Federal Register / Vol. 79, No. 245 / Monday, December 22, 2014 / Notices 76411 

1Applicants request that the order apply to each 

existing and future series of the Wilshire Funds and 

to each existing and future registered open-end 

management investment company or series thereof 

that is advised by the Adviser or any entity 

controlling, controlled by or under common control 

with the Adviser and is part of the same ‘‘group of 

investment companies’’ (as defined in section 

12(d)(1)(G)(ii) of the Act), as the Wilshire Funds 

(each, a ‘‘Fund’’ and collectively, ‘‘Funds.’’). All 

entities that currently intend to rely on the 

requested 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. 

2Certain of the Unaffiliated Funds may be 

registered under the Act as either UITs or open-end 

management investment companies and have 

received exemptive relief to permit their shares to 

be listed and traded on a national securities 

exchange at negotiated prices (‘‘ETFs’’). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

31381; File No. 812–14350] 

Wilshire Mutual Funds, Inc., et al.; 

Notice of Application 

December 16, 2014. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 12(d)(1)(J) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) for an exemption from sections 

12(d)(1)(A) and (B) of the Act, under 

sections 6(c) and 17(b) of the Act for an 

exemption from sections 17(a)(1) and (2) 

of the Act, and under section 6(c) of the 

Act for an exemption from rule 12d1– 

2(a) under the Act. 

SUMMARY OF THE APPLICATION: The 

requested order would (a) permit certain 

registered open-end management 

investment companies that operate as 

‘‘funds of funds’’ to acquire shares of 

certain registered open-end management 

investment companies and unit 

investment trusts (‘‘UITs’’) that are 

within and outside the same group of 

investment companies as the acquiring 

investment companies, and (b) permit 

funds of funds relying on rule 12d1–2 

under the Act to invest in certain 

financial instruments. 

APPLICANTS: Wilshire Mutual Funds, 

Inc. (‘‘Wilshire Mutual Funds’’), 

Wilshire Variable Insurance Trust 

(‘‘Wilshire VIT’’, and with Wilshire 

Mutual Funds, the ‘‘Wilshire Funds’’), 

Wilshire Associates Incorporated 

(‘‘Adviser’’), and SEI Investments 

Distribution Co. (the ‘‘Distributor’’). 

DATES: Filing Dates: The application was 

filed on August 19, 2014 and amended 

on November 10, 2014. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the requested relief will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on January 9, 2015 and 

should be accompanied by proof of 

service on the applicants, in the form of 

an affidavit, or, for lawyers, a certificate 

of service. Pursuant to rule 0–5 under 

the Act, hearing requests should state 

the nature of the writer’s interest, any 

facts bearing upon the desirability of a 

hearing on the matter, the reason for the 

request, and the issues contested. 

Persons who wish to be notified of a 

hearing may request notification by 

writing to the Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

Applicants, 1299 Ocean Avenue, Suite 

700, Santa Monica, CA 90401. 

FOR FURTHER INFORMATION CONTACT: 

Kaitlin C. Bottock, Attorney Adviser, at 

(202) 551–8658, or Daniele Marchesani, 

Branch Chief, at (202) 551–6821 

(Division of Investment Management, 

Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

Web site by searching for the file 

number, or for an applicant using the 

Company name box, at http://

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

calling (202) 551–8090. 

Applicants’ Representations 

1. Wilshire Mutual Funds, a Maryland 

corporation, and Wilshire VIT, a 

Delaware statutory trust, are each 

registered under the Act as an open-end 

management investment company. 

Wilshire Mutual Funds and Wilshire 

VIT currently offer shares of 6 series and 

9 series, respectively, each of which 

pursues different investment objectives 

and principal investment strategies.1

2. The Adviser, a California 

corporation, is registered as an 

investment adviser under the 

Investment Advisers Act of 1940, as 

amended (‘‘Advisers Act’’) and serves as 

investment adviser to the Funds. 

