Barings LLC, et al., 34339-34343 [2017-15404]

Download as PDF Federal Register / Vol. 82, No. 140 / Monday, July 24, 2017 / Notices disapprove the proposed rule change (File Number SR–BatsEDGA–2017–14). SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81158; File No. SR– BatsEDGA–2017–14] Self-Regulatory Organizations; Bats EDGA Exchange, Inc.; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change To Adopt Rule 4.17, Consolidated Audit Trail—Fee Dispute Resolution mstockstill on DSK30JT082PROD with NOTICES July 18, 2017. On May 23, 2017, Bats EDGA Exchange, Inc. (‘‘EDGA’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt Rule 4.17 (Consolidated Audit Trail—Fee Dispute Resolution). The proposed rule change was published for comment in the Federal Register on June 7, 2017.3 The Commission received no comment letters on the proposed rule change. Section 19(b)(2) of the Act 4 provides that, within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The Commission is extending this 45-day time period. The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change. The proposed rule change would establish the procedures for resolving potential disputes related to CAT Fees charged to Industry Members. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,5 designates September 5, 2017, as the date by which the Commission should either approve or disapprove or institute proceedings to determine whether to 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Securities Exchange Act Release No. 80835 (June 1, 2017), 82 FR 26549 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 15 U.S.C. 78s(b)(2). 2 17 VerDate Sep<11>2014 18:13 Jul 21, 2017 Jkt 241001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–15411 Filed 7–21–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 32734; File No. 812–14607] Barings LLC, et al. July 18, 2017. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application for an order under section 17(b) of the Investment Company Act of 1940 (the ‘‘Act’’) granting an exemption from section 17(a) of the Act, and under section 17(d) of the Act and rule 17d– 1 thereunder permitting certain joint transactions. AGENCY: Barings LLC (the ‘‘Barings Adviser’’), Barings Global Advisors Limited (‘‘BGA’’), certain investment companies or series of investment companies advised by the Barings Adviser (the ‘‘Barings Funds’’), certain series of MassMutual Premier Funds, MassMutual Select Funds, MML Series Investment Fund, and MML Series Investment Fund II (the ‘‘MML Funds’’) advised by MML Investment Advisers, LLC (the ‘‘MML Adviser’’ and, together with the Barings Adviser and BGA, the ‘‘Advisers’’) (the MML Funds together with the Barings Funds, the ‘‘Funds’’); and Jeffries LLC (‘‘JEFLLC’’), Jeffries International Limited (‘‘JIL’’) and Jeffries Leveraged Credit Products, LLC (‘‘JLCP’’ and, together with JEFLLC and JIL, the ‘‘Jeffries Trading Entities’’ and the Jeffries Trading Entities, together with the Advisers and the Funds, the ‘‘Applicants’’). SUMMARY OF APPLICATION: As more fully described in the application, applicants seek an order to permit ‘‘Securities Transactions’’ consisting of: (1) Primary and secondary market transactions in fixed-income securities executed on a principal basis between the Funds and the Jeffries Trading Entities; and (2) certain types of transactions in which the Jeffries Trading Entities and the Funds might each participate jointly or have a joint interest (‘‘Joint Transactions’’). The order would apply APPLICANTS: 6 17 PO 00000 CFR 200.30–3(a)(31). Frm 00065 Fmt 4703 Sfmt 4703 34339 only under circumstances in which a Jeffries Trading Entity might be deemed an affiliated person of an affiliated person (a ‘‘second-tier affiliate’’) of a Fund solely as a result of the formation of Jeffries Finance LLC (‘‘JFIN’’), a joint venture of which each of Massachusetts Mutual Life Insurance Co. (‘‘MassMutual’’), the indirect parent company of each of the Advisers, and Jeffries Group LLC (‘‘Jeffries’’), the parent company of each of the Jeffries Trading Entities, own more than 25% of the outstanding voting securities, as that term is defined in Section 2(a)(42) of the Act. FILING DATES: The application was filed on February 2, 2016, and subsequently amended on July 15, 2016, December 20, 2016 and May 12, 2017. HEARING OR NOTIFICATION OF HEARING: An order granting the application 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 August 14, 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. The Applicants: c/o Gregory D. Sheehan, Esq. and Brian D. McCabe, Esq., Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199, with copies to Christopher DeFrancis, Esq., Barings LLC, 1500 Main Street, Springfield, MA 01115 and Sheldon Francis, Esq., Barings LLC, 550 South Tyron Street, Suite 3300, Charlotte, NC 28202. FOR FURTHER INFORMATION CONTACT: Kyle R. Ahlgren, Senior Counsel, at (202) 551–6857, or Aaron T. Gilbride, Acting Branch Chief, at (202) 551–6906 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s Web site by searching for the file number, or an applicant using the Company name box, at http:// E:\FR\FM\24JYN1.SGM 24JYN1 34340 Federal Register / Vol. 82, No. 140 / Monday, July 24, 2017 / Notices mstockstill on DSK30JT082PROD with NOTICES www.sec.gov/search/search.htm or by calling (202) 551–8090. Applicants’ Representations 1. Each Fund is an open-end or closed-end management investment company registered under the Act and is organized as a business trust under the laws of Massachusetts, or as a series thereof. The Funds have a variety of investment objectives, but each may invest some or all of its assets in fixedincome securities. 2. The Barings Adviser, a member of the MassMutual Financial Group, is an indirect wholly-owned subsidiary of MassMutual and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the ‘‘Advisers Act’’). The Barings Adviser acts as investment adviser to each of the Barings Funds and as an investment sub-adviser to certain of the MML Funds. BGA serves as a subadviser with respect to certain of the Barings Funds, subject to the supervision of the Barings Adviser. 3. The MML Adviser, a member of the MassMutual Financial Group, is a direct wholly-owned subsidiary of MassMutual and is registered as an investment adviser under the Advisers Act. The MML Adviser acts as investment adviser to each of the MML Funds and supervises 32 affiliated or unaffiliated sub-advisers (including the Barings Adviser) with respect to certain MML Funds. 4. Each Jeffries Trading Entity is a wholly-owned subsidiary of Jeffries. Jeffries is an indirect, wholly-owned subsidiary of Leucadia National Corporation, a diversified holding company. JEFLLC is a broker-dealer registered with the Commission pursuant to section 15 of the Securities Exchange Act of 1934, as amended, and JIL is authorized and regulated by the UK Financial Conduct Authority. Each of JEFLLC and JIL conducts a diversified, full service securities business, including (but not limited to) as a dealer and underwriter for fixedincome securities. JEFLLC is a primary dealer in U.S. government securities and JIL is a primary dealer in government securities of Germany, the Netherlands, Portugal, Slovenia and the United Kingdom. JLCP is a loan trading entity active in the loan trading market. 5. JFIN, the MassMutual/Jeffries joint venture, structures, underwrites and syndicates senior secured loans to corporate borrowers. JFIN also purchases syndicated loans in the secondary market. JFIN operates separately from the ‘‘Jeffries Entities’’ (defined as Jeffries or any other entity that is under common control with JFIN VerDate Sep<11>2014 18:13 Jul 21, 2017 Jkt 241001 that is not controlled by or under common control with MassMutual) and the ‘‘MassMutual Entities’’ (defined as MassMutual, the Advisers, or any other MassMutual entity that is not JFIN). Jeffries has no interest in, and will not control (within the meaning of Section 2(a)(9) of the Act) directly or indirectly, the MassMutual Entities. MassMutual has no interest in, and will not control (within the meaning of Section 2(a)(9) of the Act) directly or indirectly the Jeffries Entities. 