82 FR 16642 - Angel Oak Funds Trust and Angel Oak Capital Advisors, LLC

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 64 (April 5, 2017)

Page Range		16642-16643
FR Document		2017-06692
Federal Register, Volume 82 Issue 64 (Wednesday, April 5, 2017)
[Federal Register Volume 82, Number 64 (Wednesday, April 5, 2017)]
[Notices]
[Pages 16642-16643]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-06692]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32584; File No. 812-14636]


Angel Oak Funds Trust and Angel Oak Capital Advisors, LLC

March 30, 2017.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    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:  Angel Oak Funds Trust, a Delaware statutory trust 
registered under the Act as an open-end management series investment 
company, and Angel Oak Capital Advisors, LLC (the ``Adviser''), a 
Delaware limited liability company registered as an investment adviser 
under the Investment Advisers Act of 1940.

Filing Dates:  The application was filed on April 1, 2016, and amended 
on September 30, 2016 and February 6, 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 April 24, 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: Dory S. Black, Esq., 
President, c/o Angel Oak Capital Advisors, LLC, One Buckhead Plaza, 
3060 Peachtree Rd. NW., Suite 500, Atlanta, Georgia 30305.

FOR FURTHER INFORMATION CONTACT:  Steven I. Amchan, Senior Counsel, at 
(202) 551-6826 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 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 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.
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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

[[Page 16643]]

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 agreement with each Fund 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.\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.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-06692 Filed 4-4-17; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 64 / Wednesday, April 5, 2017 / Notices 16643

