80 FR 29775 - BMO Funds, Inc. and BMO Asset Management Corp.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 99 (May 22, 2015)

Page Range		29775-29778
FR Document		2015-12381
Federal Register, Volume 80 Issue 99 (Friday, May 22, 2015)
[Federal Register Volume 80, Number 99 (Friday, May 22, 2015)]
[Notices]
[Pages 29775-29778]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-12381]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31603; 812-14370]


BMO Funds, Inc. and BMO Asset Management Corp.; Notice of 
Application

May 15, 2015.
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.

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Summary of Application: Applicants request an order that would permit 
them to enter into and materially amend sub-advisory agreements with 
Wholly-Owned Sub-Advisers (as defined below) and non-affiliated sub-
advisers without shareholder approval and would grant relief from 
certain disclosure requirements.

Applicants: BMO Funds, Inc. (the ``Company'') and BMO Asset Management 
Corp. (the ``Adviser'').

Filing Dates: The application was filed October 10, 2014, and amended 
on January 30, 2015, and May 8, 2015.

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 June 9, 2015 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 of 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, 111 East Kilbourn 
Avenue, Suite 200, Milwaukee, WI 53202.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at 
(202) 551-6811, or Danielle Marchesani, Branch Chief, at (202) 551-6821 
(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 Company is organized as a Wisconsin corporation and is 
registered under the Act as an open-end management investment company. 
The Company currently has, or intends to introduce, at least one series 
of shares (each, a ``Series''), with its own distinct investment 
objective, policies and restrictions, that would operate under a multi-
manager structure. The Adviser is a Delaware corporation and is 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (``Advisers Act'').\1\ The Adviser is an indirect wholly-owned 
subsidiary of the Bank of Montreal, a Canadian bank holding company.
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    \1\ Applicants request that the relief apply to applicants, as 
well as to any future Series and any other existing or future 
registered open-end investment management company or series thereof 
that: (a) Is advised by the Adviser; (b) uses the multi-manager 
structure described in the application (``Multi-Manager 
Structure''); and (c) complies with the terms and conditions of the 
application (``Sub-Advised Series''). All registered open-end 
investment companies that currently intend to rely on the requested 
order are named as applicants. Any entity that relies on the 
requested order will do so only in accordance with the terms and 
conditions contained in the application. If the name of any Sub-
Advised Series contains the name of a sub-adviser (as defined 
below), the name of the Adviser that serves as the primary adviser 
to the Sub-Advised Series, or a trademark or trade name that is 
owned by or publicly used to identify that Adviser, will precede the 
name of the sub-adviser.
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    2. Each Series has, or will have, as its investment adviser, the 
Adviser, or an entity controlling, controlled by or under common 
control with the Adviser or its successors (included in the term, the 
``Adviser'').\2\ An Adviser serves, or will serve, as the investment 
adviser to each Series pursuant to an investment advisory agreement 
with the Company (the ``Investment Management Agreement''). Each 
Investment Management Agreement has been or will be approved by the 
board of directors (the ``Board''),\3\ including a majority of the 
members of the Board who are not ``interested persons,'' as defined in 
section 2(a)(19) of the Act, of the Series, or the Adviser 
(``Independent Board Members''), and by the shareholders of the 
relevant Series as required by sections 15(a) and 15(c) of the Act and 
rule 18f-2 thereunder. The terms of these Investment Management 
Agreements comply or will comply with section 15(a) of the Act.
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    \2\ Each Adviser is, or will be, registered with the Commission 
as an investment adviser under the Advisers Act. For the 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.
    \3\ The term ``Board'' also includes the board of trustees or 
directors of a future Sub-Advised Series.
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    3. Under the terms of each Investment Management Agreement, the 
Adviser, subject to the supervision of the Board, will provide 
continuous investment management of the assets of each Series. The 
Adviser will periodically review a Series' investment policies and 
strategies, and based on the need of a particular Series may recommend 
changes to the investment policies and strategies of the Series for 
consideration by the Board. For its services to each Series under the 
applicable Investment Management Agreement, the Adviser will receive an 
investment management fee from that Series. Each Investment Management 
Agreement provides that the Adviser may, subject to the approval of the 
Board, including a majority of the Independent Board Members, and the 
shareholders of the applicable Sub-Advised Series (if required), 
delegate portfolio management responsibilities of all or a portion of 
the assets of a Sub-Advised Series to one or more Sub-Advisers.\4\
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    \4\ A ``Sub-Adviser'' is (a) an indirect or direct ``wholly-
owned subsidiary'' (as such term is defined in the Act) of the 
Adviser for that Series; (b) a sister company of the Adviser for 
that Series that is an indirect or direct ``wholly-owned 
subsidiary'' (as such term is defined in the Act) of the same 
company that, indirectly or directly, wholly owns the Adviser (each 
of (a) and (b), a ``Wholly-Owned Sub-Adviser'' and collectively, the 
Wholly-Owned Sub-Advisers''), or (c) an investment sub-adviser for 
that Series that is not an ``affiliated person'' (as such term is 
defined in section 2(a)(3) of the Act) of the Series, or the 
Adviser, except to the extent that an affiliation arises solely 
because the sub-adviser serves as a sub-adviser to one or more 
Series (each, a ``Non-Affiliated Sub-Adviser'').

