AllianceBernstein Cap Fund, Inc., et al.; Notice of Application, 67479-67485 [2014-26816]
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Federal Register / Vol. 79, No. 219 / Thursday, November 13, 2014 / Notices
determine whether the purchases were
influenced by the investment by the
Acquiring Fund in the ETMF. The
Board will consider, among other
things: (i) Whether the purchases were
consistent with the investment
objectives and policies of the ETMF (or,
in the case of an ETMF Feeder, its
Master Fund); (ii) 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 (iii) whether the amount of
securities purchased by the ETMF (or,
in the case of an ETMF Feeder, its
Master 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 assure that
purchases of securities in Affiliated
Underwritings are in the best interest of
shareholders of the ETMF.
7. Each ETMF (or, in the case of an
ETMF Feeder, its Master Fund) will
maintain and preserve permanently in
an easily accessible place a written copy
of the procedures described in the
preceding condition, and any
modifications to such procedures, and
will maintain and preserve for a period
of not less than six years from the end
of the fiscal year in which any purchase
in an Affiliated Underwriting occurred,
the first two years in an easily accessible
place, a written record of each purchase
of securities in Affiliated Underwritings,
once an investment by an Acquiring
Fund in the securities of the ETMF
exceeds the limit of section
12(d)(1)(A)(i) of the Act, setting forth
from whom the securities were
acquired, the identity of the
underwriting syndicate’s members, the
terms of the purchase, and the
information or materials upon which
the determinations of the Board were
made.
8. Before investing in an ETMF in
excess of the limits in section
12(d)(1)(A), an Acquiring Fund and the
ETMF will execute an Acquiring Fund
Agreement stating that their boards of
directors or trustees and their
investment advisers, or Trustee and
Sponsor, as applicable, understand the
terms and conditions of the order, and
agree to fulfill their responsibilities
under the order. At the time of its
investment in Shares of an ETMF in
excess of the limit in section
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12(d)(1)(A)(i), an Acquiring Fund will
notify the ETMF of the investment. At
such time, the Acquiring Fund will also
transmit to the ETMF a list of the names
of each Acquiring Fund Affiliate and
Underwriting Affiliate. The Acquiring
Fund will notify the ETMF of any
changes to the list of the names as soon
as reasonably practicable after a change
occurs. The ETMF and the Acquiring
Fund will maintain and preserve a copy
of the order, the Acquiring Fund
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. The Acquiring Fund Adviser, or
Trustee or Sponsor, as applicable, will
waive fees otherwise payable to it by the
Acquiring Fund in an amount at least
equal to any compensation received
from an ETMF (or, in the case of an
ETMF Feeder, its Master Fund) by the
Acquiring Fund Adviser, or Trustee, or
Sponsor, or an affiliated person of the
Acquiring Fund Adviser, or Trustee, or
Sponsor, other than any advisory fees
paid to the Acquiring Fund Adviser, or
Trustee, or Sponsor, or its affiliated
person by the ETMF (or, in the case of
an ETMF Feeder, its Master Fund), in
connection with the investment by the
Acquiring Fund in the ETMF. Any
Acquiring Fund Subadviser will waive
fees otherwise payable to the Acquiring
Fund Subadviser, directly or indirectly,
by the Acquiring Management Company
in an amount at least equal to any
compensation received from an ETMF
(or, in the case of an ETMF Feeder, its
Master Fund) by the Acquiring Fund
Subadviser, or an affiliated person of the
Acquiring Fund Subadviser, other than
any advisory fees paid to the Acquiring
Fund Subadviser or its affiliated person
by the ETMF (or, in the case of an ETMF
Feeder, its Master Fund), in connection
with any investment by the Acquiring
Management Company in the ETMF
made at the direction of the Acquiring
Fund Subadviser. In the event that the
Acquiring Fund Subadviser waives fees,
the benefit of the waiver will be passed
through to the Acquiring Management
Company.
10. Any sales charges and/or service
fees charged with respect to shares of an
Acquiring Fund will not exceed the
limits applicable to a fund of funds as
set forth in NASD Conduct Rule 2830.
11. No ETMF (or, in the case of an
ETMF Feeder, its Master Fund) relying
on the Section 12(d)(1) relief 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
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67479
extent that the ETMF acquires such
securities in compliance with section
12(d)(1)(E) of the Act or acquires shares
of a Master Fund; or the ETMF (or, in
the case of an ETMF Feeder, its Master
Fund) (a) Receives securities of another
investment company as a dividend or as
a result of a plan of reorganization of a
company (other than a plan devised for
the purpose of evading section 12(d)(1)
of the Act), or (b) acquires securities of
another investment company pursuant
to exemptive relief from the
Commission permitting such ETMF (or,
in the case of an ETMF Feeder, its
Master Fund) to (i) Acquire securities of
one or more investment companies for
short-term cash management purposes
or (ii) engage in interfund borrowing
and lending transactions.
12. Before approving any advisory
contract under section 15 of the Act, the
board of each Acquiring Management
Company, including a majority of the
disinterested directors or trustees, will
find that the advisory fees charged
under such advisory contract are based
on services provided that will be in
addition to, rather than duplicative of,
the services provided under the
advisory contracts of any ETMF (or, in
the case of an ETMF Feeder, its Master
Fund) in which the Acquiring
Management Company may invest.
These findings and their basis will be
recorded fully in the minute books of
the appropriate Acquiring Management
Company.
By the Commission.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–26817 Filed 11–12–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31332; 812–14236]
AllianceBernstein Cap Fund, Inc., et
al.; Notice of Application
November 6, 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 exemptions from sections
12(d)(1)(A), (B), and (C) of the Act,
under sections 6(c) and 17(b) of the Act
for an exemption from section 17(a) of
the Act, and under section 6(c) of the
Act for an exemption from rule 12d1–
2(a) under the Act.
AGENCY:
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Federal Register / Vol. 79, No. 219 / Thursday, November 13, 2014 / Notices
SUMMARY OF THE APPLICATION:
Applicants request an order that would
(a) permit certain registered open-end
management investment companies that
operate as ‘‘funds of funds’’ to acquire
shares of certain registered open-end
management investment companies,
registered closed-end management
investment companies, business
development companies as defined by
section 2(a)(48) of the Act (‘‘business
development companies’’), and
registered unit investment trusts that are
within or outside the same group of
investment companies as the acquiring
investment companies and (b) permit
certain registered open-end management
investment companies relying on rule
12d1–2 under the Act to invest in
certain financial instruments.
APPLICANTS: AllianceBernstein Cap
Fund, Inc. (the ‘‘Company’’),
AllianceBernstein L.P. (the ‘‘Adviser’’),
and AllianceBernstein Investments, Inc.
(the ‘‘Distributor’’).
DATES: Filing Dates: The application was
filed on November 14, 2013, and
amended on June 10, 2014, August 22,
2014, and November 4, 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 December 1, 2014, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing on the desirability of a hearing
on the matter, 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: c/o Emilie D. Wrapp, 1345
Avenue of the Americas, New York, NY
10105.
FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Senior Counsel, at (202)
551–6876, or Mary Kay Frech, Branch
Chief, at (202) 551–6821 (Division of
Investment Management, Chief
Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
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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 Company is an open-end
management investment company
registered under the Act and organized
as a Maryland corporation. The
Company has multiple series, which
pursue distinct investment objectives
and strategies. Applicants request that
the order apply not only to any existing
series of the Company, but also to any
future series of the Company, and any
other existing or future registered openend management investment companies
and any series thereof that are part of
the same group of investment
companies, as defined in section
12(d)(1)(G)(ii) of the Act, as the
Company and are, or may in the future
be, advised by the Adviser or any other
investment adviser controlling,
controlled by, or under common control
with the Adviser (together with the
existing series of the Company, each
series a ‘‘Fund,’’ and collectively, the
‘‘Funds’’).1
2. The Adviser, a Delaware limited
partnership, is registered as an
investment adviser under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’), and serves as the
investment adviser to the existing
Funds.2 The Distributor is a Broker (as
defined below) and serves as the
existing Funds’ principal underwriter
and distributor.
3. Applicants request relief to the
extent necessary to permit: (a) A Fund
(each, a ‘‘Fund of Funds,’’ and
collectively, the ‘‘Funds of Funds’’) to
acquire shares of registered open-end
management investment companies
(each, an ‘‘Unaffiliated Open-End
Investment Company’’), registered
closed-end management investment
companies, business development
companies (each registered closed-end
management investment company and
each business development company,
an ‘‘Unaffiliated Closed-End Investment
Company’’ and, together with the
Unaffiliated Open-End Investment
Companies, the ‘‘Unaffiliated
Investment Companies’’), and registered
unit investment trusts (‘‘UITs’’) (the
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.
2 All references to the term ‘‘Adviser’’ include any
successors in interest to the Adviser. A successor
is limited to an entity that results from a
reorganization into another jurisdiction or a change
in the type of business organization.