subject to the terms and conditions not banks) is appropriate in light of the SECURITIES AND EXCHANGE
stated in the Application. Among conditions and safeguards described in COMMISSION
others, the Adviser, through a the application and because the Funds
designated committee, would would remain subject to the [Release No. 34–80346; File No. SR–
administer the facility as a disinterested NYSEArca–2017–09]
requirement of section 18(f)(1) that all
fiduciary as part of its duties under the borrowings of a Fund, including
investment management agreement with Self-Regulatory Organizations; NYSE
combined interfund loans and bank Arca, Inc.; Notice of Designation of a
each Fund and would receive no borrowings, have at least 300% asset
additional fee as compensation for its Longer Period for Commission Action
coverage. on Proposed Rule Change, as Modified
services in connection with the
administration of the facility. The 6. Section 6(c) of the Act permits the by Amendment No. 1, Regarding
facility would be subject to oversight Commission to exempt any persons or Investments of the Janus Short
and certain approvals by the Funds’ transactions from any provision of the Duration Income ETF Listed Under
Board, including, among others, Act if such exemption is necessary or NYSE Arca Equities Rule 8.600
approval of the interest rate formula and appropriate in the public interest and March 30, 2017.
of the method for allocating loans across consistent with the protection of On January 30, 2017, NYSE Arca, Inc.
Funds, as well as review of the process investors and the purposes fairly (‘‘Exchange’’) filed with the Securities
in place to evaluate the liquidity intended by the policy and provisions of and Exchange Commission
implications for the Funds. A Fund’s the Act. Section 12(d)(1)(J) of the Act (‘‘Commission’’), pursuant to Section
aggregate outstanding interfund loans provides that the Commission may 19(b)(1) of the Securities Exchange Act
will not exceed 15% of its net assets, exempt any person, security, or of 1934 (‘‘Act’’) 1 and Rule 19b–4
and the Fund’s loans to any one Fund transaction, or any class or classes of thereunder,2 a proposed rule change
will not exceed 5% of the lending persons, securities, or transactions, from regarding investments of the Janus Short
Fund’s net assets.3 any provision of section 12(d)(1) if the Duration Income ETF listed under
4. Applicants assert that the facility
exemption is consistent with the public NYSE Arca Equities Rule 8.600. The
does not raise the concerns underlying
interest and the protection of investors. proposed rule change was published for
section 12(d)(1) of the Act given that the
Section 17(b) of the Act authorizes the comment in the Federal Register on
Funds are part of the same group of
Commission to grant an order February 17, 2017.3 On March 13, 2017,
investment companies and there will be
no duplicative costs or fees to the permitting a transaction otherwise the Exchange filed Amendment No. 1 to
Funds.4 Applicants also assert that the prohibited by section 17(a) if it finds the proposed rule change.4 The
proposed transactions do not raise the that (a) the terms of the proposed Commission received no comment
concerns underlying sections 17(a)(1), transaction are fair and reasonable and letters on the proposed rule change.
17(a)(3), 17(d) and 21(b) of the Act as do not involve overreaching on the part Section 19(b)(2) of the Act 5 provides
the Funds would not engage in lending of any person concerned; (b) the that within 45 days of the publication of
transactions that unfairly benefit proposed transaction is consistent with notice of the filing of a proposed rule
insiders or are detrimental to the Funds. the policies of each registered change, or within such longer period up
Applicants state that the facility will to 90 days as the Commission may
investment company involved; and (c)
offer both reduced borrowing costs and designate if it finds such longer period
the proposed transaction is consistent
enhanced returns on loaned funds to all to be appropriate and publishes its
with the general purposes of the Act. reasons for so finding, or as to which the
participating Funds and each Fund Rule 17d–1(b) under the Act provides
would have an equal opportunity to self-regulatory organization consents,
that in passing upon an application filed the Commission shall either approve the
borrow and lend on equal terms based under the rule, the Commission will
on an interest rate formula that is proposed rule change, disapprove the
consider whether the participation of proposed rule change, or institute
objective and verifiable. With respect to
the registered investment company in a proceedings to determine whether the
the relief from section 17(a)(2) of the
joint enterprise, joint arrangement or proposed rule change should be
Act, applicants note that any collateral
pledged to secure an interfund loan profit sharing plan on the basis disapproved. The 45th day after
would be subject to the same conditions proposed is consistent with the publication of the notice for this
imposed by any other lender to a Fund provisions, policies and purposes of the proposed rule change is April 3, 2017.
that imposes conditions on the quality Act and the extent to which such The Commission is extending this 45-
of or access to collateral for a borrowing participation is on a basis different from day time period.
(if the lender is another Fund) or the or less advantageous than that of the The Commission finds it appropriate
same or better conditions (in any other other participants. to designate a longer period within
circumstance).5 which to take action on the proposed
For the Commission, by the Division of
5. Applicants also believe that the Investment Management, under delegated
rule change so that it has sufficient time
limited relief from section 18(f)(1) of the authority.
to consider the proposed rule change, as
Act that is necessary to implement the modified by Amendment No. 1.
Eduardo A. Aleman, Accordingly, the Commission, pursuant
facility (because the lending Funds are
Assistant Secretary. to Section 19(b)(2) of the Act,6
3 Under certain circumstances, a borrowing Fund [FR Doc. 2017–06692 Filed 4–4–17; 8:45 am]
will be required to pledge collateral to secure the
jstallworth on DSK7TPTVN1PROD with NOTICES

BILLING CODE 8011–01–P 1 15 U.S.C. 78s(b)(1).
loan. 2 17
4 Applicants state that the obligation to repay an
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 80028
interfund loan could be deemed to constitute a
security for the purposes of sections 17(a)(1) and (February 13, 2017), 82 FR 11089.
4 Amendment No. 1 is available at: https://
12(d)(1) of the Act.
5 Applicants state that any pledge of securities to www.sec.gov/comments/sr-nysearca-2017-09/
secure an interfund loan could constitute a nysearca201709-1641603-145721.pdf.
5 15 U.S.C. 78s(b)(2).
purchase of securities for purposes of section
17(a)(2) of the Act. 6 Id.

VerDate Sep<11>2014 15:11 Apr 04, 2017 Jkt 241001 PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 E:\FR\FM\05APN1.SGM 05APN1
Document Created: 2018-02-01 14:47:09
Document Modified: 2018-02-01 14:47:09
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.
Dates		The application was filed on April 1, 2016, and amended on September 30, 2016 and February 6, 2017.
Contact		Steven I. Amchan, Senior Counsel, at (202) 551-6826 or David J. Marcinkus, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation		82 FR 16642