AmericaFirst Quantitative Trust and AmericaFirst Securities, Inc.; Notice of Application, 42017-42019 [2012-17336]
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Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices
DATES:
Effective Date: July 17, 2012.
FOR FURTHER INFORMATION CONTACT:
David Rubin, 202–268–2986.
The
United States Postal Service® hereby
gives notice that on July 10, 2012, it
filed with the Postal Regulatory
Commission a Request of the United
States Postal Service to Add Every Door
Direct Mail—Retail to the Mail
Classification Schedule, pursuant to 39
U.S.C. 3642. Documents are available at
www.prc.gov, Docket No. MC2012–31.
SUPPLEMENTARY INFORMATION:
Stanley F. Mires,
Attorney, Legal Policy & Legislative Advice.
[FR Doc. 2012–17300 Filed 7–16–12; 8:45 am]
BILLING CODE 7710–12–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
30134; 812–14005]
AmericaFirst Quantitative Trust and
AmericaFirst Securities, Inc.; Notice of
Application
July 10, 2012.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application under
(a) section 6(c) of the Investment
Company Act of 1940 (‘‘Act’’) for an
exemption from sections 2(a)(32),
2(a)(35), 14(a), 19(b), 22(d) and
26(a)(2)(C) of the Act and rules 19b–1
and rule 22c–1 thereunder and (b)
sections 11(a) and 11(c) of the Act for
approval of certain exchange and
rollover privileges.
AGENCY:
AmericaFirst Quantitative
Trust (the ‘‘AmericaFirst Trust’’) and
AmericaFirst Securities, Inc. (‘‘AFSI’’).1
SUMMARY OF APPLICATION: Applicants
request an order to permit certain unit
investment trusts to: (a) impose sales
charges on a deferred basis and waive
the deferred sales charge in certain
cases; (b) offer unitholders certain
exchange and rollover options; (c)
publicly offer units without requiring
the Depositor to take for its own account
$100,000 worth of units; and (d)
distribute capital gains resulting from
tkelley on DSK3SPTVN1PROD with NOTICES
APPLICANTS:
1 Applicants also request relief for future unit
investment trusts (collectively, with the
AmericaFirst Trust, the ‘‘Trusts’’) and series of the
Trusts (‘‘Series’’) for which AFSI or any entity
controlling, controlled by or under common control
with AFSI (together with AFSI, the ‘‘Depositors’’)
serves as Depositor. Any future Trust and Series
that relies on the requested order will comply with
the terms and conditions of the application. All
existing entities that currently intend to rely on the
requested order are named as applicants.
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Jkt 226001
the sale of portfolio securities within a
reasonable time after receipt.
FILING DATES: The application was filed
on February 2, 2012, and amended on
February 7, 2012, June 25, 2012 and
June 26, 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 August 3, 2012, and
should be accompanied by proof of
service on the applicants, in the form of
an affidavit, or, for lawyers, a certificate
of service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090;
Applicants, 8150 Sierra College Blvd.,
Suite 290, Roseville, CA 95661.
FOR FURTHER INFORMATION CONTACT:
Bruce R. MacNeil, Senior Counsel, at
(202) 551–6817, or Daniele Marchesani,
Branch Chief, at (202) 551–6821 (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 AmericaFirst Trust is a unit
investment trust (‘‘UIT’’) that is
registered under the Act. Any future
Trust will be a registered UIT. AFSI will
be registered under the Securities
Exchange Act of 1934 as a broker-dealer
and is the Depositor of the AmericaFirst
Trust. Each Series will be created by a
trust indenture between the Depositor
and a banking institution or trust
company as trustee (‘‘Trustee’’).
2. The Depositor acquires a portfolio
of securities, which it deposits with the
Trustee in exchange for certificates
representing units of fractional
undivided interest in the Series’
portfolio (‘‘Units’’). The Units are
offered to the public through the
Depositor and dealers at a price which,
during the initial offering period, is
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based upon the aggregate market value
of the underlying securities, or, the
aggregate offering side evaluation of the
underlying securities if the underlying
securities are not listed on a securities
exchange, plus a front-end sales charge.
The maximum sales charge may be
reduced in compliance with rule
22d–1 under the Act in certain
circumstances, which are disclosed in
the Series’ prospectus.
3. The Depositor is not legally
obligated, and does not currently
intend, to maintain a secondary market
for Units of outstanding equity Series,
but may seek to do so in the future.
