Principal Funds, Inc., et al.; Notice of Application, 52399-52401 [2020-18561]
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Federal Register / Vol. 85, No. 165 / Tuesday, August 25, 2020 / Notices
to have a pricing impact to any BX
Participant.
The Exchange’s proposal to remove
current rule text and replace it with new
rule text does not impose an undue
burden on competition, as the current
rule text refers to a technology migration
from 2019 and is obsolete.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.25
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:
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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–
BX–2020–022 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–BX–2020–022. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
25 15
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
19:55 Aug 24, 2020
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 such
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–BX–2020–022, and should
be submitted on or before September 15,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–18558 Filed 8–24–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33973; 812–15115]
Principal Funds, Inc., et al.; Notice of
Application
August 19, 2020.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application under
Section 6(c) of the Investment Company
Act of 1940 (‘‘Act’’) for an exemption
from Section 15(c) of the Act.
AGENCY:
Principal Funds, Inc.,
Principal Variable Contracts Funds, Inc.
and Principal Exchange-Traded Funds,
each of which is a registered open-end
investment company that is organized
either as a Maryland corporation or a
Delaware statutory trust (each a
‘‘Registrant’’) and that may offer one or
more series of shares (each a ‘‘Series’’),
APPLICANTS:
26 17
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CFR 200.30–3(a)(12).
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52399
and Principal Global Investors, LLC
(‘‘Adviser’’), a Delaware limited liability
company registered as an investment
adviser under the Investment Advisers
Act of 1940 (‘‘Advisers Act’’), that
serves an investment adviser to each
Registrant (together with the Registrants
and the Series, the ‘‘Applicants’’).
SUMMARY OF APPLICATION: The requested
exemption would permit a Registrant’s
board of trustees or directors (the
‘‘Board’’) to approve new sub-advisory
agreements and material amendments to
existing sub-advisory agreements for the
Subadvised Series (as defined below),
without complying with the in-person
meeting requirement of Section 15(c) of
the Act.
FILING DATES: The application was filed
on March 27, 2020, and amended on
June 11, 2020, June 24, 2020, and July
22, 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
September 14, 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
by emailing the Commission’s Secretary.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
John L. Sullivan, Esq., Principal Global
Investors, LLC, at sullivan.john.l@
principal.com.
FOR FURTHER INFORMATION CONTACT: Jean
E. Minarick, Senior Counsel, at (202)
551–6811, or Kaitlin C. Bottock, 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 an Applicant using the ‘‘Company’’
name box, at https://www.sec.gov/
search/search.htm or by calling (202)
551–8090.
I. Requested Exemptive Relief
1. Applicants request an exemption
from Section 15(c) of the Act to permit
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Federal Register / Vol. 85, No. 165 / Tuesday, August 25, 2020 / Notices
the Board,1 including the Independent
Board Members,2 to approve an
agreement (each a ‘‘Sub-Advisory
Agreement’’) pursuant to which a subadviser manages all or a portion of the
assets of one or more of the Series, or
a material amendment thereof (a ‘‘SubAdviser Change’’), without complying
with the in-person meeting requirement
of Section 15(c).3 Under the requested
relief, the Independent Board Members
could instead approve a Sub-Adviser
Change at a meeting at which members
of the Board participate by any means
of communication that allows them to
hear each other simultaneously during
the meeting.
2. Applicants request that the relief
apply to Applicants, as well as to any
future series of the Registrants and any
other existing or future registered openend management investment company
or Series thereof that intends to rely on
the requested order in the future and
that: (i) Is advised by the Adviser;4 (ii)
uses the multi-manager structure
described in the application; and (iii)
complies with the terms and conditions
of the application (each, a ‘‘Subadvised
Series’’).5
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II. Management of the Subadvised
Series
3. The Adviser will serve as the
investment adviser to each Subadvised
Series pursuant to an investment
advisory agreement with the Registrant
(each an ‘‘Investment Management
Agreement’’). The Adviser, subject to
the oversight of the Board, will provide
continuous investment management
services to each Subadvised Series.
