Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 45331 

1 ‘‘Regulated Funds’’ means OSI and any other 

Future Regulated Funds. ‘‘Future Regulated Fund’’ 

means a closed-end management investment 

company (a) that is registered under the Act or has 

elected to be regulated as a BDC and (b) whose 

investment adviser is an Adviser. ‘‘Adviser’’ means 

OCM LP together with any future investment 

adviser that (i) controls, is controlled by or is under 

common control with OCM LP, (ii) is registered as 

an investment adviser under the Investment 

Advisers Act of 1940 (the ‘‘Advisers Act’’), and (iii) 

is not a Regulated Fund or a subsidiary of a 

Regulated Fund. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

32831; File No. 812–14758] 

Oaktree Strategic Income, LLC, et al. 

September 22, 2017. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice. 

Notice of application for an order 

under sections 17(d) and 57(i) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) and rule 17d–1 under the Act to 

permit certain joint transactions 

otherwise prohibited by sections 17(d) 

and 57(a)(4) of the Act and rule 17d–1 

under the Act. Applicants request an 

order to permit a business development 

company to co-invest in portfolio 

companies with affiliated investment 

funds. 

APPLICANTS: Oaktree Strategic Income, 

LLC (‘‘OSI’’), Oaktree Capital 

Management, L.P. (‘‘OCM LP’’), Oaktree 

High Yield Bond Fund, L.P., Oaktree 

High Yield Fund II, L.P., OCM High 

Yield Trust, Oaktree Expanded High 

Yield Fund, L.P., Oaktree Global High 

Yield Bond Fund, L.P., Oaktree 

European High Yield Fund, L.P., 

Oaktree Senior Loan Fund, L.P., Oaktree 

Enhanced Income Fund III, L.P., Oaktree 

Enhanced Income Fund III (Parallel), 

L.P., Oaktree CLO 2014–1 Ltd., Oaktree 

CLO 2014–2 Ltd., Oaktree CLO 2015–1 

Ltd., Oaktree EIF I Series A1, Ltd., 

Oaktree EIF I Series A, Ltd., Oaktree EIF 

II Series A1, Ltd., Oaktree EIF II Series 

A2, Ltd., Oaktree EIF II Series B1, Ltd., 

Oaktree EIF III Series I, Ltd., Oaktree EIF 

III Series II, Ltd., Oaktree Strategic 

Credit Fund A, L.P., Oaktree Strategic 

Credit Fund B, L.P., Ace Strategic Credit 

Holdings (Cayman), L.P., Exelon 

Strategic Credit Holdings, LLC, Oaktree 

FF Investment Fund, L.P., Oaktree-Minn 

Strategic Credit, LLC, Oaktree-NGP 

Strategic Credit, LLC, Oaktree-TBMR 

Strategic Credit Fund, LLC, OaktreeTBMR Strategic Credit Fund C, LLC, 

Oaktree-TBMR Strategic Credit Fund F, 

LLC, Oaktree-TBMR Strategic Credit 

Fund G, LLC, Oaktree-TCDRS Strategic 

Credit, LLC, Oaktree-TSE 16 Strategic 

Credit, LLC, Oaktree Mezzanine Fund 

IV, L.P., Oaktree Middle-Market Direct 

Lending Fund, L.P., Oaktree MiddleMarket Direct Lending Unlevered Fund, 

L.P., Oaktree Middle-Market Direct 

Lending Fund (Parallel), L.P., Oaktree 

Middle-Market Direct Lending 

Unlevered Fund (Parallel), L.P., Oaktree 

European Capital Solutions Fund 

(Parallel), L.P., Oaktree European 

Capital Solutions Fund, L.P., Oaktree 

European Special Situations Fund, L.P., 

Oaktree Desert Sky Investment Fund, 

L.P., Oaktree Emerging Markets Debt 

Total Return Fund, L.P., Oaktree 

Boulder Investment Fund, L.P., OCM 

Convertible Trust, Oaktree Non-U.S. 

Convertible Fund, L.P., Oaktree High 

Income Convertible Fund, L.P., Oaktree 

High Income Convertible Fund II, L.P., 

Oaktree Opportunities Fund X, L.P., 

Oaktree Opportunities Fund X 

(Parallel), L.P., Oaktree Opportunities 

Fund X (Parallel 2), L.P., Oaktree 

Opportunities Fund Xb, L.P., Oaktree 

Opportunities Fund Xb (Parallel), L.P., 

Oaktree Opportunities Fund Xb (Parallel 

2), L.P., Oaktree Huntington Investment 

Fund II, L.P., Oaktree Cascade 

Investment Fund I, L.P., Oaktree 

Cascade Investment Fund II, L.P., 

Oaktree Value Opportunities Fund, L.P., 

Oaktree BAA Emerging Market 

Opportunities Fund, L.P., Oaktree 

Glacier Investment Fund, L.P., Oaktree 

TX Emerging Market Opportunities 

Fund, L.P., Oaktree Emerging Market 

Opportunities Fund, L.P., Oaktree 

Special Situations Fund, L.P., OCM 

Avalon Co-Investment Fund, L.P., 

Oaktree European Principal Fund IV, 

L.P., Oaktree European Principal Fund 

IV, S.C.S., Oaktree Power Opportunities 

Fund IV, L.P., Oaktree Power 

Opportunities Fund IV (Parallel), L.P., 

Oaktree Infrastructure Fund, L.P., 

Oaktree Infrastructure Fund (Parallel), 

L.P., Oaktree Infrastructure Fund, 

S.C.S., Oaktree Energy Infrastructure 

Fund, L.P., Oaktree Energy 

Infrastructure Fund (Parallel), L.P., 

Oaktree Transportation Infrastructure 

Fund, L.P., Oaktree Transportation 

Infrastructure Fund (Parallel), L.P., 

Oaktree Real Estate Opportunities Fund 

VII, L.P., Oaktree Real Estate 

Opportunities Fund VII (Parallel), L.P., 

Oaktree Real Estate Opportunities Fund 

VII (Parallel 2), L.P., Oaktree Real Estate 

Opportunities Fund VII (Parallel 3), 

L.P., Oaktree Real Estate Opportunities 

Fund VII (Parallel 4), L.P., Oaktree 

Juniper Investment Fund, L.P., Oaktree 

Pinnacle Investment Fund, L.P., Oaktree 

Real Estate Debt Fund II, L.P., Oaktree 

Real Estate Debt Fund II (Parallel), L.P., 

Oaktree Real Estate Income Fund, L.P., 

Oaktree Real Estate Debt Securities 

Fund—SF, LLC, Oaktree Emerging 

Markets Absolute Return Fund, L.P., 

Oaktree Emerging Markets Equity Fund, 

L.P., Oaktree Value Equity Fund, L.P., 

Oaktree Japan Absolute Return Fund, 

L.P., Oaktree Private Investment Fund 

IV, L.P., Oaktree-Forrest Multi-Strategy, 

LLC, Oaktree TT Multi-Strategy Fund, 

L.P., and Oaktree Global Credit Fund, 

L.P. 

FILING DATES: The application was filed 

on March 30, 2017, and amended on 

August 28, 2017. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the requested relief will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on October 17, 2017, 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 St. 

NE., Washington, DC 20549–1090. 

Applicants: 333 South Grand Ave., 28th 

Floor, Los Angeles, CA 90071. 

FOR FURTHER INFORMATION CONTACT: Jean 

E. Minarick, Senior Counsel, at (202) 

551–6811, or David J. Marcinkus, 

Branch Chief, at (202) 551–6821 (Chief 

Counsel’s Office, Division of Investment 

Management). 

