83 FR 53341 - Procure Active ETF Trust, et al.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 204 (October 22, 2018)

Page Range		53341-53343
FR Document		2018-22996
Federal Register, Volume 83 Issue 204 (Monday, October 22, 2018)
[Federal Register Volume 83, Number 204 (Monday, October 22, 2018)]
[Notices]
[Pages 53341-53343]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-22996]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33273; File No. 812-14772]


Procure Active ETF Trust, et al.

October 17, 2018.
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; (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 Creations Units in-kind in a 
master-feeder structure.
    Applicants: Procure Active ETF Trust (the ``Trust''), a Delaware 
statutory trust that will register under the Act as an open-end 
management investment company with multiple series, ProcureAM, 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 Quasar Distributors LLC (the ``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 May 10, 2017 and amended 
on February 15, 2018, May 29, 2018, August 2, 2018, and October 15, 
2018.
    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 6, 2018, and should be accompanied by proof of

[[Page 53342]]

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: Robert Tull, ProcureAM, LLC, 
16 Firebush Road, Levittown, PA 19056.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 551-6876, or Andrea Ottomanelli Magovern, 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 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.
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    \1\ Applicants request that the order apply to the initial Fund, 
as well as to future series of the Trust and any existing or future 
open-end management investment companies or series thereof (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, an ``Adviser'') and (b) 
comply with the terms and conditions of the application.
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    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, 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.
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    \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.
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    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

[[Page 53343]]

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. 2018-22996 Filed 10-19-18; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 83, No. 204 / Monday, October 22, 2018 / Notices 53343

limitations in section 12(d)(1)(A) and change as described in Items I and II comply with Rule 14.11(i)(4)(C)(v),4 as
permit the Master Fund, and any below, which Items have been prepared further described below. Otherwise, the
principal underwriter for the Master by the Exchange. The Commission is Fund will comply with all other listing
Fund, to sell shares of the Master Fund publishing this notice to solicit requirements on an initial and
to the Feeder Fund beyond the comments on the proposed rule change continued listing basis under Rule
limitations in section 12(d)(1)(B). from interested persons. 14.11(i).
10. Section 6(c) of the Act permits the The Shares will be offered by the
Commission to exempt any persons or I. Self-Regulatory Organization’s Trust, which was established as a
transactions from any provision of the Statement of the Terms of Substance of Delaware statutory trust on June 2, 2015.
Act if such exemption is necessary or the Proposed Rule Change FormulaFolio Investments, LLC (the
appropriate in the public interest and The Exchange filed a proposal to list ‘‘Adviser’’) is the investment adviser to
consistent with the protection of and trade shares of the FormulaFolios the Fund. The Trust is registered with
investors and the purposes fairly Sector Rotation ETF (the ‘‘Fund’’), a the Commission as an open-end
intended by the policy and provisions of series of the Northern Lights Fund Trust investment company and has filed a
the Act. Section 12(d)(1)(J) of the Act IV (the ‘‘Trust’’), under Rule 14.11(i) registration statement on behalf of the
provides that the Commission may (‘‘Managed Fund Shares’’). The shares of Fund on Form N–1A (‘‘Registration
exempt any person, security, or Statement’’) with the Commission.5
the Fund are referred to herein as the
transaction, or any class or classes of Rule 14.11(i)(7) provides that, if the
‘‘Shares.’’
persons, securities, or transactions, from investment adviser to the investment
any provision of section 12(d)(1) if the The text of the proposed rule change company issuing Managed Fund Shares
exemption is consistent with the public is available at the Exchange’s website at is affiliated with a broker-dealer, such
interest and the protection of investors. www.markets.cboe.com, at the principal investment adviser shall erect and
Section 17(b) of the Act authorizes the office of the Exchange, and at the maintain a ‘‘fire wall’’ between the
Commission to grant an order Commission’s Public Reference Room. investment adviser and the broker-
permitting a transaction otherwise II. Self-Regulatory Organization’s dealer with respect to access to
prohibited by section 17(a) if it finds Statement of the Purpose of, and information concerning the composition
that (a) the terms of the proposed Statutory Basis for, the Proposed Rule and/or changes to such investment
transaction are fair and reasonable and Change company portfolio.6 In addition, Rule
do not involve overreaching on the part
of any person concerned; (b) the In its filing with the Commission, the 4 Rule 14.11(i)(4)(C)(v) provides that ‘‘the

