AdvisorShares Investments, LLC and AdvisorShares Trust; Notice of Application, 11702-11705 [2013-03686]
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TKELLEY on DSK3SPTVN1PROD with NOTICES
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Federal Register / Vol. 78, No. 33 / Tuesday, February 19, 2013 / Notices
complete. The total annual reporting
burden for filing Advance Notices is
therefore 31,500 hours (10 designated
clearing agencies × 35 Advance Notices
per year × 90 hours per response).
Designated clearing agencies are
required to post all Advance Notices to
their Web sites, each of which takes
approximately four hours to complete.
For 35 Advance Notices, the total
annual reporting burden for posting
them to respondents’ Web sites is 1,400
hours (10 designated clearing agencies ×
35 Advance Notices per year × 4 hours
per Web site posting). Respondents are
required to update the postings of those
Advance Notices that become effective,
each of which takes approximately four
hours to complete. The total annual
reporting burden for updating Advance
Notices on the respondents’ Web sites is
1,400 hours (10 designated clearing
agencies × 35 Advance Notices per year
× 4 hours per Web site posting).
The respondents are also required to
provide copies of all materials
submitted to the Commission relating to
an Advance Notice to the Board of
Governors of the Federal Reserve
System (‘‘Board’’) contemporaneously
with such submission to the
Commission, which is estimated to take
two hours. The total annual reporting
burden for designated clearing agencies
to meet this requirement is 700 hours
(10 designated clearing agencies × 35
Advance Notices per year &2 hours per
response).
The Commission estimates that six
security-based swap clearing agencies
will each submit 20 Security-Based
Swap Submissions per year, with each
submission taking 140 hours to
complete resulting in a total annual
reporting burden of 16,800 hours (6
respondent clearing agencies × 20
Security-Based Swap Submissions per
year × 140 hours per response).
Respondent clearing agencies are
required to post all Security-Based
Swap Submissions to their Web sites,
each of which takes approximately four
hours to complete. For 20 SecurityBased Swap Submissions, the total
annual reporting burden for posting
them to the six respondents’ Web sites
is 480 hours (6 respondent clearing
agencies × 20 Security-Based Swap
Submissions per year × 4 hours per Web
site posting). In addition, three of the six
respondent clearing agencies that have
not previously posted Security-Based
Swap Submissions, Advance Notices,
and proposed rule changes on their Web
sites may need to update their existing
Web sites to post such filings online.
The Commission estimates that each of
these three clearing agencies would
spend approximately 15 hours updating
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its existing Web site, resulting in a total
one-time burden of 45 hours (3
respondent clearing agencies × 15 hours
per Web site update) or 15 hours
annualized over three years.
Respondent clearing agencies will
also have to provide training to staff
members using the Electronic Form
19b–4 Filing System (‘‘EFFS’’) to submit
Security-Based Swap Submissions,
Advance Notices, and/or proposed rule
changes electronically. The Commission
estimates that each of the six estimated
security-based swap clearing agencies
will spend approximately 20 hours
training all staff members who will use
EFFS to submit Security-Based Swap
Submissions, Advance Notices, and/or
proposed rule changes electronically,
for a total of 120 hours (6 respondent
clearing agencies × 20 hours) or 40
hours annualized over three years. The
Commission also estimates that each of
these six clearing agencies will have a
one-time burden of 130 hours to draft
and implement internal policies and
procedures for using EFFS to make
these submissions, for a total of 780
hours (6 clearing agencies × 130 hours)
or 260 hours annualized over three
years. The four remaining clearing
agencies that have existing internal
policies and procedures for using EFFS
will need to update them for submitting
Security-Based Swap Submissions and/
or Advance Notices with the
Commission. The Commission estimates
that each of these four clearing agencies
will have a one-time burden of 30 hours
to draft and implement modifications to
their internal policies, for a total of 120
hours (4 clearing agencies × 30 hours) or
40 hours annualized over three years.
After the initial training is completed,
the Commission estimates that each of
the 38 respondents will spend 10 hours
each year training new compliance staff
members and updating the training of
existing compliance staff members to
use EFFS, for a total annual burden of
380 hours (38 respondent SROs × 10
hours).
Based on the above, the total
estimated annual response burden
pursuant to Rule 19b–4 and Form 19b–
4 is the sum of the total annual
reporting burdens for filing proposed
rule changes, Advance Notices, and
Security-Based Swap Submissions;
training staff to file such proposals;
drafting, modifying, and implementing
internal policies and procedures for
filing such proposals; posting each
proposal on the respondents’ Web sites;
updating Web sites to enable posting of
proposals; updating the respondents’
online rulebooks to reflect the proposals
that became effective; and submitting
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copies of Advance Notices to the Board,
which is 130,191 hours.
Compliance with Rule 19b–4 is
mandatory. Information received in
response to Rule 19b–4 shall not be kept
confidential; the information collected
is public information.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimate of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
The Commission may not conduct or
sponsor a collection of information
unless it displays a currently valid
control number. No person shall be
subject to any penalty for failing to
comply with a collection of information
subject to the PRA that does not display
a valid OMB control number.
