Cresset Private Markets Opportunity Fund and Cresset SPG, LLC, 26489-26491 [2019-11793]
Download as PDF
Federal Register / Vol. 84, No. 109 / Thursday, June 6, 2019 / Notices
Form ATS–N submitted by JPB–X
ineffective.
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–11822 Filed 6–5–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85979; File No. 013–00141]
Initial Form ATS–N Filing; Notice of
Extension of Commission Review
Period
khammond on DSKBBV9HB2PROD with NOTICES
May 31, 2019.
On February 13, 2019, XE filed an
initial Form ATS–N (‘‘Form ATS–N’’)
with the Securities and Exchange
Commission (‘‘Commission’’). Pursuant
to Rule 304 under the Securities and
Exchange Act of 1934 (‘‘Act’’), the
Commission may, after notice and an
opportunity for hearing, declare an
initial Form ATS–N ineffective no later
than 120 days from the date of filing
with the Commission, or, if applicable,
the extended review period. June 13,
2019 is 120 calendar days from the date
of filing. Pursuant to Rule
304(a)(1)(iv)(B), the Commission may
extend the initial Form ATS–N review
period for up to an additional 120
calendar days if the initial Form ATS–
N is unusually lengthy or raises novel
or complex issues that require
additional time for review.
XE was operating pursuant to an
initial operation report on Form ATS on
file with the Commission as of January
7, 2019.1 XE filed an initial Form ATS–
N on February 13, 2019. During the
initial 120 calendar day review period,
the Commission staff has been
reviewing the disclosures on XE’s initial
Form ATS–N. In addition, the staff has
been engaged in ongoing discussions
with XE about its disclosures and
manner of operations, as well as the
requirements of Form ATS–N, to
facilitate complete and comprehensible
disclosures that reflect the complexities
of those operations.
Form ATS–N requires NMS Stock
ATSs to file with the Commission, and
disclose to the public for the first time,
certain information, including
descriptions by the NMS Stock ATSs of
their fees, the trading activities by their
broker-dealer operators and their
affiliates in the NMS Stock ATSs, their
1 An
NMS Stock ATS (as defined in Rule 300(k)
of Regulation ATS) that was operating pursuant to
an initial operation report on Form ATS on file with
the Commission as of January 7, 2019 is a ‘‘Legacy
NMS Stock ATS.’’ 17 CFR 242.301(b)(2)(viii).
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use of market data, their written
standards for granting access to trading
on the NMS Stock ATSs, and their
written safeguards and procedures for
protecting their subscribers’ confidential
trading information required by revised
Rule 301(b)(10) of Regulation ATS. The
initial Form ATS–N disclosures and
discussions with Commission staff have
revealed complexities about the
operations of Legacy NMS Stock ATSs
including, among other things, matching
functionalities, means of order entry,
order interaction and execution
procedures, conditional order processes,
segmentation of orders, and
counterparty selection protocols. The
Commission staff needs additional time
to review novel and complex issues
such as these, which Commission staff
has discussed with XE. Extending the
initial Form ATS–N Commission review
period for an additional 120 calendar
days will provide Commission staff an
opportunity to continue its review of the
initial Form ATS–N disclosures and
discussions with XE.
In the conversations between XE and
Commission staff about the initial Form
ATS–N disclosures and the ATS
operations, Commission staff and XE
have discussed a potential amendment
to update XE’s disclosures regarding the
complexities of its operations.
Extending the review period will enable
the NMS Stock ATS to amend its
disclosures, if appropriate, and allow
Commission staff to conduct a thorough
review of amendments to the initial
disclosures provided on the initial Form
ATS–N.
For the reasons given above, the
Commission is extending the review
period of the initial Form ATS–N
submitted by XE. Accordingly, pursuant
to Rule 304(a)(1)(iv)(B), October 11,
2019 is the date by which the
Commission may declare the initial
Form ATS–N submitted by XE
ineffective.
By the Commission.
Eduardo A. Aleman,
Deputy Secretary.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33497; 812–14915]
Cresset Private Markets Opportunity
Fund and Cresset SPG, LLC
May 31, 2019.
Securities and Exchange
Commission (‘‘Commission’’).
AGENCY:
Frm 00093
Fmt 4703
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, and for an order pursuant to section
17(d) of the Act and rule 17d–1 under
the Act.
Applicants
request an order to permit certain
registered closed-end management
investment companies to issue multiple
classes of shares of beneficial interest
with varying sales loads and to impose
asset-based distribution and/or service
fees.
SUMMARY OF APPLICATION:
Cresset Private Markets
Opportunity Fund (the ‘‘Initial Fund’’)
and Cresset SPG, LLC (the ‘‘Adviser’’).
