Destra International & Event-Driven Credit Fund and Destra Capital Advisors LLC; Notice of Application, 52602-52605 [2018-22541]

Download as PDF 52602 Federal Register / Vol. 83, No. 201 / Wednesday, October 17, 2018 / Notices 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CboeEDGA–2018–016 and should be submitted on or before November 7, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–22536 Filed 10–16–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 33268; 812–14903] Destra International & Event-Driven Credit Fund and Destra Capital Advisors LLC; Notice of Application October 11, 2018. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice. daltland on DSKBBV9HB2PROD with NOTICES AGENCY: Notice of an application under section 6(c) of the Investment Company Act of 1940 (the ‘‘Act’’) for an exemption from sections 18(a)(2), 18(c) and 18(i) of the Act, under sections 6(c) and 23(c) of the Act for an exemption from rule 23c–3 under the Act, and for an order pursuant to section 17(d) of the Act and rule 17d– 1 under the Act. SUMMARY OF APPLICATION: Applicants request an order to permit certain registered closed-end management investment companies to issue multiple classes of shares and to impose assetbased distribution and/or service fees, early withdrawal charges (‘‘EWCs’’), and early repurchase fees. 23 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 19:46 Oct 16, 2018 Jkt 247001 Destra International & Event-Driven Credit Fund (the ‘‘Initial Fund’’) and Destra Capital Advisors LLC (the ‘‘Adviser’’). FILING DATES: The application was filed on May 4, 2018 and an amendment on August 22, 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 November 5, 2018, 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, 444 West Lake Street, Suite 1700, Chicago, IL 60606. FOR FURTHER INFORMATION CONTACT: Benjamin Kalish, Attorney-Advisor, at (202) 551–7361 or Parisa Haghshenas, Branch Chief, at (202) 551–6723 (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. APPLICANTS: Applicants’ Representations 1. The Initial Fund is a Delaware statutory trust that is registered under the Act as a non-diversified, closed-end management investment company. The Initial Fund’s investment objective is to provide attractive total returns, consisting of income and capital appreciation. 2. The Adviser, a Delaware limited liability company, is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. The Adviser serves as investment adviser to the Initial Fund. 3. The applicants seek an order to permit the Initial Fund to issue multiple classes of shares, each having its own PO 00000 Frm 00227 Fmt 4703 Sfmt 4703 fee and expense structure, and to impose asset-based distribution and/or service fees with respect to certain classes and EWCs. 4. Applicants request that the order also apply to any continuously offered registered closed-end management investment company that has been previously organized or that may be organized in the future for which the Adviser, or any entity controlling, controlled by, or under common control with the Adviser, or any successor in interest to any such entity,1 acts as investment adviser and which operates as an interval fund pursuant to rule 23c–3 under the Act or provides periodic liquidity with respect to its shares pursuant to rule 13e–4 under the Securities Exchange Act of 1934 (‘‘Exchange Act’’) (each, a ‘‘Future Fund’’ and together with the Initial Fund, the ‘‘Funds’’).2 5. The Initial Fund currently issues a single class of common shares in connection with its registration statement. Applicants state that additional offerings by any Fund relying on the order may be on a private placement or public offering basis. Shares of the Funds will not be listed on any securities exchange, nor quoted on any quotation medium. The Funds do not expect there to be a secondary trading market for their shares. 6. If the requested relief is granted, the Initial Fund intends to redesignate its common shares as ‘‘Class I Shares’’ and to file an amendment to its registration statement in order to continuously offer additional classes of shares, currently contemplated to be named ‘‘Class A Shares,’’ ‘‘Class L Shares’’, and ‘‘Class T Shares.’’ Because of the different distribution fees, shareholder services fees, and any other class expenses that may be attributable to the Class I Shares, Class A Shares, Class L Shares, and Class T Shares, the net income attributable to, and any dividends payable on, each class of shares may differ from each other. The Fund’s Class I Shares will be subject to other expenses but not a front-end sales charge nor a distribution fee or a service fee. The Fund’s Class A Shares will be subject to other expenses including a front-end sales charge and a service fee but not a distribution fee. The Fund’s Class L Shares and Class T Shares will 1 A successor in interest is limited to an entity that results from a reorganization into another jurisdiction or a change in the type of business organization. 2 Any Fund relying on this relief in the future will do so in a manner consistent with the terms and conditions of the application. Applicants represent that each entity presently intending to rely on the requested relief is listed as an applicant. E:\FR\FM\17OCN1.SGM 17OCN1 daltland on DSKBBV9HB2PROD with NOTICES Federal Register / Vol. 83, No. 201 / Wednesday, October 17, 2018 / Notices each be subject to other expenses including a front-end sales charge, distribution fee, and service fee. Currently, Class I Shares, Class A Shares, Class L Shares and Class T Shares will not be subject to an EWC. 7. Applicants state that, from time to time, a Fund may create additional classes of shares the terms of which may differ from their other share classes, in the following respects: (1) The amount of fees permitted by different distribution plans or different service fee arrangements; (2) voting rights with respect to a distribution plan of a class; (3) different class designations; (4) the impact of any class expenses directly attributable to a particular class of Shares allocated on a class basis as described in the application; (5) any differences in dividends and net asset value resulting from differences in fees under a distribution plan or servie fee arrangement or in class expenses; (6) any EWC or other sales load structure; and (7) exchange or conversion privileges of the classes as permitted under the Act. 8. Applicants state that shares of a Fund may be subject to an early repurchase fee (‘‘Early Repurchase Fee’’) at a rate of no greater than 2% of the shareholder’s