Figure Certificate Company (“Applicant”), 92241-92243 [2024-27229]
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Federal Register / Vol. 89, No. 225 / Thursday, November 21, 2024 / Notices
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
4–443 and should be submitted on or
before December 12, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.5
Stephanie J. Fouse,
Assistant Secretary.
[FR Doc. 2024–27220 Filed 11–20–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
35388; File No. 812–15654]
Figure Certificate Company
(‘‘Applicant’’)
November 15, 2024.
Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’).
ACTION: Notice.
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AGENCY:
Notice of application for an order
under section 28(c) of the Investment
Company Act of 1940 (the ‘‘Act’’).
SUMMARY OF APPLICATION: Applicant
seeks an order pursuant to section 28(c)
of the Act approving certain proposed
custodial arrangements.
APPLICANTS: Figure Certificate
Company.
FILING DATES: The application was filed
on November 7, 2024 and amended and
restated on November 13, 2024.
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 on any application by
emailing the SEC’s Secretary at
Secretarys-Office@sec.gov and serving
the Applicant with a copy of the request
by email, if an email address is listed for
the Applicant below, or personally or by
mail, if a physical address is listed for
the Applicant below. Hearing requests
should be received by the Commission
by 5:30 p.m. on December 11, 2024 and
should be accompanied by proof of
service on the Applicant, 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
5 17
CFR 200.30–3(a)(85).
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emailing the Commission’s Secretary at
Secretarys-Office@sec.gov.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicant:
susan.gault-brown@aoshearman.com.
FOR FURTHER INFORMATION CONTACT:
Taylor Evenson, Senior Counsel, or
Robert S. Shapiro, Assistant Director, at
(202) 551–6825 (Division of Investment
Management, Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. For Applicant’s
representations, legal analysis, and
conditions, please refer to Applicant’s
amended and restated application,
dated November 13, 2024, which may
be obtained via the Commission’s
website by searching for the file number
at the top of this document, or for the
Applicant using the Company name
search field, on the SEC’s EDGAR
system. The SEC’s EDGAR system may
be searched at, https://www.sec.gov/
edgar/searchedgar/legacy/
companysearch.html. You may also call
the SEC’s Public Reference Room at
(202) 551–8090.
Applicant’s Representations
1. Applicant, a Delaware corporation,
intends to register under the Act as a
face-amount certificate company and
operate as a registered face-amount
certificate company. Applicant
currently intends to offer two types of
face-amount certificates registered
under the Securities Act of 1933, faceamount certificates of the installment
type (the ‘‘Installment Certificates’’) and
fully-paid certificates (the
‘‘Transferrable Certificates’’ and,
together with the Installment
Certificates, the ‘‘Certificates’’).
Applicant states that it does not
contemplate, or seek approval for,
custodial arrangements under which
Applicant would deposit and maintain
reserves associated with any faceamount certificates other than the
Installment Certificates and
Transferrable Certificates. Applicant
represents that both types of Certificates
will be issued and the fully-paid
Certificates will be transferable using
blockchain technology and, as a result,
both types of Certificates will be ‘‘digital
assets.’’ Applicant further represents
that, although the Certificates will be
digital assets, Applicant will not accept
or hold any assets that are digital assets
other than as necessary to destroy
Certificates that have been surrendered.
2. The Certificates are interest-bearing
debt securities. The Certificates entitle
the Certificate holder to receive, at
maturity, the face-amount of the
Certificate and interest credited thereon,
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92241
less applicable expenses or fees. To
meet its payment obligations, Applicant
is required to maintain a minimum
amount of reserves in ‘‘qualified
investments’’ as defined in Section 28(b)
of the Act (‘‘Reserves’’).
3. Applicant proposes to enter into
custodial arrangements, from time to
time, with one or more banks as defined
in Section 2(a)(5) of the Act, that
possess the qualifications required by
Section 26(a) of the Act for trustees of
unit investment trusts (‘‘Custodians’’).