6. The Jeffries Trading Entities and the Advisers operate as separate, independent businesses. The Jeffries Trading Entities, on the one hand, and the Advisers, on the other, have separate ownership, and each has its own separate officers and employees, is separately capitalized and maintains its own separate books and records and physically separate offices. No director, officer, or employee of the Funds or the Advisers is or will be a director, officer or employee of the Jeffries Trading Entities. Officers and employees of each Adviser may not communicate confidential and non-public investmentrelated information outside of the Adviser, except in connection with a conflicts clearing process set up for that purpose. There is not, and will not be, any express or implied understanding between any Jeffries Trading Entity and any Adviser that an Adviser will cause a Fund to enter into Securities Transactions or give preference to the Jeffries Trading Entity in effecting such transactions between the Fund and the Jeffries Trading Entity. All decisions by the Funds to enter into portfolio transactions are determined solely by their respective Advisers in accordance with the investment objectives of the Fund. 7. As more fully described in the application, the Securities Transactions include: (i) The purchase of fixedincome securities by a Fund in underwritten offerings in which a Jeffries Trading Entity is a manager or member of the underwriting syndicate, and where a Fund purchases underwritten fixed-income securities from the Jeffries Trading Entity; (ii) the purchase by a Fund of fixed-income securities from, or the sale of fixedincome securities to, a Jeffries Trading Entity, in transactions in which the Jeffries Trading Entity is acting as a principal; and (iii) participation in certain specific arrangements or transactions that a Fund may participate in with a Jeffries Trading Entity (including tender option bond trust structures (‘‘TOBs’’), certain assetbacked or mortgage-backed securitization structures, loan PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 syndicates, and investments in the same company. 8. If the Jeffries Trading Entities were considered to be second-tier affiliates of the Funds, a Securities Transaction would potentially violate one or more of section 17(a) or section 17(d) of the Act and rule 17d–1 thereunder. Applicants assert that the inability of the Funds to execute Securities Transactions involving the Jeffries Trading Entities imposes a hardship on the Funds by prohibiting the Funds from engaging in Securities Transactions with a dealer or trader with a substantial market share in certain fixed income markets and by preventing the Funds from purchasing or selling securities that the Funds would have purchased or sold in transactions in which a Jeffries Trading Entity has some involvement. Applicants’ Legal Analysis 1. Applicants request an order under section 6(c) and section 17(b) of the Act granting an exemption from section 17(a) of the Act and under section 17(d) of the Act and rule 17d–1 thereunder permitting certain joint transactions. Section 6(c) of the Act, in relevant part, authorizes the Commission to exempt any person or transaction, or any class or classes of persons or transactions, from any provision or provisions of the Act, if and to the extent that 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 provision of the Act. Section 17(b) of the Act authorizes the Commission to issue an exemptive order if the Commission finds that the terms of the proposed transaction are fair and reasonable and do not involve overreaching on the part of any persons concerned, and the proposed transaction is consistent with the policy of each registered investment company and the general purposes of the Act. 2. Section 17(a) of the Act generally prohibits an affiliated person of a registered investment company, or an affiliated person of such a person, acting as principal, from selling to or purchasing from such registered company any security or other property and from borrowing money or other property from such investment company. Due to their second-tier affiliation, any Securities Transaction by the Funds involving Jeffries Trading Entities would be subject to section 17(a) of the Act where it constitutes a principal transaction between them. Applicants note that the primary purpose of section 17(a) is to prevent a person with the power to control an investment company from engaging in E:\FR\FM\24JYN1.SGM 24JYN1 mstockstill on DSK30JT082PROD with NOTICES Federal Register / Vol. 82, No. 140 / Monday, July 24, 2017 / Notices self-dealing to the detriment of the investment company’s shareholders, and contend that when the person acting on behalf of an investment company has no direct or indirect pecuniary interest in a party to a principal transaction, then the abuse that section 17(a) is designed to prevent is not present. Applicants submit that no risk of self-dealing would present itself in any Securities Transaction because the Jeffries Trading Entities will have no influence over portfolio decisions by the Advisers, and the Advisers would receive no unfair pecuniary advantage from engaging in the Securities Transactions with the Jeffries Trading Entities. 3. Section 17(d) of the Act and rule 17d–1 thereunder prohibit any affiliated person of or principal underwriter for a registered investment company or any second-tier affiliate, acting as principal, from effecting any transaction in connection with any joint enterprise or other joint arrangement or profit sharing plan in which the investment company participates, unless an application regarding the joint transaction has been filed with the Commission and granted by order. Rule 17d–1 provides that, in passing upon applications for such an order, the Commission will consider whether the participation of a registered investment company in a joint transaction is consistent with the provisions, policies and purposes of the Act and the extent to which such participation is on a basis different from or less advantageous than that of the other applicants. Due to their secondtier affiliation, any Securities Transaction by the Funds involving Jeffries Trading Entities would be subject to section 17(d) of the Act and rule 17d–1 thereunder where it constitutes a joint transaction between them. Applicants note that section 17(d) and rule 17d–1 thereunder were intended to prohibit abuses arising from conflicts of interest where rather than being on opposite sides of a transaction, an investment company and its affiliates share ‘‘some element of combination’’ in a transaction. Applicants submit that in no event will the Jeffries Trading Entities have the ability to influence the decisions of the Advisers on behalf of the Funds, and that participation by the Funds in such transactions with the Jeffries Trading Entities would be on a basis similar to the Jeffries Trading Entities, unless any difference is related to the differing nature of their participation in the transaction. 4. Applicants submit that the circumstances under which the Securities Transactions would be conducted, including in particular the VerDate Sep<11>2014 18:13 Jul 21, 2017 Jkt 241001 proposed conditions for the order (detailed below) satisfy the statutory standards for relief. Applicants contend that the ‘‘structural’’ conditions are intended to assure that the Advisers and the Funds continue to operate independently of, and free of any undue influence by, Jeffries and the Jeffries Trading Entities, while the ‘‘transactional’’ conditions are designed to assure that the terms of the individual transactions are fair from the perspective of the Funds. Applicants further contend that: (i) The Securities Transactions are reasonable and fair and do not involve the risk of overreaching due to the independence of the Jeffries Trading Entities from the Advisers; (ii) the Fund’s participation in Joint Transactions will be on a basis no less advantageous than that of similarly situated trading entities due to the complete separation of the Advisers from the Jeffries Trading Entities and the inability of the Jeffries Trading Entities to influence the Advisers; (iii) the order would be appropriate in the public interest and consistent with the policies of the Funds, and that prohibiting the Funds from engaging in Securities Transactions involving the Jeffries Trading Entities would harm the interests of shareholders of the Funds by preventing the Adviser from investing in a way which is most beneficial to the shareholders; and (iv) the Securities Transactions are consistent with the purposes of the Act and the protection of investors, as evidenced by the independence of the businesses of MassMutual and Jeffries and the adoption of procedures designed to ensure that the terms of particular Securities Transactions involving the Jeffries Trading Entities are fair and reasonable and do not involve overreaching. Applicants’ Conditions Applicants agree that the order granting the requested relief will be subject to the following conditions: Applicants’ Structural Conditions 1. Jeffries will control none of the Advisers or the Funds or any principal underwriter for the Funds, directly or indirectly, within the meaning of Section 2(a)(9) of the Act and Jeffries will not exercise, or attempt to exercise, control over any Fund. The order will remain in effect only so long as MassMutual, or such other entity no controlling, controlled by or under common control with Jeffries, primarily controls the Advisers. 