Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Notices 5153 

which any purchase in an Affiliated 

Underwriting occurred, the first two 

years in an easily accessible place, a 

written record of each purchase of 

securities in Affiliated Underwritings 

once an investment by a Fund of Funds 

in the securities of the Fund exceeds the 

limit of section 12(d)(1)(A)(i) of the Act, 

setting forth from whom the securities 

were acquired, the identity of the 

underwriting syndicate’s members, the 

terms of the purchase, and the 

information or materials upon which 

the Board’s determinations were made. 

9. Before investing in a Fund in 

excess of the limit in section 

12(d)(1)(A), a Fund of Funds and the 

Trust will execute a FOF Participation 

Agreement stating, without limitation, 

that their respective boards of directors 

or trustees and their investment 

advisers, or trustee and Sponsor, as 

applicable, understand the terms and 

conditions of the order, and agree to 

fulfill their responsibilities under the 

order. At the time of its investment in 

Shares of a Fund in excess of the limit 

in section 12(d)(1)(A)(i), a Fund of 

Funds will notify the Fund of the 

investment. At such time, the Fund of 

Funds will also transmit to the Fund a 

list of the names of each Fund of Funds 

Affiliate and Underwriting Affiliate. The 

Fund of Funds will notify the Fund of 

any changes to the list of the names as 

soon as reasonably practicable after a 

change occurs. The Fund and the Fund 

of Funds will maintain and preserve a 

copy of the order, the FOF Participation 

Agreement, and the list with any 

updated information for the duration of 

the investment and for a period of not 

less than six years thereafter, the first 

two years in an easily accessible place. 

10. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Investing Management Company 

including a majority of the disinterested 

directors or trustees, will find that the 

advisory fees charged under such 

contract are based on services provided 

that will be in addition to, rather than 

duplicative of, the services provided 

under the advisory contract(s) of any 

Fund, or its respective Master Fund, in 

which the Investing Management 

Company may invest. These findings 

and their basis will be fully recorded in 

the minute books of the appropriate 

Investing Management Company. 

11. Any sales charges and/or service 

fees charged with respect to shares of a 

Fund of Funds will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

12. No Fund, or its respective Master 

Fund, will acquire securities of an 

investment company or company 

relying on section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act, other 

than any Wholly-Owned Subsidiary, 

and except to the extent (i) the Fund, or 

its respective Master Fund, acquires 

securities of another investment 

company pursuant to exemptive relief 

from the Commission permitting the 

Fund, or its respective Master Fund, to 

acquire securities of one or more 

investment companies for short-term 

cash management purposes or (ii) the 

Fund acquires securities of the Master 

Fund pursuant to the Master-Feeder 

Relief. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–01750 Filed 1–29–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

31427; 812–14362] 

Goldman Sachs ETF Trust, et al.; 

Notice of Application 

January 26, 2015. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 6(c) of the 

Investment Company Act of 1940 

(‘‘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 

(a)(2) of the Act, and under section 

12(d)(1)(J) of the Act for an exemption 

from sections 12(d)(1)(A) and (B) of the 

Act. 

APPLICANTS: Goldman Sachs ETF Trust 

(the ‘‘Trust’’), Goldman Sachs Asset 

Management, L.P., GS Investment 

Strategies, LLC, and Goldman Sachs 

Asset Management International (each, 

an ‘‘Initial Adviser’’), and ALPS 

Distributors, Inc. (the ‘‘Initial 

Distributor’’). 

SUMMARY OF APPLICATION: Applicants 

request an order that permits: (a) 

Actively-managed series of certain 

open-end management investment 

companies to issue shares (‘‘Shares’’) 

redeemable in large aggregations only 

(‘‘Creation Units’’); (b) secondary market 

transactions in Shares to occur at 

negotiated market prices; (c) certain 

series to pay redemption proceeds, 

under certain circumstances, more than 

seven days from the tender of Shares for 

redemption; (d) certain affiliated 

persons of the series to deposit 

securities into, and receive securities 

from, the series 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 

series to acquire Shares; and certain 

series to perform creations and 

redemptions of Creation Units in-kind 

in a master-feeder structure. 

DATES: Filing Dates: The application was 

filed on September 19, 2014 and 

amended on December 23, 2014 and 

January 20, 2015. 

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 February 20, 2015, 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: The Trust, Goldman Sachs 

Asset Management, L.P., and GS 

Investment Strategies, LLC, 200 West 

Street, New York, New York 10282; 

Goldman Sachs Asset Management 

International, River Court, 120 Fleet 

Street, London, EC4A 2BE, United 

Kingdom; and the Initial Distributor, 

1290 Broadway, Suite 1100, Denver, 

Colorado 80203. 

FOR FURTHER INFORMATION CONTACT: 

Mark Zaruba, Senior Counsel, at (202) 

551–6878 or Dalia Blass, Assistant Chief 

Counsel, at (202) 551–6821 (Division of 

Investment Management, Chief 

Counsel’s Office). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

Web site by searching for the file 

number, or for an applicant using the 

Company name box, at http://

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 


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1Any Adviser to a Future Fund will be registered 

as an investment adviser under the Advisers Act. 

All entities that currently intend to rely on the 

order are named as applicants. Any other entity that 

relies on the order in the future will comply with 

the terms and conditions of the application. 

2 If a Fund (or its respective Master Fund) invests 

in derivatives, then (a) the board of trustees 

(‘‘Board’’) of the Fund will periodically review and 

approve the Fund’s use of derivatives and how the 

Fund’s (or, in the case of a Feeder Fund, its Master 

Fund’s) investment adviser assesses and manages 

risk with respect to the Fund’s (or, in the case of 

a Feeder Fund, its Master Fund’s) use of derivatives 

and (b) the Fund’s (or, in the case of a Feeder Fund, 

its Master Fund’s) disclosure of its use of 

derivatives in its offering documents and periodic 

reports will be consistent with relevant Commission 

and staff guidance. 

3 Depositary Receipts are typically issued by a 

financial institution, a ‘‘depositary’’, and evidence 

ownership in a security or pool of securities that 

have been deposited with the depositary. A Fund 

(or its respective Master Fund) will not invest in 

any Depositary Receipts that the Adviser or any 

Sub-Adviser deems to be illiquid or for which 

pricing information is not readily available. No 

affiliated persons of applicants, any Future Fund, 

any Adviser, or any Sub-Adviser will serve as the 

depositary bank for any Depositary Receipts held by 

a Fund, or its respective Master Fund, except a 

depositary bank that is deemed to be affiliated 

solely because a Fund owns greater than 5% of the 

outstanding voting securities of such depositary 

bank. 

4An Investing Fund may rely on the order only 

to invest in Funds and not in any other registered 

investment company. 

5A Feeder Fund managed in a master-feeder 

structure will not make direct investments in any 

security or other instrument other than the 

securities issued by its respective Master Fund. 

6 In a master-feeder structure, the Master Fund, 

rather than the Feeder Fund, would invest its 

portfolio in compliance with the order. There 

would be no ability by Fund shareholders to 

exchange shares of Feeder Funds for shares of 

another feeder series of the Master Fund. 

Applicants’ Representations 

1. The Trust has registered as an 

open-end management investment 

company under the Act and is a 

statutory trust organized under the laws 

of Delaware. The Trust will offer a 

number of Funds (as defined below), 

each of which will utilize active 

management investment strategies. 

Applicants expect the initial series of 

the Trust (the ‘‘Initial Fund’’) to be the 

Goldman Sachs Equity Dividend Fund, 

which will seek total return with an 

emphasis on dividends. The Initial 

Fund will seek to achieve its investment 

objective by investing in dividendpaying equity investments in U.S. 

issuers (including foreign issuers that 

are traded in the United States) with 

large public stock market 

capitalizations. 