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‘‘Unaffiliated Trusts,’’ and together with
the Unaffiliated Investment Companies,
the ‘‘Unaffiliated Funds’’), in each case,
that are not part of the same ‘‘group of
investment companies’’ as the Funds of
Funds; 3 (b) the Unaffiliated Open-End
Investment Companies, their principal
underwriters and any broker or dealer
registered under the Securities
Exchange Act of 1934 (the ‘‘1934 Act’’)
(‘‘Broker’’) to sell shares of such
Unaffiliated Open-End Investment
Companies to the Funds of Funds; (c)
the Funds of Funds to acquire shares of
other registered investment companies,
including open-end management
investment companies and series
thereof, closed-end management
investment companies and UITs, as well
as business development companies, in
the same group of investment
companies as the Funds of Funds
(collectively, the ‘‘Affiliated Funds,’’
and, together with the Unaffiliated
Funds, the ‘‘Underlying Funds’’); 4 and
(d) the Affiliated Funds that are
registered open-end management
investment companies, their principal
underwriters and any Broker to sell
shares of the Affiliated Funds to the
Funds of Funds. 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 certain Underlying Funds to sell
their shares to Funds of Funds and
redeem their shares from Funds of
Funds.
4. Applicants also request an
exemption under section 6(c) from rule
12d1–2 under the Act to permit any
existing or future Fund that relies on
3 For purposes of the request for relief from
sections 12(d)(1)(A), (B), and (C) of the Act, the term
‘‘group of investment companies’’ means any two
or more registered investment companies (including
closed-end investment companies) or business
development companies that hold themselves out to
investors as related companies for purposes of
investment and investor services.
4 Certain of the Underlying Funds may be
registered under the Act as either UITs or open-end
management investment companies and have
obtained exemptions from the Commission
necessary to permit their shares to be listed and
traded on a national securities exchange at
negotiated prices and, accordingly, to operate as
exchange-traded funds (collectively, ‘‘ETFs’’ and
each, an ‘‘ETF’’). In addition, certain of the
Underlying Funds may now or in the future pursue
their investment objectives through a master-feeder
arrangement in reliance on section 12(d)(1)(E) of the
Act. In accordance with condition 12, a Fund of
Funds may not invest in an Underlying Fund that
operates as a feeder fund unless the feeder fund is
part of the same ‘‘group of investment companies’’
as its corresponding master fund or the Fund of
Funds. If a Fund of Funds invests in an Affiliated
Fund that operates as a feeder fund and the
corresponding master fund is not within the same
‘‘group of investment companies’’ as the Fund of
Funds and Affiliated Fund, the master fund would
be an Unaffiliated Fund for purposes of the
application and its conditions.
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section 12(d)(1)(G) of the Act (‘‘Section
12(d)(1)(G) Fund’’) and that otherwise
complies with rule 12d1–2 under the
Act, to also invest, to the extent
consistent with its investment
objective(s), policies, strategies and
limitations, in other financial
instruments that may not be securities
within the meaning of section 2(a)(36) of
the Act (‘‘Other Investments’’).
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Applicants’ Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act, in
relevant part, prohibits a registered
investment company from acquiring
shares of an investment company if the
securities represent more than 3% of the
total outstanding voting stock of the
acquired company, more than 5% of the
total assets of the acquiring company,
or, together with the securities of any
other investment companies, more than
10% of the total assets of the acquiring
company. Section 12(d)(1)(B) of the Act
prohibits a registered open-end
investment company, its principal
underwriter, and any broker or dealer
from 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 voting stock, or if
the sale will cause more than 10% of the
acquired company’s voting stock to be
owned by investment companies
generally. Section 12(d)(1)(C) prohibits
an investment company from acquiring
any security issued by a registered
closed-end investment company if such
acquisition would result in the
acquiring company, any other
investment companies having the same
investment adviser, and companies
controlled by such investment
companies, collectively, owning more
than 10% of the outstanding voting
stock of the registered closed-end
investment company.
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 request an exemption under
section 12(d)(1)(J) of the Act from the
limitations of sections 12(d)(1)(A), (B)
and (C) of the Act to the extent
necessary to permit: (i) The Funds of
Funds to acquire shares of Underlying
Funds in excess of the limits set forth
in section 12(d)(1)(A) and (C) of the Act;
and (ii) the Underlying Funds that are
registered open-end management
investment companies, their principal
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underwriters and any Broker to sell
shares of the Underlying Funds to the
Funds of Funds in excess of the limits
set forth 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), (B), and (C), 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 submit that the
proposed structure will not result in the
exercise of undue influence by a Fund
of Funds or its affiliated persons over
the Underlying Funds. Applicants assert
that the concern about undue influence
does not arise in connection with a
Fund of Funds’ investment in the
Affiliated Funds because they are part of
the same group of investment
companies. To limit the control a Fund
of Funds or Fund of Funds Affiliate 5
may have over an Unaffiliated Fund,
applicants propose a condition
prohibiting the Adviser and any person
controlling, controlled by or under
common control with the Adviser, and
any investment company and any issuer
that would be an investment company
but for section 3(c)(1) or section 3(c)(7)
of the Act advised or sponsored by the
Adviser or any person controlling,
controlled by or under common control
with the Adviser (collectively, the
‘‘Group’’) from controlling (individually
or in the aggregate) an Unaffiliated Fund
within the meaning of section 2(a)(9) of
the Act. The same prohibition would
apply to any other investment adviser
within the meaning of section
2(a)(20)(B) of the Act (‘‘Sub-Adviser’’)
and any person controlling, controlled
by or under common control with the
Sub-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 (or portion
of such investment company or issuer)
advised or sponsored by the SubAdviser or any person controlling,
controlled by or under common control
with the Sub-Adviser (collectively, the
‘‘Sub-Adviser Group’’).
5 A ‘‘Fund of Funds Affiliate’’ is the Adviser, any
Sub-Adviser, promoter or principal underwriter of
a Fund of Funds, as well as any person controlling,
controlled by or under common control with any
of those entities. An ‘‘Unaffiliated Fund Affiliate’’
is an investment adviser(s), sponsor, promoter or
principal underwriter of any Unaffiliated Fund or
any person controlling, controlled by or under
common control with any of those entities.
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5. With respect to closed-end
Underlying Funds, applicants note that
although closed-end funds may not be
unduly influenced by a holder’s right of
redemption, closed-end Underlying
Funds may be unduly influenced by a
holder’s ability to vote a large block of
stock. To address this concern,
applicants submit that, with respect to
a Fund’s investment in an Unaffiliated
Closed-End Investment Company, (i)
each member of the Group or SubAdviser Group that is an investment
company or an issuer that would be an
investment company but for section
3(c)(1) or 3(c)(7) of the Act will vote its
shares of the Unaffiliated Closed-End
Investment Company in the manner
prescribed by section 12(d)(1)(E) of the
Act and (ii) each other member of the
Group or Sub-Adviser Group will vote
its shares of the Unaffiliated Closed-End
Investment Company in the same
proportion as the vote of all other
holders of the same type of such
Unaffiliated Closed-End Investment
Company’s shares. Applicants state that,
in this way, an Unaffiliated Closed-End
Investment Company will be protected
from undue influence by a Fund of
Funds through the voting of the
Unaffiliated Closed-End Investment
Company’s shares.
6. Applicants propose other
conditions to limit the potential for
undue influence over the Unaffiliated
Funds, including that no Fund of Funds
or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an
investment adviser to an Unaffiliated
Investment Company or sponsor to an
Unaffiliated Trust) will cause an
Unaffiliated Fund to purchase a security
in an offering of securities during the
existence of any underwriting or selling
syndicate of which a principal
underwriter is an Underwriting Affiliate
(‘‘Affiliated Underwriting’’).6
7. To further ensure that an
Unaffiliated Investment Company
understands the implications of a Fund
of Funds’ investment under the
requested exemptive relief, prior to its
investment in the shares of an
Unaffiliated Investment Company in
excess of the limit of section
12(d)(1)(A)(i) of the Act, a Fund of
Funds and the Unaffiliated Investment
Company will execute an agreement
6 An ‘‘Underwriting Affiliate’’ is a principal
underwriter in any underwriting or selling
syndicate that is an officer, director, trustee,
advisory board member, investment adviser, subadviser or employee of the Fund of Funds, or a
person of which any such officer, director, trustee,
investment adviser, sub-adviser, member of an
advisory board or employee is an affiliated person.
An Underwriting Affiliate does not include any
person whose relationship to an Unaffiliated Fund
is covered by section 10(f) of the Act.
