81 FR 26279 - Terra Capital Partners, LLC, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 84 (May 2, 2016)

Page Range		26279-26281
FR Document		2016-10109

Federal Register, Volume 81 Issue 84 (Monday, May 2, 2016)

[Federal Register Volume 81, Number 84 (Monday, May 2, 2016)]
[Notices]
[Pages 26279-26281]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2016-10109]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32097; 812-14645]

Terra Capital Partners, LLC, et al.; Notice of Application

April 26, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under sections 57(a)(4)
and 57(i) of the Investment Company Act of 1940 (the ``Act'') and rule
17d-1 under the Act permitting certain joint transactions otherwise
prohibited by section 57(a)(4) of the Act and rule 17d-1 under the Act.

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Summary of the Application: Terra Capital Partners, LLC (the
``Sponsor''), Terra Income Fund 6, Inc. (the ``Company''), Terra Income
Advisors, LLC (the ``Advisor''), on behalf of itself and its
successors,\1\ and Terra Capital Markets, LLC (the ``Dealer Manager''
and collectively with the Sponsor, the Company, and the Advisor, the
``Applicants''), on behalf of itself and its successors, request an
order to permit the Applicants to complete certain transactions in
connection with an amendment to the dealer-manager agreement entered
into by and among the Company, the Advisor, and the Dealer Manager.
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\1\ The term ``successor,'' as applied to each entity, means an
entity that results from a reorganization into another jurisdiction
or change in the type of business organization.

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Filing Date: The application was filed on April 25, 2016.

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 May 17, 2016, 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, Bruce D. Batkin,
Terra Income Fund 6, Inc., c/o Terra Capital Partners, LLC, 805 Third
Avenue, 8th Floor, New York, New York 10022.

FOR FURTHER INFORMATION CONTACT: Kieran G. Brown, Senior Counsel, at
(202) 551-6773, or James M. Curtis, Branch Chief, at (202) 551-6712
(Chief Counsel's Office, Division of Investment Management).

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 for 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 Sponsor is a Delaware limited liability company and served
as the organizer and sponsor of the Company. The Sponsor is also the
parent company of the Advisor and the Dealer Manager. Since its
formation in February 2001, the Sponsor has organized or acted as
investment manager for multiple private real estate investment funds
(``REITs'').
2. The Company, a Maryland corporation, is an externally managed,
non-diversified, closed-end management investment company that has
elected to be regulated as a business development company (``BDC'')
under the Act.\2\ The Company's investment Objectives and Strategies
\3\ are to pay attractive and stable cash distributions and to
preserve, protect and return capital contributions to the holders
(``Common Shareholders'') of the Company's common stock (``Common
Shares''). On March 2, 2015, the Company filed a public registration
statement on Form N-2 (the ``Registration Statement'') with the
Commission to offer its Common Shares in a continuous public offering
(the ``Offering''). The Registration Statement was declared effective
on April 20, 2015. Since commencing the Offering and through April 14,
2016, the Company has sold 2,444,185.856 Common Shares, including
Common Shares purchased by the Sponsor in both an initial private
placement and from the Offering. The Company currently has a five-
member board of directors (the ``Board'') of whom three are not
``interested persons'' of the Company within the meaning of section
2(a)(19) of the Act (the ``Non-interested Directors'').
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\2\ The Company was incorporated in Maryland in 2013 and
commenced operations on June 24, 2015, upon raising gross proceeds
in excess of $2.0 million in its initial public offering. Section
2(a)(48) defines a BDC to be any closed-end investment company that
operates for the purpose of making investments in securities
described in sections 55(a)(1) through 55(a)(3) of the Act and makes
available significant managerial assistance with respect to the
issuers of such securities.
\3\ The ``Objectives and Strategies'' means the investment
objectives and strategies, as described in the Registration
Statement, other filings the Company has made with the Commission
under the Securities Act of 1933, as amended or under the Securities
Exchange Act of 1934, as amended (the ``1934 Act''), and the
Company's reports to Common Shareholders.
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3. The Advisor is a Delaware limited liability company that is
registered as an investment adviser under the Investment Advisers Act
of 1940. The Advisor serves as the investment adviser to the Company.
4. The Dealer Manager is a Delaware limited liability company that
serves as the dealer manager of the Company pursuant to a dealer
manager agreement dated April 20, 2015 by and among the Company, the
Advisor and the Dealer Manager (the ``Dealer Manager Agreement''). The
Dealer Manager is duly registered as a broker-dealer pursuant to the
provisions of the 1934 Act, a member in good standing with the
Financial Industry Regulatory Authority, Inc. (``FINRA''), and a broker
dealer duly registered as such in those states where the Dealer Manager
is required to be registered in order to carry out the Offering.
5. Currently, the Common Shares are sold at a public offering price
of $12.50