2. An Initial Adviser will be the 

investment adviser to the Initial Fund 

and an Adviser (as defined below) will 

be the investment adviser to the Funds. 

The Initial Advisers are, and any other 

Adviser will be, registered as an 

investment adviser under the 

Investment Advisers Act of 1940 

(‘‘Advisers Act’’). The Adviser (as 

defined below) may in the future retain 

one or more sub-advisers (each a ‘‘SubAdviser’’) to manage the portfolios of 

the Funds (as defined below). Any SubAdviser will be registered, or not subject 

to registration, under the Advisers Act. 

The Initial Distributor is a registered 

broker-dealer (‘‘Broker’’) under the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) and will act as the 

distributor and principal underwriter of 

the Funds. Applicants request that the 

order also apply to any future 

distributor of Shares (‘‘Future 

Distributor’’ and, together with the 

Initial Distributor, the ‘‘Distributor’’), 

provided that any such Future 

Distributor complies with the terms and 

conditions of the application. 

3. Applicants request that the order 

apply to the Initial Fund and any future 

series of the Trust as well as other openend management companies that may 

utilize active management investment 

strategies (‘‘Future Funds’’). Any Future 

Fund will (a) be advised by an Initial 

Adviser or an entity controlling, 

controlled by, or under common control 

with an Initial Adviser (any Initial 

Adviser and each such other entity 

included in the term ‘‘Adviser’’), and (b) 

comply with the terms and conditions 

of the application.1 The Initial Fund and 

Future Funds together are the ‘‘Funds.’’ 

Each Fund, or its respective Master 

Fund (as defined below), will consist of 

a portfolio of securities (including fixed 

income securities and/or equity 

securities) and/or currencies traded in 

the U.S. and/or non-U.S. markets, and 

derivatives, other assets, and other 

investment positions (‘‘Portfolio 

Instruments’’).2 Funds, or their 

respective Master Funds, may invest in 

‘‘Depositary Receipts.’’ 3 Each Fund will 

operate as an actively managed 

exchange-traded fund (‘‘ETF’’), and a 

Fund may operate as a feeder fund in a 

master-feeder structure (‘‘Feeder 

Fund’’). 

4. Applicants also request that any 

exemption under section 12(d)(1)(J) of 

the Act from sections 12(d)(1)(A) and 

(B) apply to: (i) Any Fund that is 

currently or subsequently part of the 

same ‘‘group of investment companies’’ 

as the Initial Fund within the meaning 

of section 12(d)(1)(G)(ii) of the Act; (ii) 

any principal underwriter for the Fund; 

(iii) any Brokers selling Shares of a 

Fund to an Investing Fund (as defined 

below); and (iv) each management 

investment company or unit investment 

trust registered under the Act that is not 

part of the same ‘‘group of investment 

companies’’ as the Funds within the 

meaning of section 12(d)(1)(G)(ii) of the 

Act and that enters into a FOF 

Participation Agreement (as defined 

below) with a Fund (such management 

investment companies, ‘‘Investing 

Management Companies,’’ such unit 

investment trusts, ‘‘Investing Trusts,’’ 

and Investing Management Companies 

and Investing Trusts together, 

‘‘Investing Funds’’). Investing Funds do 

not include the Funds.4

5. Applicants further request that the 

order permit a Fund to operate as a 

Feeder Fund (‘‘Master-Feeder Relief’’). 

Under the order, a Feeder Fund would 

be permitted to acquire shares of 

another registered investment company 

in the same group of investment 

companies having substantially the 

same investment objectives as the 

Feeder Fund (‘‘Master Fund’’) beyond 

the limitations in section 12(d)(1)(A) of 

the Act,5 and the Master Fund, and any 

principal underwriter for the Master 

Fund, would be permitted to sell shares 

of the Master Fund to the Feeder Fund 

beyond the limitations in section 

12(d)(1)(B) of the Act. Applicants 

request that the Master-Feeder Relief 

apply to any Feeder Fund, any Master 

Fund and any principal underwriter for 

the Master Funds selling shares of a 

Master Fund to a Feeder Fund. 

Applicants state that creating an 

exchange-traded feeder fund may be 

preferable to creating entirely new series 

for several reasons, including avoiding 

additional overhead costs and 

economies of scale for the Feeder 

Funds.6 Applicants assert that, while 

certain costs may be higher in a masterfeeder structure and there may possibly 

be lower tax efficiencies for the Feeder 

Funds, the Feeder Funds’ Board will 

consider any such potential 

disadvantages against the benefits of 

economies of scale and other benefits of 

operating within a master-feeder 

structure. 

6. Applicants anticipate that a 

Creation Unit will consist of at least 

10,000 Shares. Applicants anticipate 

that the trading price of a Share will 

range from $10 to $100. All orders to 

purchase Creation Units must be placed 

with the Distributor by or through a 

party that has entered into a participant 

agreement with the Distributor and the 

transfer agent of the Fund (‘‘Authorized 

Participant’’) with respect to the 

creation and redemption of Creation 

Units. An Authorized Participant is 

either: (a) A Broker or other participant 

in the Continuous Net Settlement 

System of the National Securities 

Clearing Corporation (‘‘NSCC’’), a 


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7The Funds must comply with the federal 

securities laws in accepting Deposit Instruments 

and satisfying redemptions with Redemption 

Instruments, including that the Deposit Instruments 

and Redemption Instruments are sold in 

transactions that would be exempt from registration 

under the Securities Act of 1933 (‘‘Securities Act’’). 

In accepting Deposit Instruments and satisfying 

redemptions with Redemption Instruments that are 

restricted securities eligible for resale pursuant to 

Rule 144A under the Securities Act, the Funds will 

comply with the conditions of Rule 144A. 

8Each Fund will sell and redeem Creation Units 

on any day the Fund is open, including as required 

by section 22(e) of the Act (each, a ‘‘Business Day’’). 

9The portfolio used for this purpose will be the 

same portfolio used to calculate the Fund’s net asset 

value (‘‘NAV’’) for that Business Day. 

10A tradeable round lot for a security will be the 

standard unit of trading in that particular type of 

security in its primary market. 

11A TBA Transaction is a method of trading 

mortgage-backed securities. In a TBA Transaction, 

the buyer and seller agree on general trade 

parameters such as agency, settlement date, par 

amount and price. 

12This includes instruments that can be 

transferred in kind only with the consent of the 

original counterparty to the extent the Fund does 

not intend to seek such consents. 

13Because these instruments will be excluded 

from the Creation Basket, their value will be 

reflected in the determination of the Cash Amount 

(defined below). 

14A ‘‘custom order’’ is any purchase or 

redemption of Shares made in whole or in part on 

a cash basis in reliance on clause (e)(i) or (e)(ii). 

15Applicants are not requesting relief from 

section 18 of the Act. Accordingly, a Master Fund 

may require a Transaction Fee payment to cover 

expenses related to purchases or redemptions of the 

Master Fund’s shares by a Feeder Fund only if it 

requires the same payment for equivalent purchases 

or redemptions by any other feeder fund. Thus, for 

example, a Master Fund may require payment of a 

Transaction Fee by a Feeder Fund for transactions 

for 20,000 or more shares so long as it requires 

payment of the same Transaction Fee by all feeder 

funds for transactions involving 20,000 or more 

shares. 

16Where a Fund permits an in-kind purchaser to 

deposit cash in lieu of depositing one or more 

Deposit Instruments, the purchaser may be assessed 

a higher Transaction Fee to offset the cost to the 

Fund of buying those particular Deposit 

Instruments. In all cases, the Transaction Fee will 

be limited in accordance with the requirements of 

the Commission applicable to open-end 

management investment companies offering 

redeemable securities. 

clearing agency registered with the 

Commission and affiliated with the 

Depository Trust Company (‘‘DTC’’), or 

(b) a participant in the DTC (such 

participant, ‘‘DTC Participant’’). 