Applicants are not seeking an
1 The term ‘‘Board’’ also includes the board of
trustees or directors of a future Subadvised Series
(as defined below).
2 The term ‘‘Independent Board Members’’ means
the members of the Board who are not parties to the
Sub-Advisory Agreement (as defined below), or
‘‘interested persons’’, as defined in Section 2(a)(19)
of the Act, of any such party.
3 Applicants do not request relief that would
permit the Board and the Independent Board
Members to approve renewals of Sub-Advisory
Agreements at non-in-person meetings.
4 The term ‘‘Adviser’’ includes (i) the Adviser or
its successors, and (ii) any entity controlling,
controlled by or under common control with, the
Adviser or its successors. For the purposes of the
requested order, ‘‘successor’’ is limited to an entity
or entities that result from a reorganization into
another jurisdiction or a change in the type of
business organization.
5 The term ‘‘Subadvised Series’’ also includes a
wholly-owned subsidiary, as defined in the Act, of
a Subadvised Series (each a ‘‘Subsidiary’’) and the
term ‘‘sub-Adviser’’ includes any sub-Adviser to a
Subsidiary. All registered open-end investment
companies that currently intend to rely on the
requested order are named as Applicants. Any
entity that relies on the requested order will do so
only in accordance with the terms and conditions
contained in the application.
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exemption from the Act with respect to
the Investment Management
Agreements.
4. Applicants state that the
Subadvised Series may seek to provide
exposure to multiple strategies across
various asset classes, thus allowing
investors to more easily access such
strategies without the additional
transaction costs and administrative
burdens of investing in multiple funds
to seek to achieve comparable
exposures.
5. To that end, the Adviser may
achieve its desired exposures to specific
strategies by allocating discrete portions
of the Subadvised Series’ assets to
various sub-advisers. Consistent with
the terms of each Investment
Management Agreement and subject to
the Board’s approval,6 the Adviser
would delegate management of all or a
portion of the assets of a Subadvised
Series to a sub-adviser.7 Each subadviser would be an ‘‘investment
adviser’’ to the Subadvised Series
within the meaning of Section 2(a)(20)
of the Act.8 The Adviser would retain
overall responsibility for the
management and investment of the
assets of each Subadvised Series.
III. Applicable Law
6. Section 15(c) of the Act prohibits a
registered investment company having a
board from entering into, renewing or
performing any contract or agreement
whereby a person undertakes regularly
to act as an investment adviser
(including a sub-adviser) to the
investment company, unless the terms
of such contract or agreement and any
renewal thereof have been approved by
the vote of a majority of the investment
company’s board members who are not
parties to such contract or agreement, or
interested persons of any such party,
cast in person at a meeting called for the
purpose of voting on such approval.
7. 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
6 A Sub-Advisory Agreement may also be subject
to approval by a Subadvised Series’ shareholders.
Applicants currently rely on a multi-manager
exemptive order to enter into and materially amend
Sub-Advisory Agreements without obtaining
shareholder approval. See Principal Funds, Inc., et
al., Investment Company Act Release Nos. 31203
(Aug. 11, 2014) (notice) and 31244 (Sep. 8, 2014)
(order).
7 A sub-adviser may manage the assets of a
Subadvised Series directly or provide the Adviser
with model portfolio or investment
recommendation(s) that would be utilized in
connection with the management of a Subadvised
Series.
8 Each sub-adviser would be registered with the
Commission as an investment adviser under the
Advisers Act or not subject to such registration.
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transactions from any provisions of the
Act, or any rule thereunder, if such
exemption is necessary or appropriate
in the public interest and consistent
with the protection of investors and the
purposes fairly intended by the policy
and provisions of the Act. Applicants
state that the requested relief meets this
standard for the reasons discussed
below.
IV. Arguments in Support of the
Requested Relief
8. Applicants assert that boards of
registered investment companies,
including the Board, typically hold inperson meetings on a quarterly basis.
Applicants state that during the three to
four month period between board
meeting dates, market conditions may
change or investment opportunities may
arise such that the Adviser may wish to
make a Sub-Adviser Change. Applicants
also state that at these moments it may
be impractical and costly to hold an
additional in-person Board meeting,
especially given the geographic
diversity of Board members and the
additional cost of holding in-person
meetings.
