Altegris Advisors, L.L.C., et al.; Notice of Application, 69155-69159 [2013-27477]

Download as PDF Federal Register / Vol. 78, No. 222 / Monday, November 18, 2013 / Notices provided that will be in addition to, rather than duplicative of, the services provided under the advisory contract(s) of any Fund in which the Investing Management Company may invest. These findings and their basis will be fully recorded in the minute books of the appropriate Investing Management Company. 11. Any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to a fund of funds as set forth in NASD Conduct Rule 2830. 12. No Fund will acquire securities of an 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 to the extent the Fund acquires securities of another investment company pursuant to exemptive relief from the Commission permitting the Fund to acquire securities of one or more investment companies for shortterm cash management purposes. For the Commission, by the Division of Investment Management, under delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–27476 Filed 11–15–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 30779; 812–14130] Altegris Advisors, L.L.C., et al.; Notice of Application November 12, 2013. 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 that operate as ‘‘funds of funds’’ to acquire shares of certain 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 mstockstill on DSK4VPTVN1PROD with NOTICES SUMMARY OF APPLICATION: VerDate Mar<15>2010 17:33 Nov 15, 2013 Jkt 232001 funds of funds relying on rule 12d1–2 under the Act to invest in certain financial instruments. APPLICANTS: Altegris Advisors, L.L.C. (the ‘‘Adviser’’) and Northern Lights Fund Trust (the ‘‘Trust’’), on behalf of Altegris Multi-Strategy Alternative Fund (the ‘‘Multi-Strategy Alternative Fund’’). FILING DATES: The application was filed on March 7, 2013, and amended on October 3, 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 December 6, 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. ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. Applicants: c/o Richard Horowitz, Dechert LLP, 1095 Avenue of the Americas, New York, NY 10036. FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at (202) 551–6817 or Daniele Marchesani, Branch Chief, at (202) 551–6821 (Division of Investment Management, Exemptive Applications Office). 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 http:// www.sec.gov/search/search.htm or by calling (202) 551–8090. Applicants’ Representations 1. The Trust is an open-end management investment company registered under the Act and organized as a Delaware statutory trust. The Trust currently is comprised of multiple series, including the Multi-Strategy Alternative Fund, each of which has its own investment objective, policies, and restrictions.1 1 Applicants request that the order apply to each existing and future series of the Trust and to each existing and future registered open-end PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 69155 2. The Adviser, a Delaware limited liability company, is registered as an investment adviser under the Investment Advisers Act of 1940 (‘‘Advisers Act’’) and serves as investment adviser to the Multi-Strategy Alternative Fund, certain other Funds of the Trust, and may serve as investment adviser to future Funds. 3. Applicants request an order to permit (a) a Fund that operates as a ‘‘fund of funds’’ (each a ‘‘Fund of Funds’’) 2 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 Fund of Funds (‘‘Unaffiliated Investment Companies’’) and UITs that are not part of the same group of investment companies as the Fund of Funds (‘‘Unaffiliated Trusts,’’ together with the Unaffiliated Investment Companies, ‘‘Unaffiliated Funds’’) 3 or (ii) registered open-end management companies or UITs that are part of the same ‘‘group of investment companies,’’ within the meaning of section 12(d)(1)(G) (ii) of the Act, as the Fund of Funds (collectively, ‘‘Affiliated Funds,’’ together with the Unaffiliated Funds, ‘‘Underlying Funds’’) and (b) each Underlying Fund, any principal underwriter for the Underlying Fund, and any broker or dealer (‘‘Broker’’) registered under the Securities Exchange Act 1934 (‘‘Exchange Act’’) to sell shares of the Underlying Fund to the Fund of Funds.4 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 Funds of Funds and redeem their shares from Funds of Funds. 4. Applicants also request an exemption under section 6(c) from rule 12d1–2 under the Act to permit any management investment company or series thereof (each, a ‘‘Fund’’ and collectively, including the Multi-Strategy Alternative Fund, the ‘‘Funds’’) that is advised by the Adviser or any entity controlling, controlled by or under common control with the Adviser (included in the term ‘‘Adviser’’) and is part of the same ‘‘group of investment companies’’ (as defined in section 12(d)(1)(G)(ii) of the Act), as the Trust. 2 Any Fund of Funds relying on the requested relief will be advised by the Adviser. 3 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’’). 4 All entities that currently intend to rely on the requested order are named as applicants. Any other entity that relies on the order in the future will comply with the terms and conditions of the application. E:\FR\FM\18NON1.SGM 18NON1 69156 Federal Register / Vol. 78, No. 222 / Monday, November 18, 2013 / Notices existing or future 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 mstockstill on DSK4VPTVN1PROD with NOTICES 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 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 total outstanding voting stock, or if the sale will cause more than 10% of the acquired company’s total outstanding 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 Fund 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 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 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 VerDate Mar<15>2010 17:33 Nov 15, 2013 Jkt 232001 