BlackRock Preferred Partners LLC, et al.; Notice of Application, 47442-47444 [2012-19366]
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47442
Federal Register / Vol. 77, No. 153 / Wednesday, August 8, 2012 / Notices
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[FR Doc. 2012–19312 Filed 8–7–12; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
wreier-aviles on DSK7SPTVN1PROD with NOTICES
[Investment Company Act Release No.
30160; 812–13964]
BlackRock Preferred Partners LLC, et
al.; Notice of Application
August 2, 2012.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application under
section 6(c) of the Investment Company
Act of 1940 (the ‘‘Act’’) for an
exemption from sections 18(c) and 18(i)
AGENCY:
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Jkt 226001
limited liability company. The Adviser
is registered as an investment adviser
under the Investment Advisers Act of
1940 and serves as investment adviser
SUMMARY: Summary of Application:
to the Fund. The Distributor, a brokerApplicants request an order to permit
dealer registered under the Securities
certain registered closed-end
Exchange Act of 1934, acts as principal
management investment companies to
underwriter to the Fund. The
issue multiple classes of shares and to
Distributor is under common control
impose asset-based distribution and
with the Adviser and is an affiliated
service fees and contingent deferred
person, as defined in section 2(a)(3) of
sales loads (‘‘CDSCs’’).
the Act, of the Adviser.
Applicants: BlackRock Preferred
2. The Fund continuously offers its
Partners LLC (the ‘‘Fund’’), BlackRock
limited liability company interests
Advisors, LLC (the ‘‘Adviser’’) and
(‘‘Units’’) to the public pursuant to a
BlackRock Investments, LLC (the
registration statement under the
‘‘Distributor’’).
Securities Act of 1933. The Units of the
Fund are not listed on any securities
DATES: Filing Dates: The application
exchange and are not traded on an overwas filed on September 23, 2011, and
the-counter system such as NASDAQ.
amended on June 22, 2012.
Hearing or Notification of Hearing: An Applicants do not expect that any
order granting the requested relief will
secondary market will develop for the
be issued unless the Commission orders Units.
3. The Fund currently offers an initial
a hearing. Interested persons may
class of Units (‘‘Initial Class’’) at net
request a hearing by writing to the
asset value subject to a front-end sales
Commission’s Secretary and serving
load and an ongoing asset-based
applicants with a copy of the request,
distribution fee and proposes to offer
personally or by mail. Hearing requests
multiple classes of Units. The Fund
should be received by the Commission
would offer new Unit classes (‘‘New
by 5:30 p.m. on August 27, 2012, and
Class’’) at net asset value and may also
should be accompanied by proof of
service on the applicants, in the form of charge a front-end sales load and an
an affidavit, or, for lawyers, a certificate annual service and/or distribution fee.
of service. Hearing requests should state The Fund intends to continue to offer
Initial Class Units, subject to minimum
the nature of the writer’s interest, the
purchase requirements.
reason for the request, and the issues
4. In order to provide a degree of
contested. Persons who wish to be
liquidity to members (‘‘Members’’), the
notified of a hearing may request
Fund may from time to time offer to
notification by writing to the
repurchase Units at net asset value in
Commission’s Secretary.
accordance with rule 13e–4 under the
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street Exchange Act of 1934 Act, as amended
(the ‘‘1934 Act’’).1 A Fund will
NE., Washington, DC 20549–1090;
repurchase Units at the times, in the
Applicants, c/o Janey Ahn, Esq.,
amounts and on the terms as may be
BlackRock Advisors, LLC, 55 East 52nd
determined by the Board of Directors
Street, New York, New York 10055.
(‘‘Board’’) of the Fund in its sole
FOR FURTHER INFORMATION CONTACT:
discretion. The Adviser expects to
Emerson S. Davis, Senior Counsel, at
recommend ordinarily that the Board
(202) 551–6868 or Daniele Marchesani,
authorize each Fund to offer to
Branch Chief, at (202) 551–6821
repurchase Units from Members
(Division of Investment Management,
quarterly.
