Special Opportunities Fund, Inc.; Notice of Application, 49555-49556 [2013-19693]
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Federal Register / Vol. 78, No. 157 / Wednesday, August 14, 2013 / Notices
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Please direct your written comment to
Thomas Bayer, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 100 F Street, NE., Washington,
DC 20549 or send an email to:
PRA_Mailbox@sec.gov.
Dated: August 8, 2013.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–19670 Filed 8–13–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
30647; File No. 811–07528]
Applicant’s Representations
Special Opportunities Fund, Inc.;
Notice of Application
August 8, 2013.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for a
declaratory order under Section 554(e)
of the Administrative Procedure Act of
1946 (‘‘APA’’) concerning a proxy
voting procedure under Section
12(d)(1)(F) of the Investment Company
Act of 1940 (‘‘Act’’).
AGENCY:
Applicant
requests an order declaring that its
proxy voting procedure does not cause
the applicant to be in violation of
Section 12(d)(1) of the Act.
APPLICANT: Special Opportunities Fund,
Inc. (‘‘SPE’’ or ‘‘Fund’’).
FILING DATES: The application was filed
on December 13, 2011 and amended on
November 5, 2012.
HEARING OR NOTIFICATION OF HEARING:
Interested persons may request a
hearing by writing to the Commission’s
Secretary and serving applicant with a
copy of the request, personally or by
mail. Hearing requests should be
received by the Commission by 5:30
p.m. on September 3, 2013, 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.
Absent a request for a hearing that is
granted by the Commission, the
Commission intends to issue an order
under Section 554(e) of the APA
declaring that applicant’s proxy voting
tkelley on DSK3SPTVN1PROD with NOTICES
SUMMARY OF APPLICATION:
VerDate Mar<15>2010
16:16 Aug 13, 2013
Jkt 229001
procedure does not satisfy Section
12(d)(1)(F) of the Act.
ADDRESSES: Elizabeth M. Murphy,
Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090;
Applicant, 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
FOR FURTHER INFORMATION CONTACT:
Adam Glazer, Senior Counsel, at (202)
551–6825, Division of Investment
Management, Office of Chief Counsel.
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site at https://www.sec.gov/rules/ic/
2012/special-opportunities-fundapplication.pdf or by calling (202) 551–
8090.
1. SPE is organized as a Maryland
corporation and is registered under the
Act as a closed-end management
investment company. Brooklyn Capital
Management, LLC (‘‘Adviser’’), a
Delaware limited liability company, is
an investment adviser registered under
the Investment Advisers Act of 1940
and currently serves as investment
adviser to SPE. SPE seeks to rely on
Section 12(d)(1)(F) of the Act to invest
its assets in securities of other
investment companies registered under
the Act (‘‘underlying funds’’) that are
closed-end investment companies, in
excess of the limits in Section
12(d)(1)(A) of the Act.
2. On December 7, 2011, SPE’s
shareholders approved a proposal to
‘‘instruct the Adviser to vote proxies
received by the Fund from any
[underlying fund] on any proposal
(including the election of directors) in a
manner which the Adviser reasonably
determines is likely to favorably impact
the discount of such [underlying fund’s]
market price as compared to its net asset
value’’ (‘‘Voting Procedure’’). SPE
requests a declaratory order pursuant to
Section 554(e) of the APA stating that
the Voting Procedure ‘‘does not cause it
to be in violation of Section 12(d)(1) of
the Act.’’
Applicant’s Legal Analysis
1. Section 12(d)(1)(A) of the Act
provides, in relevant part, that it shall
be unlawful for any registered
investment company (‘‘acquiring fund’’)
to purchase or otherwise acquire any
security issued by an underlying fund if
immediately after such purchase or
acquisition: (i) the acquiring company
owns more than 3% of the underlying
fund’s total outstanding voting stock; (ii)
securities issued by the underlying fund
PO 00000
Frm 00112
Fmt 4703
Sfmt 4703
49555
have an aggregate value in excess of 5%
of the value of the acquiring fund’s total
assets (‘‘5% limit’’); or if such securities,
together with the securities of other
investment companies, have an
aggregate value in excess of 10% of the
value of the acquiring fund’s total assets
(‘‘10% limit’’).