2. The Jeffries Trading Entities will not directly or indirectly consult with MassMutual, the Advisers or any PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 34341 portfolio manager of the Advisers concerning securities purchases or sales or the selection of a broker or dealer for any Securities Transaction placed or to be placed on behalf of a Fund, or otherwise seek to influence the choice of broker or dealer for any Securities Transaction by a Fund other than in the normal course of sales activities of the same nature that are being carried out during the same time period with respect to unaffiliated institutional clients of the Jeffries Trading Entity. 3. No officer, director or employee of JFIN will directly or indirectly seek to influence in any way the terms of any Securities Transaction covered by the order. 4. The Advisers and the Jeffries Trading Entities will operate as separate organizations, with separate capitalization, separate books and records, separate officers and employees, and physically separate offices. The Jeffries Trading Entities will adopt, and implement, policies and that prohibit the Jeffries Trading Entities from (i) linking any approval or action relating to JFIN to any action by any Fund or by any Adviser relating to any Fund or (ii) using the existence of JFIN as a basis for seeking to persuade any Fund or Adviser to engage in business with the Jeffries Trading Entity. The Funds have adopted policies designed to keep information about their holdings and transactions on a confidential basis, prior to any public disclosures, except in connection with the ordinary course of business as permitted by the portfolio holdings disclosure policies approved by the Funds’ directors and involving communications of the same nature as are being made during the same period to unaffiliated trading partners of the Funds. Pursuant to these policies, the Advisers will designate information regarding investment advisory and portfolio execution matters relating to the Funds as information that may or may not be communicated between JFIN, on one hand, and the Advisers, on the other hand, prior to any public disclosure. 5. The Jeffries Trading Entities will not adopt any compensation scheme any component of which is based on (i) a factor that treats the Funds differently than unaffiliated counterparties or (ii) the amount of business done by the Funds with the Jeffries Trading Entities, except to the extent such business might affect indirectly the profits or losses of the Jeffries Trading Entities. 6. The respective legal/compliance departments of the Advisers and the Jeffries Trading Entities will prepare guidelines for their respective personnel to make certain that Securities E:\FR\FM\24JYN1.SGM 24JYN1 34342 Federal Register / Vol. 82, No. 140 / Monday, July 24, 2017 / Notices Transactions effected pursuant to the order comply with its conditions, and that the respective Advisers and Jeffries Trading Entities maintain an armslength relationship. The respective compliance departments of the Advisers and Jeffries Trading Entities will monitor periodically the activities of the Advisers and Jeffries Trading Entities, respectively, to make certain that the conditions to the order are met. mstockstill on DSK30JT082PROD with NOTICES Applicants’ Transactional Conditions With respect to each Securities Transaction entered into or effected pursuant to the order: 1. Each Fund’s Board, including a majority of its disinterested directors/ trustees (the ‘‘Necessary Majority’’), shall approve, and the Fund shall implement, procedures governing all transactions pursuant to the order and the Fund’s Board shall no less frequently than quarterly review all such transactions and receive and review a report of those transactions. Such report, which will be prepared by the Fund’s Adviser, and reviewed and approved by the Fund’s Chief Compliance Officer, will indicate for each transaction that the conditions of the order have been satisfied, and will include a discussion of any significant changes in the volume, type or terms of transactions between the relevant Fund and the relevant Jeffries Trading Entity, the reasons for these changes, and a determination that such changes are appropriate. In addition, annually and prior to entering into a Securities Transaction with a Jeffries Trading Entity that no Fund has previously traded with, the Board will consider (i) whether the level of Securities Transactions with Jeffries Trading Entities is appropriate and (ii) whether continued reliance on the order in any applicable category of fixed-income instruments is appropriate in light of the need of the Funds to have the Jeffries Trading Entities available as trading counterparties, as evidenced by, among other things, the aggregate market share of the Jeffries Trading Entities in each such category. 2. For each transaction, the Advisers will adhere to a ‘‘best execution’’ standard and will consider only the interests of the Funds and will not take into account the impact of a Fund’s investment decision on the Jeffries Trading Entities or their affiliates. Before entering into any such transaction, the Adviser will determine that the transaction is consistent with the investment objectives and policies of the Fund and is in the best interests of the Fund and its shareholders. VerDate Sep<11>2014 18:13 Jul 21, 2017 Jkt 241001 3. Each Fund will (i) for so long as the order is relied upon, maintain and preserve in an easily accessible place a written copy of the procedures and conditions (and any modifications thereto) that are described herein, and (ii) maintain and preserve for a period of not less than six years form the end of the fiscal year in which any Securities Transaction in which the Fund’s Adviser knows that both a Jeffries Trading Entity and the Fund directly or indirectly have an interest occurs, the first two years in an easily accessible place, a written record of each such transaction setting forth a description of the security purchased or sold by the Fund, a description of the Jeffries Trading Entity’s interest or role in the transaction, the terms of the transaction, and the information or materials upon which the determination was made that each such transaction was made in accordance with the procedures and conditions set forth in the application. 4. Except for Securities Transactions involving repurchase agreements and variable rate demand notes, before any secondary market principal transaction in fixed income securities is entered into between a Fund and a Jeffries Trading Entity, the Fund’s Adviser will obtain a competitive quotation for the same securities (or in the case of securities for which quotations for the same securities are not available, a competitive quotation for securities with substantially identical maturities, credit risk and repayment terms (including floating or fixed-rate coupons, attached options, or any other provisions that affect the expected size or timing of the payments from the securities) as the securities to be purchases or sold) from at least two unaffiliated market counter-parties that are in a position to quote favorable market prices. For each such transaction, the Adviser will determine, based upon the quotations and such other relevant information (such as available transaction prices and any other information regarding the value of securities) as is reasonably available to the Adviser, that the price available from the Jeffries Trading Entity is at least as favorable as that available from other sources. a. With respect to each such transaction involving repurchase agreements, a Fund will enter into such agreements only where the Adviser has determined, based upon relevant information reasonably available to the Adviser, that the income to be earned from the repurchase agreement is at least equal to that available from other sources. Before any repurchase PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 agreements are entered into pursuant to the exemption, the Fund or the Adviser must obtain competitive quotations from at least two unaffiliated dealers with respect to repurchase agreements comparable to the type of repurchase agreement involved, except that if quotations are unavailable from two such dealers, only one other competitive quotations is required. b. With respect to each such transaction involving variable rate demand notes for which dealer quotes are not ordinarily available, a Fund will only undertake purchases and sales where the Adviser has determined, based on relevant information reasonably available to the Adviser, that the income earned from the variable rate demand note is at least equal to that of variable rate demand notes of comparable quality that are available from other sources. 