Professionally Managed Portfolios and Balter Liquid Alternatives, LLC; Notice of Application, 20942-20945 [2014-08286]
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Federal Register / Vol. 79, No. 71 / Monday, April 14, 2014 / Notices
Underwritings are in the best interest of
shareholders of the Fund.
8. Each Fund, or its respective Master
Fund, will 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 will maintain and
preserve for a period of 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 Affiliated Underwritings
once an investment by a Fund of Funds
in the securities of the Fund exceeds the
limit of section 12(d)(1)(A)(i) of the Act,
setting forth from whom the securities
were acquired, the identity of the
underwriting syndicate’s members, the
terms of the purchase, and the
information or materials upon which
the Board’s determinations were made.
9. Before investing in a Fund in
excess of the limit in section
12(d)(1)(A), a Fund of Funds and the
Trust will execute a FOF Participation
Agreement stating without limitation
that their respective boards of directors
or trustees and their investment
advisers, or trustee and Sponsor, as
applicable, 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 a Fund in excess of the limit
in section 12(d)(1)(A)(i), a Fund of
Funds will notify the Fund of the
investment. At such time, the Fund of
Funds will also transmit to the Fund a
list of the names of each Fund of Funds
Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the Fund of
any changes to the list of the names as
soon as reasonably practicable after a
change occurs. The Fund and the Fund
of Funds will maintain and preserve a
copy of the order, the FOF 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.
10. Before approving any advisory
contract under section 15 of the Act, the
board of directors or trustees of each
Investing Management Company
including a majority of the disinterested
directors or trustees, will find that the
advisory fees charged under such
contract are based on services provided
that will be in addition to, rather than
duplicative of, the services provided
under the advisory contract(s) of any
Fund, or its respective Master Fund, in
which the Investing Management
Company may invest. These findings
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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, or its respective Master
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 (i) the Fund, or its
respective Master Fund, acquires
securities of another investment
company pursuant to exemptive relief
from the Commission permitting the
Fund, or its respective Master Fund, to
acquire securities of one or more
investment companies for short-term
cash management purposes or (ii) the
Fund acquires securities of the Master
Fund pursuant to the Master–Feeder
Relief.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–08287 Filed 4–11–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31010; 812–14243]
Professionally Managed Portfolios and
Balter Liquid Alternatives, LLC; Notice
of Application
April 8, 2014.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application under
section 6(c) of the Investment Company
Act of 1940 (‘‘Act’’) for an exemption
from section 15(a) of the Act and rule
18f–2 under the Act, as well as from
certain disclosure requirements.
AGENCY:
Summary of Application:
Applicants request an order that would
permit them to enter into and materially
amend sub-advisory agreements without
shareholder approval and that would
grant relief from certain disclosure
requirements.
Applicants: Professionally Managed
Portfolios (the ‘‘Trust’’) and Balter
Liquid Alternatives, LLC (the
‘‘Adviser’’) (collectively, ‘‘Applicants’’).
DATES: Filing Dates: The application was
filed November 22, 2013, and amended
on February 18, 2014 and March 14,
2014.
SUMMARY:
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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 May 2, 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: The Trust: Elaine Richards,
Esq., President and Secretary,
Professionally Managed Portfolios, 2020
East Financial Way, Suite 100,
Glendora, CA 91741; The Adviser:
Victor W. Chiang, Balter Liquid
Alternatives, LLC, 125 High Street,
Oliver Street Tower Suite 802, Boston,
MA 02110
FOR FURTHER INFORMATION CONTACT:
Kieran G. Brown, Senior Counsel, at
(202) 551–6773, or Daniele Marchesani,
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 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 Massachusetts
business trust, is registered under the
Act as an open-end management
investment company. Prior to May 1991,
the Trust was known as the Avondale
Investment Trust. The Trust is
organized as a series trust and currently
consists of 46 series, one of which will
be advised by the Adviser.1 The Adviser
1 Applicants request relief with respect to any
existing and any future series of the Trust or any
other registered open-end management company
that: (a) Is advised by the Adviser or its successor
or by a person controlling, controlled by, or under
common control with the Adviser or its successor
(each, also an ‘‘Adviser’’); (b) uses the manager of
managers structure described in the application;
and (c) complies with the terms and conditions of
the requested order (any such series, a ‘‘Fund’’ and
collectively, the ‘‘Funds’’). The only existing
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is a limited liability company organized
under Delaware law. The Adviser is,
and any future Adviser will be,
registered as an investment adviser
under the Investment Advisers Act of
1940 (‘‘Advisers Act’’). The Adviser will
serve as the investment adviser to the
Funds pursuant to an investment
advisory agreement with the Trust (the
‘‘Advisory Agreement’’).2 Each Advisory
Agreement was approved or will be
approved by the Fund’s board of
trustees (the ‘‘Board’’), including a
majority of the trustees who are not
‘‘interested persons,’’ as defined in
section 2(a)(19) of the Act, of the Trust,
the Fund, or the Adviser (‘‘Independent
Trustees’’), and by the Fund’s
shareholder(s) in the manner required
by sections 15(a) and 15(c) of the Act
and rule 18f–2 under the Act. The terms
of each Advisory Agreement will
comply with section 15(a) of the Act.
