[Federal Register Volume 76, Number 206 (Tuesday, October 25, 2011)]
[Notices]
[Pages 66096-66103]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-27531]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29840; 812-13755]


RiverPark Advisors, LLC, et al.; Notice of Application

October 19, 2011.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940 (``Act'') for an exemption from sections 
2(a)(32), 5(a)(1), 22(d) and 22(e) of the Act and rule 22c-1 under the 
Act, under sections 6(c) and 17(b) of the Act for an exemption from 
sections 17(a)(1) and (a)(2) of the Act, and under section 12(d)(1)(J) 
of the Act for an exemption from sections 12(d)(1)(A) and (B) of the 
Act.

-----------------------------------------------------------------------

Applicants:  RiverPark Advisors, LLC (``RiverPark''), RiverPark Funds 
Trust (the ``Trust'') and ALPS Distributors, Inc. (the 
``Distributor'').

Summary of Application: Applicants request an order that permits: (a) 
Series of certain actively managed open-end management investment 
companies to issue exchange-traded shares (``Shares'') redeemable in 
large aggregations only (``Creation Units''); (b) secondary market 
transactions in Shares to occur at negotiated market prices; (c) 
certain series to pay redemption proceeds, under certain circumstances, 
more than seven days from the tender of Shares for redemption; (d) 
certain affiliated persons of the series to deposit securities into, 
and receive securities from, the series in connection with the purchase 
and redemption of Creation Units; and (e) certain registered management 
investment companies and unit investment trusts outside of the same 
group of investment companies as the series to acquire Shares.

[[Page 66097]]


Filing Dates: The application was filed on February 17, 2010, and 
amended on July 29, 2010, December 22, 2010, March 1, 2011, April 26, 
2011, September 30, 2011 and October 18, 2011.

Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on November 14, 2011, and should be accompanied by proof of 
service on applicants, 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 who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants: RiverPark and the 
Trust, 156 West 56th Street, New York, NY 10019; the Distributor, c/o 
Thomas A. Carter, 1290 Broadway 1100, Denver, CO .

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 551-6817 or Janet M. Grossnickle, Assistant Director, at (202) 
551-6821 (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 via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Trust is registered as an open-end management investment 
company under the Act and is a statutory trust organized under the laws 
of Delaware. The Trust will initially create and operate four series of 
actively-managed portfolios that offer Shares: RiverPark Large Growth 
ETF, RiverPark/Wedgewood ETF, RiverPark Small Cap Growth ETF and 
RiverPark Short Term High Yield ETF (together, the ``Initial Funds''). 
The investment objectives of RiverPark Large Growth ETF, RiverPark/
Wedgewood ETF and RiverPark Small Cap Growth ETF will be to seek long-
term capital appreciation. The investment objective of RiverPark Short 
Term High Yield ETF will be to seek high current income and capital 
appreciation consistent with the preservation of capital.
    2. Applicants request that the order apply to the Initial Funds and 
any future series of the Trust and other future open-end management 
companies or series thereof that may utilize active management 
investment strategies (``Future Funds''). Any Future Fund will (a) 
Advised by RiverPark or an entity controlling, controlled by, or under 
common control with RiverPark (together with RiverPark, an 
``Advisor''), and (b) comply with the terms and conditions of the 
application.\1\ The Initial Funds and Future Funds together are the 
``Funds''. Each Fund will consist of a portfolio of securities 
(including fixed income securities and/or equity securities) and/or 
currencies (``Portfolio Instruments'').\2\ Funds may also invest in 
``Depositary Receipts''.\3\ A Fund will not invest in any Depositary 
Receipts that the Advisor deems to be illiquid or for which pricing 
information is not readily available. Each Fund will operate as an 
actively managed exchange-traded fund (``ETF''). The Future Funds might 
include one or more ETFs which invest in other open-end and/or closed-
end investment companies and/or ETFs.
---------------------------------------------------------------------------

    \1\ All entities that currently intend to rely on the order are 
named as applicants. Any other entity that relies on the order in 
the future will comply with the terms and conditions of the 
application. An Investing Fund (as defined below) may rely on the 
order only to invest in Funds and not in any other registered 
investment company. Each Fund will comply with the disclosure 
requirements adopted by the Commission in Investment Company Act 
Release No. 28584 (Jan. 13, 2009).
    \2\ Neither the Initial Funds nor any Future Fund will invest in 
options contracts, futures contracts or swap agreements.
    \3\ Depositary Receipts are typically issued by a financial 
institution, a ``depositary'', and evidence ownership in a security 
or pool of securities that have been deposited with the depositary. 
No affiliated persons of applicants will serve as the depositary 
bank for any Depositary Receipts held by a Fund.
---------------------------------------------------------------------------