5. With respect to securities offered in a primary market underwritten transaction, a Fund will undertake such purchase from a Jeffries Trading Entity only where the Adviser has determined, based upon relevant information reasonably available to the Adviser, that the securities were purchased at a price that is no more than the price paid by each other purchaser of securities from the Jeffries Trading Entity or other members of the underwriting syndicate in that offering or in any concurrent offering of the securities, and on the same terms as such other purchasers (except in the case of an offering conducted under the laws of a country other than the United States, for any rights to purchase that are required by law to be granted to existing securities holders of the issuer). 6. In the case of an arrangement regarding a tender option bond trust for which a Jeffries Trading Entity acts as a liquidity provider or remarketing agent and owns an interest (or may own an interest as a result of such capacity): a. (i) The Necessary Majority of the Fund’s Board will adopt procedures designed to assure that it is in the best interests of the Fund to participate in any such arrangements. Such procedures will take into consideration, among other things, the terms of the arrangement, the nature of the respective interests in the trusts that may be held by the Jeffries Trading Entity and the Funds, and the circumstances under which the Jeffries Trading Entity may cause termination of the trust and the transfer of the underlying bonds back to the Fund; and (ii) where the Jeffries Trading Entity owns the residual interest and a Fund owns a floating rate interest: (1) The Fund must be eligible to participate in E:\FR\FM\24JYN1.SGM 24JYN1 mstockstill on DSK30JT082PROD with NOTICES Federal Register / Vol. 82, No. 140 / Monday, July 24, 2017 / Notices any discretionary tender on the same basis as any similarly situated holder of floating rate interests; (2) the Fund must participate in any mandatory tender on the same basis as each similarly situated holder; and (3) less than 50% of the floating rate interests must be owned by Funds (and other discretionary accounts) managed by the Fund’s Adviser. b. Before any such arrangements are entered into pursuant to the exemption, where the Fund holds the residual interest, the Fund or the Adviser must obtain competitive quotations from at least two unaffiliated institutions with respect to fees charged by such institutions for acting as liquidity provider or remarketing agent, except that if quotations are unavailable from two such institutions, only one other competitive quotation is required. Any fees paid to the Jeffries Trading Entity as liquidity provider or remarketing agent will be no greater than the lowest of such quotations, unless the Board finds that such difference is justified by a corresponding difference in the nature of the services provided. 7. With respect to asset-backed securities or mortgage-backed securities that are newly issued by special purpose entities sponsored by a Jeffries Trading Entity (or an affiliate) under circumstances in which both the following are true: (i) The residual interest in the special purpose entity is owned directly or indirectly by the Jeffries Trading Entity (or an affiliate), and (ii) the Jeffries Trading Entity (or an affiliate) acts as the servicer of assets, purchases of such securities will be made by a Fund only where, based on relevant information that is reasonably available to the Adviser, the Adviser believes that, upon the close of the transaction, Funds (and other discretionary advisory accounts) managed by the Adviser will purchase less than 50% of the dollar amount of securities of each class acquired by the Fund in the aggregate, and the Fund participates in each such class on the same terms as other purchasers of that class. 8. With respect to a syndicated loan facility in which a Fund and a Jeffries Trading Entity participate in a manner that might otherwise be prohibited by section 17(d) of the Act and rule 17d– 1 thereunder, (a) the participation by the Fund and the Jeffries Trading Entity will involve no coordination between the Fund and the Jeffries Trading Entity beyond that of a type the Jeffries Trading Entity engages in with other unaffiliated participants in such facility, (b) the terms of the Fund’s participation in the facility (to the extent within the VerDate Sep<11>2014 18:13 Jul 21, 2017 Jkt 241001 knowledge and control of the Jeffries Trading Entity) will be on a basis no less advantageous than that of other similarly situated participants (i.e., the Fund will receive the same priority, security, interest rate and fees as other participants in the same tranche or other portion of the loan in which the Fund is a participant), except to the extent such difference is related to services performed with respect to the facility or their role in the facility and (c) in the case of the primary syndication of a loan facility where the Jeffries Trading Entity is lead agent with primary responsibility for structuring, arranging or placing such facility, the Fund will participate in the facility only where, based on relevant information that is reasonably available to the Adviser, the Adviser believes that, upon conclusion of allocations to holders of record in the primary syndication of the facility, less than 50% of the participants will be held by Funds (and other discretionary advisory accounts) managed by the Adviser. 9. With respect to situations in which a Fund and a Jeffries Trading Entity (or an affiliate) have invested in the same company and that might otherwise be prohibited by section 17(d) of the Act and rule 17d–1 thereunder (other than a syndicated loan transaction, which is subject to Transactional Condition (8) above), (a) the Fund’s and the Jeffries Trading Entity’s (or affiliate’s) investment will involve no coordination between the Jeffries Trading Entity (or an affiliate) and the Fund beyond that of a type the Jeffries Trading Entity (or an affiliate) engages in with other unaffiliated investors in such company and (b) the Fund will participate or invest in a type or class of securities (e.g., equity securities) of the company only where, based on relevant information that is reasonably available to the Adviser, the Adviser believes that, upon the close of the investment transaction, less than 50% of the dollar amount of the securities of such type or class will be owned by Funds (and other discretionary advisory accounts) managed by the Adviser. For the Commission, by the Division of Investment Management, under delegated authority. Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–15404 Filed 7–21–17; 8:45 am] BILLING CODE 8011–01–P PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 34343 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81163; File No. SR–CHX– 2017–11] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change To Adopt Article 23, Rule 13, Consolidated Audit Trail—Fee Dispute Resolution July 18, 2017. On June 5, 2017, the Chicago Stock Exchange, Inc. (‘‘CHX’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt Article 23, Rule 13 (Consolidated Audit Trail—Fee Dispute Resolution). The proposed rule change was published for comment in the Federal Register on June 19, 2017.3 The Commission received no comment letters on the proposed rule change. Section 19(b)(2) of the Act 4 provides that, within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The Commission is extending this 45-day time period. The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change. The proposed rule change would establish the procedures for resolving potential disputes related to CAT Fees charged to Industry Members. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,5 designates September 17, 2017, as the date by which the Commission should either approve or disapprove or institute proceedings to determine whether to 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Securities Exchange Act Release No. 80916 (June 13, 2017), 82 FR 27904 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 15 U.S.C. 78s(b)(2). 2 17 E:\FR\FM\24JYN1.SGM 24JYN1