[[Page 26280]]

per Common Share. This public offering price includes $1.25 in
underwriting compensation (the ``Underwriting Compensation'') payable
to the Dealer Manager. The Underwriting Compensation as set forth in
the current prospectus contained in the Registration Statement (the
``Prospectus'') consists of three components: A 6% selling commission,
a 3% dealer manager fee, and a 1% broker-dealer fee (collectively, the
``Upfront Sales Load''), all of which are paid to the Dealer Manager
and a portion of which is re-allowed to the selling broker-dealers as
set forth in the Prospectus. The Underwriting Compensation terms are
currently governed by the Dealer Manager Agreement.
6. The Board, including the Non-Interested Directors, has
determined that it is in the best interests of the Common Shareholders
to amend the Dealer Manager Agreement (the ``Dealer Manager Agreement
Amendment'') solely to change the Underwriting Compensation terms to
reduce the Upfront Sales Load and implement an asset-based, ongoing
distribution fee (a ``Distribution Fee''). The proposed change would
reduce the selling commissions and dealer manager fees from 6.0% and
3.0% to 3.0% and 1.5%, respectively, of gross offering proceeds or an
aggregate reduction in Upfront Sales Load of 4.5%. The proposed change
also implements the Distribution Fee of 1.125% of gross offering
proceeds, payable annually for four years, or 4.5%. The maximum
Distribution Fee of 4.5% is therefore equal to the reduction in the
Upfront Sales Load. All Common Shares will continue to have an offering
price of $12.50 per Common Share after the proposed change.
7. To ensure that, following the change in Underwriting
Compensation, the net proceeds to the Company from the sale of all
Common Shares will be equivalent, the Dealer Manager proposes to
reimburse to the Company an amount equal to the Distribution Fee to be
paid with respect to the Common Shares outstanding, or 4.5% of the
gross proceeds from the Offering, before the implementation of the
proposed Dealer Manager Agreement Amendment (the ``Distribution Fee
Reimbursement''). Once this amount is returned to the Company, (1) all
Common Shares will become subject to the same 5.5% Upfront Sales Load;
(2) all holders of Common Shares will become subject to the same
aggregate Distribution Fee of 4.5%; (3) the net proceeds to the Company
from the sale of all Common Shares (whether issued before or after the
implementation of the Dealer Manager Agreement Amendment) will be the
same, $11.25 per Common Share; and (4) all Common Shares will be
subject to the same 10% in Underwriting Compensation, consistent with
the limitations imposed by Conduct Rule 2310 of FINRA (``Conduct Rule
2310'').
8. Applicants believe that, if the Dealer Manager Agreement
Amendment is entered into, a greater amount of the existing and future
Common Shareholders' capital will be available for investment at an
earlier stage in the Company's investment cycle. This would permit the
Company and all Common Shareholders to benefit from the income
generated from such investments while the Distribution Fee Payment is
deferred, enable the Company to achieve its investment objectives and
acquire a diversified portfolio, and lead to greater demand for the
Company's Common Shares, which would further benefit the Common
Shareholders because of the lower operating expense ratio and Company
portfolio diversification resulting from such increased sales of Common
Shares.
9. The Company believes that the Dealer Manager Agreement Amendment
will enable the Common Shares to remain competitive with similar
investments sold by broker-dealers. Because the per share estimated
value of Common Shares that appears on customer account statements for
Common Shares with a low Upfront Sales Load combined with a
Distribution Fee is greater than the per share estimated value of
Common Shares with a high Upfront Sales Load and no Distribution Fee,
the Company believes that broker-dealers generally would prefer selling
Common Shares with a with a low Upfront Sales Load and a Distribution
Fee.\4\ To accommodate the needs of these broker-dealers, other
investment products (e.g., non-traded REITs) offer common shares with a
low Upfront Sales Load and a Distribution Fee, and the inability of the
Company to offer Common Shares with a similar fee structure places the
Company at a competitive disadvantage.
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\4\ NASD Rule 2340 requires, among other things, broker-dealers
to include on customer account statements a ``per share estimated
value'' for shares of non-traded, continuously offered BDCs and
certain similar investments. Amendments to NASD Rule 2340 effective
April 11, 2016 require, among other things, broker-dealers to
include on the customer account statements a ``per share estimated
value,'' generally the current public offering price of the Common
Shares minus sales charges and estimated organization and offering
expenses. Prior to the amendment of Rule 2340, the general industry
practice was to use the public offering price as the per share
estimated value on customer account statements.
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10. The Board, including the Non-Interested Directors, after
reviewing and evaluating the proposed transactions and the Dealer
Manager Agreement Amendment, determined that: (i) The Dealer Manager
Agreement Amendment is in the best interests of the Company and its
Common Shareholders; (ii) the services to be rendered by the Dealer
Manager are required for the operation of the Company; (iii) the Dealer
Manager can provide the services such that the nature and quality of
the services are at least equal to those provided by others; and (iv)
the fees charged are fair and reasonable in light of the usual and
customary charges made by others for services of the same nature and
quality.
11. The Company has filed a Post-Effective Amendment to its
registration statement disclosing the changes to the Underwriting
Compensation terms and will seek a declaration of effectiveness of such
Post-Effective Amendment by the Commission prior to commencing sales of
the Common Shares subject to the revised Underwriting Compensation as
implemented by the Dealer Manager Agreement Amendment. All current
Common Shares outstanding immediately prior to the implementation of
the Dealer Manager Agreement Amendment and Common Shares to be issued
upon effectiveness of the Post-Effective Amendment (exclusive of Common
Shares to be issued pursuant to the Company's distribution reinvestment
plan, as further described in the Prospectus) will be subject to the
same Distribution Fee.

