[Federal Register Volume 77, Number 122 (Monday, June 25, 2012)]
[Notices]
[Pages 37941-37942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-15410]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67215; File No. TP 11-07]


Order Granting a Limited Exemption From Exchange Act Rule 10b-17 
to Certain Actively Managed Exchange-Traded Funds Pursuant to Exchange 
Act Rule 10b-17(b)(2)

June 19, 2012.
    By letter dated June 19, 2012 (``letter''), as supplemented by 
conversations with the staff of the Division of Trading and Markets 
(``Staff''), counsel for PIMCO ETF Trust (``Trust'') requested on 
behalf of the Trust and PIMCO Global Advantage Inflation-Linked Bond 
Strategy Fund (``Fund'') that the Securities and Exchange Commission 
(``Commission'') issue an exemption from Rule 10b-17 under the 
Securities Exchange Act of 1934, as amended (``Exchange Act''). 
Specifically, the letter requests that the Commission exempt issuers of 
actively managed exchange-traded funds (``ETFs'') such as the Trust 
from the requirements of Exchange Act Rule 10b-17(b)(1)(v)(a) and (b) 
subject to certain conditions. The request is similar to a number of 
requests from issuers of actively managed ETFs for conditional 
exemptive relief from Rule 10b-17 that were granted pursuant to 
delegated authority (``prior requests'').\1\
---------------------------------------------------------------------------

    \1\ See, e.g., Letter from Josephine J. Tao, Assistant Director 
to W. John McGuire, Esq., Morgan Lewis & Bockius LLP regarding 
AdvisorShares Trust (December 16, 2011); Letter from Josephine J. 
Tao, Assistant Director to Jeremy Senderowicz, Dechert LLP regarding 
PIMCO Total Return Exchange-Traded Fund (March 1, 2012) and Letter 
from Josephine J. Tao, Assistant Director to Jack P. Drogin, Schiff 
Hardin regarding WisdomTree Emerging Markets Corporate Bond Fund 
(April 16, 2012).
---------------------------------------------------------------------------

    Rule 10b-17, with certain exceptions, requires an issuer of a class 
of publicly traded securities to give timely notice of certain 
specified actions (for example, a dividend distribution) relating to 
such class of securities in accordance with Rule 10b-17(b). In 
particular, Rule 10b-17(b)(1)(v)(a) requires that the issuer provide 
notice, for a dividend or other distribution including a stock or 
reverse split or rights or other subscription offering, of the amount 
in cash to be paid or distributed per share.\2\ Rule 10b-17(b)(1)(v)(b) 
requires that the issuer provide notice, also for a dividend or other 
distribution including a stock or reverse split or rights or other 
subscription offering, of the amount (in the same security) of the 
security outstanding immediately prior to and immediately following the 
dividend or distribution and the rate of the dividend or distribution.
---------------------------------------------------------------------------

    \2\ If the exact per share cash distributions cannot be given 
because of existing conversion rights which may be exercised during 
the notice period and which may affect the per share cash 
distribution, Rule 10b-17(b)(1)(v)(a) permits the issuer to provide 
a reasonable approximation of the per share distribution so long as 
the actual per share distribution is subsequently provided on the 
record date.

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

[[Page 37942]]

    In adopting Rule 10b-17, the Commission stated its concern that the 
failure of an issuer to provide timely announcements of record dates 
may have misleading and deceptive effects.\3\ For example, the 
Commission stated that if buyers and sellers (and their brokers) do not 
have knowledge that these rights may be forthcoming, they could suffer 
losses.\4\ Also, the Commission found that ``some issuers made belated 
declarations of stock splits or dividends with the apparent knowledge 
that this action would have a manipulative effect on the market for 
their securities.'' \5\ The letter represents, as had the prior 
requests, that the concerns that the Commission raised in adopting Rule 
10b-17 will not be implicated if exemptive relief, subject to the 
conditions below, is granted to the Trust.
---------------------------------------------------------------------------

    \3\ Exchange Act Release No. 9192 (Jun. 7, 1971); 36 FR 11513 
(Jun. 15, 1971).
    \4\ See id.
    \5\ Id.
---------------------------------------------------------------------------

    We find that it is appropriate in the public interest and is 
consistent with the protection of investors to grant a conditional 
exemption from Rule 10b-17 to any issuer of an actively managed ETF 
including the Trust. Specifically, other than receiving a delayed 
notice of the cash distributed and the shares outstanding, market 
participants will receive timely notification of the existence and 
timing of a pending distribution as the Fund will comply with all other 
requirements of Rule 10b-17.\6\ Further, the provision of the 
information required under Rule 10b-17(b)(1)(v)(a) and (b) the day 
before the ex-dividend date should allow market participants time to 
update their systems to reflect the accurate price once trading begins 
on the ex-dividend date.
---------------------------------------------------------------------------

    \6\ Rule 10b-17(b)(1)(v)(a) and (b). We also note that timely 
compliance with Rule 10b-17(b)(1)(v)(a) and (b) would be impractical 
in light of the nature of such ETFs. This is because it is not 
possible for these ETFs to accurately project ten days in advance 
the composition of the dividend that would be paid on a particular 
record date.
---------------------------------------------------------------------------

Conclusion

    It Is Hereby Ordered, pursuant to Rule 10b-17(b)(2), that any 
issuer of an actively managed ETF is exempt from the requirements of 
Rule 10b-17(b)(1)(v)(a) and (b) with respect to transactions in shares 
of the actively managed ETF, subject to the following conditions:
     The issuer must comply with Rule 10b-17 except for Rule 
10b-17(b)(1)(v)(a) and (b); and
     The issuer must provide the information required by Rule 
10b-17(b)(1)(v)(a) and (b) to the national securities exchange upon 
which shares of the ETF are registered pursuant to section 12 of the 
Exchange Act (``Exchange'') as soon as practicable before trading 
begins on the ex-dividend date, but in no event later than the time 
when the Exchange last accepts information relating to distributions on 
the day before the ex-dividend date.
    This exemptive relief is subject to modification or revocation at 
any time the Commission determines that such action is necessary or 
appropriate in furtherance of the purposes of the Exchange Act. In 
addition, persons relying on this exemption are directed to the anti-
fraud and anti-manipulation provisions of the federal securities laws, 
particularly Section 10(b) of the Exchange Act, and Rule 10b-5 
thereunder. Responsibility for compliance with these and any other 
applicable provisions of the federal securities laws must rest with the 
persons relying on this exemption. This order should not be considered 
a view with respect to any other question that the transactions may 
raise, including, but not limited to the adequacy of the disclosure 
concerning, and the applicability of other federal or state laws to, 
such transactions.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(9).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-15410 Filed 6-22-12; 8:45 am]
BILLING CODE 8011-01-P