Pacific Life Insurance Company, et al.; Notice of Application, 9708-9713 [2012-3740]
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9708
Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Notices
foreign banks and foreign insurance
companies that are exempted from the
definition of ‘‘investment company’’ by
virtue of rules 3a–1 (17 CFR 270.3a–1),
3a–5 (17 CFR 270.3a–5), and 3a–6 (17
CFR 270.3a–6) under the Investment
Company Act of 1940 (15 U.S.C. 80a–1
et seq.) to file Form F–N (17 CFR
239.43) to appoint an agent for service
of process when making a public
offering of securities in the United
States. During calendar year 2010,
approximately 13 entities were required
by rule 489 to make 15 Form F–N
submissions. The Commission has
previously estimated that the total
annual burden associated with
information collection and Form F–N
preparation and submission is one hour
per filing. Based on the Commission’s
experience with disclosure documents
generally, the Commission continues to
believe that this estimate is appropriate.
The estimated annual burden of
complying with the rule’s filing
requirement is approximately 15 hours,
as some of the entities submitted
multiple filings.
The estimates of average burden hours
are made solely for the purposes of the
Paperwork Reduction Act of 1995 and
are not derived from a comprehensive or
even representative survey or study of
the cost of Commission rules and forms.
The collection of information under
Form F–N is mandatory. The
information provided by the Form is not
kept confidential. 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.
The public may view the background
documentation for this information
collection at the following Web site,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to:
Shagufta_Ahmed@omb.eop.gov; and (ii)
Thomas Bayer, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 6432 General Green Way,
Alexandria, VA 22312 or send an email
to: PRA_Mailbox@sec.gov. Comments
must be submitted to OMB within 30
days of this notice.
Dated: February 14, 2012.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–3768 Filed 2–16–12; 8:45 am]
BILLING CODE 8011–01–P
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SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of Investor
Education and Advocacy,
Washington, DC 20549–0213.
Extension: Rule 6c–7, SEC File No. 270–269,
OMB Control No. 3235–0276.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission (the
‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Rule 6c–7 (17 CFR 270.6c–7) under
the Investment Company Act of 1940
(15 U.S.C. 80a–1 et seq.) (‘‘1940 Act’’)
provides exemption from certain
provisions of Sections 22(e) and 27 of
the 1940 Act for registered separate
accounts offering variable annuity
contracts to certain employees of Texas
institutions of higher education
participating in the Texas Optional
Retirement Program. There are
approximately 50 registrants governed
by rule 6c–7. The burden of compliance
with rule 6c–7, in connection with the
registrants obtaining from a purchaser,
prior to or at the time of purchase, a
signed document acknowledging the
restrictions on redeemability imposed
by Texas law, is estimated to be
approximately 3 minutes of professional
time per response for each of
approximately 2,400 purchasers
annually (at an estimated $67 per
hour),1 for a total annual burden of 120
hours (at a total annual cost of $8,040).
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act, and is not
derived from a comprehensive or even
a representative survey or study of the
costs of Commission rules or forms. The
Commission does not include in the
estimate of average burden hours the
time preparing registration statements
and sales literature disclosure regarding
the restrictions on redeemability
imposed by Texas law. The estimate of
burden hours for completing the
relevant registration statements are
1 $67/hour figure for a Compliance Clerk is from
SIFMA’s Office Salaries in the Securities Industry
2010, modified by Commission staff to account for
an 1,800-hour work year and multiplied by 2.93 to
account for bonuses, firm size, employee benefits
and overhead.
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reported on the separate PRA
submissions for those statements. (See
the separate PRA submissions for Form
N–3 (17 CFR 274.11b) and Form N–4 (17
CFR 274.11c.)
The Commission requests written
comments on: (a) Whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility; (b) the accuracy of the
agency’s estimate of the burden of the
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Please direct your written comments
to Thomas Bayer, Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Remi
Pavlik-Simon, 6432 General Green Way,
Alexandria, VA 22312; or send an email
to: PRA_Mailbox@sec.gov.
February 14, 2012.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–3767 Filed 2–16–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
29944; File No. 812–13962]
Pacific Life Insurance Company, et al.;
Notice of Application
February 13, 2012.
Securities and Exchange
Commission (the ‘‘Commission’’).
ACTION: Notice of application for an
order under section 12(d)(1)(J) of the
Investment Company Act of 1940, as
amended (the ‘‘Act’’), for an exemption
from sections 12(d)(1)(A) and (B) of the
Act, under sections 6(c) and 17(b) of the
Act for an exemption from section 17(a)
of the Act, and under section 6(c) of the
Act for an exemption from rule 12d1–
2(a) under the Act.
AGENCY:
Summary of the Application:
Applicants request an order that would
(a) permit certain series of registered
open-end management investment
companies to acquire shares of other
registered open-end management
investment companies and unit
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investment trusts (‘‘UITs’’) that are
within or outside the same ‘‘group of
investment companies,’’ as defined in
section 12(d)(1)(G)(ii) of the Act, as the
acquiring company and (b) permit
certain series of registered open-end
management investment companies
relying on rule 12d1–2 under the Act to
invest in certain financial instruments.
Applicants: Pacific Life Insurance
Company (‘‘Pacific Life’’), Pacific Life &
Annuity Company (‘‘PL&A,’’ and
collectively with Pacific Life and any
insurance company controlling,
controlled by, or under common control
with Pacific Life or PL&A, the
‘‘Insurance Companies’’); Pacific Life
Fund Advisors LLC (the ‘‘Manager’’);
Pacific Select Fund (the ‘‘Fund’’); and
Pacific Select Distributors, Inc. (the
‘‘Distributor’’).
Filing Dates: The application was
filed on September 20, 2011, and
amended on December 16, 2011 and
February 10, 2012.
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 March 9, 2012, 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: The Commission: Secretary,
U.S. Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090;
Applicants: c/o Robin S. Yonis, Esq.,
Pacific Life Fund Advisors LLC, 700
Newport Center Drive, Newport Beach,
California 92660.
FOR FURTHER INFORMATION CONTACT:
Mark N. Zaruba, Attorney Advisor, at
(202) 551–6878, or Mary Kay Frech,
Branch Chief, at (202) 551–6814 (Office
of Investment Company Regulation,
Division of Investment Management).
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.
