Advisors Asset Management, Inc. and AAM ETF Trust; Notice of Application, 11846-11850 [2016-04913]

Download as PDF 11846 Federal Register / Vol. 81, No. 44 / Monday, March 7, 2016 / Notices By the Commission. Stacy L. Ruble, Secretary. [FR Doc. 2016–04979 Filed 3–4–16; 8:45 am] BILLING CODE P POSTAL REGULATORY COMMISSION [Docket No. CP2015–142; Order No. 3121] New Postal Product Postal Regulatory Commission. Notice. AGENCY: ACTION: The Commission is noticing a recent Postal Service filing concerning a modification to an existing Global Expedited Package Services 3 negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps. DATES: Comments are due: March 8, 2016. SUMMARY: Submit comments electronically via the Commission’s Filing Online system at https:// www.prc.gov. Those who cannot submit comments electronically should contact the person identified in the FOR FURTHER INFORMATION CONTACT section by telephone for advice on filing alternatives. ADDRESSES: FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 202–789–6820. SUPPLEMENTARY INFORMATION: SECURITIES AND EXCHANGE COMMISSION II. Notice of Filings APPLICANTS: The Commission invites comments on whether the changes presented in the Postal Service’s Notice are consistent with the policies of 39 U.S.C. 3632, 3633, or 3642, 39 CFR 3015.5, and 39 CFR part 3020, subpart B. Comments are due no later than March 8, 2016. The public portions of these filings can be accessed via the Commission’s Web site (https://www.prc.gov). The Commission appoints Kenneth R. Moeller to represent the interests of the general public (Public Representative) in this docket. III. Ordering Paragraphs Table of Contents I. Introduction II. Notice of Filings III. Ordering Paragraphs I. Introduction asabaliauskas on DSK3SPTVN1PROD with NOTICES that it has filed under seal. Notice at 1– 2. The Modification ‘‘revises a few articles in the agreement to change the mailer’s minimum commitment and mail preparation requirements, and amend[s] Annex 1 of the agreement.’’ Id. at 1. The Postal Service states that it will ‘‘notify the Mailer of the Effective Date of this Modification within thirty (30) days after receiving the approval of the entities that have oversight responsibilities for the [Postal Service].’’ Id. Attachment 1 at 1. The Postal Service asserts that the Modification will not impair the ability of the contract to comply with 39 U.S.C. 3633. Notice, Attachment 2. On February 29, 2016, the Postal Service filed notice that it has agreed to a modification to the existing Global Expedited Package Services 3 negotiated service agreement approved in this docket.1 In support of its Notice, the Postal Service includes a redacted copy of the Modification and a certification of compliance with 39 U.S.C. 3633(a), as required by 39 CFR 3015.5. The Postal Service also filed the unredacted Modification and supporting financial information under seal. The Postal Service seeks to incorporate by reference the Application for NonPublic Treatment originally filed in this docket for the protection of information It is ordered: 1. The Commission reopens Docket No. CP2015–142 for consideration of matters raised by the Postal Service’s Notice. 2. Pursuant to 39 U.S.C. 505, the Commission appoints Kenneth R. Moeller to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in this proceeding. 3. Comments are due no later than March 8, 2016. 4. The Secretary shall arrange for publication of this order in the Federal Register. By the Commission. Stacy L. Ruble, Secretary. [FR Doc. 2016–04923 Filed 3–4–16; 8:45 am] BILLING CODE 7710–FW–P 1 Notice of the United States Postal Service of Filing Modification to Global Expedited Package Services 3 Negotiated Service Agreement, February 29, 2016 (Notice). The modification is an attachment to the Notice (Modification). VerDate Sep<11>2014 18:37 Mar 04, 2016 Jkt 238001 PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 [Investment Company Act Release No. 32015; 812–14535] Advisors Asset Management, Inc. and AAM ETF Trust; Notice of Application March 1, 2016. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application for an order under section 6(c) of the Investment Company Act of 1940 (‘‘Act’’) for an exemption from sections 2(a)(32), 5(a)(1), 22(d) and 22(e) of the Act and rule 22c–1 under the Act, under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and (a)(2) of the Act. AGENCY: Advisors Asset Management, Inc. (‘‘Advisors Asset Management’’) and AAM ETF Trust (the ‘‘Trust’’). SUMMARY: Summary of Application: Applicants request an order that permits: (a) Series of certain open-end management investment companies to issue shares (‘‘Shares’’) redeemable in large aggregations only (‘‘Creation Units’’); (b) secondary market transactions in Shares to occur at negotiated market prices; (c) certain series to pay redemption proceeds, under certain circumstances, more than seven days from the tender of Shares for redemption; and (d) certain affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of Creation Units. DATES: Filing Dates: The application was filed on August 20, 2015 and amended on November 12, 2015. 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 March 28, 2016, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Pursuant to rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission’s Secretary. E:\FR\FM\07MRN1.SGM 07MRN1 Federal Register / Vol. 81, No. 44 / Monday, March 7, 2016 / Notices Brent J. Fields, Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. Applicants, 18925 Base Camp Road, Suite 203, Monument, Colorado 80132. FOR FURTHER INFORMATION CONTACT: KayMario Vobis, Senior Counsel, at (202) 551–6728, or Mary Kay Frech, Branch Chief, at (202) 551–6821 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s Web site by searching for the file number, or for an applicant using the Company name box, at https:// www.sec.gov/search/search.htm or by calling (202) 551–8090. ADDRESSES: asabaliauskas on DSK3SPTVN1PROD with NOTICES Applicants’ Representations 1. The Trust, a business trust organized under the laws of Massachusetts, intends to register with the Commission as an open-end management investment company. The applicants are requesting relief not only for the Trust and its initial series, AAM Income Growth ETF (‘‘Initial Fund’’), but also with respect to any future series of the Trust, and to any registered openend management investment company or series thereof that may be created in the future and that utilizes active management investment strategies (‘‘Future Funds’’ and collectively with the Initial Fund, the ‘‘Funds’’).1 Funds may invest in equity securities or fixed income securities traded in the U.S. or non-U.S. markets or a combination of equity and fixed income securities, including ‘‘to-be-announced transactions’’ (‘‘TBA Transactions’’) 2 and depositary receipts (‘‘Depositary Receipts’’).3 The securities, other assets, 1 All entities that currently intend to rely on the requested order are named as applicants and any Fund that currently intends to rely on the requested order is identified in the application. Any other entity that relies on the requested order in the future will comply with the terms and conditions of the application. 2 A TBA Transaction is a method of trading mortgage-backed securities. In a TBA Transaction, the buyer and seller agree on general trade parameters such as agency, settlement date, par amount and price. The actual pools delivered generally are determined two days prior to the settlement date. 3 Depositary Receipts include American Depositary Receipts (‘‘ADRs’’) and Global Depositary Receipts (‘‘GDRs’’). With respect to ADRs, the depositary is typically a U.S. financial institution and the underlying securities are issued by a foreign issuer. The ADR is registered under the Securities Act of 1933 (‘‘Securities Act’’) on Form F–6. ADR trades occur either on a national securities exchange as defined in section 2(a)(26) of the Act (‘‘Listing Exchange’’) or off-exchange. Financial Industry Regulatory Authority Rule 6620 VerDate Sep<11>2014 18:37 Mar 04, 2016 Jkt 238001 and other positions in which a Fund invests are its ‘‘Portfolio Positions.’’ 4 The Trust currently expects that the Initial Fund’s investment objective will be to seek current income by investing, under normal market conditions, at least 80% of its net assets in a portfolio of dividend-paying stocks and other income producing securities. 2. Each Fund will (a) be advised by Advisors Asset Management or an entity controlling, controlled by or under common control with Advisors Asset Management (each such entity and any successor thereto, an ‘‘Adviser’’) 5 and (b) comply with the terms and conditions stated in the application. Advisors Asset Management is a Delaware corporation and is registered as an investment adviser under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). Any other Adviser to a Fund will be registered under the Advisers Act. The Adviser may retain sub-advisers (each, a ‘‘Fund SubAdviser’’) in connection with the Funds; each Fund Sub-Adviser will be registered under the Advisers Act or not subject to such registration. 