Agencies

[Federal Register Volume 82, Number 140 (Monday, July 24, 2017)]
[Notices]
[Pages 34339-34343]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-15404]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32734; File No. 812-14607]


Barings LLC, et al.

July 18, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 17(b) of 
the Investment Company Act of 1940 (the ``Act'') granting an exemption 
from section 17(a) of the Act, and under section 17(d) of the Act and 
rule 17d-1 thereunder permitting certain joint transactions.

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Applicants:  Barings LLC (the ``Barings Adviser''), Barings Global 
Advisors Limited (``BGA''), certain investment companies or series of 
investment companies advised by the Barings Adviser (the ``Barings 
Funds''), certain series of MassMutual Premier Funds, MassMutual Select 
Funds, MML Series Investment Fund, and MML Series Investment Fund II 
(the ``MML Funds'') advised by MML Investment Advisers, LLC (the ``MML 
Adviser'' and, together with the Barings Adviser and BGA, the 
``Advisers'') (the MML Funds together with the Barings Funds, the 
``Funds''); and Jeffries LLC (``JEFLLC''), Jeffries International 
Limited (``JIL'') and Jeffries Leveraged Credit Products, LLC (``JLCP'' 
and, together with JEFLLC and JIL, the ``Jeffries Trading Entities'' 
and the Jeffries Trading Entities, together with the Advisers and the 
Funds, the ``Applicants'').

Summary of Application:  As more fully described in the application, 
applicants seek an order to permit ``Securities Transactions'' 
consisting of: (1) Primary and secondary market transactions in fixed-
income securities executed on a principal basis between the Funds and 
the Jeffries Trading Entities; and (2) certain types of transactions in 
which the Jeffries Trading Entities and the Funds might each 
participate jointly or have a joint interest (``Joint Transactions''). 
The order would apply only under circumstances in which a Jeffries 
Trading Entity might be deemed an affiliated person of an affiliated 
person (a ``second-tier affiliate'') of a Fund solely as a result of 
the formation of Jeffries Finance LLC (``JFIN''), a joint venture of 
which each of Massachusetts Mutual Life Insurance Co. (``MassMutual''), 
the indirect parent company of each of the Advisers, and Jeffries Group 
LLC (``Jeffries''), the parent company of each of the Jeffries Trading 
Entities, own more than 25% of the outstanding voting securities, as 
that term is defined in Section 2(a)(42) of the Act.

Filing Dates:  The application was filed on February 2, 2016, and 
subsequently amended on July 15, 2016, December 20, 2016 and May 12, 
2017.

Hearing or Notification of Hearing:  An order granting the application 
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 August 14, 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. The Applicants: c/o Gregory D. 
Sheehan, Esq. and Brian D. McCabe, Esq., Ropes & Gray LLP, Prudential 
Tower, 800 Boylston Street, Boston, MA 02199, with copies to 
Christopher DeFrancis, Esq., Barings LLC, 1500 Main Street, 
Springfield, MA 01115 and Sheldon Francis, Esq., Barings LLC, 550 South 
Tyron Street, Suite 3300, Charlotte, NC 28202.

FOR FURTHER INFORMATION CONTACT: Kyle R. Ahlgren, Senior Counsel, at 
(202) 551-6857, or Aaron T. Gilbride, Acting Branch Chief, at (202) 
551-6906 (Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://

[[Page 34340]]

