The MainStay Funds, et al.; Notice of Application, 28031-28035 [2015-11730]
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Required Majority determines that it is
in the Regulated Fund’s best interests.
(c) If, with respect to any Follow-On
Investment:
(i) The amount of the opportunity is
not based on the Regulated Funds’ and
the Future Affiliated Funds’ outstanding
investments immediately preceding the
Follow-On Investment; and
(ii) the aggregate amount
recommended by the Adviser to be
invested by each Regulated Fund in the
Follow-On Investment, together with
the amount proposed to be invested by
the participating Future Affiliated
Funds in the same transaction, exceeds
the amount of the opportunity; then the
amount invested by each such party will
be allocated among them pro rata based
on each participating party’s capital
available for investment in the asset
class being allocated, up to the amount
proposed to be invested by each.
(d) The acquisition of Follow-On
Investments as permitted by this
condition will be considered a CoInvestment Transaction for all purposes
and subject to the other conditions set
forth in the application.
9. The Non-Interested Directors of
each Regulated Fund will be provided
quarterly for review all information
concerning Potential Co-Investment
Transactions and Co-Investment
Transactions, including investments
made by other Regulated Funds or
Future Affiliated Funds that the
Regulated Fund considered but declined
to participate in, so that the NonInterested Directors may determine
whether all investments made during
the preceding quarter, including those
investments that the Regulated Fund
considered but declined to participate
in, comply with the conditions of the
Order. In addition, the Non-Interested
Directors will consider at least annually
the continued appropriateness for the
Regulated Fund of participating in new
and existing Co-Investment
Transactions.
10. Each Regulated Fund will
maintain the records required by section
57(f)(3) of the Act as if each of the
Regulated Funds were a BDC and each
of the investments permitted under
these conditions were approved by the
Required Majority under section 57(f) of
the Act.
11. No Non-Interested Director of a
Regulated Fund will also be a director,
general partner, managing member or
principal, or otherwise an ‘‘affiliated
person’’ (as defined in the Act), of a
Future Affiliated Fund.
12. The expenses, if any, associated
with acquiring, holding or disposing of
any securities acquired in a CoInvestment Transaction (including,
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without limitation, the expenses of the
distribution of any such securities
registered for sale under the Securities
Act) will, to the extent not payable by
the Advisers under their respective
investment advisory agreements with
Future Affiliated Funds and the
Regulated Funds, be shared by the
Regulated Funds and the Future
Affiliated Funds in proportion to the
relative amounts of the securities held
or to be acquired or disposed of, as the
case may be.
13. Any transaction fee 12 (including
break-up or commitment fees but
excluding broker’s fees contemplated by
section 17(e) or 57(k) of the Act, as
applicable) received in connection with
a Co-Investment Transaction will be
distributed to the participating
Regulated Funds and Future Affiliated
Funds on a pro rata basis based on the
amounts they invested or committed, as
the case may be, in such Co-Investment
Transaction. If any transaction fee is to
be held by an Adviser pending
consummation of the transaction, the
fee will be deposited into an account
maintained by such Adviser at a bank or
banks having the qualifications
prescribed in section 26(a)(1) of the Act,
and the account will earn a competitive
rate of interest that will also be divided
pro rata among the participating
Regulated Funds and Future Affiliated
Funds based on the amounts they invest
in such Co-Investment Transaction.
None of the Future Affiliated Funds, the
Advisers, the other Regulated Funds or
any affiliated person of the Regulated
Funds or Future Affiliated Funds will
receive additional compensation or
remuneration of any kind as a result of
or in connection with a Co-Investment
Transaction (other than (a) in the case
of the Regulated Funds and the Future
Affiliated Funds, the pro rata
transaction fees described above and
fees or other compensation described in
condition 2(c)(iii)(C); and (b) in the case
of an Adviser, investment advisory fees
paid in accordance with the agreement
between the Adviser and the Regulated
Fund or Future Affiliated Fund.
14. If the Holders own in the aggregate
more than 25% of the outstanding
Shares, then the Holders will vote such
Shares as directed by an independent
third party (such as the trustee of a
voting trust or a proxy adviser) when
voting on (1) the election of directors;
(2) the removal of one or more directors;
or (3) any matters requiring approval by
the vote of a majority of the outstanding
12 Applicants are not requesting and the staff is
not providing any relief for transaction fees
received in connection with any Co-Investment
Transaction.
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28031
voting securities, as defined in Section
2(a)(42) of the Act.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–11731 Filed 5–14–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31597; File No. 812–14360]
The MainStay Funds, et al.; Notice of
Application
May 11, 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 with WhollyOwned Subadvisers (as defined below)
and Non-Affiliated Subadvisers (as
defined below) without shareholder
approval and would grant relief from
certain disclosure requirements. The
requested order would supersede a prior
order that granted relief solely with
respect to Non-Affiliated Subadvisers.1
APPLICANTS: The MainStay Funds,
MainStay Funds Trust and MainStay VP
Funds Trust (each, a ‘‘Trust’’) and New
York Life Investment Management LLC
(the ‘‘Adviser’’ or ‘‘New York Life
Investments’’).
FILING DATES: The application was filed
on September 19, 2014, and amended
on February 3, 2015, and April 3, 2015.
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 June 5, 2015, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
SUMMARY OF APPLICATION:
1 The MainStay Funds, et al., Investment
Company Act Release Nos. 27595 (December 11,
2006) (notice) and 27656 (January 8, 2007) (order).
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the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
Applicants, c/o J. Kevin Gao, Esq., New
York Life Investment Management LLC,
169 Lackawanna Avenue, Parsippany,
New Jersey 07054.