3. The Trust will enter into a distribution agreement with one or more distributors (‘‘Distributor’’). Each Distributor will be registered under the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), and will act as Distributor and principal underwriter of the Funds. No Distributor will be affiliated with the Listing Exchange. The Distributor of any Fund may be an ‘‘affiliated person’’ or an affiliated person of an affiliated person of the Fund’s Adviser or Fund Sub-Adviser. requires all off-exchange transactions in ADRs to be reported within 90 seconds and ADR trade reports to be disseminated on a real-time basis. With respect to GDRs, the depositary may be a foreign or a U.S. entity, and the underlying securities may have a foreign or a U.S. issuer. All GDRs are sponsored and trade on a foreign exchange. No affiliated persons of applicants, any Adviser (as defined below), Fund Sub-Adviser (as defined below), or Fund will serve as the depositary for any Depositary Receipts held by a Fund. A Fund will not invest in any Depositary Receipts that the Adviser (or, if applicable, the Fund Sub-Adviser) deems to be illiquid or for which pricing information is not readily available. 4 If a Fund invests in derivatives: (a) The Fund’s board of trustees periodically will review and approve (i) the Fund’s use of derivatives and (ii) how the Fund’s investment adviser assesses and manages risk with respect to the Fund’s use of derivatives; and (b) the Fund’s disclosure of its use of derivatives in its offering documents and periodic reports will be consistent with relevant Commission and staff guidance. 5 For the purposes of the requested order, a ‘‘successor’’ is limited to an entity or entities that result from a reorganization into another jurisdiction or a change in the type of business organization. PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 11847 4. Shares of each Fund will be purchased from the Trust only in large aggregations of a specified number referred to as ‘‘Creation Units.’’ Creation Units may be purchased through orders placed with the Distributor by or through an ‘‘Authorized Participant’’ which is either (a) a broker-dealer or other participant in the Continuous Net Settlement (‘‘CNS’’) System of the National Securities Clearing Corporation (‘‘NSCC’’), a clearing agency that is registered with the Commission, or (b) a participant (‘‘DTC Participant’’) in the Depository Trust Company (‘‘DTC’’), and which in either case has executed a participant agreement with the Distributor with respect to the creation and redemption of Creation Units. Purchases and redemptions of the Funds’ Creation Units will be processed either through an enhanced clearing process available to DTC Participants that are also participants in the CNS system of the NSCC (the ‘‘NSCC Process’’) or through a manual clearing process that is available to all DTC Participants (the ‘‘DTC Process’’). 5. In order to keep costs low and permit each Fund to be as fully invested as possible, Shares will be purchased and redeemed in Creation Units and generally on an in-kind basis. Accordingly, except where the purchase or redemption will include cash under the limited circumstances specified below, purchasers will be required to purchase Creation Units by making an in-kind deposit of specified instruments (‘‘Deposit Instruments’’), and shareholders redeeming their Shares will receive an in-kind transfer of specified instruments (‘‘Redemption Instruments’’).6 On any given Business Day,7 the names and quantities of the instruments that constitute the Deposit Instruments and the names and quantities of the instruments that constitute the Redemption Instruments will be identical, and these instruments may be referred to, in the case of either a purchase or redemption, as the ‘‘Creation Basket.’’ In addition, the Creation Basket will correspond pro rata to the positions in a Fund’s portfolio 6 The Funds must comply with the federal securities laws in accepting Deposit Instruments and satisfying redemptions with Redemption Instruments, including that the Deposit Instruments and Redemption Instruments are sold in transactions that would be exempt from registration under the Securities Act. In accepting Deposit Instruments and satisfying redemptions with Redemption Instruments that are restricted securities eligible for resale pursuant to Rule 144A under the Securities Act, the Funds will comply with the conditions of Rule 144A. 7 Each Fund will sell and redeem Creation Units on any day the Fund is open, including as required by section 22(e) of the Act (each, a ‘‘Business Day’’). E:\FR\FM\07MRN1.SGM 07MRN1 11848 Federal Register / Vol. 81, No. 44 / Monday, March 7, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES (including cash positions),8 except: (a) In the case of bonds, for minor differences when it is impossible to break up bonds beyond certain minimum sizes needed for transfer and settlement; (b) for minor differences when rounding is necessary to eliminate fractional shares or lots that are not tradeable round lots; 9 or (c) TBA Transactions, short positions, and other positions that cannot be transferred in kind 10 will be excluded from the Creation Basket.11 If there is a difference between the net asset value (‘‘NAV’’) attributable to a Creation Unit and the aggregate market value of the Creation Basket exchanged for the Creation Unit, the party conveying instruments with the lower value will also pay to the other an amount in cash equal to that difference (the ‘‘Balancing Amount’’). 6. Purchases and redemptions of Creation Units may be made in whole or in part on a cash basis, rather than in kind, solely under the following circumstances: (a) To the extent there is a Balancing Amount, as described above; (b) if, on a given Business Day, a Fund announces before the open of trading that all purchases, all redemptions or all purchases and redemptions on that day will be made entirely in cash; (c) if, upon receiving a purchase or redemption order from an Authorized Participant, a Fund determines to require the purchase or redemption, as applicable, to be made entirely in cash; 12 (d) if, on a given Business Day, a Fund requires all Authorized Participants purchasing or redeeming Shares on that day to deposit or receive (as applicable) cash in lieu of 8 The portfolio used for this purpose will be the same portfolio used to calculate the Fund’s NAV for that Business Day. 9 A tradeable round lot for a security will be the standard unit of trading in that particular type of security in its primary market. 10 This includes instruments that can be transferred in kind only with the consent of the original counterparty to the extent the Fund does not intend to seek such consents. 11 Because these instruments will be excluded from the Creation Basket, their value will be reflected in the determination of the Balancing Amount (defined below). 12 In determining whether a particular Fund will sell or redeem Creation Units entirely on a cash or in-kind basis (whether for a given day or a given order), the key consideration will be the benefit that would accrue to the Fund and its investors. For instance, in bond transactions, the Adviser may be able to obtain better execution than Share purchasers because of the Adviser’s size, experience and potentially stronger relationships in the fixed income markets. Purchases of Creation Units either on an all cash basis or in kind are expected to be neutral to the Funds from a tax perspective. In contrast, cash redemptions typically require selling portfolio holdings, which may result in adverse tax consequences for the remaining Fund shareholders that would not occur with an in-kind redemption. As a result, tax considerations may warrant in-kind redemptions. VerDate Sep<11>2014 18:37 Mar 04, 2016 Jkt 238001 some or all of the Deposit Instruments or Redemption Instruments, respectively, solely because: (i) Such instruments are not eligible for transfer through either the NSCC Process or DTC Process; or (ii) in the case of Funds holding non-U.S. investments (‘‘Global Funds’’), such instruments are not eligible for trading due to local trading restrictions, local restrictions on securities transfers or other similar circumstances; or (e) if a Fund permits an Authorized Participant to deposit or receive (as applicable) cash in lieu of some or all of the Deposit Instruments or Redemption Instruments, respectively, solely because: (i) Such instruments are, in the case of the purchase of a Creation Unit, not available in sufficient quantity; (ii) such instruments are not eligible for trading by an Authorized Participant or the investor on whose behalf the Authorized Participant is acting; or (iii) a holder of Shares of a Fund holding non-U.S. investments would be subject to unfavorable income tax treatment if the holder receives redemption proceeds in kind.13 7. Each Business Day, before the open of trading on the Listing Exchange, each Fund will cause to be published through the NSCC the names and quantities of the instruments comprising the Creation Basket, as well as the estimated Balancing Amount (if any), for that day. The published Creation Basket will apply until a new Creation Basket is announced on the following Business Day, and there will be no intra-day changes to the Creation Basket except to correct errors in the published Creation Basket. The Listing Exchange or a major market data vendor will disseminate every 15 seconds throughout the trading day an amount representing the Fund’s estimated NAV, which will be the value of the Fund’s Portfolio Positions, on a per Share basis. 