AQR Funds, et al., 44474-44475 [2017-20177]

Download as PDF 44474 Federal Register / Vol. 82, No. 183 / Friday, September 22, 2017 / Notices terms consistent with the other EM Contracts approved for clearing at ICC and governed by Subchapter 26D of the Rules.5 ICC has also represented that clearing of the additional EM Contracts will not require any changes to ICC’s Risk Management Framework or other policies and procedures constituting rules within the meaning of the Act.6 III. Discussion and Commission Findings Section 19(b)(2)(C) of the Act directs the Commission to approve a proposed rule change of a self-regulatory organization if the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such selfregulatory organization.7 Section 17A(b)(3)(F) of the Act 8 requires that, among other things, that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions, to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible and, in general, to protect investors and the public interest. The Commission finds that the rule change is consistent with the requirements of Section 17A of the Act 9 and the rules and regulations thereunder applicable to ICC. The Commission has reviewed the terms and conditions of these contracts and has determined that they are substantially similar to the other contracts listed in Subchapter 26D of the ICC Rules, all of which ICC currently clears, the key difference being that the underlying reference obligations will be issuances by the Kingdom of Saudi Arabia and the Republic of Kazakhstan, the new Eligible SES Reference Entities. Moreover, the Commission has reviewed the Notice and ICC’s Rules, policies and procedures, which provide that the additional EM Contracts will be cleared pursuant to ICC’s existing clearing arrangements and related financial safeguards, protections and risk management procedures.10 In addition, the Commission has evaluated information submitted by ICC, including data on volume, open interest, and the number of ICC clearing participants 82 FR at 30931. at 30931–32. 7 15 U.S.C. 78s(b)(2)(C). 8 15 U.S.C. 78q–1(b)(3)(F). 9 15 U.S.C. 78q–1. 10 Notice, 82 FR at 30932. 6 Id. 18:11 Sep 21, 2017 IV. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of Section 17A of the Act 12 and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,13 that the proposed rule change (File No. SR–ICC– 2017–008) be, and hereby is, approved.14 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–20203 Filed 9–21–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 32821; File No. 812–14741] AQR Funds, et al. September 18, 2017. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice. AGENCY: Notice of an application for an order pursuant to: (a) Section 6(c) of the 11 15 U.S.C. 78q–1(b)(3)(F). U.S.C. 78q–1. 13 15 U.S.C. 78s(b)(2). 14 In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 15 17 CFR 200.30–3(a)(12). 12 15 5 Notice, VerDate Sep<11>2014 (‘‘CPs’’) that currently trade in the additional EM Contracts as well as certain model parameters for the additional EM Contracts. Based on this review, the Commission finds that ICC’s rules, policies, and procedures are reasonably designed to price and measure the potential risk presented by these products; collect financial resources in proportion to such risk; and liquidate these products in the event of a CP default. Thus, the Commission finds that acceptance of the additional EM Contracts, on the terms and conditions set out in ICC’s Rules, is consistent with the prompt and accurate clearance of and settlement of securities transactions and derivative agreements, contracts and transactions cleared by ICC, the safeguarding of securities and funds in the custody or control of ICC, and the protection of investors and the public interest, within the meaning of Section 17A(b)(3)(F) of the Act.11 Jkt 241001 PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 Investment Company Act of 1940 (‘‘Act’’) granting an exemption from sections 18(f) and 21(b) of the Act; (b) section 12(d)(1)(J) of the Act granting an exemption from section 12(d)(1) of the Act; (c) sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Act; and (d) section 17(d) of the Act and rule 17d–1 under the Act to permit certain joint arrangements and transactions. Applicants request an order that would permit certain registered open-end management investment companies to participate in a joint lending and borrowing facility. Applicants: AQR Funds (the ‘‘Trust’’), registered under the Act as an open-end management investment company, and AQR Capital Management, LLC (‘‘AQR’’), registered as an investment adviser under the Investment Advisers Act of 1940. Filing Dates: The application was filed on February 2, 2017 and amended on July 6, 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 13, 2017 and should be accompanied by proof of service on the applicants, in the form of an affidavit, or, for lawyers, a certificate of service. Pursuant to Rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission’s Secretary. ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090; Applicants: AQR Capital Management, LLC, Two Greenwich Plaza, 4th Floor, Greenwich, CT 06830. FOR FURTHER INFORMATION CONTACT: James Maclean, Senior Counsel, at (202) 551–7794, or Robert Shapiro, Branch Chief, at (202) 551–7758 (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\22SEN1.SGM 22SEN1 Federal Register / Vol. 82, No. 183 / Friday, September 22, 2017 / Notices www.sec.gov/search/search.htm or by calling (202) 551–8090. Summary of the Application 1. Applicants request an order that would permit the applicants to participate in an interfund lending facility where each Fund could lend money directly to and borrow money directly from other Funds to cover unanticipated cash shortfalls, such as unanticipated redemptions or trade fails.1 The Funds will not borrow under the facility for leverage purposes and the loans’ duration will be no more than 7 days.2 2. Applicants anticipate that the proposed facility would provide a borrowing Fund with a source of liquidity at a rate lower than the bank borrowing rate at times when the cash position of the Fund is insufficient to meet temporary cash requirements. In addition, Funds making short-term cash loans directly to other Funds would earn interest at a rate higher than they otherwise could obtain from investing their cash in U.S. Treasury bills or certain other short-term money market instruments. Thus, applicants assert that the facility would benefit both borrowing and lending Funds. 