www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicants' Representations

    1. Each Fund is an open-end or closed-end management investment 
company registered under the Act and is organized as a business trust 
under the laws of Massachusetts, or as a series thereof. The Funds have 
a variety of investment objectives, but each may invest some or all of 
its assets in fixed-income securities.
    2. The Barings Adviser, a member of the MassMutual Financial Group, 
is an indirect wholly-owned subsidiary of MassMutual and is registered 
as an investment adviser under the Investment Advisers Act of 1940, as 
amended (the ``Advisers Act''). The Barings Adviser acts as investment 
adviser to each of the Barings Funds and as an investment sub-adviser 
to certain of the MML Funds. BGA serves as a sub-adviser with respect 
to certain of the Barings Funds, subject to the supervision of the 
Barings Adviser.
    3. The MML Adviser, a member of the MassMutual Financial Group, is 
a direct wholly-owned subsidiary of MassMutual and is registered as an 
investment adviser under the Advisers Act. The MML Adviser acts as 
investment adviser to each of the MML Funds and supervises 32 
affiliated or unaffiliated sub-advisers (including the Barings Adviser) 
with respect to certain MML Funds.
    4. Each Jeffries Trading Entity is a wholly-owned subsidiary of 
Jeffries. Jeffries is an indirect, wholly-owned subsidiary of Leucadia 
National Corporation, a diversified holding company. JEFLLC is a 
broker-dealer registered with the Commission pursuant to section 15 of 
the Securities Exchange Act of 1934, as amended, and JIL is authorized 
and regulated by the UK Financial Conduct Authority. Each of JEFLLC and 
JIL conducts a diversified, full service securities business, including 
(but not limited to) as a dealer and underwriter for fixed-income 
securities. JEFLLC is a primary dealer in U.S. government securities 
and JIL is a primary dealer in government securities of Germany, the 
Netherlands, Portugal, Slovenia and the United Kingdom. JLCP is a loan 
trading entity active in the loan trading market.
    5. JFIN, the MassMutual/Jeffries joint venture, structures, 
underwrites and syndicates senior secured loans to corporate borrowers. 
JFIN also purchases syndicated loans in the secondary market. JFIN 
operates separately from the ``Jeffries Entities'' (defined as Jeffries 
or any other entity that is under common control with JFIN that is not 
controlled by or under common control with MassMutual) and the 
``MassMutual Entities'' (defined as MassMutual, the Advisers, or any 
other MassMutual entity that is not JFIN). Jeffries has no interest in, 
and will not control (within the meaning of Section 2(a)(9) of the Act) 
directly or indirectly, the MassMutual Entities. MassMutual has no 
interest in, and will not control (within the meaning of Section 
2(a)(9) of the Act) directly or indirectly the Jeffries Entities.
    6. The Jeffries Trading Entities and the Advisers operate as 
separate, independent businesses. The Jeffries Trading Entities, on the 
one hand, and the Advisers, on the other, have separate ownership, and 
each has its own separate officers and employees, is separately 
capitalized and maintains its own separate books and records and 
physically separate offices. No director, officer, or employee of the 
Funds or the Advisers is or will be a director, officer or employee of 
the Jeffries Trading Entities. Officers and employees of each Adviser 
may not communicate confidential and non-public investment-related 
information outside of the Adviser, except in connection with a 
conflicts clearing process set up for that purpose. There is not, and 
will not be, any express or implied understanding between any Jeffries 
Trading Entity and any Adviser that an Adviser will cause a Fund to 
enter into Securities Transactions or give preference to the Jeffries 
Trading Entity in effecting such transactions between the Fund and the 
Jeffries Trading Entity. All decisions by the Funds to enter into 
portfolio transactions are determined solely by their respective 
Advisers in accordance with the investment objectives of the Fund.
    7. As more fully described in the application, the Securities 
Transactions include: (i) The purchase of fixed-income securities by a 
Fund in underwritten offerings in which a Jeffries Trading Entity is a 
manager or member of the underwriting syndicate, and where a Fund 
purchases underwritten fixed-income securities from the Jeffries 
Trading Entity; (ii) the purchase by a Fund of fixed-income securities 
from, or the sale of fixed-income securities to, a Jeffries Trading 
Entity, in transactions in which the Jeffries Trading Entity is acting 
as a principal; and (iii) participation in certain specific 
arrangements or transactions that a Fund may participate in with a 
Jeffries Trading Entity (including tender option bond trust structures 
(``TOBs''), certain asset-backed or mortgage-backed securitization 
structures, loan syndicates, and investments in the same company.
    8. If the Jeffries Trading Entities were considered to be second-
tier affiliates of the Funds, a Securities Transaction would 
potentially violate one or more of section 17(a) or section 17(d) of 
the Act and rule 17d-1 thereunder. Applicants assert that the inability 
of the Funds to execute Securities Transactions involving the Jeffries 
Trading Entities imposes a hardship on the Funds by prohibiting the 
Funds from engaging in Securities Transactions with a dealer or trader 
with a substantial market share in certain fixed income markets and by 
preventing the Funds from purchasing or selling securities that the 
Funds would have purchased or sold in transactions in which a Jeffries 
Trading Entity has some involvement.

Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) and section 17(b) 
of the Act granting an exemption from section 17(a) of the Act and 
under section 17(d) of the Act and rule 17d-1 thereunder permitting 
certain joint transactions. Section 6(c) of the Act, in relevant part, 
authorizes the Commission to exempt any person or transaction, or any 
class or classes of persons or transactions, from any provision or 
provisions of the Act, if and to the extent that 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 provision of the Act. Section 17(b) of the Act authorizes the 
Commission to issue an exemptive order if the Commission finds that the 
terms of the proposed transaction are fair and reasonable and do not 
involve overreaching on the part of any persons concerned, and the 
proposed transaction is consistent with the policy of each registered 
investment company and the general purposes of the Act.
    2. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such a person, acting as principal, from selling to or purchasing from 
such registered company any security or other property and from 
borrowing money or other property from such investment company. Due to 
their second-tier affiliation, any Securities Transaction by the Funds 
involving Jeffries Trading Entities would be subject to section 17(a) 
of the Act where it constitutes a principal transaction between them. 
Applicants note that the primary purpose of section 17(a) is to prevent 
a person with the power to control an investment company from engaging 
in

[[Page 34341]]

self-dealing to the detriment of the investment company's shareholders, 
and contend that when the person acting on behalf of an investment 
company has no direct or indirect pecuniary interest in a party to a 
principal transaction, then the abuse that section 17(a) is designed to 
prevent is not present. Applicants submit that no risk of self-dealing 
would present itself in any Securities Transaction because the Jeffries 
Trading Entities will have no influence over portfolio decisions by the 
Advisers, and the Advisers would receive no unfair pecuniary advantage 
from engaging in the Securities Transactions with the Jeffries Trading 
Entities.
    3. Section 17(d) of the Act and rule 17d-1 thereunder prohibit any 
affiliated person of or principal underwriter for a registered 
investment company or any second-tier affiliate, acting as principal, 
from effecting any transaction in connection with any joint enterprise 
or other joint arrangement or profit sharing plan in which the 
investment company participates, unless an application regarding the 
joint transaction has been filed with the Commission and granted by 
order. Rule 17d-1 provides that, in passing upon applications for such 
an order, the Commission will consider whether the participation of a 
registered investment company in a joint transaction is consistent with 
the provisions, policies and purposes of the Act and the extent to 
which such participation is on a basis different from or less 
advantageous than that of the other applicants. Due to their second-
tier affiliation, any Securities Transaction by the Funds involving 
Jeffries Trading Entities would be subject to section 17(d) of the Act 
and rule 17d-1 thereunder where it constitutes a joint transaction 
between them. Applicants note that section 17(d) and rule 17d-1 
thereunder were intended to prohibit abuses arising from conflicts of 
interest where rather than being on opposite sides of a transaction, an 
investment company and its affiliates share ``some element of 
combination'' in a transaction. Applicants submit that in no event will 
the Jeffries Trading Entities have the ability to influence the 
decisions of the Advisers on behalf of the Funds, and that 
participation by the Funds in such transactions with the Jeffries 
Trading Entities would be on a basis similar to the Jeffries Trading 
Entities, unless any difference is related to the differing nature of 
their participation in the transaction.JY3.
    4. Applicants submit that the circumstances under which the 
Securities Transactions would be conducted, including in particular the 
proposed conditions for the order (detailed below) satisfy the 
statutory standards for relief. Applicants contend that the 
``structural'' conditions are intended to assure that the Advisers and 
the Funds continue to operate independently of, and free of any undue 
influence by, Jeffries and the Jeffries Trading Entities, while the 
``transactional'' conditions are designed to assure that the terms of 
the individual transactions are fair from the perspective of the Funds. 
Applicants further contend that: (i) The Securities Transactions are 
reasonable and fair and do not involve the risk of overreaching due to 
the independence of the Jeffries Trading Entities from the Advisers; 
(ii) the Fund's participation in Joint Transactions will be on a basis 
no less advantageous than that of similarly situated trading entities 
due to the complete separation of the Advisers from the Jeffries 
Trading Entities and the inability of the Jeffries Trading Entities to 
influence the Advisers; (iii) the order would be appropriate in the 
public interest and consistent with the policies of the Funds, and that 
prohibiting the Funds from engaging in Securities Transactions 
involving the Jeffries Trading Entities would harm the interests of 
shareholders of the Funds by preventing the Adviser from investing in a 
way which is most beneficial to the shareholders; and (iv) the 
Securities Transactions are consistent with the purposes of the Act and 
the protection of investors, as evidenced by the independence of the 
businesses of MassMutual and Jeffries and the adoption of procedures 
designed to ensure that the terms of particular Securities Transactions 
involving the Jeffries Trading Entities are fair and reasonable and do 
not involve overreaching.

