Esoterica Thematic Trust and Esoterica Capital LLC; Notice of Application, 1551-1555 [2021-00089]
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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Notices
Act. These estimates are not derived
from a comprehensive or even a
representative survey or study of the
costs of Commission rules.
Written comments are invited on: (a)
Whether the collection of information is
necessary for the proper performance of
the functions of the Commission,
including whether the information has
practical utility; (b) the accuracy of the
Commission’s estimate of the burdens of
the collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burdens of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Please direct your written comments
to David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Cynthia
Roscoe, 100 F Street, NE Washington,
DC 20549; or send an email to: PRA_
Mailbox@sec.gov.
Dated: January 5, 2021.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–00144 Filed 1–7–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting; Cancellation
FEDERAL REGISTER CITATION OF PREVIOUS
ANNOUNCEMENT: 85 FR 157, January 4,
2021.
PREVIOUSLY ANNOUNCED TIME AND DATE OF
THE MEETING: Wednesday, January 6,
2021 at 2:00 p.m.
The closed
meeting scheduled for Wednesday,
January 6, 2021 at 2:00 p.m., has been
cancelled.
CHANGES IN THE MEETING:
CONTACT PERSON FOR MORE INFORMATION:
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For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Dated: January 6, 2021.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021–00319 Filed 1–6–21; 4:15 pm]
BILLING CODE 8011–01–P
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SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–305, OMB Control No.
3235–0346]
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension:
Rule 34b–1
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) the Securities
and Exchange Commission (the
‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Rule 34b–1 under the Investment
Company Act (17 CFR 270.34b–1)
governs sales material that accompanies
or follows the delivery of a statutory
prospectus (‘‘sales literature’’). Rule
34b–1 deems to be materially
misleading any investment company
(‘‘fund’’) sales literature required to be
filed with the Securities and Exchange
Commission (‘‘Commission’’) by Section
24(b) of the Investment Company Act
(15 U.S.C. 80a–24(b)) that includes
performance data, unless the sales
literature also includes the appropriate
uniformly computed data and the
legend disclosure required in
investment company advertisements by
rule 482 under the Securities Act of
1933 (17 CFR 230.482). Requiring the
inclusion of such standardized
performance data in sales literature is
designed to prevent misleading
performance claims by funds and to
enable investors to make meaningful
comparisons among funds.
The Commission estimates that on
average approximately 351 respondents
file 7,362 1 responses that include the
information required by rule 34b–1 each
year. The burden resulting from the
collection of information requirements
of rule 34b–1 is estimated to be 6 hours
per response. The total hourly burden
for rule 34b–1 is approximately 46,278
hours per year in the aggregate.2
1 The estimated number of responses to rule 34b–
1 is composed of 7,362 responses filed with FINRA
and 351 responses filed with the Commission in
2019.
2 7,713 responses × 6 hours per response = 46,278
hours.
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The collection of information under
rule 34b–1 is mandatory. The
information provided under rule 34b–1
is not kept confidential. The
Commission may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the
proposed performance of the functions
of the agency, including whether
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden of the collection of
information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
Please direct your written comments
to David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Cynthia
Roscoe, 100 F Street NE, Washington,
DC 20549; or send an email to: PRA_
Mailbox@sec.gov.
Dated: January 5, 2021.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–00145 Filed 1–7–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
34161; 812–15106]
Esoterica Thematic Trust and
Esoterica Capital LLC; Notice of
Application
January 4, 2021.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
Notice of an application under section
6(c) of the Investment Company Act of
1940 (‘‘Act’’) for an exemption from
section 15(a) of the Act, as well as from
certain disclosure requirements in rule
20a–1 under the Act, Item 19(a)(3) of
Form N–1A, Items 22(c)(1)(ii),
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of
Schedule 14A under the Securities
Exchange Act of 1934 (‘‘1934 Act’’), and
sections 6–07(2)(a), (b), and (c) of
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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Notices
Regulation S–X (‘‘Disclosure
Requirements’’).
Applicants: Esoterica Thematic Trust
(the ‘‘Trust’’), a Delaware statutory trust
registered under the Act as an open-end
management investment company with
multiple series, which includes
Esoterica NextG Economy ETF (each a
‘‘Fund’’), and Esoterica Capital LLC
(‘‘Initial Adviser’’), a New York limited
liability company registered as an
investment adviser under the
Investment Advisers Act of 1940
(‘‘Advisers Act’’) that serves an
investment adviser to the Funds
(collectively with the Trust, the
‘‘Applicants’’).
Summary of Application: The
requested exemption would permit
Applicants to enter into and materially
amend subadvisory agreements with
subadvisers without shareholder
approval and would grant relief from
the Disclosure Requirements as they
relate to fees paid to the subadvisers.
Filing Dates: The application was
filed on March 11, 2020, and amended
on August 19, 2020, and December 11,
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 January
29, 2021, 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 at SecretarysOffice@sec.gov.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. The Trust
and the Initial Adviser: Bruce.Liu@
EsotericaCap.com (with a copy to
JoAnn.Strasser@ThompsonHine.com).
FOR FURTHER INFORMATION CONTACT:
Christine Y. Greenlees, Senior Counsel,
at (202) 551–6879, or Lisa Reid Ragen,
Branch Chief at (202) 551–6825
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
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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 order to
permit the Adviser,1 subject to the
approval of the board of trustees of the
Trust (collectively, the ‘‘Board’’),2
including a majority of the trustees who
are not ‘‘interested persons’’ of the Trust
or the Adviser, as defined in section
2(a)(19) of the Act (the ‘‘Independent
Trustees’’), without obtaining
shareholder approval, to: (i) Select
investment subadvisers (‘‘Subadvisers’’)
for all or a portion of the assets of one
or more of the Funds pursuant to an
investment subadvisory agreement with
each Subadviser (each a ‘‘Subadvisory
Agreement’’); and (ii) materially amend
Subadvisory Agreements with the
Subadvisers.
2. Applicants also request an order
exempting the Subadvised Funds (as
defined below) from the Disclosure
Requirements, which require each Fund
to disclose fees paid to a Subadviser.