8. An investor purchasing or redeeming a Creation Unit will be charged a fee (‘‘Transaction Fee’’) to protect continuing shareholders of the Funds from the dilutive costs associated with the purchase and redemption of Creation Units.14 The Distributor will deliver a confirmation and Fund 13 A ‘‘custom order’’ is any purchase or redemption of Shares made in whole or in part on a cash basis in reliance on clause (e)(i) or (e)(ii). 14 Where a Fund permits an in-kind purchaser to deposit cash in lieu of depositing one or more Deposit Instruments, the purchaser may be assessed a higher Transaction Fee to offset the cost to the Fund of buying those particular Deposit Instruments. In all cases, such Transaction Fees will be limited in accordance with requirements of the Commission applicable to open-end management investment companies offering redeemable securities. PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 prospectus (‘‘Prospectus’’) to the purchaser. In addition, the Distributor will maintain records of both the orders placed with it and the confirmations of acceptance furnished by it. 9. Beneficial owners of Shares may sell their Shares in the secondary market. Shares will be listed on a Listing Exchange and traded in the secondary market in the same manner as other equity securities. Applicants state that it is expected that one or more specialists or market makers (collectively, ‘‘Exchange Market Makers’’) will be assigned for the Shares of each Fund. The price of Shares trading on the Listing Exchange will be based on a current bid/offer market. Transactions involving the sale of Shares on the Listing Exchange will be subject to customary brokerage commissions and charges. 10. Applicants expect that purchasers of Creation Units will include arbitrageurs and that Exchange Market Makers, acting in their unique role to provide a fair and orderly secondary market for Shares, also may purchase Creation Units for use in their own market making activities.15 Applicants expect that secondary market purchasers of Shares will include both institutional investors and retail investors.16 Applicants state that because the market price of Creation Units will be disciplined by arbitrage opportunities, investors should be able to sell Shares in the secondary market at prices that do not vary materially from their NAV. 11. Neither the Trust nor any Fund will be advertised or marketed as a conventional open-end investment company or mutual fund. Instead, each Fund will be marketed as an ‘‘activelymanaged exchange-traded fund.’’ Any advertising material that describes the 15 If Shares are listed on The NASDAQ Stock Market LLC (‘‘Nasdaq’’) or a similar electronic Listing Exchange (including NYSE Arca), one or more member firms of that Listing Exchange will act as Exchange Market Maker and maintain a market for Shares trading on that Listing Exchange. On Nasdaq, no particular Exchange Market Maker would be contractually obligated to make a market in Shares. However, the listing requirements on Nasdaq, for example, stipulate that at least two Exchange Market Makers must be registered in Shares to maintain a listing. In addition, on Nasdaq and NYSE Arca, registered Exchange Market Makers are required to make a continuous two-sided market or subject themselves to regulatory sanctions. No Exchange Market Maker will be an affiliated person or an affiliated person of an affiliated person, of the Funds, except within the meaning of section 2(a)(3)(A) or (C) of the Act due solely to ownership of Shares as discussed below. 16 Shares will be registered in book-entry form only. DTC or its nominee will be the record or registered owner of all outstanding Shares. DTC or DTC Participants will maintain records of beneficial ownership of Shares. E:\FR\FM\07MRN1.SGM 07MRN1 Federal Register / Vol. 81, No. 44 / Monday, March 7, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES features of obtaining, buying or selling Creation Units, or buying or selling Shares on the Listing Exchange, or where there is reference to redeemability, will prominently disclose that Shares are not individually redeemable and that owners of Shares may acquire Shares from a Fund and tender those Shares for redemption to a Fund in Creation Units only. 12. The Funds’ Web site, which will be publicly available prior to the public offering of Shares, will include, or will include links to, each Fund’s current Prospectus, which may be downloaded. That Web site, which will be publicly available at no charge, will also contain, on a per Share basis for each Fund, the prior Business Day’s NAV and the market closing price or the mid-point of the bid/ask spread at the time of calculation of such NAV (the ‘‘Bid/Ask Price’’), and a calculation of the premium or discount of the market closing price or Bid/Ask Price against such NAV. On each Business Day, before commencement of trading in Shares on the Listing Exchange, each Fund will also disclose on its Web site the identities and quantities of its Portfolio Positions held by the Fund that will form the basis for the Fund’s calculation of NAV at the end of the Business Day.17 concerned, and the proposed transaction is consistent with the policies of the registered investment company and the general provisions of the Act. Applicants’ Legal Analysis 1. Applicants request an order under section 6(c) of the Act for an exemption from sections 2(a)(32), 5(a)(1), 22(d) and 22(e) of the Act and rule 22c–1 under the Act, and under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and (a)(2) of the Act. 2. Section 6(c) of the Act provides that the Commission may exempt any person, security or transaction, or any class of persons, securities or transactions, from any provision of the Act, if and to the extent that 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. Section 17(b) of the Act authorizes the Commission to exempt a proposed transaction from section 17(a) of the Act if evidence establishes that the terms of the proposed transaction, including the consideration to be paid or received, are reasonable and fair and do not involve overreaching on the part of any person Section 22(d) of the Act and Rule 22c– 1 under the Act 4. Section 22(d) of the Act, among other things, prohibits a dealer from selling a redeemable security, which is currently being offered to the public by or through a principal underwriter, except at a current public offering price described in the prospectus. Rule 22c– 1 under the Act generally requires that a dealer selling, redeeming, or repurchasing a redeemable security do so only at a price based on its NAV. Applicants state that secondary market trading in Shares will take place at negotiated prices, rather than at the current offering price described in the Fund’s Prospectus. Thus, purchases and sales of Shares in the secondary market will not comply with section 22(d) of the Act and rule 22c–1 under the Act. Applicants request an exemption under section 6(c) from these provisions. 5. Applicants assert that the concerns sought to be addressed by section 22(d) of the Act and rule 22c–1 under the Act with respect to pricing are equally satisfied by the proposed method of pricing Shares. Applicants maintain that while there is little legislative history regarding section 22(d), its provisions, as well as those of rule 22c–1, appear to have been intended (a) to prevent dilution caused by certain riskless- 17 Under accounting procedures followed by the Funds, trades made on the prior Business Day (‘‘T’’) will be booked and reflected in NAV on the current Business Day (‘‘T+1’’). Accordingly, the Funds will be able to disclose at the beginning of the Business Day the portfolio that will form the basis for the NAV calculation at the end of the Business Day. VerDate Sep<11>2014 18:37 Mar 04, 2016 Jkt 238001 Sections 5(a)(1) and 2(a)(32) of the Act 3. Section 5(a)(1) of the Act defines an ‘‘open-end company’’ as a management investment company that is offering for sale or has outstanding any redeemable security of which it is the issuer. Section 2(a)(32) of the Act defines a redeemable security as any security, other than short-term paper, under the terms of which the holder, upon its presentation to the issuer, is entitled to receive approximately a proportionate share of the issuer’s current net assets, or the cash equivalent. Applicants request an order to permit the Trust to register as an open-end management investment company and redeem Shares in Creation Units only. Applicants state that each investor is entitled to purchase or redeem Creation Units rather than trade the individual Shares in the secondary market. Applicants further state that because of the arbitrage possibilities created by the redeemability of Creation Units, it is expected that the market price of an individual Share will not vary materially from its NAV. PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 11849 trading schemes by principal underwriters and contract dealers, (b) to prevent unjust discrimination or preferential treatment among buyers, and (c) to ensure an orderly distribution of shares by eliminating price competition from brokers offering shares at less than the published sales price and repurchasing shares at more than the published redemption price. 