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. 

Introduction 

1. The Applicants request an order of 

the Commission under Sections 17(d) 

and 57(i) and Rule 17d–1 thereunder 

(the ‘‘Order’’) to permit, subject to the 

terms and conditions set forth in the 

application (the ‘‘Conditions’’), a 

Regulated Fund 1 and one or more other 

Regulated Funds and/or one or more 

45332 Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 

2 ‘‘Affiliated Fund’’ means any Existing Affiliated 

Fund (identified in Appendix A to the application) 

or any entity (a) whose investment adviser is an 

Adviser, (b) that would be an investment company 

but for Section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of the 

Act and (c) that intends to participate in the 

program of co-investments described in the 

application. 

3All existing entities that currently intend to rely 

on the Order have been named as Applicants and 

any existing or future entities that may rely on the 

Order in the future will comply with its terms and 

Conditions set forth in the application. 

4Section 2(a)(48) defines a BDC to be any closedend investment company that operates for the 

purpose of making investments in securities 

described in Section 55(a)(1) through 55(a)(3) and 

makes available significant managerial assistance 

with respect to the issuers of such securities. 

5 ‘‘Board’’ means the board of directors (or the 

equivalent) of a Regulated Fund. 

6 ‘‘Independent Director’’ means a member of the 

Board of any relevant entity who is not an 

‘‘interested person’’ as defined in Section 2(a)(19) 

of the Act. No Independent Director of a Regulated 

Fund will have a financial interest in any CoInvestment Transaction, other than indirectly 

through share ownership in one of the Regulated 

Funds. 

7 ‘‘Wholly-Owned Investment Sub’’ means an 

entity (i) that is wholly-owned by a Regulated Fund 

(with such Regulated Fund at all times holding, 

beneficially and of record, 100% of the voting and 

economic interests); (ii) whose sole business 

purpose is to hold one or more investments on 

behalf of such Regulated Fund (and, in the case of 

a SBIC Subsidiary (defined below), maintain a 

license under the SBA Act (defined below) and 

issue debentures guaranteed by the SBA (defined 

below)); (iii) with respect to which such Regulated 

Fund’s Board has the sole authority to make all 

determinations with respect to the entity’s 

participation under the Conditions; and (iv) that 

would be an investment company but for Section 

3(c)(1) or 3(c)(7) of the Act. ‘‘SBIC Subsidiary’’ 

means a Wholly- Owned Investment Sub that is 

licensed by the Small Business Administration (the 

‘‘SBA’’) to operate under the Small Business 

Investment Act of 1958, as amended, (the ‘‘SBA 

Act’’) as a small business investment company. 

8 ‘‘Objectives and Strategies’’ means with respect 

to any Regulated Fund, its investment objectives 

and strategies, as described in its most current 

registration statement on Form N–2, other current 

filings with the Commission under the Securities 

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

Securities Exchange Act of 1934, as amended, and 

its most current report to stockholders. 

Affiliated Funds 2 to enter into CoInvestment Transactions with each 

other. ‘‘Co-Investment Transaction’’ 

means any transaction in which one or 

more Regulated Funds (or its WhollyOwned Investment Sub) participated 

together with one or more Affiliated 

Funds and/or one or more other 

Regulated Funds in reliance on the 

Order. ‘‘Potential Co-Investment 

Transaction’’ means any investment 

opportunity in which a Regulated Fund 

(or its Wholly-Owned Investment Sub) 

could not participate together with one 

or more Affiliated Funds and/or one or 

more other Regulated Funds without 

obtaining and relying on the Order.3

Applicants 

2. OSI is a Delaware limited liability 

company and a closed-end management 

investment company that will elect to 

be regulated as a business development 

company (‘‘BDC’’) under the Act.4 Upon 

OSI’s election to be regulated as a BDC, 

OSI’s Board 5 will be comprised of a 

majority of members who are 

Independent Directors.6

3. OCM LP, a Delaware limited 

partnership that is registered under the 

Advisers Act, serves as the investment 

adviser to OSI. 

4. The Existing Affiliated Funds are 

the investment funds identified in 

Appendix A to the application. 

Applicants represent that each Existing 

Affiliated Fund is a separate and 

distinct legal entity and each would be 

an investment company but for Section 

3(c)(1), 3(c)(5)(C) or 3(c)(7) of the Act. 

OCM LP is the Adviser to the Existing 

Affiliated Funds. 

5. Each of the Applicants may be 

deemed to be controlled by Oaktree 

Capital Group, LLC (‘‘OCG’’), a publicly 

traded company. OCG owns controlling 

interests in the Adviser and, thus, may 

be deemed to control the Regulated 

Funds and the Affiliated Funds. 

Applicants state that OCG is a holding 

company and does not currently offer 

investment advisory services to any 

person and is not expected to do so in 

the future. Applicants state that as a 

result, OCG has not been included as an 

Applicant. 

6. Applicants state that a Regulated 

Fund may, from time to time, form one 

or more Wholly-Owned Investment 

Subs.7 Such a subsidiary may be 

prohibited from investing in a CoInvestment Transaction with a 

Regulated Fund (other than its parent) 

or any Affiliated Fund because it would 

be a company controlled by its parent 

Regulated Entity for purposes of Section 

57(a)(4) and Rule 17d–1. Applicants 

request that each Wholly-Owned 

Investment Sub be permitted to 

participate in Co-Investment 

Transactions in lieu of the Regulated 

Entity that owns it and that the WhollyOwned Investment Sub’s participation 

in any such transaction be treated, for 

purposes of the Order, as though the 

parent Regulated Fund were 

participating directly. Applicants 

represent that this treatment is justified 

because a Wholly-Owned Investment 

Sub would have no purpose other than 

serving as a holding vehicle for the 

Regulated Fund’s investments and, 

therefore, no conflicts of interest could 

arise between the parent Regulated 

Fund and the Wholly-Owned 

Investment Sub. The Board of the parent 

Regulated Fund would make all relevant 

determinations under the Conditions 

with regard to a Wholly-Owned 

Investment Sub’s participation in a CoInvestment Transaction, and the Board 

would be informed of, and take into 

consideration, any proposed use of a 

Wholly-Owned Investment Sub in the 

Regulated Fund’s place. If the parent 

Regulated Fund proposes to participate 

in the same Co-Investment Transaction 

with any of its Wholly-Owned 

Investment Subs, the Board of the 

parent Regulated Fund will also be 

informed of, and take into 

consideration, the relative participation 

of the Regulated Fund and the WhollyOwned Investment Sub. 

Applicants’ Representations 

A. Allocation Process 

7. Applicants state that the Adviser is 

presented with thousands of investment 

opportunities each year on behalf of its 

clients and after OSI elects to be 

regulated as a BDC, the Adviser will 

determine how to allocate those 

opportunities in a manner that, over 

time, is fair and equitable to all of its 

clients. Such investment opportunities 

may be Potential Co-Investment 

Transactions. 

8. Applicants represent that the 

Adviser has established processes for 

allocating initial investment 

opportunities, opportunities for 

subsequent investments in an issuer and 

dispositions of securities holdings 

reasonably designed to treat all clients 

fairly and equitably. Further, Applicants 

represent that these processes will be 

extended and modified in a manner 

reasonably designed to ensure that the 

additional transactions permitted under 

the Order will both (i) be fair and 

equitable to the Regulated Funds and 

the Affiliated Funds and (ii) comply 

with the Conditions. 

