81 FR 51237 - CSat Investment Advisory, L.P., et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 149 (August 3, 2016)

Page Range		51237-51239
FR Document		2016-18321

Federal Register, Volume 81 Issue 149 (Wednesday, August 3, 2016)

[Federal Register Volume 81, Number 149 (Wednesday, August 3, 2016)]
[Notices]
[Pages 51237-51239]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-18321]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32196; 812-14650]


CSat Investment Advisory, L.P., et al.; Notice of Application

July 28, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') for an exemption from 
sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c-1 
under the Act, under sections 6(c) and 17(b) of the Act for an 
exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under 
section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and 
12(d)(1)(B) of the Act. The requested order would permit (a) index-
based series of certain open-end management investment companies 
(``Funds'') to issue shares redeemable in large aggregations only 
(``Creation Units''); (b) secondary market transactions in Fund shares 
to occur at negotiated market prices rather than at net asset value 
(``NAV''); (c) certain Funds to pay redemption proceeds, under certain 
circumstances, more than seven days after the tender of shares for 
redemption; (d) certain affiliated persons of a Fund to deposit 
securities into, and receive securities from, the Fund in connection 
with the purchase and redemption of Creation Units; and (e) certain 
registered management investment companies and unit investment trusts 
outside of the same group of investment companies as the

[[Page 51238]]

Funds (``Funds of Funds'') to acquire shares of the Funds.

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APPLICANTS:  CSat Investment Advisory, L.P. (``CSat''), a Delaware 
limited partnership registered as an investment adviser under the 
Investment Advisers Act of 1940, ETF Series Solutions (``Trust''), a 
Delaware statutory trust registered under the Act as an open-end 
management investment company with multiple series, and Quasar 
Distributors, LLC (``Distributor''), a Delaware limited liability 
company and broker-dealer registered under the Securities Exchange Act 
of 1934 (``Exchange Act'').

FILING DATES:  The application was filed on May 11, 2016.

