Strategas Trust and Strategas Securities, LLC, 10606-10608 [2021-03455]

Download as PDF 10606 Federal Register / Vol. 86, No. 33 / Monday, February 22, 2021 / Notices submissions should refer to File Number SR–BX–2021–002 and should be submitted on or before March 15, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–03460 Filed 2–19–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 34195; 812–15160] Strategas Trust and Strategas Securities, LLC February 16, 2021. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice. AGENCY: Notice of an application under (a) section 6(c) of the Investment Company Act of 1940 (‘‘Act’’) for an exemption from sections 2(a)(32), 2(a)(35), 14(a), 19(b), 22(d) and 26(a)(2)(C) of the Act and rules 19b–1 and rule 22c–1 thereunder and (b) sections 11(a) and 11(c) of the Act for approval of certain exchange and rollover privileges. APPLICANTS: Strategas Securities, LLC (‘‘Strategas’’) and Strategas Trust.1 SUMMARY OF APPLICATION: Applicants request an order to permit certain unit investment trusts (‘‘UIT’’) to: (a) Impose sales charges on a deferred basis and waive the deferred sales charge in certain cases; (b) offer unitholders certain exchange and rollover options; (c) publicly offer units without requiring the Depositor to take for its own account $100,000 worth of units; and (d) distribute capital gains resulting from the sale of portfolio securities within a reasonable time after receipt. FILING DATES: The application was filed on September 18, 2020, and amended on January 5, 2021. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief will be issued unless the Commission orders 7 17 CFR 200.30–3(a)(12). also request relief for future registered unit investment trusts (collectively, with Strategas Trust, the ‘‘Trusts’’) and series of the Trusts (‘‘Series’’) that are sponsored by Strategas or any entity controlling, controlled by or under common control with Strategas or any successor in interest to any such entity (together with Strategas, the ‘‘Depositor’’). Any existing or future entity that relies on the requested order will comply with the terms and conditions of the application. All existing entities that currently intend to rely on the requested order are named as applicants. tkelley on DSKBCP9HB2PROD with NOTICES 1 Applicants VerDate Sep<11>2014 19:48 Feb 19, 2021 Jkt 253001 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 mail. Hearing requests should be received by the Commission by 5:30 p.m. on March 15, 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. Applicants: Gus Demopolous, Strategas Trust, 52 Vanderbilt Avenue, 8th Floor, New York, NY 10017 and Bradley Berman and Anna T. Pinedo, Mayer Brown LLP, 1221 Avenue of the Americas, New York, NY 10020–1001. FOR FURTHER INFORMATION CONTACT: Laura L. Solomon, Senior Counsel, at (202) 551–6915, 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. Applicants’ Representations 1. Strategas Trust and any future Trust will be a UIT registered under the Act. Strategas, a limited liability company, is registered under the Securities Exchange Act of 1934 as a broker-dealer and will be the Depositor of Strategas Trust. Each Series will be created by a trust agreement between the Depositor, the evaluator, and a banking institution or trust company as trustee. 2. The Depositor acquires a portfolio of securities, which it deposits with the series trustee (‘‘Trustee’’) in exchange for certificates representing units of fractional undivided interest in the Series’ portfolio (‘‘Units’’). The Units are offered to the public through the Depositor and dealers at a price which, during the initial offering period, is based upon the aggregate market value of the underlying securities, or, the aggregate offering side evaluation of the PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 underlying securities if the underlying securities are not listed on a securities exchange, plus a front-end sales charge, a deferred sales charge or both. The maximum sales charge may be reduced in compliance with rule 22d–1 under the Act in certain circumstances, which are disclosed in the Series’ prospectus. 3. The Depositor may, but is not legally obligated to, maintain a secondary market for Units of an outstanding Series. Other broker-dealers may or may not maintain a secondary market for Units of a Series. If a secondary market is maintained, investors will be able to purchase Units on the secondary market at the current public offering price plus a front-end sales charge. If such a market is not maintained at any time for any Series, holders of the Units (‘‘Unitholders’’) of that Series may redeem their Units through the Trustee. A. Deferred Sales Charge and Waiver of Deferred Sales Charge Under Certain Circumstances 1. Applicants request an order to the extent necessary to permit one or more Series to impose a sales charge on a deferred basis (‘‘DSC’’). For each Series, the Depositor would set a maximum sales charge per Unit, a portion of which may be collected ‘‘up front’’ (i.e., at the time an investor purchases the Units). The DSC would be collected subsequently in installments (‘‘Installment Payments’’) as described in the application. The Depositor would not add any amount for interest or any similar or related charge to adjust for such deferral. 2. When a Unitholder redeems or sells Units, the Depositor intends to deduct any unpaid DSC from the redemption or sale proceeds. When calculating the amount due, the Depositor will assume that Units on which the DSC has been paid in full are redeemed or sold first. With respect to Units on which the DSC has not been paid in full, the Depositor will assume that the Units held for the longest time are redeemed or sold first. Applicants represent that the DSC collected at the time of redemption or sale, together with the Installment Payments and any amount collected up front, will not exceed the maximum sales charge per Unit. Under certain circumstances, the Depositor may waive the collection of any unpaid DSC in connection with redemptions or sales of Units. These circumstances will be disclosed in the prospectus for the relevant Series and implemented in accordance with rule 22d–1 under the Act. 3. Each Series offering Units subject to a DSC will state the maximum charge E:\FR\FM\22FEN1.SGM 22FEN1 Federal Register / Vol. 86, No. 33 / Monday, February 22, 2021 / Notices per Unit