ClearShares, LLC et al., 21282-21284 [2017-09065]
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Federal Register / Vol. 82, No. 86 / Friday, May 5, 2017 / Notices
adopting Rule 10b–17 will not be
implicated.7
SRADOVICH on DSK3GMQ082PROD with NOTICES
Conclusion
It is hereby ordered, pursuant to Rule
101(d) of Regulation M, that the Trust,
based on the representations and facts
presented in the Letter, is exempt from
the requirements of Rule 101 with
respect to Shares of the Fund, thus
permitting persons who may be deemed
to be participating in a distribution of
Shares of the Fund to bid for or
purchase such Shares during their
participation in such distribution.
It is further ordered, pursuant to Rule
102(e) of Regulation M, that the Trust,
based on the representations and the
facts presented in the Letter, is exempt
from the requirements of Rule 102 with
respect to the Fund, thus permitting the
Fund to redeem Shares of the Fund
during the continuous offering of such
Shares.
It is further ordered, pursuant to Rule
10b–17(b)(2), that the Trust, based on
the representations and the facts
presented in the Letter and subject to
the conditions below, is exempt from
the requirements of Rule 10b–17 with
respect to the transactions in the Shares
of the Fund.
The exemption from Rule 10b–17 is
subject to the following conditions:
• The Trust will comply with Rule
10b–17, except for Rule 10b–
17(b)(1)(v)(a) and (b); and
• The Trust will provide the
information required by Rule 10b–
17(b)(1)(v)(a) and (b) to the Exchange as
soon as practicable before trading begins
on the ex-dividend date, but in no event
later than the time when the Exchange
last accepts information relating to
distributions on the day before the exdividend date.
This exemptive relief is subject to
modification or revocation at any time
the Commission determines that such
action is necessary or appropriate in
furtherance of the purposes of the
Exchange Act. These exemptions are
based on the facts presented and the
representations made in the Letter. Any
different facts or representations may
require a different response. Persons
relying upon this exemptive relief shall
promptly present the facts for the
Commission’s consideration in the
7 We also note that timely compliance with Rule
10b–17(b)(1)(v)(a) and (b) would be impractical in
light of the Fund’s nature because it is not possible
for the Fund to accurately project ten days in
advance what dividend, if any, would be paid on
a particular record date. Further, the Commission
finds, based on the Requestors representations in
the Letter, that the provision of notices as described
in the Letter would not constitute a manipulative
or deceptive device or contrivance comprehended
within the purpose of Rule 10b–17.
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event that any material change occurs
with respect to any of the facts or
representations made by the Requestors,
and, as is the case with all preceding
relief for ETFs, particularly with respect
to the close alignment between the
market price of Shares and the Fund’s
NAV. In addition, persons relying on
these exemptions are directed to the
anti-fraud and anti-manipulation
provisions of the Exchange Act,
particularly Sections 9(a), 10(b), and
Rule 10b–5 thereunder. Responsibility
for compliance with these and any other
applicable provisions of the federal
securities laws must rest with the
persons relying on these exemptions.
This Order should not be considered
a view with respect to any other
question that the proposed transactions
may raise, including, but not limited to,
the adequacy of the disclosure
concerning, and the applicability of
other federal or state laws to, the
proposed transactions.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–09080 Filed 5–4–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32620; 812–14739]
ClearShares, LLC et al.
May 1, 2017.
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) of the Act for an exemption
from sections 12(d)(1)(A) and
12(d)(1)(B) of the Act. The requested
order would permit (a) activelymanaged series of certain open-end
management investment companies
(‘‘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
8 17
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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; (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; and (f) certain
Funds (‘‘Feeder Funds’’) to create and
redeem Creation Units in-kind in a
master-feeder structure.
APPLICANTS: ETF Series Solutions
(‘‘Trust’’), a Delaware statutory trust
registered under the Act as an open-end
management investment company with
multiple series, ClearShares LLC
(‘‘ClearShares’’), a Delaware limited
liability company that is registered as an
investment adviser under the
Investment Advisers Act of 1940, and
Quasar Distributors, LLC
(‘‘Distributor’’), a Delaware limited
liability company and broker-dealer
registered under the Securities
Exchange Act of 1934 (‘‘Exchange Act’’).
FILING DATES: The application was filed
on January 24, 2017.
