Context Capital Advisers, LLC and Context Capital Funds; Notice of Application, 1519-1522 [2015-00227]

Download as PDF tkelley on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices on any basis other than the relative net asset values (‘‘NAVs’’) of the respective securities to be exchanged, ‘‘unless the terms of the offer have first been submitted to and approved by the Commission or are in accordance with such rules and regulations as the Commission may have prescribed in respect of such offers.’’ Section 11(a) was designed to prevent ‘‘switching,’’ the practice of inducing shareholders of one fund to exchange their shares for the shares of another fund for the purpose of exacting additional sales charges. Rule 11a–3 (17 CFR 270.11a–3) under the Act is an exemptive rule that permits open-end investment companies (‘‘funds’’), other than insurance company separate accounts, and funds’ principal underwriters, to make certain exchange offers to fund shareholders and shareholders of other funds in the same group of investment companies. The rule requires a fund, among other things, (i) to disclose in its prospectus and advertising literature the amount of any administrative or redemption fee imposed on an exchange transaction, (ii) if the fund imposes an administrative fee on exchange transactions, other than a nominal one, to maintain and preserve records with respect to the actual costs incurred in connection with exchanges for at least six years, and (iii) give the fund’s shareholders a sixty day notice of a termination of an exchange offer or any material amendment to the terms of an exchange offer (unless the only material effect of an amendment is to reduce or eliminate an administrative fee, sales load or redemption fee payable at the time of an exchange). The rule’s requirements are designed to protect investors against abuses associated with exchange offers, provide fund shareholders with information necessary to evaluate exchange offers and certain material changes in the terms of exchange offers, and enable the Commission staff to monitor funds’ use of administrative fees charged in connection with exchange transactions. The staff estimates that there are approximately 1,633 active open-end investment companies registered with the Commission as of March 2014. The staff estimates that 25 percent (or 408) of these funds impose a non-nominal administrative fee on exchange transactions. The staff estimates that the recordkeeping requirement of the rule requires approximately 1 hour annually of clerical time per fund, for a total of 408 hours for all funds. The staff estimates that 5 percent of these 1,633 funds (or 82) terminate an exchange offer or make a material VerDate Sep<11>2014 17:35 Jan 09, 2015 Jkt 235001 change to the terms of their exchange offer each year, requiring the fund to comply with the notice requirement of the rule. The staff estimates that complying with the notice requirement of the rule requires approximately 1 hour of attorney time and 2 hours of clerical time per fund, for a total of approximately 246 hours for all funds to comply with the notice requirement.1 The staff estimates that such notices will be enclosed with other written materials sent to shareholders, such as annual shareholder reports or account statements, and therefore any burdens associated with mailing required notices are accounted for in the burdens associated with Form N–1A registration statements for funds. The recordkeeping and notice requirements together therefore impose a total burden of 654 hours on all funds.2 The total number of respondents is 490, each responding once a year.3 The burdens associated with the disclosure requirement of the rule are accounted for in the burdens associated with the Form N–1A registration statement for funds. The estimate of average burden hours is made solely for the purposes of the Paperwork Reduction Act, and is not derived from a comprehensive or even a representative survey or study of the costs of Commission rules and forms. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. Written comments are requested on: (a) Whether the collection of information is necessary for the proper performance of the functions of the Commission, including whether the information has practical utility; (b) the accuracy of the Commission’s estimate of the burden(s) of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted 1 This estimate is based on the following calculations: (1,633 (funds) × 0.05% = 82 funds); (82 × 1 (attorney hour) = 82 total attorney hours); (82 (funds) × 2 (clerical hours) = 164 total clerical hours); (82 (attorney hours) + 164 (clerical hours) = 246 total hours). 2 This estimate is based on the following calculations: (246 (notice hours) + 408 (recordkeeping hours) = 654 total hours). 3 This estimate is based on the following calculation: (408 funds responding to recordkeeping requirement + 82 funds responding to notice requirement = 490 total respondents). PO 00000 Frm 00027 Fmt 4703 Sfmt 4703 1519 in writing within 60 days of this publication. Please direct your written comments to Pamela Dyson, Acting Director/Chief Information Officer, Securities and Exchange Commission, C/O Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549; or send an email to: PRA_Mailbox@sec.gov. Dated: January 6, 2015. