Innovator ETFs Trust, et al., 43262-43264 [2017-19537]
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Federal Register / Vol. 82, No. 177 / Thursday, September 14, 2017 / Notices
Laws in the manner set forth in Section
1. Furthermore, the Exchange has
always intended to allow amendments
to the By-Laws by either the Company
Member or the Board, as evidenced by
the discussions of this provision in both
the Governance Approval Order and
Notice of Filing.7 The existing language
in Section 1 itself, however, provides
that the By-Laws may be amended by
the Company Member and by the
majority of the Exchange’s Board of
Directors, so the Exchange is now
seeking to make the non-substantive
change from ‘‘and’’ to ‘‘or’’ in Section 1
to reflect the rule’s original intent.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,8 in general, and furthers the
objectives of Section 6(b)(5) of the Act,9
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest, by
permitting the Exchange to align the
implementation date of its Governance
Proposal with its affiliates Nasdaq
GEMX, LLC and Nasdaq MRX, LLC, and
to make non-substantive corrections to
the proposed By-Laws. The Exchange’s
proposal does not significantly affect the
protection of investors or the public
interest because this proposal does not
make any substantive changes to the
Governance Proposal itself; the only
changes are to extend the
implementation date and to make nonsubstantive corrections to the proposed
By-Laws, as discussed above. As noted
above, the Exchange will provide
advance notice to members with respect
to the specific implementation date
through a Regulatory Alert. In addition,
the Exchange believes that the nonsubstantive amendments to the By-Laws
proposed herein will alleviate potential
confusion as to the applicability of the
Exchange’s rules, which will protect
investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange’s proposal does not impose
any significant burden on competition
because the Governance Proposal and
7 Id.
8 15
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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the proposed non-substantive changes
to the By-Laws will apply to all market
participants in a uniform manner once
implemented.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 10 and
subparagraph (f)(6) of Rule 19b–4
thereunder.11
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of 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:
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–
ISE–2017–80 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
10 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
11 17
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and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–ISE–2017–80. 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
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–ISE–
2017–80, and should be submitted on or
before October 5, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–19477 Filed 9–13–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32812; 812–14781]
Innovator ETFs Trust, et al.
September 11, 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),
12 17
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CFR 200.30–3(a)(12).
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Federal Register / Vol. 82, No. 177 / Thursday, September 14, 2017 / Notices
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) actively-managed series of
certain open-end management
investment companies (‘‘Funds’’) to
issue shares redeemable in large
aggregations only (‘‘Creation Units’’); (b)
secondary market transactions in Fund
shares to occur at negotiated market
prices rather than at net asset value
(‘‘NAV’’); (c) certain Funds to pay
redemption proceeds, under certain
circumstances, more than seven days
after the tender of shares for
redemption; (d) certain affiliated
persons of a Fund to deposit securities
into, and receive securities from, the
Fund in connection with the purchase
and redemption of Creation Units; 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: Innovator Capital
Management, LLC (‘‘Innovator’’), a
Delaware limited liability company
registered as an investment adviser
under the Investment Advisers Act of
1940, Innovator ETFs Trust (formerly,
Academy Funds Trust) (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 June 7, 2017, and amended on
September 8, 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 October 5, 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.
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Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: Secretary, Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090;
Applicants: The Trust and Innovator,
120 N. Hale Street, Suite 200, Wheaton,
Illinois 60187; the Distributor, 615 East
Michigan Street, Milwaukee, Wisconsin
53202.
FOR FURTHER INFORMATION CONTACT: HaeSung Lee, Attorney-Adviser, at (202)
551–7345, or Andrea Ottomanelli
Magovern, Acting 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.