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[[Page 29776]]

    4. Applicants request an order to permit the Adviser, subject to 
the approval of the Board, including a majority of the Independent 
Board Members, to, without obtaining shareholder approval: (i) Select 
Sub-Advisers to manage all or a portion of the assets of a Series and 
enter into Sub-Advisory Agreements (as defined below) with the Sub-
Advisers, and (ii) materially amend Sub-Advisory Agreements with the 
Sub-Advisers.\5\ The requested relief will not extend to any sub-
adviser, other than a Wholly-Owned Sub-Adviser, that is an affiliated 
person, as defined in section 2(a)(3) of the Act, of the Sub-Advised 
Series, or the Adviser, other than by reason of serving as a sub-
adviser to one or more of the Sub-Advised Series (``Affiliated Sub-
Adviser'').
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    \5\ Shareholder approval will continue to be required for any 
other sub-adviser changes (not otherwise permitted by application, 
law or rule) and material amendments to an existing sub-advisory 
agreement with any sub-adviser other than a Non-Affiliated Sub-
Adviser or a Wholly-Owned Sub-Adviser (all such changes and 
amendments referred to as ``Ineligible Sub-Adviser Changes'').
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    5. Pursuant to each Investment Management Agreement, the Adviser 
has overall responsibility for the management and investment of the 
assets of each Sub-Advised Series. These responsibilities include 
recommending the removal or replacement of Sub-Advisers, determining 
the portion of that Sub-Advised Series' assets to be managed by any 
given Sub-Adviser and reallocating those assets as necessary from time 
to time.
    6. The Adviser may enter into sub-advisory agreements with various 
Sub-Advisers (``Sub-Advisory Agreements'') to provide investment 
management services to the Sub-Advised Series. The terms of each Sub-
Advisory Agreement comply or will comply fully with the requirements of 
section 15(a) of the Act and have been or will be approved by the 
Board, including a majority of the Independent Board Members and the 
initial shareholder of the applicable Sub-Advised Series, in accordance 
with sections 15(a) and 15(c) of the Act and rule 18f-2 thereunder. The 
Sub-Advisers, subject to the supervision of the Adviser and oversight 
of the Board, will determine the securities and other investments to be 
purchased or sold by a Sub-Advised Series and place orders with brokers 
or dealers that they select. The Adviser will compensate the Sub-
Advisers out of the fee paid to the Adviser under the Investment 
Management Agreement.\6\
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    \6\ A Sub-Advised Series also may pay advisory fees directly to 
a Sub-Adviser.
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    7. Sub-Advised Series will inform shareholders of the hiring of a 
new Sub-Adviser pursuant to the following procedures (``Modified Notice 
and Access Procedures''): (a) Within 90 days after a new Sub-Adviser is 
hired for any Sub-Advised Series, that Sub-Advised Series will send its 
shareholders either a Multi-manager Notice or a Multi-manager Notice 
and Multi-manager Information Statement; \7\ and (b) the Sub-Advised 
Series 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 the application, a proxy solicitation to approve the 
appointment of new Sub-Advisers provides no more meaningful information 
to shareholders than the proposed Multi-manager Information Statement. 
Applicants state that the Board would comply with the requirements of 
sections 15(a) and 15(c) of the Act before entering into or amending 
Sub-Advisory Agreements.
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    \7\ 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 (``1934 Act''), and specifically will, among 
other things: (a) Summarize the relevant information regarding the 
new Sub-Adviser (except as modified to permit Aggregate Fee 
Disclosure (as defined below)); (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 Sub-Advised Series. A ``Multi-manager Information Statement'' 
will meet the requirements of Regulation 14C, Schedule 14C and Item 
22 of Schedule 14A under the 1934 Act for an information statement, 
except as modified by the requested order to permit Aggregate Fee 
Disclosure. Multi-manager Information Statements will be filed with 
the Commission via the EDGAR system.
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    8. Applicants also request an order exempting the Sub-Advised 
Series from certain disclosure obligations that may require each Sub-
Advised Series to disclose fees paid by the Adviser to each Sub-
Adviser. Applicants seek relief to permit each Sub-Advised Series to 
disclose (as a dollar amount and a percentage of the Sub-Advised 
Series' net assets): (a) The aggregate fees paid to the Adviser and any 
Wholly-Owned Sub-Advisers; (b) the aggregate fees paid to Non-
Affiliated Sub-Advisers; and (c) the fee paid to each Affiliated Sub-
Adviser (collectively, the ``Aggregate Fee Disclosure'').

