Franklin Fund Allocator Series, et al., 26720-26721 [2017-11924]
Download as PDF
<![CDATA[
26720
Federal Register / Vol. 82, No. 109 / Thursday, June 8, 2017 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32669; File No. 812–14611]
Franklin Fund Allocator Series, et al.
June 5, 2017.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
AGENCY:
Notice of an application for an order
under section 12(d)(1)(J) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from sections
12(d)(1)(A), (B), and (C) of the Act;
under sections 6(c) and 17(b) of the Act
for an exemption from sections 17(a) of
the Act; and under section 6(c) of the
Act for an exemption from rule 12d1–
2(a) under the Act. The requested order
would: (a) Permit certain registered
open-end investment companies to
acquire shares of certain registered
open-end investment companies,
registered closed-end investment
companies, business development
companies, as defined in section
2(a)(48) of the Act, and unit investment
trusts (collectively, ‘‘Underlying
Funds’’) that are within and outside the
same group of investment companies as
the acquiring investment companies, in
excess of the limits in section 12(d)(1)
of the Act; and (b) permit certain
registered open-end management
investment companies relying on rule
12d1–2 under the Act to invest in
certain financial instruments.
APPLICANTS: Franklin Fund Allocator
Series, a Delaware statutory trust, that is
registered under the Act as an open-end
management investment company with
multiple series (the ‘‘Trust’’); Franklin
Advisers, Inc. (the ‘‘Initial Adviser’’), a
California corporation, registered as an
investment adviser under the
Investment Advisers Act of 1940; and
Franklin Templeton Distributors, Inc.
(the ‘‘Distributor’’), registered as a
broker-dealer under the Securities
Exchange Act of 1934 (the ‘‘1934 Act’’)
and a member of the Financial Industry
Regulatory Authority.
FILING DATES: The application was filed
on February 9, 2016, and amended on
May 23, 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 June 30, 2017, and
VerDate Sep<11>2014
17:24 Jun 07, 2017
Jkt 241001
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: Craig S. Tyle, Franklin
Templeton Investments, One Franklin
Parkway, San Mateo, CA 94403; and
Bruce G. Leto and Michael W. Mundt,
Stradley Ronon Stevens & Young, LLP,
2600 One Commerce Square,
Philadelphia, PA 19103.
FOR FURTHER INFORMATION CONTACT:
Laura L. Solomon, Senior Counsel, at
(202) 551–6915, or Nadya Roytblat,
Assistant Chief Counsel, at (202) 551–
6821 (Division of Investment
Management, Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm, or by
calling (202) 551–8090.
Summary of the Application
1. Applicants request an order to
permit (a) each Fund 1 (each a ‘‘Fund of
Funds’’) to acquire shares of Underlying
Funds 2 in excess of the limits in
1 Applicants request that the order apply not only
to the existing series of the Trust (the ‘‘Initial
Funds’’), but that the order also extend to any future
series of the Trust and any other existing or future
registered open-end management investment
companies and any series thereof that are part of the
same ‘‘group of investment companies,’’ as defined
in section 12(d)(1)(G)(ii) of the Act, as the Trust and
are, or may in the future be, advised by the Initial
Adviser or its successor or any other investment
adviser controlling, controlled by, or under
common control with the Initial Adviser or its
successor (together with the Initial Funds, each
series a ‘‘Fund,’’ and collectively, the ‘‘Funds’’).
Applicants further request that the order also apply
to any future principal underwriter and distributor
for a Fund. For purposes of the requested order,
‘‘successor’’ is limited to an entity that results from
a reorganization into another jurisdiction or a
change in the type of business organization. For
purposes of the request for relief, the term ‘‘group
of investment companies’’ means any two or more
registered investment companies, including closedend investment companies, and business
development companies, that hold themselves out
to investors as related companies for purposes of
investment and investor services.
2 Certain of the Underlying Funds have obtained
exemptions from the Commission necessary to
permit their shares to be listed and traded on a
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
sections 12(d)(1)(A) and (C) of the Act
and (b) each Underlying Fund that is a
registered open-end management
investment company or series thereof,
their principal underwriters, and any
broker or dealer registered under the
1934 Act to sell shares of the
Underlying Funds to the Fund of Funds
in excess of the limits in section
12(d)(1)(B) of the Act.3 Applicants also
request an order of exemption under
sections 6(c) and 17(b) of the Act from
the prohibition on certain affiliated
transactions in section 17(a) of the Act
to the extent necessary to permit the
Underlying Funds to sell their shares to,
and redeem their shares from, the Funds
of Funds.4 Applicants state that such
transactions will be consistent with the
policies of each Fund of Funds and each
Underlying Fund and with the general
purposes of the Act and will be based
on the net asset values of the
Underlying Funds.