repurchase proceeds if the interval between the date of purchase of the shares and the valuation date with respect to the repurchase of those shares is less than one year. Any Early Repurchase Fees will apply equally to all classes of shares of a Fund, consistent with section 18 of the Act and rule 18f–3 thereunder. To the extent a Fund determines to waive, impose scheduled variations of, or eliminate any Early Repurchase Fee, it will do so consistently with the requirements of rule 22d–1 under the Act as if the Early Repurchase Fee were a CDSL (defined below) and as if the Fund were an openend investment company and the Fund’s waiver of, scheduled variation in, or elimination of, any such Early Repurchase Fee will apply uniformly to all shareholders of the Fund regardless of class. Applicants state that the Initial Fund does not intend to impose an Early Repurchase Fee 9. Applicants state that the Initial Fund has adopted a fundamental policy to repurchase a specified percentage of its shares at net asset value on a quarterly basis. Such repurchase offers will be conducted pursuant to rule 23c– 3 under the Act. Any Future Funds will likewise adopt fundamental investment policies and make periodic repurchase offers to its shareholders in compliance with rule 23c–3 or will provide periodic liquidity with respect to its shares pursuant to rule 13e–4 under the VerDate Sep<11>2014 19:46 Oct 16, 2018 Jkt 247001 Exchange Act.3 Any repurchase offers made by the Funds will be made to all holders of shares of each such Fund. 10. Applicants represent that any asset-based service and/or distribution fees for each class of shares of the Funds will comply with the provisions of the FINRA Rule 2341(d) (‘‘FINRA Sales Charge Rule’’).4 Applicants also represent that each Fund will disclose in its prospectus the fees, expenses and other characteristics of each class of shares offered for sale by the prospectus, as is required for open-end, multiple class funds under Form N–1A. As is required for open-end funds, each Fund will disclose its expenses in shareholder reports, and describe any arrangements that result in breakpoints in, or elimination of, sales loads in its prospectus.5 In addition, applicants will comply with applicable enhanced fee disclosure requirements for fund of funds, including registered funds of hedge funds.6 11. Each of the Funds will comply with any requirements that the Commission or FINRA may adopt regarding disclosure at the point of sale and in transaction confirmations about the costs and conflicts of interest arising out of the distribution of open-end investment company shares, and regarding prospectus disclosure of sales loads and revenue sharing arrangements, as if those requirements applied to the Fund. In addition, each Fund will contractually require that any distributor of the Fund’s shares comply with such requirements in connection with the distribution of such Fund’s shares. 12. Each Fund will allocate all expenses incurred by it among the various classes of shares based on the net assets of that Fund attributable to each class, except that the net asset 3 Applicants submit that rule 23c–3 and Regulation M under the Exchange Act permit an interval fund to make repurchase offers to repurchase its shares while engaging in a continuous offering of its shares pursuant to Rule 415 under the Securities Act of 1933, as amended. 4 Any reference to the FINRA Sales Charge Rule includes any successor or replacement to the FINRA Sales Charge Rule. 5 See Shareholder Reports and Quarterly Portfolio Disclosure of Registered Management Investment Companies, Investment Company Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring open-end investment companies to disclose fund expenses in shareholder reports); and Disclosure of Breakpoint Discounts by Mutual Funds, Investment Company Act Release No. 26464 (June 7, 2004) (adopting release) (requiring open-end investment companies to provide prospectus disclosure of certain sales load information). 6 Fund of Funds Investments, Investment Company Act Rel. Nos. 26198 (Oct. 1, 2003) (proposing release) and 27399 (Jun. 20, 2006) (adopting release). See also Rules 12d1–1, et seq. of the Act. PO 00000 Frm 00228 Fmt 4703 Sfmt 4703 52603 value and expenses of each class will reflect the expenses associated with the distribution plan of that class (if any), service fees attributable to that class (if any), including transfer agency fees, and any other incremental expenses of that class. Expenses of a Fund allocated to a particular class of shares will be borne on a pro rata basis by each outstanding share of that class. Applicants state that each Fund will comply with the provisions of rule 18f–3 under the Act as if it were an open-end investment company. 13. Applicants state that the Initial Fund does not currently intend to impose an EWC. However, a Fund may impose an EWC on shares submitted for repurchase that have been held less than a specified period and may waive the EWC for certain categories of shareholders or transactions to be established from time to time. Applicants state that each Fund will apply the EWC (and any waivers or scheduled variations, or elimination of the EWC) uniformly to all shareholders in a given class and consistently with the requirements of rule 22d–1 under the Act as if the Funds were open-end investment companies. 14. Each Fund operating as an interval fund pursuant to rule 23c–3 under the Act may offer its shareholders an exchange feature under which the shareholders of the Fund may, in connection with such Fund’s periodic repurchase offers, exchange their shares of the Fund for shares of the same class of (i) registered open-end investment companies or (ii) other registered closed-end investment companies that comply with rule 23c–3 under the Act and continuously offer their shares at net asset value, that are in the Fund’s group of investment companies (collectively, ‘‘Other Funds’’). Shares of a Fund operating pursuant to rule 23c– 3 that are exchanged for shares of Other Funds will be included as part of the amount of the repurchase offer amount for such Fund as specified in rule 23c– 3 under the Act. Any exchange option will comply with rule 11a–3 under the Act, as if the Fund were an open-end investment company subject to rule 11a–3. In complying with rule 11a–3, each Fund will treat an EWC as if it were a contingent deferred sales load (‘‘CDSL’’). Applicants’ Legal Analysis Multiple Classes of Shares 1. Section 18(a)(2) of the Act provides that a closed-end investment company may not issue or sell a senior security that is a stock unless certain requirements are met. Applicants state E:\FR\FM\17OCN1.SGM 17OCN1 daltland on DSKBBV9HB2PROD with NOTICES 52604 Federal Register / Vol. 83, No. 201 / Wednesday, October 17, 2018 / Notices that the creation of multiple classes of shares of the Funds may violate section 18(a)(2) because the Funds may not meet such requirements with respect to a class of shares that may be a senior security. 