Office of Investment Company
5. Applicants request that the order
Regulation).
also apply to any other continuously
SUPPLEMENTARY INFORMATION: The
offered registered closed-end
following is a summary of the
management investment companies
application. The complete application
existing now or in the future for which
may be obtained via the Commission’s
Web site by searching for the file
1 For the Initial Class, a 2% early repurchase fee
number, or an applicant using the
will be charged to any Member that tenders its
Units to the Fund in connection with a tender offer
Company name box, at https://
with a valuation date that is prior to the business
www.sec.gov/search/search.htm or by
day immediately preceding the one-year
calling (202) 551–8090.
anniversary of the Member’s purchase of the
of the Act and for an order pursuant to
section 17(d) of the Act and rule 17d–
1 under the Act.
Applicants’ Representations
1. The Fund is a continuously offered
non-diversified closed-end management
investment company registered under
the Act and organized as a Delaware
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
respective Units. Any early repurchase fee, and the
Fund’s waiver of, scheduled variation in, or
elimination of, such early repurchase fee, will
equally apply to all Members of the Fund, within
the applicable category of Members, regardless of
class, consistent with section 18 of the Act and rule
18f–3 thereunder.
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Federal Register / Vol. 77, No. 153 / Wednesday, August 8, 2012 / Notices
wreier-aviles on DSK7SPTVN1PROD with NOTICES
the Adviser, the Distributor, or any
entity controlling, controlled by or
under common control with the Adviser
or the Distributor acts as investment
adviser or principal underwriter, and
which provides periodic liquidity with
respect to its Units pursuant to rule
13e–4 under the 1934 Act (such
investment companies, together with
the Fund, the ‘‘Funds’’).2
6. Applicants represent that any assetbased service and distribution fees will
comply with the provisions of rule
2830(d) of the Conduct Rules of the
National Association of Securities
Dealers, Inc. (‘‘NASD Conduct Rule
2830’’).3 Applicants also represent that
each Fund will disclose in its
prospectus, the fees, expenses and other
characteristics of each class of Units
offered for sale by the prospectus as is
required for open-end multiple class
funds under Form N–1A. The Fund will
disclose fund expenses in Member
reports as if it were an open-end
management investment company, and
disclose any arrangements that result in
breakpoints in, or elimination of, sales
loads in its prospectus.4 The Fund and
the Distributor will also comply with
any requirements that may be adopted
by the Commission or FINRA regarding
disclosure at the point of sale and in
transaction confirmations about the
costs and conflicts of interest arising out
of the distribution of open-end
investment company shares, and
regarding prospectus disclosure of sales
loads and revenue sharing arrangements
as if those requirements applied to the
Fund and the Distributor.5
7. The Fund will allocate all expenses
incurred by it among the various classes
of Units based on the respective net
assets of the Fund attributable to each
2 Any Fund relying on this relief in the future will
do so in a manner consistent with the terms and
conditions of the application. Applicants represent
that any investment company presently intending
to rely on the requested relief is listed as an
applicant.
3 All references to NASD Conduct Rule 2830
include any successor or replacement rule that may
be adopted by the Financial Industry Regulatory
Authority (‘‘FINRA’’).
4 See Shareholder Reports and Quarterly Portfolio
Disclosure of Registered Management Investment
Companies, Investment Company Act Release No.
26372 (Feb. 27, 2004) (adopting release) (requiring
open-end investment companies to disclose fund
expenses in shareholder reports); and Disclosure of
Breakpoint Discounts by Mutual Funds, Investment
Company Act Release No. 26464 (June 7, 2004)
(adopting release) (requiring open-end investment
companies to provide prospectus disclosure of
certain sales load information).
5 See, e.g., Confirmation Requirements and Point
of Sale Disclosure Requirements for Transactions in
Certain Mutual Funds and Other Securities, and
Other Confirmation Requirement Amendments, and
Amendments to the Registration Form for Mutual
Funds, Investment Company Act Release No. 26341
(Jan. 29, 2004) (proposing release).