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Applicants’ Representations
1. The Fund is a Massachusetts
business trust, registered under the Act
as an open-end management investment
company, and is comprised of multiple
series (the ‘‘Series’’), each of which has
its own investment objective, policies
and restrictions.1 Shares of the Series
are not offered directly to the public.
Shares of the Series are offered through
separate accounts that are registered as
UITs under the Act (‘‘Registered
Separate Accounts’’) or that are exempt
from registration under the Act
(‘‘Unregistered Separate Accounts,’’ and
together with the Registered Separate
Accounts, ‘‘Separate Accounts’’) of the
Insurance Companies and serve as the
underlying funding vehicles for the
variable life insurance contracts and
variable annuity contracts (the
‘‘Contracts’’) issued by the Insurance
Companies. Shares of the Series may
also be offered to qualified pension and
retirement plans, certain of the general
accounts of the Insurance Companies, or
to other Series.
2. The Manager is a Delaware limited
liability company registered as an
investment adviser under the
Investment Advisers Act of 1940, as
amended (the ‘‘Advisers Act’’), and
serves as investment adviser to the
Series. The Manager is a wholly-owned
subsidiary of Pacific Life and PL&A.
PL&A is a wholly-owned subsidiary of
Pacific Life and Pacific Life is a whollyowned subsidiary of Pacific Mutual
Holding Company.
3. The Distributor is a California
corporation and serves as the Fund’s
principal underwriter and distributor.
The Distributor is registered as a brokerdealer with the Commission and the
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’). The
Distributor is a wholly-owned
subsidiary of Pacific Life. The
Distributor also serves as the distributor
for the Contracts.
4. Applicants request relief to permit:
(a) Certain Series (each, a ‘‘Fund of
Funds,’’ and collectively, the ‘‘Funds of
Funds’’) to acquire shares of registered
open-end management investment
1 Applicants request that the order extend to any
future Series of the Fund, and any other existing or
future registered open-end management investment
company and series thereof that are part of the same
‘‘group of investment companies,’’ as defined in
section 12(d)(1)(G)(ii) of the Act, as the Fund and
are, or may in the future be, advised by the Manager
or any other investment adviser controlling,
controlled by, or under common control with the
Manager (any such entity is included in the term,
‘‘Series’’). All entities that currently intend to rely
on the requested order are named as applicants.
Any other entity that relies on the order in the
future will comply with the terms and conditions
of the application.
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companies and UITs that are not part of
the same ‘‘group of investment
companies,’’ as defined in section
12(d)(1)(G)(ii) of the Act, as the Funds
of Funds (the ‘‘Unaffiliated Investment
Companies’’ and ‘‘Unaffiliated Trusts,’’
respectively, and together, the
‘‘Unaffiliated Funds’’); 2 (b) the
Unaffiliated Investment Companies,
their principal underwriters and any
broker or dealer registered under the
Securities Exchange Act of 1934, as
amended (the ‘‘Exchange Act’’, and any
such broker or dealer, a ‘‘Broker’’), to
sell shares of the Unaffiliated
Investment Companies to the Funds of
Funds in excess of the limitations in
section 12(d)(1)(B) of the Act; (c) the
Funds of Funds to acquire shares of
certain other Series in the same ‘‘group
of investment companies,’’ as defined in
section 12(d)(1)(G)(ii) of the Act, as the
Fund of Funds (the ‘‘Affiliated Funds,’’
and together with the Unaffiliated
Funds, the ‘‘Underlying Funds’’); 3 and
(d) the Affiliated Funds, their principal
underwriters and any Broker to sell
shares of the Affiliated Funds to the
Fund of Funds in excess of the
limitations in section 12(d)(1)(B) of the
Act. Applicants also request an order
under sections 6(c) and 17(b) of the Act
exempting the transactions described in
(a) through (d) above from section 17(a)
of the Act to the extent necessary to
permit an Underlying Fund that is an
affiliated person of a Fund of Funds to
sell its shares to, and redeem its shares
from, the Fund of Funds.
5. Applicants also request an
exemption to the extent necessary to
permit a Fund of Funds that invests in
Underlying Funds in reliance on section
12(d)(1)(G) of the Act (a ‘‘Section
12(d)(1)(G) Fund of Funds’’), and that is
eligible to invest in securities (as
defined in section 2(a)(36) of the Act) in
reliance on rule 12d1–2 under the Act,
to also invest, to the extent consistent
2 Certain of the Unaffiliated Funds may have
obtained exemptions from the Commission
necessary to permit their shares to be listed and
traded on a national securities exchange at
negotiated prices (‘‘ETFs’’).
3 Certain of the Underlying Funds currently
pursue, or may in the future pursue, their
investment objectives through a master-feeder
arrangement in reliance on section 12(d)(1)(E) of the
Act. In accordance with condition 12, a Fund of
Funds may not invest in an Underlying Fund that
operates as a feeder fund unless the feeder fund is
part of the same ‘‘group of investment companies,’’
as defined in section 12(d)(1)(G)(ii) of the Act, as
its corresponding master fund or the Fund of
Funds. If a Fund of Funds invests in an Affiliated
Fund that operates as a feeder fund and the
corresponding master fund is not within the same
‘‘group of investment companies,’’ as defined in
section 12(d)(1)(G)(ii) of the Act, as the Fund of
Funds and Affiliated Fund, the master fund would
be an Unaffiliated Fund for purposes of the
application and its conditions.
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with its investment objectives, policies,
strategies and limitations, in financial
instruments that may not be securities
within the meaning of section 2(a)(36) of
the Act (‘‘Other Investments’’).
Applicants’ Legal Analysis
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A. Investments in Underlying Funds—
Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act
prohibits a registered investment
company (an ‘‘acquiring company’’)
from acquiring shares of another
investment company (an ‘‘acquired
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 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) of the
Act 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 the Underlying
Funds in excess of the limits set forth
in section 12(d)(1)(A) of the Act and to
permit the Underlying Funds, their
principal underwriters and any Broker
to sell shares of the Underlying Funds
to the Funds of Funds in excess of the
limits set forth in section 12(d)(1)(B) of
the Act.
3. Applicants state that the proposed
arrangement will not give rise to the
policy concerns underlying sections
12(d)(1)(A) and (B) of the Act, which
include concerns about undue influence
by a Fund of Funds or its affiliated
persons over the Underlying Funds,
excessive layering of fees, and overly
complex fund structures. Accordingly,
applicants believe that the requested
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exemption is consistent with the public
interest and the protection of investors.
