82 FR 50700 - The Relative Value Fund et al.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 210 (November 1, 2017)

Applicants request an order to permit certain registered closed-end management investment companies to issue multiple classes of shares and to impose asset-based distribution and/or service fees, early withdrawal charges (``EWCs'') and early repurchase fees.

[Federal Register Volume 82, Number 210 (Wednesday, November 1, 2017)]
[Notices]
[Pages 50700-50703]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-23695]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32884; 812-14683]


The Relative Value Fund et al.

October 26, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

-----------------------------------------------------------------------

    Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from sections 
18(a)(2), 18(c) and 18(i) of the Act, under sections 6(c) and 23(c) of 
the Act for an exemption from rule 23c-3 under the Act, and for an 
order pursuant to section 17(d) of the Act and rule 17d-1 under the 
Act.

SUMMARY: Applicants request an order to permit certain registered 
closed-end management investment companies to issue multiple classes of 
shares and to impose asset-based distribution and/or service fees, 
early withdrawal charges (``EWCs'') and early repurchase fees.

Applicants: The Relative Value Fund and the Infinity Core Alternative 
Fund (the ``Initial Funds'') and Vivaldi Asset Management, LLC (the 
``Adviser'').

DATES: The application was filed on August 8, 2016 and amended on March 
8, 2017 and June 30, 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 November 20, 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: Vivaldi Asset 
Management, LLC, 225 W. Wacker Drive, Suite 2100, Chicago IL 60606; The 
Relative Value Fund and the Infinity Core Alternative Fund c/o UMB Fund 
Services, Inc., 235 West Galena Street, Milwaukee, WI 53212.

FOR FURTHER INFORMATION CONTACT: Rachel Loko, Senior Counsel or Holly 
Hunter-Ceci, Assistant Chief Counsel, 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.

Applicants' Representations

    1. The Relative Value Fund is a Delaware statutory trust that is 
registered under the Act as a non-diversified, closed-end management 
investment company. The Relative Value Fund's investment objective is 
long-term capital appreciation. The Relative Value Fund seeks to 
achieve its investment objective by generating attractive long-term 
returns with low sensitivity to traditional equity and fixed income 
indices through a ``multi-manager'' approach implementing strategies 
including without limitation, global macro, opportunistic equity anf 
fixed income, systematic and arbitrage strategies that invest in 
different asset classes, securities and derivatives instruments. The 
Infinity Core Alternative Fund is a Maryland statutory trust that is 
registered under the Act as a non-diversified, continuously offered 
closed-end management investment company. The Infinity Core Alternative 
Fund's investment objective is long-term capital growth. The Infinity 
Core Alternative Fund seeks to achieve its investment objective by 
operating as a ``fund of funds'' that invests primarily in general or 
limited partnerships, funds, corporations, trusts or other investment 
vehicles based primarily in the United States that invest or trade in a 
wide range of securities, and, to a lesser extent, other property and 
currency interests. The Infinity Core Alternative Fund may also make 
investments meant to hedge exposures deemed too risky or to invest in 
strategies not employed by investment funds or to hedge a position in 
an investment fund that is locked-up or difficult to sell.
    2. The Adviser, a Delaware limited liability company, is registered 
as an investment adviser under the Investment Advisers Act of 1940, as 
amended. The Adviser serves as investment adviser to the Initial Funds.
    3. The applicants seek an order to permit the Initial Funds to 
issue multiple classes of shares and to impose asset-based distribution 
and/or service fees and EWCs.
    4. Applicants request that the order also apply to any continuously 
offered registered closed-end management investment company that may be 
organized in the future for which the Adviser, or any entity 
controlling, controlled by, or under common control with the Adviser, 
or any successor in interest to any such entity,\1\ acts as investment 
adviser and which operates as an interval fund pursuant to rule 23c-3 
under the Act or provides periodic liquidity with respect to its shares 
pursuant to rule 13e-4 under the

[[Page 50701]]

Securities Exchange Act of 1934 (``Exchange Act'') (each, a ``Future 
Fund'' and together with the Initial Funds, the ``Funds'').\2\
---------------------------------------------------------------------------

    \1\ A successor in interest is limited to an entity that results 
from a reorganization into another jurisdiction or a change in the 
type of business organization.
    \2\ Any Fund relying on this relief in the future will do so in 
a manner consistent with the terms and conditions of the 
application. Applicants represent that each entity presently 
intending to rely on the requested relief is listed as an applicant.
---------------------------------------------------------------------------