Applicants seek relief to permit each
Subadvised Fund to disclose (as a dollar
amount and a percentage of the Fund’s
net assets): (i) The aggregate fees paid to
the Adviser and any Wholly-Owned
Subadvisers; and (ii) the aggregate fees
paid to Affiliated and Non-Affiliated
Subadvisers (‘‘Aggregate Fee
Disclosure’’).3 Applicants seek an
exemption to permit a Subadvised Fund
1 The term ‘‘Adviser’’ means (i) the Initial
Adviser, (ii) its successors, and (iii) any entity
controlling, controlled by or under common control
with, the Initial Adviser or its successors that serves
as the primary adviser to a Subadvised Fund (as
defined below). For the purposes of the requested
order, ‘‘successor’’ is limited to an entity that
results from a reorganization into another
jurisdiction or a change in the type of business
organization.
2 The term ‘‘Board’’ also includes the board of
trustees or directors of a future Subadvised Fund (as
defined below), if different from the board of
trustees of the Trust.
3 A ‘‘Wholly-Owned Subadviser’’ is any
investment adviser that is (1) an indirect or direct
‘‘wholly-owned subsidiary’’ (as such term is
defined in section 2(a)(43) of the 1940 Act) of the
Adviser, (2) a ‘‘sister company’’ of the Adviser that
is an indirect or direct ‘‘wholly-owned subsidiary’’
of the same company that indirectly or directly
wholly owns the Adviser (the Adviser’s ‘‘parent
company’’), or (3) a parent company of the Adviser.
A ‘‘Non-Affiliated Subadviser’’ is any investment
adviser that is not an ‘‘affiliated person’’ (as defined
in the 1940 Act) of a Fund or the Adviser, except
to the extent that an affiliation arises solely because
the Subadviser serves as a subadviser to one or
more Funds. Section 2(a)(43) of the 1940 Act
defines ‘‘wholly-owned subsidiary’’ of a person as
a company 95 per centum or more of the
outstanding voting securities of which are, directly
or indirectly, owned by such a person.
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to include only the Aggregate Fee
Disclosure.4
3. Applicants request that the relief
apply to Applicants, as well as to any
future Fund 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; (ii) uses the
multi-manager structure described in
the application; and (iii) complies with
the terms and conditions of the
application (each, a ‘‘Subadvised
Fund’’).5
II. Management of the Subadvised
Funds
4. The Adviser serves or will serve as
the investment adviser to each
Subadvised Fund pursuant to an
investment advisory agreement with the
Fund (each an ‘‘Investment Advisory
Agreement’’). Each Investment Advisory
Agreement has been or will be approved
by the Board, including a majority of the
Independent Trustees, and by the
shareholders of the relevant Subadvised
Fund in the manner required by
sections 15(a) and 15(c) of the Act. The
terms of these Investment Advisory
Agreements comply or will comply with
section 15(a) of the Act. Applicants are
not seeking an exemption from the Act
with respect to the Investment Advisory
Agreements. Pursuant to the terms of
each Investment Advisory Agreement,
the Adviser, subject to the oversight of
the Board, will provide continuous
investment management for each
Subadvised Fund. For its services to
each Subadvised Fund, the Adviser
receives or will receive an investment
advisory fee from that Fund as specified
in the applicable Investment Advisory
Agreement.
5. Consistent with the terms of each
Investment Advisory Agreement, the
Adviser may, subject to the approval of
the Board, including a majority of the
Independent Trustees, and the
shareholders of the applicable
Subadvised Fund (if required by
applicable law), delegate portfolio
management responsibilities of all or a
portion of the assets of a Subadvised
Fund to a Subadviser. The Adviser will
retain overall responsibility for the
management and investment of the
assets of each Subadvised Fund. This
4 Applicants note that all other items required by
sections 6–07(2)(a), (b) and (c) of Regulation S–X
will be disclosed.
5 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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responsibility includes recommending
the removal or replacement of
Subadvisers, allocating the portion of
that Subadvised Fund’s assets to any
given Subadviser and reallocating those
assets as necessary from time to time.6
The Subadvisers will be ‘‘investment
advisers’’ to the Subadvised Funds
within the meaning of section 2(a)(20) of
the Act and will provide investment
management services to the Funds
subject to, without limitation, the
requirements of sections 15(c) and 36(b)
of the Act.7 The Subadvisers, subject to
the oversight of the Adviser and the
Board, will determine the securities and
other investments to be purchased, sold
or entered into by a Subadvised Fund’s
portfolio or a portion thereof, and will
place orders with brokers or dealers that
they select.8
6. The Subadvisory Agreements will
be approved by the Board, including a
majority of the Independent Trustees, in
accordance with sections 15(a) and 15(c)
of the Act. In addition, the terms of each
Subadvisory Agreement will comply
fully with the requirements of section
15(a) of the Act. The Adviser may
compensate the Subadvisers or the
Subadvised Funds may compensate the
Subadvisers directly.
7. Subadvised Funds will inform
shareholders of the hiring of a new
Subadviser pursuant to the following
procedures (‘‘Modified Notice and
Access Procedures’’): (a) Within 90 days
after a new Subadviser is hired for any
Subadvised Fund, that Fund will send
its shareholders either a Multi-manager
Notice or a Multi-manager Notice and
Multi-manager Information Statement; 9
6 Applicants represent that if the name of any
Subadvised Fund contains the name of a
subadviser, the name of the Adviser that serves as
the primary adviser to the Fund, or a trademark or
trade name that is owned by or publicly used to
identify the Adviser, will precede the name of the
subadviser.
7 The Subadvisers will be registered with the
Commission as an investment adviser under the
Advisers Act or not subject to such registration.
8 A ‘‘Subadviser’’ also includes an investment
subadviser that provides or will provide the
Adviser with a model portfolio reflecting a specific
strategy, style or focus with respect to the
investment of all or a portion of a Subadvised
Fund’s assets. The Adviser may use the model
portfolio to determine the securities and other
instruments to be purchased, sold or entered into
by a Subadvised Fund’s portfolio or a portion
thereof, and place orders with brokers or dealers
that it selects.