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15:11 Aug 07, 2012
Jkt 226001
class, except that the net asset value and
expenses of each class will reflect
distribution fees, service fees, and any
other incremental expenses of that class.
Expenses of the Fund allocated to a
particular class of Units will be borne
on a pro rata basis by each outstanding
Unit of that class. Applicants state that
the Fund will comply with the
provisions of rule 18f–3 under the Act
as if it were an open-end investment
company.
8. In the event the Fund imposes a
CDSC, the Applicants will comply with
the provisions of rules 6c–10, as if that
rule applied to closed-end management
investment companies. With respect to
any waiver of, scheduled variation in, or
elimination of the CDSC, the Fund will
comply with rule 22d–1 under the Act
as if the Fund were an open-end
investment company.
Applicants’ Legal Analysis
Multiple Classes of Shares
1. Section 18(c) of the Act provides,
in relevant part, that a closed-end
investment company may not issue or
sell any senior security if, immediately
thereafter, the company has outstanding
more than one class of senior security.
Applicants state that the creation of
multiple classes of Units of the Funds
may be prohibited by section 18(c).
2. Section 18(i) of the Act provides
that each share of stock issued by a
registered management investment
company will be a voting stock and
have equal voting rights with every
other outstanding voting stock.
Applicants state that permitting
multiple classes of Units of the Funds
may violate section 18(i) of the Act
because each class would be entitled to
exclusive voting rights with respect to
matters solely related to that class.
3. Section 6(c) 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 the
Act, or from any rule under the Act, if
and to the extent 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
request an exemption under section 6(c)
from sections 18(c) and 18(i) to permit
the Funds to issue multiple classes of
Units.
4. Applicants submit that the
proposed allocation of expenses and
voting rights among multiple classes is
equitable and will not discriminate
against any group or class of Members.
Applicants submit that the proposed
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Fmt 4703
Sfmt 4703
47443
arrangements would permit the Fund to
facilitate the distribution of its Units
and provide investors with a broader
choice of Member options. Applicants
assert that the proposed closed-end
investment company multiple class
structure does not raise the concerns
underlying section 18 of the Act to any
greater degree than open-end
investment companies’ multiple class
structures that are permitted by rule
18f–3 under the Act. Applicants state
that each Fund will comply with the
provisions of rule 18f–3 as if it were an
open-end investment company.
CDSCs
1. Applicants believe that the
requested relief meets the standards of
section 6(c) of the Act. Rule 6c–10
under the Act permits open-end
investment companies to impose
CDSCs, subject to certain conditions.
Applicants state that any CDSC imposed
by the Fund will comply with rule 6c–
10 under the Act as if the rule were
applicable to closed-end investment
companies. The Fund also will disclose
CDSCs in accordance with the
requirements of Form N–1A concerning
CDSCs as if the Fund were open-end
investment companies. Applicants
further state that the Fund will apply
the CDSC (and any waivers or
scheduled variations of the CDSC)
uniformly to all Members in a given
class and consistently with the
requirements of rule 22d–1 under the
Act.
Asset-Based Service and Distribution
Fees
1. Section 17(d) of the Act and rule
17d–1 under the Act prohibit an
affiliated person of a registered
investment company or an affiliated
person of such person, acting as
principal, from participating in or
effecting any transaction in connection
with any joint enterprise or joint
arrangement in which the investment
company participates unless the
Commission issues an order permitting
the transaction. In reviewing
applications submitted under section
17(d) and rule 17d–1, the Commission
considers whether the participation of
the investment company in a joint
enterprise or joint arrangement is
consistent with the provisions, policies
and purposes of the Act, and the extent
to which the participation is on a basis
different from or less advantageous than
that of other participants.
2. Rule 17d–3 under the Act provides
an exemption from section 17(d) and
rule 17d–1 to permit open-end
investment companies to enter into
distribution arrangements pursuant to
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47444
Federal Register / Vol. 77, No. 153 / Wednesday, August 8, 2012 / Notices
rule 12b–1 under the Act. Applicants
request an order under section 17(d) and
rule 17d–1 under the Act to permit the
Funds to impose asset-based service
and/or distribution fees. Applicants
have agreed to comply with rules 12b–
1 and 17d–3 as if those rules applied to
closed-end investment companies.