2. Section 12(d)(1)(F) of the Act
provides a conditional exemption from
the 5% and 10% limits in Section
12(d)(1)(A). Section 12(d)(1)(F) permits
an acquiring fund to purchase or
otherwise acquire shares of an
underlying fund if, immediately after
the purchase or acquisition, the
acquiring fund and all of its affiliated
persons would not own more than 3%
of the underlying fund’s total
outstanding stock, and if certain sales
load restrictions are met. Section
12(d)(1)(F) further provides that the
underlying fund is not obligated to
redeem, during any period of less than
30 days, securities held by the acquiring
fund in an amount exceeding 1% of the
underlying fund’s outstanding
securities. Finally, Section 12(d)(1)(F)
provides that the acquiring fund ‘‘shall
exercise voting rights by proxy or
otherwise with respect to any security
purchased or acquired pursuant to
[Section 12(d)(1)(F)] in the manner
prescribed by [Section 12(d)(1)(E)].’’
Section 12(d)(1)(E)(iii), in turn,
provides, in relevant part, that ‘‘the
purchase or acquisition is made
pursuant to an arrangement with the
issuer of, or principal underwriter for,
the issuer of the security whereby [the
acquiring fund] is obligated either to
seek instructions from its security
holders with regard to the voting of all
proxies with respect to such security
and to vote such proxies only in
accordance with such instructions, or to
vote the shares held by it in the same
proportion as the vote of all other
holders of such security.’’ The first
alternative is referred to as ‘‘PassThrough Voting Condition.’’ The second
alternative is referred to as ‘‘Mirror
Voting.’’
3. SPE asserts that its Voting
Procedure satisfies the Pass-Through
Voting Condition. SPE states that it has
been ‘‘unable to find anything in the
legislative history of Section 12(d)(1)
that provides any clue as to the reason
for the [Pass-Through Voting
Condition].’’ SPE further asserts that
‘‘there are good reasons for interpreting
the [Pass-Through Voting Condition] to
allow an acquiring fund to seek standing
instructions to vote on proposals
regarding acquired funds.’’ In this
regard, SPE asserts that it is not cost
effective for an acquiring fund to obtain
voting instructions for a particular
E:\FR\FM\14AUN1.SGM
14AUN1
49556
Federal Register / Vol. 78, No. 157 / Wednesday, August 14, 2013 / Notices
underlying fund after it receives a
proxy. SPE also states that ‘‘there is
almost never sufficient time for an
acquiring fund to seek and actually
obtain instructions from its own
shareholders as to how to vote a specific
proxy solicited by a particular acquired
fund.’’ SPE further states that ‘‘SPE has
no such relationship with any fund and
it would be futile for SPE to try to
persuade an unrelated acquired fund to
transmit its proxy materials to SPE’s
stockholders.’’
4. SPE requests an order under section
554(e) of the APA declaring that the
Voting Procedure ‘‘does not cause it to
be in violation of Section 12(d)(1) of the
Act.’’ Section 554(e) of the APA
provides that ‘‘[t]he agency, with like
effect as in the case of other orders, and
in its sound discretion, may issue a
declaratory order to terminate a
controversy or remove uncertainty.’’
SPE states that, if the Commission
issues the requested declaratory order,
SPE intends to submit the Voting
Procedure for shareholder approval on
an annual basis ‘‘to insure that its
standing proxy voting instructions do
not become stale.’’
tkelley on DSK3SPTVN1PROD with NOTICES
The Commission’s Preliminary Views
1. Section 12(d)(1)(F) of the 1940 Act
provides a conditional exemption from
the restrictions in Section 12(d)(1)(A) on
an acquiring fund purchasing or
otherwise acquiring a security issued by
an underlying fund. The legislative
history of Section 12(d)(1)(A) suggests
that these restrictions were designed, in
part, to address the concern that an
acquiring fund could be used by an
investment adviser, among others, as a
vehicle to control or unduly influence,
through voting, threat of redemption or
otherwise, an underlying fund for its
own benefit and to the detriment of the
shareholders of both funds.1 The
conditions contained in the exemption
provided by Section 12(d)(1)(F), and in
particular the condition requiring voting
in accordance with Section
12(d)(1)(E)(iii), attempts to minimize the
influence that an acquiring fund may
exercise over an underlying fund
through voting.2
2. Shortly after Section 12(d)(1)(F)
was enacted in 1970, the Commission
issued a release providing guidance on
the various provisions enacted by the
new legislation, including specifically
1 See U.S. Securities and Exchange Commission,
Investment Trusts and Investment Companies, H.R.