    3. RiverPark, a Delaware corporation, will be the investment 
advisor to the Initial Funds. Each Advisor is or will be registered as 
an ``investment adviser'' under the Investment Advisers Act of 1940 
(the ``Advisers Act''). The Advisor may retain investment advisers as 
sub-advisers in connection with the Funds (each, a ``Subadvisor''). Any 
Subadvisor will be registered under the Advisers Act. A registered 
broker-dealer under the Securities Exchange Act of 1934 (``Exchange 
Act''), which may be an affiliate of the Advisor, will act as the 
distributor and principal underwriter of the Funds. ALPS Distributors, 
Inc. will serve as the initial Distributor.
    4. Applicants anticipate that a Creation Unit will consist of at 
least 50,000 Shares and that the price of a Share will range from $20 
to $200. All orders to purchase Creation Units must be placed with the 
Distributor by or through a party that has entered into a participant 
agreement with the Distributor and the transfer agent of the Trust 
(``Authorized Participant'') with respect to the creation and 
redemption of Creation Units. An Authorized Participant is either: (a) 
A broker or dealer registered under the Exchange Act (``Broker'') or 
other participant in the Continuous Net Settlement System of the 
National Securities Clearing Corporation, a clearing agency registered 
with the Commission and affiliated with the Depository Trust Company 
(``DTC''), or (b) a participant in the DTC (such participant, ``DTC 
Participant''). The Initial Funds and most Future Funds will generally 
be purchased in Creation Units in exchange for the ``in-kind'' deposit 
of specified instruments (``Deposit Instruments'') and will generally 
be redeemed in-kind for specified Portfolio Instruments (``Redemption 
Instruments''). In-kind purchases and in-kind redemptions will be 
accompanied by an amount of cash specified by the Advisor (``Cash 
Balancing Amount''). The Deposit Instruments and the Cash Balancing 
Amount collectively are referred to as the ``Creation Deposit.'' The 
Cash Balancing Amount is a cash payment designed to ensure that the net 
asset value of a Creation Deposit is identical to the net asset value 
of the Creation Unit it is used to purchase. Certain Future Funds may 
be purchased entirely for cash (``All-Cash Payment'') and will 
generally be redeemed in-kind.\4\ However, the Trust reserves the right 
to accept and deliver Creation Units of such Future Funds by means of 
an in-kind tender of specified Deposit Instruments) and to permit cash 
redemptions for any Fund.\5\
---------------------------------------------------------------------------

    \4\ On each Business Day (as defined below), prior to the 
opening of trading on the Stock Exchange (as defined below), the 
estimated All-Cash Payment for each Fund or a list of the required 
Deposit Instruments to be included in the Creation Deposit for each 
Fund, as applicable, the previous day's Cash Balancing Amount, and 
the estimated Cash Balancing Amount for the current day, will be 
made available. The Stock Exchange will disseminate every 15 seconds 
throughout the trading day through the facilities of the 
Consolidated Tape Association an amount representing, on a per Share 
basis, the sum of the current value of the Portfolio Instruments.
    \5\ Applicants state that in determining whether a particular 
Fund will be selling or redeeming Creation Units on a cash or in-
kind basis, the key consideration will be the benefit which would 
accrue to Fund investors. In many cases, particularly to the extent 
the Deposit Instruments are less liquid, investors may benefit by 
the use of all cash creations because the Advisor would execute 
trades rather than Exchange Market Makers (as defined below). 
Applicants believe that the Advisor may be able to obtain better 
execution for certain Portfolio Instruments due to its size, 
experience and relationships in the markets. With respect to 
redemptions, tax considerations may warrant in-kind redemptions 
which do not result in a taxable event for the Fund.

---------------------------------------------------------------------------

[[Page 66098]]

    5. An investor purchasing or redeeming a Creation Unit from a Fund 
may be charged a fee (``Transaction Fee'') to protect existing 
shareholders of the Funds from the dilutive costs associated with the 
purchase and redemption of Creation Units.\6\ All orders to purchase 
Creation Units will be placed with the Distributor and the Distributor 
will transmit all purchase orders to the relevant Fund. The Distributor 
will be responsible for delivering a prospectus (``Prospectus'') to 
those persons purchasing Creation Units and for maintaining records of 
both the orders placed with it and the confirmations of acceptance 
furnished by it.
---------------------------------------------------------------------------

    \6\ Where a Fund permits an in-kind purchaser to substitute cash 
in lieu of depositing one or more Deposit Instruments, the purchaser 
may be assessed a higher Transaction Fee to offset the cost to the 
Fund of buying those particular Deposit Instruments.
---------------------------------------------------------------------------

    6. Shares will be listed and traded at negotiated prices on a 
national securities exchange as defined in section 2(a)(26) of the Act 
(the ``Stock Exchange'') and traded in the secondary market. Applicants 
expect that exchange market makers (``Exchange Market Makers'') will be 
assigned to Shares. The price of Shares trading on the Stock Exchange 
will be based on a current bid/offer market. Transactions involving the 
purchases and sales of Shares on the Stock Exchange will be subject to 
customary brokerage commissions and charges.
    7. Applicants expect that purchasers of Creation Units will include 
arbitrageurs. Exchange Market Makers, acting in their unique role to 
provide a fair and orderly secondary market for Shares, also may 
purchase Creation Units for use in their own market making 
activities.\7\ Applicants expect that secondary market purchasers of 
Shares will include both institutional and retail investors.\8\ 
Applicants expect that arbitrage opportunities created by the ability 
to continually purchase or redeem Creation Units at their net asset 
value should ensure that the Shares will not trade at a material 
discount or premium in relation to net asset value per individual share 
(``NAV'').
---------------------------------------------------------------------------

    \7\ Applicants state that unlike other Stock Exchanges where a 
lead market maker may oversee trading in Shares, on NASDAQ, numerous 
Exchange Market Makers may buy and sell shares for their own 
account. If Shares are listed on NASDAQ, and no designated liquidity 
provider has been selected, then under NASDAQ's listing 
requirements, two or more Exchange Market Makers will be registered 
in Shares and required to make a continuous, two-sided market or 
face regulatory sanctions.
    \8\ Shares will be registered in book-entry form only. DTC or 
its nominee will be the record or registered owner of all 
outstanding Shares. Beneficial ownership of Shares will be shown on 
the records of DTC or DTC Participants.
---------------------------------------------------------------------------

