81 FR 95690 - Virtus Alternative Solutions Trust, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 249 (December 28, 2016)

Page Range		95690-95691
FR Document		2016-31288

Federal Register, Volume 81 Issue 249 (Wednesday, December 28, 2016)

[Federal Register Volume 81, Number 249 (Wednesday, December 28, 2016)]
[Notices]
[Pages 95690-95691]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-31288]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32398; File No. 812-14603]


Virtus Alternative Solutions Trust, et al.; Notice of Application

December 21, 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.

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    Applicants: Virtus Alternative Solutions Trust, Virtus Equity 
Trust, Virtus Opportunities Trust, Virtus Retirement Trust, and Virtus 
Variable Insurance Trust (the ``Trusts''), registered under the Act as 
open-end management investment companies with one or more series, and 
Virtus Alternative Investment Advisers, Inc. (``VAIA''), Virtus 
Investment Advisers, Inc. (``VIA''), and Virtus Retirement Investment 
Advisers, LLC (``VRIA''), registered as investment advisers under the 
Investment Advisers Act of 1940.
    Filing Dates: The application was filed on January 15, 2016, and 
amended on June 23, 2016 and October 3, 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 January 17, 2017 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: 100 Pearl Street, 
Hartford, CT 06103.

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 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\
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    \1\ Applicants request that the order apply to the Trusts and 
any existing or future series thereof (each a ``Fund'' and 
collectively, the ``Funds'') and to any other registered open-end 
management investment company or its series for which VIA, VAIA, or 
VRIA and each successor thereto or a person controlling, controlled 
by, or under common control (within the meaning of section 2(a)(9) 
of the Act) with VIA, VAIA, or VRIA serves as investment adviser 
(each an ``Adviser'' and collectively, the ``Advisers''). Any 
Adviser will be registered as an investment adviser under the 
Advisers Act. All Funds that currently intend to rely on the 
requested order have been named as applicants and any other Fund 
that relies on the requested order in the future will comply with 
the terms and conditions of the application. A ``successor'' is 
defined as any entity resulting from a reorganization of either VIA, 
VAIA, or VRIA into another jurisdiction or a change in the type of 
business organization.
    \2\ Any Fund, however, will be able to call a loan on one 
business day's notice.
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    2. Applicants anticipate that the proposed facility would provide a 
borrowing Fund with a source of 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 Advisers, 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

[[Page 95691]]

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 loans to any one Fund will not exceed 5% 
of the lending Fund's net assets.\3\
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    \3\ Under certain circumstances, a borrowing Fund will be 
required to pledge collateral to secure the loan.
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    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\
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    \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.
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    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. 2016-31288 Filed 12-27-16; 8:45 am]
 BILLING CODE 8011-01-P

Federal Register / Vol. 81, No. 249 / Wednesday, December 28, 2016 / Notices 95691