3. The Distributor, a Pennsylvania 

corporation, is registered as a brokerdealer under the Securities Exchange 

Act of 1934 (the ‘‘Exchange Act’’). The 

Distributor serves as principal 

underwriter and distributor for the 

shares of the Funds. 

4. Applicants request an order to 

permit (a) a Fund that operates as a 

‘‘fund of funds’’ (each a ‘‘Fund of 

Funds’’) to acquire shares of (i) 

registered open-end management 

investment companies that are not part 

of the same ‘‘group of investment 

companies,’’ within the meaning of 

section 12(d)(1)(G)(ii) of the Act, as the 

Fund of Funds (‘‘Unaffiliated 

Investment Companies’’) and unit 

investment trusts (‘‘UITs’’) that are not 

part of the same ‘‘group of investment 

companies’’ as the Fund of Funds 

(‘‘Unaffiliated Trusts,’’ together with the 

Unaffiliated Investment Companies, 

‘‘Unaffiliated Funds’’) 2 or (ii) registered 

open-end management investment 

companies or UITs that are part of the 

same ‘‘group of investment companies,’’ 

within the meaning of section 

12(d)(1)(G) (ii) of the Act, as the Fund 

of Funds (collectively, ‘‘Affiliated 

Funds,’’ together with the Unaffiliated 

Funds, ‘‘Underlying Funds’’) and (b) 

each Underlying Fund that is a 

registered open-end management 

investment company or series thereof, 

the Distributor or any principal 

underwriter for the Underlying Fund, 

and any broker or dealer registered 

under the Exchange Act (‘‘Broker’’) to 

sell shares of the Underlying Fund to 

the Fund of Funds in amounts in excess 

of limits set forth in section 12(d)(1)(B). 

Applicants also request an order under 

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

exempt applicants from section 17(a) to 

the extent necessary to permit 

Underlying Funds to sell their shares to 

Funds of Funds and redeem their shares 

from Funds of Funds. 

5. Applicants also request an 

exemption under section 6(c) from rule 

12d1–2 under the Act to permit any 

existing or future Fund that relies on 

section 12(d)(1)(G) of the Act (‘‘Same 

Group Fund of Funds’’) and that 

otherwise complies with rule 12d1–2 to 

also invest, to the extent consistent with 

its investment objective, policies, 

strategies, and limitations, in financial 

instruments that may not be securities 

within the meaning of section 2(a)(36) of 

the Act (‘‘Other Investments’’). 

Applicants’ Legal Analysis 

A. Investments in Underlying Funds— 

Section 12(d)(1) 

1. Section 12(d)(1)(A) of the Act, in 

relevant part, 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 


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3A ‘‘Fund of Funds Affiliate’’ is the Adviser, any 

Subadviser (as defined below), promoter, or 

principal underwriter of a Fund of Funds, as well 

as any person controlling, controlled by, or under 

common control with any of those entities. An 

‘‘Unaffiliated Fund Affiliate’’ is an investment 

adviser, sponsor, promoter, or principal 

underwriter of an Unaffiliated Fund, as well as any 

person controlling, controlled by, or under common 

control with any of those entities. 

4An Unaffiliated Investment Company, including 

an ETF, would retain its right to reject any initial 

investment by a Fund of Funds in excess of the 

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

declining to execute the Participation Agreement 

with the Fund of Funds. 

5Any references to NASD Conduct Rule 2830 

include any successor or replacement rule of FINRA 

to NASD Conduct Rule 2830. 

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

prohibits a registered open-end 

investment company, its principal 

underwriter, and any Broker from 

selling the investment company’s shares 

to another investment company if the 

sale will cause the acquiring company 

to own more than 3% of the acquired 

company’s total outstanding voting 

stock, or if the sale will cause more than 

10% of the acquired company’s total 

outstanding voting stock to be owned by 

investment companies generally. 

2. 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. 