2. Applicants further request an
exemption under section 6(c) from rule
12d1–2 under the Act to permit any
Fund of Funds that relies on section
12(d)(1)(G) of the Act (‘‘Section
12(d)(1)(G) Fund of Funds’’) and that
otherwise complies with rule 12d1–2(a)
under the Act, to also invest, to the
extent consistent with its investment
objective, policies, strategies and
limitations, in other financial
instruments that may not be securities
within the meaning of section 2(a)(36) of
the Act (‘‘Other Investments’’).
3. Applicants agree that any order
granting the requested relief will be
subject to the terms and conditions
national securities exchange at negotiated prices
and, accordingly, to operate as an exchange-traded
fund (‘‘ETF’’).
3 Applicants are not requesting relief for a Fund
of Funds to invest in business development
companies and registered closed-end investment
companies that are not listed and traded on a
national securities exchange.
4 Applicants note that a Fund of Funds generally
would purchase and sell shares of an Underlying
Fund that operates as an ETF or closed-end fund
through secondary market transactions rather than
through principal transactions with the Underlying
Fund. Applicants nevertheless request relief from
sections 17(a)(1) and (2) to permit each ETF or
closed-end fund that is an affiliated person, or an
affiliated person of an affiliated person, as defined
in section 2(a)(3) of the Act, of a Fund of Funds,
to sell shares to or redeem shares from the Fund of
Funds. This includes, in the case of sales and
redemptions of shares of ETFs, the in-kind
transactions that accompany such sales and
redemptions. Applicants are not seeking relief from
Section 17(a) for, and the requested relief will not
apply to, transactions where an ETF, BDC or closedend fund could be deemed an affiliated person, or
an affiliated person of an affiliated person, of a
Fund of Funds because an investment adviser to the
ETF, BDC or closed-end fund or an entity
controlling, controlled by or under common control
with the investment adviser to the ETF, BDC or
closed-end fund, is also an investment adviser to
the Fund of Funds.
E:\FR\FM\08JNN1.SGM
08JNN1
Federal Register / Vol. 82, No. 109 / Thursday, June 8, 2017 / Notices
stated in the application. Such terms
and conditions are designed to, among
other things, help prevent any potential
(i) undue influence over an Underlying
Fund that is not in the same ‘‘group of
investment companies’’ as the Fund of
Funds 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), (B), and (C) of
the Act. Applicants assert that
permitting a Section 12(d)(1)(G) Fund of
Funds to invest in Other Investments as
described in the application would not
raise any of the concerns that section
12(d)(1) of the Act was intended to
address.
4. 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.
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.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Robert W. Errett,
Deputy Secretary.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
[FR Doc. 2017–11924 Filed 6–7–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80849; File No. SR–LCH
SA–2017–004]
Self-Regulatory Organizations; LCH
SA; Order Approving Proposed Rule
Change Relating to LCH SA’s CDS
Margin and Extreme Credit Spread
Curves
June 2, 2017.
I. Introduction
On April 4, 2017, Banque Central de
Compensation, which conducts
business under the name LCH SA (‘‘LCH
SA’’), 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 (SR–LCH SA–004)
to amend its CDS margin framework to
replace an algorithm-based approach to
pricing credit default swaps (‘‘CDS’’) in
the event extreme spread curves cause
the International Swaps and Derivatives
Association Standard Model for pricing
credit default swaps (‘‘ISDA Pricer’’) to
fail with an approximation-based
method.3 The proposed rule change was
published for comment in the Federal
Register on April 19, 2017.4 The
Commission received no comment
letters regarding the proposed change.
For the reasons discussed below, the
Commission is approving the proposed
rule change.
II. Description of the Proposed Rule
Change
LCH SA has proposed to amend its
CDS margin framework. The proposed
change would alter the approach used
by LCH SA when the ISDA Pricer, used
in pricing CDS, fails as a result of
extreme spread curves. Under its
current CDS margin framework, LCH SA
uses the ISDA Pricer to calibrate credit
spread curves as part of its spread
margin component. According to LCH
SA, the ISDA Pricer cannot be used to
calibrate credit spread curves where
‘‘extreme’’ credit spread curves exist.5
In the event that the ISDA Pricer fails
due to the existence of extreme credit
spread curves, LCH SA has established
a dichotomy-based algorithm that it uses
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 For additional information regarding the ISDA
Standard Model, see www.cdsmodel.com. The
Commission is providing this link solely for
informational purposes.
