Legg Mason Global Asset Management Trust, et al.; Notice of Application, 69887-69889 [2016-24286]
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Federal Register / Vol. 81, No. 195 / Friday, October 7, 2016 / Notices
a result, OCC believes that the proposed
fee schedule provides for the equitable
allocation of reasonable fees in
accordance with Section 17A(b)(3)(D) of
the Act.15 The proposed rule change is
not inconsistent with the existing rules
of OCC, including any other rules
proposed to be amended.
(B) Clearing Agency’s Statement on
Burden on Competition
Section 17A(b)(3)(I) of the Act 16
requires that the rules of a clearing
agency not impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act. OCC does not
believe that the proposed rule change
would have any impact or impose a
burden on competition. Although this
proposed rule change affects clearing
members, their customers, and the
markets that OCC serves, OCC believes
that the proposed rule change would not
disadvantage or favor any particular
user of OCC’s services in relationship to
another user because the proposed
clearing fees apply equally to all users
of OCC. Accordingly, OCC does not
believe that the proposed rule change
would have any impact or impose a
burden on competition.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
Written comments on the proposed
rule change were not and are not
intended to be solicited with respect to
the proposed rule change and none have
been received.
mstockstill on DSK3G9T082PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A)(ii) 17
of the Act, and Rule 19b–4(f)(2)
thereunder,18 the proposed rule change
is filed for immediate effectiveness as it
constitutes a change in fees charged to
OCC clearing members. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.19
15 17
U.S.C. 78q–1(b)(3)(D).
U.S.C. 78q–1(b)(3)(I).
17 15 U.S.C. 78s(b)(3)(A)(ii).
18 17 CFR 240.19b–4(f)(2).
19 Notwithstanding its immediate effectiveness,
implementation of this rule change will be delayed
until this change is deemed certified under CFTC
Regulation § 40.6.
16 15
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–OCC–2016–012 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–OCC–2016–012. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of OCC and on OCC’s Web site
(https://www.theocc.com/components/
docs/legal/rules_and_bylaws/
sr_occ_16_012.pdf). All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–OCC–
2016–012 and should be submitted on
or before October 28, 2016.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–24282 Filed 10–6–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
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[Investment Company Act Release No.
32300; File No. 812–14583]
Legg Mason Global Asset Management
Trust, et al.; Notice of Application
October 3, 2016.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order pursuant to: (a) Section 6(c) of the
Investment Company Act of 1940
(‘‘Act’’) granting an exemption from
sections 18(f) and 21(b) of the Act; (b)
section 12(d)(1)(J) of the Act granting an
exemption from section 12(d)(1) of the
Act; (c) sections 6(c) and 17(b) of the
Act granting an exemption from sections
17(a)(1), 17(a)(2) and 17(a)(3) of the Act;
and (d) section 17(d) of the Act and rule
17d–1 under the Act to permit certain
joint arrangements and transactions.
Applicants request an order that would
permit certain registered open-end
management investment companies to
participate in a joint lending and
borrowing facility.
AGENCY:
Legg Mason Global Asset
Management Trust, Legg Mason Global
Asset Management Variable Trust, Legg
Mason Partners Income Trust, Legg
Mason Partners Institutional Trust, Legg
Mason Partners Money Market Trust,
Legg Mason Partners Premium Money
Market Trust, Legg Mason Partners
Variable Income Trust, Master Portfolio
Trust, and Western Asset Funds, Inc.,
registered under the Act as open-end
management investment companies
with one or more series, and Legg
Mason Partners Fund Advisor, LLC (the
‘‘Adviser’’), registered as an investment
adviser under the Investment Advisers
Act of 1940.
FILING DATES: The application was filed
on November 27, 2015, and amended on
May 5, 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,
APPLICANTS:
20 17
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CFR 200.30–3(a)(12).
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Federal Register / Vol. 81, No. 195 / Friday, October 7, 2016 / Notices
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on October 28, 2016 and
should be accompanied by proof of
service on the applicants, in the form of
an affidavit, or, for lawyers, a certificate
of service. Pursuant to Rule 0–5 under
the Act, hearing requests should state
the nature of the writer’s interest, any
facts bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090;
Applicants, c/o: Bryan Chegwidden,
Esq., Rope & Gray LLP, 1211 Avenue of
the Americas, New York, NY 10036, and
Robert I. Frenkel, Legg Mason & Co.,
LLC, 100 First Stamford Place,
Stamford, CT 06902.
