81 FR 69884 - Legg Mason Global Asset Management Trust, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 195 (October 7, 2016)

Page Range		69884-69885
FR Document		2016-24285

Federal Register, Volume 81 Issue 195 (Friday, October 7, 2016)

[Federal Register Volume 81, Number 195 (Friday, October 7, 2016)]
[Notices]
[Pages 69884-69885]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-24285]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32-300; File No. 812-14583]


Legg Mason Global Asset Management Trust, et al.; Notice of 
Application

October 3, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION:  Notice of an application for an order pursuant to: (a) Section 
6(c) of the Investment Company Act of 1940 (``Act'') granting an 
exemption from sections 18(f) and 21(b) of the Act; (b) section 
12(d)(1)(J) of the Act granting an exemption from section 12(d)(1) of 
the Act; (c) sections 6(c) and 17(b) of the Act granting an exemption 
from sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Act; and (d) 
section 17(d) of the Act and rule 17d-1 under the Act to permit certain 
joint arrangements and transactions. Applicants request an order that 
would permit certain registered open-end management investment 
companies to participate in a joint lending and borrowing facility.

-----------------------------------------------------------------------

APPLICANTS:  Legg Mason Global Asset Management Trust, Legg Mason 
Global Asset Management Variable Trust, Legg Mason Partners Income 
Trust, Legg Mason Partners Institutional Trust, Legg Mason Partners 
Money Market Trust, Legg Mason Partners Premium Money Market Trust, 
Legg Mason Partners Variable Income Trust, Master Portfolio Trust, and 
Western Asset Funds, Inc., registered under the Act as open-end 
management investment companies with one or more series, and Legg Mason 
Partners Fund Advisor, LLC (the ``Adviser''), registered as an 
investment adviser under the Investment Advisers Act of 1940.

FILING DATES:  The application was filed on November 27, 2015, and 
amended on May 5, 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 28, 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, c/o: Bryan 
Chegwidden, Esq., Rope & Gray LLP, 1211 Avenue of the Americas, New 
York, NY 10036, and Robert I. Frenkel, Legg Mason & Co., LLC, 100 First 
Stamford Place, Stamford, CT 06902.

FOR FURTHER INFORMATION CONTACT:  Judy T. Lee, Senior Special Counsel, 
at (202) 551-6259 or Sara Crovitz, Assistant Chief Counsel, at (202) 
551-6720 (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.

Summary of the Application

    1. Applicants request an order that would permit the applicants to 
participate in an interfund lending facility where each Fund could lend 
money directly to and borrow money directly from other Funds to cover 
unanticipated cash shortfalls, such as unanticipated redemptions or 
trade fails.\1\ The Funds will not borrow under the facility for 
leverage purposes and the loans' duration will be no more than 7 
days.\2\
---------------------------------------------------------------------------

    \1\ Applicants request that the order apply to the applicants 
and to any existing or future registered open-end management 
investment company or series thereof for which the Adviser or any 
successor thereto or an investment adviser controlling, controlled 
by, or under common control with the Adviser or any successor 
thereto serves as investment adviser (each a ``Fund'' and 
collectively the ``Funds'' and each such investment adviser an 
``Adviser''). For purposes of the requested order, ``successor'' is 
limited to any entity that results from a reorganization into 
another jurisdiction or a change in the type of a business 
organization.
    \2\ Any Fund, however, will be able to call a loan on one 
business day's notice.
---------------------------------------------------------------------------

    2. Applicants anticipate that the proposed facility would provide a 
borrowing Fund with a source of

[[Page 69885]]

liquidity at a rate lower than the bank borrowing rate at times when 
the cash position of the Fund is insufficient to meet temporary cash 
requirements. In addition, Funds making short-term cash loans directly 
to other Funds would earn interest at a rate higher than they otherwise 
could obtain from investing their cash in repurchase agreements or 
certain other short term money market instruments. Thus, applicants 
assert that the facility would benefit both borrowing and lending 
Funds.
    3. Applicants agree that any order granting the requested relief 
will be subject to the terms and conditions stated in the Application. 
Among others, the Adviser, through a designated committee, would 
administer the facility as a disinterested fiduciary as part of its 
duties under the investment management and administrative agreements 
with the Funds and would receive no additional fee as compensation for 
its services in connection with the administration of the facility. The 
facility would be subject to oversight and certain approvals by the 
Funds' Board, including, among others, approval of the interest rate 
formula and of the method for allocating loans across Funds, as well as 
review of the process in place to evaluate the liquidity implications 
for the Funds. A Fund's aggregate outstanding interfund loans will not 
exceed 15% of its net assets, and the Fund's loan to any one Fund will 
not exceed 5% of the lending Fund's net assets.\3\
---------------------------------------------------------------------------

    \3\ Under certain circumstances, a borrowing Fund will be 
required to pledge collateral to secure the loan.
---------------------------------------------------------------------------