7. In order to keep costs low and 

permit each Fund to be as fully invested 

as possible, 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 below, 

purchasers will be required to purchase 

Creation Units by making an in-kind 

deposit of specified instruments 

(‘‘Deposit Instruments’’), and 

shareholders redeeming their Shares 

will receive an in-kind transfer of 

specified instruments (‘‘Redemption 

Instruments’’).7 On any given Business 

Day 8 the names and quantities of the 

instruments that constitute the Deposit 

Instruments and the names and 

quantities of the instruments that 

constitute the Redemption Instruments 

will be identical, and these instruments 

may be referred to, in the case of either 

a purchase or redemption, as the 

‘‘Creation Basket.’’ In addition, the 

Creation Basket will correspond pro rata 

to the positions in a Fund’s portfolio 

(including cash positions),9 except: (a) 

In the case of bonds, for minor 

differences when it is impossible to 

break up bonds beyond certain 

minimum sizes needed for transfer and 

settlement; (b) for minor differences 

when rounding is necessary to eliminate 

fractional shares or lots that are not 

tradeable round lots; 10 or (c) TBA 

Transactions,11 short positions and 

other positions that cannot be 

transferred in kind 12 will be excluded 

from the Creation Basket.13 If there is a 

difference between NAV attributable to 

a Creation Unit and the aggregate market 

value of the Creation Basket exchanged 

for the Creation Unit, the party 

conveying instruments with the lower 

value will also pay to the other an 

amount in cash equal to that difference 

(the ‘‘Cash Amount’’). 

8. Purchases and redemptions of 

Creation Units may be made in whole or 

in part on a cash basis, rather than in 

kind, solely under the following 

circumstances: (a) To the extent there is 

a Cash Amount, as described above; (b) 

if, on a given Business Day, a Fund 

announces before the open of trading 

that all purchases, all redemptions or all 

purchases and redemptions on that day 

will be made entirely in cash; (c) if, 

upon receiving a purchase or 

redemption order from an Authorized 

Participant, a Fund determines to 

require the purchase or redemption, as 

applicable, to be made entirely in cash; 

(d) if, on a given Business Day, a Fund 

requires all Authorized Participants 

purchasing or redeeming Shares on that 

day to deposit or receive (as applicable) 

cash in lieu of some or all of the Deposit 

Instruments or Redemption Instruments, 

respectively, solely because: (i) Such 

instruments are not eligible for transfer 

through either the NSCC or DTC; or (ii) 

in the case of Funds holding non-U.S. 

investment (‘‘Global Funds’’), such 

instruments are not eligible for trading 

due to local trading restrictions, local 

restrictions on securities transfers or 

other similar circumstances; or (e) if a 

Fund permits an Authorized Participant 

to deposit or receive (as applicable) cash 

in lieu of some or all of the Deposit 

Instruments or Redemption Instruments, 

respectively, solely because: (i) Such 

instruments are, in the case of the 

purchase of a Creation Unit, not 

available in sufficient quantity; (ii) such 

instruments are not eligible for trading 

by an Authorized Participant or the 

investor on whose behalf the 

Authorized Participant is acting; or (iii) 

a holder of Shares of a Global Fund 

would be subject to unfavorable income 

tax treatment if the holder receives 

redemption proceeds in kind.14

9. Each Business Day, before the open 

of trading on a national securities 

exchange, as defined in section 2(a)(26) 

of the Act (‘‘Stock Exchange’’), on which 

Shares are listed, each Fund will cause 

to be published through the NSCC the 

names and quantities of the instruments 

comprising the Creation Basket, as well 

as the estimated Cash Amount (if any), 

for that day. The published Creation 

Basket will apply until a new Creation 

Basket is announced on the following 

Business Day, and there will be no intraday changes to the Creation Basket 

except to correct errors in the published 

Creation Basket. The Stock Exchange 

will disseminate every 15 seconds 

throughout the trading day an amount 

representing, on a per Share basis, the 

sum of the current value of the Portfolio 

Instruments that were publicly 

disclosed prior to the commencement of 

trading in Shares on the Stock 

Exchange. 

10. A Fund may recoup the settlement 

costs charged by NSCC and DTC by 

imposing a transaction fee on investors 

purchasing or redeeming Creation Units 

(the ‘‘Transaction Fee’’).15 The 

Transaction Fee will be borne only by 

purchasers and redeemers of Creation 

Units and will be limited to amounts 

that have been determined appropriate 

by the Adviser to defray the transaction 

expenses that will be incurred by a 

Fund when an investor purchases or 

redeems Creation Units.16 All orders to 

purchase Creation Units will be placed 

with the Distributor by or through an 

Authorized Participant and the 

Distributor will transmit all purchase 

orders to the relevant Fund. The 

Distributor will be responsible for 

delivering a prospectus (‘‘Prospectus’’) 

to those Authorized Participants 

purchasing Creation Units and for 

maintaining records of both the orders 

placed with it and the confirmations of 

acceptance furnished by it. 

11. Shares will be listed and traded at 

negotiated prices on a Stock Exchange 

and traded in the secondary market. 

Applicants expect that Stock Exchange 


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17 If Shares are listed on The NASDAQ Stock 

Market LLC (‘‘Nasdaq’’) or a similar electronic Stock 

Exchange (including NYSE Arca), one or more 

member firms of that Stock Exchange will act as 

Market Maker and maintain a market for Shares 

trading on that Stock Exchange. On Nasdaq, no 

particular Market Maker would be contractually 

obligated to make a market in Shares. However, the 

listing requirements on Nasdaq, for example, 

stipulate that at least two Market Makers must be 

registered in Shares to maintain a listing. In 

addition, on Nasdaq and NYSE Arca, registered 

Market Makers are required to make a continuous 

two-sided market or subject themselves to 

regulatory sanctions. No Market Maker will be an 

affiliated person or an affiliated person of an 

affiliated person, of the Funds, except within the 

meaning of section 2(a)(3)(A) or (C) of the Act due 

solely to ownership of Shares as discussed below. 

18Shares will be registered in book-entry form 

only. DTC or its nominee will be the record or 

registered owner of all outstanding Shares. 

Beneficial ownership of Shares will be shown on 

the records of DTC or DTC Participants. 

19Feeder Funds will disclose information about 

the securities and other assets held by the Master 

Fund. 

20Applicants note that under accounting 

procedures followed by the Funds, trades made on 

the prior Business Day will be booked and reflected 

in NAV on the current Business Day. Accordingly, 

each Fund will be able to disclose at the beginning 

of the Business Day the portfolio that will form the 

basis for its NAV calculation at the end of such 

Business Day. 

21The Master Funds will not require relief from 

sections 2(a)(32) and 5(a)(1) because the Master 

Funds will issue individually redeemable 

securities. 

specialists or market makers (‘‘Market 

Makers’’) will be assigned to Shares. 

The price of Shares trading on the Stock 

Exchange will be based on a current 

bid/offer in the secondary market. 

Transactions involving the purchases 

and sales of Shares on the Stock 

Exchange will be subject to customary 

brokerage fees and charges. 

12. Applicants expect that purchasers 

of Creation Units will include 

institutional investors and arbitrageurs. 

Market Makers, acting in their unique 

role to provide a fair and orderly 

secondary market for Shares, also may 

purchase Creation Units for use in their 

own market making activities.17

Applicants expect that secondary 

market purchasers of Shares will 

include both institutional and retail 

investors.18 Applicants expect that 

arbitrage opportunities created by the 

ability to continually purchase or 

redeem Creation Units at their NAV per 

Share should ensure that the Shares will 

not trade at a material discount or 

premium in relation to their NAV. 