3. Applicants agree that any order granting the requested relief will be subject to the terms and conditions stated in the application. Among others, an Adviser, through a designated committee, would administer the facility as a disinterested fiduciary as part of its duties under the investment management agreements with the Funds and would receive no additional fee as compensation for its services in connection with the administration of the facility. The facility would be subject to oversight and certain approvals by the Funds’ Board, including, among others, approval of the interest rate formula and of the method 1 Applicants request that the order apply to the applicants and to any existing or future series of the Trust and any existing or future registered open-end management investment company or series thereof (each a ‘‘Fund’’) for which AQR, or an entity controlling, controlled by, or under common control with AQR or any successor thereto serves as investment adviser (with AQR, each an ‘‘Adviser’’). For purposes of the requested order, ‘‘successor’’ is limited to any entity that results from a reorganization into another jurisdiction or a change in the type of a business organization. Although the applicants do not currently operate any money market funds, applicants request that the order also apply to any future Fund that is a money market fund that complies with rule 2a–7 of the Act (each a ‘‘Money Market Fund’’). Money Market Funds will not participate as borrowers under the interfund lending facility because such funds rarely need to borrow cash to meet redemptions. 2 Any Fund, however, will be able to call a loan on one business day’s notice. VerDate Sep<11>2014 18:11 Sep 21, 2017 Jkt 241001 44475 for allocating loans across Funds, as well as review of the process in place to evaluate the liquidity implications for the Funds. A Fund’s aggregate outstanding interfund loans will not exceed 15% of its net assets, and the Fund’s loans to any one Fund will not exceed 5% of the lending Fund’s net assets.3 4. Applicants assert that the facility does not raise the concerns underlying section 12(d)(1) of the Act given that the Funds are part of the same group of investment companies and there will be no duplicative costs or fees to the Funds.4 Applicants also assert that the proposed transactions do not raise the concerns underlying sections 17(a)(1), 17(a)(3), 17(d) and 21(b) of the Act as the Funds would not engage in lending transactions that unfairly benefit insiders or are detrimental to the Funds. Applicants state that the facility will offer both reduced borrowing costs and enhanced returns on loaned funds to all participating Funds and each Fund would have an equal opportunity to borrow and lend on equal terms based on an interest rate formula that is objective and verifiable. With respect to the relief from section 17(a)(2) of the Act, applicants note that any collateral pledged to secure an interfund loan would be subject to the same conditions imposed by any other lender to a Fund that imposes conditions on the quality of or access to collateral for a borrowing (if the lender is another Fund) or the same or better conditions (in any other circumstance).5 5. Applicants also believe that the limited relief from section 18(f)(1) of the Act that is necessary to implement the facility (because the lending Funds are not banks) is appropriate in light of the conditions and safeguards described in the application and because the Funds would remain subject to the requirement of section 18(f)(1) that all borrowings of a Fund, including combined interfund loans and bank borrowings, have at least 300% asset coverage. 6. 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. Rule 17d–1(b) under the Act provides that in passing upon an application filed under the rule, the Commission will consider whether the participation of the registered investment company in a joint enterprise, joint arrangement or profit sharing plan on the basis proposed 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 participants. 3 Under certain circumstances, a borrowing Fund will be required to pledge collateral to secure the loan. 4 Applicants state that the obligation to repay an interfund loan could be deemed to constitute a security for the purposes of sections 17(a)(1) and 12(d)(1) of the Act. 5 Applicants state that any pledge of securities to secure an interfund loan could constitute a purchase of securities for purposes of section 17(a)(2) of the Act. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget this request for extension of the previously approved collection of information discussed below. PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 For the Commission, by the Division of Investment Management, under delegated authority. Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–20177 Filed 9–21–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–558, OMB Control No. 3235–0617] Submission for OMB Review; Comment Request Upon Written Request Copies Available From: Securities and Exchange Commission, Office of FOIA Services, Washington, DC 20549–2736 Extension: Rule 433 E:\FR\FM\22SEN1.SGM 22SEN1