Summary of the Application
1. Applicants request an order that
would allow Funds to operate as
actively-managed exchange traded
funds (‘‘ETFs’’).1 Fund shares will be
purchased and redeemed at their NAV
in Creation Units only. All orders to
purchase Creation Units and all
redemption requests will be placed by
or through an ‘‘Authorized Participant,’’
which will have signed a participant
agreement with the Distributor. Shares
will be listed and traded individually on
a national securities exchange, where
share prices will be based on the current
bid/offer market. Any order granting the
requested relief would be subject to the
terms and conditions stated in the
application.2
1 Applicants request that the order apply to the
initial Fund 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
actively-managed ETF. Any Fund will (a) be
advised by Innovator or an entity controlling,
controlled by, or under common control with
Innovator (each, an ‘‘Advisor’’) and (b) comply with
the terms and conditions of the application.
2 Prior to May 9, 2017, Innovator Management
LLC (‘‘Innovator Management’’) served as the
Trust’s investment adviser. (Innovator and
Innovator Management are not affiliated persons of
each other.) Innovator Management entered into an
agreement with Innovator pursuant to which
Innovator Management transferred the assets of its
investment advisory business and related
intellectual property to Innovator (the
‘‘Transaction’’). The closing of the Transaction (the
‘‘Closing’’) occurred on May 9, 2017. The
Commission previously granted relief to Innovator
Management and the Trust that, other than the
identity of the investment adviser, was identical in
all material respects to that requested in the
application. Innovator Management LLC, et al.,
PO 00000
Frm 00048
Fmt 4703
Sfmt 4703
43263
2. Each Fund will consist of a
portfolio of securities and other assets
and investment positions (‘‘Portfolio
Instruments’’). Each Fund will disclose
on its Web site the identities and
quantities of the Portfolio Instruments
that will form the basis for the Fund’s
calculation of NAV at the end of the
day.
3. Shares will be purchased and
redeemed in Creation Units and
generally on an in-kind basis. Except
where the purchase or redemption will
include cash under the limited
circumstances specified in the
application, purchasers will be required
to purchase Creation Units by
depositing specified instruments
(‘‘Deposit Instruments’’), and
shareholders redeeming their shares
will receive specified instruments
(‘‘Redemption Instruments’’). The
Deposit Instruments and the
Redemption Instruments will each
correspond pro rata to the positions in
the Fund’s portfolio (including cash
positions) except as specified in the
application.
4. Because shares will not be
individually redeemable, applicants
request an exemption from section
5(a)(1) and section 2(a)(32) of the Act
that would permit the Funds to register
as open-end management investment
companies and issue shares that are
redeemable in Creation Units only.
5. Applicants also request an
exemption from section 22(d) of the Act
and rule 22c–1 under the Act as
secondary market trading in shares will
take place at negotiated prices, not at a
current offering price described in a
Fund’s prospectus, and not at a price
based on NAV. Applicants state that (a)
secondary market trading in shares does
not involve a Fund as a party and will
not result in dilution of an investment
in shares, and (b) to the extent different
prices exist during a given trading day,
or from day to day, such variances occur
as a result of third-party market forces,
such as supply and demand. Therefore,
applicants assert that secondary market
transactions in shares will not lead to
discrimination or preferential treatment
among purchasers. Finally, applicants
represent that share market prices will
be disciplined by arbitrage
opportunities, which should prevent
Investment Company Act Release Nos. 31209 (Aug.
13, 2014) (notice) and 31248 (Sep. 9, 2014) (order)
(‘‘Existing Order’’). On May 5, 2017, the
Commission staff provided oral no-action relief to
Innovator, the Trust, and the Distributor to rely on
the Existing Order until the earlier of the receipt of
any order granted by the Commission on the
application or 150 days from the date of the
Closing.
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43264
Federal Register / Vol. 82, No. 177 / Thursday, September 14, 2017 / Notices
shares from trading at a material
discount or premium from NAV.
6. With respect to Funds that hold
non-U.S. Portfolio Instruments and that
effect creations and redemptions of
Creation Units in kind, applicants
request relief from the requirement
imposed by section 22(e) in order to
allow such Funds to pay redemption
proceeds within fourteen calendar days
following the tender of Creation Units
for redemption. Applicants assert that
the requested relief would not be
inconsistent with the spirit and intent of
section 22(e) to prevent unreasonable,
undisclosed or unforeseen delays in the
actual payment of redemption proceeds.
