FundVantage Trust, et al., 42847-42850 [2014-17270]
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Federal Register / Vol. 79, No. 141 / Wednesday, July 23, 2014 / Notices
Subsidiary would be entitled to rely on
section 18(k) if it were a BDC itself,
there is no policy reason to deny the
benefit of that exemption to the
Company.
Applicants’ Condition
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
The Company shall not issue or sell
any senior security, and the Company
shall not cause or permit Stellus SBIC
or any other SBIC Subsidiary to issue or
sell any senior security of which the
Company, Stellus SBIC or any other
SBIC Subsidiary is the issuer except to
the extent permitted by section 18 (as
modified for BDCs by section 61) of the
Act; provided that, immediately after
the issuance or sale by any of the
Company, Stellus SBIC or any other
SBIC Subsidiary of any such senior
security, the Company, individually and
on a consolidated basis, shall have the
asset coverage required by section 18(a)
of the Act (as modified by section 61(a)).
In determining whether the Company
has the asset coverage on a consolidated
basis required by section 18(a) of the
Act (as modified by section 61(a)), any
senior securities representing
indebtedness of an SBIC Subsidiary if
that SBIC Subsidiary has issued
indebtedness that is held or guaranteed
by the SBA shall not be considered
senior securities and, for purposes of the
definition of ‘‘asset coverage’’ in section
18(h), shall be treated as indebtedness
not represented by senior securities.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–17267 Filed 7–22–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31161; 812–14253]
FundVantage Trust, et al.; Notice of
Application
July 17, 2014.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under section 12(d)(1)(J) of the
Investment Company Act of 1940 (the
‘‘Act’’) for exemption from sections
12(d)(1)(A) and (B) of the Act, and
under sections 6(c) and 17(b) of the Act
for an exemption from section 17(a) of
the Act.
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AGENCY:
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SUMMARY:
Summary of the Application: The
order would permit certain open-end
management investment companies
registered under the Act to acquire
shares of certain open-end management
investment companies registered under
the Act that are outside of the same
group of investment companies as the
acquiring investment companies.
Applicants: FundVantage Trust (the
‘‘Trust’’), Gotham Asset Management,
LLC (the ‘‘Adviser’’), and Foreside
Funds Distributor, LLC (the
‘‘Distributor’’).
DATES: Filing Dates: The application was
filed on December 16, 2013, and
amended on April 25, 2014.
Hearing or Notification of Hearing: An
order granting the application will be
issued unless the Commission orders a
hearing. Interested persons may request
a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on August 11, 2014, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090;
Applicants, Attn: John M. Ford, Esq.,
Pepper Hamilton LLP, 3000 Two Logan
Square, Philadelphia, PA 19103.
FOR FURTHER INFORMATION CONTACT:
Michael S. Didiuk, Senior Counsel, at
(202) 551–6839, or Holly Hunter-Ceci,
Branch Chief, at (202) 551–6869
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm, or by
calling (202) 551–8090.
Applicants’ Representations
1. The Trust is organized as a
Delaware statutory trust and is
registered as an open-end management
investment company under the Act. The
Trust is comprised of separate series
(each a ‘‘Fund’’ and collectively, the
‘‘Funds’’). The Adviser is registered as
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an investment adviser under the
Investment Advisers Act of 1940
(‘‘Advisers Act’’) and serves as
investment adviser for three of the
Funds. The Distributor is registered as a
broker-dealer under the Securities
Exchange Act of 1934 (the ‘‘Exchange
Act’’) and serves as the Funds’ principal
underwriter and distributor. Both the
Adviser and the Distributor are
Delaware limited liability companies.
2. Applicants request an order to
permit (a) registered open-end
management investment companies (the
‘‘Investing Funds’’) that are not part of
the same ‘‘group of investment
companies,’’ within the meaning of
section 12(d)(1)(G)(ii) of the Act, as the
Trust, to acquire shares of the Funds in
excess of the limits in section
12(d)(1)(A) of the Act, and (b) the
Funds, any principal underwriter for a
Fund, and any broker or dealer
registered under the Exchange Act
(‘‘Broker’’) to sell shares of the Funds to
the Investing Funds in excess of the
limits of section 12(d)(1)(B) of the Act.1
Applicants also request an order under
sections 6(c) and 17(b) of the Act to
exempt applicants from section 17(a) to
the extent necessary to permit a Fund to
sell its shares to and redeem its shares
from an Investing Fund.2
3. Each Investing Fund will be
advised by an ‘‘investment adviser,’’
within the meaning of section
2(a)(20)(A) of the Act, and such adviser
will be registered as an investment
adviser under the Advisers Act (each, an
‘‘Investing Fund Adviser’’). Some
Investing Funds may also be advised by
investment adviser(s) that meets the
definition of section 2(a)(20)(B) of the
Act (each, an ‘‘Investing Fund
Subadviser’’).
Applicants’ Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act, in
relevant part, prohibits a registered
1 All entities that currently intend to rely on the
requested order are named as applicants. Any other
entity that relies on the order in the future will
comply with the terms and conditions of the
application. Certain of the Funds created in the
future may be registered under the Act as open-end
management investment companies and may have
received exemptive relief to permit their shares to
be listed and traded on a national securities
exchange at negotiated prices (‘‘ETFs’’).
2 Applicants request that the relief apply to: (1)
each registered open-end management investment
company or series thereof that currently or
subsequently is part of the same ‘‘group of
investment companies,’’ within the meaning of
section 12(d)(1)(G)(ii) of the Act, as the Trust and
is advised by the Adviser (included in the term
‘‘Funds’’); (2) each Investing Fund that enters into
a Participation Agreement (as defined below) with
a Fund to purchase shares of the Fund; and (3) any
principal underwriter to a Fund or Broker selling
shares of a Fund.
