Nationwide Fund Advisors, et al., 32214-32216 [2017-14558]
Download as PDF
<![CDATA[
32214
Federal Register / Vol. 82, No. 132 / Wednesday, July 12, 2017 / Notices
unless it displays a currently valid
control number.
Please direct your written comment to
Pamela Dyson, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 100 F Street NE., Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: July 7, 2017.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–14571 Filed 7–11–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736
asabaliauskas on DSKBBXCHB2PROD with NOTICES
Extension: Rule 433
SEC File No. 270–558, OMB Control No.
3235–0617
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collections of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Rule 433 (17 CFR 230.433) governs
the use and filing of free writing
prospectuses under the Securities Act of
1933 (15 U.S.C. 77a et seq.). The
purpose of Rule 433 is to reduce the
restrictions on communications that a
company can make to investors during
a registered offering of its securities,
while maintaining a high level of
investor protection. A free writing
prospectus meeting the conditions of
Rule 433(d)(1) must be filed with the
Commission and is publicly available.
We estimate that it takes approximately
1.3 burden hours per response to
prepare a free writing prospectus and
that the information is filed by 3,633
respondents approximately 1.25 times a
year for a total of 3,633 responses. We
estimate that 25% of the 1.3 burden
hours per response (0.32 hours) is
prepared by the company for total
annual reporting burden of 1,163 hours
(0.32 hours x 3,633 responses).
Written comments are invited on: (a)
Whether this proposed collection of
information is necessary for the
VerDate Sep<11>2014
17:54 Jul 11, 2017
Jkt 241001
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden imposed by the collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
Please direct your written comment to
Pamela Dyson, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 100 F Street NE., Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: July 7, 2017.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–14574 Filed 7–11–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32727; 812–14751]
Nationwide Fund Advisors, et al.
July 6, 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) for an exemption from
sections 12(d)(1)(A) and 12(d)(1)(B) of
the Act. The requested order would
permit (a) index-based 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,
PO 00000
Frm 00055
Fmt 4703
Sfmt 4703
under certain circumstances, more than
seven days after the tender of shares for
redemption; (d) certain affiliated
persons of a Fund to deposit securities
into, and receive securities from, the
Fund in connection with the purchase
and redemption of Creation Units; and
(e) certain registered management
investment companies and unit
investment trusts outside of the same
group of investment companies as the
Funds (‘‘Funds of Funds’’) to acquire
shares of the Funds.
APPLICANTS: Nationwide Fund Advisors
(the ‘‘Initial Adviser’’), a Delaware
statutory trust that is registered as an
investment adviser under the
Investment Advisers Act of 1940, ETF
Series Solutions (the ‘‘Trust’’), a
Delaware statutory trust registered
under the Act as an open-end
management investment company with
multiple series, and Quasar Distributors,
LLC (the ‘‘Distributor’’), a Delaware
limited liability company and brokerdealer registered under the Securities
Exchange Act of 1934 (‘‘Exchange Act’’).
FILING DATES: The application was filed
on March 3, 2017 and amended on June
14, 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 July 31, 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: Brent J. Fields, 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:
Laura J. Riegel, Senior Counsel, at (202)
551–3038, or Robert H. Shapiro, Branch
Chief, at (202) 551–6821 (Division of
Investment Management, Chief
Counsel’s Office).
E:\FR\FM\12JYN1.SGM
12JYN1
Federal Register / Vol. 82, No. 132 / Wednesday, July 12, 2017 / Notices
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.
SUPPLEMENTARY INFORMATION:
asabaliauskas on DSKBBXCHB2PROD with NOTICES
Summary of the Application
1. Applicants request an order that
would allow Funds to operate as index
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. Any order granting the
requested relief would be subject to the
terms and conditions stated in the
application.
2. Each Fund will hold investment
positions selected to correspond
generally to the performance of an
Underlying Index. In the case of SelfIndexing Funds, an affiliated person, as
defined in section 2(a)(3) of the Act
(‘‘Affiliated Person’’), or an affiliated
person of an Affiliated Person (‘‘SecondTier Affiliate’’), of the Trust or a Fund,
of the Adviser, of any sub-adviser to or
promoter of a Fund, or of the Distributor
will compile, create, sponsor or
maintain the Underlying Index.2
3. Shares will be purchased and
redeemed in Creation Units and
generally on an in-kind basis. Except
where the purchase or redemption will
include cash under the limited
circumstances specified in the
application, purchasers will be required
to purchase Creation Units by
depositing specified instruments
1 Applicants request that the order apply to the
new series of the Trust and any additional series of
the Trust, and any other open-end management
investment company or series thereof (each,
included in the term ‘‘Fund’’), each of which will
operate as an ETF and will track a specified index
comprised of domestic or foreign equity and/or
fixed income securities (each, an ‘‘Underlying
Index’’). Any Fund will (a) be advised by the Initial
Adviser or an entity controlling, controlled by, or
under common control with the Initial Adviser
(each, an ‘‘Adviser’’) and (b) comply with the terms
and conditions of the application.