    5. The Initial Funds are currently making a continuous public 
offering of beneficial interest in connection with their registration 
statement. Applicants state that additional offerings by any Fund 
relying on the order may be on a private placement or public offering 
basis. Shares of the Funds will not be listed on any securities 
exchange nor quoted on any quotation medium. The Funds do not expect 
there to be a secondary trading market for their shares.
    6. If the requested relief is granted, the Relative Value Fund will 
offer Advisor Class Shares alongside its current CIA Class Shares and 
the Infinity Core Alternative Fund will amend its registration 
statement to continuously offer at least one additional class of shares 
(the ``New Class Shares'') alongside its currently offered Initial 
Class Shares. Each of the Adviser Class Shares, the CIA Class Shares, 
the Initial Class Shares and the New Class Shares will have their own 
fee and expense structure. The Funds may in the future offer additional 
classes of shares and/or another sales charges structure. Because of 
the different distribution fees, services and any other class expenses 
that may be attributable to the each class of shares, the net income 
attributable to, and the dividends payable on, each class of shares may 
differ from each other.
    7. Applicants state that, from time to time, the Funds may create 
additional classes of shares, the terms of which may differ from other 
share classes in the following respects: (i) The amount of fees 
permitted by different distribution plans or different service fee 
arrangements; (ii) voting rights with respect to a distribution plan of 
a class; (iii) different class designations; (iv) the impact of any 
class expenses directly attributable to a particular class of shares 
allocated on a class basis as described in the application; (v) any 
differences in dividends and net asset value resulting from differences 
in fees under a distribution or service fee arrangement or in class 
expenses; (vi) any EWC or other sales load structure; and (vii) 
exchange or conversion privileges of the classes as permitted under the 
Act.
    8. Applicants state that shares of a Fund may be subject to an 
early repurchase fee (``Early Repurchase Fee'') at a rate of no greater 
than 2% of the aggregate net asset value of a shareholder's shares 
repurchased by the Fund if the interval between the date of purchase of 
the shares and the valuation date with respect to the repurchase of 
those shares is less than one year. Any Early Repurchase Fees will 
apply equally to all classes of shares of a Fund, consistent with 
section 18 of the Act and rule 18f-3 thereunder. To the extent a Fund 
determines to waive, impose scheduled variations of, or eliminate any 
Early Repurchase Fee, it will do so consistently with the requirements 
of rule 22d-1 under the Act as if the Early Repurchase Fee were a CDSL 
(defined below) and as if the Fund were an open-end investment company 
and the Fund's waiver of, scheduled variation in, or elimination of, 
any such Early Repurchase Fee will apply uniformly to all shareholders 
of the Fund regardless of class. Applicants state that the Initial 
Funds do not intend to impose an Early Repurchase Fee.
    9. Applicants state that the Relative Value Fund has adopted a 
fundamental policy to repurchase a specified percentage of its shares 
at net asset value on a quarterly basis. Such repurchase offers will be 
conducted pursuant to rule 23c-3 under the Act. The Infinity Core 
Alternative Fund provides periodic liquidity with respect to its shares 
pursuant to Rule 13e-4 under the Exchange Act. Each of the Future Funds 
will likewise adopt fundamental investment policies and make periodic 
repurchase offers to its shareholders in compliance with rule 23c-3 or 
will provide periodic liquidity with respect to its shares pursuant to 
rule 13e-4 under the Exchange Act.\3\ Any repurchase offers made by the 
Funds will be made to all holders of shares of each such Fund.
---------------------------------------------------------------------------

    \3\ Applicants submit that rule 23c-3 and Regulation M under the 
Exchange Act permit an interval fund to make repurchase offers to 
repurchase its shares while engaging in a continuous offering of its 
shares pursuant to Rule 415 under the Securities Act of 1933, as 
amended.
---------------------------------------------------------------------------

    10. Applicants represent that any asset-based service and/or 
distribution fees for each class of shares of the Funds will comply 
with the provisions of the NASD Rule 2830(d) (``NASD Sales Charge 
Rule'').\4\ Applicants also represent that each Fund will disclose in 
its prospectus the fees, expenses and other characteristics of each 
class of shares offered for sale by the prospectus, as is required for 
open-end multiple class funds under Form N-1A. As is required for open-
end funds, each Fund will disclose its expenses in shareholder reports, 
and describe any arrangements that result in breakpoints in or 
elimination of sales loads in its prospectus.\5\ In addition, 
applicants will comply with applicable enhanced fee disclosure 
requirements for fund of funds, including registered funds of hedge 
funds.\6\
---------------------------------------------------------------------------