Please direct your written comments
to: Thomas Bayer, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 6432 General Green Way,
Alexandria, Virginia 22312 or send an
email to PRA_Mailbox@sec.gov.
Dated: February 13, 2013.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–03690 Filed 2–15–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
30381; File No. 812–14027]
AdvisorShares Investments, LLC and
AdvisorShares Trust; Notice of
Application
February 12, 2013.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application under
section 6(c) of the Investment Company
Act of 1940 (‘‘Act’’) for an exemption
from section 15(a) of the Act and rule
18f–2 under the Act, as well as from
certain disclosure requirements.
AGENCY:
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Federal Register / Vol. 78, No. 33 / Tuesday, February 19, 2013 / Notices
Summary of Application:
Applicants request an order that would
permit them to enter into and materially
amend subadvisory agreements without
shareholder approval and would grant
relief from certain disclosure
requirements.
Applicants: AdvisorShares
Investments, LLC (the ‘‘Advisor’’) and
AdvisorShares Trust (the ‘‘Trust’’).
DATES: Filing Dates: The application
was filed on April 16, 2012, and
amended on October 11, 2012 and
February 6, 2013.
Hearing or Notification of Hearing: An
order granting the application will be
issued unless the Commission orders a
hearing. Interested persons may request
a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on March 8, 2013, 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: Elizabeth M. Murphy,
Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
Applicants: AdvisorShares Investments,
LLC, 2 Bethesda Metro Center, Suite
1330, Bethesda, MD 20814.
FOR FURTHER INFORMATION CONTACT:
Laura J. Riegel, Senior Counsel, at (202)
551–6873, 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 an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
SUMMARY:
TKELLEY on DSK3SPTVN1PROD with NOTICES
Applicants’ Representations
1. The Trust is organized as a
Delaware statutory trust and is
registered under the Act as an open-end
management investment company. The
Trust currently offers 18 series (each, a
‘‘Fund’’) and may offer additional Funds
in the future.1 Each existing Fund
1 Applicants also request relief with respect to
future Funds and any other existing or future
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operates as an actively-managed
exchange-traded fund in reliance on
previously-granted exemptive orders.2
2. The Advisor, a Delaware limited
liability company, is registered as an
investment adviser under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’). The Advisor serves as
the investment adviser to each of the
Funds pursuant to an investment
advisory agreement with the Trust, with
respect to each Fund (the ‘‘Investment
Advisory Agreement’’). The Investment
Advisory Agreement was approved by
the Trust’s board of trustees (the
‘‘Board’’),3 including a majority of the
trustees who are not ‘‘interested
persons,’’ as defined in section 2(a)(19)
of the Act (the ‘‘Independent Trustees’’),
and by the initial shareholder of each
Fund in the manner required by
sections 15(a) and 15(c) of the Act and
rule 18f–2 under the Act.
3. Under the terms of the Investment
Advisory Agreement, the Advisor,
subject to the oversight of the Board,
manages the investment operations and
determines the composition of the
portfolio of each Fund, including the
purchase, retention and disposition of
the securities and other instruments
held by the Fund, in accordance with
the investment objectives and policies
of the Fund. For its services to each
Fund, the Advisor receives a fee from
that Fund as specified in the Investment
Advisory Agreement computed as a
percentage of the Fund’s average daily
net assets. The Investment Advisory
Agreement also permits the Advisor,
subject to the approval of the Board,
including a majority of the Independent
Trustees, and the shareholders of the
applicable Fund (if required by
registered open-end management investment
company or series thereof that (a) is advised by the
Advisor or an entity controlling, controlled by, or
under common control with the Advisor or its
successors (each such entity included in the term
‘‘Advisor’’); (b) uses the multi-manager structure
described in the application; and (c) complies with
the terms and conditions of the application
(included in the term ‘‘Funds’’). Every existing
entity that currently intends to rely on the
requested order is named as an applicant. For
purposes of the requested order, ‘‘successor’’ is
limited to an entity or entities that result from a
reorganization into another jurisdiction or a change
in the type of business organization. If the name of
any Fund contains the name of a Sub-Advisor (as
defined below), the name of the Advisor, or a
trademark or trade name that is owned by the
Advisor, will precede the name of the Sub-Advisor.
2 AdvisorShares Investments, LLC and
AdvisorShares Trust, Investment Company Act
Release Nos. 29264 (May 6, 2010) (notice) and
29291 (May 28, 2010) (order); and AdvisorShares
Investments, LLC and AdvisorShares Trust,
Investment Company Act Release Nos. 28568 (Dec.
23, 2008) (notice) and 28822 (Jul. 20, 2009) (order).
3 The term ‘‘Board’’ also includes the board of
trustees or directors of a future Trust and future
Fund, if different.