    4. Applicants assert that the facility does not raise the concerns 
underlying section 12(d)(1) of the Act given that the Funds are part of 
the same group of investment companies and there will be no duplicative 
costs or fees to the Funds.\4\ Applicants also assert that the proposed 
transactions do not raise the concerns underlying sections 17(a)(1), 
17(a)(3), 17(d) and 21(b) of the Act as the Funds would not engage in 
lending transactions that unfairly benefit insiders or are detrimental 
to the Funds. Applicants state that the facility will offer both 
reduced borrowing costs and enhanced returns on loaned funds to all 
participating Funds and each Fund would have an equal opportunity to 
borrow and lend on equal terms based on an interest rate formula that 
is objective and verifiable. With respect to the relief from section 
17(a)(2) of the Act, applicants note that any collateral pledged to 
secure an interfund loan would be subject to the same conditions 
imposed by any other lender to a Fund that imposes conditions on the 
quality of or access to collateral for a borrowing (if the lender is 
another Fund) or the same or better conditions (in any other 
circumstance).\5\
---------------------------------------------------------------------------

    \4\ Applicants state that the obligation to repay an interfund 
loan could be deemed to constitute a security for the purposes of 
sections 17(a)(1) and 12(d)(1) of the Act.
    \5\ Applicants state that any pledge of securities to secure an 
interfund loan could constitute a purchase of securities for 
purposes of section 17(a)(2) of the Act.
---------------------------------------------------------------------------

    5. Applicants also believe that the limited relief from section 
18(f)(1) of the Act that is necessary to implement the facility 
(because the lending Funds are not banks) is appropriate in light of 
the conditions and safeguards described in the application and because 
the Funds would remain subject to the requirement of section 18(f)(1) 
that all borrowings of a Fund, including combined interfund loans and 
bank borrowings, have at least 300% asset coverage.
    6. 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. Rule 
17d-1(b) under the Act provides that in passing upon an application 
filed under the rule, the Commission will consider whether the 
participation of the registered investment company in a joint 
enterprise, joint arrangement or profit sharing plan on the basis 
proposed 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 the other 
participants.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-24285 Filed 10-6-16; 8:45 am]
 BILLING CODE 8011-01-P

