Sunshine Act Meetings, 69108-69109 [2021-26480]
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69108
Federal Register / Vol. 86, No. 231 / Monday, December 6, 2021 / Notices
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3(d) under the Act. (On November 29,
2021, the Board, including a majority of
disinterested Board members, approved
clarifying amendments to the plan in
accordance with rule 18f–3.) Also on
November 12, 2021, the Board,
including a majority of disinterested
Board members, adopted a plan for the
distribution of Units (‘‘Rule 12b–1 Plan).
On November 29, 2021, the Board,
including a majority of disinterested
Board members, approved clarifying
amendments to the Rule 12b–1 Plan in
accordance with rule 12b–1.
Applicants’ Legal Analysis
1. Section 18(f)(1) of the Act provides,
in relevant part, that an open-end
investment company may not issue or
sell any senior security if, immediately
thereafter, the company has outstanding
more than one class of senior security.
Section 18(i) of the Act provides that
each share of stock issued by a
registered management investment
company will be a voting stock and
have equal voting rights with every
other outstanding voting stock.
2. Section 12(b) of the Act makes it
unlawful, with certain exceptions, for
any registered open-end investment
company to act as a distributor of
securities, except through an
underwriter, in contravention of such
rules as the Commission may prescribe
as necessary or appropriate in the public
interest or for the protection of
investors. Rule 12b–1 under the Act
provides that an open-end investment
company that engages in financing any
activity that is primarily intended to
result in the sale of its shares will be
deemed to be acting as a distributor of
securities of which it is the issuer,
unless it adopts a written plan that
meets certain requirements.
3. Applicants state that the issuance
and sale of multiple classes of Units of
Fortune V may be deemed to be
prohibited by section 18(f)(1) of the Act
and to violate section 18(i). Applicants
also state that the use of Sub-Account
assets to finance the distribution of the
Contracts may be deemed to violate
section 12(b) of the Act.
4. Section 6(c) of the Act provides that
the Commission may exempt any
person, security or transaction or any
class or classes of persons, securities or
transactions from any provision of the
Act, or from any rule under the Act, if
and to the extent such exemption is
necessary or appropriate in the public
interest and consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the Act. Applicants
request an exemption under section 6(c)
from sections 18(f)(1) and 18(i) to the
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extent that the proposed issuance and
sale of multiple classes of Units of
Fortune V with varying Covered
Expenses may be deemed: (1) To result
in the issuance of a ‘‘senior security’’
within the meaning of section 18(g) of
the Act and thus be prohibited by
section 18(f)(1); and (2) to violate the
equal voting provisions of section 18(i)
of the Act. In addition, Applicants
request an exemption under section 6(c)
of the Act from section 12(b), to the
extent that Fortune V may be deemed to
be acting as a distributor of its own
securities within the meaning of rule
12b–1 under the Act, solely with respect
to the initial shareholder approval
requirement in rule 12b–1(b) as it
applies to the Rule 12b–1 Plan adopted
on November 12, 2021 and amended on
November 29, 2021. Applicants state
that, for the reasons discussed below,
they satisfy the standard for relief under
section 6(c) of the Act.
5. Applicants state that the different
classes of Units provide the Applicants
with the flexibility to offer different
liquidity options and death benefits to
Contract owners. Further, Applicants
assert that being limited to a single
liquidity option may adversely affect
Fortune V’s ability to maintain and
attract retirement assets and maintain
significant economies of scale.
6. Applicants submit that the
proposed allocation of Covered
Expenses and voting rights relating to
the Covered Expenses applicable to the
classes of Units in Fortune V is
equitable and will not discriminate
against any group of participants.
Applicants state that Fortune V will
comply with the requirements of rule
18f–3 under the Act. Applicants further
state that Fortune V will disclose in its
prospectus the fees, charges, estimated
expenses and other characteristics of
each class of Units offered for sale by
the prospectus, as is required for openend investment companies offering
multiple classes under Form N–1A; and
Fortune V will disclose expenses borne
by Contract owners during the reporting
period in annual and semi-annual
reports as if it were an open-end
investment company registered on Form
N–1A.