4. Applicants state that the proposed
arrangement will not result in undue
influence by a Fund of Funds or its
affiliated persons over the Underlying
Funds. The concern about undue
influence does not arise in connection
with a Fund of Funds’ investment in the
Affiliated Funds, since the Affiliated
Funds are part of the same ‘‘group of
investment companies,’’ as defined in
section 12(d)(1)(G)(ii) of the Act, as the
Funds of Funds. To limit the control
that a Fund of Funds or its affiliated
persons may have over an Unaffiliated
Fund, applicants state that condition 1
prohibits: (a) The Manager and any
person controlling, controlled by or
under common control with the
Manager, 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, the ‘‘Group’’) and (b) any
other investment adviser within the
meaning of section 2(a)(20)(B) of the Act
to a Fund of Funds (each, a
‘‘Subadviser’’), any person controlling,
controlled by or under common control
with a Subadviser, 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 or sponsored by a Subadviser or
any person controlling, controlled by or
under common control with the
Subadviser (collectively, the
‘‘Subadviser 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
condition 2 precludes a Fund of Funds,
the Manager, any Subadviser, promoter
or principal underwriter of a Fund of
Funds, and any person controlling,
controlled by or under common control
with any of those entities (each, a ‘‘Fund
of Funds Affiliate’’) from taking
advantage of an Unaffiliated Fund, with
respect to transactions between the
Fund of Funds or a Fund of Funds
Affiliate and the Unaffiliated Fund or
the Unaffiliated Fund’s investment
adviser(s), sponsor, promoter, principal
underwriter and any person controlling,
controlled by or under common control
with any of those entities (each, an
‘‘Unaffiliated Fund Affiliate’’).
6. Condition 5 precludes a 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 Investment Company or
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sponsor to an Unaffiliated Trust) from
causing 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, member of an advisory
board, Manager, Subadviser, or
employee of the Fund of Funds, or a
person of which any such officer,
director, Manager, Subadviser, member
of an advisory board, 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.’’
7. As an additional assurance that an
Unaffiliated Investment Company
understands the implications of an
investment by a Fund of Funds under
the requested order, prior to an
investment in the shares of the
Unaffiliated Investment Company in
excess of the limit in section
12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Investment
Company will execute an agreement
(the ‘‘Participation Agreement’’) stating,
without limitation, that their respective
boards of directors or trustees (for any
entity, the ‘‘Board’’) and their
investment advisers understand the
terms and conditions of the order and
agree to fulfill their respective
responsibilities under the order.
Applicants note that an Unaffiliated
Investment Company (other than an ETF
whose shares are purchased by a Fund
of Funds in the secondary market) will
retain the right at all times to reject any
investment by a Fund of Funds.4
8. Applicants do not believe that the
proposed arrangement will involve
excessive layering of fees. With respect
to investment advisory fees, applicants
state that, in connection with the
approval of any investment advisory
contract under section 15 of the Act, the
Board of the Fund, including a majority
of the trustees who are not ‘‘interested
persons,’’ as defined in section 2(a)(19)
of the Act (for any Board, the
‘‘Independent Trustees’’), will find that
the advisory fees charged to a Fund of
Funds under the advisory contract are
based on services provided that are in
4 An Unaffiliated Investment Company, 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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addition to, rather than duplicative of,
services provided pursuant to any
Underlying Fund’s advisory contract(s).
Applicants further state that the
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 Investment Company
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 an
Unaffiliated Investment Company, in
connection with the investment by the
Fund of Funds in the Unaffiliated Fund.
9. 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 NASD (‘‘NASD Conduct
Rule 2830’’),5 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 the Fund of Funds will not
exceed the limits applicable to funds of
funds as set forth in NASD Conduct
Rule 2830.
10. Applicants represent that each
Fund of Funds will represent in the
Participation Agreement that no
Insurance Company sponsoring a
Registered Separate Account funding
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 amount 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, is reasonable in
relation to the services rendered, the
expenses expected to be incurred, and
the risks assumed by the Insurance
Company.
11. Applicants state that the proposed
arrangement will not create an overly
complex fund structure. Applicants note
that an Underlying Fund will be
prohibited from acquiring securities of
any investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except
to the extent that such Underlying
5 Any references to NASD Conduct Rule 2830
include any successor or replacement rule to NASD
Conduct Rule 2830 that may be adopted by FINRA.
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Fund: (a) Acquires such securities in
compliance with section 12(d)(1)(E) of
the Act and either is an Affiliated Fund
or is in the same ‘‘group of investment
companies,’’ as defined in Section
12(d)(G)(ii) of the Act, as its
corresponding master fund; (b) 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 (c) 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.
B. Investments in Underlying Funds—
Section 17(a)
1. Section 17(a) of the Act generally
prohibits sales or purchases of securities
between a registered investment
company and its affiliated persons or
affiliated persons of such persons.
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 may be
deemed to be under common control
and therefore affiliated persons of one
another. Applicants also state that the
Funds of Funds and the Underlying
Funds may be deemed to be affiliated
persons of one another if a Fund of
Funds acquires 5% or more of an
Underlying Fund’s outstanding voting
securities. In light of these possible
affiliations, section 17(a) of the Act
could prevent an Underlying Fund from
selling shares to, and redeeming shares
from, a Fund of Funds.6
6 Applicants acknowledge that receipt of any
compensation by (a) an affiliated person of a Funds
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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3. Section 17(b) of the Act authorizes
the Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) of the Act if
it finds that (a) the terms of the
proposed transaction are fair and
reasonable and do not involve
overreaching on the part of any person
concerned; (b) the proposed transaction
is consistent with the policies of each
registered investment company
involved; and (c) the proposed
transaction is consistent with the
general purposes of the Act. Section 6(c)
of the Act permits the Commission to
exempt any person or transactions from
any provision of the Act if such
exemption is necessary or appropriate
in the public interest and consistent
with the protection of investors and the
purposes fairly intended by the policy
and provisions of the Act.
4. Applicants submit that the
proposed transactions satisfy the
standards for relief under sections 17(b)
and 6(c) of the Act, as the terms 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.7 Applicants also state
that the proposed transactions will be
consistent with the policies of each
Fund of Funds and Underlying Fund,
and with the general purposes of the
Act.
