Professionally Managed Portfolios and Balter Liquid Alternatives, LLC; Notice of Application, 20942-20945 [2014-08286]

Download as PDF mstockstill on DSK4VPTVN1PROD with NOTICES 20942 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 VerDate Mar<15>2010 17:39 Apr 11, 2014 Jkt 232001 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: PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 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 http:// 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 E:\FR\FM\14APN1.SGM 14APN1 Federal Register / Vol. 79, No. 71 / Monday, April 14, 2014 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES 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- VerDate Mar<15>2010 17:39 Apr 11, 2014 Jkt 232001 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. PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 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 E:\FR\FM\14APN1.SGM 14APN1 20944 Federal Register / Vol. 79, No. 71 / Monday, April 14, 2014 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES 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. VerDate Mar<15>2010 17:39 Apr 11, 2014 Jkt 232001 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- PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 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. E:\FR\FM\14APN1.SGM 14APN1 Federal Register / Vol. 79, No. 71 / Monday, April 14, 2014 / Notices 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. mstockstill on DSK4VPTVN1PROD with NOTICES 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 (http:// www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements 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. VerDate Mar<15>2010 17:39 Apr 11, 2014 Jkt 232001 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 http://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.
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    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.
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    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