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stating, without limitation, that each of
their boards of directors or trustees (for
any entity, the ‘‘Board’’) and their
investment advisers understand the
terms and conditions of the order and
agree to fulfill their responsibilities
under the order (the ‘‘Participation
Agreement’’). Applicants note that an
Unaffiliated Investment Company
(including an ETF or an Unaffiliated
Closed-End Investment Company)
would also retain its right to reject any
initial investment by a Fund of Funds
in excess of the limits in section
12(d)(1)(A)(i) of the Act by declining to
execute the Participation Agreement
with the Fund of Funds. In addition, an
Unaffiliated Investment Company (other
than an ETF or closed-end fund whose
shares are purchased by a Fund of
Funds in the secondary market) will
retain its right at all times to reject any
investment by a Fund of Funds. Finally,
subject solely to the giving of notice to
a Fund of Funds and the passage of a
reasonable notice period, an
Unaffiliated Fund (including an ETF or
an Unaffiliated Closed-End Investment
Company) could terminate a
Participation Agreement with the Fund
of Funds.
8. Applicants state that they do not
believe that the proposed arrangement
will result in excessive layering of fees.
The Board of each Fund of Funds,
including a majority of the directors
who are not ‘‘interested persons’’ within
the meaning of section 2(a)(19) of the
Act (the ‘‘Independent Directors’’), will
find that the management or advisory
fees charged under a Fund of Funds’
advisory contract are based on services
provided that are in addition to, rather
than duplicative of, services provided
under the advisory contract(s) of any
Underlying Fund in which the Fund of
Funds may invest. In addition, the
Adviser will waive fees otherwise
payable to it by a Fund of Funds in an
amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Unaffiliated Investment Company under
rule 12b-1 under the Act) received from
an Unaffiliated Fund by the Adviser, or
an affiliated person of the Adviser, other
than any advisory fees paid to the
Adviser or an affiliated person of the
Adviser by the Unaffiliated Investment
Company, in connection with the
investment by the Fund of Funds in the
Unaffiliated Fund.
9. Applicants further state that any
sales charges and/or service fees
charged with respect to shares of a Fund
of Funds will not exceed the limits
applicable to funds of funds set forth in
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rule 2830 of the Conduct Rules of the
NASD (‘‘NASD Conduct Rule 2830’’).7
10. Applicants submit that the
proposed arrangement will not create an
overly complex fund structure.
Applicants note that no Underlying
Fund (or, if applicable, its respective
master fund) will acquire securities of
any other 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, or
affiliated person of an affiliated person,
of the company. Section 2(a)(3) of the
Act defines an ‘‘affiliated person’’ of
another person to include (a) any person
directly or indirectly owning,
controlling, or holding with power to
vote, 5% or more of the outstanding
voting securities of the other person; (b)
any person 5% or more of whose
outstanding voting securities are
directly or indirectly owned, controlled,
or held with power to vote by the other
person; and (c) any person directly or
indirectly controlling, controlled by, or
under common control with the other
person.
2. Applicants state that the Funds of
Funds and the Affiliated Funds may be
deemed to be under the common control
of the Adviser and, therefore, affiliated
persons of one another. Applicants also
state that the Funds of Funds and the
Underlying Funds organized as openend investment companies
(‘‘Underlying Open-End Funds’’) or
UITs (‘‘Underlying UITs’’) may also be
deemed to be affiliated persons of one
another if a Fund of Funds owns 5% or
more of the outstanding voting
securities of one or more of such
Underlying Open-End Funds and/or
Underlying UITs. Applicants state that
the sale of shares by the Underlying
Open-End Funds or Underlying UITs to
the Funds of Funds and the purchase of
those shares from the Funds of Funds by
the Underlying Open-End Funds and/or
Underlying UITs (through redemptions)
could be deemed to violate section
17(a).8
7 Any references to NASD Conduct Rule 2830
include any successor or replacement FINRA rule
to NASD Conduct Rule 2830.
8 Applicants acknowledge that receipt of any
compensation by (a) an affiliated person of a Fund
of Funds, or an affiliated person of such person, for
the purchase by the Fund of Funds of shares of an
Underlying Fund or (b) an affiliated person of an
Underlying Fund, or an affiliated person of such
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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 (i) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (ii) the
proposed transaction is consistent with
the policies of each registered
investment company concerned; and
(iii) the proposed transaction is
consistent with the general purposes of
the Act. Section 6(c) of the Act permits
the Commission to exempt any person
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. Applicants state that
the terms of the transactions are
reasonable and fair and do not involve
overreaching. Applicants state that the
terms upon which an Underlying OpenEnd Fund or Underlying UIT will sell
its shares to or purchase its shares from
a Fund of Funds will be based on the
net asset value of each Underlying
Open-End Fund or Underlying UIT.9
Applicants also state that the proposed
transactions will be consistent with the
policies of each Fund of Funds,
Underlying Open-End Fund, and
person, for the sale by the Underlying Fund of its
shares to a Fund of Funds may be prohibited by
section 17(e)(1) of the Act. The Participation
Agreement also will include this acknowledgement.
9 Applicants note that a Fund of Funds generally
would purchase and sell shares of an Underlying
Fund that operates as an ETF through secondary
market transactions rather than through principal
transactions with the Underlying Fund. Applicants
nevertheless request relief from sections 17(a)(1)
and (2) to permit each Fund of Funds that is an
affiliated person, or an affiliated person of an
affiliated person, as defined in section 2(a)(3) of the
Act, of an ETF to purchase or redeem shares from
the ETF. 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 a Fund of Funds because
an investment adviser to the ETF or an entity
controlling, controlled by or under common control
with the investment adviser to the ETF is also an
investment adviser to the Fund of Funds.
Applicants further note that a Fund of Funds will
purchase and sell shares of an Underlying Fund
that is a closed-end fund (including business
development companies) through secondary market
transactions at market prices rather than through
principal transactions with the closed-end fund (or
business development company). Accordingly,
applicants are not requesting section 17(a) relief
with respect to principal transactions with closedend funds (including business development
companies).
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Underlying UIT and with the general
purposes of the Act.
C. Other Investments by Section
12(d)(1)(G) Funds
1. Section 12(d)(1)(G) of the Act
provides that section 12(d)(1) will not
apply to securities of an acquired
company purchased by an acquiring
company if: (i) The acquiring company
and acquired company are part of the
same ‘‘group of investment companies,’’
as defined in section 12(d)(1)(G)(ii) of
the Act; (ii) the acquiring company
holds only securities of acquired
companies that are part of the same
‘‘group of investment companies,’’ as
defined in section 12(d)(1)(G)(ii) of the
Act, government securities, and shortterm paper; (iii) the aggregate sales loads
and distribution-related fees of the
acquiring company and the acquired
company are not excessive under rules
adopted pursuant to section 22(b) or
section 22(c) of the Act by a securities
association registered under section 15A
of the 1934 Act or by the Commission;
and (iv) the acquired company has a
policy that prohibits it from acquiring
securities of registered open-end
management investment companies or
registered UITs in reliance on section
12(d)(1)(F) or (G) of the Act.
2. Rule 12d1–2 under the Act permits
a registered open-end investment
company or a registered UIT that relies
on section 12(d)(1)(G) of the Act to
acquire, in addition to securities issued
by another registered investment
company in the same group of
investment companies, government
securities, and short-term paper: (1)
Securities issued by an investment
company that is not in the same group
of investment companies, when the
acquisition is in reliance on section
12(d)(1)(A) or 12(d)(1)(F) of the Act; (2)
securities (other than securities issued
by an investment company); and (3)
securities issued by a money market
fund, when the investment is in reliance
on rule 12d1–1 under the Act. For the
purposes of rule 12d1–2, ‘‘securities’’
means any security as defined in section
2(a)(36) of the Act.
3. Applicants state that the proposed
arrangement would comply with rule
12d1–2 under the Act, but for the fact
that the Section 12(d)(1)(G) Funds may
invest a portion of their assets in Other
Investments. Applicants request an
order under section 6(c) of the Act for
an exemption from rule 12d1–2(a) to
allow the Section 12(d)(1)(G) Funds to
invest in Other Investments. Applicants
assert that permitting a Section
12(d)(1)(G) Fund to invest in Other
Investments as described in the
application would not raise any of the
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concerns that section 12(d)(1) of the Act
was intended to address.
4. Consistent with its fiduciary
obligations under the Act, a Section
12(d)(1)(G) Fund’s Board will review the
advisory fees charged by the Section
12(d)(1)(G) Fund’s investment adviser(s)
to ensure that the fees are based on
services provided that are in addition to,
rather than duplicative of, services
provided pursuant to the advisory
agreement of any investment company
in which the Section 12(d)(1)(G) Fund
may invest.
Applicants’ Conditions
A. Investments by Funds of Funds in
Underlying Funds
Applicants agree that the order
granting the requested relief to permit
Funds of Funds to invest in Underlying
Funds shall be subject to the following
conditions:
1. The members of the Group will not
control (individually or in the aggregate)
an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act.
The members of a Sub-Adviser Group
will not control (individually or in the
aggregate) an Unaffiliated Fund within
the meaning of section 2(a)(9) of the Act.
