Cliffwater Corporate Lending Fund and Cliffwater LLC, 63929-63932 [2018-26797]
Download as PDF
<![CDATA[
Federal Register / Vol. 83, No. 238 / Wednesday, December 12, 2018 / Notices
19b–4(f)(6)(iii) 20 permits the
Commission to designate a shorter time
if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange states that
immediately codifying its current
practice within its rules to accurately
reflect the operation of the Exchange’s
System will avoid confusion. The
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the
operative delay and designates the
proposed rule change as operative upon
filing.21
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
amozie on DSK3GDR082PROD with NOTICES1
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–
MRX–2018–36 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MRX–2018–36. 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
20 17
CFR 240.19b–4(f)(6)(iii).
purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
21 For
VerDate Sep<11>2014
18:39 Dec 11, 2018
Jkt 247001
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.
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–MRX–2018–36 and should
be submitted on or before January 2,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–26825 Filed 12–11–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33318; 812–14902]
Cliffwater Corporate Lending Fund and
Cliffwater LLC
December 6, 2018.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
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.
22 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00105
Fmt 4703
Sfmt 4703
63929
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.
Applicants: Cliffwater Corporate
Lending Fund (the ‘‘Initial Fund’’) and
Cliffwater LLC (the ‘‘Adviser’’).
Filing Dates: The application was
filed on April 27, 2018, and amended on
September 28, 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
December 31, 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: 4640 Admiralty Way, 11th
Floor, Marina del Rey, CA 90292.
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.
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 primary investment
objective is to seek consistent current
income. Capital preservation will be
considered a secondary objective.
2. The Adviser, a Delaware limited
liability company, is registered as an
E:\FR\FM\12DEN1.SGM
12DEN1
amozie on DSK3GDR082PROD with NOTICES1
63930
Federal Register / Vol. 83, No. 238 / Wednesday, December 12, 2018 / Notices
investment adviser under the
Investment Advisers Act of 1940, as
amended. The Adviser will serve as
investment adviser to the Initial Fund.
3. The applicants seek an order to
permit the Initial Fund to issue multiple
classes of shares and to impose assetbased distribution and/or service fees
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 anticipates making
a continuous public offering of its
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 anticipates offering Class A
Shares and Class I Shares. Each of the
Class A Shares and Class I Shares will
have their own fee and expense
structure. The Funds may in the future
offer additional classes of shares and/or
another sales charge structure. Because
of the different distribution fees,
services and any other class expenses
that may be attributable to each class of
shares, the net income attributable to,
and the dividends payable on, each
class of shares may differ from each
other.
7. Applicants state that, from time to
time, the Fund may create additional
classes of shares, the terms of which
may differ from the initial classes
pursuant to and in compliance with rule
18f–3 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
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
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.
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.
VerDate Sep<11>2014
18:39 Dec 11, 2018
Jkt 247001
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
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
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 each 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
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.
E:\FR\FM\12DEN1.SGM
12DEN1
Federal Register / Vol. 83, No. 238 / Wednesday, December 12, 2018 / Notices
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’’).
amozie on DSK3GDR082PROD with NOTICES1
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
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
VerDate Sep<11>2014
18:39 Dec 11, 2018
Jkt 247001
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
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
63931
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
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.
E:\FR\FM\12DEN1.SGM
12DEN1
63932
Federal Register / Vol. 83, No. 238 / Wednesday, December 12, 2018 / Notices
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 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.
Applicants’ Condition
amozie on DSK3GDR082PROD with NOTICES1
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. 2018–26797 Filed 12–11–18; 8:45 am]
BILLING CODE P
VerDate Sep<11>2014
18:39 Dec 11, 2018
Jkt 247001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84738; File No. SR–
CboeBZX–2018–079]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Order Granting
Approval to a Proposed Rule Change,
as Modified by Amendment No. 1, To
Establish How the BZX Official Closing
Price Would Be Determined for BZXListed Securities
December 6, 2018.
I. Introduction
On October 18, 2018, Cboe BZX
Exchange, Inc. (the ‘‘Exchange’’ or
‘‘BZX’’) 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 how the
BZX Official Closing price would be
determined for BZX-listed securities
that are not corporate securities if the
Exchange does not conduct a Closing
Auction or if a Closing Auction trade is
less than a round lot.3 The proposed
rule change was published for comment
in the Federal Register on November 5,
2018.4 The Commission received no
comments on the proposal. This order
approves the proposed rule change, as
modified by Amendment No. 1.
II. Description of the Proposal, as
Modified by Amendment No. 1
The Exchange proposes to amend
BZX Rule 11.23(c)(2)(B) to change how
it would determine the BZX Official
Closing Price 5 for an Exchange-listed
security that is not a corporate security
(‘‘Derivative Securities Product’’) if the
Exchange does not conduct a Closing
Auction or if a Closing Auction trade is
less than a round lot. Current Rule
11.23(c)(2)(B) provides that in the event
that there is no Closing Auction for a
BZX-listed security, the BZX Official
Closing Price will be the price of the
Final Last Sale Eligible Trade.6 The
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 On October 29, 2018, the Exchange filed
Amendment No. 1 to the proposed rule change to
specify the date upon which the Exchange’s
President (or designee) approved the proposed rule
change, pursuant to delegated authority.
