Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Notices 36647 

2As used herein, a ‘‘Sub-Adviser’’ for a 

Subadvised Fund is (1) an indirect or direct 

‘‘wholly owned subsidiary’’ (as such term is defined 

in the Act) of the Adviser for that Subadvised Fund, 

or (2) a sister company of the Adviser for that 

Subadvised Fund that is an indirect or direct 

‘‘wholly-owned subsidiary’’ of the same company 

that, indirectly or directly, wholly owns the Adviser 

(each of (1) and (2) a ‘‘Wholly-Owned Sub-Adviser’’ 

and collectively, the ‘‘Wholly-Owned SubAdvisers’’), or (3) not an ‘‘affiliated person’’ (as such 

term is defined in section 2(a)(3) of the Act) of the 

Subadvised Fund, any Feeder Fund invested in a 

Master Fund, the Trust, or the Adviser, except to 

the extent that an affiliation arises solely because 

the Sub-Adviser serves as a sub-adviser to a 

Subadvised Fund (‘‘Non-Affiliated Sub-Advisers’’). 

3The requested relief will not extend to any subadviser, other than a Wholly-Owned Sub-Adviser, 

who is an affiliated person, as defined in section 

2(a)(3) of the Act, of the Subadvised Fund, of any 

Feeder Fund, or of the Adviser, other than by 

reason of serving as a sub-adviser to one or more 

of the Subadvised Funds (‘‘Affiliated SubAdviser’’). 

4For any Subadvised Fund that is a Master Fund, 

the relief would also permit any Feeder Fund 

invested in that Master Fund to disclose Aggregate 

Fee Disclosure. 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

supervision of the board of trustees of 

the Trust (‘‘Board’’), provides 

continuous investment management of 

the assets of each Subadvised Fund. 

Consistent with the terms of the 

Investment Management Agreement, the 

Adviser may, subject to the approval of 

the Board, delegate portfolio 

management responsibilities of all or a 

portion of the assets of a Subadvised 

Fund to one or more Sub-Advisers.2 The 

Adviser will continue to have overall 

responsibility for the management and 

investment of the assets of each 

Subadvised Fund. The Adviser will 

evaluate, select, and recommend SubAdvisers to manage the assets of a 

Subadvised Fund and will oversee, 

monitor and review the Sub-Advisers 

and their performance and recommend 

the removal or replacement of SubAdvisers. 

2. Applicants request an order to 

permit the Adviser, subject to the 

approval of the Board, to enter into 

investment sub-advisory agreements 

with the Sub-Advisers (each, a ‘‘SubAdvisory Agreement’’) and materially 

amend such Sub-Advisory Agreements 

without obtaining the shareholder 

approval required under section 15(a) of 

the Act and rule 18f–2 under the Act.3

Applicants also seek an exemption from 

the Disclosure Requirements to permit a 

Subadvised Fund to disclose (as both a 

dollar amount and a percentage of the 

Subadvised Fund’s net assets): (a) The 

aggregate fees paid to the Adviser and 

any Wholly-Owned Sub-Adviser; (b) the 

aggregate fees paid to Non-Affiliated 

Sub-Advisers; and (c) the fee paid to 

each Affiliated Sub-Adviser 

(collectively, Aggregate Fee 

Disclosure’’).4

3. Applicants agree that any order 

granting the requested relief will be 

subject to the terms and conditions 

stated in the application. Such terms 

and conditions provide for, among other 

safeguards, appropriate disclosure to 

Subadvised Funds’ shareholders and 

notification about sub-advisory changes 

and enhanced Board oversight to protect 

the interests of the Subadvised Funds’ 

shareholders. 

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 provisions of the 

Act, or any rule thereunder, if such 

relief is necessary or appropriate in the 

public interest and consistent with the 

protection of investors and purposes 

fairly intended by the policy and 

provisions of the Act. Applicants 

believe that the requested relief meets 

this standard because, as further 

explained in the application, the 

Investment Management Agreements 

will remain subject to shareholder 

approval, while the role of the SubAdvisers is substantially equivalent to 

that of individual portfolio managers, so 

that requiring shareholder approval of 

Sub-Advisory Agreements would 

impose unnecessary delays and 

expenses on the Subadvised Funds. 