Applicants' Legal Analysis

1. Section 57(a) of the Act prohibits certain transactions between
a BDC and persons related to the BDC absent an order from the
Commission. Specifically, section 57(a)(4) makes it unlawful for any
person who is related to a BDC in a manner described in section 57(b),
acting as principal, knowingly to effect any transaction in which the
BDC or a company controlled by such BDC is a joint or a joint and
several participant with that person in contravention of rules and
regulations as the Commission may prescribe for the purpose of limiting
or preventing participation by the BDC or controlled company on a basis
less advantageous than that of the other participant. Section 57(b)
specifies the persons to whom the prohibitions of section 57(a)(4)
apply. Under section 57(b)(2), these persons include any investment
adviser or promoter of, general partner in, principal underwriter for,
or person directly or indirectly either controlling, controlled by, or
under common control with a BDC (except the BDC itself and

[[Page 26281]]

any person who, if it were not directly or indirectly controlled by the
BDC, would not be directly or indirectly under the control of a person
who controls the BDC), or any person who is, within the meaning of
section 2(a)(3)(C) of the Act, an affiliated person of such person.
Sections 2(a)(3)(C) defines an ``affiliated person'' of another person
as any person directly or indirectly controlling, controlled by, or
under common control with, such other person.
2. Rule 17d-1 under the Act generally prohibits participation by a
registered investment company and an affiliated person (as defined in
section 2(a)(3) of the Act) or principal underwriter for that
investment company, or an affiliated person of such affiliated person
or principal underwriter, in any ``joint enterprise or other joint
arrangement or profit-sharing plan,'' as defined in the rule, without
prior approval by the Commission by order upon application. Although
the Commission has not adopted any rules expressly under section
57(a)(4), section 57(i) provides that the rules (but not section 17(d)
itself) under section 17(d) applicable to registered closed-end
investment companies (e.g., rule 17d-1) are, in the interim, deemed to
apply to transactions subject to section 57(a).
3. As the investment adviser and principal underwriter to the
Company, the Advisor and the Dealer Manager, respectively, are subject
to the prohibitions of section 57(a)(4) as a result of section 57(b)(2)
of the Act. Moreover, the Sponsor may be deemed to control both the
Advisor and the Dealer Manager and the Advisor may be deemed to control
the Company within the meaning of section 2(a)(9) of the Act.\1\
Accordingly, the Company, the Advisor, the Dealer Manager and the
Sponsor may be deemed to be affiliated persons of each other under
section 2(a)(3)(C) of the Act because they are under common control of
the Sponsor, and thus the Advisor, the Dealer Manager and the Sponsor
would be persons described in section 57(b)(2) subject to the
prohibitions of section 57(a)(4). The Distribution Fee Reimbursement
and the Dealer-Manager Agreement Amendment (the ``Proposed
Transactions'') might be deemed a ``joint enterprise or other joint
arrangement,'' within the meaning of section 57(a)(4) of the Act and
rule 17d-1 thereunder. Therefore, the Sponsor, the Advisor, the Dealer
Manager, and the Company may be prohibited from engaging in the
Proposed Transactions as a result of the prohibitions of section
57(a)(4) and rule 17d-1, without a grant of the Order of the
Commission.
4. In passing upon applications under rule 17d-1, the Commission
considers whether the company's participation in the joint transaction
is consistent with the provisions, policies, and purposes of the Act
and the extent to which such participation is on a basis different from
or less advantageous than that of other participants.
5. Applicants believe that the representations and conditions set
forth in the application will ensure that the Proposed Transactions are
consistent with the protection of the Company's Shareholders, including
the Current Common Shareholders (as herein defined), and with the
purposes intended by the policies and provisions of the Act. Applicants
state that the Company's participation in the Proposed Transactions
will be consistent with the provisions, policies, and purposes of the
Act and on a basis that is not different from or less advantageous than
that of other participants.

