iShares Trust, et al.; Notice of Application, 59710-59711 [2016-20739]

Download as PDF 59710 Federal Register / Vol. 81, No. 168 / Tuesday, August 30, 2016 / Notices [Investment Company Act Release No. 32235; 812–14678] iShares Trust, et al.; Notice of Application August 24, 2016. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice. AGENCY: Notice of an application for an order under section 6(c) of the Investment Company Act of 1940 (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, under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act. The requested order would permit (a) series of certain open-end management investment companies that track the performance of an index provided by an affiliated person (‘‘Funds’’) to issue shares redeemable in large aggregations only (‘‘Creation Units’’); (b) secondary market transactions in Fund shares to occur at negotiated market prices rather than at net asset value (‘‘NAV’’); (c) certain Funds to pay redemption proceeds, under certain circumstances, more than seven days after the tender of shares for redemption; (d) certain affiliated persons of a Fund to deposit securities into, and receive securities from, the Fund in connection with the purchase and redemption of Creation Units; and (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the Funds (‘‘Funds of Funds’’) to acquire shares of the Funds. APPLICANTS: iShares Trust (the ‘‘Trust’’), a Delaware statutory trust registered under the Act as an open-end management investment company with multiple series, and iShares, Inc. (the ‘‘Corporation’’), a Maryland corporation registered under the Act as an open-end management investment company with multiple series, (each a ‘‘Company,’’ and, together, the ‘‘Companies’’), BlackRock Fund Advisors (the ‘‘Initial Adviser’’), a California corporation registered as an investment adviser under the Investment Advisers Act of 1940, and BlackRock Investments, LLC (the ‘‘Distributor’’), a broker-dealer registered under the Securities Exchange Act of 1934 (‘‘Exchange Act’’). mstockstill on DSK3G9T082PROD with NOTICES SUMMARY: VerDate Sep<11>2014 20:04 Aug 29, 2016 Jkt 238001 The application was filed on July 22, 2016. 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 September 19, 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. ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090; Applicants: Deepa Damre, Esq., BlackRock Fund Advisors, 400 Howard Street, San Francisco, CA 94105. FOR FURTHER INFORMATION CONTACT: Mark N. Zaruba, Senior Counsel, at (202) 551–6878, or Mary Kay Frech, 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 http:// www.sec.gov/search/search.htm or by calling (202) 551–8090. FILING DATES: SECURITIES AND EXCHANGE COMMISSION Summary of the Application 1. Applicants request an order that would allow Funds to operate as exchange traded funds (‘‘ETFs’’) that track an Underlying Index provided by an Affiliated Index Provider (as defined below).1 Fund shares will be purchased and redeemed at their NAV in Creation Units only. All orders to purchase Creation Units and all redemption requests will be placed by or through an 1 Applicants request that the order apply to a new series and any additional series of a Company, and any other open-end management investment company or series thereof, that may be created in the future (each, included in the term ‘‘Fund’’), each of which will operate as an ETF and will track a specified index comprised of domestic or foreign equity and/or fixed income securities (each, an ‘‘Underlying Index’’). Any Fund will (a) be advised by the Initial Adviser or an entity controlling, controlled by, or under common control with the Initial Adviser (each, an ‘‘Adviser’’) and (b) comply with the terms and conditions of the application. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 ‘‘Authorized Participant,’’ which will have signed a participant agreement with the Distributor. Shares will be listed and traded individually on a national securities exchange, where share prices will be based on the current bid/offer market. Any order granting the requested relief would be subject to the terms and conditions stated in the application. 