in its prospectus. In addition, the prospectus for such Series will include the table required by Form N–1A (modified as appropriate to reflect the difference between UITs and openend management investment companies) and a schedule setting forth the number and date of each Installment Payment, along with the duration of the collection period. The prospectus also will disclose that portfolio securities may be sold to pay the DSC if distribution income is insufficient and that securities will be sold pro rata, if practicable, otherwise a specific security will be designated for sale. B. Exchange Option and Rollover Option 1. Applicants request an order to the extent necessary to permit Unitholders of a Series to exchange their Units for Units of another Series (‘‘Exchange Option’’) and Unitholders of a Series that is terminating to exchange their Units for Units of a new Series of the same type (‘‘Rollover Option’’). The Exchange Option and Rollover Option would apply to all exchanges of Units sold with a front-end sales charge, a DSC or both. 2. A Unitholder who purchases Units under the Exchange Option or Rollover Option would pay a lower sales charge than that which would be paid for the Units by a new investor. The reduced sales charge will be reasonably related to the expenses incurred in connection with the administration of the DSC program, which may include an amount that will fairly and adequately compensate the Depositor and participating underwriters and brokers for their services in providing the DSC program. Applicants’ Legal Analysis tkelley on DSKBCP9HB2PROD with NOTICES A. DSC and Waiver of DSC 1. Section 4(2) of the Act defines a ‘‘unit investment trust’’ as an investment company that issues only redeemable securities. Section 2(a)(32) of the Act defines a ‘‘redeemable security’’ as a security that, upon its presentation to the issuer, entitles the holder to receive approximately his or her proportionate share of the issuer’s current net assets or the cash equivalent of those assets. Rule 22c–1 under the Act requires that the price of a redeemable security issued by a registered investment company for purposes of sale, redemption or repurchase be based on the security’s current net asset value (‘‘NAV’’). Because the collection of any unpaid DSC may cause a redeeming Unitholder to receive an amount less than the NAV VerDate Sep<11>2014 19:48 Feb 19, 2021 Jkt 253001 of the redeemed Units, applicants request relief from section 2(a)(32) and rule 22c–1. 2. Section 22(d) of the Act and rule 22d–1 under the Act require a registered investment company and its principal underwriter and dealers to sell securities only at the current public offering price described in the investment company’s prospectus, with the exception of sales of redeemable securities at prices that reflect scheduled variations in the sales load. Section 2(a)(35) of the Act defines the term ‘‘sales load’’ as the difference between the sales price and the portion of the proceeds invested by the depositor or trustee. Applicants request relief from section 2(a)(35) and section 22(d) to permit waivers, deferrals or other scheduled variations of the sales load. 3. Under section 6(c) of the Act, the Commission may exempt classes of transactions, if and to the extent that 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 their proposal meets the standards of section 6(c). Applicants state that the provisions of section 22(d) are intended to prevent (a) riskless trading in investment company securities due to backward pricing, (b) disruption of orderly distribution by dealers selling shares at a discount, and (c) discrimination among investors resulting from different prices charged to different investors. Applicants assert that the proposed DSC program will present none of these abuses. Applicants further state that all scheduled variations in the sales load will be disclosed in the prospectus of each Series and applied uniformly to all investors, and that applicants will comply with all the conditions set forth in rule 22d–1. 4. Section 26(a)(2)(C) of the Act, in relevant part, prohibits a trustee or custodian of a UIT from collecting from the trust as an expense any payment to the trust’s depositor or principal underwriter. Because the Trustee’s payment of the DSC to the Depositor may be deemed to be an expense under section 26(a)(2)(C), applicants request relief under section 6(c) from section 26(a)(2)(C) to the extent necessary to permit the Trustee to collect Installment Payments and disburse them to the Depositor. Applicants submit that the relief is appropriate because the DSC is more properly characterized as a sales load. PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 10607 B. Exchange Option and Rollover Option 1. Sections 11(a) and 11(c) of the Act prohibit any offer of exchange by a UIT for the securities of another investment company unless the terms of the offer have been approved in advance by the Commission. Applicants request an order under sections 11(a) and 11(c) for Commission approval of the Exchange Option and the Rollover Option. C. Net Worth Requirement 1. Section 14(a) of the Act requires that a registered investment company have $100,000 of net worth prior to making a public offering. Applicants state that each Series will comply with this requirement because the Depositor will deposit more than $100,000 of securities. Applicants assert, however, that the Commission has interpreted section 14(a) as requiring that the initial capital investment in an investment company be made without any intention to dispose of the investment. Applicants state that, under this interpretation, a Series would not satisfy section 14(a) because of the Depositor’s intention to sell all the Units of the Series. 2. Rule 14a–3 under the Act exempts UITs from section 14(a) if certain conditions are met, one of which is that the UIT invest only in ‘‘eligible trust securities,’’ as defined in the rule. Applicants state that they may not rely on rule 14a–3 because certain Series (collectively, ‘‘Structured Series’’) will invest all or a portion of their assets in equity securities, debt securities, FLexible EXchange® Options (‘‘FLEX Options’’) 2, or other assets which do not satisfy the definition of eligible trust securities. 