[Federal Register Volume 84, Number 122 (Tuesday, June 25, 2019)]
[Notices]
[Pages 29919-29922]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13414]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33513; File No. 812-14962]
Lord Abbett Credit Opportunities Fund, et al.
June 19, 2019.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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Notice of an application under section 6(c) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from sections
18(a)(2), 18(c) and 18(i) of the Act, under sections 6(c) and 23(c) of
the Act for an exemption from rule 23c-3 under the Act, and for an
order pursuant to section 17(d) of the Act and rule 17d-1 under the
Act.
Summary of Application: Applicants request an order to permit certain
registered closed-end management investment companies to issue multiple
classes of shares with varying sales loads and asset-based service and/
or distribution fees and to impose early withdrawal charges.
Applicants: Lord Abbett Credit Opportunities Fund (the ``Initial
Fund''), Lord, Abbett & Co. LLC (the ``Adviser'') and Lord Abbett
Distributor LLC (the ``Distributor'', and together with the Initial
Fund and the Adviser, the ``Applicants'').
Filing Dates: The application was filed on October 5, 2018 and amended
on March 1, 2019.
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 July 15, 2019, and should be accompanied by proof of
service on the applicants, in the form of an affidavit, or, for
lawyers, a certificate of service. Pursuant to rule 0-5 under the Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, 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: John T. Fitzgerald,
Vice President and Assistant Secretary, 90 Hudson Street, Jersey City,
NJ 07302-3973, and Bryan Chegwidden, Esq., Ropes & Gray LLP, 1211
Avenue of the Americas, New York, NY 10036-8704.
FOR FURTHER INFORMATION CONTACT: Kyle R. Ahlgren, Senior Counsel or
Aaron Gilbride, Branch Chief, at (202) 551-6825 (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 website by searching for the file number, or for an
applicant using the Company name box, at or by calling (202) 551-8090.
Applicants' Representations
1. The Initial Fund is a Delaware statutory trust that is
registered under the Act as a closed-end management investment company
and will operate as a non-diversified investment company under the Act.
The Initial Fund will operate as an ``interval fund'' pursuant to rule
23c-3 under the Act and intends to continuously offer its shares.
2. The Adviser is a limited liability company organized under the
laws of the state of Delaware. The Adviser serves as investment adviser
to the Initial Fund. The Adviser is registered with the Commission as
an investment adviser under the Investment Advisers Act of 1940, as
amended (the ``Advisers Act'').
3. The Applicants seek an order to permit the Initial Fund to issue
multiple classes of shares of beneficial interest (``Shares'') with
varying sales loads and asset-based service and/or distribution fees
and to impose early withdrawal charges (``EWCs'').
4. The Applicants request that the order also apply to any other
registered closed-end management investment company that conducts a
continuous offering of its shares, existing now or in the future, for
which the Adviser, its successors, the Distributor, its successors,\1\
or any entity controlling, controlled by, or under common control with
the Adviser or the Distributor, or any successor in interest to such
entity, acts as investment adviser or principal underwriter, and which
provides periodic liquidity with respect to its Shares through tender
offers conducted in compliance with either rule 23c-3 under the 1940
Act or rule 13e-4 under the Securities Exchange Act of 1934, as amended
(the ``1934 Act'') (each a ``Future Fund'' and, together with the
[[Page 29920]]
Initial Fund, each, a ``Fund'' and collectively, the ``Funds'').
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\1\ A successor in interest is limited to an entity that results
from a reorganization into another jurisdiction or a change in the
type of business organization.
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5. The Initial Fund intends to offer its Shares on a continuous
basis at net asset value per share plus the applicable sales load, if
any. The Shares will not be offered or traded in a secondary market and
will not be listed on any securities exchange or quoted on any
quotation medium.
6. The Initial Fund will initially issue a single class of Shares
(the ``Initial Class Shares''), but may offer investors multiple
classes of Shares in the future, with each class of Shares having its
own fee and expense structure. Under the proposal, the Initial Class
Shares would be an Institutional Share class and would be offered at
net asset value per share. A new Share class (the ``New Class'') would
be offered at net asset value and may (but would not necessarily) be
subject to a front-end sales load, an annual asset-based service and/or
distribution fee and/or an EWC. Prior to introducing a Share class that
charges distribution and/or service fees, the Initial Fund intends to
adopt a distribution and service plan in voluntary compliance with
rules 12b-1 and 17d-3 under the Act, as if those rules applied to
closed-end management investment companies (a ``Distribution and
Service Plan'').
7. From time to time, the Board of a Fund may create and offer
additional classes of shares, or may vary the characteristics described
above of Initial Class and New Class Shares, including without
limitation: (i) The amount of fees permitted by a Distribution and
Service Plan as to such class; (ii) voting rights with respect to a
Distribution and Service Plan as to such class; (iii) different class
designations; (iv) the impact of any class expenses directly
attributable to a particular class of Shares allocated on a class basis
as described in the Application; (v) differences in any dividends and
net asset values per Share resulting from differences in fees under a
Distribution and Service Plan or in class expenses; (vi) any EWC or
other sales load structure; and (vii) any exchange or conversion
features, in each case, as permitted under the Act. Each Fund will
comply with the provisions of rule 18f-3 under the Act, as if it were
an open-end management investment company.