Applicants' Conditions

Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The Company will ensure that total Underwriting Compensation
payable in the Offering will not exceed 10% of the gross proceeds of
the Offering, consistent with Conduct Rule 2310.
2. For the period of time in which the Distribution Fee is payable,
the Dealer Manager will waive any annual Distribution Fee payment to
which it is otherwise entitled in an amount sufficient to ensure that
the total return experienced by the holders of the Company's Common
Shares immediately prior to the implementation of the Dealer Manager
Agreement Amendment (the ``Current Common Shareholders'') is not less
than the total return the Current Common Shareholders would have
experienced if the Proposed Transactions had not occurred and the
Dealer Manager Agreement had not been amended.

For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-10109 Filed 4-29-16; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 81, No. 84 / Monday, May 2, 2016 / Notices 26281

any person who, if it were not directly 4. In passing upon applications under SECURITIES AND EXCHANGE
or indirectly controlled by the BDC, rule 17d–1, the Commission considers COMMISSION
would not be directly or indirectly whether the company’s participation in
under the control of a person who the joint transaction is consistent with [File No. 500–1]
controls the BDC), or any person who is, the provisions, policies, and purposes of
within the meaning of section 2(a)(3)(C) Order of Suspension of Trading; In the
the Act and the extent to which such
of the Act, an affiliated person of such Matter of Pineapple Express, Inc.
participation is on a basis different from
person. Sections 2(a)(3)(C) defines an or less advantageous than that of other April 28, 2016.
‘‘affiliated person’’ of another person as participants. It appears to the Securities and
any person directly or indirectly
5. Applicants believe that the Exchange Commission that the public
controlling, controlled by, or under
representations and conditions set forth interest and the protection of investors
common control with, such other
person. in the application will ensure that the require a suspension of trading in the
2. Rule 17d–1 under the Act generally Proposed Transactions are consistent securities of Pineapple Express, Inc.
prohibits participation by a registered with the protection of the Company’s (CIK No. 1654672) because of recent,
investment company and an affiliated Shareholders, including the Current unusual and unexplained market
person (as defined in section 2(a)(3) of Common Shareholders (as herein activity in the company’s stock that
the Act) or principal underwriter for raises concerns about the adequacy of
defined), and with the purposes
that investment company, or an publicly-available information regarding
intended by the policies and provisions
affiliated person of such affiliated the company. Pineapple Express, Inc. is
of the Act. Applicants state that the a Wyoming corporation with its
person or principal underwriter, in any Company’s participation in the
‘‘joint enterprise or other joint principal place of business listed as Los
Proposed Transactions will be Angeles, California, with stock quoted
arrangement or profit-sharing plan,’’ as consistent with the provisions, policies,
defined in the rule, without prior on OTC Link (previously ‘‘Pink Sheets’’)
and purposes of the Act and on a basis operated by OTC Markets Group, Inc.
approval by the Commission by order
that is not different from or less under the ticker symbol PNPL.
upon application. Although the
Commission has not adopted any rules advantageous than that of other The Commission is of the opinion that
expressly under section 57(a)(4), section participants. the public interest and the protection of
57(i) provides that the rules (but not Applicants’ Conditions investors require a suspension of trading
section 17(d) itself) under section 17(d) in the securities of the above-listed
applicable to registered closed-end Applicants agree that any order company.