2. Section 18(c) of the Act provides, in relevant part, that a closed-end investment company may not issue or sell any senior security if, immediately thereafter, the company has outstanding more than one class of senior security. Applicants state that the creation of multiple classes of shares of the Funds may be prohibited by section 18(c), as a class may have priority over another class as to payment of dividends because shareholders of different classes would pay different fees and expenses. 3. Section 18(i) of the Act provides that each share of stock issued by a registered management investment company will be a voting stock and have equal voting rights with every other outstanding voting stock. Applicants state that multiple classes of shares of the Funds may violate section 18(i) of the Act because each class would be entitled to exclusive voting rights with respect to matters solely related to that class. 4. Section 6(c) 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 the Act, or from any rule or regulation under the Act, if and to the extent 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. Applicants request an exemption under section 6(c) from sections 18(a)(2), 18(c) and 18(i) to permit the Funds to issue multiple classes of shares. 5. Applicants submit that the proposed allocation of expenses relating to distribution and voting rights among multiple classes is equitable and will not discriminate against any group or class of shareholders. Applicants submit that the proposed arrangements would permit a Fund to facilitate the distribution of its securities and provide investors with a broader choice of shareholder services. Applicants assert that the proposed closed-end investment company multiple class structure does not raise the concerns underlying section 18 of the Act to any greater degree than open-end investment companies’ multiple class structures that are permitted by rule 18f–3 under the Act. Applicants state that each Fund will comply with the provisions of rule 18f–3 as if it were an open-end investment company. VerDate Sep<11>2014 19:46 Oct 16, 2018 Jkt 247001 Early Withdrawal Charges 1. Section 23(c) of the Act provides, in relevant part, that no registered closed-end investment company shall purchase securities of which it is the issuer, except: (a) On a securities exchange or other open market; (b) pursuant to tenders, after reasonable opportunity to submit tenders given to all holders of securities of the class to be purchased; or (c) under other circumstances as the Commission may permit by rules and regulations or orders for the protection of investors. 2. Rule 23c–3 under the Act permits an ‘‘interval fund’’ to make repurchase offers of between five and twenty-five percent of its outstanding shares at net asset value at periodic intervals pursuant to a fundamental policy of the interval fund. Rule 23c–3(b)(1) under the Act permits an interval fund to deduct from repurchase proceeds only a repurchase fee, not to exceed two percent of the proceeds, that is paid to the interval fund and is reasonably intended to compensate the fund for expenses directly related to the repurchase. 3. Section 23(c)(3) provides that the Commission may issue an order that would permit a closed-end investment company to repurchase its shares in circumstances in which the repurchase is made in a manner or on a basis that does not unfairly discriminate against any holders of the class or classes of securities to be purchased. 4. Applicants request relief under section 6(c), discussed above, and section 23(c)(3) from rule 23c–3 to the extent necessary for the Funds to impose EWCs on shares of the Funds submitted for repurchase that have been held for less than a specified period. 5. Applicants state that the EWCs they intend to impose are functionally similar to CDSLs imposed by open-end investment companies under rule 6c–10 under the Act. Rule 6c–10 permits openend investment companies to impose CDSLs, subject to certain conditions. Applicants note that rule 6c–10 is grounded in policy considerations supporting the employment of CDSLs where there are adequate safeguards for the investor and state that the same policy considerations support imposition of EWCs in the interval fund context. In addition, applicants state that EWCs may be necessary for the distributor to recover distribution costs. Applicants represent that any EWC imposed by the Funds will comply with rule 6c–10 under the Act as if the rule were applicable to closed-end investment companies. The Funds will disclose EWCs in accordance with the PO 00000 Frm 00229 Fmt 4703 Sfmt 4703 requirements of Form N–1A concerning CDSLs. Asset-based Distribution and/or Service Fees 1. Section 17(d) of the Act and rule 17d–1 under the Act prohibit an affiliated person of a registered investment company, or an affiliated person of such person, acting as principal, from participating in or effecting any transaction in connection with any joint enterprise or joint arrangement in which the investment company participates unless the Commission issues an order permitting the transaction. In reviewing applications submitted under section 17(d) and rule 17d–1, the Commission considers whether the participation of the investment company in a joint enterprise or joint arrangement is consistent with the provisions, policies and purposes of the Act, and the extent to which the participation is on a basis different from or less advantageous than that of other participants. 