FOR FURTHER INFORMATION CONTACT: Judy
T. Lee, Senior Special Counsel, at (202)
551–6259 or Sara Crovitz, Assistant
Chief Counsel, at (202) 551–6720
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Summary of the Application
mstockstill on DSK3G9T082PROD with NOTICES
1. Applicants request an order that
would permit the applicants to
participate in an interfund lending
facility where each Fund could lend
money directly to and borrow money
directly from other Funds to cover
unanticipated cash shortfalls, such as
unanticipated redemptions or trade
fails.1 The Funds will not borrow under
the facility for leverage purposes and
the loans’ duration will be no more than
7 days.2
1 Applicants request that the order apply to the
applicants and to any existing or future registered
open-end management investment company or
series thereof for which the Adviser or any
successor thereto or an investment adviser
controlling, controlled by, or under common
control with the Adviser or any successor thereto
serves as investment adviser (each a ‘‘Fund’’ and
collectively the ‘‘Funds’’ and each such investment
adviser an ‘‘Adviser’’). For purposes of the
requested order, ‘‘successor’’ is limited to any entity
that results from a reorganization into another
jurisdiction or a change in the type of a business
organization.
2 Any Fund, however, will be able to call a loan
on one business day’s notice.
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2. Applicants anticipate that the
proposed facility would provide a
borrowing Fund with a source of
liquidity at a rate lower than the bank
borrowing rate at times when the cash
position of the Fund is insufficient to
meet temporary cash requirements. In
addition, Funds making short-term cash
loans directly to other Funds would
earn interest at a rate higher than they
otherwise could obtain from investing
their cash in repurchase agreements or
certain other short term money market
instruments. Thus, applicants assert that
the facility would benefit both
borrowing and lending Funds.
3. Applicants agree that any order
granting the requested relief will be
subject to the terms and conditions
stated in the Application. Among
others, the Adviser, through a
designated committee, would
administer the facility as a disinterested
fiduciary as part of its duties under the
investment management and
administrative agreements with the
Funds and would receive no additional
fee as compensation for its services in
connection with the administration of
the facility. The facility would be
subject to oversight and certain
approvals by the Funds’ Board,
including, among others, approval of the
interest rate formula and of the method
for allocating loans across Funds, as
well as review of the process in place to
evaluate the liquidity implications for
the Funds. A Fund’s aggregate
outstanding interfund loans will not
exceed 15% of its net assets, and the
Fund’s loan to any one Fund will not
exceed 5% of the lending Fund’s net
assets.3
4. Applicants assert that the facility
does not raise the concerns underlying
section 12(d)(1) of the Act given that the
Funds are part of the same group of
investment companies and there will be
no duplicative costs or fees to the
Funds.4 Applicants also assert that the
proposed transactions do not raise the
concerns underlying sections 17(a)(1),
17(a)(3), 17(d) and 21(b) of the Act as
the Funds would not engage in lending
transactions that unfairly benefit
insiders or are detrimental to the Funds.
Applicants state that the facility will
offer both reduced borrowing costs and
enhanced returns on loaned funds to all
participating Funds and each Fund
would have an equal opportunity to
borrow and lend on equal terms based
3 Under certain circumstances, a borrowing Fund
will be required to pledge collateral to secure the
loan.
4 Applicants state that the obligation to repay an
interfund loan could be deemed to constitute a
security for the purposes of sections 17(a)(1) and
12(d)(1) of the Act.
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on an interest rate formula that is
objective and verifiable. With respect to
the relief from section 17(a)(2) of the
Act, applicants note that any collateral
pledged to secure an interfund loan
would be subject to the same conditions
imposed by any other lender to a Fund
that imposes conditions on the quality
of or access to collateral for a borrowing
(if the lender is another Fund) or the
same or better conditions (in any other
circumstance).5
5. Applicants also believe that the
limited relief from section 18(f)(1) of the
Act that is necessary to implement the
facility (because the lending Funds are
not banks) is appropriate in light of the
conditions and safeguards described in
the application and because the Funds
would remain subject to the
requirement of section 18(f)(1) that all
borrowings of a Fund, including
combined interfund loans and bank
borrowings, have at least 300% asset
coverage.
6. 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.
Rule 17d–1(b) under the Act provides
that in passing upon an application filed
under the rule, the Commission will
consider whether the participation of
the registered investment company in a
joint enterprise, joint arrangement or
profit sharing plan on the basis
proposed is consistent with the
provisions, policies and purposes of the
Act and the extent to which such
5 Applicants state that any pledge of securities to
secure an interfund loan could constitute a
purchase of securities for purposes of section
17(a)(2) of the Act.