    8. Shares may be redeemed only if tendered in Creation Units. 
Redemption requests must be placed by or through an Authorized 
Participant. Applicants currently contemplate that Creation Units of 
the Initial Funds will be redeemed principally in-kind (together with a 
Cash Balancing Amount).\9\ To the extent a Fund utilizes in-kind 
redemptions, Shares in Creation Units will be redeemable on any 
Business Day, which is defined to include any day that the Trust is 
open for business as required by section 22(e) of the Act, for the 
Redemption Instruments, which will be the same as the Deposit 
Instruments deposited by investors purchasing Creation Units on the 
same day, except for the limited exceptions noted below. The redeeming 
investor will also usually pay to the Fund a Transaction Fee.
---------------------------------------------------------------------------

    \9\ To the extent consistent with other investment limitations, 
the Funds may invest in mortgage- or asset-backed securities, 
including a ``to-be-announced transaction'' or ``TBA Transactions''. 
Each Fund intends to substitute a cash-in-lieu amount to replace any 
Deposit Instrument or Redemption Instrument that is a TBA 
Transaction. A TBA Transaction is a method of trading mortgage-
backed securities. In a TBA Transaction, the buyer and seller agree 
upon general trade parameters such as agency, settlement date, par 
amount and price. The actual pools delivered generally are 
determined two days prior to the settlement date. The amount of 
substituted cash in the case of TBA Transactions will be equivalent 
to the value of the TBA Transaction listed as a Deposit Instrument 
or Redemption Instrument.
---------------------------------------------------------------------------

    9. Applicants state that in accepting Deposit Instruments and 
satisfying redemptions with Redemption Instruments, the Funds must 
comply with the federal securities laws, including that the Deposit 
Instruments and Redemption Instruments are sold in transactions that 
would be exempt from registration under the Securities Act.\10\ To the 
extent in-kind purchases and redemptions are utilized, the Deposit 
Instruments and Redemption Instruments will correspond pro rata to the 
Fund portfolio, except that there may be minor differences between a 
basket of Deposit Instruments or Redemption Instruments and a true pro 
rata slice of a Fund's portfolio solely when (a) It is impossible to 
break up bonds beyond certain minimum sizes needed for transfer and 
settlement or, (b) in the case of equity securities, rounding is 
necessary to eliminate fractional shares or lots that are not tradeable 
round lots. With respect to the Funds that hold short positions, 
Deposit Instruments and Redemption Instruments will correspond pro rata 
to the long Portfolio Securities of the relevant Fund. There may be 
minor differences between a basket of Deposit Instruments or Redemption 
Instruments and a true pro rata slice of the long Portfolio Securities 
solely to the extent necessary (a) Because it is impossible to break up 
bonds beyond certain minimum sizes needed for transfer and settlement, 
or (b) because, in the case of equity securities, rounding is necessary 
to eliminate fractional shares or lots that are not tradable round 
lots.\11\ Because they cannot be transferred in-kind, short positions 
will not be included in the Deposit Securities and Redemption 
Securities for a Fund.
---------------------------------------------------------------------------

    \10\ In accepting Deposit Instruments and satisfying redemptions 
with Redemption Instruments that are restricted securities eligible 
for resale pursuant to rule 144A under the Securities Act, the Funds 
will comply with the conditions of Rule 144A.
    \11\ A tradeable round lot for an equity security will be the 
standard unit of trading in that particular type of security in its 
primary market.
---------------------------------------------------------------------------

    10. Neither the Trust nor any Fund will be marketed or otherwise 
held out as a ``mutual fund.'' Instead, each Fund will be marketed as 
an ``actively-managed exchange-traded fund.'' Any advertising material 
where features of obtaining, buying or selling Creation Units are 
described or where there is reference to redeemability will prominently 
disclose that Shares are not individually redeemable and that owners of 
Shares may acquire Shares from a Fund and tender those Shares for 
redemption to a Fund in Creation Units only.
    11. The Funds' Web site, which will be publicly available prior to 
the public offering of Shares, will include the Prospectus and 
additional quantitative information updated on a daily basis, 
including, on a per Share basis for each Fund, the prior Business Day's 
NAV and the market closing price or mid-point of the bid/ask spread at 
the time of the calculation of such NAV (``Bid/Ask Price''), and a 
calculation of the premium or discount of the market closing price or 
Bid/Ask Price against such NAV. On each Business Day, before 
commencement of trading in Shares on the Stock Exchange, the Fund will 
disclose on its Web site the identities and quantities of the Portfolio 
Instruments and other assets held by the Fund that will form the basis 
for the

[[Page 66099]]

Fund's calculation of NAV at the end of the Business Day.\12\
---------------------------------------------------------------------------

    \12\ Applicants note that under accounting procedures followed 
by the Funds, trades made on the prior Business Day (``T'') will be 
booked and reflected in NAV on the current Business Day (``T+1''). 
Accordingly, the Funds will be able to disclose at the beginning of 
the Business Day the portfolio that will form the basis for the NAV 
calculation at the end of the Business Day.
---------------------------------------------------------------------------

Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act for an 
exemption from sections 2(a)(32), 5(a)(1), 22(d) and 22(e) of the Act 
and rule 22c-1 under the Act, under sections 6(c) and 17(b) of the Act 
for an exemption from sections 17(a)(1) and 17(a)(2) of the Act, and 
under section 12(d)(1)(J) of the Act for an exemption from sections 
12(d)(1)(A) and (B) of the Act.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction, or any class of persons, 
securities or transactions, from any provisions of the Act, if and to 
the extent that such exemption is necessary or appropriate in the 
public interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act. 
Section 17(b) of the Act authorizes the Commission to exempt a proposed 
transaction from section 17(a) of the Act if evidence establishes that 
the terms of the transaction, including the consideration to be paid or 
received, are reasonable and fair and do not involve overreaching on 
the part of any person concerned, and the proposed transaction is 
consistent with the policies of the registered investment company and 
the general provisions of the Act. Section 12(d)(1)(J) 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 section 12(d)(1) if the exemption 
is consistent with the public interest and the protection of investors.