7. Applicants further state that the
Board has adopted the Rule 12b–1 Plan
which complies with rule 12b–1 under
the Act except for the initial shareholder
approval requirement in rule 12b–
1(b)(1). Applicants state that, when the
Fortune V was established under the
laws of Puerto Rico in 2007, it was
exempt from the Act pursuant to section
6(a)(1) thereof, and only became subject
to section 12(b) on May 24, 2021, long
after the Contracts were offered and sold
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to the Contract owners. Applicants state
that the Rule 12b–1 Plan does not
change the rights or benefits of Contract
owners, but reflects the current terms
and provisions of the Contracts.
Applicants also note that the Rule 12b–
1 Plan was adopted prior to any public
offering of shares of Fortune V as a
registered investment company.
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. Fortune V will disclose in its
prospectus the estimated expenses and
other characteristics of each class of
Units offered for sale by the prospectus,
as is required for open-end, multiple
class funds under Form N–1A. Fortune
V will disclose expenses borne by
Contract owners during the reporting
period in annual and semi-annual
reports as if it were an open-end
management investment company
registered on Form N–1A.
2. Fortune V will comply with rule
18f–3 under the Act.
3. Fortune V will comply with section
12(b) of the Act and rule 12b–1 under
the Act (except with respect to the
initial shareholder approval
requirement in rule 12b–1(b)(1) for the
Rule 12b–1 Plan adopted on November
12, 2021 and amended on November 29,
2021).
For the Commission, by the Division
of Investment Management, under
delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–26328 Filed 12–3–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
2:00 p.m. on Thursday,
December 9, 2021.
PLACE: The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
TIME AND DATE:
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06DEN1
Federal Register / Vol. 86, No. 231 / Monday, December 6, 2021 / Notices
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
meeting will consist of the following
topics:
Institution and settlement of injunctive
actions;
Institution and settlement of administrative
proceedings;
Resolution of litigation claims; and
Other matters relating to examinations and
enforcement proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
(Authority: 5 U.S.C. 552b.)
Dated: December 2, 2021.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021–26480 Filed 12–2–21; 11:15 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93678; File No. SR–NSCC–
2021–014]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Enhance the
Transparency of the Calculation of the
Backtesting Charge
khammond on DSKJM1Z7X2PROD with NOTICES
November 30, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
23, 2021, National Securities Clearing
Corporation (‘‘NSCC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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by the clearing agency. NSCC filed the
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(4) thereunder.4 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 proposed rule change of NSCC
consists of modifications to Procedure
XV (Clearing Fund Formula and Other
Matters) of the NSCC Rules &
Procedures (‘‘Rules’’) to provide
additional transparency into the
calculation of the Backtesting Charge
that may be collected by NSCC as part
of Members’ Required Fund Deposits to
the Clearing Fund by clarifying that
such calculation does not include
amounts already collected from a
Member as a Backtesting Charge, as
described in greater detail below.5
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency 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
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
(a) Purpose
NSCC is proposing amendments to
the Rules that would provide additional
transparency into the calculation of the
Backtesting Charge by clarifying that
such calculation does not include
amounts already collected from a
Member as a Backtesting Charge. NSCC
is not proposing to change how it
calculates Members’ backtesting
coverage or any applicable Backtesting
Charge and is proposing only to include
additional transparency in the Rules in
describing those calculations, as
described in greater detail below.
3 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(4).
5 Terms not defined herein are defined in the
Rules, available at https://dtcc.com/∼/media/Files/
Downloads/legal/rules/nscc_rules.pdf.