FOR FURTHER INFORMATION CONTACT:
Elizabeth G. Miller, Senior Counsel, at
(202) 551–8707, or Holly Hunter-Ceci,
Branch Chief, at (202) 551–6825
(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
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1. Each Trust is registered with the
Commission as an open-end
management investment company
under the Act. Each of MainStay Funds
Trust and MainStay VP Funds Trust is
organized as a Delaware statutory trust,
and The MainStay Funds is organized as
a Massachusetts business trust. Each
Trust may offer one or more series of
shares (each a ‘‘Fund,’’ and collectively
the ‘‘Funds’’), each with its own distinct
investment objectives, policies and
restrictions. Shares of MainStay VP
Funds Trust will be offered and sold
through insurance company accounts,
which are used to fund variable annuity
contracts. The Adviser is a Delaware
limited liability company registered
with the Commission as an investment
adviser under the Investment Advisers
Act of 1940 (the ‘‘Advisers Act’’), and
serves as investment adviser to the
Funds.
2. Applicants request an order to
permit the Adviser,2 subject to the
approval of the board of trustees of the
applicable Trust (each a ‘‘Board’’),3
2 The term ‘‘Adviser’’ includes (1) New York Life
Investments and (ii) any entity controlling,
controlled by or under common control with, New
York Life Investments or its successors. For the
purposes of the requested order, ‘‘successor’’ is
limited to an entity that results from a
reorganization into another jurisdiction or a change
in the type of business organization.
3 The term ‘‘Board’’ also includes the board of
trustees or directors of a future Subadvised Fund (as
defined below), if different from the board of
trustees of a Trust.
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including a majority of the trustees who
are not ‘‘interested persons’’ of the
Trusts or the Adviser, as defined in
section 2(a)(19) of the Act (the
‘‘Independent Trustees’’), to, without
obtaining shareholder 4 approval: (i)
Select certain wholly-owned and nonaffiliated investment Subadvisers 5 to
manage all or a portion of the assets of
one or more of the Funds pursuant to an
investment subadvisory agreement with
each Subadviser (each a ‘‘Subadvisory
Agreement’’ and collectively, the
‘‘Subadvisory Agreements’’); and (ii)
materially amend Subadvisory
Agreements with the Subadvisers.6
Applicants request that the relief apply
to the named applicants, as well as to
any future Fund and any other existing
or future registered open-end
management investment company or
series thereof that intends to rely on the
requested order in the future and (i) is
advised by the Adviser or its successors;
(ii) uses the multi-manager structure
described in the application; and (iii)
complies with the terms and conditions
set forth in the application (each, a
‘‘Subadvised Fund’’).7 The requested
4 The term ‘‘shareholder’’ includes variable
contract owners and insurance companies entitled
to give voting instructions with respect to a Fund.
Pursuant to current Commission requirements and
Commission staff interpretations, insurance
companies vote Fund shares held in registered
separate accounts in accordance with voting
instructions received from variable contract owners
or payees. In addition, Fund shares held in
registered separate accounts for which contract
owners or payees are entitled to give voting
instructions, but as to which no voting instructions
are received, are voted in proportion to the shares
for which voting instructions have been received by
that company. The term ‘‘payee’’ shall include an
individual entitled to the receipt of payment under
a variable annuity contract.
5 A ‘‘Subadviser’’ for a Fund is a Subadviser that
is (i) an indirect or direct ‘‘wholly-owned
subsidiary’’ (as such term is defined in the Act) of
the Adviser, or (ii) a sister company of the Adviser
that is an indirect or direct ‘‘wholly-owned
subsidiary’’ (as such term is defined in the Act) of
the same company that, indirectly or directly,
wholly owns the Adviser (each of (i) and (ii) a
‘‘Wholly-Owned Subadviser’’ and collectively, the
‘‘Wholly-Owned Subadvisers’’), or (iii) not an
‘‘affiliated person’’ (as such term is defined in
section 2(a)(3) of the Act) of the Funds, the
applicable Trust, or the Adviser, except to the
extent that an affiliation arises solely because the
Subadviser serves as a subadviser to one or more
Funds (each a ‘‘Non-Affiliated Subadviser’’ and
collectively, the ‘‘Non-Affiliated Subadvisers’’).
6 Shareholder approval will continue to be
required for any other subadviser changes and
material amendments to an existing subadvisory
agreement with any subadviser other than a NonAffiliated Subadviser or a Wholly-Owned
Subadviser (all such changes referred to herein as
‘‘Ineligible Subadviser Changes’’), except as
otherwise permitted by rule.
7 All registered open-end investment companies
that currently intend to rely on the requested order
are named as applicants. Any entity that relies on
the requested order will do so only in accordance
with the terms and conditions contained in the
application. If the name of any Subadvised Fund
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relief will not extend to any subadviser,
other than a Wholly-Owned Subadviser,
who is an affiliated person, as defined
in section 2(a)(3) of the Act, of the
Subadvised Funds or of the Adviser,
other than by reason of serving as a
subadviser to one or more of the
Subadvised Funds (‘‘Affiliated
Subadviser’’).
3. New York Life Investments serves
as the investment adviser to each Fund
pursuant to an investment advisory
agreement with the applicable Trust
(each an ‘‘Investment Advisory
Agreement’’ and together the
‘‘Investment Advisory Agreements’’).
Any future Adviser also will be
registered with the Commission as an
investment adviser under the Advisers
Act. Each Investment Advisory
Agreement has been or will be approved
by the applicable Board, including a
majority of the Independent Trustees,
and by the shareholders of the relevant
Fund in the manner required by
sections 15(a) and 15(c) of the Act and
rule 18f–2 thereunder. The terms of the
Investment Advisory Agreements
comply or will comply with section
15(a) of the Act.
