82 FR 44232 - Active Weighting Funds ETF Trust and Active Weighting Advisors LLC

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 182 (September 21, 2017)

Page Range		44232-44234
FR Document		2017-20143
Federal Register, Volume 82 Issue 182 (Thursday, September 21, 2017)
[Federal Register Volume 82, Number 182 (Thursday, September 21, 2017)]
[Notices]
[Pages 44232-44234]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-20143]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32820; 812-14696]


Active Weighting Funds ETF Trust and Active Weighting Advisors 
LLC

September 18, 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 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; and (e) certain 
registered management investment companies and unit investment trusts 
outside of the same group of investment companies as the Funds 
(``Acquiring Funds'') to acquire shares of the Funds.

[[Page 44233]]


Applicants: Active Weighting Funds ETF Trust (the ``Trust''), a 
Delaware statutory trust registered under the Act as an open-end 
management investment company with multiple series, and Active 
Weighting Advisors LLC (the ``Initial Adviser''), a Delaware limited 
liability company registered as an investment adviser under the 
Investment Advisers Act of 1940.

Filing Date: The application was filed on August 31, 2016, and amended 
on January 13, 2017, May 25, 2017, and September 15, 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 October 10, 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, 200 Vesey Street, 24th 
Floor, New York, NY 10281.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 551-6879, 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 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 a broker-dealer registered under 
the Securities Exchange Act of 1934 (``Exchange Act'') (together with 
any future distributor, 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 future series of 
the Trust or of other open-end management investment companies that 
currently exist or 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 such entity or any successor thereto is 
included in the term ``Adviser'') and (b) comply with the terms and 
conditions of the application. For purposes of the requested order, 
the term ``successor'' is limited to an entity that results from a 
reorganization into another jurisdiction or a change in the type of 
business organization.
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    2. Each Fund will consist of a portfolio of securities and other 
assets and investment positions (``Portfolio Positions''). Each Fund 
will disclose on its Web site the identities and quantities of the 
Portfolio Positions 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 Positions 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 Acquiring 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 Acquiring 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

[[Page 44234]]

Portfolio 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 
an Acquiring Fund, and to engage in the accompanying in-kind 
transactions with the Acquiring Fund.\2\ The purchase of Creation Units 
by an Acquiring Fund directly from a Fund will be accomplished in 
accordance with the policies of the Acquiring Fund 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 an Acquiring Fund 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 an Acquiring Fund because an Adviser or an 
entity controlling, controlled by or under common control with an 
Adviser provides investment advisory services to that Acquiring 
Fund.
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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. 2017-20143 Filed 9-20-17; 8:45 am]
 BILLING CODE 8011-01-P
44234 Federal Register / Vol. 82, No. 182 / Thursday, September 21, 2017 / Notices

Portfolio Positions currently held by the SECURITIES AND EXCHANGE Change, including a response letter from
Funds. Applicants also seek relief from COMMISSION FICC. On May 30, 2017, the Commission
the prohibitions on affiliated instituted proceedings under Section
[Release No. 34–81638; File No. SR–FICC–
transactions in section 17(a) to permit a 2017–002]
19(b)(2)(B)(i) of the Act 6 to determine
Fund to sell its shares to and redeem its whether to approve or disapprove the
shares from an Acquiring Fund, and to Self-Regulatory Organizations; Fixed Proposed Rule Change.7
engage in the accompanying in-kind Income Clearing Corporation; Notice of Section 19(b)(2)(B)(ii) of the Act
transactions with the Acquiring Fund.2 Designation of Longer Period for provides that, after initiating
The purchase of Creation Units by an Commission Action on Proceedings To proceedings, the Commission shall issue
Acquiring Fund directly from a Fund Determine Whether To Approve or an order approving or disapproving the
will be accomplished in accordance Disapprove a Proposed Rule Change proposed rule change not later than 180
with the policies of the Acquiring Fund To Implement the Capped Contingency days after the date of publication of
Liquidity Facility in the Government notice of filing of the proposed rule
and will be based on the NAVs of the
Securities Division Rulebook change.8 The Commission may,
Funds.
however, extend the period for issuing
9. Section 6(c) of the Act permits the September 15, 2017. an order approving or disapproving the
Commission to exempt any persons or On March 1, 2017, Fixed Income proposed rule change by not more than
transactions from any provision of the Clearing Corporation (‘‘FICC’’) filed 60 days if the Commission determines
Act if such exemption is necessary or with the Securities and Exchange that a longer period is appropriate and
appropriate in the public interest and Commission (‘‘Commission’’) proposed publishes the reasons for such
consistent with the protection of rule change SR–FICC–2017–002 determination.9
investors and the purposes fairly (‘‘Proposed Rule Change’’) pursuant to The 180th day after publication of the
Section 19(b)(1) of the Securities notice for the Proposed Rule Change in
intended by the policy and provisions of
Exchange Act of 1934 (‘‘Act’’),1 and the Federal Register is September 16,
the Act. Section 12(d)(1)(J) of the Act
Rule 19b–4 thereunder,2 to implement a 2017. The Commission finds it
provides that the Commission may Capped Contingency Liquidity Facility
exempt any person, security, or appropriate to designate a longer period
in FICC’s Government Securities within which to issue an order
transaction, or any class or classes of Division Rulebook.3 The Proposed Rule
persons, securities, or transactions, from approving or disapproving the Proposed
Change was published for comment in Rule Change so that it has sufficient
any provision of section 12(d)(1) if the the Federal Register on March 20,
exemption is consistent with the public time to consider the Proposed Rule
2017.4 The Commission received five Change and the comments received.
interest and the protection of investors. comment letters 5 to the Proposed Rule Accordingly, the Commission, pursuant
Section 17(b) of the Act authorizes the
to Section 19(b)(2)(B)(ii) of the Act,10
Commission to grant an order 1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
designates November 15, 2017 as the
permitting a transaction otherwise date by which the Commission shall
3 FICC also filed the Proposed Rule Change as
prohibited by section 17(a) if it finds either approve or disapprove the
advance notice SR–FICC–2017–802 (‘‘Advance
that (a) the terms of the proposed Notice’’) pursuant to Section 806(e)(1) of the Proposed Rule Change.
transaction are fair and reasonable and Payment, Clearing, and Settlement Supervision Act The Commission also seeks additional
do not involve overreaching on the part of 2010, 12 U.S.C. 5465(e)(1), and Rule 19b–
4(n)(1)(i) under the Act, 17 CFR 240.19b–4(n)(1)(i). comment to help further inform its
of any person concerned; (b) the Notice of filing of the Advance Notice was analysis of the Proposed Rule Change.
proposed transaction is consistent with published for comment in the Federal Register on Specifically, the Commission invites
the policies of each registered March 15, 2017. Securities Exchange Act Release
No. 80191 (March 9, 2017), 82 FR 13876 (March 15,
interested persons to provide views,
investment company involved; and (c) 2017) (SR–FICC–2017–802). The Commission data, and arguments concerning the
the proposed transaction is consistent extended the deadline for its review period of the Proposed Rule Change, including
with the general purposes of the Act. Advance Notice from April 30, 2017 to June 29, whether the Proposed Rule Change is
2017. Securities Exchange Act Release No. 80520
For the Commission, by the Division of (April 25, 2017), 82 FR 20404 (May 1, 2017) (SR–
consistent with the Act and the
Investment Management, under delegated FICC–2017–802). The Commission issued a notice applicable rules or regulations
authority. of no objection to the Advance Notice on June 29, thereunder. Please note that comments
2017. Securities Exchange Act Release No. 81054 previously received on the substance of
Eduardo A. Aleman, (June 29, 2017), 82 FR 31356 (July 6, 2017). The
proposal in the Proposed Rule Change and the
the Proposed Rule Change will be
Assistant Secretary. considered together with comments
Advance Notice shall not take effect until all
[FR Doc. 2017–20143 Filed 9–20–17; 8:45 am] regulatory actions required with respect to the submitted in response to this notice.
BILLING CODE 8011–01–P proposal are completed. Therefore, while commenters are free to
4 Securities Exchange Act Release No. 80234