2 Each Self-Indexing Fund will post on its Web
site the identities and quantities of the investment
positions that will form the basis for the Fund’s
calculation of its NAV at the end of the day.
Applicants believe that requiring Self-Indexing
Funds to maintain full portfolio transparency will
help address, together with other protections,
conflicts of interest with respect to such Funds.
VerDate Sep<11>2014
17:54 Jul 11, 2017
Jkt 241001
(‘‘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 effect
creations and redemptions of Creation
Units in kind and that are based on
certain Underlying Indexes that include
foreign securities, applicants request
relief from the requirement imposed by
section 22(e) in order to allow such
Funds to pay redemption proceeds
within fifteen calendar days following
the tender of Creation Units for
redemption. Applicants assert that the
requested relief would not be
inconsistent with the spirit and intent of
section 22(e) to prevent unreasonable,
undisclosed or unforeseen delays in the
actual payment of redemption proceeds.
7. Applicants request an exemption to
permit Funds of Funds to acquire Fund
shares beyond the limits of section
12(d)(1)(A) of the Act; and the Funds,
and any principal underwriter for the
Funds, and/or any broker or dealer
registered under the Exchange Act, to
sell shares to Funds of Funds beyond
the limits of section 12(d)(1)(B) of the
Act. The application’s terms and
PO 00000
Frm 00056
Fmt 4703
Sfmt 4703
32215
conditions are designed to, among other
things, help prevent any potential (i)
undue influence over a Fund through
control or voting power, or in
connection with certain services,
transactions, and underwritings, (ii)
excessive layering of fees, and (iii)
overly complex fund structures, which
are the concerns underlying the limits
in sections 12(d)(1)(A) and (B) of the
Act.
8. Applicants request an exemption
from sections 17(a)(1) and 17(a)(2) of the
Act to permit persons that are Affiliated
Persons, or Second-Tier Affiliates, of the
Funds, solely by virtue of certain
ownership interests, to effectuate
purchases and redemptions in-kind. The
deposit procedures for in-kind
purchases of Creation Units and the
redemption procedures for in-kind
redemptions of Creation Units will be
the same for all purchases and
redemptions and Deposit Instruments
and Redemption Instruments will be
valued in the same manner as those
investment positions currently held by
the Funds. Applicants also seek relief
from the prohibitions on affiliated
transactions in section 17(a) to permit a
Fund to sell its shares to and redeem its
shares from a Fund of Funds, and to
engage in the accompanying in-kind
transactions with the Fund of Funds.3
The purchase of Creation Units by a
Fund of Funds directly from a Fund will
be accomplished in accordance with the
policies of the Fund of Funds and will
be based on the NAVs of the Funds.
9. Section 6(c) of the Act permits the
Commission to exempt any persons or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities, or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
3 The requested relief would apply to direct sales
of shares in Creation Units by a Fund to a Fund of
Funds and redemptions of those shares. Applicants,
moreover, are not seeking relief from section 17(a)
for, and the requested relief will not apply to,
transactions where a Fund could be deemed an
Affiliated Person, or a Second-Tier Affiliate, of a
Fund of Funds because an Adviser or an entity
controlling, controlled by or under common control
with an Adviser provides investment advisory
services to that Fund of Funds.
E:\FR\FM\12JYN1.SGM
12JYN1
32216
Federal Register / Vol. 82, No. 132 / Wednesday, July 12, 2017 / Notices
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. 2017–14558 Filed 7–11–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81084; File No. SR–
BatsBZX–2017–35]
Self-Regulatory Organizations; Bats
BZX Exchange, Inc.; Order Granting
Approval of a Proposed Rule Change
To Amend Rule 20.6, Nullification and
Adjustment of Options Transactions
Including Obvious Errors, and Rule
20.3, Trading Halts
July 6, 2017.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
I. Introduction
On May 5, 2017, Bats BZX Exchange,
Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ‘‘Act’’),1 and
Rule 19b–4 thereunder,2 a proposed rule
change to amend Exchange Rule 20.6
(‘‘Rule 20.6’’), relating to the adjustment
and nullification of transactions that
occur on the Exchange’s equity options
platform, and Exchange Rule 20.3
(‘‘Rule 20.3’’), relating to trading halts.
