Figure Certificate Company (“Applicant”), 92241-92243 [2024-27229]

Download as PDF 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. lotter on DSK11XQN23PROD with NOTICES1 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). VerDate Sep<11>2014 18:02 Nov 20, 2024 Jkt 265001 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, PO 00000 Frm 00156 Fmt 4703 Sfmt 4703 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 E:\FR\FM\21NON1.SGM 21NON1 lotter on DSK11XQN23PROD with NOTICES1 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, VerDate Sep<11>2014 18:02 Nov 20, 2024 Jkt 265001 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. PO 00000 Frm 00157 Fmt 4703 Sfmt 4703 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 E:\FR\FM\21NON1.SGM 21NON1 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 VerDate Sep<11>2014 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. PO 00000 Frm 00158 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/. E:\FR\FM\21NON1.SGM 21NON1

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


This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.