Sections 5(a)(1) and 2(a)(32) of the Act

    3. Section 5(a)(1) of the Act defines an ``open-end company'' as a 
management investment company that is offering for sale or has 
outstanding any redeemable security of which it is the issuer. Section 
2(a)(32) of the Act defines a redeemable security as any security, 
other than short-term paper, under the terms of which the holder, upon 
its presentation to the issuer, is entitled to receive approximately a 
proportionate share of the issuer's current net assets, or the cash 
equivalent. Because Shares will not be individually redeemable, 
applicants request an order that would permit the Trust to register as 
an open-end management investment company and redeem Shares in Creation 
Units only. Applicants state that investors may purchase Shares in 
Creation Units from each Fund and redeem Creation Units from each Fund. 
Applicants further state that because the market price of Creation 
Units will be disciplined by arbitrage opportunities, investors should 
be able to sell Shares in the secondary market at prices that do not 
vary substantially from their NAV.

Section 22(d) of the Act and Rule 22c-1 Under the Act

    4. Section 22(d) of the Act, among other things, prohibits a dealer 
from selling a redeemable security that is currently being offered to 
the public by or through a principal underwriter, except at a current 
public offering price described in the prospectus. Rule 22c-1 under the 
Act generally requires that a dealer selling, redeeming, or 
repurchasing a redeemable security do so only at a price based on its 
NAV. Applicants state that secondary market trading in Shares will take 
place at negotiated prices, not at a current offering price described 
in the Prospectus, and not at a price based on NAV. Thus, purchases and 
sales of Shares in the secondary market will not comply with section 
22(d) of the Act and rule 22c-1 under the Act. Applicants request an 
exemption under section 6(c) from these provisions.
    5. Applicants assert that the concerns sought to be addressed by 
section 22(d) of the Act and rule 22c-1 under the Act with respect to 
pricing are equally satisfied by the proposed method of pricing Shares. 
Applicants maintain that while there is little legislative history 
regarding section 22(d), its provisions, as well as those of rule 22c-
1, appear to have been designed to (a) Prevent dilution caused by 
certain riskless-trading schemes by principal underwriters and contract 
dealers, (b) prevent unjust discrimination or preferential treatment 
among buyers resulting from sales at different prices, and (c) assure 
an orderly distribution system of investment company shares by 
eliminating price competition from Brokers offering shares at less than 
the published sales price and repurchasing shares at more than the 
published redemption price.
    6. Applicants believe that none of these purposes will be thwarted 
by permitting Shares to trade in the secondary market at negotiated 
prices. Applicants state that (a) Secondary market trading in Shares 
does not involve the Funds as parties and cannot result in dilution of 
an investment in Shares, and (b) to the extent different prices exist 
during a given trading day, or from day to day, such variances occur as 
a result of third-party market forces, such as supply and demand. 
Therefore, applicants assert that secondary market transactions in 
Shares will not lead to discrimination or preferential treatment among 
purchasers. Finally, applicants contend that the proposed distribution 
system will be orderly because arbitrage activity should ensure that 
the difference between the market price of Shares and their NAV remains 
narrow.

Section 22(e) of the Act

    7. Section 22(e) of the Act generally prohibits a registered 
investment company from suspending the right of redemption or 
postponing the date of payment of redemption proceeds for more than 
seven days after the tender of a security for redemption. Applicants 
observe that settlement of redemptions of Creation Units of Funds 
holding non-U.S. investments (``Global Funds'') is contingent not only 
on the settlement cycle of the U.S. securities markets but also on the 
delivery cycles present in foreign markets in which those Funds invest. 
Applicants have been advised that, under certain circumstances, the 
delivery cycles for transferring Portfolio Instruments to redeeming 
investors, coupled with local market holiday schedules, will require a 
delivery process of up to 14 calendar days. Applicants therefore 
request relief from section 22(e) in order to provide payment or 
satisfaction of redemptions within the maximum number of calendar days 
required for such payment or satisfaction in the principal local 
markets where transactions in the Portfolio Instruments of each Global 
Fund customarily clear and settle, but in all cases no later than 14 
calendar days following the tender of a Creation Unit. With respect to 
Future Funds that are Global Funds, applicants seek the same relief 
from section 22(e) only to the extent that circumstances exist similar 
to those described in the application. Except as disclosed in the SAI 
for a Fund, deliveries of redemption proceeds for Global Funds are 
expected to be made within seven days.\13\
---------------------------------------------------------------------------

    \13\ Rule 15c6-1 under the Exchange Act requires that most 
securities transactions be settled within three business days of the 
trade date. Applicants acknowledge that no relief obtained from the 
requirements of section 22(e) will affect any obligations that they 
have under rule 15c6-1.
---------------------------------------------------------------------------

    8. Applicants submit that Congress adopted section 22(e) to prevent 
unreasonable, undisclosed or unforeseen delays in the actual payment

[[Page 66100]]

of redemption proceeds. Applicants state that allowing redemption 
payments for Creation Units of a Fund to be made within a maximum of 14 
calendar days would not be inconsistent with the spirit and intent of 
section 22(e). Applicants state the SAI will disclose those local 
holidays (over the period of at least one year following the date of 
the SAI), if any, that are expected to prevent the delivery of 
redemption proceeds in seven calendar days and the maximum number of 
days needed to deliver the proceeds for each affected Global Fund.
    9. Applicants are not seeking relief from section 22(e) with 
respect to Global Funds that do not effect creations or redemptions in-
kind.