9. Specifically, applicants state that 

the Adviser is organized and managed 

such that the portfolio managers and 

analysts (‘‘Investment Teams’’), 

responsible for evaluating investment 

opportunities and making investment 

decisions on behalf of clients are 

promptly notified of the opportunities. 

If the requested Order is granted, the 

Advisers will establish, maintain and 

implement policies and procedures 

reasonably designed to ensure that, 

when such opportunities arise, the 

Advisers to the relevant Regulated 

Funds are promptly notified and receive 

the same information about the 

opportunity as any other Advisers 

considering the opportunity for their 

clients. In particular, consistent with 

Condition 1, if a Potential CoInvestment Transaction falls within the 

then-current Objectives and Strategies 8

Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 45333 

9 ‘‘Board-Established Criteria’’ means criteria that 

the Board of a Regulated Fund may establish from 

time to time to describe the characteristics of 

Potential Co-Investment Transactions regarding 

which the Adviser to the Regulated Fund should be 

notified under Condition 1. The Board-Established 

Criteria will be consistent with the Regulated 

Fund’s Objectives and Strategies. If no BoardEstablished Criteria are in effect, then the Regulated 

Fund’s Adviser will be notified of all Potential CoInvestment Transactions that fall within the 

Regulated Fund’s then-current Objectives and 

Strategies. Board-Established Criteria will be 

objective and testable, meaning that they will be 

based on observable information, such as industry/ 

sector of the issuer, minimum EBITDA of the issuer, 

asset class of the investment opportunity or 

required commitment size, and not on 

characteristics that involve a discretionary 

assessment. The Adviser to the Regulated Fund may 

from time to time recommend criteria for the 

Board’s consideration, but Board-Established 

Criteria will only become effective if approved by 

a majority of the Independent Directors. The 

Independent Directors of a Regulated Fund may at 

any time rescind, suspend or qualify its approval 

of any Board-Established Criteria, though 

Applicants anticipate that, under normal 

circumstances, the Board would not modify these 

criteria more often than quarterly. 

10The reason for any such adjustment to a 

proposed order amount will be documented in 

writing and preserved in the records of the 

Advisers. 

11 ‘‘Required Majority’’ means a required 

majority, as defined in Section 57(o) of the Act. In 

the case of a Regulated Fund that is a registered 

closed-end fund, the Board members that make up 

the Required Majority will be determined as if the 

Regulated Fund were a BDC subject to Section 

57(o). 

12The Advisers will maintain records of all 

proposed order amounts, Internal Orders and 

External Submissions in conjunction with Potential 

Co-Investment Transactions. Each applicable 

Adviser will provide the Eligible Directors with 

information concerning the Affiliated Funds’ and 

Regulated Funds’ order sizes to assist the Eligible 

Directors with their review of the applicable 

Regulated Fund’s investments for compliance with 

the Conditions. ‘‘Eligible Directors’’ means, with 

respect to a Regulated Fund and a Potential CoInvestment Transaction, the members of the 

Regulated Fund’s Board eligible to vote on that 

Potential Co-Investment Transaction under Section 

57(o) of the Act. 

13However, if the size of the opportunity is 

decreased such that the aggregate of the original 

Internal Orders would exceed the amount of the 

remaining investment opportunity, then upon 

submitting any revised order amount to the Board 

of a Regulated Fund for approval, the Adviser to the 

Regulated Fund will also notify the Board promptly 

of the amount that the Regulated Fund would 

receive if the remaining investment opportunity 

were allocated pro rata on the basis of the size of 

the original Internal Orders. The Board of the 

Regulated Fund will then either approve or 

disapprove of the investment opportunity in 

accordance with condition 2, 6, 7, 8 or 9, as 

applicable. 

14 ‘‘Follow-On Investment’’ means an additional 

investment in the same issuer, including, but not 

limited to, through the exercise of warrants, 

conversion privileges or other rights to purchase 

securities of the issuer. 

15 ‘‘Pre-Boarding Investments’’ are investments in 

an issuer held by a Regulated Fund as well as one 

or more Affiliated Funds and/or one or more other 

Regulated Funds that: (i) Were acquired prior to 

participating in any Co-Investment Transaction; (ii) 

were acquired in transactions in which the only 

term negotiated by or on behalf of such funds was 

price; and (iii) were acquired either: (A) in reliance 

on one of the JT No-Action Letters (defined below); 

or (B) in transactions occurring at least 90 days 

apart and without coordination between the 

Regulated Fund and any Affiliated Fund or other 

Regulated Fund. 

16A ‘‘Pro Rata Follow-On Investment’’ is a 

Follow-On Investment (i) in which the participation 

of each Affiliated Fund and each Regulated Fund 

Continued 

and any Board-Established Criteria 9 of a 

Regulated Fund, the policies and 

procedures will require that the relevant 

Investment Team responsible for that 

Regulated Fund receive sufficient 

information to allow the Regulated 

Fund’s Adviser to make its independent 

determination and recommendations 

under the Conditions. 

10. The Adviser to each applicable 

Regulated Fund will then make an 

independent determination of the 

appropriateness of the investment for 

the Regulated Fund in light of the 

Regulated Fund’s then-current 

circumstances. If the Adviser to a 

Regulated Fund deems the Regulated 

Fund’s participation in such Potential 

Co-Investment Transaction to be 

appropriate, then it will formulate a 

recommendation regarding the proposed 

order amount for the Regulated Fund. 

11. Applicants state that, for each 

Regulated Fund and Affiliated Fund 

whose Adviser recommends 

participating in a Potential CoInvestment Transaction, the Adviser 

will submit a proposed order amount to 

an internal allocation committee which 

the Adviser will establish to handle the 

allocation of investment opportunities 

in Potential Co-Investment Transactions 

(the ‘‘Co-Investment Transaction 

Allocation Committee’’). Applicants 

state further that, at this stage, each 

proposed order amount may be 

reviewed and adjusted, in accordance 

with the Advisers’ written allocation 

policies and procedures, by the CoInvestment Transaction Allocation 

Committee.10 The order of a Regulated 

Fund or Affiliated Fund resulting from 

this process is referred to as its ‘‘Internal 

Order.’’ The Internal Order will be 

submitted for approval by the Required 

Majority of any participating Regulated 

Funds in accordance with the 

Conditions.11

12. If the aggregate Internal Orders for 

a Potential Co-Investment Transaction 

do not exceed the size of the investment 

opportunity immediately prior to the 

submission of the orders to the 

underwriter, broker, dealer or issuer, as 

applicable (the ‘‘External Submission’’), 

then each Internal Order will be 

fulfilled as placed. If, on the other hand, 

the aggregate Internal Orders for a 

Potential Co-Investment Transaction 

exceed the size of the investment 

opportunity immediately prior to the 

External Submission, then the allocation 

of the opportunity will be made pro rata 

on the basis of the size of the Internal 

Orders.12 If, subsequent to such External 

Submission, the size of the opportunity 

is increased or decreased, or if the terms 

of such opportunity, or the facts and 

circumstances applicable to the 

Regulated Funds’ or the Affiliated 

Funds’ consideration of the opportunity, 

change, the participants will be 

permitted to submit revised Internal 

Orders in accordance with written 

allocation policies and procedures that 

the Advisers will establish, implement 

and maintain.13

B. Follow-On Investments 

13. Applicants state that from time to 

time the Regulated Funds and Affiliated 

Funds may have opportunities to make 

Follow-On Investments 14 in an issuer in 

which a Regulated Fund and one or 

more other Regulated Funds and/or 

Affiliated Funds previously have 

invested. 