4 Securities Exchange Act Release No. 34–80451
(April 13, 2017), 82 FR 18515 (April 19, 2017) (SR–
LCH SA–2017–004) (‘‘Notice’’).
5 Notice, 82 FR at 18515.
2 17
VerDate Sep<11>2014
17:24 Jun 07, 2017
Jkt 241001
PO 00000
Frm 00065
Fmt 4703
Sfmt 4703
26721
to adjust the inputs and calibrate the
spread curves iteratively until it
identifies the tenor causing the
calibration to fail, and the closest spread
to that tenor that will allow the curve to
appropriately calibrate.6
LCH SA represented that this
dichotomy-based algorithm can
consume significant amounts of time to
process because of the number of
repetitions that may be necessary for the
process to produce the appropriate
results, which could result in delays in
calculating margin requirements.7 To
ameliorate the potential for these delays,
LCH SA has proposed to amend its
approach by replacing the dichotomybased algorithm described above with
an approximation-based approach under
which LCH SA would, in the event that
the ISDA Pricer fails, construct a
piecewise hazard rate curve and a
piecewise constant interest rate curve,
and then apply average hazard and
interest rates for the relevant period to
price the relevant CDS.8
LCH SA represents that it has
performed quantitative analysis, which
indicates that the revised approach to
calculating margin requirements in the
event that the ISDA Pricer fails is a
reliable pricing tool.9 Therefore, this
revised approach is not likely to result
in significant changes to CDS prices and
margin requirements calculated using
LCH SA’s current approach.
III. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Act directs
the Commission to approve a propose
rule change of a self-regulatory
organization if it finds that such
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to such organization.10
Section 17A(b)(3)(F) of the Act requires,
among other things, that the rules of a
registered clearing agency be designed
to promote the prompt and accurate
clearance and settlement of securities
transactions and, to the extent
applicable, derivative agreements,
contracts, and transactions.11 Rule
17Ad–22(e)(17) requires, in relevant
part, that each covered clearing agency
establish, implement, maintain, and
enforce written policies and procedures
reasonably designed to manage a
covered clearing agency’s operational
risk by identifying the plausible sources
6 Id.
7 Id.
8 Id.
9 Notice,
82 FR at 18516.
U.S.C. 78s(b)(2)(C).
11 15 U.S.C. 78q–1(b)(3)(F).
10 15
E:\FR\FM\08JNN1.SGM
08JNN1
]]>Agencies
[Federal Register Volume 82, Number 109 (Thursday, June 8, 2017)]
[Notices]
[Pages 26720-26721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11924]
[[Page 26720]]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 32669; File No. 812-14611]
Franklin Fund Allocator Series, et al.
June 5, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
-----------------------------------------------------------------------
Notice of an application for an order under section 12(d)(1)(J) of
the Investment Company Act of 1940 (the ``Act'') for an exemption from
sections 12(d)(1)(A), (B), and (C) of the Act; under sections 6(c) and
17(b) of the Act for an exemption from sections 17(a) of the Act; and
under section 6(c) of the Act for an exemption from rule 12d1-2(a)
under the Act. The requested order would: (a) Permit certain registered
open-end investment companies to acquire shares of certain registered
open-end investment companies, registered closed-end investment
companies, business development companies, as defined in section
2(a)(48) of the Act, and unit investment trusts (collectively,
``Underlying Funds'') that are within and outside the same group of
investment companies as the acquiring investment companies, in excess
of the limits in section 12(d)(1) of the Act; and (b) permit certain
registered open-end management investment companies relying on rule
12d1-2 under the Act to invest in certain financial instruments.
Applicants: Franklin Fund Allocator Series, a Delaware statutory trust,
that is registered under the Act as an open-end management investment
company with multiple series (the ``Trust''); Franklin Advisers, Inc.
(the ``Initial Adviser''), a California corporation, registered as an
investment adviser under the Investment Advisers Act of 1940; and
Franklin Templeton Distributors, Inc. (the ``Distributor''), registered
as a broker-dealer under the Securities Exchange Act of 1934 (the
``1934 Act'') and a member of the Financial Industry Regulatory
Authority.
Filing Dates: The application was filed on February 9, 2016, and
amended on May 23, 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 June 30, 2017, 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: Craig S. Tyle,
Franklin Templeton Investments, One Franklin Parkway, San Mateo, CA
94403; and Bruce G. Leto and Michael W. Mundt, Stradley Ronon Stevens &
Young, LLP, 2600 One Commerce Square, Philadelphia, PA 19103.