Applicant seeks an order approving the
Applicant’s proposed custodial
arrangements under which the
Applicant will (i) deposit and maintain,
with one or more Custodians, the
Reserves associated with the
Certificates, pursuant to Section 28(c) of
the Act, and (ii) enter into custody
agreements (‘‘Custodial Agreements’’),
the substantive portions of which will
not vary in any material respects from
those contained in the form of
agreement attached to the application as
Attachment 1 (the ‘‘Form of
Agreement’’). Under the requested
order, Applicant would be free to
employ or terminate the Custodians
from time to time in its sole discretion.
4. Under the proposed custodial
arrangements, one or more of the
Custodians would be responsible for
maintaining the safekeeping of all of
Applicant’s assets, including the
aggregate amount that Applicant must
maintain as Reserves pursuant to
Section 28(a) of the Act. The Custodian
would (i) maintain Applicant’s Assets in
compliance with Section 17(f) of the Act
and the rules thereunder as though
Section 17(f) and the rules thereunder
were applicable to a face-amount
certificate company and (ii) maintain
Applicant’s Reserves to ensure the
Applicant meets its payment obligations
under the terms and conditions of any
outstanding Certificate. If the Applicant
were to default on any obligation under
a Certificate, the Custodian would be
authorized to cure such default by
liquidating so much of the assets held
by it as necessary to discharge
Applicant’s obligations. The Custodian
also would perform the duties and
functions typically performed by a
custodian, such as securities registration
and delivery, income collection,
periodic reporting, payment of monies,
and other safekeeping and processing
functions.
Applicant’s Legal Analysis
1. Section 28(c) provides that ‘‘[t]he
Commission shall by rule, regulation, or
order, in the public interest or for the
protection of investors, require a
registered face-amount certificate
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92242
Federal Register / Vol. 89, No. 225 / Thursday, November 21, 2024 / Notices
company to deposit and maintain, upon
such terms and conditions as the
Commission shall prescribe and as are
appropriate for the protection of
investors, with one or more institutions
having the qualifications of paragraph
(1) of Section 26(a) for a trustee of a unit
investment trust, all or any part of the
investments maintained by such
company as certificate reserve
requirements under the provisions of
subsection (b) hereof.’’
2. Applicant states that the Form of
Agreement contains numerous
provisions designed to maintain and
safeguard its assets, including
provisions governing the (i) holding,
segregation, registration, depositing, and
delivery of securities and (ii) the
payment of monies and maintenance of
bank accounts, as well as (iii) provisions
establishing procedures to cure any
defaults by the Applicant on its
obligations under the Certificates and
procedures for periodic reporting and
inspection of the assets. Applicant
further states that, although tailored for
the specific activities of a face-amount
certificate company, these provisions
are similar to those contained in
custody agreements between registered
open-end management investment
companies and their custodians.
3. Application asserts that its
discretion to employ and terminate the
Custodians is consistent with the
protection of investors and the public
interest. Applicant states that it may add
or change the Custodians for many
reasons, including, but not limited to: (i)
the availability of superior or
specialized services through other
Custodians, (ii) dissatisfaction with the
quality of a Custodian’s services, (iii) fee
increases or the availability of
comparable services from other
Custodians at more competitive rates,
(iv) changes in a Custodian’s
management, location, financial
condition, or methods of operation, (v)
regulatory developments or actions
affecting the ability or qualification of a
Custodian to serve as such, or (vi) a
determination by a Custodian to cease
offering its services.
4. Applicant also asserts that the
process by which it will select and
retain the Custodians is consistent with
the protection of investors and the
public interest. Applicant represents
that, before entering into a Custodial
Agreement, Applicant will request and
consider relevant information regarding
the Custodian, including, without
limitation, information about its ability
to provide the services required by
Applicant’s operations and the Act, its
experience in providing such or similar
services to other investment companies,
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18:02 Nov 20, 2024
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the resources it intends to make
available to Applicant in providing such
services, the fees it intends to charge
Applicant for such services, its internal
controls, its ability to protect the assets
entrusted to it, and its financial
condition.