14. Applicants propose that FollowOn Investments would be divided into 

two categories depending on whether 

the prior investment was a CoInvestment Transaction or a PreBoarding Investment.15 If the Regulated 

Funds and Affiliated Funds had 

previously participated in a CoInvestment Transaction with respect to 

the issuer, then the terms and approval 

of the Follow-On Investment would be 

subject to the Standard Review FollowOns described in Condition 8. If the 

Regulated Funds and Affiliated Funds 

have not previously participated in a 

Co-Investment Transaction with respect 

to the issuer but hold a Pre-Boarding 

Investment, then the terms and approval 

of the Follow-On Investment would be 

subject to the Enhanced-Review FollowOns described in Condition 9. All 

Enhanced Review Follow-Ons require 

the approval of the Required Majority. 

For a given issuer, the participating 

Regulated Funds and Affiliated Funds 

would need to comply with the 

requirements of Enhanced-Review 

Follow-Ons only for the first CoInvestment Transaction. Subsequent CoInvestment Transactions with respect to 

the issuer would be governed by the 

requirements of Standard Review 

Follow-Ons. 

15. A Regulated Fund would be 

permitted to invest in Standard Review 

Follow-Ons either with the approval of 

the Required Majority under Condition 

8(c) or without Board approval under 

Condition 8(b) if it is (i) a Pro Rata 

Follow-On Investment 16 or (ii) a NonVerDate Sep<11>2014 18:44 Sep 27, 2017 Jkt 241001 PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 E:\FR\FM\28SEN1.SGM 28SEN1
45334 Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 

is proportionate to its outstanding investments in 

the issuer or security, as appropriate, immediately 

preceding the Follow-On Investment, and (ii) in the 

case of a Regulated Fund, a majority of the Board 

has approved the Regulated Fund’s participation in 

the pro rata Follow-On Investments as being in the 

best interests of the Regulated Fund. The Regulated 

Fund’s Board may refuse to approve, or at any time 

rescind, suspend or qualify, its approval of Pro Rata 

Follow-On Investments, in which case all 

subsequent Follow-On Investments will be 

submitted to the Regulated Fund’s Eligible Directors 

in accordance with Condition 8(c). 

17A ‘‘Non-Negotiated Follow-On Investment’’ is a 

Follow-On Investment in which a Regulated Fund 

participates together with one or more Affiliated 

Funds and/or one or more other Regulated Funds 

(i) in which the only term negotiated by or on behalf 

of the funds is price and (ii) with respect to which, 

if the transaction were considered on its own, the 

funds would be entitled to rely on one of the JT NoAction Letters. ‘‘JT No-Action Letters’’ means SMC 

Capital, Inc., SEC No-Action Letter (pub. avail. 

Sept. 5, 1995) and Massachusetts Mutual Life 

Insurance Company, SEC No-Action Letter (pub. 

avail. June 7, 2000). 

18 ‘‘Disposition’’ means the sale, exchange or 

other disposition of an interest in a security of an 

issuer. 

19However, with respect to an issuer, if a 

Regulated Fund’s first Co-Investment Transaction is 

an Enhanced Review Disposition, and the Regulated 

Fund does not dispose of its entire position in the 

Enhanced Review Disposition, then before such 

Regulated Fund may complete its first Standard 

Review Follow-On in such issuer, the Eligible 

Directors must review the proposed Follow-On 

Investment not only on a stand-alone basis but also 

in relation to the total economic exposure in such 

issuer (i.e., in combination with the portion of the 

Pre-Boarding Investment not disposed of in the 

Enhanced Review Disposition), and the other terms 

of the investments. This additional review would be 

required because such findings would not have 

been required in connection with the prior 

Enhanced Review Disposition, but they would have 

been required had the first Co-Investment 

Transaction been an Enhanced Review Follow-On. 

20A ‘‘Pro Rata Disposition’’ is a Disposition (i) in 

which the participation of each Affiliated Fund and 

each Regulated Fund is proportionate to its 

outstanding investment in the security subject to 

Disposition immediately preceding the Disposition; 

and (ii) in the case of a Regulated Fund, a majority 

of the Board has approved the Regulated Fund’s 

participation in pro rata Dispositions as being in the 

best interests of the Regulated Fund. The Regulated 

Fund’s Board may refuse to approve, or at any time 

rescind, suspend or qualify, its approval of Pro Rata 

Dispositions, in which case all subsequent 

Dispositions will be submitted to the Regulated 

Fund’s Eligible Directors. 

21 ‘‘Tradable Security’’ means a security that 

meets the following criteria at the time of 

Disposition: (i) It trades on a national securities 

exchange or designated offshore securities market 

as defined in rule 902(b) under the Securities Act; 

(ii) it is not subject to restrictive agreements with 

the issuer or other security holders; and (iii) it 

trades with sufficient volume and liquidity 

(findings as to which are documented by the 

Advisers to any Regulated Funds holding 

investments in the issuer and retained for the life 

of the Regulated Fund) to allow each Regulated 

Fund to dispose of its entire position remaining 

after the proposed Disposition within a short period 

of time not exceeding 30 days at approximately the 

value (as defined by section 2(a)(41) of the Act) at 

which the Regulated Fund has valued the 

investment. 

22Applicants state this may occur for two 

reasons. First, when the Affiliated Fund or 

Regulated Fund is not yet fully funded because, 

when the Affiliated Fund or Regulated Fund desires 

to make an investment, it must call capital from its 

investors to obtain the financing to make the 

investment, and in these instances, the notice 

requirement to call capital could be as much as ten 

business days. Second, where, for tax or regulatory 

reasons, an Affiliated Fund or Regulated Fund does 

not purchase new issuances immediately upon 

issuance but only after a short seasoning period of 

up to ten business days. 

Negotiated Follow-On Investment.17

Applicants believe that these Pro Rata 

and Non-Negotiated Follow-On 

Investments do not present a significant 

opportunity for overreaching on the part 

of any Adviser and thus do not warrant 

the time or the attention of the Board. 

Pro Rata Follow-On Investments and 

Non-Negotiated Follow-On Investments 

remain subject to the Board’s periodic 

review in accordance with Condition 

10. 

C. Dispositions 

16. Applicants propose that 

Dispositions 18 would be divided into 

two categories. If the Regulated Funds 

and Affiliated Funds holding 

investments in the issuer had previously 

participated in a Co-Investment 

Transaction with respect to the issuer, 

then the terms and approval of the 

Disposition would be subject to the 

Standard Review Dispositions described 

in Condition 6. If the Regulated Funds 

and Affiliated Funds have not 

previously participated in a CoInvestment Transaction with respect to 

the issuer but hold a Pre-Boarding 

Investment, then the terms and approval 

of the Disposition would be subject to 

the Enhanced Review Dispositions 

described in Condition 7. Subsequent 

Dispositions with respect to the same 

issuer would be governed by Condition 

6 under the Standard Review 

Dispositions.19

17. A Regulated Fund may participate 

in a Standard Review Disposition either 

with the approval of the Required 

Majority under Condition 6(d) or 

without Board approval under 

Condition 6(c) if (i) the Disposition is a 

Pro Rata Disposition 20 or (ii) the 

securities are Tradable Securities 21 and 

the Disposition meets the other 

requirements of Condition 6(c)(ii). Pro 

Rata Dispositions and Dispositions of a 

Tradable Security remain subject to the 

Board’s periodic review in accordance 

with Condition 10. 

