SL Advisors, LLC, et al., 42201-42203 [2017-18777]
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Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Exchange Act 7 and
Rule 19b–4(f)(2) thereunder,8 because it
establishes or changes a due, or fee.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend the rule change if
it appears to the Commission that the
action is necessary or appropriate in the
public interest, for the protection of
investors, or would otherwise further
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
asabaliauskas on DSKBBXCHB2PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BOX–2017–29 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BOX–2017–29. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
7 15
8 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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17:37 Sep 05, 2017
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BOX–
2017–29, and should be submitted on or
before September 27, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–18800 Filed 9–5–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32801; 812–14802]
SL Advisors, LLC, et al.
August 30, 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,
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
9 17
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CFR 200.30–3(a)(12).
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42201
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: SL Advisors, LLC (the
‘‘Initial Adviser’’), a New Jersey limited
liability company 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 July 20, 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 September 25, 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:
Deepak T. Pai, Senior Counsel, at (202)
551–6876, or Robert H. Shapiro, Branch
Chief, at (202) 551–6821 (Division of
Investment Management, Chief
Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
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42202
Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices
Summary of the Application
asabaliauskas on DSKBBXCHB2PROD with NOTICES
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
(‘‘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
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.
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Jkt 241001
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
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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
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)
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.
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Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices
operative delay period contained in
Exchange Act Rule 19b–4(f)(6)(iii).3
While these amendments are effective
upon filing, the Exchange has
designated the proposed amendments to
be operative on September 5, 2017.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqphlx.cchwallstreet.com/,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
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. 2017–18777 Filed 9–5–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81501; File No. SR–Phlx–
2017–71]
Self-Regulatory Organizations;
NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change to Rules 431,
432, and 835 To Conform Them to
Securities Exchange Act Rule 15c6–
1(a), Which Shortens the Settlement
Cycle to Two Dates After the Trade
Date, and To Interpret the Amended
Rules To Exclude September 5, 2017
as the First Ex-Dividend Date
Thereunder
August 30, 2017.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
22, 2017, NASDAQ PHLX LLC (‘‘Phlx’’
or ‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II,
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
PHLX Rules 431, 432, and 825 to
conform them to SEA Rule 15c6–1(a) to
shorten the standard settlement cycle
for most broker-dealer transactions from
three business days after the trade date
(‘‘T+3’’) to two business days after the
trade date (‘‘T+2’’) and the industry-led
initiative to shorten the settlement cycle
from T+3 to T+2. The proposal also
addresses the application of these Rules
as they relate to establishing exdividend dates in connection with the
implementation of the T+2 settlement
cycle on September 5, 2017.
The Exchange requests that the
Commission waive the five-day prefiling requirement and the 30-day
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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17:37 Sep 05, 2017
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Background
On March 22, 2017, the SEC adopted
amendments to SEA Rule 15c6–1(a) to
shorten the standard settlement cycle
for U.S. secondary market transactions
in equities, corporate and municipal
bonds, unit investment trusts and
financial instruments composed of these
products, from T+3 to T+2.4 The
industry-wide initiative is designed to
reduce a number of risks, including
credit risk, market risk, and liquidity
risk and, as a result, reduce systemic
risk for U.S. market participants.5 The
compliance date for the rule
amendments is September 5, 2017.
The Exchange [sic] proposing changes
to its Rules pertaining to securities
settlement to conform them to SEA Rule
3 17
CFR 240.19b–4(f)(6)(iii).
Securities Exchange Act Release No. 80295
(March 22, 2017), 82 FR 15564 (March 29, 2017)
(Securities Transaction Settlement Cycle) (File No.
S7–22–16) (stating that, as amended, SEA Rule
15c6–1(a) will prohibit broker-dealers from
effecting or entering into a contract for the purchase
or sale of a security (other than an exempted
security, government security, municipal security,
commercial paper, bankers’ acceptances or
commercial bills) that provides for payment of
funds and delivery of securities later than the
second business day after the date of the contract,
unless otherwise expressly agreed to by the parties
at the time of the transaction).
5 See id.
4 See
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42203
15c6–1(a), as amended, and to conform
them to similar changes that other
exchanges have made.6
Specifically, the Exchange proposes to
amend Rule 431 (Ex-dividend, Exrights), which presently provides that
transactions in stocks (except for those
made for cash) shall be ex-dividend or
ex-rights on the second business day
preceding the record date fixed by the
corporation or the date of the closing of
transfer books thereof. It also provides
that if the record date or closing of
transfer books occurs on a day other
than a business day, the transaction will
be ex-dividend or ex-rights on the third
preceding business day. The Exchange
proposes to amend this Rule to provide
that: (1) The transactions shall be exdividend or ex-rights on the first
business day preceding the record date
fixed by the corporation or the date of
the closing of transfer books thereof; and
(2) the transaction will be ex-dividend
or ex-rights on the second preceding
business day if the record date or
closing of transfer books occurs on a day
other than a business day.
Similarly, the Exchange proposes to
amend Rule 432 (Ex-warrants), which
presently provides that transactions in
securities which have subscription
warrants attached (except those made
for cash) shall be ex-warrants on the
second business day preceding the date
of expiration of the warrants, except that
when the date of expiration occurs on
a day other than a business day, the
transactions will be ex-warrants on the
third business day preceding the date of
expiration. The proposal will amend
this Rule to provide that transactions in
securities which have subscription
warrants attached (except those made
for cash) shall be ex-warrants on the
first business day preceding the date of
expiration of the warrants, except that
when the date of expiration occurs on
a day other than a business day, the
transactions will be ex-warrants on the
second business day preceding the date
of expiration.
Third, the Exchange proposes to
amend Rule 825 (Ex-dividend
Procedure), which sets forth the exdividend rules for transactions in
securities subject to unlisted trading
privileges. The Rule presently provides
that transactions in stocks (except those
made for cash) are ex-dividend on the
second business day preceding the
record date and that, if the record date
selected is not a business day, then the
stock will be quoted ex-dividend on the
6 See, e.g., Securities Exchange Act Release No.
34–80640 (May 16, 2017), 82 FR 22598 (May 10,
2017) (Order Approving File No. SR–NASDAQ–
2017–13).
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]]>Agencies
[Federal Register Volume 82, Number 171 (Wednesday, September 6, 2017)]
[Notices]
[Pages 42201-42203]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18777]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 32801; 812-14802]
SL Advisors, LLC, et al.
August 30, 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: SL Advisors, LLC (the ``Initial Adviser''), a New Jersey
limited liability company 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 July 20, 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 September 25, 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: Deepak T. Pai, Senior Counsel, at
(202) 551-6876, or Robert H. Shapiro, Branch Chief, at (202) 551-6821
(Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.
[[Page 42202]]
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\
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\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.
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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.
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\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.
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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 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)
[[Page 42203]]
the proposed transaction is consistent with the general purposes of the
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Act.
For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-18777 Filed 9-5-17; 8:45 am]
BILLING CODE 8011-01-P