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2015–00228 Filed 1–9–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 31408; 812–14266] Context Capital Advisers, LLC and Context Capital Funds; Notice of Application January 6, 2015. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application under section 6(c) of the Investment Company Act of 1940 (‘‘Act’’) for an exemption from section 15(a) of the Act and rule 18f–2 under the Act, as well as from certain disclosure requirements. AGENCY: 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: Context Capital Advisers, LLC (‘‘Context Capital’’ or the ‘‘Adviser’’) and Context Capital Funds (the ‘‘Trust’’ and collectively with Context Capital, the ‘‘Applicants’’). FILING DATES: The application was filed January 14, 2014 and amended on May 21, 2014 and September 19, 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 February 2, 2015 and should be accompanied by proof of service on the 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 SUMMARY OF APPLICATION: E:\FR\FM\12JAN1.SGM 12JAN1 1520 Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices 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: Context Capital Funds, Three Canal Plaza, Suite 600, Portland, Maine 04101; Jason A. Myers, Context Capital Advisers, LLC, 401 City Avenue, Suite 800, Bala Cynwyd, PA 19004. FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel, at (202) 551–6990, or James M. Curtis, Branch Chief, at (202) 551–6712 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s Web site by searching for the file number, or an applicant using the Company name box, at https:// www.sec.gov/search/search.htm or by calling (202) 551–8090. tkelley on DSK3SPTVN1PROD with NOTICES Applicants’ Representations 1. The Trust is organized as a Delaware statutory trust and is registered under the Act as an open-end management investment company. Currently, the Trust is comprised of one series, the Context Alternative Strategies Fund (‘‘Alternative Strategies Fund’’).1 Each of the Trust’s series will have its own investment objective, policies and restrictions. 2. Context Capital, a Delaware limited liability company, is registered as an investment adviser with the Commission under the Investment Advisers Act of 1940 (‘‘Advisers Act’’). Any future Adviser also will also be registered with the Commission as an investment adviser under the Advisers 1 Applicants also request relief with respect to any existing or 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 the Adviser or any entity controlling, controlled by, or under common control with the Adviser or its successors (included in the term ‘‘Adviser’’); (b) uses the manager of managers structure (‘‘Manager of Managers Structure’’) described in the application; and (c) complies with the terms and conditions of the application (together with the Alternative Strategies Fund, the ‘‘Funds’’ and each individually, a ‘‘Fund’’). For purposes of the requested order, ‘‘successor’’ is limited to an entity that would result from a reorganization into another jurisdiction or a change in the type of business organization. The only existing registered open-end management investment company that currently intends to rely on the requested order is the Trust. If the name of any Fund contains the name of a Subadviser, the name of the Adviser will precede the name of the Subadviser. The term ‘‘Board’’ also includes the board of trustees or directors of a future Fund. VerDate Sep<11>2014 17:35 Jan 09, 2015 Jkt 235001 Act. Context Capital serves as the investment adviser of the Alternative Strategies Fund pursuant to an investment advisory agreement with the Trust (the ‘‘Advisory Agreement’’).2 The Advisory Agreement was approved by the board of trustees of the Trust (the ‘‘Board’’), including a majority of the members of the board of trustees who are not ‘‘interested persons,’’ as defined in section 2(a)(19) of the Act, of the Trust, the Fund, or of the Adviser (‘‘Independent Trustees’’) and was approved by the initial shareholder of the Alternative Strategies Fund, in the manner required by sections 15(a) and 15(c) of the Act and rule 18f–2 under the Act.3 Applicants are not seeking any exemptions with respect to the Advisory Agreement or Future Advisory Agreements. 