    \4\ Any reference to the NASD Sales Charge Rule includes any 
successor or replacement to the NASD Sales Charge Rule.
    \5\ See Shareholder Reports and Quarterly Portfolio Disclosure 
of Registered Management Investment Companies, Investment Company 
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring 
open-end investment companies to disclose fund expenses in 
shareholder reports); and Disclosure of Breakpoint Discounts by 
Mutual Funds, Investment Company Act Release No. 26464 (June 7, 
2004) (adopting release) (requiring open-end investment companies to 
provide prospectus disclosure of certain sales load information).
    \6\ Fund of Funds Investments, Investment Company Act Rel. Nos. 
26198 (Oct. 1, 2003) (proposing release) and 27399 (Jun. 20, 2006) 
(adopting release). See also Rules 12d1-1, et seq. of the Act.
---------------------------------------------------------------------------

    11. Each of the Funds will comply with any requirements that the 
Commission or FINRA may adopt regarding disclosure at the point of sale 
and in transaction confirmations about the costs and conflicts of 
interest arising out of the distribution of open-end investment company 
shares, and regarding prospectus disclosure of sales loads and revenue 
sharing arrangements, as if those requirements applied to the Fund. In 
addition, each Fund will contractually require that any distributor of 
the Fund's shares comply with such requirements in connection with the 
distribution of such Fund's shares.
    12. Each Fund will allocate all expenses incurred by it among the 
various classes of shares based on the net assets of that Fund 
attributable to each class, except that the net asset value and 
expenses of each class will reflect the expenses associated with the 
distribution plan of that class, service fees attributable to that 
class (if any), including transfer agency fees, and any other 
incremental expenses of that class. Expenses of a Fund allocated to a 
particular class of shares will be borne on a pro rata basis by each 
outstanding share of that class. Applicants state that each Fund will 
comply with the provisions of rule 18f-3 under the Act as if it were an 
open-end investment company.
    13. Applicants state that each Fund may impose an EWC on shares 
submitted for repurchase that have been held less than a specified 
period and may waive the EWC for certain categories of shareholders or 
transactions to be established from time to time. Applicants state that 
each Fund will apply the EWC (and any waivers or

[[Page 50702]]

scheduled variations, or elimination of the EWC) uniformly to all 
shareholders in a given class and consistently with the requirements of 
rule 22d-1 under the Act as if the Funds were open-end investment 
companies.
    14. Each Fund operating as an interval fund pursuant to rule 23c-3 
under the Act may offer its shareholders an exchange feature under 
which the shareholders of the Fund may, in connection with such Fund's 
periodic repurchase offers, exchange their shares of the Fund for 
shares of the same class of (i) registered open-end investment 
companies or (ii) other registered closed-end investment companies that 
comply with rule 23c-3 under the Act and continuously offer their 
shares at net asset value, that are in the Fund's group of investment 
companies (collectively, ``Other Funds''). Shares of a Fund operating 
pursuant to rule 23c-3 that are exchanged for shares of Other Funds 
will be included as part of the amount of the repurchase offer amount 
for such Fund as specified in rule 23c-3 under the Act. Any exchange 
option will comply with rule 11a-3 under the Act, as if the Fund were 
an open-end investment company subject to rule 11a-3. In complying with 
rule 11a-3, each Fund will treat an EWC as if it were a contingent 
deferred sales load (``CDSL'').

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(a)(2) of the Act provides that a closed-end 
investment company may not issue or sell a senior security that is a 
stock unless certain requirements are met. Applicants state that the 
creation of multiple classes of shares of the Funds may violate section 
18(a)(2) because the Funds may not meet such requirements with respect 
to a class of shares that may be a senior security.
    2. Section 18(c) of the Act provides, in relevant part, that a 
closed-end investment company may not issue or sell any senior security 
if, immediately thereafter, the company has outstanding more than one 
class of senior security. Applicants state that the creation of 
multiple classes of shares of the Funds may be prohibited by section 
18(c), as a class may have priority over another class as to payment of 
dividends because shareholders of different classes would pay different 
fees and expenses.
    3. Section 18(i) of the Act provides that each share of stock 
issued by a registered management investment company will be a voting 
stock and have equal voting rights with every other outstanding voting 
stock. Applicants state that multiple classes of shares of the Funds 
may violate section 18(i) of the Act because each class would be 
entitled to exclusive voting rights with respect to matters solely 
related to that class.
    4. Section 6(c) 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 the Act, or from any 
rule or regulation under the Act, if and to the extent 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. Applicants request an exemption under 
section 6(c) from sections 18(a)(2), 18(c) and 18(i) to permit the 
Funds to issue multiple classes of shares.
    5. Applicants submit that the proposed allocation of expenses 
relating to distribution and voting rights among multiple classes is 
equitable and will not discriminate against any group or class of 
shareholders. Applicants submit that the proposed arrangements would 
permit a Fund to facilitate the distribution of its securities and 
provide investors with a broader choice of shareholder services. 
Applicants assert that the proposed closed-end investment company 
multiple class structure does not raise the concerns underlying section 
18 of the Act to any greater degree than open-end investment companies' 
multiple class structures that are permitted by rule 18f-3 under the 
Act. Applicants state that each Fund will comply with the provisions of 
rule 18f-3 as if it were an open-end investment company.

