SSgA Funds Management, Inc., et al.; Notice of Application, 77545-77548 [2014-30128]
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Federal Register / Vol. 79, No. 247 / Wednesday, December 24, 2014 / Notices
of the Adviser on a per Subadvised
Series basis. The information will reflect
the impact on profitability of the hiring
or termination of any sub-adviser during
the applicable quarter.
9. Whenever a sub-adviser is hired or
terminated, the Adviser will provide the
Board with information showing the
expected impact on the profitability of
the Adviser.
10. Whenever a sub-adviser change is
proposed for an Affiliated Sub-Adviser
or Wholly-Owned Sub-Adviser to a
Subadvised Series, the Board, including
a majority of the Independent Board
Members, will make a separate finding,
reflected in the Board minutes, that
such change is in the best interests of
the Subadvised Series and its
shareholders, and does not involve a
conflict of interest from which the
Adviser or the Affiliated Sub-Adviser or
the Wholly-Owned Sub-Adviser derives
an inappropriate advantage.
11. No Board Member or officer of a
Subadvised Series, or partner, director,
manager, or officer of the Adviser, will
own directly or indirectly (other than
through a pooled investment vehicle
that is not controlled by such person),
any interest in a Sub-Adviser, except for
(i) ownership of interests in the Adviser
or any entity, other than a WhollyOwned Sub-Adviser, that controls, is
controlled by, or is under common
control with the Adviser; or (ii)
ownership of less than 1% of the
outstanding securities of any class of
equity or debt of a publicly-traded
company that is either a Sub-Adviser or
an entity that controls, is controlled by
or is under common control with a SubAdviser.
12. Each Subadvised Series will
disclose the Aggregate Fee Disclosure in
its registration statement.
13. In the event the Commission
adopts a rule under the Act providing
substantially similar relief to that
requested in the Application, the
requested order will expire on the
effective date of that rule.
14. Any new Sub-Advisory
Agreement or any amendment to a
Subadvised Series’ existing Investment
Management Agreement or SubAdvisory Agreement that directly or
indirectly results in an increase in the
aggregate advisory fee rate payable by
the Subadvised Series will be submitted
to the Subadvised Series’ shareholders
for approval.
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For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–30130 Filed 12–23–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31384; 812–13961]
SSgA Funds Management, Inc., et al.;
Notice of Application
December 18, 2014.
Securities and Exchange
Commission (the ‘‘Commission’’).
ACTION: Notice of an application under
section 6(c) of the Investment Company
Act of 1940 (‘‘Act’’) for an exemption
from section 15(a) of the Act and rule
18f–2 under the Act, as well as from
certain disclosure requirements.
AGENCY:
Applicants
request an order that would permit them
to enter into and materially amend
subadvisory agreements without
shareholder approval and would grant
relief from certain disclosure
requirements.
APPLICANTS: SSgA Funds Management,
Inc. (‘‘SSgA FM’’) and SPDR Series
Trust, SPDR Index Shares Funds, SSgA
Master Trust and SSgA Active Trust
(each, a ‘‘Trust,’’ and collectively, the
‘‘Trusts,’’ and together with SSgA FM,
‘‘Applicants’’).
DATES: Filing Dates: The application
was filed on September 16, 2011, and
amended on March 13, 2012, August 18,
2014 and December 12, 2014.
Applicants have agreed to file an
amendment during the notice period,
the substance of which is reflected in
this notice.
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 January 12, 2015, 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 upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
SUMMARY OF APPLICATION:
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Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: The Commission: Secretary,
U.S. Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
Applicants: Joshua A. Weinberg, Esq.,
State Street Global Advisors, State Street
Financial Center, One Lincoln Street,
Boston, MA 02111.
FOR FURTHER INFORMATION CONTACT:
Mark N. Zaruba, Senior Counsel, at
(202) 551–6878, or Mary Kay Frech,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Office of Investment Company
Regulation).
The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or an applicant using the
‘‘Company’’ name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
SUPPLEMENTARY INFORMATION:
Applicants’ Representations
1. Each Trust is organized as a
business trust under the laws of the
Commonwealth of Massachusetts and
registered under the Act as an open-end
management investment company. Each
Trust will offer multiple series (each a
‘‘Fund’’),1 some of which currently
operate, or may in the future operate, as
exchange-traded funds.2 SSgA FM, a
Massachusetts corporation, is a whollyowned subsidiary of State Street
Corporation. SSgA FM is, and any other
Adviser will be, registered as an
investment adviser under the
Investment Advisers Act of 1940 (the
1 Currently, certain series of SSgA Active Trust
are part of a Master-Feeder Structure as Feeder
Funds investing in corresponding Master Funds
that are series of SSgA Master Trust. A ‘‘MasterFeeder Structure’’ involves a ‘‘Feeder Fund’’
investing in a corresponding ‘‘Master Fund.’’
2 Applicants also request relief with respect to
future series of the Trust and any other existing or
future registered open-end management investment
company or series thereof that: (a) Is advised by
SSgA FM or an entity controlling, controlled by, or
under common control with SSgA FM (collectively,
the ‘‘Adviser’’) or its successors; (b) uses the multimanager structure described in the application
(‘‘Manager of Managers Structure’’); and (c)
complies with the terms and conditions of the
application (included in the term ‘‘Funds’’). Every
entity that currently intends to rely on the
requested order is named as an Applicant. For
purposes of the requested order, ‘‘successor’’ is
limited to an entity or entities that result from a
reorganization into another jurisdiction or a change
in the type of business organization. If the name of
any Fund contains the name of a Sub-Adviser (as
defined below), the name of the Adviser, or a
trademark or trade name that is owned or licensed
by the Adviser, will precede the name of the SubAdviser.