Applicant’s Conditions
Applicant agrees that any order
granted by the Commission pursuant to
the application will be subject to the
following conditions:
1. Before entering into a Custodial
Agreement with a qualified custodian,
Applicant will request and consider
relevant information regarding the
Custodian. Applicant’s officers and/or
investment advisers, as appropriate, will
perform the above inquiry and will
present their findings to the Board (as
defined below).
2. Applicant shall only enter into a
Custodial Agreement if (1) its
substantive portions do not vary in any
material respects from those contained
in the Form of Agreement; and (2) that
Custodial Agreement is approved by its
board of directors (‘‘Board’’), including
a majority of directors who are not an
‘‘interested persons’’ as defined in
Section 2(a)(19) of the Act
(‘‘Disinterested Directors’’).
3. The continuance of a Custodial
Agreement shall be subject to annual
review and reapproval by the Board,
including a majority of the Disinterested
Directors, to determine whether the
quality of services provided by the
Custodian remains satisfactory and the
fees are reasonably competitive.
4. Each Custodial Agreement shall
contain provisions to maintain and
safeguard Applicant’s Assets, including
provisions governing the (i) holding,
segregation, depositing, and delivery of
securities, (ii) the payment of monies,
and (iii) establishing of procedures to
cure any defaults by Applicant on its
obligations under the Certificates and
procedures for periodic reporting and
inspection of the Assets.
5. Applicant shall establish and
maintain procedures to cure any
defaults by Applicant on its obligations
under the Certificates and procedures
for periodic reporting and inspection of
Applicant’s Assets.
6. Applicant shall comply with
Section 17(f) of the Act and the rules
thereunder as if it were a registered
management investment company.
7. Applicant shall obtain an amended
order from the SEC prior to entry into
a Custodial Agreement containing
substantive provisions that vary in any
material respects from those contained
in the Form of Agreement.
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8. Applicant shall comply with the
Bank Secrecy Act (31 U.S.C §§ 5311 et
seq) and the rules thereunder, including
31 CFR 1024.210, 31 CFR 1024.220 and
31 CFR 1010.230, as if it were a
registered open-end management
investment company.
9. Any advisory agreement entered
into between Applicant and an adviser
shall provide that the adviser will
provide quarterly reports to the Board
stating, as of the last day of the
preceding quarter:
(a) the aggregate value of assets on
deposit with the Custodian,
(b) the aggregate value of assets
identified by Applicant as qualifying
investments on deposit with the
Custodian, and
(c) the aggregate amount of reserves,
as governed by Section 28(a)(2) of the
Act, required to be maintained by
Applicant in respect of all outstanding
Certificates.
The first quarterly report every year
shall be made and certified by an
independent public accountant and the
others shall be verified by the adviser’s
chief compliance officer or his or her
delegate.
10. Any advisory agreement entered
into between the Applicant and an
adviser shall provide that the adviser’s
compliance program shall include
procedures for generating monthly
reports of:
(a) the aggregate value of Applicant’s
assets on deposit with the Custodian;
(b) the aggregate value of assets
identified by Applicant as qualifying
investments on deposit with the
Custodian; and
(c) the aggregate amount of reserves,
as governed by Section 28(a)(2) of the
Act, required to be maintained by
Applicant in respect of all outstanding
Certificates; and for the review of such
monthly reports by the adviser’s chief
compliance officer or his or her
delegate.
11. Any advisory agreement entered
into between Applicant and an adviser
shall provide that if, at any time, it is
determined by the adviser’s chief
compliance officer or his or her delegate
that the amount of Applicant’s qualified
investments on deposit with the
Custodian is less than the required
reserves, as governed by Section 28(a)(2)
of the Act, the adviser and/or Applicant
shall notify the SEC in writing of such
deficiency promptly upon ascertaining
such fact.
12. In the event Applicant were to
default on any obligation under a
Certificate, Custodian would be
authorized, at the instruction of the
Board or a court of competent
jurisdiction, to cure the default as
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Federal Register / Vol. 89, No. 225 / Thursday, November 21, 2024 / Notices
necessary to discharge Applicant’s
obligations. In connection with any
such default, the Applicant shall notify
the SEC in writing of such default
promptly upon ascertaining that a
default has occurred.