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applicable law), to engage one or more
unaffiliated investment sub-advisers
(‘‘Sub-Advisors’’) to manage all or a
portion of the assets of any Fund. The
Advisor has entered into subadvisory
agreements (‘‘Sub-Advisory
Agreements’’) with various SubAdvisors to provide investment
advisory services to the Funds.4 Each
Sub-Advisor is, and each future SubAdvisor will be, an ‘‘investment
adviser’’ as defined in section
2(a)(20)(B) of the Act, as well as
registered as an investment adviser
under the Advisers Act. The Advisor
will evaluate, select and recommend
Sub-Advisors to the Board, monitor and
evaluate each Sub-Advisor’s investment
program, and review each Fund’s
compliance with its investment
objective, policies and restrictions. The
Advisor also will recommend to the
Board whether Sub-Advisory
Agreements should be renewed,
modified or terminated. The Advisor
currently compensates each SubAdvisor out of the fee paid by a Fund
to the Advisor under the Investment
Advisory Agreement. However,
applicants note that future arrangements
with one or more Sub-Advisors may be
implemented whereby a Fund
compensates a Sub-Advisor directly.
4. Applicants request an order to
permit the Funds, subject to Board
approval, to engage Sub-Advisors to
manage all or a portion of the assets of
a Fund pursuant to a Sub-Advisory
Agreement and materially amend SubAdvisory Agreements without obtaining
shareholder approval. The requested
relief will not extend to any SubAdvisor that is an affiliated person, as
defined in section 2(a)(3) of the Act, of
a Fund or the Advisor, other than by
reason of serving as Sub-Advisor to a
Fund (‘‘Affiliated Sub-Advisor’’).
5. Applicants also request an order
exempting each Fund from certain
disclosure provisions described below
that may require the Funds to disclose
fees paid by the Advisor or a Fund to
each Sub-Advisor. Applicants seek an
order to permit each Fund to disclose
(as a dollar amount and a percentage of
4 Currently, the Advisor has entered into SubAdvisory Agreements with the following SubAdvisors: Accuvest Global Advisors, WCM
Investment Management, Cambria Investment
Management, L.P., Peritus I Asset Management,
LLC, Ranger Alternative Management, L.P.,
Madrona Funds, LLC, American Wealth
Management, Trim Tabs Asset Management, LLC,
Rockledge Advisors, LLC, Your Source Financial,
PLC, Baldwin Brothers Inc., Community Capital
Management Inc., First Affirmative Financial
Network LLC, Reynders, McVeigh Capital
Management, LLC, Commerce Asset Management,
LLC, Partnervest Advisory Services, LLC, Pring
Turner Capital Group, Newfleet Asset Management,
LLC, and Treesdale Partners LLC.
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Federal Register / Vol. 78, No. 33 / Tuesday, February 19, 2013 / Notices
a Fund’s net assets) only: (a) the
aggregate fees paid to the Advisor and
any Affiliated Sub-Advisors; and (b) the
aggregate fees paid to Sub-Advisors
other than Affiliated Sub-Advisors
(collectively, the ‘‘Aggregate Fee
Disclosure’’). A Fund that employs an
Affiliated Sub-Advisor will provide
separate disclosure of any fees paid to
the Affiliated Sub-Advisor.
6. The Funds will inform
shareholders of the hiring of a new SubAdvisor pursuant to the following
procedures (‘‘Modified Notice and
Access Procedures’’): (a) within 90 days
after a new Sub-Advisor is hired for any
Fund, that Fund will send its
shareholders either a Multi-manager
Notice or a Multi-manager Notice and
Multi-manager Information Statement; 5
and (b) the Fund will make the Multimanager Information Statement
available on the Web site identified in
the Multi-manager Notice no later than
when the Multi-manager Notice (or
Multi-manager Notice and Multimanager Information Statement) is first
sent to shareholders, and will maintain
it on that Web site for at least 90 days.
TKELLEY on DSK3SPTVN1PROD with NOTICES
Applicants’ Legal Analysis
1. Section 15(a) of the Act provides,
in relevant part, that it is unlawful for
any person to act as an investment
adviser to a registered investment
company except pursuant to a written
contract that has been approved by the
vote of a majority of the company’s
outstanding voting securities. Rule 18f–
2 under the Act provides that each
series or class of stock in a series
investment company affected by a
matter must approve that matter if the
Act requires shareholder approval.
2. Form N–1A is the registration
statement used by open-end investment
companies. Item 19(a)(3) of Form N–1A
requires disclosure of the method and
5 A ‘‘Multi-manager Notice’’ will be modeled on
a Notice of Internet Availability as defined in rule
14a–16 under the Securities Exchange Act of 1934
(‘‘Exchange Act’’), and specifically will, among
other things: (a) Summarize the relevant
information regarding the new Sub-Advisor; (b)
inform shareholders that the Multi-manager
Information Statement is available on a Web site;
(c) provide the Web site address; (d) state the time
period during which the Multi-manager Information
Statement will remain available on that Web site;
(e) provide instructions for accessing and printing
the Multi-manager Information Statement; and (f)
instruct the shareholder that a paper or email copy
of the Multi manager Information Statement may be
obtained, without charge, by contacting the Funds.
