Keystone Private Income Fund and Keystone National Group, LLC, 41073-41075 [2020-14633]
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Federal Register / Vol. 85, No. 131 / Wednesday, July 8, 2020 / Notices
actions in a manner that constitutes
forward fitting as that term is defined
and described in Management Directive
8.4.
Dated: July 1, 2020.
For the Nuclear Regulatory Commission.
Meraj Rahimi,
Chief, Regulatory Guidance and Generic
Issues Branch, Division of Engineering, Office
of Nuclear Regulatory Research.
[FR Doc. 2020–14621 Filed 7–7–20; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33917; 812–15073]
Keystone Private Income Fund and
Keystone National Group, LLC
July 1, 2020.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
jbell on DSKJLSW7X2PROD 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, 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: Keystone Private Income
Fund (the ‘‘Initial Fund’’) and Keystone
National Group, LLC (the ‘‘Adviser’’).
FILING DATES: The application was filed
on October 7, 2019, and amended on
January 13, 2020, and April 23, 2020.
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 emailing the
Commission’s Secretary at SecretarysOffice@sec.gov and serving Applicants
with a copy of the request by email.
Hearing requests should be received by
the Commission by 5:30 p.m. on July 27,
2020, 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.
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Persons who wish to be notified of a
hearing may request notification by
emailing the Commission’s Secretary.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
c/o Joshua Deringer, by email to
joshua.deringer@faegredrinker.com;
Adviser, c/o Brad Allen, by email to
ballen@keystonenational.net.
FOR FURTHER INFORMATION CONTACT:
Christine Y. Greenlees, Senior Counsel,
at (202) 551–6871, or Daniele
Marchesani, Assistant Chief Counsel, 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.
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 produce current
income by investing in a wide range of
private credit-oriented or other cash
flow producing investments, including
corporate loans and credit facilities,
equipment leasing transactions, real
estate backed loans, corporate and
consumer receivables, and other
specialty finance opportunities or
income-producing assets.
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
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.
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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 with five initial classes of
shares, Class I Shares, Class A Shares,
Class D Shares, Class Y Shares, and
Class Z Shares, each with 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. The Initial Fund
will only offer one class of shares, Class
Y Shares, until receipt of the requested
relief. 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. 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, Class A Shares, Class D Shares,
Class Y Shares, and Class Z Shares
pursuant to and in compliance with rule
18f–3 under the Act.
7. 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, in
compliance 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
in compliance with the requirements of
rule 22d–1 under the Act as if the Early
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.
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.
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Federal Register / Vol. 85, No. 131 / Wednesday, July 8, 2020 / Notices
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%.
8. 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
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
9. 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.
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APPLICANTS’ LEGAL ANALYSIS:
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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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
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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 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.
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Federal Register / Vol. 85, No. 131 / Wednesday, July 8, 2020 / Notices
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.
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 aspects of such
statements.
For the Commission, by the Division of
Investment Management, under delegated
authority.
J. Matthew DeLesDernier,
Assistant Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
APPLICANTS’ CONDITION:
[FR Doc. 2020–14633 Filed 7–7–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89212; File No. SR–MIAX–
2020–20]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Exchange Rule 518,
Complex Orders
July 1, 2020.
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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 June 25,
2020, Miami International Securities
Exchange, LLC (‘‘MIAX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend Exchange Rule 518, Complex
Orders.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/ at MIAX’s principal office, and
at the Commission’s Public Reference
Room.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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1. Purpose
The Exchange proposes to amend
Exchange Rule 518, Complex Orders, to
adopt a new Complex Auction-onArrival-Only (‘‘cAOAO’’) order type and
to amend relevant portions of the rule
to accurately describe the behavior and
operation of a cAOAO order.
Currently, the Exchange offers a
Complex Auction-on-Arrival or ‘‘cAOA’’
order that is a complex order designated
to be placed into a Complex Auction
upon receipt or upon evaluation.
Complex orders that are not designated
as cAOA will, by default, not initiate a
Complex Auction upon arrival, but
except as described in Exchange Rule
518 will be eligible to participate in a
Complex Auction that is in progress
when such complex order arrives or if
placed on the Strategy Book may
participate in or may initiate a Complex
Auction, following evaluation
conducted by the System.3 Complex
orders that are designated as cIOC 4 or
cAOC 5 are not eligible for cAOA
designation, and their evaluation will
not result in the initiation of a Complex
Auction either upon arrival or if eligible
when resting on the Strategy Book.6 Any
3 See Exchange Rule 518(b)(2)(i); The term
‘‘System’’ means the automated trading system used
by the Exchange for the trading of securities. See
Exchange Rule 100.
4 A Complex Immediate-or-Cancel or ‘‘cIOC’’
order is a complex order that is to be executed in
whole or in part upon receipt. Any portion not so
executed is cancelled. See Exchange Rule 518(b)(4).
5 A Complex Auction-or-Cancel or ‘‘cAOC’’ order
is a complex limit order used to provide liquidity
during a specific Complex Auction with a time in
force that corresponds with that of the event. cAOC
orders are not displayed to any market participant,
and are not eligible for trading outside of the event.