For the Commission, by the Division of
Investment Management, under delegated
authority.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024–27229 Filed 11–20–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101636; File No. SR–
NYSEARCA–2024–94]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Establish Fees for the
NYSE Arca Aggregated Lite Data Feed
November 15, 2024.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 4, 2024, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
lotter on DSK11XQN23PROD with NOTICES1
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to establish
fees for the NYSE Arca Aggregated Lite
data feed. The proposed rule change is
available on the Exchange’s website at
www.nyse.com, 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
self-regulatory organization 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 those statements may be examined at
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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18:02 Nov 20, 2024
Jkt 265001
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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
NYSE Arca Equities Proprietary Market
Data Fees Schedule (‘‘Fee Schedule’’)
and establish fees for the NYSE Arca
Aggregated Lite (‘‘NYSE Arca Agg Lite’’)
data feed,4 effective November 4, 2024.5
In summary, the NYSE Arca Agg Lite
is a NYSE Arca-only frequency-based
depth of book market data feed of the
NYSE Arca’s limit order book for up to
ten (10) price levels on both the bid and
offer sides of the order book for
securities traded on the Exchange and
for which the Exchange reports quotes
and trades under the Consolidated Tape
Association (‘‘CTA’’) Plan or the
Nasdaq/UTP Plan. The NYSE Arca Agg
Lite is a compilation of limit order data
that the Exchange provides to vendors
and subscribers. The NYSE Arca Agg
Lite includes partial depth of book order
data as well as security status messages.
The security status message informs
subscribers of changes in the status of a
specific security, such as trading halts,
short sale restriction, etc. In addition,
the NYSE Arca Agg Lite includes order
imbalance information prior to the
opening and closing of trading.
Background
The Exchange operates in a highly
competitive market. The Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, the
Commission highlighted the importance
of market forces in determining prices
and SRO revenues and, also, recognized
that current regulation of the market
4 The proposed rule change establishing the
NYSE Arca Agg Lite data feed was immediately
effective on February 27, 2024. See Securities
Exchange Act Release No. 99713 (March 12, 2024),
89 FR 19381 (March 18, 2024) (SR–NYSEARCA–
2024–22) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Establish
the NYSE Arca Aggregated Lite Market Data Feed).
5 The Exchange originally filed to amend the Fee
Schedule on May 13, 2024 (SR–NYSEARCA–2024–
39). On July 11, 2024, the Exchange withdrew SR–
NYSEARCA–2024–39 and replaced it with SR–
NYSEARCA–2024–60. On September 6, the
Exchange withdrew SR–NYSEARCA–2024–60 and
replaced it with SR–NYSEARCA–2024–75. On
November 4, 2024, the Exchange withdrew SR–
NYSEARCA–2024–75 and replaced it with this
filing.
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Fmt 4703
Sfmt 4703
92243
system ‘‘has been remarkably successful
in promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 6
While Regulation NMS has enhanced
competition, it has also fostered a
‘‘fragmented’’ market structure where
trading in a single stock can occur
across multiple trading centers. When
multiple trading centers compete for
order flow in the same stock, the
Commission has recognized that ‘‘such
competition can lead to the
fragmentation of order flow in that
stock.’’ 7 Indeed, cash equity trading is
currently dispersed across 16
exchanges,8 numerous alternative
trading systems,9 and broker-dealer
internalizers and wholesalers, all
competing for order flow. Based on
publicly-available information, no
single exchange currently has more than
20% market share (whether including or
excluding auction volume).10
Proposed NYSE Arca Agg Lite Data Feed
Fees
The Exchange proposes to establish
the fees listed below for the NYSE Arca
Agg Lite data feed. The Exchange
proposes to charge fees for the same
categories of market data use as its
affiliated exchanges (namely, NYSE,
NYSE American and NYSE National)
currently charge. The Exchange believes
that adopting the same fee structure as
its affiliated exchanges would reduce
administrative burdens on market data
subscribers that also currently subscribe
to market data feeds from the
Exchange’s affiliates.