With respect to a Fund’s investment in
an Unaffiliated Closed-End Investment
Company, (i) each member of the Group
or Sub-Adviser Group that is an
investment company or an issuer that
would be an investment company but
for section 3(c)(1) or 3(c)(7) of the Act
will vote its shares of the Unaffiliated
Closed-End Investment Company in the
manner prescribed by section
12(d)(1)(E) of the Act and (ii) each other
member of the Group or Sub-Adviser
Group will vote its shares of the
Unaffiliated Closed-End Investment
Company in the same proportion as the
vote of all other holders of the same
type of such Unaffiliated Closed-End
Investment Company’s shares. If, as a
result of a decrease in the outstanding
voting securities of any other
Unaffiliated Fund, the Group or a SubAdviser Group, each in the aggregate,
becomes a holder of more than 25% of
the outstanding voting securities of such
Unaffiliated Fund, then the Group or the
Sub-Adviser Group will vote its shares
of the Unaffiliated Fund in the same
proportion as the vote of all other
holders of the Unaffiliated Fund’s
shares. This condition will not apply to
a Sub-Adviser Group with respect to an
Unaffiliated Fund for which the SubAdviser or a person controlling,
controlled by or under common control
with the Sub-Adviser acts as the
investment adviser within the meaning
of section 2(a)(20)(A) of the Act (in the
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67483
case of an Unaffiliated Investment
Company) or as the sponsor (in the case
of an Unaffiliated Trust).
2. No Fund of Funds or Fund of
Funds Affiliate will cause any existing
or potential investment by the Fund of
Funds in an Unaffiliated Fund to
influence the terms of any services or
transactions between the Fund of Funds
or a Fund of Funds Affiliate and the
Unaffiliated Fund or an Unaffiliated
Fund Affiliate.
3. The Board of each Fund of Funds,
including a majority of the Independent
Directors, will adopt procedures
reasonably designed to ensure that its
Adviser and any Sub-Adviser to the
Fund of Funds are conducting the
investment program of the Fund of
Funds without taking into account any
consideration received by the Fund of
Funds or Fund of Funds Affiliate from
an Unaffiliated Investment Company or
Unaffiliated Trust or any Unaffiliated
Fund Affiliate of such Unaffiliated
Investment Company or Unaffiliated
Trust in connection with any services or
transactions.
4. Once an investment by a Fund of
Funds in the securities of an
Unaffiliated Investment Company
exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of
the Unaffiliated Investment Company,
including a majority of the Independent
Directors, will determine that any
consideration paid by the Unaffiliated
Investment Company to a Fund of
Funds or a Fund of Funds Affiliate in
connection with any services or
transactions: (a) Is fair and reasonable in
relation to the nature and quality of the
services and benefits received by the
Unaffiliated Investment Company; (b) is
within the range of consideration that
the Unaffiliated Investment Company
would be required to pay to another
unaffiliated entity in connection with
the same services or transactions; and
(c) does not involve overreaching on the
part of any person concerned. This
condition does not apply with respect to
any services or transactions between an
Unaffiliated Investment Company and
its investment adviser(s), or any person
controlling, controlled by, or under
common control with such investment
adviser(s).
5. No Fund of Funds or Fund of
Funds Affiliate (except to the extent it
is acting in its capacity as an investment
adviser to an Unaffiliated Investment
Company or sponsor to an Unaffiliated
Trust) will cause an Unaffiliated Fund
to purchase a security in any Affiliated
Underwriting.
6. The Board of an Unaffiliated
Investment Company, including a
majority of the Independent Directors,
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will adopt procedures reasonably
designed to monitor any purchases of
securities by the Unaffiliated Investment
Company in an Affiliated Underwriting
once an investment by a Fund of Funds
in the securities of the Unaffiliated
Investment Company exceeds the limit
of section 12(d)(1)(A)(i) of the Act,
including any purchases made directly
from an Underwriting Affiliate. The
Board of the Unaffiliated Investment
Company will review these purchases
periodically, but no less frequently than
annually, to determine whether the
purchases were influenced by the
investment by the Fund of Funds in the
Unaffiliated Investment Company. The
Board of the Unaffiliated Investment
Company will consider, among other
things: (a) Whether the purchases were
consistent with the investment
objectives and policies of the
Unaffiliated Investment Company; (b)
how the performance of securities
purchased in an Affiliated Underwriting
compares to the performance of
comparable securities purchased during
a comparable period of time in
underwritings other than Affiliated
Underwritings or to a benchmark such
as a comparable market index; and (c)
whether the amount of securities
purchased by the Unaffiliated
Investment Company in Affiliated
Underwritings and the amount
purchased directly from an
Underwriting Affiliate have changed
significantly from prior years. The
Board of the Unaffiliated Investment
Company will take any appropriate
actions based on its review, including,
if appropriate, the institution of
procedures designed to assure that
purchases of securities in Affiliated
Underwritings are in the best interests
of shareholders.
7. Each Unaffiliated Investment
Company will maintain and preserve
permanently, in an easily accessible
place, a written copy of the procedures
described in the preceding condition,
and any modifications to such
procedures, and will maintain and
preserve for a period of not less than six
years from the end of the fiscal year in
which any purchase in an Affiliated
Underwriting occurred, the first two
years in an easily accessible place, a
written record of each purchase of
securities in an Affiliated Underwriting
once an investment by a Fund of Funds
in the securities of an Unaffiliated
Investment Company exceeds the limit
of section 12(d)(1)(A)(i) of the Act,
setting forth (1) the party from whom
the securities were acquired, (2) the
identity of the underwriting syndicate’s
members, (3) the terms of the purchase,
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and (4) the information or materials
upon which the determinations of the
Board of the Unaffiliated Investment
Company were made.
8. Prior to its investment in shares of
an Unaffiliated Investment Company in
excess of the limit set forth in section
12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Investment
Company will execute a Participation
Agreement stating, without limitation,
that their Boards and their investment
advisers understand the terms and
conditions of the order and agree to
fulfill their responsibilities under the
order. At the time of its investment in
shares of an Unaffiliated Investment
Company in excess of the limit set forth
in section 12(d)(1)(A)(i), a Fund of
Funds will notify the Unaffiliated
Investment Company of the investment.
At such time, the Fund of Funds will
also transmit to the Unaffiliated
Investment Company a list of the names
of each Fund of Funds Affiliate and
Underwriting Affiliate. The Fund of
Funds will notify the Unaffiliated
Investment Company of any changes to
the list as soon as reasonably practicable
after a change occurs. The Unaffiliated
Investment Company and the Fund of
Funds will maintain and preserve a
copy of the order, the Participation
Agreement, and the list with any
updated information for the duration of
the investment and for a period of not
less than six years thereafter, the first
two years in an easily accessible place.
9. Before approving any advisory
contract under section 15 of the Act, the
Board of each Fund of Funds, including
a majority of the Independent Directors,
shall find that the advisory fees charged
under the advisory contract are based on
services provided that are in addition to,
rather than duplicative of, services
provided under the advisory contract(s)
of any Underlying Fund in which the
Fund of Funds may invest. Such
finding, and the basis upon which the
finding was made, will be recorded fully
in the minute books of the appropriate
Fund of Funds.
10. The Adviser will waive fees
otherwise payable to it by a Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Unaffiliated Investment Company
pursuant to rule 12b–1 under the Act)
received from an Unaffiliated Fund by
the Adviser, or an affiliated person of
the Adviser, other than any advisory
fees paid to the Adviser or its affiliated
person by the Unaffiliated Investment
Company, in connection with the
investment by the Fund of Funds in the
Unaffiliated Fund. Any Sub-Adviser
will waive fees otherwise payable to the
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Sub-Adviser, directly or indirectly, by
the Fund of Funds in an amount at least
equal to any compensation received by
the Sub-Adviser, or an affiliated person
of the Sub-Adviser, from an Unaffiliated
Fund, other than any advisory fees paid
to the Sub-Adviser or its affiliated
person by the Unaffiliated Investment
Company, in connection with the
investment by the Fund of Funds in the
Unaffiliated Fund made at the direction
of the Sub-Adviser. In the event that the
Sub-Adviser waives fees, the benefit of
the waiver will be passed through to the
Fund of Funds.
11. Any sales charges and/or service
fees charged with respect to shares of a
Fund of Funds will not exceed the
limits applicable to funds of funds set
forth in NASD Conduct Rule 2830.
12. No Underlying Fund will acquire
securities of any other 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 that such Underlying Fund: (a)
Acquires such securities in compliance
with section 12(d)(1)(E) of the Act and
either is an Affiliated Fund or is in the
same ‘‘group of investment companies’’
as its corresponding master fund; (b)
receives securities of another
investment company as a dividend or as
a result of a plan of reorganization of a
company (other than a plan devised for
the purpose of evading section 12(d)(1)
of the Act); or (c) acquires (or is deemed
to have acquired) securities of another
investment company pursuant to
exemptive relief from the Commission
permitting such Underlying Fund to: (i)
Acquire securities of one or more
investment companies for short-term
cash management purposes or (ii)
engage in inter-fund borrowing and
lending transactions.
