ALPS Series Trust, et al.; Notice of Application, 3633-3637 [2014-01135]
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Federal Register / Vol. 79, No. 14 / Wednesday, January 22, 2014 / Notices
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Dated: January 16, 2014.
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Policy Coordinator, Office of the Secretary.
[FR Doc. 2014–01289 Filed 1–17–14; 4:15 pm]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
30858; File No. 812–14218]
ALPS Series Trust, et al.; Notice of
Application
January 15, 2014.
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:
Summary of the 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: ALPS Series Trust
(‘‘Trust’’), Brinker Capital, Inc. (‘‘Fund
of Funds Adviser’’), and ALPS
Distributors, Inc. (the ‘‘Distributor’’).
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SUMMARY:
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Filing Dates: The application was
filed on September 27, 2013 and was
amended on January 3, 2014.
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 February 10, 2014, 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: ALPS Series Trust, 1290
Broadway, Suite 1100, Denver, CO
80203; Brinker Capital, Inc., 1055
Westlakes Drive, Suite 250, Berwyn, PA;
ALPS Distributors, Inc., 1290 Broadway,
Suite 1100, Denver, CO 80203.
FOR FURTHER INFORMATION CONTACT:
Jason M. Williams, Senior Counsel, at
(202) 551–6817, or Daniele Marchesani,
Branch Chief, at (202) 551–6817
(Division of Investment Management,
Chief Counsel’s 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 for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm, or by
calling (202) 551–8090.
DATES:
Applicants’ Representations
1. The Trust, a Delaware statutory
trust, is registered under the Act as an
open-end management investment
company and offers shares of multiple
series, each of which pursues different
investment objectives and principal
investment strategies.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
management investment company or series thereof
that is advised by the Fund of Funds Adviser or any
entity controlling, controlled by or under common
control with the Fund of Funds Adviser (any such
entity is included in the term ‘‘Fund of Funds
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 (each, a
‘‘Fund’’ and collectively, ‘‘Funds.’’). All entities
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2. Brinker Capital, Inc., a Delaware
corporation, is registered as an
investment adviser under the
Investment Advisers Act of 1940, as
amended (the ‘‘Advisers Act’’). A Fund
of Funds Adviser will serve as
investment adviser to the Funds. Any
other Fund of Funds Adviser will also
be registered as an investment adviser
under the Advisers Act.
3. The Distributor, a Colorado
corporation, is registered as a brokerdealer under the Securities Exchange
Act of 1934 (the ‘‘Exchange Act’’). The
Distributor, or another distributor, will
serve as principal underwriter and
distributor for the shares of the Funds.
4. Applicants request an order to
permit (a) a Fund that operates as a
‘‘fund of funds’’ (each a ‘‘Fund of
Funds’’) to acquire shares of (i)
registered open-end management
investment companies that are not part
of the same ‘‘group of investment
companies,’’ within the meaning of
section 12(d)(1)(G)(ii) of the Act, as the
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,’’ and
together with the Unaffiliated
Investment Companies, ‘‘Unaffiliated
Funds’’) 2 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,’’ and together with the
Unaffiliated Funds, ‘‘Underlying
Funds’’) 3 and (b) each Underlying
Fund, the Distributor or any principal
underwriter for the Underlying Fund,
and any broker or dealer registered
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.
2 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’’).
3 Certain of the Underlying Funds currently
pursue, or may in the future pursue, their
investment objectives through a master-feeder
arrangement in reliance on section 12(d)(1)(E) of the
Act. In accordance with condition 11, a Fund of
Funds may not invest in an Underlying Fund that
operates as a feeder fund unless the feeder fund is
part of the same ‘‘group of investment companies,’’
as defined in section 12(d)(1)(G)(ii) of the Act, as
its corresponding master fund or the Fund of
Funds. If a Fund of Funds invests in an Affiliated
Fund that operates as a feeder fund and the
corresponding master fund is not within the same
‘‘group of investment companies,’’ as defined in
section 12(d)(1)(G)(ii) of the Act, as the Fund of
Funds and Affiliated Fund, the master fund would
be an Unaffiliated Fund for purposes of the
application and its conditions.