2. Each Fund will hold investment positions selected to correspond generally to the performance of an Underlying Index. An affiliated person, as defined in section 2(a)(3) of the Act (‘‘Affiliated Person’’), or an affiliated person of an Affiliated Person (‘‘SecondTier Affiliate’’), of a Company or a Fund, of the Adviser, of any sub-adviser to or promoter of a Fund, or of the Distributor will compile, create, sponsor or maintain the Underlying Index (an ‘‘Affiliated Index Provider’’).2 3. Shares will be purchased and redeemed in Creation Units and generally on an in-kind basis. Except where the purchase or redemption will include cash under the limited circumstances specified in the application, purchasers will be required to purchase Creation Units by depositing specified instruments (‘‘Deposit Instruments’’), and shareholders redeeming their shares will receive specified instruments (‘‘Redemption Instruments’’). The Deposit Instruments and the Redemption Instruments will each correspond pro rata to the positions in the Fund’s portfolio (including cash positions) except as specified in the application. 4. Because shares will not be individually redeemable, applicants request an exemption from section 5(a)(1) and section 2(a)(32) of the Act that would permit the Funds to register as open-end management investment companies and issue shares that are redeemable in Creation Units only. 5. Applicants also request an exemption from section 22(d) of the Act and rule 22c–1 under the Act as secondary market trading in shares will take place at negotiated prices, not at a current offering price described in a Fund’s prospectus, and not at a price based on NAV. Applicants state that (a) secondary market trading in shares does not involve a Fund as a party and will not result in dilution of an investment 2 Each Fund will post on its Web site the identities and quantities of the investment positions that will form the basis for the Fund’s calculation of its NAV at the end of the day. Applicants believe that requiring the Funds to maintain full portfolio transparency will help address, together with other protections, conflicts of interest with respect to such Funds. E:\FR\FM\30AUN1.SGM 30AUN1 mstockstill on DSK3G9T082PROD with NOTICES Federal Register / Vol. 81, No. 168 / Tuesday, August 30, 2016 / Notices in shares, 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 represent that share market prices will be disciplined by arbitrage opportunities, which should prevent shares from trading at a material discount or premium from NAV. 6. With respect to Funds that effect creations and redemptions of Creation Units in kind and that are based on certain Underlying Indexes that include foreign securities, applicants request relief from the requirement imposed by section 22(e) in order to allow such Funds to pay redemption proceeds within fifteen calendar days following the tender of Creation Units for redemption. Applicants assert that the requested relief would not be inconsistent with the spirit and intent of section 22(e) to prevent unreasonable, undisclosed or unforeseen delays in the actual payment of redemption proceeds. 7. Applicants request an exemption to permit Funds of Funds to acquire Fund shares beyond the limits of section 12(d)(1)(A) of the Act; and the Funds, and any principal underwriter for the Funds, and/or any broker or dealer registered under the Exchange Act, to sell shares to Funds of Funds beyond the limits of section 12(d)(1)(B) of the Act. The application’s terms and conditions are designed to, among other things, help prevent any potential (i) undue influence over a Fund through control or voting power, or in connection with certain services, transactions, and underwritings, (ii) excessive layering of fees, and (iii) overly complex fund structures, which are the concerns underlying the limits in sections 12(d)(1)(A) and (B) of the Act. 8. Applicants request an exemption from sections 17(a)(1) and 17(a)(2) of the Act to permit persons