Wells Fargo Funds Trust, et al.; Notice of Application, 57597-57602 [2012-22917]
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Federal Register / Vol. 77, No. 181 / Tuesday, September 18, 2012 / Notices
9:45 a.m.
10 a.m., Thursday,
September 20, 2012.
PLACE: Board Room, 7th Floor, Room
7047, 1775 Duke Street (All visitors
must use Diagonal Road Entrance),
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Permissible Investments –Treasury
Inflation Protected Securities.
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Interpretive Ruling and Policy
Statement 12–2, Regulatory Relief for
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for Field of Membership.
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Payday-Alternative Loans.
FOR FURTHER INFORMATION CONTACT:
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Telephone: 703–518–6304.
RECESS:
TIME AND DATE:
Mary Rupp,
Board Secretary.
[FR Doc. 2012–23009 Filed 9–14–12; 11:15 am]
BILLING CODE 7535–01–P
NUCLEAR REGULATORY
COMMISSION
[NRC–2012–0002]
Sunshine Federal Register Notice
AGENCY HOLDING THE MEETINGS: Nuclear
Regulatory Commission,
DATE: Weeks of September 17, 24,
October 1, 8, 15, 22, 2012.
PLACE: Commissioners’ Conference
Room, 11555 Rockville Pike, Rockville,
Maryland.
STATUS: Public and Closed.
Week of September 17, 2012
There are no meetings scheduled for
the week of September 17, 2012.
Week of September 24, 2012—Tentative
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Tuesday, September 25, 2012
9:30 a.m. Strategic Programmatic
Overview of the New Reactors
Business Line (Public Meeting)
(Contact: Donna Williams, 301–
415–1322)
This meeting will be webcast live at
the Web address—www.nrc.gov.
Week of October 1, 2012—Tentative
Tuesday, October 2, 2012
9:30 a.m. Strategic Programmatic
Overview of the Nuclear Materials
Users and Decommissioning and
Low-Level Waste Business Lines
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(Public Meeting) (Contact: Kimyata
Morgan Butler, 301–415–0733)
This meeting will be webcast live at
the Web address—www.nrc.gov.
SECURITIES AND EXCHANGE
COMMISSION
Week of October 8, 2012—Tentative
Wells Fargo Funds Trust, et al.; Notice
of Application
There are no meetings scheduled for
the week of October 8, 2012.
Week of October 15, 2012—Tentative
There are no meetings scheduled for
the week of October 15, 2012.
Week of October 22, 2012—Tentative
Tuesday, October 23, 2012
9:30 a.m. Strategic Programmatic
Overview of the Spent Fuel Storage
and Transportation and Fuel
Facilities Business Lines (Public
Meeting) (Contact: Kevin Mattern,
301–492–3221)
This meeting will be webcast live at
the Web address—www.nrc.gov.
*
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*The schedule for Commission
meetings is subject to change on short
notice. To verify the status of meetings,
call (recording)—301–415–1292.
Contact person for more information:
Rochelle Bavol, 301–415–1651.
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The NRC Commission Meeting
Schedule can be found on the Internet
at: https://www.nrc.gov/public-involve/
public-meetings/schedule.html.
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The NRC provides reasonable
accommodation to individuals with
disabilities where appropriate. If you
need a reasonable accommodation to
participate in these public meetings, or
need this meeting notice or the
transcript or other information from the
public meetings in another format (e.g.
braille, large print), please notify Bill
Dosch, Chief, Work Life and Benefits
Branch, at 301–415–6200, TDD: 301–
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on requests for reasonable
accommodation will be made on a caseby-case basis.
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contact the Office of the Secretary,
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or send an email to
darlene.wright@nrc.gov.
Dated: September 13, 2012.
Rochelle C. Bavol,
Policy Coordinator, Office of the Secretary.
[FR Doc. 2012–23062 Filed 9–14–12; 11:15 am]
BILLING CODE 7590–01–P
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[Investment Company Act Release No.
30201; File No. 812–13967]
September 12, 2012.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under section 12(d)(1)(J) of the
Investment Company Act of 1940 (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 sections 17(a)(1) and (2)
of the Act, and under section 6(c) of the
Act for an exemption from rule 12d1–
2(a) under the Act.
AGENCY:
The
requested order would (a) permit certain
registered open-end management
investment companies to acquire shares
of other registered open-end
management investment companies and
unit investment trusts (‘‘UITs’’) that are
within and outside the same group of
investment companies as the acquiring
investment companies, and (b) permit
funds of funds relying on rule 12d1–2
under the Act to invest in certain
financial instruments.
APPLICANTS: Wells Fargo Funds Trust
(‘‘Trust’’), on behalf of its series, Wells
Fargo Advantage WealthBuilder
Conservative Allocation Portfolio, Wells
Fargo Advantage WealthBuilder
Moderate Balanced Portfolio, Wells
Fargo Advantage WealthBuilder Growth
Balanced Portfolio, Wells Fargo
Advantage WealthBuilder Growth
Allocation Portfolio, Wells Fargo
Advantage WealthBuilder Equity
Portfolio and Wells Fargo Advantage
WealthBuilder Tactical Equity Portfolio
(collectively, the ‘‘WealthBuilder
Portfolios’’), and Wells Fargo Funds
Management, LLC (‘‘WFFM’’ or the
‘‘Adviser’’).
DATES: Filing Dates: The application was
filed on October 12, 2011, and amended
on May 10, 2012, and August 27, 2012.
Applicants have agreed to file an
amendment during the notice period,
the substance of which is reflected in
this notice.
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
SUMMARY OF THE APPLICATION:
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Federal Register / Vol. 77, No. 181 / Tuesday, September 18, 2012 / Notices
by 5:30 p.m. on October 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: Elizabeth M. Murphy,
Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
Applicants: 525 Market Street, 12th
Floor, San Francisco, CA 94105.
FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Senior Counsel, at (202)
551–6876, or Mary Kay Frech, 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 for 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 Trust is a Delaware statutory
trust and is registered as an open-end
management investment company
under the Act. The WealthBuilder
Portfolios are series of the Trust, and
each pursues a distinct investment
objective and strategy.1 The
WealthBuilder Portfolios are the only
Wells Fargo Advantage Funds that
currently intend to rely on the requested
order. In the future, other Wells Fargo
Advantage Funds, including series of
Wells Fargo Variable Trust, that pursue
their investment objective by investing
in Underlying Funds (as defined below)
may rely on the requested order. 2
1 Applicants request that the relief apply to any
existing or future registered open-end management
investment companies and any series thereof that
are part of the same group of investment companies
(as defined in section 12(d)(1)(G)(ii) of the Act) as
the WealthBuilder Portfolios and that are, or may
in the future be, advised by WFFM (together with
the WealthBuilder Portfolios, the ‘‘Wells Fargo
Advantage Funds’’).