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under the Exchange Act (‘‘Broker’’) to
sell shares of the Underlying Fund to
the Fund of Funds. Applicants also
request an order under sections 6(c) and
17(b) of the Act to exempt applicants
from section 17(a) of the Act to the
extent necessary to permit Underlying
Funds to sell their shares to Funds of
Funds and redeem their shares from
Funds of Funds.
5. Applicants also request an
exemption under section 6(c) of the Act
from rule 12d1–2 under the Act to
permit any existing or future Fund that
relies on section 12(d)(1)(G) of the Act
(‘‘Same Group Investing Fund’’) and
that otherwise complies with rule 12d1–
2 under the Act 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’’).
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Applicants’ Legal Analysis
A. Investments in Underlying Funds—
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
knowingly 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) of the
Act 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) of the Act, and an
Underlying Fund, the Distributor or any
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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)
of the Act, 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 believe that the
proposed arrangement will not result in
the exercise of undue influence by the
Fund of Funds or a Fund of Funds
Affiliate over the Unaffiliated Funds.4
To limit the control that the Fund of
Funds may have over an Unaffiliated
Fund, applicants propose a condition
prohibiting the Fund of Funds Adviser,
any person controlling, controlled by, or
under common control with the Fund of
Funds 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 Fund of
Funds Adviser or any person
controlling, controlled by, or under
common control with the Fund of
Funds 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 other investment adviser within the
meaning of section 2(a)(20)(B) of the Act
to a Fund of Funds (‘‘Subadviser’’), any
person controlling, controlled by, or
under common control with the
Subadviser, and any investment
company or issuer that would be an
investment company but for sections
3(c)(1) or 3(c)(7) of the Act (or portion
of such investment company or issuer)
advised or sponsored by the Subadviser
or any person controlling, controlled by,
or under common control with the
Subadviser (the ‘‘Subadvisory Group’’).
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
4 A ‘‘Fund of Funds Affiliate’’ is the Fund of
Funds Adviser, any Subadviser (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, sponsor, promoter, or principal
underwriter of an Unaffiliated Fund, as well as any
person controlling, controlled by, or under common
control with any of those entities.
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in its capacity as an investment adviser
to an Unaffiliated Investment Company
or sponsor to an Unaffiliated Trust) will
cause an Unaffiliated Fund to purchase
a security in an offering of securities
during the existence of any
underwriting or selling syndicate of
which a principal underwriter is an
Underwriting Affiliate (‘‘Affiliated
Underwriting’’). An ‘‘Underwriting
Affiliate’’ is a principal underwriter in
any underwriting or selling syndicate
that is an officer, director, trustee,
advisory board member, investment
adviser, Subadviser, or employee of the
Fund of Funds, or a person of which
any such officer, director, trustee,
member of an advisory board,
investment adviser, Subadviser, or
employee is an affiliated person. An
Underwriting Affiliate does not include
any person whose relationship to an
Unaffiliated Fund is covered by section
10(f) of the Act.
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.5
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
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
5 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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contract(s) of any Underlying Fund in
which the Fund of Funds may invest. In
addition, the Fund of Funds 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 Fund of Funds
Adviser or an affiliated person of the
Fund of Funds 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
charged with respect to shares of the
Fund of Funds will not exceed the
limits applicable to a fund of funds as
set forth in Rule 2830 of the Conduct
Rules of the NASD (‘‘NASD Conduct
Rule 2830’’).6
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
managed by the same Adviser might be
deemed to be under common control of
the Fund of Funds Adviser and
therefore affiliated persons of one
another. Applicants also state that the
Fund of Funds and the Unaffiliated
Funds might be deemed to be affiliated
6 Any references to NASD Conduct Rule 2830
include any successor or replacement rule of FINRA
to NASD Conduct Rule 2830.
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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) of the
Act 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) of the Act 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 persons 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.7 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.8 Applicants state that
the proposed transactions will be
consistent with the policies of each
Fund of Funds and each Underlying
7 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.
8 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 or an
entity controlling, controlled by, or under common
control with the investment adviser to the ETF, also
is an investment adviser to the Fund of Funds.
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Fund and with the general purposes of
the Act.