9 A ‘‘Multi-manager Notice’’ will be modeled on
a Notice of Internet Availability as defined in Rule
14a–16 under the 1934 Act, and specifically will,
among other things: (a) Summarize the relevant
information regarding the new Subadviser (except
as modified to permit Aggregate Fee Disclosure); (b)
inform shareholders that the Multi-manager
Information Statement is available on a website; (c)
provide the website address; (d) state the time
period during which the Multi-manager Information
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and (b) the Subadvised Fund will make
the Multi-manager Information
Statement available on the website
identified in the Multi-manager Notice
no later than when the Multi-manager
Notice (or Multi-manager Notice and
Multi-manager Information Statement)
is first sent to shareholders, and will
maintain it on that website for at least
90 days.10
III. Applicable Law
8. Section 15(a) of the Act states, in
part, that it is unlawful for any person
to act as an investment adviser to a
registered investment company ‘‘except
pursuant to a written contract, which
contract, whether with such registered
company or with an investment adviser
of such registered company, has been
approved by the vote of a majority of the
outstanding voting securities of such
registered company.’’
9. Form N–1A is the registration
statement used by open-end investment
companies. Item 19(a)(3) of Form N–1A
requires a registered investment
company to disclose in its statement of
additional information the method of
computing the ‘‘advisory fee payable’’
by the investment company with respect
to each investment adviser, including
the total dollar amounts that the
investment company ‘‘paid to the
adviser (aggregated with amounts paid
to affiliated advisers, if any), and any
advisers who are not affiliated persons
of the adviser, under the investment
advisory contract for the last three fiscal
years.’’
10. Rule 20a–1 under the Act requires
proxies solicited with respect to a
registered investment company to
comply with Schedule 14A under the
1934 Act. Items 22(c)(1)(ii), 22(c)(1)(iii),
22(c)(8) and 22(c)(9) of Schedule 14A,
taken together, require a proxy
statement for a shareholder meeting at
which the advisory contract will be
voted upon to include the ‘‘rate of
compensation of the investment
Statement will remain available on that website; (e)
provide instructions for accessing and printing the
Multi-manager Information Statement; and (f)
instruct the shareholder that a paper or email copy
of the Multi-manager Information Statement may be
obtained, without charge, by contacting the
Subadvised Fund. A ‘‘Multi-manager Information
Statement’’ will meet the requirements of
Regulation 14C, Schedule 14C and Item 22 of
Schedule 14A under the 1934 Act for an
information statement, except as modified by the
requested order to permit Aggregate Fee Disclosure.
Multi-manager Information Statements will be filed
with the Commission via the EDGAR system.
10 In addition, Applicants represent that
whenever a Subadviser is hired or terminated, or a
Subadvisory Agreement is materially amended, the
Subadvised Fund’s prospectus and statement of
additional information will be supplemented
promptly pursuant to rule 497(e) under the
Securities Act of 1933.
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adviser,’’ the ‘‘aggregate amount of the
investment adviser’s fee,’’ a description
of the ‘‘terms of the contract to be acted
upon,’’ and, if a change in the advisory
fee is proposed, the existing and
proposed fees and the difference
between the two fees.
11. Regulation S–X sets forth the
requirements for financial statements
required to be included as part of a
registered investment company’s
registration statement and shareholder
reports filed with the Commission.
Sections 6–07(2)(a), (b), and (c) of
Regulation S–X require a registered
investment company to include in its
financial statements information about
investment advisory fees.
12. 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
13. Applicants assert that, from the
perspective of the shareholder, the role
of the Subadvisers is substantially
equivalent to the limited role of the
individual portfolio managers employed
by an investment adviser to a traditional
investment company. Applicants also
assert that the shareholders expect the
Adviser, subject to review and approval
of the Board, to select a Subadviser who
is in the best position to achieve the
Subadvised Fund’s investment
objective. Applicants believe that
permitting the Adviser to perform the
duties for which the shareholders of the
Subadvised Fund are paying the
Adviser—the selection, oversight and
evaluation of the Subadviser—without
incurring unnecessary delays or
expenses of convening special meetings
of shareholders is appropriate and in the
interest of the Fund’s shareholders, and
will allow such Fund to operate more
efficiently. Applicants state that each
Investment Advisory Agreement will
continue to be fully subject to section
15(a) of the Act and approved by the
relevant Board, including a majority of
the Independent Trustees, in the
manner required by section 15(a) and
15(c) of the Act.
14. Applicants submit that the
requested relief meets the standards for
relief under section 6(c) of the Act.
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Applicants state that the operation of
the Subadvised Fund in the manner
described in the Application must be
approved by shareholders of that Fund
before it may rely on the requested
relief. Applicants also state that the
proposed conditions to the requested
relief are designed to address any
potential conflicts of interest or
economic incentives, and provide that
shareholders are informed when new
Subadvisers are hired.
15. Applicants contend that, in the
circumstances described in the
application, a proxy solicitation to
approve the appointment of new
Subadvisers provides no more
meaningful information to shareholders
than the proposed Multi-manager
Information Statement. Applicants state
that, accordingly, they believe the
requested relief 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.
16. With respect to the relief
permitting Aggregate Fee Disclosure,
Applicants assert that disclosure of the
individual fees paid to the Subadvisers
does not serve any meaningful purpose.
Applicants contend that the primary
reasons for requiring disclosure of
individual fees paid to Subadvisers are
to inform shareholders of expenses to be
charged by a particular Subadvised
Fund and to enable shareholders to
compare the fees to those of other
comparable investment companies.
Applicants believe that the requested
relief satisfies these objectives because
the Subadvised Fund’s overall advisory
fee will be fully disclosed and,
therefore, shareholders will know what
the Subadvised Fund’s fees and
expenses are and will be able to
compare the advisory fees a Subadvised
Fund is charged to those of other
investment companies. In addition,
Applicants assert that the requested
relief would benefit shareholders of the
Subadvised Fund because it would
improve the Adviser’s ability to
negotiate the fees paid to Subadvisers.