that are Affiliated Persons, or Second Tier Affiliates, of the Funds, solely by virtue of certain ownership interests, to effectuate purchases and redemptions in-kind. The deposit procedures for in-kind purchases of Creation Units and the redemption procedures for in-kind redemptions of Creation Units will be the same for all purchases and redemptions and Deposit Instruments and Redemption Instruments will be valued in the same manner as those investment positions currently held by the Funds. Applicants also seek relief from the prohibitions on affiliated VerDate Sep<11>2014 20:04 Aug 29, 2016 Jkt 238001 transactions in section 17(a) to permit a Fund to sell its shares to and redeem its shares from a Fund of Funds, and to engage in the accompanying in-kind transactions with the Fund of Funds.3 The purchase of Creation Units by a Fund of Funds directly from a Fund will be accomplished in accordance with the policies of the Fund of Funds and will be based on the NAVs of the Funds. 9. Section 6(c) of the Act permits the Commission to exempt any persons or transactions from any provision of the Act if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Section 12(d)(1)(J) of the Act provides that the Commission may exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision of section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that (a) the terms of the proposed transaction are fair and reasonable and do not involve overreaching on the part of any person concerned; (b) the proposed transaction is consistent with the policies of each registered investment company involved; and (c) the proposed transaction is consistent with the general purposes of the Act. For the Commission, by the Division of Investment Management, under delegated authority. Robert W. Errett, Deputy Secretary. [FR Doc. 2016–20739 Filed 8–29–16; 8:45 am] BILLING CODE 8011–01–P 59711 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78644; File No. SR– NYSEArca–2016–87] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Withdrawal of a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Shares of the First Trust Horizon Managed Volatility Domestic ETF and the First Trust Horizon Managed Volatility Developed International ETF Under NYSE Arca Equities Rule 8.600 August 23, 2016. On June 16, 2016, NYSE Arca, Inc. (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares of the First Trust Horizon Managed Volatility Domestic ETF and the First Trust Horizon Managed Volatility Developed International ETF. The proposed rule change was published for comment in the Federal Register on July 6, 2016.3 On July 18, 2016, the Exchange submitted Amendment No. 1 to the proposed rule change.4 On August 16, 2016, pursuant to Section 19(b)(2) of the Act,5 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.6 The Commission received no comment letters on the proposed rule change. On August 18, 2016, the Exchange withdrew the proposed rule change, as modified by Amendment No. 1 (SR– NYSEArca–2016–87). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–20740 Filed 8–29–16; 8:45 am] BILLING CODE 8011–01–P 3 The requested relief would apply to direct sales of shares in Creation Units by a Fund to a Fund of Funds and redemptions of those shares. Applicants, moreover, are not seeking relief from section 17(a) for, and the requested relief will not apply to, transactions where a Fund could be deemed an Affiliated Person, or a Second-Tier Affiliate, of a Fund of Funds because an Adviser or an entity controlling, controlled by or under common control with an Adviser provides investment advisory services to that Fund of Funds. PO 00000 Frm 00115 Fmt 4703 Sfmt 9990 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 78191 (June 29, 2016), 81 FR 44056. 4 Amendment No. 1 replaced and superseded the original filing in its entirety. Amendment No. 1 is available at https://www.sec.gov/comments/srnysearca-2016-87/nysearca201687-1.pdf. 5 15 U.S.C. 78s(b)(2). 6 See Securities Exchange Act Release No. 78587, 81 FR 56728 (August 22, 2016). 7 17 CFR 200.30–3(a)(12). 2 17 E:\FR\FM\30AUN1.SGM 30AUN1