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investment company from acquiring
shares of an investment company if the
securities represent more than 3% of the
total outstanding voting stock of the
acquired company, more than 5% of the
total assets of the acquiring company,
or, together with the securities of any
other investment companies, more than
10% of the total assets of the acquiring
company. Section 12(d)(1)(B) of the Act
prohibits a registered open-end
investment company, its principal
underwriter, and any Broker from
knowingly selling the investment
company’s shares to another investment
company if the sale will cause the
acquiring company to own more than
3% of the acquired company’s total
outstanding voting stock, or if the sale
will cause more than 10% of the
acquired company’s total outstanding
voting stock to be owned by investment
companies generally.
2. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Applicants seek an exemption under
section 12(d)(1)(J) of the Act to permit
Investing Funds to acquire shares of the
Funds in excess of the limits in section
12(d)(1)(A), and a Fund, any principal
underwriter for a Fund and any Broker
to sell shares of a Fund to an Investing
Fund in excess of the limits in section
12(d)(1)(B) of the Act.
3. Applicants state that the proposed
arrangement will not give rise to the
policy concerns underlying sections
12(d)(1)(A) and (B), which include
concerns about undue influence by a
fund of funds over underlying funds,
excessive layering of fees, and overly
complex fund structures. Accordingly,
applicants believe that the requested
exemption is consistent with the public
interest and the protection of investors.
4. Applicants believe that the
proposed arrangement will not result in
the exercise of undue influence by an
Investing Fund or an Investing Fund
Affiliate over the Funds.3 To limit the
control that an Investing Fund may have
over a Fund, applicants propose a
condition prohibiting the Investing
Fund’s Advisory Group from controlling
3 An ‘‘Investing Fund Affiliate’’ is the Investing
Fund Adviser, any Investing Fund Subadviser,
promoter or principal underwriter of an Investing
Fund, as well as any person controlling, controlled
by, or under common control with any of those
entities. A ‘‘Fund Affiliate’’ is an investment
adviser, sponsor, promoter, or principal
underwriter of a Fund, as well as any person
controlling, controlled by, or under common
control with any of those entities.
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(individually or in the aggregate) a Fund
within the meaning of section 2(a)(9) of
the Act.4 The same prohibition would
apply to any Investing Fund’s
Subadvisory Group.5 Applicants
propose other conditions to limit the
potential for undue influence over the
Funds, including that no Investing Fund
or Investing Fund Affiliate (except to
the extent it is acting in its capacity as
an investment adviser to a Fund) will
cause a Fund to purchase a security in
an offering of securities during the
existence of any underwriting or selling
syndicate of which a principal
underwriter is an Underwriting Affiliate
(‘‘Affiliated Underwriting’’).6
5. To ensure that the Investing Funds
comply with the terms and conditions
of the requested relief, prior to an
Investing Fund’s investment in the
shares of a Fund in excess of the limit
in section 12(d)(1)(A) of the Act, the
Investing Fund and the Fund will
execute an agreement stating, without
limitation, that their Boards (as defined
below) and their investment advisers
understand the terms and conditions of
the order and agree to fulfill their
responsibilities under the order
(‘‘Participation Agreement’’).7
Applicants note that each of the Funds
(other than an ETF whose shares are
purchased by an Investing Fund in the
secondary market) will retain its right at
all times to reject any investment by an
Investing Fund.8
4 An ‘‘Investing Fund’s Advisory Group’’ is the
Investing Fund Adviser, any person controlling,
controlled by or under common control with the
Investing Fund Adviser, and any investment
company or issuer that would be an investment
company but for section 3(c)(1) or 3(c)(7) of the Act
that is advised or sponsored by the Investing Fund
Adviser or any person controlling, controlled by or
under common control with the Investing Fund
Adviser.
5 An ‘‘Investing Fund’s Subadvisory Group’’ is an
Investing Fund Subadviser, any person controlling,
controlled by or under common control with the
Investing Fund Subadviser, and any investment
company or issuer that would be an investment
company but for section 3(c)(1) or 3(c)(7) of the Act
(or portion of such investment company or issuer)
advised or sponsored by the Investing Fund
Subadviser or any person controlling, controlled by
or under common control with the Investing Fund
Subadviser.
6 An ‘‘Underwriting Affiliate’’ is a principal
underwriter in any underwriting or selling
syndicate that is an officer, director, trustee,
advisory board member, Investing Fund Adviser,
Investing Fund Subadviser, or employee of the
Investing Fund, or a person of which any such
officer, director, trustee, advisory board member,
Investing Fund Adviser, Investing Fund Subadviser,
or employee is an affiliated person. An
Underwriting Affiliate does not include any person
whose relationship to the Fund is covered by
section 10(f) of the Act.
7 The board of directors or trustees, as applicable,
of a specified entity is referred to herein as a
‘‘Board.’’
8 A Fund, including an ETF, would retain its right
to reject any initial investment by an Investing
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6. Applicants state that they do not
believe that the proposed arrangement
will involve excessive layering of fees.