FOR FURTHER INFORMATION CONTACT: Laura L. Solomon, Senior Counsel, at
(202) 551-6915, or Nadya Roytblat, Assistant Chief Counsel, at (202)
551-6821 (Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Summary of the Application
1. Applicants request an order to permit (a) each Fund \1\ (each a
``Fund of Funds'') to acquire shares of Underlying Funds \2\ in excess
of the limits in sections 12(d)(1)(A) and (C) of the Act and (b) each
Underlying Fund that is a registered open-end management investment
company or series thereof, their principal underwriters, and any broker
or dealer registered under the 1934 Act to sell shares of the
Underlying Funds to the Fund of Funds in excess of the limits in
section 12(d)(1)(B) of the Act.\3\ Applicants also request an order of
exemption under sections 6(c) and 17(b) of the Act from the prohibition
on certain affiliated transactions in section 17(a) of the Act to the
extent necessary to permit the Underlying Funds to sell their shares
to, and redeem their shares from, the Funds of Funds.\4\ Applicants
state that such transactions will be consistent with the policies of
each Fund of Funds and each Underlying Fund and with the general
purposes of the Act and will be based on the net asset values of the
Underlying Funds.
---------------------------------------------------------------------------
\1\ Applicants request that the order apply not only to the
existing series of the Trust (the ``Initial Funds''), but that the
order also extend to any future series of the Trust and any other
existing or future registered open-end management investment
companies and any series thereof that are part of the same ``group
of investment companies,'' as defined in section 12(d)(1)(G)(ii) of
the Act, as the Trust and are, or may in the future be, advised by
the Initial Adviser or its successor or any other investment adviser
controlling, controlled by, or under common control with the Initial
Adviser or its successor (together with the Initial Funds, each
series a ``Fund,'' and collectively, the ``Funds''). Applicants
further request that the order also apply to any future principal
underwriter and distributor for a Fund. For purposes of the
requested order, ``successor'' is limited to an entity that results
from a reorganization into another jurisdiction or a change in the
type of business organization. For purposes of the request for
relief, the term ``group of investment companies'' means any two or
more registered investment companies, including closed-end
investment companies, and business development companies, that hold
themselves out to investors as related companies for purposes of
investment and investor services.
\2\ Certain of the Underlying Funds have obtained exemptions
from the Commission necessary to permit their shares to be listed
and traded on a national securities exchange at negotiated prices
and, accordingly, to operate as an exchange-traded fund (``ETF'').
\3\ Applicants are not requesting relief for a Fund of Funds to
invest in business development companies and registered closed-end
investment companies that are not listed and traded on a national
securities exchange.
\4\ Applicants note that a Fund of Funds generally would
purchase and sell shares of an Underlying Fund that operates as an
ETF or closed-end fund through secondary market transactions rather
than through principal transactions with the Underlying Fund.
Applicants nevertheless request relief from sections 17(a)(1) and
(2) to permit each ETF or closed-end fund that is an affiliated
person, or an affiliated person of an affiliated person, as defined
in section 2(a)(3) of the Act, of a Fund of Funds, to sell shares to
or redeem shares from the Fund of Funds. This includes, in the case
of sales and redemptions of shares of ETFs, the in-kind transactions
that accompany such sales and redemptions. Applicants are not
seeking relief from Section 17(a) for, and the requested relief will
not apply to, transactions where an ETF, BDC or closed-end fund
could be deemed an affiliated person, or an affiliated person of an
affiliated person, of a Fund of Funds because an investment adviser
to the ETF, BDC or closed-end fund or an entity controlling,
controlled by or under common control with the investment adviser to
the ETF, BDC or closed-end fund, is also an investment adviser to
the Fund of Funds.
---------------------------------------------------------------------------
2. Applicants further request an exemption under section 6(c) from
rule 12d1-2 under the Act to permit any Fund of Funds that relies on
section 12(d)(1)(G) of the Act (``Section 12(d)(1)(G) Fund of Funds'')
and that otherwise complies with rule 12d1-2(a) under the Act, to also
invest, to the extent consistent with its investment objective,
policies, strategies and limitations, in other financial instruments
that may not be securities within the meaning of section 2(a)(36) of
the Act (``Other Investments'').
3. Applicants agree that any order granting the requested relief
will be subject to the terms and conditions
[[Page 26721]]
stated in the application. Such terms and conditions are designed to,
among other things, help prevent any potential (i) undue influence over
an Underlying Fund that is not in the same ``group of investment
companies'' as the Fund of Funds 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),
(B), and (C) of the Act. Applicants assert that permitting a Section
12(d)(1)(G) Fund of Funds to invest in Other Investments as described
in the application would not raise any of the concerns that section
12(d)(1) of the Act was intended to address.
4. 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. 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.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-11924 Filed 6-7-17; 8:45 am]
BILLING CODE 8011-01-P