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‘‘Advisers Act’’). SSgA FM serves as the
investment adviser to each of the Funds
pursuant to a separate investment
advisory agreement (each, an
‘‘Investment Advisory Agreement’’ and
collectively, the ‘‘Investment Advisory
Agreements’’) with the relevant Trust.
Each Investment Advisory Agreement
was approved by the Trust’s board of
trustees (the ‘‘Board’’),3 including a
majority of the trustees who are not
‘‘interested persons,’’ as defined in
section 2(a)(19) of the Act (for any
Board, the ‘‘Independent Trustees’’),
and by the initial shareholder of each
Fund in the manner required by
sections 15(a) and 15(c) of the Act and
rule 18f–2 under the Act.
2. Under the terms of each Investment
Advisory Agreement, the Adviser,
subject to the oversight of the Board,
manages the investment operations and
determines the composition of the
portfolio of each Fund, including the
purchase, retention and disposition of
the securities and other instruments
held by the Fund. For its services to
each Fund, the Adviser receives an
investment advisory fee from that Fund
as specified in the applicable
Investment Advisory Agreement
computed as a percentage of the Fund’s
average daily net assets. Each
Investment Advisory Agreement also
permits the Adviser, subject to the
approval of the Board, including a
majority of the Independent Trustees,
and the shareholders of the applicable
Fund (if required by applicable law), to
delegate portfolio management
responsibilities of all or a portion of a
Fund to one or more subadvisers (‘‘SubAdvisers’’). The Adviser has entered
into subadvisory agreements (‘‘SubAdvisory Agreements’’) with various
Sub-Advisers to provide investment
advisory services to certain Funds.4
Each Sub-Adviser is, and each future
Sub-Adviser will be, an ‘‘investment
adviser’’ as defined in section 2(a)(20) of
the Act as well as registered with the
Commission as an investment adviser
under the Advisers Act or exempt from
such registration. The Adviser will
evaluate and recommend Sub-Advisers
to the Board and will monitor and
evaluate each Sub-Adviser’s investment
programs, performance and compliance.
The Adviser will recommend to the
Board whether Sub-Advisory
Agreements should be renewed,
modified or terminated. The Adviser
currently compensates each Sub3 The term ‘‘Board’’ also includes the board of
trustees or directors of a future Fund, if different.
4 Currently, Nuveen Asset Management LLC,
GSO/Blackstone Debt Funds Management LLC, and
Massachusetts Financial Services Company serve as
Sub-Advisers to certain Funds.
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Adviser out of the fee paid by a Fund
to the Adviser under the Investment
Advisory Agreement. However,
Applicants note that future
arrangements with one or more SubAdvisers may be implemented whereby
a Fund will be responsible for paying
subadvisory fees directly to the SubAdviser.
3. Applicants request an order
(‘‘Order’’) to permit the Adviser, subject
to Board approval, to select certain SubAdvisers to manage all or a portion of
the assets of a Fund pursuant to a SubAdvisory Agreement and materially
amend Sub-Advisory Agreements
without obtaining shareholder approval.
The requested relief will not extend to
any Sub-Adviser that is an affiliated
person, as defined in section 2(a)(3) of
the Act, of a Fund, any Feeder Fund, or
the Adviser, other than by reason of
serving as a Sub-Adviser to a Fund
(‘‘Affiliated Sub-Adviser’’).
4. Applicants also request an order
exempting the Funds from certain
disclosure provisions described below
that may require the Applicants to
disclose fees paid by the Adviser or a
Fund to each Sub-Adviser. Applicants
seek an order to permit each Fund to
disclose (as a dollar amount and a
percentage of a Fund’s net assets) only:
(a) The aggregate fees paid to the
Adviser and any Affiliated SubAdvisers; and (b) the aggregate fees paid
to Sub-Advisers other than Affiliated
Sub-Advisers (collectively, the
‘‘Aggregate Fee Disclosure’’). A Fund
that employs an Affiliated Sub-Adviser
will provide separate disclosure of any
fees paid to the Affiliated Sub-Adviser.
5. The Funds will inform
shareholders of the hiring of a new SubAdviser pursuant to the following
procedures (‘‘Modified Notice and
Access Procedures’’): (a) Within 90 days
after a new Sub-Advisor is hired for any
Fund, that Fund will send its
shareholders 5 either a Multi-manager
Notice or a Multi-manager Notice and
Multi-manager Information Statement; 6
5 If the Fund utilizing the Manager of Managers
Structure is a Master Fund, for purposes of the
Modified Notice and Access Procedures,
‘shareholders’ include both the shareholders of the
applicable Master Fund and the shareholders of its
Feeder Funds.