The Board of each Investing Fund,
including a majority of the directors or
trustees who are not ‘‘interested
persons’’ (within the meaning of section
2(a)(19) of the Act) (‘‘Independent
Trustees’’), will find that the advisory
fees charged under investment advisory
contract(s) are based on services
provided that will be in addition to,
rather than duplicative of, the services
provided under the advisory contract(s)
of any Fund in which the Investing
Fund may invest. In addition, the
Investing Fund Adviser will waive fees
otherwise payable to it by an Investing
Fund in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by a Fund
under rule 12b–1 under the Act)
received from a Fund by the Investing
Fund Adviser, or an affiliated person of
the Investing Fund Adviser, other than
any advisory fees paid to the Investing
Fund Adviser or its affiliated person by
the Fund, in connection with the
investment by the Investing Fund in the
Fund. Any sales charges and/or service
fees charged with respect to shares of an
Investing Fund will not exceed the
limits applicable to a fund of funds as
set forth in Rule 2830 of the Conduct
Rules of the NASD (‘‘NASD Conduct
Rule 2830’’).9
7. Applicants submit that the
proposed arrangement will not create an
overly complex fund structure.
Applicants note that no Fund will
acquire securities of any investment
company or company relying on section
3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section
12(d)(1)(A) of the Act, except in certain
circumstances identified in condition 12
below.
B. Section 17(a)
1. Section 17(a) of the Act generally
prohibits sales or purchases of securities
between a registered investment
company and any affiliated person of
the company. Section 2(a)(3) of the Act
defines an ‘‘affiliated person’’ of another
person to include (a) any person directly
or indirectly owning, controlling, or
holding with power to vote, 5% or more
of the outstanding voting securities of
the other person; (b) any person 5% or
more of whose outstanding voting
securities are directly or indirectly
owned, controlled, or held with power
Fund in excess of the limit in section 12(d)(1)(A)(i)
of the Act by declining to execute the Participation
Agreement with the Investing Fund.
9 Any references to NASD Conduct Rule 2830
include any successor or replacement FINRA rule
to NASD Conduct Rule 2830.
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to vote by the other person; and (c) any
person directly or indirectly controlling,
controlled by, or under common control
with the other person.
2. Applicants state that an Investing
Fund and a Fund might be deemed to
be affiliated persons of one another if
the Investing Fund acquires 5% or more
of a Fund’s outstanding voting
securities. Accordingly, section 17(a)
could prevent a Fund from selling
shares to and redeeming shares from an
Investing Fund.
3. Section 17(b) of the Act authorizes
the Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
Section 6(c) of the Act permits the
Commission to exempt any persons or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act.
4. Applicants submit that the
proposed transactions satisfy the
standards for relief under sections 17(b)
and 6(c) of the Act.10 Applicants state
that the terms of the transactions are
reasonable and fair and do not involve
overreaching. Applicants state that the
terms upon which a Fund will sell its
shares to or purchase its shares from an
Investing Fund will be based on the net
asset value of the Fund.11 Applicants
state that the proposed transactions will
be consistent with the policies of each
10 Applicants acknowledge that receipt of any
compensation by (a) an affiliated person of an
Investing Fund, or an affiliated person of such
person, for the purchase by an Investing Fund of
shares of a Fund or (b) an affiliated person of a
Fund, or an affiliated person of such person, for the
sale by the Fund of its shares to an Investing Fund
may be prohibited by section 17(e)(1) of the Act.
The Participation Agreement also will include this
acknowledgement.
11 Applicants note that an Investing Fund
generally would purchase and sell shares of a Fund
that operates as an ETF through secondary market
transactions rather than through principal
transactions with the Fund. The requested relief is
intended to cover, however, transactions directly
between Funds and Investing Funds. Applicants are
not seeking relief from section 17(a) for, and the
requested relief will not apply to, transactions
where an ETF could be deemed an affiliated person,
or an affiliated person of an affiliated person of an
Investing Fund because an investment adviser to
the ETF is also an investment adviser to the
Investing Fund.
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Investing Fund and each Fund and with
the general purposes of the Act.
Applicants’ Conditions
Applicants agree that the relief to
permit Investing Funds to invest in
Funds shall be subject to the following
conditions:
1. The members of an Investing
Fund’s Advisory Group will not control
(individually or in the aggregate) a Fund
within the meaning of section 2(a)(9) of
the Act. The members of an Investing
Fund’s Subadvisory Group will not
control (individually or in the aggregate)
a Fund within the meaning of section
2(a)(9) of the Act. If, as a result of a
decrease in the outstanding voting
securities of a Fund, the Investing
Fund’s Advisory Group or the Investing
Fund’s Subadvisory Group, each in the
aggregate, becomes a holder of more
than 25 percent of the outstanding
voting securities of a Fund, it will vote
its shares of the Fund in the same
proportion as the vote of all other
holders of the Fund’s shares. This
condition does not apply to the
Investing Fund’s Subadvisory Group
with respect to a Fund for which the
Investing Fund Subadviser or a person
controlling, controlled by, or under
common control with the Investing
Fund Subadviser acts as the investment
adviser within the meaning of section
2(a)(20)(A) of the Act.
2. No Investing Fund or Investing
Fund Affiliate will cause any existing or
potential investment by the Investing
Fund in shares of a Fund to influence
the terms of any services or transactions
between the Investing Fund or an
Investing Fund Affiliate and the Fund or
a Fund Affiliate.
3. The Board of an Investing Fund,
including a majority of the Independent
Trustees, will adopt procedures
reasonably designed to ensure that the
Investing Fund Adviser and any
Investing Fund Subadviser(s) are
conducting the investment program of
the Investing Fund without taking into
account any consideration received by
the Investing Fund or an Investing Fund
Affiliate from a Fund or a Fund Affiliate
in connection with any services or
transactions.