4 17
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69109
Overview of NSCC’s Clearing Fund and
the Backtesting Charge
As part of its market risk management
strategy, NSCC manages its credit
exposure to Members by determining
the appropriate Required Fund Deposits
to the Clearing Fund and monitoring its
sufficiency, as provided for in the
Rules.6 The Required Fund Deposit
serves as each Member’s margin. The
objective of a Member’s Required Fund
Deposit is to mitigate potential losses to
NSCC associated with liquidating a
Member’s portfolio in the event NSCC
ceases to act for that Member
(hereinafter referred to as a ‘‘default’’).7
The aggregate of all Members’ Required
Fund Deposits constitutes the Clearing
Fund of NSCC. NSCC would access its
Clearing Fund should a defaulting
Member’s own Required Fund Deposit
be insufficient to satisfy losses to NSCC
caused by the liquidation of that
Member’s portfolio. Pursuant to the
Rules, each Member’s Required Fund
Deposit consists of a number of
applicable components, each of which
is calculated to address specific risks
faced by NSCC, as identified within
Procedure XV of the Rules.8
NSCC employs daily backtesting to
determine the adequacy of each
Member’s Required Fund Deposit.
NSCC compares the Required Fund
Deposit 9 for each Member with the
simulated liquidation gains/losses using
the actual positions in the Member’s
portfolio, and the actual historical
security returns. NSCC investigates the
cause(s) of any backtesting deficiencies.
As a part of this investigation, NSCC
pays particular attention to Members
with backtesting deficiencies that bring
the results for that Member below the 99
percent confidence target (i.e., greater
than two backtesting deficiency days in
a rolling twelve-month period) to
determine if there is an identifiable
cause of repeat backtesting deficiencies.
NSCC also evaluates whether multiple
Members may experience backtesting
6 See Rule 4 (Clearing Fund) and Procedure XV
(Clearing Fund Formula and Other Matters), id.
NSCC’s market risk management strategy is
designed to comply with Rule 17Ad–22(e)(4) under
the Act, where these risks are referred to as ‘‘credit
risks.’’ 17 CFR 240.17Ad–22(e)(4).
7 The Rules identify when NSCC may cease to act
for a Member and the types of actions NSCC may
take. For example, NSCC may suspend a firm’s
membership with NSCC or prohibit or limit a
Member’s access to NSCC’s services in the event
that a Member defaults on a financial or other
obligation to NSCC. See Rule 46 (Restrictions on
Access to Services) of the Rules, supra note 6.
8 Supra note 6.
9 For backtesting comparisons, NSCC uses the
Required Fund Deposit amount without regard to
the actual collateral posted by the Member.
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Agencies
[Federal Register Volume 86, Number 231 (Monday, December 6, 2021)]
[Notices]
[Pages 69108-69109]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-26480]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Sunshine Act Meetings
TIME AND DATE: 2:00 p.m. on Thursday, December 9, 2021.
PLACE: The meeting will be held via remote means and/or at the
Commission's headquarters, 100 F Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to the public.
MATTERS TO BE CONSIDERED: Commissioners, Counsel to the Commissioners,
the Secretary to the Commission, and recording secretaries will attend
the closed meeting. Certain staff members who have an interest in the
matters also may be present.
In the event that the time, date, or location of this meeting
changes, an announcement of the change, along with
[[Page 69109]]
the new time, date, and/or place of the meeting will be posted on the
Commission's website at https://www.sec.gov.
The General Counsel of the Commission, or his designee, has
certified that, in his opinion, one or more of the exemptions set forth
in 5 U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) and (10) and 17 CFR
200.402(a)(3), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and (a)(10),
permit consideration of the scheduled matters at the closed meeting.
The subject matter of the closed meeting will consist of the
following topics:
Institution and settlement of injunctive actions;
Institution and settlement of administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations and enforcement
proceedings.
At times, changes in Commission priorities require alterations in
the scheduling of meeting agenda items that may consist of
adjudicatory, examination, litigation, or regulatory matters.
CONTACT PERSON FOR MORE INFORMATION: For further information; please
contact Vanessa A. Countryman from the Office of the Secretary at (202)
551-5400.
(Authority: 5 U.S.C. 552b.)
Dated: December 2, 2021.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021-26480 Filed 12-2-21; 11:15 am]
BILLING CODE 8011-01-P