D. Delayed Settlement 

18. Applicants represent that under 

the terms and Conditions of the 

Application, all Regulated Funds and 

Affiliated Funds participating in a CoInvestment Transaction will invest at 

the same time, for the same price and 

with the same terms, conditions, class, 

registration rights and any other rights, 

so that none of them receives terms 

more favorable than any other. 

However, the settlement date for an 

Affiliated Fund in a Co-Investment 

Transaction may occur up to ten 

business days after the settlement date 

for the Regulated Fund, and vice 

versa.22 Nevertheless, in all cases, (i) the 

date on which the commitment of the 

Affiliated Funds and Regulated Funds is 

made will be the same even where the 

settlement date is not and (ii) the 

earliest settlement date and the latest 

settlement date of any Affiliated Fund 

or Regulated Fund participating in the 

transaction will occur within ten 

business days of each other. 

E. Holders 

19. Under Condition 15, if an Adviser, 

its principals, or any person controlling, 

controlled by, or under common control 

with the Adviser or its principals, and 

the Affiliated Funds (collectively, the 

‘‘Holders’’) own in the aggregate more 

than 25 percent of the outstanding 

voting shares of a Regulated Fund (the 

‘‘Shares’’), then the Holders will vote 

such Shares as directed by an 

independent third party when voting on 

matters specified in the Condition. 

Applicants believe that this Condition 

will ensure that the Independent 

Directors will act independently in 

evaluating Co-Investment Transactions, 

because the ability of the Adviser or its 

principals to influence the Independent 

Directors by a suggestion, explicit or 

implied, that the Independent Directors 

can be removed will be limited 

significantly. The Independent Directors 

shall evaluate and approve any 

independent party, taking into account 

its qualifications, reputation for 

independence, cost to the shareholders, 

and other factors that they deem 

relevant. 

Applicants’ Legal Analysis 

1. Section 17(d) of the Act and rule 

17d–1 under the Act prohibit 

participation by a registered investment 

company and an affiliated person in any 

‘‘joint enterprise or other joint 

arrangement or profit-sharing plan,’’ as 

defined in the rule, without prior 

approval by the Commission by order 

upon application. Section 17(d) of the 

Act and rule 17d–1 under the Act are 

applicable to Regulated Funds that are 

registered closed-end investment 

companies. 

2. Similarly, with regard to BDCs, 

section 57(a)(4) of the Act generally 

prohibits certain persons specified in 

section 57(b) from participating in joint 

transactions with the BDC or a company 

Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 45335 

controlled by the BDC in contravention 

of rules as prescribed by the 

Commission. Section 57(i) of the Act 

provides that, until the Commission 

prescribes rules under section 57(a)(4), 

the Commission’s rules under section 

17(d) of the Act applicable to registered 

closed-end investment companies will 

be deemed to apply to transactions 

subject to section 57(a)(4). Because the 

Commission has not adopted any rules 

under section 57(a)(4), rule 17d–1 also 

applies to joint transactions with 

Regulated Funds that are BDCs. 

3. Co-Investment Transactions are 

prohibited by either or both of Rule 

17d–1 and Section 57(a)(4) without a 

prior exemptive order of the 

Commission to the extent that the 

Affiliated Funds and the Regulated 

Funds participating in such transactions 

fall within the category of persons 

described by Rule 17d–1 and/or Section 

57(b), as applicable, vis-a`-vis each 

participating Regulated Fund. Each of 

the participating Regulated Funds and 

Affiliated Funds may be deemed to be 

affiliated persons vis-a`-vis a Regulated 

Fund within the meaning of section 

2(a)(3) by reason of common control 

because (i) controlled affiliates of OCG 

manage each of the Affiliated Funds and 

may be deemed to control any Future 

Regulated Fund, (ii) OCG controls OCM 

LP, which manages OSI. Thus, each of 

the Affiliated Funds could be deemed to 

be a person related to OSI in a manner 

described by Section 57(b) and related 

to other Future Regulated Funds in a 

manner described by Rule 17d–1; and 

therefore the prohibitions of Rule 17d– 

1 and Section 57(a)(4) would apply 

respectively to prohibit the Affiliated 

Funds from participating in CoInvestment Transactions with the 

Regulated Funds. 

4. In passing upon applications under 

rule 17d–1, the Commission considers 

whether the company’s participation in 

the joint transaction is consistent with 

the provisions, policies, and purposes of 

the Act and the extent to which such 

participation is on a basis different from 

or less advantageous than that of other 

participants. 

5. Applicants state that in the absence 

of the requested relief, in many 

circumstances the Regulated Funds 

would be limited in their ability to 

participate in attractive and appropriate 

investment opportunities. Applicants 

state that, as required by Rule 17d–1(b), 

the Conditions ensure that the terms on 

which Co-Investment Transactions may 

be made will be consistent with the 

participation of the Regulated Funds 

being on a basis that it is neither 

different from nor less advantageous 

than other participants, thus protecting 

the equity holders of any participant 

from being disadvantaged. Applicants 

further state that the Conditions ensure 

that all Co-Investment Transactions are 

reasonable and fair to the Regulated 

Funds and their shareholders and do 

not involve overreaching by any person 

concerned, including the Advisers. 

Applicants state that the Regulated 

Funds’ participation in the CoInvestment Transactions in accordance 

with the Conditions will be consistent 

with the provisions, policies, and 

purposes of the Act and would be done 

in a manner that is not different from, 

or less advantageous than, that of other 

participants. 

Applicants’ Conditions 

Applicants agree that the Order will 

be subject to the following Conditions: 

1. Identification and Referral of 

Potential Co-Investment Transactions. 

(a) The Advisers will establish, 

maintain and implement policies and 

procedures reasonably designed to 

ensure that each Adviser is promptly 

notified of all Potential Co-Investment 

Transactions that fall within the thencurrent Objectives and Strategies and 

Board-Established Criteria of any 

Regulated Fund the Adviser manages. 

(b) When an Adviser to a Regulated 

Fund is notified of a Potential CoInvestment Transaction under 

Condition 1(a), the Adviser will make 

an independent determination of the 

appropriateness of the investment for 

the Regulated Fund in light of the 

Regulated Fund’s then-current 

circumstances. 

2. Board Approvals of Co-Investment 

Transactions. 

(a) If the Adviser deems a Regulated 

Fund’s participation in any Potential 

Co-Investment Transaction to be 

appropriate for the Regulated Fund, it 

will then determine an appropriate level 

of investment for the Regulated Fund. 

(b) If the aggregate amount 

recommended by the Advisers to be 

invested in the Potential Co-Investment 

Transaction by the participating 

Regulated Funds and any participating 

Affiliated Funds, collectively, exceeds 

the amount of the investment 

opportunity, the investment opportunity 

will be allocated among them pro rata 

based on the size of the Internal Orders, 

as described in section III.A.1.b. of the 

application. Each Adviser to a 

participating Regulated Fund will 

promptly notify and provide the Eligible 

Directors with information concerning 

the Affiliated Funds’ and Regulated 

Funds’ order sizes to assist the Eligible 

Directors with their review of the 

applicable Regulated Fund’s 

investments for compliance with these 

Conditions. 