A ‘‘Multi-manager Information Statement’’ will
meet the requirements of Regulation 14C, Schedule
14C and Item 22 of Schedule 14A under the
Exchange Act for an information statement, except
as modified by the requested order to permit
Aggregate Fee Disclosure. Multi-manager
Information Statements will be filed electronically
with the Commission via the EDGAR system.
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amount of the investment adviser’s
compensation.
3. Rule 20a–1 under the Act requires
proxies solicited with respect to a
registered investment company to
comply with Schedule 14A under the
Exchange Act. Items 22(c)(1)(ii),
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of
Schedule 14A, taken together, require a
proxy statement for a shareholder
meeting at which the advisory contract
will be voted upon to include the ‘‘rate
of compensation of the investment
adviser,’’ the ‘‘aggregate amount of the
investment adviser’s fees,’’ a description
of the ‘‘terms of the contract to be acted
upon,’’ and, if a change in the advisory
fee is proposed, the existing and
proposed fees and the difference
between the two fees.
4. Regulation S–X sets forth the
requirements for financial statements
required to be included as part of a
registered investment company’s
registration statement and shareholder
reports filed with the Commission.
Sections 6–07(2)(a), (b) and (c) of
Regulation S–X require a registered
investment company to include in its
financial statement information about
the investment advisory fees.
5. 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 provisions of the
Act, or from any rule thereunder, 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. Applicants
state that the requested relief meets this
standard for the reasons discussed
below.
6. Applicants assert that the
shareholders expect the Advisor, subject
to the review and approval of the Board,
to select the Sub-Advisors who are best
suited to achieve the Fund’s investment
objective. Applicants assert that, from
the perspective of the shareholder, the
role of the Sub-Advisor is substantially
equivalent to the role of the individual
portfolio managers employed by
traditional investment company
advisory firms. Applicants state that
requiring shareholder approval of each
Subadvisory Agreement would impose
unnecessary delays and expenses on the
Funds, and may preclude the Fund from
acting promptly when the Board and the
Advisor believe that a change would
benefit a Fund and its shareholders.
Applicants note that the Investment
Advisory Agreement and any SubAdvisory Agreement with an Affiliated
Sub-Advisor (if any) will continue to be
subject to the shareholder approval
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requirements of section 15(a) of the Act
and rule 18f-2 under the Act.
7. Applicants assert that the requested
disclosure relief would benefit
shareholders of the Funds because it
would improve the Advisor’s ability to
negotiate the fees paid to Sub-Advisors.
Applicants state that the Advisor may
be able to negotiate rates that are below
a Sub-Advisor’s ‘‘posted’’ amounts, if
the Advisor is not required to disclose
the Sub-Advisors’ fees to the public.
Applicants submit that the requested
relief will encourage Sub-Advisors to
negotiate lower subadvisory fees with
the Advisor if the lower fees are not
required to be made public.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions: 6
1. Before a Fund may rely on the
order, the operation of the Fund in the
manner described in the application
will be approved by a majority of the
Fund’s outstanding voting securities, as
defined in the Act, or, in the case of a
Fund whose public shareholders
purchase shares on the basis of a
prospectus containing the disclosure
contemplated by condition 2 below, by
the initial shareholder(s) before offering
the Fund’s shares to the public.
2. Each Fund that relies on the order
will disclose in its prospectus the
existence, substance, and effect of the
order. Each Fund relying on the order
will hold itself out to the public as
utilizing the manager of managers
structure described in the application.
The prospectus will prominently
disclose that the Advisor has ultimate
responsibility (subject to oversight by
the Board) to oversee the Sub-Advisors
and recommend their hiring,
termination, and replacement.
3. Each Fund will inform
shareholders of the hiring of a new SubAdvisor within 90 days after the hiring
of the new Sub-Advisor pursuant to the
Modified Notice and Access Procedures.
4. The Advisor will not enter into a
Sub-Advisory Agreement with any
Affiliated Sub-Advisor without such
agreement, including the compensation
to be paid thereunder, being approved
by the shareholders of the applicable
Fund.
5. At all times, at least a majority of
the Board will be Independent Trustees,
and the nomination of new or additional
Independent Trustees will be at the
discretion of the then-existing
Independent Trustees.
6 Applicants will only comply with conditions
11, 12, 13, and 14 if they rely on the relief that
would allow them to provide Aggregate Fee
Disclosure.
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Federal Register / Vol. 78, No. 33 / Tuesday, February 19, 2013 / Notices
6. Whenever a Sub-Advisor change is
proposed for a Fund with an Affiliated
Sub-Advisor, the Board, including a
majority of the Independent Trustees,
will make a separate finding, reflected
in the applicable Board minutes, that
such change is in the best interests of
such Fund and its shareholders and
does not involve a conflict of interest
from which the Advisor or an Affiliated
Sub-Advisor derives an inappropriate
advantage.
