Shares.10
The Commission finds that the
proposal to list and trade the Shares on
the Exchange is consistent with Section
11A(a)(1)(C)(iii) of the Act,11 which sets
forth Congress’ finding that it is in the
public interest and appropriate for the
protection of investors and the
maintenance of fair and orderly markets
to assure the availability to brokers,
dealers, and investors of information
with respect to quotations for and
transactions in securities. Quotation and
7 See
supra notes 3 and 4.
approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
9 15 U.S.C. 78f(b)(5).
10 See, e.g., Securities Exchange Act Release No.
63076 (October 12, 2010), 75 FR 63874 (October 18,
2010) (SR–NYSEArca–2010–79) (approving the
listing and trading of the Cambria Global Tactical
ETF, which is a ‘‘fund-of-funds’’ that seeks to invest
primarily in other exchange-traded funds listed and
traded in the United States and certain other
exchange-traded products including, but not
limited to, exchange-traded notes, exchange-traded
currency trusts, and closed-end funds).
11 15 U.S.C. 78k–1(a)(1)(C)(iii).
8 In
E:\FR\FM\04FEN1.SGM
04FEN1
srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 76, No. 24 / Friday, February 4, 2011 / Notices
last-sale information for the Shares will
be available via the Consolidated Tape
Association high-speed line. In
addition, the Portfolio Indicative Value
will be disseminated at least every 15
seconds during the Core Trading
Session by one or more major market
data vendors. On each business day
before commencement of trading in
Shares in the Core Trading Session on
the Exchange, the Funds will disclose
on their website the Disclosed Portfolio,
as defined in NYSE Arca Equities Rule
8.600(c)(2), that will form the basis for
the Funds’ calculation of NAV at the
end of the business day.12 The NAV per
Share for the Funds will be calculated
by the Administrator and determined as
of the close of the regular trading
session on NYSE Arca (ordinarily 4:00
p.m., Eastern Time) on each day that the
Exchange is open. Information regarding
market price and trading volume of the
Underlying ETPs will be continually
available on a real-time basis throughout
the day from major market data vendors,
and last-sale and closing price
information for Underlying ETPs will be
available on the website of the national
securities exchange on which such
securities are listed or through major
market data vendors. Information
regarding market price and trading
volume of the Shares will be continually
available on a real time basis through
the day on brokers’ computer screens
and other electronic services, and the
previous day’s closing price and trading
volume information will be published
daily in the financial section of
newspapers. The Funds’ Web site will
also include a form of the Prospectus for
the Funds, information relating to NAV,
and other quantitative and trading
information. Further, a basket
composition file, which includes the
security names and share quantities
required to be delivered in exchange for
Fund Shares, together with estimates
and actual cash components, will be
publicly disseminated daily prior to the
opening of the New York Stock
Exchange via the National Securities
Clearing Corporation.
The Commission further believes that
the proposal to list and trade the Shares
is reasonably designed to promote fair
disclosure of information that may be
necessary to price the Shares
appropriately and to prevent trading
when a reasonable degree of
12 On a daily basis, the Advisor will disclose for
each portfolio security or other financial instrument
of the Funds the following information: Ticker
symbol (if applicable), name of security or financial
instrument, number of shares or dollar value of
financial instruments held in the portfolio, and
percentage weighting of the security or financial
instrument in the portfolio.
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16:05 Feb 03, 2011
Jkt 223001
transparency cannot be assured. The
Commission notes that the Exchange
will obtain a representation from the
issuer of the Shares that the NAV and
the Disclosed Portfolio will be made
available to all market participants at
the same time.13 In addition, the
Exchange will halt trading in the Shares
under the specific circumstances set
forth in NYSE Arca Equities Rule
8.600(d)(2)(D), and may halt trading in
the Shares to the extent to which trading
is not occurring in the securities and/or
the financial instruments comprising
the Disclosed Portfolio of the Funds, or
whether other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present.14 In addition, NYSE
Arca Equities Rule 8.600(d)(2)(B)(ii)
requires that the Reporting Authority
that provides the Disclosed Portfolio
implement and maintain, or be subject
to, procedures designed to prevent the
use and dissemination of material nonpublic information regarding the actual
components of the portfolio. Further,
the Commission notes that neither the
Advisor nor the Sub-Advisor is
affiliated with a broker-dealer.15 In the
13 See NYSE Arca Equities Rule 8.600(d)(1)(B)
(also requiring that the Exchange obtain a
representation from the issuer that NAV per Share
for each Fund will be calculated daily).