2 Shares of the series of Wells Fargo Variable
Trust are not offered directly to the public. Shares
of each series of Wells Fargo Variable Trust are
offered to separate accounts that are registered as
investment companies under the Act (‘‘Registered
Separate Accounts’’) or that are not registered under
the Act (‘‘Unregistered Separate Accounts’’, and
together with the Registered Separate Accounts,
‘‘Separate Accounts’’) of affiliated and unaffiliated
insurance companies (collectively, ‘‘Insurance
Companies’’) as the underlying investment vehicles
for the variable life insurance and variable annuity
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2. The Adviser is registered as an
investment adviser under the
Investment Advisers Act of 1940
(‘‘Advisers Act’’) and serves as
investment adviser for each Wells Fargo
Advantage Fund.3 The Adviser may
engage one or more affiliated or
unaffiliated subadvisers (each a
‘‘Subadviser’’). Each Subadviser will be
registered as an investment adviser
under the Advisers Act.
3. Applicants request an order to
permit (a) certain Wells Fargo
Advantage Funds that operate as a
‘‘fund of funds’’ (each, a ‘‘Wells Fargo
Fund-of-Funds’’) to acquire shares of (i)
registered open-end management
investment companies that are not part
of the same ‘‘group of investment
companies,’’ within the meaning of
section 12(d)(1)(G)(ii) of the Act, as the
Wells Fargo Fund-of-Funds (the
‘‘Unaffiliated Investment Companies’’)
and unit investment trusts (‘‘UITs’’) that
are not part of the same ‘‘group of
investment companies’’ as the Wells
Fargo Fund-of-Funds (‘‘Unaffiliated
Trusts’’ and together with the
Unaffiliated Investment Companies,
‘‘Unaffiliated Funds’’),4 and (ii)
registered open-end management
companies or UITs that are part of the
same ‘‘group of investment companies’’
as the Wells Fargo Fund-of-Funds
(collectively, ‘‘Affiliated Funds,’’ and
together with the Unaffiliated Funds,
‘‘Underlying Funds’’) and (b) each
Underlying Fund, any principal
underwriter for the Underlying Fund,
and any broker or dealer registered
under the Securities Exchange Act of
1934 (‘‘Broker’’) to sell shares of the
Underlying Fund to the Wells Fargo
Fund-of-Funds.5 Applicants also request
an order under sections 6(c) and 17(b)
of the Act to exempt applicants from
section 17(a) to the extent necessary to
permit Underlying Funds to sell their
shares to Wells Fargo Funds-of-Funds
contracts (‘‘Variable Contracts’’) issued by the
Insurance Companies.
3 The term ‘‘WFFM’’ or ‘‘Adviser’’ includes any
existing or future entity controlling, controlled by
or under common control with Wells Fargo Funds
Management, LLC and any successor thereto. A
successor entity is limited to any entity that results
from a reorganization of the Adviser into another
jurisdiction or a change in the type of business
organization.
4 Certain of the Unaffiliated Funds may be
registered under the Act as either UITs or open-end
management investment companies and have
received exemptive relief to permit their shares to
be listed and traded on a national securities
exchange at negotiated prices (‘‘ETFs’’).
5 All entities that currently intend to rely on the
requested order are named as applicants, and 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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and redeem their shares from Wells
Fargo Funds-of-Funds.
4. Applicants also request an
exemption under section 6(c) from rule
12d1–2 under the Act to permit any
existing or future Wells Fargo Fund-ofFunds that relies on section 12(d)(1)(G)
of the Act (‘‘Same Group Fund of
Funds’’) and that otherwise complies
with rule 12d1–2 to also invest, to the
extent consistent with its investment
objective, 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
Investments in Underlying Funds
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act, in
relevant part, prohibits a registered
investment company from acquiring
shares of an investment company if the
securities represent more than 3% of the
total outstanding voting stock of the
acquired company, more than 5% of the
total assets of the acquiring company,
or, together with the securities of any
other investment companies, more than
10% of the total assets of the acquiring
company. Section 12(d)(1)(B) of the Act
prohibits a registered open-end
investment company, its principal
underwriter, and any broker or dealer
from selling the investment company’s
shares to another investment company if
the sale will cause the acquiring
company to own more than 3% of the
acquired company’s voting stock, or if
the sale will cause more than 10% of the
acquired company’s voting stock to be
owned by investment companies
generally.
2. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Applicants seek an exemption under
section 12(d)(1)(J) of the Act to permit
a Wells Fargo Funds-of-Funds to acquire
shares of the Underlying Funds in
excess of the limits in section
12(d)(1)(A), and an Underlying Fund,
any principal underwriter for an
Underlying Fund, and any Broker to sell
shares of an Underlying Fund to a Wells
Fargo Fund-of-Funds in excess of the
limits in section 12(d)(1)(B) of the Act.
3. Applicants state that the terms and
conditions of the proposed arrangement
will not give rise to the policy concerns
underlying sections 12(d)(1)(A) and (B),
which include concerns about undue
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influence by a fund of funds over
underlying funds, excessive layering of
fees, and overly complex fund
structures. Accordingly, applicants
believe that the requested exemption is
consistent with the public interest and
the protection of investors.
4. Applicants submit that the
proposed arrangement will not result in
the exercise of undue influence by a
Wells Fargo Fund-of-Funds or a Fund of
Funds Affiliate (as defined below) over
the Unaffiliated Funds.6 To limit the
control that a Wells Fargo Fund-ofFunds may have over an Unaffiliated
Fund, applicants propose condition 1
prohibiting the Adviser, any person
controlling, controlled by, or under
common control with the Adviser, and
any investment company or issuer that
would be an investment company but
for section 3(c)(1) or 3(c)(7) of the Act
that is advised or sponsored by the
Adviser or any person controlling,
controlled by, or under common control
with the Adviser (the ‘‘Advisory
Group’’) from controlling (individually
or in the aggregate) an Unaffiliated Fund
within the meaning of section 2(a)(9) of
the Act. The same prohibition would
apply to any Subadviser within the
meaning of section 2(a)(20)(B) of the Act
to a Wells Fargo Fund-of-Funds, any
person controlling, controlled by or
under common control with the
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 the Subadviser
or any person controlling, controlled by
or under common control with the
Subadviser (the ‘‘Subadvisory Group’’).