Other broker-dealers may or may not
maintain a secondary market for Units
of a Series. If a secondary market is
maintained, investors will be able to
purchase Units on the secondary market
at the current public offering price plus
a front-end sales charge. If such a
market is not maintained at any time for
any Series, holders of the Units
(‘‘Unitholders’’) of that Series may
redeem their Units through the Trustee.
A. Deferred Sales Charge and Waiver of
Deferred Sales Charge Under Certain
Circumstances
1. Applicants request an order to the
extent necessary to permit one or more
Series to impose a sales charge on a
deferred basis (‘‘DSC’’). For each Series,
the Depositor would set a maximum
sales charge per Unit, a portion of which
may be collected ‘‘up front’’ (i.e., at the
time an investor purchases the Units).
The DSC would be collected
subsequently in installments
(‘‘Installment Payments’’) as described
in the application. The Depositor would
not add any amount for interest or any
similar or related charge to adjust for
such deferral.
2. When a Unitholder redeems or sells
Units, the Depositor intends to deduct
any unpaid DSC from the redemption or
sale proceeds. When calculating the
amount due, the Depositor will assume
that Units on which the DSC has been
paid in full are redeemed or sold first.
With respect to Units on which the DSC
has not been paid in full, the Depositor
will assume that the Units held for the
longest time are redeemed or sold first.
Applicants represent that the DSC
collected at the time of redemption or
sale, together with the Installment
Payments and any amount collected up
front, will not exceed the maximum
sales charge per Unit. Under certain
circumstances, the Depositor may waive
the collection of any unpaid DSC in
connection with redemptions or sales of
Units. These circumstances will be
disclosed in the prospectus for the
relevant Series and implemented in
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Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices
accordance with rule 22d–1 under the
Act.
3. Each Series offering Units subject to
a DSC will state the maximum charge
per Unit in its prospectus. In addition,
the prospectus for such Series will
include the table required by Form N–
1A (modified as appropriate to reflect
the difference between UITs and openend management investment
companies) and a schedule setting forth
the number and date of each Installment
Payment, along with the duration of the
collection period. The prospectus also
will disclose that portfolio securities
may be sold to pay the DSC if
distribution income is insufficient and
that securities will be sold pro rata, if
practicable, otherwise a specific security
will be designated for sale.
B. Exchange Option and Rollover
Option
1. Applicants request an order to the
extent necessary to permit Unitholders
of a Series to exchange their Units for
Units of another Series (‘‘Exchange
Option’’) and Unitholders of a Series
that is terminating to exchange their
Units for Units of a new Series of the
same type (‘‘Rollover Option’’). The
Exchange Option and Rollover Option
would apply to all exchanges of Units
sold with a front-end sales charge or
DSC.
2. A Unitholder who purchases Units
under the Exchange Option or Rollover
Option would pay a lower sales charge
than that which would be paid for the
Units by a new investor. The reduced
sales charge will be reasonably related
to the expenses incurred in connection
with the administration of the DSC
program, which may include an amount
that will fairly and adequately
compensate the Depositor and
participating underwriters and brokers
for their services in providing the DSC
program.
Applicants’ Legal Analysis
tkelley on DSK3SPTVN1PROD with NOTICES
A. DSC and Waiver of DSC
1. Section 4(2) of the Act defines a
‘‘unit investment trust’’ as an
investment company that issues only
redeemable securities. Section 2(a)(32)
of the Act defines a ‘‘redeemable
security’’ as a security that, upon its
presentation to the issuer, entitles the
holder to receive approximately his or
her proportionate share of the issuer’s
current net assets or the cash equivalent
of those assets. Rule 22c–1 under the
Act requires that the price of a
redeemable security issued by a
registered investment company for
purposes of sale, redemption or
repurchase be based on the security’s
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16:53 Jul 16, 2012
Jkt 226001
current net asset value (‘‘NAV’’).
Because the collection of any unpaid
DSC may cause a redeeming Unitholder
to receive an amount less than the NAV
of the redeemed Units, applicants
request relief from section 2(a)(32) and
rule 22c–1.
2. Section 22(d) of the Act and rule
22d–1 under the Act require a registered
investment company and its principal
underwriter and dealers to sell
securities only at the current public
offering price described in the
investment company’s prospectus, with
the exception of sales of redeemable
securities at prices that reflect
scheduled variations in the sales load.
