Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of Shares of the AdvisorShares Athena High Dividend ETF Under NYSE Arca Equities Rule 8.600, 33024-33032 [2014-13310]
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Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
[FR Doc. 2014–13311 Filed 6–6–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
• Use the Commission’s Internet
comment form https://www.sec.gov/
rules/sro.shtml); or
• Send an Email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2014–44 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
All submissions should refer to File
Number SR–NYSEArca–2014–44. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2014–44 and should be
submitted on or before June 30, 2014.
[Release No. 34–72298; File No. SR–
NYSEArca–2014–59]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change Relating to the Listing
and Trading of Shares of the
AdvisorShares Athena High Dividend
ETF Under NYSE Arca Equities Rule
8.600
June 3, 2014.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on May 20,
2014, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) 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 self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade the shares of the following under
NYSE Arca Equities Rule 8.600
(‘‘Managed Fund Shares’’):
AdvisorShares Athena High Dividend
ETF. The text of the proposed rule
change is available on the Exchange’s
Web site at www.nyse.com, at the
principal office of the Exchange, 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
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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of those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade shares (‘‘Shares’’) of the following
under NYSE Arca Equities Rule 8.600,
which governs the listing and trading of
Managed Fund Shares: 4 AdvisorShares
Athena High Dividend ETF (‘‘Fund’’).
The Shares will be offered by
AdvisorShares Trust (the ‘‘Trust’’),5 a
statutory trust organized under the laws
of the State of Delaware and registered
with the Commission as an open-end
management investment company.6 The
investment adviser to the Fund will be
AdvisorShares Investments, LLC (the
‘‘Adviser’’). AthenaInvest Advisors LLC
(‘‘Sub-Adviser’’) will be the Fund’s subadviser and will provide day-to-day
4 A Managed Fund Share is a security that
represents an interest in an investment company
registered under the Investment Company Act of
1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as
an open-end investment company or similar entity
that invests in a portfolio of securities selected by
its investment adviser consistent with its
investment objectives and policies. In contrast, an
open-end investment company that issues
Investment Company Units, listed and traded on
the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that
correspond generally to the price and yield
performance of a specific foreign or domestic stock
index, fixed income securities index or combination
thereof.
5 The Trust is registered under the 1940 Act. On
February 18, 2014, the Trust filed with the
Commission an amendment to its registration
statement on Form N–1A under the Securities Act
of 1933 (15 U.S.C. 77a) (‘‘Securities Act’’), and
under the 1940 Act relating to the Fund (File Nos.
333–157876 and 811–22110) (‘‘Registration
Statement’’). The description of the operation of the
Trust and the Fund herein is based, in part, on the
Registration Statement. In addition, the
Commission has issued an order granting certain
exemptive relief to the Trust under the 1940 Act.
See Investment Company Act Release No. 29291
(May 28, 2010) (File No. 812–13677) (‘‘Exemptive
Order’’).
6 The Commission has approved listing and
trading on the Exchange of shares of a number of
actively managed funds under Rule 8.600. See, e.g.,
Securities Exchange Act Release Nos. 63076
(October 12, 2010), 75 FR 63874 (October 18, 2010)
(SR–NYSEArca–2010–79) (order approving
Exchange listing and trading of Cambria Global
Tactical ETF); 63802 (January 31, 2011), 76 FR 6503
(February 4, 2011) (SR–NYSEArca–2010–118)
(order approving Exchange listing and trading of the
SiM Dynamic Allocation Diversified Income ETF
and SiM Dynamic Allocation Growth Income ETF);
and 65468 (October 3, 2011), 76 FR 62873 (October
11, 2011) (SR–NYSEArca–2011–51) (order
approving Exchange listing and trading of TrimTabs
Float Shrink ETF).
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Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices
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portfolio management of the Fund.
Foreside Fund Services, LLC (the
‘‘Distributor’’) will be the principal
underwriter and distributor of the
Fund’s Shares. The Bank of New York
Mellon (the ‘‘Administrator’’) will serve
as the administrator, custodian, transfer
agent and accounting agent for the
Fund.
Commentary .06 to Rule 8.600
provides that, if the investment adviser
to the investment company issuing
Managed Fund Shares is affiliated with
a broker-dealer, such investment adviser
shall erect a ‘‘fire wall’’ between the
investment adviser and the brokerdealer with respect to access to
information concerning the composition
and/or changes to such investment
company portfolio. In addition,
Commentary .06 further requires that
personnel who make decisions on the
open-end fund’s portfolio composition
must be subject to procedures designed
to prevent the use and dissemination of
material nonpublic information
regarding the open-end fund’s
portfolio. 7 Commentary .06 to Rule
8.600 is similar to Commentary .03(a)(i)
and (iii) to NYSE Arca Equities Rule
5.2(j)(3); however, Commentary .06 in
connection with the establishment of a
‘‘fire wall’’ between the investment
adviser and the broker-dealer reflects
the applicable open-end fund’s
portfolio, not an underlying benchmark
index, as is the case with index-based
funds. Neither the Adviser nor the SubAdviser is registered as a broker-dealer
or is affiliated with a broker-dealer. In
the event (a) the Adviser or the SubAdviser becomes a registered brokerdealer or becomes newly affiliated with
a broker-dealer, or (b) any new adviser
7 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
result, the Adviser and Sub-Adviser and their
related personnel are subject to the provisions of
Rule 204A–1 under the Advisers Act relating to
codes of ethics. This Rule requires investment
advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as
well as compliance with other applicable securities
laws. Accordingly, procedures designed to prevent
the communication and misuse of non-public
information by an investment adviser must be
consistent with Rule 204A–1 under the Advisers
Act. In addition, Rule 206(4)–7 under the Advisers
Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such
investment adviser has (i) adopted and
implemented written policies and procedures
reasonably designed to prevent violation, by the
investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted
thereunder; (ii) implemented, at a minimum, an
annual review regarding the adequacy of the
policies and procedures established pursuant to
subparagraph (i) above and the effectiveness of their
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
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or sub-adviser is a registered brokerdealer or becomes affiliated with a
broker-dealer, it will implement a fire
wall with respect to its relevant
personnel or its broker-dealer affiliate
regarding access to information
concerning the composition and/or
changes to the portfolio, and will be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding such portfolio.
Principal Investments
According to the Registration
Statement, the Fund will seek long-term
capital appreciation.
Under normal market conditions,8 the
Fund will seek to achieve its investment
objective by investing substantially all
of the Fund’s assets in (1) U.S. and
foreign common stock of issuers of any
capitalization range, and (2) American
Depositary Receipts (‘‘ADRs’’), Global
Depositary Receipts (‘‘GDRs’’), European
Depositary Receipts (‘‘EDRs’’) and
International Depository Receipts
(‘‘IDRs’’, and together with ADRs, GDRs,
and EDRs, ‘‘Depositary Receipts’’) that
provide investment exposure to global
equity markets.9 Other than
unsponsored ADRs, all U.S. and foreign
8 The term ‘‘under normal market conditions’’
means, without limitation, the absence of extreme
volatility or trading halts in the equity markets or
the financial markets generally; operational issues
causing dissemination of inaccurate market
information; or force majeure type events such as
systems failure, natural or man-made disaster, act
of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance.
9 ADRs are U.S. dollar denominated receipts
typically issued by U.S. banks and trust companies
that evidence ownership of underlying securities
issued by a foreign issuer. The underlying securities
may not necessarily be denominated in the same
currency as the securities into which they may be
converted. The underlying securities are held in
trust by a custodian bank or similar financial
institution in the issuer’s home country. The
depositary bank may not have physical custody of
the underlying securities at all times and may
charge fees for various services, including
forwarding dividends and interest and corporate
actions. Generally, ADRs in registered form are
equity securities designed for use in domestic
securities markets and are traded on exchanges or
over-the-counter in the U.S. GDRs, EDRs, and IDRs
are similar to ADRs in that they are certificates
evidencing ownership of shares of a foreign issuer;
however, GDRs, EDRs, and IDRs may be issued in
bearer form and denominated in other currencies,
and are generally designed for use in specific or
multiple securities markets outside the U.S. EDRs,
for example, are designed for use in European
securities markets while GDRs are designed for use
throughout the world. ADRs may be purchased with
and sold for U.S. dollars. ADRs may be sponsored
or unsponsored, but unsponsored ADRs will not
exceed 10% of the Fund’s net assets. Not more than
10% of the net assets of the Fund in the aggregate
shall consist of equity securities whose principal
market is not a member of the Intermarket
Surveillance Group (‘‘ISG’’) or is a market with
which the Exchange does not have a comprehensive
surveillance sharing agreement. See note 30 [sic],
infra.
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33025
common stocks and Depositary Receipts
in which the Fund will invest will be
exchange-traded.
The Sub-Adviser will manage the
Fund’s portfolio based on its patented
Behavioral Portfolio Management
methodology. The Sub-Adviser will
start by applying a quantitative
behavioral screen that narrows the
equity universe to securities held in
large part by mutual funds the SubAdviser believes to be most consistently
pursuing their investment strategy. The
Sub-Adviser then will narrow this
universe by a high dividend yield
criteria and select positions for the
portfolio based on the highest combined
ranking of the two dimensions.
Other Fund Investments
While the Fund, under normal market
conditions, will invest substantially all
of the Fund’s assets [sic] in exchangetraded U.S. and foreign common stocks
as well as Depositary Receipts, the Fund
may invest in other securities and
financial instruments, as described
below.
The Fund may purchase equity
securities (other than U.S. and foreign
common stocks and Depositary
Receipts) traded in the U.S. on
registered exchanges. Such other equity
securities in which the Fund may invest
include preferred stock, rights, warrants,
convertible securities,10 master limited
partnerships (‘‘MLPs’’),11 real estate
investment trusts (‘‘REITs’’),12 and
closed-end funds.13 The Fund may
invest in affiliated and unaffiliated
exchange-traded funds (‘‘ETFs’’),14, and
10 Convertible securities are bonds, debentures,
notes, preferred stocks or other securities that may
be converted or exchanged (by the holder or by the
issuer) into shares of the underlying common stock
(or cash or securities of equivalent value) at a stated
exchange ratio.
11 MLPs are limited partnerships in which the
ownership units are publicly traded.
12 REITs are pooled investment vehicles which
invest primarily in real estate or real estate related
loans. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity
and mortgage REITs.
13 A closed-end fund is a pooled investment
vehicle that is registered under the 1940 Act and
whose shares are listed and traded on U.S. national
securities exchanges.
14 For purposes of this filing, ETFs include
Investment Company Units (as described in NYSE
Arca Equities Rule 5.2(j)(3)); Portfolio Depositary
Receipts (as described in NYSE Arca Equities Rule
8.100); and Managed Fund Shares (as described in
NYSE Arca Equities Rule 8.600). The ETFs in which
the Fund will invest all will be listed and traded
on national securities exchanges. The Fund will
invest in the securities of ETFs registered under the
1940 Act consistent with the requirements of
Section 12(d)(1) of the 1940 Act, or any rule,
regulation or order of the Commission or
interpretation thereof. The Fund will only make
such investments in conformity with the
requirements of Regulation M of the Internal
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exchange-traded notes (‘‘ETNs’’).15 The
Fund also may invest in the securities
of exchange-traded pooled investment
vehicles (together with ETFs, and ETNs,
‘‘exchange-traded products’’ or ‘‘ETPs)
that are not investment companies and,
thus, not required to comply with the
provisions of the 1940 Act. These
pooled vehicles typically hold
commodities, such as gold or oil,
currency, or other property that is itself
not a security.16
On a day-to-day basis, the Fund may
hold money market instruments, cash,
other cash equivalents, and ETPs that
invest in these and other highly liquid
instruments.