5. Applicants also propose conditions
to limit the potential for undue
influence over the Unaffiliated Funds,
including that no Wells Fargo Fund-ofFunds 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 an offering of securities
during the existence of any
underwriting or selling syndicate of
which a principal underwriter is an
Underwriting Affiliate (‘‘Affiliated
Underwriting’’). An ‘‘Underwriting
6 A ‘‘Fund of Funds Affiliate’’ is the Adviser, any
Subadviser, promoter or principal underwriter of a
Wells Fargo Fund-of-Funds, as well as any person
controlling, controlled by, or under common
control with any of those entities. An ‘‘Unaffiliated
Fund Affiliate’’ is an investment adviser, sponsor,
promoter, or principal underwriter of an
Unaffiliated Fund, as well as any person
controlling, controlled by, or under common
control with any of those entities.
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Affiliate’’ is a principal underwriter in
any underwriting or selling syndicate
that is an officer, director, member of an
advisory board, investment adviser,
Subadviser, or employee of the Wells
Fargo Fund-of-Funds, or a person of
which any such officer, director,
member of an advisory board,
investment adviser, Subadviser, or
employee is an affiliated person. An
Underwriting Affiliate does not include
any person whose relationship to an
Unaffiliated Fund is covered by section
10(f) of the Act.
6. As an additional assurance that an
Unaffiliated Investment Company
understands the implications of an
investment by a Wells Fargo Fund-ofFunds under the requested order, prior
to a Wells Fargo Fund-of-Funds’
investment in the shares of an
Unaffiliated Investment Company in
excess of the limit in section
12(d)(1)(A)(i) of the Act, the Wells Fargo
Fund-of-Funds and the Unaffiliated
Investment Company will execute an
agreement stating, without limitation,
that their boards of directors or trustees
(‘‘Boards’’) and their investment
advisers understand the terms and
conditions of the order and agree to
fulfill their responsibilities under the
order (‘‘Participation Agreement’’).
Applicants note that an Unaffiliated
Investment Company (other than an ETF
whose shares are purchased by a Wells
Fargo Fund-of-Funds in the secondary
market) will retain its right at all times
to reject any investment by a Wells
Fargo Fund-of-Funds.7
7. Applicants state that they do not
believe that the proposed arrangement
will involve excessive layering of fees.
The Board of the Wells Fargo Fund-ofFunds, including a majority of the
trustees who are not ‘‘interested
persons’’ (within the meaning of section
2(a)(19) of the Act) (‘‘Independent
Trustees’’), will find that the advisory
fees charged under any investment
advisory or management contract are
based on services provided that will be
in addition to, rather than duplicative
of, the services provided under the
advisory contract(s) of any Underlying
Fund in which the Wells Fargo Fund-ofFunds may invest. In addition, the
Adviser will waive fees otherwise
payable to it by the Wells Fargo Fundof-Funds in an amount at least equal to
any compensation (including fees
received pursuant to any plan adopted
by an Unaffiliated Investment Company
7 An Unaffiliated Investment Company, including
an ETF, would retain its right to reject any initial
investment by a Wells Fargo 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 Wells Fargo Fund-of-Funds.
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under rule 12b–1 under the Act)
received from an Unaffiliated Fund by
the Adviser or an affiliated person of the
Adviser, other than any advisory fees
paid to the Adviser or its affiliated
person by an Unaffiliated Investment
Company, in connection with the
investment by the Wells Fargo Fund-ofFunds in the Unaffiliated Fund.
8. Applicants state that with respect
to Registered Separate Accounts that
may invest in a Wells Fargo Fund-ofFunds in the future, no sales load will
be charged at the Wells Fargo Fund-ofFunds 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’’),8 if any, will only
be charged at the Wells Fargo Fund-ofFunds level or at the Underlying Fund
level, not both. With respect to other
investments in a Wells Fargo Fund-ofFunds, any sales charges and/or service
fees charged with respect to shares of
the Wells Fargo Fund-of-Funds will not
exceed the limits applicable to funds of
funds as set forth in NASD Conduct
Rule 2830.
9. Applicants represent that if a series
of Wells Fargo Variable Trust operates
as a Wells Fargo Fund-of-Funds in the
future, each such Wells Fargo Fund-ofFunds will represent in its Participation
Agreement that no Insurance Company
sponsoring a Registered Separate
Account funding Variable Contracts will
be permitted to invest in the Wells
Fargo Fund-of-Funds unless the
Insurance Company has certified to the
Wells Fargo Fund-of-Funds that the
aggregate amount of all fees and charges
associated with each Variable Contract
that invests in the Wells Fargo Fund-ofFunds, including fees and charges at the
Separate Account, Wells Fargo Fund-ofFunds, 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.
10. Applicants submit that the
proposed arrangement will not create an
overly complex fund structure.
Applicants note that no Underlying
Fund will acquire 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
in certain circumstances identified in
condition 11 below.
8 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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B. Section 17(a)
1. Section 17(a) of the Act generally
prohibits sales or purchases of securities
between a registered investment
company and any affiliated person of
the company. Section 2(a)(3) of the Act
defines an ‘‘affiliated person’’ of another
person to include (a) any person directly
or indirectly owning, controlling, or
holding with power to vote, 5% or more
of the outstanding voting securities of
the other person; (b) any person 5% or
more of whose outstanding voting
securities are directly or indirectly
owned, controlled, or held with power
to vote by the other person; and (c) any
person directly or indirectly controlling,
controlled by, or under common control
with the other person.
2. Applicants state that a Wells Fargo
Fund-of-Funds and the Affiliated Funds
might be deemed to be under common
control of the Adviser and therefore
affiliated persons of one another.
Applicants also state that a Wells Fargo
Fund-of-Funds and the Unaffiliated
Funds might be deemed to be affiliated
persons of one another if the Wells
Fargo Fund-of-Funds acquires 5% or
more of an Unaffiliated Fund’s
outstanding voting securities. In light of
these and other possible affiliations,
section 17(a) could prevent an
Underlying Fund from selling shares to
and redeeming shares from a Wells
Fargo Fund-of-Funds.
3. Section 17(b) of the Act authorizes
the Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
Section 6(c) of the Act permits the
Commission to exempt any person or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act.