Applicants seek an exemption under 

section 12(d)(1)(J) of the Act to permit 

a Fund of Funds to acquire shares of the 

Underlying Funds in excess of the limits 

in section 12(d)(1)(A), and an 

Underlying Fund, any principal 

underwriter for an Underlying Fund, 

and any Broker to sell shares of an 

Underlying Fund to a Fund of Funds in 

excess of the limits in section 

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

3. Applicants state that the terms and 

conditions of the proposed arrangement 

will not give rise to the policy concerns 

underlying sections 12(d)(1)(A) and (B), 

which include concerns about undue 

influence by a fund of funds over 

underlying funds, excessive layering of 

fees, and overly complex fund 

structures. Accordingly, applicants 

believe that the requested exemption is 

consistent with the public interest and 

the protection of investors. 

4. Applicants believe that the 

proposed arrangement will not result in 

the exercise of undue influence by the 

Fund of Funds or a Fund of Funds 

Affiliate over the Unaffiliated Funds.3

To limit the control that the Fund of 

Funds may have over an Unaffiliated 

Fund, applicants propose a condition 

prohibiting the Adviser, any person 

controlling, controlled by, or under 

common control with the Adviser, and 

any investment company or issuer that 

would be an investment company but 

for section 3(c)(1) or 3(c)(7) of the Act 

that is advised or sponsored by the 

Adviser or any person controlling, 

controlled by, or under common control 

with the Adviser (the ‘‘Advisory 

Group’’) from controlling (individually 

or in the aggregate) an Unaffiliated Fund 

within the meaning of section 2(a)(9) of 

the Act. The same prohibition would 

apply to any other investment adviser 

within the meaning of section 

2(a)(20)(B) of the Act to a Fund of Funds 

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

controlled by, or under common control 

with the Subadviser, and any 

investment company or issuer that 

would be an investment company but 

for section 3(c)(1) or 3(c)(7) of the Act 

(or portion of such investment company 

or issuer) advised or sponsored by the 

Subadviser or any person controlling, 

controlled by, or under common control 

with the Subadviser (the ‘‘Subadvisory 

Group’’). Applicants propose other 

conditions to limit the potential for 

undue influence over the Unaffiliated 

Funds, including that no Fund of Funds 

or Fund of Funds Affiliate (except to the 

extent it is acting in its capacity as an 

investment adviser to an Unaffiliated 

Investment Company or sponsor to an 

Unaffiliated Trust) will cause an 

Unaffiliated Fund to purchase a security 

in an offering of securities during the 

existence of any 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, trustee, advisory board 

member, investment adviser, 

Subadviser, or employee of the Fund of 

Funds, or a person of which any such 

officer, director, trustee, advisory board 

member, investment adviser, 

Subadviser, or employee is an affiliated 

person. An Underwriting Affiliate does 

not include any person whose 

relationship to an Unaffiliated Fund is 

covered by section 10(f) of the Act. 

5. To further ensure that an 

Unaffiliated Investment Company 

understands the implications of an 

investment by a Fund of Funds under 

the requested order, prior to a Fund of 

Funds’ investment in the shares of an 

Unaffiliated Investment Company in 

excess of the limit in section 

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

Funds and the Unaffiliated Investment 

Company will execute an agreement 

stating, without limitation, that their 

respective board of directors or trustees 

(for any entity, the ‘‘Board’’) and their 

investment advisers understand the 

terms and conditions of the order and 

agree to fulfill their responsibilities 

under the order (‘‘Participation 

Agreement’’). Applicants note that an 

Unaffiliated Investment Company (other 

than an ETF whose shares are 

purchased by a Fund of Funds in the 

secondary market) will retain its right at 

all times to reject any investment by a 

Fund of Funds.4

6. Applicants state that they do not 

believe that the proposed arrangement 

will involve excessive layering of fees. 