3. Under the terms of the Advisory Agreement, and subject to the oversight of the Board, Context Capital is responsible for the overall management of the Alternative Strategies Fund’s business affairs and selecting investments according to its investment objective, policies, and restrictions. For the investment management services that it provides to the Alternative Strategies Fund, Context Capital receives the fee specified in the Advisory Agreement based on average daily net assets. In addition, under the Advisory Agreement, Context Capital may retain one or more subadvisers, at Context Capital’s own cost and expense, subject to approval of the Board, including approval by a majority of the Independent Trustees and the shareholders of the Fund (if required by applicable law), for the purpose of managing the investment of all or a portion of the assets of the Alternative Strategies Fund. Context Capital has entered into subadvisory agreements with eight subadvisers to provide investment advisory services to the 2 The Adviser will enter into substantially similar investment advisory agreements to provide investment management services to future Funds (‘‘Future Advisory Agreements’’). The terms of Future Advisory Agreements will comply with section 15(a) of the Act, and Future Advisory Agreements will be approved by shareholders and by the Board, including a majority of the Independent Trustees, in the manner required by Sections 15(a) and 15(c) of the Act and rule 18f– 2 thereunder. References to any Advisory Agreement(s) include Future Advisory Agreements as they pertain to future Funds. 3 Context Asset Management, L.P. the parent company of the Adviser, is undergoing a reorganization resulting in the termination of the Fund’s current advisory agreement and subadvisory agreements. At a meeting held on June 16, 2014, the Fund’s Board unanimously approved a new advisory agreement and subadvisory agreements for the Fund. The new advisory agreement and subadvisory agreements become effective upon approval by the Fund’s shareholders. PO 00000 Frm 00028 Fmt 4703 Sfmt 4703 Alternative Strategies Fund.4 Each subadviser is an ‘‘investment adviser’’ as defined in section 2(a)(20) of the Act and registered as an investment adviser under the Advisers Act. The Adviser selects subadvisers based on the Adviser’s evaluation of the subadviser’s skills in managing assets pursuant to particular investment styles that are consistent with the investment objective of each Fund and recommends their hiring to the Board. For the investment advisory services subadvisers provide to the Funds, each subadviser receives annual fees from the Adviser calculated at an annual rate based on the average daily net assets of the respective Fund. The Adviser compensates each subadviser out of the fees that are paid to the Adviser under the Advisory Agreement.5 4. Applicants request an order to permit the Adviser, subject to approval of the Board, including a majority of the Independent Trustees, to do the following without obtaining shareholder approval: (a) Select an unaffiliated investment subadviser or subadvisers (each a ‘‘Subadviser’’) to manage all or a portion of the assets of the Alternative Strategies Fund or any other Fund pursuant to an investment subadvisory agreement with a Subadviser (each a ‘‘Subadvisory Agreement’’), and (b) materially amend Subadvisory Agreements. The requested relief will not extend to any subadviser that is an affiliated person, as defined in section 2(a)(3) of the Act, of the Trust, a Fund or the Adviser, other than by reason of serving as a subadviser to one or more of the Funds (‘‘Affiliated Subadviser’’). 5. If a new Subadviser is hired, the Fund 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 Subadviser is hired for any Fund, that Fund will send its shareholders either a Multimanager Notice or a Multi-manager Notice and Multi-manager Information Statement; 6 and (b) the Fund will make 4 All existing subadvisory agreements comply with sections 15(a) and (c) of the Act and rule 18f– 2 thereunder. 5 The reorganization will result in new subadvisory agreements that will become effective upon approval by the Fund’s shareholders. 6 A ‘‘Multi-manager Notice’’ will be modeled on a Notice of Internet Availability as defined in rule 14a–16 under the 1934 Act, and specifically will, among other things: (a) Summarize the relevant information regarding the new Subadviser; (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) E:\FR\FM\12JAN1.SGM 12JAN1 Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices the Multi-manager Information Statement available on the Web site identified in the Multi-manager Notice no later than when the Multi-manager Notice (or Multi-manager Notice and Multi-manager Information Statement) is first sent to shareholders, and will maintain it on that Web site for at least 90 days. Applicants assert that a proxy solicitation to approve the appointment of new Subadvisers provides no more meaningful information to shareholders than the proposed Multi-manager Information Statement. Moreover, as indicated above, the Board would comply with the requirements of sections 15(a) and 15(c) of the Act before entering into or amending Subadvisory Agreements. 