14 See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii).
With respect to trading halts, the Exchange may
consider other relevant factors in exercising its
discretion to halt or suspend trading in the Shares
of the Funds. Trading in Shares of the Funds will
be halted if the circuit breaker parameters in NYSE
Arca Equities Rule 7.12 have been reached. Trading
also may be halted because of market conditions or
for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable.
15 See Commentary .06 to NYSE Arca Equities
Rule 8.600. With respect to the Funds, the Exchange
represents that the Advisor and Sub-Advisor, and
their related personnel, are subject to Investment
Advisers Act Rule 204A–1. This Rule specifically
requires the adoption of a code of ethics by an
investment advisor to include, at a minimum: (i)
Standards of business conduct that reflect the
firm’s/personnel fiduciary obligations; (ii)
provisions requiring supervised persons to comply
with applicable federal securities laws; (iii)
provisions that require all access persons to report,
and the firm to review, their personal securities
transactions and holdings periodically as
specifically set forth in Rule 204A–1; (iv) provisions
requiring supervised persons to report any
violations of the code of ethics promptly to the
chief compliance officer (‘‘CCO’’) or, provided the
CCO also receives reports of all violations, to other
persons designated in the code of ethics; and (v)
provisions requiring the investment advisor to
provide each of the supervised persons with a copy
of the code of ethics with an acknowledgement by
said supervised persons. In addition, Rule 206(4)–
7 under the Advisers Act makes it unlawful for an
investment advisor to provide investment advice to
clients unless such investment advisor has (i)
adopted and implemented written policies and
procedures reasonably designed to prevent
violation, by the investment advisor and its
supervised persons, of the Advisers Act and the
Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review
PO 00000
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Fmt 4703
Sfmt 4703
6505
event (a) the Advisor or the Sub-Advisor
becomes newly affiliated with a brokerdealer, or (b) any new advisor or subadvisor becomes affiliated with a
broker-dealer, they will be required to
implement a fire wall with respect to
such broker-dealer regarding access to
information concerning the composition
and/or changes to a portfolio, and will
be subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding such portfolio.
The Exchange represents that the
Shares are deemed to be equity
securities, thus rendering trading in the
Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. In support of this
proposal, the Exchange has made
representations, including:
(1) The Shares will conform to the
initial and continued listing criteria
under NYSE Arca Equities Rule 8.600.
(2) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.
(3) The Exchange’s surveillance
procedures are adequate to properly
monitor Exchange trading of the Shares
in all trading sessions and to deter and
detect violations of Exchange rules and
applicable federal securities laws.
(4) Prior to the commencement of
trading, the Exchange will inform its
ETP Holders in an Information Bulletin
of the special characteristics and risks
associated with trading the Shares.
Specifically, the Information Bulletin
will discuss the following: (a) The
procedures for purchases and
redemptions of Shares in Creation Unit
aggregations (and that Shares are not
individual redeemable); (b) NYSE Arca
Equities Rule 9.2(a), which imposes a
duty of due diligence on its ETP Holders
to learn the essential facts relating to
every customer prior to trading the
Shares; (c) the risks involved in trading
the Shares during the Opening and Late
Trading Sessions when an updated
Portfolio Indicative Value will not be
calculated or publicly disseminated; (d)
how information regarding the Portfolio
Indicative Value is disseminated; (e) the
requirement that ETP Holders deliver a
prospectus to investors purchasing
newly issued Shares prior to or
concurrently with the confirmation of a
transaction; and (f) trading information.
(5) A minimum of 100,000 Shares for
each Fund will be outstanding at the
regarding the adequacy of the policies and
procedures established pursuant to subparagraph (i)
above and the effectiveness of their
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
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Federal Register / Vol. 76, No. 24 / Friday, February 4, 2011 / Notices
commencement of trading on the
Exchange.
(6) For initial and/or continued
listing, the Funds will be in compliance
with Rule 10A–3 under the Act.16
This approval order is based on the
Exchange’s representations.
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act 17 and the rules and
regulations thereunder applicable to a
national securities exchange.