7. The Advisor will provide general
management services to each Fund
relying on the order, including overall
supervisory responsibility for the
general management and investment of
the Fund’s assets and, subject to review
and approval by the Board, will: (a) set
the Fund’s overall investment strategies;
(b) evaluate, select and recommend SubAdvisors to provide purchase and sale
recommendations to the Advisor or
investment advice to all or a portion of
the Fund’s assets; (c) allocate and, when
appropriate, reallocate the Fund’s assets
among multiple Sub-Advisors; (d)
monitor and evaluate the Sub-Advisors’
performance; and (e) implement
procedures reasonably designed to
ensure that Sub-Advisor(s) comply with
the relevant Fund’s investment
objectives, policies and restrictions.
8. No trustee or officer of a Fund
relying on the order or director or officer
of the Advisor will own directly or
indirectly (other than through a pooled
investment vehicle that is not controlled
by such person) any interest in a SubAdvisor except for (a) ownership of
interests in the Advisor or any entity
that controls, is controlled by or is
under common control with the
Advisor; or (b) ownership of less than
1% of the outstanding securities of any
class of equity or debt of a publicly
traded company that is either a SubAdvisor or an entity that controls, is
controlled by or is under common
control with a Sub-Advisor.
9. For any Fund that utilizes a SubAdvisor and pays fees to a Sub-Advisor
directly from Fund assets, any changes
to a Sub-Advisory Agreement that
would result in an increase in the total
management and advisory fees payable
by that Fund will be required to be
approved by the shareholders of the
Fund.
10. In the event the Commission
adopts a rule under the Act providing
substantially similar relief to that
requested in the application, the
requested order will expire on the
effective date of that rule.
11. Each Fund relying on the order
will disclose in its registration statement
the Aggregate Fee Disclosure.
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12. Independent legal counsel, as
defined in rule 0–1(a)(6) under the Act,
will be engaged to represent the
Independent Trustees. The selection of
such counsel will be within the
discretion of the then-existing
Independent Trustees.
13. The Advisor will provide the
Board, no less frequently than quarterly,
with information about the profitability
of the Advisor on a per-Fund basis for
each Fund relying on the order. The
information will reflect the impact on
profitability of the hiring or termination
of any Sub-Advisor during the
applicable quarter.
14. Whenever a Sub-Advisor is hired
or terminated, the Advisor will provide
the Board with information showing the
expected impact on the profitability of
the Advisor.
An adjudicatory matter.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact the Office of the Secretary at
(202) 551–5400.
Dated: February 14, 2013.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013–03829 Filed 2–14–13; 4:15 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68907; File No. SR–PHLX–
2013–05]
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing of Proposed Rule Change
Regarding Catastrophic Errors
[FR Doc. 2013–03686 Filed 2–15–13; 8:45 am]
February 12, 2013.
BILLING CODE 8011–01–P
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 January
31, 2013, NASDAQ OMX PHLX LLC
(‘‘PHLX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting.
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold a Closed Meeting
on Thursday, February 21, 2013 at 2:00
p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10)
and 17 CFR 200.402(a)(3), (5), (7), 9(ii)
and (10), permit consideration of the
scheduled matters at the Closed
Meeting.
Commissioner Aguilar, as duty
officer, voted to consider the items
listed for the Closed Meeting in a closed
session.
The subject matter of the Closed
Meeting will be:
Institution and settlement of injunctive
actions;
Institution and settlement of
administrative proceedings;
Other matters relating to enforcement
proceedings; and
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Commission a proposal to amend Rule
1092, Obvious Errors and Catastrophic
Errors. Specifically, Phlx proposes to
amend Rule 1092(f)(ii) to permit the
nullification of trades involving
catastrophic errors in certain situations
specified below.
The text of the proposed rule change
is set forth below. Proposed new
language is italics; proposed deletions
are in brackets.
*
*
*
*
*
Rule 1092. Obvious Errors and Catastrophic
Errors
The Exchange shall either nullify a
transaction or adjust the execution price of a
transaction that results in an Obvious Error
as provided in this Rule.
1 15
2 17
E:\FR\FM\19FEN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
19FEN1
]]>Agencies
[Federal Register Volume 78, Number 33 (Tuesday, February 19, 2013)]
[Notices]
[Pages 11702-11705]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03686]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30381; File No. 812-14027]
AdvisorShares Investments, LLC and AdvisorShares Trust; Notice of
Application
February 12, 2013.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (``Act'') for an exemption from section 15(a) of
the Act and rule 18f-2 under the Act, as well as from certain
disclosure requirements.
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[[Page 11703]]
SUMMARY: Summary of Application: Applicants request an order that would
permit them to enter into and materially amend subadvisory agreements
without shareholder approval and would grant relief from certain
disclosure requirements.
Applicants: AdvisorShares Investments, LLC (the ``Advisor'') and
AdvisorShares Trust (the ``Trust'').