9. As a result, Applicants believe that
the requested relief would allow the
Subadvised Series to operate more
efficiently. In particular, Applicants
assert that without the delay inherent in
holding in-person Board meetings (and
the attendant difficulty of obtaining the
necessary quorum for, and the
additional costs of, an unscheduled inperson Board meeting), the Subadvised
Series would be able to act more quickly
and with less expense to add or replace
sub-advisers when the Board and the
Adviser believe that a Sub-Adviser
Change would benefit the Subadvised
Series.
10. Applicants also note that the inperson meeting requirement in Section
15(c) of the Act was designed to prohibit
absentee approval of advisory
agreements. Applicants state that
condition 1 to the requested relief is
designed to avoid such absentee
approval by requiring that the Board
approve a Sub-Adviser Change at a
meeting where all participating Board
members can hear each other and be
heard by each other during the
meeting.9
11. Applicants, moreover, represent
that the Board would conduct any such
non-in-person consideration of a Sub9 Applicants state that technology that includes
visual capabilities will be used unless
unanticipated circumstances arise. Applicants also
state that the Board could not rely upon the relief
to approve a Sub-Advisory Agreement by written
consent or another form of absentee approval by the
Board.
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Federal Register / Vol. 85, No. 165 / Tuesday, August 25, 2020 / Notices
Advisory Agreement in accordance with
its typical process for approving SubAdvisory Agreements. Consistent with
Section 15(c) of the Act, the Board
would request and evaluate such
information as may reasonably be
necessary to evaluate the terms of any
Sub-Advisory Agreement, and the
Adviser and sub-adviser would provide
such information.
12. Finally, Applicants note that that
if one or more Board members request
that a Sub-Adviser Change be
considered in-person, then the Board
would not be able to rely on the relief
and would have to consider the SubAdviser Change at an in-person meeting.
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V. Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. The Independent Board Members
will approve a Sub-Adviser Change at a
non-in-person meeting in which Board
members may participate by any means
of communication that allows those
Board members participating to hear
each other simultaneously during the
meeting.
2. Management will represent that the
materials provided to the Board for the
non-in-person meeting include the same
information the Board would have
received if a Sub-Adviser Change were
sought at an in-person Board meeting.
3. The notice of the non-in-person
meeting will explain the need for
considering the Sub-Adviser Change at
a non-in-person meeting. Once notice of
the non-in-person meeting to consider a
Sub-Adviser Change is sent, Board
members will be given the opportunity
to object to considering the Sub-Adviser
Change at a non-in-person Board
meeting. If a Board member requests
that the Sub-Adviser Change be
considered in-person, the Board will
consider the Sub-Adviser Change at an
in-person meeting, unless such request
is rescinded.
4. A Subadvised Series’ ability to rely
on the requested relief will be disclosed
in the Subadvised Series’ registration
statement.
5. In the event that the Commission
adopts a rule under the Act providing
substantially similar relief to that in the
order requested in the application, the
requested order will expire on the
effective date of that rule.
For the Commission, by the Division of
Investment Management, under delegated
authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–18561 Filed 8–24–20; 8:45 am]
BILLING CODE 8011–01–P
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SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #16590 and #16591;
Pennsylvania Disaster Number PA–00107]
Administrative Declaration of a
Disaster for the Commonwealth of
Pennsylvania
U.S. Small Business
Administration.
ACTION: Notice.
This is a notice of an
Administrative declaration of a disaster
for the Commonwealth of Pennsylvania
dated 08/17/2020.
Incident: Apartment Complex Fire.
Incident Period: 07/31/2020.
DATES: Issued on 08/17/2020.
Physical Loan Application Deadline
Date: 10/16/2020.
Economic Injury (EIDL) Loan
Application Deadline Date: 05/17/2021.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
Administrator’s disaster declaration,
applications for disaster loans may be
filed at the address listed above or other
locally announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Chester.
Contiguous Counties:
Pennsylvania: Berks, Delaware,
Lancaster, Montgomery.
