[Federal Register Volume 60, Number 117 (Monday, June 19, 1995)]
[Notices]
[Pages 32038-32040]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14849]



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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-21129; 812-9562]


First Trust Special Situations Trust, Series 69

June 12, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of Application for Exemption under the Investment 
Company Act of 1940 (the ``Act'').

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APPLICANT: First Trust Special Situations Trust, Series 69.
RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act 
that would exempt applicant from section 12(d)(3) of the Act.

SUMMARY OF APPLICATION: Applicant requests an order on behalf of itself 
and certain subsequent series (collectively, the ``Series'') to permit 
each Series to invest up to twenty percent of its total assets in 
securities of issuers that derived more than fifteen percent of their 
gross revenues in their most recent fiscal year from securities related 
activities.

FILING DATE: The application was filed on March 31, 1995 and amended on 
June 8, 1995.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicant with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on July 7, 1995 and 
should be accompanied by proof of service on the applicant, in the form 
of an affidavit or, for lawyers, a certificate of service. Hearing 
requests should state the nature of the writer's interest, the reason 
for the request, and the issues contested. Persons may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, D.C. 
20549. [[Page 32039]] Applicant, c/o Nike Securities, L.P., 1001 
Warrenville Road, Lisle, Illinois 60532.

FOR FURTHER INFORMATION CONTACT:
Sarah A. Buescher, Staff Attorney, at (202) 942-0573, or Robert A. 
Robertson, Branch Chief, at (202) 942-0564 (Division of Investment 
Management, Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the SEC's Public Reference Branch.

Applicant's Representations

    1. Nike Securities, L.P. is applicant's depositor (the 
``Sponsor''). Each Series will invest approximately 20%, but in no 
event more than 20.5%,\1\ of the value of its total assets in each of 
the five lowest dollar price per share stocks of the ten common stocks 
in the Dow Jones Industrial Average (``DJIA'') having the highest 
dividend yields no more than two business days prior to the States' 
initial date of deposit, and hold those stocks for approximately one 
year.

    \1\ The Sponsor will attempt to purchase equal values of each of 
the five common stocks in a Series' portfolio. However, it is more 
efficient if securities are purchased in 100 share lots and 50 share 
lots. As a result, applicant may choose to purchase securities of a 
securities related issuer which represent over 20%, but in no event 
more than 20.5% percent, of a Series' assets on the initial date of 
deposit to the extent necessary to enable the Sponsor to meet its 
purchase requirements and to obtain the best price for the 
securities.
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    2. The DJIA comprises 30 common stocks chosen by the editors of The 
Wall Street Journal. The DJIA is the property of Dow Jones & Company, 
Inc., which is not affiliated with any Series or the Sponsor and does 
not participate in any way in the creation of any Series or the 
selection of its stocks.
    3. The securities deposited in each Series will be chosen solely 
according to the formula described above, and will not necessarily 
reflect the research opinions or buy or sell recommendations of the 
Sponsor. The Sponsor is authorized to determine the date of deposit, to 
purchase securities for deposit in the Series, and to supervise each 
Series' portfolio. The Sponsor will have no discretion as to which 
securities are purchased. Securities deposited in a Series may include 
securities of issuers that derived more than fifteen percent of their 
gross revenues in their most recent fiscal year from securities related 
activities.
    4. During the 90-day period following the initial date of deposit, 
the Sponsor may deposit additional securities while maintaining to the 
extent practicable the original proportionate relationship among the 
number of shares of each stock in the portfolio. Deposits made after 
this 90-day period must replicate exactly (subject to certain limited 
exceptions) the proportionate relationship among the face amounts of 
the securities comprising the portfolio at the end of the initial 90-
day period, whether or not a stock continues to be among the five 
lowest price per share stocks of the ten highest dividend yielding 
stocks.
    5. The Series' portfolios will not be actively managed. Sales of 
portfolio securities will be made in connection with redemptions of 
units issued by a Series and at termination of the Series. The Sponsor 
has no discretion as to when securities will be sold except that it is 
authorized to sell securities in extremely limited circumstances, such 
as a public tender, merger or acquisition affecting the security, a 
default in the payment of a declared dividend or other outstanding 
obligation, any action or proceeding restraining the payment of 
dividends, any legal question or impediment affecting the security, a 
breach by the issuer of a covenant which would affect the payment of a 
dividend, circumstances which would impair the investment character of 
the security, a decrease in the price of the security or other credit 
factors so that in the opinion of the Sponsor, the retention of the 
securities would be detrimental to the Series. The adverse financial 
condition of an issuer will not necessarily require the sale of its 
securities from a Series' portfolio.