Doc No. 279, 76th Cong., 1st Sess., pt. 3, at 2721–
95 (1939).
2 See Fund of Funds Investments, Investment
Company Act Release No. 27399 (June 20, 2006) at
n.11 and accompanying text.
VerDate Mar<15>2010
16:16 Aug 13, 2013
Jkt 229001
the Pass-Through Voting Condition.3
The 1971 Release stated that the PassThrough Voting Condition in Section
12(d)(1)(F) ‘‘in effect, requires the fund
holding company to make an
arrangement with the issuer or principal
underwriter of the issuer whereby
sufficient proxy solicitation or other
material may be transmitted to the fund
holding company’s security holders so
that their instructions may be
obtained.’’ 4 This approach addresses
the concern underlying the restrictions
in Section 12(d)(1)(A)—that the fund of
funds’ investment adviser or another
affiliate not exercise undue influence
over the management or policies of an
underlying fund—by placing the voting
of the underlying fund’s proxies in the
hands of the fund of funds’ shareholders
(rather than its investment adviser).
Consistent with the Commission’s
analysis in the 1971 Release, the
Commission interprets Section
12(d)(1)(F), through the incorporation of
the requirement in Section
12(d)(1)(E)(iii), to require SPE, if it
chooses the Pass-Through Voting
Condition, to have an arrangement with
each underlying fund or its principal
underwriter whereby SPE will pass
through the proxies to SPE’s
shareholders and vote according to their
instructions.
3. In the Commission’s preliminary
view, SPE’s Voting Procedure does not
appear to be consistent with the
purposes and policies behind Section
12(d)(1)(F) of the Act, or with the
guidance that the Commission
articulated in the 1971 Release. The
Voting Procedure gives the Adviser
broad discretion in voting the
underlying funds’ proxies and thus
presents the potential for the Adviser to
exercise undue influence over the
management and policies of the
underlying funds. As to SPE’s assertion
that soliciting proxies as described in
the 1971 Release is ‘‘prohibitively
expensive and logistically impractical,’’
we note that Section 12(d)(1)(E) requires
there to be ‘‘an arrangement’’ between
the acquiring fund and an underlying
fund concerning the voting of proxies,
which suggests that at least the logistics
of the Pass-Through Voting Condition
could be addressed as part of ‘‘the
arrangement.’’ We also note that funds
3 Changes in the Investment Company Act of 1940
Made by the Investment Company Amendments Act
of 1970 (Pub. L. 91–547) Relating to the Repeal and
Modification of Exemptions for Certain Companies;
The Pyramiding of Investment Companies and the
Regulation of Fund Holding Companies; and
Rescission of Rule 11b-1 under the Investment
Company Act, Investment Company Act Release
No. 6440 (Apr. 6, 1971) (‘‘1971 Release’’).
4 Id. at 4.
PO 00000
Frm 00113
Fmt 4703
Sfmt 4703
of funds similar to SPE existed at the
time the 1971 Release was issued and
the Pass-Through Voting Condition was
enacted as an alternative to Mirror
Voting, yet Congress nevertheless
determined the statutory conditions to
be appropriate.5 To the extent that SPE
finds making ‘‘an arrangement’’ with an
underlying fund under the PassThrough Voting Condition ‘‘futile,’’ SPE
has the option of using Mirror Voting.
Therefore, absent a request for a hearing
that is granted by the Commission, the
Commission intends to respond to SPE’s
application by issuing an order under
Section 554(e) of the APA declaring that
the Voting Procedure does not satisfy
Section 12(d)(1)(F) of the Act.
By the Commission.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–19693 Filed 8–13–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70150]
Order Temporarily Exempting Certain
Broker-Dealers and Certain
Transactions From the Recordkeeping
and Reporting Requirements of Rule
13h–1 Under the Securities Exchange
Act of 1934
August 8, 2013.