The proposed rule change was
published for comment in the Federal
Register on May 23, 2017.3 The
Commission received no comments
regarding the proposal. This order
approves the proposed rule change.
II. Description of the Proposed Rule
Change
The Exchange proposes to amend
Rule 20.6, entitled ‘‘Nullification and
Adjustment of Options Transactions
including Obvious Errors,’’ to: (i) Adopt
procedures to determine Theoretical
Price in the event a reliable national
best bid or offer (‘‘NBBO’’) is not
available; and (ii) expand the category of
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 80709
(May 17, 2017), 82 FR 23684 (‘‘Notice’’).
2 17
VerDate Sep<11>2014
17:54 Jul 11, 2017
Jkt 241001
invalid quotes. The Exchange also
proposes to amend Rule 20.3, entitled
‘‘Trading Halts,’’ to require the
Exchange to nullify any transaction that
occurs during a regulatory halt on the
primary listing market for the
underlying security.
A. Background
The Exchange and other options
exchanges previously adopted new,
harmonized rules related to the
adjustment and nullification of
erroneous options transactions.4 The
Exchange believes that the changes the
options exchanges implemented with
the new, harmonized rules have led to
increased transparency and finality with
respect to the adjustment and
nullification of erroneous options
transactions.5 However, as part of the
initial initiative, the Exchange and other
options exchanges deferred a few
specific matters for further discussion,
including the calculation of Theoretical
Price in the event a reliable NBBO is not
available and the handling of erroneous
complex orders and stock-option
orders.6 The calculation of Theoretical
Price is used in determining whether an
options transaction is potentially
erroneous and subject to a nullification
or adjustment under Rule 20.6.
B. Calculation of Theoretical Price
Using a Third Party Provider
Pursuant to Rule 20.6, when
reviewing a transaction as potentially
erroneous, the Exchange needs to first
determine the ‘‘Theoretical Price’’ of the
option, i.e., the Exchange’s estimate of
the correct market price for the option.
If the applicable option series is traded
on at least one other options exchange,
then the Theoretical Price of an option
series is generally the last national best
bid (‘‘NBB’’) just prior to the trade in
question with respect to an erroneous
sell transaction or the last national best
offer (‘‘NBO’’) just prior to the trade in
question with respect to an erroneous
buy transaction. However, there may be
situations where the NBB or NBO is not
4 See Securities Exchange Act Release No. 74556
(March 20, 2015), 80 FR 16031 (March 26, 2015)
(order approving SR–BATS–2014–067); see also
Securities and Exchange Act Release No. 73884
(December 18, 2014), 79 FR 77557 (December 24,
2014) (notice of filing of SR–BATS–2014–067).
5 See Notice, supra note 3, at 23684.
6 Since adopting the initial harmonized rule, the
exchanges that offer complex orders and/or stockoption orders have addressed the handling of
erroneous options transactions that result from the
execution of complex orders and stock-option
orders. See, e.g., Securities Exchange Act Release
No. 80040 (February 14, 2017), 82 FR 11248
(February 21, 2017) (SR–CBOE–2016–088) (granting
approval of a proposal related to the nullification
and adjustment of erroneous complex order and
stock-option order transactions).
PO 00000
Frm 00057
Fmt 4703
Sfmt 4703
available or may not be reliable.
Specifically, under sub-paragraphs
(b)(1)–(3) of Rule 20.6, these situations
occur when there are no quotes or no
valid quotes for comparison purposes,
when the NBBO is determined to be too
wide to be reliable, and at the open of
each trading day. In each of these
circumstances, because the NBB or NBO
is not available or is deemed to be
unreliable, the Exchange determines
Theoretical Price.7 The Exchange notes
that the process for determining
Theoretical Price in such situations
could be subjective and lead to
disparate results for a transaction that
spans multiple options exchanges.8
Accordingly, the Exchange proposes
to adopt Interpretation and Policy .03 to
Rule 20.6 to specify how the Exchange
would determine Theoretical Price
when required by sub-paragraphs (b)(1)–
(3) of Rule 20.6.9 In particular, the
Exchange worked with other options
exchanges to identify and select a
reliable third party vendor (‘‘TP
Provider’’) that would provide
Theoretical Price to the Exchange
whenever one or more transactions is
under review pursuant to Rule 20.6 and
the NBBO is unavailable or deemed
unreliable pursuant to Rule 20.6(b).10
The Exchange and other options
exchanges selected CBOE Livevol, LLC
(‘‘Livevol’’) as the TP Provider.11
According to the Exchange, Livevol will
develop a new tool in connection with
this proposal based on its existing
technology and services that would
supply Theoretical Price to the
Exchange and other options exchanges
upon request.12 Accordingly, pursuant
to proposed Interpretation and Policy
.03 of Rule 20.6, when the Exchange
must determine Theoretical Price
pursuant to sub-paragraphs (b)(1)–(3) of
7 The Exchange states that when determining
Theoretical Price under the current Rule, Exchange
personnel generally consult and refer to data such
as the prices of related series (especially the closest
strikes in the option in question), the price of the
underlying security, volatility characteristics of the
option, and historical pricing of the option and/or
similar options. See Notice, supra note 3, at 23685.