A cAOC order with a size greater than the aggregate
auctioned size (as defined in Rule 518(d)(4)) will be
capped for allocation purposes at the aggregate
auctioned size. See Exchange Rule 518(b)(3).
6 See Exchange Rule 518(b)(2)(ii); The ‘‘Strategy
Book’’ is the Exchange’s electronic book of complex
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41075
unexecuted balance of a cAOA order
remaining upon the completion of the
auction process is eligible 7 to be placed
on the Strategy Book.
The Exchange now proposes to adopt
a new Complex Auction-on-ArrivalOnly or ‘‘cAOAO’’ order type. A
cAOAO order is a complex order that
will be placed into an auction as
described in Rule 518(d) if eligible, and
cancelled if not eligible. Any
unexecuted balance of a cAOAO order
remaining upon the completion of the
auction process is also cancelled.
Similar to Immediate-or-Cancel orders,
the cAOAO order type is designed to
assist Members 8 in achieving an
expeditious execution by exposing
eligible Complex Orders for potential
price improvement before cancelling
any unexecuted balance.
Example 1
Suppose the following market in
complex strategy ABC:
MIAX dcMBBO: 9 1.00–1.10 (10 × 10)
A cAOAO order is entered to buy 20 @
1.07.
A Request For Response (RFR)
message is sent identifying the complex
strategy, the price, quantity of matched
complex quotes and/or orders at that
price, imbalance quantity and side of
the market of the Complex Auctioneligible order, in accordance to Rule
518(d)(2).10
During the Response Time Interval,
the following RFR Responses 11 are
received:
orders and complex quotes. See Exchange Rule
518(a)(17).
7 Any unexecuted portion of a Complex Auctioneligible order remaining at the end of the Response
Time Interval will either be: (A) Evaluated to
determine if it may initiate another Complex
Auction; or (B) placed on the Strategy Book and
ranked pursuant to subparagraph (c)(3) of Exchange
Rule 518. See Exchange Rule 518(d)(5)(ii).
8 The term ‘‘Member’’ means an individual or
organization approved to exercise the trading rights
associated with a Trading Permit. Members are
deemed ‘‘members’’ under the Exchange Act. See
Exchange Rule 100.
9 The dcMBBO is calculated using the best
displayed price for each component of a complex
strategy from the Simple Order Book. For stockoption orders, the dcMBBO for a complex strategy
will be calculated using the Exchange’s best
displayed bid or offer in the individual option
component(s) and the NBBO in the stock
component. See Exchange Rule 518(a)(8).
10 An auction is commenced as the cAOAO order
satisfies the URIP requirement described in
Exchange Rule 518(c)(5)(i).
11 Members may submit a response to the RFR
message (an ‘‘RFR Response’’) during the Response
Time Interval. RFR Responses may be submitted in
$0.01 increments. RFR Responses must be a cAOC
order or a cAOC eQuote as defined in
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]]>Agencies
[Federal Register Volume 85, Number 131 (Wednesday, July 8, 2020)]
[Notices]
[Pages 41073-41075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14633]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33917; 812-15073]
Keystone Private Income Fund and Keystone National Group, LLC
July 1, 2020.
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: Keystone Private Income Fund (the ``Initial Fund'') and
Keystone National Group, LLC (the ``Adviser'').
Filing Dates: The application was filed on October 7, 2019, and
amended on January 13, 2020, and April 23, 2020.
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 emailing the Commission's
Secretary at [email protected] and serving Applicants with a
copy of the request by email. Hearing requests should be received by
the Commission by 5:30 p.m. on July 27, 2020, 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 emailing the
Commission's Secretary.
ADDRESSES: The Commission: [email protected]. Applicants: c/o
Joshua Deringer, by email to [email protected]inker.com;
Adviser, c/o Brad Allen, by email to [email protected].
FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior
Counsel, at (202) 551-6871, or Daniele Marchesani, Assistant Chief
Counsel, 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.
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 produce current income by investing in a wide range of
private credit-oriented or other cash flow producing investments,
including corporate loans and credit facilities, equipment leasing
transactions, real estate backed loans, corporate and consumer
receivables, and other specialty finance opportunities or income-
producing assets.
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 with five initial
classes of shares, Class I Shares, Class A Shares, Class D Shares,
Class Y Shares, and Class Z Shares, each with 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. The Initial Fund will
only offer one class of shares, Class Y Shares, until receipt of the
requested relief. 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. 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, Class A Shares, Class D Shares, Class Y Shares,
and Class Z Shares pursuant to and in compliance with rule 18f-3 under
the Act.
7. 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, in compliance 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 in
compliance with the requirements of rule 22d-1 under the Act as if the
Early
[[Page 41074]]
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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8. 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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9. 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 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.
[[Page 41075]]
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.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-14633 Filed 7-7-20; 8:45 am]
BILLING CODE 8011-01-P