The Commission subsequently extended
the time period in which to either
approve the proposed rule change, or to
institute proceedings to determine
whether to disapprove the proposed
rule change, to February 1, 2011.4 The
Commission received one comment
letter on the proposal.5 This order
institutes proceedings under Section
19(b)(2)(B) of the Act to determine
whether to disapprove the proposed
rule change.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,18 that the
proposed rule change (SR–NYSEArca–
2010–118), be, and it hereby is,
approved.
II. Description of the Proposal
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–2457 Filed 2–3–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63804; File No. SR–
NASDAQ–2010–134]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Instituting Proceedings To Determine
Whether To Disapprove Proposed Rule
Change To Adopt Additional Criteria
for Listing Commodity Stockpiling
Companies That Have Indicated Their
Business Plan Is To Buy and Hold
Commodities
January 31, 2011.
srobinson on DSKHWCL6B1PROD with NOTICES
I. Introduction
On October 15, 2010, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
adopt additional criteria for listing
companies that have indicated that their
business plan is to buy and hold
commodities. The proposed rule change
was published for comment in the
Federal Register on November 3, 2010.3
16 17
CFR 240.10A–3.
U.S.C. 78f(b)(5).
18 15 U.S.C. 78s(b)(2).
19 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 63207
(October 28, 2010), 75 FR 67788.
17 15
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The Exchange proposes to adopt
additional listing standards for
companies that have indicated that their
business plan is to purchase and
stockpile raw materials or other
commodities (‘‘commodity stockpiling
companies’’). Under the proposal, such
companies are required to meet all other
applicable Nasdaq initial listing
requirements, as well as the following
additional listing standards. First,
within 18 months of the effectiveness of
its initial public offering registration
statement, or such shorter period as the
company specifies in the registration
statement, the company would be
required to invest at least 85% of the net
proceeds of the initial public offering in
the raw material or commodity
identified in the registration statement,
or return the unused amount pro rata to
its shareholders.6
Second, the company would be
required to publish, or facilitate access
to, at no cost and in an easily accessible
manner, regular pricing information
regarding the raw material or other
commodity from a reliable, independent
source, at least as frequently as current
industry practice but no less than twice
per week.7
Third, the company would be
required to publish its net market value
on a daily basis, or where pricing
information for the raw material or other
commodity is not available on a daily
basis, no less frequently than twice per
week.8 If the spot price of the raw
material or commodity fluctuates by
more than 5%, the company shall
4 See Securities Exchange Act Release No. 63508
(December 9, 2010), 75 FR 78300 (December 15,
2010).
5 See Letter from Edward H. Smith, Jr. to Florence
E. Harmon, Deputy Secretary, Commission, dated
January 18, 2011.
6 See proposed Nasdaq IM–5101–3(a).
7 See proposed Nasdaq IM–5101–3(b).
8 See proposed Nasdaq IM–5101–3(d). Net market
value would be determined by multiplying the
volume of the raw material or commodity held in
inventory by the last spot price published or
otherwise relied upon by the company, plus cash
and other assets, less any liabilities.
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Sfmt 4703
publish the net market value within one
business day of the fluctuation.
Fourth, the company would be
required to publish the quantity of the
raw material or other commodity held
in inventory, the average price paid, and
the company’s net market value within
two business days of any change in
inventory held.9 Where the company
contracts to purchase or sell a material
quantity of the raw material or
commodity, such information would be
required to be disclosed in a Form 8–K
filing within four business days.
Fifth, the company would be required
to employ the services of one or more
independent third party storage
facilities to safeguard the physical
holdings of the raw material or
commodity.10 Finally, the company
would be required to create a committee
comprised solely of independent
directors who shall consider, at least
quarterly, whether the company’s
purchasing activities have had a
measurable impact on the market price
of the raw material or other commodity
and shall report such determinations
and make subsequent recommendations
to the company’s board of directors.11
Nasdaq also is proposing to adopt
additional audit committee
requirements applicable to commodity
stockpiling companies. In addition to
the existing audit committee
requirements in Nasdaq rules, audit
committees for commodity stockpiling
companies would be required to
establish procedures for the
identification and management of
potential conflicts of interest, and
would be required to review and
approve any transactions where such
potential conflicts have been
identified.12
9 See
proposed Nasdaq IM–5101–3(c).
proposed Nasdaq IM–5101–3(e). Under the
proposed rule language, the facility ‘‘should provide
services consistent with those provided by
custodians and these must include: Storage and
safeguarding; insurance; transfer of the raw material
or other commodity in and out of the facility; visual
inspections, spot checks and assays; confirmation of
deliveries to supplier packing lists; and reporting of
transfers and of inventory to the [commodity
stockpiling company] and its auditors.’’ The
company must oversee the third party storage
facility with its committee of independent directors.
