[Federal Register Volume 77, Number 21 (Wednesday, February 1, 2012)]
[Notices]
[Pages 5065-5067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-2158]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29937; 812-13965]


Preservation Trust Advisors, LLC and Northern Lights Fund Trust; 
Notice of Application

January 26, 2012.
AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940, as amended (the ``Act''), for an 
exemption from section 15(a) of the Act and rule 18f-2 under the Act.

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SUMMARY OF APPLICATION:  Applicants request an order that would permit 
them to enter into and materially amend subadvisory agreements without 
shareholder approval.

APPLICANTS: Preservation Trust Advisors, LLC (``PTA'' or the 
``Adviser'') and Northern Lights Fund Trust (the ``Trust'').

FILING DATES: The application was filed on September 29, 2011, and 
amended on January 19, 2012 and January 26, 2012.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
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 February 21, 2012, and should be accompanied by proof of 
service on the 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants: 
PTA, One Embarcadero Center, Suite 1140, San Francisco, CA 94111; 
Trust: 4020 South 147th Street Omaha, NE 68137.

FOR FURTHER INFORMATION CONTACT: Mark N. Zaruba, Attorney-Advisor, at 
(202) 551-6878, or Dalia Osman Blass, 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, a Delaware statutory trust, is registered under the 
Act as an open-end management investment company and as of January 18, 
2012 was comprised of 133 individual registered series, including the 
PTA Comprehensive Alternatives Fund (the ``PTA Fund''), and 2 
additional series that are in registration. The PTA Fund does not 
currently employ unaffiliated investment subadvisers (each, a 
``Subadviser''), but anticipates doing so in the future.\1\ PTA, a 
Delaware limited

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liability company, is, and each other Adviser will be, registered as an 
investment adviser under the Investment Advisers Act of 1940, as 
amended (the ``Advisers Act''). PTA serves as the investment adviser of 
the PTA Fund, and an Adviser will serve as investment adviser to each 
future Fund, pursuant to investment advisory agreements. The PTA Fund 
has entered into an investment advisory agreement with PTA (the 
``Advisory Agreement''),\2\ approved by the Trust's board of trustees 
(the ``Board''),\3\ including a majority of the trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act, of 
the Trust or the Adviser (the ``Independent Trustees''), and by 
shareholders representing a majority of the PTA Fund's shares.
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    \1\ Applicants also request relief with respect to any existing 
or future series of the Trust and any other existing or future 
registered open-end management investment company or series thereof 
that: (a) Is advised by the Adviser or any entity controlling, 
controlled by, or under common control with the Adviser or its 
successors (included within the term ``Adviser''); (b) uses the 
manager of managers structure (the ``Manager of Managers 
Structure'') described in the application; and (c) complies with the 
terms and conditions of the application (together with the PTA Fund, 
the ``Funds'' and each, individually, a ``Fund''). For the purposes 
of the requested order, ``successor'' is limited to those one or 
more entities that would result from a reorganization into another 
jurisdiction or a change in the type of business organization. All 
existing entities that currently intend to rely on the requested 
order are named as applicants, and the PTA Fund is the only series 
that currently intends to rely on the requested order. If the name 
of any Fund contains the name of a Subadviser, the name of the 
Adviser will precede the name of the Subadviser.
    \2\ The Adviser will enter into substantially similar investment 
advisory agreements to provide investment management services to 
future Funds (``Future Advisory Agreements''). The terms of Future 
Advisory Agreements will comply with Section 15(a) of the Act and 
Future Advisory Agreements will be approved by shareholders and by 
the Board, including a majority of the Independent Trustees, in the 
manner required by Sections 15(a) and 15(c) of the Act and rule 18f-
2 thereunder. References to any Advisory Agreement or Advisory 
Agreements include Future Advisory Agreements as they pertain to 
future Funds.
    \3\ The term ``Board'' also includes the board of trustees or 
directors of a future Fund.
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    2. Under the terms of the Advisory Agreement, the Adviser is 
responsible for the overall management of the PTA Fund's business 
affairs and selecting investments according to their respective 
investment objectives, policies and restrictions. For the investment 
management services that it provides to the PTA Fund, the Adviser 
receives the fee specified in the Advisory Agreement. The Advisory 
Agreement also permits the Adviser to retain one or more subadvisers 
for the purpose of managing the investments of all or a portion of the 
assets of the PTA Fund. Pursuant to this authority, the Adviser may 
enter into investment subadvisory agreements with Subadvisers to 
provide investment advisory services to the PTA Fund (each, a 
``Subadvisory Agreement'' and together, the ``Subadvisory 
Agreements''). Each Subadviser will be registered as an investment 
adviser under the Advisers Act. The Adviser will supervise, evaluate 
and allocate assets to the Subadvisers, and make recommendations to the 
Board about their hiring, retention or release, at all times subject to 
the authority of the Board. The Adviser will compensate each Subadviser 
out of the fees paid to the Adviser under the Advisory Agreement.
    3. Applicants request an order to permit the Adviser, subject to 
Board approval, to enter into and materially amend Subadvisory 
Agreements without obtaining shareholder approval. The requested relief 
will not extend to any subadviser that is an affiliated person, as 
defined in section 2(a)(3) of the Act, of the Trust, a Fund or the 
Adviser, other than by reason of serving as a subadviser to one or more 
of the Funds (an ``Affiliated Subadviser'').
    4. Funds will inform shareholders of the hiring of a new Subadviser 
pursuant to the following procedures (``Modified Notice and Access 
Procedures''): (a) within 90 days after a new Subadviser is hired for 
any Fund, that Fund will send its shareholders either a Multi-manager 
Notice or a Multi-manager Notice and Multi-manager Information 
Statement; \4\ and (b) the Fund will make the Multi-manager Information 
Statement available on the Web site identified in the Multi-manager 
Notice no later than when the Multi-manager Notice (or Multi-manager 
Notice and Multi-manager Information Statement) is first sent to 
shareholders, and will maintain it on that Web site for at least 90 
days. In the circumstances described in this Application, a proxy 
solicitation to approve the appointment of new Subadvisers provides no 
more meaningful information to shareholders than the proposed Multi-
manager Information Statement. Moreover, as indicated above, the Board 
would comply with the requirements of Sections 15(a) and 15(c) of the 
1940 Act before entering into or amending Subadvisory Agreements.
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    \4\ A ``Multi-manager Notice'' will be modeled on a Notice of 
Internet Availability as defined in rule 14a-16 under the Securities 
Exchange Act of 1934 (``Exchange Act''), and specifically will, 
among other things: (a) Summarize the relevant information regarding 
the new Subadviser; (b) inform shareholders that the Multi-manager 
Information Statement is available on a Web site; (c) provide the 
Web site address; (d) state the time period during which the Multi-
manager Information Statement will remain available on that Web 
site; (e) provide instructions for accessing and printing the Multi-
manager Information Statement; and (f) instruct the shareholder that 
a paper or email copy of the Multi-manager Information Statement may 
be obtained, without charge, by contacting the Funds.
    A ``Multi-manager Information Statement'' will meet the 
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 
14A under the Exchange Act for an information statement. Multi-
manager Information Statements will be filed electronically with the 
Commission via the EDGAR system.
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Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except pursuant to a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of securities in a series investment company affected by a matter must 
approve that matter if the Act requires shareholder approval.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provisions of the Act, or 
from any rule thereunder, if such exemption is necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act. Applicants state that the requested relief meets this standard.
    3. Applicants assert that the shareholders expect the Adviser and 
the Board to select the Subadvisers for the Funds that are best suited 
to achieve each Fund's investment objective. Applicants assert that, 
from the perspective of the investor, the role of the Subadvisers is 
substantially equivalent to that of the individual portfolio managers 
employed by the Adviser. Applicants state that requiring shareholder 
approval of each Subadvisory Agreement would impose costs and 
unnecessary delays on the Funds, and may preclude the Adviser from 
acting promptly in a manner considered advisable by the Board. 
Applicants note that the Advisory Agreement and any Subadvisory 
Agreement with an Affiliated Subadviser will remain subject to section 
15(a) of the Act and rule 18f-2 under the Act, including the 
requirement for shareholder voting.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Fund may rely on the requested order, the operation of 
the Fund in the manner described in the application will be approved by 
a

