[Federal Register Volume 84, Number 179 (Monday, September 16, 2019)]
[Notices]
[Pages 48671-48672]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19979]
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SECURITIES AND EXCHANGE COMMISSION
Investment Company Act Release No. 33622; File No. 812-15031
ETFis Series Trust I, et al.; Notice of Application
September 11, 2019.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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Notice of an application for an order under section 12(d)(1)(J) of
the Investment Company Act of 1940 (the ``Act'') for an exemption from
sections 12(d)(1)(A), (B), and (C) of the Act and under sections 6(c)
and 17(b) of the Act for an exemption from sections 17(a)(1) and (2) of
the Act. The requested order would permit certain registered open-end
investment companies to acquire shares of certain registered open-end
investment companies (each an ``Unaffiliated Open-End Investment
Company''), registered closed-end investment companies and ``business
development companies,'' as defined in section 2(a)(48) of the Act
(each registered closed-end management and each business development
company, an ``Unaffiliated Closed-End Investment Company'' and,
together with the Unaffiliated Open-End Investment Companies, the
``Unaffiliated Investment Companies''), and registered unit investment
trusts (the ``Unaffiliated Trusts,'' and together with the Unaffiliated
Investment Companies, the ``Unaffiliated Funds'') that are within the
same group of investment companies (collectively, the ``Affiliated
Funds'') and outside the same group of investment companies as the
acquiring investment companies (collectively, the Affiliated Funds and,
together with the Unaffiliated Funds, the ``Underlying Funds''), in
excess of the limits in section 12(d)(1) of the Act.
APPLICANTS: ETFis Series Trust I and Virtus ETF Trust II, Delaware
statutory trusts that are registered under the Act as open-end
management investment companies and intend to introduce multiple
series, and Virtus ETF Advisers LLC, a Delaware limited liability
company registered as an investment adviser under the Investment
Advisers Act of 1940.
FILING DATES: The application was filed on May 9, 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 October 7, 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: William J. Smalley,
Virtus ETF Advisers LLC, 1540 Broadway, New York, NY 10036; and Michael
W. Mundt, Esq., Stradley Ronon Stevens & Young, LLP, 1250 Connecticut
Avenue NW, Suite 500, Washington, DC 20036.
FOR FURTHER INFORMATION CONTACT: Rochelle Kauffman Plesset, Senior
Counsel, or David J. Marcinkus, 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 http://www.sec.gov/search/search.htm, or by calling (202) 551-8090.
Summary of the Application
1. Applicants request an order to permit (a) a Fund \1\ (each a
``Fund of Funds'') to acquire shares of Underlying Funds \2\ in excess
of the limits in sections 12(d)(1)(A) and (C) of the Act and (b) the
Underlying Funds that are registered open-end investment companies or
series thereof, their principal underwriters and any broker or dealer
registered under the Securities Exchange Act of 1934 to sell shares of
the Underlying Fund to the Fund of Funds in excess of the limits in
section 12(d)(1)(B) of the Act.\3\ Applicants also request an order of
exemption under sections 6(c) and 17(b) of the Act from the prohibition
on certain affiliated transactions in section 17(a) of the Act to the
extent necessary to permit the Underlying Funds to sell their shares
to, and redeem their shares from, the Funds of Funds.\4\ Applicants
state that such transactions will be consistent with the policies of
each Fund of Funds and each Underlying Fund and with the general
purposes of the Act and will be based on the net asset values of the
Underlying Funds.
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\1\ Applicants request that the order apply to each existing and
future series of ETFis Series Trust I and Virtus ETF Trust II and to
each existing and future registered open-end investment company or
series thereof that is advised by Virtus ETF Advisers LLC or its
successor or by any other investment adviser controlling, controlled
by or under common control with Virtus ETF Advisers LLC or its
successor and is part of the same ``group of investment companies''
as ETFis Series Trust I and Virtus ETF Trust II (each, a ``Fund'').
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. For purposes of
the request for relief, the term ``group of investment companies''
means any two or more registered investment companies, including
closed-end investment companies and business development companies,
that hold themselves out to investors as related companies for
purposes of investment and investor services.
\2\ Certain of the Underlying Funds have obtained exemptions
from the Commission necessary to permit their shares to be listed
and traded on a national securities exchange at negotiated prices
and, accordingly, to operate as an exchange-traded fund (``ETF'').
\3\ Applicants do not request relief for Funds of Funds to
invest in reliance on the order in business development companies
and registered closed-end investment companies that are not listed
and traded on a national securities exchange.
\4\ A Fund of Funds generally would purchase and sell shares of
an Underlying Fund that operates as an ETF or closed-end fund
through secondary market transactions rather than through principal
transactions with the Underlying Fund. Applicants nevertheless
request relief from sections 17(a)(1) and (2) to permit each ETF or
Unaffiliated Closed-End Investment Company that is an affiliated
person, or an affiliated person of an affiliated person, as defined
in section 2(a)(3) of the 1940 Act, of a Fund of Funds to sell
shares to or redeem shares from the Fund of Funds. This includes, in
the case of sales and redemptions of shares of ETFs, the in-kind
transactions that accompany such sales and redemptions. The
Applicants are not seeking relief from section 17(a) for, and the
requested relief will not apply to, transactions where an ETF,
business development company, or closed-end fund could be deemed an
affiliated person, or an affiliated person of an affiliated person,
of a Fund of Funds because an investment adviser to the ETF,
business development company, or closed-end fund or an entity
controlling, controlled by or under common control with the
investment adviser to the ETF, business development company, or
closed-end fund, is also an investment adviser to the Fund of Funds.
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2. Applicants agree that any order granting the requested relief
will be subject to the terms and conditions stated in the application.
Such terms and conditions are designed to, among other things, help
prevent any potential
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(i) undue influence over an Underlying Fund that is not in the same
``group of investment companies'' as the Fund of Funds through control
or voting power, or in connection with certain services, transactions,
and underwritings, (ii) excessive layering of fees, and (iii) overly
complex fund structures, which are the concerns underlying the limits
in sections 12(d)(1)(A), (B), and (C) of the Act.
3. 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. Section 17(b) of the Act authorizes the
Commission to grant an order permitting a transaction otherwise
prohibited by section 17(a) if it finds that (a) the terms of the
proposed transaction are fair and reasonable and do not involve
overreaching on the part of any person concerned; (b) the proposed
transaction is consistent with the policies of each registered
investment company involved; and (c) the proposed transaction is
consistent with the general purposes of the Act. Section 6(c) of the
Act permits the Commission to exempt any persons or transactions from
any provision of the Act 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.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19979 Filed 9-13-19; 8:45 am]
BILLING CODE 8011-01-P