Applicants believe that the requested 

relief from the Disclosure Requirements 

meets this standard because it will 

improve the Adviser’s ability to 

negotiate fees paid to the Sub-Advisers 

that are more advantageous for the 

Subadvised Funds. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–16155 Filed 7–27–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83699; File No. SR–FINRA– 

2018–026] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of a 

Proposed Rule Change To Amend the 

Arbitrator Payment Rule To Pay Each 

Arbitrator a $200 Honorarium To 

Decide Without a Hearing Session a 

Contested Subpoena Request or a 

Contested Order for Production or 

Appearance 

July 24, 2018. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on July 13, 

2018, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I, II, 

and III below, which Items have been 

prepared by FINRA. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to amend FINRA 

Rule 12214(c) of the Code of Arbitration 

Procedure for Customer Disputes 

(‘‘Customer Code’’) and FINRA Rule 

13214(c) through (e) of the Code of 

Arbitration Procedure for Industry 

Disputes (‘‘Industry Code’’ and together, 

‘‘Codes’’), to provide that FINRA will 

pay each arbitrator a $200 honorarium 

to decide without a hearing session a 

contested subpoena request or a 

contested order for production or 

appearance. 

The text of the proposed rule change 

is available on FINRA’s website at 

http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 


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3See FINRA Rules 12505 and 13505. 

4See FINRA Rules 12512 and 13512. 

5See FINRA Rules 12513 and 13513. 

6See FINRA Rules 12512(a)(1) and 13512(a)(1). 

7See FINRA Rules 12512(a)(2) and 13512(a)(2). 

8See FINRA Rules 12512(c) and 13512(c). 

9See FINRA Rules 12214(d)(2) and 13214(d)(2). 

10See, e.g., FINRA Rules 12512(c) and 13512(c). 11See also FINRA Rule 13214(d). 12A hearing session is a meeting between the 

parties and arbitrators of four hours or less, 

including a hearing or prehearing conference. See 

FINRA Rules 12100(p) and 13100(p). 13See FINRA Rules 12214(d)(1) and 13214(d)(1). 14 Id. The chairperson of a three-person panel will 

decide the contested subpoena request without a 

hearing session, for which the chairperson would 

be paid $250. The honorarium for contested 

subpoena requests could increase in $250 

increments, if, for example, the chairperson recuses 

or withdraws from the panel and the replacement 

chairperson must decide another contested 

subpoena request without a hearing session. In this 

instance, the replacement chairperson would 

receive a $250 honorarium for this work. In no 

event would the parties be charged more than $750 

per case. 

15 If a hearing session is required to decide the 

motion, each arbitrator who participates in the 

hearing session will receive a $300 honorarium 

instead. See FINRA Rules 12214(a) and 13214(a). 

16See FINRA Rules 12214(d)(3) and 13214(d)(3). 

17FINRA Rules 12513(a) and 13513(a) provide 

that upon a motion of a party, the panel may order 

the appearance of any employee or associated 

person of a FINRA member or the production of any 

documents in the possession or control of such 

persons or members, without the use of subpoenas. 

18See FINRA Rules 12512(a)(2) and 13512(a)(2). 

19See FINRA Rules 12513(c) and 13513(c). 

20See FINRA Rules 12513(b) and 13513(b). 

21 Id. 

22See FINRA Rules 12513(c) and 13513(c). 

23See, e.g., FINRA Rules 12513(c) and 13513(c). 

24FINRA Rules 12214(c) and 13214(c) provide 

that FINRA will pay each arbitrator an honorarium 

of $200 to decide a discovery-related motion 

without a hearing session. 

25See FINRA Rules 12512(a)(2) and 13512(a)(2). 

26See FINRA Rules 12214(d)(1) and 13214(d)(1). 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Introduction 

The proposed rule change would 

amend FINRA Rules 12214 and 13214 

that govern the payments (referred to as 

honorarium) arbitrators receive for 

deciding contested requests to issue 

subpoenas and orders for production 

and appearance. The proposed rule 

change would provide uniformity 

regarding when and how much 

arbitrators receive when deciding 

contested subpoenas and orders for 

production and appearance without a 

hearing session. 