4. Applicants submit that the
proposed transactions satisfy the
standards for relief under sections 17(b)
and 6(c) of the Act.9 Applicants state
9 Applicants acknowledge that receipt of any
compensation by (a) an affiliated person of a Wells
Fargo Fund-of-Funds, or an affiliated person of such
person, for the purchase by a Wells Fargo Fund-ofFunds of shares of an Underlying Fund or (b) an
affiliated person of an Underlying Fund, or an
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that the terms of the transactions are
reasonable and fair 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 Wells Fargo Fund-ofFunds will be based on the net asset
value of the Underlying Fund.10
Applicants state that the proposed
transactions will be consistent with the
policies of each Wells Fargo Fund-ofFunds and each Underlying Fund and
with the general purposes of the Act.
Other Investments by Same Group
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;
(ii) the acquiring company holds only
securities of acquired companies that
are part of the same group of investment
companies, government securities, and
short-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 unit investment
trusts 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
affiliated person of such person, for the sale by the
Underlying Fund of its shares to a Wells Fargo
Fund-of-Funds may be prohibited by section
17(e)(1) of the Act. The Participation Agreement
also will include this acknowledgement.
10 Applicants note that a Wells Fargo Fund-ofFunds generally would purchase and sell shares of
an Unaffiliated Fund that operates as an ETF
through secondary market transactions rather than
through principal transactions with the Unaffiliated
Fund. To the extent purchases and sales of shares
of an ETF occur in the secondary market (and not
through principal transactions directly between a
Wells Fargo Fund-of-Funds and an ETF), relief from
section 17(a) would not be necessary. The requested
relief is intended to cover, however, transactions
directly between ETFs and a Wells Fargo Fund-ofFunds. 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 Wells Fargo Fund-ofFunds, because an investment adviser to the ETF
is also an investment adviser to the Wells Fargo
Fund-of-Funds.
PO 00000
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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 Same Group
Fund 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 Same
Group Funds of Funds to invest in
Other Investments. Applicants assert
that permitting Same Group 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) were
designed to address.
4. Consistent with its fiduciary
obligations under the Act, the Board of
each Same Group Fund of Funds will
review the advisory fees charged by the
Same Group Fund of Fund’s investment
adviser to ensure that they 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 Same Group Fund of
Funds may invest.
Applicants’ Conditions
Investments by Funds of Funds in
Underlying Funds
Applicants agree that the relief to
permit Funds of Funds to invest in
Underlying Funds shall be subject to the
following conditions:
1. The members of an Advisory 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 Subadvisory 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 Advisory Group
or a Subadvisory Group, each in the
aggregate, becomes a holder of more
than 25 percent of the outstanding
voting securities of the Unaffiliated
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Fund, then the Advisory Group or the
Subadvisory Group 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 Subadvisory 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
of section 2(a)(20)(A) of the Act (in the
case of an Unaffiliated Investment
Company) or as the sponsor (in the case
of an Unaffiliated Trust). A Registered
Separate Account will seek voting
instructions from its Variable 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 Variable 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 Wells Fargo Fund-of-Funds or
Fund of Funds Affiliate will cause any
existing or potential investment by the
Wells Fargo Fund-of-Funds in shares of
an Unaffiliated Fund to influence the
terms of any services or transactions
between the Wells Fargo Fund-of-Funds
or a Fund of Funds Affiliate and the
Unaffiliated Fund or an Unaffiliated
Fund Affiliate.
3. The Board of each Wells Fargo
Fund-of-Funds, including a majority of
the Independent Trustees, will adopt
procedures reasonably designed to
assure that its Adviser and any
Subadviser(s) to the Wells Fargo Fundof-Funds are conducting the investment
program of the Wells Fargo Fund-ofFunds without taking into account any
consideration received by the Wells
Fargo Fund-of-Funds or Fund of Funds
Affiliate from an Unaffiliated Fund or
an Unaffiliated Fund Affiliate in
connection with any services or
transactions.
4. Once an investment by a Wells
Fargo Fund-of-Funds in the securities of
an Unaffiliated Investment Company
exceeds the limit of section 12(d)(l)(A)(i)
of the Act, the Board of the Unaffiliated
Investment Company, including a
majority of the Independent Trustees,
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18:39 Sep 17, 2012
Jkt 226001
will determine that any consideration
paid by the Unaffiliated Investment
Company to a Wells Fargo Fund-ofFunds 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 Wells Fargo 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 Wells Fargo
Fund-of-Funds in the securities of the
Unaffiliated Investment Company
exceeds the limit of section 12(d)(l)(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 purchases were influenced
by the investment by the Wells Fargo
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
PO 00000
Frm 00046
Fmt 4703
Sfmt 4703
57601
purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board of the 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 shall 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 shall maintain and
preserve for a period 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 Wells Fargo
Fund-of-Funds in the securities of an
Unaffiliated Investment Company
exceeds the limit of section 12(d)(l)(A)(i)
of the Act, setting forth the: (a) Party
from whom the securities were
acquired, (b) identity of the
underwriting syndicate’s members, (c)
terms of the purchase, and (d)
information or materials upon which
the determinations of the Board of the
Unaffiliated Investment Company were
made.
8. Prior to its investment in shares of
an Unaffiliated Investment Company in
excess of the limit in section
12(d)(l)(A)(i) of the Act, the Wells Fargo
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 in section 12(d)(l)(A)(i), a Wells
Fargo Fund-of-Funds will notify the
Unaffiliated Investment Company of the
investment. At such time, the Wells
Fargo 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 Wells Fargo Fund-ofFunds will notify the Unaffiliated
Investment Company of any changes to
the list of the names as soon as
reasonably practicable after a change
occurs. The Unaffiliated Investment
Company and the Wells Fargo Fund-ofFunds will maintain and preserve a
copy of the order, the Participation
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Agreement, and the list with any
updated information for the duration of
the investment and for a period of not
less than six years thereafter, the first
two years in an easily accessible place.
9. Before approving any advisory
contract under section 15 of the Act, the
Board of each Wells Fargo Fund-ofFunds, including a majority of the
Independent Trustees, shall find that
the advisory fees charged under such
advisory contract are based on services
provided that are in addition to, rather
than duplicative of, services provided
under the advisory contract(s) of any
Underlying Fund in which the Wells
Fargo Fund-of-Funds may invest. Such
finding and the basis upon which the
finding was made will be recorded fully
in the minute books of the appropriate
Wells Fargo Fund-of-Funds.