(c) After making the determinations 

required in Condition 1(b) above, each 

Adviser to a participating Regulated 

Fund will distribute written information 

concerning the Potential Co-Investment 

Transaction (including the amount 

proposed to be invested by each 

participating Regulated Fund and each 

participating Affiliated Fund) to the 

Eligible Directors of its participating 

Regulated Fund(s) for their 

consideration. A Regulated Fund will 

enter into a Co-Investment Transaction 

with one or more other Regulated Funds 

or Affiliated Funds only if, prior to the 

Regulated Fund’s participation in the 

Potential Co-Investment Transaction, a 

Required Majority concludes that: 

(i) The terms of the transaction, 

including the consideration to be paid, 

are reasonable and fair to the Regulated 

Fund and its equity holders and do not 

involve overreaching in respect of the 

Regulated Fund or its equity holders on 

the part of any person concerned; 

(ii) the transaction is consistent with: 

(A) The interests of the Regulated 

Fund’s equity holders; and 

(B) the Regulated Fund’s then-current 

Objectives and Strategies; 

(iii) the investment by any other 

Regulated Fund(s) or Affiliated Fund(s) 

would not disadvantage the Regulated 

Fund, and participation by the 

Regulated Fund would not be on a basis 

different from, or less advantageous 

than, that of any other Regulated 

Fund(s) or Affiliated Fund(s) 

participating in the transaction; 

provided that the Required Majority 

shall not be prohibited from reaching 

the conclusions required by this 

Condition 2(c)(iii) if: 

(A) The settlement date for another 

Regulated Fund or an Affiliated Fund in 

a Co-Investment Transaction is later 

than the settlement date for the 

Regulated Fund by no more than ten 

business days or earlier than the 

settlement date for the Regulated Fund 

by no more than ten business days, in 

either case, so long as: (x) The date on 

which the commitment of the Affiliated 

Funds and Regulated Funds is made is 

the same; and (y) the earliest settlement 

date and the latest settlement date of 

any Affiliated Fund or Regulated Fund 

participating in the transaction will 

occur within ten business days of each 

other; or 

(B) any other Regulated Fund or 

Affiliated Fund, but not the Regulated 

Fund itself, gains the right to nominate 

a director for election to a portfolio 

company’s board of directors, the right 

to have a board observer or any similar 

right to participate in the governance or 

45336 Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 

23For example, procuring the Regulated Fund’s 

investment in a Potential Co-Investment 

Transaction to permit an affiliate to complete or 

obtain better terms in a separate transaction would 

constitute an indirect financial benefit. 

24This exception applies only to Follow-On 

Investments by a Regulated Fund in issuers in 

which that Regulated Fund already holds 

investments. 

25 ‘‘Related Party’’ means (i) any Close Affiliate 

and (ii) in respect of matters as to which any 

Adviser has knowledge, any Remote Affiliate. 

‘‘Close Affiliate’’ means the Advisers, the Regulated 

Funds, the Affiliated Funds and any other person 

described in Section 57(b) (after giving effect to 

Rule 57b–1) in respect of any Regulated Fund 

(treating any registered investment company or 

series thereof as a BDC for this purpose) except for 

limited partners included solely by reason of the 

reference in Section 57(b) to Section 2(a)(3)(D). 

‘‘Remote Affiliate’’ means any person described in 

Section 57(e) in respect of any Regulated Fund 

(treating any registered investment company or 

series thereof as a BDC for this purpose) and any 

limited partner holding 5% or more of the relevant 

limited partner interests that would be a Close 

Affiliate but for the exclusion in that definition. 

26 In the case of any Disposition, proportionality 

will be measured by each participating Regulated 

Fund’s and Affiliated Fund’s outstanding 

investment in the security in question immediately 

preceding the Disposition. 

management of the portfolio company 

so long as: (x) The Eligible Directors will 

have the right to ratify the selection of 

such director or board observer, if any; 

(y) the Adviser agrees to, and does, 

provide periodic reports to the 

Regulated Fund’s Board with respect to 

the actions of such director or the 

information received by such board 

observer or obtained through the 

exercise of any similar right to 

participate in the governance or 

management of the portfolio company; 

and (z) any fees or other compensation 

that any other Regulated Fund or 

Affiliated Fund or any affiliated person 

of any other Regulated Fund or 

Affiliated Fund receives in connection 

with the right of one or more Regulated 

Funds or Affiliated Funds to nominate 

a director or appoint a board observer or 

otherwise to participate in the 

governance or management of the 

portfolio company will be shared 

proportionately among any participating 

Affiliated Funds (who may, in turn, 

share their portion with their affiliated 

persons) and any participating 

Regulated Fund(s) in accordance with 

the amount of each such party’s 

investment; and 

(iv) the proposed investment by the 

Regulated Fund will not involve 

compensation, remuneration or a direct 

or indirect 23 financial benefit to the 

Advisers, any other Regulated Fund, the 

Affiliated Funds or any affiliated person 

of any of them (other than the parties to 

the Co-Investment Transaction), except 

(A) to the extent permitted by Condition 

14, (B) to the extent permitted by 

Section 17(e) or 57(k), as applicable, (C) 

indirectly, as a result of an interest in 

the securities issued by one of the 

parties to the Co-Investment 

Transaction, or (D) in the case of fees or 

other compensation described in 

Condition 2(c)(iii)(B)(z). 

3. Right to Decline. Each Regulated 

Fund has the right to decline to 

participate in any Potential CoInvestment Transaction or to invest less 

than the amount proposed. 

4. General Limitation. Except for 

Follow-On Investments made in 

accordance with Conditions 8 and 9 

below,24 a Regulated Fund will not 

invest in reliance on the Order in any 

issuer in which a Related Party has an 

investment.25

5. Same Terms and Conditions. A 

Regulated Fund will not participate in 

any Potential Co-Investment 

Transaction unless (i) the terms, 

conditions, price, class of securities to 

be purchased, date on which the 

commitment is entered into and 

registration rights (if any) will be the 

same for each participating Regulated 

Fund and Affiliated Fund and (ii) the 

earliest settlement date and the latest 

settlement date of any participating 

Regulated Fund or Affiliated Fund will 

occur as close in time as practicable and 

in no event more than ten business days 

apart. The grant to one or more 

Regulated Funds or Affiliated Funds, 

but not the respective Regulated Fund, 

of the right to nominate a director for 

election to a portfolio company’s board 

of directors, the right to have an 

observer on the board of directors or 

similar rights to participate in the 

governance or management of the 

portfolio company will not be 

interpreted so as to violate this 

Condition 5, if Condition 2(c)(iii)(B) is 

met. 

6. Standard Review Dispositions. 

(a) General. If any Regulated Fund or 

Affiliated Fund elects to sell, exchange 

or otherwise dispose of an interest in a 

security and one or more Regulated 

Funds and Affiliated Funds have 

previously participated in a CoInvestment Transaction with respect to 

the issuer, then: 

(i) The Adviser to such Regulated 

Fund or Affiliated Fund will notify each 

Regulated Fund that holds an 

investment in the issuer of the proposed 

Disposition at the earliest practical time; 

and 

(ii) the Adviser to each Regulated 

Fund that holds an investment in the 

issuer will formulate a recommendation 

as to participation by such Regulated 

Fund in the Disposition. 

(b) Same Terms and Conditions. Each 

Regulated Fund will have the right to 

participate in such Disposition on a 

proportionate basis, at the same price 

and on the same terms and conditions 

as those applicable to the Affiliated 

Funds and any other Regulated Fund. 