8 See id.
9 The Exchange has further proposed to modify
paragraph (b) to Rule 20.6 to state that the Exchange
will rely on paragraph (b) and Interpretation and
Policy .03 when determining Theoretical Price.
10 See Notice, supra note 3, at 23685.
11 See id. The Exchange proposes to codify the
selection of Livevol in proposed paragraph (d) to
Interpretation and Policy .03 of Rule 20.6. See id.
12 See id. The Exchange states that the Theoretical
Price tool would leverage current market data and
surrounding strikes to assist in a relative value
pricing approach to generating a Theoretical Price.
See id. When relative value methods are incapable
of generating a valid Theoretical Price, the
Theoretical Price tool will utilize historical trade
and quote data to calculate Theoretical Price. See
id.
E:\FR\FM\12JYN1.SGM
12JYN1
]]>Agencies
[Federal Register Volume 82, Number 132 (Wednesday, July 12, 2017)]
[Notices]
[Pages 32214-32216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-14558]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 32727; 812-14751]
Nationwide Fund Advisors, et al.
July 6, 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) for an exemption from sections 12(d)(1)(A) and
12(d)(1)(B) of the Act. The requested order would permit (a) index-
based 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; and (e) certain
registered management investment companies and unit investment trusts
outside of the same group of investment companies as the Funds (``Funds
of Funds'') to acquire shares of the Funds.
Applicants: Nationwide Fund Advisors (the ``Initial Adviser''), a
Delaware statutory trust that is registered as an investment adviser
under the Investment Advisers Act of 1940, ETF Series Solutions (the
``Trust''), a Delaware statutory trust registered under the Act as an
open-end management investment company with multiple series, and Quasar
Distributors, LLC (the ``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 March 3, 2017 and amended on
June 14, 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 July 31, 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: Brent J. Fields, 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: Laura J. Riegel, Senior Counsel, at
(202) 551-3038, or Robert H. Shapiro, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
[[Page 32215]]
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
index 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. Any order
granting the requested relief would be subject to the terms and
conditions stated in the application.
---------------------------------------------------------------------------
\1\ Applicants request that the order apply to the new series of
the Trust and any additional series of the Trust, and any other
open-end management investment company or series thereof (each,
included in the term ``Fund''), each of which will operate as an ETF
and will track a specified index comprised of domestic or foreign
equity and/or fixed income securities (each, an ``Underlying
Index''). Any Fund will (a) be advised by the Initial Adviser or an
entity controlling, controlled by, or under common control with the
Initial Adviser (each, an ``Adviser'') and (b) comply with the terms
and conditions of the application.
---------------------------------------------------------------------------
2. Each Fund will hold investment positions selected to correspond
generally to the performance of an Underlying Index. In the case of
Self-Indexing Funds, an affiliated person, as defined in section
2(a)(3) of the Act (``Affiliated Person''), or an affiliated person of
an Affiliated Person (``Second-Tier Affiliate''), of the Trust or a
Fund, of the Adviser, of any sub-adviser to or promoter of a Fund, or
of the Distributor will compile, create, sponsor or maintain the
Underlying Index.\2\
---------------------------------------------------------------------------
\2\ Each Self-Indexing Fund will post on its Web site the
identities and quantities of the investment positions that will form
the basis for the Fund's calculation of its NAV at the end of the
day. Applicants believe that requiring Self-Indexing Funds to
maintain full portfolio transparency will help address, together
with other protections, conflicts of interest with respect to such
Funds.
---------------------------------------------------------------------------
3. Shares will be purchased and redeemed in Creation Units and
generally on an in-kind basis. Except where the purchase or redemption
will include cash under the limited circumstances specified in the
application, purchasers will be required to purchase Creation Units by
depositing specified instruments (``Deposit Instruments''), and
shareholders redeeming their shares will receive specified instruments
(``Redemption Instruments''). The Deposit Instruments and the
Redemption Instruments will each correspond pro rata to the positions
in the Fund's portfolio (including cash positions) except as specified
in the application.