13. Shares will not be individually 

redeemable and owners of Shares may 

acquire those Shares from a Fund, or 

tender such shares for redemption to the 

Fund, in Creation Units only. To 

redeem, an investor must accumulate 

enough Shares to constitute a Creation 

Unit. Redemption requests must be 

placed by or through an Authorized 

Participant. 

14. Neither the Trust nor any Fund 

will be marketed or otherwise held out 

as a ‘‘mutual fund.’’ Instead, each Fund 

will be marketed as an ‘‘activelymanaged exchange-traded fund.’’ In any 

advertising material where features of 

obtaining, buying or selling Shares 

traded on the Stock Exchange are 

described there will be an appropriate 

statement to the effect that Shares are 

not individually redeemable. 

15. The Funds’ Web site, which will 

be publicly available prior to the public 

offering of Shares, will include a 

Prospectus and additional quantitative 

information updated on a daily basis, 

including, on a per Share basis for each 

Fund, the prior Business Day’s NAV and 

the market closing price or mid-point of 

the bid/ask spread at the time of the 

calculation of such NAV (‘‘Bid/Ask 

Price’’), and a calculation of the 

premium or discount of the market 

closing price or Bid/Ask Price against 

such NAV. On each Business Day, 

before commencement of trading in 

Shares on the Stock Exchange, the Fund 

will disclose on its Web site the 

identities and quantities of the Portfolio 

Instruments held by the Fund (or its 

respective Master Fund) 19 that will 

form the basis for the Fund’s calculation 

of NAV at the end of the Business Day.20

This disclosure will look through any 

Wholly-Owned Subsidiary (defined 

below) and identify the specific 

Portfolio Instruments held by that 

entity. 

Applicants’ Legal Analysis 

1. Applicants request an order under 

section 6(c) of 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) of the Act for 

an exemption from sections 12(d)(1)(A) 

and (B) of the Act. 

2. Section 6(c) of the Act provides that 

the Commission may exempt any 

person, security or transaction, or any 

class of persons, securities or 

transactions, from any provisions of the 

Act, if and to the extent that 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 17(b) 

of the Act authorizes the Commission to 

exempt a proposed transaction from 

section 17(a) of the Act if evidence 

establishes that the terms of the 

transaction, including the consideration 

to be paid or received, are reasonable 

and fair and do not involve 

overreaching on the part of any person 

concerned, and the proposed 

transaction is consistent with the 

policies of the registered investment 

company and the general 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. 

Sections 5(a)(1) and 2(a)(32) of the Act 

3. Section 5(a)(1) of the Act defines an 

‘‘open-end company’’ as a management 

investment company that is offering for 

sale or has outstanding any redeemable 

security of which it is the issuer. 

Section 2(a)(32) of the Act defines a 

redeemable security as any security, 

other than short-term paper, under the 

terms of which the holder, upon its 

presentation to the issuer, is entitled to 

receive approximately a proportionate 

share of the issuer’s current net assets, 

or the cash equivalent. Because Shares 

will not be individually redeemable, 

applicants request an order that would 

permit each Fund to redeem Shares in 

Creation Units only.21 Applicants state 

that investors may purchase Shares in 

Creation Units from each Fund and 

redeem Creation Units from each Fund. 

Applicants further state that because the 

market price of Creation Units will be 

disciplined by arbitrage opportunities, 

investors should be able to sell Shares 

in the secondary market at prices that 

do not vary materially from their NAV. 

Section 22(d) of the Act and Rule 

22c–1 Under the Act 

4. Section 22(d) of the Act, among 

other things, prohibits a dealer from 

selling a redeemable security that is 

currently being offered to the public by 

or through a principal underwriter, 

except at a current public offering price 

described in the prospectus. Rule 

22c–1 under the Act generally requires 

that a dealer selling, redeeming, or 

repurchasing a redeemable security do 

so only at a price based on its NAV. 

Applicants state that secondary market 

trading in Shares will take place at 

negotiated prices, not at a current 

offering price described in the 

Prospectus, and not at a price based on 

NAV. Thus, purchases and sales of 

Shares in the secondary market will not 

comply with section 22(d) of the Act 

and rule 22c–1 under the Act. 


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22The Master Funds will not require relief from 

section 22(d) or rule 22c–1 because shares of the 

Master Funds will not trade at negotiated prices in 

the secondary market. 

23Applicants acknowledge that no relief obtained 

from the requirements of section 22(e) will affect 

any obligations that it may otherwise have under 

rule 15c6–1 under the Exchange Act. Rule 15c6–1 

requires that most securities transactions be settled 

within three business days of the trade date. 

24Other feeder funds invested in any Master 

Fund are not seeking, and will not rely on, the 

section 22(e) relief requested herein. 

25 In addition, the requested exemption from 

section 22(e) would only apply to in-kind 

redemptions by the Feeder Funds and would not 

apply to in-kind redemptions by other feeder funds. 

Applicants request an exemption under 

section 6(c) from these provisions.22

5. Applicants assert that the concerns 

sought to be addressed by section 22(d) 

of the Act and rule 22c–1 under the Act 

with respect to pricing are equally 

satisfied by the proposed method of 

pricing Shares. Applicants maintain that 

while there is little legislative history 

regarding section 22(d), its provisions, 

as well as those of rule 22c–1, appear to 

have been designed to (a) prevent 

dilution caused by certain risklesstrading schemes by principal 

underwriters and contract dealers, (b) 

prevent unjust discrimination or 

preferential treatment among buyers 

resulting from sales at different prices, 

and (c) assure an orderly distribution 

system of investment company shares 

by eliminating price competition from 

brokers offering shares at less than the 

published sales price and repurchasing 

shares at more than the published 

redemption price. 

6. Applicants believe that none of 

these purposes will be thwarted by 

permitting Shares to trade in the 

secondary market at negotiated prices. 

Applicants state that (a) secondary 

market trading in Shares does not 

involve the Funds as parties and cannot 

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 

contend that the proposed distribution 

system will be orderly because arbitrage 

activity should ensure that the 

difference between the market price of 

Shares and their NAV remains narrow. 

Section 22(e) of the Act 

7. Section 22(e) of the Act generally 

prohibits a registered investment 

company from suspending the right of 

redemption or postponing the date of 

payment of redemption proceeds for 

more than seven days after the tender of 

a security for redemption. Applicants 

observe that settlement of redemptions 

of Creation Units of Global Funds is 

contingent not only on the settlement 

cycle of the U.S. securities markets but 

also on the delivery cycles present in 

foreign markets in which those Funds 

invest. Applicants have been advised 

that, under certain circumstances, the 

delivery cycles for transferring Portfolio 

Instruments to redeeming investors, 

coupled with local market holiday 

schedules, will require a delivery 

process of up to 15 calendar days. 

Applicants therefore request relief from 

section 22(e) in order to provide 

payment or satisfaction of redemptions 

within the maximum number of 

calendar days required for such 

payment or satisfaction in the principal 

local markets where transactions in the 

Portfolio Instruments of each Global 

Fund customarily clear and settle, but in 

all cases no later than 15 calendar days 

following the tender of a Creation 

Unit.23

8. Applicants state that section 22(e) 

was designed to prevent unreasonable, 

undisclosed and unforeseen delays in 

the actual payment of redemption 

proceeds. Applicants assert that the 

requested relief will not lead to the 

problems that section 22(e) was 

designed to prevent. Applicants state 

that allowing redemption payments for 

Creation Units of a Fund to be made 

within a maximum of 15 calendar days 

would not be inconsistent with the 

spirit and intent of section 22(e).24

Applicants state each Global Fund’s 

statement of additional information 

(‘‘SAI’’) will disclose those local 

holidays (over the period of at least one 

year following the date of the SAI), if 

any, that are expected to prevent the 

delivery of redemption proceeds in 

seven calendar days and the maximum 

number of days needed to deliver the 

proceeds for each affected Global Fund. 