2. Under the terms of each Advisory
Agreement, the Adviser will provide the
Funds with overall investment
management services and will
continuously review, supervise and
administer each Fund’s investment
program, subject to the supervision of,
and policies established by the Board.
For the investment management
services it will provide to each Fund the
Adviser will receive the fee specified in
the Advisory Agreement from such
Fund, based on the average daily net
assets of the Fund. The Advisory
Agreement permits the Adviser, subject
to the approval of the Board, to delegate
certain responsibilities to one or more
sub-advisers (‘‘Sub-Advisers’’) to
provide investment advisory services to
the Funds. As of the date of the
amended application, the Adviser has
entered into sub-advisory agreements
(‘‘Sub-Advisory Agreements’’) with two
Sub-Advisers to provide investment
advisory services to the Balter Long/
Short Equity Fund.3 Each Sub-Adviser
registered open-end management investment
company that currently intends to rely on the
requested order is named as an Applicant, and the
only series that currently intends to rely on the
requested order as a Fund is the Balter Long/Short
Equity Fund. For purposes of the requested order,
‘‘successor’’ is limited to an entity that results from
a reorganization into another jurisdiction or a
change in the type of business organization. If the
name of any Fund contains the name of a SubAdviser (as defined below), that name will be
preceded by the name of the Adviser.
2 ‘‘Advisory Agreement’’ includes advisory
agreements with an Adviser for the Balter Long/
Short Equity Fund and any future Funds.
3 As of the date of the amended application, as
approved by the Fund’s sole initial shareholder, the
Adviser has entered into Sub-Advisory Agreements
with Apis Capital Advisors LLC (‘‘Apis’’) and
Midwood Capital Management LLC (‘‘Midwood’’).
On February 17–18, 2014, the Adviser
recommended to the Board, and the Board
approved, the engagement of two additional Sub-
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is, and any future Sub-Adviser will be,
an investment adviser as defined in
section 2(a)(20) of the Act and registered
with the Commission as an ‘‘investment
adviser’’ under the Advisers Act. The
Adviser evaluates, allocates assets to
and oversees the Sub-Advisers, and
makes recommendations about their
hiring, termination and replacement to
the Board, at all times subject to the
authority of the Board. The Adviser will
compensate the Sub-Advisers out of the
advisory fee paid by the Funds to the
Adviser under the Advisory Agreement.
3. Applicants request an order to
permit the Adviser, subject to Board
approval, to select certain Sub-Advisers
to manage all or a portion of the assets
of a Fund or Funds pursuant to a SubAdvisory Agreement and materially
amend existing Sub-Advisory
Agreements without obtaining
shareholder approval. The requested
relief will not extend to any SubAdviser that is an affiliated person, as
defined in section 2(a)(3) of the Act, of
the Trust, a Fund, or the Adviser, other
than by reason of serving as a subadviser to one or more of the Funds
(‘‘Affiliated Sub-Adviser’’).
4. Applicants also request an order
exempting the Funds from certain
disclosure provisions described below
that may require the Applicants to
disclose fees paid by the Adviser or a
Fund to each Sub-Adviser. Applicants
seek an order to permit a Fund to
disclose (as both a dollar amount and a
percentage of the Fund’s net assets): (a)
The aggregate fees paid to the Adviser
and any Affiliated Sub-Adviser; and (b)
the aggregate fees paid to Sub-Advisers
other than Affiliated Sub-Advisers
(collectively, ‘‘Aggregate Fee
Disclosure’’). Any Fund that employs an
Affiliated Sub-Adviser will provide
separate disclosure of any fees paid to
the Affiliated Sub-Adviser.
Applicants’ Legal Analysis
1. Section 15(a) of the Act provides,
in relevant part, that is unlawful for any
person to act as an investment adviser
to a registered investment company
except pursuant to a written contract
that has been approved by a vote of a
Advisers for the Balter Long/Short Equity Fund,
Madison Street Partners, LLC (‘‘Madison’’) and
Millrace Asset Group, Inc. (‘‘Millrace’’). Both
Madison and Millrace are registered investment
advisers under the Advisors Act. The engagement
of Madison and Millrace are dependent on the
occurrence of either of the following conditions: (i)
The granting of the relief requested in the
application and satisfaction of the Conditions for
Relief set forth in such application, or (ii) approval
by shareholders of the Balter Long/Short Equity
Fund to the engagement of Madison and Millrace
in accordance with the requirements of the 1940
Act at a Special Meeting of shareholders called for
such purpose.
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20943
majority of the company’s outstanding
voting securities. Rule 18f–2 under the
Act provides that each series or class of
stock in a series investment company
affected by a matter must approve that
matter if the Act requires shareholder
approval.