Section 12(d)(1) of the Act

    10. Section 12(d)(1)(A) of the Act prohibits a registered 
investment company from acquiring shares of an investment company if 
the securities represent more than 3% of the total outstanding voting 
stock of the acquired company, more than 5% of the total assets of the 
acquiring company, or, together with the securities of any other 
investment companies, more than 10% of the total assets of the 
acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter, or 
any other broker or dealer from selling its shares to another 
investment company if the sale will cause the acquiring company to own 
more than 3% of the acquired company's voting stock, or if the sale 
will cause more than 10% of the acquired company's voting stock to be 
owned by investment companies generally.
    11. Applicants request relief to permit Investing Funds (as defined 
below) to acquire Shares in excess of the limits in section 12(d)(1)(A) 
of the Act and to permit the Funds, their principal underwriters and 
any Brokers to sell Shares to Investing Funds in excess of the limits 
in section 12(d)(1)(B) of the Act. Applicants request that these 
exemptions apply to: (a) Any Fund that is currently or subsequently 
part of the same ``group of investment companies'' as the Initial Funds 
within the meaning of section 12(d)(1)(G)(ii) of the Act as well as any 
principal underwriter for the Funds and any Brokers selling Shares of a 
Fund to an Investing Fund; and (b) each management investment company 
or unit investment trust registered under the Act that is not part of 
the same ``group of investment companies'' as the Funds and that enters 
into a FOF Participation Agreement (as defined below) with a Fund (such 
management investment companies are referred to herein as ``Investing 
Management Companies,'' such unit investment trusts are referred to 
herein as ``Investing Trusts,'' and Investing Management Companies and 
Investing Trusts together are referred to herein as ``Investing 
Funds'').\14\ Investing Funds do not include the Funds. Each Investing 
Trust will have a sponsor (``Sponsor'') and each Investing Management 
Company will have an investment adviser within the meaning of section 
2(a)(20)(A) of the Act (``Investing Fund Advisor'') that does not 
control, is not controlled by or under common control with the Advisor. 
Each Investing Management Company may also have one or more investment 
advisers within the meaning of section 2(a)(20)(B) of the Act (each, an 
``Investing Fund Sub-Advisor''). Each Investing Fund Advisor and any 
Investing Fund Sub-Advisor will be registered as an investment adviser 
under the Advisers Act.
---------------------------------------------------------------------------

    \14\ Applicants anticipate that there may be Investing Funds 
that are not part of the same group of investment companies as the 
Funds but may be subadvised by an Advisor.
---------------------------------------------------------------------------

    12. Applicants submit that the proposed conditions to the requested 
relief are designed to address the concerns underlying the limits in 
section 12(d)(1), which include concerns about undue influence, 
excessive layering of fees and overly complex structures.
    13. Applicants propose a condition to prohibit an Investing Fund or 
Investing Fund Affiliate \15\ from causing an investment by an 
Investing Fund in a Fund to influence the terms of services or 
transactions between an Investing Fund or an Investing Fund Affiliate 
and the Fund or Fund Affiliate. Applicants propose a condition to limit 
the ability of the Investing Fund Advisor, or Sponsor, any person 
controlling, controlled by or under common control with such Advisor or 
Sponsor, and any investment company or issuer that would be an 
investment company but for sections 3(c)(1) or 3(c)(7) of the Act that 
is advised or sponsored by the Investing Fund Advisor, the Sponsor, or 
any person controlling, controlled by, or under common control with 
such Advisor or Sponsor (``Investing Fund's Advisory Group'') from 
(individually or in the aggregate) controlling a Fund within the 
meaning of section 2(a)(9) of the Act. The same prohibition would apply 
to any Investing Fund Sub-Advisor, any person controlling, controlled 
by, or under common control with the Investing Fund Sub-Advisor, and 
any investment company or issuer that would be an investment company 
but for sections 3(c)(1) or 3(c)(7) of the Act (or portion of such 
investment company or issuer) advised or sponsored by the Investing 
Fund Sub-Advisor or any person controlling, controlled by or under 
common control with the Investing Fund Sub-Advisor (``Investing Fund's 
Sub-Advisory Group'').
---------------------------------------------------------------------------

    \15\ An ``Investing Fund Affiliate'' is defined as the Investing 
Fund Advisor, Investing Fund Sub-Advisor, Sponsor, promoter and 
principal underwriter of an Investing Fund, and any person 
controlling, controlled by or under common control with any of these 
entities. A ``Fund Affiliate'' is defined as an investment adviser, 
promoter or principal underwriter of a Fund and any person 
controlling, controlled by or under common control with any of these 
entities.
---------------------------------------------------------------------------

    14. Applicants propose other conditions to limit the potential for 
an Investing Fund and certain affiliates of an Investing Fund 
(including Underwriting Affiliates) to exercise undue influence over a 
Fund and certain of its affiliates, including that no Investing Fund or 
Investing Fund Affiliate (except to the extent it is acting in its 
capacity as an investment adviser to a Fund) will cause a Fund to 
purchase a security in an offering of securities during the existence 
of an underwriting or selling syndicate of which a principal 
underwriter is an Underwriting Affiliate (``Affiliated Underwriting''). 
An ``Underwriting Affiliate'' is a principal underwriter in any 
underwriting or selling syndicate that is an officer, director, member 
of an advisory board, Investing Fund Advisor, Investing Fund Sub-
Advisor, employee or Sponsor of the Investing Fund, or a person of 
which any such officer, director, member of an advisory board, 
Investing Fund Advisor or Investing Fund Sub-Advisor, employee or 
Sponsor is an affiliated person. An Underwriting Affiliate does not 
include any person whose relationship to the Fund is covered by section 
10(f) of the Act.
    15. Applicants propose several conditions to address the concerns 
regarding layering of fees and expenses. Applicants note that the board 
of directors or trustees of any Investing Management Company, including 
a majority of the directors or trustees who are not ``interested 
persons'' within the meaning of section 2(a)(19) of the Act 
(``disinterested directors or trustees''), will be required to find 
that the advisory fees charged under the contract are based on services 
provided that will be in addition to, rather than duplicative of, 
services provided under the advisory contract of any Fund in which the 
Investing Management Company may invest. In addition, an Investing Fund 
Advisor, trustee of an Investing Trust