4. Once an investment by an Investing
Fund in the securities of a Fund exceeds
the limit in section 12(d)(1)(A)(i) of the
Act, the Board of the Fund, including a
majority of the Independent Trustees,
will determine that any consideration
paid by the Fund to the Investing Fund
or an Investing Fund Affiliate in
connection with any services or
transactions: (a) Is fair and reasonable in
relation to the nature and quality of the
services and benefits received by the
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42849
Fund; (b) is within the range of
consideration that the Fund would be
required to pay to another unaffiliated
entity in connection with the same
services or transactions; and (c) does not
involve overreaching on the part of any
person concerned. This condition does
not apply with respect to any services
or transactions between a Fund and its
investment adviser(s) or any person
controlling, controlled by, or under
common control with such investment
adviser(s).
5. No Investing Fund or Investing
Fund Affiliate (except to the extent it is
acting in its capacity as an investment
adviser to a Fund) will cause a Fund to
purchase a security in any Affiliated
Underwriting.
6. The Board of a Fund, including a
majority of the Independent Trustees,
will adopt procedures reasonably
designed to monitor any purchases of
securities by the Fund in an Affiliated
Underwriting once an investment by an
Investing Fund in the securities of the
Fund exceeds the limit of section
12(d)(1)(A)(i) of the Act, including any
purchases made directly from an
Underwriting Affiliate. The Board of the
Fund will review these purchases
periodically, but no less frequently than
annually, to determine whether the
purchases were influenced by the
investment by the Investing Fund in
shares of the Fund. The Board will
consider, among other things, (a)
whether the purchases were consistent
with the investment objectives and
policies of the Fund; (b) how the
performance of securities purchased in
an Affiliated Underwriting compares to
the performance of comparable
securities purchased during a
comparable period of time in
underwritings other than Affiliated
Underwritings or to a benchmark such
as a comparable market index; and (c)
whether the amount of securities
purchased by the Fund in Affiliated
Underwritings and the amount
purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board will take any appropriate actions
based on its review, including, if
appropriate, the institution of
procedures designed to ensure that
purchases of securities in Affiliated
Underwritings are in the best interest of
shareholders.
7. Each Fund will maintain and
preserve permanently in an easily
accessible place a written copy of the
procedures described in the preceding
condition, and any modifications to
such procedures, and will maintain and
preserve for a period of not less than six
years from the end of the fiscal year in
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which any purchase in an Affiliated
Underwriting occurred, the first two
years in an easily accessible place, a
written record of each purchase of
securities in Affiliated Underwritings
once an investment by an Investing
Fund in the securities of a Fund exceeds
the limit in section 12(d)(1)(A)(i) of the
Act, setting forth the: (a) party from
whom the securities were acquired, (b)
identity of the underwriting syndicate’s
members, (c) terms of the purchase, and
(d) information or materials upon which
the Board’s determinations were made.
8. Before investing in shares of a Fund
in excess of the limits in section
12(d)(1)(A) of the Act, each Investing
Fund and Fund will execute a
Participation Agreement stating,
without limitation, that their Boards and
their investment advisers understand
the terms and conditions of the order
and agree to fulfill their responsibilities
under the order. At the time of its
investment in shares of a Fund in excess
of the limit in section 12(d)(1)(A)(i), an
Investing Fund will notify the Fund of
the investment. At such time, the
Investing Fund will also transmit to the
Fund a list of the names of each
Investing Fund Affiliate and
Underwriting Affiliate. The Investing
Fund will notify the Fund of any
changes to the list of the names as soon
as reasonably practicable after a change
occurs. The Fund and the Investing
Fund will maintain and preserve a copy
of the order, the Participation
Agreement, and the list with any
updated information for the duration of
the investment and for a period of not
less than six years thereafter, the first
two years in an easily accessible place.
9. Prior to approving any advisory
contract under section 15 of the Act, the
Board of each Investing Fund, including
a majority of the Independent Trustees,
will find that the advisory fees charged
under such advisory contracts are based
on services provided that will be in
addition to, rather than duplicative of,
services provided under the advisory
contract(s) of any Fund in which the
Investing Fund may invest. Such
finding and the basis upon which the
finding was made will be recorded fully
in the minute books of the appropriate
Investing Fund.
10. The Investing Fund Adviser will
waive fees otherwise payable to it by the
Investing Fund in an amount at least
equal to any compensation (including
fees received pursuant to a plan adopted
by a Fund under Rule 12b–1 under the
Act) received from a Fund by the
Investing Fund Adviser, or an affiliated
person of the Investing Fund Adviser,
other than any advisory fees paid to the
Investing Fund Adviser or its affiliated
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person by the Fund, in connection with
the investment by the Investing Fund in
the Fund. Any Investing Fund
Subadviser will waive fees otherwise
payable to the Investing Fund
Subadviser, directly or indirectly, by the
Investing Fund in an amount at least
equal to any compensation received
from a Fund by the Investing Fund
Subadviser, or an affiliated person of the
Investing Fund Subadviser, other than
any advisory fees paid to the Investing
Fund Subadviser or its affiliated person
by the Fund, in connection with the
investment by the Investing Fund in the
Fund made at the direction of the
Investing Fund Subadviser. In the event
that the Investing Fund Subadviser
waives fees, the benefit of the waiver
will be passed through to the Investing
Fund.
11. Any sales charges and/or service
fees charged with respect to shares of an
Investing Fund will not exceed the
limits applicable to a fund of funds as
set forth in NASD Conduct Rule 2830.