The Board of each Fund of Funds, 

including a majority of the directors 

who are not ‘‘interested persons’’ 

(within the meaning of section 2(a)(19) 

of the Act) (‘‘Independent Directors’’), 

will find that the advisory fees charged 

under investment advisory or 

management contract(s) are based on 

services provided that will be in 

addition to, rather than duplicative of, 

the services provided under such 

advisory contract(s) of any Underlying 

Fund in which the Fund of Funds may 

invest. In addition, the Adviser will 

waive fees otherwise payable to it by a 

Fund of Funds in an amount at least 

equal to any compensation (including 

fees received pursuant to any plan 

adopted by an Unaffiliated Investment 

Company under rule 12b-1 under the 

Act) received from an Unaffiliated Fund 

by the Adviser or an affiliated person of 

the Adviser, other than any advisory 

fees paid to the Adviser or its affiliated 

person by an Unaffiliated Investment 

Company, in connection with the 

investment by the Fund of Funds in the 

Unaffiliated Fund. 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 rule 2830 of the 

Conduct Rules of the NASD (‘‘NASD 

Conduct Rule 2830’’).5

7. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that no Underlying 

Fund 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, except 

in certain circumstances identified in 

condition 11 below. 

B. Section 17(a) 

1. Section 17(a) of the Act generally 

prohibits sales or purchases of securities 

between a registered investment 

company and any affiliated person of 


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6Applicants acknowledge that receipt of any 

compensation by (a) an affiliated person of a Fund 

of Funds, or an affiliated person of such person, for 

the purchase by a Fund of Funds of shares of an 

Underlying Fund or (b) an affiliated person of an 

Underlying Fund, or an affiliated person of such 

person, for the sale by the Underlying Fund of its 

shares to a Fund of Funds may be prohibited by 

section 17(e)(1) of the Act. The Participation 

Agreement also will include this acknowledgement. 

7To the extent purchases and sales of shares of 

an ETF occur in the secondary market (and not 

through principal transactions directly between a 

Fund of Funds and an ETF), relief from section 

17(a) of the Act would not be necessary. The 

requested relief is intended to cover, however, 

transactions directly between ETFs and a Fund of 

Funds. Applicants are not seeking relief from 

section 17(a) of the Act for, and the requested relief 

will not apply to, transactions where an ETF could 

be deemed an affiliated person, or an affiliated 

person of an affiliated person, of a Fund of Funds 

because the investment adviser to the ETF, or an 

entity controlling, controlled by, or under common 

control with the investment adviser to the ETF, is 

an investment adviser to the Fund of Funds. 

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

defines an ‘‘affiliated person’’ of another 

person to include (a) 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; (b) any person 5% or 

more of whose outstanding voting 

securities are directly or indirectly 

owned, controlled, or held with power 

to vote by the other person; and (c) any 

person directly or indirectly controlling, 

controlled by, or under common control 

with the other person. 

2. Applicants state that a Fund of 

Funds and the Affiliated Funds 

managed by the same Adviser might be 

deemed to be under common control of 

the Adviser and therefore affiliated 

persons of one another. Applicants also 

state that the Fund of Funds and the 

Unaffiliated Funds might be deemed to 

be affiliated persons of one another if 

the Fund of Funds acquires 5% or more 

of an Unaffiliated Fund’s outstanding 

voting securities. In light of these and 

other possible affiliations, section 17(a) 

could prevent an Underlying Fund from 

selling shares to and redeeming shares 

from a Fund of Funds. 

3. Section 17(b) of the Act authorizes 

the Commission to grant an order 

permitting a transaction otherwise 

prohibited by section 17(a) if it finds 

that (a) the terms of the proposed 

transaction are fair and reasonable and 

do not involve overreaching on the part 

of any person concerned; (b) the 

proposed transaction is consistent with 

the policies of each registered 

investment company involved; and (c) 

the proposed transaction is consistent 

with the general purposes of the Act. 