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 May 26, 2017, 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: W. John McGuire, Esq.,
Morgan, Lewis & Bockius, LLP, 1111
Pennsylvania Avenue NW., Washington,
DC 20004–2541 and Michael D.
Barolsky, Esq., U.S. Bancorp Fund
Services, LLC, 615 E. Michigan Street,
Milwaukee, WI 53202.
FOR FURTHER INFORMATION CONTACT:
Rochelle Kauffman Plesset, Senior
Counsel, at (202) 551–6840 or Daniele
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Federal Register / Vol. 82, No. 86 / Friday, May 5, 2017 / Notices
Marchesani, Assistant Chief Counsel, at
(202) 551–6747 (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.
SRADOVICH on DSK3GMQ082PROD with NOTICES
Summary of the Application
1. Applicants request an order that
would allow Funds to operate as
actively-managed exchange traded
funds (‘‘ETFs’’).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. Certain Funds may
operate as Feeder Funds in a masterfeeder structure. Any order granting the
requested relief would be subject to the
terms and conditions stated in the
application.
2. Each Fund will consist of a
portfolio of securities and other assets
and investment positions (‘‘Portfolio
Instruments’’). Each Fund will disclose
on its Web site the identities and
quantities of the Portfolio Instruments
that will form the basis for the Fund’s
calculation of NAV at the end of the
day.
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
1 Applicants request that the order apply to the
new series of the Trust as well as to additional
series of the Trust and any other open-end
management investment company or series thereof
that currently exist or that may be created in the
future (each, included in the term ‘‘Fund’’), each of
which will operate as an actively-managed ETF.
Any Fund will (a) be advised by ClearShares or an
entity controlling, controlled by, or under common
control with ClearShares (each, an ‘‘Adviser’’) and
(b) comply with the terms and conditions of the
application.
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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
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 hold
non-U.S. Portfolio Instruments and that
effect creations and redemptions of
Creation Units in kind, 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)
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21283
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
Portfolio Instruments 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.2
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. Applicants also request relief to
permit a Feeder Fund to acquire shares
of another registered investment
company managed by the Adviser
having substantially the same
investment objectives as the Feeder
Fund (‘‘Master Fund’’) beyond the
limitations in section 12(d)(1)(A) and
permit the Master Fund, and any
principal underwriter for the Master
Fund, to sell shares of the Master Fund
to the Feeder Fund beyond the
limitations in section 12(d)(1)(B).
10. 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
2 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.
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Federal Register / Vol. 82, No. 86 / Friday, May 5, 2017 / Notices
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.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–09065 Filed 5–4–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80563; File No. SR–FICC–
2017–003]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Order
Approving a Proposed Rule Change,
as Modified by Amendment No. 1, To
Expand the Types of Entities That Are
Eligible To Participate in Fixed Income
Clearing Corporation as Sponsored
Members and Make Other Changes
May 1, 2017.
SRADOVICH on DSK3GMQ082PROD with NOTICES
I. Introduction
On March 1, 2017, Fixed Income
Clearing Corporation (‘‘FICC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–FICC–2017–003,
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder.2
On March 13, 2017, FICC filed
Amendment No. 1 to the proposed rule
change, which amended and replaced
the original filing in its entirety
(hereinafter, ‘‘Proposed Rule Change’’).
The Proposed Rule Change was
published for comment in the Federal
Register on March 17, 2017.3 The
Commission received four comment
letters 4 to the Proposed Rule Change,
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 80236
(March 14, 2017), 82 FR 14265 (March 17, 2017)
(SR–FICC–2017–003) (‘‘Notice’’).
4 See letter from Stefan M. Gavell, Executive Vice
President and Head of Regulatory, Industry and
Government Affairs, State Street Corporation
(‘‘State Street’’), dated April 7, 2017, to Brent J.
Fields, Secretary, Commission (‘‘State Street
2 17
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17:43 May 04, 2017
Jkt 241001
including a response letter from FICC.
For the reasons discussed below, the
Commission is approving the Proposed
Rule Change.
II. Description of the Proposed Rule
Change
The Proposed Rule Change consists of
changes to the Government Securities
Division (‘‘GSD’’) Rulebook (‘‘Rules’’) 5
in order to (i) expand the types of
entities that are eligible to participate in
FICC’s Sponsored Membership program
as Sponsored Members, and (ii) make
amendments and clarifications to the
Rules relating to the Sponsored
Membership service in general.