11 See proposed Nasdaq IM–5101–3(f). The
independent directors may rely upon and shall
have the authority to engage and pay an industry
expert in conducting this review. If the company’s
board of directors disagrees with or does not accept
the recommendations of the committee, the
company will be required to file a Form 8–K with
the Commission outlining the relevant events,
committee’s determinations and recommendations,
and rationale for the board of directors’
determination.
12 See proposed Nasdaq Rule 5605(c)(3) and IM–
5605. Under the proposal, the procedures should
include any material amendment to the
10 See
E:\FR\FM\04FEN1.SGM
04FEN1
]]>Agencies
[Federal Register Volume 76, Number 24 (Friday, February 4, 2011)]
[Notices]
[Pages 6503-6506]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-2457]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63802; File No. SR-NYSEArca-2010-118]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change Relating to the Listing and Trading of
the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic
Allocation Growth Income ETF
January 31, 2011.
I. Introduction
On December 15, 2010, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to list and trade the following Managed Fund
Shares under NYSE Arca Equities Rule 8.600: SiM Dynamic Allocation
Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF.
The proposed rule change was published for comment in the Federal
Register on December 28, 2010.\3\ The Commission received no comments
on the proposal. This order grants approval of the proposed rule
change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 63587 (December 21,
2010), 75 FR 81697 (``Notice'').
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II. Description of the Proposal
The Exchange proposes to list and trade the shares (``Shares'') of
the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic
Allocation Growth Income ETF (each a ``Fund'' and, collectively,
``Funds'') under NYSE Arca Equities Rule 8.600. The Shares will be
offered by AdvisorShares Trust (``Trust''), a statutory trust organized
under the laws of the State of Delaware and registered with the
Commission as an open-end management investment company.\4\ The
investment advisor to the Funds is AdvisorShares Investments, LLC
(``Advisor''), and Strategic Income Management, LLC (``Sub-Advisor'' or
``SiM'') serves as investment sub-advisor to the Funds. Foreside Fund
Services, LLC is the principal underwriter and distributor of the
Funds' Shares. The Bank of New York Mellon Corporation
(``Administrator'') serves as the administrator, custodian, transfer
agent, and fund accounting agent for the Funds. Each Fund is an
actively managed exchange-traded fund (``ETF'') and thus does not seek
to replicate the performance of a specified index, but uses an active
investment strategy to meet its investment objective. Accordingly, the
Sub-Advisor manages each Fund's portfolio in accordance with each
Fund's investment objective.
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\4\ The Trust is registered under the Investment Company Act of
1940 (``1940 Act''). On October 14, 2010, the Trust filed with the
Commission Post-Effective Amendment No. 13 to Form N-1A under the
Securities Act of 1933 (15 U.S.C. 77a) and under the 1940 Act
relating to the Funds (File Nos. 333-157876 and 811-22110)
(``Registration Statement'').
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SiM Dynamic Allocation Diversified Income ETF
This Fund's objective is to provide total return, consisting
primarily of reinvestment and growth of income with some long-term
capital appreciation. The Fund is considered a ``fund-of-funds'' that
will seek to achieve its investment objective by primarily investing in
other ETFs that offer diversified exposure to various investment types
(equities, bonds, etc.), global regions, countries, styles (market
capitalization, value, growth, etc.) or sectors, and exchange-traded
products (``ETPs,'' and, together with ETFs, ``Underlying ETPs'')
including, but not limited to, exchange-traded notes (``ETNs''),
exchange-traded currency trusts, and closed-end funds.\5\
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\5\ Underlying ETPs, which will be listed on a national
securities exchange, include: Investment Company Units (as described
in NYSE Arca Equities Rule 5.2(j)(3)); Index-Linked Securities (as
described in NYSE Arca Equities Rule 5.2(j)(6)); Portfolio
Depositary Receipts (as described in NYSE Arca Equities Rule 8.100);
Trust Issued Receipts (as described in NYSE Arca Equities Rule
8.200); Commodity-Based Trust Shares (as described in NYSE Arca
Equities Rule 8.201); Currency Trust Shares (as described in NYSE
Arca Equities Rule 8.202); Commodity Index Trust Shares (as
described in NYSE Arca Equities Rule 8.203); Trust Units (as
described in NYSE Arca Equities Rule 8.500); Managed Fund Shares (as
described in NYSE Arca Equities Rule 8.600); and closed-end funds.
