81 FR 56722 - Davis Fundamental ETF Trust, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 162 (August 22, 2016)

Page Range		56722-56724
FR Document		2016-19900

Federal Register, Volume 81 Issue 162 (Monday, August 22, 2016)

[Federal Register Volume 81, Number 162 (Monday, August 22, 2016)]
[Notices]
[Pages 56722-56724]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-19900]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32219; 812-14632]


Davis Fundamental ETF Trust, et al.; Notice of Application

August 16, 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) actively-
managed 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

[[Page 56723]]

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.
    Applicants: Davis Fundamental ETF Trust (the ``Trust''), a Delaware 
statutory trust, which will be registered under the Act as an open-end 
management investment company with multiple series, Davis Selected 
Advisers, L.P. (the ``Initial Adviser''), an investment adviser 
registered under the Investment Advisers Act of 1940, and Foreside Fund 
Services, LLC (the ``Distributor''), a broker-dealer registered under 
the Securities Exchange Act of 1934 (``Exchange Act'').
    Filing Dates: The application was filed on March 24, 2016, and 
amended on June 14, 2016 and August 15, 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 September 12, 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: 2949 E. Elvira Road, 
Suite 101, Tucson, Arizona 85756.
    For Further Information Contact: Hae-Sung Lee, Attorney-Adviser, at 
(202) 551-7345, or Mary Kay Frech, 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 
actively-managed 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 the initial Fund, 
as well as to future series of the Trust and any future open-end 
management investment companies or series thereof (each, included in 
the term ``Fund''), each of which will operate as an actively-
managed ETF. Any Fund will (a) be advised by the Initial Adviser or 
an entity controlling, controlled by, or under common control with 
the Initial Adviser (each, an ``Adviser'') and (b) comply with the 
terms and conditions of the application.
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    2. Each Fund will consist of a portfolio of securities and other 
assets and investment positions (``Portfolio Instruments''). Each Fund 
will disclose on its Web site the identities and quantities of the 
Portfolio Instruments that will form the basis for the Fund's 
calculation of NAV at the end of the day.
    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 hold non-U.S. Portfolio Instruments 
and that effect creations and redemptions of Creation Units in kind, 
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 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

[[Page 56724]]

and Redemption Instruments will be valued in the same manner as those 
Portfolio Instruments 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.\2\ 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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    \2\ 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. 2016-19900 Filed 8-19-16; 8:45 am]
 BILLING CODE 8011-01-P

