81 FR 83899 - Legg Mason ETF Equity Trust, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 225 (November 22, 2016)

Page Range		83899-83901
FR Document		2016-28029

Federal Register, Volume 81 Issue 225 (Tuesday, November 22, 2016)

[Federal Register Volume 81, Number 225 (Tuesday, November 22, 2016)]
[Notices]
[Pages 83899-83901]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-28029]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32360; File No. 812-14547]


Legg Mason ETF Equity Trust, et al.; Notice of Application

November 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 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.

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    Applicants: Legg Mason Partners Fund Advisor, LLC (``Initial 
Adviser''), a Delaware limited liability company registered as an 
investment adviser under the Investment Advisers Act of 1940, Legg 
Mason ETF Equity Trust and Legg Mason ETF Trust (each a ``Trust,'' and 
together, the ``Trusts''), each a

[[Page 83900]]

Maryland statutory trust registered under the Act as an open-end 
management investment company with multiple series, and Legg Mason 
Investor Services, LLC (``Distributor''), a Delaware limited liability 
company and broker-dealer registered under the Securities Exchange Act 
of 1934 (``Exchange Act'').

DATES:  Filing Dates: The application was filed on September 15, 2015, 
and amended on January 20, 2016 and July 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 December 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: Trusts and Initial Adviser, 
620 Eighth Avenue, New York, NY 10018; Distributer, 100 International 
Drive, Baltimore, MD 21202.

FOR FURTHER INFORMATION CONTACT:  Jessica Shin, Attorney-Adviser, at 
(202) 551-5921, or David J. Marcinkus, 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. 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 Funds and any 
additional series of the Trusts, and any other open-end management 
investment company or series thereof, that may be created in the 
future (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 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

[[Page 83901]]

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. 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. 2016-28029 Filed 11-21-16; 8:45 am]
 BILLING CODE 8011-01-P

Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices 83901

Fund to sell its shares to and redeem its SECURITIES AND EXCHANGE The Commission estimates that there
shares from a Fund of Funds, and to COMMISSION are approximately 12,971 reporting
engage in the accompanying in-kind institutions (respondents) and, on
transactions with the Fund of Funds.2 Submission for OMB Review; average, each respondent would need to
The purchase of Creation Units by a Comment Request retain 33 records annually, with each
Fund of Funds directly from a Fund will retention requiring approximately 1
Upon Written Request, Copies Available
be accomplished in accordance with the minute (a total of 33 minutes or 0.55
From: Securities and Exchange
policies of the Fund of Funds and will hours per respondent per year). Thus,
Commission Office of FOIA Services,
be based on the NAVs of the Funds. the total estimated annual time burden
9. Applicants also request relief to 100 F Street NE., Washington, DC
20549–2736. for all respondents is 7,134 hours
permit a Feeder Fund to acquire shares
(12,971 × 0.55 hours = 7,134). Assuming
of another registered investment Extension:
Rule 17f–1(g); SEC File No. 270–30, OMB an average hourly cost for clerical work
company managed by the Adviser
having substantially the same Control No. 3235–0290. of $50.00, the average total yearly record
investment objectives as the Feeder retention cost of compliance for each
Notice is hereby given that, pursuant
Fund (‘‘Master Fund’’) beyond the respondent would be $27.50 ($50 × 0.55
to the Paperwork Reduction Act of 1995
limitations in section 12(d)(1)(A) and hours). Based on these estimates, the
(44 U.S.C. 3501et seq.) (‘‘PRA’’), the
permit the Master Fund, and any total annual compliance cost for the
Securities and Exchange Commission
principal underwriter for the Master (‘‘Commission’’) has submitted to the estimated 12,971 reporting institutions
Fund, to sell shares of the Master Fund Office of Management and Budget would be approximately $356,702
to the Feeder Fund beyond the (‘‘OMB’’) a request for approval of (12,971 × $27.50).
limitations in section 12(d)(1)(B). extension of the previously approved Rule 17f–1(g) does not require
10. Section 6(c) of the Act permits the collection of information provided for in periodic collection, but it does require
Commission to exempt any persons or Rule 17f–1(g) (17 CFR 240.17f–1(g)), retention of records generated as a result
transactions from any provision of the under the Securities Exchange Act of of compliance with Rule 17f–1. Under
Act if such exemption is necessary or 1934 (15 U.S.C. 78a et seq.). Section 17(b) and (f) of the Act, the
appropriate in the public interest and Rule 17f–1(g) requires that all information required by Rule 17f–1(g) is
consistent with the protection of reporting institutions (i.e., every available to the Commission and
investors and the purposes fairly national securities exchange, member Federal bank regulators for
intended by the policy and provisions of thereof, registered securities association,
the Act. Section 12(d)(1)(J) of the Act examinations or collection purposes.
broker, dealer, municipal securities Rule 0–4 of the Securities Exchange Act
provides that the Commission may dealer, registered transfer agent,
exempt any person, security, or deems such information to be
registered clearing agency, participant confidential.
transaction, or any class or classes of therein, member of the Federal Reserve
persons, securities, or transactions, from System, and bank insured by the FDIC) An agency may not conduct or
any provision of section 12(d)(1) if the maintain and preserve a number of sponsor, and a person is not required to
exemption is consistent with the public documents related to their participation respond to, a collection of information
interest and the protection of investors. in the Lost and Stolen Securities under the PRA unless it displays a
Section 17(b) of the Act authorizes the Program (‘‘Program’’) under Rule 17f–1. currently valid OMB control number.
Commission to grant an order The following documents must be kept The public may view background
permitting a transaction otherwise in an easily accessible place for three documentation for this information
prohibited by section 17(a) if it finds years, according to paragraph (g): (1)
that (a) the terms of the proposed collection at the following Web site:
Copies of all reports of theft or loss www.reginfo.gov. Comments should be
transaction are fair and reasonable and (Form X–17F–1A) filed with the
do not involve overreaching on the part directed to (i) Desk Officer for the
Commission’s designee: (2) All Securities and Exchange Commission,
of any person concerned; (b) the agreements between reporting
proposed transaction is consistent with Office of Information and Regulatory
institutions regarding registration in the
the policies of each registered Affairs, Office of Management and
Program or other aspects of Rule 17f–1;
investment company involved; and (c) Budget, Room 10102, New Executive
and (3) all confirmations or other
the proposed transaction is consistent Office Building, Washington, DC 20503
information received from the
with the general purposes of the Act. Commission or its designee as a result or by sending an email to: Shagufta_
For the Commission, by the Division of of inquiry. Ahmed@omb.eop.gov; and (ii) Pamela
Investment Management, under delegated Reporting institutions utilize these Dyson, Director/Chief Information
authority. records and reports (a) to report missing, Officer, Securities and Exchange
Brent J. Fields, lost, stolen or counterfeit securities to Commission, c/o Remi Pavlik-Simon,
Secretary. the database, (b) to confirm inquiry of 100 F Street NE., Washington, DC 20549
[FR Doc. 2016–28029 Filed 11–21–16; 8:45 am] the database, and (c) to demonstrate or by sending an email to: PRA_
BILLING CODE 8011–01–P compliance with Rule 17f–1. The Mailbox@sec.gov. Comments must be
Commission and the reporting submitted within 30 days of this notice.
2 The requested relief would apply to direct sales institutions’ examining authorities Dated: November 16, 2016.
of shares in Creation Units by a Fund to a Fund of utilize these records to monitor the
sradovich on DSK3GMQ082PROD with NOTICES

Funds and redemptions of those shares. Applicants, Brent J. Fields,
moreover, are not seeking relief from section 17(a)
incidence of thefts and losses incurred
Secretary.
for, and the requested relief will not apply to, by reporting institutions and to
transactions where a Fund could be deemed an determine compliance with Rule 17f–1. [FR Doc. 2016–28026 Filed 11–21–16; 8:45 am]
Affiliated Person, or a Second-Tier Affiliate, of a If such records were not retained by BILLING CODE 8011–01–P
Fund of Funds because an Adviser or an entity
controlling, controlled by or under common control
reporting institutions, compliance with
with an Adviser provides investment advisory Rule 17f–1 could not be monitored
services to that Fund of Funds. effectively.

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Document Created: 2018-02-14 08:29:03
Document Modified: 2018-02-14 08:29:03

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; (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		Filing Dates: The application was filed on September 15, 2015, and amended on January 20, 2016 and July 11, 2016.
Contact		Jessica Shin, Attorney-Adviser, at (202) 551-5921, or David J. Marcinkus, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation		81 FR 83899