B. Other Investments by Section
12(d)(1)(G) Funds
Applicants agree that the order
granting the requested relief to permit
Section 12(d)(1)(G) Funds to invest in
Other Investments shall be subject to the
following condition:
1. Applicants will comply with all
provisions of rule 12d1–2 under the Act,
except for paragraph (a)(2) to the extent
that it restricts any Section 12(d)(1)(G)
Fund from investing in Other
Investments as described in the
application.
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For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin M. O’Neill,
Deputy Secretary.
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2014–26816 Filed 11–12–14; 8:45 am]
BILLING CODE 8011–01–P
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73544; File No. SR–
NYSEMKT–2014–14]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing of Proposed
Rule Change Amending Rule 967NY To
Enhance the Functionality of the Trade
Collar Protection Mechanism
November 6, 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 October
24, 2014, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) 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 selfregulatory 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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend
Rule 967NY to enhance the
functionality of the trade collar
protection mechanism. 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.
tkelley on DSK3SPTVN1PROD with NOTICES
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,
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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The Exchange is proposing to amend
Rule 967NY(a) to clarify and conform
with the functionality of the trade collar
protection mechanism in use on the
Exchange. The Exchange’s amendment
is to specify (a) how marketable Limit
Orders behave when received in a wide
market, (b) how subsequently-arriving
Market Orders effect collared orders,
and (c) the values associated with a
Trading Collar. The Exchange also seeks
to make non-substantive wording
changes to Rule 967NY(a).
Background
Pursuant to Rule 967NY(a), the
Exchange applies a ‘‘Trade Collar
Protection’’ mechanism that prevents
the immediate execution of certain
orders at prices outside of a specified
parameter (referred to as a ‘‘Trading
Collar’’).4 Pursuant to Rule 967NY(a)(3),
the Trade Collar Protection mechanism
is not available for quotes or for orders
with execution conditions IOC, AON,
FOK and NOW.
Trading Collars are determined by the
Exchange on a class-by-class basis and,
unless announced otherwise via Trader
Update, are the same value as the bidask differential guidelines established
pursuant to Rule 925NY(b)(4), as set
forth in Rule 967NY(a)(2). For example,
Rule 925NY(b)(4) sets the bid-ask
differential for an option priced less
than $2.00 at $0.25. For any option that
has a bid less than $2.00, the Trading
Collar will be $0.25. Accordingly, if the
National Best Bid and Offer (‘‘NBBO’’)
for XYZ is $0.75 bid and $1.75 offer,
certain orders the Exchange receives
will be subject to a $0.25 Trading
Collar.5 If necessary to preserve a fair
and orderly market, the Exchange may,
with the approval of two Trading
Officials,6 widen or narrow the Trading
Collar for one or more option series.
4 The Exchange adopted Rule 967NY governing
Trade Collar Protection in 2013. See, Exchange Rule
967NY (Securities Exchange Act Release No. 70037)
(July 25, 2013), 78 FR 46399 (July 31, 2013)
(NYSEMKT–2013–62).
5 The bid-ask differential changes as the price
increases. Rule 925NY(b)(4) sets the bid-ask
differential at no more than $0.40 where the bid is
$2.00 or more but does not exceed $5.00.
Accordingly, if the NBBO for XYZ is $3.00 bid and
$3.50 offer, certain orders the Exchange receives
will be subject to a $0.40 Trading Collar Protection.
6 A Trading Official, as defined by Rule
900.2NY(82) is an officer or employee of the
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67485
Trade Collar Protection applies to two
scenarios. First, pursuant to Rule
967NY(a)(1)(i), Trade Collar Protection
prevents executions of certain orders
when the difference between the
National Best Offer (‘‘NBO’’) and the
National Best Bid (‘‘NBB’’) is greater
than one Trading Collar. Second,
pursuant to Rule 967NY(a)(1)(ii), Trade
Collar Protection prevents the execution
of the balance of an eligible buy order
if it were to execute at a price that is the
NBO plus a Trading Collar (or a price
that is the NBB minus a Trading Collar
for an eligible sell order).
Pursuant to Rule 967NY(a)(1)(i), if the
difference between the NBO and the
NBB is greater than one Trading Collar,
the Exchange will prevent execution or
routing of certain orders. Instead,
pursuant to Rule 967NY(a)(4)(A), the
Exchange will display the order at a
price equal to the NBO minus one
Trading Collar for sell orders or the NBB
plus one Trading Collar for buy orders
(the ‘‘collared order’’). The Exchange
will then attempt to execute or route the
collared order to buy (sell) against any
contra interest priced within one
Trading Collar above (below) the
displayed price of the collared order.7
As set forth in Rule 967NY(a)(4)(C)(iii),
should market conditions prevent the
order from trading or recalculating for a
period of one second, the order will
improve its displayed price by an
amount equal to an additional Trading
Collar.
The collared order will re-price before
the expiration of one second as a result
of certain changes in the market.
Pursuant to Rule 967NY(a)(4)(C)(i), an
update to the NBBO (based on another
market center or a quote or order on the
Exchange) that improves the same side
of the market as the collared order will
cause the collared order to be
redisplayed at the same price as the
updated NBBO. In accordance with Rule
967NY(a)(4)(C)(ii), a Limit Order (which
is not an IOC Order, AON Order, FOK
Order or NOW Order) on the same side
of the market priced better than one
Trading Collar from the collared order
will also become subject to Trade Collar
Protection and will cause the collared
order to improve by one Trading Collar
(which will redisplay at the new price
and additional size of the new Limit
Order).8
Exchange. Trading Officials are not affiliated with
ATP Holders.
7 See, Rule 967NY(a)(4)(B).
8 Rule 967NY(a)(4)(C)(iv) states that a new Market
Order on the same side as a collared order will not
cause the order subject to Trade Collar Protection
to be recalculated (but will redisplay with the
additional size of the new Market Order).
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]]>Agencies
[Federal Register Volume 79, Number 219 (Thursday, November 13, 2014)]
[Notices]
[Pages 67479-67485]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-26816]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31332; 812-14236]
AllianceBernstein Cap Fund, Inc., et al.; Notice of Application
November 6, 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 exemptions from
sections 12(d)(1)(A), (B), and (C) of the Act, under sections 6(c) and
17(b) of the Act for an exemption from section 17(a) of the Act, and
under section 6(c) of the Act for an exemption from rule 12d1-2(a)
under the Act.
-----------------------------------------------------------------------
[[Page 67480]]
Summary of the Application: Applicants request an order that would (a)
permit certain registered open-end management investment companies that
operate as ``funds of funds'' to acquire shares of certain registered
open-end management investment companies, registered closed-end
management investment companies, business development companies as
defined by section 2(a)(48) of the Act (``business development
companies''), and registered unit investment trusts that are within or
outside the same group of investment companies as the acquiring
investment companies and (b) permit certain registered open-end
management investment companies relying on rule 12d1-2 under the Act to
invest in certain financial instruments.
Applicants: AllianceBernstein Cap Fund, Inc. (the ``Company''),
AllianceBernstein L.P. (the ``Adviser''), and AllianceBernstein
Investments, Inc. (the ``Distributor'').
DATES: Filing Dates: The application was filed on November 14, 2013,
and amended on June 10, 2014, August 22, 2014, and November 4, 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 December 1, 2014, and should be accompanied by proof of service
on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing on the desirability of a hearing on the matter, 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: c/o Emilie D. Wrapp,
1345 Avenue of the Americas, New York, NY 10105.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 551-6876, or Mary Kay Frech, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the ``Company'' name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicants' Representations
1. The Company is an open-end management investment company
registered under the Act and organized as a Maryland corporation. The
Company has multiple series, which pursue distinct investment
objectives and strategies. Applicants request that the order apply not
only to any existing series of the Company, but also to any future
series of the Company, and any other existing or future registered
open-end management investment companies and any series thereof that
are part of the same group of investment companies, as defined in
section 12(d)(1)(G)(ii) of the Act, as the Company and are, or may in
the future be, advised by the Adviser or any other investment adviser
controlling, controlled by, or under common control with the Adviser
(together with the existing series of the Company, each series a
``Fund,'' and collectively, the ``Funds'').\1\
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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.
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2. The Adviser, a Delaware limited partnership, is registered as an
investment adviser under the Investment Advisers Act of 1940 (the
``Advisers Act''), and serves as the investment adviser to the existing
Funds.\2\ The Distributor is a Broker (as defined below) and serves as
the existing Funds' principal underwriter and distributor.
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\2\ All references to the term ``Adviser'' include any
successors in interest to the Adviser. A successor is limited to an
entity that results from a reorganization into another jurisdiction
or a change in the type of business organization.