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majority of the Fund's outstanding voting securities, as defined in the 
Act, or in the case of a Fund whose public shareholders purchase shares 
on the basis of a prospectus containing the disclosure contemplated by 
condition 2 below, by the initial shareholder(s) before offering shares 
of that Fund to the public.
    2. Each Fund relying on the requested order will disclose in its 
prospectus the existence, substance, and effect of any order granted 
pursuant to the application. Each Fund will hold itself out to the 
public as utilizing the Manager of Managers Structure. The prospectus 
will prominently disclose that the Adviser has ultimate responsibility 
(subject to oversight by the Board) to oversee the Subadvisers and 
recommend their hiring, termination, and replacement.
    3. Funds will inform shareholders of the hiring of a new Subadviser 
within 90 days after the hiring of the new Subadviser pursuant to the 
Modified Notice and Access Procedures.
    4. The Adviser will not enter into a subadvisory agreement with any 
Affiliated Subadviser without such agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    5. At all times, at least a majority of the Board will be 
Independent Trustees, and the nomination of new or additional 
Independent Trustees will be placed within the discretion of the then-
existing Independent Trustees.
    6. Whenever a subadviser change is proposed for a Fund with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
applicable Board minutes, that such change is in the best interests of 
the Fund and its shareholders, and does not involve a conflict of 
interest from which the Adviser or the Affiliated Subadviser derives an 
inappropriate advantage.
    7. The Adviser will provide general management services to each 
Fund, including overall supervisory responsibility for the general 
management and investment of each Fund's assets and, subject to review 
and approval of the Board, will: (a) Set each Fund's overall investment 
strategies; (b) evaluate, select and recommend Subadvisers to manage 
all or a part of each Fund's assets; (c) allocate and, when 
appropriate, reallocate each Fund's assets among one or more 
Subadvisers; (d) monitor and evaluate the performance of Subadvisers; 
and (e) implement procedures reasonably designed to ensure that the 
Subadvisers comply with each Fund's investment objective, policies and 
restrictions.
    8. No trustee or officer of the Trust or a Fund, or director, 
manager, or officer of the Adviser, will own directly or indirectly 
(other than through a pooled investment vehicle that is not controlled 
by such person), any interest in a Subadviser, except for (a) ownership 
of interests in the Adviser or any entity that controls, is controlled 
by, or is under common control with the Adviser, or (b) ownership of 
less than 1% of the outstanding securities of any class of equity or 
debt of any publicly traded company that is either a Subadviser or an 
entity that controls, is controlled by, or is under common control with 
a Subadviser.
    9. In the event the Commission adopts a rule under the Act 
providing substantially similar relief to that in the order requested 
in the application, the requested order will expire on the effective 
date of that rule.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-2158 Filed 1-31-12; 8:45 am]
BILLING CODE 8011-01-P