Agencies

[Federal Register Volume 82, Number 183 (Friday, September 22, 2017)]
[Notices]
[Pages 44474-44475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-20177]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32821; File No. 812-14741]


AQR Funds, et al.

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

ACTION: Notice.

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    Notice of an application for an order pursuant to: (a) Section 6(c) 
of the Investment Company Act of 1940 (``Act'') granting an exemption 
from sections 18(f) and 21(b) of the Act; (b) section 12(d)(1)(J) of 
the Act granting an exemption from section 12(d)(1) of the Act; (c) 
sections 6(c) and 17(b) of the Act granting an exemption from sections 
17(a)(1), 17(a)(2) and 17(a)(3) of the Act; and (d) section 17(d) of 
the Act and rule 17d-1 under the Act to permit certain joint 
arrangements and transactions. Applicants request an order that would 
permit certain registered open-end management investment companies to 
participate in a joint lending and borrowing facility.
    Applicants: AQR Funds (the ``Trust''), registered under the Act as 
an open-end management investment company, and AQR Capital Management, 
LLC (``AQR''), registered as an investment adviser under the Investment 
Advisers Act of 1940.
    Filing Dates: The application was filed on February 2, 2017 and 
amended on July 6, 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 13, 2017 and should be accompanied by proof of 
service on the applicants, in the form of an affidavit, or, for 
lawyers, a certificate of service. Pursuant to Rule 0-5 under the Act, 
hearing requests should state the nature of the writer's interest, any 
facts bearing upon the desirability of a hearing on the matter, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES:  Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090; Applicants: AQR Capital 
Management, LLC, Two Greenwich Plaza, 4th Floor, Greenwich, CT 06830.

FOR FURTHER INFORMATION CONTACT:  James Maclean, Senior Counsel, at 
(202) 551-7794, or Robert Shapiro, Branch Chief, at (202) 551-7758 
(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 44475]]

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

Summary of the Application

    1. Applicants request an order that would permit the applicants to 
participate in an interfund lending facility where each Fund could lend 
money directly to and borrow money directly from other Funds to cover 
unanticipated cash shortfalls, such as unanticipated redemptions or 
trade fails.\1\ The Funds will not borrow under the facility for 
leverage purposes and the loans' duration will be no more than 7 
days.\2\
---------------------------------------------------------------------------