C. Other Investments by Same Group
Investing Funds
1. Section 12(d)(1)(G) of the Act
provides that section 12(d)(1) of the Act
will not apply to securities of an
acquired company purchased by an
acquiring company if: (i) the acquiring
company and acquired company are
part of the same group of investment
companies; (ii) the acquiring company
holds only securities of acquired
companies that are part of the same
group of investment companies,
government securities, and short-term
paper; (iii) the aggregate sales loads and
distribution-related fees of the acquiring
company and the acquired company are
not excessive under rules adopted
pursuant to section 22(b) or section
22(c) of the Act by a securities
association registered under section 15A
of the Exchange Act or by the
Commission; and (iv) the acquired
company has a policy that prohibits it
from acquiring securities of registered
open-end management investment
companies or registered unit investment
trusts in reliance on sections 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: (1)
securities issued by an investment
company that is not in the same group
of investment companies, when the
acquisition is in reliance on sections
12(d)(1)(A) or 12(d)(1)(F) of the Act; (2)
securities (other than securities issued
by an investment company); and (3)
securities issued by a money market
fund, when the investment is in reliance
on rule 12d1–1 under the Act. For the
purposes of rule 12d1–2 under the Act,
‘‘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
Investing Fund 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) under the Act to
allow the Same Group Investing Funds
to invest in Other Investments.
Applicants assert that permitting Same
Group Investing Funds to invest in
Other Investments as described in the
application would not raise any of the
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concerns that the requirements of
section 12(d)(1) of the Act were
designed to address.
4. Consistent with its fiduciary
obligations under the Act, the Board of
each Same Group Investing Fund will
review the advisory fees charged by the
Same Group Investing 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
Investing Fund may invest.
Applicants’ Conditions
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Investments by Funds of Funds in
Underlying Funds
Applicants agree that the relief to
permit Funds of Funds to invest in
Underlying Funds shall be subject to the
following conditions:
1. The members of an Advisory Group
will not control (individually or in the
aggregate) an Unaffiliated Fund within
the meaning of section 2(a)(9) of the Act.
The members of a Subadvisory Group
will not control (individually or in the
aggregate) an Unaffiliated Fund within
the meaning of section 2(a)(9) of the Act.
If, as a result of a decrease in the
outstanding voting securities of an
Unaffiliated Fund, an 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 Subadviser acts as the
investment adviser within the meaning
of section 2(a)(20)(A) of the Act (in the
case of an Unaffiliated Investment
Company) or as the sponsor (in the case
of an Unaffiliated Trust).
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
Fund of Funds Adviser and any
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Subadviser(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)(1)(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)(1)(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
PO 00000
Frm 00074
Fmt 4703
Sfmt 4703
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)(1)(A)(i) of the Act,
setting forth: (a) The party from whom
the securities were acquired, (b) the
identity of the underwriting syndicate’s
members, (c) the terms of the purchase,
and (d) the 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)(1)(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)(1)(A)(i) of the Act, a Fund
of Funds will notify the Unaffiliated
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emcdonald on DSK67QTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 14 / Wednesday, January 22, 2014 / Notices
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
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. A Fund of Funds 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 Fund of Funds Adviser, or an
affiliated person of the Fund of Funds
Adviser, other than any advisory fees
paid to the Fund of Funds 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
Subadviser will waive fees otherwise
payable to the Subadviser, 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
Subadviser, from an Unaffiliated Fund,
other than any advisory fees paid to the
Subadviser or its affiliated person by an
Unaffiliated Investment Company, in
connection with the investment by the
Fund of Funds in the Unaffiliated Fund
made at the direction of the Subadviser.
In the event that a Subadviser waives
fees, the benefit of the waiver will be
passed through to the applicable Fund
of Funds.
11. No Underlying Fund will acquire
securities of any other investment
VerDate Mar<15>2010
16:00 Jan 21, 2014
Jkt 232001
company or company relying on
sections 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 that such Underlying Fund: (a)
Acquires such securities in compliance
with section 12(d)(1)(E) of the Act and
either is an Affiliated Fund or is in the
same ‘‘group of investment companies,’’
as defined in section 12(d)(1)(G)(ii) of
the Act, as its corresponding master
fund; (b) 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)(1)
of the Act); or (c) 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 funds of funds set
forth in NASD Conduct Rule 2830.