2. Rule 17d–3 under the Act provides an exemption from section 17(d) and rule 17d–1 to permit open-end investment companies to enter into distribution arrangements pursuant to rule 12b–1 under the Act. Applicants request an order under section 17(d) and rule 17d–1 under the Act to the extent necessary to permit the Fund to impose asset-based distribution and/or service fees. Applicants have agreed to comply with rules 12b–1 and 17d–3 as if those rules applied to closed-end investment companies, which they believe will resolve any concerns that might arise in connection with a Fund financing the distribution of its shares through assetbased distribution and/or service fees. 3. For the reasons stated above, applicants submit that the exemptions requested under section 6(c) are necessary and appropriate in the public interest and are consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Applicants further submit that the relief requested pursuant to section 23(c)(3) will be consistent with the protection of investors and will insure that applicants do not unfairly discriminate against any holders of the class of securities to be purchased. Finally, applicants state that the Funds’ imposition of asset-based distribution and/or service fees is consistent with the provisions, policies and purposes of the Act and does not involve participation on a basis different from or less advantageous than that of other participants. E:\FR\FM\17OCN1.SGM 17OCN1 Federal Register / Vol. 83, No. 201 / Wednesday, October 17, 2018 / Notices Applicants’ Condition Applicants agree that any order granting the requested relief will be subject to the following condition: Each Fund relying on the order will comply with the provisions of rules 6c– 10, 12b–1, 17d–3, 18f–3, 22d–1, and, where applicable, 11a–3 under the Act, as amended from time to time, as if those rules applied to closed-end management investment companies, and will comply with the FINRA Sales Charge Rule, as amended from time to time, as if that rule applied to all closedend management investment companies. For the Commission, by the Division of Investment Management, under delegated authority. Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–22541 Filed 10–16–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–84403; File No. SR– CboeEDGX–2018–042] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Introduce Equities Purge Ports To (1) Establish Purge Ports for Equities Trading and Amend the Interpretations and Policies to Rule 11.10, Order Execution, To Reflect the Proposed Purge Ports, and (2) Modify the Fee Schedule Applicable To the Exchange’s Equities Platform (‘‘EDGX Equities’’) to Identify and To Set Fees for Purge Ports daltland on DSKBBV9HB2PROD with NOTICES October 11, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on September 28, 2018, Cboe EDGX Exchange, Inc. (‘‘Exchange’’ or ‘‘EDGX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated this proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6)(iii) thereunder,4 which renders it effective upon filing with the Commission. The Commission is publishing this notice to 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6)(iii). 19:46 Oct 16, 2018 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to (1) establish Purge Ports for equities trading and amend the Interpretations and Policies to Rule 11.10, Order Execution, to reflect the proposed Purge Ports, and (2) modify the fee schedule applicable to the Exchange’s equities platform (‘‘EDGX Equities’’) to identify and to set fees for Purge Ports. The Exchange has designated this proposal as noncontroversial and provided the Commission with the notice required by Rule 19b–4(f)(6)(iii) under the Act.5 The text of the proposed rule change is available at the Exchange’s website at www.markets.cboe.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to offer Users 6 an additional tool to manage risk and exercise additional control over their quotations in equity securities (i.e., ‘‘Purge Ports’’). Specifically, the Exchange proposes to: (1) Establish Purge Ports for equities trading and amend the Interpretations and Policies to Rule 11.10, Order Execution, to reflect the proposed Purge Ports, and (2) modify the fee schedule applicable to EDGX Equities to identify and to set fees for Purge Ports. Purge Ports are already available on the Exchange’s affiliated options markets—i.e., the Exchange’s options trading platform (‘‘EDGX Options’’), the 5 17 CFR 240.19b–4(f)(6)(iii). ‘‘User’’ is any Member or Sponsored Participant who is authorized to obtain access to the System pursuant to Rule 11.3. See Rule 1.5(ee). 2 17 VerDate Sep<11>2014 solicit comments on the proposed rule change from interested persons. 6A Jkt 247001 PO 00000 Frm 00230 Fmt 4703 Sfmt 4703 52605 options trading platform of Cboe BZX Exchange, Inc. (‘‘BZX Options’’), and Cboe C2 Exchange, Inc. (‘‘C2’’).7 Based on the successful experience with Purge Ports for options, and in response to demand for similar functionality for equities trading, the Exchange has determined to offer Purge Ports on EDGX Equities. The Exchange believes that the proposed Purge Port functionality will provide an effective tool for Users to manage their risk associated with equities trading. Background A logical port represents a port established by the Exchange within the Exchange’s system for trading and billing purposes. Each logical port established is specific to a Member or non-Member and grants that Member or non-Member the ability to accomplish a specific function, such as order entry, order cancellation, or data receipt. In addition, logical ports enable Users to access information such as execution reports, execution report messages, auction notifications, and administrative data through a single feed. Purge Ports The Exchange now proposes to amend the Interpretations and Policies to Rule 11.10, Order Execution, to identify Purge Ports, a new type of logical port that would enable Users to cancel all open orders, or a subset thereof, across multiple logical ports through a single cancel message. The Exchange also proposes to amend the EDGX Equities fee schedule to adopt fees for Purge Ports. The proposed ports are designed to assist Users, including Market Makers,8 in the management of, and risk control over, their quotes, particularly if the firm is quoting a large number of securities. For example, if a Market Maker detects market indications that may influence the direction or bias of his or her quotes, the Market Maker may use the proposed Purge Port(s) to reduce uncertainty and to manage risk by purging all quotes in a number of securities. This would allow the firm to seamlessly avoid unintended executions, while continuing to evaluate the direction of the market. While Purge Ports will be available to all Users, the 7 See Securities Exchange Act Release Nos. 79957 (February 3, 2017), 82 FR 10070 (February 9, 2017) (SR–BatsEDGX–2017–07); 79956 (February 3, 2017), 82 FR 10102 (February 9, 2017) (SR–BatsBZX– 2017–05); 83201 (May 9, 2018), 83 FR 22546 (May 15, 2018) (SR–C2–2018–006). 8 A ‘‘Market Maker’’ is a Member that acts as a Market Maker pursuant to Chapter XI. See Rule 1.5(l). E:\FR\FM\17OCN1.SGM 17OCN1