Delaware: New Castle.
Maryland: Cecil.
The Interest Rates are:
SUMMARY:
Percent
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Percent
Non-Profit
Organizations
Without Credit Available
Elsewhere ..........................
2.750
The number assigned to this disaster
for physical damage is 16590 5 and for
economic injury is 16591 0.
The States which received an EIDL
Declaration # are Pennsylvania,
Delaware, Maryland.
AGENCY:
For Physical Damage:
Homeowners With Credit
Available Elsewhere ..........
Homeowners Without Credit
Available Elsewhere ..........
Businesses With Credit Available Elsewhere ..................
Businesses Without Credit
Available Elsewhere ..........
Non-Profit Organizations With
Credit Available Elsewhere
Non-Profit
Organizations
Without Credit Available
Elsewhere ..........................
For Economic Injury:
Businesses & Small Agricultural Cooperatives Without
Credit Available Elsewhere
52401
2.375
1.188
6.000
3.000
2.750
2.750
3.000
(Catalog of Federal Domestic Assistance
Number 59008)
Jovita Carranza,
Administrator.
[FR Doc. 2020–18556 Filed 8–24–20; 8:45 am]
BILLING CODE 8026–03–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #16592; South
Carolina Disaster Number SC–00074
Declaration of Economic Injury]
Administrative Declaration of an
Economic Injury Disaster for the State
of South Carolina
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a notice of an
Economic Injury Disaster Loan (EIDL)
declaration for the State of South
Carolina, dated 08/17/2020.
Incident: Civil Unrest.
Incident Period: 05/28/2020 through
06/30/2020.
DATES: Issued on 08/17/2020.
Economic Injury (EIDL) Loan
Application Deadline Date: 05/17/2021.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
Administrator’s EIDL declaration,
applications for economic injury
disaster loans may be filed at the
address listed above or other locally
announced locations. The following
areas have been determined to be
adversely affected by the disaster:
Primary Counties: Charleston.
Contiguous Counties:
South Carolina: Berkeley, Colleton,
Dorchester, Georgetown.
The Interest Rates are:
SUMMARY:
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]]>Agencies
[Federal Register Volume 85, Number 165 (Tuesday, August 25, 2020)]
[Notices]
[Pages 52399-52401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18561]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33973; 812-15115]
Principal Funds, Inc., et al.; Notice of Application
August 19, 2020.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under Section 6(c) of the Investment
Company Act of 1940 (``Act'') for an exemption from Section 15(c) of
the Act.
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Applicants: Principal Funds, Inc., Principal Variable Contracts Funds,
Inc. and Principal Exchange-Traded Funds, each of which is a registered
open-end investment company that is organized either as a Maryland
corporation or a Delaware statutory trust (each a ``Registrant'') and
that may offer one or more series of shares (each a ``Series''), and
Principal Global Investors, LLC (``Adviser''), a Delaware limited
liability company registered as an investment adviser under the
Investment Advisers Act of 1940 (``Advisers Act''), that serves an
investment adviser to each Registrant (together with the Registrants
and the Series, the ``Applicants'').
Summary of Application: The requested exemption would permit a
Registrant's board of trustees or directors (the ``Board'') to approve
new sub-advisory agreements and material amendments to existing sub-
advisory agreements for the Subadvised Series (as defined below),
without complying with the in-person meeting requirement of Section
15(c) of the Act.
Filing Dates: The application was filed on March 27, 2020, and amended
on June 11, 2020, June 24, 2020, and July 22, 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 September 14, 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 by emailing
the Commission's Secretary.
ADDRESSES: The Commission: [email protected]. Applicants: John
L. Sullivan, Esq., Principal Global Investors, LLC, at
[email protected].
FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at
(202) 551-6811, or Kaitlin C. Bottock, 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 an Applicant
using the ``Company'' name box, at https://www.sec.gov/search/search.htm
or by calling (202) 551-8090.