2. Form N–1A is the registration
statement used by open-end investment
companies. Item 19(a)(3) of Form N–1A
requires disclosure of the method and
amount of the investment adviser’s
compensation.
3. Rule 20a–1 under the Act requires
proxies solicited with respect to a
registered investment company to
comply with Schedule 14A under the
Securities Exchange Act of 1934 (‘‘1934
Act’’). Items 22(c)(1)(ii), 22(c)(1)(iii),
22(c)(8) and 22(c)(9) of Schedule 14A,
taken together, require a proxy
statement for a shareholder meeting at
which the advisory contract will be
voted upon to include the ‘‘rate of
compensation of the investment
adviser,’’ the ‘‘aggregate amount of the
investment adviser’s fees,’’ a description
of the ‘‘terms of the contract to be acted
upon,’’ and, if a change in the advisory
fee is proposed, the existing and
proposed fees and the difference
between the two fees.
4. Regulation S–X sets forth the
requirements for financial statements
required to be included as part of a
registered investment company’s
registration statement and shareholder
reports filed with the Commission.
Sections 6–07(2)(a), (b), and (c) of
Regulation S–X require a registered
investment company to include in its
financial statement information about
investment advisory fees.
5. Section 6(c) of the Act provides that
the Commission may exempt any
person, security, or transaction or any
class or classes of persons, securities, or
transactions from any provisions of the
Act, or from any rule thereunder, if such
exemption is necessary or appropriate
in the public interest and consistent
with the protection of investors and the
purposes fairly intended by the policy
and provisions of the Act. Applicants
state that the requested relief meets this
standard for the reasons discussed
below.
6. Applicants assert that the
shareholders expect the Adviser, subject
to the review and approval of the Board,
to select the Sub-Advisers who are best
suited to achieve each Fund’s
investment objectives. Applicants assert
that, from the perspective of the
shareholder, the role of the SubAdvisers is substantially equivalent to
that of the individual portfolio managers
employed by traditional investment
company advisory firms. Applicants
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state that requiring shareholder
approval of each Sub-Advisory
Agreement would impose unnecessary
delays and expenses on the Funds and
may preclude the Funds from acting
promptly when the Adviser and Board
consider it appropriate to hire SubAdvisers or amend Sub-Advisory
Agreements. Applicants note that the
Advisory Agreements and any SubAdvisory Agreements with Affiliated
Sub-Advisers will remain subject to the
shareholder approval requirements of
section 15(a) of the Act and rule 18f–2
under the Act.
7. If a new Sub-Adviser is retained in
reliance on the requested order, the
applicable Fund will inform its
shareholders of the hiring of a new SubAdviser pursuant to the following
procedures (‘‘Modified Notice and
Access Procedures’’): (a) Within 90 days
after a new Sub-Adviser is hired for a
Fund, the Fund will send its
shareholders either a Multi-manager
Notice or a Multi-manager Notice and
Multi-manager Information Statement; 4
and (b) the Fund will make the Multimanager Information Statement
available on the Web site identified in
the Multi-manager Notice no later than
when the Multi-manager Notice (or
Multi-manager Notice and Multimanager Information Statement) is first
sent to shareholders, and will maintain
it on that Web site for at least 90 days.
Applicants assert that a proxy
solicitation to approve the appointment
of new Sub-Advisers would provide no
more meaningful information to
shareholders than the proposed Multimanager Information Statement.
Moreover, as indicated above, the
applicable Board would comply with
the requirements of sections 15(a) and
15(c) of the Act before entering into or
amending Sub-Advisory Agreements.
8. Applicants assert that the requested
disclosure relief will benefit
4 A ‘‘Multi-manager Notice’’ will be modeled on
a Notice of Internet Availability as defined in rule
14a–16 under the 1934 Act, and specifically will,
among other things: (a) Summarize the relevant
information regarding the new Sub-Adviser; (b)
inform shareholders that the Multi-manager
Information Statement is available on a Web site;
(c) provide the Web site address; (d) state the time
period during which the Multi-manager Information
Statement will remain available on that Web site;
(e) provide instructions for accessing and printing
the Multi-manager Information Statement; and (f)
instruct the shareholder that a paper or email copy
of the Multi-manager Information Statement may be
obtained, without charge, by contacting the Fund.
A ‘‘Multi-manager Information Statement’’ will
meet the requirements of Regulation 14C, Schedule
14C and Item 22 of Schedule 14A under the 1934
Act for an information statement, except as
modified by the requested order to permit Aggregate
Fee Disclosure. Multi-manager Information
Statements will be filed electronically with the
Commission via the EDGAR system.
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shareholders of the Funds because it
will improve the Adviser’s ability to
negotiate the fees paid to Sub-Advisers.