4 See Securities Exchange Act Release No. 84507
(October 30, 2018), 83 FR 55435 (‘‘Notice’’).
5 See BZX Rule 11.23(a)(3) (defining the term
‘‘BZX Official Closing Price’’ as the price
disseminated to the consolidated tape as the market
center closing trade).
6 As defined in BZX Rule 11.23(a)(9), the term
‘‘Final Last Sale Eligible Trade’’ means the last
trade occurring during Regular Trading Hours on
the Exchange if the trade was executed within the
last one second prior to either the Closing Auction
2 17
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
Exchange proposes to amend this
provision to provide that for Derivative
Securities Products only, in the event
there is no Closing Auction, or if less
than a round lost was executed in the
Closing Auction, the BZX Official
Closing Price will depend upon when
the Final Last Sale Eligible Trade in that
security occurred.
Specifically, if the Final Last Sale
Eligible Trade occurred within the final
five minutes before the end of Regular
Trading Hours, the Final Last Sale
Eligible Trade will be the BZX Official
Closing Price.7 However, if such trade
occurred prior to the last five minutes
before the end of Regular Trading
Hours, the time-weighted average price
of the NBBO midpoint measured over
the last five minutes before the end of
Regular Trading Hours will be the BZX
Official Closing Price.8
If the BZX Official Closing Price
cannot be determined under proposed
BZX Rule 11.23(c)(2)(B)(i) or (ii), the
Final Last Sale Eligible Trade will be the
BZX Official Closing Price.9 If there is
no qualifying trade for the current day,
the BZX Official Closing Price from the
previous trading day will be used.10
The Exchange states that it will
implement the proposed rule change as
soon as is practicable after the
Commission’s approval and will
announce the implementation date via
Trade Desk Notice.11
III. Discussion and Commission
Findings
The Commission finds that the
proposed rule change, as modified by
Amendment No. 1, is consistent with
the requirements of Section 6 of the
Act 12 and the rules and regulations
thereunder applicable to a national
securities exchange.13 In particular, the
Commission finds that the proposed
rule change is consistent with Sections
6(b)(5) the Act,14 which requires, among
other things, that the rules of a national
securities exchange be designed to
or, for Halt Auctions, trading in the security being
halted. Where the trade was not executed within
the last one second, the last trade reported to the
consolidated tape received by BZX Exchange during
Regular Trading Hours and, where applicable, prior
to trading in the security being halted will be used.
If there is no qualifying trade for the current day,
the BZX Official Closing Price from the previous
trading day will be used.
7 See proposed BZX Rule 11.23(c)(2)(B)(ii)(a).
8 See proposed BZX Rule 11.23(c)(2)(B)(ii)(b).
9 See proposed BZX Rule 11.23(c)(2)(B)(iii).
10 See BZX Rule 11.23(a)(9).
11 See Notice, supra note 4, at 55436.
12 15 U.S.C. 78f(b).
13 In approving this proposed rule change, the
Commission has considered the proposed rules’
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
14 15 U.S.C. 78f(b)(5).
E:\FR\FM\12DEN1.SGM
12DEN1
]]>Agencies
[Federal Register Volume 83, Number 238 (Wednesday, December 12, 2018)]
[Notices]
[Pages 63929-63932]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26797]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33318; 812-14902]
Cliffwater Corporate Lending Fund and Cliffwater LLC
December 6, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
-----------------------------------------------------------------------
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: Cliffwater Corporate Lending Fund (the ``Initial
Fund'') and Cliffwater LLC (the ``Adviser'').
Filing Dates: The application was filed on April 27, 2018, and
amended on September 28, 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 December 31, 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: 4640 Admiralty Way,
11th Floor, Marina del Rey, CA 90292.
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.
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 primary investment objective is
to seek consistent current income. Capital preservation will be
considered a secondary objective.
2. The Adviser, a Delaware limited liability company, is registered
as an
[[Page 63930]]
investment adviser under the Investment Advisers Act of 1940, as
amended. The Adviser will serve as investment adviser to the Initial
Fund.
3. The applicants seek an order to permit the Initial Fund to issue
multiple classes of shares and to impose asset-based distribution and/
or service fees 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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
5. The Initial Fund anticipates making a continuous public offering
of its 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 anticipates
offering Class A Shares and Class I Shares. Each of the Class A Shares
and Class I Shares will have their own fee and expense structure. The
Funds may in the future offer additional classes of shares and/or
another sales charge structure. Because of the different distribution
fees, services and any other class expenses that may be attributable to
each class of shares, the net income attributable to, and the dividends
payable on, each class of shares may differ from each other.
7. Applicants state that, from time to time, the Fund may create
additional classes of shares, the terms of which may differ from the
initial classes pursuant to and in compliance with rule 18f-3 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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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 each 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
[[Page 63931]]
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 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.
[[Page 63932]]
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 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.
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. 2018-26797 Filed 12-11-18; 8:45 am]
BILLING CODE P
