[Federal Register Volume 79, Number 126 (Tuesday, July 1, 2014)]
[Notices]
[Pages 37366-37369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-15332]


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

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31134; 812-14265]


Rothschild Larch Lane Management Company LLC and The Advisors' 
Inner Circle Fund III; Notice of Application

June 25, 2014.
AGENCY:  Securities and Exchange Commission (``Commission'').

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

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

Summary of Application:  Applicants request an order that would permit 
them to enter into and materially amend subadvisory agreements without 
shareholder approval and would grant relief from certain disclosure 
requirements.

Applicants:  Rothschild Larch Lane Management Company LLC (the 
``Adviser'') and The Advisors' Inner Circle Fund III (the ``Trust'').

[[Page 37367]]


DATES:  Filing Dates: The application was filed January 10, 2014, and 
amended on April 11, 2014, and May 23, 2014.

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 July 21, 2014, 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:  Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. Applicants: Rothschild Larch 
Lane Management Company LLC, c/o SEI Corporation, One Freedom Valley 
Drive, Oaks, PA 19456.

FOR FURTHER INFORMATION CONTACT:  Linda A. Schneider, Senior Counsel, 
at (202) 551-6859, or Holly Hunter-Ceci, Branch Chief, at (202) 551-
6869 (Division of Investment Management, Chief Counsel's Office).

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 organized as a Delaware statutory trust and is 
registered under the Act as an open-end management investment company. 
The Trust is composed of one or more series of shares, each with its 
own distinct investment objectives, policies and restrictions.\1\
---------------------------------------------------------------------------

    \1\ Applicants request relief with respect to all existing and 
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 in the term ``Adviser''); (b) uses the multi-
manager structure described in the application (``Manager of 
Managers Structure''); and (c) complies with the terms and 
conditions of the application (each a ``Subadvised Fund'' and 
collectively, the ``Subadvised Funds''). The only existing 
registered open-end management investment company that currently 
intends to rely on the requested order is named as an applicant. For 
purposes of the requested order, ``successor'' is limited to an 
entity that results from a reorganization into another jurisdiction 
or a change in the type of business organization. If the name of any 
Subadvised Fund contains the name of a Subadviser (as defined 
below), the name of the Adviser that serves as the primary adviser 
to the Subadvised Fund, or a trademark or trade name that is owned 
by the Adviser, will precede the name of the Subadviser.
---------------------------------------------------------------------------

    2. The Adviser is, and any other Adviser will be, registered as an 
investment adviser under the Investment Advisers Act of 1940 
(``Advisers Act''). The Adviser serves as the investment adviser to 
series of the Trust pursuant to an investment advisory agreement with 
the Trust (each an ``Investment Advisory Agreement'' and collectively, 
the ``Investment Advisory Agreements'').\2\ Each Investment Advisory 
Agreement was approved or will be approved by the board of trustees of 
the Trust (the ``Board''), 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 (``Independent Trustees'') and by the 
shareholders of the relevant Subadvised Fund in the manner required by 
sections 15(a) and 15(c) of the Act and rule 18f-2 under the Act.\3\ 
Applicants are not seeking any exemption from the provisions of the Act 
with respect to the Investment Advisory Agreement.
---------------------------------------------------------------------------

    \2\ Each other Subadvised Fund will enter into an investment 
advisory agreement with its Adviser (included in the term 
``Investment Advisory Agreement'').
    \3\ The term ``Board'' also includes the board of trustees or 
directors of a future Subadvised Fund, if different.
---------------------------------------------------------------------------