3. Applicants request an exemption under section 6(c) of the Act to the extent necessary to exempt the Structured Series from the net worth requirement in section 14(a). Applicants state that the Series and the Depositor will comply in all respects with the requirements of rule 14a–3, except that the Structured Series will not restrict their portfolio investments to ‘‘eligible trust securities.’’ D. Capital Gains Distribution 1. Section 19(b) of the Act and rule 19b–1 under the Act provide that, except under limited circumstances, no registered investment company may 2 Applicants state that a Structured Series will invest in FLEX Options with expiration dates that coincide with the Structured Series’ maturity date and any relief granted from the provisions of sections 14(a) and 19(b) of the Act and rule 19b– 1 under the Act included in the requested order will not extend to any Series that intends to hold a derivative security other than FLEX Options. E:\FR\FM\22FEN1.SGM 22FEN1 10608 Federal Register / Vol. 86, No. 33 / Monday, February 22, 2021 / Notices distribute long-term gains more than once every twelve months. Rule 19b– 1(c), under certain circumstances, exempts a UIT investing in eligible trust securities (as defined in rule 14a–3) from the requirements of rule 19b–1. Because the Structured Series do not limit their investments to eligible trust securities, however, the Structured Series will not qualify for the exemption in paragraph (c) of rule 19b–1. Applicants therefore request an exemption under section 6(c) from section 19(b) and rule 19b–1 to the extent necessary to permit capital gains earned in connection with the sale of portfolio securities to be distributed to Unitholders along with the Structured Series’ regular distributions. In all other respects, applicants will comply with section 19(b) and rule 19b–1. 2. Applicants state that their proposal meets the standards of section 6(c). Applicants assert that any sale of portfolio securities would be triggered by the need to meet Trust expenses, Installment Payments, or by redemption requests, events over which the Depositor and the Structured Series do not have control. Applicants further state that, because principal distributions must be clearly indicated in accompanying reports to Unitholders as a return of principal and will be relatively small in comparison to normal dividend distributions, there is little danger of confusion from failure to differentiate among distributions. tkelley on DSKBCP9HB2PROD with NOTICES Applicants’ Conditions Applicants agree that any order granting the requested relief will be subject to the following conditions: A. DSC Relief and Exchange and Rollover Options 1. Whenever the Exchange Option or Rollover Option is to be terminated or its terms are to be amended materially, any holder of a security subject to that privilege will be given prominent notice of the impending termination or amendment at least 60 days prior to the date of termination or the effective date of the amendment, provided that: (a) No such notice need be given if the only material effect of an amendment is to reduce or eliminate the sales charge payable at the time of an exchange, to add one or more new Series eligible for the Exchange Option or the Rollover Option, or to delete a Series which has terminated; and (b) no notice need be given if, under extraordinary circumstances, either (i) there is a suspension of the redemption of Units of the Series under section 22(e) of the Act and the rules and regulations promulgated thereunder, or (ii) a Series VerDate Sep<11>2014 19:48 Feb 19, 2021 Jkt 253001 temporarily delays or ceases the sale of its Units because it is unable to invest amounts effectively in accordance with applicable investment objectives, policies and restrictions. 2. An investor who purchases Units under the Exchange Option or Rollover Option will pay a lower sales charge than that which would be paid for the Units by a new investor. 3. The prospectus of each Series offering exchanges or rollovers and any sales literature or advertising that mentions the existence of the Exchange Option or Rollover Option will disclose that the Exchange Option and the Rollover Option are subject to modification, termination or suspension without notice, except in certain limited cases. 4. Any DSC imposed on a Series’ Units will comply with the requirements of subparagraphs (1), (2) and (3) of rule 6c–10(a) under the Act. 5. Each Series offering Units subject to a DSC will include in its prospectus the disclosure required by Form N–1A relating to deferred sales charges (modified as appropriate to reflect the differences between UITs and open-end management investment companies) and a schedule setting forth the number and date of each Installment Payment. B. Net Worth Requirement Applicants will comply in all respects with the requirements of rule 14a–3 under the Act, except that the Structured Series will not restrict their portfolio investments to ‘‘eligible trust securities.’’ For the Commission, by the Division of Investment Management, under delegated authority. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–03455 Filed 2–19–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91138; File No. SR– NASDAQ–2021–008] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 4, Rule 4759 February 16, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00079 Fmt 4703 Sfmt 4703 notice is hereby given that on February 3, 2021, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Equity 4, Rule 4759 (Data Feeds Utilized) to change the primary and secondary source of quotation data of certain market centers in the list of proprietary and network processor feeds that the Exchange utilizes for the handling, routing, and execution of orders as well as regulatory compliance processes related to those functions. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/nasdaq/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to update and amend the data feeds table in Equity 4, Rule 4759, which sets forth on a marketby-market basis the specific proprietary and network processor feeds that the Exchange utilizes for the handling, routing, and execution of orders, and for performing the regulatory compliance processes related to each of those functions. Specifically, the table would be amended to reflect that the Exchange will receive a direct feed from MIAX PEARL, LLC (‘‘MIAX PEARL’’) and MEMX LLC (‘‘MEMX’’) as its primary E:\FR\FM\22FEN1.SGM 22FEN1