I. Requested Exemptive Relief
1. Applicants request an exemption from Section 15(c) of the Act to
permit
[[Page 52400]]
the Board,\1\ including the Independent Board Members,\2\ to approve an
agreement (each a ``Sub-Advisory Agreement'') pursuant to which a sub-
adviser manages all or a portion of the assets of one or more of the
Series, or a material amendment thereof (a ``Sub-Adviser Change''),
without complying with the in-person meeting requirement of Section
15(c).\3\ Under the requested relief, the Independent Board Members
could instead approve a Sub-Adviser Change at a meeting at which
members of the Board participate by any means of communication that
allows them to hear each other simultaneously during the meeting.
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\1\ The term ``Board'' also includes the board of trustees or
directors of a future Subadvised Series (as defined below).
\2\ The term ``Independent Board Members'' means the members of
the Board who are not parties to the Sub-Advisory Agreement (as
defined below), or ``interested persons'', as defined in Section
2(a)(19) of the Act, of any such party.
\3\ Applicants do not request relief that would permit the Board
and the Independent Board Members to approve renewals of Sub-
Advisory Agreements at non-in-person meetings.
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2. Applicants request that the relief apply to Applicants, as well
as to any future series of the Registrants and any other existing or
future registered open-end management investment company or Series
thereof that intends to rely on the requested order in the future and
that: (i) Is advised by the Adviser;\4\ (ii) uses the multi-manager
structure described in the application; and (iii) complies with the
terms and conditions of the application (each, a ``Subadvised
Series'').\5\
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\4\ The term ``Adviser'' includes (i) the Adviser or its
successors, and (ii) any entity controlling, controlled by or under
common control with, the Adviser or its successors. For the purposes
of the requested order, ``successor'' is limited to an entity or
entities that result from a reorganization into another jurisdiction
or a change in the type of business organization.
\5\ The term ``Subadvised Series'' also includes a wholly-owned
subsidiary, as defined in the Act, of a Subadvised Series (each a
``Subsidiary'') and the term ``sub-Adviser'' includes any sub-
Adviser to a Subsidiary. All registered open-end investment
companies that currently intend to rely on the requested order are
named as Applicants. Any entity that relies on the requested order
will do so only in accordance with the terms and conditions
contained in the application.
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II. Management of the Subadvised Series
3. The Adviser will serve as the investment adviser to each
Subadvised Series pursuant to an investment advisory agreement with the
Registrant (each an ``Investment Management Agreement''). The Adviser,
subject to the oversight of the Board, will provide continuous
investment management services to each Subadvised Series. Applicants
are not seeking an exemption from the Act with respect to the
Investment Management Agreements.
4. Applicants state that the Subadvised Series may seek to provide
exposure to multiple strategies across various asset classes, thus
allowing investors to more easily access such strategies without the
additional transaction costs and administrative burdens of investing in
multiple funds to seek to achieve comparable exposures.
5. To that end, the Adviser may achieve its desired exposures to
specific strategies by allocating discrete portions of the Subadvised
Series' assets to various sub-advisers. Consistent with the terms of
each Investment Management Agreement and subject to the Board's
approval,\6\ the Adviser would delegate management of all or a portion
of the assets of a Subadvised Series to a sub-adviser.\7\ Each sub-
adviser would be an ``investment adviser'' to the Subadvised Series
within the meaning of Section 2(a)(20) of the Act.\8\ The Adviser would
retain overall responsibility for the management and investment of the
assets of each Subadvised Series.
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\6\ A Sub-Advisory Agreement may also be subject to approval by
a Subadvised Series' shareholders. Applicants currently rely on a
multi-manager exemptive order to enter into and materially amend
Sub-Advisory Agreements without obtaining shareholder approval. See
Principal Funds, Inc., et al., Investment Company Act Release Nos.
31203 (Aug. 11, 2014) (notice) and 31244 (Sep. 8, 2014) (order).
\7\ A sub-adviser may manage the assets of a Subadvised Series
directly or provide the Adviser with model portfolio or investment
recommendation(s) that would be utilized in connection with the
management of a Subadvised Series.
\8\ Each sub-adviser would be registered with the Commission as
an investment adviser under the Advisers Act or not subject to such
registration.
