82 FR 34719 - Point Bridge Capital, LLC, et al.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 142 (July 26, 2017)

Page Range		34719-34721
FR Document		2017-15712
Federal Register, Volume 82 Issue 142 (Wednesday, July 26, 2017)
[Federal Register Volume 82, Number 142 (Wednesday, July 26, 2017)]
[Notices]
[Pages 34719-34721]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-15712]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32738; 812-14763]


Point Bridge Capital, LLC, et al.

July 21, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    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

[[Page 34720]]

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) index-
based 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; and (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.

Applicants:  Point Bridge Capital, LLC (the ``Initial Adviser''), a 
Delaware limited liability company that will be registered as an 
investment adviser under the Investment Advisers Act of 1940 and ETF 
Series Solutions (the ``Trust''), a Delaware statutory trust registered 
under the Act as an open-end management investment company with 
multiple series.

Filing Date:  The application was filed on April 13, 2017, and amended 
on June 21, 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 August 14, 2017, 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: The Initial Adviser, 300 
Throckmorton Street, Suite 1550, Fort Worth, Texas 76102; and the 
Trust, 615 East Michigan Street, 4th Floor, Milwaukee, Wisconsin 53202.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 551-6817, or Nadya B. Roytblat, Assistant Director, at (202) 551-
6825 (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 
index 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 a broker-dealer that will be registered 
under the Securities Exchange Act of 1934 (``Exchange Act'') (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. 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 new series of 
the Trust and any additional series of the Trust, and any other 
open-end management investment company or series thereof (each, 
included in the term ``Fund''), each of which will operate as an ETF 
and will track a specified index comprised of domestic or foreign 
equity and/or fixed income securities (each, an ``Underlying 
Index''). 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 such entity or any successor thereto, an 
``Adviser'') and (b) comply with the terms and conditions of the 
application. For purposes of the requested order, a ``successor'' is 
limited to an entity or entities that result from a reorganization 
into another jurisdiction or a change in the type of business 
organization.
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    2. Each Fund will hold investment positions selected to correspond 
closely to the performance of an Underlying Index. In the case of Self-
Indexing Funds, an affiliated person, as defined in section 2(a)(3) of 
the Act (``Affiliated Person''), or an affiliated person of an 
Affiliated Person (``Second-Tier Affiliate''), of the Trust or a Fund, 
of the Adviser, of any sub-adviser to or promoter of a Fund, or of the 
Distributor will compile, create, sponsor or maintain the Underlying 
Index.\2\
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    \2\ Each Self-Indexing Fund will post on its Web site the 
identities and quantities of the investment positions that will form 
the basis for the Fund's calculation of its NAV at the end of the 
day. Applicants believe that requiring Self-Indexing Funds to 
maintain full portfolio transparency will help address, together 
with other protections, conflicts of interest with respect to such 
Funds.
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    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 effect creations and redemptions of 
Creation Units in kind and that are based on certain Underlying Indexes 
that include foreign securities, applicants request relief from the 
requirement imposed by section 22(e) in order to allow such

[[Page 34721]]

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 
investment positions currently held by the Funds. Applicants also seek 
relief from the prohibitions on affiliated transactions in section 
17(a) to permit a 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.\3\ 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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    \3\ 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. 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.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-15712 Filed 7-25-17; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 142 / Wednesday, July 26, 2017 / Notices 34719