In particular, Applicants state that if the
Adviser is not required to disclose the
Subadvisers’ fees to the public, the
Adviser may be able to negotiate rates
that are below a Subadviser’s ‘‘posted’’
amounts. Applicants assert that the
relief will also encourage Subadvisers to
negotiate lower subadvisory fees with
the Adviser if the lower fees are not
required to be made public.
Owned and Non-Affiliated Subadvisers
through numerous exemptive orders.
The Commission also has extended the
requested relief to Affiliated
Subadvisers.11 Applicants state that
although the Adviser’s judgment in
recommending a Subadviser can be
affected by certain conflicts, they do not
warrant denying the extension of the
requested relief to Affiliated
Subadvisers. Specifically, the Adviser
faces those conflicts in allocating fund
assets between itself and a Subadviser,
and across Subadvisers, as it has an
interest in considering the benefit it will
receive, directly or indirectly, from the
fee the Subadvised Fund pays for the
management of those assets. Applicants
also state that to the extent the Adviser
has a conflict of interest with respect to
the selection of an Affiliated
Subadviser, the proposed conditions are
protective of shareholder interests by
ensuring the Board’s independence and
providing the Board with the
appropriate resources and information
to monitor and address conflicts.
18. With respect to the relief
permitting Aggregate Fee Disclosure,
Applicants assert that it is appropriate
to disclose only aggregate fees paid to
Affiliated Subadvisers for the same
reasons that similar relief has been
granted previously with respect to
Wholly-Owned and Non-Affiliated
Subadvisers.
V. Relief for Affiliated Subadvisers
17. The Commission has granted the
requested relief with respect to Wholly-
11 See Carillon Series Trust and Carillon Tower
Advisers, Inc., Investment Company Act Rel. Nos.
33464 (May 2, 2019) (notice) and 33494 (May 29,
2019) (order).
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VI. Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Before a Subadvised Fund may rely
on the order requested in the
Application, the operation of the
Subadvised Fund in the manner
described in the Application will be, or
has been, approved by a majority of the
Subadvised Fund’s outstanding voting
securities as defined in the Act, or, in
the case of a Subadvised Fund whose
public shareholders purchase shares on
the basis of a prospectus containing the
disclosure contemplated by condition 2
below, by the initial shareholder before
such Subadvised Fund’s shares are
offered to the public.
2. The prospectus for each
Subadvised Fund will disclose the
existence, substance and effect of any
order granted pursuant to the
Application. In addition, each
Subadvised Fund will hold itself out to
the public as employing the multimanager structure described in the
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Application. The prospectus will
prominently disclose that the Adviser
has the ultimate responsibility, subject
to oversight by the Board, to oversee the
Subadvisers and recommend their
hiring, termination, and replacement.
3. The Adviser will provide general
management services to each
Subadvised Fund, including overall
supervisory responsibility for the
general management and investment of
the Subadvised Fund’s assets, and
subject to review and oversight of the
Board, will (i) set the Subadvised
Fund’s overall investment strategies, (ii)
evaluate, select, and recommend
Subadvisers for all or a portion of the
Subadvised Fund’s assets, (iii) allocate
and, when appropriate, reallocate the
Subadvised Fund’s assets among
Subadvisers, (iv) monitor and evaluate
the Subadvisers’ performance, and (v)
implement procedures reasonably
designed to ensure that Subadvisers
comply with the Subadvised Fund’s
investment objective, policies and
restrictions.
4. Subadvised Funds will inform
shareholders of the hiring of a new
Subadviser within 90 days after the
hiring of the new Subadviser pursuant
to the Modified Notice and Access
Procedures.
5. At all times, at least a majority of
the Board will be Independent Trustees,
and the selection and nomination of
new or additional Independent Trustees
will be placed within the discretion of
the then-existing Independent Trustees.
6. Independent Legal Counsel, as
defined in Rule 0–1(a)(6) under the Act,
will be engaged to represent the
Independent Trustees. The selection of
such counsel will be within the
discretion of the then-existing
Independent Trustees.
7. Whenever a Subadviser is hired or
terminated, the Adviser will provide the
Board with information showing the
expected impact on the profitability of
the Adviser.
8. The Board must evaluate any
material conflicts that may be present in
a subadvisory arrangement. Specifically,
whenever a subadviser change is
proposed for a Subadvised Fund
(‘‘Subadviser Change’’) or the Board
considers an existing Subadvisory
Agreement as part of its annual review
process (‘‘Subadviser Review’’):
(a) The Adviser will provide the
Board, to the extent not already being
provided pursuant to section 15(c) of
the Act, with all relevant information
concerning:
(i) Any material interest in the
proposed new Subadviser, in the case of
a Subadviser Change, or the Subadviser
in the case of a Subadviser Review, held
E:\FR\FM\08JAN1.SGM
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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Notices
tkelley on DSKBCP9HB2PROD with NOTICES
directly or indirectly by the Adviser or
a parent or sister company of the
Adviser, and any material impact the
proposed Subadvisory Agreement may
have on that interest;
(ii) any arrangement or understanding
in which the Adviser or any parent or
sister company of the Adviser is a
participant that (A) may have had a
material effect on the proposed
Subadviser Change or Subadviser
Review, or (B) may be materially
affected by the proposed Subadviser
Change or Subadviser Review;
(iii) any material interest in a
Subadviser held directly or indirectly by
an officer or Trustee of the Subadvised
Fund, or an officer or board member of
the Adviser (other than through a
pooled investment vehicle not
controlled by such person); and
(iv) any other information that may be
relevant to the Board in evaluating any
potential material conflicts of interest in
the proposed Subadviser Change or
Subadviser Review.
(b) the Board, including a majority of
the Independent Trustees, will make a
separate finding, reflected in the Board
minutes, that the Subadviser Change or
continuation after Subadviser Review is
in the best interests of the Subadvised
Fund and its shareholders and, based on
the information provided to the Board,
does not involve a conflict of interest
from which the Adviser, a Subadviser,
any officer or Trustee of the Subadvised
Fund, or any officer or board member of
the Adviser derives an inappropriate
advantage.
9. Each Subadvised Fund will
disclose in its registration statement the
Aggregate Fee Disclosure.
10. 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.