6. Applicants also request an order exempting the Fund from certain disclosure provisions described below that may require the Applicants to disclose fees paid to each Subadviser by the Adviser. Applicants seek an order to permit each Fund to disclose (both as a dollar amount and a percentage of a Fund’s net assets): (a) Aggregate fees paid to the Adviser and Affiliated Subadvisers; and (b) aggregate fees paid to Subadvisers other than Affiliated Subadvisers (‘‘Aggregate Fee Disclosure’’). For any Fund that employs Affiliated Subadvisers, the Fund will provide separate disclosure of any fees paid to such Affiliated Subadvisers. tkelley on DSK3SPTVN1PROD with NOTICES 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 of 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 of such registered company. 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. 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 1934 Act for an information statement, except as modified by the requested order to permit Aggregate Fee Disclosure. Multi-manager Information Statements will be filed electronically with the Commission via the EDGAR system. VerDate Sep<11>2014 17:35 Jan 09, 2015 Jkt 235001 3. Rule 20a–1 under the Act requires proxies solicited with respect to a registered investment company to comply with Schedule 14A under the Securities Exchange Act of 1934 (‘‘1934 Act’’). Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together, require a proxy statement for a shareholder meeting at which the advisory contract will be voted upon to include the ‘‘rate of compensation of the investment adviser,’’ the ‘‘aggregate amount of the investment adviser’s fees,’’ a description of the ‘‘terms of the contract to be acted upon,’’ and, if a change in the advisory fee is proposed, the existing and proposed fees and the difference between the two fees. 4. Regulation S–X sets forth the requirements for financial statements required to be included as part of a registered investment company’s registration statement and shareholder reports filed with the Commission. Sections 6–07(2)(a), (b) and (c) of Regulation S–X require a registered investment company to include in its financial statement information about investment advisory fees. 5. Section 6(c) of the Act provides that the Commission may exempt any person, security, or transaction or any class or classes of persons, securities, or transactions from any provisions of the Act, or from any rule thereunder, if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Applicants state that the requested relief meets this standard for the reasons discussed below. 6. Applicants assert that the shareholders expect the Adviser, subject to the review and approval of the Board, to select the Subadvisers who are best suited to achieve each Fund’s investment objective. Applicants assert that, from the perspective of the shareholder, the role of the Subadvisers is substantially equivalent to the role of the individual portfolio managers employed by an investment adviser to a traditional investment company. Applicants state that requiring shareholder approval of each Subadvisory Agreement would impose unnecessary delays and expenses on the Funds and may preclude the Funds from acting promptly when the Adviser and Board consider it appropriate to hire Subadvisers or amend Subadvisory Agreements. Applicants note that the Advisory Agreements and Subadvisory Agreements with Affiliated Subadvisers (if any) will remain subject to the shareholder approval requirements of PO 00000 Frm 00029 Fmt 4703 Sfmt 4703 1521 section 15(a) of the Act and rule 18f–2 under the Act. 7. Applicants assert that the requested disclosure relief will benefit shareholders to the extent that it will facilitate lower overall investment advisory fees. Applicants state that if the Adviser is not required to disclose the Subadvisers’ fees to the public, the Adviser may be able to negotiate rates that are below a Subadviser’s ‘‘posted’’ amounts. Applicants state that the requested relief will encourage Subadvisers to negotiate lower advisory 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: 1. Before a Fund may rely on the requested 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, 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 shares of that Fund to the public. 2. The prospectus for each Fund will disclose the existence, substance, and effect of any order granted pursuant to the Application. Each Fund will hold itself out to the public as utilizing the Manager of Managers Structure. The prospectus will prominently disclose that the Adviser has ultimate responsibility (subject to oversight by the Board) to oversee the Subadvisers and recommend their hiring, termination, and replacement. 3. Funds will inform shareholders of the hiring of a new Subadviser within 90 days after the hiring of the new Subadviser, pursuant to the Modified Notice and Access Procedures. 4. The Adviser will not enter into a subadvisory agreement with any Affiliated Subadviser 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 selection and nomination of new or additional Independent Trustees will be placed within the discretion of the then-existing Independent Trustees. 