C. Other Investments by Section
12(d)(1)(G) Funds of Funds
1. Section 12(d)(1)(G) of the Act
provides that section 12(d)(1) will not
apply to securities of an acquired
company purchased by an acquiring
company if: (i) The acquiring company
and acquired company are part of the
same ‘‘group of investment companies,’’
as defined in section 12(d)(1)(G)(ii) of
the Act; (ii) the acquiring company
holds only securities of acquired
companies that are part of the same
‘‘group of investment companies,’’ as
defined in section 12(d)(1)(G)(ii) of the
Act, government securities, and short7 To the extent purchases and sales of shares of
an ETF occur in the secondary market (and not
through principal transactions directly between a
Fund of Funds and an ETF), relief from section
17(a) of the Act would not be necessary. The
requested relief is intended to cover, however,
transactions directly between ETFs and a Fund of
Funds. Applicants are not seeking relief from
section 17(a) for, and the requested relief will not
apply to, transactions where an ETF could be
deemed an affiliated person, or an affiliated person
of an affiliated person, of a Fund of Funds because
the investment adviser to the ETF or an entity
controlling, controlled by or under common control
with the investment adviser to the ETF also is a
Manager to the Fund of Funds.
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term paper; (iii) the aggregate sales loads
and distribution-related fees of the
acquiring company and the acquired
company are not excessive under rules
adopted pursuant to section 22(b) or
section 22(c) of the Act by a securities
association registered under section 15A
of the Exchange Act or by the
Commission; and (iv) the acquired
company has a policy that prohibits it
from acquiring securities of registered
open-end management investment
companies or registered UITs in reliance
on section 12(d)(1)(F) or (G) of the Act.
2. Rule 12d1–2 under the Act permits
a registered open-end investment
company or a registered UIT that relies
on section 12(d)(1)(G) of the Act to
acquire, in addition to securities issued
by another registered investment
company in the same group of
investment companies, government
securities, and short-term paper: (1)
Securities issued by an investment
company that is not in the same group
of investment companies, when the
acquisition is in reliance on section
12(d)(1)(A) or 12(d)(1)(F) of the Act; (2)
securities (other than securities issued
by an investment company); and (3)
securities issued by a money market
fund, when the investment is in reliance
on rule 12d1–1 under the Act. For the
purposes of rule 12d1–2, ‘‘securities’’
means any security as defined in section
2(a)(36) of the Act.
3. Applicants state that the proposed
arrangement would comply with the
provisions of rule 12d1–2 under the Act,
but for the fact that the Section
12(d)(1)(G) Funds of Funds may invest
a portion of their assets in Other
Investments. Applicants request an
order under section 6(c) of the Act for
an exemption from rule 12d1–2(a) to
allow the Section 12(d)(1)(G) Funds of
Funds to invest in Other Investments.
Applicants assert that permitting the
Section 12(d)(1)(G) Funds of Funds to
invest in Other Investments as described
in the application would not raise any
of the concerns that the requirements of
section 12(d)(1) of the Act were
designed to address.
4. Consistent with its fiduciary
obligations under the Act, each Section
12(d)(1)(G) Fund of Funds’ board of
trustees will review the advisory fees
charged by the Section 12(d)(1)(G) Fund
of Funds’ investment adviser(s) to
ensure that the fees are based on
services provided that are in addition to,
rather than duplicative of, services
provided pursuant to the advisory
agreement of any investment company
in which the Section 12(d)(1)(G) Fund
of Funds may invest.
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Applicants’ Conditions
Applicants agree that the order
granting the requested relief shall be
subject to the following conditions:
A. Investments in Underlying Funds by
Funds of Funds
1. The members of the Group will not
control (individually or in the aggregate)
an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act.
The members of a Subadviser Group
will not control (individually or in the
aggregate) an Unaffiliated Fund within
the meaning of section 2(a)(9) of the Act.
If, as a result of a decrease in the
outstanding voting securities of an
Unaffiliated Fund, the Group or a
Subadviser Group, each in the aggregate,
becomes a holder of more than 25% of
the outstanding voting securities of the
Unaffiliated Fund, then the Group or the
Subadviser Group (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 Subadviser Group with respect to an
Unaffiliated Fund for which the
Subadviser or a person controlling,
controlled by, or under common control
with the Subadviser acts as the
investment adviser within the meaning
section 2(a)(20)(A) of the Act (in the
case of an Unaffiliated Investment
Company) or 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
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Unaffiliated Fund or an Unaffiliated
Fund Affiliate.
3. The Board of the Fund, including
a majority of the Independent Trustees,
will adopt procedures reasonably
designed to assure that the Manager and
any Subadviser are conducting the
investment program of the Fund of
Funds without taking into account any
consideration received by the Fund of
Funds or a Fund of Funds Affiliate from
an 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 Investment Company
exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of
the Unaffiliated Investment Company,
including a majority of the Independent
Trustees, will determine that any
consideration paid by the Unaffiliated
Investment 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 Investment Company; (b) is
within the range of consideration that
the Unaffiliated Investment 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 Investment 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 Investment
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
Investment Company, including a
majority of the Independent Trustees,
will adopt procedures reasonably
designed to monitor any purchases of
securities by the Unaffiliated Investment
Company in an Affiliated Underwriting
once an investment by a Fund of Funds
in the securities of the Unaffiliated
Investment 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 Investment
Company will review these purchases
periodically, but no less frequently than
annually, to determine whether the
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purchases were influenced by the
investment by the Fund of Funds in the
Unaffiliated Investment Company. The
Board of the Unaffiliated Investment
Company will consider, among other
things: (a) Whether the purchases were
consistent with the investment
objectives and policies of the
Unaffiliated Investment Company; (b)
how the performance of securities
purchased in an Affiliated Underwriting
compares to the performance of
comparable securities purchased during
a comparable period of time in
underwritings other than Affiliated
Underwritings or to a benchmark such
as a comparable market index; and (c)
whether the amount of securities
purchased by the Unaffiliated
Investment Company in Affiliated
Underwritings and the amount
purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board of an Unaffiliated Investment
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 interests
of shareholders.