Agencies

[Federal Register Volume 86, Number 33 (Monday, February 22, 2021)]
[Notices]
[Pages 10606-10608]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03455]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34195; 812-15160]


Strategas Trust and Strategas Securities, LLC

February 16, 2021.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of an application under (a) section 6(c) of the Investment 
Company Act of 1940 (``Act'') for an exemption from sections 2(a)(32), 
2(a)(35), 14(a), 19(b), 22(d) and 26(a)(2)(C) of the Act and rules 19b-
1 and rule 22c-1 thereunder and (b) sections 11(a) and 11(c) of the Act 
for approval of certain exchange and rollover privileges.

APPLICANTS: Strategas Securities, LLC (``Strategas'') and Strategas 
Trust.\1\
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    \1\ Applicants also request relief for future registered unit 
investment trusts (collectively, with Strategas Trust, the 
``Trusts'') and series of the Trusts (``Series'') that are sponsored 
by Strategas or any entity controlling, controlled by or under 
common control with Strategas or any successor in interest to any 
such entity (together with Strategas, the ``Depositor''). Any 
existing or future entity that relies on the requested order will 
comply with the terms and conditions of the application. All 
existing entities that currently intend to rely on the requested 
order are named as applicants.

SUMMARY OF APPLICATION: Applicants request an order to permit certain 
unit investment trusts (``UIT'') to: (a) Impose sales charges on a 
deferred basis and waive the deferred sales charge in certain cases; 
(b) offer unitholders certain exchange and rollover options; (c) 
publicly offer units without requiring the Depositor to take for its 
own account $100,000 worth of units; and (d) distribute capital gains 
resulting from the sale of portfolio securities within a reasonable 
---------------------------------------------------------------------------
time after receipt.