Other Investments by Same Group
Investing Funds
Applicants agree that the relief to
permit Same Group Investing 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
Investing Fund from investing in Other
Investments as described in the
application.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–01135 Filed 1–21–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
30860; File No. 812–14228]
Multi-Strategy Growth & Income Fund
and RJL Capital Management, LLC;
Notice of Application
January 15, 2014
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application under
section 6(c) of the Investment Company
AGENCY:
PO 00000
Frm 00075
Fmt 4703
Sfmt 4703
3637
Act of 1940 (the ‘‘Act’’) for an
exemption from sections 18(c) and 18(i)
of the Act, under sections 6(c) and
23(c)(3) of the Act for an exemption
from rule 23c–3 under the Act, and for
an order pursuant to section 17(d) of the
Act and rule 17d–1 under the Act.
Summary of Application: Applicants
request an order to permit certain
registered closed-end management
investment companies to issue multiple
classes of shares and to impose assetbased distribution fees and early
withdrawal charges (‘‘EWCs’’).
Applicants: Multi-Strategy Growth &
Income Fund (‘‘Initial Fund’’) and RJL
Capital Management, LLC (‘‘Adviser’’).
DATES: Filing Dates: The application was
filed on October 30, 2013, and amended
on December 31, 2013.
Hearing or Notification of Hearing: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on February 10, 2014 and
should be accompanied by proof of
service on the applicants, in the form of
an affidavit, or, for lawyers, a certificate
of service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090;
Applicants: Multi-Strategy Growth &
Income Fund, 80 Arkay Drive,
Hauppauge, NY 11788, and RJL Capital
Management, LLC, 13520 Evening Creek
Drive North, Suite 300, San Diego,
California 92128.
FOR FURTHER INFORMATION CONTACT: Jill
Ehrlich, Senior Counsel, at (202) 551–
6819, or David P. Bartels, Branch Chief,
at (202) 551–6821 (Division of
Investment Management, Chief
Counsel’s 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 for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. The Initial Fund is a recentlyformed Delaware statutory trust that is
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]]>Agencies
[Federal Register Volume 79, Number 14 (Wednesday, January 22, 2014)]
[Notices]
[Pages 3633-3637]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01135]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30858; File No. 812-14218]
ALPS Series Trust, et al.; Notice of Application
January 15, 2014.
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: Summary of the 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: ALPS Series Trust (``Trust''), Brinker Capital, Inc.
(``Fund of Funds Adviser''), and ALPS Distributors, Inc. (the
``Distributor'').
DATES: Filing Dates: The application was filed on September 27, 2013
and was amended on January 3, 2014.
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 February 10, 2014, 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:
ALPS Series Trust, 1290 Broadway, Suite 1100, Denver, CO 80203; Brinker
Capital, Inc., 1055 Westlakes Drive, Suite 250, Berwyn, PA; ALPS
Distributors, Inc., 1290 Broadway, Suite 1100, Denver, CO 80203.
FOR FURTHER INFORMATION CONTACT: Jason M. Williams, Senior Counsel, at
(202) 551-6817, or Daniele Marchesani, Branch Chief, at (202) 551-6817
(Division of Investment Management, Chief Counsel's 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 for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1. The Trust, a Delaware statutory trust, is registered under the
Act as an open-end management investment company and offers shares of
multiple series, each of which pursues different investment objectives
and principal investment strategies.\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
that is advised by the Fund of Funds Adviser or any entity
controlling, controlled by or under common control with the Fund of
Funds Adviser (any such entity is included in the term ``Fund of
Funds 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 (each, a ``Fund'' and collectively, ``Funds.''). 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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2. Brinker Capital, Inc., a Delaware corporation, is registered as
an investment adviser under the Investment Advisers Act of 1940, as
amended (the ``Advisers Act''). A Fund of Funds Adviser will serve as
investment adviser to the Funds. Any other Fund of Funds Adviser will
also be registered as an investment adviser under the Advisers Act.
3. The Distributor, a Colorado corporation, is registered as a
broker-dealer under the Securities Exchange Act of 1934 (the ``Exchange
Act''). The Distributor, or another distributor, will serve as
principal underwriter and distributor for the shares of the Funds.