4. Pursuant to the terms of each
Investment Advisory Agreement, the
Adviser, subject to the oversight of the
applicable Board, has agreed or will
agree to provide a continuous
investment program for each Fund and
determine the securities and other
investments to be purchased, retained,
sold or loaned by each Fund and the
portion of such assets to be invested or
held uninvested as cash. The Adviser
will periodically review each Fund’s
investment policies and strategies and,
based on the need of a particular Fund,
may recommend changes to the
investment policies and strategies of the
Fund for consideration by the Board.
For its services to each Fund, the
Adviser receives or will receive an
investment advisory fee from that Fund
as specified in the applicable
Investment Advisory Agreement.
Consistent with the terms of each
Subadvised Fund’s Investment Advisory
Agreement, the Adviser may, subject to
the approval of the Board, including a
majority of the Independent Trustees,
and the shareholders of the applicable
Subadvised Fund (if required), delegate
portfolio management responsibilities of
all or a portion of the assets of a
Subadvised Fund to a Subadviser. The
Adviser continues to have overall
responsibility for the management and
contains the name of a Subadviser, the name of the
Adviser that serves as the primary adviser to the
Subadvised Fund, or a trademark or trade name that
is owned by or publicly used to identify that
Adviser, will precede the name of the Subadviser.
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investment of the assets of each
Subadvised Fund. These responsibilities
include recommending the removal or
replacement of Subadvisers, and
determining the portion of that
Subadvised Fund’s assets to be managed
by any given Subadviser and
reallocating those assets as necessary
from time to time.
5. Pursuant to the authority under the
Investment Advisory Agreements, the
Adviser may enter into Subadvisory
Agreements with various Subadvisers
on behalf of the Funds. The Adviser has
entered into a Subadvisory Agreement
with the following Subadvisers:
Candriam Belgium S.A., Cornerstone
Capital Management Holdings LLC;
Cushing® Asset Management, LP; Eagle
Asset Management, Inc.; Epoch
Investments Partners, Inc.; Institutional
Capital LLC; Janus Capital Management
LLC; MacKay Shields LLC; Marketfield
Asset Management LLC; Markston
International LLC; Massachusetts
Financial Services Company; NYL
Investors LLC; Pacific Investment
Management Company LLC; T. Rowe
Price Associates, Inc.; Van Eck
Associates Corporation; and Winslow
Capital Management LLC. The Adviser
also may, in the future, enter into
Subadvisory Agreements with other
Subadvisers on behalf of the Funds. The
Subadvisory Agreements were or will be
approved by the applicable Board,
including a majority of the Independent
Trustees, and the shareholders of the
Subadvised Fund in accordance with
sections 15(a) and 15(c) of the Act and
rule 18f–2 thereunder. In addition, the
terms of the Subadvisory Agreements
comply or will comply fully with the
requirements of section 15(a) of the Act.
The Subadvisers, subject to the
oversight of the Adviser and the
applicable Board, determine or will
determine the securities and other
instruments to be purchased, sold or
entered into by a Subadvised Fund’s
portfolio or a portion thereof, and place
orders with brokers or dealers that they
select. The Adviser will compensate the
Subadvisers out of the fee received by
the Adviser from the applicable
Subadvised Fund under the applicable
Investment Advisory Agreement.
6. Subadvised 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 Subadviser is hired for any
Subadvised Fund, that Subadvised
Fund will send its shareholders either a
Multi-manager Notice or a Multimanager Notice and Multi-manager
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Information Statement; 8 and (b) a
Subadvised 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 state that, in the
circumstances described in the
application, a proxy solicitation to
approve the appointment of new
Subadvisers provides no more
meaningful information to shareholders
than the proposed Multi-manager
Information Statement. Applicants also
state that the applicable Board would
comply with the requirements of
sections 15(a) and 15(c) of the Act
before entering into or amending
Subadvisory Agreements.
7. Applicants also request an order
under section 6(c) of the Act exempting
the Subadvised Funds from certain
disclosure obligations that may require
each Subadvised Fund to disclose fees
paid by the Adviser to each Subadviser.
Applicants seek relief to permit each
Subadvised Fund to disclose (as a dollar
amount and a percentage of a
Subadvised Fund’s net assets) (a) the
aggregate fees paid to the Adviser and
any Wholly-Owned Subadvisers; (b) the
aggregate fees paid to Non-Affiliated
Subadvisers; and (c) the fee paid to each
Affiliated Subadviser (collectively, the
‘‘Aggregate Fee Disclosure’’). An
exemption is requested to permit a
Subadvised Fund to include only the
Aggregate Fee Disclosure. All other
items required by Sections 6–07(2)(a),
(b) and (c) of Regulation S–X will be
disclosed.
8 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 Subadviser (except
as modified to permit Aggregate Fee Disclosure, as
defined below); (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 Multimanager 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 Multimanager Information Statement may be obtained,
without charge, by contacting the Subadvised Fund.
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 order to permit Aggregate Fee
Disclosure. Multi-manager Information Statements
will be filed with the Commission via the EDGAR
system.
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Applicants’ Legal Analysis
1. Section 15(a) of the Act states, in
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, which
contract, whether with such registered
company or with an investment adviser
of such registered company, has been
approved by the vote of a majority of the
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 a registered investment
company to disclose in its statement of
additional information the method of
computing the ‘‘advisory fee payable’’
by the investment company, including
the total dollar amounts that the
investment company ‘‘paid to the
adviser (aggregated with amounts paid
to affiliated advisers, if any), and any
advisers who are not affiliated persons
of the adviser, under the investment
advisory contract for the last three fiscal
years.’’
3. Rule 20a–1 under the Act requires
proxies solicited with respect to a
registered 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 fee,’’ 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.