10. The Adviser will waive fees
otherwise payable to it by a Wells Fargo
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 Adviser, or an affiliated person
of the Adviser, other than any advisory
fees paid to the Adviser or its affiliated
person by an Unaffiliated Investment
Company, in connection with the
investment by the Wells Fargo Fund-ofFunds in the Unaffiliated Fund. Any
Subadviser will waive fees otherwise
payable to the Subadviser, directly or
indirectly, by the Wells Fargo Fund-ofFunds 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 its affiliated person by an
Unaffiliated Investment Company, in
connection with the investment by the
Wells Fargo 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
Wells Fargo Fund-of-Funds.
11. No Underlying Fund will acquire
securities of any other investment
company or company relying on section
3(c)(l) or 3(c)(7) of the Act in excess of
the limits contained in section
12(d)(1)(A) of the Act, except to the
extent that such Underlying Fund: (a)
Receives securities of another
investment company as a dividend or as
a result of a plan of reorganization of a
company (other than a plan devised for
the purpose of evading section 12(d)(l)
of the Act); or (b) acquires (or is deemed
to have acquired) securities of another
investment company pursuant to
exemptive relief from the Commission
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18:39 Sep 17, 2012
Jkt 226001
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.
12. With respect to Registered
Separate Accounts that invest in a Wells
Fargo Fund-of-Funds, no sales load will
be charged at the Wells Fargo Fund-ofFunds 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
Wells Fargo Fund-of-Funds level or at
the Underlying Fund level, not both.
With respect to other investments in a
Wells Fargo Fund-of-Funds, any sales
charges and/or service fees charged with
respect to shares of a Wells Fargo Fundof-Funds will not exceed the limits
applicable to funds of funds set forth in
NASD Conduct Rule 2830.
Other Investments by Same Group
Funds of Funds
Applicants agree that the relief to
permit Same Group Funds of Funds to
invest in Other Investments shall be
subject to the following condition:
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 Same Group 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. 2012–22917 Filed 9–17–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67835; File No. SR–OCC–
2012–14]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing of Proposed Rule Change
Relating to the Clearance and
Settlement of Over-the-Counter
Options
September 12, 2012.
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 August
30, 2012, The Options Clearing
Corporation (‘‘OCC’’) filed with the
Securities and Exchange Commission
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Frm 00047
Fmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The proposed rule change would
allow OCC to provide central clearing of
index options on the S&P 500 that are
negotiated bilaterally in the over-thecounter market and submitted to OCC
for clearance.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
OCC 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. OCC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
The purpose of this proposed rule
change is to allow OCC to provide
central clearing of OTC index options
on the S&P 500 Index. The proposed
rule change replaces a previously
proposed rule change which was
withdrawn by OCC.3 OCC will clear the
proposed OTC options in a manner that
is highly similar to the manner in which
it clears listed options, with only such
modifications as are appropriate to
reflect the unique characteristics of OTC
options.
OTC Options
OCC has entered into a license
agreement with Standard & Poor’s
Financial Services LLC (‘‘S&P’’) that
allows OCC to clear OTC options on
three equity indices published by the
S&P: the S&P 500 Index, the S&P
MidCap 400 Index and the S&P Small
Cap 600 Index. The initial OTC options
to be cleared by OCC will consist of
options on the S&P 500 Index. OCC may
clear OTC options on other indices and
on individual equity securities in the
future, subject to Commission approval
3 Securities Exchange Act Release No. 34–66090
(January 3, 2012), 77 FR 1107 (January 9, 2012) (SR–
OCC–2011–19).
1 15
PO 00000
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared primarily by OCC. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
Sfmt 4703
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]]>Agencies
[Federal Register Volume 77, Number 181 (Tuesday, September 18, 2012)]
[Notices]
[Pages 57597-57602]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-22917]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30201; File No. 812-13967]
Wells Fargo Funds Trust, et al.; Notice of Application
September 12, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under section 12(d)(1)(J)
of the Investment Company Act of 1940 (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 sections 17(a)(1) and (2) 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: The requested order would (a) permit
certain registered open-end management investment companies to acquire
shares of other registered open-end management investment companies and
unit investment trusts (``UITs'') that are within and outside the same
group of investment companies as the acquiring investment companies,
and (b) permit funds of funds relying on rule 12d1-2 under the Act to
invest in certain financial instruments.
Applicants: Wells Fargo Funds Trust (``Trust''), on behalf of its
series, Wells Fargo Advantage WealthBuilder Conservative Allocation
Portfolio, Wells Fargo Advantage WealthBuilder Moderate Balanced
Portfolio, Wells Fargo Advantage WealthBuilder Growth Balanced
Portfolio, Wells Fargo Advantage WealthBuilder Growth Allocation
Portfolio, Wells Fargo Advantage WealthBuilder Equity Portfolio and
Wells Fargo Advantage WealthBuilder Tactical Equity Portfolio
(collectively, the ``WealthBuilder Portfolios''), and Wells Fargo Funds
Management, LLC (``WFFM'' or the ``Adviser'').
DATES: Filing Dates: The application was filed on October 12, 2011, and
amended on May 10, 2012, and August 27, 2012. Applicants have agreed to
file an amendment during the notice period, the substance of which is
reflected in this notice.
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
[[Page 57598]]
by 5:30 p.m. on October 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants:
525 Market Street, 12th Floor, San Francisco, CA 94105.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 551-6876, or Mary Kay Frech, 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 for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1. The Trust is a Delaware statutory trust and is registered as an
open-end management investment company under the Act. The WealthBuilder
Portfolios are series of the Trust, and each pursues a distinct
investment objective and strategy.\1\ The WealthBuilder Portfolios are
the only Wells Fargo Advantage Funds that currently intend to rely on
the requested order. In the future, other Wells Fargo Advantage Funds,
including series of Wells Fargo Variable Trust, that pursue their
investment objective by investing in Underlying Funds (as defined
below) may rely on the requested order. \2\
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\1\ Applicants request that the relief apply to any existing or
future registered open-end management investment companies and any
series thereof that are part of the same group of investment
companies (as defined in section 12(d)(1)(G)(ii) of the Act) as the
WealthBuilder Portfolios and that are, or may in the future be,
advised by WFFM (together with the WealthBuilder Portfolios, the
``Wells Fargo Advantage Funds'').
\2\ Shares of the series of Wells Fargo Variable Trust are not
offered directly to the public. Shares of each series of Wells Fargo
Variable Trust are offered to separate accounts that are registered
as investment companies under the Act (``Registered Separate
Accounts'') or that are not registered under the Act (``Unregistered
Separate Accounts'', and together with the Registered Separate
Accounts, ``Separate Accounts'') of affiliated and unaffiliated
insurance companies (collectively, ``Insurance Companies'') as the
underlying investment vehicles for the variable life insurance and
variable annuity contracts (``Variable Contracts'') issued by the
Insurance Companies.