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 the Fund of Funds or a Fund of Funds Affiliate (as defined below) over the Unaffiliated Funds.5 To limit the control that the Fund of Funds may have over an Unaffiliated Fund, applicants propose a condition 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 Fund of Funds (‘‘Sub-adviser’’), any person controlling, controlled by, or under common control with the Sub-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 (or portion of such investment company or issuer) advised or sponsored by the Sub-adviser or any person controlling, controlled by, or under common control with the Sub-adviser (the ‘‘Subadvisory Group’’). Applicants propose other conditions to limit the potential for undue influence over the Unaffiliated Funds, including that no 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’’).6 5 A ‘‘Fund of Funds Affiliate’’ is the Adviser, any Sub-adviser (as defined below), promoter, or principal underwriter of a 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(s), 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. 6 An ‘‘Underwriting Affiliate’’ is a principal underwriter in any underwriting or selling syndicate that is an officer, director, trustee, advisory board member, investment adviser, Subadviser, or employee of the Fund of Funds, or a person of which any such officer, director, trustee, investment adviser, Sub-adviser, member of an advisory board, or employee is an affiliated person. PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 5. To further ensure that an Unaffiliated Investment Company understands the implications of an investment by a Fund of Funds under the requested order, prior to a 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 Fund of Funds and the Unaffiliated Investment Company will execute an agreement stating, without limitation, that their respective board of directors or trustees (for any entity, the ‘‘Board’’) 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 Fund of Funds in the secondary market) will retain its right at all times to reject any investment by a Fund of Funds.7 6. Applicants state that they do not believe that the proposed arrangement will involve excessive layering of fees. The Board of each 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(s) are based on services provided that will be in addition to, rather than duplicative of, the services provided under such advisory contract(s) of any Underlying Fund in which the Fund of Funds may invest. In addition, the Adviser will waive fees otherwise payable to it by a 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 Fund of Funds in the Unaffiliated Fund. Any sales charges and/or service fees, as defined in rule 2830 of the Conduct Rules of the NASD (‘‘NASD Conduct An Underwriting Affiliate does not include any person whose relationship to an Unaffiliated Fund is covered by section 10(f) of the Act. 7 An Unaffiliated Investment Company, including an ETF, would retain its right to reject any initial investment by a 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 Fund of Funds. E:\FR\FM\18NON1.SGM 18NON1 Federal Register / Vol. 78, No. 222 / Monday, November 18, 2013 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES Rule 2830’’),8 charged with respect to shares of a Fund of Funds will not exceed the limits applicable to a fund of funds as set forth in NASD Conduct Rule 2830. 7. 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. 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 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 the Funds of Funds and the Unaffiliated Funds might be deemed to be affiliated persons of one another if the 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 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 8 Any references to NASD Conduct Rule 2830 include any successor or replacement FINRA rule to NASD Conduct Rule 2830. VerDate Mar<15>2010 17:33 Nov 15, 2013 Jkt 232001 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 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 Fund of Funds 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: (a) The acquiring company and acquired company are part of the same group of investment companies; (b) 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; (c) 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 (d) the acquired 9 Applicants acknowledge that receipt of any compensation by (a) an affiliated person of a Fund of Funds, or an affiliated person of such person, for the purchase by a 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 Fund of Funds may be prohibited by section 17(e)(1) of the Act. The Participation Agreement also will include this acknowledgement. 10 To the extent purchases and sales of shares of an ETF occur in the secondary market (and not through principal transactions directly between a Fund of Funds and an ETF), relief from section 17(a) of the Act would not be necessary. The requested relief is intended to cover, however, transactions directly between ETFs and a Fund of Funds. Applicants are not seeking relief from section 17(a) of the Act 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 Fund of Funds because the investment adviser to the ETF also is an investment adviser to the Fund of Funds. PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 69157 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 unit investment trust 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: (a) 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; (b) securities (other than securities issued by an investment company); and (c) 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 a Same Group Fund of Funds may invest a portion of its 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. Applicants represent that, 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 E:\FR\FM\18NON1.SGM 18NON1 mstockstill on DSK4VPTVN1PROD with NOTICES 69158 Federal Register / Vol. 78, No. 222 / Monday, November 18, 2013 / Notices 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 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 Sub-adviser 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). 