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
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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 their 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
applicable Board, to select a Subadviser
who is in the best position to achieve
the Subadvised 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
believe that permitting the Adviser to
perform the duties for which the
shareholders of a Subadvised Fund are
paying the Adviser—the selection,
supervision and evaluation of the
Subadviser—without incurring
unnecessary delays or expenses is
appropriate and in the interest of a
Subadvised Fund’s shareholders and
will allow such Subadvised Fund to
operate more efficiently. Applicants
state that each Investment Advisory
Agreement will continue to be fully
subject to section 15(a) of the Act and
rule 18f–2 under the Act and approved
by the relevant Board, including a
majority of the Independent Trustees, in
the manner required by sections 15(a)
and 15(c) of the Act. Applicants are not
seeking an exemption with respect to
the Investment Advisory Agreements.
7. Applicants assert that disclosure of
the individual fees that the Adviser
would pay to the Subadvisers does not
serve any meaningful purpose.
Applicants contend that the primary
reasons for requiring disclosure of
individual fees paid to Subadvisers are
to inform shareholders of expenses to be
charged by a particular Subadvised
Fund and to enable shareholders to
compare the fees to those of other
comparable investment companies.
Applicants believe that the requested
relief satisfies these objectives because
the advisory fee paid to the Adviser will
be fully disclosed and, therefore,
shareholders will know what a
Subadvised Fund’s fees and expenses
are and will be able to compare the
advisory fees a Subadvised Fund is
charged to those of other investment
companies. Applicants assert that the
requested disclosure relief would
benefit shareholders of the Subadvised
Funds because it would improve the
Adviser’s ability to negotiate the fees
paid to Subadvisers. Applicants state
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that the Adviser may be able to
negotiate rates that are below a
Subadviser’s ‘‘posted’’ amounts if the
Adviser is not required to disclose the
Subadvisers’ fees to the public.
Applicants assert that the relief will also
encourage Subadvisers to negotiate
lower subadvisory fees with the Adviser
if the lower fees are not required to be
made public.
8. Applicants submit that the
requested relief meets the standards for
relief under section 6(c) of the Act.
Applicants state that the operation of a
Subadvised Fund in the manner
described in the application must be
approved by shareholders of the
Subadvised Fund before that
Subadvised Fund may rely on the
requested order. In addition, applicants
state that any conflict of interest or
economic incentive that may exist in
connection with the Adviser selecting a
Wholly-Owned Subadviser to manage
all or a portion of the assets of a
Subadvised Fund are addressed under
the terms and conditions of the
application and will be disclosed to
shareholders and considered by the
applicable Board when it reviews the
selection or termination of Subadvisers.
Applicants also assert that conditions 6,
7, 10 and 11 are designed to provide the
Board with sufficient independence and
the resources and information it needs
to monitor and address any conflicts of
interest. Applicants state that,
accordingly, they believe the requested
relief 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’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Before a Subadvised Fund may rely
on the order requested in the
application, the operation of the
Subadvised Fund in the manner
described in the application, including
the hiring of Wholly-Owned
Subadvisers, will be, or has been,
approved by a majority of the
Subadvised Fund’s outstanding voting
securities (or if the Subadvised Fund
serves as a funding medium for any subaccount of a registered separate account,
pursuant to voting instructions provided
by variable contract owners with to
whom units of the sub-account are
credited), as defined in the Act, or, in
the case of a Subadvised Fund whose
public shareholders (or variable contract
owners through a registered separate
account) purchase shares on the basis of
a prospectus containing the disclosure
PO 00000
Frm 00150
Fmt 4703
Sfmt 4703
contemplated by condition 2 below, by
the initial shareholder before such
Subadvised Fund’s shares are offered to
the public (or the variable contract
owners through a separate account).
2. The prospectus for each
Subadvised Fund will disclose the
existence, substance, and effect of any
order granted pursuant to the
application. In addition, each
Subadvised Fund will hold itself out to
the public as employing the multimanager structure described in the
application. The prospectus will
prominently disclose that the Adviser
has the ultimate responsibility, subject
to oversight by the applicable Board, to
oversee the Subadvisers and
recommend their hiring, termination
and replacement.
3. The Adviser will provide general
management services to each
Subadvised Fund, including overall
supervisory responsibility for the
general management and investment of
the Subadvised Fund’s assets, and
subject to review and approval of the
applicable Board, will (i) set the
Subadvised Fund’s overall investment
strategies; (ii) evaluate, select, and
recommend Subadvisers to manage all
or a portion of the Subadvised Fund’s
assets; (iii) allocate and, when
appropriate, reallocate the Subadvised
Fund’s assets among Subadvisers; (iv)
monitor and evaluate the Subadvisers’
performance; and (v) implement
procedures reasonably designed to
ensure that Subadvisers comply with
the Subadvised Fund’s investment
objective, policies and restrictions.
4. A Subadvised Fund will not make
any Ineligible Subadviser Changes
without the approval of the
shareholders (or, if the Subadvised
Fund serves as a funding medium for
any sub-account of a registered separate
account, the Adviser will inform the
unitholders of the sub-account) of the
applicable Subadvised Fund.
5. Subadvised Funds will inform
shareholders (or, if the Subadvised
Fund serves as a funding medium for
any sub-account of a registered separate
account, the Adviser will inform the
unitholders of the sub-account) 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.
6. At all times, at least a majority of
the applicable Board will be
Independent Trustees, and the selection
and nomination of new or additional
Independent Trustees will be placed
within the discretion of the thenexisting Independent Trustees.
7. Independent Legal Counsel, as
defined in rule 0–1(a)(6) under the Act,
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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
applicable Board, no less frequently
than quarterly, with information about
the profitability of the Adviser on a per
Subadvised 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
applicable Board with information
showing the expected impact on the
profitability of the Adviser.