FILING DATES: The application was filed on September 18, 2020, and 
amended on January 5, 2021.

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 Secretary[email protected] and serving applicants with a 
copy of the request, by mail. Hearing requests should be received by 
the Commission by 5:30 p.m. on March 15, 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]. Applicants: Gus 
Demopolous, Strategas Trust, 52 Vanderbilt Avenue, 8th Floor, New York, 
NY 10017 and Bradley Berman and Anna T. Pinedo, Mayer Brown LLP, 1221 
Avenue of the Americas, New York, NY 10020-1001.

FOR FURTHER INFORMATION CONTACT: Laura L. Solomon, Senior Counsel, at 
(202) 551-6915, 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.

Applicants' Representations

    1. Strategas Trust and any future Trust will be a UIT registered 
under the Act. Strategas, a limited liability company, is registered 
under the Securities Exchange Act of 1934 as a broker-dealer and will 
be the Depositor of Strategas Trust. Each Series will be created by a 
trust agreement between the Depositor, the evaluator, and a banking 
institution or trust company as trustee.
    2. The Depositor acquires a portfolio of securities, which it 
deposits with the series trustee (``Trustee'') in exchange for 
certificates representing units of fractional undivided interest in the 
Series' portfolio (``Units''). The Units are offered to the public 
through the Depositor and dealers at a price which, during the initial 
offering period, is based upon the aggregate market value of the 
underlying securities, or, the aggregate offering side evaluation of 
the underlying securities if the underlying securities are not listed 
on a securities exchange, plus a front-end sales charge, a deferred 
sales charge or both. The maximum sales charge may be reduced in 
compliance with rule 22d-1 under the Act in certain circumstances, 
which are disclosed in the Series' prospectus.
    3. The Depositor may, but is not legally obligated to, maintain a 
secondary market for Units of an outstanding Series. Other broker-
dealers may or may not maintain a secondary market for Units of a 
Series. If a secondary market is maintained, investors will be able to 
purchase Units on the secondary market at the current public offering 
price plus a front-end sales charge. If such a market is not maintained 
at any time for any Series, holders of the Units (``Unitholders'') of 
that Series may redeem their Units through the Trustee.

A. Deferred Sales Charge and Waiver of Deferred Sales Charge Under 
Certain Circumstances

    1. Applicants request an order to the extent necessary to permit 
one or more Series to impose a sales charge on a deferred basis 
(``DSC''). For each Series, the Depositor would set a maximum sales 
charge per Unit, a portion of which may be collected ``up front'' 
(i.e., at the time an investor purchases the Units). The DSC would be 
collected subsequently in installments (``Installment Payments'') as 
described in the application. The Depositor would not add any amount 
for interest or any similar or related charge to adjust for such 
deferral.
    2. When a Unitholder redeems or sells Units, the Depositor intends 
to deduct any unpaid DSC from the redemption or sale proceeds. When 
calculating the amount due, the Depositor will assume that Units on 
which the DSC has been paid in full are redeemed or sold first. With 
respect to Units on which the DSC has not been paid in full, the 
Depositor will assume that the Units held for the longest time are 
redeemed or sold first. Applicants represent that the DSC collected at 
the time of redemption or sale, together with the Installment Payments 
and any amount collected up front, will not exceed the maximum sales 
charge per Unit. Under certain circumstances, the Depositor may waive 
the collection of any unpaid DSC in connection with redemptions or 
sales of Units. These circumstances will be disclosed in the prospectus 
for the relevant Series and implemented in accordance with rule 22d-1 
under the Act.
    3. Each Series offering Units subject to a DSC will state the 
maximum charge

[[Page 10607]]

per Unit in its prospectus. In addition, the prospectus for such Series 
will include the table required by Form N-1A (modified as appropriate 
to reflect the difference between UITs and open-end management 
investment companies) and a schedule setting forth the number and date 
of each Installment Payment, along with the duration of the collection 
period. The prospectus also will disclose that portfolio securities may 
be sold to pay the DSC if distribution income is insufficient and that 
securities will be sold pro rata, if practicable, otherwise a specific 
security will be designated for sale.