The Fund may invest in the securities
of other investment companies,
including mutual funds and business
development companies (‘‘BDCs’’),17 to
the extent that such an investment
would be consistent with the
requirements of Section 12(d)(1) of the
1940 Act, or any rule, regulation or
order of the Commission or
interpretation thereof. The Fund will
only make such investments in
conformity with the requirements of
Subchapter M of the Internal Revenue
Code.18
The Fund may invest in variable and
floating rate instruments, which involve
certain obligations that may carry
variable or floating rates of interest, and
may involve a conditional or
unconditional demand feature. Such
instruments bear interest at rates which
are not fixed, but which vary with
changes in specified market rates or
indices. The interest rates on these
securities may be reset daily, weekly,
Revenue Code of 1986, as amended (the ‘‘Internal
Revenue Code’’). While the Fund may invest in
inverse ETFs, the Fund will not invest in leveraged
or inverse leveraged (e.g., 2X, –2X, 3X or –3X) ETFs.
15 ETNs are securities listed and traded on the
Exchange under NYSE Arca Equities Rule 5.2(j)(6)
(‘‘Index-Linked Securities’’). ETNs are senior,
unsecured unsubordinated debt securities issued by
an underwriting bank that are designed to provide
returns that are linked to a particular benchmark
less investor fees. ETNs have a maturity date and,
generally, are backed only by the creditworthiness
of the issuer.
16 Pooled investment vehicles include Trust
Issued Receipts (as described in NYSE Arca
Equities Rule 8.200); Commodity-Based Trust
Shares (as described in NYSE Arca Equities Rule
8.201); Currency Trust Shares (as described in
NYSE Arca Equities Rule 8.202); Commodity Index
Trust Shares (as described in NYSE Arca Equities
Rule 8.203); and Trust Units (as described in NYSE
Arca Equities Rule 8.500).
17 A BDC is a less common type of exchangetraded closed-end investment company that more
closely resembles an operating company than a
typical investment company. BDCs generally focus
on investing in, and providing managerial
assistance to, small, developing, financially
troubled, private companies or other companies
that may have value that can be realized over time
and with management assistance.
18 26 U.S.C. 851.
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quarterly, or some other reset period,
and may have a set floor or ceiling on
interest rate changes. A demand
instrument with a demand notice
exceeding seven days may be
considered illiquid if there is no
secondary market for such security.
The Fund may invest in bank
obligations, which will include
certificates of deposit, bankers’
acceptances, and fixed time deposits.
Certificates of deposit are negotiable
certificates issued against funds
deposited in a commercial bank for a
definite period of time and earning a
specified return. Bankers’ acceptances
are negotiable drafts or bills of
exchange, normally drawn by an
importer or exporter to pay for specific
merchandise, which are ‘‘accepted’’ by
a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face
value of the instrument on maturity.
Fixed time deposits are bank obligations
payable at a stated maturity date and
bearing interest at a fixed rate.
The Fund may invest in municipal
securities.
The Fund may seek to invest in
corporate debt securities.19 The broad
category of corporate debt securities in
which the Fund may invest includes
debt issued by domestic or foreign
companies of all kinds, including those
with small-, mid- and largecapitalizations. The Fund also may
invest in corporate debt securities
representative of one or more high yield
bond or credit derivative indices, which
may change from time to time. Selection
will generally be dependent on
independent credit analysis or
fundamental analysis performed by the
Sub-Adviser. The Fund may invest in
all grades of corporate debt securities
including below investment grade, and
such debt may carry variable or floating
rates of interest. The Fund also may
invest in unrated corporate debt
securities.
The Fund may invest in noninvestment-grade debt securities. Noninvestment-grade securities, also
19 According to the Registration Statement,
corporate debt securities are typically fixed-income
securities issued by businesses to finance their
operations. Notes, bonds, debentures and
commercial paper are the most common types of
corporate debt securities. The primary differences
between the different types of corporate debt
securities are their maturities and secured or
unsecured status. Commercial paper has the
shortest term and is usually unsecured. Commercial
paper is a short-term obligation with a maturity
ranging from one to 270 days issued by banks,
corporations and other borrowers. Such
investments are unsecured and usually discounted.
The Fund may invest in commercial paper rated A–
1 or A–2 by Standard and Poor’s Ratings Services
(‘‘S&P’’) or Prime-1 or Prime-2 by Moody’s Investors
Service, Inc. (‘‘Moody’s’’).
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referred to as ‘‘high yield securities’’ or
‘‘junk bonds,’’ are debt securities that
are rated lower than the four highest
rating categories by a nationally
recognized statistical rating organization
(for example, lower than Baa3 by
Moody’s Investors Service, Inc. or lower
than BBB–by Standard & Poor’s) or are
determined to be of comparable quality
by the Fund’s Sub-Adviser.
The Fund may invest in unrated debt
securities. The creditworthiness of the
issuer, as well as any financial
institution or other party responsible for
payments on the security, will be
analyzed to determine whether to
purchase unrated bonds.
The Fund may invest up to 10% of
net assets in asset-backed and
commercial mortgaged-backed
securities. Asset-backed securities are
securities backed by installment
contracts, credit-card receivables or
other assets. Commercial mortgagebacked securities are securities backed
by commercial real estate properties.
Both asset-backed and commercial
mortgage-backed securities represent
interests in ‘‘pools’’ of assets in which
payments of both interest and principal
on the securities are made on a regular
basis.
The Fund may invest in inflationindexed bonds, which are fixed income
securities whose principal value is
periodically adjusted according to the
rate of inflation.
The Fund may invest in U.S.
government securities. Securities issued
or guaranteed by the U.S. government or
its agencies or instrumentalities include
U.S. Treasury securities, which are
backed by the full faith and credit of the
U.S. Treasury and which differ only in
their interest rates, maturities, and times
of issuance.
The Fund may also invest in
separately traded principal and interest
components of securities guaranteed or
issued by the U.S. government or its
agencies, instrumentalities or sponsored
enterprises if such components trade
independently under the Separate
Trading of Registered Interest and
Principal of Securities program
(‘‘STRIPS’’) or any similar program
sponsored by the U.S. government.
STRIPS may be sold as zero coupon
securities.
The Fund may invest in U.S. Treasury
zero-coupon bonds. These securities are
U.S. Treasury bonds which have been
stripped of their unmatured interest
coupons, the coupons themselves, and
receipts or certificates representing
interests in such stripped debt
obligations and coupons. Interest is not
paid in cash during the term of these
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securities, but is accrued and paid at
maturity.
The Fund may enter into repurchase
agreements with financial institutions,
which may be deemed to be loans. The
Fund will follow certain procedures
designed to minimize the risks inherent
in such agreements. These procedures
include effecting repurchase
transactions only with large, wellcapitalized and well-established
financial institutions whose condition
will be continually monitored by the
Sub-Adviser. In addition, the value of
the collateral underlying the repurchase
agreement will always be at least equal
to the repurchase price, including any
accrued interest earned on the
repurchase agreement. It is the current
policy of the Fund not to invest in
repurchase agreements that do not
mature within seven days if any such
investment, together with any other
illiquid assets held by the Fund, amount
to more than 15% of the Fund’s net
assets.
The Fund may enter into reverse
repurchase agreements as part of the
Fund’s investment strategy. Reverse
repurchase agreements involve sales by
the Fund of portfolio assets
concurrently with an agreement by the
Fund to repurchase the same assets at a
later date at a fixed price.
ehiers on DSK2VPTVN1PROD with NOTICES
Investment Restrictions
According to the Registration
Statement, the Fund may not
(i) With respect to 75% of its total
assets, purchase securities of any issuer
(except securities issued or guaranteed
by the U.S. government, its agencies or
instrumentalities or shares of
investment companies) if, as a result,
more than 5% of its total assets would
be invested in the securities of such
issuer; or (ii) acquire more than 10% of
the outstanding voting securities of any
one issuer. For purposes of this policy,
the issuer of the underlying security
will be deemed to be the issuer of any
respective depositary receipt; 20 or
(ii) Invest 25% or more of its total
assets in the securities of one or more
issuers conducting their principal
business activities in the same industry
or group of industries. This limitation
does not apply to investments in
securities issued or guaranteed by the
U.S. government, its agencies or
instrumentalities, or shares of
investment companies. The Fund will
not invest 25% or more of its total assets
20 The diversification standard is set forth in
Section 5(b)(1) of the 1940 Act. See note 8 [sic],
supra, regarding Depositary Receipts that the Fund
may hold.
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in any investment company that so
concentrates.21
The Fund may hold up to an aggregate
amount of 15% of its net assets in
illiquid assets (calculated at the time of
investment), including Rule 144A
securities deemed illiquid by the
Adviser or Sub-Adviser,22 in accordance
with Commission guidance. The Fund
will monitor its portfolio liquidity on an
ongoing basis to determine whether, in
light of current circumstances, an
adequate level of liquidity is being
maintained, and will consider taking
appropriate steps in order to maintain
adequate liquidity if, through a change
in values, net assets, or other
circumstances, more than 15% of the
Fund’s net assets are held in illiquid
assets. Illiquid assets include securities
subject to contractual or other
restrictions on resale and other
instruments that lack readily available
markets as determined in accordance
with Commission staff guidance.23
According to the Registration
Statement, the Fund will seek to qualify
for treatment as a Regulated Investment
Company (‘‘RIC’’) under the Internal
Revenue Code.24
The Fund will not invest in options,
futures, swaps or other derivatives.
The Fund’s investments will be
consistent with the Fund’s investment
objective and will not be used to
enhance leverage.
21 See Form N–1A, Item 9. The Commission has
taken the position that a fund is concentrated if it
invests more than 25% of the value of its total
assets in any one industry. See, e.g., Investment
Company Act Release No. 9011 (October 30, 1975),
40 FR 54241 (November 21, 1975).
22 In reaching liquidity decisions, the Adviser or
Sub-Adviser may consider the following factors:
The frequency of trades and quotes for the security;
the number of dealers wishing to purchase or sell
the security and the number of other potential
purchasers; dealer undertakings to make a market
in the security; and the nature of the security and
the nature of the marketplace in which it trades
(e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of
transfer).
23 The Commission has stated that long-standing
Commission guidelines have required open-end
funds to hold no more than 15% of their net assets
in illiquid securities and other illiquid assets. See
Investment Company Act Release No. 28193 (March
11, 2008), 73 FR 14618 (March 18, 2008), footnote
34. See also, Investment Company Act Release No.
5847 (October 21, 1969), 35 FR 19989 (December
31, 1970) (Statement Regarding ‘‘Restricted
Securities’’); Investment Company Act Release No.