Applicants' Legal Analysis

    1. Section 15(a) of the Act states, in part, that is unlawful for 
any person to act as an investment adviser to a registered investment 
company ``except pursuant to a written contract, which contract, 
whether with such registered company or with an investment adviser of 
such registered company, has been approved by the vote of a majority of 
the outstanding voting securities of such registered company.'' 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 a registered 
investment company to disclose in its statement of additional 
information the method of computing the ``advisory fee payable'' by the 
investment company, including the total dollar amounts that the 
investment company ``paid to the adviser (aggregated with amounts paid 
to affiliated advisers, if any), and any advisers who are not 
affiliated persons of the adviser, under the investment advisory 
contract for the last three fiscal years.''
    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 fee,'' 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 under the Securities Act of 1933 sets forth the 
requirements for financial statements required to be included as part 
of a registered investment company's registration statement and 
shareholder

[[Page 29777]]

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 by order 
upon application may conditionally or unconditionally 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 their 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 Sub-
Advisers who are in the best position to achieve the Sub-Advised 
Series' investment objectives. Applicants assert that, from the 
perspective of the shareholder, the role of the Sub-Advisers is 
substantially equivalent to the role of the individual portfolio 
managers employed by an investment adviser to a traditional investment 
company. Applicants believe that permitting the Adviser to perform the 
duties for which the shareholders of the Sub-Advised Series are paying 
the Adviser the selection, supervision and evaluation of the Sub-
Advisers without incurring unnecessary delays or expenses is 
appropriate in the interests of the Sub-Advised Series' shareholders 
and will allow such Sub-Advised Series to operate more efficiently. 
Applicants state that each Investment Management Agreement will 
continue to be fully subject to section 15(a) of the Act and rule 18f-2 
under the Act, and approved by the Board, including a majority of the 
Independent Board Members, in the manner required by sections 15(a) and 
15(c) of the Act. Applicants are not seeking an exemption with respect 
to the Investment Management Agreements.
    7. Applicants assert that disclosure of the individual fees that 
the Adviser would pay to the Sub-Advisers of Sub-Advised Series that 
operate under the multi-manager structure described in the application 
would not serve any meaningful purpose. Applicants contend that the 
primary reasons for requiring disclosure of individual fees paid to 
Sub-Advisers are to inform shareholders of expenses to be charged by a 
particular Sub-Advised Series and to enable shareholders to compare the 
fees to those of other comparable investment companies. Applicants 
believe that the requested relief satisfies these objectives because 
the advisory fee paid to the Adviser will be fully disclosed and, 
therefore, shareholders will know what the Sub-Advised Series' fees and 
expenses are and will be able to compare the advisory fees a Sub-
Advised Series is charged to those of other investment companies. 
Applicants assert that the requested disclosure relief would benefit 
shareholders of the Sub-Advised Series because it would improve the 
Adviser's ability to negotiate the fees paid to Sub-Advisers. 
Applicants state that the Adviser may be able to negotiate rates that 
are below a Sub-Adviser's ``posted'' amounts if the Adviser is not 
required to disclose the Sub-Advisers' fees to the public. Applicants 
submit that the relief requested to use Aggregate Fee Disclosure will 
encourage Sub-Advisers to negotiate lower subadvisory fees with the 
Adviser if the lower fees are not required to be made public.
    8. For the reasons discussed above, applicants submit that the 
requested relief meets the standards for relief under section 6(c) of 
the Act. Applicants state that the operation of the Sub-Advised Series 
in the manner described in the application must be approved by 
shareholders of a Sub-Advised Series before that Sub-Advised Series may 
rely on the requested relief. In addition, applicants state that the 
proposed conditions to the requested relief are designed to address any 
potential conflicts of interest, including any posed by the use of 
Wholly-Owned Sub-Advisers, and provide that shareholders are informed 
when new Sub-Advisers are hired. Applicants assert that conditions 6, 
10 and 11 are designed to provide the Board with sufficient 
independence and the resources and information it needs to monitor and 
address any conflicts of interest with affiliated persons of the 
Adviser, including Wholly-Owned Sub-Advisers. Applicants state that, 
accordingly, they believe the requested relief 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' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions: \8\
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    \8\ Applicants will only comply with conditions 7, 8, 9 and 12 
if they rely on the relief that would allow them to provide 
Aggregate Fee Disclosure.
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    1. Before a Sub-Advised Series may rely on the order requested in 
the application, the operation of the Sub-Advised Series in the manner 
described in the application, including the hiring of Wholly-Owned Sub-
Advisers, will be, or has been, approved by a majority of the Sub-
Advised Series' outstanding voting securities, as defined in the Act, 
or, in the case of a new Sub-Advised Series whose public shareholders 
purchase shares on the basis of a prospectus containing the disclosure 
contemplated by condition 2 below, by the sole initial shareholder 
before offering the Sub-Advised Series' shares to the public.
    2. The prospectus for each Sub-Advised Series will disclose the 
existence, substance, and effect of any order granted pursuant to the 
application. Each Sub-Advised Series will hold itself out to the public 
as employing the multi-manager structure described in the application. 
Each prospectus will prominently disclose that the Adviser has ultimate 
responsibility, subject to oversight by the Board, to oversee the Sub-
Advisers and recommend their hiring, termination, and replacement.
    3. The Adviser will provide general management services to each 
Sub-Advised Series, including overall supervisory responsibility for 
the general management and investment of the Sub-Advised Series' 
assets. Subject to review and approval of the Board, the Adviser will: 
(i) Set the Sub-Advised Series' overall investment strategies; (ii) 
evaluate, select and recommend Sub-Advisers to manage all or a portion 
of the Sub-Advised Series' assets; and (iii) implement procedures 
reasonably designed to ensure that Sub-Advisers comply with a Sub-
Advised Series' investment objectives, policies and restrictions. 
Subject to review by the Board, the Adviser will (i) when appropriate, 
allocate and reallocate the Sub-Advised Series' assets among multiple 
Sub-Advisers; and (ii) monitor and evaluate the performance of Sub-
Advisers.
    4. A Sub-Advised Series will not make any Ineligible Sub-Adviser 
Changes without the approval of the shareholders of the applicable Sub-
Advised Series.
    5. A Sub-Advised Series will inform shareholders of the hiring of a 
new Sub-Adviser within 90 days after the hiring of the new Sub-Adviser 
pursuant to the Modified Notice and Access Procedures.
    6. At all times, at least a majority of the Board will be 
Independent Board Members, and the selection and nomination of new or 
additional Independent Board Members will be