6. Whenever a subadviser change is proposed for a Fund with an Affiliated Subadviser, the Board, including a majority of the Independent Trustees, will make a separate finding, reflected E:\FR\FM\12JAN1.SGM 12JAN1 tkelley on DSK3SPTVN1PROD with NOTICES 1522 Federal Register / Vol. 80, No. 7 / Monday, January 12, 2015 / Notices in the applicable Board minutes, that such change is in the best interests of the Fund and its shareholders, and does not involve a conflict of interest from which the Adviser or the Affiliated Subadviser derives an inappropriate advantage. 7. Independent legal counsel, as defined in rule 0–1(a)(6) under the Act, will be engaged to represent the Independent Trustees. The selection of such counsel will be within the discretion of the then-existing Independent Trustees. 8. The Adviser will provide the Board, no less frequently than quarterly, with information about the profitability of the Adviser on a per Fund basis. The information will reflect the impact on profitability of the hiring or termination of any Subadviser during the applicable quarter. 9. Whenever a Subadviser is hired or terminated, the Adviser will provide the Board with information showing the expected impact on the profitability of the Adviser. 10. The Adviser will provide general management services to each Fund, including overall supervisory responsibility for the general management and investment of each Fund’s assets, and, subject to review and approval of the Board, will: (a) Set each Fund’s overall investment strategies; (b) evaluate, select, and recommend Subadvisers to manage all or a portion of the each Fund’s assets; (c) allocate and, when appropriate, reallocate each Fund’s assets among one or more Subadvisers; (d) monitor and evaluate the performance of Subadvisers; and (e) implement procedures reasonably designed to ensure that Subadvisers comply with each Fund’s investment objective, policies and restrictions. 11. No trustee or officer of the Trust or a Fund, or 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 Subadviser, except for (a) ownership of interests in the Adviser or any entity that controls, is controlled by, or is under common control with the Adviser; or (b) ownership of less than 1% of the outstanding securities of any class of equity or debt of any publicly traded company that is either a Subadviser or an entity that controls, is controlled by or is under common control with a Subadviser. 12. In the event the Commission adopts a rule under the Act providing substantially similar relief to that in the order requested in the Application, the VerDate Sep<11>2014 17:35 Jan 09, 2015 Jkt 235001 requested order will expire on the effective date of that rule. 13. Each Fund will disclose the Aggregate Fee Disclosure in its registration statement. 14. Any new Subadvisory Agreement or any amendment to a Fund’s existing Advisory Agreement or Subadvisory Agreement that directly or indirectly results in an increase in the aggregate advisory rate payable by the Fund will be submitted to the Fund’s shareholders for approval. For the Commission, by the Division of Investment Management, under delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2015–00227 Filed 1–9–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 31407; 812–14355] Forum Funds II, et al.; Notice of Application January 6, 2015. 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 ‘‘1940 Act’’) for exemptions from sections 12(d)(1)(A), (B), and (C) of the 1940 Act, under sections 6(c) and 17(b) of the 1940 Act for an exemption from section 17(a) of the 1940 Act, and under section 6(c) of the 1940 Act for an exemption from rule 12d1–2(a) under the 1940 Act. AGENCY: 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 1940 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 1940 Act to invest in certain financial instruments. APPLICANTS: Forum Funds II (‘‘Trust’’), Full Circle Advisors, LLC (‘‘Initial PO 00000 Frm 00030 Fmt 4703 Sfmt 4703 Advisor’’) and Foreside Fund Services, LLC (the ‘‘Distributor’’). FILING DATES: The application was filed August 29, 2014, and amended on November 4, 2014, November 12, 2014, December 17, 2014, and December 24, 2014. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief 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 February 2, 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 1940 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: Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. Applicants: Forum Funds II, Three Canal Plaza, Suite 600, Portland, Maine 04101; Full Circle Advisors, LLC, 102 Greenwich Avenue, 2nd Floor, Greenwich, CT 06830; Foreside Fund Services LLC, Three Canal Plaza, Suite 300, Portland, ME 04101. FOR FURTHER INFORMATION CONTACT: Jill Ehrlich, Senior Counsel, at (202) 551– 6819, or David P. Bartels, 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 Trust is an open-end management company registered under the 1940 Act and organized as a Delaware statutory trust. The Trust may offer multiple series.1 1 The Applicants request that the order apply not only to the series of the Trust advised by the Initial Adviser, The BDC Income Fund, but also to any future series of the Trust 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 E:\FR\FM\12JAN1.SGM 12JAN1