    \1\ Applicants request that the order apply to the applicants 
and to any existing or future series of the Trust and any existing 
or future registered open-end management investment company or 
series thereof (each a ``Fund'') for which AQR, or an entity 
controlling, controlled by, or under common control with AQR or any 
successor thereto serves as investment adviser (with AQR, each an 
``Adviser''). For purposes of the requested order, ``successor'' is 
limited to any entity that results from a reorganization into 
another jurisdiction or a change in the type of a business 
organization. Although the applicants do not currently operate any 
money market funds, applicants request that the order also apply to 
any future Fund that is a money market fund that complies with rule 
2a-7 of the Act (each a ``Money Market Fund''). Money Market Funds 
will not participate as borrowers under the interfund lending 
facility because such funds rarely need to borrow cash to meet 
redemptions.
    \2\ Any Fund, however, will be able to call a loan on one 
business day's notice.
---------------------------------------------------------------------------

    2. Applicants anticipate that the proposed facility would provide a 
borrowing Fund with a source of liquidity at a rate lower than the bank 
borrowing rate at times when the cash position of the Fund is 
insufficient to meet temporary cash requirements. In addition, Funds 
making short-term cash loans directly to other Funds would earn 
interest at a rate higher than they otherwise could obtain from 
investing their cash in U.S. Treasury bills or certain other short-term 
money market instruments. Thus, applicants assert that the facility 
would benefit both borrowing and lending Funds.
    3. Applicants agree that any order granting the requested relief 
will be subject to the terms and conditions stated in the application. 
Among others, an Adviser, through a designated committee, would 
administer the facility as a disinterested fiduciary as part of its 
duties under the investment management agreements with the Funds and 
would receive no additional fee as compensation for its services in 
connection with the administration of the facility. The facility would 
be subject to oversight and certain approvals by the Funds' Board, 
including, among others, approval of the interest rate formula and of 
the method for allocating loans across Funds, as well as review of the 
process in place to evaluate the liquidity implications for the Funds. 
A Fund's aggregate outstanding interfund loans will not exceed 15% of 
its net assets, and the Fund's loans to any one Fund will not exceed 5% 
of the lending Fund's net assets.\3\
---------------------------------------------------------------------------

    \3\ Under certain circumstances, a borrowing Fund will be 
required to pledge collateral to secure the loan.
---------------------------------------------------------------------------

    4. Applicants assert that the facility does not raise the concerns 
underlying section 12(d)(1) of the Act given that the Funds are part of 
the same group of investment companies and there will be no duplicative 
costs or fees to the Funds.\4\ Applicants also assert that the proposed 
transactions do not raise the concerns underlying sections 17(a)(1), 
17(a)(3), 17(d) and 21(b) of the Act as the Funds would not engage in 
lending transactions that unfairly benefit insiders or are detrimental 
to the Funds. Applicants state that the facility will offer both 
reduced borrowing costs and enhanced returns on loaned funds to all 
participating Funds and each Fund would have an equal opportunity to 
borrow and lend on equal terms based on an interest rate formula that 
is objective and verifiable. With respect to the relief from section 
17(a)(2) of the Act, applicants note that any collateral pledged to 
secure an interfund loan would be subject to the same conditions 
imposed by any other lender to a Fund that imposes conditions on the 
quality of or access to collateral for a borrowing (if the lender is 
another Fund) or the same or better conditions (in any other 
circumstance).\5\
---------------------------------------------------------------------------

    \4\ Applicants state that the obligation to repay an interfund 
loan could be deemed to constitute a security for the purposes of 
sections 17(a)(1) and 12(d)(1) of the Act.
    \5\ Applicants state that any pledge of securities to secure an 
interfund loan could constitute a purchase of securities for 
purposes of section 17(a)(2) of the Act.
---------------------------------------------------------------------------

    5. Applicants also believe that the limited relief from section 
18(f)(1) of the Act that is necessary to implement the facility 
(because the lending Funds are not banks) is appropriate in light of 
the conditions and safeguards described in the application and because 
the Funds would remain subject to the requirement of section 18(f)(1) 
that all borrowings of a Fund, including combined interfund loans and 
bank borrowings, have at least 300% asset coverage.
    6. 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. Rule 
17d-1(b) under the Act provides that in passing upon an application 
filed under the rule, the Commission will consider whether the 
participation of the registered investment company in a joint 
enterprise, joint arrangement or profit sharing plan on the basis 
proposed 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 
participants.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-20177 Filed 9-21-17; 8:45 am]
BILLING CODE 8011-01-P