its back-up data center. Moreover, the or otherwise unavailable could help duration and the rule provides a fair
Commission notes that such additional ensure that the market for these procedure for imposing such
requirements will be imposed only on securities would continue to be restrictions. Specifically, the
Designated BCP/DR Participants, which available and functioning, which should Commission notes that the Exchange’s
are market participants that the protect investors by providing the authority under this provision is limited
Exchange has determined that, taken as ability to continue to trade these to when, due to a systems issue, a
a whole, are necessary for the products until such time as the Trading Permit Holder’s activity poses a
maintenance of fair and orderly markets Exchange can resume normal trading. present threat to the Exchange’s ability
in the event of the activation of the The Commission notes that this to operate systems essential to
Exchange’s business continuity and provision would be invoked only if the maintaining a fair and orderly market.
disaster recovery plans pursuant to Exchange’s primary and back-up data The Commission also notes that the
Regulation SCI.24 The Commission centers were both inoperable or decision to restrict access would be
believes that, through the adoption of otherwise unavailable due to a made by the highest levels of Exchange
this rule, Designated BCP/DR significant systems failure, disaster, or management, namely the President (or
Participants will be on notice that they other unusual circumstances, and will his or her senior-level designee), and
might be called upon to meet only apply to the Exchange’s this restriction would be temporary,
heightened quoting obligations up to the exclusively-licensed and proprietary lasting only until the end of the trading
levels currently required for Designated products, which only trade on CBOE session or such earlier time that it is
Primary Market-Makers in CBOE Rule and, in some instances, its affiliated determined by the President, in
8.85(a) 25 during unusual circumstances exchanges. The Commission notes that consultation with the affected Trading
when the back-up data center is in use the period of operation for this Permit Holder, that the access no longer
and notes that the Exchange would exclusively floor-based environment poses a threat. Consistent with the
provide specific notice prior to invoking should be minimal based on Regulation Exchange’s representations, the
this new authority. The Commission SCI’s requirements and the Exchange’s Commission expects that the Exchange
further notes that, as described above, two-hour resumption standard for its would make reasonable efforts to
Regulation SCI requires the Exchange to trading systems.28 contact the affected Trading Permit
have business continuity and disaster The Commission believes that the Holder immediately before, or, if that is
recovery plans reasonably designed to Exchange’s ability to temporarily not possible, contemporaneously with,
achieve two-hour resumption of critical deactivate certain non-core systems or any restriction of access.30
SCI systems and next business day systems functionalities in the event of a Accordingly, for the reasons
resumption of trading,26 and the systems disruption or malfunction, discussed above, the Commission
Exchange represented that its security intrusion, systems compliance believes that the Exchange’s proposal is
procedures are reasonably designed to issue, or other unusual circumstances consistent with the Act.
achieve two-hour resumption of all could help prevent systems issues from
spreading and potentially causing harm IV. Conclusion
trading systems that are essential to
conducting business on the exchange to investors or impeding the Exchange’s It is therefore ordered, pursuant to
and that they are designed to support ability to maintain fair and orderly Section 19(b)(2) of the Act,31 that the
resumption in a significantly shorter markets. The Commission notes that proposed rule change (SR–CBOE–2017–
amount of time.27 As such, the this authority will only extend to those 044) be, and hereby is, approved.
additional requirements imposed by this systems not essential to conducting For the Commission, by the Division of
provision should be in effect for business on the Exchange. The Trading and Markets, pursuant to delegated
relatively short periods of time if they Commission further notes that the new authority.32
are ever invoked. In addition, to the rule provides that the Exchange will Eduardo A. Aleman,
extent the Exchange invokes this notify market participants of any such Assistant Secretary.
authority when necessary to support fair deactivation and any subsequent [FR Doc. 2017–15630 Filed 7–25–17; 8:45 am]
and orderly markets when its systems reactivation promptly.
BILLING CODE 8011–01–P
The Commission believes that the
are in back-up mode, then the
Exchange’s ability to temporarily restrict
additional requirements may help
a Trading Permit Holder’s or associated SECURITIES AND EXCHANGE
support quote activity during a
person’s access to the Hybrid Trading COMMISSION
disruption and thereby may help protect
System or other electronic trading
investors and the public interest. [Investment Company Act Release No.
system as provided in the rule is
The Commission believes that the 32738; 812–14763]
designed to allow the Exchange to
Exchange’s ability to temporarily
prevent a Trading Permit Holder’s
operate in an exclusively floor-based Point Bridge Capital, LLC, et al.
systems issues from spreading across
environment via open outcry in certain
the Exchange’s systems and potentially July 21, 2017.
proprietary and exclusively-licensed
causing a more widespread problem AGENCY: Securities and Exchange
products if the Exchange’s primary and
implicating the Exchange’s ability to Commission (‘‘Commission’’).
back-up data centers become inoperable
maintain fair and orderly markets and ACTION: Notice.
24 See Notice, supra note 3, at 26826 n. 7. thus potentially impacting other market
25 These heighted quoting obligations could participants. The Commission believes Notice of an application for an order
mstockstill on DSK30JT082PROD with NOTICES

include providing continuous electronic quotes in that this connectivity restriction is under section 6(c) of the Investment
up to the lesser of 99 percent of the non-adjusted consistent with Section 6(b)(7) of the Company Act of 1940 (the ‘‘Act’’) for an
option series or 100 percent of the non-adjusted exemption from sections 2(a)(32),
option series minus one call-put pair in classes in
Act,29 as the proposed limitation on
which the Designated BCP/DR Participant is already access is exceptionally limited in 5(a)(1), 22(d), and 22(e) of the Act and
an appointed LMM or Market-Maker. See supra
note 9. 28 See supra notes 26 and 27 and accompanying 30 See supra note 18 and accompanying text.
26 17 CFR 242.1001(a)(v). text. 31 15 U.S.C. 78s(b)(2).
27 See supra notes 22–23 and accompanying text. 29 15 U.S.C. 78f(b)(7). 32 17 CFR 200.30–3(a)(12).

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Document Created: 2017-07-26 01:29:55
Document Modified: 2017-07-26 01:29:55
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 13, 2017, and amended on June 21, 2017.
Contact		Bruce R. MacNeil, Senior Counsel, at (202) 551-6817, or Nadya B. Roytblat, Assistant Director, at (202) 551- 6825 (Division of Investment Management, Chief Counsel's Office).
FR Citation		82 FR 34719