Early Withdrawal Charges

    1. Section 23(c) of the Act provides, in relevant part, that no 
registered closed-end investment company shall purchase securities of 
which it is the issuer, except: (a) On a securities exchange or other 
open market; (b) pursuant to tenders, after reasonable opportunity to 
submit tenders given to all holders of securities of the class to be 
purchased; or (c) under other circumstances as the Commission may 
permit by rules and regulations or orders for the protection of 
investors.
    2. Rule 23c-3 under the Act permits an ``interval fund'' to make 
repurchase offers of between five and twenty-five percent of its 
outstanding shares at net asset value at periodic intervals pursuant to 
a fundamental policy of the interval fund. Rule 23c-3(b)(1) under the 
Act permits an interval fund to deduct from repurchase proceeds only a 
repurchase fee, not to exceed two percent of the proceeds, that is paid 
to the interval fund and is reasonably intended to compensate the fund 
for expenses directly related to the repurchase.
    3. Section 23(c)(3) provides that the Commission may issue an order 
that would permit a closed-end investment company to repurchase its 
shares in circumstances in which the repurchase is made in a manner or 
on a basis that does not unfairly discriminate against any holders of 
the class or classes of securities to be purchased.
    4. Applicants request relief under section 6(c), discussed above, 
and section 23(c)(3) from rule 23c-3 to the extent necessary for the 
Funds to impose EWCs on shares of the Funds submitted for repurchase 
that have been held for less than a specified period.
    5. Applicants state that the EWCs they intend to impose are 
functionally similar to CDSLs imposed by open-end investment companies 
under rule 6c-10 under the Act. Rule 6c-10 permits open-end investment 
companies to impose CDSLs, subject to certain conditions. Applicants 
note that rule 6c-10 is grounded in policy considerations supporting 
the employment of CDSLs where there are adequate safeguards for the 
investor and state that the same policy considerations support 
imposition of EWCs in the interval fund context. In addition, 
applicants state that EWCs may be necessary for the distributor to 
recover distribution costs. Applicants represent that any EWC imposed 
by the Funds will comply with rule 6c-10 under the Act as if the rule 
were applicable to closed-end investment companies. The Funds will 
disclose EWCs in accordance with the requirements of Form N-1A 
concerning CDSLs.

Asset-Based Distribution and/or Service Fees

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company, or an 
affiliated person of such person, acting as principal, from 
participating in or effecting any transaction in connection with any 
joint enterprise or joint arrangement in which the investment company 
participates unless the Commission issues an order permitting the 
transaction. In reviewing applications submitted under section 17(d) 
and rule 17d-1, the Commission considers whether the participation of 
the investment company in a joint enterprise or joint arrangement is 
consistent with the provisions, policies and purposes of the Act, and 
the extent to which the participation is on a basis

[[Page 50703]]

different from or less advantageous than that of other participants.
    2. Rule 17d-3 under the Act provides an exemption from section 
17(d) and rule 17d-1 to permit open-end investment companies to enter 
into distribution arrangements pursuant to rule 12b-1 under the Act. 
Applicants request an order under section 17(d) and rule 17d-1 under 
the Act to the extent necessary to permit the Fund to impose asset-
based distribution and/or service fees. Applicants have agreed to 
comply with rules 12b-1 and 17d-3 as if those rules applied to closed-
end investment companies, which they believe will resolve any concerns 
that might arise in connection with a Fund financing the distribution 
of its shares through asset-based distribution fees.
    3. For the reasons stated above, applicants submit that the 
exemptions requested under section 6(c) are necessary and appropriate 
in the public interest and are consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of the Act. Applicants further submit that the relief requested 
pursuant to section 23(c)(3) will be consistent with the protection of 
investors and will insure that applicants do not unfairly discriminate 
against any holders of the class of securities to be purchased. 
Finally, applicants state that the Funds' imposition of asset-based 
distribution and/or service fees is consistent with the provisions, 
policies and purposes of the Act and does not involve participation on 
a basis different from or less advantageous than that of other 
participants.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Each Fund relying on the order will comply with the provisions of 
rules 6c-10, 12b-1, 17d-3, 18f-3, 22d-1, and, where applicable, 11a-3 
under the Act, as amended from time to time, as if those rules applied 
to closed-end management investment companies, and will comply with the 
NASD Sales Charge Rule, as amended from time to time, as if that rule 
applied to all closed-end management investment companies.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-23695 Filed 10-31-17; 8:45 am]
 BILLING CODE 8011-01-P