10. Whenever a Subadviser change is
proposed for a Subadvised Fund with
an Affiliated Subadviser or a WhollyOwned Subadviser, the applicable
Board, including a majority of the
Independent Trustees, will make a
separate finding, reflected in the
applicable Board minutes, that the
change is in the best interests of the
Subadvised Fund and its shareholders
and does not involve a conflict of
interest from which the Adviser or the
Affiliated Subadviser or Wholly-Owned
Subadviser derives an inappropriate
advantage.
11. No Trustee or officer of a
Subadvised 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, other than a WhollyOwned Subadviser, 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 a 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. Each Subadvised Fund will
disclose in its registration statement the
Aggregate Fee Disclosure.
13. In the event that 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 Subadvisory Agreement
or any amendment to a Subadvised
Fund’s existing investment advisory
agreement or Subadvisory Agreement
that directly or indirectly results in an
increase in the aggregate advisory fee
rate payable by the Subadvised Fund
VerDate Sep<11>2014
18:20 May 14, 2015
Jkt 235001
will be submitted to the Subadvised
Fund’s shareholders (or, if the
Subadvised Fund serves as a funding
medium for any sub-account of a
registered separate account, the Adviser
will inform the unitholders of the subaccount) for approval.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–11730 Filed 5–14–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74922; File No. SR–ICEEU–
2015–009]
Self-Regulatory Organizations; ICE
Clear Europe Limited; Notice of Filing
of Proposed Rule Change Relating to
Finance Procedures To Add
Clearstream Banking as a Triparty
Collateral Service Provider
May 11, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder 2
notice is hereby given that on May 5,
2015, ICE Clear Europe Limited (‘‘ICE
Clear Europe’’) 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
primarily prepared by ICE Clear Europe.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
ICE Clear Europe proposes
amendments to its Finance Procedures
in order to facilitate the use by CDS
Clearing Members of Clearstream
Banking as a triparty collateral service
provider.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, ICE
Clear Europe included statements
concerning the purpose of and basis for
the proposed rule change. The text of
these statements may be examined at
the places specified in Item IV below.
ICE Clear Europe has prepared
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00151
Fmt 4703
summaries, set forth in sections A, B
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
The purpose of the proposed rule
change is to modify the Finance
Procedures to allow Clearstream
Banking to serve as a triparty collateral
service provider for initial or original
margin provided in respect of all
product categories, including CDS
Contracts. (Clearstream Banking
currently serves as a triparty collateral
service provider solely for original
margin provided in respect of F&O
Contracts).
Specifically, paragraph 3.1 of the
Finance Procedures is revised to remove
the existing restriction that Clearstream
Banking may only act as a triparty
collateral service provider with respect
to Original Margin in respect of F&O
Contracts. As a result of such change,
Clearstream Banking would be
permitted to act as a triparty collateral
service provider for initial or original
margin in respect of any product
category, including the CDS product
category. (The other currently
authorized triparty collateral service
provider, Euroclear Bank, is similarly
eligible to act as such for any product
category.) A correction is also made in
paragraph 3.20 to provide that the
specified instruction deadlines apply to
triparty collateral arrangements with
both Euroclear Bank and Clearstream
Banking.
ICE Clear Europe believes that the
proposed rule change is consistent with
the requirements of Section 17A of the
Act 3 and the regulations thereunder
applicable to it. Section 17A(b)(3)(F) of
the Act 4 requires, among other things,
that the rules of a clearing agency be
designed to promote the prompt and
accurate clearance and settlement of
securities transactions and, to the extent
applicable, derivative agreements,
contracts, and transactions and to assure
the safeguarding of securities and funds
which are in the custody or control of
the clearing agency or for which it is
responsible.
The proposed amendments are
intended to extend the Clearing House’s
existing triparty collateral service to
allow optional use by Clearing Members
of Clearstream Banking as a triparty
collateral service provider with respect
to initial and original margin for the
CDS (and FX) product categories, in
3 15
4 15
Sfmt 4703
28035
U.S.C. 78q–1.
U.S.C. 78q–1(b)(3)(F).
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]]>Agencies
[Federal Register Volume 80, Number 94 (Friday, May 15, 2015)]
[Notices]
[Pages 28031-28035]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-11730]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31597; File No. 812-14360]
The MainStay Funds, et al.; Notice of Application
May 11, 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.
-----------------------------------------------------------------------
Summary of Application: Applicants request an order that would permit
them to enter into and materially amend subadvisory agreements with
Wholly-Owned Subadvisers (as defined below) and Non-Affiliated
Subadvisers (as defined below) without shareholder approval and would
grant relief from certain disclosure requirements. The requested order
would supersede a prior order that granted relief solely with respect
to Non-Affiliated Subadvisers.\1\
---------------------------------------------------------------------------
\1\ The MainStay Funds, et al., Investment Company Act Release
Nos. 27595 (December 11, 2006) (notice) and 27656 (January 8, 2007)
(order).
Applicants: The MainStay Funds, MainStay Funds Trust and MainStay VP
Funds Trust (each, a ``Trust'') and New York Life Investment Management
---------------------------------------------------------------------------
LLC (the ``Adviser'' or ``New York Life Investments'').
Filing Dates: The application was filed on September 19, 2014, and
amended on February 3, 2015, and April 3, 2015.
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 June 5, 2015, and should be accompanied by proof of service on
applicants, in the form of an affidavit or, for lawyers, a certificate
of service. Hearing requests should state
[[Page 28032]]
the nature of the writer's interest, the reason for the request, and
the issues contested. Persons who wish to be notified of a hearing may
request notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090. Applicants, c/o J. Kevin Gao,
Esq., New York Life Investment Management LLC, 169 Lackawanna Avenue,
Parsippany, New Jersey 07054.