Applicants are not seeking relief from 

section 22(e) with respect to Global 

Funds that do not effect redemptions inkind.25

Section 12(d)(1) of the Act 

9. Section 12(d)(1)(A) of the Act 

prohibits a registered investment 

company from acquiring shares of an 

investment company if the securities 

represent more than 3% of the total 

outstanding voting stock of the acquired 

company, more than 5% of the total 

assets of the acquiring company, or, 

together with the securities of any other 

investment companies, more than 10% 

of the total assets of the acquiring 

company. Section 12(d)(1)(B) of the Act 

prohibits a registered open-end 

investment company, its principal 

underwriter, or any other broker or 

dealer from selling its shares to another 

investment company if the sale will 

cause the acquiring company to own 

more than 3% of the acquired 

company’s voting stock, or if the sale 

will cause more than 10% of the 

acquired company’s voting stock to be 

owned by investment companies 

generally. 

10. Applicants request relief to permit 

Investing Funds to acquire Shares in 

excess of the limits in section 

12(d)(1)(A) of the Act and to permit the 

Funds, their principal underwriters and 

any Broker to sell Shares to Investing 

Funds in excess of the limits in section 

12(d)(1)(B) of the Act. Applicants 

submit that the proposed conditions to 

the requested relief address the 

concerns underlying the limits in 

section 12(d)(1), which include 

concerns about undue influence, 

excessive layering of fees and overly 

complex structures. 

11. Applicants submit that their 

proposed conditions address any 

concerns regarding the potential for 

undue influence. To limit the control 

that an Investing Fund may have over a 

Fund, applicants propose a condition 

prohibiting the adviser of an Investing 

Management Company (‘‘Investing Fund 

Adviser’’), sponsor of an Investing Trust 

(‘‘Sponsor’’), any person controlling, 

controlled by, or under common control 

with the Investing Fund Adviser or 

Sponsor, and any investment company 

or issuer that would be an investment 

company but for sections 3(c)(1) or 

3(c)(7) of the Act that is advised or 

sponsored by the Investing Fund 

Adviser, the Sponsor, or any person 

controlling, controlled by, or under 

common control with the Investing 

Fund Adviser or Sponsor (‘‘Investing 

Fund’s Advisory Group’’) from 

controlling (individually or in the 

aggregate) a Fund within the meaning of 

section 2(a)(9) of the Act. The same 

prohibition would apply to any subadviser to an Investing Management 

Company (‘‘Investing Fund SubAdviser’’), any person controlling, 

controlled by or under common control 

with the Investing Fund Sub-Adviser, 

and any investment company or issuer 

that would be an investment company 

but for sections 3(c)(1) or 3(c)(7) of the 

Act (or portion of such investment 

company or issuer) advised or 

sponsored by the Investing Fund SubAdviser or any person controlling, 

controlled by or under common control 

with the Investing Fund Sub-Adviser 


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26An ‘‘Investing Fund Affiliate’’ is any Investing 

Fund Adviser, Investing Fund Sub-Adviser, 

Sponsor, promoter and principal underwriter of an 

Investing Fund, and any person controlling, 

controlled by or under common control with any 

of these entities. ‘‘Fund Affiliate’’ is an investment 

adviser, promoter, or principal underwriter of a 

Fund or any person controlling, controlled by or 

under common control with any of these entities. 

27Any reference to NASD Conduct Rule 2830 

includes any successor or replacement rule that 

may be adopted by the Financial Industry 

Regulatory Authority. 

28A Fund, or its respective Master Fund, may 

invest in a wholly-owned subsidiary, organized 

under the laws of the Cayman Islands as an 

exempted company or under the laws of another 

non-U.S. jurisdiction (each, a ‘‘Wholly-Owned 

Subsidiary’’), in order to pursue its investment 

objectives and/or ensure that the Fund remains 

qualified as a registered investment company for 

U.S. federal income tax purposes. Certain WhollyOwned Subsidiaries may be investment companies 

or excluded from the definition of investment 

company by section 3(c)(1) or 3(c)(7) of the Act. For 

a Fund (or its respective Master Fund) that invests 

in a Wholly-Owned Subsidiary, the Adviser will 

serve as investment adviser to both the Fund (or its 

respective Master Fund) and the Wholly-Owned 

Subsidiary. A Feeder Fund will not invest in a 

Wholly-Owned Subsidiary. 

29Applicants 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 an affiliated person of an 

affiliated person, of an Investing Fund because an 

investment adviser to the Funds is also an 

investment adviser to an Investing Fund. 

30To the extent that purchases and sales of Shares 

occur in the secondary market and not through 

(‘‘Investing Fund’s Sub-Advisory 

Group’’). 

12. Applicants propose a condition to 

ensure that no Investing Fund or 

Investing Fund Affiliate 26 (except to the 

extent it is acting in its capacity as an 

investment adviser to a Fund) will cause 

a Fund to purchase a security in an 

offering of securities during the 

existence of an underwriting or selling 

syndicate of which a principal 

underwriter is an Underwriting Affiliate 

(‘‘Affiliated Underwriting’’). An 

‘‘Underwriting Affiliate’’ is a principal 

underwriter in any underwriting or 

selling syndicate that is an officer, 

director, member of an advisory board, 

Investing Fund Adviser, Investing Fund 

Sub-Adviser, employee or Sponsor of 

the Investing Fund, or a person of which 

any such officer, director, member of an 

advisory board, Investing Fund Adviser, 

Investing Fund Sub-Adviser, employee 

or Sponsor is an affiliated person 

(except any person whose relationship 

to the Fund is covered by section 10(f) 

of the Act is not an Underwriting 

Affiliate). 

13. Applicants propose several 

conditions to address the potential for 

layering of fees. Applicants note that the 

board of directors or trustees of any 

Investing Management Company, 

including a majority of the directors or 

trustees who are not ‘‘interested 

persons’’ within the meaning of section 

2(a)(19) of the Act (‘‘disinterested 

directors or trustees’’), will be required 

to find that the advisory fees charged 

under the contract are based on services 

provided that will be in addition to, 

rather than duplicative of, services 

provided under the advisory contract of 

any Fund in which the Investing 

Management Company may invest. 

Applicants also state that any sales 

charges and/or service fees charged with 

respect to shares of an Investing Fund 

will not exceed the limits applicable to 

a fund of funds as set forth in NASD 

Conduct Rule 2830.27

14. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that a Fund will be 

prohibited from acquiring securities of 

any investment company or company 

relying on section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act, other 

than a Wholly-Owned Subsidiary,28

except to the extent permitted by 

exemptive relief from the Commission 

permitting the Fund to purchase shares 

of other investment companies for shortterm cash management purposes. 

15. To ensure that an Investing Fund 

is aware of the terms and conditions of 

the requested order, the Investing Funds 

must enter into an agreement with the 

respective Funds (‘‘FOF Participation 

Agreement’’). The FOF Participation 

Agreement will include an 

acknowledgement from the Investing 

Fund that it may rely on the order only 

to invest in a Fund and not in any other 

investment company. 

16. Applicants also are seeking relief 

from Sections 12(d)(1)(A) and 

12(d)(1)(B) to the extent necessary to 

permit the Feeder Funds to perform 

creations and redemptions of Shares inkind in a master-feeder structure. 