Section 2(a)(35) of the Act defines the
term ‘‘sales load’’ as the difference
between the sales price and the portion
of the proceeds invested by the
depositor or trustee. Applicants request
relief from section 2(a)(35) and section
22(d) to permit waivers, deferrals or
other scheduled variations of the sales
load.
3. Under section 6(c) of the Act, the
Commission may exempt classes of
transactions, if and to the extent that
such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act. Applicants state that their
proposal meets the standards of section
6(c). Applicants state that the provisions
of section 22(d) are intended to prevent
(a) riskless trading in investment
company securities due to backward
pricing, (b) disruption of orderly
distribution by dealers selling shares at
a discount, and (c) discrimination
among investors resulting from different
prices charged to different investors.
Applicants assert that the proposed DSC
program will present none of these
abuses. Applicants further state that all
scheduled variations in the sales load
will be disclosed in the prospectus of
each Series and applied uniformly to all
investors, and that applicants will
comply with all the conditions set forth
in rule 22d–1.
4. Section 26(a)(2)(C) of the Act, in
relevant part, prohibits a trustee or
custodian of a UIT from collecting from
the trust as an expense any payment to
the trust’s depositor or principal
underwriter. Because the Trustee’s
payment of the DSC to the Depositor
may be deemed to be an expense under
section 26(a)(2)(C), applicants request
relief under section 6(c) from section
26(a)(2)(C) to the extent necessary to
permit the Trustee to collect Installment
Payments and disburse them to the
Depositor. Applicants submit that the
relief is appropriate because the DSC is
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Frm 00052
Fmt 4703
Sfmt 4703
more properly characterized as a sales
load.
B. Exchange Option and Rollover
Option
1. Sections 11(a) and 11(c) of the Act
prohibit any offer of exchange by a UIT
for the securities of another investment
company unless the terms of the offer
have been approved in advance by the
Commission. Applicants request an
order under sections 11(a) and 11(c) for
Commission approval of the Exchange
Option and the Rollover Option.
C. Net Worth Requirement
1. Section 14(a) of the Act requires
that a registered investment company
have $100,000 of net worth prior to
making a public offering. Applicants
state that each Series will comply with
this requirement because the Depositor
will deposit more than $100,000 of
securities. Applicants assert, however,
that the Commission has interpreted
section 14(a) as requiring that the initial
capital investment in an investment
company be made without any intention
to dispose of the investment. Applicants
state that, under this interpretation, a
Series would not satisfy section 14(a)
because of the Depositor’s intention to
sell all the Units of the Series.
2. Rule 14a–3 under the Act exempts
UITs from section 14(a) if certain
conditions are met, one of which is that
the UIT invest only in ‘‘eligible trust
securities,’’ as defined in the rule.
Applicants state that they may not rely
on rule 14a–3 because certain Series
(collectively, ‘‘Equity Series’’) will
invest all or a portion of their assets in
equity securities or shares of registered
investment companies which do not
satisfy the definition of eligible trust
securities.
3. Applicants request an exemption
under section 6(c) of the Act to the
extent necessary to exempt the Equity
Series from the net worth requirement
in section 14(a). Applicants state that
the Series and the Depositor will
comply in all respects with the
requirements of rule 14a–3, except that
the Equity Series will not restrict their
portfolio investments to ‘‘eligible trust
securities.’’
D. Capital Gains Distribution
1. Section 19(b) of the Act and rule
19b–1 under the Act provide that,
except under limited circumstances, no
registered investment company may
distribute long-term gains more than
once every twelve months. Rule 19b–
1(c), under certain circumstances,
exempts a UIT investing in eligible trust
securities (as defined in rule 14a–3)
from the requirements of rule 19b–1.
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Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices
Because the Equity Series do not limit
their investments to eligible trust
securities, however, the Equity Series
will not qualify for the exemption in
paragraph (c) of rule 19b–1. Applicants
therefore request an exemption under
section 6(c) from section 19(b) and rule
19b–1 to the extent necessary to permit
capital gains earned in connection with
the sale of portfolio securities to be
distributed to Unitholders along with
the Equity Series’ regular distributions.
In all other respects, applicants will
comply with section 19(b) and rule 19b–
1.
2. Applicants state that their proposal
meets the standards of section 6(c).