Section 6(c) of the Act permits the 

Commission to exempt any persons or 

transactions from any provision of the 

Act if such exemption is necessary or 

appropriate in the public interest and 

consistent with the protection of 

investors and the purposes fairly 

intended by the policy and provisions of 

the Act. 

4. Applicants submit that the 

proposed transactions satisfy the 

standards for relief under sections 17(b) 

and 6(c) of the Act.6 Applicants state 

that the terms of the transactions are 

reasonable and fair and do not involve 

overreaching. Applicants state that the 

terms upon which an Underlying Fund 

will sell its shares to or purchase its 

shares from a Fund of Funds will be 

based on the net asset value of the 

Underlying Fund.7 Applicants state that 

the proposed transactions will be 

consistent with the policies of each 

Fund of Funds and each Underlying 

Fund and with the general purposes of 

the Act. 

C. Other Investments by Same Group 

Fund of Funds 

1. Section 12(d)(1)(G) of the Act 

provides that section 12(d)(1) will not 

apply to securities of an acquired 

company purchased by an acquiring 

company if: (i) The acquiring company 

and acquired company are part of the 

same group of investment companies; 

(ii) the acquiring company holds only 

securities of acquired companies that 

are part of the same group of investment 

companies, government securities, and 

short-term paper; (iii) the aggregate sales 

loads and distribution-related fees of the 

acquiring company and the acquired 

company are not excessive under rules 

adopted pursuant to section 22(b) or 

section 22(c) of the Act by a securities 

association registered under section 15A 

of the Exchange Act or by the 

Commission; and (iv) the acquired 

company has a policy that prohibits it 

from acquiring securities of registered 

open-end management investment 

companies or registered unit investment 

trusts in reliance on section 12(d)(1)(F) 

or (G) of the Act. 

2. Rule 12d1–2 under the Act permits 

a registered open-end investment 

company or a registered unit investment 

trust that relies on section 12(d)(1)(G) of 

the Act to acquire, in addition to 

securities issued by another registered 

investment company in the same group 

of investment companies, government 

securities, and short-term paper: (1) 

securities issued by an investment 

company that is not in the same group 

of investment companies, when the 

acquisition is in reliance on section 

12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) 

securities (other than securities issued 

by an investment company); and (3) 

securities issued by a money market 

fund, when the acquisition is in reliance 

on rule 12d1–1 under the Act. For the 

purposes of rule 12d1–2, ‘‘securities’’ 

means any security as defined in section 

2(a)(36) of the Act. 

3. Applicants state that the proposed 

arrangement would comply with the 

provisions of rule 12d1–2 under the Act, 

but for the fact that a Same Group Fund 

of Funds may invest a portion of its 

assets in Other Investments. Applicants 

request an order under section 6(c) of 

the Act for an exemption from rule 

12d1–2(a) to allow the Same Group 

Fund of Funds to invest in Other 

Investments. Applicants assert that 

permitting Same Group Fund of Funds 

to invest in Other Investments as 

described in the application would not 

raise any of the concerns that the 

requirements of section 12(d)(1) were 

designed to address. 

4. Consistent with its fiduciary 

obligations under the Act, the Board of 

each Same Group Fund of Funds will 

review the advisory fees charged by the 

Same Group Fund of Funds’ investment 

adviser to ensure that they are based on 

services provided that are in addition to, 

rather than duplicative of, services 

provided pursuant to the advisory 

agreement of any investment company 

in which the Same Group Fund of 

Funds may invest. 

