82 FR 61094 - FQF Trust, et al.
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 246 (December 26, 2017)
Federal Register Volume 82, Issue 246 (December 26, 2017)
| Page Range | 61094-61096 | |
| FR Document | 2017-27649 |
[Federal Register Volume 82, Number 246 (Tuesday, December 26, 2017)] [Notices] [Pages 61094-61096] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-27649] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 32942; 812-14742] FQF Trust, et al. December 19, 2017. AGENCY: Securities and Exchange Commission (``Commission''). ACTION: Notice. ----------------------------------------------------------------------- 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 [[Page 61095]] 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; (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; and (f) certain Funds (``Feeder Funds'') to create and redeem Creation Units in-kind in a master-feeder structure. APPLICANTS: FQF Trust (``Trust''), a Delaware statutory trust registered under the Act as an open-end management investment company with multiple series, FFCM, LLC (``FFCM'' or ``Initial Adviser''), a Delaware limited liability company that will be registered as an investment adviser under the Investment Advisers Act of 1940, and Foreside Fund Services, LLC (``Distributor''), a Delaware limited liability company and broker-dealer registered under the Securities Exchange Act of 1934 (``Exchange Act''). FILING DATES: The application was filed on February 6, 2017, and amended on June 12, 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 January 16, 2018, 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: FFCM, LLC and FQF Trust, 53 State Street, Suite 1308, Boston, MA 02109; Foreside Fund Services, LLC, Three Canal Plaza, Suite 100, Portland, ME 04101; and c/o Stacy L. Fuller, K&L Gates LLP, 1601 K Street NW, Washington, DC 20006. FOR FURTHER INFORMATION CONTACT: Laura L. Solomon, Senior Counsel, at (202) 551-6915, or David J. Marcinkus, Branch Chief, 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 website 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 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. Certain Funds may operate as Feeder Funds in a master-feeder structure. Any order granting the requested relief would be subject to the terms and conditions stated in the application. --------------------------------------------------------------------------- \1\ Applicants request that the order apply to the new series of the Trust as well as to additional series of the Trust and any other open-end management investment company or series thereof 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 FFCM or an entity controlling, controlled by, or under common control with FFCM (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, 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. --------------------------------------------------------------------------- 2. Each Fund will consist of a portfolio of securities and other assets and investment positions (``Portfolio Instruments''). Each Fund will disclose on its website the identities and quantities of the Portfolio Instruments 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 Instruments 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 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, [[Page 61096]] 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 Portfolio Instruments 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.\2\ 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. --------------------------------------------------------------------------- \2\ 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. --------------------------------------------------------------------------- 9. Applicants also request relief to permit a Feeder Fund to acquire shares of another registered investment company managed by the Adviser having substantially the same investment objectives as the Feeder Fund (``Master Fund'') beyond the limitations in section 12(d)(1)(A) and permit the Master Fund, and any principal underwriter for the Master Fund, to sell shares of the Master Fund to the Feeder Fund beyond the limitations in section 12(d)(1)(B). 10. 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. 2017-27649 Filed 12-22-17; 8:45 am] BILLING CODE 8011-01-P
![61094 Federal Register / Vol. 82, No. 246 / Tuesday, December 26, 2017 / Notices
markets. The Exchange believes that the license the use of a new or different those that may be withheld from the
concerns that led to the transition to index to compete with the Nasdaq-100 public in accordance with the
A.M.-settlement for index derivatives and seek Commission approval to list provisions of 5 U.S.C. 552, will be
have been largely mitigated today. and trade options on such an index. available for website viewing and
Opening procedures in the 1990s were printing in the Commission’s Public
C. Self-Regulatory Organization’s Reference Room, 100 F Street NE,
deemed acceptable to mitigate one-sided
order flow driven by index option Statement on Comments on the Washington, DC 20549, on official
expiration. Nasdaq now has an Proposed Rule Change Received From business days between the hours of
automated closing cross that that Members, Participants, or Others 10:00 a.m. and 3:00 p.m. Copies of the
facilitates orderly closings by No written comments were either filing also will be available for
aggregating a large pool of liquidity, solicited or received. inspection and copying at the principal
across a variety of order types, in a III. Date of Effectiveness of the office of the Exchange. All comments
single venue. The Exchange believes Proposed Rule Change and Timing for received will be posted without change.