Applicants assert that any sale of
portfolio securities would be triggered
by the need to meet Trust expenses,
Installment Payments, or by redemption
requests, events over which the
Depositor and the Equity Series do not
have control. Applicants further state
that, because principal distributions
must be clearly indicated in
accompanying reports to Unitholders as
a return of principal and will be
relatively small in comparison to
normal dividend distributions, there is
little danger of confusion from failure to
differentiate among distributions.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
tkelley on DSK3SPTVN1PROD with NOTICES
A. DSC Relief and Exchange and
Rollover Options
1. Whenever the Exchange Option or
the Rollover Option is to be terminated
or its terms are to be amended
materially, any holder of a security
subject to that privilege will be given
prominent notice of the impending
termination or amendment at least 60
days prior to the date of termination or
the effective date of the amendment,
provided that: (a) no such notice need
be given if the only material effect of an
amendment is to reduce or eliminate the
sales charge payable at the time of an
exchange, to add one or more new
Series eligible for the Exchange Option
or the Rollover Option, or to delete a
Series which has terminated; and (b) no
notice need be given if, under
extraordinary circumstances, either (i)
there is a suspension of the redemption
of Units of the Series under section
22(e) of the Act and the rules and
regulations promulgated thereunder, or
(ii) a Series temporarily delays or ceases
the sale of its Units because it is unable
to invest amounts effectively in
accordance with applicable investment
objectives, policies and restrictions.
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2. An investor who purchases Units
under the Exchange Option or the
Rollover Option will pay a lower sales
charge than that which would be paid
for the Units by a new investor.
3. The prospectus of each Series
offering exchanges or rollovers and any
sales literature or advertising that
mentions the existence of the Exchange
Option or Rollover Option will disclose
that the Exchange Option and the
Rollover Option are subject to
modification, termination or suspension
without notice, except in certain limited
cases.
4. Any DSC imposed on a Series’
Units will comply with the
requirements of subparagraphs (1), (2)
and (3) of rule 6c–10(a) under the Act.
5. Each Series offering Units subject to
a DSC will include in its prospectus the
disclosure required by Form N–1A
relating to deferred sales charges
(modified as appropriate to reflect the
differences between UITs and open-end
management investment companies)
and a schedule setting forth the number
and date of each Installment Payment.
42019
consideration of the scheduled matters
at the Closed Meeting.
Commissioner Walter, as duty officer,
voted to consider the items listed for the
Closed Meeting in a closed session.
The subject matter of the Closed
Meeting scheduled for Thursday, July
19, 2012 will be:
Institution and settlement of injunctive
actions;
Institution and settlement of
administrative proceedings;
A litigation matter;
An adjudicatory matter; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact: The Office of the Secretary at
(202) 551–5400.
Dated: July 12, 2012.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–17422 Filed 7–13–12; 11:15 am]
B. Net Worth Requirement
1. Applicants will comply in all
respects with the requirements of rule
14a–3 under the Act, except that the
Equity Series will not restrict their
portfolio investments to ‘‘eligible trust
securities.’’
BILLING CODE 8011–01–P
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change to Rule
4751(f)(7) Concerning the Processing
of the Price To Comply Order
[FR Doc. 2012–17336 Filed 7–16–12; 8:45 am]
BILLING CODE 8011–01–P
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold a Closed Meeting
on Thursday, July 19, 2012 at 10:00 a.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(2), (3), (5), (6), (7), 9(B)
and (10) and 17 CFR 200.402(a)(2), (3),
(5), (6), (7), 9(ii) and (10), permit
Frm 00053
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[Release No. 34–67414; File No. SR–BX–
2012–050]
July 11, 2012.
SECURITIES AND EXCHANGE
COMMISSION
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SECURITIES AND EXCHANGE
COMMISSION
Sfmt 4703
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 2,
2012, NASDAQ OMX BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to clarify how
the processing of a Price to Comply
Order under Rule 4751(f)(7) operates
based on the method of entry.
1 15
2 17
E:\FR\FM\17JYN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
17JYN1
]]>Agencies
[Federal Register Volume 77, Number 137 (Tuesday, July 17, 2012)]
[Notices]
[Pages 42017-42019]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17336]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30134; 812-14005]
AmericaFirst Quantitative Trust and AmericaFirst Securities,
Inc.; Notice of Application
July 10, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under (a) section 6(c) of the
Investment Company Act of 1940 (``Act'') for an exemption from sections
2(a)(32), 2(a)(35), 14(a), 19(b), 22(d) and 26(a)(2)(C) of the Act and
rules 19b-1 and rule 22c-1 thereunder and (b) sections 11(a) and 11(c)
of the Act for approval of certain exchange and rollover privileges.