7. Applicants request an exemption to
permit Funds of Funds to acquire Fund
shares beyond the limits of section
12(d)(1)(A) of the Act; and the Funds,
and any principal underwriter for the
Funds, and/or any broker or dealer
registered under the Exchange Act, to
sell shares to Funds of Funds beyond
the limits of section 12(d)(1)(B) of the
Act. The application’s terms and
conditions are designed to, among other
things, help prevent any potential (i)
undue influence over a Fund through
control or voting power, or in
connection with certain services,
transactions, and underwritings, (ii)
excessive layering of fees, and (iii)
overly complex fund structures, which
are the concerns underlying the limits
in sections 12(d)(1)(A) and (B) of the
Act.
8. Applicants request an exemption
from sections 17(a)(1) and 17(a)(2) of the
Act to permit persons that are affiliated
persons, or second-tier affiliates, of the
Funds, solely by virtue of certain
ownership interests, to effectuate
purchases and redemptions in-kind. The
deposit procedures for in-kind
purchases of Creation Units and the
redemption procedures for in-kind
redemptions of Creation Units will be
the same for all purchases and
redemptions and Deposit Instruments
and Redemption Instruments will be
valued in the same manner as those
Portfolio Instruments currently held by
the Funds. Applicants also seek relief
from the prohibitions on affiliated
transactions in section 17(a) to permit a
Fund to sell its shares to and redeem its
shares from a Fund of Funds, and to
engage in the accompanying in-kind
transactions with the Fund of Funds.3
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 Advisor or an entity
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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)
the proposed transaction is consistent
with the general purposes of the Act.
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend Exchange Rules 4702
and 4754 relating to the Nasdaq Closing
Cross and to make other related
changes. The proposed rule change was
published for comment in the Federal
Register on July 27, 2017.3 On August
22, 2017, the Exchange filed
Amendment No. 1 to the proposed rule
change.4 The Commission received no
comment letters on the proposed rule
change. The Commission is publishing
this notice to solicit comments on
Amendment No. 1 from interested
persons, and is approving the proposed
rule change, as modified by Amendment
No. 1, on an accelerated basis.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
Currently, Exchange Rule
4702(b)(12)(A) provides that LOC
Orders may be entered between 4:00
a.m. ET and immediately prior to 3:50
p.m. ET. The Exchange proposes to
amend this rule to permit LOC orders to
be entered between 3:50 p.m. ET and
immediately prior to 3:55 p.m. ET,
provided that there is a First Reference
Price.7 The Exchange proposes to define
the First Reference Price to mean the
[FR Doc. 2017–19537 Filed 9–13–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81556; File No. SR–
NASDAQ–2017–061]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Amendment No. 1 and Order
Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendment No. 1, To Amend Rules
4702 and 4754 Relating to the Nasdaq
Closing Cross and To Make Other
Related Changes
September 8, 2017.
I. Introduction
On July 13, 2017, The NASDAQ Stock
Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
controlling, controlled by or under common control
with an Advisor provides investment advisory
services to that Fund of Funds.
PO 00000
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Fmt 4703
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II. Description of the Proposed Rule
Change, as Modified by Amendment
No. 1 5
As described in more detail below,
the Exchange proposes to enhance the
operation of the Nasdaq Closing Cross
by extending the time period during
which members may submit LOC
Orders,6 and to make other changes
relating to the Nasdaq Closing Cross and
the Nasdaq Opening Cross.
A. Acceptance of LOC Orders and
Related Changes
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 81188
(July 21, 2017), 82 FR 35014 (‘‘Notice’’).
4 In Amendment No. 1, the Exchange proposes to
remove a reference to Retail Order from Exchange
Rule 4702(b)(12)(B) and to remove a reference to
Retail Orders and RPI Orders from Exchange Rule
4703(l), as these two order types are no longer
available on the Exchange. The Exchange also
provides an example to illustrate its assertion that
permitting members to submit Limit On Close
(‘‘LOC’’) Orders until immediately prior to 3:55
p.m. would facilitate price discovery in the Nasdaq
Closing Cross. Amendment No. 1 is available at
https://www.sec.gov/comments/sr-nasdaq-2017061/nasdaq2017061.htm.