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[[Page 6504]]
The Fund will seek to offer the potential for total return from a
high level of income and a low level of capital growth, with exposure
to a low level of principal risk. The Fund, through its investments in
the Underlying ETPs, generally will invest at least 60% of its net
assets in domestic and international fixed-income funds. The Fund will
allocate its assets among Underlying ETPs in accordance with the Sub-
Advisor's outlook for the economy, the financial markets, and the
relative market valuations of the Underlying ETPs. The Fund will sell
interests or reduce investment exposure among market segments or
Underlying ETPs, if appropriate, when the Sub-Advisor's fundamental and
quantitative factors indicate a low relative strength of such market
segments and that such market segments are likely to underperform the
market as a whole.
Under normal market conditions, the Fund's portfolio will
generally:
Invest up to 85% of its assets in Underlying ETPs that
hold fixed-income securities as well as cash equivalents;
Not invest more than 40% of its net assets in Underlying
ETPs that primarily hold equity securities; and
Invest up to 20% of its assets in any single Underlying
ETP.
The Fund's portfolio may temporarily exceed these percentage ranges
for short periods without notice, and the Sub-Advisor, due to certain
market conditions, may alter the percentage ranges when it deems
appropriate.
SiM Dynamic Allocation Growth Income ETF
This Fund's objective is to provide total return, consisting
primarily of long-term capital appreciation with some reinvestment and
growth of income. The Fund is considered a ``fund-of-funds'' that will
seek to achieve its investment objective by primarily investing in
Underlying ETPs that offer diversified exposure to various investment
types (equities, bonds, etc.), global regions, countries, styles
(market capitalization, value, growth, etc.) or sectors, and ETPs
including, but not limited to, ETNs, exchange-traded currency trusts,
and closed-end funds.
In general, the Fund will seek to offer investors the potential for
total return from a low to medium level of income and a medium to high
level of capital growth, while exposing them to a medium to high level
of principal risk. The Fund, through its investments in the Underlying
ETPs, generally will invest at least 60% of its net assets in domestic
and international equity funds. The Fund will allocate its assets among
Underlying ETPs in accordance with the Sub-Advisor's outlook for the
economy, the financial markets, and the relative market valuations of
the Underlying ETPs. The Fund will sell interests or reduce investment
exposure among market segments or Underlying ETPs when the Sub-
Advisor's fundamental and quantitative factors indicate a low relative
strength of such market segments and that such market segments are
likely to underperform the market as a whole.
The Fund's portfolio will generally:
Invest up to 85% of its assets in Underlying ETPs that
hold equity securities as well as cash equivalents;
Not invest more than 40% of its net assets in Underlying
ETPs that primarily hold fixed-income securities; and
Invest up to 20% of its assets in any single Underlying
ETP.
The Fund's portfolio may temporarily exceed these percentage ranges
for short periods without notice, and the Sub-Advisor, due to certain
market conditions, may alter the percentage ranges when it deems
appropriate.
Other Investments
The Funds and the Underlying ETPs may invest in equity securities
representing ownership interests in a company or partnership and that
consist of common stocks, preferred stocks, warrants to acquire common
stock, securities convertible into common stock, and investments in
master limited partnerships.\6\ The Funds may enter into repurchase
agreements, which may be deemed to be loans, with financial
institutions, and reverse repurchase agreements as part of the Funds'
investment strategy. The Funds may also invest in U.S. government
securities, U.S. Treasury zero-coupon bonds, and shares of real estate
investment trusts, which are pooled investment vehicles that primarily
invest in real estate or real estate-related loans. To respond to
adverse market, economic, political, or other conditions, the Funds may
invest 100% of their total assets, without limitation, in high-quality
short-term debt securities and money market instruments.
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\6\ The Funds will hold only equity securities traded in the
United States on registered exchanges.