Applicant's Legal Analysis

    1. Section 12(d)(3) of the Act, with limited exceptions, prohibits 
an investment company from acquiring any security issued by any person 
who is a broker, dealer, underwriter, or investment adviser. Rule 12d3-
1 under the Act exempts the purchase of securities of an issuer that 
derived more than fifteen percent of its gross revenues in its most 
recent fiscal year from securities related activities, provided that, 
among other things, immediately after such acquisition, the acquiring 
company has invested not more than five percent of the value of its 
total assets in securities of the issuer. Notwithstanding the above, 
rule 12d3-1 prohibits any registered investment company from acquiring 
any security issued by the company's investment adviser, promoter, or 
principal underwriter or any affiliated person of such investment 
adviser, promoter, or principal underwriter that is a securities 
related business, with certain limited exceptions.
    2. Applicant requests an exemption under section 6(c) from section 
12(d)(3) to permit a Series to invest up to approximately 20%, but in 
no event more than 20.5%, of the value of its total assets in 
securities of an issuer that derives more than fifteen percent of its 
gross revenues from securities related activities.
    3. Section 12(d)(3) was intended to prevent investment companies 
from exposing their assets to the entrepreneurial risks of securities 
related businesses, to prevent potential conflicts of interest, and to 
eliminate certain reciprocal practices between investment companies and 
securities related businesses. One potential conflict could occur if an 
investment company purchased securities or other interests in a broker-
dealer to reward that broker-dealer for selling fund shares, rather 
than solely on investment merit. Applicant believes that this concern 
does not arise in connection with its application because neither 
applicant nor the Sponsor has discretion in choosing the portfolio 
securities or amount purchased. The security must first be included in 
the DJIA, which is unaffiliated with the Sponsor and applicant, and 
must also qualify as one of the five lowest dollar price per share 
stocks of the ten highest dividend yielding stocks.
    4. Applicant also believes that the effect of a Series' purchase on 
the stock of parents of broker-dealers would be de minimis. Applicant 
asserts that the common stocks of securities related issuers 
represented in the DJIA are widely held, have active markets, and that 
potential purchases by any Series would represent an insignificant 
amount of the outstanding common stock and the trading volume of any of 
these issues. Accordingly, applicant believes that it is highly 
unlikely that purchases of these securities by a Series would have any 
significant impact on the securities' market value.
    5. Another potential conflict of interest could occur if an 
investment company directed the brokerage to a broker-dealer in which 
the company has invested to enhance the broker-dealer's profitability 
or to assist it during financial difficulty, even though that broker-
dealer may not offer the best price and execution. To preclude this 
type of conflict, applicant and each Series agree, as a condition of 
this application, that no company held in the portfolio of a Series nor 
any affiliate thereof will act as a broker for any Series in the 
purchase or sale of any security for its portfolio. In light of the 
above, applicant believes that its [[Page 32040]] proposal meets the 
section 6(c) standards.

Condition

    Applicant agrees that the requested exemptive order may be 
conditioned upon no company held in the Series' portfolio, nor any 
affiliate thereof, acting as broker for any Series in the purchase or 
sale of any security for the Series' portfolio.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-14849 Filed 6-16-95; 8:45 am]
BILLING CODE 8010-01-M