Applicants assert that this structure is 

substantially identical to traditional 

master-feeder structures permitted 

pursuant to the exception provided in 

section 12(d)(1)(E) of the Act. Section 

12(d)(1)(E) provides that the percentage 

limitations of sections 12(d)(1)(A) and 

(B) will not apply to a security issued 

by an investment company (in this case, 

the shares of the applicable Master 

Fund) if, among other things, that 

security is the only investment security 

held in the investing fund’s portfolio (in 

this case, the Feeder Fund’s portfolio). 

Applicants believe the proposed masterfeeder structure complies with section 

12(d)(1)(E) because each Feeder Fund 

will hold only investment securities 

issued by its corresponding Master 

Fund; however, the Feeder Funds may 

receive securities other than securities 

of its corresponding Master Fund if a 

Feeder Fund accepts an in-kind 

creation. To the extent that a Feeder 

Fund may be deemed to be holding both 

shares of the Master Fund and other 

securities, applicants request relief from 

sections 12(d)(1)(A) and (B). The Feeder 

Funds would operate in compliance 

with all other provisions of section 

12(d)(1)(E). 

Sections 17(a)(1) and (2) of the Act 

17. Section 17(a) of the Act generally 

prohibits an affiliated person of a 

registered investment company, or an 

affiliated person of such a person 

(‘‘second tier affiliate’’), from selling any 

security to or purchasing any security 

from the company. Section 2(a)(3) of the 

Act defines ‘‘affiliated person’’ to 

include any person directly or indirectly 

owning, controlling, or holding with 

power to vote, 5% or more of the 

outstanding voting securities of the 

other person and any person directly or 

indirectly controlling, controlled by, or 

under common control with, the other 

person. Section 2(a)(9) of the Act 

defines ‘‘control’’ as the power to 

exercise a controlling influence over the 

management or policies of a company 

and provides that a control relationship 

will be presumed where one person 

owns more than 25% of another 

person’s voting securities. Each Fund 

may be deemed to be controlled by an 

Adviser and hence affiliated persons of 

each other. In addition, the Funds may 

be deemed to be under common control 

with any other registered investment 

company (or series thereof) advised by 

an Adviser (an ‘‘Affiliated Fund’’). 

18. Applicants request an exemption 

under sections 6(c) and 17(b) of the Act 

from sections 17(a)(1) and 17(a)(2) of the 

Act to permit in-kind purchases and 

redemptions of Creation Units by 

persons that are affiliated persons or 

second tier affiliates of the Funds solely 

by virtue of one or more of the 

following: (a) Holding 5% or more, or in 

excess of 25% of the outstanding Shares 

of one or more Funds; (b) having an 

affiliation with a person with an 

ownership interest described in (a); or 

(c) holding 5% or more, or more than 

25% of the Shares of one or more 

Affiliated Funds.29 Applicants also 

request an exemption in order to permit 

a Fund to sell its Shares to and redeem 

its Shares from, and engage in the inkind transactions that would 

accompany such sales and redemptions 

with, certain Investing Funds of which 

the Funds are affiliated persons or 

second-tier affiliates.30


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principal transactions directly between an Investing 

Fund and a Fund, relief from section 17(a) would 

not be necessary. However, the requested relief 

would apply to direct sales of Shares in Creation 

Units by a Fund to an Investing Fund and 

redemptions of those Shares. The requested relief 

is also intended to cover the in-kind transactions 

that may accompany such sales and redemptions. 

Applicants 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 an affiliated person of an 

affiliated person, of an Investing Fund because an 

investment adviser to the Funds is also an 

investment adviser to an Investing Fund. 

31Applicants acknowledge that the receipt of 

compensation by (a) an affiliated person of an 

Investing Fund, or an affiliated person of such 

person, for the purchase by the Investing Fund of 

Shares of the Fund or (b) an affiliated person of a 

Fund, or an affiliated person of such person, for the 

sale by the Fund of its Shares to an Investing Fund, 

may be prohibited by section 17(e)(1) of the Act. 

The FOF Participation Agreement also will include 

this acknowledgment. 

19. Applicants assert that no useful 

purpose would be served by prohibiting 

such affiliated persons from making inkind purchases or in-kind redemptions 

of Shares of a Fund in Creation Units. 

Absent the unusual circumstances 

discussed in the application, the 

Deposit Instruments and Redemption 

Instruments available for a Fund will be 

the same for all purchasers and 

redeemers, respectively, and will 

correspond pro rata to the Fund’s 

Portfolio Instruments. The deposit 

procedures for in-kind purchases of 

Creation Units and the redemption 

procedures for in-kind redemptions will 

be the same for all purchases and 

redemptions. Deposit Instruments and 

Redemption Instruments will be valued 

in the same manner as those Portfolio 

Instruments currently held by the 

relevant Funds, and the valuation of the 

Deposit Instruments and Redemption 

Instruments will be made in the same 

manner and on the same terms for all, 

regardless of the identity of the 

purchaser or redeemer. Applicants do 

not believe that in-kind purchases and 

redemptions will result in abusive selfdealing or overreaching of the Fund. 

20. Applicants also submit that the 

sale of Shares to and redemption of 

Shares from an Investing Fund meets 

the standards for relief under sections 

17(b) and 6(c) of the Act. Applicants 

note that any consideration paid for the 

purchase or redemption of Shares 

directly from a Fund will be based on 

the NAV of the Fund in accordance with 

policies and procedures set forth in the 

Fund’s registration statement.31 The 

FOF Participation Agreement will 

require any Investing Fund that 

purchases Creation Units directly from 

a Fund to represent that the purchase of 

Creation Units from a Fund by an 

Investing Fund will be accomplished in 

compliance with the investment 

restrictions of the Investing Fund and 

will be consistent with the investment 

policies set forth in the Investing Fund’s 

registration statement. Applicants also 

state that the proposed transactions are 

consistent with the general purposes of 

the Act and appropriate in the public 

interest. 

21. In addition, to the extent that a 

Fund operates in a master-feeder 

structure, applicants also request relief 

permitting the Feeder Funds to engage 

in in-kind creations and redemptions 

with the applicable Master Fund. 

Applicants state that the request for 

relief described above would not be 

sufficient to permit such transactions 

because the Feeder Funds and the 

applicable Master Fund could also be 

affiliated by virtue of having the same 

investment adviser. However, 

applicants believe that in-kind creations 

and redemptions between a Feeder 

Fund and a Master Fund advised by the 

same investment adviser do not involve 

‘‘overreaching’’ by an affiliated person. 

Applicants represent that such 

transactions will occur only at the 

Feeder Fund’s proportionate share of 

the Master Fund’s net assets, and the 

distributed securities will be valued in 

the same manner as they are valued for 

the purposes of calculating the 

applicable Master Fund’s NAV. Further, 

all such transactions will be effected 

with respect to predetermined securities 

and on the same terms with respect to 

all investors. Finally, such transaction 

would only occur as a result of, and to 

effectuate, a creation or redemption 

transaction between the Feeder Fund 

and a third-party investor. Applicants 

state that, in effect, the Feeder Fund will 

serve as a conduit through which 

creation and redemption orders by 

Authorized Participants will be effected. 

Applicants’ Conditions 

Applicants agree that any order of the 

Commission granting the requested 

relief will be subject to the following 

conditions: 

A. ETF Relief 

1. As long as a Fund operates in 

reliance on the requested order, the 

Shares of the Fund will be listed on a 

Stock Exchange. 