18612 (March 12, 1992), 57 FR 9828 (March 20,
1992) (Revisions of Guidelines to Form N–1A). A
fund’s portfolio security is illiquid if it cannot be
disposed of in the ordinary course of business
within seven days at approximately the value
ascribed to it by the fund. See Investment Company
Act Release No. 14983 (March 12, 1986), 51 FR
9773 (March 21, 1986) (adopting amendments to
Rule 2a–7 under the 1940 Act); Investment
Company Act Release No. 17452 (April 23, 1990),
55 FR 17933 (April 30, 1990) (adopting Rule 144A
under the Securities Act).
24 26 U.S.C. 851.
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33027
Creation and Redemption of Shares
The Trust will issue and sell Shares
of the Fund in aggregations of 25,000
Shares or more (‘‘Creation Units’’) on a
continuous basis through the
Distributor, at their net asset value
(‘‘NAV’’) next determined after receipt,
on any business day. The consideration
for purchase of a Creation Unit of the
Fund generally will consist of an inkind deposit of a designated portfolio of
securities—the ‘‘Deposit Securities’’—
per each Creation Unit constituting a
substantial replication, or a
representation, of the securities
included in the Fund’s portfolio and an
amount of cash—the ‘‘Cash
Component’’—computed as described
below. Together, the Deposit Securities
and the Cash Component constitute the
‘‘Fund Deposit,’’ which represents the
minimum initial and subsequent
investment amount for a Creation Unit
of the Fund. The Cash Component is an
amount equal to the difference between
the NAV of the Shares (per Creation
Unit) and the market value of the
Deposit Securities. If the Cash
Component is a positive number (i.e.,
the NAV per Creation Unit exceeds the
market value of the Deposit Securities),
the Cash Component shall be such
positive amount. If the Cash Component
is a negative number (i.e., the NAV per
Creation Unit is less than the market
value of the Deposit Securities), the
Cash Component shall be such negative
amount and the creator will be entitled
to receive cash from the Fund in an
amount equal to the Cash Component.
The Cash Component serves the
function of compensating for any
differences between the NAV per
Creation Unit and the market value of
the Deposit Securities.
The Administrator, through the
National Securities Clearing Corporation
(‘‘NSCC’’), will make available on each
business day, immediately prior to the
opening of business on the Exchange
(currently 9:30 a.m., Eastern Time), the
list of the names and the required
quantity or number of shares of each
Deposit Security to be included in the
current Fund Deposit (based on
information at the end of the previous
business day) for the Fund. Such Fund
Deposit will be applicable, subject to
any adjustments as described below, in
order to effect creations of Creation
Units of the Fund until such time as the
next-announced composition of the
Deposit Securities is made available.
The identity and number of shares or
quantity of the Deposit Securities
required for a Fund Deposit for the
Fund may change as rebalancing
adjustments and corporate action events
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occur from time to time. In addition, the
Trust reserves the right to permit or
require the substitution of an amount of
cash—i.e., a ‘‘cash in lieu’’ amount—to
be added to the Cash Component to
replace any Deposit Security which may
not be available in sufficient quantity
for delivery or which may not be
eligible for transfer (as discussed in the
Registration Statement), or which may
not be eligible for trading by an
Authorized Participant or the investor
for which it is acting. The Trust also
reserves the right to offer an ‘‘all cash’’
option for creations of Creation Units for
the Fund. The Adviser represents that,
to the extent the Trust effects the
creation of Shares in cash, such
transactions will be effected in the same
manner for all Authorized Participants.
In addition to the list of names and
numbers of securities constituting the
current Deposit Securities of a Fund
Deposit, the Administrator, through the
NSCC, also will make available on each
business day, the estimated Cash
Component, effective through and
including the previous business day, per
outstanding Creation Unit of the Fund.
Shares may be redeemed only in
Creation Units at their NAV next
determined after receipt of a redemption
request in proper form by the Fund
through the Administrator and only on
a business day. The Trust will not
redeem Shares in amounts less than
Creation Units. Beneficial owners must
accumulate enough Shares in the
secondary market to constitute a
Creation Unit in order to have such
Shares redeemed by the Trust.
With respect to the Fund, the
Administrator, through the NSCC, will
make available immediately prior to the
opening of business on the Exchange
(currently 9:30 a.m., Eastern Time) on
each business day, the ‘‘Fund
Securities’’ that will be applicable
(subject to possible amendment or
correction) to redemption requests
received in proper form on that day.
Fund Securities received on redemption
may not be identical to Deposit
Securities which are applicable to
creations of Creation Units.
For the Fund, unless cash
redemptions are available or specified
for the Fund, the redemption proceeds
for a Creation Unit generally will consist
of Fund Securities—as announced by
the Administrator on the business day
of the request for redemption received
in proper form—plus cash in an amount
equal to the difference between the NAV
of the Shares being redeemed, as next
determined after receipt of a request in
proper form, and the value of the Fund
Securities (the ‘‘Cash Redemption
Amount’’), less a redemption
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Jkt 232001
transaction fee described in the
Registration Statement. In the event that
the Fund Securities have a value greater
than the NAV of the Shares, a
compensating cash payment equal to the
differential is required to be made by or
through an Authorized Participant by
the redeeming shareholder.
If it is not possible to effect deliveries
of the Fund Securities, the Trust may in
its discretion exercise its option to
redeem such Shares in cash, and the
redeeming beneficial owner will be
required to receive its redemption
proceeds in cash. In addition, an
investor may request a redemption in
cash which the Fund may, in its sole
discretion, permit. In either case, the
investor will receive a cash payment
equal to the NAV of its Shares based on
the NAV of Shares of the Fund next
determined after the redemption request
is received in proper form (minus a
redemption transaction fee and
additional charge for requested cash
redemptions specified above, to offset
the Trust’s brokerage and other
transaction costs associated with the
disposition of Fund Securities). The
Fund may also, in its sole discretion,
upon request of a shareholder, provide
such redeemer a portfolio of securities
which differs from the exact
composition of the Fund Securities but
does not differ in NAV.
The Trust also reserves the right to
offer an ‘‘all cash’’ option for
redemptions of Creation Units for the
Fund. The Adviser represents that, to
the extent the Trust effects the
redemption of Shares in cash, such
transactions will be effected in the same
manner for all Authorized Participants.
Net Asset Value
The NAV per Share of the Fund will
be computed by dividing the value of
the net assets of the Fund (i.e., the value
of its total assets less total liabilities) by
the total number of Shares of the Fund
outstanding, rounded to the nearest
cent. Expenses and fees, including
without limitation, the management,
administration and distribution fees,
will be accrued daily and taken into
account for purposes of determining
NAV per Share.
In calculating NAV, the Fund will
generally value its portfolio investments
at market prices. In computing the
Fund’s NAV, the Fund’s securities
holdings will be valued based on their
last readily available market price. Price
information on exchange-listed
securities, including common stocks,
ETFs, ETNs, closed-end funds,
exchange-traded pooled investment
vehicles, Depositary Receipts, MLPs,
REITs, warrants, rights, preferred stocks,
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BDCs and convertible securities will be
valued at market value, which will
generally be determined using the last
reported official closing or last trading
price on the exchange or market on
which the security is primarily traded at
the time of valuation or, if no sale has
occurred, at the last quoted bid price on
the primary market or exchange on
which they are traded. Other portfolio
securities and assets for which market
quotations are not readily available or
determined to not represent the current
fair value will be valued based on fair
value as determined in good faith in
accordance with procedures adopted by
the Trust’s Board of Trustees and in
accordance with the 1940 Act.
The Fund will have an approved
pricing matrix at the time of launch. The
matrix will be based on pre-determined
rules for pricing logic (such as mean)
and valuation point (such as market
close). Third party pricing sources will
be used.
Unsponsored ADRs will be valued on
the basis of the market closing price on
the exchange where the stock of the
foreign issuer that underlies the ADR is
listed. Investment company securities,
other than ETFs and BDCs, (including
mutual funds), will be valued at NAV.
Domestic and foreign fixed income
securities, including U.S. government
securities, repurchase agreements,
reverse repurchase agreement, variable
and floating rate securities, bank
obligations, corporate debt securities,
zero-coupon bonds, commercial paper,
inflation-indexes bonds, mortgagebacked securities and asset-backed
securities generally trade in the overthe-counter market rather than on a
securities exchange. The Fund will
generally value these portfolio securities
by relying on independent pricing
services. The Fund’s pricing services
will use valuation models or matrix
pricing to determine current value. In
general, pricing services use information
with respect to comparable bond and
note transactions, quotations from bond
dealers or by reference to other
securities that are considered
comparable in such characteristics as
rating, interest rate, maturity date,
option adjusted spread models,
prepayment projections, interest rate
spreads and yield curves. Matrix price
is an estimated price or value for a
fixed-income security. Matrix pricing is
considered a form of fair value pricing.
The Administrator will calculate NAV
and NAV per Share once each business
day as of the regularly scheduled close
of normal trading on the New York
Stock Exchange, LLC (the ‘‘NYSE’’)
(normally, 4:00 p.m., Eastern Time).
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Availability of Information
The Fund’s Web site
(www.advisorshares.com), which will be
publicly available prior to the public
offering of Shares, will include a form
of the prospectus for the Fund that may
be downloaded. The Fund’s Web site
will include additional quantitative
information updated on a daily basis,
including, for the Fund, (1) daily trading
volume, the prior business day’s
reported closing price, NAV and midpoint of the bid/ask spread at the time
of calculation of such NAV (the ‘‘Bid/
Ask Price’’),25 and a calculation of the
premium and discount of the Bid/Ask
Price against the NAV, and (2) data in
chart format displaying the frequency
distribution of discounts and premiums
of the daily Bid/Ask Price against the
NAV, within appropriate ranges, for
each of the four previous calendar
quarters. On each business day, before
commencement of trading in Shares in
the Core Trading Session on the
Exchange, the Fund will disclose on its
Web site the Disclosed Portfolio that
will form the basis for the Fund’s
calculation of NAV at the end of the
business day.26
On a daily basis, the Adviser will
disclose on behalf of the Fund on the
Fund’s Web site each portfolio security
and other financial instrument of the
Fund the following information: Ticker
symbol (if applicable), name of security
and financial instrument, number of
shares, if applicable, and dollar value of
securities and financial instruments
held in the portfolio, and percentage
weighting of the security and financial
instrument in the portfolio. The Web
site information will be publicly
available at no charge.
In addition, a basket composition file,
which includes the security names and
share quantities (as applicable) required
to be delivered in exchange for Fund
Shares, together with estimates and
actual cash components, will be
publicly disseminated daily prior to the
opening of the NYSE via the NSCC. The
basket will represent one Creation Unit
of the Fund.
Investors can also obtain the Trust’s
Statement of Additional Information
(‘‘SAI’’), the Fund’s Shareholder
25 The Bid/Ask Price of Shares of the Fund will
be determined using the mid-point of the highest
bid and the lowest offer on the Exchange as of the
time of calculation of the Fund’s NAV. The records
relating to Bid/Ask Prices will be retained by the
Fund and its service providers.
26 Under accounting procedures followed by the
Fund, trades made on the prior business day (‘‘T’’)
will be booked and reflected in NAV on the current
business day (‘‘T+1’’). Accordingly, the Fund will
be able to disclose at the beginning of the business
day the portfolio that will form the basis for the
NAV calculation at the end of the business day.