    3. Under the terms of the Investment Advisory Agreement, the 
Adviser, subject to the oversight of the Board, furnishes a continuous 
investment program for each Subadvised Fund and determines the 
investments to be purchased, held, sold or exchanged by each Subadvised 
Fund and the portion, if any, of the assets of the Subadvised Fund to 
be held uninvested. For its services to each Subadvised Fund, the 
Adviser receives an investment advisory fee from that Subadvised Fund 
as specified in the Investment Advisory Agreement calculated based on 
that Subadvised Fund's average daily net assets. The terms of the 
Investment Advisory Agreements also permit the Adviser, subject to the 
approval of the Board, including a majority of the Independent 
Trustees, and the shareholders of the applicable Subadvised Fund (if 
required by applicable law), to delegate portfolio management 
responsibilities of all or a portion of the assets of the Subadvised 
Fund to one or more subadvisers (``Subadvisers''). The Adviser 
evaluates, selects and recommends Subadvisers to manage the assets (or 
portion thereof) of Subadvised Funds, monitors and reviews the 
Subadvisers and their performance and their compliance with that 
Subadvised Fund's investment policies and restrictions. The Adviser has 
entered into subadvisory agreements (``Subadvisory Agreements'') with 
various Subadvisers to serve as Subadvisers to the Subadvised Funds. 
Each Subadviser is, and each future Subadviser will be, an ``investment 
adviser,'' as defined in section 2(a)(20) of the Act, and is 
registered, or will register, as an investment adviser under the 
Advisers Act, or not subject to such registration. The Adviser may 
compensate each Subadviser out of the advisory fees paid to the Adviser 
under the Investment Advisory Agreement, or Subadvised Funds may 
compensate the Subadvisers directly.
    4. Applicants request an order to permit the Adviser, subject to 
Board approval, to select Subadvisers to manage all or a portion of the 
assets of a Subadvised Fund pursuant to a Subadvisory Agreement 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 or a Subadvised Fund or the Adviser, other than by reason 
of solely serving as a Subadviser to a Subadvised Fund or as an 
investment adviser or subadviser to any series of the Trust other than 
the series of the Trust advised by the Adviser (``Affiliated 
Subadviser'').
    5. Applicants also request an order exempting each Subadvised Fund 
from certain disclosure provisions described below that may require the 
Subadvised Funds to disclose fees paid to each Subadviser by the 
Adviser or a Subadvised Fund. Applicants seek an order to permit each 
Subadvised Fund to disclose (as a dollar amount and a percentage of 
each Subadvised Fund's net assets) only: (a) The aggregate fees paid to 
the Adviser and any Affiliated Subadviser; and (b) the aggregate fees 
paid to Subadvisers other than Affiliated Subadvisers (collectively, 
the ``Aggregate Fee Disclosure''). A Subadvised Fund that employs an 
Affiliated Subadviser will provide separate disclosure of any fees paid 
to the Affiliated Subadviser.
    6. The 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 Subadvised Fund, that Subadvised

[[Page 37368]]

Fund will send its shareholders either a Multi-manager Notice or a 
Multi-manager Notice and Multi-manager Information Statement; \4\ and 
(b) the Subadvised 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.
---------------------------------------------------------------------------

    \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 Subadvised 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, except as modified by 
the requested order to permit Aggregate Fee Disclosure. Multi-
manager Information Statements will be filed electronically with the 
Commission via the EDGAR system.
---------------------------------------------------------------------------

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 stock in a series investment company affected by a matter must 
approve that matter if the Act requires shareholder approval.
    2. Form N-1A is the registration statement used by open-end 
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of 
the method and amount of the investment adviser's compensation.
    3. Rule 20a-1 under the Act requires proxies solicited with respect 
to a registered investment company to comply with Schedule 14A under 
the Exchange Act. Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and 
22(c)(9) of Schedule 14A, taken together, require a proxy statement for 
a shareholder meeting at which the advisory contract will be voted upon 
to include the ``rate of compensation of the investment adviser,'' the 
``aggregate amount of the investment adviser's fees,'' a description of 
the ``terms of the contract to be acted upon,'' and, if a change in the 
advisory fee is proposed, the existing and proposed fees and the 
difference between the two fees.
    4. Regulation S-X sets forth the requirements for financial 
statements required to be included as part of a registered investment 
company's registration statement and shareholder reports filed with the 
Commission. Sections 6-07(2)(a), (b) and (c) of Regulation S-X require 
a registered investment company to include in its financial statement 
information about the investment advisory fees.
    5. 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 provision 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 for 
the reasons discussed below.
    6. Applicants assert that the shareholders expect the Adviser, 
subject to the review and approval of the Board, to select the 
Subadvisers who are best suited to achieve the Subadvised Fund's 
investment objective. Applicants assert that, from the perspective of 
the shareholder, the role of the Subadviser is substantially equivalent 
to the role of the individual portfolio managers employed by an 
investment adviser to a traditional investment company. Applicants 
state that requiring shareholder approval of each Subadvisory Agreement 
would impose unnecessary delays and expenses on the Subadvised Funds 
and may preclude the Subadvised Funds from acting promptly when the 
Board and the Adviser believe that a change would benefit a Fund and 
its shareholders. Applicants note that the Investment Advisory 
Agreements and any subadvisory agreement with an Affiliated Subadviser 
(if any) will continue to be subject to the shareholder approval 
requirements of section 15(a) of the Act and rule 18f-2 under the Act.
    7. Applicants assert that the requested disclosure relief would 
benefit shareholders of the Subadvised Funds because it would improve 
the Adviser's ability to negotiate the fees paid to Subadvisers. 
Applicants state that the Adviser may be able to negotiate rates that 
are below a Subadviser's ``posted'' amounts if the Adviser is not 
required to disclose the Subadvisers' fees to the public. Applicants 
submit that the requested relief will encourage Subadvisers to 
negotiate lower subadvisory fees with the Adviser if the lower fees are 
not required to be made public.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions: \5\
---------------------------------------------------------------------------