-----------------------------------------------------------------------
Applicants: AmericaFirst Quantitative Trust (the ``AmericaFirst
Trust'') and AmericaFirst Securities, Inc. (``AFSI'').\1\
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\1\ Applicants also request relief for future unit investment
trusts (collectively, with the AmericaFirst Trust, the ``Trusts'')
and series of the Trusts (``Series'') for which AFSI or any entity
controlling, controlled by or under common control with AFSI
(together with AFSI, the ``Depositors'') serves as Depositor. Any
future Trust and Series that relies on the requested order will
comply with the terms and conditions of the application. All
existing entities that currently intend to rely on the requested
order are named as applicants.
Summary of Application: Applicants request an order to permit certain
unit investment trusts to: (a) impose sales charges on a deferred basis
and waive the deferred sales charge in certain cases; (b) offer
unitholders certain exchange and rollover options; (c) publicly offer
units without requiring the Depositor to take for its own account
$100,000 worth of units; and (d) distribute capital gains resulting
from the sale of portfolio securities within a reasonable time after
---------------------------------------------------------------------------
receipt.
Filing Dates: The application was filed on February 2, 2012, and
amended on February 7, 2012, June 25, 2012 and June 26, 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 August 3, 2012, and should be accompanied by proof of service
on the applicants, in the form of an affidavit, or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street
NE., Washington, DC 20549-1090; Applicants, 8150 Sierra College Blvd.,
Suite 290, Roseville, CA 95661.
FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at
(202) 551-6817, or Daniele Marchesani, Branch Chief, at (202) 551-6821
(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 AmericaFirst Trust is a unit investment trust (``UIT'') that
is registered under the Act. Any future Trust will be a registered UIT.
AFSI will be registered under the Securities Exchange Act of 1934 as a
broker-dealer and is the Depositor of the AmericaFirst Trust. Each
Series will be created by a trust indenture between the Depositor and a
banking institution or trust company as trustee (``Trustee'').
2. The Depositor acquires a portfolio of securities, which it
deposits with the Trustee in exchange for certificates representing
units of fractional undivided interest in the Series' portfolio
(``Units''). The Units are offered to the public through the Depositor
and dealers at a price which, during the initial offering period, is
based upon the aggregate market value of the underlying securities, or,
the aggregate offering side evaluation of the underlying securities if
the underlying securities are not listed on a securities exchange, plus
a front-end sales charge. The maximum sales charge may be reduced in
compliance with rule 22d-1 under the Act in certain circumstances,
which are disclosed in the Series' prospectus.
3. The Depositor is not legally obligated, and does not currently
intend, to maintain a secondary market for Units of outstanding equity
Series, but may seek to do so in the future. Other broker-dealers may
or may not maintain a secondary market for Units of a Series. If a
secondary market is maintained, investors will be able to purchase
Units on the secondary market at the current public offering price plus
a front-end sales charge. If such a market is not maintained at any
time for any Series, holders of the Units (``Unitholders'') of that
Series may redeem their Units through the Trustee.
A. Deferred Sales Charge and Waiver of Deferred Sales Charge Under
Certain Circumstances
1. Applicants request an order to the extent necessary to permit
one or more Series to impose a sales charge on a deferred basis
(``DSC''). For each Series, the Depositor would set a maximum sales
charge per Unit, a portion of which may be collected ``up front''
(i.e., at the time an investor purchases the Units). The DSC would be
collected subsequently in installments (``Installment Payments'') as
described in the application. The Depositor would not add any amount
for interest or any similar or related charge to adjust for such
deferral.
2. When a Unitholder redeems or sells Units, the Depositor intends
to deduct any unpaid DSC from the redemption or sale proceeds. When
calculating the amount due, the Depositor will assume that Units on
which the DSC has been paid in full are redeemed or sold first. With
respect to Units on which the DSC has not been paid in full, the
Depositor will assume that the Units held for the longest time are
redeemed or sold first. Applicants represent that the DSC collected at
the time of redemption or sale, together with the Installment Payments
and any amount collected up front, will not exceed the maximum sales
charge per Unit. Under certain circumstances, the Depositor may waive
the collection of any unpaid DSC in connection with redemptions or
sales of Units. These circumstances will be disclosed in the prospectus
for the relevant Series and implemented in
[[Page 42018]]
accordance with rule 22d-1 under the Act.