4. Because shares will not be individually redeemable, applicants
request an exemption from section 5(a)(1) and section 2(a)(32) of the
Act that would permit the Funds to register as open-end management
investment companies and issue shares that are redeemable in Creation
Units only.
5. Applicants also request an exemption from section 22(d) of the
Act and rule 22c-1 under the Act as secondary market trading in shares
will take place at negotiated prices, not at a current offering price
described in a Fund's prospectus, and not at a price based on NAV.
Applicants state that (a) secondary market trading in shares does not
involve a Fund as a party and will not result in dilution of an
investment in shares, and (b) to the extent different prices exist
during a given trading day, or from day to day, such variances occur as
a result of third-party market forces, such as supply and demand.
Therefore, applicants assert that secondary market transactions in
shares will not lead to discrimination or preferential treatment among
purchasers. Finally, applicants represent that share market prices will
be disciplined by arbitrage opportunities, which should prevent shares
from trading at a material discount or premium from NAV.
6. With respect to Funds that effect creations and redemptions of
Creation Units in kind and that are based on certain Underlying Indexes
that include foreign securities, applicants request relief from the
requirement imposed by section 22(e) in order to allow such Funds to
pay redemption proceeds within fifteen calendar days following the
tender of Creation Units for redemption. Applicants assert that the
requested relief would not be inconsistent with the spirit and intent
of section 22(e) to prevent unreasonable, undisclosed or unforeseen
delays in the actual payment of redemption proceeds.
7. Applicants request an exemption to permit Funds of Funds to
acquire Fund shares beyond the limits of section 12(d)(1)(A) of the
Act; and the Funds, and any principal underwriter for the Funds, and/or
any broker or dealer registered under the Exchange Act, to sell shares
to Funds of Funds beyond the limits of section 12(d)(1)(B) of the Act.
The application's terms and conditions are designed to, among other
things, help prevent any potential (i) undue influence over a Fund
through control or voting power, or in connection with certain
services, transactions, and underwritings, (ii) excessive layering of
fees, and (iii) overly complex fund structures, which are the concerns
underlying the limits in sections 12(d)(1)(A) and (B) of the Act.
8. Applicants request an exemption from sections 17(a)(1) and
17(a)(2) of the Act to permit persons that are Affiliated Persons, or
Second-Tier Affiliates, of the Funds, solely by virtue of certain
ownership interests, to effectuate purchases and redemptions in-kind.
The deposit procedures for in-kind purchases of Creation Units and the
redemption procedures for in-kind redemptions of Creation Units will be
the same for all purchases and redemptions and Deposit Instruments and
Redemption Instruments will be valued in the same manner as those
investment positions currently held by the Funds. Applicants also seek
relief from the prohibitions on affiliated transactions in section
17(a) to permit a Fund to sell its shares to and redeem its shares from
a Fund of Funds, and to engage in the accompanying in-kind transactions
with the Fund of Funds.\3\ The purchase of Creation Units by a Fund of
Funds directly from a Fund will be accomplished in accordance with the
policies of the Fund of Funds and will be based on the NAVs of the
Funds.
---------------------------------------------------------------------------
\3\ The requested relief would apply to direct sales of shares
in Creation Units by a Fund to a Fund of Funds and redemptions of
those shares. Applicants, moreover, are not seeking relief from
section 17(a) for, and the requested relief will not apply to,
transactions where a Fund could be deemed an Affiliated Person, or a
Second-Tier Affiliate, of a Fund of Funds because an Adviser or an
entity controlling, controlled by or under common control with an
Adviser provides investment advisory services to that Fund of Funds.
---------------------------------------------------------------------------
9. Section 6(c) of the Act permits the Commission to exempt any
persons or transactions from any provision of the Act if such exemption
is necessary or appropriate in the public interest and consistent with
the protection of investors and the purposes fairly intended by the
policy and provisions of the Act. Section 12(d)(1)(J) of the Act
provides that the Commission may exempt any person, security, or
transaction, or any class or classes of persons, securities, or
transactions, from any provision of section 12(d)(1) if the exemption
is consistent with the public interest and the protection of investors.
Section 17(b) of the Act authorizes the Commission to grant an order
permitting a transaction otherwise prohibited by section 17(a) if it
finds
[[Page 32216]]
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. 2017-14558 Filed 7-11-17; 8:45 am]
BILLING CODE 8011-01-P