DATES: Filing Dates: The application was filed on April 16, 2012, and
amended on October 11, 2012 and February 6, 2013.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on March 8, 2013, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants:
AdvisorShares Investments, LLC, 2 Bethesda Metro Center, Suite 1330,
Bethesda, MD 20814.
FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-6873, 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 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 organized as a Delaware statutory trust and is
registered under the Act as an open-end management investment company.
The Trust currently offers 18 series (each, a ``Fund'') and may offer
additional Funds in the future.\1\ Each existing Fund operates as an
actively-managed exchange-traded fund in reliance on previously-granted
exemptive orders.\2\
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\1\ Applicants also request relief with respect to future Funds
and any other existing or future registered open-end management
investment company or series thereof that (a) is advised by the
Advisor or an entity controlling, controlled by, or under common
control with the Advisor or its successors (each such entity
included in the term ``Advisor''); (b) uses the multi-manager
structure described in the application; and (c) complies with the
terms and conditions of the application (included in the term
``Funds''). Every existing entity that currently intends to rely on
the requested order is named as an applicant. For purposes of the
requested order, ``successor'' is limited to an entity or entities
that result from a reorganization into another jurisdiction or a
change in the type of business organization. If the name of any Fund
contains the name of a Sub-Advisor (as defined below), the name of
the Advisor, or a trademark or trade name that is owned by the
Advisor, will precede the name of the Sub-Advisor.
\2\ AdvisorShares Investments, LLC and AdvisorShares Trust,
Investment Company Act Release Nos. 29264 (May 6, 2010) (notice) and
29291 (May 28, 2010) (order); and AdvisorShares Investments, LLC and
AdvisorShares Trust, Investment Company Act Release Nos. 28568 (Dec.
23, 2008) (notice) and 28822 (Jul. 20, 2009) (order).
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2. The Advisor, a Delaware limited liability company, is registered
as an investment adviser under the Investment Advisers Act of 1940 (the
``Advisers Act''). The Advisor serves as the investment adviser to each
of the Funds pursuant to an investment advisory agreement with the
Trust, with respect to each Fund (the ``Investment Advisory
Agreement''). The Investment Advisory Agreement was approved by the
Trust's board of trustees (the ``Board''),\3\ including a majority of
the trustees who are not ``interested persons,'' as defined in section
2(a)(19) of the Act (the ``Independent Trustees''), and by the initial
shareholder of each Fund in the manner required by sections 15(a) and
15(c) of the Act and rule 18f-2 under the Act.
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\3\ The term ``Board'' also includes the board of trustees or
directors of a future Trust and future Fund, if different.
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3. Under the terms of the Investment Advisory Agreement, the
Advisor, subject to the oversight of the Board, manages the investment
operations and determines the composition of the portfolio of each
Fund, including the purchase, retention and disposition of the
securities and other instruments held by the Fund, in accordance with
the investment objectives and policies of the Fund. For its services to
each Fund, the Advisor receives a fee from that Fund as specified in
the Investment Advisory Agreement computed as a percentage of the
Fund's average daily net assets. The Investment Advisory Agreement also
permits the Advisor, subject to the approval of the Board, including a
majority of the Independent Trustees, and the shareholders of the
applicable Fund (if required by applicable law), to engage one or more
unaffiliated investment sub-advisers (``Sub-Advisors'') to manage all
or a portion of the assets of any Fund. The Advisor has entered into
subadvisory agreements (``Sub-Advisory Agreements'') with various Sub-
Advisors to provide investment advisory services to the Funds.\4\ Each
Sub-Advisor is, and each future Sub-Advisor will be, an ``investment
adviser'' as defined in section 2(a)(20)(B) of the Act, as well as
registered as an investment adviser under the Advisers Act. The Advisor
will evaluate, select and recommend Sub-Advisors to the Board, monitor
and evaluate each Sub-Advisor's investment program, and review each
Fund's compliance with its investment objective, policies and
restrictions. The Advisor also will recommend to the Board whether Sub-
Advisory Agreements should be renewed, modified or terminated. The
Advisor currently compensates each Sub-Advisor out of the fee paid by a
Fund to the Advisor under the Investment Advisory Agreement. However,
applicants note that future arrangements with one or more Sub-Advisors
may be implemented whereby a Fund compensates a Sub-Advisor directly.
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\4\ Currently, the Advisor has entered into Sub-Advisory
Agreements with the following Sub-Advisors: Accuvest Global
Advisors, WCM Investment Management, Cambria Investment Management,
L.P., Peritus I Asset Management, LLC, Ranger Alternative
Management, L.P., Madrona Funds, LLC, American Wealth Management,
Trim Tabs Asset Management, LLC, Rockledge Advisors, LLC, Your
Source Financial, PLC, Baldwin Brothers Inc., Community Capital
Management Inc., First Affirmative Financial Network LLC, Reynders,
McVeigh Capital Management, LLC, Commerce Asset Management, LLC,
Partnervest Advisory Services, LLC, Pring Turner Capital Group,
Newfleet Asset Management, LLC, and Treesdale Partners LLC.