1. Access Fee. For the receipt of
access to the NYSE Arca Agg Lite data
feed, the Exchange proposes to charge
$1,500 per month. This proposed
Access Fee would be charged to any
data recipient that receives the NYSE
Arca Agg Lite data feed. Data recipients
that only use display devices to view
NYSE Arca Agg Lite market data and do
6 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(File No. S7–10–04) (Final Rule) (‘‘Regulation
NMS’’).
7 See Securities Exchange Act Release No. 61358,
75 FR 3594, 3597 (January 21, 2010) (File No. S7–
02–10) (Concept Release on Equity Market
Structure).
8 See Cboe U.S Equities Market Volume
Summary, available at https://markets.cboe.com/us/
equities/market_share. See generally https://
www.sec.gov/fastanswers/divisionsmarket
regmrexchangesshtml.html.
9 See FINRA ATS Transparency Data, available at
https://otctransparency.finra.org/otctransparency/
AtsIssueData. A list of alternative trading systems
registered with the Commission is available at
https://www.sec.gov/foia/docs/atslist.htm.
10 See Cboe Global Markets, U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
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Agencies
[Federal Register Volume 89, Number 225 (Thursday, November 21, 2024)]
[Notices]
[Pages 92241-92243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27229]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 35388; File No. 812-15654]
Figure Certificate Company (``Applicant'')
November 15, 2024.
AGENCY: Securities and Exchange Commission (``Commission'' or ``SEC'').
ACTION: Notice.
-----------------------------------------------------------------------
Notice of application for an order under section 28(c) of the
Investment Company Act of 1940 (the ``Act'').
Summary of Application: Applicant seeks an order pursuant to section
28(c) of the Act approving certain proposed custodial arrangements.
Applicants: Figure Certificate Company.
Filing Dates: The application was filed on November 7, 2024 and
amended and restated on November 13, 2024.
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 on any application by emailing
the SEC's Secretary at [email protected] and serving the
Applicant with a copy of the request by email, if an email address is
listed for the Applicant below, or personally or by mail, if a physical
address is listed for the Applicant below. Hearing requests should be
received by the Commission by 5:30 p.m. on December 11, 2024 and should
be accompanied by proof of service on the Applicant, 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]. Applicant:
[email protected].
FOR FURTHER INFORMATION CONTACT: Taylor Evenson, Senior Counsel, or
Robert S. Shapiro, Assistant Director, at (202) 551-6825 (Division of
Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. For Applicant's representations, legal analysis, and
conditions, please refer to Applicant's amended and restated
application, dated November 13, 2024, which may be obtained via the
Commission's website by searching for the file number at the top of
this document, or for the Applicant using the Company name search
field, on the SEC's EDGAR system. The SEC's EDGAR system may be
searched at, https://www.sec.gov/edgar/searchedgar/legacy/companysearch.html. You may also call the SEC's Public Reference Room
at (202) 551-8090.
Applicant's Representations
1. Applicant, a Delaware corporation, intends to register under the
Act as a face-amount certificate company and operate as a registered
face-amount certificate company. Applicant currently intends to offer
two types of face-amount certificates registered under the Securities
Act of 1933, face-amount certificates of the installment type (the
``Installment Certificates'') and fully-paid certificates (the
``Transferrable Certificates'' and, together with the Installment
Certificates, the ``Certificates''). Applicant states that it does not
contemplate, or seek approval for, custodial arrangements under which
Applicant would deposit and maintain reserves associated with any face-
amount certificates other than the Installment Certificates and
Transferrable Certificates. Applicant represents that both types of
Certificates will be issued and the fully-paid Certificates will be
transferable using blockchain technology and, as a result, both types
of Certificates will be ``digital assets.'' Applicant further
represents that, although the Certificates will be digital assets,
Applicant will not accept or hold any assets that are digital assets
other than as necessary to destroy Certificates that have been
surrendered.
2. The Certificates are interest-bearing debt securities. The
Certificates entitle the Certificate holder to receive, at maturity,
the face-amount of the Certificate and interest credited thereon, less
applicable expenses or fees. To meet its payment obligations, Applicant
is required to maintain a minimum amount of reserves in ``qualified
investments'' as defined in Section 28(b) of the Act (``Reserves'').