12. No Fund will acquire securities of
any investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except
to the extent permitted by exemptive
relief from the Commission permitting
the Fund to purchase shares of other
investment companies for short-term
cash management purposes.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin O’Neill,
Deputy Secretary.
[FR Doc. 2014–17270 Filed 7–22–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72638; File No. SR–FINRA–
2014–033]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating To Serving
Electronically Written Decisions on
Members Seeking Exemptive Relief
Under NASD Rule 1070
July 17, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 9,
2014, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
PO 00000
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00096
Fmt 4703
Sfmt 4703
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by FINRA. 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
FINRA is proposing to amend FINRA
Rule 9620 (Decision) to permit FINRA
staff to serve by an electronic method
written decisions on members seeking
exemptive relief from FINRA’s
qualification examination requirements
under NASD Rule 1070.
Below is the text of the proposed rule
change. Proposed new language is in
italics.
*
*
*
*
*
9000. CODE OF PROCEDURE
*
*
*
*
*
9600. PROCEDURES FOR
EXEMPTIONS
*
*
*
*
*
9620. Decision
After considering an application,
FINRA staff shall issue a written
decision setting forth its findings and
conclusions. The decision shall be
served on the Applicant pursuant to
Rules 9132 and 9134, except with
respect to written decisions for
exemptive relief under NASD Rule 1070
(Qualification Examinations and Waiver
of Requirements), which shall be served
on the Applicant electronically. After
the decision is served on the Applicant,
the application and decision may be
publicly available.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for the Proposed Rule
Change
In its filing with the Commission,
FINRA 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 these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
E:\FR\FM\23JYN1.SGM
23JYN1
]]>Agencies
[Federal Register Volume 79, Number 141 (Wednesday, July 23, 2014)]
[Notices]
[Pages 42847-42850]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17270]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31161; 812-14253]
FundVantage Trust, et al.; Notice of Application
July 17, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under section 12(d)(1)(J)
of the Investment Company Act of 1940 (the ``Act'') for exemption from
sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) and
17(b) of the Act for an exemption from section 17(a) of the Act.
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SUMMARY:
Summary of the Application: The order would permit certain open-end
management investment companies registered under the Act to acquire
shares of certain open-end management investment companies registered
under the Act that are outside of the same group of investment
companies as the acquiring investment companies.
Applicants: FundVantage Trust (the ``Trust''), Gotham Asset
Management, LLC (the ``Adviser''), and Foreside Funds Distributor, LLC
(the ``Distributor'').
DATES: Filing Dates: The application was filed on December 16, 2013,
and amended on April 25, 2014.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on August 11, 2014, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants, Attn: John M. Ford,
Esq., Pepper Hamilton LLP, 3000 Two Logan Square, Philadelphia, PA
19103.
FOR FURTHER INFORMATION CONTACT: Michael S. Didiuk, Senior Counsel, at
(202) 551-6839, or Holly Hunter-Ceci, Branch Chief, at (202) 551-6869
(Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Applicants' Representations
1. The Trust is organized as a Delaware statutory trust and is
registered as an open-end management investment company under the Act.
The Trust is comprised of separate series (each a ``Fund'' and
collectively, the ``Funds''). The Adviser is registered as an
investment adviser under the Investment Advisers Act of 1940
(``Advisers Act'') and serves as investment adviser for three of the
Funds. The Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the ``Exchange Act'') and serves as
the Funds' principal underwriter and distributor. Both the Adviser and
the Distributor are Delaware limited liability companies.
2. Applicants request an order to permit (a) registered open-end
management investment companies (the ``Investing Funds'') that are not
part of the same ``group of investment companies,'' within the meaning
of section 12(d)(1)(G)(ii) of the Act, as the Trust, to acquire shares
of the Funds in excess of the limits in section 12(d)(1)(A) of the Act,
and (b) the Funds, any principal underwriter for a Fund, and any broker
or dealer registered under the Exchange Act (``Broker'') to sell shares
of the Funds to the Investing Funds in excess of the limits of section
12(d)(1)(B) of the Act.\1\ Applicants also request an order under
sections 6(c) and 17(b) of the Act to exempt applicants from section
17(a) to the extent necessary to permit a Fund to sell its shares to
and redeem its shares from an Investing Fund.\2\
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\1\ All entities that currently intend to rely on the requested
order are named as applicants. Any other entity that relies on the
order in the future will comply with the terms and conditions of the
application. Certain of the Funds created in the future may be
registered under the Act as open-end management investment companies
and may have received exemptive relief to permit their shares to be
listed and traded on a national securities exchange at negotiated
prices (``ETFs'').
\2\ Applicants request that the relief apply to: (1) each
registered open-end management investment company or series thereof
that currently or subsequently is part of the same ``group of
investment companies,'' within the meaning of section
12(d)(1)(G)(ii) of the Act, as the Trust and is advised by the
Adviser (included in the term ``Funds''); (2) each Investing Fund
that enters into a Participation Agreement (as defined below) with a
Fund to purchase shares of the Fund; and (3) any principal
underwriter to a Fund or Broker selling shares of a Fund.
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3. Each Investing Fund will be advised by an ``investment
adviser,'' within the meaning of section 2(a)(20)(A) of the Act, and
such adviser will be registered as an investment adviser under the
Advisers Act (each, an ``Investing Fund Adviser''). Some Investing
Funds may also be advised by investment adviser(s) that meets the
definition of section 2(a)(20)(B) of the Act (each, an ``Investing Fund
Subadviser'').