7. Each Unaffiliated Investment
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 in an Affiliated
Underwriting occurred, the first two
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
Investment Company exceeds the limit
of section 12(d)(1)(A)(i) of the Act,
setting forth (a) the party from whom
the securities were acquired, (b) the
identity of the underwriting syndicate’s
members, (c) the terms of the purchase,
and (d) the information or materials
upon which the determinations of the
Board of the Unaffiliated Investment
Company were made.
8. Prior to its investment in shares of
an Unaffiliated Investment Company in
excess of the limit of section
12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Investment
Company will execute a Participation
Agreement stating, without limitation,
that their Boards and their investment
advisers understand the terms and
conditions of the order and agree to
fulfill their responsibilities under the
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order. At the time of its investment in
shares of an Unaffiliated Investment
Company in excess of the limit set forth
in section 12(d)(1)(A)(i), a Fund of
Funds will notify the Unaffiliated
Investment Company of the investment.
At such time, the Fund of Funds will
also transmit to the Unaffiliated
Investment Company a list of the names
of each Fund of Funds Affiliate and
Underwriting Affiliate. The Fund of
Funds will notify the Unaffiliated
Investment Company of any changes to
the list as soon as reasonably practicable
after a change occurs. The Unaffiliated
Investment 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 the Fund, including a majority
of the Independent Trustees, shall find
that the advisory fees charged to the
Fund of Funds under the advisory
contract(s) 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 Fund.
10. The 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 Investment Company under
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 an
Unaffiliated Investment Company, in
connection with the investment by the
Fund of Funds in the Unaffiliated Fund.
Any Subadviser will waive fees
otherwise payable to the Subadviser,
directly or indirectly, by the Fund of
Funds in an amount at least equal to any
compensation received by the
Subadviser, or an affiliated person of the
Subadviser, from an Unaffiliated Fund,
other than any advisory fees paid to the
Subadviser or an affiliated person of the
Subadviser by the Unaffiliated
Investment Company, 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.
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9713
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)
acquires such securities in compliance
with section 12(d)(1)(E) of the Act and
either is an Affiliated Fund or is in the
same ‘‘group of investment companies,’’
as defined in section 12(d)(1)(G)(ii) of
the Act, as its corresponding master
fund; (b) 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 (c) 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.
B. Other Investments by Section
12(d)(1)(G) Funds of Funds
13. Applicants will comply with all
provisions of rule 12d1–2 under the Act,
except for paragraph (a)(2) to the extent
that it restricts any Section 12(d)(1)(G)
Fund of Funds from investing in Other
Investments as described in the
application.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–3740 Filed 2–16–12; 8:45 am]
BILLING CODE 8011–01–P
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[Federal Register Volume 77, Number 33 (Friday, February 17, 2012)]
[Notices]
[Pages 9708-9713]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-3740]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29944; File No. 812-13962]
Pacific Life Insurance Company, et al.; Notice of Application
February 13, 2012.
AGENCY: Securities and Exchange Commission (the ``Commission'').
ACTION: Notice of application for an order under section 12(d)(1)(J) of
the Investment Company Act of 1940, as amended (the ``Act''), for an
exemption from sections 12(d)(1)(A) and (B) of the Act, under sections
6(c) and 17(b) of the Act for an exemption from section 17(a) of the
Act, and under section 6(c) of the Act for an exemption from rule 12d1-
2(a) under the Act.
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Summary of the Application: Applicants request an order that would
(a) permit certain series of registered open-end management investment
companies to acquire shares of other registered open-end management
investment companies and unit
[[Page 9709]]
investment trusts (``UITs'') that are within or outside the same
``group of investment companies,'' as defined in section
12(d)(1)(G)(ii) of the Act, as the acquiring company and (b) permit
certain series of registered open-end management investment companies
relying on rule 12d1-2 under the Act to invest in certain financial
instruments.
Applicants: Pacific Life Insurance Company (``Pacific Life''),
Pacific Life & Annuity Company (``PL&A,'' and collectively with Pacific
Life and any insurance company controlling, controlled by, or under
common control with Pacific Life or PL&A, the ``Insurance Companies'');
Pacific Life Fund Advisors LLC (the ``Manager''); Pacific Select Fund
(the ``Fund''); and Pacific Select Distributors, Inc. (the
``Distributor'').
Filing Dates: The application was filed on September 20, 2011, and
amended on December 16, 2011 and February 10, 2012.
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 March 9, 2012, 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: The Commission: Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants: c/
o Robin S. Yonis, Esq., Pacific Life Fund Advisors LLC, 700 Newport
Center Drive, Newport Beach, California 92660.
FOR FURTHER INFORMATION CONTACT: Mark N. Zaruba, Attorney Advisor, at
(202) 551-6878, or Mary Kay Frech, Branch Chief, at (202) 551-6814
(Office of Investment Company Regulation, Division of Investment
Management).
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 Fund is a Massachusetts business trust, registered under the
Act as an open-end management investment company, and is comprised of
multiple series (the ``Series''), each of which has its own investment
objective, policies and restrictions.\1\ Shares of the Series are not
offered directly to the public. Shares of the Series are offered
through separate accounts that are registered as UITs under the Act
(``Registered Separate Accounts'') or that are exempt from registration
under the Act (``Unregistered Separate Accounts,'' and together with
the Registered Separate Accounts, ``Separate Accounts'') of the
Insurance Companies and serve as the underlying funding vehicles for
the variable life insurance contracts and variable annuity contracts
(the ``Contracts'') issued by the Insurance Companies. Shares of the
Series may also be offered to qualified pension and retirement plans,
certain of the general accounts of the Insurance Companies, or to other
Series.
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\1\ Applicants request that the order extend to any future
Series of the Fund, and any other existing or future registered
open-end management investment company and series thereof that are
part of the same ``group of investment companies,'' as defined in
section 12(d)(1)(G)(ii) of the Act, as the Fund and are, or may in
the future be, advised by the Manager or any other investment
adviser controlling, controlled by, or under common control with the
Manager (any such entity is included in the term, ``Series''). All
entities that currently intend to rely on the requested order are
named as applicants. Any other entity that relies on the order in
the future will comply with the terms and conditions of the
application.
---------------------------------------------------------------------------
2. The Manager is a Delaware limited liability company registered
as an investment adviser under the Investment Advisers Act of 1940, as
amended (the ``Advisers Act''), and serves as investment adviser to the
Series. The Manager is a wholly-owned subsidiary of Pacific Life and
PL&A. PL&A is a wholly-owned subsidiary of Pacific Life and Pacific
Life is a wholly-owned subsidiary of Pacific Mutual Holding Company.