Applicants’ Conditions 

Investments by Funds of Funds in 

Underlying Funds 

Applicants agree that the relief to 

permit Funds of Funds to invest in 

Underlying Funds shall be subject to the 

following conditions: 

1. The members of an Advisory Group 

will not control (individually or in the 

aggregate) an Unaffiliated Fund within 

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

The members of a Subadvisory Group 

will not control (individually or in the 

aggregate) an Unaffiliated 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 an 

Unaffiliated Fund, the Advisory Group 

or a Subadvisory Group, each in the 

aggregate, becomes a holder of more 

than 25 percent of the outstanding 

voting securities of the Unaffiliated 

Fund, then the Advisory Group or the 

Subadvisory Group will vote its shares 

of the Unaffiliated Fund in the same 

proportion as the vote of all other 

holders of the Unaffiliated Fund’s 

shares. This condition will not apply to 

a Subadvisory Group with respect to an 

Unaffiliated Fund for which the 

Subadviser or a person controlling, 

controlled by, or under common control 

with the Subadviser acts as the 


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investment adviser within the meaning 

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

case of an Unaffiliated Investment 

Company) or as the sponsor (in the case 

of an Unaffiliated Trust). 

2. No Fund of Funds or Fund of 

Funds Affiliate will cause any existing 

or potential investment by the Fund of 

Funds in shares of an Unaffiliated Fund 

to influence the terms of any services or 

transactions between the Fund of Funds 

or a Fund of Funds Affiliate and the 

Unaffiliated Fund or an Unaffiliated 

Fund Affiliate. 

3. The Board of each Fund of Funds, 

including a majority of the Independent 

Directors, will adopt procedures 

reasonably designed to ensure that its 

Adviser and any Subadviser(s) to the 

Fund of Funds are conducting the 

investment program of the Fund of 

Funds without taking into account any 

consideration received by the Fund of 

Funds or Fund of Funds Affiliate from 

an Unaffiliated Fund or an Unaffiliated 

Fund Affiliate in connection with any 

services or transactions. 

4. Once an investment by a Fund of 

Funds in the securities of an 

Unaffiliated Investment Company 

exceeds the limit of section 12(d)(l)(A)(i) 

of the Act, the Board of the Unaffiliated 

Investment Company, including a 

majority of the Independent Directors, 

will determine that any consideration 

paid by the Unaffiliated Investment 

Company to a Fund of Funds or a Fund 

of Funds Affiliate in connection with 

any services or transactions: (a) is fair 

and reasonable in relation to the nature 

and quality of the services and benefits 

received by the Unaffiliated Investment 

Company; (b) is within the range of 

consideration that the Unaffiliated 

Investment Company would be required 

to pay to another unaffiliated entity in 

connection with the same services or 

transactions; and (c) does not involve 

overreaching on the part of any person 

concerned. This condition does not 

apply with respect to any services or 

transactions between an Unaffiliated 

Investment Company and its investment 

adviser(s) or any person controlling, 

controlled by, or under common control 

with such investment adviser(s). 

5. No Fund of Funds or Fund of 

Funds Affiliate (except to the extent it 

is acting in its capacity as an investment 

adviser to an Unaffiliated Investment 

Company or sponsor to an Unaffiliated 

Trust) will cause an Unaffiliated Fund 

to purchase a security in any Affiliated 

Underwriting. 

6. The Board of an Unaffiliated 

Investment Company, including a 

majority of the Independent Directors, 

will adopt procedures reasonably 

designed to monitor any purchases of 

securities by the Unaffiliated Investment 

Company in an Affiliated Underwriting 

once an investment by a Fund of Funds 

in the securities of the Unaffiliated 

Investment Company exceeds the limit 

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

including any purchases made directly 

from an Underwriting Affiliate. The 

Board of the Unaffiliated Investment 

Company will review these purchases 

periodically, but no less frequently than 

annually, to determine whether the 

purchases were influenced by the 

investment by the Fund of Funds in the 

Unaffiliated Investment Company. The 

Board of the Unaffiliated Investment 

Company will consider, among other 

things, (a) whether the purchases were 

consistent with the investment 

objectives and policies of the 

Unaffiliated Investment Company; (b) 

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 (c) 

whether the amount of securities 

purchased by the Unaffiliated 

Investment Company in Affiliated 

Underwritings and the amount 

purchased directly from an 

Underwriting Affiliate have changed 

significantly from prior years. The 

Board of the Unaffiliated Investment 

Company will take any appropriate 

actions based on its review, including, 

if appropriate, the institution of 

procedures designed to ensure that 

purchases of securities in Affiliated 

Underwritings are in the best interests 

of shareholders. 