Applicants' Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act, in relevant part, prohibits a
registered
[[Page 42848]]
investment company from acquiring shares of an investment company if
the securities represent more than 3% of the total outstanding voting
stock of the acquired company, more than 5% of the total assets of the
acquiring company, or, together with the securities of any other
investment companies, more than 10% of the total assets of the
acquiring company. Section 12(d)(1)(B) of the Act prohibits a
registered open-end investment company, its principal underwriter, and
any Broker from knowingly selling the investment company's shares to
another investment company if the sale will cause the acquiring company
to own more than 3% of the acquired company's total outstanding voting
stock, or if the sale will cause more than 10% of the acquired
company's total outstanding voting stock to be owned by investment
companies generally.
2. Section 12(d)(1)(J) of the Act provides that the Commission may
exempt any person, security, or transaction, or any class or classes of
persons, securities or transactions, from any provision of section
12(d)(1) if the exemption is consistent with the public interest and
the protection of investors. Applicants seek an exemption under section
12(d)(1)(J) of the Act to permit Investing Funds to acquire shares of
the Funds in excess of the limits in section 12(d)(1)(A), and a Fund,
any principal underwriter for a Fund and any Broker to sell shares of a
Fund to an Investing Fund in excess of the limits in section
12(d)(1)(B) of the Act.
3. Applicants state that the proposed arrangement will not give
rise to the policy concerns underlying sections 12(d)(1)(A) and (B),
which include concerns about undue influence by a fund of funds over
underlying funds, excessive layering of fees, and overly complex fund
structures. Accordingly, applicants believe that the requested
exemption is consistent with the public interest and the protection of
investors.
4. Applicants believe that the proposed arrangement will not result
in the exercise of undue influence by an Investing Fund or an Investing
Fund Affiliate over the Funds.\3\ To limit the control that an
Investing Fund may have over a Fund, applicants propose a condition
prohibiting the Investing Fund's Advisory Group from controlling
(individually or in the aggregate) a Fund within the meaning of section
2(a)(9) of the Act.\4\ The same prohibition would apply to any
Investing Fund's Subadvisory Group.\5\ Applicants propose other
conditions to limit the potential for undue influence over the Funds,
including that no Investing Fund or Investing Fund Affiliate (except to
the extent it is acting in its capacity as an investment adviser to a
Fund) will cause a Fund to purchase a security in an offering of
securities during the existence of any underwriting or selling
syndicate of which a principal underwriter is an Underwriting Affiliate
(``Affiliated Underwriting'').\6\
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\3\ An ``Investing Fund Affiliate'' is the Investing Fund
Adviser, any Investing Fund Subadviser, promoter or principal
underwriter of an Investing Fund, as well as any person controlling,
controlled by, or under common control with any of those entities. A
``Fund Affiliate'' is an investment adviser, sponsor, promoter, or
principal underwriter of a Fund, as well as any person controlling,
controlled by, or under common control with any of those entities.
\4\ An ``Investing Fund's Advisory Group'' is the Investing Fund
Adviser, any person controlling, controlled by or under common
control with the Investing Fund Adviser, and any investment company
or issuer that would be an investment company but for section
3(c)(1) or 3(c)(7) of the Act that is advised or sponsored by the
Investing Fund Adviser or any person controlling, controlled by or
under common control with the Investing Fund Adviser.
\5\ An ``Investing Fund's Subadvisory Group'' is an Investing
Fund Subadviser, any person controlling, controlled by or under
common control with the Investing Fund Subadviser, and any
investment company or issuer that would be an investment company but
for section 3(c)(1) or 3(c)(7) of the Act (or portion of such
investment company or issuer) advised or sponsored by the Investing
Fund Subadviser or any person controlling, controlled by or under
common control with the Investing Fund Subadviser.
\6\ An ``Underwriting Affiliate'' is a principal underwriter in
any underwriting or selling syndicate that is an officer, director,
trustee, advisory board member, Investing Fund Adviser, Investing
Fund Subadviser, or employee of the Investing Fund, or a person of
which any such officer, director, trustee, advisory board member,
Investing Fund Adviser, Investing Fund Subadviser, or employee is an
affiliated person. An Underwriting Affiliate does not include any
person whose relationship to the Fund is covered by section 10(f) of
the Act.
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5. To ensure that the Investing Funds comply with the terms and
conditions of the requested relief, prior to an Investing Fund's
investment in the shares of a Fund in excess of the limit in section
12(d)(1)(A) of the Act, the Investing Fund and the Fund will execute an
agreement stating, without limitation, that their Boards (as defined
below) and their investment advisers understand the terms and
conditions of the order and agree to fulfill their responsibilities
under the order (``Participation Agreement'').\7\ Applicants note that
each of the Funds (other than an ETF whose shares are purchased by an
Investing Fund in the secondary market) will retain its right at all
times to reject any investment by an Investing Fund.\8\
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\7\ The board of directors or trustees, as applicable, of a
specified entity is referred to herein as a ``Board.''
\8\ A Fund, including an ETF, would retain its right to reject
any initial investment by an Investing Fund in excess of the limit
in section 12(d)(1)(A)(i) of the Act by declining to execute the
Participation Agreement with the Investing Fund.