On July 27, 2011, the Securities and
Exchange Commission (‘‘Commission’’)
adopted Rule 13h–1 (the ‘‘Rule’’) under
the Securities Exchange Act of 1934
(‘‘Exchange Act’’) concerning large
trader reporting to assist the
Commission in both identifying and
obtaining trade information for market
participants that conduct a substantial
amount of trading activity, as measured
by volume or market value, in U.S.
securities (such persons are referred to
as ‘‘large traders’’).1 The Financial
Information Forum (‘‘FIF’’) and the
Securities Industry and Financial
Markets Association (‘‘SIFMA,’’ and
collectively the ‘‘Industry
Organizations’’), each representing a
variety of broker-dealers and other
market participants, have requested that
the Commission grant certain
substantive relief from the broker-dealer
recordkeeping and reporting
5 See Mutual Fund Legislation of 1967: Hearings
on S. 1659 Before the Senate Comm. on Banking
and Currency, 90th Cong., 1st Sess. 882–891 (1967)
(statement of Milton Mound, President, First
Multifund of America, Inc.).
1 See Securities Exchange Act Release No. 64976
(July 27, 2011), 76 FR 46960 (Aug. 3, 2011) (‘‘Large
Trader Adopting Release’’). The effective date of
Rule 13h–1 was October 3, 2011.
E:\FR\FM\14AUN1.SGM
14AUN1
]]>Agencies
[Federal Register Volume 78, Number 157 (Wednesday, August 14, 2013)]
[Notices]
[Pages 49555-49556]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-19693]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30647; File No. 811-07528]
Special Opportunities Fund, Inc.; Notice of Application
August 8, 2013.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for a declaratory order under Section
554(e) of the Administrative Procedure Act of 1946 (``APA'') concerning
a proxy voting procedure under Section 12(d)(1)(F) of the Investment
Company Act of 1940 (``Act'').
-----------------------------------------------------------------------
SUMMARY OF APPLICATION: Applicant requests an order declaring that its
proxy voting procedure does not cause the applicant to be in violation
of Section 12(d)(1) of the Act.
APPLICANT: Special Opportunities Fund, Inc. (``SPE'' or ``Fund'').
FILING DATES: The application was filed on December 13, 2011 and
amended on November 5, 2012.
HEARING OR NOTIFICATION OF HEARING: Interested persons may request a
hearing by writing to the Commission's Secretary and serving applicant
with a copy of the request, personally or by mail. Hearing requests
should be received by the Commission by 5:30 p.m. on September 3, 2013,
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. Absent a request for a hearing that is granted
by the Commission, the Commission intends to issue an order under
Section 554(e) of the APA declaring that applicant's proxy voting
procedure does not satisfy Section 12(d)(1)(F) of the Act.
ADDRESSES: Elizabeth M. Murphy, Secretary, Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicant, 615
East Michigan Street, Milwaukee, Wisconsin 53202.
FOR FURTHER INFORMATION CONTACT: Adam Glazer, Senior Counsel, at (202)
551-6825, Division of Investment Management, Office of Chief Counsel.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site at https://www.sec.gov/rules/ic/2012/special-opportunities-fund-application.pdf or by calling (202) 551-8090.
Applicant's Representations
1. SPE is organized as a Maryland corporation and is registered
under the Act as a closed-end management investment company. Brooklyn
Capital Management, LLC (``Adviser''), a Delaware limited liability
company, is an investment adviser registered under the Investment
Advisers Act of 1940 and currently serves as investment adviser to SPE.
SPE seeks to rely on Section 12(d)(1)(F) of the Act to invest its
assets in securities of other investment companies registered under the
Act (``underlying funds'') that are closed-end investment companies, in
excess of the limits in Section 12(d)(1)(A) of the Act.
2. On December 7, 2011, SPE's shareholders approved a proposal to
``instruct the Adviser to vote proxies received by the Fund from any
[underlying fund] on any proposal (including the election of directors)
in a manner which the Adviser reasonably determines is likely to
favorably impact the discount of such [underlying fund's] market price
as compared to its net asset value'' (``Voting Procedure''). SPE
requests a declaratory order pursuant to Section 554(e) of the APA
stating that the Voting Procedure ``does not cause it to be in
violation of Section 12(d)(1) of the Act.''