(c) No Board Approval Required. A 

Regulated Fund may participate in such 

a Disposition without obtaining prior 

approval of the Required Majority if: 

(i) (A) The participation of each 

Regulated Fund and Affiliated Fund in 

such Disposition is proportionate to its 

then-current holding of the security (or 

securities) of the issuer that is (or are) 

the subject of the Disposition; 26 (B) the 

Board of the Regulated Fund has 

approved as being in the best interests 

of the Regulated Fund the ability to 

participate in such Dispositions on a pro 

rata basis (as described in greater detail 

in the application); and (C) the Board of 

the Regulated Fund is provided on a 

quarterly basis with a list of all 

Dispositions made in accordance with 

this Condition; or 

(ii) each security is a Tradable 

Security and (A) the Disposition is not 

to the issuer or any affiliated person of 

the issuer; and (B) the security is sold 

for cash in a transaction in which the 

only term negotiated by or on behalf of 

the participating Regulated Funds and 

Affiliated Funds is price. 

(d) Standard Board Approval. In all 

other cases, the Adviser will provide its 

written recommendation as to the 

Regulated Fund’s participation to the 

Eligible Directors and the Regulated 

Fund will participate in such 

Disposition solely to the extent that a 

Required Majority determines that it is 

in the Regulated Fund’s best interests. 

7. Enhanced Review Dispositions. 

(a) General. If any Regulated Fund or 

Affiliated Fund elects to sell, exchange 

or otherwise dispose of a Pre-Boarding 

Investment in a Potential Co-Investment 

Transaction and the Regulated Funds 

and Affiliated Funds have not 

previously participated in a CoInvestment Transaction with respect to 

the issuer: 

(i) The Adviser to such Regulated 

Fund or Affiliated Fund will notify each 

Regulated Fund that holds an 

investment in the issuer of the proposed 

Disposition at the earliest practical time; 

(ii) the Adviser to each Regulated 

Fund that holds an investment in the 

issuer will formulate a recommendation 

as to participation by such Regulated 

Fund in the Disposition; and 

(iii) the Advisers will provide to the 

Board of each Regulated Fund that 

holds an investment in the issuer all 

Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 45337 

27 In determining whether a holding is 

‘‘immaterial’’ for purposes of the Order, the 

Required Majority will consider whether the nature 

and extent of the interest in the transaction or 

arrangement is sufficiently small that a reasonable 

person would not believe that the interest affected 

the determination of whether to enter into the 

transaction or arrangement or the terms of the 

transaction or arrangement. 

28To the extent that a Follow-On Investment 

opportunity is in a security or arises in respect of 

a security held by the participating Regulated 

Funds and Affiliated Funds, proportionality will be 

measured by each participating Regulated Fund’s 

and Affiliated Fund’s outstanding investment in the 

security in question immediately preceding the 

Follow-On Investment using the most recent 

available valuation thereof. To the extent that a 

Follow-On Investment opportunity relates to an 

opportunity to invest in a security that is not in 

respect of any security held by any of the 

participating Regulated Funds or Affiliated Funds, 

proportionality will be measured by each 

participating Regulated Fund’s and Affiliated 

Fund’s outstanding investment in the issuer 

immediately preceding the Follow-On Investment 

using the most recent available valuation thereof. 

information relating to the existing 

investments in the issuer of the 

Regulated Funds and Affiliated Funds, 

including the terms of such investments 

and how they were made, that is 

necessary for the Required Majority to 

make the findings required by this 

Condition. 

(b) Enhanced Board Approval. The 

Adviser will provide its written 

recommendation as to the Regulated 

Fund’s participation to the Eligible 

Directors, and the Regulated Fund will 

participate in such Disposition solely to 

the extent that a Required Majority 

determines that: 

(i) The Disposition complies with 

Conditions 2(c)(i), (ii), (iii)(A), and (iv); 

and 

(ii) the making and holding of the PreBoarding Investments were not 

prohibited by Section 57 or Rule 17d– 

1, as applicable, and records the basis 

for the finding in the Board minutes. 

(c) Additional Requirements. The 

Disposition may only be completed in 

reliance on the Order if: 

(i) Same Terms and Conditions. Each 

Regulated Fund has the right to 

participate in such Disposition on a 

proportionate basis, at the same price 

and on the same terms and conditions 

as those applicable to the Affiliated 

Funds and any other Regulated Fund; 

(ii) Original Investments. All of the 

Affiliated Funds’ and Regulated Funds’ 

investments in the issuer are PreBoarding Investments; 

(iii) Advice of counsel. Independent 

counsel to the Board advises that the 

making and holding of the investments 

in the Pre-Boarding Investments were 

not prohibited by Section 57 (as 

modified by Rule 57b–1) or Rule 17d– 

1, as applicable; 

(iv) Multiple Classes of Securities. All 

Regulated Funds and Affiliated Funds 

that hold Pre-Boarding Investments in 

the issuer immediately before the time 

of completion of the Co-Investment 

Transaction hold the same security or 

securities of the issuer. For the purpose 

of determining whether the Regulated 

Funds and Affiliated Funds hold the 

same security or securities, they may 

disregard any security held by some but 

not all of them if, prior to relying on the 

Order, the Required Majority is 

presented with all information 

necessary to make a finding, and finds, 

that: (x) Any Regulated Fund’s or 

Affiliated Fund’s holding of a different 

class of securities (including for this 

purpose a security with a different 

maturity date) is immaterial 27 in 

amount, including immaterial relative to 

the size of the issuer; and (y) the Board 

records the basis for any such finding in 

its minutes. In addition, securities that 

differ only in respect of issuance date, 

currency, or denominations may be 

treated as the same security; and 

(v) No control. The Affiliated Funds, 

the other Regulated Funds and their 

affiliated persons (within the meaning 

of Section 2(a)(3)(C) of the Act), 

individually or in the aggregate, do not 

control the issuer of the securities 

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

the Act). 

8. Standard Review Follow-Ons. 

(a) General. If any Regulated Fund or 

Affiliated Fund desires to make a 

Follow-On Investment in an issuer and 

the Regulated Funds and Affiliated 

Funds holding investments in the issuer 

previously participated in a CoInvestment Transaction with respect to 

the issuer: 

(i) The Adviser to each such 

Regulated Fund or Affiliated Fund will 

notify each Regulated Fund that holds 

securities of the portfolio company of 

the proposed transaction at the earliest 

practical time; and 

(ii) the Adviser to each Regulated 

Fund that holds an investment in the 

issuer will formulate a recommendation 

as to the proposed participation, 

including the amount of the proposed 

investment, by such Regulated Fund. 

(b) No Board Approval Required. A 

Regulated Fund may participate in the 

Follow-On Investment without 

obtaining prior approval of the Required 

Majority if: 

(i) (A) The proposed participation of 

each Regulated Fund and each 

Affiliated Fund in such investment is 

proportionate to its outstanding 

investments in the issuer or the security 

at issue, as appropriate,28 immediately 

preceding the Follow-On Investment; 

and (B) the Board of the Regulated Fund 

has approved as being in the best 

interests of the Regulated Fund the 

ability to participate in Follow-On 

Investments on a pro rata basis (as 

described in greater detail in the 

Application); or 

(ii) it is a Non-Negotiated Follow-On 

Investment. 

(c) Standard Board Approval. In all 

other cases, the Adviser will provide its 

written recommendation as to the 

Regulated Fund’s participation to the 

Eligible Directors and the Regulated 

Fund will participate in such Follow-On 

Investment solely to the extent that a 

Required Majority makes the 

determinations set forth in Condition 

2(c). If the only previous Co-Investment 

Transaction with respect to the issuer 

was an Enhanced Review Disposition 

the Eligible Directors must complete 

this review of the proposed Follow-On 

Investment both on a stand-alone basis 

and together with the Pre-Boarding 

Investments in relation to the total 

economic exposure and other terms of 

the investment. 