[[Page 29778]]

placed within the discretion of the then-existing Independent Board 
Members.
    7. Independent legal counsel, as defined in rule 0-1(a)(6) under 
the Act, will be engaged to represent the Independent Board Members. 
The selection of such counsel will be within the discretion of the then 
existing Independent Board Members.
    8. The Adviser will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Adviser on a 
per Sub-Advised Series basis. The information will reflect the impact 
on profitability of the hiring or termination of any sub-adviser during 
the applicable quarter.
    9. Whenever a sub-adviser is hired or terminated, the Adviser will 
provide the Board with information showing the expected impact on the 
profitability of the Adviser.
    10. Whenever a sub-adviser change is proposed for a Sub-Advised 
Series with an Affiliated Sub-Adviser or a Wholly-Owned Sub-Adviser, 
the Board, including a majority of the Independent Board Members, will 
make a separate finding, reflected in the Board minutes, that such 
change is in the best interests of the Sub-Advised Series and its 
shareholders and does not involve a conflict of interest from which the 
Adviser or the Affiliated Sub-Adviser or Wholly-Owned Sub-Adviser 
derives an inappropriate advantage.
    11. No director or officer of a Sub-Advised Series, 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 Sub-Adviser, except for (i) ownership of 
interests in the Adviser or any entity, other than a Wholly-Owned Sub-
Adviser 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 a publicly traded company 
that is either a Sub-Adviser or an entity that controls, is controlled 
by, or is under common control with a Sub-Adviser.
    12. Each Sub-Advised Series will disclose the Aggregate Fee 
Disclosure in its registration statement.
    13. 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.
    14. Any new Sub-Advisory Agreement or any amendment to a Sub-
Advised Series' existing Investment Management Agreement or Sub-
Advisory Agreement that directly or indirectly results in an increase 
in the aggregate advisory fee rate payable by the Sub-Advised Series 
will be submitted to the Sub-Advised Series' shareholders for approval.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12381 Filed 5-21-15; 8:45 am]
BILLING CODE 8011-01-P
29776 Federal Register / Vol. 80, No. 99 / Friday, May 22, 2015 / Notices