Applicant's Legal Analysis
1. Section 12(d)(1)(A) of the Act provides, in relevant part, that
it shall be unlawful for any registered investment company (``acquiring
fund'') to purchase or otherwise acquire any security issued by an
underlying fund if immediately after such purchase or acquisition: (i)
the acquiring company owns more than 3% of the underlying fund's total
outstanding voting stock; (ii) securities issued by the underlying fund
have an aggregate value in excess of 5% of the value of the acquiring
fund's total assets (``5% limit''); or if such securities, together
with the securities of other investment companies, have an aggregate
value in excess of 10% of the value of the acquiring fund's total
assets (``10% limit'').
2. Section 12(d)(1)(F) of the Act provides a conditional exemption
from the 5% and 10% limits in Section 12(d)(1)(A). Section 12(d)(1)(F)
permits an acquiring fund to purchase or otherwise acquire shares of an
underlying fund if, immediately after the purchase or acquisition, the
acquiring fund and all of its affiliated persons would not own more
than 3% of the underlying fund's total outstanding stock, and if
certain sales load restrictions are met. Section 12(d)(1)(F) further
provides that the underlying fund is not obligated to redeem, during
any period of less than 30 days, securities held by the acquiring fund
in an amount exceeding 1% of the underlying fund's outstanding
securities. Finally, Section 12(d)(1)(F) provides that the acquiring
fund ``shall exercise voting rights by proxy or otherwise with respect
to any security purchased or acquired pursuant to [Section 12(d)(1)(F)]
in the manner prescribed by [Section 12(d)(1)(E)].'' Section
12(d)(1)(E)(iii), in turn, provides, in relevant part, that ``the
purchase or acquisition is made pursuant to an arrangement with the
issuer of, or principal underwriter for, the issuer of the security
whereby [the acquiring fund] is obligated either to seek instructions
from its security holders with regard to the voting of all proxies with
respect to such security and to vote such proxies only in accordance
with such instructions, or to vote the shares held by it in the same
proportion as the vote of all other holders of such security.'' The
first alternative is referred to as ``Pass-Through Voting Condition.''
The second alternative is referred to as ``Mirror Voting.''
3. SPE asserts that its Voting Procedure satisfies the Pass-Through
Voting Condition. SPE states that it has been ``unable to find anything
in the legislative history of Section 12(d)(1) that provides any clue
as to the reason for the [Pass-Through Voting Condition].'' SPE further
asserts that ``there are good reasons for interpreting the [Pass-
Through Voting Condition] to allow an acquiring fund to seek standing
instructions to vote on proposals regarding acquired funds.'' In this
regard, SPE asserts that it is not cost effective for an acquiring fund
to obtain voting instructions for a particular
[[Page 49556]]
underlying fund after it receives a proxy. SPE also states that ``there
is almost never sufficient time for an acquiring fund to seek and
actually obtain instructions from its own shareholders as to how to
vote a specific proxy solicited by a particular acquired fund.'' SPE
further states that ``SPE has no such relationship with any fund and it
would be futile for SPE to try to persuade an unrelated acquired fund
to transmit its proxy materials to SPE's stockholders.''
4. SPE requests an order under section 554(e) of the APA declaring
that the Voting Procedure ``does not cause it to be in violation of
Section 12(d)(1) of the Act.'' Section 554(e) of the APA provides that
``[t]he agency, with like effect as in the case of other orders, and in
its sound discretion, may issue a declaratory order to terminate a
controversy or remove uncertainty.'' SPE states that, if the Commission
issues the requested declaratory order, SPE intends to submit the
Voting Procedure for shareholder approval on an annual basis ``to
insure that its standing proxy voting instructions do not become
stale.''
The Commission's Preliminary Views
1. Section 12(d)(1)(F) of the 1940 Act provides a conditional
exemption from the restrictions in Section 12(d)(1)(A) on an acquiring
fund purchasing or otherwise acquiring a security issued by an
underlying fund. The legislative history of Section 12(d)(1)(A)
suggests that these restrictions were designed, in part, to address the
concern that an acquiring fund could be used by an investment adviser,
among others, as a vehicle to control or unduly influence, through
voting, threat of redemption or otherwise, an underlying fund for its
own benefit and to the detriment of the shareholders of both funds.\1\
The conditions contained in the exemption provided by Section
12(d)(1)(F), and in particular the condition requiring voting in
accordance with Section 12(d)(1)(E)(iii), attempts to minimize the
influence that an acquiring fund may exercise over an underlying fund
through voting.\2\
---------------------------------------------------------------------------
\1\ See U.S. Securities and Exchange Commission, Investment
Trusts and Investment Companies, H.R. Doc No. 279, 76th Cong., 1st
Sess., pt. 3, at 2721-95 (1939).