3. Applicant proposes to enter into custodial arrangements, from
time to time, with one or more banks as defined in Section 2(a)(5) of
the Act, that possess the qualifications required by Section 26(a) of
the Act for trustees of unit investment trusts (``Custodians'').
Applicant seeks an order approving the Applicant's proposed custodial
arrangements under which the Applicant will (i) deposit and maintain,
with one or more Custodians, the Reserves associated with the
Certificates, pursuant to Section 28(c) of the Act, and (ii) enter into
custody agreements (``Custodial Agreements''), the substantive portions
of which will not vary in any material respects from those contained in
the form of agreement attached to the application as Attachment 1 (the
``Form of Agreement''). Under the requested order, Applicant would be
free to employ or terminate the Custodians from time to time in its
sole discretion.
4. Under the proposed custodial arrangements, one or more of the
Custodians would be responsible for maintaining the safekeeping of all
of Applicant's assets, including the aggregate amount that Applicant
must maintain as Reserves pursuant to Section 28(a) of the Act. The
Custodian would (i) maintain Applicant's Assets in compliance with
Section 17(f) of the Act and the rules thereunder as though Section
17(f) and the rules thereunder were applicable to a face-amount
certificate company and (ii) maintain Applicant's Reserves to ensure
the Applicant meets its payment obligations under the terms and
conditions of any outstanding Certificate. If the Applicant were to
default on any obligation under a Certificate, the Custodian would be
authorized to cure such default by liquidating so much of the assets
held by it as necessary to discharge Applicant's obligations. The
Custodian also would perform the duties and functions typically
performed by a custodian, such as securities registration and delivery,
income collection, periodic reporting, payment of monies, and other
safekeeping and processing functions.
Applicant's Legal Analysis
1. Section 28(c) provides that ``[t]he Commission shall by rule,
regulation, or order, in the public interest or for the protection of
investors, require a registered face-amount certificate
[[Page 92242]]
company to deposit and maintain, upon such terms and conditions as the
Commission shall prescribe and as are appropriate for the protection of
investors, with one or more institutions having the qualifications of
paragraph (1) of Section 26(a) for a trustee of a unit investment
trust, all or any part of the investments maintained by such company as
certificate reserve requirements under the provisions of subsection (b)
hereof.''
2. Applicant states that the Form of Agreement contains numerous
provisions designed to maintain and safeguard its assets, including
provisions governing the (i) holding, segregation, registration,
depositing, and delivery of securities and (ii) the payment of monies
and maintenance of bank accounts, as well as (iii) provisions
establishing procedures to cure any defaults by the Applicant on its
obligations under the Certificates and procedures for periodic
reporting and inspection of the assets. Applicant further states that,
although tailored for the specific activities of a face-amount
certificate company, these provisions are similar to those contained in
custody agreements between registered open-end management investment
companies and their custodians.
3. Application asserts that its discretion to employ and terminate
the Custodians is consistent with the protection of investors and the
public interest. Applicant states that it may add or change the
Custodians for many reasons, including, but not limited to: (i) the
availability of superior or specialized services through other
Custodians, (ii) dissatisfaction with the quality of a Custodian's
services, (iii) fee increases or the availability of comparable
services from other Custodians at more competitive rates, (iv) changes
in a Custodian's management, location, financial condition, or methods
of operation, (v) regulatory developments or actions affecting the
ability or qualification of a Custodian to serve as such, or (vi) a
determination by a Custodian to cease offering its services.
4. Applicant also asserts that the process by which it will select
and retain the Custodians is consistent with the protection of
investors and the public interest. Applicant represents that, before
entering into a Custodial Agreement, Applicant will request and
consider relevant information regarding the Custodian, including,
without limitation, information about its ability to provide the
services required by Applicant's operations and the Act, its experience
in providing such or similar services to other investment companies,
the resources it intends to make available to Applicant in providing
such services, the fees it intends to charge Applicant for such
services, its internal controls, its ability to protect the assets
entrusted to it, and its financial condition.
