82 FR 12862 - Victory Portfolios, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 43 (March 7, 2017)

Page Range		12862-12863
FR Document		2017-04440

Federal Register, Volume 82 Issue 43 (Tuesday, March 7, 2017)

[Federal Register Volume 82, Number 43 (Tuesday, March 7, 2017)]
[Notices]
[Pages 12862-12863]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-04440]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32519; File No. 812-14719]


Victory Portfolios, et al.; Notice of Application

March 2, 2017.
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: Victory Portfolios, Victory Portfolios II, Victory 
Institutional Funds and Victory Variable Insurance Funds (each a 
``Trust''), each a Delaware statutory trust registered under the Act as 
an open-end management investment company with multiple series,\1\ and 
Victory Capital Management Inc. (the ``Adviser''), a New York 
Corporation registered as an investment adviser under the Investment 
Advisers Act of 1940.
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    \1\ In the future the Adviser may advise Funds (as defined 
below) that are registered closed-end management investment 
companies or Funds that are money market funds that comply with Rule 
2a-7 under the 1940 Act. The Funds that are closed-end management 
investment companies and money market funds will not participate as 
borrowers in the interfund lending facility.

DATES: Filing Dates: The application was filed on December 2, 2016 and 
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amended on January 17, 2017.

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 March 27, 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

[[Page 12863]]

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: Victory Portfolios, 
Victory Portfolios II, Victory Institutional Funds, Victory Variable 
Insurance Funds and Victory Capital Management Inc., 4900 Tiedeman 
Road, 4th Floor, Brooklyn, Ohio 44144.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 551-6876 or Robert H. Shapiro, 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.\2\ The Funds will not borrow under the facility for 
leverage purposes and the loans' duration will be no more than 7 
days.\3\
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    \2\ Applicants request that the order apply to the applicants 
and to any existing or future registered open-end or closed-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 the ``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.
    \3\ 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 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 loans to any one Fund will 
not exceed 5% of the lending Fund's net assets.\4\
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    \4\ 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.\5\ 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).\6\
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    \5\ 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.
    \6\ 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 open-end Funds would remain subject to the requirement of section 
18(f)(1) that all borrowings of the open-end 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.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-04440 Filed 3-6-17; 8:45 am]
 BILLING CODE 8011-01-P