Applicants state that the Adviser may be
able to negotiate rates that are below a
Sub-Adviser’s ‘‘posted’’ amounts if the
Adviser is not required to disclose the
Sub-Advisers’ fees to the public.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Before a Fund may rely on the
order requested in the application, the
operation of the Fund in the manner
described in the application will be
approved by a majority of the Fund’s
outstanding voting securities, as defined
in the Act, or, in the case of a Fund
whose public shareholders purchase
shares on the basis of a prospectus
containing the disclosure contemplated
by condition 2 below, by the sole initial
shareholder before offering the Fund’s
shares to the public.
2. The prospectus for each Fund will
disclose the existence, substance, and
effect of any order granted pursuant to
the application. Each Fund will hold
itself out to the public as employing the
manager of managers structure
described in the application. The
prospectus will prominently disclose
that the Adviser has ultimate
responsibility (subject to oversight by
the Board) to oversee the Sub-Advisers
and recommend their hiring,
termination, and replacement.
3. Funds will inform shareholders of
the hiring of a new Sub-Adviser (other
than an Affiliated Sub-Adviser) within
90 days after the hiring of that new SubAdviser pursuant to the Modified Notice
and Access Procedures.
4. The Adviser will not enter into a
Sub-Advisory Agreement with any
Affiliated Sub-Adviser without that
agreement, including the compensation
to be paid thereunder, being approved
by the shareholders of the applicable
Fund.
5. At all times, at least a majority of
the Board will be Independent Trustees,
and the nomination and selection of
new or additional Independent Trustees
will be placed within the discretion of
the then-existing Independent Trustees.
6. When a Sub-Adviser change is
proposed for a Fund with an Affiliated
Sub-Adviser, the Board, including a
majority of the Independent Trustees,
will make a separate finding, reflected
in the applicable Board minutes, that
such change is in the best interests of
the Fund and its shareholders and does
not involve a conflict of interest from
which the Adviser or the Affiliated Sub-
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Adviser derives an inappropriate
advantage.
7. Independent legal counsel, as
defined in rule 0–1(a)(6) under the Act,
will be engaged to represent the
Independent Trustees. The selection of
such counsel will be within the
discretion of the then existing
Independent Trustees.
8. Each Adviser will provide the
Board, no less frequently than quarterly,
with information about the profitability
of the Adviser on a per-Fund basis. The
information will reflect the impact on
profitability of the hiring or termination
of any Sub-Adviser during the
applicable quarter.
9. Whenever a Sub-Adviser is hired or
terminated, the Adviser will provide the
Board with information showing the
expected impact on the profitability of
the Adviser.
10. The Adviser will provide general
management services to a Fund,
including overall supervisory
responsibility for the general
management and investment of the
Fund’s assets and, subject to review and
approval of the Board, will (i) set a
Fund’s overall investment strategies; (ii)
evaluate, select and recommend SubAdvisers to manage all or part of a
Fund’s assets; (iii) when appropriate,
allocate and reallocate a Fund’s assets
among multiple Sub-Advisers; (iv)
monitor and evaluate the performance
of Sub-Advisers; and (v) implement
procedures reasonably designed to
ensure that the Sub-Advisers comply
with a Fund’s investment objective,
policies and restrictions.
11. No trustee or officer of the Trust,
or of a Fund, or director or officer of the
Adviser, will own directly or indirectly
(other than through a pooled investment
vehicle that is not controlled by such
person) any interest in a Sub-Adviser,
except for (i) ownership of interests in
the Adviser or any entity that controls,
is controlled by, or is under common
control with the Adviser; or (ii)
ownership of less than 1% of the
outstanding securities of any class of
equity or debt of a publicly traded
company that is either a Sub-Adviser or
an entity that controls, is controlled by,
or is under common control with a SubAdviser.
12. Each Fund will disclose in its
registration statement the Aggregate Fee
Disclosure.
13. Any new Sub-Advisory
Agreement or any amendment to an
existing Advisory Agreement or SubAdvisory Agreement that directly or
indirectly results in an increase in the
aggregate advisory fee rate payable by
the Fund will be submitted to the
Fund’s shareholders for approval.
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14. In the event the Commission
adopts a rule under the Act providing
substantially similar relief to that in the
order requested in the application, the
requested order will expire on the
effective date of that rule.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2014–08286 Filed 4–11–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71899; File No. SR–CBOE–
2014–031]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Fees
Schedule
April 8, 2014.
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 March 28,
2014, 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.
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Fees Schedule. The text of the proposed
rule change is available on the
Exchange’s Web site (https://
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
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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.