Applicant's Conditions
Applicant agrees that any order granted by the Commission pursuant
to the application will be subject to the following conditions:
1. Before entering into a Custodial Agreement with a qualified
custodian, Applicant will request and consider relevant information
regarding the Custodian. Applicant's officers and/or investment
advisers, as appropriate, will perform the above inquiry and will
present their findings to the Board (as defined below).
2. Applicant shall only enter into a Custodial Agreement if (1) its
substantive portions do not vary in any material respects from those
contained in the Form of Agreement; and (2) that Custodial Agreement is
approved by its board of directors (``Board''), including a majority of
directors who are not an ``interested persons'' as defined in Section
2(a)(19) of the Act (``Disinterested Directors'').
3. The continuance of a Custodial Agreement shall be subject to
annual review and reapproval by the Board, including a majority of the
Disinterested Directors, to determine whether the quality of services
provided by the Custodian remains satisfactory and the fees are
reasonably competitive.
4. Each Custodial Agreement shall contain provisions to maintain
and safeguard Applicant's Assets, including provisions governing the
(i) holding, segregation, depositing, and delivery of securities, (ii)
the payment of monies, and (iii) establishing of procedures to cure any
defaults by Applicant on its obligations under the Certificates and
procedures for periodic reporting and inspection of the Assets.
5. Applicant shall establish and maintain procedures to cure any
defaults by Applicant on its obligations under the Certificates and
procedures for periodic reporting and inspection of Applicant's Assets.
6. Applicant shall comply with Section 17(f) of the Act and the
rules thereunder as if it were a registered management investment
company.
7. Applicant shall obtain an amended order from the SEC prior to
entry into a Custodial Agreement containing substantive provisions that
vary in any material respects from those contained in the Form of
Agreement.
8. Applicant shall comply with the Bank Secrecy Act (31 U.S.C
Sec. Sec. 5311 et seq) and the rules thereunder, including 31 CFR
1024.210, 31 CFR 1024.220 and 31 CFR 1010.230, as if it were a
registered open-end management investment company.
9. Any advisory agreement entered into between Applicant and an
adviser shall provide that the adviser will provide quarterly reports
to the Board stating, as of the last day of the preceding quarter:
(a) the aggregate value of assets on deposit with the Custodian,
(b) the aggregate value of assets identified by Applicant as
qualifying investments on deposit with the Custodian, and
(c) the aggregate amount of reserves, as governed by Section
28(a)(2) of the Act, required to be maintained by Applicant in respect
of all outstanding Certificates.
The first quarterly report every year shall be made and certified
by an independent public accountant and the others shall be verified by
the adviser's chief compliance officer or his or her delegate.
10. Any advisory agreement entered into between the Applicant and
an adviser shall provide that the adviser's compliance program shall
include procedures for generating monthly reports of:
(a) the aggregate value of Applicant's assets on deposit with the
Custodian;
(b) the aggregate value of assets identified by Applicant as
qualifying investments on deposit with the Custodian; and
(c) the aggregate amount of reserves, as governed by Section
28(a)(2) of the Act, required to be maintained by Applicant in respect
of all outstanding Certificates; and for the review of such monthly
reports by the adviser's chief compliance officer or his or her
delegate.
11. Any advisory agreement entered into between Applicant and an
adviser shall provide that if, at any time, it is determined by the
adviser's chief compliance officer or his or her delegate that the
amount of Applicant's qualified investments on deposit with the
Custodian is less than the required reserves, as governed by Section
28(a)(2) of the Act, the adviser and/or Applicant shall notify the SEC
in writing of such deficiency promptly upon ascertaining such fact.
12. In the event Applicant were to default on any obligation under
a Certificate, Custodian would be authorized, at the instruction of the
Board or a court of competent jurisdiction, to cure the default as
[[Page 92243]]
necessary to discharge Applicant's obligations. In connection with any
such default, the Applicant shall notify the SEC in writing of such
default promptly upon ascertaining that a default has occurred.
For the Commission, by the Division of Investment Management,
under delegated authority.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-27229 Filed 11-20-24; 8:45 am]
BILLING CODE 8011-01-P