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2. The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 (``Advisers Act'') and serves as
investment adviser for each Wells Fargo Advantage Fund.\3\ The Adviser
may engage one or more affiliated or unaffiliated subadvisers (each a
``Subadviser''). Each Subadviser will be registered as an investment
adviser under the Advisers Act.
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\3\ The term ``WFFM'' or ``Adviser'' includes any existing or
future entity controlling, controlled by or under common control
with Wells Fargo Funds Management, LLC and any successor thereto. A
successor entity is limited to any entity that results from a
reorganization of the Adviser into another jurisdiction or a change
in the type of business organization.
---------------------------------------------------------------------------
3. Applicants request an order to permit (a) certain Wells Fargo
Advantage Funds that operate as a ``fund of funds'' (each, a ``Wells
Fargo Fund-of-Funds'') to acquire shares of (i) registered open-end
management investment companies that are not part of the same ``group
of investment companies,'' within the meaning of section
12(d)(1)(G)(ii) of the Act, as the Wells Fargo Fund-of-Funds (the
``Unaffiliated Investment Companies'') and unit investment trusts
(``UITs'') that are not part of the same ``group of investment
companies'' as the Wells Fargo Fund-of-Funds (``Unaffiliated Trusts''
and together with the Unaffiliated Investment Companies, ``Unaffiliated
Funds''),\4\ and (ii) registered open-end management companies or UITs
that are part of the same ``group of investment companies'' as the
Wells Fargo Fund-of-Funds (collectively, ``Affiliated Funds,'' and
together with the Unaffiliated Funds, ``Underlying Funds'') and (b)
each Underlying Fund, any principal underwriter for the Underlying
Fund, and any broker or dealer registered under the Securities Exchange
Act of 1934 (``Broker'') to sell shares of the Underlying Fund to the
Wells Fargo Fund-of-Funds.\5\ Applicants also request an order under
sections 6(c) and 17(b) of the Act to exempt applicants from section
17(a) to the extent necessary to permit Underlying Funds to sell their
shares to Wells Fargo Funds-of-Funds and redeem their shares from Wells
Fargo Funds-of-Funds.
---------------------------------------------------------------------------
\4\ Certain of the Unaffiliated Funds may be registered under
the Act as either UITs or open-end management investment companies
and have received exemptive relief to permit their shares to be
listed and traded on a national securities exchange at negotiated
prices (``ETFs'').
\5\ All entities that currently intend to rely on the requested
order are named as applicants, and any other entity that relies on
the order in the future will comply with the terms and conditions of
the application.
---------------------------------------------------------------------------
4. Applicants also request an exemption under section 6(c) from
rule 12d1-2 under the Act to permit any existing or future Wells Fargo
Fund-of-Funds that relies on section 12(d)(1)(G) of the Act (``Same
Group Fund of Funds'') and that otherwise complies with rule 12d1-2 to
also invest, to the extent consistent with its investment objective,
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
Investments in Underlying Funds
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act, in relevant part, prohibits a
registered investment company from acquiring shares of an investment
company if the securities represent more than 3% of the total
outstanding voting stock of the acquired company, more than 5% of the
total assets of the acquiring company, or, together with the securities
of any other investment companies, more than 10% of the total assets of
the acquiring company. Section 12(d)(1)(B) of the Act prohibits a
registered open-end investment company, its principal underwriter, and
any broker or dealer from selling the investment company's shares to
another investment company if the sale will cause the acquiring company
to own more than 3% of the acquired company's voting stock, or if the
sale will cause more than 10% of the acquired company's voting stock to
be owned by investment companies generally.
2. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt any person, security, or transaction, or any class or classes of
persons, securities or transactions, from any provision of section
12(d)(1) if the exemption is consistent with the public interest and
the protection of investors. Applicants seek an exemption under section
12(d)(1)(J) of the Act to permit a Wells Fargo Funds-of-Funds to
acquire shares of the Underlying Funds in excess of the limits in
section 12(d)(1)(A), and an Underlying Fund, any principal underwriter
for an Underlying Fund, and any Broker to sell shares of an Underlying
Fund to a Wells Fargo Fund-of-Funds in excess of the limits in section
12(d)(1)(B) of the Act.
3. Applicants state that the terms and conditions of the proposed
arrangement will not give rise to the policy concerns underlying
sections 12(d)(1)(A) and (B), which include concerns about undue
[[Page 57599]]
influence by a fund of funds over underlying funds, excessive layering
of fees, and overly complex fund structures. Accordingly, applicants
believe that the requested exemption is consistent with the public
interest and the protection of investors.
4. Applicants submit that the proposed arrangement will not result
in the exercise of undue influence by a Wells Fargo Fund-of-Funds or a
Fund of Funds Affiliate (as defined below) over the Unaffiliated
Funds.\6\ To limit the control that a Wells Fargo Fund-of-Funds may
have over an Unaffiliated Fund, applicants propose condition 1
prohibiting the Adviser, any person controlling, controlled by, or
under common control with the Adviser, and any investment company or
issuer that would be an investment company but for section 3(c)(1) or
3(c)(7) of the Act that is advised or sponsored by the Adviser or any
person controlling, controlled by, or under common control with the
Adviser (the ``Advisory Group'') from controlling (individually or in
the aggregate) an Unaffiliated Fund within the meaning of section
2(a)(9) of the Act. The same prohibition would apply to any Subadviser
within the meaning of section 2(a)(20)(B) of the Act to a Wells Fargo
Fund-of-Funds, any person controlling, controlled by or under common
control with the 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 the Subadviser or any person controlling, controlled by or
under common control with the Subadviser (the ``Subadvisory Group'').
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\6\ A ``Fund of Funds Affiliate'' is the Adviser, any
Subadviser, promoter or principal underwriter of a Wells Fargo Fund-
of-Funds, as well as any person controlling, controlled by, or under
common control with any of those entities. An ``Unaffiliated Fund
Affiliate'' is an investment adviser, sponsor, promoter, or
principal underwriter of an Unaffiliated Fund, as well as any person
controlling, controlled by, or under common control with any of
those entities.