    \5\ Applicants will comply with conditions 6, 8, 11 and 13 only 
if they rely on the relief that would allow them to provide 
Aggregate Fee Disclosure.
---------------------------------------------------------------------------

    1. Before a Subadvised Fund may rely on the order, the operation of 
the Subadvised Fund in the manner described in the application will be 
approved by a majority of the Subadvised Fund's outstanding voting 
securities as defined in the Act or, in the case of a Subadvised Fund 
whose public shareholders purchase shares on the basis of a prospectus 
containing the disclosure contemplated by condition 2 below, by the 
initial shareholder before such Subadvised Fund's shares are offered to 
the public.
    2. The prospectus for each Subadvised Fund will disclose the 
existence, substance, and effect of any order granted pursuant to the 
application. In addition, each Subadvised Fund will hold itself out to 
the public as employing a Manager of Managers Structure. The prospectus 
will prominently disclose that the Adviser has the ultimate 
responsibility, subject to oversight by the Board, to oversee the 
Subadvisers and recommend their hiring, termination, and replacement.
    3. A Subadvised Fund 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 that agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Subadvised Fund.
    5. At all times, at least a majority of the Board will be 
Independent Trustees, and the selection and nomination of new or 
additional Independent Trustees will be placed within the discretion of 
the then-existing Independent Trustees.
    6. Independent legal counsel, as defined in rule 0-1(a)(6) under 
the Act, has been and will continue to be engaged to represent the 
Independent Trustees. The selection of such counsel will be within the 
discretion of the then-existing Independent Trustees.
    7. Whenever a Subadviser change is proposed for a Subadvised Fund 
with an Affiliated Subadviser, the Board,

[[Page 37369]]

including a majority of the Independent Trustees, will make a separate 
finding, reflected in the Board minutes, that the change is in the best 
interests of the Subadvised Fund and its shareholders, and does not 
involve a conflict of interest from which the Adviser or the Affiliated 
Subadviser derives an inappropriate advantage.
    8. Whenever a Subadviser is hired or terminated, the Adviser will 
provide the Board with information showing the expected impact on the 
profitability of the Adviser.
    9. The Adviser will provide general management services to each 
Subadvised Fund, including overall supervisory responsibility for the 
general management and investment of the Subadvised Fund's assets and, 
subject to review and approval of the Board, will: (i) Set the 
Subadvised Fund's overall investment strategies; (ii) evaluate, select, 
and recommend Subadvisers to manage all or a portion of the Subadvised 
Fund's assets; (iii) allocate and, when appropriate, reallocate the 
Subadvised Fund's assets among Subadvisers; (iv) monitor and evaluate 
the Subadvisers' performance; and (v) implement procedures reasonably 
designed to ensure that Subadvisers comply with the Subadvised Fund's 
investment objective, policies and restrictions.
    10. No Trustee or officer of the Trust or of a Subadvised Fund or 
director 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 (i) ownership 
of interests in the Adviser or any entity that controls, is controlled 
by or is under common control with the Adviser; or (ii) 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.
    11. Each Subadvised Fund will disclose in its registration 
statement the Aggregate Fee Disclosure.
    12. 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.
    13. The Adviser will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Adviser on a 
per Subadvised Fund basis. The information will reflect the impact on 
profitability of the hiring or termination of any Subadviser during the 
applicable quarter.
    14. Any new Subadvisory Agreement or any amendment to a Subadvised 
Fund's existing Investment Advisory Agreement or Subadvisory Agreement 
that directly or indirectly results in an increase in the aggregate 
advisory fee rate payable by the Subadvised Fund will be submitted to 
the Subadvised Fund's shareholders for approval.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-15332 Filed 6-30-14; 8:45 am]
BILLING CODE 8011-01-P