that Nasdaq’s closing procedures are Persons submitting comments are
Commission Action
well-equipped to mitigate imbalance cautioned that we do not redact or edit
pressure at the close. Furthermore, the Within 45 days of the date of personal identifying information from
Exchange believes that the proposed publication of this notice in the Federal comment submissions. You should
Pilot Program is designed to mitigate Register or within such longer period (i) submit only information that you wish
any potential concerns regarding P.M. as the Commission may designate up to to make available publicly. All
settlement. Specifically, the Exchange 90 days of such date if it finds such submissions should refer to File
believes that the Pilot Program will longer period to be appropriate and Number SR–ISE–2017–106 and should
provide additional trading and hedging publishes its reasons for so finding or be submitted on or before January 16,
opportunities for investors while (ii) as to which the Exchange consents, 2018.
providing the Commission with data to the Commission shall: (a) By order For the Commission, by the Division of
monitor for and assess any potential for approve or disapprove such proposed Trading and Markets, pursuant to delegated
adverse market effects of allowing P.M.- rule change, or (b) institute proceedings authority.22
settlement for NQX options, including to determine whether the proposed rule Eduardo A. Aleman,
on the underlying component stocks. change should be disapproved. Assistant Secretary.
Finally, NQX options will be subject
IV. Solicitation of Comments [FR Doc. 2017–27699 Filed 12–22–17; 8:45 am]
to the same rules that presently govern
BILLING CODE 8011–01–P
the trading of index options based on Interested persons are invited to
the Nasdaq-100, including sales practice submit written data, views, and
rules, margin requirements, trading arguments concerning the foregoing,
SECURITIES AND EXCHANGE
rules, and position and exercise limits. including whether the proposed rule
COMMISSION
The Exchange therefore believes that the change is consistent with the Act.
rules applicable to trading in NQX Comments may be submitted by any of [Investment Company Act Release No.
options are consistent with the the following methods: 32942; 812–14742]
protection of investors and the public Electronic Comments FQF Trust, et al.
interest. Furthermore, the Exchange
represents that it has sufficient systems • Use the Commission’s internet December 19, 2017.
capacity and adequate surveillance comment form (http://www.sec.gov/ AGENCY: Securities and Exchange
procedures to handle trading in NQX rules/sro.shtml); or Commission (‘‘Commission’’).
options. • Send an email to rule-comments@
ACTION: Notice.
sec.gov. Please include File Number SR–
B. Self-Regulatory Organization’s ISE–2017–106 on the subject line. Notice of an application for an order
Statement on Burden on Competition under section 6(c) of the Investment
Paper Comments
The Exchange does not believe that Company Act of 1940 (the ‘‘Act’’) for an
the proposed rule change will impose • Send paper comments in triplicate exemption from sections 2(a)(32),
any burden on competition that is not to Brent J. Fields, Secretary, Securities 5(a)(1), 22(d), and 22(e) of the Act and
necessary or appropriate in furtherance and Exchange Commission, 100 F Street rule 22c–1 under the Act, under
of the purposes of the Act. NQX options NE, Washington, DC 20549–1090. sections 6(c) and 17(b) of the Act for an
would be available for trading to all All submissions should refer to File exemption from sections 17(a)(1) and
market participants. The proposed rule Number SR–ISE–2017–106. This file 17(a)(2) of the Act, and under section
change will facilitate the listing and number should be included on the 12(d)(1)(J) for an exemption from
trading of a new option product that subject line if email is used. To help the sections 12(d)(1)(A) and 12(d)(1)(B) of
will enhance competition among market Commission process and review your the Act. The requested order would
participants, to the benefit of investors comments more efficiently, please use permit (a) actively-managed series of
and the marketplace. The listing of NQX only one method. The Commission will certain open-end management
will enhance competition by providing post all comments on the Commission’s investment companies (‘‘Funds’’) to
investors with an additional investment internet website (http://www.sec.gov/ issue shares redeemable in large
vehicle, in a fully-electronic trading rules/sro.shtml). Copies of the aggregations only (‘‘Creation Units’’); (b)
environment, through which investors submission, all subsequent secondary market transactions in Fund
ethrower on DSK3G9T082PROD with NOTICES
can gain and hedge exposure to the amendments, all written statements shares to occur at negotiated market
Nasdaq-100. Furthermore, this product with respect to the proposed rule prices rather than at net asset value
could offer a competitive alternative to change that are filed with the (‘‘NAV’’); (c) certain Funds to pay
other existing investment products that Commission, and all written redemption proceeds, under certain
seek to allow investors to gain broad communications relating to the circumstances, more than seven days
market exposure. Finally, it is possible proposed rule change between the
for other exchanges to develop or Commission and any person, other than 22 17 CFR 200.30–3(a)(12).