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Federal Register / Vol. 81, No. 195 / Friday, October 7, 2016 / Notices
participation is on a basis different from
or less advantageous than that of the
other participants.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Robert W. Errett,
Deputy Secretary.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2016–24286 Filed 10–6–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79027; File No. SR–CHX–
2016–19]
Self Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change To Amend
Rules To Describe Changes Necessary
To Implement the Tick Size Pilot
Program
October 3, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 2 thereunder,
notice is hereby given that on
September 30, 2016, the Chicago Stock
Exchange, Inc. (‘‘CHX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
mstockstill on DSK3G9T082PROD with NOTICES
CHX proposes to amend the Rules of
the Exchange (‘‘CHX Rules’’) to describe
changes to CHX Matching System 3
functionality necessary to implement
the quoting and trading provisions of
the Regulation NMS Plan to Implement
a Tick Size Pilot Program (‘‘Plan’’ or
‘‘Pilot’’).4
The Exchange has designated this
proposal as ‘‘non-controversial’’ and
provided the Commission with the
notice required by Rule 19b–4(f)(6)(iii)
under the Act.5
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Matching System is an automated order
execution system, which is a part of the Exchange’s
‘‘Trading Facilities,’’ as defined under CHX Article
1, Rule 1(z).
4 See Securities Exchange Act Release No. 74892
(May 6, 2015), 80 FR 27513 (May 13, 2015)
(‘‘Approval Order’’).
5 17 CFR 240.19b–4(f)(6)(iii).
2 17
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17:36 Oct 06, 2016
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The text of this proposed rule change
is available on the Exchange’s Web site
at (www.chx.com) and in the
Commission’s Public Reference Room.
In its filing with the Commission, the
CHX included statements concerning
the purpose of and basis for the
proposed rule changes and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
CHX has prepared summaries, set forth
in sections A, B and C below, of the
most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Changes
1. Purpose
On August 25, 2014, NYSE Group,
Inc., on behalf of the Exchange, Bats
BZX Exchange, Inc. f/k/a BATS ZExchange, Inc., Bats BYX Exchange, Inc.
f/k/a BATS Y-Exchange, Inc., Bats
EDGA Exchange, Inc. f/k/a EDGA
Exchange, Inc., Bats EDGX Exchange,
Inc. f/k/a EDGX Exchange, Inc.,
Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’), NASDAQ
OMX BX, Inc., NASDAQ OMX PHLX
LLC, the Nasdaq Stock Market LLC,
New York Stock Exchange LLC
(‘‘NYSE’’), NYSE MKT LLC, and NYSE
Arca, Inc. (collectively ‘‘Plan
Participants’’),6 filed with the
Commission, pursuant to Section 11A of
the Act 7 and Rule 608 of Regulation
NMS 8 thereunder, the Plan.9 The Plan
Participants filed the Plan to comply
with an order issued by the Commission
on June 24, 2014.10 The Plan 11 was
published for comment in the Federal
Register on November 7, 2014, and
6A
‘‘Participant’’ is a ‘‘member’’ of the Exchange
for purposes of the Act. See CHX Article 1, Rule
1(s). For clarity, the Exchange proposes to utilize
the term ‘‘CHX Participant’’ when referring to
members of the Exchange and the term ‘‘Plan
Participant’’ when referring to Participants of the
Plan.
7 15 U.S.C. 78k–1.
8 17 CFR 242.608.
9 See Letter from Brendon J. Weiss, Vice
President, Intercontinental Exchange, Inc., to
Secretary, Commission, dated August 25, 2014.
10 See Securities Exchange Act Release No. 72460
(June 24, 2014), 79 FR 36840 (June 30, 2014).
11 Unless otherwise specified, capitalized terms
used in this rule filing are defined as set forth in
the Plan.
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69889
approved by the Commission, as
modified, on May 6, 2015.12
The Plan is designed to allow the
Commission, market participants, and
the public to study and assess the
impact of increment conventions on the
liquidity and trading of the common
stocks of small-capitalization
companies. Each Plan Participant is
required to comply with, and to enforce
compliance by its member
organizations, as applicable, with the
provisions of the Plan.