3. Each Series offering Units subject to a DSC will state the
maximum charge per Unit in its prospectus. In addition, the prospectus
for such Series will include the table required by Form N-1A (modified
as appropriate to reflect the difference between UITs and open-end
management investment companies) and a schedule setting forth the
number and date of each Installment Payment, along with the duration of
the collection period. The prospectus also will disclose that portfolio
securities may be sold to pay the DSC if distribution income is
insufficient and that securities will be sold pro rata, if practicable,
otherwise a specific security will be designated for sale.
B. Exchange Option and Rollover Option
1. Applicants request an order to the extent necessary to permit
Unitholders of a Series to exchange their Units for Units of another
Series (``Exchange Option'') and Unitholders of a Series that is
terminating to exchange their Units for Units of a new Series of the
same type (``Rollover Option''). The Exchange Option and Rollover
Option would apply to all exchanges of Units sold with a front-end
sales charge or DSC.
2. A Unitholder who purchases Units under the Exchange Option or
Rollover Option would pay a lower sales charge than that which would be
paid for the Units by a new investor. The reduced sales charge will be
reasonably related to the expenses incurred in connection with the
administration of the DSC program, which may include an amount that
will fairly and adequately compensate the Depositor and participating
underwriters and brokers for their services in providing the DSC
program.
Applicants' Legal Analysis
A. DSC and Waiver of DSC
1. Section 4(2) of the Act defines a ``unit investment trust'' as
an investment company that issues only redeemable securities. Section
2(a)(32) of the Act defines a ``redeemable security'' as a security
that, upon its presentation to the issuer, entitles the holder to
receive approximately his or her proportionate share of the issuer's
current net assets or the cash equivalent of those assets. Rule 22c-1
under the Act requires that the price of a redeemable security issued
by a registered investment company for purposes of sale, redemption or
repurchase be based on the security's current net asset value
(``NAV''). Because the collection of any unpaid DSC may cause a
redeeming Unitholder to receive an amount less than the NAV of the
redeemed Units, applicants request relief from section 2(a)(32) and
rule 22c-1.
2. Section 22(d) of the Act and rule 22d-1 under the Act require a
registered investment company and its principal underwriter and dealers
to sell securities only at the current public offering price described
in the investment company's prospectus, with the exception of sales of
redeemable securities at prices that reflect scheduled variations in
the sales load. Section 2(a)(35) of the Act defines the term ``sales
load'' as the difference between the sales price and the portion of the
proceeds invested by the depositor or trustee. Applicants request
relief from section 2(a)(35) and section 22(d) to permit waivers,
deferrals or other scheduled variations of the sales load.
3. Under section 6(c) of the Act, the Commission may exempt classes
of transactions, if and to the extent that such exemption is necessary
or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act. Applicants state that their proposal meets
the standards of section 6(c). Applicants state that the provisions of
section 22(d) are intended to prevent (a) riskless trading in
investment company securities due to backward pricing, (b) disruption
of orderly distribution by dealers selling shares at a discount, and
(c) discrimination among investors resulting from different prices
charged to different investors. Applicants assert that the proposed DSC
program will present none of these abuses. Applicants further state
that all scheduled variations in the sales load will be disclosed in
the prospectus of each Series and applied uniformly to all investors,
and that applicants will comply with all the conditions set forth in
rule 22d-1.
4. Section 26(a)(2)(C) of the Act, in relevant part, prohibits a
trustee or custodian of a UIT from collecting from the trust as an
expense any payment to the trust's depositor or principal underwriter.
Because the Trustee's payment of the DSC to the Depositor may be deemed
to be an expense under section 26(a)(2)(C), applicants request relief
under section 6(c) from section 26(a)(2)(C) to the extent necessary to
permit the Trustee to collect Installment Payments and disburse them to
the Depositor. Applicants submit that the relief is appropriate because
the DSC is more properly characterized as a sales load.
B. Exchange Option and Rollover Option
1. Sections 11(a) and 11(c) of the Act prohibit any offer of
exchange by a UIT for the securities of another investment company
unless the terms of the offer have been approved in advance by the
Commission. Applicants request an order under sections 11(a) and 11(c)
for Commission approval of the Exchange Option and the Rollover Option.
C. Net Worth Requirement
1. Section 14(a) of the Act requires that a registered investment
company have $100,000 of net worth prior to making a public offering.
Applicants state that each Series will comply with this requirement
because the Depositor will deposit more than $100,000 of securities.