4. Applicants request an order to Advisers, subject to the supervision of Sub-Adviser. Applicants seek relief to
permit the Adviser, subject to the the Adviser and oversight of the Board, permit each Sub-Advised Series to
approval of the Board, including a will determine the securities and other disclose (as a dollar amount and a
majority of the Independent Board investments to be purchased or sold by percentage of the Sub-Advised Series’
Members, to, without obtaining a Sub-Advised Series and place orders net assets): (a) The aggregate fees paid
shareholder approval: (i) Select Sub- with brokers or dealers that they select. to the Adviser and any Wholly-Owned
Advisers to manage all or a portion of The Adviser will compensate the Sub- Sub-Advisers; (b) the aggregate fees paid
the assets of a Series and enter into Sub- Advisers out of the fee paid to the to Non-Affiliated Sub-Advisers; and (c)
Advisory Agreements (as defined below) Adviser under the Investment the fee paid to each Affiliated Sub-
with the Sub-Advisers, and (ii) Management Agreement.6 Adviser (collectively, the ‘‘Aggregate
materially amend Sub-Advisory 7. Sub-Advised Series will inform Fee Disclosure’’).
Agreements with the Sub-Advisers.5 shareholders of the hiring of a new Sub-
Adviser pursuant to the following Applicants’ Legal Analysis
The requested relief will not extend to
any sub-adviser, other than a Wholly- procedures (‘‘Modified Notice and 1. Section 15(a) of the Act states, in
Owned Sub-Adviser, that is an affiliated Access Procedures’’): (a) Within 90 days part, that is unlawful for any person to
person, as defined in section 2(a)(3) of after a new Sub-Adviser is hired for any act as an investment adviser to a
the Act, of the Sub-Advised Series, or Sub-Advised Series, that Sub-Advised registered investment company ‘‘except
the Adviser, other than by reason of Series will send its shareholders either pursuant to a written contract, which
serving as a sub-adviser to one or more a Multi-manager Notice or a Multi- contract, whether with such registered
of the Sub-Advised Series (‘‘Affiliated manager Notice and Multi-manager company or with an investment adviser
Sub-Adviser’’). Information Statement; 7 and (b) the of such registered company, has been
5. Pursuant to each Investment Sub-Advised Series will make the approved by the vote of a majority of the
Management Agreement, the Adviser Multi-manager Information Statement outstanding voting securities of such
has overall responsibility for the available on the Web site identified in registered company.’’ Rule 18f–2 under
management and investment of the the Multi-manager Notice no later than the Act provides that each series or class
assets of each Sub-Advised Series. when the Multi-manager Notice (or of stock in a series investment company
These responsibilities include Multi-manager Notice and Multi- affected by a matter must approve that
recommending the removal or manager Information Statement) is first matter if the Act requires shareholder
replacement of Sub-Advisers, sent to shareholders, and will maintain approval.
determining the portion of that Sub- it on that Web site for at least 90 days. 2. Form N–1A is the registration
Advised Series’ assets to be managed by In the circumstances described in the statement used by open-end investment
any given Sub-Adviser and reallocating application, a proxy solicitation to companies. Item 19(a)(3) of Form N–1A
those assets as necessary from time to approve the appointment of new Sub- requires a registered investment
time. Advisers provides no more meaningful company to disclose in its statement of
6. The Adviser may enter into sub- information to shareholders than the additional information the method of
advisory agreements with various Sub- proposed Multi-manager Information computing the ‘‘advisory fee payable’’
Advisers (‘‘Sub-Advisory Agreements’’) Statement. Applicants state that the by the investment company, including
to provide investment management Board would comply with the the total dollar amounts that the
services to the Sub-Advised Series. The requirements of sections 15(a) and 15(c) investment company ‘‘paid to the