---------------------------------------------------------------------------
Additional details regarding the Trust, Shares, and the Funds,
including, among other things, investment strategies, risks, creations
and redemptions of Shares, fees, portfolio holdings disclosure
policies, distributions, taxes, the calculation of the net asset value
(``NAV''), dissemination and availability of key information about the
Funds, trading halts, trading rules, surveillance, and the Information
Bulletin can be found in the Notice and the Registration Statement, as
applicable.\7\
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\7\ See supra notes 3 and 4.
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III. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\8\ In particular, the Commission finds that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act,\9\ which requires, among other things, that the Exchange's rules
be designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in
facilitating transactions in securities, to remove impediments to, and
perfect the mechanism of, a free and open market and a national market
system, and, in general, to protect investors and the public interest.
The Commission notes that it has approved the listing and trading of
other similar Managed Fund Shares.\10\
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\8\ In approving this proposed rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\9\ 15 U.S.C. 78f(b)(5).
\10\ See, e.g., Securities Exchange Act Release No. 63076
(October 12, 2010), 75 FR 63874 (October 18, 2010) (SR-NYSEArca-
2010-79) (approving the listing and trading of the Cambria Global
Tactical ETF, which is a ``fund-of-funds'' that seeks to invest
primarily in other exchange-traded funds listed and traded in the
United States and certain other exchange-traded products including,
but not limited to, exchange-traded notes, exchange-traded currency
trusts, and closed-end funds).
---------------------------------------------------------------------------
The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\11\ which sets forth Congress' finding that it is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for and transactions in securities. Quotation and
[[Page 6505]]
last-sale information for the Shares will be available via the
Consolidated Tape Association high-speed line. In addition, the
Portfolio Indicative Value will be disseminated at least every 15
seconds during the Core Trading Session by one or more major market
data vendors. On each business day before commencement of trading in
Shares in the Core Trading Session on the Exchange, the Funds will
disclose on their website the Disclosed Portfolio, as defined in NYSE
Arca Equities Rule 8.600(c)(2), that will form the basis for the Funds'
calculation of NAV at the end of the business day.\12\ The NAV per
Share for the Funds will be calculated by the Administrator and
determined as of the close of the regular trading session on NYSE Arca
(ordinarily 4:00 p.m., Eastern Time) on each day that the Exchange is
open. Information regarding market price and trading volume of the
Underlying ETPs will be continually available on a real-time basis
throughout the day from major market data vendors, and last-sale and
closing price information for Underlying ETPs will be available on the
website of the national securities exchange on which such securities
are listed or through major market data vendors. Information regarding
market price and trading volume of the Shares will be continually
available on a real time basis through the day on brokers' computer
screens and other electronic services, and the previous day's closing
price and trading volume information will be published daily in the
financial section of newspapers. The Funds' Web site will also include
a form of the Prospectus for the Funds, information relating to NAV,
and other quantitative and trading information. Further, a basket
composition file, which includes the security names and share
quantities required to be delivered in exchange for Fund Shares,
together with estimates and actual cash components, will be publicly
disseminated daily prior to the opening of the New York Stock Exchange
via the National Securities Clearing Corporation.
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\11\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\12\ On a daily basis, the Advisor will disclose for each
portfolio security or other financial instrument of the Funds the
following information: Ticker symbol (if applicable), name of
security or financial instrument, number of shares or dollar value
of financial instruments held in the portfolio, and percentage
weighting of the security or financial instrument in the portfolio.
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The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Commission notes that the Exchange will obtain a
representation from the issuer of the Shares that the NAV and the
Disclosed Portfolio will be made available to all market participants
at the same time.\13\ In addition, the Exchange will halt trading in
the Shares under the specific circumstances set forth in NYSE Arca
Equities Rule 8.600(d)(2)(D), and may halt trading in the Shares to the
extent to which trading is not occurring in the securities and/or the
financial instruments comprising the Disclosed Portfolio of the Funds,
or whether other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present.\14\ In addition,
NYSE Arca Equities Rule 8.600(d)(2)(B)(ii) requires that the Reporting
Authority that provides the Disclosed Portfolio implement and maintain,
or be subject to, procedures designed to prevent the use and
dissemination of material non-public information regarding the actual
components of the portfolio. Further, the Commission notes that neither
the Advisor nor the Sub-Advisor is affiliated with a broker-dealer.\15\
In the event (a) the Advisor or the Sub-Advisor becomes newly
affiliated with a broker-dealer, or (b) any new advisor or sub-advisor
becomes affiliated with a broker-dealer, they will be required to
implement a fire wall with respect to such broker-dealer regarding
access to information concerning the composition and/or changes to a
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material non-public information regarding such
portfolio.