FOR FURTHER INFORMATION CONTACT: Elizabeth G. Miller, Senior Counsel,
at (202) 551-8707, or Holly Hunter-Ceci, Branch Chief, at (202) 551-
6825 (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. Each Trust is registered with the Commission as an open-end
management investment company under the Act. Each of MainStay Funds
Trust and MainStay VP Funds Trust is organized as a Delaware statutory
trust, and The MainStay Funds is organized as a Massachusetts business
trust. Each Trust may offer one or more series of shares (each a
``Fund,'' and collectively the ``Funds''), each with its own distinct
investment objectives, policies and restrictions. Shares of MainStay VP
Funds Trust will be offered and sold through insurance company
accounts, which are used to fund variable annuity contracts. The
Adviser is a Delaware limited liability company registered with the
Commission as an investment adviser under the Investment Advisers Act
of 1940 (the ``Advisers Act''), and serves as investment adviser to the
Funds.
2. Applicants request an order to permit the Adviser,\2\ subject to
the approval of the board of trustees of the applicable Trust (each a
``Board''),\3\ including a majority of the trustees who are not
``interested persons'' of the Trusts or the Adviser, as defined in
section 2(a)(19) of the Act (the ``Independent Trustees''), to, without
obtaining shareholder \4\ approval: (i) Select certain wholly-owned and
non-affiliated investment Subadvisers \5\ to manage all or a portion of
the assets of one or more of the Funds pursuant to an investment
subadvisory agreement with each Subadviser (each a ``Subadvisory
Agreement'' and collectively, the ``Subadvisory Agreements''); and (ii)
materially amend Subadvisory Agreements with the Subadvisers.\6\
Applicants request that the relief apply to the named applicants, as
well as to any future Fund and any other existing or future registered
open-end management investment company or series thereof that intends
to rely on the requested order in the future and (i) is advised by the
Adviser or its successors; (ii) uses the multi-manager structure
described in the application; and (iii) complies with the terms and
conditions set forth in the application (each, a ``Subadvised
Fund'').\7\ The requested relief will not extend to any subadviser,
other than a Wholly-Owned Subadviser, who is an affiliated person, as
defined in section 2(a)(3) of the Act, of the Subadvised Funds or of
the Adviser, other than by reason of serving as a subadviser to one or
more of the Subadvised Funds (``Affiliated Subadviser'').
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\2\ The term ``Adviser'' includes (1) New York Life Investments
and (ii) any entity controlling, controlled by or under common
control with, New York Life Investments or its successors. For the
purposes of the requested order, ``successor'' is limited to an
entity that results from a reorganization into another jurisdiction
or a change in the type of business organization.
\3\ The term ``Board'' also includes the board of trustees or
directors of a future Subadvised Fund (as defined below), if
different from the board of trustees of a Trust.
\4\ The term ``shareholder'' includes variable contract owners
and insurance companies entitled to give voting instructions with
respect to a Fund. Pursuant to current Commission requirements and
Commission staff interpretations, insurance companies vote Fund
shares held in registered separate accounts in accordance with
voting instructions received from variable contract owners or
payees. In addition, Fund shares held in registered separate
accounts for which contract owners or payees are entitled to give
voting instructions, but as to which no voting instructions are
received, are voted in proportion to the shares for which voting
instructions have been received by that company. The term ``payee''
shall include an individual entitled to the receipt of payment under
a variable annuity contract.
\5\ A ``Subadviser'' for a Fund is a Subadviser that is (i) an
indirect or direct ``wholly-owned subsidiary'' (as such term is
defined in the Act) of the Adviser, or (ii) a sister company of the
Adviser that is an indirect or direct ``wholly-owned subsidiary''
(as such term is defined in the Act) of the same company that,
indirectly or directly, wholly owns the Adviser (each of (i) and
(ii) a ``Wholly-Owned Subadviser'' and collectively, the ``Wholly-
Owned Subadvisers''), or (iii) not an ``affiliated person'' (as such
term is defined in section 2(a)(3) of the Act) of the Funds, the
applicable Trust, or the Adviser, except to the extent that an
affiliation arises solely because the Subadviser serves as a
subadviser to one or more Funds (each a ``Non-Affiliated
Subadviser'' and collectively, the ``Non-Affiliated Subadvisers'').
\6\ Shareholder approval will continue to be required for any
other subadviser changes and material amendments to an existing
subadvisory agreement with any subadviser other than a Non-
Affiliated Subadviser or a Wholly-Owned Subadviser (all such changes
referred to herein as ``Ineligible Subadviser Changes''), except as
otherwise permitted by rule.
\7\ All registered open-end investment companies that currently
intend to rely on the requested order are named as applicants. Any
entity that relies on the requested order will do so only in
accordance with the terms and conditions contained in the
application. If the name of any Subadvised Fund contains the name of
a Subadviser, the name of the Adviser that serves as the primary
adviser to the Subadvised Fund, or a trademark or trade name that is
owned by or publicly used to identify that Adviser, will precede the
name of the Subadviser.
---------------------------------------------------------------------------
3. New York Life Investments serves as the investment adviser to
each Fund pursuant to an investment advisory agreement with the
applicable Trust (each an ``Investment Advisory Agreement'' and
together the ``Investment Advisory Agreements''). Any future Adviser
also will be registered with the Commission as an investment adviser
under the Advisers Act. Each Investment Advisory Agreement has been or
will be approved by the applicable Board, including a majority of the
Independent Trustees, and by the shareholders of the relevant Fund in
the manner required by sections 15(a) and 15(c) of the Act and rule
18f-2 thereunder. The terms of the Investment Advisory Agreements
comply or will comply with section 15(a) of the Act.