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15:08 Jun 06, 2014
Jkt 232001
Reports, and its Form N–CSR and Form
N–SAR, filed twice a year. The Trust’s
SAI and Shareholder Reports will be
available free upon request from the
Trust, and those documents and the
Form N–CSR and Form N–SAR may be
viewed on-screen or downloaded from
the Commission’s Web site at
www.sec.gov. Information regarding
market price and trading volume of the
Shares will be continually available on
a real-time basis throughout the day on
brokers’ computer screens and other
electronic services. Information
regarding the previous day’s closing
price and trading volume information
for the Shares will be published daily in
the financial section of newspapers.
Quotation and last sale information for
the Shares and U.S. exchange-listed
equity securities, including common
stocks, ETPs, closed-end funds,
exchange-traded pooled investment
vehicles, Depositary Receipts, MLPs,
REITs, warrants, rights, preferred stocks,
BDCs and convertible securities will be
available via the Consolidated Tape
Association (‘‘CTA’’) high-speed line,
and will be available from the national
securities exchange on which they are
listed. Information regarding
unsponsored ADRs will be available
from major market data vendors. Intraday and closing price information
relating to the fixed income investments
of the Fund will be available from major
market data vendors. Price information
regarding investment company
securities will be available from on-line
sources and from the Web site for the
applicable investment company
securities. In addition, the Portfolio
Indicative Value, as defined in NYSE
Arca Equities Rule 8.600(c)(3), based on
current information regarding the value
of the securities and other assets in the
Disclosed Portfolio, will be widely
disseminated at least every 15 seconds
during the Core Trading Session by one
or more major market data vendors.27
The dissemination of the Portfolio
Indicative Value, together with the
Disclosed Portfolio, will allow investors
to determine the value of the underlying
portfolio of the Fund on a daily basis
and will provide a close estimate of that
value throughout the trading day. The
Portfolio Indicative Value should not be
viewed as a ‘‘real-time’’ update of the
NAV per Share of the Fund, which will
be calculated once per day.
Additional information regarding the
Trust and the Shares, including
investment strategies, risks, creation and
27 Currently, it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available Portfolio Indicative
Values taken from CTA or other data feeds.
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33029
redemption procedures, fees, portfolio
holdings disclosure policies,
distributions and taxes is included in
the Registration Statement. All terms
relating to the Fund that are referred to,
but not defined in, this proposed rule
change are defined in the Registration
Statement.
Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
the Fund.28 Trading in Shares of the
Fund will be halted if the circuit breaker
parameters in NYSE Arca Equities Rule
7.12 have been reached. Trading also
may be halted because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in the securities and/or
the financial instruments comprising
the Disclosed Portfolio of the Fund; or
(2) whether other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present. Trading in the
Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets
forth circumstances under which Shares
of the Fund may be halted.
Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. Shares will trade on
the NYSE Arca Marketplace from 4 a.m.
to 8 p.m. Eastern Time in accordance
with NYSE Arca Equities Rule 7.34
(Opening, Core, and Late Trading
Sessions). The Exchange has
appropriate rules to facilitate
transactions in the Shares during all
trading sessions. As provided in NYSE
Arca Equities Rule 7.6, Commentary .03,
the minimum price variation (‘‘MPV’’)
for quoting and entry of orders in equity
securities traded on the NYSE Arca
Marketplace is $0.01, with the exception
of securities that are priced less than
$1.00 for which the MPV for order entry
is $0.0001.
The Shares will conform to the initial
and continued listing criteria under
NYSE Arca Equities Rule 8.600. The
Exchange represents that, for initial
and/or continued listing, the Fund will
be in compliance with Rule 10A–3 29
under the Act, as provided by NYSE
Arca Equities Rule 5.3. A minimum of
100,000 Shares will be outstanding at
28 See
29 17
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09JNN1
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Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices
the commencement of trading on the
Exchange. The Exchange will obtain a
representation from the issuer of the
Shares that the NAV and the Disclosed
Portfolio as defined in NYSE Arca
Equities Rule 8.600(c)(2) will be made
available to all market participants at
the same time.
ehiers on DSK2VPTVN1PROD with NOTICES
Surveillance
The Exchange represents that trading
in the Shares will be subject to the
existing trading surveillances,
administered by the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws.30 The Exchange
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and federal
securities laws applicable to trading on
the Exchange.
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
FINRA, on behalf of the Exchange,
will communicate as needed regarding
trading in the Shares, and underlying
exchange-traded equity securities
(including, without limitation, common
stocks, ETPs, closed-end funds,
exchange-traded pooled investment
vehicles, Depositary Receipts, MLPs,
REITs, warrants, rights, preferred stocks,
BDCs and convertible securities with
other markets and other entities that are
members of the ISG, and FINRA, on
behalf of the Exchange, may obtain
trading information regarding trading in
the Shares and underlying exchangetraded equity securities from such
markets and other entities. In addition,
the Exchange may obtain information
regarding trading in the Shares and
underlying exchange-traded equity
securities (including, without
limitation, common stocks, ETPs,
closed-end funds, exchange-traded
pooled investment vehicles, Depositary
Receipts, MLPs, REITs, warrants, rights,
preferred stocks, BDCs and convertible
securities) from markets and other
30 FINRA surveils trading on the Exchange
pursuant to a regulatory services agreement. The
Exchange is responsible for FINRA’s performance
under this regulatory services agreement.
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15:08 Jun 06, 2014
Jkt 232001
entities that are members of ISG or with
which the Exchange has in place a
comprehensive surveillance sharing
agreement.31 In addition, FINRA, on
behalf of the Exchange, is able to access,
as needed, trade information for certain
fixed income securities held by the
Fund reported to FINRA’s Trade
Reporting and Compliance Engine
(‘‘TRACE’’).
Not more than 10% of the net assets
of the Fund in the aggregate shall
consist of equity securities whose
principal market is not a member of ISG
or is a market with which the Exchange
does not have a comprehensive
surveillance sharing agreement.
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit Holders in an
Information Bulletin (‘‘Bulletin’’) of the
special characteristics and risks
associated with trading the Shares.
Specifically, the Bulletin will discuss
the following: (1) The procedures for
purchases and redemptions of Shares in
Creation Unit aggregations (and that
Shares are not individually redeemable);
(2) NYSE Arca Equities Rule 9.2(a),
which imposes a duty of due diligence
on its Equity Trading Permit Holders to
learn the essential facts relating to every
customer prior to trading the Shares; (3)
the risks involved in trading the Shares
during the Opening and Late Trading
Sessions when an updated Portfolio
Indicative Value will not be calculated
or publicly disseminated; (4) how
information regarding the Portfolio
Indicative Value is disseminated; (5) the
requirement that Equity Trading Permit
Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; and (6)
trading information.
In addition, the Bulletin will
reference that the Fund is subject to
various fees and expenses described in
the Registration Statement. The Bulletin
will discuss any exemptive, no-action,
and interpretive relief granted by the
Commission from any rules under the
Act. The Bulletin will also disclose that
the NAV for the Shares will be
calculated after 4:00 p.m. Eastern Time
each trading day.
31 For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all
components of the Disclosed Portfolio for the Fund
may trade on markets that are members of ISG or
with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 32 that an
exchange have rules that are designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to, and perfect the
mechanism of a free and open market
and, in general, to protect investors and
the public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the initial and continued
listing criteria in NYSE Arca Equities
Rule 8.600. The Exchange has in place
surveillance procedures that are
adequate to properly monitor trading in
the Shares in all trading sessions and to
deter and detect violations of Exchange
rules and applicable federal securities
laws. FINRA, on behalf of the Exchange,
will communicate as needed regarding
trading in the Shares and underlying
exchange-traded equity securities
(including, without limitation, common
stocks, ETPs, closed-end funds,
exchange-traded pooled investment
vehicles, Depositary Receipts, MLPs,
REITs, warrants, rights, preferred stocks,
BDCs and convertible securities) with
other markets and other entities that are
members of the ISG, and FINRA, on
behalf of the Exchange, may obtain
trading information regarding trading in
the Shares and underlying exchangetraded equity securities from such
markets and other entities. In addition,
the Exchange may obtain information
regarding trading in the Shares and
underlying exchange-traded equity
securities (including, without
limitation, common stocks, ETPs,
closed-end funds, exchange-traded
pooled investment vehicles, Depositary
Receipts, MLPs, REITs, warrants, rights,
preferred stocks, BDCs and convertible
securities) from other markets and other
entities that are members of the ISG or
with which the Exchange has in place
a comprehensive surveillance sharing
agreement. In addition, FINRA, on
behalf of the Exchange, is able to access,
as needed, trade information for certain
fixed income securities held by the
Fund reported to FINRA’s TRACE. Not
more than 10% of the net assets of the
Fund in the aggregate shall consist of
equity securities whose principal
market is not a member of ISG or is a
market with which the Exchange does
not have a comprehensive surveillance
32 15
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U.S.C. 78f(b)(5).
09JNN1
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Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices
sharing agreement. Neither the Adviser
nor the Sub-Adviser is registered as a
broker-dealer or is affiliated with a
broker-dealer. The Fund may invest up
to 10% of net assets in asset-backed and
commercial mortgaged-backed
securities. The Fund may hold up to an
aggregate amount of 15% of its net
assets in illiquid securities, including
Rule 144A securities deemed illiquid by
the Adviser. The Fund will not invest in
leveraged or inverse leveraged (e.g., 2X,
–2X, 3X or –3X) ETFs. The Fund will
not invest in options, futures, swaps or
other derivatives. The Fund’s
investments will be consistent with the
Fund’s investment objective and will
not be used to enhance leverage.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that the Exchange will
obtain a representation from the issuer
of the Shares that the NAV per Share
will be calculated daily and that the
NAV and the Disclosed Portfolio will be
made available to all market
participants at the same time. In
addition, a large amount of information
is publicly available regarding the Fund
and the Shares, thereby promoting
market transparency. Quotation and last
sale information for the Shares will be
available via the CTA high-speed line.
In addition, the Portfolio Indicative
Value will be widely disseminated by
the Exchange at least every 15 seconds
during the Core Trading Session. The
Fund’s Web site will include a form of
the prospectus for the Fund that may be
downloaded, as well as additional
quantitative information updated on a
daily basis. On a daily basis, the Adviser
will disclose on behalf of the Fund each
portfolio security and other financial
instrument of the Fund the following
information: Ticker symbol (if
applicable), name of security and
financial instrument, number of shares,
if applicable, and dollar value of
securities and financial instruments
held in the portfolio, and percentage
weighting of the security and financial
instrument in the portfolio. The Web
site information will be publicly
available at no charge [sic] Moreover,
prior to the commencement of trading,
the Exchange will inform its Equity
Trading Permit Holders in an
Information Bulletin of the special
characteristics and risks associated with
trading the Shares. Trading in Shares of
the Fund will be halted if the circuit
breaker parameters in NYSE Arca
Equities Rule 7.12 have been reached or
because of market conditions or for
reasons that, in the view of the
Exchange, make trading in the Shares
VerDate Mar<15>2010
15:08 Jun 06, 2014
Jkt 232001
inadvisable. Trading in the Shares will
be subject to NYSE Arca Equities Rule
8.600(d)(2)(D), which sets forth
circumstances under which Shares of
the Fund may be halted. In addition, as
noted above, investors will have ready
access to information regarding the
Fund’s holdings, the Portfolio Indicative
Value, the Disclosed Portfolio, and
quotation and last sale information for
the Shares.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of an additional type of activelymanaged exchange-traded product that
will enhance competition among market
participants, to the benefit of investors
and the marketplace. As noted above,
the Exchange has in place surveillance
procedures that are adequate to properly
monitor trading in the Shares in all
trading sessions and to deter and detect
violations of Exchange rules and
applicable federal securities laws. In
addition, as noted above, investors will
have ready access to information
regarding the Fund’s holdings, the
Portfolio Indicative Value, the Disclosed
Portfolio, and quotation and last sale
information for the Shares.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purpose of the Act. The Exchange
notes that the proposed rule change will
facilitate the listing and trading of an
additional type of actively-managed
exchange-traded product that primarily
holds equity securities and that will
enhance competition among market
participants, to the benefit of investors
and the marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
PO 00000
Frm 00125
Fmt 4703
Sfmt 4703
33031
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2014–59 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2014–59. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2014–59 and should be
submitted on or before June 30, 2014.