B. Exchange Option and Rollover Option

    1. Applicants request an order to the extent necessary to permit 
Unitholders of a Series to exchange their Units for Units of another 
Series (``Exchange Option'') and Unitholders of a Series that is 
terminating to exchange their Units for Units of a new Series of the 
same type (``Rollover Option''). The Exchange Option and Rollover 
Option would apply to all exchanges of Units sold with a front-end 
sales charge, a DSC or both.
    2. A Unitholder who purchases Units under the Exchange Option or 
Rollover Option would pay a lower sales charge than that which would be 
paid for the Units by a new investor. The reduced sales charge will be 
reasonably related to the expenses incurred in connection with the 
administration of the DSC program, which may include an amount that 
will fairly and adequately compensate the Depositor and participating 
underwriters and brokers for their services in providing the DSC 
program.

Applicants' Legal Analysis

A. DSC and Waiver of DSC

    1. Section 4(2) of the Act defines a ``unit investment trust'' as 
an investment company that issues only redeemable securities. Section 
2(a)(32) of the Act defines a ``redeemable security'' as a security 
that, upon its presentation to the issuer, entitles the holder to 
receive approximately his or her proportionate share of the issuer's 
current net assets or the cash equivalent of those assets. Rule 22c-1 
under the Act requires that the price of a redeemable security issued 
by a registered investment company for purposes of sale, redemption or 
repurchase be based on the security's current net asset value 
(``NAV''). Because the collection of any unpaid DSC may cause a 
redeeming Unitholder to receive an amount less than the NAV of the 
redeemed Units, applicants request relief from section 2(a)(32) and 
rule 22c-1.
    2. Section 22(d) of the Act and rule 22d-1 under the Act require a 
registered investment company and its principal underwriter and dealers 
to sell securities only at the current public offering price described 
in the investment company's prospectus, with the exception of sales of 
redeemable securities at prices that reflect scheduled variations in 
the sales load. Section 2(a)(35) of the Act defines the term ``sales 
load'' as the difference between the sales price and the portion of the 
proceeds invested by the depositor or trustee. Applicants request 
relief from section 2(a)(35) and section 22(d) to permit waivers, 
deferrals or other scheduled variations of the sales load.
    3. Under section 6(c) of the Act, the Commission may exempt classes 
of transactions, if and to the extent that 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 their proposal meets 
the standards of section 6(c). Applicants state that the provisions of 
section 22(d) are intended to prevent (a) riskless trading in 
investment company securities due to backward pricing, (b) disruption 
of orderly distribution by dealers selling shares at a discount, and 
(c) discrimination among investors resulting from different prices 
charged to different investors. Applicants assert that the proposed DSC 
program will present none of these abuses. Applicants further state 
that all scheduled variations in the sales load will be disclosed in 
the prospectus of each Series and applied uniformly to all investors, 
and that applicants will comply with all the conditions set forth in 
rule 22d-1.
    4. Section 26(a)(2)(C) of the Act, in relevant part, prohibits a 
trustee or custodian of a UIT from collecting from the trust as an 
expense any payment to the trust's depositor or principal underwriter. 
Because the Trustee's payment of the DSC to the Depositor may be deemed 
to be an expense under section 26(a)(2)(C), applicants request relief 
under section 6(c) from section 26(a)(2)(C) to the extent necessary to 
permit the Trustee to collect Installment Payments and disburse them to 
the Depositor. Applicants submit that the relief is appropriate because 
the DSC is more properly characterized as a sales load.

B. Exchange Option and Rollover Option

    1. Sections 11(a) and 11(c) of the Act prohibit any offer of 
exchange by a UIT for the securities of another investment company 
unless the terms of the offer have been approved in advance by the 
Commission. Applicants request an order under sections 11(a) and 11(c) 
for Commission approval of the Exchange Option and the Rollover Option.