Background 

In arbitration, the parties exchange 

documents and information to prepare 

for the arbitration through the discovery 

process. The Codes require parties to 

cooperate with each other and exchange 

documents or information to expedite 

the arbitration.3 If an individual or 

entity objects to a discovery request, the 

party seeking the documents or 

information may request that the 

arbitrator issue a subpoena 4 or an 

order.5

Requests to Issue a Subpoena 

Under the Codes, parties may request 

that the panel issue a subpoena to 

parties in an arbitration, non-parties, as 

well as entities and individuals who are 

not FINRA members.6 If the subpoena 

will be served on a FINRA member, 

FINRA rules favor the use of orders 

rather than subpoenas, unless 

circumstances dictate otherwise.7 A 

party’s request (or motion) to issue a 

subpoena becomes a ‘‘contested 

subpoena request’’ if there is an 

objection raised to the scope or 

propriety of the subpoena.8

To decide a contested subpoena 

request, the arbitrator must review the 

motion requesting issuance of the 

subpoena, the draft subpoena, any 

written objections, and any other 

documents supporting a party’s 

position.9 When arbitrators decide these 

contested requests, they must review 

and consider all parties’ objections and 

render their decision promptly on the 

issuance and scope of the subpoena.10

Currently, under FINRA Rule 

12214(d),11 each arbitrator who decides 

one or more contested subpoenas 

without a hearing session 12 receives a 

one-time honorarium of $250 during the 

life of the arbitration case.13 The rule 

caps the total amount that the parties 

could pay the arbitrators to decide a 

contested subpoena request in any one 

case at $750.14 This means that 

regardless of the number of contested 

subpoena requests that arbitrators 

decide without a hearing session in an 

arbitration case, an arbitrator will 

receive one honorarium payment of 

$250.15 The panel allocates the cost of 

the honorarium to the parties in the 

award.16

If a party’s request to issue a subpoena 

does not receive any objections, it 

remains unopposed, and arbitrators do 

not receive an honorarium for issuing an 

unopposed subpoena. 

Request To Issue an Order for 

Production or Appearance 

If a party is seeking documents or 

information, or the appearance of a 

witness from a FINRA member, the 

Codes direct the parties to request the 

issuance of an order for production or 

appearance,17 rather than a subpoena.18

A party’s motion to issue an order 

becomes a ‘‘contested order request’’ if 

a party objects to the scope or propriety 

of the order.19

An arbitrator would decide a 

contested order request by reviewing the 

motion requesting issuance of the 

order,20 the draft order,21 and any 

written objections from the party 

receiving the motion.22 Further, when 

arbitrators decide these contested order 

requests, they must review and consider 

all parties’ objections and render their 

decision promptly on the issuance and 

scope of the order.23 Thus, arbitrators 

review similar documents and follow 

the same process when deciding 

contested order requests as they do 

when deciding contested subpoena 

requests. 

The Codes do not expressly provide 

an honorarium for arbitrators who 

decide requests for such orders without 

a hearing session. Thus, FINRA 

categorizes requests to issue orders for 

production as discovery-related 

motions 24 rather than requests to issue 

subpoenas and, thus, FINRA pays the 

$200 honorarium for each. FINRA pays 

the $200 honorarium for an order for 

production, whether contested or 

unopposed. FINRA does not pay the 

honorarium, however, for an order for 

appearance, regardless of whether it is 

contested or unopposed. 

Concerns About Current Subpoena and 

Order Honorarium Structure 

Parties label requests for subpoenas or 

orders interchangeably, which is 

understandable given the similarities of 

the requests and the work arbitrators do 

to decide them without a hearing 

session. However, the Codes treat the 

two discovery mechanisms differently. 

As noted, the Codes favor the use of 

orders over subpoenas when a party 

seeks documents or witnesses from a 

FINRA member.25 If a request to issue 

a subpoena should have been a request 

to issue an order, a change in the 

labelling of the document can result in 

the arbitrators receiving a reduced 

honorarium (i.e., $200 for an order 

versus $250 for a contested subpoena or 

no payment at all if the change is to an 

order of appearance). 

The Codes also impose a per-case 

honorarium cap of $250 that each 

arbitrator who decides a contested 

subpoena request without a hearing 

session may receive.26 Arbitrators do 

not receive an honorarium for deciding 

an unopposed subpoena request. There 

is no per-case cap on deciding requests 


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27Under the proposed rule change, FINRA would 

add a contested subpoena request and a contested 

order for production or appearance to the 

discovery-related motions rule; however, FINRA 

would not change the rule language explaining 

what constitutes a discovery-related motion. 