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5. Applicants also propose conditions to limit the potential for
undue influence over the Unaffiliated Funds, including that no Wells
Fargo 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 an offering of securities
during the existence of any underwriting or selling syndicate of which
a principal underwriter is an Underwriting Affiliate (``Affiliated
Underwriting''). An ``Underwriting Affiliate'' is a principal
underwriter in any underwriting or selling syndicate that is an
officer, director, member of an advisory board, investment adviser,
Subadviser, or employee of the Wells Fargo Fund-of-Funds, or a person
of which any such officer, director, member of an advisory board,
investment adviser, Subadviser, or employee is an affiliated person. An
Underwriting Affiliate does not include any person whose relationship
to an Unaffiliated Fund is covered by section 10(f) of the Act.
6. As an additional assurance that an Unaffiliated Investment
Company understands the implications of an investment by a Wells Fargo
Fund-of-Funds under the requested order, prior to a Wells Fargo Fund-
of-Funds' investment in the shares of an Unaffiliated Investment
Company in excess of the limit in section 12(d)(1)(A)(i) of the Act,
the Wells Fargo Fund-of-Funds and the Unaffiliated Investment Company
will execute an agreement stating, without limitation, that their
boards of directors or trustees (``Boards'') and their investment
advisers understand the terms and conditions of the order and agree to
fulfill their responsibilities under the order (``Participation
Agreement''). Applicants note that an Unaffiliated Investment Company
(other than an ETF whose shares are purchased by a Wells Fargo Fund-of-
Funds in the secondary market) will retain its right at all times to
reject any investment by a Wells Fargo Fund-of-Funds.\7\
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\7\ An Unaffiliated Investment Company, including an ETF, would
retain its right to reject any initial investment by a Wells Fargo
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
Wells Fargo Fund-of-Funds.
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7. Applicants state that they do not believe that the proposed
arrangement will involve excessive layering of fees. The Board of the
Wells Fargo Fund-of-Funds, including a majority of the trustees who are
not ``interested persons'' (within the meaning of section 2(a)(19) of
the Act) (``Independent Trustees''), will find that the advisory fees
charged under any investment advisory or management contract are based
on services provided that will be in addition to, rather than
duplicative of, the services provided under the advisory contract(s) of
any Underlying Fund in which the Wells Fargo Fund-of-Funds may invest.
In addition, the Adviser will waive fees otherwise payable to it by the
Wells Fargo 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 Adviser or an affiliated
person of the Adviser, other than any advisory fees paid to the Adviser
or its affiliated person by an Unaffiliated Investment Company, in
connection with the investment by the Wells Fargo Fund-of-Funds in the
Unaffiliated Fund.
8. Applicants state that with respect to Registered Separate
Accounts that may invest in a Wells Fargo Fund-of-Funds in the future,
no sales load will be charged at the Wells Fargo 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''),\8\ if any, will only be charged at the Wells Fargo Fund-
of-Funds level or at the Underlying Fund level, not both. With respect
to other investments in a Wells Fargo Fund-of-Funds, any sales charges
and/or service fees charged with respect to shares of the Wells Fargo
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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\8\ 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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9. Applicants represent that if a series of Wells Fargo Variable
Trust operates as a Wells Fargo Fund-of-Funds in the future, each such
Wells Fargo Fund-of-Funds will represent in its Participation Agreement
that no Insurance Company sponsoring a Registered Separate Account
funding Variable Contracts will be permitted to invest in the Wells
Fargo Fund-of-Funds unless the Insurance Company has certified to the
Wells Fargo Fund-of-Funds that the aggregate amount of all fees and
charges associated with each Variable Contract that invests in the
Wells Fargo Fund-of-Funds, including fees and charges at the Separate
Account, Wells Fargo 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.
10. Applicants submit that the proposed arrangement will not create
an overly complex fund structure. Applicants note that no Underlying
Fund will acquire 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 in certain
circumstances identified in condition 11 below.
[[Page 57600]]
B. Section 17(a)
1. Section 17(a) of the Act generally prohibits sales or purchases
of securities between a registered investment company and any
affiliated person of the company. Section 2(a)(3) of the Act defines an
``affiliated person'' of another person to include (a) any person
directly or indirectly owning, controlling, or holding with power to
vote, 5% or more of the outstanding voting securities of the other
person; (b) any person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held with
power to vote by the other person; and (c) any person directly or
indirectly controlling, controlled by, or under common control with the
other person.
2. Applicants state that a Wells Fargo Fund-of-Funds and the
Affiliated Funds might be deemed to be under common control of the
Adviser and therefore affiliated persons of one another. Applicants
also state that a Wells Fargo Fund-of-Funds and the Unaffiliated Funds
might be deemed to be affiliated persons of one another if the Wells
Fargo Fund-of-Funds acquires 5% or more of an Unaffiliated Fund's
outstanding voting securities. In light of these and other possible
affiliations, section 17(a) could prevent an Underlying Fund from
selling shares to and redeeming shares from a Wells Fargo Fund-of-
Funds.
3. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
it finds that (a) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (b) the proposed transaction is consistent with the policies
of each registered investment company involved; and (c) the proposed
transaction is consistent with the general purposes of the Act. Section
6(c) of the Act permits the Commission to exempt any person or
transactions from any provision of the Act if such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act.
4. Applicants submit that the proposed transactions satisfy the
standards for relief under sections 17(b) and 6(c) of the Act.\9\
Applicants state that the terms of the transactions are reasonable and
fair 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 Wells Fargo Fund-of-Funds will be based on the net asset
value of the Underlying Fund.\10\ Applicants state that the proposed
transactions will be consistent with the policies of each Wells Fargo
Fund-of-Funds and each Underlying Fund and with the general purposes of
the Act.
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\9\ Applicants acknowledge that receipt of any compensation by
(a) an affiliated person of a Wells Fargo Fund-of-Funds, or an
affiliated person of such person, for the purchase by a Wells Fargo
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 Wells
Fargo Fund-of-Funds may be prohibited by section 17(e)(1) of the
Act. The Participation Agreement also will include this
acknowledgement.
\10\ Applicants note that a Wells Fargo Fund-of-Funds generally
would purchase and sell shares of an Unaffiliated Fund that operates
as an ETF through secondary market transactions rather than through
principal transactions with the Unaffiliated Fund. To the extent
purchases and sales of shares of an ETF occur in the secondary
market (and not through principal transactions directly between a
Wells Fargo Fund-of-Funds and an ETF), relief from section 17(a)
would not be necessary. The requested relief is intended to cover,
however, transactions directly between ETFs and a Wells Fargo 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 Wells Fargo Fund-of-Funds, because an
investment adviser to the ETF is also an investment adviser to the
Wells Fargo Fund-of-Funds.