6. Applicants state that (a) secondary market transactions in Shares would not cause dilution for owners of such Shares because such transactions do not involve the Trust or Funds as parties, and (b) to the extent different prices exist during a given trading day, or from day to day, such variances occur as a result of third-party market forces, such as supply and demand. Therefore, applicants assert that secondary market transactions in Shares will not lead to discrimination or preferential treatment among purchasers. Finally, applicants contend that the proposed distribution system will be orderly because arbitrage activity will ensure that the difference between the market price of Shares and their NAV remains immaterial. Section 22(e) 7. Section 22(e) of the Act generally prohibits a registered investment company from suspending the right of redemption or postponing the date of payment of redemption proceeds for more than seven days after the tender of a security for redemption. Applicants observe that the settlement of redemptions of Creation Units of Global Funds will be contingent not only on the settlement cycle of the U.S. securities markets but also on the delivery cycles in foreign markets in which those Funds invest. Applicants assert that, under certain circumstances, the delivery cycles for transferring Portfolio Positions to redeeming investors, coupled with local market holiday schedules, may require a delivery process of up to 15 calendar days. Applicants therefore request relief from section 22(e) in order for each Global Fund to provide payment or satisfaction of redemptions within the maximum number of calendar days required for such payment or satisfaction in the principal local market(s) where transactions in its Portfolio Positions customarily clear and settle, but in any event, within a period not to exceed fifteen calendar days.18 18 Applicants acknowledge that no relief obtained from the requirements of section 22(e) will affect any obligations that they may otherwise have under rule 15c6–1 under the Exchange Act, which E:\FR\FM\07MRN1.SGM Continued 07MRN1 11850 Federal Register / Vol. 81, No. 44 / Monday, March 7, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES 8. Applicants submit that Congress adopted section 22(e) to prevent unreasonable, undisclosed or unforeseen delays in the actual payment of redemption proceeds. Applicants state that allowing redemption payments for Creation Units of a Global Fund to be made within 15 calendar days would not be inconsistent with the spirit and intent of section 22(e).19 Applicants state that each Global Fund’s statement of additional information (‘‘SAI’’) will disclose those local holidays (over the period of at least one year following the date of the SAI), if any, that are expected to prevent the delivery of redemption proceeds in seven calendar days and the maximum number of days, up to 15 calendar days, needed to deliver the proceeds for that Global Fund. Applicants are not seeking relief from section 22(e) with respect to Global Funds that do not effect redemptions of Creation Units in kind. Sections 17(a)(1) and (2) of the Act 9. Section 17(a)(1) and (2) of the Act generally prohibit an affiliated person of a registered investment company, or an affiliated person of such a person (‘‘second tier affiliate’’), from selling any security to or purchasing any security from the company. Section 2(a)(3) of the Act defines ‘‘affiliated person’’ to include any person directly or indirectly owning, controlling, or holding with power to vote 5% or more of the outstanding voting securities of the other person and any person directly or indirectly controlling, controlled by, or under common control with, the other person. Section 2(a)(9) of the Act defines ‘‘control’’ of a fund as ‘‘the power to exercise a controlling influence over the management or policies’’ of the fund and provides that a control relationship will be presumed where one person owns more than 25% of another person’s voting securities. The Funds may be deemed to be controlled by an Adviser and hence affiliated persons of each other. In addition, the Funds may be deemed to be under common control with any other registered investment company (or series thereof) advised by an Adviser (an ‘‘Affiliated Fund’’). 10. Applicants request an exemption from section 17(a) under sections 6(c) and 17(b) to permit in-kind purchases and redemptions of Creation Units from the Funds by persons that are affiliated persons or second tier affiliates of the Funds solely by virtue of one or more requires that most securities transactions be settled within three business days of the trade date. 19 Certain countries in which a Global Fund may invest have historically had settlement periods of up to 15 calendar days. VerDate Sep<11>2014 18:37 Mar 04, 2016 Jkt 238001 of the following: (a) Holding 5% or more, or more than 25%, of the outstanding Shares of one or more Funds; (b) an affiliation with a person with an ownership interest described in (a); or (c) holding 5% or more, or more than 25%, of the shares of one or more Affiliated Funds. 11. Applicants assert that no useful purpose would be served by prohibiting the affiliated persons described above from making in-kind purchases or inkind redemptions of Shares of a Fund in Creation Units. Both the deposit procedures for in-kind purchases of Creation Units and the redemption procedures for in-kind redemptions will be effected in exactly the same manner for all purchases and redemptions. The valuation of the Deposit Instruments and Redemption Instruments will be made in the same manner, and in the same manner as the Fund’s Portfolio Positions, regardless of the identity of the purchaser or redeemer. Except with respect to cash determined in accordance with the procedures described in section I.G.1. of the application, Deposit Instruments and Redemption Instruments will be the same for all purchasers and redeemers. Therefore, applicants state that the inkind purchases and redemptions will afford no opportunity for the specified affiliated persons of a Fund to effect a transaction detrimental to other holders of Shares of that Fund. Applicants do not believe that in-kind purchases and redemptions will result in abusive selfdealing or overreaching of the Fund. Applicant’s Conditions Applicants agree that any order of the Commission granting the requested relief will be subject to the following conditions: 1. As long as the Funds operate in reliance on the requested order, the Shares of the Funds will be listed on a Listing Exchange. 2. Neither the Trust nor any Fund will be advertised or marketed as an openend investment company or a mutual fund. Any advertising material that describes the purchase or sale of Creation Units or refers to redeemability will prominently disclose that the Shares are not individually redeemable and that owners of the Shares may acquire those Shares from the Fund and tender those Shares for redemption to the Fund in Creation Units only. 3. The Web site for the Funds, which is and will be publicly accessible at no charge, will contain on a per Share basis, for each Fund, the prior Business Day’s NAV and the market closing price or Bid/Ask Price, and a calculation of the premium or discount of the market PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 closing price or Bid/Ask Price against such NAV. 4. On each Business Day, before commencement of trading in Shares on the Listing Exchange, the Fund will disclose on its Web site the identities and quantities of the Portfolio Positions held by the Fund that will form the basis for the Fund’s calculation of NAV at the end of the Business Day. 5. The Adviser or any Fund SubAdviser, directly or indirectly, will not cause any Authorized Participant (or any investor on whose behalf an Authorized Participant may transact with the Fund) to acquire any Deposit Instrument for the Fund through a transaction in which the Fund could not engage directly. 6. The requested relief to permit ETF operations will expire on the effective date of any Commission rule under the Act that provides relief permitting the operation of actively managed exchange-traded funds. For the Commission, by the Division of Investment Management, under delegated authority. Robert W. Errett, Deputy Secretary. [FR Doc. 2016–04913 Filed 3–4–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77264; File No. SR–PHLX– 2016–12] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Withdrawal of Proposed Rule Change to Adopt Limit Order Protection and Market Order Protection March 1, 2016. On January 21, 2016, NASDAQ OMX PHLX LLC (the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt a Limit Order Protection and a Market Order Protection feature for members accessing PSX. The proposed rule change was published for comment in the Federal Register on February 5, 2016.3 The Commission received no comment letters on the proposal. On February 26, 2016, the Exchange withdrew the proposed rule change. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 77007 (February 1, 2016), 81 FR 6314. 4 17 CFR 200.30–3(a)(12). 2 17 E:\FR\FM\07MRN1.SGM 07MRN1