28The proposal would retain what constitutes a 

contested subpoena by moving the description from 

FINRA Rule 12214(d)(2) to FINRA Rule 

12214(c)(2)(ii). 

29As is current practice, arbitrators would not 

receive an honorarium for an unopposed subpoena 

request. 

30The proposed rule change would also permit 

parties to request the issuance of one or more orders 

in the same motion or a combination of subpoena 

and order requests. 

31The proposed rule change would also permit 

parties to request the issuance of one or more 

subpoenas in the same motion or a combination of 

subpoena and order requests. 

32 15 U.S.C. 78o–3(b)(6). 

33 15 U.S.C. 78o–3(b)(5). 

to issue orders of production however. 

Moreover, arbitrators receive an 

honorarium for deciding such requests, 

whether they are contested or 

unopposed. 

Proposed Rule Change 

FINRA believes that the subpoena or 

order label on a discovery-related 

motion should not dictate the amount of 

honorarium that arbitrators receive or 

the frequency with which they are paid. 

The honoraria that arbitrators receive 

should reflect the time and effort they 

spend in deciding requests without a 

hearing session and fairly compensate 

them for this work. Accordingly, FINRA 

is proposing to amend FINRA Rules 

12214(c) and 13214(c) to provide that 

FINRA would pay each arbitrator an 

honorarium of $200 to decide, without 

a hearing session: (i) A discovery-related 

motion; 27 (ii) a motion that contains one 

or more contested subpoena requests 28

or contested orders for production or 

appearance; or (iii) a motion that 

contains one or more contested 

subpoena requests and contested orders 

for production or appearance. FINRA 

believes that unifying the honorarium 

structure for these discovery 

mechanisms would remove 

inconsistencies from FINRA’s rules and 

make them more transparent as well as 

eliminate confusion for parties, 

arbitrators and staff that can occur when 

a discovery request is mislabeled. 

Contested Subpoena Requests 

The proposed rule change would 

reduce the honorarium that an arbitrator 

receives to decide a contested subpoena 

request from $250 to $200; however, it 

would also remove the per-case cap on 

these payments. Thus, under the 

proposed rule change, an arbitrator 

would receive a $200 honorarium for 

each contested subpoena request that he 

or she decides.29

FINRA recognizes that removing the 

per-case cap on contested subpoena 

requests could result in an increase in 

fees for the parties. In response to this 

concern, the proposed rule change 

would permit a party or parties to use 

one motion to request the issuance of 

one or more subpoenas.30 FINRA is 

proposing to include this current 

practice in the rule, so that parties may 

mitigate their costs. Thus, under the 

proposed rule change, if parties request 

one or more subpoenas in one motion, 

for example, and one or all of the 

subpoena requests become contested, 

each arbitrator who decides the motion 

would receive one honorarium payment 

of $200. In addition to helping to 

minimize costs, requesting multiple 

subpoenas in one motion helps expedite 

the arbitration, which benefits parties 

and arbitrators. 

FINRA believes that reducing the 

honorarium for contested subpoena 

requests and removing the per-case cap 

on these payments would provide 

consistency and fairness to the arbitrator 

payment rules by ensuring that the 

payment arbitrators receive for deciding 

these requests is commensurate with the 

time and effort spent on each motion. 

Contested Orders for Production or 

Appearance 

FINRA would amend Rule 12214(c) to 

provide a $200 honorarium for deciding 

a contested order for production or 

appearance without a hearing session. 

This means that arbitrators would 

receive an honorarium for deciding 

without a hearing session, a contested 

arbitrator order for appearance as well 

as for production. Under the proposed 

rule change, arbitrators would no longer 

receive an honorarium for unopposed 

requests to issue an order for production 

as these requests do not require the 

amount of time and effort needed to 

resolve contested requests. 

The proposed rule change would 

describe what constitutes a contested 

order for production or appearance by 

modeling the description on that of a 

contested subpoena request. Thus, 

proposed FINRA Rule 12214(c)(2)(iii) 

would provide that a contested order for 

production or appearance shall include 

a motion requesting the issuance of an 

order for production or appearance, a 

written objection from the party 

opposing the issuance of the order, and 

any other documents supporting a 

party’s position. 