E:\FR\FM\09JNN1.SGM
09JNN1
33032
Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Kevin M. O’Neill,
Deputy Secretary.
trading in the securities of the abovelisted company is suspended for the
period from 9:30 a.m. EDT on June 5,
2014, through 11:59 p.m. EDT on June
18, 2014.
trading in the securities of the abovelisted company is suspended for the
period from 9:30 a.m. EDT on June 5,
2014, through 11:59 p.m. EDT on June
18, 2014.
[FR Doc. 2014–13310 Filed 6–6–14; 8:45 am]
By the Commission.
Jill M. Peterson,
Assistant Secretary.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014–13475 Filed 6–5–14; 11:15 am]
[FR Doc. 2014–13474 Filed 6–5–14; 11:15 am]
BILLING CODE 8011–01–P
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
SECURITIES AND EXCHANGE
COMMISSION
In the Matter of WebXU, Inc., File No.
500–1; Order of Suspension of Trading
[File No. 500–1]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[File No. 500–1]
China Power Technology, Inc.; Order
of Suspension of Trading
June 5, 2014.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of China
Power Technology, Inc. because it has
not filed any periodic reports since the
period ended March 31, 2011.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
company. Therefore, it is ordered,
pursuant to Section 12(k) of the
Securities Exchange Act of 1934, that
trading in the securities of the abovelisted company is suspended for the
period from 9:30 a.m. EDT on June 5,
2014, through 11:59 p.m. EDT on June
18, 2014.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
June 5, 2014.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of WebXU,
Inc. because of questions regarding the
accuracy of publicly available
information about the company’s
finances.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
company.
Therefore, it is ordered, pursuant to
Section 12(k) of the Securities Exchange
Act of 1934, that trading in the
securities of the above-listed company is
suspended for the period from 9:30 a.m.
EDT on June 5, 2014, through 11:59 p.m.
EDT on June 18, 2014.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014–13477 Filed 6–5–14; 11:15 am]
BILLING CODE 8011–01–P
[FR Doc. 2014–13478 Filed 6–5–14; 11:15 am]
SECURITIES AND EXCHANGE
COMMISSION
BILLING CODE 8011–01–P
Order of Suspension of Trading; China
Digital Animation Development, Inc.
ehiers on DSK2VPTVN1PROD with NOTICES
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Zhidali
Radio and Television Network, Inc.
because it has not filed any periodic
reports since the period ended
December 31, 2010.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
company. Therefore, it is ordered,
pursuant to Section 12(k) of the
Securities Exchange Act of 1934, that
trading in the securities of the abovelisted company is suspended for the
period from 9:30 a.m. EDT on June 5,
2014, through 11:59 p.m. EDT on June
18, 2014.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014–13476 Filed 6–5–14; 11:15 am]
SECURITIES AND EXCHANGE
COMMISSION
DEPARTMENT OF STATE
[ File No. 500–1]
[Public Notice: 8758]
June 5, 2014.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of China
Digital Animation Development, Inc.
because it has not filed any periodic
reports since the period ended March
31, 2012.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
company. Therefore, it is ordered,
pursuant to Section 12(k) of the
Securities Exchange Act of 1934, that
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
June 5, 2014.
BILLING CODE 8011–01–P
[File No. 500–1]
33 17
Zhidali Radio and Television Network,
Inc.; Order of Suspension of Trading
15:08 Jun 06, 2014
Jkt 232001
Order of Suspension of Trading; In the
Matter of FLM Minerals, Inc.
June 5, 2014.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of FLM
Minerals, Inc. because it has not filed
any periodic reports since the period
ended August 31, 2011.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
company. Therefore, it is ordered,
pursuant to Section 12(k) of the
Securities Exchange Act of 1934, that
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
Culturally Significant Objects Imported
for Exhibition Determinations:
‘‘Charlotte Salomon: Life? or
Theater?’’
Notice is hereby given of the
following determinations: Pursuant to
the authority vested in me by the Act of
October 19, 1965 (79 Stat. 985; 22 U.S.C.
2459), Executive Order 12047 of March
27, 1978, the Foreign Affairs Reform and
Restructuring Act of 1998 (112 Stat.
2681, et seq.; 22 U.S.C. 6501 note, et
seq.), Delegation of Authority No. 234 of
October 1, 1999, and Delegation of
Authority No. 236–3 of August 28, 2000
(and, as appropriate, Delegation of
SUMMARY:
E:\FR\FM\09JNN1.SGM
09JNN1
]]>Agencies
[Federal Register Volume 79, Number 110 (Monday, June 9, 2014)]
[Notices]
[Pages 33024-33032]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-13310]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72298; File No. SR-NYSEArca-2014-59]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to the Listing and Trading of Shares
of the AdvisorShares Athena High Dividend ETF Under NYSE Arca Equities
Rule 8.600
June 3, 2014.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on May 20, 2014, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') 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 self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade the shares of the following
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''):
AdvisorShares Athena High Dividend ETF. The text of the proposed rule
change is available on the Exchange's Web site at www.nyse.com, at the
principal office of the Exchange, 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 self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade shares (``Shares'') of the
following under NYSE Arca Equities Rule 8.600, which governs the
listing and trading of Managed Fund Shares: \4\ AdvisorShares Athena
High Dividend ETF (``Fund''). The Shares will be offered by
AdvisorShares Trust (the ``Trust''),\5\ a statutory trust organized
under the laws of the State of Delaware and registered with the
Commission as an open-end management investment company.\6\ The
investment adviser to the Fund will be AdvisorShares Investments, LLC
(the ``Adviser''). AthenaInvest Advisors LLC (``Sub-Adviser'') will be
the Fund's sub-adviser and will provide day-to-day
[[Page 33025]]
portfolio management of the Fund. Foreside Fund Services, LLC (the
``Distributor'') will be the principal underwriter and distributor of
the Fund's Shares. The Bank of New York Mellon (the ``Administrator'')
will serve as the administrator, custodian, transfer agent and
accounting agent for the Fund.
---------------------------------------------------------------------------
\4\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an
open-end investment company or similar entity that invests in a
portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Investment Company Units,
listed and traded on the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that correspond
generally to the price and yield performance of a specific foreign
or domestic stock index, fixed income securities index or
combination thereof.
\5\ The Trust is registered under the 1940 Act. On February 18,
2014, the Trust filed with the Commission an amendment to its
registration statement on Form N-1A under the Securities Act of 1933
(15 U.S.C. 77a) (``Securities Act''), and under the 1940 Act
relating to the Fund (File Nos. 333-157876 and 811-22110)
(``Registration Statement''). The description of the operation of
the Trust and the Fund herein is based, in part, on the Registration
Statement. In addition, the Commission has issued an order granting
certain exemptive relief to the Trust under the 1940 Act. See
Investment Company Act Release No. 29291 (May 28, 2010) (File No.
812-13677) (``Exemptive Order'').
\6\ The Commission has approved listing and trading on the
Exchange of shares of a number of actively managed funds under Rule
8.600. See, e.g., Securities Exchange Act Release Nos. 63076
(October 12, 2010), 75 FR 63874 (October 18, 2010) (SR-NYSEArca-
2010-79) (order approving Exchange listing and trading of Cambria
Global Tactical ETF); 63802 (January 31, 2011), 76 FR 6503 (February
4, 2011) (SR-NYSEArca-2010-118) (order approving Exchange listing
and trading of the SiM Dynamic Allocation Diversified Income ETF and
SiM Dynamic Allocation Growth Income ETF); and 65468 (October 3,
2011), 76 FR 62873 (October 11, 2011) (SR-NYSEArca-2011-51) (order
approving Exchange listing and trading of TrimTabs Float Shrink
ETF).
---------------------------------------------------------------------------
Commentary .06 to Rule 8.600 provides that, if the investment
adviser to the investment company issuing Managed Fund Shares is
affiliated with a broker-dealer, such investment adviser shall erect a
``fire wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such investment company portfolio. In addition, Commentary
.06 further requires that personnel who make decisions on the open-end
fund's portfolio composition must be subject to procedures designed to
prevent the use and dissemination of material nonpublic information
regarding the open-end fund's portfolio. \7\ Commentary .06 to Rule
8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the
establishment of a ``fire wall'' between the investment adviser and the
broker-dealer reflects the applicable open-end fund's portfolio, not an
underlying benchmark index, as is the case with index-based funds.
Neither the Adviser nor the Sub-Adviser is registered as a broker-
dealer or is affiliated with a broker-dealer. In the event (a) the
Adviser or the Sub-Adviser becomes a registered broker-dealer or
becomes newly affiliated with a broker-dealer, or (b) any new adviser
or sub-adviser is a registered broker-dealer or becomes affiliated with
a broker-dealer, it will implement a fire wall with respect to its
relevant personnel or its broker-dealer affiliate regarding access to
information concerning the composition and/or changes to the portfolio,
and will be subject to procedures designed to prevent the use and
dissemination of material non-public information regarding such
portfolio.
---------------------------------------------------------------------------
\7\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser and Sub-Adviser and their related
personnel are subject to the provisions of Rule 204A-1 under the
Advisers Act relating to codes of ethics. This Rule requires
investment advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as well as
compliance with other applicable securities laws. Accordingly,
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under
the Advisers Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such investment adviser
has (i) adopted and implemented written policies and procedures
reasonably designed to prevent violation, by the investment adviser
and its supervised persons, of the Advisers Act and the Commission
rules adopted thereunder; (ii) implemented, at a minimum, an annual
review regarding the adequacy of the policies and procedures
established pursuant to subparagraph (i) above and the effectiveness
of their implementation; and (iii) designated an individual (who is
a supervised person) responsible for administering the policies and
procedures adopted under subparagraph (i) above.
---------------------------------------------------------------------------
Principal Investments
According to the Registration Statement, the Fund will seek long-
term capital appreciation.
Under normal market conditions,\8\ the Fund will seek to achieve
its investment objective by investing substantially all of the Fund's
assets in (1) U.S. and foreign common stock of issuers of any
capitalization range, and (2) American Depositary Receipts (``ADRs''),
Global Depositary Receipts (``GDRs''), European Depositary Receipts
(``EDRs'') and International Depository Receipts (``IDRs'', and
together with ADRs, GDRs, and EDRs, ``Depositary Receipts'') that
provide investment exposure to global equity markets.\9\ Other than
unsponsored ADRs, all U.S. and foreign common stocks and Depositary
Receipts in which the Fund will invest will be exchange-traded.