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3. Applicants request relief to the extent necessary to permit: (a)
A Fund (each, a ``Fund of Funds,'' and collectively, the ``Funds of
Funds'') to acquire shares of registered open-end management investment
companies (each, an ``Unaffiliated Open-End Investment Company''),
registered closed-end management investment companies, business
development companies (each registered closed-end management investment
company and each business development company, an ``Unaffiliated
Closed-End Investment Company'' and, together with the Unaffiliated
Open-End Investment Companies, the ``Unaffiliated Investment
Companies''), and registered unit investment trusts (``UITs'') (the
``Unaffiliated Trusts,'' and together with the Unaffiliated Investment
Companies, the ``Unaffiliated Funds''), in each case, that are not part
of the same ``group of investment companies'' as the Funds of Funds;
\3\ (b) the Unaffiliated Open-End Investment Companies, their principal
underwriters and any broker or dealer registered under the Securities
Exchange Act of 1934 (the ``1934 Act'') (``Broker'') to sell shares of
such Unaffiliated Open-End Investment Companies to the Funds of Funds;
(c) the Funds of Funds to acquire shares of other registered investment
companies, including open-end management investment companies and
series thereof, closed-end management investment companies and UITs, as
well as business development companies, in the same group of investment
companies as the Funds of Funds (collectively, the ``Affiliated
Funds,'' and, together with the Unaffiliated Funds, the ``Underlying
Funds''); \4\ and (d) the Affiliated Funds that are registered open-end
management investment companies, their principal underwriters and any
Broker to sell shares of the Affiliated Funds to the Funds of Funds.
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 certain Underlying Funds to sell their shares to Funds of Funds
and redeem their shares from Funds of Funds.
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\3\ For purposes of the request for relief from sections
12(d)(1)(A), (B), and (C) of the Act, the term ``group of investment
companies'' means any two or more registered investment companies
(including closed-end investment companies) or business development
companies that hold themselves out to investors as related companies
for purposes of investment and investor services.
\4\ Certain of the Underlying Funds may be registered under the
Act as either UITs or open-end management investment companies and
have obtained exemptions from the Commission necessary to permit
their shares to be listed and traded on a national securities
exchange at negotiated prices and, accordingly, to operate as
exchange-traded funds (collectively, ``ETFs'' and each, an ``ETF'').
In addition, certain of the Underlying Funds may now or in the
future pursue their investment objectives through a master-feeder
arrangement in reliance on section 12(d)(1)(E) of the Act. In
accordance with condition 12, a Fund of Funds may not invest in an
Underlying Fund that operates as a feeder fund unless the feeder
fund is part of the same ``group of investment companies'' as its
corresponding master fund or the Fund of Funds. If a Fund of Funds
invests in an Affiliated Fund that operates as a feeder fund and the
corresponding master fund is not within the same ``group of
investment companies'' as the Fund of Funds and Affiliated Fund, the
master fund would be an Unaffiliated Fund for purposes of the
application and its conditions.
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4. Applicants also request an exemption under section 6(c) from
rule 12d1-2 under the Act to permit any existing or future Fund that
relies on
[[Page 67481]]
section 12(d)(1)(G) of the Act (``Section 12(d)(1)(G) Fund'') and that
otherwise complies with rule 12d1-2 under the Act, to also invest, to
the extent consistent with its investment objective(s), policies,
strategies and limitations, in other financial instruments that may not
be securities within the meaning of section 2(a)(36) of the Act
(``Other Investments'').
Applicants' Legal Analysis
A. Section 12(d)(1)
1. Section 12(d)(1)(A) of the Act, in relevant part, prohibits a
registered investment company from acquiring shares of an investment
company if the securities represent more than 3% of the total
outstanding voting stock of the acquired company, more than 5% of the
total assets of the acquiring company, or, together with the securities
of any other investment companies, more than 10% of the total assets of
the acquiring company. Section 12(d)(1)(B) of the Act prohibits a
registered open-end investment company, its principal underwriter, and
any broker or dealer from 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 voting stock, or if the
sale will cause more than 10% of the acquired company's voting stock to
be owned by investment companies generally. Section 12(d)(1)(C)
prohibits an investment company from acquiring any security issued by a
registered closed-end investment company if such acquisition would
result in the acquiring company, any other investment companies having
the same investment adviser, and companies controlled by such
investment companies, collectively, owning more than 10% of the
outstanding voting stock of the registered closed-end investment
company.
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 request an exemption under
section 12(d)(1)(J) of the Act from the limitations of sections
12(d)(1)(A), (B) and (C) of the Act to the extent necessary to permit:
(i) The Funds of Funds to acquire shares of Underlying Funds in excess
of the limits set forth in section 12(d)(1)(A) and (C) of the Act; and
(ii) the Underlying Funds that are registered open-end management
investment companies, their principal underwriters and any Broker to
sell shares of the Underlying Funds to the Funds of Funds in excess of
the limits set forth 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), (B), and
(C), 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 submit that the proposed structure will not result in
the exercise of undue influence by a Fund of Funds or its affiliated
persons over the Underlying Funds. Applicants assert that the concern
about undue influence does not arise in connection with a Fund of
Funds' investment in the Affiliated Funds because they are part of the
same group of investment companies. To limit the control a Fund of
Funds or Fund of Funds Affiliate \5\ may have over an Unaffiliated
Fund, applicants propose a condition prohibiting the Adviser and any
person controlling, controlled by or under common control with the
Adviser, and any investment company and any issuer that would be an
investment company but for section 3(c)(1) or section 3(c)(7) of the
Act advised or sponsored by the Adviser or any person controlling,
controlled by or under common control with the Adviser (collectively,
the ``Group'') from controlling (individually or in the aggregate) an
Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. The
same prohibition would apply to any other investment adviser within the
meaning of section 2(a)(20)(B) of the Act (``Sub-Adviser'') and any
person controlling, controlled by or under common control with the Sub-
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 (or
portion of such investment company or issuer) advised or sponsored by
the Sub-Adviser or any person controlling, controlled by or under
common control with the Sub-Adviser (collectively, the ``Sub-Adviser
Group'').
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\5\ A ``Fund of Funds Affiliate'' is the Adviser, any Sub-
Adviser, promoter or principal underwriter of a Fund of Funds, as
well as any person controlling, controlled by or under common
control with any of those entities. An ``Unaffiliated Fund
Affiliate'' is an investment adviser(s), sponsor, promoter or
principal underwriter of any Unaffiliated Fund or any person
controlling, controlled by or under common control with any of those
entities.
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5. With respect to closed-end Underlying Funds, applicants note
that although closed-end funds may not be unduly influenced by a
holder's right of redemption, closed-end Underlying Funds may be unduly
influenced by a holder's ability to vote a large block of stock. To
address this concern, applicants submit that, with respect to a Fund's
investment in an Unaffiliated Closed-End Investment Company, (i) each
member of the Group or Sub-Adviser Group that is an investment company
or an issuer that would be an investment company but for section
3(c)(1) or 3(c)(7) of the Act will vote its shares of the Unaffiliated
Closed-End Investment Company in the manner prescribed by section
12(d)(1)(E) of the Act and (ii) each other member of the Group or Sub-
Adviser Group will vote its shares of the Unaffiliated Closed-End
Investment Company in the same proportion as the vote of all other
holders of the same type of such Unaffiliated Closed-End Investment
Company's shares. Applicants state that, in this way, an Unaffiliated
Closed-End Investment Company will be protected from undue influence by
a Fund of Funds through the voting of the Unaffiliated Closed-End
Investment Company's shares.
6. Applicants propose other conditions to limit the potential for
undue influence over the Unaffiliated Funds, including that no Fund of
Funds or Fund of Funds Affiliate (except to the extent it is acting in
its capacity as an investment adviser to an Unaffiliated Investment
Company or sponsor to an Unaffiliated Trust) will cause an Unaffiliated
Fund to purchase a security in an offering of securities during the
existence of any underwriting or selling syndicate of which a principal
underwriter is an Underwriting Affiliate (``Affiliated
Underwriting'').\6\
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\6\ An ``Underwriting Affiliate'' is a principal underwriter in
any underwriting or selling syndicate that is an officer, director,
trustee, advisory board member, investment adviser, sub-adviser or
employee of the Fund of Funds, or a person of which any such
officer, director, trustee, investment adviser, sub-adviser, member
of an advisory board or employee is an affiliated person. An
Underwriting Affiliate does not include any person whose
relationship to an Unaffiliated Fund is covered by section 10(f) of
the Act.
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7. To further ensure that an Unaffiliated Investment Company
understands the implications of a Fund of Funds' investment under the
requested exemptive relief, prior to its investment in the shares of an
Unaffiliated Investment Company in excess of the limit of section
12(d)(1)(A)(i) of the Act, a Fund of Funds and the Unaffiliated
Investment Company will execute an agreement
[[Page 67482]]
stating, without limitation, that each of their boards of directors or
trustees (for any entity, the ``Board'') and their investment advisers
understand the terms and conditions of the order and agree to fulfill
their responsibilities under the order (the ``Participation
Agreement''). Applicants note that an Unaffiliated Investment Company
(including an ETF or an Unaffiliated Closed-End Investment Company)
would also retain its right to reject any initial investment by a Fund
of Funds in excess of the limits in section 12(d)(1)(A)(i) of the Act
by declining to execute the Participation Agreement with the Fund of
Funds. In addition, an Unaffiliated Investment Company (other than an
ETF or closed-end fund whose shares are purchased by a Fund of Funds in
the secondary market) will retain its right at all times to reject any
investment by a Fund of Funds. Finally, subject solely to the giving of
notice to a Fund of Funds and the passage of a reasonable notice
period, an Unaffiliated Fund (including an ETF or an Unaffiliated
Closed-End Investment Company) could terminate a Participation
Agreement with the Fund of Funds.