7. Each Unaffiliated Investment 

Company shall 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 shall maintain and 

preserve for a period 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 an Affiliated Underwriting 

once an investment by a Fund of Funds 

in the securities of an Unaffiliated 

Investment Company exceeds the limit 

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

setting forth the: (a) party from whom 

the securities were acquired, (b) identity 

of the underwriting syndicate’s 

members, (c) terms of the purchase, and 

(d) information or materials upon which 

the determinations of the Board of the 

Unaffiliated Investment Company were 

made. 

8. Prior to its investment in shares of 

an Unaffiliated Investment Company in 

excess of the limit in section 

12(d)(l)(A)(i) of the Act, the Fund of 

Funds and the Unaffiliated Investment 

Company will execute a Participation 

Agreement stating, without limitation, 

that their Boards and their investment 

advisers 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 an Unaffiliated Investment 

Company in excess of the limit in 

section 12(d)(l)(A)(i), a Fund of Funds 

will notify the Unaffiliated Investment 

Company of the investment. At such 

time, the Fund of Funds will also 

transmit to the Unaffiliated Investment 

Company a list of the names of each 

Fund of Funds Affiliate and 

Underwriting Affiliate. The Fund of 

Funds will notify the Unaffiliated 

Investment Company of any changes to 

the list of the names as soon as 

reasonably practicable after a change 

occurs. The Unaffiliated Investment 

Company and the Fund of Funds will 

maintain and preserve a copy of the 

order, the 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. 

9. Before approving any advisory 

contract under section 15 of the Act, the 

Board of each Fund of Funds, including 

a majority of the Independent Directors, 

shall find that the advisory fees charged 

under such advisory contract are based 

on services provided that are in addition 

to, rather than duplicative of, services 

provided under the advisory contract(s) 

of any Underlying Fund in which the 

Fund of Funds may invest. Such finding 

and the basis upon which the finding 

was made will be recorded fully in the 

minute books of the appropriate Fund of 

Funds. 

10. The Adviser will waive fees 

otherwise payable to it by a Fund of 

Funds in an amount at least equal to any 

compensation (including fees received 

pursuant to any plan adopted by an 

Unaffiliated Investment Company under 

rule 12b-1 under the Act) received from 

an Unaffiliated Fund by the Adviser, or 

an affiliated person of the Adviser, other 

than any advisory fees paid to the 

Adviser or its affiliated person by an 

Unaffiliated Investment Company, in 

connection with the investment by the 

Fund of Funds in the Unaffiliated Fund. 

Any Subadviser will waive fees 

otherwise payable to the Subadviser, 

directly or indirectly, by the Fund of 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 245 / Monday, December 22, 2014 / Notices 76415 

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

2 17 CFR 240.19b–4. 

Funds in an amount at least equal to any 

compensation received by the 

Subadviser, or an affiliated person of the 

Subadviser, from an Unaffiliated Fund, 

other than any advisory fees paid to the 

Subadviser or its affiliated person by an 

Unaffiliated Investment Company, in 

connection with the investment by the 

Fund of Funds in the Unaffiliated Fund 

made at the direction of the Subadviser. 

In the event that the Subadviser waives 

fees, the benefit of the waiver will be 

passed through to the applicable Fund 

of Funds. 