Agencies

[Federal Register Volume 81, Number 44 (Monday, March 7, 2016)]
[Notices]
[Pages 11846-11850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04913]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32015; 812-14535]


Advisors Asset Management, Inc. and AAM ETF Trust; Notice of 
Application

March 1, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940 (``Act'') for an exemption from sections 
2(a)(32), 5(a)(1), 22(d) and 22(e) of the Act and rule 22c-1 under the 
Act, under sections 6(c) and 17(b) of the Act for an exemption from 
sections 17(a)(1) and (a)(2) of the Act.

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Applicants:  Advisors Asset Management, Inc. (``Advisors Asset 
Management'') and AAM ETF Trust (the ``Trust'').
SUMMARY:  Summary of Application: Applicants request an order that 
permits: (a) Series of certain open-end management investment companies 
to issue shares (``Shares'') redeemable in large aggregations only 
(``Creation Units''); (b) secondary market transactions in Shares to 
occur at negotiated market prices; (c) certain series to pay redemption 
proceeds, under certain circumstances, more than seven days from the 
tender of Shares for redemption; and (d) certain affiliated persons of 
the series to deposit securities into, and receive securities from, the 
series in connection with the purchase and redemption of Creation 
Units.

DATES:  Filing Dates: The application was filed on August 20, 2015 and 
amended on November 12, 2015.

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 March 28, 2016, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Pursuant to rule 0-5 under the Act, hearing 
requests should state the nature of the writer's interest, any facts 
bearing upon the desirability of a hearing on the matter, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request notification by writing to the 
Commission's Secretary.

[[Page 11847]]


ADDRESSES: Brent J. Fields, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants, 
18925 Base Camp Road, Suite 203, Monument, Colorado 80132.

FOR FURTHER INFORMATION CONTACT: Kay-Mario Vobis, Senior Counsel, at 
(202) 551-6728, or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

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

Applicants' Representations

    1. The Trust, a business trust organized under the laws of 
Massachusetts, intends to register with the Commission as an open-end 
management investment company. The applicants are requesting relief not 
only for the Trust and its initial series, AAM Income Growth ETF 
(``Initial Fund''), but also with respect to any future series of the 
Trust, and to any registered open-end management investment company or 
series thereof that may be created in the future and that utilizes 
active management investment strategies (``Future Funds'' and 
collectively with the Initial Fund, the ``Funds'').\1\ Funds may invest 
in equity securities or fixed income securities traded in the U.S. or 
non-U.S. markets or a combination of equity and fixed income 
securities, including ``to-be-announced transactions'' (``TBA 
Transactions'') \2\ and depositary receipts (``Depositary 
Receipts'').\3\ The securities, other assets, and other positions in 
which a Fund invests are its ``Portfolio Positions.'' \4\ The Trust 
currently expects that the Initial Fund's investment objective will be 
to seek current income by investing, under normal market conditions, at 
least 80% of its net assets in a portfolio of dividend-paying stocks 
and other income producing securities.
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    \1\ All entities that currently intend to rely on the requested 
order are named as applicants and any Fund that currently intends to 
rely on the requested order is identified in the application. Any 
other entity that relies on the requested order in the future will 
comply with the terms and conditions of the application.
    \2\ A TBA Transaction is a method of trading mortgage-backed 
securities. In a TBA Transaction, the buyer and seller agree on 
general trade parameters such as agency, settlement date, par amount 
and price. The actual pools delivered generally are determined two 
days prior to the settlement date.
    \3\ Depositary Receipts include American Depositary Receipts 
(``ADRs'') and Global Depositary Receipts (``GDRs''). With respect 
to ADRs, the depositary is typically a U.S. financial institution 
and the underlying securities are issued by a foreign issuer. The 
ADR is registered under the Securities Act of 1933 (``Securities 
Act'') on Form F-6. ADR trades occur either on a national securities 
exchange as defined in section 2(a)(26) of the Act (``Listing 
Exchange'') or off-exchange. Financial Industry Regulatory Authority 
Rule 6620 requires all off-exchange transactions in ADRs to be 
reported within 90 seconds and ADR trade reports to be disseminated 
on a real-time basis. With respect to GDRs, the depositary may be a 
foreign or a U.S. entity, and the underlying securities may have a 
foreign or a U.S. issuer. All GDRs are sponsored and trade on a 
foreign exchange. No affiliated persons of applicants, any Adviser 
(as defined below), Fund Sub-Adviser (as defined below), or Fund 
will serve as the depositary for any Depositary Receipts held by a 
Fund. A Fund will not invest in any Depositary Receipts that the 
Adviser (or, if applicable, the Fund Sub-Adviser) deems to be 
illiquid or for which pricing information is not readily available.
    \4\ If a Fund invests in derivatives: (a) The Fund's board of 
trustees periodically will review and approve (i) the Fund's use of 
derivatives and (ii) how the Fund's investment adviser assesses and 
manages risk with respect to the Fund's use of derivatives; and (b) 
the Fund's disclosure of its use of derivatives in its offering 
documents and periodic reports will be consistent with relevant 
Commission and staff guidance.
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    2. Each Fund will (a) be advised by Advisors Asset Management or an 
entity controlling, controlled by or under common control with Advisors 
Asset Management (each such entity and any successor thereto, an 
``Adviser'') \5\ and (b) comply with the terms and conditions stated in 
the application. Advisors Asset Management is a Delaware corporation 
and is registered as an investment adviser under the Investment 
Advisers Act of 1940 (the ``Advisers Act''). Any other Adviser to a 
Fund will be registered under the Advisers Act. The Adviser may retain 
sub-advisers (each, a ``Fund Sub-Adviser'') in connection with the 
Funds; each Fund Sub-Adviser will be registered under the Advisers Act 
or not subject to such registration.
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    \5\ For the purposes of the requested order, a ``successor'' is 
limited to an entity or entities that result from a reorganization 
into another jurisdiction or a change in the type of business 
organization.
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    3. The Trust will enter into a distribution agreement with one or 
more distributors (``Distributor''). Each Distributor will be 
registered under the Securities Exchange Act of 1934, as amended (the 
``Exchange Act''), and will act as Distributor and principal 
underwriter of the Funds. No Distributor will be affiliated with the 
Listing Exchange. The Distributor of any Fund may be an ``affiliated 
person'' or an affiliated person of an affiliated person of the Fund's 
Adviser or Fund Sub-Adviser.
    4. Shares of each Fund will be purchased from the Trust only in 
large aggregations of a specified number referred to as ``Creation 
Units.'' Creation Units may be purchased through orders placed with the 
Distributor by or through an ``Authorized Participant'' which is either 
(a) a broker-dealer or other participant in the Continuous Net 
Settlement (``CNS'') System of the National Securities Clearing 
Corporation (``NSCC''), a clearing agency that is registered with the 
Commission, or (b) a participant (``DTC Participant'') in the 
Depository Trust Company (``DTC''), and which in either case has 
executed a participant agreement with the Distributor with respect to 
the creation and redemption of Creation Units. Purchases and 
redemptions of the Funds' Creation Units will be processed either 
through an enhanced clearing process available to DTC Participants that 
are also participants in the CNS system of the NSCC (the ``NSCC 
Process'') or through a manual clearing process that is available to 
all DTC Participants (the ``DTC Process'').
    5. In order to keep costs low and permit each Fund to be as fully 
invested as possible, Shares will be purchased and redeemed in Creation 
Units and generally on an in-kind basis. Accordingly, except where the 
purchase or redemption will include cash under the limited 
circumstances specified below, purchasers will be required to purchase 
Creation Units by making an in-kind deposit of specified instruments 
(``Deposit Instruments''), and shareholders redeeming their Shares will 
receive an in-kind transfer of specified instruments (``Redemption 
Instruments'').\6\ On any given Business Day,\7\ the names and 
quantities of the instruments that constitute the Deposit Instruments 
and the names and quantities of the instruments that constitute the 
Redemption Instruments will be identical, and these instruments may be 
referred to, in the case of either a purchase or redemption, as the 
``Creation Basket.'' In addition, the Creation Basket will correspond 
pro rata to the positions in a Fund's portfolio