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Other Investments by Same Group 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; (ii) the acquiring
company holds only securities of acquired companies that are part of
the same group of investment companies, government securities, and
short-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 unit
investment trusts 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
Same Group Fund 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 Same Group Funds of
Funds to invest in Other Investments. Applicants assert that permitting
Same Group 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) were designed to address.
4. Consistent with its fiduciary obligations under the Act, the
Board of each Same Group Fund of Funds will review the advisory fees
charged by the Same Group Fund of Fund's investment adviser to ensure
that they 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 Same Group Fund of
Funds may invest.
Applicants' Conditions
Investments by Funds of Funds in Underlying Funds
Applicants agree that the relief to permit Funds of Funds to invest
in Underlying Funds shall be subject to the following conditions:
1. The members of an Advisory 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 Subadvisory 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 Advisory
Group or a Subadvisory Group, each in the aggregate, becomes a holder
of more than 25 percent of the outstanding voting securities of the
Unaffiliated
[[Page 57601]]
Fund, then the Advisory Group or the Subadvisory Group 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 Subadvisory 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 of section 2(a)(20)(A) of the Act (in the
case of an Unaffiliated Investment Company) or as the sponsor (in the
case of an Unaffiliated Trust). A Registered Separate Account will seek
voting instructions from its Variable 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 Variable 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 Wells Fargo Fund-of-Funds or Fund of Funds Affiliate will
cause any existing or potential investment by the Wells Fargo Fund-of-
Funds in shares of an Unaffiliated Fund to influence the terms of any
services or transactions between the Wells Fargo Fund-of-Funds or a
Fund of Funds Affiliate and the Unaffiliated Fund or an Unaffiliated
Fund Affiliate.
3. The Board of each Wells Fargo Fund-of-Funds, including a
majority of the Independent Trustees, will adopt procedures reasonably
designed to assure that its Adviser and any Subadviser(s) to the Wells
Fargo Fund-of-Funds are conducting the investment program of the Wells
Fargo Fund-of-Funds without taking into account any consideration
received by the Wells Fargo Fund-of-Funds or Fund of Funds Affiliate
from an Unaffiliated Fund or an Unaffiliated Fund Affiliate in
connection with any services or transactions.
4. Once an investment by a Wells Fargo Fund-of-Funds in the
securities of an Unaffiliated Investment Company exceeds the limit of
section 12(d)(l)(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 Wells Fargo 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 Wells Fargo 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 Wells Fargo Fund-of-Funds in the securities of the Unaffiliated
Investment Company exceeds the limit of section 12(d)(l)(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 purchases were influenced by the investment by
the Wells Fargo 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 the 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 shall 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 shall maintain and preserve for a period 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 Wells
Fargo Fund-of-Funds in the securities of an Unaffiliated Investment
Company exceeds the limit of section 12(d)(l)(A)(i) of the Act, setting
forth the: (a) Party from whom the securities were acquired, (b)
identity of the underwriting syndicate's members, (c) terms of the
purchase, and (d) information or materials upon which the
determinations of the Board of the Unaffiliated Investment Company were
made.
8. Prior to its investment in shares of an Unaffiliated Investment
Company in excess of the limit in section 12(d)(l)(A)(i) of the Act,
the Wells Fargo 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 in section
12(d)(l)(A)(i), a Wells Fargo Fund-of-Funds will notify the
Unaffiliated Investment Company of the investment. At such time, the
Wells Fargo 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 Wells Fargo Fund-of-Funds will notify
the Unaffiliated Investment Company of any changes to the list of the
names as soon as reasonably practicable after a change occurs. The
Unaffiliated Investment Company and the Wells Fargo Fund-of-Funds will
maintain and preserve a copy of the order, the Participation
[[Page 57602]]
Agreement, and the list with any updated information for the duration
of the investment and for a period of not less than six years
thereafter, the first two years in an easily accessible place.
9. Before approving any advisory contract under section 15 of the
Act, the Board of each Wells Fargo Fund-of-Funds, including a majority
of the Independent Trustees, shall find that the advisory fees charged
under such advisory contract are based on services provided that are in
addition to, rather than duplicative of, services provided under the
advisory contract(s) of any Underlying Fund in which the Wells Fargo
Fund-of-Funds may invest. Such finding and the basis upon which the
finding was made will be recorded fully in the minute books of the
appropriate Wells Fargo Fund-of-Funds.
10. The Adviser will waive fees otherwise payable to it by a Wells
Fargo 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 Adviser, or an affiliated
person of the Adviser, other than any advisory fees paid to the Adviser
or its affiliated person by an Unaffiliated Investment Company, in
connection with the investment by the Wells Fargo Fund-of-Funds in the
Unaffiliated Fund. Any Subadviser will waive fees otherwise payable to
the Subadviser, directly or indirectly, by the Wells Fargo 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 its affiliated person by an Unaffiliated Investment Company, in
connection with the investment by the Wells Fargo 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 Wells Fargo Fund-of-Funds.
11. No Underlying Fund will acquire securities of any other
investment company or company relying on section 3(c)(l) or 3(c)(7) of
the Act in excess of the limits contained in section 12(d)(1)(A) of the
Act, except to the extent that such Underlying Fund: (a) Receives
securities of another investment company as a dividend or as a result
of a plan of reorganization of a company (other than a plan devised for
the purpose of evading section 12(d)(l) of the Act); or (b) acquires
(or is deemed to have acquired) securities of another investment
company pursuant to exemptive relief from the Commission permitting
such Underlying Fund to (i) acquire securities of one or more
investment companies for short-term cash management purposes, or (ii)
engage in interfund borrowing and lending transactions.
12. With respect to Registered Separate Accounts that invest in a
Wells Fargo Fund-of-Funds, no sales load will be charged at the Wells
Fargo 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 Wells Fargo Fund-of-Funds level or at the
Underlying Fund level, not both. With respect to other investments in a
Wells Fargo Fund-of-Funds, any sales charges and/or service fees
charged with respect to shares of a Wells Fargo Fund-of-Funds will not
exceed the limits applicable to funds of funds set forth in NASD
Conduct Rule 2830.
Other Investments by Same Group Funds of Funds
Applicants agree that the relief to permit Same Group Funds of
Funds to invest in Other Investments shall be subject to the following
condition:
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 Same Group 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. 2012-22917 Filed 9-17-12; 8:45 am]
BILLING CODE 8011-01-P