Moreover, like a contested subpoena 

request, a party would be permitted to 

request the issuance of one or more 

orders in one motion,31 and if one or all 

of the arbitrator orders become 

contested, each arbitrator who decides 

the motion would receive one 

honorarium payment of $200. In 

addition to helping to minimize costs, 

requesting multiple orders in one 

motion helps expedite the arbitration, 

which benefits parties and arbitrators. 

FINRA believes that adding contested 

orders for production or appearance to 

its honorarium rules would make the 

rules more transparent, so that parties 

and arbitrators understand how and 

when the honorarium and fees are 

assessed for contested orders. Moreover, 

FINRA believes that limiting 

honorarium to contested orders makes 

the honorarium rules more consistent 

and more equitable to the parties, as the 

fees FINRA would assess for arbitrators 

to decide contested orders for 

production or appearance would be 

proportionate with the time and effort 

that they spend deciding such orders. 

Nonsubstantive Changes 

In addition to the amendments 

discussed above to simplify the 

honorarium structure for contested 

subpoenas requests and contested 

orders for production and appearance, 

the proposed rule change would also 

amend Rules 12214(a) and 13214(a) to 

make a few nonsubstantive changes. 

As noted in Item 2 of this filing, if the 

Commission approves the proposed rule 

change, FINRA will announce the 

effective date of the proposed rule 

change in a Regulatory Notice to be 

published no later than 60 days 

following Commission approval. The 

effective date will be no later than 30 

days following publication of the 

Regulatory Notice announcing 

Commission approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,32 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest, and Section 15A(b)(5) of 

the Act,33 which requires, among other 

things, that FINRA rules provide for the 

equitable allocation of reasonable dues, 

fees and other charges among members 

and issuers and other persons using any 

facility or system that FINRA operates 

or controls. 

FINRA believes that the proposed rule 

change would simplify the structure of 

arbitrator honorarium for deciding 


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34For example, arbitrators raised issues with 

FINRA concerning the inconsistencies in the 

existing honorarium structure for requests to issue 

subpoenas or orders without a hearing session. 

35For most unopposed requests, arbitrators can 

resolve them by signing the subpoena or order that 

accompanies the request. 

contested subpoena requests and 

contested orders for production or 

appearance without a hearing session by 

making the honorarium amount the 

same ($200) for each request. Further, 

the proposed rule change makes the 

honorarium structure more transparent 

by including expressly the current 

practice of paying arbitrators for 

deciding contested orders for 

production without a hearing session in 

the Codes’ payment rules. For 

consistency and fairness, the proposed 

rule change would also extend the 

honorarium to include contested orders 

for appearance without a hearing 

session. These changes, FINRA believes, 

make the arbitrator honorarium 

structure easier to understand for parties 

and arbitrators and easier for FINRA to 

apply, and, therefore, will help parties, 

arbitrators and staff conserve resources 

that they might otherwise spend in 

trying to interpret the rules and 

understand the honorarium structure. 

Further, FINRA believes structuring 

the arbitrator honorarium rules so that 

arbitrators receive an honorarium for 

each contested subpoena request or 

contested order for production or 

appearance they decide without a 

hearing session ensures that the 

honoraria arbitrators receive are 

proportionate with the time and effort 

they spend deciding such requests and 

the fees parties are assessed are 

equitable in relation to the services that 

they receive. Last, the proposed rule 

change allows parties to combine 

multiple requests for subpoenas or 

orders into one motion as a way to 

minimize costs and expedite the 

discovery process. For these reasons, 

FINRA believes that the proposed rule 

change is an equitable allocation of a 

reasonable fee to use the forum. 

Moreover, FINRA believes that the 

proposed rule change would protect 

investors and the public interest by 

ensuring that arbitrators are 

compensated equitably for the services 

that they provide, which would enhance 

FINRA’s ability to retain qualified 

arbitrators willing to devote the time 

and effort necessary to consider 

thoroughly the discovery issues 

presented. Retaining qualified 

arbitrators is an essential element, 

FINRA believes, in maintaining its 

ability to operate an effective arbitration 

forum for the purposes of investor 

protection and market integrity. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. A discussion 

of the economic impacts of the proposed 

amendments follows. 