4. Applicants request an order to permit (a) a Fund that operates
as a ``fund of funds'' (each a ``Fund of Funds'') to acquire shares of
(i) registered open-end management investment companies that are not
part of the same ``group of investment companies,'' within the meaning
of section 12(d)(1)(G)(ii) of the Act, as the 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,'' and together with the Unaffiliated Investment
Companies, ``Unaffiliated Funds'') \2\ 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,''
and together with the Unaffiliated Funds, ``Underlying Funds'') \3\ and
(b) each Underlying Fund, the Distributor or any principal underwriter
for the Underlying Fund, and any broker or dealer registered
[[Page 3634]]
under the Exchange Act (``Broker'') to sell shares of the Underlying
Fund to the Fund of Funds. Applicants also request an order under
sections 6(c) and 17(b) of the Act to exempt applicants from section
17(a) of the Act 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\ 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'').
\3\ Certain of the Underlying Funds currently pursue, or may in
the future pursue, their investment objectives through a master-
feeder arrangement in reliance on section 12(d)(1)(E) of the Act. In
accordance with condition 11, a Fund of Funds may not invest in an
Underlying Fund that operates as a feeder fund unless the feeder
fund is part of the same ``group of investment companies,'' as
defined in section 12(d)(1)(G)(ii) of the Act, as its corresponding
master fund or the Fund of Funds. If a Fund of Funds invests in an
Affiliated Fund that operates as a feeder fund and the corresponding
master fund is not within the same ``group of investment
companies,'' as defined in section 12(d)(1)(G)(ii) of the Act, as
the Fund of Funds and Affiliated Fund, the master fund would be an
Unaffiliated Fund for purposes of the application and its
conditions.
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5. Applicants also request an exemption under section 6(c) of the
Act from rule 12d1-2 under the Act to permit any existing or future
Fund that relies on section 12(d)(1)(G) of the Act (``Same Group
Investing Fund'') and that otherwise complies with rule 12d1-2 under
the Act 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
A. Investments in Underlying Funds--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 knowingly 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) of the Act 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) of the Act, and an Underlying Fund, the Distributor
or 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) of the Act, 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 believe that the proposed arrangement will not result
in the exercise of undue influence by the Fund of Funds or a Fund of
Funds Affiliate over the Unaffiliated Funds.\4\ To limit the control
that the Fund of Funds may have over an Unaffiliated Fund, applicants
propose a condition prohibiting the Fund of Funds Adviser, any person
controlling, controlled by, or under common control with the Fund of
Funds 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 Fund of Funds Adviser or any person
controlling, controlled by, or under common control with the Fund of
Funds 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 other
investment adviser within the meaning of section 2(a)(20)(B) of the Act
to a Fund of Funds (``Subadviser''), any person controlling, controlled
by, or under common control with the Subadviser, and any investment
company or issuer that would be an investment company but for sections
3(c)(1) or 3(c)(7) of the Act (or portion of such investment company or
issuer) advised or sponsored by the Subadviser or any person
controlling, controlled by, or under common control with the Subadviser
(the ``Subadvisory Group''). 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''). 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, member of an advisory board,
investment adviser, Subadviser, or employee is an affiliated person. An
Underwriting Affiliate does not include any person whose relationship
to an Unaffiliated Fund is covered by section 10(f) of the Act.
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\4\ A ``Fund of Funds Affiliate'' is the Fund of Funds Adviser,
any Subadviser (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,
sponsor, promoter, or principal underwriter of an Unaffiliated Fund,
as well as any person controlling, controlled by, or under common
control with any of those entities.
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5. 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.\5\
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\5\ 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 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
[[Page 3635]]
contract(s) of any Underlying Fund in which the Fund of Funds may
invest. In addition, the Fund of Funds 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 Fund of Funds
Adviser or an affiliated person of the Fund of Funds 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 charged with respect to shares of the Fund of Funds will
not exceed the limits applicable to a fund of funds as set forth in
Rule 2830 of the Conduct Rules of the NASD (``NASD Conduct Rule
2830'').\6\
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\6\ Any references to NASD Conduct Rule 2830 include any
successor or replacement rule of FINRA to 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
managed by the same Adviser might be deemed to be under common control
of the Fund of Funds Adviser and therefore affiliated persons of one
another. Applicants also state that the Fund 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) of the Act 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) of
the Act 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
persons 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.\7\
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.\8\ 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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\7\ 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.