APPLICANTS:
The application was filed
on June 6, 2018, and amended on
February 1, 2019.
FILING DATES:
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 June 25, 2019, 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.
HEARING OR NOTIFICATION OF HEARING:
Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE, Washington, DC 20549–1090;
Applicants, 444 W Lake Street, Suite
4700, Chicago, IL 60606.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
[FR Doc. 2019–11837 Filed 6–5–19; 8:45 am]
PO 00000
ACTION:
26489
Sfmt 4703
Christine Y. Greenlees, Senior Counsel,
at (202) 551–6871, or Andrea
Ottomanelli Magovern, Branch Chief, at
(202) 551–6821 (Division of Investment
Management, Chief Counsel’s Office).
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.
SUPPLEMENTARY INFORMATION:
E:\FR\FM\06JNN1.SGM
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26490
Federal Register / Vol. 84, No. 109 / Thursday, June 6, 2019 / Notices
khammond on DSKBBV9HB2PROD with NOTICES
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 will be to generate appropriate
risk-adjusted long-term returns by
investing in a diversified portfolio of
private equity investments.
2. The Adviser, a Delaware limited
liability company, is registered as an
investment adviser under the
Investment Advisers Act of 1940, as
amended (the ‘‘Advisers Act’’). The
Adviser will serve as investment adviser
to the Initial Fund.
3. Applicants seek an order to permit
the Initial Fund to issue multiple classes
of shares of beneficial interest with
varying sales loads and to impose assetbased distribution and/or service fees
and early repurchase fees.
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 provides
periodic liquidity with respect to its
shares pursuant to rule 13e–4 under the
Securities Exchange Act of 1934 (each,
a ‘‘Future Fund’’ and together with the
Initial Fund, the ‘‘Funds’’).2
5. The Initial Fund initially will
register a single class of shares (the
‘‘Initial Class’’). Shares of the Initial
Fund will be sold only to persons who
are ‘‘accredited investors,’’ as defined in
Regulation D under the Securities Act of
1933, and ‘‘qualified clients,’’ as defined
in the Advisers Act. The Funds will
offer their Shares continuously at a
price based on net asset value. 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 the
Initial Class as ‘‘Class I Shares.’’
Additionally, if the requested relief is
granted, the Initial Fund currently
intends to continuously offer at least
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 compliance 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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one additional class of shares, currently
contemplated to be named ‘‘Class A
Shares.’’ Each of the Class I Shares and
Class A shares will have its own fee and
expense structure. Additional offerings
by any Fund relying on the order may
be on a private placement or public
offering basis.
7. Applicants state that, from time to
time, the Initial Fund may create
additional classes of shares, the terms of
which may differ between Class I Shares
and Class A Shares 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.3 Any Early
Repurchase Fee 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 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 intends to
impose an Early Repurchase Fee of 2%.
9. Applicants represent that any assetbased 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
3 Applicants state that an Early Repurchase Fee
charged by a Fund is not the same as a contingent
deferred sales load (‘‘CDSL’’) assessed by an openend fund pursuant to rule 6c–10 under the Act, as
CDSLs are distribution-related charges payable to a
distributor, whereas the Early Repurchase Fee is
payable to the Fund to compensate long-term
shareholders for the expenses related to shorter
term investors, in light of the Fund’s generally
longer-term investment horizons and investment
operations.
4 Any reference to the FINRA Sales Charge Rule
includes any successor or replacement to the
FINRA Sales Charge Rule.
PO 00000
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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
10. 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.
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
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.
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Federal Register / Vol. 84, No. 109 / Thursday, June 6, 2019 / Notices
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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.
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
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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 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 also
state that the Funds’ imposition of assetbased 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 closedend management investment
companies.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Deputy Secretary.
26491
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85978; File No. 013–00140]
Initial Form ATS–N Filing; Notice of
Extension of Commission Review
Period
May 31, 2019.
On February 13, 2019, Virtu MatchIt
ATS filed an initial Form ATS–N
(‘‘Form ATS–N’’) with the Securities
and Exchange Commission
(‘‘Commission’’). Pursuant to Rule 304
under the Securities and Exchange Act
of 1934 (‘‘Act’’), the Commission may,
after notice and an opportunity for
hearing, declare an initial Form ATS–N
ineffective no later than 120 days from
the date of filing with the Commission,
or, if applicable, the extended review
period. June 13, 2019 is 120 calendar
days from the date of filing. Pursuant to
Rule 304(a)(1)(iv)(B), the Commission
may extend the initial Form ATS–N
review period for up to an additional
120 calendar days if the initial Form
ATS–N is unusually lengthy or raises
novel or complex issues that require
additional time for review.