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 August 23, 2016, and should be accompanied by proof of 
service on 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, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-1090; Applicants: CSAT: 625 Avis Drive, Ann 
Arbor, MI 48108; The Trust and the Distributor: Michael Barolsky, Esq., 
615 East Michigan Street, 4th Floor, Milwaukee, WI 53202.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at 
(202) 551-6811, or Daniele 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 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 that would allow Funds to operate as 
index exchange traded funds (``ETFs'').\1\ Fund shares will be 
purchased and redeemed at their NAV in Creation Units only. All orders 
to purchase Creation Units and all redemption requests will be placed 
by or through an ``Authorized Participant'', which will have signed a 
participant agreement with the Distributor. Shares will be listed and 
traded individually on a national securities exchange, where share 
prices will be based on the current bid/offer market. Any order 
granting the requested relief would be subject to the terms and 
conditions stated in the application.
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    \1\ Applicants request that the order apply to CSAT US Equity 
ETF and any additional series of the Trust, and any other open-end 
management investment company or series thereof (each, included in 
the term ``Fund''), each of which will operate as an ETF and will 
track a specified index comprised of domestic or foreign equity and/
or fixed income securities (each, an ``Underlying Index''). Any Fund 
will (a) be advised by CSat or an entity controlling, controlled by, 
or under common control with CSat (each, an ``Adviser'') and (b) 
comply with the terms and conditions of the application.
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    2. Each Fund will hold investment positions selected to correspond 
generally to the performance of an Underlying Index. In the case of 
Self-Indexing Funds, an affiliated person, as defined in section 
2(a)(3) of the Act (``Affiliated Person''), or an affiliated person of 
an Affiliated Person (``Second-Tier Affiliate''), of the Trust or a 
Fund, of the Adviser, of any sub-adviser to or promoter of a Fund, or 
of the Distributor will compile, create, sponsor or maintain the 
Underlying Index.\2\
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    \2\ Each Self-Indexing Fund will post on its Web site the 
identities and quantities of the investment positions that will form 
the basis for the Fund's calculation of its NAV at the end of the 
day. Applicants believe that requiring Self-Indexing Funds to 
maintain full portfolio transparency will help address, together 
with other protections, conflicts of interest with respect to such 
Funds.
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    3. Shares will be purchased and redeemed in Creation Units and 
generally on an in-kind basis. Except where the purchase or redemption 
will include cash under the limited circumstances specified in the 
application, purchasers will be required to purchase Creation Units by 
depositing specified instruments (``Deposit Instruments''), and 
shareholders redeeming their shares will receive specified instruments 
(``Redemption Instruments''). The Deposit Instruments and the 
Redemption Instruments will each correspond pro rata to the positions 
in the Fund's portfolio (including cash positions) except as specified 
in the application.
    4. Because shares will not be individually redeemable, applicants 
request an exemption from section 5(a)(1) and section 2(a)(32) of the 
Act that would permit the Funds to register as open-end management 
investment companies and issue shares that are redeemable in Creation 
Units only.
    5. Applicants also request an exemption from section 22(d) of the 
Act and rule 22c-1 under the Act as secondary market trading in shares 
will take place at negotiated prices, not at a current offering price 
described in a Fund's prospectus, and not at a price based on NAV. 
Applicants state that (a) secondary market trading in shares does not 
involve a Fund as a party and will not result in dilution of an 
investment in shares, and (b) to the extent different prices exist 
during a given trading day, or from day to day, such variances occur as 
a result of third-party market forces, such as supply and demand. 
Therefore, applicants assert that secondary market transactions in 
shares will not lead to discrimination or preferential treatment among 
purchasers. Finally, applicants represent that share market prices will 
be disciplined by arbitrage opportunities, which should prevent shares 
from trading at a material discount or premium from NAV.
    6. With respect to Funds that effect creations and redemptions of 
Creation Units in kind and that are based on certain Underlying Indexes 
that include foreign securities, applicants request relief from the 
requirement imposed by section 22(e) in order to allow such Funds to 
pay redemption proceeds within fifteen calendar days following the 
tender of Creation Units for redemption. Applicants assert that the 
requested relief would not be inconsistent with the spirit and intent 
of section 22(e) to prevent unreasonable, undisclosed or unforeseen 
delays in the actual payment of redemption proceeds.
    7. Applicants request an exemption to permit Funds of Funds to 
acquire Fund shares beyond the limits of section 12(d)(1)(A) of the 
Act; and the Funds, and any principal underwriter for the Funds, and/or 
any broker or dealer registered under the Exchange Act, to sell shares 
to Funds of Funds beyond the limits of section 12(d)(1)(B) of the Act. 
The application's terms and conditions are designed to, among other 
things, help prevent any potential (i) undue influence over a Fund 
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) and (B) of the Act.
    8. Applicants request an exemption from sections 17(a)(1) and 
17(a)(2) of the

[[Page 51239]]

Act to permit persons that are Affiliated Persons, or Second Tier 
Affiliates, of the Funds, solely by virtue of certain ownership 
interests, to effectuate purchases and redemptions in-kind. The deposit 
procedures for in-kind purchases of Creation Units and the redemption 
procedures for in-kind redemptions of Creation Units will be the same 
for all purchases and redemptions and Deposit Instruments and 
Redemption Instruments will be valued in the same manner as those 
investment positions currently held by the Funds. Applicants also seek 
relief from the prohibitions on affiliated transactions in section 
17(a) to permit a Fund to sell its shares to and redeem its shares from 
a Fund of Funds, and to engage in the accompanying in-kind transactions 
with the Fund of Funds.\3\ The purchase of Creation Units by a Fund of 
Funds directly from a Fund will be accomplished in accordance with the 
policies of the Fund of Funds and will be based on the NAVs of the 
Funds.
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    \3\ The requested relief would apply to direct sales of shares 
in Creation Units by a Fund to a Fund of Funds and redemptions of 
those shares. Applicants, moreover, are not seeking relief from 
section 17(a) for, and the requested relief will not apply to, 
transactions where a Fund could be deemed an Affiliated Person, or a 
Second-Tier Affiliate, of a Fund of Funds because an Adviser or an 
entity controlling, controlled by or under common control with an 
Adviser provides investment advisory services to that Fund of Funds.
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    9. 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. 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.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18321 Filed 8-2-16; 8:45 am]
 BILLING CODE 8011-01-P

Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices 51239

Act to permit persons that are Affiliated For the Commission, by the Division of II. Self-Regulatory Organization’s
Persons, or Second Tier Affiliates, of the Investment Management, under delegated Statement of the Purpose of, and
Funds, solely by virtue of certain authority. Statutory Basis for, the Proposed Rule
ownership interests, to effectuate Robert W. Errett, Change
purchases and redemptions in-kind. The Deputy Secretary.
In its filing with the Commission,
deposit procedures for in-kind [FR Doc. 2016–18321 Filed 8–2–16; 8:45 am]
FINRA included statements concerning
purchases of Creation Units and the BILLING CODE 8011–01–P the purpose of and basis for the
redemption procedures for in-kind
proposed rule change and discussed any
redemptions of Creation Units will be
comments it received on the proposed
the same for all purchases and SECURITIES AND EXCHANGE rule change. The text of these statements
redemptions and Deposit Instruments COMMISSION may be examined at the places specified
and Redemption Instruments will be in Item IV below. FINRA has prepared
valued in the same manner as those [Release No. 34–78435; File No. SR–FINRA– summaries, set forth in sections A, B,
investment positions currently held by 2016–028] and C below, of the most significant
the Funds. Applicants also seek relief aspects of such statements.
from the prohibitions on affiliated Self-Regulatory Organizations;
transactions in section 17(a) to permit a Financial Industry Regulatory A. Self-Regulatory Organization’s
Fund to sell its shares to and redeem its Authority, Inc.; Notice of Filing and Statement of the Purpose of, and
shares from a Fund of Funds, and to Immediate Effectiveness of a Proposed Statutory Basis for, the Proposed Rule
engage in the accompanying in-kind Rule Change To Clarify the Operation Change
transactions with the Fund of Funds.3 of the Regulation NMS Plan To 1. Purpose
The purchase of Creation Units by a Address Extraordinary Market
Fund of Funds directly from a Fund will Volatility FINRA Rule 6121.01 (Trading Pauses)
be accomplished in accordance with the (‘‘Rule’’) sets forth requirements
July 28, 2016.
policies of the Fund of Funds and will applicable to member firms in
be based on the NAVs of the Funds. Pursuant to Section 19(b)(1) of the connection with Trading Pauses.5 The
Securities Exchange Act of 1934 Rule addresses the Plan’s provisions
9. Section 6(c) of the Act permits the
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 regarding Trading Pause, including that
Commission to exempt any persons or
notice is hereby given that on July 22, no trades in an NMS Stock are
transactions from any provision of the 2016, Financial Industry Regulatory permitted to occur during a Trading
Act if such exemption is necessary or Authority, Inc. (‘‘FINRA’’) filed with the Pause, and sets forth the circumstances
appropriate in the public interest and Securities and Exchange Commission under which trading in an NMS Stock
consistent with the protection of (‘‘SEC’’ or ‘‘Commission’’) the proposed can resume after a Trading Pause.
investors and the purposes fairly rule change as described in Items I, II, Currently, the Rule also provides that
intended by the policy and provisions of and III below, which Items have been FINRA may permit the resumption of
the Act. Section 12(d)(1)(J) of the Act prepared by FINRA. FINRA has trading otherwise than on an exchange
provides that the Commission may designated the proposed rule change as if trading has commenced on at least
exempt any person, security, or constituting a ‘‘non-controversial’’ rule one other national securities exchange.
transaction, or any class or classes of change under paragraph (f)(6) of Rule In addition, FINRA Rule 6190
persons, securities, or transactions, from 19b–4 under the Act,3 which renders (Compliance with Regulation NMS Plan
any provision of section 12(d)(1) if the the proposal effective upon receipt of to Address Extraordinary Market
exemption is consistent with the public this filing by the Commission. The Volatility) provides, among other things,
interest and the protection of investors. Commission is publishing this notice to that a member that is a Trading Center
Section 17(b) of the Act authorizes the solicit comments on the proposed rule in an NMS Stock must establish,
Commission to grant an order change from interested persons. maintain and enforce written policies
permitting a transaction otherwise and procedures reasonably designed to
prohibited by section 17(a) if it finds I. Self-Regulatory Organization’s comply with the requirements of the
Statement of the Terms of Substance of Plan, including to prevent the execution
that (a) the terms of the proposed
the Proposed Rule Change of trades at prices below the Lower Price
transaction are fair and reasonable and
do not involve overreaching on the part FINRA is proposing to clarify the Band or above the Upper Price Band for
of any person concerned; (b) the operation of the Regulation NMS Plan to an NMS Stock. The pilot period for the
proposed transaction is consistent with Address Extraordinary Volatility Plan was recently extended through
the policies of each registered (‘‘Plan’’) following a Trading Pause or April 21, 2017.6
investment company involved; and (c) Regulatory Halt in a security subject to FINRA and other self-regulatory
the proposed transaction is consistent the Plan.4 organizations (SROs) are taking
with the general purposes of the Act. The text of the proposed rule change measures to clarify the operation of the
is available on FINRA’s Web site at Plan that results from the short period
3 The requested relief would apply to direct sales
http://www.finra.org, at the principal of time (generally up to three
asabaliauskas on DSK3SPTVN1PROD with NOTICES