\8\ 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 or an entity controlling,
controlled by, or under common control with the investment adviser
to the ETF, also is an investment adviser to the Fund of Funds.
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C. Other Investments by Same Group Investing Funds
1. Section 12(d)(1)(G) of the Act provides that section 12(d)(1) of
the Act will not apply to securities of an acquired company purchased
by an acquiring company if: (i) the acquiring company and acquired
company are part of the same group of investment companies; (ii) the
acquiring company holds only securities of acquired companies that are
part of the same group of investment companies, government securities,
and short-term paper; (iii) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not
excessive under rules adopted pursuant to section 22(b) or section
22(c) of the Act by a securities association registered under section
15A of the Exchange Act or by the Commission; and (iv) the acquired
company has a policy that prohibits it from acquiring securities of
registered open-end management investment companies or registered unit
investment trusts in reliance on sections 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: (1)
securities issued by an investment company that is not in the same
group of investment companies, when the acquisition is in reliance on
sections 12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) securities (other
than securities issued by an investment company); and (3) securities
issued by a money market fund, when the investment is in reliance on
rule 12d1-1 under the Act. For the purposes of rule 12d1-2 under the
Act, ``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 Investing Fund 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) under the Act to allow the Same
Group Investing Funds to invest in Other Investments. Applicants assert
that permitting Same Group Investing Funds to invest in Other
Investments as described in the application would not raise any of the
[[Page 3636]]
concerns that the requirements of section 12(d)(1) of the Act were
designed to address.
4. Consistent with its fiduciary obligations under the Act, the
Board of each Same Group Investing Fund will review the advisory fees
charged by the Same Group Investing 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 Investing
Fund may invest.
Applicants' Conditions
Investments by Funds of Funds in Underlying Funds
Applicants agree that the relief to permit Funds of Funds to invest
in Underlying Funds shall be subject to the following conditions:
1. The members of an Advisory Group will not control (individually
or in the aggregate) an Unaffiliated Fund within the meaning of section
2(a)(9) of the Act. The members of a Subadvisory Group will not control
(individually or in the aggregate) an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act. If, as a result of a decrease in
the outstanding voting securities of an Unaffiliated Fund, an 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 Subadviser acts as the
investment adviser within the meaning of section 2(a)(20)(A) of the Act
(in the case of an Unaffiliated Investment Company) or as the sponsor
(in the case of an Unaffiliated Trust).
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 Fund of Funds Adviser and any Subadviser(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)(1)(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)(1)(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)(1)(A)(i) of the Act, setting forth:
(a) The party from whom the securities were acquired, (b) the identity
of the underwriting syndicate's members, (c) the terms of the purchase,
and (d) the 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)(1)(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)(1)(A)(i) of the Act, a Fund of Funds will notify the Unaffiliated
[[Page 3637]]
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 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. A Fund of Funds 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 Fund of Funds Adviser, or an
affiliated person of the Fund of Funds Adviser, other than any advisory
fees paid to the Fund of Funds 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 Subadviser will waive
fees otherwise payable to the Subadviser, 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 Subadviser,
from an Unaffiliated Fund, other than any advisory fees paid to the
Subadviser or its affiliated person by an Unaffiliated Investment
Company, in connection with the investment by the Fund of Funds in the
Unaffiliated Fund made at the direction of the Subadviser. In the event
that a Subadviser waives fees, the benefit of the waiver will be passed
through to the applicable Fund of Funds.
11. No Underlying Fund will acquire securities of any other
investment company or company relying on sections 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 that such Underlying Fund: (a) Acquires such
securities in compliance with section 12(d)(1)(E) of the Act and either
is an Affiliated Fund or is in the same ``group of investment
companies,'' as defined in section 12(d)(1)(G)(ii) of the Act, as its
corresponding master fund; (b) 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)(1) of the Act); or (c) 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
funds of funds set forth in NASD Conduct Rule 2830.
Other Investments by Same Group Investing Funds
Applicants agree that the relief to permit Same Group Investing
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 Investing Fund from investing in Other Investments as
described in the application.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01135 Filed 1-21-14; 8:45 am]
BILLING CODE 8011-01-P