Virtu MatchIt ATS was operating
pursuant to an initial operation report
on Form ATS on file with the
Commission as of January 7, 2019.1
Virtu MatchIt ATS filed an initial Form
ATS–N on February 13, 2019. During
the initial 120 calendar day review
period, the Commission staff has been
reviewing the disclosures on Virtu
MatchIt ATS’s initial Form ATS–N. In
addition, the staff has been engaged in
ongoing discussions with Virtu MatchIt
ATS about its disclosures and manner of
operations, as well as the requirements
of Form ATS–N, to facilitate complete
and comprehensible disclosures that
reflect the complexities of those
operations.
Form ATS–N requires NMS Stock
ATSs to file with the Commission, and
disclose to the public for the first time,
certain information, including
descriptions by the NMS Stock ATSs of
their fees, the trading activities by their
broker-dealer operators and their
affiliates in the NMS Stock ATSs, their
use of market data, their written
standards for granting access to trading
on the NMS Stock ATSs, and their
written safeguards and procedures for
protecting their subscribers’ confidential
trading information required by revised
Rule 301(b)(10) of Regulation ATS. The
[FR Doc. 2019–11793 Filed 6–5–19; 8:45 am]
1 An NMS Stock ATS (as defined in Rule 300(k)
of Regulation ATS) that was operating pursuant to
an initial operation report on Form ATS on file with
the Commission as of January 7, 2019 is a ‘‘Legacy
NMS Stock ATS.’’ 17 CFR 242.301(b)(2)(viii).
BILLING CODE 8011–01–P
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Agencies
[Federal Register Volume 84, Number 109 (Thursday, June 6, 2019)]
[Notices]
[Pages 26489-26491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11793]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33497; 812-14915]
Cresset Private Markets Opportunity Fund and Cresset SPG, LLC
May 31, 2019.
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, 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 of beneficial interest with varying sales loads and
to impose asset-based distribution and/or service fees.
Applicants: Cresset Private Markets Opportunity Fund (the ``Initial
Fund'') and Cresset SPG, LLC (the ``Adviser'').
Filing Dates: The application was filed on June 6, 2018, and amended on
February 1, 2019.
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 June 25, 2019, 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 W Lake Street,
Suite 4700, Chicago, IL 60606.
FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior
Counsel, at (202) 551-6871, or Andrea Ottomanelli Magovern, Branch
Chief, at (202) 551-6821 (Division of Investment Management, Chief
Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's 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.
[[Page 26490]]
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
will be to generate appropriate risk-adjusted long-term returns by
investing in a diversified portfolio of private equity investments.
2. The Adviser, a Delaware limited liability company, is registered
as an investment adviser under the Investment Advisers Act of 1940, as
amended (the ``Advisers Act''). The Adviser will serve as investment
adviser to the Initial Fund.
3. Applicants seek an order to permit the Initial Fund to issue
multiple classes of shares of beneficial interest with varying sales
loads and to impose asset-based distribution and/or service fees and
early repurchase fees.
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 provides periodic
liquidity with respect to its shares pursuant to rule 13e-4 under the
Securities Exchange Act of 1934 (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
compliance 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 initially will register a single class of
shares (the ``Initial Class''). Shares of the Initial Fund will be sold
only to persons who are ``accredited investors,'' as defined in
Regulation D under the Securities Act of 1933, and ``qualified
clients,'' as defined in the Advisers Act. The Funds will offer their
Shares continuously at a price based on net asset value. 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 the Initial Class as ``Class I Shares.'' Additionally, if
the requested relief is granted, the Initial Fund currently intends to
continuously offer at least one additional class of shares, currently
contemplated to be named ``Class A Shares.'' Each of the Class I Shares
and Class A shares will have its own fee and expense structure.
Additional offerings by any Fund relying on the order may be on a
private placement or public offering basis.
7. Applicants state that, from time to time, the Initial Fund may
create additional classes of shares, the terms of which may differ
between Class I Shares and Class A Shares 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.\3\ Any
Early Repurchase Fee 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 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 intends to impose an Early Repurchase Fee of 2%.
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\3\ Applicants state that an Early Repurchase Fee charged by a
Fund is not the same as a contingent deferred sales load (``CDSL'')
assessed by an open-end fund pursuant to rule 6c-10 under the Act,
as CDSLs are distribution-related charges payable to a distributor,
whereas the Early Repurchase Fee is payable to the Fund to
compensate long-term shareholders for the expenses related to
shorter term investors, in light of the Fund's generally longer-term
investment horizons and investment operations.
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9. 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.
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10. 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.
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
[[Page 26491]]
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.
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 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 also 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,
Deputy Secretary.
[FR Doc. 2019-11793 Filed 6-5-19; 8:45 am]
BILLING CODE 8011-01-P