2. No Fund of Funds or Fund of Funds Affiliate will cause any existing or potential investment by the Fund of Funds in shares of an Unaffiliated Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated Fund or an Unaffiliated Fund Affiliate. 3. The Board of each Fund of Funds, including a majority of the Independent Trustees, will adopt procedures reasonably designed to ensure that its Adviser and any Sub-adviser(s) to the Fund of Funds are conducting the investment program of the Fund of Funds without taking into account any consideration received by the 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 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 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 VerDate Mar<15>2010 17:33 Nov 15, 2013 Jkt 232001 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 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 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 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 ensure that purchases of securities in Affiliated Underwritings are in the best interests of shareholders. PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 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 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 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 Fund of Funds will notify the Unaffiliated Investment Company of the investment. At such time, the 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 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 Fund of Funds will maintain and preserve a copy of the order, the Participation 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 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 E:\FR\FM\18NON1.SGM 18NON1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 222 / Monday, November 18, 2013 / Notices provided under the advisory contract(s) of any Underlying Fund in which the 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 Fund of Funds. 10. The Adviser will waive fees otherwise payable to it by a 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 Fund of Funds in the Unaffiliated Fund. Any Sub-adviser will waive fees otherwise payable to the Sub-adviser, directly or indirectly, by the Fund of Funds in an amount at least equal to any compensation received by the Subadviser, or an affiliated person of the Sub-adviser, from an Unaffiliated Fund, other than any advisory fees paid to the Sub-adviser or its affiliated person by an Unaffiliated Investment Company, in connection with the investment by the Fund of Funds in the Unaffiliated Fund made at the direction of the Sub-adviser. In the event that the Sub-adviser waives fees, the benefit of the waiver will be passed through to the 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. Any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to fund 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 VerDate Mar<15>2010 17:33 Nov 15, 2013 Jkt 232001 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, under delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–27477 Filed 11–15–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70844; File No. SR–CBOE– 2013–103] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Obvious Error November 12, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that, on October 28, 2013, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 6.25 (Nullification and Adjustment of Options Transactions). The text of the proposed rule change is available on the Exchange’s Web site (http:// www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00120 Fmt 4703 Sfmt 4703 69159 concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Exchange Rule 6.25 (Nullification and Adjustment of Options Transactions) governs the nullification and adjustment of options transactions. The Exchange is proposing to amend Rule 6.25(a)(1) to modify how the Exchange will nullify or adjust an obvious error. The Exchange believes this proposal will also harmonize its rules to more closely align with other options exchanges.3 Under the current rule 6.25(a)(1)(i), the Exchange will adjust the price of an erroneous transaction to the Theoretical Price when the transaction is between two market-makers unless such parties agree to adjust the transaction to a different price or bust the trade within fifteen minutes of being notified by Exchange Trading Officials of the error. Pursuant to current Exchange Rule 6.25(a)(1)(iv), transactions involving at least one non-CBOE market-maker will be adjusted to the Theoretical Price provided that the adjustment does not violate the non-CBOE market-maker’s limit price unless both parties agree to adjust the transaction to a different price or agree to bust the trade within thirty minutes of being notified by Trading Officials of the error. The Exchange is now proposing to amend Rule 6.25(a)(1) to modify the Exchange obvious error procedures by nullifying trades for transactions involving at least one non-broker-dealer customer and adjusting all other trades between groups that do not fall into that category including for example, a market maker or a broker-dealer.4 The Exchange believes that the proposal will eliminate some uncertainty in the 3 See, e.g., International Securities Exchange, LLC (‘‘ISE’’) Rule 720(b)(2). 4 The Exchange is also proposing to add text to Exchange Rule 1.1(fff) (Voluntary Professional) and Rule 1.1(ggg) (Professional) to include a reference to Rule 6.25. These designations are done on the Exchange on an order by order basis. Thus, through reference, professional orders will be treated as broker-dealer orders. In addition certain nonbroker-dealer customers may have their orders treated as broker-dealer orders rather than as public customer orders for purposes of Rule 6.25. E:\FR\FM\18NON1.SGM 18NON1