---------------------------------------------------------------------------
\8\ The term ``under normal market conditions'' means, without
limitation, the absence of extreme volatility or trading halts in
the equity markets or the financial markets generally; operational
issues causing dissemination of inaccurate market information; or
force majeure type events such as systems failure, natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption or any similar intervening circumstance.
\9\ ADRs are U.S. dollar denominated receipts typically issued
by U.S. banks and trust companies that evidence ownership of
underlying securities issued by a foreign issuer. The underlying
securities may not necessarily be denominated in the same currency
as the securities into which they may be converted. The underlying
securities are held in trust by a custodian bank or similar
financial institution in the issuer's home country. The depositary
bank may not have physical custody of the underlying securities at
all times and may charge fees for various services, including
forwarding dividends and interest and corporate actions. Generally,
ADRs in registered form are equity securities designed for use in
domestic securities markets and are traded on exchanges or over-the-
counter in the U.S. GDRs, EDRs, and IDRs are similar to ADRs in that
they are certificates evidencing ownership of shares of a foreign
issuer; however, GDRs, EDRs, and IDRs may be issued in bearer form
and denominated in other currencies, and are generally designed for
use in specific or multiple securities markets outside the U.S.
EDRs, for example, are designed for use in European securities
markets while GDRs are designed for use throughout the world. ADRs
may be purchased with and sold for U.S. dollars. ADRs may be
sponsored or unsponsored, but unsponsored ADRs will not exceed 10%
of the Fund's net assets. Not more than 10% of the net assets of the
Fund in the aggregate shall consist of equity securities whose
principal market is not a member of the Intermarket Surveillance
Group (``ISG'') or is a market with which the Exchange does not have
a comprehensive surveillance sharing agreement. See note 30 [sic],
infra.
---------------------------------------------------------------------------
The Sub-Adviser will manage the Fund's portfolio based on its
patented Behavioral Portfolio Management methodology. The Sub-Adviser
will start by applying a quantitative behavioral screen that narrows
the equity universe to securities held in large part by mutual funds
the Sub-Adviser believes to be most consistently pursuing their
investment strategy. The Sub-Adviser then will narrow this universe by
a high dividend yield criteria and select positions for the portfolio
based on the highest combined ranking of the two dimensions.
Other Fund Investments
While the Fund, under normal market conditions, will invest
substantially all of the Fund's assets [sic] in exchange-traded U.S.
and foreign common stocks as well as Depositary Receipts, the Fund may
invest in other securities and financial instruments, as described
below.
The Fund may purchase equity securities (other than U.S. and
foreign common stocks and Depositary Receipts) traded in the U.S. on
registered exchanges. Such other equity securities in which the Fund
may invest include preferred stock, rights, warrants, convertible
securities,\10\ master limited partnerships (``MLPs''),\11\ real estate
investment trusts (``REITs''),\12\ and closed-end funds.\13\ The Fund
may invest in affiliated and unaffiliated exchange-traded funds
(``ETFs''),\14\, and
[[Page 33026]]
exchange-traded notes (``ETNs'').\15\ The Fund also may invest in the
securities of exchange-traded pooled investment vehicles (together with
ETFs, and ETNs, ``exchange-traded products'' or ``ETPs) that are not
investment companies and, thus, not required to comply with the
provisions of the 1940 Act. These pooled vehicles typically hold
commodities, such as gold or oil, currency, or other property that is
itself not a security.\16\
---------------------------------------------------------------------------
\10\ Convertible securities are bonds, debentures, notes,
preferred stocks or other securities that may be converted or
exchanged (by the holder or by the issuer) into shares of the
underlying common stock (or cash or securities of equivalent value)
at a stated exchange ratio.
\11\ MLPs are limited partnerships in which the ownership units
are publicly traded.
\12\ REITs are pooled investment vehicles which invest primarily
in real estate or real estate related loans. REITs are generally
classified as equity REITs, mortgage REITs or a combination of
equity and mortgage REITs.
\13\ A closed-end fund is a pooled investment vehicle that is
registered under the 1940 Act and whose shares are listed and traded
on U.S. national securities exchanges.
\14\ For purposes of this filing, ETFs include Investment
Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3));
Portfolio Depositary Receipts (as described in NYSE Arca Equities
Rule 8.100); and Managed Fund Shares (as described in NYSE Arca
Equities Rule 8.600). The ETFs in which the Fund will invest all
will be listed and traded on national securities exchanges. The Fund
will invest in the securities of ETFs registered under the 1940 Act
consistent with the requirements of Section 12(d)(1) of the 1940
Act, or any rule, regulation or order of the Commission or
interpretation thereof. The Fund will only make such investments in
conformity with the requirements of Regulation M of the Internal
Revenue Code of 1986, as amended (the ``Internal Revenue Code'').
While the Fund may invest in inverse ETFs, the Fund will not invest
in leveraged or inverse leveraged (e.g., 2X, -2X, 3X or -3X) ETFs.
\15\ ETNs are securities listed and traded on the Exchange under
NYSE Arca Equities Rule 5.2(j)(6) (``Index-Linked Securities'').
ETNs are senior, unsecured unsubordinated debt securities issued by
an underwriting bank that are designed to provide returns that are
linked to a particular benchmark less investor fees. ETNs have a
maturity date and, generally, are backed only by the
creditworthiness of the issuer.
\16\ Pooled investment vehicles include Trust Issued Receipts
(as described in NYSE Arca Equities Rule 8.200); Commodity-Based
Trust Shares (as described in NYSE Arca Equities Rule 8.201);
Currency Trust Shares (as described in NYSE Arca Equities Rule
8.202); Commodity Index Trust Shares (as described in NYSE Arca
Equities Rule 8.203); and Trust Units (as described in NYSE Arca
Equities Rule 8.500).
---------------------------------------------------------------------------
On a day-to-day basis, the Fund may hold money market instruments,
cash, other cash equivalents, and ETPs that invest in these and other
highly liquid instruments.
The Fund may invest in the securities of other investment
companies, including mutual funds and business development companies
(``BDCs''),\17\ to the extent that such an investment would be
consistent with the requirements of Section 12(d)(1) of the 1940 Act,
or any rule, regulation or order of the Commission or interpretation
thereof. The Fund will only make such investments in conformity with
the requirements of Subchapter M of the Internal Revenue Code.\18\
---------------------------------------------------------------------------
\17\ A BDC is a less common type of exchange-traded closed-end
investment company that more closely resembles an operating company
than a typical investment company. BDCs generally focus on investing
in, and providing managerial assistance to, small, developing,
financially troubled, private companies or other companies that may
have value that can be realized over time and with management
assistance.
\18\ 26 U.S.C. 851.
---------------------------------------------------------------------------
The Fund may invest in variable and floating rate instruments,
which involve certain obligations that may carry variable or floating
rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not
fixed, but which vary with changes in specified market rates or
indices. The interest rates on these securities may be reset daily,
weekly, quarterly, or some other reset period, and may have a set floor
or ceiling on interest rate changes. A demand instrument with a demand
notice exceeding seven days may be considered illiquid if there is no
secondary market for such security.
The Fund may invest in bank obligations, which will include
certificates of deposit, bankers' acceptances, and fixed time deposits.
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts
or bills of exchange, normally drawn by an importer or exporter to pay
for specific merchandise, which are ``accepted'' by a bank, meaning, in
effect, that the bank unconditionally agrees to pay the face value of
the instrument on maturity. Fixed time deposits are bank obligations
payable at a stated maturity date and bearing interest at a fixed rate.
The Fund may invest in municipal securities.
The Fund may seek to invest in corporate debt securities.\19\ The
broad category of corporate debt securities in which the Fund may
invest includes debt issued by domestic or foreign companies of all
kinds, including those with small-, mid- and large-capitalizations. The
Fund also may invest in corporate debt securities representative of one
or more high yield bond or credit derivative indices, which may change
from time to time. Selection will generally be dependent on independent
credit analysis or fundamental analysis performed by the Sub-Adviser.
The Fund may invest in all grades of corporate debt securities
including below investment grade, and such debt may carry variable or
floating rates of interest. The Fund also may invest in unrated
corporate debt securities.
---------------------------------------------------------------------------
\19\ According to the Registration Statement, corporate debt
securities are typically fixed-income securities issued by
businesses to finance their operations. Notes, bonds, debentures and
commercial paper are the most common types of corporate debt
securities. The primary differences between the different types of
corporate debt securities are their maturities and secured or
unsecured status. Commercial paper has the shortest term and is
usually unsecured. Commercial paper is a short-term obligation with
a maturity ranging from one to 270 days issued by banks,
corporations and other borrowers. Such investments are unsecured and
usually discounted. The Fund may invest in commercial paper rated A-
1 or A-2 by Standard and Poor's Ratings Services (``S&P'') or Prime-
1 or Prime-2 by Moody's Investors Service, Inc. (``Moody's'').
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The Fund may invest in non-investment-grade debt securities. Non-
investment-grade securities, also referred to as ``high yield
securities'' or ``junk bonds,'' are debt securities that are rated
lower than the four highest rating categories by a nationally
recognized statistical rating organization (for example, lower than
Baa3 by Moody's Investors Service, Inc. or lower than BBB-by Standard &
Poor's) or are determined to be of comparable quality by the Fund's
Sub-Adviser.
The Fund may invest in unrated debt securities. The
creditworthiness of the issuer, as well as any financial institution or
other party responsible for payments on the security, will be analyzed
to determine whether to purchase unrated bonds.
The Fund may invest up to 10% of net assets in asset-backed and
commercial mortgaged-backed securities. Asset-backed securities are
securities backed by installment contracts, credit-card receivables or
other assets. Commercial mortgage-backed securities are securities
backed by commercial real estate properties. Both asset-backed and
commercial mortgage-backed securities represent interests in ``pools''
of assets in which payments of both interest and principal on the
securities are made on a regular basis.
The Fund may invest in inflation-indexed bonds, which are fixed
income securities whose principal value is periodically adjusted
according to the rate of inflation.
The Fund may invest in U.S. government securities. Securities
issued or guaranteed by the U.S. government or its agencies or
instrumentalities include U.S. Treasury securities, which are backed by
the full faith and credit of the U.S. Treasury and which differ only in
their interest rates, maturities, and times of issuance.
The Fund may also invest in separately traded principal and
interest components of securities guaranteed or issued by the U.S.
government or its agencies, instrumentalities or sponsored enterprises
if such components trade independently under the Separate Trading of
Registered Interest and Principal of Securities program (``STRIPS'') or
any similar program sponsored by the U.S. government. STRIPS may be
sold as zero coupon securities.
The Fund may invest in U.S. Treasury zero-coupon bonds. These
securities are U.S. Treasury bonds which have been stripped of their
unmatured interest coupons, the coupons themselves, and receipts or
certificates representing interests in such stripped debt obligations
and coupons. Interest is not paid in cash during the term of these
[[Page 33027]]
securities, but is accrued and paid at maturity.
The Fund may enter into repurchase agreements with financial
institutions, which may be deemed to be loans. The Fund will follow
certain procedures designed to minimize the risks inherent in such
agreements. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial
institutions whose condition will be continually monitored by the Sub-
Adviser. In addition, the value of the collateral underlying the
repurchase agreement will always be at least equal to the repurchase
price, including any accrued interest earned on the repurchase
agreement. It is the current policy of the Fund not to invest in
repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund,
amount to more than 15% of the Fund's net assets.