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III. Applicable Law
6. Section 15(c) of the Act prohibits a registered investment
company having a board from entering into, renewing or performing any
contract or agreement whereby a person undertakes regularly to act as
an investment adviser (including a sub-adviser) to the investment
company, unless the terms of such contract or agreement and any renewal
thereof have been approved by the vote of a majority of the investment
company's board members who are not parties to such contract or
agreement, or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval.
7. 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 provisions of the Act, or
any rule thereunder, if such exemption is necessary or appropriate in
the public interest and consistent with the protection of investors and
the purposes fairly intended by the policy and provisions of the Act.
Applicants state that the requested relief meets this standard for the
reasons discussed below.
IV. Arguments in Support of the Requested Relief
8. Applicants assert that boards of registered investment
companies, including the Board, typically hold in-person meetings on a
quarterly basis. Applicants state that during the three to four month
period between board meeting dates, market conditions may change or
investment opportunities may arise such that the Adviser may wish to
make a Sub-Adviser Change. Applicants also state that at these moments
it may be impractical and costly to hold an additional in-person Board
meeting, especially given the geographic diversity of Board members and
the additional cost of holding in-person meetings.
9. As a result, Applicants believe that the requested relief would
allow the Subadvised Series to operate more efficiently. In particular,
Applicants assert that without the delay inherent in holding in-person
Board meetings (and the attendant difficulty of obtaining the necessary
quorum for, and the additional costs of, an unscheduled in-person Board
meeting), the Subadvised Series would be able to act more quickly and
with less expense to add or replace sub-advisers when the Board and the
Adviser believe that a Sub-Adviser Change would benefit the Subadvised
Series.
10. Applicants also note that the in-person meeting requirement in
Section 15(c) of the Act was designed to prohibit absentee approval of
advisory agreements. Applicants state that condition 1 to the requested
relief is designed to avoid such absentee approval by requiring that
the Board approve a Sub-Adviser Change at a meeting where all
participating Board members can hear each other and be heard by each
other during the meeting.\9\
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\9\ Applicants state that technology that includes visual
capabilities will be used unless unanticipated circumstances arise.
Applicants also state that the Board could not rely upon the relief
to approve a Sub-Advisory Agreement by written consent or another
form of absentee approval by the Board.
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11. Applicants, moreover, represent that the Board would conduct
any such non-in-person consideration of a Sub-
[[Page 52401]]
Advisory Agreement in accordance with its typical process for approving
Sub-Advisory Agreements. Consistent with Section 15(c) of the Act, the
Board would request and evaluate such information as may reasonably be
necessary to evaluate the terms of any Sub-Advisory Agreement, and the
Adviser and sub-adviser would provide such information.
12. Finally, Applicants note that that if one or more Board members
request that a Sub-Adviser Change be considered in-person, then the
Board would not be able to rely on the relief and would have to
consider the Sub-Adviser Change at an in-person meeting.
V. Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The Independent Board Members will approve a Sub-Adviser Change
at a non-in-person meeting in which Board members may participate by
any means of communication that allows those Board members
participating to hear each other simultaneously during the meeting.
2. Management will represent that the materials provided to the
Board for the non-in-person meeting include the same information the
Board would have received if a Sub-Adviser Change were sought at an in-
person Board meeting.
3. The notice of the non-in-person meeting will explain the need
for considering the Sub-Adviser Change at a non-in-person meeting. Once
notice of the non-in-person meeting to consider a Sub-Adviser Change is
sent, Board members will be given the opportunity to object to
considering the Sub-Adviser Change at a non-in-person Board meeting. If
a Board member requests that the Sub-Adviser Change be considered in-
person, the Board will consider the Sub-Adviser Change at an in-person
meeting, unless such request is rescinded.
4. A Subadvised Series' ability to rely on the requested relief
will be disclosed in the Subadvised Series' registration statement.
5. In the event that the Commission adopts a rule under the Act
providing substantially similar relief to that in the order requested
in the application, the requested order will expire on the effective
date of that rule.
For the Commission, by the Division of Investment Management,
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-18561 Filed 8-24-20; 8:45 am]
BILLING CODE 8011-01-P