5 For a more detailed description of the proposal,
see Notice, supra note 3 and Amendment No. 1,
supra note 4.
6 See Exchange Rule 4702(b)(12) (defining LOC
Order).
7 The Exchange proposes a related change to
Exchange Rule 4702(b)(12)(B) to provide that LOC
Orders and Closing Cross/Extended Hours Orders
entered at or after 3:55 p.m. ET would be rejected.
2 17
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]]>Agencies
[Federal Register Volume 82, Number 177 (Thursday, September 14, 2017)]
[Notices]
[Pages 43262-43264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19537]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 32812; 812-14781]
Innovator ETFs Trust, et al.
September 11, 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),
[[Page 43263]]
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) actively-managed series of certain
open-end management investment companies (``Funds'') to issue shares
redeemable in large aggregations only (``Creation Units''); (b)
secondary market transactions in Fund shares to occur at negotiated
market prices rather than at net asset value (``NAV''); (c) certain
Funds to pay redemption proceeds, under certain circumstances, more
than seven days after the tender of shares for redemption; (d) certain
affiliated persons of a Fund to deposit securities into, and receive
securities from, the Fund in connection with the purchase and
redemption of Creation Units; 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: Innovator Capital Management, LLC (``Innovator''), a
Delaware limited liability company registered as an investment adviser
under the Investment Advisers Act of 1940, Innovator ETFs Trust
(formerly, Academy Funds Trust) (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 June 7, 2017, and amended
on September 8, 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 October 5, 2017, and should be accompanied by proof of
service on applicants, in the form of an affidavit, or for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the
Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street
NE., Washington, DC 20549-1090; Applicants: The Trust and Innovator,
120 N. Hale Street, Suite 200, Wheaton, Illinois 60187; the
Distributor, 615 East Michigan Street, Milwaukee, Wisconsin 53202.
FOR FURTHER INFORMATION CONTACT: Hae-Sung Lee, Attorney-Adviser, at
(202) 551-7345, or Andrea Ottomanelli Magovern, Acting 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.
Summary of the Application
1. Applicants request an order that would allow Funds to operate as
actively-managed exchange traded funds (``ETFs'').\1\ Fund shares will
be purchased and redeemed at their NAV in Creation Units only. All
orders to purchase Creation Units and all redemption requests will be
placed by or through an ``Authorized Participant,'' which will have
signed a participant agreement with the Distributor. Shares will be
listed and traded individually on a national securities exchange, where
share prices will be based on the current bid/offer market. Any order
granting the requested relief would be subject to the terms and
conditions stated in the application.\2\
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\1\ Applicants request that the order apply to the initial Fund
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 actively-
managed ETF. Any Fund will (a) be advised by Innovator or an entity
controlling, controlled by, or under common control with Innovator
(each, an ``Advisor'') and (b) comply with the terms and conditions
of the application.
\2\ Prior to May 9, 2017, Innovator Management LLC (``Innovator
Management'') served as the Trust's investment adviser. (Innovator
and Innovator Management are not affiliated persons of each other.)
Innovator Management entered into an agreement with Innovator
pursuant to which Innovator Management transferred the assets of its
investment advisory business and related intellectual property to
Innovator (the ``Transaction''). The closing of the Transaction (the
``Closing'') occurred on May 9, 2017. The Commission previously
granted relief to Innovator Management and the Trust that, other
than the identity of the investment adviser, was identical in all
material respects to that requested in the application. Innovator
Management LLC, et al., Investment Company Act Release Nos. 31209
(Aug. 13, 2014) (notice) and 31248 (Sep. 9, 2014) (order)
(``Existing Order''). On May 5, 2017, the Commission staff provided
oral no-action relief to Innovator, the Trust, and the Distributor
to rely on the Existing Order until the earlier of the receipt of
any order granted by the Commission on the application or 150 days
from the date of the Closing.