11. Any new Subadvisory Agreement
or any amendment to an existing
Investment Advisory Agreement or
Subadvisory Agreement that directly or
indirectly results in an increase in the
aggregate advisory fee rate payable by
the Subadvised Fund will be submitted
to the Subadvised Fund’s shareholders
for approval.
For the Commission, by the Division of
Investment Management, under delegated
authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–00089 Filed 1–7–21; 8:45 am]
BILLING CODE 8011–01–P
VerDate Sep<11>2014
21:23 Jan 07, 2021
Jkt 253001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90841; File No. SR–ICC–
2020–014]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Filing of
Proposed Rule Change Relating to the
ICC Clearing Participant Default
Management Procedures
January 4, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 1 and
Rule 19b–4 thereunder,2 notice is
hereby given that on December 22, 2020,
ICE Clear Credit LLC (‘‘ICC’’) filed with
the Securities and Exchange
Commission the proposed rule change
as described in Items I, II and III below,
which Items have been prepared
primarily by ICC. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The principal purpose of the
proposed rule change is to revise the
ICC Clearing Participant (‘‘CP’’) Default
Management Procedures (‘‘Default
Management Procedures’’). These
revisions do not require any changes to
the ICC Clearing Rules (the ‘‘Rules’’).3
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, ICC
included statements concerning the
purpose of and basis for the proposed
rule change, security-based swap
submission, or advance notice and
discussed any comments it received on
the proposed rule change, securitybased swap submission, or advance
notice. The text of these statements may
be examined at the places specified in
Item IV below. ICC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
(a) Purpose
ICC proposes to revise the Default
Management Procedures, which set
forth ICC’s default management process,
including the actions taken by ICC to
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Capitalized terms used but not defined herein
have the meanings specified in the
Rules.
2 17
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
1555
determine that a CP is in default as well
as the actions taken by ICC in
connection with such default to closeout the defaulter’s portfolio. These
revisions do not require any changes to
ICC’s existing default management rules
or any other procedures as they are
limited to clarification changes that
formalize the process for convening the
CDS Default Committee remotely and
minor updates regarding notifications
sent as part of the default management
process. ICC believes such revisions will
facilitate the prompt and accurate
clearance and settlement of securities
transactions and derivative agreements,
contracts, and transactions for which it
is responsible. ICC proposes to make
such changes effective following
Commission approval of the proposed
rule change. The proposed revisions are
described in detail as follows.
ICC proposes revisions to Subsection
4.4 (Secure Trading Facility) related to
convening the ICC CDS Default
Committee, which consists of trading
personnel seconded from CPs to assist
with default management. The proposed
changes specify that ICC may convene
its CDS Default Committee in a private
room at its offices (‘‘Secure Trading
Facility’’) or remotely by teleconference
(‘‘Remote Trader Consultation’’) in the
event the committee is unable to meet
in person. The decision of whether to
convene in person or remotely would be
made by the ICC Chief Risk Officer
(‘‘CRO’’) and would depend on the
circumstances at the time of the
declaration of the default.
ICC also proposes updates to Section
6 (Default Declaration). The proposed
changes to Subsection 6.1.5 (CCO PreDeclaration Initiated Actions) allow the
ICC Chief Compliance Officer (‘‘CCO’’)
to inform the Commission and the
Commodity Futures Trading
Commission (‘‘CFTC’’) by telephone or
email of a potential default and further
direct the CCO to inform other
regulators of the potential default as
may be required. Amended Subsection
6.4 (Default Declaration Notification)
similarly directs the CCO to notify other
regulators (in addition to the
Commission and the CFTC) of a default
if applicable and includes a minor edit
to replace ‘‘all’’ with ‘‘above’’ in the
phrase ‘‘CCO confirming all
notifications.’’ The proposed updates to
Subsection 6.5.3 (CRO Post-Declaration
Preparation) relate to the CRO’s actions
to convene the CDS Default Committee
following a declaration of default,
including the CRO’s determination of
whether this committee meets in person
or remotely, and distinguish certain
actions that would be taken for an inperson CDS Default Committee meeting.
E:\FR\FM\08JAN1.SGM
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]]>Agencies
[Federal Register Volume 86, Number 5 (Friday, January 8, 2021)]
[Notices]
[Pages 1551-1555]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00089]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 34161; 812-15106]
Esoterica Thematic Trust and Esoterica Capital LLC; Notice of
Application
January 4, 2021.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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Notice of an application under section 6(c) of the Investment
Company Act of 1940 (``Act'') for an exemption from section 15(a) of
the Act, as well as from certain disclosure requirements in rule 20a-1
under the Act, Item 19(a)(3) of Form N-1A, Items 22(c)(1)(ii),
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A under the
Securities Exchange Act of 1934 (``1934 Act''), and sections 6-
07(2)(a), (b), and (c) of
[[Page 1552]]
Regulation S-X (``Disclosure Requirements'').
Applicants: Esoterica Thematic Trust (the ``Trust''), a Delaware
statutory trust registered under the Act as an open-end management
investment company with multiple series, which includes Esoterica NextG
Economy ETF (each a ``Fund''), and Esoterica Capital LLC (``Initial
Adviser''), a New York limited liability company registered as an
investment adviser under the Investment Advisers Act of 1940
(``Advisers Act'') that serves an investment adviser to the Funds
(collectively with the Trust, the ``Applicants'').
Summary of Application: The requested exemption would permit
Applicants to enter into and materially amend subadvisory agreements
with subadvisers without shareholder approval and would grant relief
from the Disclosure Requirements as they relate to fees paid to the
subadvisers.
Filing Dates: The application was filed on March 11, 2020, and
amended on August 19, 2020, and December 11, 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 January 29, 2021, 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 at [email protected].
ADDRESSES: The Commission: [email protected]. The Trust and the
Initial Adviser: [email protected] (with a copy to
[email protected]).
FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior
Counsel, at (202) 551-6879, or Lisa Reid Ragen, Branch Chief at (202)
551-6825 (Division of Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's website by searching for the file number or 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 order to permit the Adviser,\1\ subject to
the approval of the board of trustees of the Trust (collectively, the
``Board''),\2\ including a majority of the trustees who are not
``interested persons'' of the Trust or the Adviser, as defined in
section 2(a)(19) of the Act (the ``Independent Trustees''), without
obtaining shareholder approval, to: (i) Select investment subadvisers
(``Subadvisers'') for all or a portion of the assets of one or more of
the Funds pursuant to an investment subadvisory agreement with each
Subadviser (each a ``Subadvisory Agreement''); and (ii) materially
amend Subadvisory Agreements with the Subadvisers.
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\1\ The term ``Adviser'' means (i) the Initial Adviser, (ii) its
successors, and (iii) any entity controlling, controlled by or under
common control with, the Initial Adviser or its successors that
serves as the primary adviser to a Subadvised Fund (as defined
below). For the purposes of the requested order, ``successor'' is
limited to an entity that results from a reorganization into another
jurisdiction or a change in the type of business organization.
\2\ The term ``Board'' also includes the board of trustees or
directors of a future Subadvised Fund (as defined below), if
different from the board of trustees of the Trust.
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2. Applicants also request an order exempting the Subadvised Funds
(as defined below) from the Disclosure Requirements, which require each
Fund to disclose fees paid to a Subadviser. Applicants seek relief to
permit each Subadvised Fund to disclose (as a dollar amount and a
percentage of the Fund's net assets): (i) The aggregate fees paid to
the Adviser and any Wholly-Owned Subadvisers; and (ii) the aggregate
fees paid to Affiliated and Non-Affiliated Subadvisers (``Aggregate Fee
Disclosure'').\3\ Applicants seek an exemption to permit a Subadvised
Fund to include only the Aggregate Fee Disclosure.\4\
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\3\ A ``Wholly-Owned Subadviser'' is any investment adviser that
is (1) an indirect or direct ``wholly-owned subsidiary'' (as such
term is defined in section 2(a)(43) of the 1940 Act) of the Adviser,
(2) a ``sister company'' of the Adviser that is an indirect or
direct ``wholly-owned subsidiary'' of the same company that
indirectly or directly wholly owns the Adviser (the Adviser's
``parent company''), or (3) a parent company of the Adviser. A
``Non-Affiliated Subadviser'' is any investment adviser that is not
an ``affiliated person'' (as defined in the 1940 Act) of a Fund or
the Adviser, except to the extent that an affiliation arises solely
because the Subadviser serves as a subadviser to one or more Funds.
Section 2(a)(43) of the 1940 Act defines ``wholly-owned subsidiary''
of a person as a company 95 per centum or more of the outstanding
voting securities of which are, directly or indirectly, owned by
such a person.
\4\ Applicants note that all other items required by sections 6-
07(2)(a), (b) and (c) of Regulation S-X will be disclosed.
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3. Applicants request that the relief apply to Applicants, as well
as to any future Fund 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; (ii) uses the multi-manager structure described in the
application; and (iii) complies with the terms and conditions of the
application (each, a ``Subadvised Fund'').\5\
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\5\ 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 Funds
4. The Adviser serves or will serve as the investment adviser to
each Subadvised Fund pursuant to an investment advisory agreement with
the Fund (each an ``Investment Advisory Agreement''). Each Investment
Advisory Agreement has been or will be approved by the Board, including
a majority of the Independent Trustees, and by the shareholders of the
relevant Subadvised Fund in the manner required by sections 15(a) and
15(c) of the Act. The terms of these Investment Advisory Agreements
comply or will comply with section 15(a) of the Act. Applicants are not
seeking an exemption from the Act with respect to the Investment
Advisory Agreements. Pursuant to the terms of each Investment Advisory
Agreement, the Adviser, subject to the oversight of the Board, will
provide continuous investment management for each Subadvised Fund. For
its services to each Subadvised Fund, the Adviser receives or will
receive an investment advisory fee from that Fund as specified in the
applicable Investment Advisory Agreement.
5. Consistent with the terms of each Investment Advisory Agreement,
the Adviser may, subject to the approval of the Board, including a
majority of the Independent Trustees, and the shareholders of the
applicable Subadvised Fund (if required by applicable law), delegate
portfolio management responsibilities of all or a portion of the assets
of a Subadvised Fund to a Subadviser. The Adviser will retain overall
responsibility for the management and investment of the assets of each
Subadvised Fund. This
[[Page 1553]]
responsibility includes recommending the removal or replacement of
Subadvisers, allocating the portion of that Subadvised Fund's assets to
any given Subadviser and reallocating those assets as necessary from
time to time.\6\ The Subadvisers will be ``investment advisers'' to the
Subadvised Funds within the meaning of section 2(a)(20) of the Act and
will provide investment management services to the Funds subject to,
without limitation, the requirements of sections 15(c) and 36(b) of the
Act.\7\ The Subadvisers, subject to the oversight of the Adviser and
the Board, will determine the securities and other investments to be
purchased, sold or entered into by a Subadvised Fund's portfolio or a
portion thereof, and will place orders with brokers or dealers that
they select.\8\
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\6\ Applicants represent that if the name of any Subadvised Fund
contains the name of a subadviser, the name of the Adviser that
serves as the primary adviser to the Fund, or a trademark or trade
name that is owned by or publicly used to identify the Adviser, will
precede the name of the subadviser.
\7\ The Subadvisers will be registered with the Commission as an
investment adviser under the Advisers Act or not subject to such
registration.
\8\ A ``Subadviser'' also includes an investment subadviser that
provides or will provide the Adviser with a model portfolio
reflecting a specific strategy, style or focus with respect to the
investment of all or a portion of a Subadvised Fund's assets. The
Adviser may use the model portfolio to determine the securities and
other instruments to be purchased, sold or entered into by a
Subadvised Fund's portfolio or a portion thereof, and place orders
with brokers or dealers that it selects.
---------------------------------------------------------------------------
6. The Subadvisory Agreements will be approved by the Board,
including a majority of the Independent Trustees, in accordance with
sections 15(a) and 15(c) of the Act. In addition, the terms of each
Subadvisory Agreement will comply fully with the requirements of
section 15(a) of the Act. The Adviser may compensate the Subadvisers or
the Subadvised Funds may compensate the Subadvisers directly.