A. The Proposed Expansion of
Sponsored Member Eligibility
Currently, GSD Bank Netting
Members that are well-capitalized with
at least $5 billion in equity capital are
permitted to serve as Sponsoring
Members and sponsor certain
institutional firms into GSD
membership as Sponsored Members.6 A
Sponsoring Member is permitted to
submit to FICC for comparison,
novation, and netting certain types of
eligible transactions between itself and
its Sponsored Members (‘‘Sponsored
Member Trades’’).7 For operational and
administrative purposes, FICC interacts
solely with the Sponsoring Member as
agent for purposes of the day-to-day
satisfaction of its Sponsored Members’
obligations to FICC, including the
Sponsored Members’ securities and
funds-only settlement obligations.8
Currently, eligibility to become a
Sponsored Member is limited to
investment companies that are
registered under the Investment
Company Act of 1940 9 (each, a
‘‘Registered Investment Company’’ or
‘‘RIC’’) and that meet the definition of
Letter’’); letter from Robert E. Pooler Jr., Chief
Financial Officer, Ronin Capital, LLC (‘‘Ronin’’),
dated April 7, 2017, to Robert W. Errett, Deputy
Secretary, Commission (‘‘Ronin Letter I’’); letter
from Murray Pozmanter, Managing Director, FICC,
dated April 17, 2017, to Robert W. Errett, Deputy
Secretary, Commission (‘‘FICC Letter’’); letter from
Robert E. Pooler Jr., Chief Financial Officer, Ronin,
dated April 20, 2017, to Robert W. Errett, Deputy
Secretary, Commission (‘‘Ronin Letter II’’) available
at https://www.sec.gov/comments/sr-ficc-2017-003/
ficc2017003.htm.
5 Capitalized terms not defined herein are defined
in the Rules, available at https://www.dtcc.com/
legal/rules-and-procedures.
6 Rule 3A, Section 2, supra note 5.
7 The Sponsoring Member is required to establish
an omnibus account at FICC for all of its Sponsored
Members’ FICC-cleared activity (‘‘Sponsoring
Member Omnibus Account’’), which is separate
from the Sponsoring Member’s regular netting
account. Rule 1; Rule 3A, Section 10, supra note 5.
8 See Rule 3A, Sections 5, 6, 7, 8 and 9, supra
note 5.
9 15 U.S.C. 80a–1 et. seq.
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a qualified institutional buyer (‘‘QIB’’),
as defined in Rule 144A 10 under the
Securities Act of 1933.11
The Proposed Rule Change would
eliminate the RIC requirement.
However, in order to ensure that
Sponsored Members are financially
sophisticated, FICC would retain the
QIB requirement to the extent that the
Sponsored Member’s legal entity type
falls under one of the enumerated
categories of Rule 144A’s QIB
definition.12 For institutional firms
whose entity types do not clearly fall
into one of the enumerated categories in
Rule 144A’s QIB definition, FICC
proposes to require that such Sponsored
Members satisfy the financial
requirements that an entity specifically
listed in paragraph (a)(1)(i) of Rule 144A
must satisfy in order to be a QIB.13
Because the proposal would newly
permit non-U.S. entities to become
Sponsored Members, FICC proposes to
amend the GSD Rules to provide that
such entities would be considered FFI
Members 14 subject to FATCA
compliance obligations.15
The proposal would also clarify that
the existing requirement on all
Sponsored Members and their
Sponsoring Members to comply with all
applicable laws includes the
requirement to comply with global
sanctions laws.
10 17
CFR 230.144A.
U.S.C. 77a et. seq.
12 17 CFR 230.144A(a)(1)(i) defines a qualified
institutional buyer as an entity ‘‘. . . acting for its
own account or the accounts of other qualified
institutional buyers, that in the aggregate owns and
invests on a discretionary basis at least $100 million
in securities of issuers that are not affiliated with
the entity. . . .’’
13 See Notice, 82 FR at 14266. Because
conceptions of financial sophistication may change
over time, FICC’s proposal ties this requirement to
the QIB definition in Rule 144A, as such definition
may be amended from time to time.
14 See Notice, 82 FR at 14267. Pursuant to Rule
1, the term ‘‘FFI Member’’ means ‘‘any Person that
is treated as a non-U.S. entity for U.S. federal
income tax purposes.’’ Rules, supra note 5. For the
avoidance of doubt, the term FFI Member also
includes ‘‘any Member that is a U.S. branch of an
entity that is treated as a non-U.S. entity for U.S.
federal income tax purposes.’’ Id.