6 A ‘‘Multi-manager Notice’’ will be modeled on
a Notice of Internet Availability as defined in rule
14a–16 under the Securities Exchange Act of 1934
(‘‘Exchange Act’’), and specifically will, among
other things: (a) Summarize the relevant
information regarding the new Sub-Adviser; (b)
inform shareholders that the Multi-manager
Information Statement is available on a Web site;
(c) provide the Web site address; (d) state the time
period during which the Multi-manager Information
Statement will remain available on that Web site;
(e) provide instructions for accessing and printing
the Multi-manager Information Statement; and (f)
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and (b) the Fund will make the Multimanager Information Statement
available on the Web site identified in
the Multi-manager Notice no later than
when the Multi-manager Notice (or
Multi-manager Notice and Multimanager Information Statement) is first
sent to shareholders, and will maintain
it on that Web site for at least 90 days.
Applicants’ Legal Analysis
1. Section 15(a) of the Act provides,
in relevant part, that it is unlawful for
any person to act as an investment
adviser to a registered investment
company except pursuant to a written
contract that has been approved by the
vote of a majority of the company’s
outstanding voting securities. Rule 18f–
2 under the Act provides that each
series or class of stock in a series
investment company affected by a
matter must approve that matter if the
Act requires shareholder approval.
2. Form N–1A is the registration
statement used by open-end investment
companies. Item 19(a)(3) of Form N–1A
requires disclosure of the method and
amount of the investment adviser’s
compensation.
3. Rule 20a–1 under the Act requires
proxies solicited with respect to an
investment company to comply with
Schedule 14A under the Exchange Act.
Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8)
and 22(c)(9) of Schedule 14A, taken
together, require a proxy statement for a
shareholder meeting at which the
advisory contract will be voted upon to
include the ‘‘rate of compensation of the
investment adviser,’’ the ‘‘aggregate
amount of the investment adviser’s
fees,’’ a description of the ‘‘terms of the
contract to be acted upon,’’ and, if a
change in the advisory fee is proposed,
the existing and proposed fees and the
difference between the two fees.
4. Regulation S–X sets forth the
requirements for financial statements
required to be included as part of a
registered investment company’s
registration statement and shareholder
reports filed with the Commission.
Sections 6–07(2)(a), (b) and (c) of
Regulation S–X require a registered
investment company to include in its
financial statement information about
the investment advisory fees.
instruct the shareholder that a paper or email copy
of the Multi manager Information Statement may be
obtained, without charge, by contacting the Funds.
A ‘‘Multi-manager Information Statement’’ will
meet the requirements of Regulation 14C, Schedule
14C and Item 22 of Schedule 14A under the
Exchange Act for an information statement, except
as modified by the requested order to permit
Aggregate Fee Disclosure. Multi-manager
Information Statements will be filed electronically
with the Commission via the EDGAR system.
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5. Section 6(c) of the Act provides that
the Commission may exempt any
person, security, or transaction or any
class or classes of persons, securities, or
transactions from any provisions of the
Act, or from any rule thereunder, if such
exemption is necessary or appropriate
in the public interest and consistent
with the protection of investors and the
purposes fairly intended by the policy
and provisions of the Act. Applicants
state that the requested relief meets this
standard for the reasons discussed
below.
6. Applicants assert that the
shareholders expect the Adviser, subject
to the review and approval of the Board,
to select the Sub-Advisers who are best
suited to achieve the Fund’s investment
objective. Applicants assert that, from
the perspective of the shareholder, the
role of the Sub-Adviser is substantially
equivalent to the role of the individual
portfolio managers employed by
traditional investment company
advisory firms. Applicants state that
requiring shareholder approval of each
Subadvisory Agreement would impose
unnecessary delays and expenses on the
Funds, and may preclude the Fund from
acting promptly when the Board and the
Adviser believe that a change would
benefit a Fund and its shareholders.
Applicants note that the Investment
Advisory Agreement and any SubAdvisory Agreement with an Affiliated
Sub-Adviser (if any) will continue to be
subject to the shareholder approval
requirements of section 15(a) of the Act
and rule 18f–2 under the Act.
7. Applicants assert that the requested
disclosure relief would benefit
shareholders of the Funds because it
would improve the Adviser’s ability to
negotiate the fees paid to Sub-Advisers.
Applicants state that the Adviser may be
able to negotiate rates that are below a
Sub-Adviser’s ‘‘posted’’ amounts, if the
Adviser is not required to disclose the
Sub-Advisers’ fees to the public.
Applicants submit that the requested
relief will encourage Sub-Advisers to
negotiate lower subadvisory fees with
the Adviser if the lower fees are not
required to be made public.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions: 7
1. Before a Fund may rely on the
Order, the operation of the Fund in the
7 Applicants will only comply with conditions
12, 13, 14 and 15 with respect to those series that
rely on the relief that would allow them to provide
Aggregate Fee Disclosure. Each Trust will comply
with condition 13 if any series of the respective
Trust provides Aggregate Fee Disclosure in its
registration statement.
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manner described in the application
will be approved by a majority of the
Fund’s outstanding voting securities, as
defined in the Act, which in the case of
a Master Fund will include voting
instructions provided by shareholders of
the Feeder Funds investing in such
Master Fund or other voting
arrangements that comply with section
12(d)(1)(E)(iii)(aa) of the Act, or, in the
case of a Fund whose public
shareholders purchase shares on the
basis of a prospectus containing the
disclosure contemplated by condition 2
below, by the initial shareholder(s)
before offering the Fund’s shares to the
public.
2. Each Fund that relies on the Order,
and in the case of Master Fund relying
on the Order, each Feeder Fund
investing in such Master Fund, will
disclose in its prospectus the existence,
substance, and effect of any Order
granted pursuant to the application.