1. Purpose
The Exchange proposes to amend its
Fees Schedule. First, the Exchange
proposes to adopt a fee of $50 per
month per login ID for PULSe
Workstation users that elect to access a
COB Feed.3 The COB Feed provides
data (which has already been otherwiseavailable to PULSe Workstation users)
on a data feed that specifically provides
COB data. In order to improve the
provision of this COB data, the
Exchange has recently contracted an
outside vendor to provide the COB
Feed. The Exchange proposes to assess
the new COB Feed Fee in order to
recoup costs associated with the
provision of the COB Feed. The
Exchange does not propose to assess the
COB Feed Fee to PULSe Workstation
users on the Exchange trading floor. Onfloor PULSe Workstation users must use
PULSe Workstations using Exchangeprovided hardware, for which such
users pay a fee. Off-floor PULSe
Workstation users, in contrast, are able
to use PULSe Workstations using their
own hardware (for which they do not
pay the Exchange). Further, for off-floor
PULSe Workstation users, the Exchange
must expend resources in order to
permission their IP addresses to access
PULSe servers (which requires the
Exchange to modify its firewall each
time an off-floor PULSe user is
permissioned), and off-floor PULSe
Workstation users are not assessed a fee
for this process. The Exchange also
would like to encourage on-floor trading
activity, as the Exchange believes that
the features of a trading floor provide
benefits (such as price improvement) to
investors and the market as a whole.
3 ‘‘COB’’ stands for the Exchange’s Complex
Order Book. For a more detailed description of the
PULSe workstation and its functionality, see, e.g.,
Securities Exchange Act Release Nos. 62286 (June
11, 2010), 75 FR 34799 (June 18, 2010) (SR–CBOE–
2010–051), 63244 (November 4, 2010), 75 FR 69148
(November 10, 2010) (SR–CBOE–2010–100), 63721
(January 14, 2011), 76 FR 3929 (January 21, 2011)
(SR–CBOE–2011–011), 65280 (September 7, 2011),
76 FR 56838 (September 14, 2011), 65491 (October
6, 2011), 76 FR 63680 (October 13, 2011) (SR–
CBOE–2011–092), 69990 (July 16, 2013), 78 FR
43953 (July 22, 2013) (SR–CBOE–2013–062), and
71285 (January 10, 2014), 79 FR 2916 (January 16,
2014) (SR–CBOE–2014–130).
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
20945
Due to the differences between on-floor
and off-floor PULSe users and the
Exchange’s valid desire to encourage onfloor trading, the Exchange proposes to
state that the COB Feed Fee will not be
assessed to PULSe Workstation users on
the Exchange trading floor.
The Exchange always strives for
clarity in its rules and Fees Schedule, so
that market participants may best
understand how rules and fees apply.
As such, the Exchange proposes to
clarify its Fees Schedule. Currently, the
‘‘Exception’’ section of the Exchange’s
‘‘Linkage Fees’’ table states: ‘‘CBOE will
not pass through or otherwise charge
customer orders (of any size) routed to
other exchanges that were originally
transmitted to the Exchange from the
trading floor through an Exchangesponsored terminal (e.g. a Floor Broker
Workstation).’’ The Exchange proposes
to add the phrase ‘‘or PULSe
Workstation’’ into the parenthetical to
clarify that CBOE will not pass through
or otherwise charge customer orders
routed to other exchanges that were
originally transmitted to the Exchange
from a PULSe Workstation (which, like
a Floor Broker Workstation, is an
Exchange-sponsored terminal on the
trading floor).
The proposed changes are to take
effect on April 1, 2014.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.4 Specifically,
the Exchange believes the proposed rule
change is consistent with Section 6(b)(4)
of the Act,5 which requires that
Exchange rules provide for the equitable
allocation of reasonable dues, fees, and
other charges among its Trading Permit
Holders and other persons using its
facilities.
The Exchange believes that the COB
Feed Fee is reasonable because, in order
to improve the provision of this COB
data, the Exchange has recently
contracted an outside vendor to provide
the COB Feed, and the new COB Feed
Fee will help serve to recoup costs
associated with the provision of the
COB Feed. The Exchange believes it is
equitable and not unfairly
discriminatory to assess the COB Feed
Fee only to off-floor PULSe Workstation
users because of the differences between
on-floor and off-floor PULSe
Workstation users, and the Exchange’s
desire to encourage on-floor trading. On4 15
5 15
E:\FR\FM\14APN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
14APN1
]]>Agencies
[Federal Register Volume 79, Number 71 (Monday, April 14, 2014)]
[Notices]
[Pages 20942-20945]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08286]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31010; 812-14243]
Professionally Managed Portfolios and Balter Liquid Alternatives,
LLC; Notice of Application
April 8, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (``Act'') for an exemption from section 15(a) of
the Act and rule 18f-2 under the Act, as well as from certain
disclosure requirements.
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SUMMARY: Summary of Application: Applicants request an order that would
permit them to enter into and materially amend sub-advisory agreements
without shareholder approval and that would grant relief from certain
disclosure requirements.
Applicants: Professionally Managed Portfolios (the ``Trust'') and
Balter Liquid Alternatives, LLC (the ``Adviser'') (collectively,
``Applicants'').