2. Neither the Trust nor any Fund will 

be advertised or marketed as an openend investment company or a mutual 

fund. Any advertising material that 

describes the purchase or sale of 

Creation Units or refers to redeemability 

will prominently disclose that the 

Shares are not individually redeemable 

and that owners of the Shares may 

acquire those Shares from the Fund and 

tender those Shares for redemption to 

the Fund in Creation Units only. 

3. The Web site for the Funds, which 

is and will be publicly accessible at no 

charge, will contain, on a per Share 

basis, for each Fund the prior Business 

Day’s NAV and the market closing price 

or Bid/Ask Price, and a calculation of 

the premium or discount of the market 

closing price or Bid/Ask Price against 

such NAV. 

4. On each Business Day, before 

commencement of trading in Shares on 

the Stock Exchange, the Fund will 

disclose on its Web site the identities 

and quantities of the Portfolio 

Instruments held by the Fund (or its 

respective Master Fund) that will form 

the basis for the Fund’s calculation of 

NAV at the end of the Business Day. 

5. The Adviser or any Sub-Adviser, 

directly or indirectly, will not cause any 

Authorized Participant (or any investor 

on whose behalf an Authorized 

Participant may transact with the Fund) 

to acquire any Deposit Instrument for 

the Fund, or its respective Master Fund, 

through a transaction in which the 

Fund, or its respective Master Fund, 

could not engage directly. 

6. The requested relief to permit ETF 

operations will expire on the effective 

date of any Commission rule under the 

Act that provides relief permitting the 

operation of actively-managed ETFs, 

other than the Master-Feeder Relief. 

B. Section 12(d)(1) Relief 

1. The members of the Investing 

Fund’s Advisory Group will not control 

(individually or in the aggregate) a Fund 

(or its respective Master Fund) within 

the meaning of section 2(a)(9) of the Act. 

The members of the Investing Fund’s 

Sub-Advisory Group will not control 

(individually or in the aggregate) a Fund 

(or its respective Master Fund) within 

the meaning of section 2(a)(9) of the Act. 

If, as a result of a decrease in the 

outstanding voting securities of a Fund, 

the Investing Fund’s Advisory Group or 

the Investing Fund’s Sub-Advisory 

Group, each in the aggregate, becomes a 

holder of more than 25 percent of the 

outstanding voting securities of a Fund, 

it will vote its Shares of the Fund in the 

same proportion as the vote of all other 

holders of the Fund’s Shares. This 

condition does not apply to the 

Investing Fund’s Sub-Advisory Group 

with respect to a Fund (or its respective 

Master Fund) for which the Investing 

Fund Sub-Adviser or a person 

controlling, controlled by or under 

common control with the Investing 

Fund Sub-Adviser acts as the 

investment adviser within the meaning 

of section 2(a)(20)(A) of the Act. 


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2. No Investing Fund or Investing 

Fund Affiliate will cause any existing or 

potential investment by the Investing 

Fund in a Fund to influence the terms 

of any services or transactions between 

the Investing Fund or an Investing Fund 

Affiliate and the Fund (or its respective 

Master Fund) or a Fund Affiliate. 

3. The board of directors or trustees of 

an Investing Management Company, 

including a majority of the independent 

directors or trustees, will adopt 

procedures reasonably designed to 

ensure that the Investing Fund Adviser 

and any Investing Fund Sub-Adviser are 

conducting the investment program of 

the Investing Management Company 

without taking into account any 

consideration received by the Investing 

Management Company or an Investing 

Fund Affiliate from a Fund (or its 

respective Master Fund) or a Fund 

Affiliate in connection with any services 

or transactions. 

4. Once an investment by an Investing 

Fund in the Shares of a Fund exceeds 

the limit in section 12(d)(1)(A)(i) of the 

Act, the Board of a Fund (or its 

respective Master Fund), including a 

majority of the independent directors or 

trustees, will determine that any 

consideration paid by the Fund (or its 

respective Master Fund) to the Investing 

Fund or an Investing Fund Affiliate in 

connection with any services or 

transactions: (i) Is fair and reasonable in 

relation to the nature and quality of the 

services and benefits received by the 

Fund (or its respective Master Fund); (ii) 

is within the range of consideration that 

the Fund (or its respective Master Fund) 

would be required to pay to another 

unaffiliated entity in connection with 

the same services or transactions; and 

(iii) does not involve overreaching on 

the part of any person concerned. This 

condition does not apply with respect to 

any services or transactions between a 

Fund (or its respective Master Fund) 

and its investment adviser(s), or any 

person controlling, controlled by or 

under common control with such 

investment adviser(s). 

5. The Investing Fund Adviser, or 

Trustee or Sponsor, as applicable, will 

waive fees otherwise payable to it by the 

Investing Fund in an amount at least 

equal to any compensation (including 

fees received pursuant to any plan 

adopted by a Fund (or its respective 

Master Fund) under rule 12b–1 under 

the Act) received from a Fund (or its 

respective Master Fund) by the 

Investing Fund Adviser, or Trustee or 

Sponsor, or an affiliated person of the 

Investing Fund Adviser, or Trustee or 

Sponsor, other than any advisory fees 

paid to the Investing Fund Adviser, or 

Trustee, or Sponsor, or its affiliated 

person by the Fund (or its respective 

Master Fund), in connection with the 

investment by the Investing Fund in the 

Fund. Any Investing Fund Sub-Adviser 

will waive fees otherwise payable to the 

Investing Fund Sub-Adviser, directly or 

indirectly, by the Investing Management 

Company in an amount at least equal to 

any compensation received from a Fund 

(or its respective Master Fund) by the 

Investing Fund Sub-Adviser, or an 

affiliated person of the Investing Fund 

Sub-Adviser, other than any advisory 

fees paid to the Investing Fund SubAdviser or its affiliated person by the 

Fund (or its respective Master Fund), in 

connection with the investment by the 

Investing Management Company in the 

Fund made at the direction of the 

Investing Fund Sub-Adviser. In the 

event that the Investing Fund SubAdviser waives fees, the benefit of the 

waiver will be passed through to the 

Investing Management Company. 

6. No Investing Fund or Investing 

Fund Affiliate (except to the extent it is 

acting in its capacity as an investment 

adviser to a Fund (or its respective 

Master Fund)) will cause a Fund (or its 

respective Master Fund) to purchase a 

security in an Affiliated Underwriting. 

7. The Board of a Fund (or its 

respective Master Fund), including a 

majority of the independent directors or 

trustees, will adopt procedures 

reasonably designed to monitor any 

purchases of securities by the Fund (or 

its respective Master Fund) in an 

Affiliated Underwriting, once an 

investment by an Investing Fund in the 

securities of the Fund exceeds the limit 

of section 12(d)(1)(A)(i) of the Act, 

including any purchases made directly 

from an Underwriting Affiliate. The 

Board will review these purchases 

periodically, but no less frequently than 

annually, to determine whether the 

purchases were influenced by the 

investment by the Investing Fund in the 

Fund. The Board will consider, among 

other things: (i) Whether the purchases 

were consistent with the investment 

objectives and policies of the Fund (or 

its respective Master Fund); (ii) how the 

performance of securities purchased in 

an Affiliated Underwriting compares to 

the performance of comparable 

securities purchased during a 

comparable period of time in 

underwritings other than Affiliated 

Underwritings or to a benchmark such 

as a comparable market index; and (iii) 

whether the amount of securities 

purchased by the Fund (or its respective 

Master Fund) in Affiliated 

Underwritings and the amount 

purchased directly from an 

Underwriting Affiliate have changed 

significantly from prior years. The 

Board will take any appropriate actions 

based on its review, including, if 

appropriate, the institution of 

procedures designed to assure that 

purchases of securities in Affiliated 

Underwritings are in the best interest of 

shareholders of the Fund. 