[[Page 66101]]

(``Trustee'') or Sponsor, as applicable, will waive fees otherwise 
payable to it by the Investing Fund in an amount at least equal to any 
compensation (including fees received pursuant to any plan adopted by a 
Fund under rule 12b-1 under the Act) received from a Fund by the 
Investing Fund Advisor, Trustee or Sponsor or an affiliated person of 
the Investing Fund Advisor, Trustee or Sponsor, other than any advisory 
fees paid to the Investing Fund Advisor, Trustee or Sponsor or its 
affiliated person by a Fund, in connection with the investment by the 
Investing Fund in the Fund. Applicants also propose a condition to 
prevent any sales charges or service fees on shares of an Investing 
Fund from exceeding the limits applicable to a fund of funds set forth 
in NASD Conduct Rule 2830.\16\
---------------------------------------------------------------------------

    \16\ Any references to NASD Conduct Rule 2830 include any 
successor or replacement rule to NASD Conduct Rule that may be 
adopted by FINRA.
---------------------------------------------------------------------------

    16. Applicants submit that the proposed arrangement will not create 
an overly complex fund structure. Applicants note that a Fund will be 
prohibited from acquiring securities of any investment company or 
company relying on sections 3(c)(1) or 3(c)(7) of the Act in excess of 
the limits contained in section 12(d)(1)(A) of the Act, except to the 
extent permitted by exemptive relief from the Commission permitting the 
Fund to purchase shares of other investment companies for short-term 
cash management purposes.
    17. To ensure that the Investing Funds understand and comply with 
the terms and conditions of the requested order, any Investing Fund 
that intends to invest in a Fund in reliance on the requested order 
will be required to enter into a participation agreement (``FOF 
Participation Agreement'') with the Fund. The FOF Participation 
Agreement will include an acknowledgment from the Investing Fund that 
it may rely on the order only to invest in the Funds and not in any 
other investment company.

Sections 17(a)(1) and (2) of the Act

    18. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such a person (``second tier affiliate''), from selling any security to 
or purchasing any security from the company. Section 2(a)(3) of the Act 
defines ``affiliated person'' to include any person directly or 
indirectly owning, controlling, or holding with power to vote, 5% or 
more of the outstanding voting securities of the other person and any 
person directly or indirectly controlling, controlled by, or under 
common control with, the other person. Section 2(a)(9) of the Act 
defines ``control'' as the power to exercise a controlling influence 
over the management or policies of a company and provides that a 
control relationship will be presumed where one person owns more than 
25% of another person's voting securities. Each Fund may be deemed to 
be controlled by an Advisor and hence affiliated persons of each other. 
In addition, the Funds may be deemed to be under common control with 
any other registered investment company (or series thereof) advised by 
an Advisor (an ``Affiliated Fund'').
    19. Applicants request an exemption under sections 6(c) and 17(b) 
of the Act from sections 17(a)(1) and 17(a)(2) of the Act to permit in-
kind purchases and redemptions of Creation Units by persons that are 
affiliated persons or second tier affiliates of the Funds solely by 
virtue of one or more of the following: (a) Holding 5% or more, or in 
excess of 25% of the outstanding Shares of one or more Funds; (b) 
having an affiliation with a person with an ownership interest 
described in (a); or (c) holding 5% or more, or more than 25% of the 
Shares of one or more Affiliated Funds.\17\ Applicants also request an 
exemption in order to permit a Fund to sell its Shares to and redeem 
its Shares from, and engage in the in-kind transactions that would 
accompany such sales and redemptions with, certain Investing Funds of 
which the Funds are affiliated persons or a second-tier affiliates.\18\
---------------------------------------------------------------------------

    \17\ Applicants are not seeking relief from section 17(a) for, 
and the requested relief will not apply to, transactions where a 
Fund could be deemed an affiliated person, or an affiliated person 
of an affiliated person, of an Investing Fund because an investment 
adviser to the Funds is also an investment adviser to an Investing 
Fund.
    \18\ Applicants expect most Investing Funds will purchase Shares 
in the secondary market and will not purchase Creation Units 
directly from a Fund. To the extent that purchases and sales of 
Shares occur in the secondary market and not through principal 
transactions directly between an Investing Fund and a Fund, relief 
from section 17(a) would not be necessary. However, the requested 
relief would apply to direct sales of Shares in Creation Units by a 
Fund to an Investing Fund and redemptions of those Shares. The 
requested relief is also intended to cover the in-kind transactions 
that may accompany such sales and redemptions.
---------------------------------------------------------------------------