DATES: Filing Dates: The application was filed November 22, 2013, and
amended on February 18, 2014 and March 14, 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 May 2, 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: The Trust: Elaine
Richards, Esq., President and Secretary, Professionally Managed
Portfolios, 2020 East Financial Way, Suite 100, Glendora, CA 91741; The
Adviser: Victor W. Chiang, Balter Liquid Alternatives, LLC, 125 High
Street, Oliver Street Tower Suite 802, Boston, MA 02110
FOR FURTHER INFORMATION CONTACT: Kieran G. Brown, Senior Counsel, at
(202) 551-6773, or Daniele Marchesani, 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 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 Massachusetts business trust, is registered under
the Act as an open-end management investment company. Prior to May
1991, the Trust was known as the Avondale Investment Trust. The Trust
is organized as a series trust and currently consists of 46 series, one
of which will be advised by the Adviser.\1\ The Adviser
[[Page 20943]]
is a limited liability company organized under Delaware law. The
Adviser is, and any future Adviser will be, registered as an investment
adviser under the Investment Advisers Act of 1940 (``Advisers Act'').
The Adviser will serve as the investment adviser to the Funds pursuant
to an investment advisory agreement with the Trust (the ``Advisory
Agreement'').\2\ Each Advisory Agreement was approved or will be
approved by the Fund's board of trustees (the ``Board''), including a
majority of the trustees who are not ``interested persons,'' as defined
in section 2(a)(19) of the Act, of the Trust, the Fund, or the Adviser
(``Independent Trustees''), and by the Fund's shareholder(s) in the
manner required by sections 15(a) and 15(c) of the Act and rule 18f-2
under the Act. The terms of each Advisory Agreement will comply with
section 15(a) of the Act.
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\1\ Applicants request relief with respect to any existing and
any future series of the Trust or any other registered open-end
management company that: (a) Is advised by the Adviser or its
successor or by a person controlling, controlled by, or under common
control with the Adviser or its successor (each, also an
``Adviser''); (b) uses the manager of managers structure described
in the application; and (c) complies with the terms and conditions
of the requested order (any such series, a ``Fund'' and
collectively, the ``Funds''). The only existing registered open-end
management investment company that currently intends to rely on the
requested order is named as an Applicant, and the only series that
currently intends to rely on the requested order as a Fund is the
Balter Long/Short Equity Fund. For purposes of the requested order,
``successor'' is limited to an entity that results from a
reorganization into another jurisdiction or a change in the type of
business organization. If the name of any Fund contains the name of
a Sub-Adviser (as defined below), that name will be preceded by the
name of the Adviser.
\2\ ``Advisory Agreement'' includes advisory agreements with an
Adviser for the Balter Long/Short Equity Fund and any future Funds.
---------------------------------------------------------------------------
2. Under the terms of each Advisory Agreement, the Adviser will
provide the Funds with overall investment management services and will
continuously review, supervise and administer each Fund's investment
program, subject to the supervision of, and policies established by the
Board. For the investment management services it will provide to each
Fund the Adviser will receive the fee specified in the Advisory
Agreement from such Fund, based on the average daily net assets of the
Fund. The Advisory Agreement permits the Adviser, subject to the
approval of the Board, to delegate certain responsibilities to one or
more sub-advisers (``Sub-Advisers'') to provide investment advisory
services to the Funds. As of the date of the amended application, the
Adviser has entered into sub-advisory agreements (``Sub-Advisory
Agreements'') with two Sub-Advisers to provide investment advisory
services to the Balter Long/Short Equity Fund.\3\ Each Sub-Adviser is,
and any future Sub-Adviser will be, an investment adviser as defined in
section 2(a)(20) of the Act and registered with the Commission as an
``investment adviser'' under the Advisers Act. The Adviser evaluates,
allocates assets to and oversees the Sub-Advisers, and makes
recommendations about their hiring, termination and replacement to the
Board, at all times subject to the authority of the Board. The Adviser
will compensate the Sub-Advisers out of the advisory fee paid by the
Funds to the Adviser under the Advisory Agreement.
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\3\ As of the date of the amended application, as approved by
the Fund's sole initial shareholder, the Adviser has entered into
Sub-Advisory Agreements with Apis Capital Advisors LLC (``Apis'')
and Midwood Capital Management LLC (``Midwood''). On February 17-18,
2014, the Adviser recommended to the Board, and the Board approved,
the engagement of two additional Sub-Advisers for the Balter Long/
Short Equity Fund, Madison Street Partners, LLC (``Madison'') and
Millrace Asset Group, Inc. (``Millrace''). Both Madison and Millrace
are registered investment advisers under the Advisors Act. The
engagement of Madison and Millrace are dependent on the occurrence
of either of the following conditions: (i) The granting of the
relief requested in the application and satisfaction of the
Conditions for Relief set forth in such application, or (ii)
approval by shareholders of the Balter Long/Short Equity Fund to the
engagement of Madison and Millrace in accordance with the
requirements of the 1940 Act at a Special Meeting of shareholders
called for such purpose.