15 FATCA is the Foreign Account Tax
Compliance Act, 26 U.S.C. 1471 et seq. The Rules
define FATCA Compliant to mean that an ‘‘. . . FFI
Member has qualified under such procedures
promulgated by the Internal Revenue Service . . .
to establish exemption from withholding under
FATCA such that [FICC] would not be required to
withhold [anything] under FATCA . . . .’’ Rules,
supra note 5. Although GSD has Members,
including certain Bank Netting Members, which are
non-U.S. entities, currently there are no Sponsoring
Members that are non-U.S. entities. See Notice, 82
FR at 14267. Any future Sponsoring Member or
Sponsored Member that is an FFI Member will be
subject to the same FATCA Compliance screening
as any other Member that is a non-U.S. entity.
Proposed Rule 3A, Section 3.
11 15
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]]>Agencies
[Federal Register Volume 82, Number 86 (Friday, May 5, 2017)]
[Notices]
[Pages 21282-21284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-09065]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 32620; 812-14739]
ClearShares, LLC et al.
May 1, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
-----------------------------------------------------------------------
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) of the Act for an exemption from sections
12(d)(1)(A) and 12(d)(1)(B) of the Act. The requested order would
permit (a) actively-managed series of certain open-end management
investment companies (``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; (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; and (f) certain
Funds (``Feeder Funds'') to create and redeem Creation Units in-kind in
a master-feeder structure.
Applicants: ETF Series Solutions (``Trust''), a Delaware statutory
trust registered under the Act as an open-end management investment
company with multiple series, ClearShares LLC (``ClearShares''), a
Delaware limited liability company that is registered as an investment
adviser under the Investment Advisers Act of 1940, and Quasar
Distributors, LLC (``Distributor''), a Delaware limited liability
company and broker-dealer registered under the Securities Exchange Act
of 1934 (``Exchange Act'').
Filing Dates: The application was filed on January 24, 2017.
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 May 26, 2017, 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: W. John McGuire, Esq.,
Morgan, Lewis & Bockius, LLP, 1111 Pennsylvania Avenue NW., Washington,
DC 20004-2541 and Michael D. Barolsky, Esq., U.S. Bancorp Fund
Services, LLC, 615 E. Michigan Street, Milwaukee, WI 53202.
FOR FURTHER INFORMATION CONTACT: Rochelle Kauffman Plesset, Senior
Counsel, at (202) 551-6840 or Daniele
[[Page 21283]]
Marchesani, Assistant Chief Counsel, at (202) 551-6747 (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.
Summary of the Application
1. Applicants request an order that would allow Funds to operate as
actively-managed exchange traded funds (``ETFs'').\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. Certain
Funds may operate as Feeder Funds in a master-feeder structure. Any
order granting the requested relief would be subject to the terms and
conditions stated in the application.
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\1\ Applicants request that the order apply to the new series of
the Trust as well as to additional series of the Trust and any other
open-end management investment company or series thereof that
currently exist or that may be created in the future (each, included
in the term ``Fund''), each of which will operate as an actively-
managed ETF. Any Fund will (a) be advised by ClearShares or an
entity controlling, controlled by, or under common control with
ClearShares (each, an ``Adviser'') and (b) comply with the terms and
conditions of the application.
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2. Each Fund will consist of a portfolio of securities and other
assets and investment positions (``Portfolio Instruments''). Each Fund
will disclose on its Web site the identities and quantities of the
Portfolio Instruments that will form the basis for the Fund's
calculation of NAV at the end of the day.
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 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 hold non-U.S. Portfolio Instruments
and that effect creations and redemptions of Creation Units in kind,
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
Portfolio Instruments 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.\2\ 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.
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\2\ 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.
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9. Applicants also request relief to permit a Feeder Fund to
acquire shares of another registered investment company managed by the
Adviser having substantially the same investment objectives as the
Feeder Fund (``Master Fund'') beyond the limitations in section
12(d)(1)(A) and permit the Master Fund, and any principal underwriter
for the Master Fund, to sell shares of the Master Fund to the Feeder
Fund beyond the limitations in section 12(d)(1)(B).
10. 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
[[Page 21284]]
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.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09065 Filed 5-4-17; 8:45 am]
BILLING CODE 8011-01-P