Each Fund relying on the Order (and
any such Feeder Fund) will hold itself
out to the public as utilizing the
Manager of Managers Structure. Each
prospectus will prominently disclose
that the Adviser has ultimate
responsibility (subject to oversight by
the Board) to oversee the Sub-Advisers
and recommend their hiring,
termination and replacement.
3. Funds will inform shareholders,
and if the Fund relying on the Order is
a Master Fund, shareholders of any
Feeder Funds of the hiring of a new
Sub-Adviser within 90 days after the
hiring of the new Sub-Adviser pursuant
to the Modified Notice and Access
Procedures.
4. The Adviser will not enter into a
Sub-Advisory Agreement with any
Affiliated Sub-Adviser without such
agreement, including the compensation
to be paid thereunder, being approved
by the shareholders of the applicable
Fund.
5. At all times, at least a majority of
the Board will be Independent Trustees
and the nomination of new or additional
Independent Trustees will be at the
discretion of the then-existing
Independent Trustees.
6. Whenever a Sub-Adviser change is
proposed for a Fund with an Affiliated
Sub-Adviser, the Board, including a
majority of the Independent Trustees,
will make a separate finding, reflected
in the applicable Board minutes, that
such change is in the best interests of
such Fund and its shareholders, and if
the Fund relying on the Order is a
Master Fund, the best interests of any
applicable Feeder Funds and their
respective shareholders, and does not
involve a conflict of interest from which
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77547
the Adviser or an Affiliated Sub-Adviser
derives an inappropriate advantage.
7. The Adviser will provide general
management services to each Fund
relying on the Order, including overall
supervisory responsibility for the
general management and investment of
the Fund’s assets and, subject to review
and approval by the Board, will: (i) Set
the Fund’s overall investment strategies;
(ii) evaluate, select and recommend
Sub-Advisers to provide purchase and
sale recommendations to the Adviser or
investment advice to all or a portion of
the Fund’s assets; (iii) allocate and,
when appropriate, reallocate the Fund’s
assets among multiple Sub-Advisers;
(iv) monitor and evaluate the SubAdvisers’ performance; and (v)
implement procedures reasonably
designed to ensure that Sub-Adviser(s)
comply with the relevant Fund’s
investment objectives, policies and
restrictions.
8. (a) No trustee or officer of a Fund
relying on the Order or a Controlling
Feeder Fund or director or officer of the
Adviser will own, directly or indirectly,
any interest in a Sub-Adviser and (b) no
trustee or officer of an Affiliated Feeder
Fund will own, directly or indirectly,
any interest in a Sub-Adviser of the
corresponding Master Fund; provided,
however, that the foregoing limitations
shall not apply to: (x) Interests owned
through a pooled investment vehicle
that is not controlled by such person; (y)
ownership of less than 1% of the
outstanding securities of any class of
equity or debt of a publicly traded
company that is either a Sub-Adviser or
an entity that controls, is controlled by
or is under common control with a SubAdviser; or, (z) solely with respect to
clause (a) above, ownership of interests
in the Adviser or any entity that
controls, is controlled by or is under
common control with the Adviser.8
9. Whenever the Board approves a
Sub-Advisory Agreement for a Fund, the
Board, including a majority of the
Independent Trustees, will make a
separate finding that such approval is
being made free of any influence from
any other Fund or Feeder Fund or its
respective trustees and officers. The
finding required by this condition will
8 For purposes of this condition, (i) a ‘‘Controlling
Feeder Fund’’ is a Feeder Fund investing in a
Master Fund relying on the Order that controls such
Master Fund, within the meaning of section 2(a)(9)
of the Act; and (ii) an ‘‘Affiliated Feeder Fund’’ is
a Feeder Fund investing in a Master Fund relying
on the Order that is either (a) in the same ‘‘group
of investment companies’’ (within the meaning of
section 12(d)(1)(G)(ii) of the Act) as any Fund; (b)
an affiliated person (within the meaning of section
2(a)(3) of the Act) or an affiliated person of such an
affiliated person of any Fund or of the Adviser; or
(c) advised by the Adviser.
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be documented in the minutes of the
meeting of the Board, together with the
trustees’ basis for the finding.
10. Any new Sub-Advisory
Agreement or any amendment to an
existing Investment Advisory
Agreement or Sub-Advisory Agreement
for a Fund relying on the Order that
directly or indirectly results in an
increase in the aggregate advisory fee
rate payable by the Fund will be
submitted to the Fund’s shareholders for
approval.
11. In the event the Commission
adopts a rule under the Act providing
substantially similar relief to that in the
Order, the requested Order will expire
on the effective date of that rule.
12. Each Fund relying on the Order
and any Feeder Fund will disclose in its
registration statement the Aggregate Fee
Disclosure.
13. Independent Legal Counsel, as
defined in rule 0–1(a)(6) under the Act,
has been and will continue to be
engaged to represent the Independent
Trustees. The selection of such counsel
will be within the discretion of the thenexisting Independent Trustees.
14. The Adviser will provide the
Board, no less frequently than quarterly,
with information about the profitability
of the Adviser on a per-Fund basis for
each Fund relying on the Order. The
information will reflect the impact on
profitability of the hiring or termination
of any Sub-Adviser during the
applicable quarter.