Applicants’ Condition
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
Applicants will comply with the
provisions of rules 12b–1, 17d–3 and
18f–3 under the Act, as amended from
time to time or replaced, as if those
rules applied to closed-end management
investment companies, and will comply
with NASD Conduct Rule 2830, as
amended from time to time or replaced,
as if that rule applied to all closed-end
management investment companies.
Additionally, in the event the Fund
imposes a CDSC, the Applicants will
comply with the provisions of rules 6c–
10 and 22d–1 under the Act, as
amended from time to time or replaced,
as if those rules applied to closed-end
management investment companies,
and to the extent the Fund may
determine to waive, impose scheduled
variations of, or eliminate the early
repurchase fee, it will do so consistently
with the requirements of rule 22d–1
under the Act, as amended from time to
time or replaced.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
BILLING CODE 8011–01–P
[Release No. 34–67558; File No. SR–BATS–
2012–030]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing of
Proposed Rule Change To Amend
BATS Rule 14.11, Entitled ‘‘Other
Securities’’
wreier-aviles on DSK7SPTVN1PROD with NOTICES
August 1, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’),1 and Rule 19b–4
thereunder,2 notice is hereby given that,
on July 20, 2012, BATS Exchange, Inc.
(‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Mar<15>2010
15:11 Aug 07, 2012
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
2 17
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 14.11, entitled ‘‘Other Securities,’’
to modify the criteria for certain
securities listed on BATS Exchange as
Index Fund Shares. The text of the
proposed rule change is available at the
Exchange’s Web site at https://
www.batstrading.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
The proposed rule text can be found in
Exhibit 5.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2012–19366 Filed 8–7–12; 8:45 am]
1 15
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.
Jkt 226001
Proposal To Amend Index Fund Shares
Rules
The Exchange proposes certain
changes to Rule 14.11(c), relating to
Index Fund Shares, to conform the
Exchange’s listings criteria for Index
Fund Shares with the analogous criteria
in place for NYSE Arca Equities, Inc.
(‘‘NYSE Arca’’).3 Specifically, the
Exchange proposes to amend Exchange
Rule 14.11(c) (‘‘Index Fund Shares’’) to:
(1) Modify the weight and volume
requirement for component stocks
comprising the applicable index or
portfolio for any U.S. index or portfolio
and any international or global index or
portfolio upon which Index Fund
Shares are based; (2) exclude Index
Fund Shares, Portfolio Depositary
3 The Exchange notes that NYSE Arca uses the
term Investment Company Units to describe the
same products that the Exchange calls Index Fund
Shares.
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Receipts, Trust Issued Receipts, and
Managed Fund Shares (collectively,
‘‘Derivative Securities Products’’)4 when
applying the quantitative generic listing
criteria in Rule 14.11(c); and (3) modify
the minimum number of component
stocks for any U.S. index or portfolio
and any international or global index or
portfolio upon which Index Fund
Shares are based to adopt certain
exceptions for any index or portfolio
that is partially or wholly comprised of
Index Fund Shares or other Derivative
Securities Products.
Rule 14.11(c)(3) provides that the
Exchange may approve a series of Index
Fund Shares for listing and trading
pursuant to Rule 19b–4(e)5 under the
Act if such series satisfies the criteria set
forth in that rule. The Exchange
proposes to amend Rule 14.11(c)(3) to
amend the index weight requirements
and adopt notional volume traded per
month6 to the initial listing standards
for Index Fund Shares, commonly
referred to as exchange-traded funds.
The Exchange proposes to amend the
minimum component stock weight
requirement for monthly trading
volumes from 90% to 70% of the weight
of the underlying index. In addition, the
Exchange proposes to adopt an
alternative notional volume traded per
month.