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![61096 Federal Register / Vol. 82, No. 246 / Tuesday, December 26, 2017 / Notices
transactions, and underwritings, (ii) persons, securities, or transactions, from February 24, 2016, June 8, 2016 and
excessive layering of fees, and (iii) any provision of section 12(d)(1) if the September 22, 2017.
overly complex fund structures, which exemption is consistent with the public HEARING OR NOTIFICATION OF HEARING:
are the concerns underlying the limits interest and the protection of investors. An order granting the requested relief
in sections 12(d)(1)(A) and (B) of the Section 17(b) of the Act authorizes the will be issued unless the Commission
Act. Commission to grant an order orders a hearing. Interested persons may
8. Applicants request an exemption permitting a transaction otherwise request a hearing by writing to the
from sections 17(a)(1) and 17(a)(2) of the prohibited by section 17(a) if it finds Commission’s Secretary and serving
Act to permit persons that are Affiliated that (a) the terms of the proposed applicants with a copy of the request,
Persons, or Second Tier Affiliates, of the transaction are fair and reasonable and personally or by mail. Hearing requests
Funds, solely by virtue of certain do not involve overreaching on the part should be received by the Commission
ownership interests, to effectuate of any person concerned; (b) the by 5:30 p.m. on January 15, 2018, and
purchases and redemptions in-kind. The proposed transaction is consistent with should be accompanied by proof of
deposit procedures for in-kind the policies of each registered service on applicants, in the form of an
purchases of Creation Units and the investment company involved; and (c) affidavit or, for lawyers, a certificate of
redemption procedures for in-kind the proposed transaction is consistent service. Pursuant to rule 0–5 under the
redemptions of Creation Units will be with the general purposes of the Act. Act, hearing requests should state the
the same for all purchases and nature of the writer’s interest, any facts
For the Commission, by the Division of
redemptions and Deposit Instruments Investment Management, under delegated bearing upon the desirability of a
and Redemption Instruments will be authority. hearing on the matter, the reason for the
valued in the same manner as those Eduardo A. Aleman, request, and the issues contested.
Portfolio Instruments currently held by Persons who wish to be notified of a
Assistant Secretary.
the Funds. Applicants also seek relief hearing may request notification by
[FR Doc. 2017–27649 Filed 12–22–17; 8:45 am]
from the prohibitions on affiliated writing to the Commission’s Secretary.
BILLING CODE 8011–01–P
transactions in section 17(a) to permit a ADDRESSES: Secretary, U.S. Securities
Fund to sell its shares to and redeem its and Exchange Commission, 100 F St.
shares from a Fund of Funds, and to NE, Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
engage in the accompanying in-kind Applicants, 40 East 52nd Street, New
transactions with the Fund of Funds.2 COMMISSION
York, NY 10022.
The purchase of Creation Units by a [Investment Company Act Release No.
FOR FURTHER INFORMATION CONTACT:
Fund of Funds directly from a Fund will 32943; File No. 812–14582]
Kaitlin C. Bottock, Senior Counsel, at
be accomplished in accordance with the
BlackRock Capital Investment (202) 551–8658, or David J. Marcinkus,
policies of the Fund of Funds and will
Corporation, et al. Branch Chief, at (202) 551–6821 (Chief
be based on the NAVs of the Funds.