---------------------------------------------------------------------------
3. Applicants request an order to permit the Adviser, subject to
Board approval, to select certain Sub-Advisers to manage all or a
portion of the assets of a Fund or Funds pursuant to a Sub-Advisory
Agreement and materially amend existing Sub-Advisory Agreements without
obtaining shareholder approval. The requested relief will not extend to
any Sub-Adviser that is an affiliated person, as defined in section
2(a)(3) of the Act, of the Trust, a Fund, or the Adviser, other than by
reason of serving as a sub-adviser to one or more of the Funds
(``Affiliated Sub-Adviser'').
4. Applicants also request an order exempting the Funds from
certain disclosure provisions described below that may require the
Applicants to disclose fees paid by the Adviser or a Fund to each Sub-
Adviser. Applicants seek an order to permit a Fund to disclose (as both
a dollar amount and a percentage of the Fund's net assets): (a) The
aggregate fees paid to the Adviser and any Affiliated Sub-Adviser; and
(b) the aggregate fees paid to Sub-Advisers other than Affiliated Sub-
Advisers (collectively, ``Aggregate Fee Disclosure''). Any Fund that
employs an Affiliated Sub-Adviser will provide separate disclosure of
any fees paid to the Affiliated Sub-Adviser.
Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that is
unlawful for any person to act as an investment adviser to a registered
investment company except pursuant to a written contract that has been
approved by a vote of a majority of the company's outstanding voting
securities. Rule 18f-2 under the Act provides that each series or class
of stock in a series investment company affected by a matter must
approve that matter if the Act requires shareholder approval.
2. Form N-1A is the registration statement used by open-end
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of
the method and amount of the investment adviser's compensation.
3. Rule 20a-1 under the Act requires proxies solicited with respect
to a registered investment company to comply with Schedule 14A under
the Securities Exchange Act of 1934 (``1934 Act''). Items 22(c)(1)(ii),
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together,
require a proxy statement for a shareholder meeting at which the
advisory contract will be voted upon to include the ``rate of
compensation of the investment adviser,'' the ``aggregate amount of the
investment adviser's fees,'' a description of the ``terms of the
contract to be acted upon,'' and, if a change in the advisory fee is
proposed, the existing and proposed fees and the difference between the
two fees.
4. Regulation S-X sets forth the requirements for financial
statements required to be included as part of a registered investment
company's registration statement and shareholder reports filed with the
Commission. Sections 6-07(2)(a), (b), and (c) of Regulation S-X require
a registered investment company to include in its financial statement
information about investment advisory fees.
5. Section 6(c) of the Act provides that the Commission may exempt
any person, security, or transaction or any class or classes of
persons, securities, or transactions from any provisions of the Act, or
from any rule thereunder, if such exemption is necessary or appropriate
in the public interest and consistent with the protection of investors
and the purposes fairly intended by the policy and provisions of the
Act. Applicants state that the requested relief meets this standard for
the reasons discussed below.
6. Applicants assert that the shareholders expect the Adviser,
subject to the review and approval of the Board, to select the Sub-
Advisers who are best suited to achieve each Fund's investment
objectives. Applicants assert that, from the perspective of the
shareholder, the role of the Sub-Advisers is substantially equivalent
to that of the individual portfolio managers employed by traditional
investment company advisory firms. Applicants
[[Page 20944]]
state that requiring shareholder approval of each Sub-Advisory
Agreement would impose unnecessary delays and expenses on the Funds and
may preclude the Funds from acting promptly when the Adviser and Board
consider it appropriate to hire Sub-Advisers or amend Sub-Advisory
Agreements. Applicants note that the Advisory Agreements and any Sub-
Advisory Agreements with Affiliated Sub-Advisers will remain subject to
the shareholder approval requirements of section 15(a) of the Act and
rule 18f-2 under the Act.
7. If a new Sub-Adviser is retained in reliance on the requested
order, the applicable Fund will inform its shareholders of the hiring
of a new Sub-Adviser pursuant to the following procedures (``Modified
Notice and Access Procedures''): (a) Within 90 days after a new Sub-
Adviser is hired for a Fund, the Fund will send its shareholders either
a Multi-manager Notice or a Multi-manager Notice and Multi-manager
Information Statement; \4\ and (b) the Fund will make the Multi-manager
Information Statement available on the Web site identified in the
Multi-manager Notice no later than when the Multi-manager Notice (or
Multi-manager Notice and Multi-manager Information Statement) is first
sent to shareholders, and will maintain it on that Web site for at
least 90 days. Applicants assert that a proxy solicitation to approve
the appointment of new Sub-Advisers would provide no more meaningful
information to shareholders than the proposed Multi-manager Information
Statement. Moreover, as indicated above, the applicable Board would
comply with the requirements of sections 15(a) and 15(c) of the Act
before entering into or amending Sub-Advisory Agreements.
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\4\ A ``Multi-manager Notice'' will be modeled on a Notice of
Internet Availability as defined in rule 14a-16 under the 1934 Act,
and specifically will, among other things: (a) Summarize the
relevant information regarding the new Sub-Adviser; (b) inform
shareholders that the Multi-manager Information Statement is
available on a Web site; (c) provide the Web site address; (d) state
the time period during which the Multi-manager Information Statement
will remain available on that Web site; (e) provide instructions for
accessing and printing the Multi-manager Information Statement; and
(f) instruct the shareholder that a paper or email copy of the
Multi-manager Information Statement may be obtained, without charge,
by contacting the Fund.