8. Each Fund (or its respective Master 

Fund) will maintain and preserve 

permanently in an easily accessible 

place a written copy of the procedures 

described in the preceding condition, 

and any modifications to such 

procedures, and will maintain and 

preserve for a period of not less than six 

years from the end of the fiscal year in 

which any purchase in an Affiliated 

Underwriting occurred, the first two 

years in an easily accessible place, a 

written record of each purchase of 

securities in Affiliated Underwritings 

once an investment by an Investing 

Fund in the securities of the Fund 

exceeds the limit of section 

12(d)(1)(A)(i) of the Act, setting forth 

from whom the securities were 

acquired, the identity of the 

underwriting syndicate’s members, the 

terms of the purchase, and the 

information or materials upon which 

the Board’s determinations were made. 

9. Before investing in a Fund in 

excess of the limits in section 

12(d)(1)(A), an Investing Fund will 

execute a FOF Participation Agreement 

with the Fund stating that their 

respective boards of directors or trustees 

and their investment advisers, or 

Trustee and Sponsor, as applicable, 

understand the terms and conditions of 

the order, and agree to fulfill their 

responsibilities under the order. At the 

time of its investment in Shares of a 

Fund in excess of the limit in section 

12(d)(1)(A)(i), an Investing Fund will 

notify the Fund of the investment. At 

such time, the Investing Fund will also 

transmit to the Fund a list of the names 

of each Investing Fund Affiliate and 

Underwriting Affiliate. The Investing 

Fund will notify the Fund of any 

changes to the list as soon as reasonably 

practicable after a change occurs. The 

Fund and the Investing Fund will 

maintain and preserve a copy of the 

order, the FOF Participation Agreement, 

and the list with any updated 

information for the duration of the 

investment and for a period of not less 

than six years thereafter, the first two 

years in an easily accessible place. 

10. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Investing Management Company, 

including a majority of the independent 

directors or trustees, will find that the 

advisory fees charged under such 

contract are based on services provided 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Notices 5161 

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

2 17 CFR 240.19b–4. 

3See e.g., NYSE MKT Rule 1000 Commentary 

.03(a)(B); NYSE Arca Equities Rule 5.2(j)(3) 

Commentary .01(a)(B); NASDAQ Rule 

5705(a)(3)(A)(ii); and BATS Rule 14.11(b)(3)(A)(ii). 

4 17 CFR 240.19b–4(e). 

5When relying on Rule 19b–4(e), the SRO must 

submit Form 19b–4(e) to the Commission within 

five business days after the SRO begins trading the 

new derivative securities products. See Securities 

Exchange Act Release No. 40761 (December 8, 

1998), 63 FR 70952 (December 22, 1998). 

6See NYSE MKT Rule 1000 Commentary 

.03(a)(B); NYSE Arca Equities Rule 5.2(j)(3) 

Commentary .01(a)(B); NASDAQ Rule 

5705(a)(3)(A)(ii); and BATS Rule 14.11(b)(3)(A)(ii). 

See also Securities Exchange Act Release Nos. 

54739 (November 9, 2006), 71 FR 66993 (SR– 

Amex–2006–78); 55269 (February 9, 2007), 72 FR 

7490 (February 15, 2007) (SR–NASDAQ–2006–050); 

55621 (April 12, 2007), 72 FR 19571 (April 18, 

2007) (SR–NYSEArca–2006–86). 

7See Rule 402(i)(5)(ii)(A). 

8See Rule 402(i)(5)(ii)(B). 

that will be in addition to, rather than 

duplicative of, the services provided 

under the advisory contract(s) of any 

Fund (or its respective Master Fund) in 

which the Investing Management 

Company may invest. These findings 

and their basis will be recorded fully in 

the minute books of the appropriate 

Investing Management Company. 

11. Any sales charges and/or service 

fees charged with respect to shares of an 

Investing Fund will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

12. No Fund (or its respective Master 

Fund) relying on the section 12(d)(1) 

relief will acquire securities of any 

investment company or company 

relying on section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act, other 

than any Wholly-Owned Subsidiary, 

and except to the extent (i) permitted by 

exemptive relief from the Commission 

permitting the Fund (or its respective 

Master Fund) to purchase shares of 

other investment companies for shortterm cash management purposes or (ii) 

the Fund acquires securities of the 

Master Fund pursuant to the MasterFeeder Relief. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–01749 Filed 1–29–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74131; File No. SR–MIAX– 

2015–04] 

Self-Regulatory Organizations; Miami 

International Securities Exchange LLC; 

Notice of Filing of a Proposed Rule 

Change To Amend MIAX Rule 402 

January 26, 2015. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on January 

16, 2015, Miami International Securities 

Exchange LLC (‘‘MIAX’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

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 

The Exchange proposes to amend 

Rule 402 to allow the listing of options 

overlying Exchange-Traded Fund Shares 

(‘‘ETFs’’) that are listed pursuant to 

generic listing standards on equities 

exchanges for series of portfolio 

depositary receipts and index fund 

shares based on international or global 

indexes under which a comprehensive 

surveillance agreement is not required. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.miaxoptions.com/filter/

wotitle/rule_filing, at MIAX’s principal 

office, 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, the 

Exchange 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. The 

Exchange has prepared 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 

The Exchange proposes to amend 

Rule 402 to allow the listing of options 

overlying ETFs that are listed pursuant 

to generic listing standards on equities 

exchanges for series of portfolio 

depositary receipts and index fund 

shares based on international or global 

indexes under which a comprehensive 

surveillance sharing agreement 

(‘‘comprehensive surveillance 

agreement’’ or ‘‘CSSA’’) is not required.3

This proposal will enable the Exchange 

to list and trade options on ETFs 

without a CSSA provided that the ETF 

is listed on an equities exchange 

pursuant to the generic listings 

standards that do not require a CSSA 

pursuant to Rule 19b–4(e) 4 of the 

Exchange Act. Rule 19b–4(e) provides 

that the listing and trading of a new 

derivative securities product by a selfregulatory organization (‘‘SRO’’) shall 

not be deemed a proposed rule change, 

pursuant to paragraph (c)(1) of Rule 

19b–4, if the Commission has approved, 

pursuant to Section 19(b) of the 

Exchange Act, the SRO’s trading rules, 

procedures and listing standards for the 

product class that would include the 

new derivatives securities product, and 

the SRO has a surveillance program for 

the product class.5 In other words, the 

proposal will amend the listing 

standards to allow the Exchange to list 

and trade options on ETFs based on 

international or global indexes to a 

similar degree that they are allowed to 

be listed on several equities exchanges.6

Exchange-Traded Funds 

The Exchange allows for the listing 

and trading of options on ETFs. Rule 

402(i)(5)(ii)(A)–(C) provide the listings 

standards for options on ETFs with nonU.S. component securities, such as ETFs 

based on international or global indexes. 

Rule 402(i)(5)(ii)(A) requires that any 

non-U.S. component securities of an 

index or portfolio of securities on which 

the Exchange-Traded Fund Shares are 

based that are not subject to 

comprehensive surveillance agreements 

do not in the aggregate represent more 

than 50% of the weight of the index or 

portfolio.7 Rule 402(i)(5)(ii)(B) requires 

that component securities of an index or 

portfolio of securities on which the 

Exchange-Traded Fund Shares are based 

for which the primary market is in any 

one country that is not subject to a 

comprehensive surveillance agreement 

do not represent 20% or more of the 

weight of the index.8 Rule 

402(i)(5)(ii)(C) requires that component 

securities of an index or portfolio of 

securities on which the ExchangeTraded Fund Shares are based for which 

the primary market is in any two 

countries that are not subject to 

comprehensive surveillance agreements 


asabaliauskas on DSK5VPTVN1PROD with NOTICES