Agencies

[Federal Register Volume 78, Number 222 (Monday, November 18, 2013)]
[Notices]
[Pages 69155-69159]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27477]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30779; 812-14130]


Altegris Advisors, L.L.C., et al.; Notice of Application

November 12, 2013.
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 Application: The requested order would (a) permit certain 
registered open-end management investment companies that operate as 
``funds of funds'' to acquire shares of certain 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: Altegris Advisors, L.L.C. (the ``Adviser'') and Northern 
Lights Fund Trust (the ``Trust''), on behalf of Altegris Multi-Strategy 
Alternative Fund (the ``Multi-Strategy Alternative Fund'').

Filing Dates: The application was filed on March 7, 2013, and amended 
on October 3, 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 December 6, 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.

ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants: c/
o Richard Horowitz, Dechert LLP, 1095 Avenue of the Americas, New York, 
NY 10036.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 551-6817 or Daniele Marchesani, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Exemptive Applications Office).

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 http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Trust is an open-end management investment company 
registered under the Act and organized as a Delaware statutory trust. 
The Trust currently is comprised of multiple series, including the 
Multi-Strategy Alternative Fund, each of which has its own investment 
objective, policies, and restrictions.\1\
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    \1\ Applicants request that the order apply to each existing and 
future series of the Trust and to each existing and future 
registered open-end management investment company or series thereof 
(each, a ``Fund'' and collectively, including the Multi-Strategy 
Alternative Fund, the ``Funds'') that is advised by the Adviser or 
any entity controlling, controlled by or under common control with 
the Adviser (included in the term ``Adviser'') and is part of the 
same ``group of investment companies'' (as defined in section 
12(d)(1)(G)(ii) of the Act), as the Trust.
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    2. The Adviser, a Delaware limited liability company, is registered 
as an investment adviser under the Investment Advisers Act of 1940 
(``Advisers Act'') and serves as investment adviser to the Multi-
Strategy Alternative Fund, certain other Funds of the Trust, and may 
serve as investment adviser to future Funds.
    3. Applicants request an order to permit (a) a Fund that operates 
as a ``fund of funds'' (each a ``Fund of Funds'') \2\ 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 Fund of Funds 
(``Unaffiliated Investment Companies'') and UITs that are not part of 
the same group of investment companies as the Fund of Funds 
(``Unaffiliated Trusts,'' together with the Unaffiliated Investment 
Companies, ``Unaffiliated Funds'') \3\ or (ii) registered open-end 
management companies or UITs that are part of the same ``group of 
investment companies,'' within the meaning of section 12(d)(1)(G) (ii) 
of the Act, as the Fund of Funds (collectively, ``Affiliated Funds,'' 
together with the Unaffiliated Funds, ``Underlying Funds'') and (b) 
each Underlying Fund, any principal underwriter for the Underlying 
Fund, and any broker or dealer (``Broker'') registered under the 
Securities Exchange Act 1934 (``Exchange Act'') to sell shares of the 
Underlying Fund to the Fund of Funds.\4\ 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 Funds of Funds and redeem their shares from 
Funds of Funds.
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    \2\ Any Fund of Funds relying on the requested relief will be 
advised by the Adviser.
    \3\ 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'').
    \4\ All entities that currently intend to rely on the requested 
order are named as applicants. 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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    4. Applicants also request an exemption under section 6(c) from 
rule 12d1-2 under the Act to permit any

[[Page 69156]]

existing or future 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 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 total outstanding voting stock, 
or if the sale will cause more than 10% of the acquired company's total 
outstanding 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 Fund 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 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 
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 the Fund of Funds or a Fund of 
Funds Affiliate (as defined below) over the Unaffiliated Funds.\5\ To 
limit the control that the Fund of Funds may have over an Unaffiliated 
Fund, applicants propose a condition 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 sub-adviser within the meaning of 
section 2(a)(20)(B) of the Act to a Fund of Funds (``Sub-adviser''), 
any person controlling, controlled by, or under common control with the 
Sub-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 (or 
portion of such investment company or issuer) advised or sponsored by 
the Sub-adviser or any person controlling, controlled by, or under 
common control with the Sub-adviser (the ``Subadvisory Group''). 
Applicants propose other conditions to limit the potential for undue 
influence over the Unaffiliated Funds, including that no 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'').\6\
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    \5\ A ``Fund of Funds Affiliate'' is the Adviser, any Sub-
adviser (as defined below), promoter, or principal underwriter of a 
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(s), 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.
    \6\ An ``Underwriting Affiliate'' is a principal underwriter in 
any underwriting or selling syndicate that is an officer, director, 
trustee, advisory board member, investment adviser, Sub-adviser, or 
employee of the Fund of Funds, or a person of which any such 
officer, director, trustee, investment adviser, Sub-adviser, member 
of an advisory board, 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.
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    5. To further ensure that an Unaffiliated Investment Company 
understands the implications of an investment by a Fund of Funds under 
the requested order, prior to a 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 Fund of Funds and the Unaffiliated 
Investment Company will execute an agreement stating, without 
limitation, that their respective board of directors or trustees (for 
any entity, the ``Board'') 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 Fund of Funds in the secondary 
market) will retain its right at all times to reject any investment by 
a 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 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 Fund of 
Funds.
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    6. Applicants state that they do not believe that the proposed 
arrangement will involve excessive layering of fees. The Board of each 
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(s) are 
based on services provided that will be in addition to, rather than 
duplicative of, the services provided under such advisory contract(s) 
of any Underlying Fund in which the Fund of Funds may invest. In 
addition, the Adviser will waive fees otherwise payable to it by a 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 Fund of Funds in the Unaffiliated Fund. Any 
sales charges and/or service fees, as defined in rule 2830 of the 
Conduct Rules of the NASD (``NASD Conduct