C. Net Worth Requirement

    1. Section 14(a) of the Act requires that a registered investment 
company have $100,000 of net worth prior to making a public offering. 
Applicants state that each Series will comply with this requirement 
because the Depositor will deposit more than $100,000 of securities. 
Applicants assert, however, that the Commission has interpreted section 
14(a) as requiring that the initial capital investment in an investment 
company be made without any intention to dispose of the investment. 
Applicants state that, under this interpretation, a Series would not 
satisfy section 14(a) because of the Depositor's intention to sell all 
the Units of the Series.
    2. Rule 14a-3 under the Act exempts UITs from section 14(a) if 
certain conditions are met, one of which is that the UIT invest only in 
``eligible trust securities,'' as defined in the rule. Applicants state 
that they may not rely on rule 14a-3 because certain Series 
(collectively, ``Structured Series'') will invest all or a portion of 
their assets in equity securities, debt securities, FLexible 
EXchange[supreg] Options (``FLEX Options'') \2\, or other assets which 
do not satisfy the definition of eligible trust securities.
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    \2\ Applicants state that a Structured Series will invest in 
FLEX Options with expiration dates that coincide with the Structured 
Series' maturity date and any relief granted from the provisions of 
sections 14(a) and 19(b) of the Act and rule 19b-1 under the Act 
included in the requested order will not extend to any Series that 
intends to hold a derivative security other than FLEX Options.
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    3. Applicants request an exemption under section 6(c) of the Act to 
the extent necessary to exempt the Structured Series from the net worth 
requirement in section 14(a). Applicants state that the Series and the 
Depositor will comply in all respects with the requirements of rule 
14a-3, except that the Structured Series will not restrict their 
portfolio investments to ``eligible trust securities.''

D. Capital Gains Distribution

    1. Section 19(b) of the Act and rule 19b-1 under the Act provide 
that, except under limited circumstances, no registered investment 
company may

[[Page 10608]]

distribute long-term gains more than once every twelve months. Rule 
19b-1(c), under certain circumstances, exempts a UIT investing in 
eligible trust securities (as defined in rule 14a-3) from the 
requirements of rule 19b-1. Because the Structured Series do not limit 
their investments to eligible trust securities, however, the Structured 
Series will not qualify for the exemption in paragraph (c) of rule 19b-
1. Applicants therefore request an exemption under section 6(c) from 
section 19(b) and rule 19b-1 to the extent necessary to permit capital 
gains earned in connection with the sale of portfolio securities to be 
distributed to Unitholders along with the Structured Series' regular 
distributions. In all other respects, applicants will comply with 
section 19(b) and rule 19b-1.
    2. Applicants state that their proposal meets the standards of 
section 6(c). Applicants assert that any sale of portfolio securities 
would be triggered by the need to meet Trust expenses, Installment 
Payments, or by redemption requests, events over which the Depositor 
and the Structured Series do not have control. Applicants further state 
that, because principal distributions must be clearly indicated in 
accompanying reports to Unitholders as a return of principal and will 
be relatively small in comparison to normal dividend distributions, 
there is little danger of confusion from failure to differentiate among 
distributions.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:

A. DSC Relief and Exchange and Rollover Options

    1. Whenever the Exchange Option or Rollover Option is to be 
terminated or its terms are to be amended materially, any holder of a 
security subject to that privilege will be given prominent notice of 
the impending termination or amendment at least 60 days prior to the 
date of termination or the effective date of the amendment, provided 
that: (a) No such notice need be given if the only material effect of 
an amendment is to reduce or eliminate the sales charge payable at the 
time of an exchange, to add one or more new Series eligible for the 
Exchange Option or the Rollover Option, or to delete a Series which has 
terminated; and (b) no notice need be given if, under extraordinary 
circumstances, either (i) there is a suspension of the redemption of 
Units of the Series under section 22(e) of the Act and the rules and 
regulations promulgated thereunder, or (ii) a Series temporarily delays 
or ceases the sale of its Units because it is unable to invest amounts 
effectively in accordance with applicable investment objectives, 
policies and restrictions.
    2. An investor who purchases Units under the Exchange Option or 
Rollover Option will pay a lower sales charge than that which would be 
paid for the Units by a new investor.
    3. The prospectus of each Series offering exchanges or rollovers 
and any sales literature or advertising that mentions the existence of 
the Exchange Option or Rollover Option will disclose that the Exchange 
Option and the Rollover Option are subject to modification, termination 
or suspension without notice, except in certain limited cases.
    4. Any DSC imposed on a Series' Units will comply with the 
requirements of subparagraphs (1), (2) and (3) of rule 6c-10(a) under 
the Act.
    5. Each Series offering Units subject to a DSC will include in its 
prospectus the disclosure required by Form N-1A relating to deferred 
sales charges (modified as appropriate to reflect the differences 
between UITs and open-end management investment companies) and a 
schedule setting forth the number and date of each Installment Payment.

B. Net Worth Requirement

    Applicants will comply in all respects with the requirements of 
rule 14a-3 under the Act, except that the Structured Series will not 
restrict their portfolio investments to ``eligible trust securities.''

    For the Commission, by the Division of Investment Management, 
under delegated authority.

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-03455 Filed 2-19-21; 8:45 am]
BILLING CODE 8011-01-P
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