subject to oversight and certain transactions from any provision of the 15, 2016, NYSE MKT LLC (‘‘Exchange’’)
approvals by the Funds’ Board, Act if such exemption is necessary or filed with the Securities and Exchange
including, among others, approval of the appropriate in the public interest and Commission (‘‘Commission’’) the
interest rate formula and of the method consistent with the protection of proposed rule change as described in
for allocating loans across Funds, as investors and the purposes fairly Items I, II, and III below, which Items
well as review of the process in place to intended by the policy and provisions of have been prepared by the self-
evaluate the liquidity implications for the Act. Section 12(d)(1)(J) of the Act regulatory organization. The
the Funds. A Fund’s aggregate provides that the Commission may Commission is publishing this notice to
outstanding interfund loans will not exempt any person, security, or solicit comments on the proposed rule
exceed 15% of its net assets, and the transaction, or any class or classes of change from interested persons.
Fund’s loans to any one Fund will not persons, securities, or transactions, from
exceed 5% of the lending Fund’s net any provision of section 12(d)(1) if the I. Self-Regulatory Organization’s
assets.3 exemption is consistent with the public Statement of the Terms of Substance of
4. Applicants assert that the facility interest and the protection of investors. the Proposed Rule Change
does not raise the concerns underlying Section 17(b) of the Act authorizes the The Exchange proposes to modify the
section 12(d)(1) of the Act given that the Commission to grant an order NYSE Amex Options Fee Schedule
Funds are part of the same group of permitting a transaction otherwise (‘‘Fee Schedule’’). The Exchange
investment companies and there will be prohibited by section 17(a) if it finds proposes to implement the fee change
no duplicative costs or fees to the that (a) the terms of the proposed effective December 15, 2016. The
Funds.4 Applicants also assert that the transaction are fair and reasonable and proposed change is available on the
proposed transactions do not raise the do not involve overreaching on the part Exchange’s Web site at www.nyse.com,
concerns underlying sections 17(a)(1), of any person concerned; (b) the at the principal office of the Exchange,
17(a)(3), 17(d) and 21(b) of the Act as proposed transaction is consistent with and at the Commission’s Public
the Funds would not engage in lending the policies of each registered Reference Room.
transactions that unfairly benefit investment company involved; and (c)
insiders or are detrimental to the Funds. the proposed transaction is consistent II. Self-Regulatory Organization’s
Applicants state that the facility will with the general purposes of the Act. Statement of the Purpose of, and
offer both reduced borrowing costs and Rule 17d–1(b) under the Act provides Statutory Basis for, the Proposed Rule
enhanced returns on loaned funds to all that in passing upon an application filed Change
participating Funds and each Fund under the rule, the Commission will In its filing with the Commission, the
would have an equal opportunity to consider whether the participation of self-regulatory organization included
borrow and lend on equal terms based the registered investment company in a statements concerning the purpose of,
on an interest rate formula that is joint enterprise, joint arrangement or and basis for, the proposed rule change
objective and verifiable. With respect to profit sharing plan on the basis and discussed any comments it received
the relief from section 17(a)(2) of the proposed is consistent with the on the proposed rule change. The text
Act, applicants note that any collateral provisions, policies and purposes of the of those statements may be examined at
pledged to secure an interfund loan Act and the extent to which such the places specified in Item IV below.
would be subject to the same conditions participation is on a basis different from The Exchange has prepared summaries,
imposed by any other lender to a Fund or less advantageous than that of the set forth in sections A, B, and C below,
that imposes conditions on the quality other participants. of the most significant parts of such
of or access to collateral for a borrowing For the Commission, by the Division of statements.
(if the lender is another Fund) or the Investment Management, under delegated
same or better conditions (in any other authority.
A. Self-Regulatory Organization’s
circumstance).5 Statement of the Purpose of, and the
Robert W. Errett,
5. Applicants also believe that the Statutory Basis for, the Proposed Rule
Deputy Secretary.
limited relief from section 18(f)(1) of the Change
[FR Doc. 2016–31288 Filed 12–27–16; 8:45 am]
Act that is necessary to implement the 1. Purpose
BILLING CODE 8011–01–P
facility (because the lending Funds are
not banks) is appropriate in light of the The purpose of this filing is to amend
conditions and safeguards described in Section III.C. of the Fee Schedule to
SECURITIES AND EXCHANGE exempt Binary Return Derivatives
the application and because the Funds COMMISSION
would remain subject to the contracts (‘‘ByRDs’’) from the monthly
requirement of section 18(f)(1) that all [Release No. 34–79651; File No. SR– Rights Fees assessed on Specialists, e-
borrowings of a Fund, including NYSEMKT–2016–121] Specialists, Directed Order Market
combined interfund loans and bank Markers (each a ‘‘DOMM’’). The
borrowings, have at least 300% asset Self-Regulatory Organizations; NYSE Exchange proposes to implement these
coverage. MKT LLC; Notice of Filing and changes effective December 15, 2016.
6. Section 6(c) of the Act permits the Immediate Effectiveness of Proposed The Exchange added rules related to
Commission to exempt any persons or Change Modifying the NYSE Amex ByRDs in 2007 and re-launched trading
Options Fee Schedule in ByRDs in March 2016.4 To encourage
3 Under certain circumstances, a borrowing Fund
December 21, 2016.
will be required to pledge collateral to secure the 4 The Exchange adopted ByRDs in 2007 and plans
sradovich on DSK3GMQ082PROD with NOTICES

loan. Pursuant to Section 19(b)(1) 1 of the to re-launch trading in ByRDs in March. See
4 Applicants state that the obligation to repay an Securities Exchange Act of 1934 Securities Exchange Act Release No. 56251 (August
interfund loan could be deemed to constitute a (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 14, 2007), 72 FR 46523 (August 20, 2007) (SR–
security for the purposes of sections 17(a)(1) and notice is hereby given that, on December Amex–2004–27) (Order approving listing of Fixed
12(d)(1) of the Act. Return Options (‘‘FROs’’)); see also Securities
5 Applicants state that any pledge of securities to Exchange Act Release Nos. 71957 (April 16, 2014),
1 15 U.S.C. 78s(b)(1).
secure an interfund loan could constitute a 79 FR 22563 (April 22, 2014) (SR–NYSEMKT–
2 15 U.S.C. 78a.
purchase of securities for purposes of section 2014–06) (Order approving name change from FROs
17(a)(2) of the Act. 3 17 CFR 240.19b–4. Continued

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Document Created: 2016-12-28 02:16:57
Document Modified: 2016-12-28 02:16:57

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 January 15, 2016, and amended on June 23, 2016 and October 3, 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 95690