(a) Need for the Rule 

The existing structure for payments to 

arbitrators for deciding requests to issue 

subpoenas or orders without a hearing 

session has been difficult for parties and 

arbitrators to understand due to the 

differences between when and under 

what circumstances arbitrators will 

receive payments.34 Parties can incur 

different fees, and arbitrators can 

receive different honorarium, for 

contested and unopposed requests to 

issue subpoenas and orders. The 

existing structure can also make it 

confusing for FINRA to apply. Under 

the proposed amendments, the 

payments arbitrators receive would be 

more commensurate with their time and 

effort to consider the requests. The 

proposed amendments would also 

simplify the structure of the payments. 

(b) Economic Baseline 

The economic baseline for the 

proposal is the current rules under the 

Codes that address the payments to 

arbitrators for deciding discoveryrelated motions and requests to issue 

subpoenas or orders. The proposal is 

expected to affect the parties to an 

arbitration, their counsel, and FINRA 

arbitrators. 

The existing fee structure for 

payments to arbitrators for deciding 

requests to issue subpoenas or orders 

without a hearing session has led to 

confusion and uncertainty with respect 

to the amount of fees that parties incur. 

As a result, parties and their counsel 

may incur time and other expenses to 

interpret the rules and understand the 

payment structure, as well as the 

possible time and expense to 

communicate and receive clarification 

from FINRA. 

Arbitrators incur more costs to decide 

contested requests to issue subpoenas or 

orders without a hearing session than 

unopposed requests. The costs to 

arbitrators for deciding contested 

requests include the time to review the 

materials and the effort to make a 

decision. Alternatively, arbitrators 

spend less time and effort to review 

unopposed requests.35

The honorarium that arbitrators 

receive, and the fees parties incur, may 

not be commensurate with the effort 

expended by arbitrators to decide the 

requests. The existing fee structure can 

result in instances where arbitrators do 

not receive an honorarium for their time 

and effort to consider a contested 

request (i.e., contested orders of 

appearance decided without a hearing 

session). Arbitrators also do not receive 

additional honorarium to decide 

multiple contested requests for 

subpoenas. In general, the absence of an 

honorarium when arbitrators decide 

certain contested requests may serve as 

a disincentive for arbitrators to give 

their best efforts or the time necessary 

to make a decision. The existing fee 

structure can also result in instances 

where arbitrators receive an honorarium 

even though they incur little time or 

effort to decide a request (e.g., 

unopposed orders of production). 

There were 7,370 arbitration cases 

closed in 2016 and 2017. Among the 

7,370 cases, there were 497 cases (6.7 

percent) with contested requests for 

subpoenas, 1,210 cases (16.4 percent) 

with unopposed requests for subpoenas, 

and 1,334 cases (18.1 percent) with 

requests for orders. The information 

available does not distinguish between 

contested and unopposed requests for 

orders of production and appearance. 

We are therefore not able to estimate the 

potential change to the fees parties 

would incur and the honorarium that 

arbitrators would receive as a result of 

the proposed amendments. 

Although the majority of the cases 

with contested subpoenas (454 or 91.3 

percent) have three arbitrators, in the 

experience of FINRA staff, typically 

only one arbitrator decides contested 

subpoenas without a hearing session. 

Thus, although parties could currently 

incur fees of $750 for contested 

subpoenas if three arbitrators decide the 

requests without a hearing session, the 

typical fee parties currently incur is 

$250. 

(c) Economic Impact 

The proposed amendments would 

simplify and make uniform the structure 

for payments to arbitrators for deciding 

requests to issue subpoenas or orders 

without a hearing session. The benefits 

of the proposed amendments include a 

decrease in the time and expense parties 

would incur to understand the payment 

structure, an increase in the incentives 

of arbitrators to decide contested 

subpoenas and orders, and an increase 

in the efficiency of the forum. 

Depending on the composition and 

timing of the requests, however, the fees 

parties incur could either increase or 

decrease. The honorarium payments 

arbitrators receive could also increase or 

decrease. The benefits and costs of the 


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proposed amendments, including the 

changes to the fees parties incur and the 

honorarium arbitrators receive, are 

discussed in further detail below. 

A benefit of the proposed 

amendments is the reduction in the 

complexity of the fee schedule. Parties 

and their counsel would be more certain 

with respect to the assessment of fees, 

and would therefore incur less time and 

expense to interpret the fee schedule. 

Parties and their counsel would also be 

less likely to incur the time and expense 

from requesting clarification from 

FINRA. 