of shares in Creation Units by a Fund to a Fund of
office of FINRA and at the milliseconds) following the resumption
Funds and redemptions of those shares. Applicants,
Commission’s Public Reference Room. of trading after a Trading Pause or
moreover, are not seeking relief from section 17(a) Regulatory Halt and before the Price
for, and the requested relief will not apply to,
Bands are received from the Processor
transactions where a Fund could be deemed an 1 15 U.S.C. 78s(b)(1).
Affiliated Person, or a Second-Tier Affiliate, of a 2 17 CFR 240.19b–4.
for securities that are subject to the
Fund of Funds because an Adviser or an entity 3 17 CFR 240.19b–4(f)(6).

controlling, controlled by or under common control 4 Unless otherwise specified, the capitalized 5 17 CFR 242.608.
with an Adviser provides investment advisory terms used herein have the same meanings as set 6 See Securities Exchange Act Release No. 77679
services to that Fund of Funds. forth in the Plan. (April 21, 2016), 81 FR 24908 (April 27, 2016).

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Document Created: 2016-08-02 23:44:02
Document Modified: 2016-08-02 23:44:02

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 section 6(c) of the Investment Company Act of 1940 (the ``Act'') for an exemption from sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c-1 under the Act, under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act. The requested order would permit (a) index- based series of certain open-end management investment companies (``Funds'') to issue shares redeemable in large aggregations only (``Creation Units''); (b) secondary market transactions in Fund shares to occur at negotiated market prices rather than at net asset value (``NAV''); (c) certain Funds to pay redemption proceeds, under certain circumstances, more than seven days after the tender of shares for redemption; (d) certain affiliated persons of a Fund to deposit securities into, and receive securities from, the Fund in connection with the purchase and redemption of Creation Units; and (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the Funds (``Funds of Funds'') to acquire shares of the Funds.
Dates		The application was filed on May 11, 2016.
Contact		Jean E. Minarick, Senior Counsel, at (202) 551-6811, or Daniele Marchesani, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation		81 FR 51237