investment companies (e.g., rule 17d–1) granting the requested relief will be Therefore, it is ordered, pursuant to
are, in the interim, deemed to apply to subject to the following conditions: Section 12(k) of the Securities Exchange
transactions subject to section 57(a). Act of 1934, that trading in the
1. The Company will ensure that total
3. As the investment adviser and securities of the above-listed company is
Underwriting Compensation payable in suspended for the period from 9:30 a.m.
principal underwriter to the Company,
the Advisor and the Dealer Manager, the Offering will not exceed 10% of the EDT, on April 28, 2016, through 11:59
respectively, are subject to the gross proceeds of the Offering, p.m. EDT, on May 11, 2016.
prohibitions of section 57(a)(4) as a consistent with Conduct Rule 2310.
By the Commission.
result of section 57(b)(2) of the Act. 2. For the period of time in which the Robert W. Errett,
Moreover, the Sponsor may be deemed Distribution Fee is payable, the Dealer Deputy Secretary.
to control both the Advisor and the Manager will waive any annual
[FR Doc. 2016–10295 Filed 4–28–16; 4:15 pm]
Dealer Manager and the Advisor may be Distribution Fee payment to which it is
deemed to control the Company within BILLING CODE 8011–01–P
otherwise entitled in an amount
the meaning of section 2(a)(9) of the sufficient to ensure that the total return
Act.1 Accordingly, the Company, the experienced by the holders of the
Advisor, the Dealer Manager and the SECURITIES AND EXCHANGE
Company’s Common Shares COMMISSION
Sponsor may be deemed to be affiliated immediately prior to the
persons of each other under section implementation of the Dealer Manager [Release No. 34–77714; File No. SR–
2(a)(3)(C) of the Act because they are NASDAQ–2016–028]
Agreement Amendment (the ‘‘Current
under common control of the Sponsor,
and thus the Advisor, the Dealer Common Shareholders’’) is not less than
the total return the Current Common Self-Regulatory Organizations; The
Manager and the Sponsor would be NASDAQ Stock Market LLC; Order
persons described in section 57(b)(2) Shareholders would have experienced if
Granting Approval of Proposed Rule
subject to the prohibitions of section the Proposed Transactions had not
Change, as Modified by Amendment
57(a)(4). The Distribution Fee occurred and the Dealer Manager No. 1 Thereto, Relating to the Listing
Reimbursement and the Dealer-Manager Agreement had not been amended. and Trading of the Shares of the
Agreement Amendment (the ‘‘Proposed For the Commission, by the Division of iSectors Post-MPT Growth ETF of
Transactions’’) might be deemed a ‘‘joint Investment Management, under delegated ETFis Series Trust I
enterprise or other joint arrangement,’’ authority.
within the meaning of section 57(a)(4) of April 26, 2016.
Robert W. Errett,
the Act and rule 17d–1 thereunder.
srobinson on DSK5SPTVN1PROD with NOTICES

Deputy Secretary. I. Introduction
Therefore, the Sponsor, the Advisor, the
Dealer Manager, and the Company may [FR Doc. 2016–10109 Filed 4–29–16; 8:45 am] On February 23, 2016, The NASDAQ
be prohibited from engaging in the BILLING CODE 8011–01–P Stock Market LLC (‘‘Exchange’’ or
Proposed Transactions as a result of the ‘‘Nasdaq’’) filed with the Securities and
prohibitions of section 57(a)(4) and rule Exchange Commission (‘‘Commission’’),
17d–1, without a grant of the Order of pursuant to Section 19(b)(1) of the
the Commission. Securities Exchange Act of 1934 (‘‘Act’’

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Document Created: 2016-04-30 13:35:26
Document Modified: 2016-04-30 13:35:26

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 for an order under sections 57(a)(4) and 57(i) of the Investment Company Act of 1940 (the ``Act'') and rule 17d-1 under the Act permitting certain joint transactions otherwise prohibited by section 57(a)(4) of the Act and rule 17d-1 under the Act.
Dates		The application was filed on April 25, 2016.
Contact		Kieran G. Brown, Senior Counsel, at (202) 551-6773, or James M. Curtis, Branch Chief, at (202) 551-6712 (Chief Counsel's Office, Division of Investment Management).
FR Citation		81 FR 26279