Agencies

[Federal Register Volume 81, Number 168 (Tuesday, August 30, 2016)]
[Notices]
[Pages 59710-59711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20739]



[[Page 59710]]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32235; 812-14678]


iShares Trust, et al.; Notice of Application

August 24, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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SUMMARY: Notice of an application for an order under section 6(c) of 
the Investment Company Act of 1940 (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, under sections 6(c) and 17(b) of the Act for an 
exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under 
section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and 
12(d)(1)(B) of the Act. The requested order would permit (a) series of 
certain open-end management investment companies that track the 
performance of an index provided by an affiliated person (``Funds'') to 
issue shares redeemable in large aggregations only (``Creation 
Units''); (b) secondary market transactions in Fund shares to occur at 
negotiated market prices rather than at net asset value (``NAV''); (c) 
certain Funds to pay redemption proceeds, under certain circumstances, 
more than seven days after the tender of shares for redemption; (d) 
certain affiliated persons of a Fund to deposit securities into, and 
receive securities from, the Fund in connection with the purchase and 
redemption of Creation Units; and (e) certain registered management 
investment companies and unit investment trusts outside of the same 
group of investment companies as the Funds (``Funds of Funds'') to 
acquire shares of the Funds.

Applicants: iShares Trust (the ``Trust''), a Delaware statutory trust 
registered under the Act as an open-end management investment company 
with multiple series, and iShares, Inc. (the ``Corporation''), a 
Maryland corporation registered under the Act as an open-end management 
investment company with multiple series, (each a ``Company,'' and, 
together, the ``Companies''), BlackRock Fund Advisors (the ``Initial 
Adviser''), a California corporation registered as an investment 
adviser under the Investment Advisers Act of 1940, and BlackRock 
Investments, LLC (the ``Distributor''), a broker-dealer registered 
under the Securities Exchange Act of 1934 (``Exchange Act'').

Filing Dates: The application was filed on July 22, 2016.

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 September 19, 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.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-1090; Applicants: Deepa Damre, Esq., 
BlackRock Fund Advisors, 400 Howard Street, San Francisco, CA 94105.

FOR FURTHER INFORMATION CONTACT: Mark N. Zaruba, Senior Counsel, at 
(202) 551-6878, or Mary Kay Frech, 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 http://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Summary of the Application

    1. Applicants request an order that would allow Funds to operate as 
exchange traded funds (``ETFs'') that track an Underlying Index 
provided by an Affiliated Index Provider (as defined below).\1\ Fund 
shares will be purchased and redeemed at their NAV in Creation Units 
only. All orders to purchase Creation Units and all redemption requests 
will be placed by or through an ``Authorized Participant,'' which will 
have signed a participant agreement with the Distributor. Shares will 
be listed and traded individually on a national securities exchange, 
where share prices will be based on the current bid/offer market. Any 
order granting the requested relief would be subject to the terms and 
conditions stated in the application.
---------------------------------------------------------------------------

    \1\ Applicants request that the order apply to a new series and 
any additional series of a Company, and any other open-end 
management investment company or series thereof, that may be created 
in the future (each, included in the term ``Fund''), each of which 
will operate as an ETF and will track a specified index comprised of 
domestic or foreign equity and/or fixed income securities (each, an 
``Underlying Index''). Any Fund will (a) be advised by the Initial 
Adviser or an entity controlling, controlled by, or under common 
control with the Initial Adviser (each, an ``Adviser'') and (b) 
comply with the terms and conditions of the application.
---------------------------------------------------------------------------

    2. Each Fund will hold investment positions selected to correspond 
generally to the performance of an Underlying Index. An affiliated 
person, as defined in section 2(a)(3) of the Act (``Affiliated 
Person''), or an affiliated person of an Affiliated Person (``Second-
Tier Affiliate''), of a Company or a Fund, of the Adviser, of any sub-
adviser to or promoter of a Fund, or of the Distributor will compile, 
create, sponsor or maintain the Underlying Index (an ``Affiliated Index 
Provider'').\2\
---------------------------------------------------------------------------

    \2\ Each Fund will post on its Web site the identities and 
quantities of the investment positions that will form the basis for 
the Fund's calculation of its NAV at the end of the day. Applicants 
believe that requiring the Funds to maintain full portfolio 
transparency will help address, together with other protections, 
conflicts of interest with respect to such Funds.
---------------------------------------------------------------------------

    3. Shares will be purchased and redeemed in Creation Units and 
generally on an in-kind basis. Except where the purchase or redemption 
will include cash under the limited circumstances specified in the 
application, purchasers will be required to purchase Creation Units by 
depositing specified instruments (``Deposit Instruments''), and 
shareholders redeeming their shares will receive specified instruments 
(``Redemption Instruments''). The Deposit Instruments and the 
Redemption Instruments will each correspond pro rata to the positions 
in the Fund's portfolio (including cash positions) except as specified 
in the application.
    4. Because shares will not be individually redeemable, applicants 
request an exemption from section 5(a)(1) and section 2(a)(32) of the 
Act that would permit the Funds to register as open-end management 
investment companies and issue shares that are redeemable in Creation 
Units only.
    5. Applicants also request an exemption from section 22(d) of the 
Act and rule 22c-1 under the Act as secondary market trading in shares 
will take place at negotiated prices, not at a current offering price 
described in a Fund's prospectus, and not at a price based on NAV. 
Applicants state that (a) secondary market trading in shares does not 
involve a Fund as a party and will not result in dilution of an 
investment