15. Whenever a Sub-Adviser is hired
or terminated, the Adviser will provide
the Board with information showing the
expected impact on the profitability of
the Adviser.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–30128 Filed 12–23–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
mstockstill on DSK4VPTVN1PROD with NOTICES
[Release No. 34–73881; File No. SR–BYX–
2014–040]
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Related to Fees for Use
of BATS Y-Exchange, Inc.
December 18, 2014.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the
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‘‘Act’’),1 and Rule 19b 4 thereunder,2
notice is hereby given that on December
12, 2014, BATS Y-Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange has designated the proposed
rule change as one establishing or
changing a member due, fee, or other
charge imposed by the Exchange under
section 19(b)(3)(A)(ii) of the Act 3 and
Rule 19b–4(f)(2) thereunder,4 which
renders the proposed rule change
effective upon filing with the
Commission. 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 filed a proposal to
make several non-substantive
amendments to the fee schedule
applicable to Members 5 and nonmembers of the Exchange pursuant to
BYX Rules 15.1(a) and (c). Changes to
the fee schedule pursuant to this
proposal are effective upon filing.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant parts of such
statements.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
5 A Member is defined as ‘‘any registered broker
or dealer that has been admitted to membership in
the Exchange.’’ See Exchange Rule 1.5(n).
2 17
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to make a
number of clarifying, non-substantive
changes to its fee schedule in order to
convert the existing fee schedule into a
chart format, including eliminating
certain redundancies from and
providing additional clarity to the
language in the existing fee schedule.
The Exchange believes that these
changes will provide greater
transparency to Members about how the
Exchange assesses fees and calculates
rebates, as well as allowing Members to
more easily validate their bills on a
monthly basis. The Exchange notes that
none of these changes substantively
amend any fee or rebate, nor do they
alter the manner in which the Exchange
assesses fees or calculates rebates.
Specifically, the Exchange is proposing
the following:
• To make clear that rebates are
indicated by parentheses.
• To state the following: The rates
listed in the Standard Rates table apply
unless a Member’s transaction is
assigned a fee code other than a
standard fee code. If a Member’s
transaction is assigned a fee code other
than a standard fee code, the rates listed
in the Fee Codes table will apply.
Footnotes provide further explanatory
text or, where annotated to fee codes,
indicate variable rate changes, provided
the conditions in the footnote are met.
Unless otherwise noted, all routing fees
or rebates in the Fee Codes and
Associated Fees table are for removing
liquidity from the destination venue.
• To add a section and chart titled
‘‘Standard Rates,’’ which will include
the standard fees and rebates for
securities priced both at or above $1.00
and below $1.00 for adding liquidity,
removing liquidity, and routing and
removing liquidity from another venue
as well as the standard fee codes
associated with these rates.
• To add a section titled ‘‘Fee Codes
and Associated Fees,’’ which will
include the fee or rebate, the fee code,
and a description for each possible
execution that could occur on the
Exchange or on another venue.
• To add a section titled
‘‘Definitions,’’ which will include
definitions that are defined in the
current fee schedule. The Exchange also
notes that ‘‘Other Non-Displayed
Liquidity’’ will not be included in
‘‘Definitions’’ because, as proposed, it is
captured in the section titled ‘‘Fee
Codes and Associated Fees.’’ These
E:\FR\FM\24DEN1.SGM
24DEN1
]]>Agencies
[Federal Register Volume 79, Number 247 (Wednesday, December 24, 2014)]
[Notices]
[Pages 77545-77548]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-30128]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31384; 812-13961]
SSgA Funds Management, Inc., et al.; Notice of Application
December 18, 2014.
AGENCY: Securities and Exchange Commission (the ``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (``Act'') for an exemption from section 15(a) of
the Act and rule 18f-2 under the Act, as well as from certain
disclosure requirements.
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Summary of Application: Applicants request an order that would permit
them to enter into and materially amend subadvisory agreements without
shareholder approval and would grant relief from certain disclosure
requirements.
Applicants: SSgA Funds Management, Inc. (``SSgA FM'') and SPDR Series
Trust, SPDR Index Shares Funds, SSgA Master Trust and SSgA Active Trust
(each, a ``Trust,'' and collectively, the ``Trusts,'' and together with
SSgA FM, ``Applicants'').
DATES: Filing Dates: The application was filed on September 16, 2011,
and amended on March 13, 2012, August 18, 2014 and December 12, 2014.
Applicants have agreed to file an amendment during the notice period,
the substance of which is reflected in this notice.
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 January 12, 2015, 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 upon 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: The Commission: Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants:
Joshua A. Weinberg, Esq., State Street Global Advisors, State Street
Financial Center, One Lincoln Street, Boston, MA 02111.
FOR FURTHER INFORMATION CONTACT: Mark N. Zaruba, Senior Counsel, at
(202) 551-6878, or Mary Kay Frech, Branch Chief, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the ``Company'' name box, at https://www.sec.gov/search/search.htm
or by calling (202) 551-8090.
Applicants' Representations
1. Each Trust is organized as a business trust under the laws of
the Commonwealth of Massachusetts and registered under the Act as an
open-end management investment company. Each Trust will offer multiple
series (each a ``Fund''),\1\ some of which currently operate, or may in
the future operate, as exchange-traded funds.\2\ SSgA FM, a
Massachusetts corporation, is a wholly-owned subsidiary of State Street
Corporation. SSgA FM is, and any other Adviser will be, registered as
an investment adviser under the Investment Advisers Act of 1940 (the
[[Page 77546]]
``Advisers Act''). SSgA FM serves as the investment adviser to each of
the Funds pursuant to a separate investment advisory agreement (each,
an ``Investment Advisory Agreement'' and collectively, the ``Investment
Advisory Agreements'') with the relevant Trust. Each Investment
Advisory Agreement was approved by the Trust's board of trustees (the
``Board''),\3\ including a majority of the trustees who are not
``interested persons,'' as defined in section 2(a)(19) of the Act (for
any Board, the ``Independent Trustees''), and by the initial
shareholder of each Fund in the manner required by sections 15(a) and
15(c) of the Act and rule 18f-2 under the Act.