Agencies

[Federal Register Volume 80, Number 7 (Monday, January 12, 2015)]
[Notices]
[Pages 1519-1522]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00227]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31408; 812-14266]


Context Capital Advisers, LLC and Context Capital Funds; Notice 
of Application

January 6, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (``Act'') for an exemption from section 15(a) of 
the Act and rule 18f-2 under the Act, as well as from certain 
disclosure requirements.

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Summary 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: Context Capital Advisers, LLC (``Context Capital'' or the 
``Adviser'') and Context Capital Funds (the ``Trust'' and collectively 
with Context Capital, the ``Applicants'').

Filing Dates: The application was filed January 14, 2014 and amended on 
May 21, 2014 and September 19, 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 February 2, 2015 and should be accompanied by proof of service 
on the 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

[[Page 1520]]

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: Context Capital 
Funds, Three Canal Plaza, Suite 600, Portland, Maine 04101; Jason A. 
Myers, Context Capital Advisers, LLC, 401 City Avenue, Suite 800, Bala 
Cynwyd, PA 19004.

FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel, 
at (202) 551-6990, or James M. Curtis, Branch Chief, at (202) 551-6712 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at https://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Trust is organized as a Delaware statutory trust and is 
registered under the Act as an open-end management investment company. 
Currently, the Trust is comprised of one series, the Context 
Alternative Strategies Fund (``Alternative Strategies Fund'').\1\ Each 
of the Trust's series will have its own investment objective, policies 
and restrictions.
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    \1\ Applicants also request relief with respect to any existing 
or 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 the Adviser or any entity controlling, 
controlled by, or under common control with the Adviser or its 
successors (included in the term ``Adviser''); (b) uses the manager 
of managers structure (``Manager of Managers Structure'') described 
in the application; and (c) complies with the terms and conditions 
of the application (together with the Alternative Strategies Fund, 
the ``Funds'' and each individually, a ``Fund''). For purposes of 
the requested order, ``successor'' is limited to an entity that 
would result from a reorganization into another jurisdiction or a 
change in the type of business organization. The only existing 
registered open-end management investment company that currently 
intends to rely on the requested order is the Trust. If the name of 
any Fund contains the name of a Subadviser, the name of the Adviser 
will precede the name of the Subadviser. The term ``Board'' also 
includes the board of trustees or directors of a future Fund.
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    2. Context Capital, a Delaware limited liability company, is 
registered as an investment adviser with the Commission under the 
Investment Advisers Act of 1940 (``Advisers Act''). Any future Adviser 
also will also be registered with the Commission as an investment 
adviser under the Advisers Act. Context Capital serves as the 
investment adviser of the Alternative Strategies Fund pursuant to an 
investment advisory agreement with the Trust (the ``Advisory 
Agreement'').\2\ The Advisory Agreement was approved by the board of 
trustees of the Trust (the ``Board''), including a majority of the 
members of the board of trustees who are not ``interested persons,'' as 
defined in section 2(a)(19) of the Act, of the Trust, the Fund, or of 
the Adviser (``Independent Trustees'') and was approved by the initial 
shareholder of the Alternative Strategies Fund, in the manner required 
by sections 15(a) and 15(c) of the Act and rule 18f-2 under the Act.\3\ 
Applicants are not seeking any exemptions with respect to the Advisory 
Agreement or Future Advisory Agreements.
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    \2\ The Adviser will enter into substantially similar investment 
advisory agreements to provide investment management services to 
future Funds (``Future Advisory Agreements''). The terms of Future 
Advisory Agreements will comply with section 15(a) of the Act, and 
Future Advisory Agreements will be approved by shareholders and by 
the Board, including a majority of the Independent Trustees, in the 
manner required by Sections 15(a) and 15(c) of the Act and rule 18f-
2 thereunder. References to any Advisory Agreement(s) include Future 
Advisory Agreements as they pertain to future Funds.
    \3\ Context Asset Management, L.P. the parent company of the 
Adviser, is undergoing a reorganization resulting in the termination 
of the Fund's current advisory agreement and subadvisory agreements. 
At a meeting held on June 16, 2014, the Fund's Board unanimously 
approved a new advisory agreement and subadvisory agreements for the 
Fund. The new advisory agreement and subadvisory agreements become 
effective upon approval by the Fund's shareholders.
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    3. Under the terms of the Advisory Agreement, and subject to the 
oversight of the Board, Context Capital is responsible for the overall 
management of the Alternative Strategies Fund's business affairs and 
selecting investments according to its investment objective, policies, 
and restrictions. For the investment management services that it 
provides to the Alternative Strategies Fund, Context Capital receives 
the fee specified in the Advisory Agreement based on average daily net 
assets. In addition, under the Advisory Agreement, Context Capital may 
retain one or more subadvisers, at Context Capital's own cost and 
expense, subject to approval of the Board, including approval by a 
majority of the Independent Trustees and the shareholders of the Fund 
(if required by applicable law), for the purpose of managing the 
investment of all or a portion of the assets of the Alternative 
Strategies Fund. Context Capital has entered into subadvisory 
agreements with eight subadvisers to provide investment advisory 
services to the Alternative Strategies Fund.\4\ Each subadviser is an 
``investment adviser'' as defined in section 2(a)(20) of the Act and 
registered as an investment adviser under the Advisers Act. The Adviser 
selects subadvisers based on the Adviser's evaluation of the 
subadviser's skills in managing assets pursuant to particular 
investment styles that are consistent with the investment objective of 
each Fund and recommends their hiring to the Board. For the investment 
advisory services subadvisers provide to the Funds, each subadviser 
receives annual fees from the Adviser calculated at an annual rate 
based on the average daily net assets of the respective Fund. The 
Adviser compensates each subadviser out of the fees that are paid to 
the Adviser under the Advisory Agreement.\5\
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    \4\ All existing subadvisory agreements comply with sections 
15(a) and (c) of the Act and rule 18f-2 thereunder.
    \5\ The reorganization will result in new subadvisory agreements 
that will become effective upon approval by the Fund's shareholders.
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    4. Applicants request an order to permit the Adviser, subject to 
approval of the Board, including a majority of the Independent 
Trustees, to do the following without obtaining shareholder approval: 
(a) Select an unaffiliated investment subadviser or subadvisers (each a 
``Subadviser'') to manage all or a portion of the assets of the 
Alternative Strategies Fund or any other Fund pursuant to an investment 
subadvisory agreement with a Subadviser (each a ``Subadvisory 
Agreement''), and (b) materially amend Subadvisory Agreements. The 
requested relief will not extend to any subadviser that is an 
affiliated person, as defined in section 2(a)(3) of the Act, of the 
Trust, a Fund or the Adviser, other than by reason of serving as a 
subadviser to one or more of the Funds (``Affiliated Subadviser'').
    5. If a new Subadviser is hired, the Fund 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 Subadviser is hired for any Fund, that Fund will send its 
shareholders either a Multi-manager Notice or a Multi-manager Notice 
and Multi-manager Information Statement; \6\ and (b) the Fund will make