terms of each Sub-Advisory Agreement of the Act before entering into or adviser (aggregated with amounts paid
comply or will comply fully with the amending Sub-Advisory Agreements. to affiliated advisers, if any), and any
requirements of section 15(a) of the Act 8. Applicants also request an order advisers who are not affiliated persons
and have been or will be approved by exempting the Sub-Advised Series from of the adviser, under the investment
the Board, including a majority of the certain disclosure obligations that may advisory contract for the last three fiscal
Independent Board Members and the require each Sub-Advised Series to years.’’
initial shareholder of the applicable disclose fees paid by the Adviser to each 3. Rule 20a–1 under the Act requires
Sub-Advised Series, in accordance with proxies solicited with respect to a
sections 15(a) and 15(c) of the Act and 6 A Sub-Advised Series also may pay advisory registered investment company to
rule 18f–2 thereunder. The Sub- fees directly to a Sub-Adviser. comply with Schedule 14A under the
7 A ‘‘Multi-manager Notice’’ will be modeled on
Exchange Act. Items 22(c)(1)(ii),
a Notice of Internet Availability as defined in rule
defined in the Act) of the Adviser for that Series; 14a–16 under the Securities Exchange Act of 1934 22(c)(1)(iii), 22(c)(8) and 22(c)(9) of
(b) a sister company of the Adviser for that Series (‘‘1934 Act’’), and specifically will, among other Schedule 14A, taken together, require a
that is an indirect or direct ‘‘wholly-owned things: (a) Summarize the relevant information proxy statement for a shareholder
subsidiary’’ (as such term is defined in the Act) of regarding the new Sub-Adviser (except as modified
the same company that, indirectly or directly,
meeting at which the advisory contract
to permit Aggregate Fee Disclosure (as defined
wholly owns the Adviser (each of (a) and (b), a below)); (b) inform shareholders that the Multi- will be voted upon to include the ‘‘rate
‘‘Wholly-Owned Sub-Adviser’’ and collectively, the manager Information Statement is available on a of compensation of the investment
Wholly-Owned Sub-Advisers’’), or (c) an Web site; (c) provide the Web site address; (d) state adviser,’’ the ‘‘aggregate amount of the
investment sub-adviser for that Series that is not an the time period during which the Multi-manager
‘‘affiliated person’’ (as such term is defined in
investment adviser’s fee,’’ a description
Information Statement will remain available on that
section 2(a)(3) of the Act) of the Series, or the Web site; (e) provide instructions for accessing and of the ‘‘terms of the contract to be acted
Adviser, except to the extent that an affiliation printing the Multi-manager Information Statement; upon,’’ and, if a change in the advisory
arises solely because the sub-adviser serves as a fee is proposed, the existing and
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and (f) instruct the shareholder that a paper or
sub-adviser to one or more Series (each, a ‘‘Non- email copy of the Multi-manager Information
Affiliated Sub-Adviser’’).
proposed fees and the difference
Statement may be obtained, without charge, by
5 Shareholder approval will continue to be contacting the Sub-Advised Series. A ‘‘Multi- between the two fees.
required for any other sub-adviser changes (not manager Information Statement’’ will meet the 4. Regulation S–X under the
otherwise permitted by application, law or rule) requirements of Regulation 14C, Schedule 14C and Securities Act of 1933 sets forth the
and material amendments to an existing sub- Item 22 of Schedule 14A under the 1934 Act for an requirements for financial statements
advisory agreement with any sub-adviser other than information statement, except as modified by the
a Non-Affiliated Sub-Adviser or a Wholly-Owned requested order to permit Aggregate Fee Disclosure.
required to be included as part of a
Sub-Adviser (all such changes and amendments Multi-manager Information Statements will be filed registered investment company’s
referred to as ‘‘Ineligible Sub-Adviser Changes’’). with the Commission via the EDGAR system. registration statement and shareholder