8. Applicants state that they do not believe that the proposed
arrangement will result in excessive layering of fees. The Board of
each Fund of Funds, including a majority of the directors who are not
``interested persons'' within the meaning of section 2(a)(19) of the
Act (the ``Independent Directors''), will find that the management or
advisory fees charged under a Fund of Funds' advisory contract are
based on services provided that are in addition to, rather than
duplicative of, services provided under the advisory contract(s) of any
Underlying Fund in which the Fund of Funds may invest. In addition, the
Adviser will waive fees otherwise payable to it by a Fund of Funds in
an amount at least equal to any compensation (including fees received
pursuant to any plan adopted by an Unaffiliated Investment Company
under rule 12b-1 under the Act) received from an Unaffiliated Fund by
the Adviser, or an affiliated person of the Adviser, other than any
advisory fees paid to the Adviser or an affiliated person of the
Adviser by the Unaffiliated Investment Company, in connection with the
investment by the Fund of Funds in the Unaffiliated Fund.
9. Applicants further state that any sales charges and/or service
fees charged with respect to shares of a Fund of Funds will not exceed
the limits applicable to funds of funds set forth in rule 2830 of the
Conduct Rules of the NASD (``NASD Conduct Rule 2830'').\7\
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\7\ Any references to NASD Conduct Rule 2830 include any
successor or replacement FINRA rule to NASD Conduct Rule 2830.
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10. Applicants submit that the proposed arrangement will not create
an overly complex fund structure. Applicants note that no Underlying
Fund (or, if applicable, its respective master fund) will acquire
securities of any other 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, or affiliated person of an affiliated person, of the
company. Section 2(a)(3) of the Act defines an ``affiliated person'' of
another person to include (a) any person directly or indirectly owning,
controlling, or holding with power to vote, 5% or more of the
outstanding voting securities of the other person; (b) any person 5% or
more of whose outstanding voting securities are directly or indirectly
owned, controlled, or held with power to vote by the other person; and
(c) any person directly or indirectly controlling, controlled by, or
under common control with the other person.
2. Applicants state that the Funds of Funds and the Affiliated
Funds may be deemed to be under the common control of the Adviser and,
therefore, affiliated persons of one another. Applicants also state
that the Funds of Funds and the Underlying Funds organized as open-end
investment companies (``Underlying Open-End Funds'') or UITs
(``Underlying UITs'') may also be deemed to be affiliated persons of
one another if a Fund of Funds owns 5% or more of the outstanding
voting securities of one or more of such Underlying Open-End Funds and/
or Underlying UITs. Applicants state that the sale of shares by the
Underlying Open-End Funds or Underlying UITs to the Funds of Funds and
the purchase of those shares from the Funds of Funds by the Underlying
Open-End Funds and/or Underlying UITs (through redemptions) could be
deemed to violate section 17(a).\8\
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\8\ Applicants acknowledge that receipt of any compensation by
(a) an affiliated person of a Fund of Funds, or an affiliated person
of such person, for the purchase by the Fund of Funds of shares of
an Underlying Fund or (b) an affiliated person of an Underlying
Fund, or an affiliated person of such person, for the sale by the
Underlying Fund of its shares to a Fund of Funds may be prohibited
by section 17(e)(1) of the Act. The Participation Agreement also
will include this acknowledgement.
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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 (i) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (ii) the proposed transaction is consistent with the
policies of each registered investment company concerned; and (iii) the
proposed transaction is consistent with the general purposes of the
Act. Section 6(c) of the Act permits the Commission to exempt any
person 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.
Applicants state that the terms of the transactions are reasonable and
fair and do not involve overreaching. Applicants state that the terms
upon which an Underlying Open-End Fund or Underlying UIT will sell its
shares to or purchase its shares from a Fund of Funds will be based on
the net asset value of each Underlying Open-End Fund or Underlying
UIT.\9\ Applicants also state that the proposed transactions will be
consistent with the policies of each Fund of Funds, Underlying Open-End
Fund, and
[[Page 67483]]
Underlying UIT and with the general purposes of the Act.
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\9\ Applicants note that a Fund of Funds generally would
purchase and sell shares of an Underlying Fund that operates as an
ETF through secondary market transactions rather than through
principal transactions with the Underlying Fund. Applicants
nevertheless request relief from sections 17(a)(1) and (2) to permit
each Fund of Funds that is an affiliated person, or an affiliated
person of an affiliated person, as defined in section 2(a)(3) of the
Act, of an ETF to purchase or redeem shares from the ETF. 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 a Fund of Funds because an investment adviser to the ETF
or an entity controlling, controlled by or under common control with
the investment adviser to the ETF is also an investment adviser to
the Fund of Funds. Applicants further note that a Fund of Funds will
purchase and sell shares of an Underlying Fund that is a closed-end
fund (including business development companies) through secondary
market transactions at market prices rather than through principal
transactions with the closed-end fund (or business development
company). Accordingly, applicants are not requesting section 17(a)
relief with respect to principal transactions with closed-end funds
(including business development companies).
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C. Other Investments by Section 12(d)(1)(G) Funds
1. Section 12(d)(1)(G) of the Act provides that section 12(d)(1)
will not apply to securities of an acquired company purchased by an
acquiring company if: (i) The acquiring company and acquired company
are part of the same ``group of investment companies,'' as defined in
section 12(d)(1)(G)(ii) of the Act; (ii) the acquiring company holds
only securities of acquired companies that are part of the same ``group
of investment companies,'' as defined in section 12(d)(1)(G)(ii) of the
Act, government securities, and short-term paper; (iii) the aggregate
sales loads and distribution-related fees of the acquiring company and
the acquired company are not excessive under rules adopted pursuant to
section 22(b) or section 22(c) of the Act by a securities association
registered under section 15A of the 1934 Act or by the Commission; and
(iv) the acquired company has a policy that prohibits it from acquiring
securities of registered open-end management investment companies or
registered UITs in reliance on section 12(d)(1)(F) or (G) of the Act.
2. Rule 12d1-2 under the Act permits a registered open-end
investment company or a registered UIT that relies on section
12(d)(1)(G) of the Act to acquire, in addition to securities issued by
another registered investment company in the same group of investment
companies, government securities, and short-term paper: (1) Securities
issued by an investment company that is not in the same group of
investment companies, when the acquisition is in reliance on section
12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) securities (other than
securities issued by an investment company); and (3) securities issued
by a money market fund, when the investment is in reliance on rule
12d1-1 under the Act. For the purposes of rule 12d1-2, ``securities''
means any security as defined in section 2(a)(36) of the Act.
3. Applicants state that the proposed arrangement would comply with
rule 12d1-2 under the Act, but for the fact that the Section
12(d)(1)(G) Funds may invest a portion of their assets in Other
Investments. Applicants request an order under section 6(c) of the Act
for an exemption from rule 12d1-2(a) to allow the Section 12(d)(1)(G)
Funds to invest in Other Investments. Applicants assert that permitting
a Section 12(d)(1)(G) Fund to invest in Other Investments as described
in the application would not raise any of the concerns that section
12(d)(1) of the Act was intended to address.
4. Consistent with its fiduciary obligations under the Act, a
Section 12(d)(1)(G) Fund's Board will review the advisory fees charged
by the Section 12(d)(1)(G) Fund's investment adviser(s) to ensure that
the fees are based on services provided that are in addition to, rather
than duplicative of, services provided pursuant to the advisory
agreement of any investment company in which the Section 12(d)(1)(G)
Fund may invest.