Agencies

[Federal Register Volume 83, Number 201 (Wednesday, October 17, 2018)]
[Notices]
[Pages 52602-52605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22541]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33268; 812-14903]


Destra International & Event-Driven Credit Fund and Destra 
Capital Advisors LLC; Notice of Application

October 11, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from sections 
18(a)(2), 18(c) and 18(i) of the Act, under sections 6(c) and 23(c) of 
the Act for an exemption from rule 23c-3 under the Act, and for an 
order pursuant to section 17(d) of the Act and rule 17d-1 under the 
Act.

Summary of Application: Applicants request an order to permit certain 
registered closed-end management investment companies to issue multiple 
classes of shares and to impose asset-based distribution and/or service 
fees, early withdrawal charges (``EWCs''), and early repurchase fees.

Applicants: Destra International & Event-Driven Credit Fund (the 
``Initial Fund'') and Destra Capital Advisors LLC (the ``Adviser'').

Filing Dates: The application was filed on May 4, 2018 and an amendment 
on August 22, 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 November 5, 2018, 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, 444 West Lake Street, 
Suite 1700, Chicago, IL 60606.

FOR FURTHER INFORMATION CONTACT: Benjamin Kalish, Attorney-Advisor, at 
(202) 551-7361 or Parisa Haghshenas, Branch Chief, at (202) 551-6723 
(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.