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2. Each Fund will consist of a portfolio of securities and other
assets and investment positions (``Portfolio Instruments''). Each Fund
will disclose on its Web site the identities and quantities of the
Portfolio Instruments that will form the basis for the Fund's
calculation of NAV at the end of the day.
3. Shares will be purchased and redeemed in Creation Units and
generally on an in-kind basis. Except where the purchase or redemption
will include cash under the limited circumstances specified in the
application, purchasers will be required to purchase Creation Units by
depositing specified instruments (``Deposit Instruments''), and
shareholders redeeming their shares will receive specified instruments
(``Redemption Instruments''). The Deposit Instruments and the
Redemption Instruments will each correspond pro rata to the positions
in the Fund's portfolio (including cash positions) except as specified
in the application.
4. Because shares will not be individually redeemable, applicants
request an exemption from section 5(a)(1) and section 2(a)(32) of the
Act that would permit the Funds to register as open-end management
investment companies and issue shares that are redeemable in Creation
Units only.
5. Applicants also request an exemption from section 22(d) of the
Act and rule 22c-1 under the Act as secondary market trading in shares
will take place at negotiated prices, not at a current offering price
described in a Fund's prospectus, and not at a price based on NAV.
Applicants state that (a) secondary market trading in shares does not
involve a Fund as a party and will not result in dilution of an
investment in shares, and (b) to the extent different prices exist
during a given trading day, or from day to day, such variances occur as
a result of third-party market forces, such as supply and demand.
Therefore, applicants assert that secondary market transactions in
shares will not lead to discrimination or preferential treatment among
purchasers. Finally, applicants represent that share market prices will
be disciplined by arbitrage opportunities, which should prevent
[[Page 43264]]
shares from trading at a material discount or premium from NAV.
6. With respect to Funds that hold non-U.S. Portfolio Instruments
and that effect creations and redemptions of Creation Units in kind,
applicants request relief from the requirement imposed by section 22(e)
in order to allow such Funds to pay redemption proceeds within fourteen
calendar days following the tender of Creation Units for redemption.
Applicants assert that the requested relief would not be inconsistent
with the spirit and intent of section 22(e) to prevent unreasonable,
undisclosed or unforeseen delays in the actual payment of redemption
proceeds.
7. Applicants request an exemption to permit Funds of Funds to
acquire Fund shares beyond the limits of section 12(d)(1)(A) of the
Act; and the Funds, and any principal underwriter for the Funds, and/or
any broker or dealer registered under the Exchange Act, to sell shares
to Funds of Funds beyond the limits of section 12(d)(1)(B) of the Act.
The application's terms and conditions are designed to, among other
things, help prevent any potential (i) undue influence over a Fund
through control or voting power, or in connection with certain
services, transactions, and underwritings, (ii) excessive layering of
fees, and (iii) overly complex fund structures, which are the concerns
underlying the limits in sections 12(d)(1)(A) and (B) of the Act.
8. Applicants request an exemption from sections 17(a)(1) and
17(a)(2) of the Act to permit persons that are affiliated persons, or
second-tier affiliates, of the Funds, solely by virtue of certain
ownership interests, to effectuate purchases and redemptions in-kind.
The deposit procedures for in-kind purchases of Creation Units and the
redemption procedures for in-kind redemptions of Creation Units will be
the same for all purchases and redemptions and Deposit Instruments and
Redemption Instruments will be valued in the same manner as those
Portfolio Instruments currently held by the Funds. Applicants also seek
relief from the prohibitions on affiliated transactions in section
17(a) to permit a Fund to sell its shares to and redeem its shares from
a Fund of Funds, and to engage in the accompanying in-kind transactions
with the Fund of Funds.\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 Advisor or an
entity controlling, controlled by or under common control with an
Advisor 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) 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. 2017-19537 Filed 9-13-17; 8:45 am]
BILLING CODE 8011-01-P