Currently for U.S. component stock
indexes, Rule 14.11(c)(3)(A)(i)(b)
provides that component stocks that in
the aggregate account for at least 90% of
the weight of the index or portfolio each
shall have a minimum monthly trading
volume during each of the last six
months of at least 250,000 shares. The
Exchange proposes to amend the
minimum component stock weight
requirement from 90% to 70% of the
weight of the underlying index or
portfolio. Further, the Exchange is
proposing to adopt an average minimum
trading volume requirement of 250,000
shares over a six-month period instead
of in each of the last six months and to
adopt a notional volume traded per
month of $25,000,000 averaged over the
4 Rule 14.11 includes criteria for derivative
securities that may be listed or traded on the
Exchange, such as Portfolio Depositary Receipts,
Trust Issued Receipts, and Managed Fund Shares.
5 17 CFR 240.19b–4(e). Rule 19b–4(e) provides
that the listing and trading of a new derivative
securities product by a self-regulatory organization
(‘‘SRO’’) shall not be deemed a proposed rule
change, pursuant to Rule 19b–4(c)(1), if the
Commission has approved, pursuant to Section
19(b) of the Exchange Act, the SRO’s trading rules,
procedures, and listing standards for the product
class that would include the new derivatives
securities product, and the SRO has a surveillance
program for the product class.
6 The notional volume traded per month is the
number of shares traded in a calendar month
multiplied by the monthly closing price.
E:\FR\FM\08AUN1.SGM
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Agencies
[Federal Register Volume 77, Number 153 (Wednesday, August 8, 2012)]
[Notices]
[Pages 47442-47444]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-19366]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30160; 812-13964]
BlackRock Preferred Partners LLC, et al.; Notice of Application
August 2, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from sections 18(c)
and 18(i) of the Act and for an order pursuant to section 17(d) of the
Act and rule 17d-1 under the Act.
-----------------------------------------------------------------------
SUMMARY: Summary of Application: Applicants request an order to permit
certain registered closed-end management investment companies to issue
multiple classes of shares and to impose asset-based distribution and
service fees and contingent deferred sales loads (``CDSCs'').
Applicants: BlackRock Preferred Partners LLC (the ``Fund''),
BlackRock Advisors, LLC (the ``Adviser'') and BlackRock Investments,
LLC (the ``Distributor'').
DATES: Filing Dates: The application was filed on September 23, 2011,
and amended on June 22, 2012.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on August 27, 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, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants, c/o Janey Ahn, Esq.,
BlackRock Advisors, LLC, 55 East 52nd Street, New York, New York 10055.
FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Senior Counsel, at
(202) 551-6868 or Daniele Marchesani, Branch Chief, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at https://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. The Fund is a continuously offered non-diversified closed-end
management investment company registered under the Act and organized as
a Delaware limited liability company. The Adviser is registered as an
investment adviser under the Investment Advisers Act of 1940 and serves
as investment adviser to the Fund. The Distributor, a broker-dealer
registered under the Securities Exchange Act of 1934, acts as principal
underwriter to the Fund. The Distributor is under common control with
the Adviser and is an affiliated person, as defined in section 2(a)(3)
of the Act, of the Adviser.
2. The Fund continuously offers its limited liability company
interests (``Units'') to the public pursuant to a registration
statement under the Securities Act of 1933. The Units of the Fund are
not listed on any securities exchange and are not traded on an over-
the-counter system such as NASDAQ. Applicants do not expect that any
secondary market will develop for the Units.
3. The Fund currently offers an initial class of Units (``Initial
Class'') at net asset value subject to a front-end sales load and an
ongoing asset-based distribution fee and proposes to offer multiple
classes of Units. The Fund would offer new Unit classes (``New Class'')
at net asset value and may also charge a front-end sales load and an
annual service and/or distribution fee. The Fund intends to continue to
offer Initial Class Units, subject to minimum purchase requirements.
4. In order to provide a degree of liquidity to members
(``Members''), the Fund may from time to time offer to repurchase Units
at net asset value in accordance with rule 13e-4 under the Exchange Act
of 1934 Act, as amended (the ``1934 Act'').\1\ A Fund will repurchase
Units at the times, in the amounts and on the terms as may be
determined by the Board of Directors (``Board'') of the Fund in its
sole discretion. The Adviser expects to recommend ordinarily that the
Board authorize each Fund to offer to repurchase Units from Members
quarterly.