Applicants' Representations

    1. The Initial Fund is a Delaware statutory trust that is 
registered under the Act as a non-diversified, closed-end management 
investment company. The Initial Fund's investment objective is to 
provide attractive total returns, consisting of income and capital 
appreciation.
    2. The Adviser, a Delaware limited liability company, is registered 
as an investment adviser under the Investment Advisers Act of 1940, as 
amended. The Adviser serves as investment adviser to the Initial Fund.
    3. The applicants seek an order to permit the Initial Fund to issue 
multiple classes of shares, each having its own fee and expense 
structure, and to impose asset-based distribution and/or service fees 
with respect to certain classes and EWCs.
    4. Applicants request that the order also apply to any continuously 
offered registered closed-end management investment company that has 
been previously organized or that may be organized in the future for 
which the Adviser, or any entity controlling, controlled by, or under 
common control with the Adviser, or any successor in interest to any 
such entity,\1\ acts as investment adviser and which operates as an 
interval fund pursuant to rule 23c-3 under the Act or provides periodic 
liquidity with respect to its shares pursuant to rule 13e-4 under the 
Securities Exchange Act of 1934 (``Exchange Act'') (each, a ``Future 
Fund'' and together with the Initial Fund, the ``Funds'').\2\
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    \1\ A successor in interest is limited to an entity that results 
from a reorganization into another jurisdiction or a change in the 
type of business organization.
    \2\ Any Fund relying on this relief in the future will do so in 
a manner consistent with the terms and conditions of the 
application. Applicants represent that each entity presently 
intending to rely on the requested relief is listed as an applicant.
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    5. The Initial Fund currently issues a single class of common 
shares in connection with its registration statement. Applicants state 
that additional offerings by any Fund relying on the order may be on a 
private placement or public offering basis. Shares of the Funds will 
not be listed on any securities exchange, nor quoted on any quotation 
medium. The Funds do not expect there to be a secondary trading market 
for their shares.
    6. If the requested relief is granted, the Initial Fund intends to 
redesignate its common shares as ``Class I Shares'' and to file an 
amendment to its registration statement in order to continuously offer 
additional classes of shares, currently contemplated to be named 
``Class A Shares,'' ``Class L Shares'', and ``Class T Shares.'' Because 
of the different distribution fees, shareholder services fees, and any 
other class expenses that may be attributable to the Class I Shares, 
Class A Shares, Class L Shares, and Class T Shares, the net income 
attributable to, and any dividends payable on, each class of shares may 
differ from each other. The Fund's Class I Shares will be subject to 
other expenses but not a front-end sales charge nor a distribution fee 
or a service fee. The Fund's Class A Shares will be subject to other 
expenses including a front-end sales charge and a service fee but not a 
distribution fee. The Fund's Class L Shares and Class T Shares will

[[Page 52603]]

each be subject to other expenses including a front-end sales charge, 
distribution fee, and service fee. Currently, Class I Shares, Class A 
Shares, Class L Shares and Class T Shares will not be subject to an 
EWC.
    7. Applicants state that, from time to time, a Fund may create 
additional classes of shares the terms of which may differ from their 
other share classes, in the following respects: (1) The amount of fees 
permitted by different distribution plans or different service fee 
arrangements; (2) voting rights with respect to a distribution plan of 
a class; (3) different class designations; (4) the impact of any class 
expenses directly attributable to a particular class of Shares 
allocated on a class basis as described in the application; (5) any 
differences in dividends and net asset value resulting from differences 
in fees under a distribution plan or servie fee arrangement or in class 
expenses; (6) any EWC or other sales load structure; and (7) exchange 
or conversion privileges of the classes as permitted under the Act.
    8. Applicants state that shares of a Fund may be subject to an 
early repurchase fee (``Early Repurchase Fee'') at a rate of no greater 
than 2% of the shareholder's repurchase proceeds if the interval 
between the date of purchase of the shares and the valuation date with 
respect to the repurchase of those shares is less than one year. Any 
Early Repurchase Fees will apply equally to all classes of shares of a 
Fund, consistent with section 18 of the Act and rule 18f-3 thereunder. 
To the extent a Fund determines to waive, impose scheduled variations 
of, or eliminate any Early Repurchase Fee, it will do so consistently 
with the requirements of rule 22d-1 under the Act as if the Early 
Repurchase Fee were a CDSL (defined below) and as if the Fund were an 
open-end investment company and the Fund's waiver of, scheduled 
variation in, or elimination of, any such Early Repurchase Fee will 
apply uniformly to all shareholders of the Fund regardless of class. 
Applicants state that the Initial Fund does not intend to impose an 
Early Repurchase Fee
    9. Applicants state that the Initial Fund has adopted a fundamental 
policy to repurchase a specified percentage of its shares at net asset 
value on a quarterly basis. Such repurchase offers will be conducted 
pursuant to rule 23c-3 under the Act. Any Future Funds will likewise 
adopt fundamental investment policies and make periodic repurchase 
offers to its shareholders in compliance with rule 23c-3 or will 
provide periodic liquidity with respect to its shares pursuant to rule 
13e-4 under the Exchange Act.\3\ Any repurchase offers made by the 
Funds will be made to all holders of shares of each such Fund.
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    \3\ Applicants submit that rule 23c-3 and Regulation M under the 
Exchange Act permit an interval fund to make repurchase offers to 
repurchase its shares while engaging in a continuous offering of its 
shares pursuant to Rule 415 under the Securities Act of 1933, as 
amended.
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    10. Applicants represent that any asset-based service and/or 
distribution fees for each class of shares of the Funds will comply 
with the provisions of the FINRA Rule 2341(d) (``FINRA Sales Charge 
Rule'').\4\ Applicants also represent that each Fund will disclose in 
its prospectus the fees, expenses and other characteristics of each 
class of shares offered for sale by the prospectus, as is required for 
open-end, multiple class funds under Form N-1A. As is required for 
open-end funds, each Fund will disclose its expenses in shareholder 
reports, and describe any arrangements that result in breakpoints in, 
or elimination of, sales loads in its prospectus.\5\ In addition, 
applicants will comply with applicable enhanced fee disclosure 
requirements for fund of funds, including registered funds of hedge 
funds.\6\
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    \4\ Any reference to the FINRA Sales Charge Rule includes any 
successor or replacement to the FINRA Sales Charge Rule.
    \5\ See Shareholder Reports and Quarterly Portfolio Disclosure 
of Registered Management Investment Companies, Investment Company 
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring 
open-end investment companies to disclose fund expenses in 
shareholder reports); and Disclosure of Breakpoint Discounts by 
Mutual Funds, Investment Company Act Release No. 26464 (June 7, 
2004) (adopting release) (requiring open-end investment companies to 
provide prospectus disclosure of certain sales load information).
    \6\ Fund of Funds Investments, Investment Company Act Rel. Nos. 
26198 (Oct. 1, 2003) (proposing release) and 27399 (Jun. 20, 2006) 
(adopting release). See also Rules 12d1-1, et seq. of the Act.
---------------------------------------------------------------------------