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6. Applicants state that they do not believe that the proposed
arrangement will involve excessive layering of fees. The Board of each
Investing Fund, including a majority of the directors or trustees who
are not ``interested persons'' (within the meaning of section 2(a)(19)
of the Act) (``Independent Trustees''), will find that the advisory
fees charged under investment advisory contract(s) are based on
services provided that will be in addition to, rather than duplicative
of, the services provided under the advisory contract(s) of any Fund in
which the Investing Fund may invest. In addition, the Investing Fund
Adviser will waive fees otherwise payable to it by an Investing Fund in
an amount at least equal to any compensation (including fees received
pursuant to any plan adopted by a Fund under rule 12b-1 under the Act)
received from a Fund by the Investing Fund Adviser, or an affiliated
person of the Investing Fund Adviser, other than any advisory fees paid
to the Investing Fund Adviser or its affiliated person by the Fund, in
connection with the investment by the Investing Fund in the Fund. Any
sales charges and/or service fees charged with respect to shares of an
Investing Fund will not exceed the limits applicable to a fund of funds
as set forth in Rule 2830 of the Conduct Rules of the NASD (``NASD
Conduct Rule 2830'').\9\
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\9\ Any references to NASD Conduct Rule 2830 include any
successor or replacement FINRA rule to NASD Conduct Rule 2830.
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7. Applicants submit that the proposed arrangement will not create
an overly complex fund structure. Applicants note that no Fund will
acquire securities of any investment company or company relying on
section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except in certain circumstances
identified in condition 12 below.
B. Section 17(a)
1. Section 17(a) of the Act generally prohibits sales or purchases
of securities between a registered investment company and any
affiliated person of the company. Section 2(a)(3) of the Act defines an
``affiliated person'' of another person to include (a) any person
directly or indirectly owning, controlling, or holding with power to
vote, 5% or more of the outstanding voting securities of the other
person; (b) any person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held with
power
[[Page 42849]]
to vote by the other person; and (c) any person directly or indirectly
controlling, controlled by, or under common control with the other
person.
2. Applicants state that an Investing Fund and a Fund might be
deemed to be affiliated persons of one another if the Investing Fund
acquires 5% or more of a Fund's outstanding voting securities.
Accordingly, section 17(a) could prevent a Fund from selling shares to
and redeeming shares from an Investing Fund.
3. Section 17(b) of the Act authorizes the Commission to grant an
order permitting a transaction otherwise prohibited by section 17(a) if
it finds that (a) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (b) the proposed transaction is consistent with the policies
of each registered investment company involved; and (c) the proposed
transaction is consistent with the general purposes of the Act. Section
6(c) of the Act permits the Commission to exempt any persons or
transactions from any provision of the Act if such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act.
4. Applicants submit that the proposed transactions satisfy the
standards for relief under sections 17(b) and 6(c) of the Act.\10\
Applicants state that the terms of the transactions are reasonable and
fair and do not involve overreaching. Applicants state that the terms
upon which a Fund will sell its shares to or purchase its shares from
an Investing Fund will be based on the net asset value of the Fund.\11\
Applicants state that the proposed transactions will be consistent with
the policies of each Investing Fund and each Fund and with the general
purposes of the Act.
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\10\ Applicants acknowledge that receipt of any compensation by
(a) an affiliated person of an Investing Fund, or an affiliated
person of such person, for the purchase by an Investing Fund of
shares of a Fund or (b) an affiliated person of a Fund, or an
affiliated person of such person, for the sale by the Fund of its
shares to an Investing Fund may be prohibited by section 17(e)(1) of
the Act. The Participation Agreement also will include this
acknowledgement.
\11\ Applicants note that an Investing Fund generally would
purchase and sell shares of a Fund that operates as an ETF through
secondary market transactions rather than through principal
transactions with the Fund. The requested relief is intended to
cover, however, transactions directly between Funds and Investing
Funds. Applicants are not seeking relief from section 17(a) for, and
the requested relief will not apply to, transactions where an ETF
could be deemed an affiliated person, or an affiliated person of an
affiliated person of an Investing Fund because an investment adviser
to the ETF is also an investment adviser to the Investing Fund.
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Applicants' Conditions
Applicants agree that the relief to permit Investing Funds to
invest in Funds shall be subject to the following conditions:
1. The members of an Investing Fund's Advisory Group will not
control (individually or in the aggregate) a Fund within the meaning of
section 2(a)(9) of the Act. The members of an Investing Fund's
Subadvisory Group will not control (individually or in the aggregate) a
Fund within the meaning of section 2(a)(9) of the Act. If, as a result
of a decrease in the outstanding voting securities of a Fund, the
Investing Fund's Advisory Group or the Investing Fund's Subadvisory
Group, each in the aggregate, becomes a holder of more than 25 percent
of the outstanding voting securities of a Fund, it will vote its shares
of the Fund in the same proportion as the vote of all other holders of
the Fund's shares. This condition does not apply to the Investing
Fund's Subadvisory Group with respect to a Fund for which the Investing
Fund Subadviser or a person controlling, controlled by, or under common
control with the Investing Fund Subadviser acts as the investment
adviser within the meaning of section 2(a)(20)(A) of the Act.
2. No Investing Fund or Investing Fund Affiliate will cause any
existing or potential investment by the Investing Fund in shares of a
Fund to influence the terms of any services or transactions between the
Investing Fund or an Investing Fund Affiliate and the Fund or a Fund
Affiliate.
3. The Board of an Investing Fund, including a majority of the
Independent Trustees, will adopt procedures reasonably designed to
ensure that the Investing Fund Adviser and any Investing Fund
Subadviser(s) are conducting the investment program of the Investing
Fund without taking into account any consideration received by the
Investing Fund or an Investing Fund Affiliate from a Fund or a Fund
Affiliate in connection with any services or transactions.