[[Page 1521]]

the Multi-manager Information Statement available on the Web site 
identified in the Multi-manager Notice no later than when the Multi-
manager Notice (or Multi-manager Notice and Multi-manager Information 
Statement) is first sent to shareholders, and will maintain it on that 
Web site for at least 90 days. Applicants assert that a proxy 
solicitation to approve the appointment of new Subadvisers provides no 
more meaningful information to shareholders than the proposed Multi-
manager Information Statement. Moreover, as indicated above, the Board 
would comply with the requirements of sections 15(a) and 15(c) of the 
Act before entering into or amending Subadvisory Agreements.
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    \6\ A ``Multi-manager Notice'' will be modeled on a Notice of 
Internet Availability as defined in rule 14a-16 under the 1934 Act, 
and specifically will, among other things: (a) Summarize the 
relevant information regarding the new Subadviser; (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 1934 Act for an information statement, 
except as modified by the requested order to permit Aggregate Fee 
Disclosure. Multi-manager Information Statements will be filed 
electronically with the Commission via the EDGAR system.
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    6. Applicants also request an order exempting the Fund from certain 
disclosure provisions described below that may require the Applicants 
to disclose fees paid to each Subadviser by the Adviser. Applicants 
seek an order to permit each Fund to disclose (both as a dollar amount 
and a percentage of a Fund's net assets): (a) Aggregate fees paid to 
the Adviser and Affiliated Subadvisers; and (b) aggregate fees paid to 
Subadvisers other than Affiliated Subadvisers (``Aggregate Fee 
Disclosure''). For any Fund that employs Affiliated Subadvisers, the 
Fund will provide separate disclosure of any fees paid to such 
Affiliated Subadvisers.