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Federal Register / Vol. 80, No. 99 / Friday, May 22, 2015 / Notices 29777

reports filed with the Commission. fees to those of other comparable 1. Before a Sub-Advised Series may
Sections 6–07(2)(a), (b), and (c) of investment companies. Applicants rely on the order requested in the
Regulation S–X require a registered believe that the requested relief satisfies application, the operation of the Sub-
investment company to include in its these objectives because the advisory fee Advised Series in the manner described
financial statement information about paid to the Adviser will be fully in the application, including the hiring
the investment advisory fees. disclosed and, therefore, shareholders of Wholly-Owned Sub-Advisers, will be,
5. Section 6(c) of the Act provides that will know what the Sub-Advised Series’ or has been, approved by a majority of
the Commission by order upon fees and expenses are and will be able the Sub-Advised Series’ outstanding
application may conditionally or to compare the advisory fees a Sub- voting securities, as defined in the Act,
unconditionally exempt any person, Advised Series is charged to those of or, in the case of a new Sub-Advised
security, or transaction or any class or other investment companies. Applicants Series whose public shareholders
classes of persons, securities, or assert that the requested disclosure purchase shares on the basis of a
transactions from any provisions of the relief would benefit shareholders of the prospectus containing the disclosure
Act, or from any rule thereunder, if such Sub-Advised Series because it would contemplated by condition 2 below, by
exemption is necessary or appropriate improve the Adviser’s ability to the sole initial shareholder before
in the public interest and consistent negotiate the fees paid to Sub-Advisers. offering the Sub-Advised Series’ shares
with the protection of investors and the Applicants state that the Adviser may be to the public.
purposes fairly intended by the policy able to negotiate rates that are below a 2. The prospectus for each Sub-
and provisions of the Act. Applicants Sub-Adviser’s ‘‘posted’’ amounts if the Advised Series will disclose the
state that their requested relief meets Adviser is not required to disclose the existence, substance, and effect of any
this standard for the reasons discussed Sub-Advisers’ fees to the public. order granted pursuant to the
below. Applicants submit that the relief application. Each Sub-Advised Series
6. Applicants assert that the requested to use Aggregate Fee will hold itself out to the public as
shareholders expect the Adviser, subject Disclosure will encourage Sub-Advisers employing the multi-manager structure
to the review and approval of the Board, to negotiate lower subadvisory fees with described in the application. Each
to select the Sub-Advisers who are in the Adviser if the lower fees are not prospectus will prominently disclose
the best position to achieve the Sub- required to be made public. that the Adviser has ultimate
Advised Series’ investment objectives. responsibility, subject to oversight by
Applicants assert that, from the 8. For the reasons discussed above, the Board, to oversee the Sub-Advisers
perspective of the shareholder, the role applicants submit that the requested and recommend their hiring,
of the Sub-Advisers is substantially relief meets the standards for relief termination, and replacement.
equivalent to the role of the individual under section 6(c) of the Act. Applicants 3. The Adviser will provide general
portfolio managers employed by an state that the operation of the Sub- management services to each Sub-
investment adviser to a traditional Advised Series in the manner described Advised Series, including overall
investment company. Applicants in the application must be approved by supervisory responsibility for the
believe that permitting the Adviser to shareholders of a Sub-Advised Series general management and investment of
perform the duties for which the before that Sub-Advised Series may rely the Sub-Advised Series’ assets. Subject
shareholders of the Sub-Advised Series on the requested relief. In addition, to review and approval of the Board, the
are paying the Adviser the selection, applicants state that the proposed Adviser will: (i) Set the Sub-Advised
supervision and evaluation of the Sub- conditions to the requested relief are Series’ overall investment strategies; (ii)
Advisers without incurring unnecessary designed to address any potential evaluate, select and recommend Sub-
delays or expenses is appropriate in the conflicts of interest, including any Advisers to manage all or a portion of
interests of the Sub-Advised Series’ posed by the use of Wholly-Owned Sub- the Sub-Advised Series’ assets; and (iii)
shareholders and will allow such Sub- Advisers, and provide that shareholders implement procedures reasonably
Advised Series to operate more are informed when new Sub-Advisers designed to ensure that Sub-Advisers
efficiently. Applicants state that each are hired. Applicants assert that comply with a Sub-Advised Series’
Investment Management Agreement will conditions 6, 10 and 11 are designed to investment objectives, policies and
continue to be fully subject to section provide the Board with sufficient restrictions. Subject to review by the
15(a) of the Act and rule 18f–2 under independence and the resources and Board, the Adviser will (i) when
the Act, and approved by the Board, information it needs to monitor and appropriate, allocate and reallocate the
including a majority of the Independent address any conflicts of interest with Sub-Advised Series’ assets among
Board Members, in the manner required affiliated persons of the Adviser, multiple Sub-Advisers; and (ii) monitor
by sections 15(a) and 15(c) of the Act. including Wholly-Owned Sub-Advisers. and evaluate the performance of Sub-
Applicants are not seeking an Applicants state that, accordingly, they Advisers.
exemption with respect to the believe the requested relief is necessary 4. A Sub-Advised Series will not
Investment Management Agreements. or appropriate in the public interest and make any Ineligible Sub-Adviser
7. Applicants assert that disclosure of consistent with the protection of Changes without the approval of the
the individual fees that the Adviser investors and the purposes fairly shareholders of the applicable Sub-
would pay to the Sub-Advisers of Sub- intended by the policy and provisions of Advised Series.
Advised Series that operate under the the Act. 5. A Sub-Advised Series will inform
multi-manager structure described in shareholders of the hiring of a new Sub-
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the application would not serve any Applicants’ Conditions
Adviser within 90 days after the hiring
meaningful purpose. Applicants Applicants agree that any order of the new Sub-Adviser pursuant to the
contend that the primary reasons for granting the requested relief will be Modified Notice and Access Procedures.
requiring disclosure of individual fees subject to the following conditions: 8 6. At all times, at least a majority of
paid to Sub-Advisers are to inform the Board will be Independent Board
shareholders of expenses to be charged 8 Applicants will only comply with conditions 7, Members, and the selection and
by a particular Sub-Advised Series and 8, 9 and 12 if they rely on the relief that would nomination of new or additional
to enable shareholders to compare the allow them to provide Aggregate Fee Disclosure. Independent Board Members will be

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29778 Federal Register / Vol. 80, No. 99 / Friday, May 22, 2015 / Notices