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\1\ Currently, certain series of SSgA Active Trust are part of a
Master-Feeder Structure as Feeder Funds investing in corresponding
Master Funds that are series of SSgA Master Trust. A ``Master-Feeder
Structure'' involves a ``Feeder Fund'' investing in a corresponding
``Master Fund.''
\2\ Applicants also request relief with respect to future series
of the Trust and any other existing or future registered open-end
management investment company or series thereof that: (a) Is advised
by SSgA FM or an entity controlling, controlled by, or under common
control with SSgA FM (collectively, the ``Adviser'') or its
successors; (b) uses the multi-manager structure described in the
application (``Manager of Managers Structure''); and (c) complies
with the terms and conditions of the application (included in the
term ``Funds''). Every entity that currently intends to rely on the
requested order is named as an Applicant. For purposes of the
requested order, ``successor'' is limited to an entity or entities
that result from a reorganization into another jurisdiction or a
change in the type of business organization. If the name of any Fund
contains the name of a Sub-Adviser (as defined below), the name of
the Adviser, or a trademark or trade name that is owned or licensed
by the Adviser, will precede the name of the Sub-Adviser.
\3\ The term ``Board'' also includes the board of trustees or
directors of a future Fund, if different.
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2. Under the terms of each Investment Advisory Agreement, the
Adviser, subject to the oversight of the Board, manages the investment
operations and determines the composition of the portfolio of each
Fund, including the purchase, retention and disposition of the
securities and other instruments held by the Fund. For its services to
each Fund, the Adviser receives an investment advisory fee from that
Fund as specified in the applicable Investment Advisory Agreement
computed as a percentage of the Fund's average daily net assets. Each
Investment Advisory Agreement also permits the Adviser, subject to the
approval of the Board, including a majority of the Independent
Trustees, and the shareholders of the applicable Fund (if required by
applicable law), to delegate portfolio management responsibilities of
all or a portion of a Fund to one or more subadvisers (``Sub-
Advisers''). The Adviser has entered into subadvisory agreements
(``Sub-Advisory Agreements'') with various Sub-Advisers to provide
investment advisory services to certain Funds.\4\ Each Sub-Adviser is,
and each future Sub-Adviser will be, an ``investment adviser'' as
defined in section 2(a)(20) of the Act as well as registered with the
Commission as an investment adviser under the Advisers Act or exempt
from such registration. The Adviser will evaluate and recommend Sub-
Advisers to the Board and will monitor and evaluate each Sub-Adviser's
investment programs, performance and compliance. The Adviser will
recommend to the Board whether Sub-Advisory Agreements should be
renewed, modified or terminated. The Adviser currently compensates each
Sub-Adviser out of the fee paid by a Fund to the Adviser under the
Investment Advisory Agreement. However, Applicants note that future
arrangements with one or more Sub-Advisers may be implemented whereby a
Fund will be responsible for paying subadvisory fees directly to the
Sub-Adviser.
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\4\ Currently, Nuveen Asset Management LLC, GSO/Blackstone Debt
Funds Management LLC, and Massachusetts Financial Services Company
serve as Sub-Advisers to certain Funds.
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3. Applicants request an order (``Order'') to permit the Adviser,
subject to Board approval, to select certain Sub-Advisers to manage all
or a portion of the assets of a Fund pursuant to a Sub-Advisory
Agreement and materially amend Sub-Advisory Agreements without
obtaining shareholder approval. The requested relief will not extend to
any Sub-Adviser that is an affiliated person, as defined in section
2(a)(3) of the Act, of a Fund, any Feeder Fund, or the Adviser, other
than by reason of serving as a Sub-Adviser to a Fund (``Affiliated Sub-
Adviser'').
4. Applicants also request an order exempting the Funds from
certain disclosure provisions described below that may require the
Applicants to disclose fees paid by the Adviser or a Fund to each Sub-
Adviser. Applicants seek an order to permit each Fund to disclose (as a
dollar amount and a percentage of a Fund's net assets) only: (a) The
aggregate fees paid to the Adviser and any Affiliated Sub-Advisers; and
(b) the aggregate fees paid to Sub-Advisers other than Affiliated Sub-
Advisers (collectively, the ``Aggregate Fee Disclosure''). A Fund that
employs an Affiliated Sub-Adviser will provide separate disclosure of
any fees paid to the Affiliated Sub-Adviser.
5. The Funds will inform shareholders of the hiring of a new Sub-
Adviser pursuant to the following procedures (``Modified Notice and
Access Procedures''): (a) Within 90 days after a new Sub-Advisor is
hired for any Fund, that Fund will send its shareholders \5\ either a
Multi-manager Notice or a Multi-manager Notice and Multi-manager
Information Statement; \6\ and (b) the Fund will make the Multi-manager
Information Statement available on the Web site identified in the
Multi-manager Notice no later than when the Multi-manager Notice (or
Multi-manager Notice and Multi-manager Information Statement) is first
sent to shareholders, and will maintain it on that Web site for at
least 90 days.