Federal Register / Vol. 81, No. 195 / Friday, October 7, 2016 / Notices 69885

liquidity at a rate lower than the bank Act, applicants note that any collateral For the Commission, by the Division of
borrowing rate at times when the cash pledged to secure an interfund loan Investment Management, under delegated
position of the Fund is insufficient to would be subject to the same conditions authority.
meet temporary cash requirements. In imposed by any other lender to a Fund Robert W. Errett,
addition, Funds making short-term cash that imposes conditions on the quality Deputy Secretary.
loans directly to other Funds would of or access to collateral for a borrowing [FR Doc. 2016–24285 Filed 10–6–16; 8:45 am]
earn interest at a rate higher than they (if the lender is another Fund) or the BILLING CODE 8011–01–P
otherwise could obtain from investing same or better conditions (in any other
their cash in repurchase agreements or circumstance).5
certain other short term money market 5. Applicants also believe that the SECURITIES AND EXCHANGE
instruments. Thus, applicants assert that limited relief from section 18(f)(1) of the COMMISSION
the facility would benefit both Act that is necessary to implement the [Release No. 34–79028; File No. SR–OCC–
borrowing and lending Funds. facility (because the lending Funds are 2016–012]
3. Applicants agree that any order not banks) is appropriate in light of the
granting the requested relief will be conditions and safeguards described in Self-Regulatory Organizations; The
subject to the terms and conditions the application and because the Funds Options Clearing Corporation; Notice
stated in the Application. Among would remain subject to the of Filing and Immediate Effectiveness
others, the Adviser, through a requirement of section 18(f)(1) that all of Proposed Rule Change To Revise
designated committee, would borrowings of a Fund, including The Options Clearing Corporation’s
administer the facility as a disinterested combined interfund loans and bank Schedule of Fees
fiduciary as part of its duties under the borrowings, have at least 300% asset
investment management and October 3, 2016.
coverage.
administrative agreements with the 6. Section 6(c) of the Act permits the Pursuant to Section 19(b)(1) of the
Funds and would receive no additional Commission to exempt any persons or Securities Exchange Act of 1934
fee as compensation for its services in transactions from any provision of the (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
connection with the administration of Act if such exemption is necessary or notice is hereby given that on
the facility. The facility would be appropriate in the public interest and September 30, 2016, The Options
subject to oversight and certain consistent with the protection of Clearing Corporation (‘‘OCC’’) filed with
approvals by the Funds’ Board, the Securities and Exchange
investors and the purposes fairly
including, among others, approval of the Commission (‘‘Commission’’) the
intended by the policy and provisions of
interest rate formula and of the method proposed rule change as described in
the Act. Section 12(d)(1)(J) of the Act
for allocating loans across Funds, as Items I, II and III below, which Items
provides that the Commission may
well as review of the process in place to have been prepared by OCC. OCC filed
exempt any person, security, or
evaluate the liquidity implications for the proposal pursuant to Section
transaction, or any class or classes of
the Funds. A Fund’s aggregate 19(b)(3)(A)(ii) of the Act 3 and Rule 19b–
persons, securities, or transactions, from
outstanding interfund loans will not 4(f)(2) thereunder 4 so that the proposal
any provision of section 12(d)(1) if the
exceed 15% of its net assets, and the was effective upon filing with the
exemption is consistent with the public
Fund’s loan to any one Fund will not Commission. The Commission is
interest and the protection of investors.
exceed 5% of the lending Fund’s net publishing this notice to solicit
Section 17(b) of the Act authorizes the
assets.3 comments on the proposed rule change
Commission to grant an order
4. Applicants assert that the facility from interested persons.
permitting a transaction otherwise
does not raise the concerns underlying prohibited by section 17(a) if it finds I. Clearing Agency’s Statement of the
section 12(d)(1) of the Act given that the that (a) the terms of the proposed Terms of Substance of the Proposed
Funds are part of the same group of transaction are fair and reasonable and Rule Change
investment companies and there will be do not involve overreaching on the part
no duplicative costs or fees to the The proposed rule change by OCC
of any person concerned; (b) the would revise OCC’s Schedule of Fees
Funds.4 Applicants also assert that the proposed transaction is consistent with
proposed transactions do not raise the effective December 1, 2016, to
the policies of each registered implement an increase in clearing fees
concerns underlying sections 17(a)(1),
investment company involved; and (c) in accordance with OCC’s Fee Policy.5
17(a)(3), 17(d) and 21(b) of the Act as
the proposed transaction is consistent
the Funds would not engage in lending
with the general purposes of the Act. 1 15 U.S.C. 78s(b)(1).
transactions that unfairly benefit
Rule 17d–1(b) under the Act provides 2 17 CFR 240.19b–4.
insiders or are detrimental to the Funds.
that in passing upon an application filed 3 15 U.S.C. 78s(b)(3)(A)(ii).
Applicants state that the facility will 4 17 CFR 240.19b–4(f)(2).
under the rule, the Commission will
offer both reduced borrowing costs and 5 OCC’s Fee Policy was adopted as part of OCC’s
consider whether the participation of
enhanced returns on loaned funds to all plan for raising additional capital (‘‘Capital Plan’’),
the registered investment company in a which was put in place in light of proposed
participating Funds and each Fund
joint enterprise, joint arrangement or regulatory capital requirements applicable to
would have an equal opportunity to
profit sharing plan on the basis systemically important financial market utilities,
borrow and lend on equal terms based such as OCC. See Securities Exchange Act Release
proposed is consistent with the
on an interest rate formula that is No. 74452 (March 6, 2015) 80 FR 13058 (March 12,
provisions, policies and purposes of the 2015) (SR–OCC–2015–02). OCC also filed proposals
objective and verifiable. With respect to
Act and the extent to which such in the Capital Plan Filing as an advance notice
mstockstill on DSK3G9T082PROD with NOTICES

the relief from section 17(a)(2) of the
participation is on a basis different from under Section 806(e)(1) of the Payment, Clearing,
or less advantageous than that of the and Settlement Supervision Act of 2010. 12 U.S.C.
3 Under certain circumstances, a borrowing Fund
5465(e)(1). On February 26, 2015, the Commission
will be required to pledge collateral to secure the other participants. issued a notice of no objection to the advance notice
loan. filing. See Exchange Act Release No. 74387
4 Applicants state that the obligation to repay an 5 Applicants state that any pledge of securities to (February 26, 2015), 80 FR 12215 (March 6, 2015)
interfund loan could be deemed to constitute a secure an interfund loan could constitute a (SR–OCC–2014–813). BATS Global Markets, Inc.,
security for the purposes of sections 17(a)(1) and purchase of securities for purposes of section BOX Options Exchange LLC, KCG Holdings, Inc.,
12(d)(1) of the Act. 17(a)(2) of the Act. Continued

VerDate Sep<11>2014 17:36 Oct 06, 2016 Jkt 241001 PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 E:\FR\FM\07OCN1.SGM 07OCN1

Document Created: 2018-02-13 16:31:55
Document Modified: 2018-02-13 16:31:55

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 pursuant to: (a) Section 6(c) of the Investment Company Act of 1940 (``Act'') granting an exemption from sections 18(f) and 21(b) of the Act; (b) section 12(d)(1)(J) of the Act granting an exemption from section 12(d)(1) of the Act; (c) sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Act; and (d) section 17(d) of the Act and rule 17d-1 under the Act to permit certain joint arrangements and transactions. Applicants request an order that would permit certain registered open-end management investment companies to participate in a joint lending and borrowing facility.
Dates		The application was filed on November 27, 2015, and amended on May 5, 2016.
Contact		Judy T. Lee, Senior Special Counsel, at (202) 551-6259 or Sara Crovitz, Assistant Chief Counsel, at (202) 551-6720 (Division of Investment Management, Chief Counsel's Office).
FR Citation		81 FR 69884