Applicants' Conditions

    Applicants agree that the order granting the requested relief will 
be subject to the following conditions:

Applicants' Structural Conditions

    1. Jeffries will control none of the Advisers or the Funds or any 
principal underwriter for the Funds, directly or indirectly, within the 
meaning of Section 2(a)(9) of the Act and Jeffries will not exercise, 
or attempt to exercise, control over any Fund. The order will remain in 
effect only so long as MassMutual, or such other entity no controlling, 
controlled by or under common control with Jeffries, primarily controls 
the Advisers.
    2. The Jeffries Trading Entities will not directly or indirectly 
consult with MassMutual, the Advisers or any portfolio manager of the 
Advisers concerning securities purchases or sales or the selection of a 
broker or dealer for any Securities Transaction placed or to be placed 
on behalf of a Fund, or otherwise seek to influence the choice of 
broker or dealer for any Securities Transaction by a Fund other than in 
the normal course of sales activities of the same nature that are being 
carried out during the same time period with respect to unaffiliated 
institutional clients of the Jeffries Trading Entity.
    3. No officer, director or employee of JFIN will directly or 
indirectly seek to influence in any way the terms of any Securities 
Transaction covered by the order.
    4. The Advisers and the Jeffries Trading Entities will operate as 
separate organizations, with separate capitalization, separate books 
and records, separate officers and employees, and physically separate 
offices. The Jeffries Trading Entities will adopt, and implement, 
policies and that prohibit the Jeffries Trading Entities from (i) 
linking any approval or action relating to JFIN to any action by any 
Fund or by any Adviser relating to any Fund or (ii) using the existence 
of JFIN as a basis for seeking to persuade any Fund or Adviser to 
engage in business with the Jeffries Trading Entity. The Funds have 
adopted policies designed to keep information about their holdings and 
transactions on a confidential basis, prior to any public disclosures, 
except in connection with the ordinary course of business as permitted 
by the portfolio holdings disclosure policies approved by the Funds' 
directors and involving communications of the same nature as are being 
made during the same period to unaffiliated trading partners of the 
Funds. Pursuant to these policies, the Advisers will designate 
information regarding investment advisory and portfolio execution 
matters relating to the Funds as information that may or may not be 
communicated between JFIN, on one hand, and the Advisers, on the other 
hand, prior to any public disclosure.
    5. The Jeffries Trading Entities will not adopt any compensation 
scheme any component of which is based on (i) a factor that treats the 
Funds differently than unaffiliated counterparties or (ii) the amount 
of business done by the Funds with the Jeffries Trading Entities, 
except to the extent such business might affect indirectly the profits 
or losses of the Jeffries Trading Entities.
    6. The respective legal/compliance departments of the Advisers and 
the Jeffries Trading Entities will prepare guidelines for their 
respective personnel to make certain that Securities

[[Page 34342]]

Transactions effected pursuant to the order comply with its conditions, 
and that the respective Advisers and Jeffries Trading Entities maintain 
an arms-length relationship. The respective compliance departments of 
the Advisers and Jeffries Trading Entities will monitor periodically 
the activities of the Advisers and Jeffries Trading Entities, 
respectively, to make certain that the conditions to the order are met.

Applicants' Transactional Conditions

    With respect to each Securities Transaction entered into or 
effected pursuant to the order:
    1. Each Fund's Board, including a majority of its disinterested 
directors/trustees (the ``Necessary Majority''), shall approve, and the 
Fund shall implement, procedures governing all transactions pursuant to 
the order and the Fund's Board shall no less frequently than quarterly 
review all such transactions and receive and review a report of those 
transactions. Such report, which will be prepared by the Fund's 
Adviser, and reviewed and approved by the Fund's Chief Compliance 
Officer, will indicate for each transaction that the conditions of the 
order have been satisfied, and will include a discussion of any 
significant changes in the volume, type or terms of transactions 
between the relevant Fund and the relevant Jeffries Trading Entity, the 
reasons for these changes, and a determination that such changes are 
appropriate. In addition, annually and prior to entering into a 
Securities Transaction with a Jeffries Trading Entity that no Fund has 
previously traded with, the Board will consider (i) whether the level 
of Securities Transactions with Jeffries Trading Entities is 
appropriate and (ii) whether continued reliance on the order in any 
applicable category of fixed-income instruments is appropriate in light 
of the need of the Funds to have the Jeffries Trading Entities 
available as trading counterparties, as evidenced by, among other 
things, the aggregate market share of the Jeffries Trading Entities in 
each such category.
    2. For each transaction, the Advisers will adhere to a ``best 
execution'' standard and will consider only the interests of the Funds 
and will not take into account the impact of a Fund's investment 
decision on the Jeffries Trading Entities or their affiliates. Before 
entering into any such transaction, the Adviser will determine that the 
transaction is consistent with the investment objectives and policies 
of the Fund and is in the best interests of the Fund and its 
shareholders.
    3. Each Fund will (i) for so long as the order is relied upon, 
maintain and preserve in an easily accessible place a written copy of 
the procedures and conditions (and any modifications thereto) that are 
described herein, and (ii) maintain and preserve for a period of not 
less than six years form the end of the fiscal year in which any 
Securities Transaction in which the Fund's Adviser knows that both a 
Jeffries Trading Entity and the Fund directly or indirectly have an 
interest occurs, the first two years in an easily accessible place, a 
written record of each such transaction setting forth a description of 
the security purchased or sold by the Fund, a description of the 
Jeffries Trading Entity's interest or role in the transaction, the 
terms of the transaction, and the information or materials upon which 
the determination was made that each such transaction was made in 
accordance with the procedures and conditions set forth in the 
application.
    4. Except for Securities Transactions involving repurchase 
agreements and variable rate demand notes, before any secondary market 
principal transaction in fixed income securities is entered into 
between a Fund and a Jeffries Trading Entity, the Fund's Adviser will 
obtain a competitive quotation for the same securities (or in the case 
of securities for which quotations for the same securities are not 
available, a competitive quotation for securities with substantially 
identical maturities, credit risk and repayment terms (including 
floating or fixed-rate coupons, attached options, or any other 
provisions that affect the expected size or timing of the payments from 
the securities) as the securities to be purchases or sold) from at 
least two unaffiliated market counter-parties that are in a position to 
quote favorable market prices. For each such transaction, the Adviser 
will determine, based upon the quotations and such other relevant 
information (such as available transaction prices and any other 
information regarding the value of securities) as is reasonably 
available to the Adviser, that the price available from the Jeffries 
Trading Entity is at least as favorable as that available from other 
sources.
    a. With respect to each such transaction involving repurchase 
agreements, a Fund will enter into such agreements only where the 
Adviser has determined, based upon relevant information reasonably 
available to the Adviser, that the income to be earned from the 
repurchase agreement is at least equal to that available from other 
sources. Before any repurchase agreements are entered into pursuant to 
the exemption, the Fund or the Adviser must obtain competitive 
quotations from at least two unaffiliated dealers with respect to 
repurchase agreements comparable to the type of repurchase agreement 
involved, except that if quotations are unavailable from two such 
dealers, only one other competitive quotations is required.
    b. With respect to each such transaction involving variable rate 
demand notes for which dealer quotes are not ordinarily available, a 
Fund will only undertake purchases and sales where the Adviser has 
determined, based on relevant information reasonably available to the 
Adviser, that the income earned from the variable rate demand note is 
at least equal to that of variable rate demand notes of comparable 
quality that are available from other sources.
    5. With respect to securities offered in a primary market 
underwritten transaction, a Fund will undertake such purchase from a 
Jeffries Trading Entity only where the Adviser has determined, based 
upon relevant information reasonably available to the Adviser, that the 
securities were purchased at a price that is no more than the price 
paid by each other purchaser of securities from the Jeffries Trading 
Entity or other members of the underwriting syndicate in that offering 
or in any concurrent offering of the securities, and on the same terms 
as such other purchasers (except in the case of an offering conducted 
under the laws of a country other than the United States, for any 
rights to purchase that are required by law to be granted to existing 
securities holders of the issuer).
    6. In the case of an arrangement regarding a tender option bond 
trust for which a Jeffries Trading Entity acts as a liquidity provider 
or remarketing agent and owns an interest (or may own an interest as a 
result of such capacity):
    a. (i) The Necessary Majority of the Fund's Board will adopt 
procedures designed to assure that it is in the best interests of the 
Fund to participate in any such arrangements. Such procedures will take 
into consideration, among other things, the terms of the arrangement, 
the nature of the respective interests in the trusts that may be held 
by the Jeffries Trading Entity and the Funds, and the circumstances 
under which the Jeffries Trading Entity may cause termination of the 
trust and the transfer of the underlying bonds back to the Fund; and 
(ii) where the Jeffries Trading Entity owns the residual interest and a 
Fund owns a floating rate interest: (1) The Fund must be eligible to 
participate in