[[Page 11848]]

(including cash positions),\8\ except: (a) In the case of bonds, for 
minor differences when it is impossible to break up bonds beyond 
certain minimum sizes needed for transfer and settlement; (b) for minor 
differences when rounding is necessary to eliminate fractional shares 
or lots that are not tradeable round lots; \9\ or (c) TBA Transactions, 
short positions, and other positions that cannot be transferred in kind 
\10\ will be excluded from the Creation Basket.\11\ If there is a 
difference between the net asset value (``NAV'') attributable to a 
Creation Unit and the aggregate market value of the Creation Basket 
exchanged for the Creation Unit, the party conveying instruments with 
the lower value will also pay to the other an amount in cash equal to 
that difference (the ``Balancing Amount'').
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    \6\ The Funds must comply with the federal securities laws in 
accepting Deposit Instruments and satisfying redemptions with 
Redemption Instruments, including that the Deposit Instruments and 
Redemption Instruments are sold in transactions that would be exempt 
from registration under the Securities Act. In accepting Deposit 
Instruments and satisfying redemptions with Redemption Instruments 
that are restricted securities eligible for resale pursuant to Rule 
144A under the Securities Act, the Funds will comply with the 
conditions of Rule 144A.
    \7\ Each Fund will sell and redeem Creation Units on any day the 
Fund is open, including as required by section 22(e) of the Act 
(each, a ``Business Day'').
    \8\ The portfolio used for this purpose will be the same 
portfolio used to calculate the Fund's NAV for that Business Day.
    \9\ A tradeable round lot for a security will be the standard 
unit of trading in that particular type of security in its primary 
market.
    \10\ This includes instruments that can be transferred in kind 
only with the consent of the original counterparty to the extent the 
Fund does not intend to seek such consents.
    \11\ Because these instruments will be excluded from the 
Creation Basket, their value will be reflected in the determination 
of the Balancing Amount (defined below).
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    6. Purchases and redemptions of Creation Units may be made in whole 
or in part on a cash basis, rather than in kind, solely under the 
following circumstances: (a) To the extent there is a Balancing Amount, 
as described above; (b) if, on a given Business Day, a Fund announces 
before the open of trading that all purchases, all redemptions or all 
purchases and redemptions on that day will be made entirely in cash; 
(c) if, upon receiving a purchase or redemption order from an 
Authorized Participant, a Fund determines to require the purchase or 
redemption, as applicable, to be made entirely in cash; \12\ (d) if, on 
a given Business Day, a Fund requires all Authorized Participants 
purchasing or redeeming Shares on that day to deposit or receive (as 
applicable) cash in lieu of some or all of the Deposit Instruments or 
Redemption Instruments, respectively, solely because: (i) Such 
instruments are not eligible for transfer through either the NSCC 
Process or DTC Process; or (ii) in the case of Funds holding non-U.S. 
investments (``Global Funds''), such instruments are not eligible for 
trading due to local trading restrictions, local restrictions on 
securities transfers or other similar circumstances; or (e) if a Fund 
permits an Authorized Participant to deposit or receive (as applicable) 
cash in lieu of some or all of the Deposit Instruments or Redemption 
Instruments, respectively, solely because: (i) Such instruments are, in 
the case of the purchase of a Creation Unit, not available in 
sufficient quantity; (ii) such instruments are not eligible for trading 
by an Authorized Participant or the investor on whose behalf the 
Authorized Participant is acting; or (iii) a holder of Shares of a Fund 
holding non-U.S. investments would be subject to unfavorable income tax 
treatment if the holder receives redemption proceeds in kind.\13\
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    \12\ In determining whether a particular Fund will sell or 
redeem Creation Units entirely on a cash or in-kind basis (whether 
for a given day or a given order), the key consideration will be the 
benefit that would accrue to the Fund and its investors. For 
instance, in bond transactions, the Adviser may be able to obtain 
better execution than Share purchasers because of the Adviser's 
size, experience and potentially stronger relationships in the fixed 
income markets. Purchases of Creation Units either on an all cash 
basis or in kind are expected to be neutral to the Funds from a tax 
perspective. In contrast, cash redemptions typically require selling 
portfolio holdings, which may result in adverse tax consequences for 
the remaining Fund shareholders that would not occur with an in-kind 
redemption. As a result, tax considerations may warrant in-kind 
redemptions.
    \13\ A ``custom order'' is any purchase or redemption of Shares 
made in whole or in part on a cash basis in reliance on clause 
(e)(i) or (e)(ii).
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    7. Each Business Day, before the open of trading on the Listing 
Exchange, each Fund will cause to be published through the NSCC the 
names and quantities of the instruments comprising the Creation Basket, 
as well as the estimated Balancing Amount (if any), for that day. The 
published Creation Basket will apply until a new Creation Basket is 
announced on the following Business Day, and there will be no intra-day 
changes to the Creation Basket except to correct errors in the 
published Creation Basket. The Listing Exchange or a major market data 
vendor will disseminate every 15 seconds throughout the trading day an 
amount representing the Fund's estimated NAV, which will be the value 
of the Fund's Portfolio Positions, on a per Share basis.
    8. An investor purchasing or redeeming a Creation Unit will be 
charged a fee (``Transaction Fee'') to protect continuing shareholders 
of the Funds from the dilutive costs associated with the purchase and 
redemption of Creation Units.\14\ The Distributor will deliver a 
confirmation and Fund prospectus (``Prospectus'') to the purchaser. In 
addition, the Distributor will maintain records of both the orders 
placed with it and the confirmations of acceptance furnished by it.
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    \14\ Where a Fund permits an in-kind purchaser to deposit cash 
in lieu of depositing one or more Deposit Instruments, the purchaser 
may be assessed a higher Transaction Fee to offset the cost to the 
Fund of buying those particular Deposit Instruments. In all cases, 
such Transaction Fees will be limited in accordance with 
requirements of the Commission applicable to open-end management 
investment companies offering redeemable securities.
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    9. Beneficial owners of Shares may sell their Shares in the 
secondary market. Shares will be listed on a Listing Exchange and 
traded in the secondary market in the same manner as other equity 
securities. Applicants state that it is expected that one or more 
specialists or market makers (collectively, ``Exchange Market Makers'') 
will be assigned for the Shares of each Fund. The price of Shares 
trading on the Listing Exchange will be based on a current bid/offer 
market. Transactions involving the sale of Shares on the Listing 
Exchange will be subject to customary brokerage commissions and 
charges.
    10. Applicants expect that purchasers of Creation Units will 
include arbitrageurs and that Exchange Market Makers, acting in their 
unique role to provide a fair and orderly secondary market for Shares, 
also may purchase Creation Units for use in their own market making 
activities.\15\ Applicants expect that secondary market purchasers of 
Shares will include both institutional investors and retail 
investors.\16\ Applicants state that because the market price of 
Creation Units will be disciplined by arbitrage opportunities, 
investors should be able to sell Shares in the secondary market at 
prices that do not vary materially from their NAV.
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    \15\ If Shares are listed on The NASDAQ Stock Market LLC 
(``Nasdaq'') or a similar electronic Listing Exchange (including 
NYSE Arca), one or more member firms of that Listing Exchange will 
act as Exchange Market Maker and maintain a market for Shares 
trading on that Listing Exchange. On Nasdaq, no particular Exchange 
Market Maker would be contractually obligated to make a market in 
Shares. However, the listing requirements on Nasdaq, for example, 
stipulate that at least two Exchange Market Makers must be 
registered in Shares to maintain a listing. In addition, on Nasdaq 
and NYSE Arca, registered Exchange Market Makers are required to 
make a continuous two-sided market or subject themselves to 
regulatory sanctions. No Exchange Market Maker will be an affiliated 
person or an affiliated person of an affiliated person, of the 
Funds, except within the meaning of section 2(a)(3)(A) or (C) of the 
Act due solely to ownership of Shares as discussed below.
    \16\ Shares will be registered in book-entry form only. DTC or 
its nominee will be the record or registered owner of all 
outstanding Shares. DTC or DTC Participants will maintain records of 
beneficial ownership of Shares.
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    11. Neither the Trust nor any Fund will be advertised or marketed 
as a conventional open-end investment company or mutual fund. Instead, 
each Fund will be marketed as an ``actively-managed exchange-traded 
fund.'' Any advertising material that describes the