7. Subadvised Funds will inform shareholders of the hiring of a new
Subadviser pursuant to the following procedures (``Modified Notice and
Access Procedures''): (a) Within 90 days after a new Subadviser is
hired for any Subadvised Fund, that Fund will send its shareholders
either a Multi-manager Notice or a Multi-manager Notice and Multi-
manager Information Statement; \9\ and (b) the Subadvised Fund will
make the Multi-manager Information Statement available on the website
identified in the Multi-manager Notice no later than when the Multi-
manager Notice (or Multi-manager Notice and Multi-manager Information
Statement) is first sent to shareholders, and will maintain it on that
website for at least 90 days.\10\
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\9\ A ``Multi-manager Notice'' will be modeled on a Notice of
Internet Availability as defined in Rule 14a-16 under the 1934 Act,
and specifically will, among other things: (a) Summarize the
relevant information regarding the new Subadviser (except as
modified to permit Aggregate Fee Disclosure); (b) inform
shareholders that the Multi-manager Information Statement is
available on a website; (c) provide the website address; (d) state
the time period during which the Multi-manager Information Statement
will remain available on that website; (e) provide instructions for
accessing and printing the Multi-manager Information Statement; and
(f) instruct the shareholder that a paper or email copy of the
Multi-manager Information Statement may be obtained, without charge,
by contacting the Subadvised Fund. A ``Multi-manager Information
Statement'' will meet the requirements of Regulation 14C, Schedule
14C and Item 22 of Schedule 14A under the 1934 Act for an
information statement, except as modified by the requested order to
permit Aggregate Fee Disclosure. Multi-manager Information
Statements will be filed with the Commission via the EDGAR system.
\10\ In addition, Applicants represent that whenever a
Subadviser is hired or terminated, or a Subadvisory Agreement is
materially amended, the Subadvised Fund's prospectus and statement
of additional information will be supplemented promptly pursuant to
rule 497(e) under the Securities Act of 1933.
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III. Applicable Law
8. Section 15(a) of the Act states, in part, that it is unlawful
for any person to act as an investment adviser to a registered
investment company ``except pursuant to a written contract, which
contract, whether with such registered company or with an investment
adviser of such registered company, has been approved by the vote of a
majority of the outstanding voting securities of such registered
company.''
9. Form N-1A is the registration statement used by open-end
investment companies. Item 19(a)(3) of Form N-1A requires a registered
investment company to disclose in its statement of additional
information the method of computing the ``advisory fee payable'' by the
investment company with respect to each investment adviser, including
the total dollar amounts that the investment company ``paid to the
adviser (aggregated with amounts paid to affiliated advisers, if any),
and any advisers who are not affiliated persons of the adviser, under
the investment advisory contract for the last three fiscal years.''
10. Rule 20a-1 under the Act requires proxies solicited with
respect to a registered investment company to comply with Schedule 14A
under the 1934 Act. Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and
22(c)(9) of Schedule 14A, taken together, require a proxy statement for
a shareholder meeting at which the advisory contract will be voted upon
to include the ``rate of compensation of the investment adviser,'' the
``aggregate amount of the investment adviser's fee,'' a description of
the ``terms of the contract to be acted upon,'' and, if a change in the
advisory fee is proposed, the existing and proposed fees and the
difference between the two fees.
11. Regulation S-X sets forth the requirements for financial
statements required to be included as part of a registered investment
company's registration statement and shareholder reports filed with the
Commission. Sections 6-07(2)(a), (b), and (c) of Regulation S-X require
a registered investment company to include in its financial statements
information about investment advisory fees.
12. 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
13. Applicants assert that, from the perspective of the
shareholder, the role of the Subadvisers is substantially equivalent to
the limited role of the individual portfolio managers employed by an
investment adviser to a traditional investment company. Applicants also
assert that the shareholders expect the Adviser, subject to review and
approval of the Board, to select a Subadviser who is in the best
position to achieve the Subadvised Fund's investment objective.
Applicants believe that permitting the Adviser to perform the duties
for which the shareholders of the Subadvised Fund are paying the
Adviser--the selection, oversight and evaluation of the Subadviser--
without incurring unnecessary delays or expenses of convening special
meetings of shareholders is appropriate and in the interest of the
Fund's shareholders, and will allow such Fund to operate more
efficiently. Applicants state that each Investment Advisory Agreement
will continue to be fully subject to section 15(a) of the Act and
approved by the relevant Board, including a majority of the Independent
Trustees, in the manner required by section 15(a) and 15(c) of the Act.
14. Applicants submit that the requested relief meets the standards
for relief under section 6(c) of the Act.
[[Page 1554]]
Applicants state that the operation of the Subadvised Fund in the
manner described in the Application must be approved by shareholders of
that Fund before it may rely on the requested relief. Applicants also
state that the proposed conditions to the requested relief are designed
to address any potential conflicts of interest or economic incentives,
and provide that shareholders are informed when new Subadvisers are
hired.
15. Applicants contend that, in the circumstances described in the
application, a proxy solicitation to approve the appointment of new
Subadvisers provides no more meaningful information to shareholders
than the proposed Multi-manager Information Statement. Applicants state
that, accordingly, they believe the requested relief 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.
16. With respect to the relief permitting Aggregate Fee Disclosure,
Applicants assert that disclosure of the individual fees paid to the
Subadvisers does not serve any meaningful purpose. Applicants contend
that the primary reasons for requiring disclosure of individual fees
paid to Subadvisers are to inform shareholders of expenses to be
charged by a particular Subadvised Fund and to enable shareholders to
compare the fees to those of other comparable investment companies.
Applicants believe that the requested relief satisfies these objectives
because the Subadvised Fund's overall advisory fee will be fully
disclosed and, therefore, shareholders will know what the Subadvised
Fund's fees and expenses are and will be able to compare the advisory
fees a Subadvised Fund is charged to those of other investment
companies. In addition, Applicants assert that the requested relief
would benefit shareholders of the Subadvised Fund because it would
improve the Adviser's ability to negotiate the fees paid to
Subadvisers. In particular, Applicants state that if the Adviser is not
required to disclose the Subadvisers' fees to the public, the Adviser
may be able to negotiate rates that are below a Subadviser's ``posted''
amounts. Applicants assert that the relief will also encourage
Subadvisers to negotiate lower subadvisory fees with the Adviser if the
lower fees are not required to be made public.