    11. Each of the Funds will comply with any requirements that the 
Commission or FINRA may adopt regarding disclosure at the point of sale 
and in transaction confirmations about the costs and conflicts of 
interest arising out of the distribution of open-end investment company 
shares, and regarding prospectus disclosure of sales loads and revenue 
sharing arrangements, as if those requirements applied to the Fund. In 
addition, each Fund will contractually require that any distributor of 
the Fund's shares comply with such requirements in connection with the 
distribution of such Fund's shares.
    12. Each Fund will allocate all expenses incurred by it among the 
various classes of shares based on the net assets of that Fund 
attributable to each class, except that the net asset value and 
expenses of each class will reflect the expenses associated with the 
distribution plan of that class (if any), service fees attributable to 
that class (if any), including transfer agency fees, and any other 
incremental expenses of that class. Expenses of a Fund allocated to a 
particular class of shares will be borne on a pro rata basis by each 
outstanding share of that class. Applicants state that each Fund will 
comply with the provisions of rule 18f-3 under the Act as if it were an 
open-end investment company.
    13. Applicants state that the Initial Fund does not currently 
intend to impose an EWC. However, a Fund may impose an EWC on shares 
submitted for repurchase that have been held less than a specified 
period and may waive the EWC for certain categories of shareholders or 
transactions to be established from time to time. Applicants state that 
each Fund will apply the EWC (and any waivers or scheduled variations, 
or elimination of the EWC) uniformly to all shareholders in a given 
class and consistently with the requirements of rule 22d-1 under the 
Act as if the Funds were open-end investment companies.
    14. Each Fund operating as an interval fund pursuant to rule 23c-3 
under the Act may offer its shareholders an exchange feature under 
which the shareholders of the Fund may, in connection with such Fund's 
periodic repurchase offers, exchange their shares of the Fund for 
shares of the same class of (i) registered open-end investment 
companies or (ii) other registered closed-end investment companies that 
comply with rule 23c-3 under the Act and continuously offer their 
shares at net asset value, that are in the Fund's group of investment 
companies (collectively, ``Other Funds''). Shares of a Fund operating 
pursuant to rule 23c-3 that are exchanged for shares of Other Funds 
will be included as part of the amount of the repurchase offer amount 
for such Fund as specified in rule 23c-3 under the Act. Any exchange 
option will comply with rule 11a-3 under the Act, as if the Fund were 
an open-end investment company subject to rule 11a-3. In complying with 
rule 11a-3, each Fund will treat an EWC as if it were a contingent 
deferred sales load (``CDSL'').

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(a)(2) of the Act provides that a closed-end 
investment company may not issue or sell a senior security that is a 
stock unless certain requirements are met. Applicants state

[[Page 52604]]