Another benefit of the proposed 

amendments is that the honorarium 

arbitrators receive would be more 

commensurate with their time and effort 

to decide requests to issue subpoenas or 

orders. Arbitrators would receive an 

honorarium to decide all contested 

requests to issue subpoenas or orders 

without a hearing session. Arbitrators 

would therefore have more incentive to 

devote the time and effort necessary to 

decide these requests. Arbitrators would 

also receive no honorarium to decide 

unopposed requests to issue subpoenas 

or orders, which reflects the minimal 

time and effort needed to review such 

requests. 

The changes to the fee schedule 

would also increase the efficiency of the 

arbitration process. Parties and their 

counsel could minimize the amount of 

fees assessed by filing a request to issue 

multiple subpoenas or orders in one 

motion instead of several separate 

motions. This could also increase the 

arbitrators’ efficiency by having them 

decide at the same time requests to issue 

multiple subpoenas or orders that are 

based largely on the same facts or 

arguments. The filing of one motion that 

requests the issuance of multiple 

subpoenas or orders could also expedite 

the discovery process, and decrease the 

amount of time to an arbitration 

decision. 

The proposed amendments would 

also benefit the parties that incur fewer 

fees and the arbitrators who receive 

additional honorarium, but would 

impose costs on the parties that incur 

additional fees and the arbitrators who 

receive less honorarium. A decrease in 

the fees that parties incur would 

correspond to a decrease in the 

honorarium that arbitrators receive, and 

an increase in the fees that parties incur 

would correspond to an increase in the 

honorarium that arbitrators receive. 

The total fees parties incur, and the 

total honorarium that arbitrators receive, 

could either increase or decrease 

depending on the composition and 

timing of the requests. For example, 

parties would be subject to fees for 

contested requests to issue orders of 

appearance without a hearing session, 

but would not be subject to fees for 

unopposed requests to issue orders of 

production. In addition, the fees for 

submitting contested requests to issue 

subpoenas without a hearing session 

would decrease from $250 to $200 per 

arbitrator. The per-case cap on these 

payments, however, would be removed. 

Therefore, parties would be assessed 

additional fees if they submit multiple 

contested requests for subpoenas. 

Among the 497 cases with contested 

subpoenas, 399 cases (or 80.3 percent) 

had only one contested request for 

subpoenas, whereas 98 cases (or 19.7 

percent) had more than one contested 

request for subpoenas. For the cases 

with two or more contested requests for 

subpoenas, the median number of days 

between requests is less than two 

months. This suggests that contested 

requests for subpoenas are often 

submitted within short periods of time, 

and that counsel could reasonably 

anticipate these requests and submit the 

requests at one time. The potential 

additional fees to parties from 

submitting multiple contested requests 

for subpoenas from the removal of the 

per-case cap, therefore, is likely to be 

minimal. 

If parties file a contested request to 

issue one or more subpoenas or orders 

at one time and these are not based on 

the same facts or arguments (i.e., 

unrelated), then arbitrators may not 

receive honorarium payments 

commensurate with their time and effort 

to decide the request. This could serve 

as a disincentive for arbitrators to give 

their best efforts or the time necessary 

to make decisions on these requests. 

The Director, however, could separate 

the motions and pay the arbitrators 

accordingly, thereby mitigating these 

potential effects. 

(d) Alternatives Considered 

Arbitrators raised issues with FINRA 

concerning the inconsistencies in the 

existing honorarium structure for 

requests to issue subpoenas or orders 

without a hearing session. Along with 

the proposed amendments, FINRA 

considered other changes to the existing 

honorarium structure. Other changes 

would have included an increase in the 

honorarium that arbitrators receive to 

decide discovery-related motions, 

contested subpoena requests, and 

requests for contested orders for 

production or appearance. The 

honorarium payments would have been 

similar to the honorarium that 

arbitrators receive for currently deciding 

contested subpoenas ($250) or for 

deciding motions in discovery 

prehearings ($300). 

FINRA believes that the fee structure 

under the proposed amendments would 

provide arbitrators with honoraria that 

are commensurate with their efforts to 

decide these requests. FINRA also 

believes that the proposed amendments 

provide incentives for parties to 

combine their requests for submission 

simultaneously to minimize their costs. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FINRA–2018–026 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2018–026. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 


daltland on DSKBBV9HB2PROD with NOTICES
36652 Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Notices 

36 17 CFR 200.30–3(a)(12). 