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\5\ If the Fund utilizing the Manager of Managers Structure is a
Master Fund, for purposes of the Modified Notice and Access
Procedures, `shareholders' include both the shareholders of the
applicable Master Fund and the shareholders of its Feeder Funds.
\6\ A ``Multi-manager Notice'' will be modeled on a Notice of
Internet Availability as defined in rule 14a-16 under the Securities
Exchange Act of 1934 (``Exchange Act''), and specifically will,
among other things: (a) Summarize the relevant information regarding
the new Sub-Adviser; (b) inform shareholders that the Multi-manager
Information Statement is available on a Web site; (c) provide the
Web site address; (d) state the time period during which the Multi-
manager Information Statement will remain available on that Web
site; (e) provide instructions for accessing and printing the Multi-
manager Information Statement; and (f) instruct the shareholder that
a paper or email copy of the Multi manager Information Statement may
be obtained, without charge, by contacting the Funds.
A ``Multi-manager Information Statement'' will meet the
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule
14A under the Exchange Act for an information statement, except as
modified by the requested order to permit Aggregate Fee Disclosure.
Multi-manager Information Statements will be filed electronically
with the Commission via the EDGAR system.
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Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that it is
unlawful for any person to act as an investment adviser to a registered
investment company except pursuant to a written contract that has been
approved by the vote of a majority of the company's outstanding voting
securities. Rule 18f-2 under the Act provides that each series or class
of stock in a series investment company affected by a matter must
approve that matter if the Act requires shareholder approval.
2. Form N-1A is the registration statement used by open-end
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of
the method and amount of the investment adviser's compensation.
3. Rule 20a-1 under the Act requires proxies solicited with respect
to an investment company to comply with Schedule 14A under the Exchange
Act. Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and 22(c)(9) of
Schedule 14A, taken together, require a proxy statement for a
shareholder meeting at which the advisory contract will be voted upon
to include the ``rate of compensation of the investment adviser,'' the
``aggregate amount of the investment adviser's fees,'' a description of
the ``terms of the contract to be acted upon,'' and, if a change in the
advisory fee is proposed, the existing and proposed fees and the
difference between the two fees.
4. Regulation S-X sets forth the requirements for financial
statements required to be included as part of a registered investment
company's registration statement and shareholder reports filed with the
Commission. Sections 6-07(2)(a), (b) and (c) of Regulation S-X require
a registered investment company to include in its financial statement
information about the investment advisory fees.
[[Page 77547]]
5. Section 6(c) of the Act provides that the Commission may exempt
any person, security, or transaction or any class or classes of
persons, securities, or transactions from any provisions of the Act, or
from any rule thereunder, if such exemption is necessary or appropriate
in the public interest and consistent with the protection of investors
and the purposes fairly intended by the policy and provisions of the
Act. Applicants state that the requested relief meets this standard for
the reasons discussed below.
6. Applicants assert that the shareholders expect the Adviser,
subject to the review and approval of the Board, to select the Sub-
Advisers who are best suited to achieve the Fund's investment
objective. Applicants assert that, from the perspective of the
shareholder, the role of the Sub-Adviser is substantially equivalent to
the role of the individual portfolio managers employed by traditional
investment company advisory firms. Applicants state that requiring
shareholder approval of each Subadvisory Agreement would impose
unnecessary delays and expenses on the Funds, and may preclude the Fund
from acting promptly when the Board and the Adviser believe that a
change would benefit a Fund and its shareholders. Applicants note that
the Investment Advisory Agreement and any Sub-Advisory Agreement with
an Affiliated Sub-Adviser (if any) will continue to be subject to the
shareholder approval requirements of section 15(a) of the Act and rule
18f-2 under the Act.
7. Applicants assert that the requested disclosure relief would
benefit shareholders of the Funds because it would improve the
Adviser's ability to negotiate the fees paid to Sub-Advisers.
Applicants state that the Adviser may be able to negotiate rates that
are below a Sub-Adviser's ``posted'' amounts, if the Adviser is not
required to disclose the Sub-Advisers' fees to the public. Applicants
submit that the requested relief will encourage Sub-Advisers to
negotiate lower subadvisory fees with the Adviser if the lower fees are
not required to be made public.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions: \7\
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\7\ Applicants will only comply with conditions 12, 13, 14 and
15 with respect to those series that rely on the relief that would
allow them to provide Aggregate Fee Disclosure. Each Trust will
comply with condition 13 if any series of the respective Trust
provides Aggregate Fee Disclosure in its registration statement.
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1. Before a Fund may rely on the Order, the operation of the Fund
in the manner described in the application will be approved by a
majority of the Fund's outstanding voting securities, as defined in the
Act, which in the case of a Master Fund will include voting
instructions provided by shareholders of the Feeder Funds investing in
such Master Fund or other voting arrangements that comply with section
12(d)(1)(E)(iii)(aa) of the Act, or, in the case of a Fund whose public
shareholders purchase shares on the basis of a prospectus containing
the disclosure contemplated by condition 2 below, by the initial
shareholder(s) before offering the Fund's shares to the public.