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\1\ For the Initial Class, a 2% early repurchase fee will be
charged to any Member that tenders its Units to the Fund in
connection with a tender offer with a valuation date that is prior
to the business day immediately preceding the one-year anniversary
of the Member's purchase of the respective Units. Any early
repurchase fee, and the Fund's waiver of, scheduled variation in, or
elimination of, such early repurchase fee, will equally apply to all
Members of the Fund, within the applicable category of Members,
regardless of class, consistent with section 18 of the Act and rule
18f-3 thereunder.
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5. Applicants request that the order also apply to any other
continuously offered registered closed-end management investment
companies existing now or in the future for which
[[Page 47443]]
the Adviser, the Distributor, or any entity controlling, controlled by
or under common control with the Adviser or the Distributor acts as
investment adviser or principal underwriter, and which provides
periodic liquidity with respect to its Units pursuant to rule 13e-4
under the 1934 Act (such investment companies, together with the Fund,
the ``Funds'').\2\
---------------------------------------------------------------------------
\2\ Any Fund relying on this relief in the future will do so in
a manner consistent with the terms and conditions of the
application. Applicants represent that any investment company
presently intending to rely on the requested relief is listed as an
applicant.
---------------------------------------------------------------------------
6. Applicants represent that any asset-based service and
distribution fees will comply with the provisions of rule 2830(d) of
the Conduct Rules of the National Association of Securities Dealers,
Inc. (``NASD Conduct Rule 2830'').\3\ Applicants also represent that
each Fund will disclose in its prospectus, the fees, expenses and other
characteristics of each class of Units offered for sale by the
prospectus as is required for open-end multiple class funds under Form
N-1A. The Fund will disclose fund expenses in Member reports as if it
were an open-end management investment company, and disclose any
arrangements that result in breakpoints in, or elimination of, sales
loads in its prospectus.\4\ The Fund and the Distributor will also
comply with any requirements that may be adopted by the Commission or
FINRA regarding disclosure at the point of sale and in transaction
confirmations about the costs and conflicts of interest arising out of
the distribution of open-end investment company shares, and regarding
prospectus disclosure of sales loads and revenue sharing arrangements
as if those requirements applied to the Fund and the Distributor.\5\
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\3\ All references to NASD Conduct Rule 2830 include any
successor or replacement rule that may be adopted by the Financial
Industry Regulatory Authority (``FINRA'').
\4\ See Shareholder Reports and Quarterly Portfolio Disclosure
of Registered Management Investment Companies, Investment Company
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring
open-end investment companies to disclose fund expenses in
shareholder reports); and Disclosure of Breakpoint Discounts by
Mutual Funds, Investment Company Act Release No. 26464 (June 7,
2004) (adopting release) (requiring open-end investment companies to
provide prospectus disclosure of certain sales load information).
\5\ See, e.g., Confirmation Requirements and Point of Sale
Disclosure Requirements for Transactions in Certain Mutual Funds and
Other Securities, and Other Confirmation Requirement Amendments, and
Amendments to the Registration Form for Mutual Funds, Investment
Company Act Release No. 26341 (Jan. 29, 2004) (proposing release).
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7. The Fund will allocate all expenses incurred by it among the
various classes of Units based on the respective net assets of the Fund
attributable to each class, except that the net asset value and
expenses of each class will reflect distribution fees, service fees,
and any other incremental expenses of that class. Expenses of the Fund
allocated to a particular class of Units will be borne on a pro rata
basis by each outstanding Unit of that class. Applicants state that the
Fund will comply with the provisions of rule 18f-3 under the Act as if
it were an open-end investment company.
8. In the event the Fund imposes a CDSC, the Applicants will comply
with the provisions of rules 6c-10, as if that rule applied to closed-
end management investment companies. With respect to any waiver of,
scheduled variation in, or elimination of the CDSC, the Fund will
comply with rule 22d-1 under the Act as if the Fund were an open-end
investment company.