11. No Underlying Fund will acquire 

securities of any other investment 

company or company relying on section 

3(c)(l) or 3(c)(7) of the Act in excess of 

the limits contained in section 

12(d)(1)(A) of the Act, except to the 

extent that such Underlying Fund: (a) 

receives securities of another 

investment company as a dividend or as 

a result of a plan of reorganization of a 

company (other than a plan devised for 

the purpose of evading section 12(d)(l) 

of the Act); or (b) acquires (or is deemed 

to have acquired) securities of another 

investment company pursuant to 

exemptive relief from the Commission 

permitting such Underlying Fund to (i) 

acquire securities of one or more 

investment companies for short-term 

cash management purposes, or (ii) 

engage in interfund borrowing and 

lending transactions. 

12. Any sales charges and/or service 

fees charged with respect to shares of a 

Fund of Funds will not exceed the 

limits applicable to fund of funds set 

forth in NASD Conduct Rule 2830. 

Other Investments by Same Group Fund 

of Funds 

Applicants agree that the relief to 

permit Same Group Fund of Funds to 

invest in Other Investments shall be 

subject to the following condition: 

13. Applicants will comply with all 

provisions of rule 12d1–2 under the Act, 

except for paragraph (a)(2) to the extent 

that it restricts any Same Group Fund of 

Funds from investing in Other 

Investments as described in the 

application. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–29809 Filed 12–19–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73846; File No. SR–MIAX– 

2014–64] 

Self-Regulatory Organizations; Miami 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change by Miami International 

Securities Exchange, LLC To Amend 

Exchange Rules 307 and 309 To 

Extend the SPY Pilot Program 

December 16, 2014. 

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 December 

11, 2014, 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 and II 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 the Substance 

of the Proposed Rule Change 

The Exchange is filing a proposal to 

amend Exchange Rules 307 and 309 to 

extend the pilot program that eliminates 

the position and exercise limits for 

physically-settled options on the SPDR 

S&P 500 ETF Trust (‘‘SPY Pilot 

Program’’). 

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 

Exchange Rule 307, Commentary .01, 

Position Limits, and Exchange Rule 309, 

Commentary .01, Exercise limits, to 

extend the duration of the SPY Pilot 

Program through July 12, 2015. There 

are no substantive changes being 

proposed to the SPY Pilot Program. In 

proposing to extend the SPY Pilot 

Program, the Exchange affirms its 

consideration of several factors that 

support the proposal to establish the 

SPY Pilot Program, which include: (1) 

The liquidity of the option and the 

underlying security; (2) the market 

capitalization of the underlying security 

and the securities that make up the S&P 

500 Index; (3) options reporting 

requirements; and (4) financial 

requirements imposed by MIAX and the 

Commission. 

The current Pilot Report for the SPY 

Pilot Program is not due until on or 

before January 15, 2015. The Exchange 

notes that it is not aware of any 

problems created by the current SPY 

Pilot Program and does not foresee any 

problems with the proposed extension. 

The Exchange will formally submit the 

current Pilot Report for the SPY Pilot 

Program on or before January 15, 2015. 

In addition, the Exchange represents 

that if it chooses to extend or seek 

permanent approval of the SPY Pilot 

Program, that the Exchange will submit 

another Pilot Report at least thirty (30) 

days prior to the expiration of the 

extended SPY Pilot Program time period 

which would cover the period between 

reports. The Pilot Report will compare 

the impact of the pilot program, if any, 

on the volumes of SPY options and the 

volatility in the price of the underlying 

SPY contract, particularly at expiration. 

The Pilot Report also will detail the size 

and different types of strategies 

employed with respect to positions 

established in SPY options; note 

whether any problems, in the 

underlying SPY ETF or otherwise, arose 

as a result of the no-limit approach; and 

include any other information that may 

be useful in evaluating the effectiveness 

of the pilot program. In preparing the 

Pilot Report, the Exchange will utilize 

various data elements such as volume 

and open interest. In addition the 

Exchange would make available to 

Commission staff data elements relating 

to the effectiveness of the SPY Pilot 

Program. 

Prior to the expiration of the SPY 

Pilot Program and based upon the 


tkelley on DSK3SPTVN1PROD with NOTICES