1A 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. 

2The Initial Fund and any Future Fund relying 

on the requested relief will do so in a manner 

consistent with the terms and conditions of the 

application. Applicants represent that any person 

presently intending to rely on the requested relief 

is listed as an applicant. 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing also will be available for 

inspection and copying at the principal 

office of FINRA. All comments received 

will be posted without change. Persons 

submitting comments are cautioned that 

we do not redact or edit personal 

identifying information from comment 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–FINRA– 

2018–026 and should be submitted on 

or before August 20, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.36

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–16166 Filed 7–27–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

33168; 812–14853] 

OFI Carlyle Private Credit Fund and OC 

Private Capital, LLC; Notice of 

Application 

July 24, 2018. 

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, pursuant to sections 6(c) and 23(c) 

of the Act, granting 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 OF APPLICATION: Applicants 

request an order to permit certain 

registered closed-end management 

investment companies to issue multiple 

classes of shares of beneficial interest 

(‘‘Shares’’) and to impose asset-based 

service and/or distribution fees and 

early withdrawal charges. 

APPLICANTS: OFI Carlyle Private Credit 

Fund (the ‘‘Initial Fund’’) and OC 

Private Capital, LLC (the ‘‘Adviser’’). 

FILING DATES: The application was filed 

on December 15, 2017, and amended on 

March 26, 2018, June 6, 2018, and July 

3, 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 August 17, 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, U.S. Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549–1090; 

Applicants, 6803 South Tucson Way, 

Centennial, Colorado 80112. 

FOR FURTHER INFORMATION CONTACT: 

Kieran G. Brown, Senior Counsel, at 

(202) 551–6773 or Nadya B. Roytblat, 

Assistant Director, at (202) 551–6825 

(Division of Investment Management, 

Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

website by searching for the file 

number, or 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 Initial Fund is a Delaware 

statutory trust that is registered under 

the Act as a non-diversified, closed-end 

management investment company. The 

Initial Fund’s investment objective is to 

produce current income by 

opportunistically allocating its assets 

across a wide range of credit strategies. 

2. The Adviser, a Delaware limited 

liability company, is registered as an 

investment adviser under the 

Investment Advisers Act of 1940. The 

Adviser serves as investment adviser to 

the Initial Fund. 

3. The applicants seek an order to 

permit the Initial Fund to issue multiple 

classes of Shares, each having its own 

fee and expense structure, and to 

impose asset-based service and/or 

distribution fees and early withdrawal 

charges. 

4. Applicants request that the order 

also apply to any other registered 

closed-end management investment 

company that conducts a continuous 

offering of its shares, existing now or in 

the future, for which the Adviser, its 

successors,1 or any entity controlling, 

controlled by, or under common control 

with the Adviser, or its successors, acts 

as investment adviser, and which 

provides periodic liquidity with respect 

to its Shares through tender offers 

conducted in compliance with either 

rule 23c–3 under the Act or rule 13e– 

4 under the Securities Exchange Act of 

1934 (the ‘‘1934 Act’’) (each such 

closed-end investment company, a 

‘‘Future Fund’’ and, together with the 

Initial Fund, each, a ‘‘Fund’’ and 

collectively, the ‘‘Funds’’).2

5. The Initial Fund currently issues a 

single class of Shares (the ‘‘Initial Class 

Shares’’). The Shares are currently being 

offered on a continuous basis pursuant 

to a registration statement under the 

Securities Act of 1933 at their net asset 

value per share plus the applicable sales 

load. The Initial Fund, as a closed-end 

investment company, does not 

continuously redeem Shares as does an 

open-end management investment 

company. Shares of the Initial Fund are 

not listed on any securities exchange 

and do not trade on an over-the-counter 

system such as NASDAQ. Applicants do 

not expect that any secondary market 

will ever develop for the Shares. 

6. If the requested relief is granted, the 

Initial Fund intends to offer multiple 

classes of Shares, such as the Initial 

Class Shares and a new Share class (the 

‘‘New Class Shares’’), or any other 

classes. Because of the different 

distribution fees, shareholder services 

fees, and any other class expenses that 

may be attributable to the different 

classes, the net income attributable to, 

and any dividends payable on, each 

class of Shares may differ from each 

other from time to time. 


daltland on DSKBBV9HB2PROD with NOTICES