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\13\ See NYSE Arca Equities Rule 8.600(d)(1)(B) (also requiring
that the Exchange obtain a representation from the issuer that NAV
per Share for each Fund will be calculated daily).
\14\ See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii). With
respect to trading halts, the Exchange may consider other relevant
factors in exercising its discretion to halt or suspend trading in
the Shares of the Funds. Trading in Shares of the Funds will be
halted if the circuit breaker parameters in NYSE Arca Equities Rule
7.12 have been reached. Trading also may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable.
\15\ See Commentary .06 to NYSE Arca Equities Rule 8.600. With
respect to the Funds, the Exchange represents that the Advisor and
Sub-Advisor, and their related personnel, are subject to Investment
Advisers Act Rule 204A-1. This Rule specifically requires the
adoption of a code of ethics by an investment advisor to include, at
a minimum: (i) Standards of business conduct that reflect the
firm's/personnel fiduciary obligations; (ii) provisions requiring
supervised persons to comply with applicable federal securities
laws; (iii) provisions that require all access persons to report,
and the firm to review, their personal securities transactions and
holdings periodically as specifically set forth in Rule 204A-1; (iv)
provisions requiring supervised persons to report any violations of
the code of ethics promptly to the chief compliance officer
(``CCO'') or, provided the CCO also receives reports of all
violations, to other persons designated in the code of ethics; and
(v) provisions requiring the investment advisor to provide each of
the supervised persons with a copy of the code of ethics with an
acknowledgement by said supervised persons. In addition, Rule
206(4)-7 under the Advisers Act makes it unlawful for an investment
advisor to provide investment advice to clients unless such
investment advisor has (i) adopted and implemented written policies
and procedures reasonably designed to prevent violation, by the
investment advisor and its supervised persons, of the Advisers Act
and the Commission rules adopted thereunder; (ii) implemented, at a
minimum, an annual review regarding the adequacy of the policies and
procedures established pursuant to subparagraph (i) above and the
effectiveness of their implementation; and (iii) designated an
individual (who is a supervised person) responsible for
administering the policies and procedures adopted under subparagraph
(i) above.
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The Exchange represents that the Shares are deemed to be equity
securities, thus rendering trading in the Shares subject to the
Exchange's existing rules governing the trading of equity securities.
In support of this proposal, the Exchange has made representations,
including:
(1) The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600.
(2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(3) The Exchange's surveillance procedures are adequate to properly
monitor Exchange trading of the Shares in all trading sessions and to
deter and detect violations of Exchange rules and applicable federal
securities laws.
(4) Prior to the commencement of trading, the Exchange will inform
its ETP Holders in an Information Bulletin of the special
characteristics and risks associated with trading the Shares.
Specifically, the Information Bulletin will discuss the following: (a)
The procedures for purchases and redemptions of Shares in Creation Unit
aggregations (and that Shares are not individual redeemable); (b) NYSE
Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its
ETP Holders to learn the essential facts relating to every customer
prior to trading the Shares; (c) the risks involved in trading the
Shares during the Opening and Late Trading Sessions when an updated
Portfolio Indicative Value will not be calculated or publicly
disseminated; (d) how information regarding the Portfolio Indicative
Value is disseminated; (e) the requirement that ETP Holders deliver a
prospectus to investors purchasing newly issued Shares prior to or
concurrently with the confirmation of a transaction; and (f) trading
information.
(5) A minimum of 100,000 Shares for each Fund will be outstanding
at the
[[Page 6506]]
commencement of trading on the Exchange.
(6) For initial and/or continued listing, the Funds will be in
compliance with Rule 10A-3 under the Act.\16\
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\16\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
This approval order is based on the Exchange's representations.
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act \17\ and the
rules and regulations thereunder applicable to a national securities
exchange.
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\17\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\18\ that the proposed rule change (SR-NYSEArca-2010-118), be, and
it hereby is, approved.
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\18\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-2457 Filed 2-3-11; 8:45 am]
BILLING CODE 8011-01-P