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 of 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 of such registered company. Rule 18f-2 under the Act 
provides that each series or class of stock in a series investment 
company affected by a matter must approve that matter if the Act 
requires shareholder approval.
    2. Form N-1A is the registration statement used by open-end 
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of 
the method and amount of the investment adviser's compensation.
    3. Rule 20a-1 under the Act requires proxies solicited with respect 
to a registered investment company to comply with Schedule 14A under 
the Securities Exchange Act of 1934 (``1934 Act''). Items 22(c)(1)(ii), 
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together, 
require a proxy statement for a shareholder meeting at which the 
advisory contract will be voted upon to include the ``rate of 
compensation of the investment adviser,'' the ``aggregate amount of the 
investment adviser's fees,'' a description of the ``terms of the 
contract to be acted upon,'' and, if a change in the advisory fee is 
proposed, the existing and proposed fees and the difference between the 
two fees.
    4. Regulation S-X sets forth the requirements for financial 
statements required to be included as part of a registered investment 
company's registration statement and shareholder reports filed with the 
Commission. Sections 6-07(2)(a), (b) and (c) of Regulation S-X require 
a registered investment company to include in its financial statement 
information about investment advisory fees.
    5. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provisions of the Act, or 
from any rule thereunder, if such exemption is necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act. Applicants state that the requested relief meets this standard for 
the reasons discussed below.
    6. Applicants assert that the shareholders expect the Adviser, 
subject to the review and approval of the Board, to select the 
Subadvisers who are best suited to achieve each Fund's investment 
objective. Applicants assert that, from the perspective of the 
shareholder, the role of the Subadvisers is substantially equivalent to 
the role of the individual portfolio managers employed by an investment 
adviser to a traditional investment company. Applicants state that 
requiring shareholder approval of each Subadvisory Agreement would 
impose unnecessary delays and expenses on the Funds and may preclude 
the Funds from acting promptly when the Adviser and Board consider it 
appropriate to hire Subadvisers or amend Subadvisory Agreements. 
Applicants note that the Advisory Agreements and Subadvisory Agreements 
with Affiliated Subadvisers (if any) will remain 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 will 
benefit shareholders to the extent that it will facilitate lower 
overall investment advisory fees. Applicants state that if the Adviser 
is not required to disclose the Subadvisers' fees to the public, the 
Adviser may be able to negotiate rates that are below a Subadviser's 
``posted'' amounts. Applicants state that the requested relief will 
encourage Subadvisers to negotiate lower advisory 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:
    1. Before a Fund may rely on the requested 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, 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 shares of that Fund to the public.
    2. The prospectus for each Fund will disclose the existence, 
substance, and effect of any order granted pursuant to the Application. 
Each Fund will hold itself out to the public as utilizing the Manager 
of Managers Structure. The prospectus will prominently disclose that 
the Adviser has ultimate responsibility (subject to oversight by the 
Board) to oversee the Subadvisers and recommend their hiring, 
termination, and replacement.
    3. Funds will inform shareholders of the hiring of a new Subadviser 
within 90 days after the hiring of the new Subadviser, pursuant to the 
Modified Notice and Access Procedures.
    4. The Adviser will not enter into a subadvisory agreement with any 
Affiliated Subadviser 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 selection and nomination of new or 
additional Independent Trustees will be placed within the discretion of 
the then-existing Independent Trustees.
    6. Whenever a subadviser change is proposed for a Fund with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected

[[Page 1522]]

in the applicable Board minutes, that such change is in the best 
interests of the Fund and its shareholders, and does not involve a 
conflict of interest from which the Adviser or the Affiliated 
Subadviser derives an inappropriate advantage.
    7. Independent legal counsel, as defined in rule 0-1(a)(6) under 
the Act, will be engaged to represent the Independent Trustees. The 
selection of such counsel will be within the discretion of the then-
existing Independent Trustees.
    8. The Adviser will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Adviser on a 
per Fund basis. The information will reflect the impact on 
profitability of the hiring or termination of any Subadviser during the 
applicable quarter.
    9. Whenever a Subadviser is hired or terminated, the Adviser will 
provide the Board with information showing the expected impact on the 
profitability of the Adviser.
    10. The Adviser will provide general management services to each 
Fund, including overall supervisory responsibility for the general 
management and investment of each Fund's assets, and, subject to review 
and approval of the Board, will: (a) Set each Fund's overall investment 
strategies; (b) evaluate, select, and recommend Subadvisers to manage 
all or a portion of the each Fund's assets; (c) allocate and, when 
appropriate, reallocate each Fund's assets among one or more 
Subadvisers; (d) monitor and evaluate the performance of Subadvisers; 
and (e) implement procedures reasonably designed to ensure that 
Subadvisers comply with each Fund's investment objective, policies and 
restrictions.
    11. No trustee or officer of the Trust or a Fund, or 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 Subadviser, except for (a) ownership 
of interests in the Adviser or any entity that controls, is controlled 
by, or is under common control with the Adviser; or (b) ownership of 
less than 1% of the outstanding securities of any class of equity or 
debt of any publicly traded company that is either a Subadviser or an 
entity that controls, is controlled by or is under common control with 
a Subadviser.
    12. In the event the Commission adopts a rule under the Act 
providing substantially similar relief to that in the order requested 
in the Application, the requested order will expire on the effective 
date of that rule.
    13. Each Fund will disclose the Aggregate Fee Disclosure in its 
registration statement.
    14. Any new Subadvisory Agreement or any amendment to a Fund's 
existing Advisory Agreement or Subadvisory Agreement that directly or 
indirectly results in an increase in the aggregate advisory rate 
payable by the Fund will be submitted to the Fund's shareholders for 
approval.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2015-00227 Filed 1-9-15; 8:45 am]
BILLING CODE 8011-01-P
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