3. The Distributor is a California corporation and serves as the
Fund's principal underwriter and distributor. The Distributor is
registered as a broker-dealer with the Commission and the Financial
Industry Regulatory Authority, Inc. (``FINRA''). The Distributor is a
wholly-owned subsidiary of Pacific Life. The Distributor also serves as
the distributor for the Contracts.
4. Applicants request relief to permit: (a) Certain Series (each, a
``Fund of Funds,'' and collectively, the ``Funds of Funds'') to acquire
shares of registered open-end management investment companies and UITs
that are not part of the same ``group of investment companies,'' as
defined in section 12(d)(1)(G)(ii) of the Act, as the Funds of Funds
(the ``Unaffiliated Investment Companies'' and ``Unaffiliated Trusts,''
respectively, and together, the ``Unaffiliated Funds''); \2\ (b) the
Unaffiliated Investment Companies, their principal underwriters and any
broker or dealer registered under the Securities Exchange Act of 1934,
as amended (the ``Exchange Act'', and any such broker or dealer, a
``Broker''), to sell shares of the Unaffiliated Investment Companies to
the Funds of Funds in excess of the limitations in section 12(d)(1)(B)
of the Act; (c) the Funds of Funds to acquire shares of certain other
Series in the same ``group of investment companies,'' as defined in
section 12(d)(1)(G)(ii) of the Act, as the Fund of Funds (the
``Affiliated Funds,'' and together with the Unaffiliated Funds, the
``Underlying Funds''); \3\ and (d) the Affiliated Funds, their
principal underwriters and any Broker to sell shares of the Affiliated
Funds to the Fund of Funds in excess of the limitations in section
12(d)(1)(B) of the Act. Applicants also request an order under sections
6(c) and 17(b) of the Act exempting the transactions described in (a)
through (d) above from section 17(a) of the Act to the extent necessary
to permit an Underlying Fund that is an affiliated person of a Fund of
Funds to sell its shares to, and redeem its shares from, the Fund of
Funds.
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\2\ Certain of the Unaffiliated Funds may have obtained
exemptions from the Commission necessary to permit their shares to
be listed and traded on a national securities exchange at negotiated
prices (``ETFs'').
\3\ Certain of the Underlying Funds currently pursue, or may in
the future pursue, their investment objectives through a master-
feeder arrangement in reliance on section 12(d)(1)(E) of the Act. In
accordance with condition 12, a Fund of Funds may not invest in an
Underlying Fund that operates as a feeder fund unless the feeder
fund is part of the same ``group of investment companies,'' as
defined in section 12(d)(1)(G)(ii) of the Act, as its corresponding
master fund or the Fund of Funds. If a Fund of Funds invests in an
Affiliated Fund that operates as a feeder fund and the corresponding
master fund is not within the same ``group of investment
companies,'' as defined in section 12(d)(1)(G)(ii) of the Act, as
the Fund of Funds and Affiliated Fund, the master fund would be an
Unaffiliated Fund for purposes of the application and its
conditions.
---------------------------------------------------------------------------
5. Applicants also request an exemption to the extent necessary to
permit a Fund of Funds that invests in Underlying Funds in reliance on
section 12(d)(1)(G) of the Act (a ``Section 12(d)(1)(G) Fund of
Funds''), and that is eligible to invest in securities (as defined in
section 2(a)(36) of the Act) in reliance on rule 12d1-2 under the Act,
to also invest, to the extent consistent
[[Page 9710]]
with its investment objectives, policies, strategies and limitations,
in financial instruments that may not be securities within the meaning
of section 2(a)(36) of the Act (``Other Investments'').
Applicants' Legal Analysis
A. Investments in Underlying Funds--Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act prohibits a registered investment
company (an ``acquiring company'') from acquiring shares of another
investment company (an ``acquired 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 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) of the Act 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 the Underlying Funds in excess of
the limits set forth in section 12(d)(1)(A) of the Act and to permit
the Underlying Funds, their principal underwriters and any Broker to
sell shares of the Underlying Funds to the Funds of Funds in excess of
the limits set forth in section 12(d)(1)(B) of the Act.
3. Applicants state that the proposed arrangement will not give
rise to the policy concerns underlying sections 12(d)(1)(A) and (B) of
the Act, which include concerns about undue influence by a Fund of
Funds or its affiliated persons over the Underlying Funds, excessive
layering of fees, and overly complex fund structures. Accordingly,
applicants believe that the requested exemption is consistent with the
public interest and the protection of investors.
4. Applicants state that the proposed arrangement will not result
in undue influence by a Fund of Funds or its affiliated persons over
the Underlying Funds. The concern about undue influence does not arise
in connection with a Fund of Funds' investment in the Affiliated Funds,
since the Affiliated Funds are part of the same ``group of investment
companies,'' as defined in section 12(d)(1)(G)(ii) of the Act, as the
Funds of Funds. To limit the control that a Fund of Funds or its
affiliated persons may have over an Unaffiliated Fund, applicants state
that condition 1 prohibits: (a) The Manager and any person controlling,
controlled by or under common control with the Manager, 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, the ``Group'') and (b) any
other investment adviser within the meaning of section 2(a)(20)(B) of
the Act to a Fund of Funds (each, a ``Subadviser''), any person
controlling, controlled by or under common control with a Subadviser,
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 or sponsored by a Subadviser
or any person controlling, controlled by or under common control with
the Subadviser (collectively, the ``Subadviser 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 condition 2 precludes a Fund of
Funds, the Manager, any Subadviser, promoter or principal underwriter
of a Fund of Funds, and any person controlling, controlled by or under
common control with any of those entities (each, a ``Fund of Funds
Affiliate'') from taking advantage of an Unaffiliated Fund, with
respect to transactions between the Fund of Funds or a Fund of Funds
Affiliate and the Unaffiliated Fund or the Unaffiliated Fund's
investment adviser(s), sponsor, promoter, principal underwriter and any
person controlling, controlled by or under common control with any of
those entities (each, an ``Unaffiliated Fund Affiliate'').