placed within the discretion of the then- aggregate advisory fee rate payable by the Commission’s Public Reference
existing Independent Board Members. the Sub-Advised Series will be Room.
7. Independent legal counsel, as submitted to the Sub-Advised Series’
defined in rule 0–1(a)(6) under the Act, shareholders for approval. II. Self-Regulatory Organization’s
will be engaged to represent the Statement of the Purpose of, and
For the Commission, by the Division of Statutory Basis for, the Proposed Rule
Independent Board Members. The Investment Management, under delegated
selection of such counsel will be within authority. Change
the discretion of the then existing Robert W. Errett, In its filing with the Commission, the
Independent Board Members. Deputy Secretary.
8. The Adviser will provide the Exchange included statements
Board, no less frequently than quarterly,
[FR Doc. 2015–12381 Filed 5–21–15; 8:45 am] concerning the purpose of and basis for
with information about the profitability BILLING CODE 8011–01–P the proposed rule change and discussed
of the Adviser on a per Sub-Advised any comments it received on the
Series basis. The information will reflect proposed rule change. The text of these
SECURITIES AND EXCHANGE statements may be examined at the
the impact on profitability of the hiring COMMISSION
or termination of any sub-adviser during places specified in Item IV below. The
the applicable quarter. [Release No. 34–74985; File No. SR–EDGX– Exchange has prepared summaries, set
9. Whenever a sub-adviser is hired or 2015–21] forth in Sections A, B, and C below, of
terminated, the Adviser will provide the the most significant parts of such
Board with information showing the Self-Regulatory Organizations; EDGX statements.
expected impact on the profitability of Exchange, Inc.; Notice of Filing of a
the Adviser. Proposed Rule Change, and (A) Self-Regulatory Organization’s
10. Whenever a sub-adviser change is Amendment No. 1 Thereto, To Amend Statement of the Purpose of, and
proposed for a Sub-Advised Series with Rule 11.2 To State That EDGX Statutory Basis for, the Proposed Rule
an Affiliated Sub-Adviser or a Wholly- Exchange, Inc. Will Not Designate for Change
Owned Sub-Adviser, the Board, Trading Any Security Admitted to
Unlisted Trading Privileges on the 1. Purpose
including a majority of the Independent
Board Members, will make a separate Exchange Unless That Security With limited exception, the current
finding, reflected in the Board minutes, Satisfies Certain Liquidity equity market structure under
that such change is in the best interests Requirements Regulation NMS applies the same rules
of the Sub-Advised Series and its May 18, 2015. with respect to, among other things, tick
shareholders and does not involve a Pursuant to Section 19(b)(1) of the sizes, order protection, locked and
conflict of interest from which the Securities Exchange Act of 1934 (the crossed markets, and access fees to all
Adviser or the Affiliated Sub-Adviser or ‘‘Act’’),1 and Rule 19b–4 thereunder,2 exchange-listed securities. The
Wholly-Owned Sub-Adviser derives an notice is hereby given that on May 5, Exchange believes that Regulation NMS,
inappropriate advantage. 2015, EDGX Exchange, Inc. (the along with technological advancements,
11. No director or officer of a Sub- ‘‘Exchange’’ or ‘‘EDGX’’) filed with the has produced great efficiencies to the
Advised Series, or director or officer of Securities and Exchange Commission equity market, resulting in intense
the Adviser, will own directly or (‘‘Commission’’) the proposed rule competition between exchanges and
indirectly (other than through a pooled change as described in Items I, II, and broker-dealers. The Exchange believes
investment vehicle that is not controlled III below, which Items have been the net result for most exchange-listed
by such person) any interest in a Sub- prepared by the Exchange. On May 15, securities has been decreases in
Adviser, except for (i) ownership of 2015, BATS filed Amendment No. 1 to transaction costs, including decreases in
interests in the Adviser or any entity, the proposal. Amendment No. 1 explicit commissions and the narrowing
other than a Wholly-Owned Sub- amended and replaced the original of effective spreads investors pay to
Adviser that controls, is controlled by, proposal in its entirety. The enter and exit positions. However, the
or is under common control with the Commission is publishing this notice to Exchange recognizes that not all
Adviser; or (ii) ownership of less than solicit comments on the proposed rule exchange-listed securities have
1% of the outstanding securities of any change, as modified by Amendment No. benefited to the same extent under the
class of equity or debt of a publicly 1, from interested persons. current one-size fits all approach to the
traded company that is either a Sub- equity market. In particular, investors
Adviser or an entity that controls, is I. Self-Regulatory Organization’s
Statement of the Terms of Substance of continue to experience difficulty trading
controlled by, or is under common illiquid securities, including paying
control with a Sub-Adviser. the Proposed Rule Change
higher effective spreads and difficulty
12. Each Sub-Advised Series will The Exchange filed a proposal to sourcing liquidity across multiple
disclose the Aggregate Fee Disclosure in amend Rule 11.2 to state that the exchanges and non-exchange trading
its registration statement. Exchange will not designate for trading venues while minimizing market
13. In the event the Commission any security admitted to unlisted impact.
adopts a rule under the Act providing trading privileges on the Exchange
substantially similar relief to that in the unless that security satisfies certain The Exchange believes the market
order requested in the application, the quality of securities that are today
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liquidity requirements, as further
requested order will expire on the described below. illiquid could benefit from a
effective date of that rule. The text of the proposed rule change concentration of quoted liquidity on the
14. Any new Sub-Advisory is available at the Exchange’s Web site listing exchange. By concentrating
Agreement or any amendment to a Sub- at www.batstrading.com, at the quoted liquidity on the listing exchange,
Advised Series’ existing Investment principal office of the Exchange, and at for the reasons discussed below, the
Management Agreement or Sub- Exchange believes liquidity providers
Advisory Agreement that directly or 1 15 U.S.C. 78s(b)(1). will quote more competitively, resulting
indirectly results in an increase in the 2 17 CFR 240.19b–4. in more efficient price formation and a

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Document Created: 2015-12-15 15:44:50
Document Modified: 2015-12-15 15:44:50
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
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.
Dates		The application was filed October 10, 2014, and amended on January 30, 2015, and May 8, 2015.
Contact		Jean E. Minarick, Senior Counsel, at (202) 551-6811, or Danielle Marchesani, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation		80 FR 29775