\2\ See Fund of Funds Investments, Investment Company Act
Release No. 27399 (June 20, 2006) at n.11 and accompanying text.
---------------------------------------------------------------------------
2. Shortly after Section 12(d)(1)(F) was enacted in 1970, the
Commission issued a release providing guidance on the various
provisions enacted by the new legislation, including specifically the
Pass-Through Voting Condition.\3\ The 1971 Release stated that the
Pass-Through Voting Condition in Section 12(d)(1)(F) ``in effect,
requires the fund holding company to make an arrangement with the
issuer or principal underwriter of the issuer whereby sufficient proxy
solicitation or other material may be transmitted to the fund holding
company's security holders so that their instructions may be
obtained.'' \4\ This approach addresses the concern underlying the
restrictions in Section 12(d)(1)(A)--that the fund of funds' investment
adviser or another affiliate not exercise undue influence over the
management or policies of an underlying fund--by placing the voting of
the underlying fund's proxies in the hands of the fund of funds'
shareholders (rather than its investment adviser). Consistent with the
Commission's analysis in the 1971 Release, the Commission interprets
Section 12(d)(1)(F), through the incorporation of the requirement in
Section 12(d)(1)(E)(iii), to require SPE, if it chooses the Pass-
Through Voting Condition, to have an arrangement with each underlying
fund or its principal underwriter whereby SPE will pass through the
proxies to SPE's shareholders and vote according to their instructions.
---------------------------------------------------------------------------
\3\ Changes in the Investment Company Act of 1940 Made by the
Investment Company Amendments Act of 1970 (Pub. L. 91-547) Relating
to the Repeal and Modification of Exemptions for Certain Companies;
The Pyramiding of Investment Companies and the Regulation of Fund
Holding Companies; and Rescission of Rule 11b-1 under the Investment
Company Act, Investment Company Act Release No. 6440 (Apr. 6, 1971)
(``1971 Release'').
\4\ Id. at 4.
---------------------------------------------------------------------------
3. In the Commission's preliminary view, SPE's Voting Procedure
does not appear to be consistent with the purposes and policies behind
Section 12(d)(1)(F) of the Act, or with the guidance that the
Commission articulated in the 1971 Release. The Voting Procedure gives
the Adviser broad discretion in voting the underlying funds' proxies
and thus presents the potential for the Adviser to exercise undue
influence over the management and policies of the underlying funds. As
to SPE's assertion that soliciting proxies as described in the 1971
Release is ``prohibitively expensive and logistically impractical,'' we
note that Section 12(d)(1)(E) requires there to be ``an arrangement''
between the acquiring fund and an underlying fund concerning the voting
of proxies, which suggests that at least the logistics of the Pass-
Through Voting Condition could be addressed as part of ``the
arrangement.'' We also note that funds of funds similar to SPE existed
at the time the 1971 Release was issued and the Pass-Through Voting
Condition was enacted as an alternative to Mirror Voting, yet Congress
nevertheless determined the statutory conditions to be appropriate.\5\
To the extent that SPE finds making ``an arrangement'' with an
underlying fund under the Pass-Through Voting Condition ``futile,'' SPE
has the option of using Mirror Voting. Therefore, absent a request for
a hearing that is granted by the Commission, the Commission intends to
respond to SPE's application by issuing an order under Section 554(e)
of the APA declaring that the Voting Procedure does not satisfy Section
12(d)(1)(F) of the Act.
---------------------------------------------------------------------------
\5\ See Mutual Fund Legislation of 1967: Hearings on S. 1659
Before the Senate Comm. on Banking and Currency, 90th Cong., 1st
Sess. 882-891 (1967) (statement of Milton Mound, President, First
Multifund of America, Inc.).
By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-19693 Filed 8-13-13; 8:45 am]
BILLING CODE 8011-01-P