The Fund may enter into reverse repurchase agreements as part of
the Fund's investment strategy. Reverse repurchase agreements involve
sales by the Fund of portfolio assets concurrently with an agreement by
the Fund to repurchase the same assets at a later date at a fixed
price.
Investment Restrictions
According to the Registration Statement, the Fund may not
(i) With respect to 75% of its total assets, purchase securities of
any issuer (except securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or shares of investment
companies) if, as a result, more than 5% of its total assets would be
invested in the securities of such issuer; or (ii) acquire more than
10% of the outstanding voting securities of any one issuer. For
purposes of this policy, the issuer of the underlying security will be
deemed to be the issuer of any respective depositary receipt; \20\ or
---------------------------------------------------------------------------
\20\ The diversification standard is set forth in Section
5(b)(1) of the 1940 Act. See note 8 [sic], supra, regarding
Depositary Receipts that the Fund may hold.
---------------------------------------------------------------------------
(ii) Invest 25% or more of its total assets in the securities of
one or more issuers conducting their principal business activities in
the same industry or group of industries. This limitation does not
apply to investments in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or shares of investment
companies. The Fund will not invest 25% or more of its total assets in
any investment company that so concentrates.\21\
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\21\ See Form N-1A, Item 9. The Commission has taken the
position that a fund is concentrated if it invests more than 25% of
the value of its total assets in any one industry. See, e.g.,
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR
54241 (November 21, 1975).
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The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A securities deemed illiquid by the Adviser or Sub-
Adviser,\22\ in accordance with Commission guidance. The Fund will
monitor its portfolio liquidity on an ongoing basis to determine
whether, in light of current circumstances, an adequate level of
liquidity is being maintained, and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets, or other circumstances, more than 15% of the Fund's
net assets are held in illiquid assets. Illiquid assets include
securities subject to contractual or other restrictions on resale and
other instruments that lack readily available markets as determined in
accordance with Commission staff guidance.\23\
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\22\ In reaching liquidity decisions, the Adviser or Sub-Adviser
may consider the following factors: The frequency of trades and
quotes for the security; the number of dealers wishing to purchase
or sell the security and the number of other potential purchasers;
dealer undertakings to make a market in the security; and the nature
of the security and the nature of the marketplace in which it trades
(e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer).
\23\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also, Investment Company
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31,
1970) (Statement Regarding ``Restricted Securities''); Investment
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio
security is illiquid if it cannot be disposed of in the ordinary
course of business within seven days at approximately the value
ascribed to it by the fund. See Investment Company Act Release No.
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990)
(adopting Rule 144A under the Securities Act).
---------------------------------------------------------------------------
According to the Registration Statement, the Fund will seek to
qualify for treatment as a Regulated Investment Company (``RIC'') under
the Internal Revenue Code.\24\
---------------------------------------------------------------------------
\24\ 26 U.S.C. 851.
---------------------------------------------------------------------------
The Fund will not invest in options, futures, swaps or other
derivatives.
The Fund's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage.
Creation and Redemption of Shares
The Trust will issue and sell Shares of the Fund in aggregations of
25,000 Shares or more (``Creation Units'') on a continuous basis
through the Distributor, at their net asset value (``NAV'') next
determined after receipt, on any business day. The consideration for
purchase of a Creation Unit of the Fund generally will consist of an
in-kind deposit of a designated portfolio of securities--the ``Deposit
Securities''--per each Creation Unit constituting a substantial
replication, or a representation, of the securities included in the
Fund's portfolio and an amount of cash--the ``Cash Component''--
computed as described below. Together, the Deposit Securities and the
Cash Component constitute the ``Fund Deposit,'' which represents the
minimum initial and subsequent investment amount for a Creation Unit of
the Fund. The Cash Component is an amount equal to the difference
between the NAV of the Shares (per Creation Unit) and the market value
of the Deposit Securities. If the Cash Component is a positive number
(i.e., the NAV per Creation Unit exceeds the market value of the
Deposit Securities), the Cash Component shall be such positive amount.
If the Cash Component is a negative number (i.e., the NAV per Creation
Unit is less than the market value of the Deposit Securities), the Cash
Component shall be such negative amount and the creator will be
entitled to receive cash from the Fund in an amount equal to the Cash
Component. The Cash Component serves the function of compensating for
any differences between the NAV per Creation Unit and the market value
of the Deposit Securities.
The Administrator, through the National Securities Clearing
Corporation (``NSCC''), will make available on each business day,
immediately prior to the opening of business on the Exchange (currently
9:30 a.m., Eastern Time), the list of the names and the required
quantity or number of shares of each Deposit Security to be included in
the current Fund Deposit (based on information at the end of the
previous business day) for the Fund. Such Fund Deposit will be
applicable, subject to any adjustments as described below, in order to
effect creations of Creation Units of the Fund until such time as the
next-announced composition of the Deposit Securities is made available.
The identity and number of shares or quantity of the Deposit
Securities required for a Fund Deposit for the Fund may change as
rebalancing adjustments and corporate action events
[[Page 33028]]
occur from time to time. In addition, the Trust reserves the right to
permit or require the substitution of an amount of cash--i.e., a ``cash
in lieu'' amount--to be added to the Cash Component to replace any
Deposit Security which may not be available in sufficient quantity for
delivery or which may not be eligible for transfer (as discussed in the
Registration Statement), or which may not be eligible for trading by an
Authorized Participant or the investor for which it is acting. The
Trust also reserves the right to offer an ``all cash'' option for
creations of Creation Units for the Fund. The Adviser represents that,
to the extent the Trust effects the creation of Shares in cash, such
transactions will be effected in the same manner for all Authorized
Participants.
In addition to the list of names and numbers of securities
constituting the current Deposit Securities of a Fund Deposit, the
Administrator, through the NSCC, also will make available on each
business day, the estimated Cash Component, effective through and
including the previous business day, per outstanding Creation Unit of
the Fund.
Shares may be redeemed only in Creation Units at their NAV next
determined after receipt of a redemption request in proper form by the
Fund through the Administrator and only on a business day. The Trust
will not redeem Shares in amounts less than Creation Units. Beneficial
owners must accumulate enough Shares in the secondary market to
constitute a Creation Unit in order to have such Shares redeemed by the
Trust.
With respect to the Fund, the Administrator, through the NSCC, will
make available immediately prior to the opening of business on the
Exchange (currently 9:30 a.m., Eastern Time) on each business day, the
``Fund Securities'' that will be applicable (subject to possible
amendment or correction) to redemption requests received in proper form
on that day. Fund Securities received on redemption may not be
identical to Deposit Securities which are applicable to creations of
Creation Units.
For the Fund, unless cash redemptions are available or specified
for the Fund, the redemption proceeds for a Creation Unit generally
will consist of Fund Securities--as announced by the Administrator on
the business day of the request for redemption received in proper
form--plus cash in an amount equal to the difference between the NAV of
the Shares being redeemed, as next determined after receipt of a
request in proper form, and the value of the Fund Securities (the
``Cash Redemption Amount''), less a redemption transaction fee
described in the Registration Statement. In the event that the Fund
Securities have a value greater than the NAV of the Shares, a
compensating cash payment equal to the differential is required to be
made by or through an Authorized Participant by the redeeming
shareholder.
If it is not possible to effect deliveries of the Fund Securities,
the Trust may in its discretion exercise its option to redeem such
Shares in cash, and the redeeming beneficial owner will be required to
receive its redemption proceeds in cash. In addition, an investor may
request a redemption in cash which the Fund may, in its sole
discretion, permit. In either case, the investor will receive a cash
payment equal to the NAV of its Shares based on the NAV of Shares of
the Fund next determined after the redemption request is received in
proper form (minus a redemption transaction fee and additional charge
for requested cash redemptions specified above, to offset the Trust's
brokerage and other transaction costs associated with the disposition
of Fund Securities). The Fund may also, in its sole discretion, upon
request of a shareholder, provide such redeemer a portfolio of
securities which differs from the exact composition of the Fund
Securities but does not differ in NAV.
The Trust also reserves the right to offer an ``all cash'' option
for redemptions of Creation Units for the Fund. The Adviser represents
that, to the extent the Trust effects the redemption of Shares in cash,
such transactions will be effected in the same manner for all
Authorized Participants.
Net Asset Value
The NAV per Share of the Fund will be computed by dividing the
value of the net assets of the Fund (i.e., the value of its total
assets less total liabilities) by the total number of Shares of the
Fund outstanding, rounded to the nearest cent. Expenses and fees,
including without limitation, the management, administration and
distribution fees, will be accrued daily and taken into account for
purposes of determining NAV per Share.
In calculating NAV, the Fund will generally value its portfolio
investments at market prices. In computing the Fund's NAV, the Fund's
securities holdings will be valued based on their last readily
available market price. Price information on exchange-listed
securities, including common stocks, ETFs, ETNs, closed-end funds,
exchange-traded pooled investment vehicles, Depositary Receipts, MLPs,
REITs, warrants, rights, preferred stocks, BDCs and convertible
securities will be valued at market value, which will generally be
determined using the last reported official closing or last trading
price on the exchange or market on which the security is primarily
traded at the time of valuation or, if no sale has occurred, at the
last quoted bid price on the primary market or exchange on which they
are traded. Other portfolio securities and assets for which market
quotations are not readily available or determined to not represent the
current fair value will be valued based on fair value as determined in
good faith in accordance with procedures adopted by the Trust's Board
of Trustees and in accordance with the 1940 Act.
The Fund will have an approved pricing matrix at the time of
launch. The matrix will be based on pre-determined rules for pricing
logic (such as mean) and valuation point (such as market close). Third
party pricing sources will be used.
Unsponsored ADRs will be valued on the basis of the market closing
price on the exchange where the stock of the foreign issuer that
underlies the ADR is listed. Investment company securities, other than
ETFs and BDCs, (including mutual funds), will be valued at NAV.
Domestic and foreign fixed income securities, including U.S.
government securities, repurchase agreements, reverse repurchase
agreement, variable and floating rate securities, bank obligations,
corporate debt securities, zero-coupon bonds, commercial paper,
inflation-indexes bonds, mortgage-backed securities and asset-backed
securities generally trade in the over-the-counter market rather than
on a securities exchange. The Fund will generally value these portfolio
securities by relying on independent pricing services. The Fund's
pricing services will use valuation models or matrix pricing to
determine current value. In general, pricing services use information
with respect to comparable bond and note transactions, quotations from
bond dealers or by reference to other securities that are considered
comparable in such characteristics as rating, interest rate, maturity
date, option adjusted spread models, prepayment projections, interest
rate spreads and yield curves. Matrix price is an estimated price or
value for a fixed-income security. Matrix pricing is considered a form
of fair value pricing.
The Administrator will calculate NAV and NAV per Share once each
business day as of the regularly scheduled close of normal trading on
the New York Stock Exchange, LLC (the ``NYSE'') (normally, 4:00 p.m.,
Eastern Time).