Applicants assert, however, that the Commission has interpreted section
14(a) as requiring that the initial capital investment in an investment
company be made without any intention to dispose of the investment.
Applicants state that, under this interpretation, a Series would not
satisfy section 14(a) because of the Depositor's intention to sell all
the Units of the Series.
2. Rule 14a-3 under the Act exempts UITs from section 14(a) if
certain conditions are met, one of which is that the UIT invest only in
``eligible trust securities,'' as defined in the rule. Applicants state
that they may not rely on rule 14a-3 because certain Series
(collectively, ``Equity Series'') will invest all or a portion of their
assets in equity securities or shares of registered investment
companies which do not satisfy the definition of eligible trust
securities.
3. Applicants request an exemption under section 6(c) of the Act to
the extent necessary to exempt the Equity Series from the net worth
requirement in section 14(a). Applicants state that the Series and the
Depositor will comply in all respects with the requirements of rule
14a-3, except that the Equity Series will not restrict their portfolio
investments to ``eligible trust securities.''
D. Capital Gains Distribution
1. Section 19(b) of the Act and rule 19b-1 under the Act provide
that, except under limited circumstances, no registered investment
company may distribute long-term gains more than once every twelve
months. Rule 19b-1(c), under certain circumstances, exempts a UIT
investing in eligible trust securities (as defined in rule 14a-3) from
the requirements of rule 19b-1.
[[Page 42019]]
Because the Equity Series do not limit their investments to eligible
trust securities, however, the Equity Series will not qualify for the
exemption in paragraph (c) of rule 19b-1. Applicants therefore request
an exemption under section 6(c) from section 19(b) and rule 19b-1 to
the extent necessary to permit capital gains earned in connection with
the sale of portfolio securities to be distributed to Unitholders along
with the Equity Series' regular distributions. In all other respects,
applicants will comply with section 19(b) and rule 19b-1.
2. Applicants state that their proposal meets the standards of
section 6(c). Applicants assert that any sale of portfolio securities
would be triggered by the need to meet Trust expenses, Installment
Payments, or by redemption requests, events over which the Depositor
and the Equity Series do not have control. Applicants further state
that, because principal distributions must be clearly indicated in
accompanying reports to Unitholders as a return of principal and will
be relatively small in comparison to normal dividend distributions,
there is little danger of confusion from failure to differentiate among
distributions.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
A. DSC Relief and Exchange and Rollover Options
1. Whenever the Exchange Option or the Rollover Option is to be
terminated or its terms are to be amended materially, any holder of a
security subject to that privilege will be given prominent notice of
the impending termination or amendment at least 60 days prior to the
date of termination or the effective date of the amendment, provided
that: (a) no such notice need be given if the only material effect of
an amendment is to reduce or eliminate the sales charge payable at the
time of an exchange, to add one or more new Series eligible for the
Exchange Option or the Rollover Option, or to delete a Series which has
terminated; and (b) no notice need be given if, under extraordinary
circumstances, either (i) there is a suspension of the redemption of
Units of the Series under section 22(e) of the Act and the rules and
regulations promulgated thereunder, or (ii) a Series temporarily delays
or ceases the sale of its Units because it is unable to invest amounts
effectively in accordance with applicable investment objectives,
policies and restrictions.
2. An investor who purchases Units under the Exchange Option or the
Rollover Option will pay a lower sales charge than that which would be
paid for the Units by a new investor.
3. The prospectus of each Series offering exchanges or rollovers
and any sales literature or advertising that mentions the existence of
the Exchange Option or Rollover Option will disclose that the Exchange
Option and the Rollover Option are subject to modification, termination
or suspension without notice, except in certain limited cases.
4. Any DSC imposed on a Series' Units will comply with the
requirements of subparagraphs (1), (2) and (3) of rule 6c-10(a) under
the Act.
5. Each Series offering Units subject to a DSC will include in its
prospectus the disclosure required by Form N-1A relating to deferred
sales charges (modified as appropriate to reflect the differences
between UITs and open-end management investment companies) and a
schedule setting forth the number and date of each Installment Payment.
B. Net Worth Requirement
1. Applicants will comply in all respects with the requirements of
rule 14a-3 under the Act, except that the Equity Series will not
restrict their portfolio investments to ``eligible trust securities.''
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-17336 Filed 7-16-12; 8:45 am]
BILLING CODE 8011-01-P