56724 Federal Register / Vol. 81, No. 162 / Monday, August 22, 2016 / Notices

and Redemption Instruments will be SECURITIES AND EXCHANGE (iii) through the Options Floor Broker
valued in the same manner as those COMMISSION Management System for trades
Portfolio Instruments currently held by involving at least one Floor Broker.
the Funds. Applicants also seek relief [Release No. 34–78593; File No. SR–Phlx– Although Floor Brokers may represent
from the prohibitions on affiliated 2016–82] orders in the trading crowd, Floor
transactions in section 17(a) to permit a Brokers are not permitted to execute
Self-Regulatory Organizations; orders in the Exchange’s options trading
Fund to sell its shares to and redeem its
NASDAQ PHLX LLC; Notice of Filing of crowd, except as follows:
shares from a Fund of Funds, and to Proposed Rule Change To Adopt a
engage in the accompanying in-kind (A) The Exchange may determine to
New Exception in Exchange Rule permit executions otherwise than in
transactions with the Fund of Funds.2 1000(f) for Sub-MPV Split-Priced
The purchase of Creation Units by a accordance with subparagraphs (i)—(iii)
Orders above respecting an option or all
Fund of Funds directly from a Fund will
be accomplished in accordance with the August 16, 2016. options in the event of a problem with
policies of the Fund of Funds and will Pursuant to Section 19(b)(1) of the Exchange systems.
be based on the NAVs of the Funds. Securities Exchange Act of 1934 (B) In addition, Floor Brokers can
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 execute orders in the options trading
9. Section 6(c) of the Act permits the crowd pursuant to Rule 1059,
notice is hereby given that on August 3,
Commission to exempt any persons or Accommodation Transactions (cabinet
2016, NASDAQ PHLX LLC (‘‘Phlx’’ or
transactions from any provision of the ‘‘Exchange’’) filed with the Securities trades), and Rule 1079, FLEX Equity,
Act if such exemption is necessary or and Exchange Commission (‘‘SEC’’ or Index and Currency Options.
appropriate in the public interest and ‘‘Commission’’) the proposed rule (C) Multi-leg orders with more than
consistent with the protection of change as described in Items I, II, and 15 legs can be executed in the trading
investors and the purposes fairly III, below, which Items have been crowd.
intended by the policy and provisions of prepared by the Exchange. The (D) The following split price orders
the Act. Section 12(d)(1)(J) of the Act Commission is publishing this notice to that, due to FBMS system limitations,
provides that the Commission may solicit comments on the proposed rule require manual calculation:
exempt any person, security, or change from interested persons. (I) simple orders not expressed in the
transaction, or any class or classes of applicable minimum increment (‘‘sub-
I. Self-Regulatory Organization’s
persons, securities, or transactions, from MPV’’) and that cannot be evenly split
Statement of the Terms of the Substance
any provision of section 12(d)(1) if the into two whole numbers to create a
of the Proposed Rule Change
exemption is consistent with the public price at the midpoint of the minimum
interest and the protection of investors. The Exchange proposes to adopt a increment; and
Section 17(b) of the Act authorizes the new exception in Rule 1000(f) (II) complex and multi-leg orders with
Commission to grant an order permitting Floor Brokers to execute at least one option leg with an odd-
permitting a transaction otherwise certain split price orders in the trading numbered volume that must trade at a
prohibited by section 17(a) if it finds crowd rather than electronically through sub-MPV price or one leg that qualifies
that (a) the terms of the proposed the Options Floor Broker Management under (I) above.
transaction are fair and reasonable and System, as described in detail below.
The text of the proposed rule change Surveillance staff must approve all
do not involve overreaching on the part executions submitted under this Rule
is set forth below. Proposed new
of any person concerned; (b) the 1000(f)(iii) to validate that each abides
language is underlined.
proposed transaction is consistent with by applicable priority and trade through
the policies of each registered * * * * * rules, and that rounding of prices is
investment company involved; and (c) NASDAQ PHLX Rules used only where necessary to execute
the proposed transaction is consistent the trade at the MPV, and only to the
* * * * *
with the general purposes of the Act. benefit of a customer order or, where
Options Rules multiple customers’ orders are involved,
For the Commission, by the Division of
* * * * * for the customer order that is earliest in
Investment Management, under delegated
time.
authority.
Rule 1000. Applicability, Definitions (g) No change.
Robert W. Errett, and References * * * * *
Deputy Secretary.
(a)–(e) No change.
[FR Doc. 2016–19900 Filed 8–19–16; 8:45 am] II. Self-Regulatory Organization’s
(f) All Exchange options transactions
Statement of the Purpose of, and
BILLING CODE 8011–01–P shall be executed in one of the following
Statutory Basis for, the Proposed Rule
ways[, once the Exchange’s new Options
Change
Floor Broker Management System
functionality has been operating for a In its filing with the Commission, the
certain period to be established by the Exchange included statements
2 The requested relief would apply to direct sales Exchange]: concerning the purpose of and basis for
(i) Automatically by the Exchange the proposed rule change and discussed
asabaliauskas on DSK3SPTVN1PROD with NOTICES

of shares in Creation Units by a Fund to a Fund of
Funds and redemptions of those shares. Applicants, Trading System pursuant to Rule 1080 any comments it received on the
moreover, are not seeking relief from section 17(a) and other applicable options rules; proposed rule change. The text of these
for, and the requested relief will not apply to, (ii) by and among members in the statements may be examined at the
transactions where a Fund could be deemed an
Exchange’s options trading crowd none places specified in Item IV below. The
Affiliated Person, or a Second-Tier Affiliate, of a
Fund of Funds because an Adviser or an entity
of whom is a Floor Broker; or Exchange has prepared summaries, set
controlling, controlled by or under common control forth in sections A, B, and C below, of
with an Adviser provides investment advisory 1 15 U.S.C. 78s(b)(1). the most significant aspects of such
services to that Fund of Funds. 2 17 CFR 240.19b–4. statements.

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Document Created: 2018-02-09 11:38:19
Document Modified: 2018-02-09 11:38:19

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) actively- managed 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 March 24, 2016, and amended on June 14, 2016 and August 15, 2016.
Contact		Hae-Sung Lee, Attorney-Adviser, at (202) 551-7345, or Mary Kay Frech, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation		81 FR 56722