12862 Federal Register / Vol. 82, No. 43 / Tuesday, March 7, 2017 / Notices

Shares under Rule 14.11(i), including Electronic Comments SECURITIES AND EXCHANGE
those requirements regarding the COMMISSION
Disclosed Portfolio,15 Intraday • Use the Commission’s Internet
comment form (http://www.sec.gov/ [Investment Company Act Release No.
Indicative Value,16 suspension of 32519; File No. 812–14719]
trading or removal,17 trading halts,18 rules/sro.shtml); or
disclosure,19 and firewalls.20 • Send an email to rule- Victory Portfolios, et al.; Notice of
For the above reasons, the Exchange comments@sec.gov. Please include File Application
believes that the proposed rule change Number SR–BatsBZX–2017–14 on the
March 2, 2017.
is consistent with the requirements of subject line.
AGENCY: Securities and Exchange
Section 6(b)(5) of the Act. Paper Comments Commission (‘‘Commission’’).
B. Self-Regulatory Organization’s ACTION: Notice of an application for an
Statement on Burden on Competition • Send paper comments in triplicate order pursuant to: (a) Section 6(c) of the
to Secretary, Securities and Exchange Investment Company Act of 1940
The Exchange does not believe that Commission, 100 F Street NE., (‘‘Act’’) granting an exemption from
the proposed rule change will impose Washington, DC 20549–1090. sections 18(f) and 21(b) of the Act; (b)
any burden on competition that is not section 12(d)(1)(J) of the Act granting an
All submissions should refer to File
necessary or appropriate in furtherance exemption from section 12(d)(1) of the
Number SR–BatsBZX–2017–14. This file
of the purpose of the Act. The Exchange Act; (c) sections 6(c) and 17(b) of the
notes that the proposed rule change, number should be included on the
Act granting an exemption from sections
rather will facilitate the listing and subject line if email is used. To help the
17(a)(1), 17(a)(2) and 17(a)(3) of the Act;
trading of an additional actively- Commission process and review your
and (d) section 17(d) of the Act and rule
managed exchange-traded product that comments more efficiently, please use 17d–1 under the Act to permit certain
will enhance competition among both only one method. The Commission will joint arrangements and transactions.
market participants and listing venues, post all comments on the Commission’s Applicants request an order that would
to the benefit of investors and the Internet Web site (http://www.sec.gov/ permit certain registered open-end
marketplace. rules/sro.shtml). Copies of the management investment companies to
submission, all subsequent participate in a joint lending and
C. Self-Regulatory Organization’s amendments, all written statements borrowing facility.
Statement on Comments on the with respect to the proposed rule
Proposed Rule Change Received From change that are filed with the APPLICANTS: Victory Portfolios, Victory
Members, Participants, or Others Portfolios II, Victory Institutional Funds
Commission, and all written
communications relating to the and Victory Variable Insurance Funds
The Exchange has neither solicited
proposed rule change between the (each a ‘‘Trust’’), each a Delaware
nor received written comments on the
Commission and any person, other than statutory trust registered under the Act
proposed rule change.
those that may be withheld from the as an open-end management investment
III. Date of Effectiveness of the company with multiple series,1 and
public in accordance with the
Proposed Rule Change and Timing for Victory Capital Management Inc. (the
provisions of 5 U.S.C. 552, will be
Commission Action ‘‘Adviser’’), a New York Corporation
available for Web site viewing and registered as an investment adviser
Within 45 days of the date of printing in the Commission’s Public under the Investment Advisers Act of
publication of this notice in the Federal Reference Room, 100 F Street, NE., 1940.
Register or within such longer period Washington, DC 20549, on official DATES: Filing Dates: The application was
up to 90 days (i) as the Commission may business days between the hours of filed on December 2, 2016 and amended
designate of such date if it finds such 10:00 a.m. and 3:00 p.m. Copies of the on January 17, 2017.
longer period to be appropriate and filing also will be available for HEARING OR NOTIFICATION OF HEARING: An
publishes its reasons for so finding or inspection and copying at the principal order granting the requested relief will
(ii) as to which the Exchange consents, office of the Exchange. All comments be issued unless the Commission orders
the Commission will: (a) By order received will be posted without change; a hearing. Interested persons may
approve or disapprove such proposed the Commission does not edit personal request a hearing by writing to the
rule change, or (b) institute proceedings identifying information from Commission’s Secretary and serving
to determine whether the proposed rule submissions. You should submit only applicants with a copy of the request,
change should be disapproved. information that you wish to make personally or by mail. Hearing requests
IV. Solicitation of Comments available publicly. All submissions should be received by the Commission
should refer to File Number SR– by 5:30 p.m. on March 27, 2017 and
Interested persons are invited to BatsBZX–2017–14 and should be should be accompanied by proof of
submit written data, views, and submitted on or before March 28, 2017. service on the applicants, in the form of
arguments concerning the foregoing, an affidavit, or, for lawyers, a certificate
For the Commission, by the Division of
including whether the proposed rule of service. Pursuant to Rule 0–5 under
Trading and Markets, pursuant to delegated
change is consistent with the Act. authority.21 the Act, hearing requests should state
Comments may be submitted by any of the nature of the writer’s interest, any
sradovich on DSK3GMQ082PROD with NOTICES

the following methods: Eduardo A. Aleman,
Assistant Secretary. 1 In the future the Adviser may advise Funds (as

15 See Rule 14.11(i)(4)(B)(i). [FR Doc. 2017–04351 Filed 3–6–17; 8:45 am] defined below) that are registered closed-end
16 See Rule 14.11(i)(4)(B)(ii). management investment companies or Funds that
BILLING CODE 8011–01–P
17 See Rule 14.11(i)(4)(B)(iii).
are money market funds that comply with Rule 2a–
7 under the 1940 Act. The Funds that are closed-
18 See Rule 14.11(i)(4)(B)(iv).
end management investment companies and money
19 See Rule 14.11(i)(6).
market funds will not participate as borrowers in
20 See Rule 14.11(i)(7). 21 17 CFR 200.30–3(a)(12). the interfund lending facility.

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Document Created: 2018-02-01 14:48:43
Document Modified: 2018-02-01 14:48:43

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		Filing Dates: The application was filed on December 2, 2016 and
Contact		Deepak T. Pai, Senior Counsel, at (202) 551-6876 or Robert H. Shapiro, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation		82 FR 12862