2. Each Fund that relies on the Order, and in the case of Master
Fund relying on the Order, each Feeder Fund investing in such Master
Fund, will disclose in its prospectus the existence, substance, and
effect of any Order granted pursuant to the application. Each Fund
relying on the Order (and any such Feeder Fund) will hold itself out to
the public as utilizing the Manager of Managers Structure. Each
prospectus will prominently disclose that the Adviser has ultimate
responsibility (subject to oversight by the Board) to oversee the Sub-
Advisers and recommend their hiring, termination and replacement.
3. Funds will inform shareholders, and if the Fund relying on the
Order is a Master Fund, shareholders of any Feeder Funds of the hiring
of a new Sub-Adviser within 90 days after the hiring of the new Sub-
Adviser pursuant to the Modified Notice and Access Procedures.
4. The Adviser will not enter into a Sub-Advisory Agreement with
any Affiliated Sub-Adviser without such agreement, including the
compensation to be paid thereunder, being approved by the shareholders
of the applicable Fund.
5. At all times, at least a majority of the Board will be
Independent Trustees and the nomination of new or additional
Independent Trustees will be at the discretion of the then-existing
Independent Trustees.
6. Whenever a Sub-Adviser change is proposed for a Fund with an
Affiliated Sub-Adviser, the Board, including a majority of the
Independent Trustees, will make a separate finding, reflected in the
applicable Board minutes, that such change is in the best interests of
such Fund and its shareholders, and if the Fund relying on the Order is
a Master Fund, the best interests of any applicable Feeder Funds and
their respective shareholders, and does not involve a conflict of
interest from which the Adviser or an Affiliated Sub-Adviser derives an
inappropriate advantage.
7. The Adviser will provide general management services to each
Fund relying on the Order, including overall supervisory responsibility
for the general management and investment of the Fund's assets and,
subject to review and approval by the Board, will: (i) Set the Fund's
overall investment strategies; (ii) evaluate, select and recommend Sub-
Advisers to provide purchase and sale recommendations to the Adviser or
investment advice to all or a portion of the Fund's assets; (iii)
allocate and, when appropriate, reallocate the Fund's assets among
multiple Sub-Advisers; (iv) monitor and evaluate the Sub-Advisers'
performance; and (v) implement procedures reasonably designed to ensure
that Sub-Adviser(s) comply with the relevant Fund's investment
objectives, policies and restrictions.
8. (a) No trustee or officer of a Fund relying on the Order or a
Controlling Feeder Fund or director or officer of the Adviser will own,
directly or indirectly, any interest in a Sub-Adviser and (b) no
trustee or officer of an Affiliated Feeder Fund will own, directly or
indirectly, any interest in a Sub-Adviser of the corresponding Master
Fund; provided, however, that the foregoing limitations shall not apply
to: (x) Interests owned through a pooled investment vehicle that is not
controlled by such person; (y) ownership of less than 1% of the
outstanding securities of any class of equity or debt of a publicly
traded company that is either a Sub-Adviser or an entity that controls,
is controlled by or is under common control with a Sub-Adviser; or, (z)
solely with respect to clause (a) above, ownership of interests in the
Adviser or any entity that controls, is controlled by or is under
common control with the Adviser.\8\
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\8\ For purposes of this condition, (i) a ``Controlling Feeder
Fund'' is a Feeder Fund investing in a Master Fund relying on the
Order that controls such Master Fund, within the meaning of section
2(a)(9) of the Act; and (ii) an ``Affiliated Feeder Fund'' is a
Feeder Fund investing in a Master Fund relying on the Order that is
either (a) in the same ``group of investment companies'' (within the
meaning of section 12(d)(1)(G)(ii) of the Act) as any Fund; (b) an
affiliated person (within the meaning of section 2(a)(3) of the Act)
or an affiliated person of such an affiliated person of any Fund or
of the Adviser; or (c) advised by the Adviser.
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9. Whenever the Board approves a Sub-Advisory Agreement for a Fund,
the Board, including a majority of the Independent Trustees, will make
a separate finding that such approval is being made free of any
influence from any other Fund or Feeder Fund or its respective trustees
and officers. The finding required by this condition will
[[Page 77548]]
be documented in the minutes of the meeting of the Board, together with
the trustees' basis for the finding.
10. Any new Sub-Advisory Agreement or any amendment to an existing
Investment Advisory Agreement or Sub-Advisory Agreement for a Fund
relying on the Order that directly or indirectly results in an increase
in the aggregate advisory fee rate payable by the Fund will be
submitted to the Fund's shareholders for approval.
11. In the event the Commission adopts a rule under the Act
providing substantially similar relief to that in the Order, the
requested Order will expire on the effective date of that rule.
12. Each Fund relying on the Order and any Feeder Fund will
disclose in its registration statement the Aggregate Fee Disclosure.
13. Independent Legal Counsel, as defined in rule 0-1(a)(6) under
the Act, has been and will continue to be engaged to represent the
Independent Trustees. The selection of such counsel will be within the
discretion of the then-existing Independent Trustees.
14. The Adviser will provide the Board, no less frequently than
quarterly, with information about the profitability of the Adviser on a
per-Fund basis for each Fund relying on the Order. The information will
reflect the impact on profitability of the hiring or termination of any
Sub-Adviser during the applicable quarter.
15. Whenever a Sub-Adviser is hired or terminated, the Adviser will
provide the Board with information showing the expected impact on the
profitability of the Adviser.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-30128 Filed 12-23-14; 8:45 am]
BILLING CODE 8011-01-P
