81 FR 63547 - Dhandho ETF Trust and Dhandho Funds LLC; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 179 (September 15, 2016)

Page Range		63547-63549
FR Document		2016-22125

Federal Register, Volume 81 Issue 179 (Thursday, September 15, 2016)

[Federal Register Volume 81, Number 179 (Thursday, September 15, 2016)]
[Notices]
[Pages 63547-63549]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-22125]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32255; 812-14665]


Dhandho ETF Trust and Dhandho Funds LLC; Notice of Application

September 9, 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; (e) certain 
registered management investment companies and unit

[[Page 63548]]

investment trusts outside of the same group of investment companies as 
the Funds (``Funds of Funds'') to acquire shares of the Funds; and (f) 
certain Funds (``Feeder Funds'') to create and redeem Creation Units 
in-kind in a master-feeder structure.

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Applicants:  Dhandho Funds LLC (``Initial Adviser''), a Delaware 
Corporation that will be registered as an investment adviser under the 
Investment Advisers Act of 1940, and Dhandho ETF Trust (``Trust''), a 
Delaware statutory trust that will be registered under the Act as an 
open-end management investment company with multiple series.

Filing Dates:  The application was filed on June 23, 2016, and amended 
on August 2, 2016 and August 31, 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 October 4, 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: Banco Popular Building, 206 
Tetuan Street, Suite 703, San Juan, PR 00902.

FOR FURTHER INFORMATION CONTACT: Elizabeth G. Miller, Senior Counsel, 
at (202) 551-8707, or Holly Hunter-Ceci, Branch Chief, at (202) 551-
6825 (Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION:  The following is a summary of the 
application. The complete application may be obtained via the 
Commission's 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 a broker-dealer registered under the 
Securities Exchange Act of 1934 (``Exchange Act'') (together with any 
future distributor, 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. Certain Funds may 
operate as Feeder Funds in a master-feeder structure. 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 Trust's 
initial index-based ETF series, as well as any additional series of 
the Trust, and any other open-end management investment company or 
existing or future series thereof that may be created in the future 
(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 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 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)

[[Page 63549]]

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 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. Applicants also request relief to permit a Feeder Fund to 
acquire shares of another registered investment company managed by the 
Adviser having substantially the same investment objectives as the 
Feeder Fund (``Master Fund'') beyond the limitations in section 
12(d)(1)(A) and permit the Master Fund, and any principal underwriter 
for the Master Fund, to sell shares of the Master Fund to the Feeder 
Fund beyond the limitations in section 12(d)(1)(B).
    10. 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.
Brent J. Fields,
Secretary.
[FR Doc. 2016-22125 Filed 9-14-16; 8:45 am]
 BILLING CODE 8011-01-P

Federal Register / Vol. 81, No. 179 / Thursday, September 15, 2016 / Notices 63549

