81 FR 72127 - ETF Managers Group, LLC and ETF Managers Trust; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 202 (October 19, 2016)

[Federal Register Volume 81, Number 202 (Wednesday, October 19, 2016)]
[Notices]
[Pages 72127-72128]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-25239]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32317; 812-14508]


ETF Managers Group, LLC and ETF Managers Trust; Notice of 
Application

October 13, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (``Act'') for an exemption

[[Page 72128]]

from section 15(a) of the Act and rule 18f-2 under the Act, as well as 
from certain disclosure requirements in rule 20a-1 under the Act, Item 
19(a)(3) of Form N-1A, Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and 
22(c)(9) of Schedule 14A under the Securities Exchange Act of 1934, and 
Sections 6-07(2)(a), (b), and (c) of Regulation S-X (``Disclosure 
Requirements''). The requested exemption would permit an investment 
adviser to hire and replace certain sub-advisers without shareholder 
approval and grant relief from the Disclosure Requirements as they 
relate to fees paid to the sub-advisers.

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Applicants:  ETF Managers Trust (the ``Trust''), a Delaware statutory 
trust registered under the Act as an open-end management investment 
company that may offer one or more series of shares, and ETF Managers 
Group, LLC, a Delaware limited liability company registered as an 
investment adviser under the Investment Advisers Act of 1940 (the 
``Initial Adviser,'' and, collectively with the Trust, the 
``Applicants'').

DATES: Filing Dates: The application was filed July 1, 2014, and 
amended on July 1, 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 November 8, 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: David C. 
Mahaffey, Esq. and Eric D. Simanek, Esq., Sullivan & Worcester LLP, 
1666 K Street NW., Washington, DC 20006.

FOR FURTHER INFORMATION CONTACT:  Judy T. Lee, Senior Special Counsel, 
at (202) 551-6259, or Sara Crovitz, Assistant Chief Counsel, at (202) 
551-6862 (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. The Adviser will serve as the investment adviser to the Funds 
pursuant to an investment advisory agreement with the Trust (the 
``Advisory Agreement'').\1\ The Adviser will provide the Funds with 
continuous and comprehensive investment management services subject to 
the supervision of, and policies established by, each Fund's board of 
trustees (``Board''). The Advisory Agreement permits the Adviser, 
subject to the approval of the Board, to delegate to one or more sub-
advisers (each, a ``Sub-Adviser'' and collectively, the ``Sub-
Advisers'') the responsibility to provide the day-to-day portfolio 
investment management of each Fund, subject to the supervision and 
direction of the Adviser. The primary responsibility for managing the 
Funds will remain vested in the Adviser. The Adviser will hire, 
evaluate, allocate assets to and oversee the Sub-Advisers, including 
determining whether a Sub-Adviser should be terminated, at all times 
subject to the authority of the Board.
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    \1\ Applicants request relief with respect to any existing and 
any future series of the Trust and any other registered open-end 
management company or series thereof that: (a) Is advised by the 
Initial Adviser or its successor or by a person controlling, 
controlled by, or under common control with the Initial Adviser or 
its successor (each, also an ``Adviser''); (b) uses the manager of 
managers structure described in the application; and (c) complies 
with the terms and conditions of the application (any such series, a 
``Fund'' and collectively, the ``Funds'' and certain Funds (each, a 
``Feeder Fund'') that may invest substantially all of their assets 
in a Fund). For purposes of the requested order, ``successor'' is 
limited to an entity that results from a reorganization into another 
jurisdiction or a change in the type of business organization.
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    2. Applicants request an exemption to permit the Adviser, subject 
to Board approval, to hire certain Sub-Advisers pursuant to Sub-
Advisory Agreements and materially amend existing Sub-Advisory 
Agreements without obtaining the shareholder approval required under 
section 15(a) of the Act and rule 18f-2 under the Act.\2\ Applicants 
also seek an exemption from the Disclosure Requirements to permit a 
Fund to disclose (as both a dollar amount and a percentage of the 
Fund's net assets): (a) The aggregate fees paid to the Adviser and any 
Affiliated Sub-Adviser; and (b) the aggregate fees paid to Sub-Advisers 
other than Affiliated Sub-Advisers (collectively, ``Aggregate Fee 
Disclosure''). For any Fund that employs an Affiliated Sub-Adviser, the 
Fund will provide separate disclosure of any fees paid to the 
Affiliated Sub-Adviser.
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    \2\ The requested relief will not extend to any Sub-Adviser that 
is an affiliated person, as defined in section 2(a)(3) of the Act, 
of a Fund, of any Feeder Fund or the Adviser, other than by reason 
of serving as a sub-adviser to one or more of the Sub-Advised Funds 
(``Affiliated Sub-Adviser'').
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    3. Applicants agree that any order granting the requested relief 
will be subject to the terms and conditions stated in the Application. 
Such terms and conditions provide for, among other safeguards, 
appropriate disclosure to Fund shareholders and notification about sub-
advisory changes and enhanced Board oversight to protect the interests 
of the Funds' shareholders.
    4. Section 6(c) 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 provisions of the Act, or 
any rule thereunder, if such relief is necessary or appropriate in the 
public interest and consistent with the protection of investors and 
purposes fairly intended by the policy and provisions of the Act. 
Applicants believe that the requested relief meets this standard 
because, as further explained in the Application, the Advisory 
Agreements will remain subject to shareholder approval, while the role 
of the Sub-Advisers is substantially similar to that of individual 
portfolio managers, so that requiring shareholder approval of Sub-
Advisory Agreements would impose unnecessary delays and expenses on the 
Funds. Applicants believe that the requested relief from the Disclosure 
Requirements meets this standard because it will improve the Adviser's 
ability to negotiate fees paid to the Sub-Advisers that are more 
advantageous for the Funds.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-25239 Filed 10-18-16; 8:45 am]
 BILLING CODE 8011-01-P