that the creation of multiple classes of shares of the Funds may 
violate section 18(a)(2) because the Funds may not meet such 
requirements with respect to a class of shares that may be a senior 
security.
    2. Section 18(c) of the Act provides, in relevant part, that a 
closed-end investment company may not issue or sell any senior security 
if, immediately thereafter, the company has outstanding more than one 
class of senior security. Applicants state that the creation of 
multiple classes of shares of the Funds may be prohibited by section 
18(c), as a class may have priority over another class as to payment of 
dividends because shareholders of different classes would pay different 
fees and expenses.
    3. Section 18(i) of the Act provides that each share of stock 
issued by a registered management investment company will be a voting 
stock and have equal voting rights with every other outstanding voting 
stock. Applicants state that multiple classes of shares of the Funds 
may violate section 18(i) of the Act because each class would be 
entitled to exclusive voting rights with respect to matters solely 
related to that class.
    4. Section 6(c) 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 the Act, or from any 
rule or regulation under the Act, if and to the extent 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. Applicants request an exemption under 
section 6(c) from sections 18(a)(2), 18(c) and 18(i) to permit the 
Funds to issue multiple classes of shares.
    5. Applicants submit that the proposed allocation of expenses 
relating to distribution and voting rights among multiple classes is 
equitable and will not discriminate against any group or class of 
shareholders. Applicants submit that the proposed arrangements would 
permit a Fund to facilitate the distribution of its securities and 
provide investors with a broader choice of shareholder services. 
Applicants assert that the proposed closed-end investment company 
multiple class structure does not raise the concerns underlying section 
18 of the Act to any greater degree than open-end investment companies' 
multiple class structures that are permitted by rule 18f-3 under the 
Act. Applicants state that each Fund will comply with the provisions of 
rule 18f-3 as if it were an open-end investment company.
Early Withdrawal Charges
    1. Section 23(c) of the Act provides, in relevant part, that no 
registered closed-end investment company shall purchase securities of 
which it is the issuer, except: (a) On a securities exchange or other 
open market; (b) pursuant to tenders, after reasonable opportunity to 
submit tenders given to all holders of securities of the class to be 
purchased; or (c) under other circumstances as the Commission may 
permit by rules and regulations or orders for the protection of 
investors.
    2. Rule 23c-3 under the Act permits an ``interval fund'' to make 
repurchase offers of between five and twenty-five percent of its 
outstanding shares at net asset value at periodic intervals pursuant to 
a fundamental policy of the interval fund. Rule 23c-3(b)(1) under the 
Act permits an interval fund to deduct from repurchase proceeds only a 
repurchase fee, not to exceed two percent of the proceeds, that is paid 
to the interval fund and is reasonably intended to compensate the fund 
for expenses directly related to the repurchase.
    3. Section 23(c)(3) provides that the Commission may issue an order 
that would permit a closed-end investment company to repurchase its 
shares in circumstances in which the repurchase is made in a manner or 
on a basis that does not unfairly discriminate against any holders of 
the class or classes of securities to be purchased.
    4. Applicants request relief under section 6(c), discussed above, 
and section 23(c)(3) from rule 23c-3 to the extent necessary for the 
Funds to impose EWCs on shares of the Funds submitted for repurchase 
that have been held for less than a specified period.
    5. Applicants state that the EWCs they intend to impose are 
functionally similar to CDSLs imposed by open-end investment companies 
under rule 6c-10 under the Act. Rule 6c-10 permits open-end investment 
companies to impose CDSLs, subject to certain conditions. Applicants 
note that rule 6c-10 is grounded in policy considerations supporting 
the employment of CDSLs where there are adequate safeguards for the 
investor and state that the same policy considerations support 
imposition of EWCs in the interval fund context. In addition, 
applicants state that EWCs may be necessary for the distributor to 
recover distribution costs. Applicants represent that any EWC imposed 
by the Funds will comply with rule 6c-10 under the Act as if the rule 
were applicable to closed-end investment companies. The Funds will 
disclose EWCs in accordance with the requirements of Form N-1A 
concerning CDSLs.
Asset-based Distribution and/or Service Fees
    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company, or an 
affiliated person of such person, acting as principal, from 
participating in or effecting any transaction in connection with any 
joint enterprise or joint arrangement in which the investment company 
participates unless the Commission issues an order permitting the 
transaction. In reviewing applications submitted under section 17(d) 
and rule 17d-1, the Commission considers whether the participation of 
the investment company in a joint enterprise or joint arrangement is 
consistent with the provisions, policies and purposes of the Act, and 
the extent to which the participation is on a basis different from or 
less advantageous than that of other participants.
    2. Rule 17d-3 under the Act provides an exemption from section 
17(d) and rule 17d-1 to permit open-end investment companies to enter 
into distribution arrangements pursuant to rule 12b-1 under the Act. 
Applicants request an order under section 17(d) and rule 17d-1 under 
the Act to the extent necessary to permit the Fund to impose asset-
based distribution and/or service fees. Applicants have agreed to 
comply with rules 12b-1 and 17d-3 as if those rules applied to closed-
end investment companies, which they believe will resolve any concerns 
that might arise in connection with a Fund financing the distribution 
of its shares through asset-based distribution and/or service fees.
    3. For the reasons stated above, applicants submit that the 
exemptions requested under section 6(c) are necessary and appropriate 
in the public interest and are consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of the Act. Applicants further submit that the relief requested 
pursuant to section 23(c)(3) will be consistent with the protection of 
investors and will insure that applicants do not unfairly discriminate 
against any holders of the class of securities to be purchased. 
Finally, applicants state that the Funds' imposition of asset-based 
distribution and/or service fees is consistent with the provisions, 
policies and purposes of the Act and does not involve participation on 
a basis different from or less advantageous than that of other 
participants.

[[Page 52605]]

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Each Fund relying on the order will comply with the provisions of 
rules 6c-10, 12b-1, 17d-3, 18f-3, 22d-1, and, where applicable, 11a-3 
under the Act, as amended from time to time, as if those rules applied 
to closed-end management investment companies, and will comply with the 
FINRA Sales Charge Rule, as amended from time to time, as if that rule 
applied to all closed-end management investment companies.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-22541 Filed 10-16-18; 8:45 am]
BILLING CODE 8011-01-P
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