V. Relief for Affiliated Subadvisers
17. The Commission has granted the requested relief with respect to
Wholly-Owned and Non-Affiliated Subadvisers through numerous exemptive
orders. The Commission also has extended the requested relief to
Affiliated Subadvisers.\11\ Applicants state that although the
Adviser's judgment in recommending a Subadviser can be affected by
certain conflicts, they do not warrant denying the extension of the
requested relief to Affiliated Subadvisers. Specifically, the Adviser
faces those conflicts in allocating fund assets between itself and a
Subadviser, and across Subadvisers, as it has an interest in
considering the benefit it will receive, directly or indirectly, from
the fee the Subadvised Fund pays for the management of those assets.
Applicants also state that to the extent the Adviser has a conflict of
interest with respect to the selection of an Affiliated Subadviser, the
proposed conditions are protective of shareholder interests by ensuring
the Board's independence and providing the Board with the appropriate
resources and information to monitor and address conflicts.
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\11\ See Carillon Series Trust and Carillon Tower Advisers,
Inc., Investment Company Act Rel. Nos. 33464 (May 2, 2019) (notice)
and 33494 (May 29, 2019) (order).
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18. With respect to the relief permitting Aggregate Fee Disclosure,
Applicants assert that it is appropriate to disclose only aggregate
fees paid to Affiliated Subadvisers for the same reasons that similar
relief has been granted previously with respect to Wholly-Owned and
Non-Affiliated Subadvisers.
VI. Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Before a Subadvised Fund may rely on the order requested in the
Application, the operation of the Subadvised Fund in the manner
described in the Application will be, or has been, approved by a
majority of the Subadvised Fund's outstanding voting securities as
defined in the Act, or, in the case of a Subadvised Fund whose public
shareholders purchase shares on the basis of a prospectus containing
the disclosure contemplated by condition 2 below, by the initial
shareholder before such Subadvised Fund's shares are offered to the
public.
2. The prospectus for each Subadvised Fund will disclose the
existence, substance and effect of any order granted pursuant to the
Application. In addition, each Subadvised Fund will hold itself out to
the public as employing the multi-manager structure described in the
Application. The prospectus will prominently disclose that the Adviser
has the ultimate responsibility, subject to oversight by the Board, to
oversee the Subadvisers and recommend their hiring, termination, and
replacement.
3. The Adviser will provide general management services to each
Subadvised Fund, including overall supervisory responsibility for the
general management and investment of the Subadvised Fund's assets, and
subject to review and oversight of the Board, will (i) set the
Subadvised Fund's overall investment strategies, (ii) evaluate, select,
and recommend Subadvisers for all or a portion of the Subadvised Fund's
assets, (iii) allocate and, when appropriate, reallocate the Subadvised
Fund's assets among Subadvisers, (iv) monitor and evaluate the
Subadvisers' performance, and (v) implement procedures reasonably
designed to ensure that Subadvisers comply with the Subadvised Fund's
investment objective, policies and restrictions.
4. Subadvised Funds will inform shareholders of the hiring of a new
Subadviser within 90 days after the hiring of the new Subadviser
pursuant to the Modified Notice and Access Procedures.
5. At all times, at least a majority of the Board will be
Independent Trustees, and the selection and nomination of new or
additional Independent Trustees will be placed within the discretion of
the then-existing Independent Trustees.
6. Independent Legal Counsel, as defined in Rule 0-1(a)(6) under
the Act, will be engaged to represent the Independent Trustees. The
selection of such counsel will be within the discretion of the then-
existing Independent Trustees.
7. Whenever a Subadviser is hired or terminated, the Adviser will
provide the Board with information showing the expected impact on the
profitability of the Adviser.
8. The Board must evaluate any material conflicts that may be
present in a subadvisory arrangement. Specifically, whenever a
subadviser change is proposed for a Subadvised Fund (``Subadviser
Change'') or the Board considers an existing Subadvisory Agreement as
part of its annual review process (``Subadviser Review''):
(a) The Adviser will provide the Board, to the extent not already
being provided pursuant to section 15(c) of the Act, with all relevant
information concerning:
(i) Any material interest in the proposed new Subadviser, in the
case of a Subadviser Change, or the Subadviser in the case of a
Subadviser Review, held
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directly or indirectly by the Adviser or a parent or sister company of
the Adviser, and any material impact the proposed Subadvisory Agreement
may have on that interest;
(ii) any arrangement or understanding in which the Adviser or any
parent or sister company of the Adviser is a participant that (A) may
have had a material effect on the proposed Subadviser Change or
Subadviser Review, or (B) may be materially affected by the proposed
Subadviser Change or Subadviser Review;
(iii) any material interest in a Subadviser held directly or
indirectly by an officer or Trustee of the Subadvised Fund, or an
officer or board member of the Adviser (other than through a pooled
investment vehicle not controlled by such person); and
(iv) any other information that may be relevant to the Board in
evaluating any potential material conflicts of interest in the proposed
Subadviser Change or Subadviser Review.
(b) the Board, including a majority of the Independent Trustees,
will make a separate finding, reflected in the Board minutes, that the
Subadviser Change or continuation after Subadviser Review is in the
best interests of the Subadvised Fund and its shareholders and, based
on the information provided to the Board, does not involve a conflict
of interest from which the Adviser, a Subadviser, any officer or
Trustee of the Subadvised Fund, or any officer or board member of the
Adviser derives an inappropriate advantage.
9. Each Subadvised Fund will disclose in its registration statement
the Aggregate Fee Disclosure.
10. 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.
11. Any new Subadvisory Agreement or any amendment to an existing
Investment Advisory Agreement or Subadvisory Agreement that directly or
indirectly results in an increase in the aggregate advisory fee rate
payable by the Subadvised Fund will be submitted to the Subadvised
Fund's shareholders for approval.
For the Commission, by the Division of Investment Management,
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-00089 Filed 1-7-21; 8:45 am]
BILLING CODE 8011-01-P