4. Once an investment by an Investing Fund in the securities of a
Fund exceeds the limit in section 12(d)(1)(A)(i) of the Act, the Board
of the Fund, including a majority of the Independent Trustees, will
determine that any consideration paid by the Fund to the Investing Fund
or an Investing Fund Affiliate in connection with any services or
transactions: (a) Is fair and reasonable in relation to the nature and
quality of the services and benefits received by the Fund; (b) is
within the range of consideration that the Fund would be required to
pay to another unaffiliated entity in connection with the same services
or transactions; and (c) does not involve overreaching on the part of
any person concerned. This condition does not apply with respect to any
services or transactions between a Fund and its investment adviser(s)
or any person controlling, controlled by, or under common control with
such investment adviser(s).
5. No Investing Fund or Investing Fund Affiliate (except to the
extent it is acting in its capacity as an investment adviser to a Fund)
will cause a Fund to purchase a security in any Affiliated
Underwriting.
6. The Board of a Fund, including a majority of the Independent
Trustees, will adopt procedures reasonably designed to monitor any
purchases of securities by the Fund in an Affiliated Underwriting once
an investment by an Investing Fund in the securities of the Fund
exceeds the limit of section 12(d)(1)(A)(i) of the Act, including any
purchases made directly from an Underwriting Affiliate. The Board of
the Fund will review these purchases periodically, but no less
frequently than annually, to determine whether the purchases were
influenced by the investment by the Investing Fund in shares of the
Fund. The Board will consider, among other things, (a) whether the
purchases were consistent with the investment objectives and policies
of the Fund; (b) how the performance of securities purchased in an
Affiliated Underwriting compares to the performance of comparable
securities purchased during a comparable period of time in
underwritings other than Affiliated Underwritings or to a benchmark
such as a comparable market index; and (c) whether the amount of
securities purchased by the Fund in Affiliated Underwritings and the
amount purchased directly from an Underwriting Affiliate have changed
significantly from prior years. The Board will take any appropriate
actions based on its review, including, if appropriate, the institution
of procedures designed to ensure that purchases of securities in
Affiliated Underwritings are in the best interest of shareholders.
7. Each Fund will maintain and preserve permanently in an easily
accessible place a written copy of the procedures described in the
preceding condition, and any modifications to such procedures, and will
maintain and preserve for a period of not less than six years from the
end of the fiscal year in
[[Page 42850]]
which any purchase in an Affiliated Underwriting occurred, the first
two years in an easily accessible place, a written record of each
purchase of securities in Affiliated Underwritings once an investment
by an Investing Fund in the securities of a Fund exceeds the limit in
section 12(d)(1)(A)(i) of the Act, setting forth the: (a) party from
whom the securities were acquired, (b) identity of the underwriting
syndicate's members, (c) terms of the purchase, and (d) information or
materials upon which the Board's determinations were made.
8. Before investing in shares of a Fund in excess of the limits in
section 12(d)(1)(A) of the Act, each Investing Fund and Fund will
execute a Participation Agreement stating, without limitation, that
their Boards and their investment advisers understand the terms and
conditions of the order and agree to fulfill their responsibilities
under the order. At the time of its investment in shares of a Fund in
excess of the limit in section 12(d)(1)(A)(i), an Investing Fund will
notify the Fund of the investment. At such time, the Investing Fund
will also transmit to the Fund a list of the names of each Investing
Fund Affiliate and Underwriting Affiliate. The Investing Fund will
notify the Fund of any changes to the list of the names as soon as
reasonably practicable after a change occurs. The Fund and the
Investing Fund will maintain and preserve a copy of the order, the
Participation Agreement, and the list with any updated information for
the duration of the investment and for a period of not less than six
years thereafter, the first two years in an easily accessible place.
9. Prior to approving any advisory contract under section 15 of the
Act, the Board of each Investing Fund, including a majority of the
Independent Trustees, will find that the advisory fees charged under
such advisory contracts are based on services provided that will be in
addition to, rather than duplicative of, services provided under the
advisory contract(s) of any Fund in which the Investing Fund may
invest. Such finding and the basis upon which the finding was made will
be recorded fully in the minute books of the appropriate Investing
Fund.
10. The Investing Fund Adviser will waive fees otherwise payable to
it by the Investing Fund in an amount at least equal to any
compensation (including fees received pursuant to a plan adopted by a
Fund under Rule 12b-1 under the Act) received from a Fund by the
Investing Fund Adviser, or an affiliated person of the Investing Fund
Adviser, other than any advisory fees paid to the Investing Fund
Adviser or its affiliated person by the Fund, in connection with the
investment by the Investing Fund in the Fund. Any Investing Fund
Subadviser will waive fees otherwise payable to the Investing Fund
Subadviser, directly or indirectly, by the Investing Fund in an amount
at least equal to any compensation received from a Fund by the
Investing Fund Subadviser, or an affiliated person of the Investing
Fund Subadviser, other than any advisory fees paid to the Investing
Fund Subadviser or its affiliated person by the Fund, in connection
with the investment by the Investing Fund in the Fund made at the
direction of the Investing Fund Subadviser. In the event that the
Investing Fund Subadviser waives fees, the benefit of the waiver will
be passed through to the Investing Fund.
11. Any sales charges and/or service fees charged with respect to
shares of an Investing Fund will not exceed the limits applicable to a
fund of funds as set forth in NASD Conduct Rule 2830.
12. No Fund will acquire securities of any investment company or
company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section 12(d)(1)(A) of the Act, except to the
extent permitted by exemptive relief from the Commission permitting the
Fund to purchase shares of other investment companies for short-term
cash management purposes.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin O'Neill,
Deputy Secretary.
[FR Doc. 2014-17270 Filed 7-22-14; 8:45 am]
BILLING CODE 8011-01-P