proposed transaction is consistent with portfolio may, on both an initial and continuing
Exchange included statements basis, hold OTC derivatives, including forwards,
the policies of each registered concerning the purpose of and basis for options, and swaps on commodities, currencies and
investment company involved; and (c) the proposed rule change and discussed financial instruments (e.g., stocks, fixed income,
the proposed transaction is consistent any comments it received on the interest rates, and volatility) or a basket or index of
with the general purposes of the Act. any of the foregoing, however the aggregate gross
proposed rule change. The text of these notional value of OTC Derivatives shall not exceed
For the Commission, by the Division of statements may be examined at the 20% of the weight of the portfolio (including gross
Investment Management, under delegated places specified in Item IV below. The notional exposures).’’ The Exchange is proposing
authority. Exchange has prepared summaries, set that the Fund be exempt from this requirement only
as it relates to the Fund’s holdings in OTC
Eduardo A. Aleman, forth in Sections A, B, and C below, of derivatives, which include total return swaps and
Assistant Secretary. the most significant parts of such certain Inflation Swaps and interest rate swaps, as
[FR Doc. 2018–22996 Filed 10–19–18; 8:45 am] statements. further described below.
5 See Registration Statement on Form N–1A for
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s the Trust, dated July 27, 2018 (File Nos. 333–
Statement of the Purpose of, and 204808 and 811–23066). The descriptions of the
Statutory Basis for, the Proposed Rule Fund and the Shares contained herein are based, in
SECURITIES AND EXCHANGE part, on information in the Registration Statement.
Change
COMMISSION The Commission has issued an order granting
1. Purpose certain exemptive relief to the Trust under the
[Release No. 34–84438; File No. SR– Investment Company Act of 1940 (15 U.S.C. 80a–
CboeBZX–2018–076] 1) (‘‘1940 Act’’) (the ‘‘Exemptive Order’’). See
The Exchange proposes to list and Investment Company Act Release No. 29571 (May
Self-Regulatory Organizations; Cboe trade the Shares under Rule 14.11(i), 16, 2017) (File No. 812–32367).
BZX Exchange, Inc.; Notice of Filing of which governs the listing and trading of 6 An investment adviser to an open-end fund is

a Proposed Rule Change To List and Managed Fund Shares on the required to be registered under the Investment
Exchange.3 The Fund will be an actively Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
Trade Shares of the FormulaFolios result, the Adviser and its related personnel are
Sector Rotation ETF, a Series of the managed exchange-traded fund that subject to the provisions of Rule 204A–1 under the
Northern Lights Fund Trust IV, Under seeks to provide a long-term total return Advisers Act relating to codes of ethics. This Rule
Rule 14.11(i), Managed Fund Shares which exceeds the total return of its requires investment advisers to adopt a code of
Primary Benchmark Index, as further ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with
October 16, 2018. described below. The Exchange submits other applicable securities laws. Accordingly,
Pursuant to Section 19(b)(1) of the this proposal in order to allow the Fund procedures designed to prevent the communication
Securities Exchange Act of 1934 (the to hold over-the-counter (‘‘OTC’’) and misuse of non-public information by an
‘‘Act’’),1 and Rule 19b–4 thereunder,2 derivatives, in a manner that may not investment adviser must be consistent with Rule
204A–1 under the Advisers Act. In addition, Rule
notice is hereby given that on October
daltland on DSKBBV9HB2PROD with NOTICES

206(4)–7 under the Advisers Act makes it unlawful
2, 2018, Cboe BZX Exchange, Inc. (the 3 The Commission originally approved BZX Rule for an investment adviser to provide investment
‘‘Exchange’’ or ‘‘BZX’’) filed with the 14.11(i) in Securities Exchange Act Release No. advice to clients unless such investment adviser has
Securities and Exchange Commission 65225 (August 30, 2011), 76 FR 55148 (September (i) adopted and implemented written policies and
6, 2011) (SR–BATS–2011–018) and subsequently procedures reasonably designed to prevent
(‘‘Commission’’) the proposed rule approved generic listing standards for Managed violation, by the investment adviser and its
Fund Shares under Rule 14.11(i) in Securities supervised persons, of the Advisers Act and the
1 15 U.S.C. 78s(b)(1). Exchange Act Release No. 78396 (July 22, 2016), 81 Commission rules adopted thereunder; (ii)
2 17 CFR 240.19b–4. FR 49698 (July 28, 2016) (SR–BATS–2015–100). Continued

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Document Created: 2018-10-20 01:50:26
Document Modified: 2018-10-20 01:50:26
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 May 10, 2017 and amended on February 15, 2018, May 29, 2018, August 2, 2018, and October 15, 2018.
Contact		Deepak T. Pai, Senior Counsel, at (202) 551-6876, or Andrea Ottomanelli Magovern, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation		83 FR 53341