Counsel’s Office, Division of Investment
9. Applicants also request relief to December 19, 2017. Management).
permit a Feeder Fund to acquire shares AGENCY: Securities and Exchange
of another registered investment SUPPLEMENTARY INFORMATION: The
Commission (‘‘Commission’’). following is a summary of the
company managed by the Adviser
ACTION: Notice. application. The complete application
having substantially the same
investment objectives as the Feeder may be obtained via the Commission’s
Notice of application for an order
Fund (‘‘Master Fund’’) beyond the website by searching for the file
under sections 17(d) and 57(i) of the
limitations in section 12(d)(1)(A) and number, or for an applicant using the
Investment Company Act of 1940 (the
permit the Master Fund, and any Company name box, at http://
‘‘Act’’) and rule 17d–1 under the Act
principal underwriter for the Master www.sec.gov/search/search.htm or by
permitting certain joint transactions
Fund, to sell shares of the Master Fund calling (202) 551–8090.
otherwise prohibited by sections 17(d)
to the Feeder Fund beyond the and 57(a)(4) of the Act and under rule Applicants’ Representations
limitations in section 12(d)(1)(B). 17d–1 under the Act.
10. Section 6(c) of the Act permits the 1. The Company, a Delaware
SUMMARY OF APPLICATION: Applicants corporation, is organized as a closed-
Commission to exempt any persons or
request an order to permit a business end management investment company
transactions from any provision of the
development company (‘‘BDC’’) and that has elected to be regulated as a BDC
Act if such exemption is necessary or
certain closed end investment under section 54(a) of the Act.2 The
appropriate in the public interest and
companies to co-invest in portfolio Company’s Objectives and Strategies 3
consistent with the protection of
companies with each other and with are to generate both current income and
investors and the purposes fairly
intended by the policy and provisions of affiliated investment funds. capital appreciation through debt and
the Act. Section 12(d)(1)(J) of the Act APPLICANTS: BlackRock Capital equity investments. The board of
provides that the Commission may Investment Corporation (‘‘Company’’),
exempt any person, security, or Middle Market Senior Fund, L.P. 2 Section 2(a)(48) defines a BDC to be any closed-
(‘‘MMSF’’), and BlackRock Capital end investment company that operates for the
transaction, or any class or classes of purpose of making investments in securities
Investment Advisors, LLC (‘‘BlackRock described in sections 55(a)(1) through 55(a)(3) of the
2 The requested relief would apply to direct sales Capital Advisor’’), on behalf of itself and Act and makes available significant managerial
of shares in Creation Units by a Fund to a Fund of its successors.1 assistance with respect to the issuers of such
ethrower on DSK3G9T082PROD with NOTICES
Funds and redemptions of those shares. Applicants, securities.
FILING DATES: The application was filed
moreover, are not seeking relief from section 17(a) 3 ‘‘Objectives and Strategies’’ means a Regulated
for, and the requested relief will not apply to, on November 19, 2015, and amended on Fund’s (defined below) investment objectives and
transactions where a Fund could be deemed an strategies, as described in the Regulated Fund’s
Affiliated Person, or a Second-Tier Affiliate, of a 1 The term ‘‘successor,’’ as applied to each registration statement on Form N–2, other filings
Fund of Funds because an Adviser or an entity BlackRock Capital Advisor, means an entity that the Regulated Fund has made with the Commission
controlling, controlled by or under common control results from a reorganization into another under the Securities Act of 1933 (the ‘‘Securities
with an Adviser provides investment advisory jurisdiction or change in the type of business Act’’) or under the Securities Exchange Act of 1934,
services to that Fund of Funds. organization. and the Regulated Fund’s reports to shareholders.
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Document Created: 2017-12-23 03:08:46
Document Modified: 2017-12-23 03:08:46
| 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 February 6, 2017, and amended on June 12, 2017. | |
| Contact | Laura L. Solomon, Senior Counsel, at (202) 551-6915, or David J. Marcinkus, Branch Chief, at (202) 551-6825 (Division of Investment Management, Chief Counsel's Office). | |
| FR Citation | 82 FR 61094 |
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