Redwood Investment Management, LLC and Two Roads Shared Trust, 19367-19369 [2018-09232]
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Federal Register / Vol. 83, No. 85 / Wednesday, May 2, 2018 / 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–
CBOE–2018–030 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.
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All submissions should refer to File
Number SR–CBOE–2018–030. 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 website (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 website 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 the
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–CBOE–
2018–030 and should be submitted on
or before May 23, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–09257 Filed 5–1–18; 8:45 am]
BILLING CODE 8011–01–P
20 17
CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83119; File No. SR–ISE–
2018–16]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Designation of
Longer Period for Commission Action
on Proposed Rule Change To
Introduce the ATR Protection for
Orders that are Routed to Away
Markets
April 26, 2018.
On February 23, 2018, Nasdaq ISE,
LLC (‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant 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 Rule 714 regarding the
Acceptable Trade Range protection for
orders and quotes. The proposed rule
change was published for comment in
the Federal Register on March 14,
2018.3 On April 20, 2018, the Exchange
submitted Amendment No. 1 to the
proposed rule change.4 The Commission
received no comments on the proposed
rule change.
Section 19(b)(2) of the Act 5 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether these
proposed rule changes should be
disapproved. The 45th day for this filing
is April 28, 2018.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 82846
(March 9, 2018), 83 FR 11254 (‘‘Notice’’).
4 See Letter to Brent J. Fields, Secretary,
Commission, from Adrian Griffiths, Senior
Associate General Counsel, Nasdaq, Inc., dated
April 20, 2018. Amendment No. 1 revises the
proposed rule change to: (i) Provide further
discussion of the current application of the ATR to
orders routed away; (ii) modify the proposed rule
text regarding the recalculation of the ATR for
orders routed away pursuant to Supplementary
Material to Exchange Rule 1901, if the applicable
National Best Bid or the National Best Offer price
is improved at the time of routing; (iii) expand the
discussion and justification for recalculating the
ATR for such orders; and (iv) make other
amendments to the proposed rule text to improve
the understandability of the current ATR
calculation. Amendment No. 1 is available at:
https://www.sec.gov/comments/sr-ise-2018-16/
ise201816-3483594-162248.pdf.
5 15 U.S.C. 78s(b)(2).
2 17
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19367
The Commission is extending the 45day time period for Commission action
on the proposed rule change. The
Commission finds that it is appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider and take action on the
Exchange’s proposed rule change.
Accordingly, pursuant to Section
19(b)(2)(A)(ii)(I) of the Act 6 and for the
reasons stated above, the Commission
designates June 12, 2018 as the date by
which the Commission should either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–ISE–2018–16).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–09264 Filed 5–1–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33076A; 812–14873]
Redwood Investment Management,
LLC and Two Roads Shared Trust
April 26, 2018.
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
6 15
7 17
U.S.C. 78s(b)(2)(A)(ii)(I).
CFR 200.30–3(a)(31).
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19368
Federal Register / Vol. 83, No. 85 / Wednesday, May 2, 2018 / Notices
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: Redwood Investment
Management, LLC (the ‘‘Initial
Adviser’’), a California limited liability
company that is registered as an
investment adviser under the
Investment Advisers Act of 1940 and
Two Roads Shared Trust (the ‘‘Trust’’),
a Delaware statutory trust registered
under the Act as a series open-end
management investment company.
FILING DATE: The application was filed
on January 25, 2018.
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 May 18, 2018, 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 Initial Adviser, 1117 S.
Robertson Boulevard, Los Angeles, CA
90035; and the Trust, 17605 Wright
Street, Omaha, NE 68130.
FOR FURTHER INFORMATION CONTACT:
Bruce R. MacNeil, Senior Counsel, at
(202) 551–6817, or Kaitlin C. Bottock,
Branch Chief, at (202) 551–6825
(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
website by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Summary of the Application
1. Applicants request an order that
would allow Funds to operate as index
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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
1 Applicants request that the order apply to
LeaderSharesTM AlphaFactor® Core ETF (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 ETF and will track a specified index
comprised of domestic or foreign equity and/or
fixed income securities (each, an ‘‘Underlying
Index’’). Each Fund will (a) be advised by the Initial
Adviser or an entity controlling, controlled by, or
under common control with the Initial Adviser
(each such entity or any successor thereto, an
‘‘Adviser’’) and (b) comply with the terms and
conditions of the application. For purposes of the
requested order, ‘‘successor’’ is limited to an entity
that results from a reorganization into another
jurisdiction or a change in the type of business
organization.
2 The Initial Fund will track the AlphaFactor®
Focused Index, which is compiled by Solactive AG.
Each Self-Indexing Fund will post on its website
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.
PO 00000
Frm 00158
Fmt 4703
Sfmt 4703
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)
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Federal Register / Vol. 83, No. 85 / Wednesday, May 2, 2018 / Notices
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excessive layering of fees, and (iii)
overly complex fund structures, which
are the concerns underlying the limits
in sections 12(d)(1)(A) and (B) of the
Act.
8. Applicants request an exemption
from sections 17(a)(1) and 17(a)(2) of the
Act to permit persons that are Affiliated
Persons, or Second Tier Affiliates, of the
Funds, solely by virtue of certain
ownership interests, to effectuate
purchases and redemptions in-kind. The
deposit procedures for in-kind
purchases of Creation Units and the
redemption procedures for in-kind
redemptions of Creation Units will be
the same for all purchases and
redemptions and Deposit Instruments
and Redemption Instruments will be
valued in the same manner as those
investment positions currently held by
the Funds. Applicants also seek relief
from the prohibitions on affiliated
transactions in section 17(a) to permit a
Fund to sell its shares to and redeem its
shares from a Fund of Funds, and to
engage in the accompanying in-kind
transactions with the Fund of Funds.3
The purchase of Creation Units by a
Fund of Funds directly from a Fund will
be accomplished in accordance with the
policies of the Fund of Funds and will
be based on the NAVs of the Funds.