6. Condition 5 precludes a 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 Investment Company or sponsor to an
Unaffiliated Trust) from causing 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, member of an advisory board, Manager, Subadviser,
or employee of the Fund of Funds, or a person of which any such
officer, director, Manager, Subadviser, member of an advisory board, 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.''
7. As an additional assurance that an Unaffiliated Investment
Company understands the implications of an investment by a Fund of
Funds under the requested order, prior to an investment in the shares
of the Unaffiliated Investment Company in excess of the limit in
section 12(d)(1)(A)(i) of the Act, the Fund of Funds and the
Unaffiliated Investment Company will execute an agreement (the
``Participation Agreement'') stating, without limitation, that their
respective boards of directors or trustees (for any entity, the
``Board'') and their investment advisers understand the terms and
conditions of the order and agree to fulfill their respective
responsibilities under the order. Applicants note that an Unaffiliated
Investment Company (other than an ETF whose shares are purchased by a
Fund of Funds in the secondary market) will retain the right at all
times to reject any investment by a Fund of Funds.\4\
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\4\ An Unaffiliated Investment Company, 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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8. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. With respect to investment advisory
fees, applicants state that, in connection with the approval of any
investment advisory contract under section 15 of the Act, the Board of
the Fund, including a majority of the trustees who are not ``interested
persons,'' as defined in section 2(a)(19) of the Act (for any Board,
the ``Independent Trustees''), will find that the advisory fees charged
to a Fund of Funds under the advisory contract are based on services
provided that are in
[[Page 9711]]
addition to, rather than duplicative of, services provided pursuant to
any Underlying Fund's advisory contract(s). Applicants further state
that the 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 Investment
Company 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 an Unaffiliated Investment Company,
in connection with the investment by the Fund of Funds in the
Unaffiliated Fund.
9. 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 NASD (``NASD Conduct Rule 2830''),\5\ 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 the Fund
of Funds will not exceed the limits applicable to funds of funds as set
forth in NASD Conduct Rule 2830.
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\5\ Any references to NASD Conduct Rule 2830 include any
successor or replacement rule to NASD Conduct Rule 2830 that may be
adopted by FINRA.
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10. Applicants represent that each Fund of Funds will represent in
the Participation Agreement that no Insurance Company sponsoring a
Registered Separate Account funding 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 amount 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, is reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the Insurance Company.
11. Applicants state that the proposed arrangement will not create
an overly complex fund structure. Applicants note that an Underlying
Fund will be prohibited from acquiring securities of any investment
company or company relying on section 3(c)(1) or 3(c)(7) of the Act in
excess of the limits contained in section 12(d)(1)(A) of the Act,
except to the extent that such Underlying Fund: (a) Acquires such
securities in compliance with section 12(d)(1)(E) of the Act and either
is an Affiliated Fund or is in the same ``group of investment
companies,'' as defined in Section 12(d)(G)(ii) of the Act, as its
corresponding master fund; (b) 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 (c) 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.
B. Investments in Underlying Funds--Section 17(a)
1. Section 17(a) of the Act generally prohibits sales or purchases
of securities between a registered investment company and its
affiliated persons or affiliated persons of such persons. 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 may be deemed to be under common control and therefore affiliated
persons of one another. Applicants also state that the Funds of Funds
and the Underlying Funds may be deemed to be affiliated persons of one
another if a Fund of Funds acquires 5% or more of an Underlying Fund's
outstanding voting securities. In light of these possible affiliations,
section 17(a) of the Act could prevent an Underlying Fund from selling
shares to, and redeeming shares from, a Fund of Funds.\6\
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\6\ Applicants acknowledge that receipt of any compensation by
(a) an affiliated person of a Funds 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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3. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) of
the Act if it finds that (a) the terms of the proposed transaction are
fair and reasonable and do not involve overreaching on the part of any
person concerned; (b) the proposed transaction is consistent with the
policies of each registered investment company involved; and (c) the
proposed transaction is consistent with the general purposes of the
Act. Section 6(c) of the Act permits the Commission to exempt any
person or transactions from any provision of the Act if such exemption
is necessary or appropriate in the public interest and consistent with
the protection of investors and the purposes fairly intended by the
policy and provisions of the Act.
4. Applicants submit that the proposed transactions satisfy the
standards for relief under sections 17(b) and 6(c) of the Act, as the
terms 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.\7\ Applicants also
state that the proposed transactions will be consistent with the
policies of each Fund of Funds and Underlying Fund, and with the
general purposes of the Act.
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\7\ To the extent purchases and sales of shares of an ETF occur
in the secondary market (and not through principal transactions
directly between a Fund of Funds and an ETF), relief from section
17(a) of the Act would not be necessary. The requested relief is
intended to cover, however, transactions directly between ETFs and a
Fund of Funds. Applicants are not seeking relief from section 17(a)
for, and the requested relief will not apply to, transactions where
an ETF could be deemed an affiliated person, or an affiliated person
of an affiliated person, of a Fund of Funds because the investment
adviser to the ETF or an entity controlling, controlled by or under
common control with the investment adviser to the ETF also is a
Manager to the Fund of Funds.
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C. Other Investments by Section 12(d)(1)(G) Funds of Funds
1. Section 12(d)(1)(G) of the Act provides that section 12(d)(1)
will not apply to securities of an acquired company purchased by an
acquiring company if: (i) The acquiring company and acquired company
are part of the same ``group of investment companies,'' as defined in
section 12(d)(1)(G)(ii) of the Act; (ii) the acquiring company holds
only securities of acquired companies that are part of the same ``group
of investment companies,'' as defined in section 12(d)(1)(G)(ii) of the
Act, government securities, and short-
[[Page 9712]]
term paper; (iii) the aggregate sales loads and distribution-related
fees of the acquiring company and the acquired company are not
excessive under rules adopted pursuant to section 22(b) or section
22(c) of the Act by a securities association registered under section
15A of the Exchange Act or by the Commission; and (iv) the acquired
company has a policy that prohibits it from acquiring securities of
registered open-end management investment companies or registered UITs
in reliance on section 12(d)(1)(F) or (G) of the Act.