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4. Applicants request an order to permit the Funds, subject to
Board approval, to engage Sub-Advisors to manage all or a portion of
the assets of a Fund pursuant to a Sub-Advisory Agreement and
materially amend Sub-Advisory Agreements without obtaining shareholder
approval. The requested relief will not extend to any Sub-Advisor that
is an affiliated person, as defined in section 2(a)(3) of the Act, of a
Fund or the Advisor, other than by reason of serving as Sub-Advisor to
a Fund (``Affiliated Sub-Advisor'').
5. Applicants also request an order exempting each Fund from
certain disclosure provisions described below that may require the
Funds to disclose fees paid by the Advisor or a Fund to each Sub-
Advisor. Applicants seek an order to permit each Fund to disclose (as a
dollar amount and a percentage of
[[Page 11704]]
a Fund's net assets) only: (a) the aggregate fees paid to the Advisor
and any Affiliated Sub-Advisors; and (b) the aggregate fees paid to
Sub-Advisors other than Affiliated Sub-Advisors (collectively, the
``Aggregate Fee Disclosure''). A Fund that employs an Affiliated Sub-
Advisor will provide separate disclosure of any fees paid to the
Affiliated Sub-Advisor.
6. The Funds will inform shareholders of the hiring of a new Sub-
Advisor pursuant to the following procedures (``Modified Notice and
Access Procedures''): (a) within 90 days after a new Sub-Advisor is
hired for any Fund, that Fund will send its shareholders either a
Multi-manager Notice or a Multi-manager Notice and Multi-manager
Information Statement; \5\ and (b) the Fund will make the Multi-manager
Information Statement available on the Web site identified in the
Multi-manager Notice no later than when the Multi-manager Notice (or
Multi-manager Notice and Multi-manager Information Statement) is first
sent to shareholders, and will maintain it on that Web site for at
least 90 days.
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\5\ A ``Multi-manager Notice'' will be modeled on a Notice of
Internet Availability as defined in rule 14a-16 under the Securities
Exchange Act of 1934 (``Exchange Act''), and specifically will,
among other things: (a) Summarize the relevant information regarding
the new Sub-Advisor; (b) inform shareholders that the Multi-manager
Information Statement is available on a Web site; (c) provide the
Web site address; (d) state the time period during which the Multi-
manager Information Statement will remain available on that Web
site; (e) provide instructions for accessing and printing the Multi-
manager Information Statement; and (f) instruct the shareholder that
a paper or email copy of the Multi manager Information Statement may
be obtained, without charge, by contacting the Funds.
A ``Multi-manager Information Statement'' will meet the
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule
14A under the Exchange Act for an information statement, except as
modified by the requested order to permit Aggregate Fee Disclosure.
Multi-manager Information Statements will be filed electronically
with the Commission via the EDGAR system.
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Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that it is
unlawful for any person to act as an investment adviser to a registered
investment company except pursuant to a written contract that has been
approved by the vote of a majority of the company's outstanding voting
securities. Rule 18f-2 under the Act provides that each series or class
of stock in a series investment company affected by a matter must
approve that matter if the Act requires shareholder approval.
2. Form N-1A is the registration statement used by open-end
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of
the method and amount of the investment adviser's compensation.
3. Rule 20a-1 under the Act requires proxies solicited with respect
to a registered investment company to comply with Schedule 14A under
the Exchange Act. Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and
22(c)(9) of Schedule 14A, taken together, require a proxy statement for
a shareholder meeting at which the advisory contract will be voted upon
to include the ``rate of compensation of the investment adviser,'' the
``aggregate amount of the investment adviser's fees,'' a description of
the ``terms of the contract to be acted upon,'' and, if a change in the
advisory fee is proposed, the existing and proposed fees and the
difference between the two fees.
4. Regulation S-X sets forth the requirements for financial
statements required to be included as part of a registered investment
company's registration statement and shareholder reports filed with the
Commission. Sections 6-07(2)(a), (b) and (c) of Regulation S-X require
a registered investment company to include in its financial statement
information about the investment advisory fees.
5. 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 provisions of the Act, or
from any rule thereunder, 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. Applicants state that the requested relief meets this standard for
the reasons discussed below.
6. Applicants assert that the shareholders expect the Advisor,
subject to the review and approval of the Board, to select the Sub-
Advisors who are best suited to achieve the Fund's investment
objective. Applicants assert that, from the perspective of the
shareholder, the role of the Sub-Advisor is substantially equivalent to
the role of the individual portfolio managers employed by traditional
investment company advisory firms. Applicants state that requiring
shareholder approval of each Subadvisory Agreement would impose
unnecessary delays and expenses on the Funds, and may preclude the Fund
from acting promptly when the Board and the Advisor believe that a
change would benefit a Fund and its shareholders. Applicants note that
the Investment Advisory Agreement and any Sub-Advisory Agreement with
an Affiliated Sub-Advisor (if any) will continue to be subject to the
shareholder approval requirements of section 15(a) of the Act and rule
18f-2 under the Act.