Applicants' Legal Analysis
Multiple Classes of Shares
1. Section 18(c) of the Act provides, in relevant part, that a
closed-end investment company may not issue or sell any senior security
if, immediately thereafter, the company has outstanding more than one
class of senior security. Applicants state that the creation of
multiple classes of Units of the Funds may be prohibited by section
18(c).
2. Section 18(i) of the Act provides that each share of stock
issued by a registered management investment company will be a voting
stock and have equal voting rights with every other outstanding voting
stock. Applicants state that permitting multiple classes of Units of
the Funds may violate section 18(i) of the Act because each class would
be entitled to exclusive voting rights with respect to matters solely
related to that class.
3. Section 6(c) 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 the Act, or from any
rule under the Act, if and to the extent 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 request an exemption under section
6(c) from sections 18(c) and 18(i) to permit the Funds to issue
multiple classes of Units.
4. Applicants submit that the proposed allocation of expenses and
voting rights among multiple classes is equitable and will not
discriminate against any group or class of Members. Applicants submit
that the proposed arrangements would permit the Fund to facilitate the
distribution of its Units and provide investors with a broader choice
of Member options. Applicants assert that the proposed closed-end
investment company multiple class structure does not raise the concerns
underlying section 18 of the Act to any greater degree than open-end
investment companies' multiple class structures that are permitted by
rule 18f-3 under the Act. Applicants state that each Fund will comply
with the provisions of rule 18f-3 as if it were an open-end investment
company.
CDSCs
1. Applicants believe that the requested relief meets the standards
of section 6(c) of the Act. Rule 6c-10 under the Act permits open-end
investment companies to impose CDSCs, subject to certain conditions.
Applicants state that any CDSC imposed by the Fund will comply with
rule 6c-10 under the Act as if the rule were applicable to closed-end
investment companies. The Fund also will disclose CDSCs in accordance
with the requirements of Form N-1A concerning CDSCs as if the Fund were
open-end investment companies. Applicants further state that the Fund
will apply the CDSC (and any waivers or scheduled variations of the
CDSC) uniformly to all Members in a given class and consistently with
the requirements of rule 22d-1 under the Act.
Asset-Based Service and Distribution Fees
1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company or an
affiliated person of such person, acting as principal, from
participating in or effecting any transaction in connection with any
joint enterprise or joint arrangement in which the investment company
participates unless the Commission issues an order permitting the
transaction. In reviewing applications submitted under section 17(d)
and rule 17d-1, the Commission considers whether the participation of
the investment company in a joint enterprise or joint arrangement is
consistent with the provisions, policies and purposes of the Act, and
the extent to which the participation is on a basis different from or
less advantageous than that of other participants.
2. Rule 17d-3 under the Act provides an exemption from section
17(d) and rule 17d-1 to permit open-end investment companies to enter
into distribution arrangements pursuant to
[[Page 47444]]
rule 12b-1 under the Act. Applicants request an order under section
17(d) and rule 17d-1 under the Act to permit the Funds to impose asset-
based service and/or distribution fees. Applicants have agreed to
comply with rules 12b-1 and 17d-3 as if those rules applied to closed-
end investment companies.
Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
Applicants will comply with the provisions of rules 12b-1, 17d-3
and 18f-3 under the Act, as amended from time to time or replaced, as
if those rules applied to closed-end management investment companies,
and will comply with NASD Conduct Rule 2830, as amended from time to
time or replaced, as if that rule applied to all closed-end management
investment companies. Additionally, in the event the Fund imposes a
CDSC, the Applicants will comply with the provisions of rules 6c-10 and
22d-1 under the Act, as amended from time to time or replaced, as if
those rules applied to closed-end management investment companies, and
to the extent the Fund may determine to waive, impose scheduled
variations of, or eliminate the early repurchase fee, it will do so
consistently with the requirements of rule 22d-1 under the Act, as
amended from time to time or replaced.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-19366 Filed 8-7-12; 8:45 am]
BILLING CODE 8011-01-P