9. Section 6(c) of the Act permits the
Commission to exempt any persons or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities, or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
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
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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22:14 May 01, 2018
Jkt 244001
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. 2018–09232 Filed 5–1–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83116; File No. SR–MRX–
2018–08]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Designation of
Longer Period for Commission Action
on Proposed Rule Change To
Introduce the ATR Protection for
Orders That Are Routed to Away
Markets
April 26, 2018.
On February 23, 2018, Nasdaq MRX,
LLC (‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant 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 Rule 714 regarding the
Acceptable Trade Range protection for
orders and quotes. The proposed rule
change was published for comment in
the Federal Register on March 14,
2018.3 On April 23, 2018, the Exchange
submitted Amendment No. 1 to the
proposed rule change.4 The Commission
received no comments on the proposed
rule change.
Section 19(b)(2) of the Act 5 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 82848
(March 9, 2018), 83 FR 11276 (‘‘Notice’’).
4 See Letter to Brent J. Fields, Secretary,
Commission, from Adrian Griffiths, Senior
Associate General Counsel, Nasdaq, Inc., dated
April 23, 2018. Amendment No. 1 revises the
proposed rule change to: (i) Provide further
discussion of the current application of the ATR to
orders routed away; (ii) modify the proposed rule
text regarding the recalculation of the ATR for
orders routed away pursuant to Supplementary
Material to Exchange Rule 1901, if the applicable
National Best Bid or the National Best Offer price
is improved at the time of routing; (iii) expand the
discussion and justification for recalculating the
ATR for such orders; and (iv) make other
amendments to the proposed rule text to improve
the understandability of the current ATR
calculation. Amendment No. 1 is available at:
https://www.sec.gov/comments/sr-mrx-2018-08/
mrx201808-3492392-162259.pdf.
5 15 U.S.C. 78s(b)(2).
2 17
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19369
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether these
proposed rule changes should be
disapproved. The 45th day for this filing
is April 28, 2018.
The Commission is extending the 45day time period for Commission action
on the proposed rule change. The
Commission finds that it is appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider and take action on the
Exchange’s proposed rule change.
Accordingly, pursuant to Section
19(b)(2)(A)(ii)(I) of the Act 6 and for the
reasons stated above, the Commission
designates June 12, 2018 as the date by
which the Commission should either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–MRX–2018–08).
For the Commission, by the Division
of Trading and Markets, pursuant to
delegated authority.7
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–09261 Filed 5–1–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83118; File No. SR–GEMX–
2018–09]
Self-Regulatory Organizations; Nasdaq
GEMX, LLC; Notice of Designation of
Longer Period for Commission Action
on Proposed Rule Change To
Introduce the ATR Protection for
Orders That Are Routed to Away
Markets
April 26, 2018.
On February 26, 2018, Nasdaq GEMX,
LLC (‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant 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 Rule 714 regarding the
Acceptable Trade Range protection for
orders and quotes. The proposed rule
6 15
U.S.C. 78s(b)(2)(A)(ii)(I).
CFR 200.30–3(a)(31).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
7 17
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]]>Agencies
[Federal Register Volume 83, Number 85 (Wednesday, May 2, 2018)]
[Notices]
[Pages 19367-19369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-09232]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33076A; 812-14873]
Redwood Investment Management, LLC and Two Roads Shared Trust
April 26, 2018.
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
[[Page 19368]]
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: Redwood Investment Management, LLC (the ``Initial
Adviser''), a California limited liability company that is registered
as an investment adviser under the Investment Advisers Act of 1940 and
Two Roads Shared Trust (the ``Trust''), a Delaware statutory trust
registered under the Act as a series open-end management investment
company.
Filing Date: The application was filed on January 25, 2018.
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 May 18, 2018, 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 Initial Adviser, 1117 S.
Robertson Boulevard, Los Angeles, CA 90035; and the Trust, 17605 Wright
Street, Omaha, NE 68130.
FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at
(202) 551-6817, or Kaitlin C. Bottock, Branch Chief, at (202) 551-6825
(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 website by searching for the file number, or for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Summary of the Application
1. Applicants request an order that would allow Funds to operate as
index exchange traded funds (``ETFs'').\1\ Fund shares will be
purchased and redeemed at their NAV in Creation Units only. All orders
to purchase Creation Units and all redemption requests will be placed
by or through an ``Authorized Participant,'' which will have signed a
participant agreement with the Distributor. Shares will be listed and
traded individually on a national securities exchange, where share
prices will be based on the current bid/offer market. Any order
granting the requested relief would be subject to the terms and
conditions stated in the application.
---------------------------------------------------------------------------
\1\ Applicants request that the order apply to LeaderShares\TM\
AlphaFactor[supreg] Core ETF (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 ETF and will track a
specified index comprised of domestic or foreign equity and/or fixed
income securities (each, an ``Underlying Index''). Each Fund will
(a) be advised by the Initial Adviser or an entity controlling,
controlled by, or under common control with the Initial Adviser
(each such entity or any successor thereto, an ``Adviser'') and (b)
comply with the terms and conditions of the application. For
purposes of the requested order, ``successor'' is limited to an
entity that results from a reorganization into another jurisdiction
or a change in the type of business organization.
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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\ The Initial Fund will track the AlphaFactor[supreg] Focused
Index, which is compiled by Solactive AG. Each Self-Indexing Fund
will post on its website 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)
[[Page 19369]]
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) 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. 2018-09232 Filed 5-1-18; 8:45 am]
BILLING CODE 8011-01-P