[[Page 34343]]

any discretionary tender on the same basis as any similarly situated 
holder of floating rate interests; (2) the Fund must participate in any 
mandatory tender on the same basis as each similarly situated holder; 
and (3) less than 50% of the floating rate interests must be owned by 
Funds (and other discretionary accounts) managed by the Fund's Adviser.
    b. Before any such arrangements are entered into pursuant to the 
exemption, where the Fund holds the residual interest, the Fund or the 
Adviser must obtain competitive quotations from at least two 
unaffiliated institutions with respect to fees charged by such 
institutions for acting as liquidity provider or remarketing agent, 
except that if quotations are unavailable from two such institutions, 
only one other competitive quotation is required. Any fees paid to the 
Jeffries Trading Entity as liquidity provider or remarketing agent will 
be no greater than the lowest of such quotations, unless the Board 
finds that such difference is justified by a corresponding difference 
in the nature of the services provided.
    7. With respect to asset-backed securities or mortgage-backed 
securities that are newly issued by special purpose entities sponsored 
by a Jeffries Trading Entity (or an affiliate) under circumstances in 
which both the following are true: (i) The residual interest in the 
special purpose entity is owned directly or indirectly by the Jeffries 
Trading Entity (or an affiliate), and (ii) the Jeffries Trading Entity 
(or an affiliate) acts as the servicer of assets, purchases of such 
securities will be made by a Fund only where, based on relevant 
information that is reasonably available to the Adviser, the Adviser 
believes that, upon the close of the transaction, Funds (and other 
discretionary advisory accounts) managed by the Adviser will purchase 
less than 50% of the dollar amount of securities of each class acquired 
by the Fund in the aggregate, and the Fund participates in each such 
class on the same terms as other purchasers of that class.
    8. With respect to a syndicated loan facility in which a Fund and a 
Jeffries Trading Entity participate in a manner that might otherwise be 
prohibited by section 17(d) of the Act and rule 17d-1 thereunder, (a) 
the participation by the Fund and the Jeffries Trading Entity will 
involve no coordination between the Fund and the Jeffries Trading 
Entity beyond that of a type the Jeffries Trading Entity engages in 
with other unaffiliated participants in such facility, (b) the terms of 
the Fund's participation in the facility (to the extent within the 
knowledge and control of the Jeffries Trading Entity) will be on a 
basis no less advantageous than that of other similarly situated 
participants (i.e., the Fund will receive the same priority, security, 
interest rate and fees as other participants in the same tranche or 
other portion of the loan in which the Fund is a participant), except 
to the extent such difference is related to services performed with 
respect to the facility or their role in the facility and (c) in the 
case of the primary syndication of a loan facility where the Jeffries 
Trading Entity is lead agent with primary responsibility for 
structuring, arranging or placing such facility, the Fund will 
participate in the facility only where, based on relevant information 
that is reasonably available to the Adviser, the Adviser believes that, 
upon conclusion of allocations to holders of record in the primary 
syndication of the facility, less than 50% of the participants will be 
held by Funds (and other discretionary advisory accounts) managed by 
the Adviser.
    9. With respect to situations in which a Fund and a Jeffries 
Trading Entity (or an affiliate) have invested in the same company and 
that might otherwise be prohibited by section 17(d) of the Act and rule 
17d-1 thereunder (other than a syndicated loan transaction, which is 
subject to Transactional Condition (8) above), (a) the Fund's and the 
Jeffries Trading Entity's (or affiliate's) investment will involve no 
coordination between the Jeffries Trading Entity (or an affiliate) and 
the Fund beyond that of a type the Jeffries Trading Entity (or an 
affiliate) engages in with other unaffiliated investors in such company 
and (b) the Fund will participate or invest in a type or class of 
securities (e.g., equity securities) of the company only where, based 
on relevant information that is reasonably available to the Adviser, 
the Adviser believes that, upon the close of the investment 
transaction, less than 50% of the dollar amount of the securities of 
such type or class will be owned by Funds (and other discretionary 
advisory accounts) managed by the Adviser.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-15404 Filed 7-21-17; 8:45 am]
BILLING CODE 8011-01-P