    20. Applicants assert that no useful purpose would be served by 
prohibiting such affiliated persons from making in-kind purchases or 
in-kind redemptions of Shares of a Fund in Creation Units. Absent the 
unusual circumstances discussed in the application, the Deposit 
Instruments and Redemption Instruments available for a Fund will be the 
same for all purchases and redeemers, respectively, and will correspond 
pro rata to the Fund's portfolio instruments. Both the deposit 
procedures for in-kind purchases of Creation Units and the redemption 
procedures for in-kind redemptions will be effected in exactly the same 
manner for all purchases and redemptions. Deposit Instruments and 
Redemption Instruments will be valued in the same manner as those 
Portfolio Instruments currently held by the relevant Funds. Therefore, 
applicants state that the in-kind purchases and redemptions create no 
opportunity for affiliated persons or the Applicants to effect a 
transaction detrimental to other holders of Shares of that Fund. 
Applicants do not believe that in-kind purchases and redemptions will 
result in abusive self-dealing or overreaching of the Fund.
    21. Applicants also submit that the sale of Shares to and 
redemption of Shares from an Investing Fund meets the standards for 
relief under sections 17(b) and 6(c) of the Act. Applicants note that 
any consideration paid for the purchase or redemption of Shares 
directly from a Fund will be based on the NAV of the Fund in accordance 
with policies and procedures set forth in the Fund's registration 
statement.\19\ Absent the unusual circumstances discussed in the 
application, the Deposit Instruments and Redemption Instruments 
available for a Fund will be the same for all purchases and redeemers, 
respectively, and will correspond pro rata to the Fund's portfolio 
instruments. Applicants also state that the proposed transactions are 
consistent with the general purposes of the Act and appropriate in the 
public interest.
---------------------------------------------------------------------------

    \19\ Applicants acknowledge that the receipt of compensation by 
(a) An affiliated person of an Investing Fund, or an affiliated 
person of such person, for the purchase by the Investing Fund of 
Shares of the Fund or (b) an affiliated person of a Fund, or an 
affiliated person of such person, for the sale by the Fund of its 
Shares to an Investing Fund, may be prohibited by section 17(e)(1) 
of the Act. The FOF Participation Agreement also will include this 
acknowledgment.
---------------------------------------------------------------------------

Applicants' Conditions:

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

A. Actively-Managed Exchange-Traded Fund Relief

    1. As long as a Fund operates in reliance on the requested order, 
the Shares of the Fund will be listed on a Stock Exchange.
    2. Neither the Trust nor any Fund will be advertised or marketed as 
an open-end investment company or a mutual fund. Any advertising 
material that describes the purchase or sale of

[[Page 66102]]

Creation Units or refers to redeemability will prominently disclose 
that the Shares are not individually redeemable and that owners of the 
Shares may acquire those Shares from the Fund and tender those Shares 
for redemption to the Fund in Creation Units only.
    3. The Web site for the Funds, which is and will be publicly 
accessible at no charge, will contain, on a per Share basis, for each 
Fund the prior Business Day's NAV and the market closing price or Bid/
Ask Price, and a calculation of the premium or discount of the market 
closing price or Bid/Ask Price against such NAV.
    4. On each Business Day, before commencement of trading in Shares 
on the Stock Exchange, the Fund will disclose on its Web site the 
identities and quantities of the Portfolio Instruments and other assets 
held by the Fund that will form the basis for the Fund's calculation of 
NAV at the end of the Business Day.
    5. The Advisor or any Subadvisor, directly or indirectly, will not 
cause any Authorized Participant (or any investor on whose behalf an 
Authorized Participant may transact with the Fund) to acquire any 
Deposit Instrument for the Fund through a transaction in which the Fund 
could not engage directly.
    6. The requested relief to permit ETF operations will expire on the 
effective date of any Commission rule under the Act that provides 
relief permitting the operation of actively-managed exchange-traded 
funds.