The Pilot will include stocks of
companies with $3 billion or less in
market capitalization, an average daily
trading volume of one million shares or
less, and a volume weighted average
price of at least $2.00 for every trading
day. The Pilot will consist of a control
group of approximately 1400 Pilot
Securities and three test groups (‘‘Test
Groups’’) with 400 Pilot Securities in
each selected by a stratified sampling.13
During the Pilot, Pilot Securities in the
control group will be quoted and traded
at the currently permissible increments.
Pilot Securities in the first test group
(‘‘Test Group One’’) will be quoted in
$0.05 minimum increments but will
continue to trade at any price increment
that is currently permitted.14 Pilot
Securities in the second test group
(‘‘Test Group Two’’) will be quoted in
$0.05 minimum increments and will
trade at $0.05 minimum increments
subject to a midpoint exception, a retail
investor order exception, and a
negotiated trade exception.15 Pilot
Securities in the third test group (‘‘Test
Group Three’’) will be subject to the
same restrictions as Test Group Two
and also will be subject to the ‘‘trade-at’’
requirement to prevent price matching
by a market participant that is not
displaying at a price of a trading
center’s 16 best protected bid or best
protected offer (‘‘Trade-at Prohibition’’),
unless an enumerated exception
applies.17 In addition to the exceptions
provided under Test Group Two, an
exception for Block Size orders and
exceptions that mirror those under Rule
12 See Securities Exchange Act Release No. 74892
(May 6, 2015), 80 FR 27514 (May 13, 2015)
(‘‘Approval Order’’).
13 See Section V of the Plan for identification of
Pilot Securities, including criteria for selection and
grouping.
14 See Section VI(B) of the Plan.
15 See Section VI(C) of the Plan.
16 The Plan incorporates the definition of ‘‘trading
center’’ from Rule 600(b)(78) of Regulation NMS.
Regulation NMS defines a ‘‘trading center’’ as ‘‘a
national securities exchange or national securities
association that operates an SRO trading facility, an
alternative trading system, an exchange market
maker, an OTC market maker, or any other broker
or dealer that executes orders internally by trading
as principal or crossing orders as agent.’’
17 See Section VI(D) of the Plan.
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]]>Agencies
[Federal Register Volume 81, Number 195 (Friday, October 7, 2016)]
[Notices]
[Pages 69887-69889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24286]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 32300; File No. 812-14583]
Legg Mason Global Asset Management Trust, et al.; Notice of
Application
October 3, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order pursuant to: (a) Section
6(c) of the Investment Company Act of 1940 (``Act'') granting an
exemption from sections 18(f) and 21(b) of the Act; (b) section
12(d)(1)(J) of the Act granting an exemption from section 12(d)(1) of
the Act; (c) sections 6(c) and 17(b) of the Act granting an exemption
from sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Act; and (d)
section 17(d) of the Act and rule 17d-1 under the Act to permit certain
joint arrangements and transactions. Applicants request an order that
would permit certain registered open-end management investment
companies to participate in a joint lending and borrowing facility.
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Applicants: Legg Mason Global Asset Management Trust, Legg Mason
Global Asset Management Variable Trust, Legg Mason Partners Income
Trust, Legg Mason Partners Institutional Trust, Legg Mason Partners
Money Market Trust, Legg Mason Partners Premium Money Market Trust,
Legg Mason Partners Variable Income Trust, Master Portfolio Trust, and
Western Asset Funds, Inc., registered under the Act as open-end
management investment companies with one or more series, and Legg Mason
Partners Fund Advisor, LLC (the ``Adviser''), registered as an
investment adviser under the Investment Advisers Act of 1940.
Filing Dates: The application was filed on November 27, 2015, and
amended on May 5, 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,
[[Page 69888]]
personally or by mail. Hearing requests should be received by the
Commission by 5:30 p.m. on October 28, 2016 and should be accompanied
by proof of service on the applicants, in the form of an affidavit, or,
for lawyers, a certificate of service. Pursuant to Rule 0-5 under the
Act, hearing requests should state the nature of the writer's interest,
any facts bearing upon the desirability of a hearing on the matter, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request notification by writing to the
Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants, c/o: Bryan
Chegwidden, Esq., Rope & Gray LLP, 1211 Avenue of the Americas, New
York, NY 10036, and Robert I. Frenkel, Legg Mason & Co., LLC, 100 First
Stamford Place, Stamford, CT 06902.