[[Page 59711]]

in shares, 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 represent that share market prices will be 
disciplined by arbitrage opportunities, which should prevent shares 
from trading at a material discount or premium from NAV.
    6. With respect to Funds that effect creations and redemptions of 
Creation Units in kind and that are based on certain Underlying Indexes 
that include foreign securities, applicants request relief from the 
requirement imposed by section 22(e) in order to allow such Funds to 
pay redemption proceeds within fifteen calendar days following the 
tender of Creation Units for redemption. Applicants assert that the 
requested relief would not be inconsistent with the spirit and intent 
of section 22(e) to prevent unreasonable, undisclosed or unforeseen 
delays in the actual payment of redemption proceeds.
    7. Applicants request an exemption to permit Funds of Funds to 
acquire Fund shares beyond the limits of section 12(d)(1)(A) of the 
Act; and the Funds, and any principal underwriter for the Funds, and/or 
any broker or dealer registered under the Exchange Act, to sell shares 
to Funds of Funds beyond the limits of section 12(d)(1)(B) of the Act. 
The application's terms and conditions are designed to, among other 
things, help prevent any potential (i) undue influence over a Fund 
through control or voting power, or in connection with certain 
services, transactions, and underwritings, (ii) excessive layering of 
fees, and (iii) overly complex fund structures, which are the concerns 
underlying the limits in sections 12(d)(1)(A) and (B) of the Act.
    8. Applicants request an exemption from sections 17(a)(1) and 
17(a)(2) of the Act to permit persons that are Affiliated Persons, or 
Second Tier Affiliates, of the Funds, solely by virtue of certain 
ownership interests, to effectuate purchases and redemptions in-kind. 
The deposit procedures for in-kind purchases of Creation Units and the 
redemption procedures for in-kind redemptions of Creation Units will be 
the same for all purchases and redemptions and Deposit Instruments and 
Redemption Instruments will be valued in the same manner as those 
investment positions currently held by the Funds. Applicants also seek 
relief from the prohibitions on affiliated transactions in section 
17(a) to permit a Fund to sell its shares to and redeem its shares from 
a Fund of Funds, and to engage in the accompanying in-kind transactions 
with the Fund of Funds.\3\ The purchase of Creation Units by a Fund of 
Funds directly from a Fund will be accomplished in accordance with the 
policies of the Fund of Funds and will be based on the NAVs of the 
Funds.
---------------------------------------------------------------------------

    \3\ The requested relief would apply to direct sales of shares 
in Creation Units by a Fund to a Fund of Funds and redemptions of 
those shares. Applicants, moreover, are not seeking relief from 
section 17(a) for, and the requested relief will not apply to, 
transactions where a Fund could be deemed an Affiliated Person, or a 
Second-Tier Affiliate, of a Fund of Funds because an Adviser or an 
entity controlling, controlled by or under common control with an 
Adviser provides investment advisory services to that Fund of Funds.
---------------------------------------------------------------------------

    9. Section 6(c) of the Act permits the Commission to exempt any 
persons or transactions from any provision of the Act if such exemption 
is necessary or appropriate in the public interest and consistent with 
the protection of investors and the purposes fairly intended by the 
policy and provisions of the Act. Section 12(d)(1)(J) of the Act 
provides that the Commission may exempt any person, security, or 
transaction, or any class or classes of persons, securities, or 
transactions, from any provision of section 12(d)(1) if the exemption 
is consistent with the public interest and the protection of investors. 
Section 17(b) of the Act authorizes the Commission to grant an order 
permitting a transaction otherwise prohibited by section 17(a) if it 
finds that (a) the terms of the proposed transaction are fair and 
reasonable and do not involve overreaching on the part of any person 
concerned; (b) the proposed transaction is consistent with the policies 
of each registered investment company involved; and (c) the proposed 
transaction is consistent with the general purposes of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-20739 Filed 8-29-16; 8:45 am]
 BILLING CODE 8011-01-P