2. Rule 12d1-2 under the Act permits a registered open-end
investment company or a registered UIT that relies on section
12(d)(1)(G) of the Act to acquire, in addition to securities issued by
another registered investment company in the same group of investment
companies, government securities, and short-term paper: (1) Securities
issued by an investment company that is not in the same group of
investment companies, when the acquisition is in reliance on section
12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) securities (other than
securities issued by an investment company); and (3) securities issued
by a money market fund, when the investment is in reliance on rule
12d1-1 under the Act. For the purposes of rule 12d1-2, ``securities''
means any security as defined in section 2(a)(36) of the Act.
3. Applicants state that the proposed arrangement would comply with
the provisions of rule 12d1-2 under the Act, but for the fact that the
Section 12(d)(1)(G) Funds of Funds may invest a portion of their assets
in Other Investments. Applicants request an order under section 6(c) of
the Act for an exemption from rule 12d1-2(a) to allow the Section
12(d)(1)(G) Funds of Funds to invest in Other Investments. Applicants
assert that permitting the Section 12(d)(1)(G) Funds of Funds to invest
in Other Investments as described in the application would not raise
any of the concerns that the requirements of section 12(d)(1) of the
Act were designed to address.
4. Consistent with its fiduciary obligations under the Act, each
Section 12(d)(1)(G) Fund of Funds' board of trustees will review the
advisory fees charged by the Section 12(d)(1)(G) Fund of Funds'
investment adviser(s) to ensure that the fees are based on services
provided that are in addition to, rather than duplicative of, services
provided pursuant to the advisory agreement of any investment company
in which the Section 12(d)(1)(G) Fund of Funds may invest.
Applicants' Conditions
Applicants agree that the order granting the requested relief shall
be subject to the following conditions:
A. Investments in Underlying Funds by Funds of Funds
1. The members of the Group will not control (individually or in
the aggregate) an Unaffiliated Fund within the meaning of section
2(a)(9) of the Act. The members of a Subadviser Group will not control
(individually or in the aggregate) an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act. If, as a result of a decrease in
the outstanding voting securities of an Unaffiliated Fund, the Group or
a Subadviser Group, each in the aggregate, becomes a holder of more
than 25% of the outstanding voting securities of the Unaffiliated Fund,
then the Group or the Subadviser Group (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 Subadviser Group with respect to an Unaffiliated
Fund for which the Subadviser or a person controlling, controlled by,
or under common control with the Subadviser acts as the investment
adviser within the meaning section 2(a)(20)(A) of the Act (in the case
of an Unaffiliated Investment Company) or 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 the Fund, including a majority of the Independent
Trustees, will adopt procedures reasonably designed to assure that the
Manager and any Subadviser are conducting the investment program of the
Fund of Funds without taking into account any consideration received by
the Fund of Funds or a Fund of Funds Affiliate from an 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 Investment Company exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment
Company, including a majority of the Independent Trustees, will
determine that any consideration paid by the Unaffiliated Investment
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 Investment Company; (b) is within the
range of consideration that the Unaffiliated Investment 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 Investment 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 Investment 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 Investment Company, including a
majority of the Independent Trustees, will adopt procedures reasonably
designed to monitor any purchases of securities by the Unaffiliated
Investment Company in an Affiliated Underwriting once an investment by
a Fund of Funds in the securities of the Unaffiliated Investment
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 Investment Company will review these
purchases periodically, but no less frequently than annually, to
determine whether the
[[Page 9713]]
purchases were influenced by the investment by the Fund of Funds in the
Unaffiliated Investment Company. The Board of the Unaffiliated
Investment Company will consider, among other things: (a) Whether the
purchases were consistent with the investment objectives and policies
of the Unaffiliated Investment Company; (b) how the performance of
securities purchased in an Affiliated Underwriting compares to the
performance of comparable securities purchased during a comparable
period of time in underwritings other than Affiliated Underwritings or
to a benchmark such as a comparable market index; and (c) whether the
amount of securities purchased by the Unaffiliated Investment Company
in Affiliated Underwritings and the amount purchased directly from an
Underwriting Affiliate have changed significantly from prior years. The
Board of an Unaffiliated Investment 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 interests of shareholders.
7. Each Unaffiliated Investment 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 in an Affiliated Underwriting occurred, the first two 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 Investment Company
exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth
(a) the party from whom the securities were acquired, (b) the identity
of the underwriting syndicate's members, (c) the terms of the purchase,
and (d) the information or materials upon which the determinations of
the Board of the Unaffiliated Investment Company were made.
8. Prior to its investment in shares of an Unaffiliated Investment
Company in excess of the limit of section 12(d)(1)(A)(i) of the Act,
the Fund of Funds and the Unaffiliated Investment Company will execute
a Participation Agreement stating, without limitation, that their
Boards and their investment advisers understand the terms and
conditions of the order and agree to fulfill their responsibilities
under the order. At the time of its investment in shares of an
Unaffiliated Investment Company in excess of the limit set forth in
section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated
Investment Company of the investment. At such time, the Fund of Funds
will also transmit to the Unaffiliated Investment Company a list of the
names of each Fund of Funds Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the Unaffiliated Investment Company of any
changes to the list as soon as reasonably practicable after a change
occurs. The Unaffiliated Investment 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 the Fund, including a majority of the Independent
Trustees, shall find that the advisory fees charged to the Fund of
Funds under the advisory contract(s) 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 Fund.
10. The 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
Investment Company under 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 an Unaffiliated Investment Company, in connection
with the investment by the Fund of Funds in the Unaffiliated Fund. Any
Subadviser will waive fees otherwise payable to the Subadviser,
directly or indirectly, by the Fund of Funds in an amount at least
equal to any compensation received by the Subadviser, or an affiliated
person of the Subadviser, from an Unaffiliated Fund, other than any
advisory fees paid to the Subadviser or an affiliated person of the
Subadviser by the Unaffiliated Investment Company, 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) acquires such
securities in compliance with section 12(d)(1)(E) of the Act and either
is an Affiliated Fund or is in the same ``group of investment
companies,'' as defined in section 12(d)(1)(G)(ii) of the Act, as its
corresponding master fund; (b) 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 (c) 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.
B. Other Investments by Section 12(d)(1)(G) Funds of Funds
13. Applicants will comply with all provisions of rule 12d1-2 under
the Act, except for paragraph (a)(2) to the extent that it restricts
any Section 12(d)(1)(G) Fund of Funds from investing in Other
Investments as described in the application.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-3740 Filed 2-16-12; 8:45 am]
BILLING CODE 8011-01-P