FOR FURTHER INFORMATION CONTACT: Judy T. Lee, Senior Special Counsel,
at (202) 551-6259 or Sara Crovitz, Assistant Chief Counsel, at (202)
551-6720 (Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at https://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Summary of the Application
1. Applicants request an order that would permit the applicants to
participate in an interfund lending facility where each Fund could lend
money directly to and borrow money directly from other Funds to cover
unanticipated cash shortfalls, such as unanticipated redemptions or
trade fails.\1\ The Funds will not borrow under the facility for
leverage purposes and the loans' duration will be no more than 7
days.\2\
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\1\ Applicants request that the order apply to the applicants
and to any existing or future registered open-end management
investment company or series thereof for which the Adviser or any
successor thereto or an investment adviser controlling, controlled
by, or under common control with the Adviser or any successor
thereto serves as investment adviser (each a ``Fund'' and
collectively the ``Funds'' and each such investment adviser an
``Adviser''). For purposes of the requested order, ``successor'' is
limited to any entity that results from a reorganization into
another jurisdiction or a change in the type of a business
organization.
\2\ Any Fund, however, will be able to call a loan on one
business day's notice.
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2. Applicants anticipate that the proposed facility would provide a
borrowing Fund with a source of liquidity at a rate lower than the bank
borrowing rate at times when the cash position of the Fund is
insufficient to meet temporary cash requirements. In addition, Funds
making short-term cash loans directly to other Funds would earn
interest at a rate higher than they otherwise could obtain from
investing their cash in repurchase agreements or certain other short
term money market instruments. Thus, applicants assert that the
facility would benefit both borrowing and lending Funds.
3. Applicants agree that any order granting the requested relief
will be subject to the terms and conditions stated in the Application.
Among others, the Adviser, through a designated committee, would
administer the facility as a disinterested fiduciary as part of its
duties under the investment management and administrative agreements
with the Funds and would receive no additional fee as compensation for
its services in connection with the administration of the facility. The
facility would be subject to oversight and certain approvals by the
Funds' Board, including, among others, approval of the interest rate
formula and of the method for allocating loans across Funds, as well as
review of the process in place to evaluate the liquidity implications
for the Funds. A Fund's aggregate outstanding interfund loans will not
exceed 15% of its net assets, and the Fund's loan to any one Fund will
not exceed 5% of the lending Fund's net assets.\3\
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\3\ Under certain circumstances, a borrowing Fund will be
required to pledge collateral to secure the loan.
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4. Applicants assert that the facility does not raise the concerns
underlying section 12(d)(1) of the Act given that the Funds are part of
the same group of investment companies and there will be no duplicative
costs or fees to the Funds.\4\ Applicants also assert that the proposed
transactions do not raise the concerns underlying sections 17(a)(1),
17(a)(3), 17(d) and 21(b) of the Act as the Funds would not engage in
lending transactions that unfairly benefit insiders or are detrimental
to the Funds. Applicants state that the facility will offer both
reduced borrowing costs and enhanced returns on loaned funds to all
participating Funds and each Fund would have an equal opportunity to
borrow and lend on equal terms based on an interest rate formula that
is objective and verifiable. With respect to the relief from section
17(a)(2) of the Act, applicants note that any collateral pledged to
secure an interfund loan would be subject to the same conditions
imposed by any other lender to a Fund that imposes conditions on the
quality of or access to collateral for a borrowing (if the lender is
another Fund) or the same or better conditions (in any other
circumstance).\5\
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\4\ Applicants state that the obligation to repay an interfund
loan could be deemed to constitute a security for the purposes of
sections 17(a)(1) and 12(d)(1) of the Act.
\5\ Applicants state that any pledge of securities to secure an
interfund loan could constitute a purchase of securities for
purposes of section 17(a)(2) of the Act.
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5. Applicants also believe that the limited relief from section
18(f)(1) of the Act that is necessary to implement the facility
(because the lending Funds are not banks) is appropriate in light of
the conditions and safeguards described in the application and because
the Funds would remain subject to the requirement of section 18(f)(1)
that all borrowings of a Fund, including combined interfund loans and
bank borrowings, have at least 300% asset coverage.
6. 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. Rule
17d-1(b) under the Act provides that in passing upon an application
filed under the rule, the Commission will consider whether the
participation of the registered investment company in a joint
enterprise, joint arrangement or profit sharing plan on the basis
proposed is consistent with the provisions, policies and purposes of
the Act and the extent to which such
[[Page 69889]]
participation is on a basis different from or less advantageous than
that of the other participants.
For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-24286 Filed 10-6-16; 8:45 am]
BILLING CODE 8011-01-P