8. The Initial Fund will be operated as an ``interval fund'' and
make quarterly offers to repurchase between 5% and 25% of its
outstanding Shares at net asset value per share, pursuant to rule 23c-3
under the Act, unless such offer is suspended or postponed in
accordance with regulatory requirements.
9. Under the proposal, each class of Shares would comply with the
provisions of rule 12b-1 under the Act, or any successor thereto or
replacement rules, as if that rule applied to closed-end management
investment companies, and with the provisions of rule 2341 of the Rules
of the Financial Industry Regulatory Authority (``FINRA''), as such
rule may be amended, or any successor rule thereto (``FINRA Rule
2341'') as if it applied to the Fund issuing such Shares. Applicants
represent that each Fund will disclose in its prospectus the fees,
expenses and other characteristics of each class of Shares offered for
sale by the prospectus, as is required for open-end, multiple class
funds under Form N-1A. As if it were an open-end management investment
company, each Fund will disclose fund expenses borne by shareholders
during the reporting period in shareholder reports and describe in its
prospectus any arrangements that result in breakpoints in, or
elimination of, sales loads. Each Fund will include any such
disclosures in its shareholder reports and prospectus to the extent
required as if the Fund were an open-end fund. Each Fund will comply
with the provisions of rule 18f-3 under the Act, as if it were an open-
end management investment company.
10. Applicants represent that each Fund and the Distributor will
also comply with any requirements that may be adopted by the Commission
or FINRA regarding disclosure at the point of sale and in transaction
confirmations about the costs and conflicts of interest arising out of
the distribution of open-end investment company shares, and regarding
prospectus disclosure of sales loads and revenue sharing arrangements
as if those requirements applied to the Fund and the Distributor.
Applicants further represent that each Fund or the Distributor will
contractually require that any other distributor of the Fund's Shares
comply with such requirements in connection with the distribution of
Shares of the Fund.
11. If a Fund charges a repurchase fee, Shares of the Fund will be
subject to a repurchase fee at a rate of no greater than 2.00% of the
shareholder's repurchase proceeds if the interval between the date of
purchase of the Shares and the valuation date with respect to the
repurchase of those Shares is less than one year. Repurchase fees, if
charged, will equally apply to New Class Shares and to all classes of
Shares of the Fund, consistent with section 18 of the Act and rule 18f-
3 thereunder. To the extent that a Fund determines to waive, impose
scheduled variations of, or eliminate a repurchase fee, it will do so
consistently with the requirements of rule 22d-1 under the Act as if
the repurchase fee were a contingent deferred sales load (``CDSL'') and
as if the Fund were a registered open-end investment company and the
Fund's waiver of, scheduled variation in, or elimination of, the
repurchase fee will apply uniformly to all shareholders of the Fund
regardless of class.
12. The Initial Fund does not intend to, but a Fund may, offer its
shareholders an exchange feature under which the shareholders of the
Fund may, in connection with the Fund's periodic repurchase offers,
exchange their Shares of the Fund for shares of the same class of (i)
registered open-end investment companies or (ii) other registered
closed-end investment companies that comply with rule 23c-3 under the
Act and continuously offer their shares at net asset value, that are in
the Fund's group of investment companies (collectively, the ``Other
Funds''). Shares of a Fund operating pursuant to rule 23c-3 that are
exchanged for shares of Other Funds will be included as part of the
repurchase offer amount for such Fund as specified in rule 23c-3 under
the Act. Any exchange option will comply with rule 11a-3 under the Act,
as if the Fund was an open-end investment company subject to rule 11a-
3. In complying with rule 11a-3 under the Act, each Fund will treat an
EWC as if it were a CDSL.
Applicants' Legal Analysis
Multiple Classes of Shares
1. Section 18(a)(2) of the Act provides that a closed-end
investment company may not issue or sell a senior security that is a
stock unless certain requirements are met. Applicants state that the
creation of multiple classes of shares of a Fund may violate section
18(a)(2) because the Fund may not meet such requirements with respect
to a class of shares that may be a senior security.
2. Section 18(c) of the Act provides, in relevant part, that a
closed-end investment company may not issue or sell any senior security
if, immediately thereafter, the company has outstanding more than one
class of senior security. Applicants state that the proposed multiple
class system may be prohibited by section 18(c), as a class may have
priority over another class as to payment of dividends because
shareholders of different classes would pay different fees and
expenses.
[[Page 29921]]
3. Section 18(i) of the Act provides that each share of stock
issued by a registered management investment company will be a voting
stock and have equal voting rights with every other outstanding voting
stock. Applicants state that the proposed multiple class system may
violate section 18(i) of the Act because each class would be entitled
to exclusive voting rights with respect to matters solely related to
that class.
4. 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 or regulation under the Act, if and to the extent 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 request an exemption under
section 6(c) from sections 18(a)(2), 18(c) and 18(i) to permit the
Funds to issue multiple classes of shares.