A ``Multi-manager Information Statement'' will meet the
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule
14A under the 1934 Act for an information statement, except as
modified by the requested order to permit Aggregate Fee Disclosure.
Multi-manager Information Statements will be filed electronically
with the Commission via the EDGAR system.
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8. Applicants assert that the requested disclosure relief will
benefit shareholders of the Funds because it will improve the Adviser's
ability to negotiate the fees paid to Sub-Advisers. Applicants state
that the Adviser may be able to negotiate rates that are below a Sub-
Adviser's ``posted'' amounts if the Adviser is not required to disclose
the Sub-Advisers' fees to the public.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Before a Fund may rely on the order requested in the
application, the operation of the Fund in the manner described in the
application will be approved by a majority of the Fund's outstanding
voting securities, as defined in the Act, or, in the case of a Fund
whose public shareholders purchase shares on the basis of a prospectus
containing the disclosure contemplated by condition 2 below, by the
sole initial shareholder before offering the Fund's shares to the
public.
2. The prospectus for each Fund will disclose the existence,
substance, and effect of any order granted pursuant to the application.
Each Fund will hold itself out to the public as employing the manager
of managers structure described in the application. The prospectus will
prominently disclose that the Adviser has ultimate responsibility
(subject to oversight by the Board) to oversee the Sub-Advisers and
recommend their hiring, termination, and replacement.
3. Funds will inform shareholders of the hiring of a new Sub-
Adviser (other than an Affiliated Sub-Adviser) within 90 days after the
hiring of that new Sub-Adviser pursuant to the Modified Notice and
Access Procedures.
4. The Adviser will not enter into a Sub-Advisory Agreement with
any Affiliated Sub-Adviser without that agreement, including the
compensation to be paid thereunder, being approved by the shareholders
of the applicable Fund.
5. At all times, at least a majority of the Board will be
Independent Trustees, and the nomination and selection of new or
additional Independent Trustees will be placed within the discretion of
the then-existing Independent Trustees.
6. When a Sub-Adviser change is proposed for a Fund with an
Affiliated Sub-Adviser, the Board, including a majority of the
Independent Trustees, will make a separate finding, reflected in the
applicable Board minutes, that such change is in the best interests of
the Fund and its shareholders and does not involve a conflict of
interest from which the Adviser or the Affiliated Sub-Adviser derives
an inappropriate advantage.
7. Independent legal counsel, as defined in rule 0-1(a)(6) under
the Act, will be engaged to represent the Independent Trustees. The
selection of such counsel will be within the discretion of the then
existing Independent Trustees.
8. Each Adviser will provide the Board, no less frequently than
quarterly, with information about the profitability of the Adviser on a
per-Fund basis. The information will reflect the impact on
profitability of the hiring or termination of any Sub-Adviser during
the applicable quarter.
9. Whenever a Sub-Adviser is hired or terminated, the Adviser will
provide the Board with information showing the expected impact on the
profitability of the Adviser.
10. The Adviser will provide general management services to a Fund,
including overall supervisory responsibility for the general management
and investment of the Fund's assets and, subject to review and approval
of the Board, will (i) set a Fund's overall investment strategies; (ii)
evaluate, select and recommend Sub-Advisers to manage all or part of a
Fund's assets; (iii) when appropriate, allocate and reallocate a Fund's
assets among multiple Sub-Advisers; (iv) monitor and evaluate the
performance of Sub-Advisers; and (v) implement procedures reasonably
designed to ensure that the Sub-Advisers comply with a Fund's
investment objective, policies and restrictions.
11. No trustee or officer of the Trust, or of a Fund, or director
or officer of the Adviser, will own directly or indirectly (other than
through a pooled investment vehicle that is not controlled by such
person) any interest in a Sub-Adviser, except for (i) ownership of
interests in the Adviser or any entity that controls, is controlled by,
or is under common control with the Adviser; or (ii) ownership of less
than 1% of the outstanding securities of any class of equity or debt of
a publicly traded company that is either a Sub-Adviser or an entity
that controls, is controlled by, or is under common control with a Sub-
Adviser.
12. Each Fund will disclose in its registration statement the
Aggregate Fee Disclosure.
13. Any new Sub-Advisory Agreement or any amendment to an existing
Advisory Agreement or Sub-Advisory Agreement that directly or
indirectly results in an increase in the aggregate advisory fee rate
payable by the Fund will be submitted to the Fund's shareholders for
approval.
[[Page 20945]]
14. In the event the Commission adopts a rule under the Act
providing substantially similar relief to that in the order requested
in the application, the requested order will expire on the effective
date of that rule.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08286 Filed 4-11-14; 8:45 am]
BILLING CODE 8011-01-P