(March 14, 2017), 82 FR 14401 (March 20, 2017)
Financial Officer, Ronin, dated June 19, 2017, to
(SR–FICC–2017–002).
5 See letter from Robert E. Pooler Jr., Chief
Robert W. Errett, Deputy Secretary, Commission;
and letter from Alan B. Levy, Managing Director,
Financial Officer, Ronin Capital LLC (‘‘Ronin’’), ICBC, Philip Vandermause, Director, Aardvark,
dated April 10, 2017, to Robert W. Errett, Deputy Robert Pooler, Chief Financial Officer, Ronin, and
2 The requested relief would apply to direct sales
Secretary, Commission; letter from Alan B. Levy, Scott Skyrm, Managing Director, Wedbush, dated
of shares in Creation Units by a Fund to an Managing Director, Industrial and Commercial Bank June 27, 2017, to Robert W. Errett, Deputy
asabaliauskas on DSKBBXCHB2PROD with NOTICES

Acquiring Fund and redemptions of those shares. of China Financial Services LLC (‘‘ICBC’’), Philip Secretary, Commission, available at https://
Applicants, moreover, are not seeking relief from Vandermause, Director, Aardvark Securities LLC www.sec.gov/comments/sr-ficc-2017-002/
section 17(a) for, and the requested relief will not (‘‘Aardvark’’), David Rutter, Chief Executive Officer, ficc2017002.htm.
apply to, transactions where a Fund could be LiquidityEdge LLC, Robert Pooler, Chief Financial 6 15 U.S.C. 78s(b)(2)(B)(i).
Officer, Ronin, Jason Manumaleuna, Chief Financial
deemed an affiliated person, or a second-tier 7 See Securities Exchange Act Release No. 80812
Officer and EVP, Rosenthal Collins Group LLC, and
affiliate, of an Acquiring Fund because an Adviser Scott Skyrm, Managing Director, Wedbush (May 30, 2017), 82 FR 25642 (June 2, 2017) (SR–
or an entity controlling, controlled by or under Securities Inc. (‘‘Wedbush’’); letter from Timothy J. FICC–2017–002).
common control with an Adviser provides 8 15 U.S.C. 78s(b)(2)(B)(ii).
Cuddihy, Managing Director, FICC, dated April 25,
investment advisory services to that Acquiring 9 Id.
2017, to Robert W. Errett, Deputy Secretary,
Fund. Commission; letter from Robert E. Pooler Jr., Chief 10 Id.

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Document Created: 2018-10-24 14:33:36
Document Modified: 2018-10-24 14:33:36
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 August 31, 2016, and amended on January 13, 2017, May 25, 2017, and September 15, 2017.
Contact		Christine Y. Greenlees, Senior Counsel, at (202) 551-6879, or Robert H. Shapiro, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation		82 FR 44232