[[Page 11849]]

features of obtaining, buying or selling Creation Units, or buying or 
selling Shares on the Listing Exchange, or where there is reference to 
redeemability, will prominently disclose that Shares are not 
individually redeemable and that owners of Shares may acquire Shares 
from a Fund and tender those Shares for redemption to a Fund in 
Creation Units only.
    12. The Funds' Web site, which will be publicly available prior to 
the public offering of Shares, will include, or will include links to, 
each Fund's current Prospectus, which may be downloaded. That Web site, 
which will be publicly available at no charge, will also contain, on a 
per Share basis for each Fund, the prior Business Day's NAV and the 
market closing price or the mid-point of the bid/ask spread at the time 
of calculation of such NAV (the ``Bid/Ask Price''), and a calculation 
of the premium or discount of the market closing price or Bid/Ask Price 
against such NAV. On each Business Day, before commencement of trading 
in Shares on the Listing Exchange, each Fund will also disclose on its 
Web site the identities and quantities of its Portfolio Positions held 
by the Fund that will form the basis for the Fund's calculation of NAV 
at the end of the Business Day.\17\
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    \17\ Under accounting procedures followed by the Funds, trades 
made on the prior Business Day (``T'') will be booked and reflected 
in NAV on the current Business Day (``T+1''). Accordingly, the Funds 
will be able to disclose at the beginning of the Business Day the 
portfolio that will form the basis for the NAV calculation at the 
end of the Business Day.
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Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act for an 
exemption from sections 2(a)(32), 5(a)(1), 22(d) and 22(e) of the Act 
and rule 22c-1 under the Act, and under sections 6(c) and 17(b) of the 
Act for an exemption from sections 17(a)(1) and (a)(2) of the Act.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction, or any class of persons, 
securities or transactions, from any provision of the Act, if and to 
the extent that 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. 
Section 17(b) of the Act authorizes the Commission to exempt a proposed 
transaction from section 17(a) of the Act if evidence establishes that 
the terms of the proposed transaction, including the consideration to 
be paid or received, are reasonable and fair and do not involve 
overreaching on the part of any person concerned, and the proposed 
transaction is consistent with the policies of the registered 
investment company and the general provisions of the Act.

Sections 5(a)(1) and 2(a)(32) of the Act

    3. Section 5(a)(1) of the Act defines an ``open-end company'' as a 
management investment company that is offering for sale or has 
outstanding any redeemable security of which it is the issuer. Section 
2(a)(32) of the Act defines a redeemable security as any security, 
other than short-term paper, under the terms of which the holder, upon 
its presentation to the issuer, is entitled to receive approximately a 
proportionate share of the issuer's current net assets, or the cash 
equivalent. Applicants request an order to permit the Trust to register 
as an open-end management investment company and redeem Shares in 
Creation Units only. Applicants state that each investor is entitled to 
purchase or redeem Creation Units rather than trade the individual 
Shares in the secondary market. Applicants further state that because 
of the arbitrage possibilities created by the redeemability of Creation 
Units, it is expected that the market price of an individual Share will 
not vary materially from its NAV.

Section 22(d) of the Act and Rule 22c-1 under the Act

    4. Section 22(d) of the Act, among other things, prohibits a dealer 
from selling a redeemable security, which is currently being offered to 
the public by or through a principal underwriter, except at a current 
public offering price described in the prospectus. Rule 22c-1 under the 
Act generally requires that a dealer selling, redeeming, or 
repurchasing a redeemable security do so only at a price based on its 
NAV. Applicants state that secondary market trading in Shares will take 
place at negotiated prices, rather than at the current offering price 
described in the Fund's Prospectus. Thus, purchases and sales of Shares 
in the secondary market will not comply with section 22(d) of the Act 
and rule 22c-1 under the Act. Applicants request an exemption under 
section 6(c) from these provisions.
    5. Applicants assert that the concerns sought to be addressed by 
section 22(d) of the Act and rule 22c-1 under the Act with respect to 
pricing are equally satisfied by the proposed method of pricing Shares. 
Applicants maintain that while there is little legislative history 
regarding section 22(d), its provisions, as well as those of rule 22c-
1, appear to have been intended (a) to prevent dilution caused by 
certain riskless-trading schemes by principal underwriters and contract 
dealers, (b) to prevent unjust discrimination or preferential treatment 
among buyers, and (c) to ensure an orderly distribution of shares by 
eliminating price competition from brokers offering shares at less than 
the published sales price and repurchasing shares at more than the 
published redemption price.
    6. Applicants state that (a) secondary market transactions in 
Shares would not cause dilution for owners of such Shares because such 
transactions do not involve the Trust or Funds as parties, and (b) to 
the extent different prices exist during a given trading day, or from 
day to day, such variances occur as a result of third-party market 
forces, such as supply and demand. Therefore, applicants assert that 
secondary market transactions in Shares will not lead to discrimination 
or preferential treatment among purchasers. Finally, applicants contend 
that the proposed distribution system will be orderly because arbitrage 
activity will ensure that the difference between the market price of 
Shares and their NAV remains immaterial.