overly complex fund structures, which exemption is consistent with the public I. Self-Regulatory Organization’s
are the concerns underlying the limits interest and the protection of investors. Statement of the Terms of Substance of
in sections 12(d)(1)(A) and (B) of the Section 17(b) of the Act authorizes the the Proposed Rule Change
Act. Commission to grant an order The Exchange filed a proposal to
8. Applicants request an exemption permitting a transaction otherwise amend Exchange Rule 11.21(b)
from sections 17(a)(1) and 17(a)(2) of the prohibited by section 17(a) if it finds regarding the data collection
Act to permit persons that are Affiliated that (a) the terms of the proposed requirements of the Regulation NMS
Persons, or Second Tier Affiliates, of the transaction are fair and reasonable and Plan to Implement a Tick Size Pilot
Funds, solely by virtue of certain Program (‘‘Plan’’).5
do not involve overreaching on the part
ownership interests, to effectuate The text of the proposed rule change
of any person concerned; (b) the
purchases and redemptions in-kind. The is available at the Exchange’s Web site
deposit procedures for in-kind proposed transaction is consistent with
the policies of each registered at www.batstrading.com, at the
purchases of Creation Units and the principal office of the Exchange, and at
redemption procedures for in-kind investment company involved; and (c)
the proposed transaction is consistent the Commission’s Public Reference
redemptions of Creation Units will be Room.
the same for all purchases and with the general purposes of the Act.
redemptions and Deposit Instruments For the Commission, by the Division of II. Self-Regulatory Organization’s
and Redemption Instruments will be Investment Management, under delegated Statement of the Purpose of, and
valued in the same manner as those authority. Statutory Basis for, the Proposed Rule
investment positions currently held by Change
Brent J. Fields,
the Funds. Applicants also seek relief In its filing with the Commission, the
Secretary.
from the prohibitions on affiliated Exchange included statements
transactions in section 17(a) to permit a [FR Doc. 2016–22125 Filed 9–14–16; 8:45 am]
concerning the purpose of and basis for
Fund to sell its shares to and redeem its BILLING CODE 8011–01–P
the proposed rule change and discussed
shares from a Fund of Funds, and to any comments it received on the
engage in the accompanying in-kind proposed rule change. The text of these
transactions with the Fund of Funds.3 SECURITIES AND EXCHANGE
statements may be examined at the
The purchase of Creation Units by a COMMISSION
places specified in Item IV below. The
Fund of Funds directly from a Fund will Exchange has prepared summaries, set
be accomplished in accordance with the [Release No. 34–78799; File No. SR– forth in sections A, B, and C below, of
policies of the Fund of Funds and will BatsEDGA–2016–21] the most significant parts of such
be based on the NAVs of the Funds. statements.
9. Applicants also request relief to Self-Regulatory Organizations; Bats
permit a Feeder Fund to acquire shares EDGA Exchange, Inc.; Notice of Filing (A) Self-Regulatory Organization’s
of another registered investment and Immediate Effectiveness of a Statement of the Purpose of, and
company managed by the Adviser Proposed Rule Change To Amend Rule Statutory Basis for, the Proposed Rule
having substantially the same 11.21(b) Regarding the Data Collection Change
investment objectives as the Feeder Requirements of the Regulation NMS 1. Purpose
Fund (‘‘Master Fund’’) beyond the Plan To Implement a Tick Size Pilot
limitations in section 12(d)(1)(A) and On August 25, 2014, the Exchange,
Program and several other self-regulatory
permit the Master Fund, and any
principal underwriter for the Master September 9, 2016. organizations (the ‘‘Participants’’) filed
Fund, to sell shares of the Master Fund with the Commission, pursuant to
Pursuant to section 19(b)(1) of the section 11A of the Act 6 and Rule 608 of
to the Feeder Fund beyond the
limitations in section 12(d)(1)(B). Securities Exchange Act of 1934 Regulation NMS thereunder,7 the Plan
10. Section 6(c) of the Act permits the (‘‘Act’’),1 and Rule 19b–4 thereunder,2 to Implement a Tick Size Pilot Program
Commission to exempt any persons or notice is hereby given that on August (the ‘‘Plan’’).8 The Participants filed the
transactions from any provision of the 26, 2016, Bats EDGA Exchange, Inc. Plan to comply with an order issued by
Act if such exemption is necessary or (‘‘Exchange’’ or ‘‘EDGA’’) filed with the the Commission on June 24, 2014.9 The
appropriate in the public interest and Securities and Exchange Commission Plan was published for comment in the
consistent with the protection of (‘‘Commission’’) the proposed rule Federal Register on November 7, 2014,
investors and the purposes fairly change as described in Items I and II and approved by the Commission, as
intended by the policy and provisions of below, which Items have been prepared modified, on May 6, 2015.10
the Act. Section 12(d)(1)(J) of the Act by the Exchange. The Exchange has The Plan is designed to allow the
provides that the Commission may designated this proposal as a ‘‘non- Commission, market participants, and
exempt any person, security, or controversial’’ proposed rule change the public to study and assess the
transaction, or any class or classes of pursuant to section 19(b)(3)(A) of the impact of increment conventions on the
persons, securities, or transactions, from Act 3 and Rule 19b–4(f)(6)(iii) 5 See Securities Exchange Act Release No. 74892
any provision of section 12(d)(1) if the thereunder,4 which renders it effective (May 6, 2015), 80 FR 27513 (May 13, 2015)
3 The requested relief would apply to direct sales
upon filing with the Commission. The (‘‘Approval Order’’).
of shares in Creation Units by a Fund to a Fund of Commission is publishing this notice to 6 15 U.S.C. 78k–1.
sradovich on DSK3GMQ082PROD with NOTICES

7 17 CFR 242.608.
Funds and redemptions of those shares. Applicants, solicit comments on the proposed rule
8 See Letter from Brendon J. Weiss, Vice
moreover, are not seeking relief from section 17(a) change from interested persons.
for, and the requested relief will not apply to, President, Intercontinental Exchange, Inc., to
transactions where a Fund could be deemed an Secretary, Commission, dated August 25, 2014.
9 See Securities Exchange Act Release No 72460
Affiliated Person, or a Second-Tier Affiliate, of a 1 15 U.S.C. 78s(b)(1).
Fund of Funds because an Adviser or an entity (June 24, 2014), 79 FR 36840 (June 30, 2014).
2 17 CFR 240.19b–4.
controlling, controlled by or under common control 10 See Securities Exchange Act Release No. 74892
3 15 U.S.C. 78s(b)(3)(A).
with an Adviser provides investment advisory (May 6, 2015), 80 FR 27513 (May 13, 2015)
services to that Fund of Funds. 4 17 CFR 240.19b–4(f)(6)(iii). (‘‘Approval Order’’).

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Document Created: 2018-02-09 13:18:06
Document Modified: 2018-02-09 13:18:06

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; (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; and (f) certain Funds (``Feeder Funds'') to create and redeem Creation Units in-kind in a master-feeder structure.
Dates		The application was filed on June 23, 2016, and amended on August 2, 2016 and August 31, 2016.
Contact		Elizabeth G. Miller, Senior Counsel, at (202) 551-8707, or Holly Hunter-Ceci, Branch Chief, at (202) 551- 6825 (Division of Investment Management, Chief Counsel's Office).
FR Citation		81 FR 63547