[[Page 33029]]
Availability of Information
The Fund's Web site (www.advisorshares.com), which will be publicly
available prior to the public offering of Shares, will include a form
of the prospectus for the Fund that may be downloaded. The Fund's Web
site will include additional quantitative information updated on a
daily basis, including, for the Fund, (1) daily trading volume, the
prior business day's reported closing price, NAV and mid-point of the
bid/ask spread at the time of calculation of such NAV (the ``Bid/Ask
Price''),\25\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV, and (2) data in chart format displaying the
frequency distribution of discounts and premiums of the daily Bid/Ask
Price against the NAV, within appropriate ranges, for each of the four
previous calendar quarters. On each business day, before commencement
of trading in Shares in the Core Trading Session on the Exchange, the
Fund will disclose on its Web site the Disclosed Portfolio that will
form the basis for the Fund's calculation of NAV at the end of the
business day.\26\
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\25\ The Bid/Ask Price of Shares of the Fund will be determined
using the mid-point of the highest bid and the lowest offer on the
Exchange as of the time of calculation of the Fund's NAV. The
records relating to Bid/Ask Prices will be retained by the Fund and
its service providers.
\26\ Under accounting procedures followed by the Fund, trades
made on the prior business day (``T'') will be booked and reflected
in NAV on the current business day (``T+1''). Accordingly, the Fund
will be able to disclose at the beginning of the business day the
portfolio that will form the basis for the NAV calculation at the
end of the business day.
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On a daily basis, the Adviser will disclose on behalf of the Fund
on the Fund's Web site each portfolio security and other financial
instrument of the Fund the following information: Ticker symbol (if
applicable), name of security and financial instrument, number of
shares, if applicable, and dollar value of securities and financial
instruments held in the portfolio, and percentage weighting of the
security and financial instrument in the portfolio. The Web site
information will be publicly available at no charge.
In addition, a basket composition file, which includes the security
names and share quantities (as applicable) required to be delivered in
exchange for Fund Shares, together with estimates and actual cash
components, will be publicly disseminated daily prior to the opening of
the NYSE via the NSCC. The basket will represent one Creation Unit of
the Fund.
Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder
Reports will be available free upon request from the Trust, and those
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or
downloaded from the Commission's Web site at www.sec.gov. Information
regarding market price and trading volume of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers. Quotation and last sale information for the
Shares and U.S. exchange-listed equity securities, including common
stocks, ETPs, closed-end funds, exchange-traded pooled investment
vehicles, Depositary Receipts, MLPs, REITs, warrants, rights, preferred
stocks, BDCs and convertible securities will be available via the
Consolidated Tape Association (``CTA'') high-speed line, and will be
available from the national securities exchange on which they are
listed. Information regarding unsponsored ADRs will be available from
major market data vendors. Intra-day and closing price information
relating to the fixed income investments of the Fund will be available
from major market data vendors. Price information regarding investment
company securities will be available from on-line sources and from the
Web site for the applicable investment company securities. In addition,
the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule
8.600(c)(3), based on current information regarding the value of the
securities and other assets in the Disclosed Portfolio, will be widely
disseminated at least every 15 seconds during the Core Trading Session
by one or more major market data vendors.\27\ The dissemination of the
Portfolio Indicative Value, together with the Disclosed Portfolio, will
allow investors to determine the value of the underlying portfolio of
the Fund on a daily basis and will provide a close estimate of that
value throughout the trading day. The Portfolio Indicative Value should
not be viewed as a ``real-time'' update of the NAV per Share of the
Fund, which will be calculated once per day.
---------------------------------------------------------------------------
\27\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available
Portfolio Indicative Values taken from CTA or other data feeds.
---------------------------------------------------------------------------
Additional information regarding the Trust and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings disclosure policies, distributions
and taxes is included in the Registration Statement. All terms relating
to the Fund that are referred to, but not defined in, this proposed
rule change are defined in the Registration Statement.
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund.\28\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Equities
Rule 7.12 have been reached. Trading also may be halted because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. These may include: (1) The
extent to which trading is not occurring in the securities and/or the
financial instruments comprising the Disclosed Portfolio of the Fund;
or (2) whether other unusual conditions or circumstances detrimental to
the maintenance of a fair and orderly market are present. Trading in
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D),
which sets forth circumstances under which Shares of the Fund may be
halted.
---------------------------------------------------------------------------
\28\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late
Trading Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. As provided in
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price
variation (``MPV'') for quoting and entry of orders in equity
securities traded on the NYSE Arca Marketplace is $0.01, with the
exception of securities that are priced less than $1.00 for which the
MPV for order entry is $0.0001.
The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents
that, for initial and/or continued listing, the Fund will be in
compliance with Rule 10A-3 \29\ under the Act, as provided by NYSE Arca
Equities Rule 5.3. A minimum of 100,000 Shares will be outstanding at
[[Page 33030]]
the commencement of trading on the Exchange. The Exchange will obtain a
representation from the issuer of the Shares that the NAV and the
Disclosed Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2)
will be made available to all market participants at the same time.
---------------------------------------------------------------------------
\29\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\30\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules and federal securities laws applicable to trading on
the Exchange.
---------------------------------------------------------------------------
\30\ FINRA surveils trading on the Exchange pursuant to a
regulatory services agreement. The Exchange is responsible for
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------
The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares, and underlying exchange-traded equity
securities (including, without limitation, common stocks, ETPs, closed-
end funds, exchange-traded pooled investment vehicles, Depositary
Receipts, MLPs, REITs, warrants, rights, preferred stocks, BDCs and
convertible securities with other markets and other entities that are
members of the ISG, and FINRA, on behalf of the Exchange, may obtain
trading information regarding trading in the Shares and underlying
exchange-traded equity securities from such markets and other entities.
In addition, the Exchange may obtain information regarding trading in
the Shares and underlying exchange-traded equity securities (including,
without limitation, common stocks, ETPs, closed-end funds, exchange-
traded pooled investment vehicles, Depositary Receipts, MLPs, REITs,
warrants, rights, preferred stocks, BDCs and convertible securities)
from markets and other entities that are members of ISG or with which
the Exchange has in place a comprehensive surveillance sharing
agreement.\31\ In addition, FINRA, on behalf of the Exchange, is able
to access, as needed, trade information for certain fixed income
securities held by the Fund reported to FINRA's Trade Reporting and
Compliance Engine (``TRACE'').
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\31\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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Not more than 10% of the net assets of the Fund in the aggregate
shall consist of equity securities whose principal market is not a
member of ISG or is a market with which the Exchange does not have a
comprehensive surveillance sharing agreement.
In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'')
of the special characteristics and risks associated with trading the
Shares. Specifically, the Bulletin will discuss the following: (1) The
procedures for purchases and redemptions of Shares in Creation Unit
aggregations (and that Shares are not individually redeemable); (2)
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence
on its Equity Trading Permit Holders to learn the essential facts
relating to every customer prior to trading the Shares; (3) the risks
involved in trading the Shares during the Opening and Late Trading
Sessions when an updated Portfolio Indicative Value will not be
calculated or publicly disseminated; (4) how information regarding the
Portfolio Indicative Value is disseminated; (5) the requirement that
Equity Trading Permit Holders deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; and (6) trading information.
In addition, the Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Act. The
Bulletin will also disclose that the NAV for the Shares will be
calculated after 4:00 p.m. Eastern Time each trading day.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \32\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\32\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Equities Rule
8.600. The Exchange has in place surveillance procedures that are
adequate to properly monitor trading in the Shares in all trading
sessions and to deter and detect violations of Exchange rules and
applicable federal securities laws. FINRA, on behalf of the Exchange,
will communicate as needed regarding trading in the Shares and
underlying exchange-traded equity securities (including, without
limitation, common stocks, ETPs, closed-end funds, exchange-traded
pooled investment vehicles, Depositary Receipts, MLPs, REITs, warrants,
rights, preferred stocks, BDCs and convertible securities) with other
markets and other entities that are members of the ISG, and FINRA, on
behalf of the Exchange, may obtain trading information regarding
trading in the Shares and underlying exchange-traded equity securities
from such markets and other entities. In addition, the Exchange may
obtain information regarding trading in the Shares and underlying
exchange-traded equity securities (including, without limitation,
common stocks, ETPs, closed-end funds, exchange-traded pooled
investment vehicles, Depositary Receipts, MLPs, REITs, warrants,
rights, preferred stocks, BDCs and convertible securities) from other
markets and other entities that are members of the ISG or with which
the Exchange has in place a comprehensive surveillance sharing
agreement. In addition, FINRA, on behalf of the Exchange, is able to
access, as needed, trade information for certain fixed income
securities held by the Fund reported to FINRA's TRACE. Not more than
10% of the net assets of the Fund in the aggregate shall consist of
equity securities whose principal market is not a member of ISG or is a
market with which the Exchange does not have a comprehensive
surveillance
[[Page 33031]]
sharing agreement. Neither the Adviser nor the Sub-Adviser is
registered as a broker-dealer or is affiliated with a broker-dealer.
The Fund may invest up to 10% of net assets in asset-backed and
commercial mortgaged-backed securities. The Fund may hold up to an
aggregate amount of 15% of its net assets in illiquid securities,
including Rule 144A securities deemed illiquid by the Adviser. The Fund
will not invest in leveraged or inverse leveraged (e.g., 2X, -2X, 3X or
-3X) ETFs. The Fund will not invest in options, futures, swaps or other
derivatives. The Fund's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation from the issuer of the
Shares that the NAV per Share will be calculated daily and that the NAV
and the Disclosed Portfolio will be made available to all market
participants at the same time. In addition, a large amount of
information is publicly available regarding the Fund and the Shares,
thereby promoting market transparency. Quotation and last sale
information for the Shares will be available via the CTA high-speed
line. In addition, the Portfolio Indicative Value will be widely
disseminated by the Exchange at least every 15 seconds during the Core
Trading Session. The Fund's Web site will include a form of the
prospectus for the Fund that may be downloaded, as well as additional
quantitative information updated on a daily basis. On a daily basis,
the Adviser will disclose on behalf of the Fund each portfolio security
and other financial instrument of the Fund the following information:
Ticker symbol (if applicable), name of security and financial
instrument, number of shares, if applicable, and dollar value of
securities and financial instruments held in the portfolio, and
percentage weighting of the security and financial instrument in the
portfolio. The Web site information will be publicly available at no
charge [sic] Moreover, prior to the commencement of trading, the
Exchange will inform its Equity Trading Permit Holders in an
Information Bulletin of the special characteristics and risks
associated with trading the Shares. Trading in Shares of the Fund will
be halted if the circuit breaker parameters in NYSE Arca Equities Rule
7.12 have been reached or because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable. Trading in the Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under
which Shares of the Fund may be halted. In addition, as noted above,
investors will have ready access to information regarding the Fund's
holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and
quotation and last sale information for the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, the Exchange has in
place surveillance procedures that are adequate to properly monitor
trading in the Shares in all trading sessions and to deter and detect
violations of Exchange rules and applicable federal securities laws. In
addition, as noted above, investors will have ready access to
information regarding the Fund's holdings, the Portfolio Indicative
Value, the Disclosed Portfolio, and quotation and last sale information
for the Shares.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of an
additional type of actively-managed exchange-traded product that
primarily holds equity securities and that will enhance competition
among market participants, to the benefit of investors and the
marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2014-59 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2014-59. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2014-59 and should
be submitted on or before June 30, 2014.
[[Page 33032]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13310 Filed 6-6-14; 8:45 am]
BILLING CODE 8011-01-P