Section 22(e)

    7. Section 22(e) of the Act generally prohibits a registered 
investment company from suspending the right of redemption or 
postponing the date of payment of redemption proceeds for more than 
seven days after the tender of a security for redemption. Applicants 
observe that the settlement of redemptions of Creation Units of Global 
Funds will be contingent not only on the settlement cycle of the U.S. 
securities markets but also on the delivery cycles in foreign markets 
in which those Funds invest. Applicants assert that, under certain 
circumstances, the delivery cycles for transferring Portfolio Positions 
to redeeming investors, coupled with local market holiday schedules, 
may require a delivery process of up to 15 calendar days. Applicants 
therefore request relief from section 22(e) in order for each Global 
Fund to provide payment or satisfaction of redemptions within the 
maximum number of calendar days required for such payment or 
satisfaction in the principal local market(s) where transactions in its 
Portfolio Positions customarily clear and settle, but in any event, 
within a period not to exceed fifteen calendar days.\18\
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    \18\ Applicants acknowledge that no relief obtained from the 
requirements of section 22(e) will affect any obligations that they 
may otherwise have under rule 15c6-1 under the Exchange Act, which 
requires that most securities transactions be settled within three 
business days of the trade date.

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[[Page 11850]]

    8. Applicants submit that Congress adopted section 22(e) to prevent 
unreasonable, undisclosed or unforeseen delays in the actual payment of 
redemption proceeds. Applicants state that allowing redemption payments 
for Creation Units of a Global Fund to be made within 15 calendar days 
would not be inconsistent with the spirit and intent of section 
22(e).\19\ Applicants state that each Global Fund's statement of 
additional information (``SAI'') will disclose those local holidays 
(over the period of at least one year following the date of the SAI), 
if any, that are expected to prevent the delivery of redemption 
proceeds in seven calendar days and the maximum number of days, up to 
15 calendar days, needed to deliver the proceeds for that Global Fund. 
Applicants are not seeking relief from section 22(e) with respect to 
Global Funds that do not effect redemptions of Creation Units in kind.
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    \19\ Certain countries in which a Global Fund may invest have 
historically had settlement periods of up to 15 calendar days.
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Sections 17(a)(1) and (2) of the Act

    9. Section 17(a)(1) and (2) of the Act generally prohibit an 
affiliated person of a registered investment company, or an affiliated 
person of such a person (``second tier affiliate''), from selling any 
security to or purchasing any security from the company. Section 
2(a)(3) of the Act defines ``affiliated person'' to include any person 
directly or indirectly owning, controlling, or holding with power to 
vote 5% or more of the outstanding voting securities of the other 
person and any person directly or indirectly controlling, controlled 
by, or under common control with, the other person. Section 2(a)(9) of 
the Act defines ``control'' of a fund as ``the power to exercise a 
controlling influence over the management or policies'' of the fund and 
provides that a control relationship will be presumed where one person 
owns more than 25% of another person's voting securities. The Funds may 
be deemed to be controlled by an Adviser and hence affiliated persons 
of each other. In addition, the Funds may be deemed to be under common 
control with any other registered investment company (or series 
thereof) advised by an Adviser (an ``Affiliated Fund'').
    10. Applicants request an exemption from section 17(a) under 
sections 6(c) and 17(b) to permit in-kind purchases and redemptions of 
Creation Units from the Funds by persons that are affiliated persons or 
second tier affiliates of the Funds solely by virtue of one or more of 
the following: (a) Holding 5% or more, or more than 25%, of the 
outstanding Shares of one or more Funds; (b) an affiliation with a 
person with an ownership interest described in (a); or (c) holding 5% 
or more, or more than 25%, of the shares of one or more Affiliated 
Funds.
    11. Applicants assert that no useful purpose would be served by 
prohibiting the affiliated persons described above from making in-kind 
purchases or in-kind redemptions of Shares of a Fund in Creation Units. 
Both the deposit procedures for in-kind purchases of Creation Units and 
the redemption procedures for in-kind redemptions will be effected in 
exactly the same manner for all purchases and redemptions. The 
valuation of the Deposit Instruments and Redemption Instruments will be 
made in the same manner, and in the same manner as the Fund's Portfolio 
Positions, regardless of the identity of the purchaser or redeemer. 
Except with respect to cash determined in accordance with the 
procedures described in section I.G.1. of the application, Deposit 
Instruments and Redemption Instruments will be the same for all 
purchasers and redeemers. Therefore, applicants state that the in-kind 
purchases and redemptions will afford no opportunity for the specified 
affiliated persons of a Fund to effect a transaction detrimental to 
other holders of Shares of that Fund. Applicants do not believe that 
in-kind purchases and redemptions will result in abusive self-dealing 
or overreaching of the Fund.

Applicant's Conditions

    Applicants agree that any order of the Commission granting the 
requested relief will be subject to the following conditions:
    1. As long as the Funds operate in reliance on the requested order, 
the Shares of the Funds will be listed on a Listing Exchange.
    2. Neither the Trust nor any Fund will be advertised or marketed as 
an open-end investment company or a mutual fund. Any advertising 
material that describes the purchase or sale of Creation Units or 
refers to redeemability will prominently disclose that the Shares are 
not individually redeemable and that owners of the Shares may acquire 
those Shares from the Fund and tender those Shares for redemption to 
the Fund in Creation Units only.
    3. The Web site for the Funds, which is and will be publicly 
accessible at no charge, will contain on a per Share basis, for each 
Fund, the prior Business Day's NAV and the market closing price or Bid/
Ask Price, and a calculation of the premium or discount of the market 
closing price or Bid/Ask Price against such NAV.
    4. On each Business Day, before commencement of trading in Shares 
on the Listing Exchange, the Fund will disclose on its Web site the 
identities and quantities of the Portfolio Positions held by the Fund 
that will form the basis for the Fund's calculation of NAV at the end 
of the Business Day.
    5. The Adviser or any Fund Sub-Adviser, directly or indirectly, 
will not cause any Authorized Participant (or any investor on whose 
behalf an Authorized Participant may transact with the Fund) to acquire 
any Deposit Instrument for the Fund through a transaction in which the 
Fund could not engage directly.
    6. The requested relief to permit ETF operations will expire on the 
effective date of any Commission rule under the Act that provides 
relief permitting the operation of actively managed exchange-traded 
funds.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-04913 Filed 3-4-16; 8:45 am]
 BILLING CODE 8011-01-P
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