5. Applicants submit that the proposed allocation of expenses
relating to distribution and voting rights among multiple classes is
equitable and will not discriminate against any group or class of
shareholders. Applicants submit that the proposed arrangements would
permit a Fund to facilitate the distribution of Shares and provide
investors with a broader choice of shareholder options. Applicants
assert that the proposed multiple class structure does not raise the
concerns underlying section 18 of the Act to any greater degree than
open-end investment companies' multiple class structures that are
permitted by rule 18f-3 under the Act. Applicants state that each Fund
will comply with the provisions of rule 18f-3 as if it were an open-end
investment company.
Early Withdrawal Charges
1. Section 23(c) of the Act provides, in relevant part, that no
registered closed-end investment company shall purchase securities of
which it is the issuer, except: (a) On a securities exchange or other
open market; (b) pursuant to tenders, after reasonable opportunity to
submit tenders given to all holders of securities of the class to be
purchased; or (c) under other circumstances as the Commission may
permit by rules and regulations or orders for the protection of
investors.
2. Rule 23c-3 under the Act permits an ``interval fund'' to make
repurchase offers of between five and twenty-five percent of its
outstanding shares at net asset value at periodic intervals pursuant to
a fundamental policy of the interval fund. Rule 23c-3(b)(1) under the
Act permits an interval fund to deduct from repurchase proceeds only a
repurchase fee, not to exceed two percent of the proceeds, that is paid
to the interval fund and is reasonably intended to compensate the fund
for expenses directly related to the repurchase.
3. Section 23(c)(3) provides that the Commission may issue an order
that would permit a closed-end investment company to repurchase its
shares in circumstances in which the repurchase is made in a manner or
on a basis that does not unfairly discriminate against any holders of
the class or classes of securities to be purchased.
4. Applicants request relief under section 6(c), discussed above,
and section 23(c)(3) from rule 23c-3 to the extent necessary for the
Funds to impose EWCs on shares of the Funds submitted for repurchase
that have been held for less than a specified period.
5. Applicants state that the EWCs they intend to impose are
functionally similar to CDSLs imposed by open-end investment companies
under rule 6c-10 under the Act. Rule 6c-10 permits open-end investment
companies to impose CDSLs, subject to certain conditions. Applicants
note that rule 6c-10 is grounded in policy considerations supporting
the employment of CDSLs where there are adequate safeguards for the
investor and state that the same policy considerations support
imposition of EWCs in the interval fund context. In addition,
applicants state that EWCs may be necessary for the distributor to
recover distribution costs. Applicants represent that any EWC imposed
by the Funds will comply with rule 6c-10 under the Act as if the rule
were applicable to closed-end investment companies. The Funds will
disclose EWCs in accordance with the requirements of Form N-1A
concerning CDSLs.
Asset-Based Distribution and/or Service Fees
1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company, or an
affiliated person of such person, acting as principal, from
participating in or effecting any transaction in connection with any
joint enterprise or joint arrangement in which the investment company
participates unless the Commission issues an order permitting the
transaction. In reviewing applications submitted under section 17(d)
and rule 17d-1, the Commission considers whether the participation of
the investment company in a joint enterprise or joint arrangement is
consistent with the provisions, policies and purposes of the Act, and
the extent to which the participation is on a basis different from or
less advantageous than that of other participants.
2. Rule 17d-3 under the Act provides an exemption from section
17(d) and rule 17d-1 to permit open-end investment companies to enter
into distribution arrangements pursuant to rule 12b-1 under the Act.
Applicants request an order under section 17(d) and rule 17d-1 under
the Act to the extent necessary to permit a Fund to impose asset-based
distribution and/or service fees. Applicants have agreed to comply with
rules 12b-1 and 17d-3 as if those rules applied to closed-end
investment companies, which they believe will resolve any concerns that
might arise in connection with a Fund financing the distribution of its
shares through asset-based distribution fees.
3. For the reasons stated above, applicants submit that the
exemptions requested under section 6(c) are necessary and appropriate
in the public interest and are consistent with the protection of
investors and the purposes fairly intended by the policy and provisions
of the Act. Applicants further submit that the relief requested
pursuant to section 23(c)(3) will be consistent with the protection of
investors and will insure that applicants do not unfairly discriminate
against any holders of the class of securities to be purchased.
Finally, applicants state that the Funds' imposition of asset-based
distribution and/or service fees is consistent with the provisions,
policies and purposes of the Act and does not involve participation on
a basis different from or less advantageous than that of other
participants.
Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
Each Fund relying on the order will comply with the provisions of
rules 6c-10, 12b-1, 17d-3, 18f-3, 22d-1, and, where applicable, 11a-3
under the Act, as amended from time to time, as if those rules applied
to closed-end management investment companies, and will comply with the
FINRA Rule 2341, as amended from time to time, as if that rule applied
to all closed-end management investment companies.
[[Page 29922]]
For the Commission, by the Division of Investment Management,
under delegated authority.
Vanessa A. Countryman,
Acting Secretary.
[FR Doc. 2019-13414 Filed 6-24-19; 8:45 am]
BILLING CODE 8011-01-P