7. Applicants assert that the requested disclosure relief would
benefit shareholders of the Funds because it would improve the
Advisor's ability to negotiate the fees paid to Sub-Advisors.
Applicants state that the Advisor may be able to negotiate rates that
are below a Sub-Advisor's ``posted'' amounts, if the Advisor is not
required to disclose the Sub-Advisors' fees to the public. Applicants
submit that the requested relief will encourage Sub-Advisors to
negotiate lower subadvisory fees with the Advisor if the lower fees are
not required to be made public.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions: \6\
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\6\ Applicants will only comply with conditions 11, 12, 13, and
14 if they rely on the relief that would allow them to provide
Aggregate Fee Disclosure.
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1. Before a Fund may rely on the order, the operation of the Fund
in the manner described in the application will be approved by a
majority of the Fund's outstanding voting securities, as defined in the
Act, or, in the case of a Fund whose public shareholders purchase
shares on the basis of a prospectus containing the disclosure
contemplated by condition 2 below, by the initial shareholder(s) before
offering the Fund's shares to the public.
2. Each Fund that relies on the order will disclose in its
prospectus the existence, substance, and effect of the order. Each Fund
relying on the order will hold itself out to the public as utilizing
the manager of managers structure described in the application. The
prospectus will prominently disclose that the Advisor has ultimate
responsibility (subject to oversight by the Board) to oversee the Sub-
Advisors and recommend their hiring, termination, and replacement.
3. Each Fund will inform shareholders of the hiring of a new Sub-
Advisor within 90 days after the hiring of the new Sub-Advisor pursuant
to the Modified Notice and Access Procedures.
4. The Advisor will not enter into a Sub-Advisory Agreement with
any Affiliated Sub-Advisor without such agreement, including the
compensation to be paid thereunder, being approved by the shareholders
of the applicable Fund.
5. At all times, at least a majority of the Board will be
Independent Trustees, and the nomination of new or additional
Independent Trustees will be at the discretion of the then-existing
Independent Trustees.
[[Page 11705]]
6. Whenever a Sub-Advisor change is proposed for a Fund with an
Affiliated Sub-Advisor, the Board, including a majority of the
Independent Trustees, will make a separate finding, reflected in the
applicable Board minutes, that such change is in the best interests of
such Fund and its shareholders and does not involve a conflict of
interest from which the Advisor or an Affiliated Sub-Advisor derives an
inappropriate advantage.
7. The Advisor will provide general management services to each
Fund relying on the order, including overall supervisory responsibility
for the general management and investment of the Fund's assets and,
subject to review and approval by the Board, will: (a) set the Fund's
overall investment strategies; (b) evaluate, select and recommend Sub-
Advisors to provide purchase and sale recommendations to the Advisor or
investment advice to all or a portion of the Fund's assets; (c)
allocate and, when appropriate, reallocate the Fund's assets among
multiple Sub-Advisors; (d) monitor and evaluate the Sub-Advisors'
performance; and (e) implement procedures reasonably designed to ensure
that Sub-Advisor(s) comply with the relevant Fund's investment
objectives, policies and restrictions.
8. No trustee or officer of a Fund relying on the order or director
or officer of the Advisor will own directly or indirectly (other than
through a pooled investment vehicle that is not controlled by such
person) any interest in a Sub-Advisor except for (a) ownership of
interests in the Advisor or any entity that controls, is controlled by
or is under common control with the Advisor; or (b) ownership of less
than 1% of the outstanding securities of any class of equity or debt of
a publicly traded company that is either a Sub-Advisor or an entity
that controls, is controlled by or is under common control with a Sub-
Advisor.
9. For any Fund that utilizes a Sub-Advisor and pays fees to a Sub-
Advisor directly from Fund assets, any changes to a Sub-Advisory
Agreement that would result in an increase in the total management and
advisory fees payable by that Fund will be required to be approved by
the shareholders of the Fund.
10. In the event the Commission adopts a rule under the Act
providing substantially similar relief to that requested in the
application, the requested order will expire on the effective date of
that rule.
11. Each Fund relying on the order will disclose in its
registration statement the Aggregate Fee Disclosure.
12. Independent legal counsel, as defined in rule 0-1(a)(6) under
the Act, will be engaged to represent the Independent Trustees. The
selection of such counsel will be within the discretion of the then-
existing Independent Trustees.
13. The Advisor will provide the Board, no less frequently than
quarterly, with information about the profitability of the Advisor on a
per-Fund basis for each Fund relying on the order. The information will
reflect the impact on profitability of the hiring or termination of any
Sub-Advisor during the applicable quarter.
14. Whenever a Sub-Advisor is hired or terminated, the Advisor will
provide the Board with information showing the expected impact on the
profitability of the Advisor.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03686 Filed 2-15-13; 8:45 am]
BILLING CODE 8011-01-P