Applicants' Conditions
A. Investments by Funds of Funds in Underlying Funds
Applicants agree that the order granting the requested relief to
permit Funds of Funds to invest in Underlying Funds shall be subject to
the following conditions:
1. The members of the Group will not control (individually or in
the aggregate) an Unaffiliated Fund within the meaning of section
2(a)(9) of the Act. The members of a Sub-Adviser Group will not control
(individually or in the aggregate) an Unaffiliated Fund within the
meaning of section 2(a)(9) of the Act. With respect to a Fund's
investment in an Unaffiliated Closed-End Investment Company, (i) each
member of the Group or Sub-Adviser Group that is an investment company
or an issuer that would be an investment company but for section
3(c)(1) or 3(c)(7) of the Act will vote its shares of the Unaffiliated
Closed-End Investment Company in the manner prescribed by section
12(d)(1)(E) of the Act and (ii) each other member of the Group or Sub-
Adviser Group will vote its shares of the Unaffiliated Closed-End
Investment Company in the same proportion as the vote of all other
holders of the same type of such Unaffiliated Closed-End Investment
Company's shares. If, as a result of a decrease in the outstanding
voting securities of any other Unaffiliated Fund, the Group or a Sub-
Adviser Group, each in the aggregate, becomes a holder of more than 25%
of the outstanding voting securities of such Unaffiliated Fund, then
the Group or the Sub-Adviser Group will vote its shares of the
Unaffiliated Fund in the same proportion as the vote of all other
holders of the Unaffiliated Fund's shares. This condition will not
apply to a Sub-Adviser Group with respect to an Unaffiliated Fund for
which the Sub-Adviser or a person controlling, controlled by or under
common control with the Sub-Adviser acts as the investment adviser
within the meaning of section 2(a)(20)(A) of the Act (in the case of an
Unaffiliated Investment Company) or as the sponsor (in the case of an
Unaffiliated Trust).
2. No Fund of Funds or Fund of Funds Affiliate will cause any
existing or potential investment by the Fund of Funds in an
Unaffiliated Fund to influence the terms of any services or
transactions between the Fund of Funds or a Fund of Funds Affiliate and
the Unaffiliated Fund or an Unaffiliated Fund Affiliate.
3. The Board of each Fund of Funds, including a majority of the
Independent Directors, will adopt procedures reasonably designed to
ensure that its Adviser and any Sub-Adviser to the Fund of Funds are
conducting the investment program of the Fund of Funds without taking
into account any consideration received by the Fund of Funds or Fund of
Funds Affiliate from an Unaffiliated Investment Company or Unaffiliated
Trust or any Unaffiliated Fund Affiliate of such Unaffiliated
Investment Company or Unaffiliated Trust in connection with any
services or transactions.
4. Once an investment by a Fund of Funds in the securities of an
Unaffiliated Investment Company exceeds the limit of section
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment
Company, including a majority of the Independent Directors, will
determine that any consideration paid by the Unaffiliated Investment
Company to a Fund of Funds or a Fund of Funds Affiliate in connection
with any services or transactions: (a) Is fair and reasonable in
relation to the nature and quality of the services and benefits
received by the Unaffiliated Investment Company; (b) is within the
range of consideration that the Unaffiliated Investment Company would
be required to pay to another unaffiliated entity in connection with
the same services or transactions; and (c) does not involve
overreaching on the part of any person concerned. This condition does
not apply with respect to any services or transactions between an
Unaffiliated Investment Company and its investment adviser(s), or any
person controlling, controlled by, or under common control with such
investment adviser(s).
5. No Fund of Funds or Fund of Funds Affiliate (except to the
extent it is acting in its capacity as an investment adviser to an
Unaffiliated Investment Company or sponsor to an Unaffiliated Trust)
will cause an Unaffiliated Fund to purchase a security in any
Affiliated Underwriting.
6. The Board of an Unaffiliated Investment Company, including a
majority of the Independent Directors,
[[Page 67484]]
will adopt procedures reasonably designed to monitor any purchases of
securities by the Unaffiliated Investment Company in an Affiliated
Underwriting once an investment by a Fund of Funds in the securities of
the Unaffiliated Investment Company exceeds the limit of section
12(d)(1)(A)(i) of the Act, including any purchases made directly from
an Underwriting Affiliate. The Board of the Unaffiliated Investment
Company will review these purchases periodically, but no less
frequently than annually, to determine whether the purchases were
influenced by the investment by the Fund of Funds in the Unaffiliated
Investment Company. The Board of the Unaffiliated Investment Company
will consider, among other things: (a) Whether the purchases were
consistent with the investment objectives and policies of the
Unaffiliated Investment Company; (b) how the performance of securities
purchased in an Affiliated Underwriting compares to the performance of
comparable securities purchased during a comparable period of time in
underwritings other than Affiliated Underwritings or to a benchmark
such as a comparable market index; and (c) whether the amount of
securities purchased by the Unaffiliated Investment Company in
Affiliated Underwritings and the amount purchased directly from an
Underwriting Affiliate have changed significantly from prior years. The
Board of the Unaffiliated Investment Company will take any appropriate
actions based on its review, including, if appropriate, the institution
of procedures designed to assure that purchases of securities in
Affiliated Underwritings are in the best interests of shareholders.
7. Each Unaffiliated Investment Company will maintain and preserve
permanently, in an easily accessible place, a written copy of the
procedures described in the preceding condition, and any modifications
to such procedures, and will maintain and preserve for a period of not
less than six years from the end of the fiscal year in which any
purchase in an Affiliated Underwriting occurred, the first two years in
an easily accessible place, a written record of each purchase of
securities in an Affiliated Underwriting once an investment by a Fund
of Funds in the securities of an Unaffiliated Investment Company
exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth
(1) the party from whom the securities were acquired, (2) the identity
of the underwriting syndicate's members, (3) the terms of the purchase,
and (4) the information or materials upon which the determinations of
the Board of the Unaffiliated Investment Company were made.
8. Prior to its investment in shares of an Unaffiliated Investment
Company in excess of the limit set forth in section 12(d)(1)(A)(i) of
the Act, the Fund of Funds and the Unaffiliated Investment Company will
execute a Participation Agreement stating, without limitation, that
their Boards and their investment advisers understand the terms and
conditions of the order and agree to fulfill their responsibilities
under the order. At the time of its investment in shares of an
Unaffiliated Investment Company in excess of the limit set forth in
section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated
Investment Company of the investment. At such time, the Fund of Funds
will also transmit to the Unaffiliated Investment Company a list of the
names of each Fund of Funds Affiliate and Underwriting Affiliate. The
Fund of Funds will notify the Unaffiliated Investment Company of any
changes to the list as soon as reasonably practicable after a change
occurs. The Unaffiliated Investment Company and the Fund of Funds will
maintain and preserve a copy of the order, the Participation Agreement,
and the list with any updated information for the duration of the
investment and for a period of not less than six years thereafter, the
first two years in an easily accessible place.
9. Before approving any advisory contract under section 15 of the
Act, the Board of each Fund of Funds, including a majority of the
Independent Directors, shall find that the advisory fees charged under
the advisory contract are based on services provided that are in
addition to, rather than duplicative of, services provided under the
advisory contract(s) of any Underlying Fund in which the Fund of Funds
may invest. Such finding, and the basis upon which the finding was
made, will be recorded fully in the minute books of the appropriate
Fund of Funds.
10. The Adviser will waive fees otherwise payable to it by a Fund
of Funds in an amount at least equal to any compensation (including
fees received pursuant to any plan adopted by an Unaffiliated
Investment Company pursuant to rule 12b-1 under the Act) received from
an Unaffiliated Fund by the Adviser, or an affiliated person of the
Adviser, other than any advisory fees paid to the Adviser or its
affiliated person by the Unaffiliated Investment Company, in connection
with the investment by the Fund of Funds in the Unaffiliated Fund. Any
Sub-Adviser will waive fees otherwise payable to the Sub-Adviser,
directly or indirectly, by the Fund of Funds in an amount at least
equal to any compensation received by the Sub-Adviser, or an affiliated
person of the Sub-Adviser, from an Unaffiliated Fund, other than any
advisory fees paid to the Sub-Adviser or its affiliated person by the
Unaffiliated Investment Company, in connection with the investment by
the Fund of Funds in the Unaffiliated Fund made at the direction of the
Sub-Adviser. In the event that the Sub-Adviser waives fees, the benefit
of the waiver will be passed through to the Fund of Funds.
11. Any sales charges and/or service fees charged with respect to
shares of a Fund of Funds will not exceed the limits applicable to
funds of funds set forth in NASD Conduct Rule 2830.
12. No Underlying Fund will acquire securities of any other
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 that such Underlying Fund: (a) Acquires
such securities in compliance with section 12(d)(1)(E) of the Act and
either is an Affiliated Fund or is in the same ``group of investment
companies'' as its corresponding master fund; (b) receives securities
of another investment company as a dividend or as a result of a plan of
reorganization of a company (other than a plan devised for the purpose
of evading section 12(d)(1) of the Act); or (c) acquires (or is deemed
to have acquired) securities of another investment company pursuant to
exemptive relief from the Commission permitting such Underlying Fund
to: (i) Acquire securities of one or more investment companies for
short-term cash management purposes or (ii) engage in inter-fund
borrowing and lending transactions.
B. Other Investments by Section 12(d)(1)(G) Funds
Applicants agree that the order granting the requested relief to
permit Section 12(d)(1)(G) Funds to invest in Other Investments shall
be subject to the following condition:
1. Applicants will comply with all provisions of rule 12d1-2 under
the Act, except for paragraph (a)(2) to the extent that it restricts
any Section 12(d)(1)(G) Fund from investing in Other Investments as
described in the application.
[[Page 67485]]
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26816 Filed 11-12-14; 8:45 am]
BILLING CODE 8011-01-P