4. Pursuant to the terms of each Investment Advisory Agreement, the
Adviser, subject to the oversight of the applicable Board, has agreed
or will agree to provide a continuous investment program for each Fund
and determine the securities and other investments to be purchased,
retained, sold or loaned by each Fund and the portion of such assets to
be invested or held uninvested as cash. The Adviser will periodically
review each Fund's investment policies and strategies and, based on the
need of a particular Fund, may recommend changes to the investment
policies and strategies of the Fund for consideration by the Board. For
its services to each Fund, the Adviser receives or will receive an
investment advisory fee from that Fund as specified in the applicable
Investment Advisory Agreement. Consistent with the terms of each
Subadvised Fund's Investment Advisory Agreement, the Adviser may,
subject to the approval of the Board, including a majority of the
Independent Trustees, and the shareholders of the applicable Subadvised
Fund (if required), delegate portfolio management responsibilities of
all or a portion of the assets of a Subadvised Fund to a Subadviser.
The Adviser continues to have overall responsibility for the management
and
[[Page 28033]]
investment of the assets of each Subadvised Fund. These
responsibilities include recommending the removal or replacement of
Subadvisers, and determining the portion of that Subadvised Fund's
assets to be managed by any given Subadviser and reallocating those
assets as necessary from time to time.
5. Pursuant to the authority under the Investment Advisory
Agreements, the Adviser may enter into Subadvisory Agreements with
various Subadvisers on behalf of the Funds. The Adviser has entered
into a Subadvisory Agreement with the following Subadvisers: Candriam
Belgium S.A., Cornerstone Capital Management Holdings LLC;
Cushing[supreg] Asset Management, LP; Eagle Asset Management, Inc.;
Epoch Investments Partners, Inc.; Institutional Capital LLC; Janus
Capital Management LLC; MacKay Shields LLC; Marketfield Asset
Management LLC; Markston International LLC; Massachusetts Financial
Services Company; NYL Investors LLC; Pacific Investment Management
Company LLC; T. Rowe Price Associates, Inc.; Van Eck Associates
Corporation; and Winslow Capital Management LLC. The Adviser also may,
in the future, enter into Subadvisory Agreements with other Subadvisers
on behalf of the Funds. The Subadvisory Agreements were or will be
approved by the applicable Board, including a majority of the
Independent Trustees, and the shareholders of the Subadvised Fund in
accordance with sections 15(a) and 15(c) of the Act and rule 18f-2
thereunder. In addition, the terms of the Subadvisory Agreements comply
or will comply fully with the requirements of section 15(a) of the Act.
The Subadvisers, subject to the oversight of the Adviser and the
applicable Board, determine or will determine the securities and other
instruments to be purchased, sold or entered into by a Subadvised
Fund's portfolio or a portion thereof, and place orders with brokers or
dealers that they select. The Adviser will compensate the Subadvisers
out of the fee received by the Adviser from the applicable Subadvised
Fund under the applicable Investment Advisory Agreement.
6. Subadvised 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 Subadviser is
hired for any Subadvised Fund, that Subadvised Fund will send its
shareholders either a Multi-manager Notice or a Multi-manager Notice
and Multi-manager Information Statement; \8\ and (b) a Subadvised 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. Applicants state that, in the
circumstances described in the application, a proxy solicitation to
approve the appointment of new Subadvisers provides no more meaningful
information to shareholders than the proposed Multi-manager Information
Statement. Applicants also state that the applicable 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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\8\ 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 Subadviser (except as modified to permit Aggregate Fee
Disclosure, as defined below); (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 Subadvised Fund.
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 order to permit Aggregate Fee Disclosure. Multi-
manager Information Statements will be filed with the Commission via
the EDGAR system.
---------------------------------------------------------------------------
7. Applicants also request an order under section 6(c) of the Act
exempting the Subadvised Funds from certain disclosure obligations that
may require each Subadvised Fund to disclose fees paid by the Adviser
to each Subadviser. Applicants seek relief to permit each Subadvised
Fund to disclose (as a dollar amount and a percentage of a Subadvised
Fund's net assets) (a) the aggregate fees paid to the Adviser and any
Wholly-Owned Subadvisers; (b) the aggregate fees paid to Non-Affiliated
Subadvisers; and (c) the fee paid to each Affiliated Subadviser
(collectively, the ``Aggregate Fee Disclosure''). An exemption is
requested to permit a Subadvised Fund to include only the Aggregate Fee
Disclosure. All other items required by Sections 6-07(2)(a), (b) and
(c) of Regulation S-X will be disclosed.
Applicants' Legal Analysis
1. Section 15(a) of the Act states, in 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, which
contract, whether with such registered company or with an investment
adviser of such registered company, has been approved by the vote of a
majority of the 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 a registered
investment company to disclose in its statement of additional
information the method of computing the ``advisory fee payable'' by the
investment company, including the total dollar amounts that the
investment company ``paid to the adviser (aggregated with amounts paid
to affiliated advisers, if any), and any advisers who are not
affiliated persons of the adviser, under the investment advisory
contract for the last three fiscal years.''
3. Rule 20a-1 under the Act requires proxies solicited with respect
to a registered 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 fee,'' 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.
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
[[Page 28034]]
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
their 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 applicable Board, to select a
Subadviser who is in the best position to achieve the Subadvised 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
believe that permitting the Adviser to perform the duties for which the
shareholders of a Subadvised Fund are paying the Adviser--the
selection, supervision and evaluation of the Subadviser--without
incurring unnecessary delays or expenses is appropriate and in the
interest of a Subadvised Fund's shareholders and will allow such
Subadvised Fund to operate more efficiently. Applicants state that each
Investment Advisory Agreement will continue to be fully subject to
section 15(a) of the Act and rule 18f-2 under the Act and approved by
the relevant Board, including a majority of the Independent Trustees,
in the manner required by sections 15(a) and 15(c) of the Act.
Applicants are not seeking an exemption with respect to the Investment
Advisory Agreements.