[[Page 69157]]

Rule 2830''),\8\ charged with respect to shares of a Fund of Funds will 
not exceed the limits applicable to a fund 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 FINRA rule to NASD Conduct Rule 2830.
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    7. 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.
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 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 the Funds 
of Funds and the Unaffiliated Funds might be deemed to be affiliated 
persons of one another if the 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 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 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 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 Fund of Funds, or an affiliated person 
of such person, for the purchase by a 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 Fund of Funds may be prohibited 
by section 17(e)(1) of the Act. The Participation Agreement also 
will include this acknowledgement.
    \10\ To the extent purchases and sales of shares of an ETF occur 
in the secondary market (and not through principal transactions 
directly between a Fund of Funds and an ETF), relief from section 
17(a) of the Act would not be necessary. The requested relief is 
intended to cover, however, transactions directly between ETFs and a 
Fund of Funds. Applicants are not seeking relief from section 17(a) 
of the Act 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 Fund of Funds 
because the investment adviser to the ETF also is an investment 
adviser to the 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: (a) The acquiring company and acquired company 
are part of the same group of investment companies; (b) 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; (c) 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 (d) 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 unit investment trust 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: (a) 
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; (b) securities (other 
than securities issued by an investment company); and (c) 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 a 
Same Group Fund of Funds may invest a portion of its 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. Applicants represent that, 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

[[Page 69158]]

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 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 Sub-adviser or a person controlling, 
controlled by, or under common control with the Sub-adviser 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).
    2. No Fund of Funds or Fund of Funds Affiliate will cause any 
existing or potential investment by the Fund of Funds in shares of an 
Unaffiliated Fund to influence the terms of any services or 
transactions between the Fund of Funds or a Fund of Funds Affiliate and 
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
    3. The Board of each Fund of Funds, including a majority of the 
Independent Trustees, will adopt procedures reasonably designed to 
ensure that its Adviser and any Sub-adviser(s) to the Fund of Funds are 
conducting the investment program of the Fund of Funds without taking 
into account any consideration received by the 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 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 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 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 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 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 ensure 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 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 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 Fund of Funds will notify the Unaffiliated Investment 
Company of the investment. At such time, the 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 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 Fund of Funds will 
maintain and preserve a copy of the order, the Participation 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 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

[[Page 69159]]

provided under the advisory contract(s) of any Underlying Fund in which 
the 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 Fund of Funds.
    10. The Adviser will waive fees otherwise payable to it by a 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 Fund of Funds in the Unaffiliated Fund. Any 
Sub-adviser will waive fees otherwise payable to the Sub-adviser, 
directly or indirectly, by the Fund of Funds in an amount at least 
equal to any compensation received by the Sub-adviser, or an affiliated 
person of the Sub-adviser, from an Unaffiliated Fund, other than any 
advisory fees paid to the Sub-adviser or its affiliated person by an 
Unaffiliated Investment Company, in connection with the investment by 
the Fund of Funds in the Unaffiliated Fund made at the direction of the 
Sub-adviser. In the event that the Sub-adviser waives fees, the benefit 
of the waiver will be passed through to the 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. Any sales charges and/or service fees charged with respect to 
shares of a Fund of Funds will not exceed the limits applicable to fund 
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, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-27477 Filed 11-15-13; 8:45 am]
BILLING CODE 8011-01-P