B. Section 12(d)(1) Relief

    1. The members of the Investing Fund's Advisory Group will not 
control (individually or in the aggregate) a Fund within the meaning of 
section 2(a)(9) of the Act. The members of the Investing Fund's Sub-
Advisory Group will not control (individually or in the aggregate) a 
Fund within the meaning of section 2(a)(9) of the Act. If, as a result 
of a decrease in the outstanding voting securities of a Fund, the 
Investing Fund's Advisory Group or the Investing Fund's Sub-Advisory 
Group, each in the aggregate, becomes a holder of more than 25 percent 
of the outstanding voting securities of a Fund, it will vote its Shares 
of the Fund in the same proportion as the vote of all other holders of 
the Fund's Shares. This condition does not apply to the Investing 
Fund's Sub-Advisory Group with respect to a Fund for which the 
Investing Fund Sub-Advisor or a person controlling, controlled by or 
under common control with the Investing Fund Sub-Advisor acts as the 
investment adviser within the meaning of section 2(a)(20)(A) of the 
Act.
    2. No Investing Fund or Investing Fund Affiliate will cause any 
existing or potential investment by the Investing Fund in a Fund to 
influence the terms of any services or transactions between the 
Investing Fund or an Investing Fund Affiliate and the Fund or a Fund 
Affiliate.
    3. The board of directors or trustees of an Investing Management 
Company, including a majority of the disinterested directors or 
trustees, will adopt procedures reasonably designed to assure that the 
Investing Fund Advisor and any Investing Fund Sub-Advisor are 
conducting the investment program of the Investing Management Company 
without taking into account any consideration received by the Investing 
Management Company or an Investing Fund Affiliate from a Fund or a Fund 
Affiliate in connection with any services or transactions.
    4. Once an investment by an Investing Fund in Shares of a Fund 
exceeds the limit in section 12(d)(1)(A)(i) of the Act, the Board of a 
Fund, including a majority of the disinterested Board members, will 
determine that any consideration paid by the Fund to the Investing Fund 
or an Investing Fund Affiliate in connection with any services or 
transactions: (a) Is fair and reasonable in relation to the nature and 
quality of the services and benefits received by the Fund; (b) is 
within the range of consideration that the Fund would be required to 
pay to another unaffiliated entity in connection with the same services 
or transactions; and (c) does not involve overreaching on the part of 
any person concerned. This condition does not apply with respect to any 
services or transactions between a Fund and its investment adviser(s), 
or any person controlling, controlled by or under common control with 
such investment adviser(s).
    5. The Investing Fund Advisor, or Trustee or Sponsor, as 
applicable, will waive fees otherwise payable to it by the Investing 
Fund in an amount at least equal to any compensation (including fees 
received pursuant to any plan adopted by a Fund under rule 12b-1 under 
the Act) received from a Fund by the Investing Fund Advisor, or Trustee 
or Sponsor, or an affiliated person of the Investing Fund Advisor, or 
Trustee or Sponsor, other than any advisory fees paid to the Investing 
Fund Advisor, or Trustee, or Sponsor, or its affiliated person by the 
Fund, in connection with the investment by the Investing Fund in the 
Fund. Any Investing Fund Sub-Advisor will waive fees otherwise payable 
to the Investing Fund Sub-Advisor, directly or indirectly, by the 
Investing Management Company in an amount at least equal to any 
compensation received from a Fund by the Investing Fund Sub-Advisor, or 
an affiliated person of the Investing Fund Sub-Advisor, other than any 
advisory fees paid to the Investing Fund Sub-Advisor or its affiliated 
person by the Fund, in connection with the investment by the Investing 
Management Company in the Fund made at the direction of the Investing 
Fund Sub-Advisor. In the event that the Investing Fund Sub-Advisor 
waives fees, the benefit of the waiver will be passed through to the 
Investing Management Company.
    6. No Investing Fund or Investing Fund Affiliate (except to the 
extent it is acting in its capacity as an investment adviser to a Fund) 
will cause a Fund to purchase a security in an Affiliated Underwriting.
    7. The Board of the Fund, including a majority of the disinterested 
Board members, will adopt procedures reasonably designed to monitor any 
purchases of securities by the Fund in an Affiliated Underwriting, once 
an investment by an Investing Fund in the securities of the Fund 
exceeds the limit of section 12(d)(1)(A)(i) of the Act, including any 
purchases made directly from an Underwriting Affiliate. The Board will 
review these purchases periodically, but no less frequently than 
annually, to determine whether the purchases were influenced by the 
investment by the Investing Fund in the Fund. The Board will consider, 
among other things: (a) Whether the purchases were consistent with the 
investment objectives and policies of the Fund; (b) how the performance 
of securities purchased in an Affiliated Underwriting compares to the 
performance of comparable securities purchased during a comparable 
period of time in underwritings other than Affiliated Underwritings or 
to a benchmark such as a comparable market index; and (c) whether the 
amount of securities purchased by the Fund in Affiliated Underwritings 
and the amount purchased directly from an Underwriting Affiliate have 
changed significantly from prior years. The Board will take any 
appropriate actions based on its review, including, if appropriate, the 
institution of procedures designed to assure that purchases of 
securities in Affiliated Underwritings are in the best interest of 
shareholders.
    8. Each Fund will maintain and preserve permanently in an easily 
accessible place a written copy of the procedures described in the 
preceding condition, and any modifications to such procedures, and will 
maintain and

[[Page 66103]]

preserve for a period of not less than six years from the end of the 
fiscal year in which any purchase in an Affiliated Underwriting 
occurred, the first two years in an easily accessible place, a written 
record of each purchase of securities in Affiliated Underwritings once 
an investment by an Investing Fund in the securities of the Fund 
exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth 
from whom the securities were acquired, the identity of the 
underwriting syndicate's members, the terms of the purchase, and the 
information or materials upon which the Board's determinations were 
made.
    9. Before investing in a Fund in excess of the limits in section 
12(d)(1)(A), an Investing Fund will execute a FOF Participation 
Agreement with the Fund stating that their respective boards of 
directors or trustees and their investment advisers, or Trustee and 
Sponsor, as applicable, understand the terms and conditions of the 
order, and agree to fulfill their responsibilities under the order. At 
the time of its investment in shares of a Fund in excess of the limit 
in section 12(d)(1)(A)(i), an Investing Fund will notify the Fund of 
the investment. At such time, the Investing Fund will also transmit to 
the Fund a list of the names of each Investing Fund Affiliate and 
Underwriting Affiliate. The Investing Fund will notify the Fund of any 
changes to the list as soon as reasonably practicable after a change 
occurs. The Fund and the Investing Fund will maintain and preserve a 
copy of the order, the FOF Participation Agreement, and the list with 
any updated information for the duration of the investment and for a 
period of not less than six years thereafter, the first two years in an 
easily accessible place.
    10. Before approving any advisory contract under section 15 of the 
Act, the board of directors or trustees of each Investing Management 
Company, including a majority of the disinterested directors or 
trustees, will find that the advisory fees charged under such contract 
are based on services provided that will be in addition to, rather than 
duplicative of, the services provided under the advisory contract(s) of 
any Fund in which the Investing Management Company may invest. These 
findings and their basis will be recorded fully in the minute books of 
the appropriate Investing Management Company.
    11. Any sales charges and/or service fees charged with respect to 
shares of an Investing Fund will not exceed the limits applicable to a 
fund of funds as set forth in NASD Conduct Rule 2830.
    12. No Fund relying on this section 12(d)(1) relief will acquire 
securities of any investment company or company relying on section 
3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in 
section 12(d)(1)(A) of the Act, except to the extent permitted by 
exemptive relief from the Commission permitting the Fund to purchase 
shares of other investment companies for short-term cash management 
purposes.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-27531 Filed 10-24-11; 8:45 am]
BILLING CODE 8011-01-P