7. Applicants assert that disclosure of the individual fees that
the Adviser would pay to the Subadvisers does not serve any meaningful
purpose. Applicants contend that the primary reasons for requiring
disclosure of individual fees paid to Subadvisers are to inform
shareholders of expenses to be charged by a particular Subadvised Fund
and to enable shareholders to compare the fees to those of other
comparable investment companies. Applicants believe that the requested
relief satisfies these objectives because the advisory fee paid to the
Adviser will be fully disclosed and, therefore, shareholders will know
what a Subadvised Fund's fees and expenses are and will be able to
compare the advisory fees a Subadvised Fund is charged to those of
other investment companies. Applicants assert that the requested
disclosure relief would benefit shareholders of the Subadvised Funds
because it would improve the Adviser's ability to negotiate the fees
paid to Subadvisers. Applicants state that the Adviser may be able to
negotiate rates that are below a Subadviser's ``posted'' amounts if the
Adviser is not required to disclose the Subadvisers' fees to the
public. Applicants assert that the relief will also encourage
Subadvisers to negotiate lower subadvisory fees with the Adviser if the
lower fees are not required to be made public.
8. Applicants submit that the requested relief meets the standards
for relief under section 6(c) of the Act. Applicants state that the
operation of a Subadvised Fund in the manner described in the
application must be approved by shareholders of the Subadvised Fund
before that Subadvised Fund may rely on the requested order. In
addition, applicants state that any conflict of interest or economic
incentive that may exist in connection with the Adviser selecting a
Wholly-Owned Subadviser to manage all or a portion of the assets of a
Subadvised Fund are addressed under the terms and conditions of the
application and will be disclosed to shareholders and considered by the
applicable Board when it reviews the selection or termination of
Subadvisers. Applicants also assert that conditions 6, 7, 10 and 11 are
designed to provide the Board with sufficient independence and the
resources and information it needs to monitor and address any conflicts
of interest. Applicants state that, accordingly, they believe the
requested relief 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' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Before a Subadvised Fund may rely on the order requested in the
application, the operation of the Subadvised Fund in the manner
described in the application, including the hiring of Wholly-Owned
Subadvisers, will be, or has been, approved by a majority of the
Subadvised Fund's outstanding voting securities (or if the Subadvised
Fund serves as a funding medium for any sub-account of a registered
separate account, pursuant to voting instructions provided by variable
contract owners with to whom units of the sub-account are credited), as
defined in the Act, or, in the case of a Subadvised Fund whose public
shareholders (or variable contract owners through a registered separate
account) purchase shares on the basis of a prospectus containing the
disclosure contemplated by condition 2 below, by the initial
shareholder before such Subadvised Fund's shares are offered to the
public (or the variable contract owners through a separate account).
2. The prospectus for each Subadvised Fund will disclose the
existence, substance, and effect of any order granted pursuant to the
application. In addition, each Subadvised Fund will hold itself out to
the public as employing the multi-manager structure described in the
application. The prospectus will prominently disclose that the Adviser
has the ultimate responsibility, subject to oversight by the applicable
Board, to oversee the Subadvisers and recommend their hiring,
termination and replacement.
3. The Adviser will provide general management services to each
Subadvised Fund, including overall supervisory responsibility for the
general management and investment of the Subadvised Fund's assets, and
subject to review and approval of the applicable Board, will (i) set
the Subadvised Fund's overall investment strategies; (ii) evaluate,
select, and recommend Subadvisers to manage all or a portion of the
Subadvised Fund's assets; (iii) allocate and, when appropriate,
reallocate the Subadvised Fund's assets among Subadvisers; (iv) monitor
and evaluate the Subadvisers' performance; and (v) implement procedures
reasonably designed to ensure that Subadvisers comply with the
Subadvised Fund's investment objective, policies and restrictions.
4. A Subadvised Fund will not make any Ineligible Subadviser
Changes without the approval of the shareholders (or, if the Subadvised
Fund serves as a funding medium for any sub-account of a registered
separate account, the Adviser will inform the unitholders of the sub-
account) of the applicable Subadvised Fund.
5. Subadvised Funds will inform shareholders (or, if the Subadvised
Fund serves as a funding medium for any sub-account of a registered
separate account, the Adviser will inform the unitholders of the sub-
account) 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.
6. At all times, at least a majority of the applicable 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.
7. Independent Legal Counsel, as defined in rule 0-1(a)(6) under
the Act,
[[Page 28035]]
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 applicable Board, no less
frequently than quarterly, with information about the profitability of
the Adviser on a per Subadvised 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 applicable Board with information showing the expected
impact on the profitability of the Adviser.
10. Whenever a Subadviser change is proposed for a Subadvised Fund
with an Affiliated Subadviser or a Wholly-Owned Subadviser, the
applicable Board, including a majority of the Independent Trustees,
will make a separate finding, reflected in the applicable Board
minutes, that the change is in the best interests of the Subadvised
Fund and its shareholders and does not involve a conflict of interest
from which the Adviser or the Affiliated Subadviser or Wholly-Owned
Subadviser derives an inappropriate advantage.
11. No Trustee or officer of a Subadvised 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, other than a Wholly-Owned
Subadviser, 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 a 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. Each Subadvised Fund will disclose in its registration
statement the Aggregate Fee Disclosure.
13. In the event that 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 Subadvisory Agreement or any amendment to a Subadvised
Fund's existing investment advisory agreement or Subadvisory Agreement
that directly or indirectly results in an increase in the aggregate
advisory fee rate payable by the Subadvised Fund will be submitted to
the Subadvised Fund's shareholders (or, if the Subadvised Fund serves
as a funding medium for any sub-account of a registered separate
account, the Adviser will inform the unitholders of the sub-account)
for approval.
For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-11730 Filed 5-14-15; 8:45 am]
BILLING CODE 8011-01-P