(d) Allocation. If, with respect to any 

such Follow-On Investment: 

(i) The amount of the opportunity 

proposed to be made available to any 

Regulated Fund is not based on the 

Regulated Funds’ and the Affiliated 

Funds’ outstanding investments in the 

issuer or the security at issue, as 

appropriate, immediately preceding the 

Follow-On Investment; and 

(ii) the aggregate amount 

recommended by the Advisers to be 

invested in the Follow-On Investment 

by the participating Regulated Funds 

and any participating Affiliated Funds, 

collectively, exceeds the amount of the 

investment opportunity, then the 

Follow-On Investment opportunity will 

be allocated among them pro rata based 

on the size of the Internal Orders, as 

described in section III.A.1.b. of the 

application. 

(e) Other Conditions. The acquisition 

of Follow-On Investments as permitted 

by this Condition will be considered a 

Co-Investment Transaction for all 

purposes and subject to the other 

Conditions set forth in the application. 

9. Enhanced Review Follow-Ons. 

(a) General. If any Regulated Fund or 

Affiliated Fund desires to make a 

Follow-On Investment in an issuer that 

is a Potential Co-Investment Transaction 

and the Regulated Funds and Affiliated 

Funds holding investments in the issuer 

have not previously participated in a 

Co-Investment Transaction with respect 

to the issuer: 

(i) The Adviser to each such 

Regulated Fund or Affiliated Fund will 

notify each Regulated Fund that holds 

45338 Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 

securities of the portfolio company of 

the proposed transaction at the earliest 

practical time; 

(ii) the Adviser to each Regulated 

Fund that holds an investment in the 

issuer will formulate a recommendation 

as to the proposed participation, 

including the amount of the proposed 

investment, by such Regulated Fund; 

and 

(iii) the Advisers will provide to the 

Board of each Regulated Fund that 

holds an investment in the issuer all 

information relating to the existing 

investments in the issuer of the 

Regulated Funds and Affiliated Funds, 

including the terms of such investments 

and how they were made, that is 

necessary for the Required Majority to 

make the findings required by this 

Condition. 

(b) Enhanced Board Approval. The 

Adviser will provide its written 

recommendation as to the Regulated 

Fund’s participation to the Eligible 

Directors, and the Regulated Fund will 

participate in such Follow-On 

Investment solely to the extent that a 

Required Majority reviews the proposed 

Follow-On Investment both on a standalone basis and together with the PreBoarding Investments in relation to the 

total economic exposure and other 

terms and makes the determinations set 

forth in Condition 2(c). In addition, the 

Follow-On Investment may only be 

completed in reliance on the Order if 

the Required Majority of each 

participating Regulated Fund 

determines that the making and holding 

of the Pre-Boarding Investments were 

not prohibited by Section 57 (as 

modified by Rule 57b–1) or Rule 17d– 

1, as applicable. The basis for the 

Board’s findings will be recorded in its 

minutes. 

(c) Additional Requirements. The 

Follow-On Investment may only be 

completed in reliance on the Order if: 

(i) Original Investments. All of the 

Affiliated Funds’ and Regulated Funds’ 

investments in the issuer are PreBoarding Investments; 

(ii) Advice of counsel. Independent 

counsel to the Board advises that the 

making and holding of the investments 

in the Pre-Boarding Investments were 

not prohibited by Section 57 (as 

modified by Rule 57b–1) or Rule 17d– 

1, as applicable; 

(iii) Multiple Classes of Securities. All 

Regulated Funds and Affiliated Funds 

that hold Pre-Boarding Investments in 

the issuer immediately before the time 

of completion of the Co-Investment 

Transaction hold the same security or 

securities of the issuer. For the purpose 

of determining whether the Regulated 

Funds and Affiliated Funds hold the 

same security or securities, they may 

disregard any security held by some but 

not all of them if, prior to relying on the 

Order, the Required Majority is 

presented with all information 

necessary to make a finding, and finds, 

that: (x) Any Regulated Fund’s or 

Affiliated Fund’s holding of a different 

class of securities (including for this 

purpose a security with a different 

maturity date) is immaterial in amount, 

including immaterial relative to the size 

of the issuer; and (y) the Board records 

the basis for any such finding in its 

minutes. In addition, securities that 

differ only in respect of issuance date, 

currency, or denominations may be 

treated as the same security; and 

(iv) No control. The Affiliated Funds, 

the other Regulated Funds and their 

affiliated persons (within the meaning 

of Section 2(a)(3)(C) of the Act), 

individually or in the aggregate, do not 

control the issuer of the securities 

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

the Act). 

(d) Allocation. If, with respect to any 

such Follow-On Investment: 

(i) The amount of the opportunity 

proposed to be made available to any 

Regulated Fund is not based on the 

Regulated Funds’ and the Affiliated 

Funds’ outstanding investments in the 

issuer or the security at issue, as 

appropriate, immediately preceding the 

Follow-On Investment; and 

(ii) the aggregate amount 

recommended by the Advisers to be 

invested in the Follow-On Investment 

by the participating Regulated Funds 

and any participating Affiliated Funds, 

collectively, exceeds the amount of the 

investment opportunity, then the 

Follow-On Investment opportunity will 

be allocated among them pro rata based 

on the size of the Internal Orders, as 

described in section III.A.1.(b) of the 

application. 

(e) Other Conditions. The acquisition 

of Follow-On Investments as permitted 

by this Condition will be considered a 

Co-Investment Transaction for all 

purposes and subject to the other 

Conditions set forth in the application. 

10. Board Reporting, Compliance and 

Annual Re-Approval. 

(a) Each Adviser to a Regulated Fund 

will present to the Board of each 

Regulated Fund, on a quarterly basis, 

and at such other times as the Board 

may request, (i) a record of all 

investments in Potential Co-Investment 

Transactions made by any of the other 

Regulated Funds or any of the Affiliated 

Funds during the preceding quarter that 

fell within the Regulated Fund’s thencurrent Objectives and Strategies and 

Board-Established Criteria that were not 

made available to the Regulated Fund, 

and an explanation of why such 

investment opportunities were not made 

available to the Regulated Fund; (ii) a 

record of all Follow-On Investments in 

and Dispositions of investments in any 

issuer in which the Regulated Fund 

holds any investments by any Affiliated 

Fund or other Regulated Fund during 

the prior quarter; and (iii) all 

information concerning Potential CoInvestment Transactions and CoInvestment Transactions, including 

investments made by other Regulated 

Funds or Affiliated Funds that the 

Regulated Fund considered but declined 

to participate in, so that the 

Independent Directors, may determine 

whether all Potential Co-Investment 

Transactions and Co-Investment 

Transactions during the preceding 

quarter, including those investments 

that the Regulated Fund considered but 

declined to participate in, comply with 

the Conditions. 

(b) All information presented to the 

Regulated Fund’s Board pursuant to this 

Condition will be kept for the life of the 

Regulated Fund and at least two years 

thereafter, and will be subject to 

examination by the Commission and its 

staff. 

(c) Each Regulated Fund’s chief 

compliance officer, as defined in rule 

38a–1(a)(4), will prepare an annual 

report for its Board each year that 

evaluates (and documents the basis of 

that evaluation) the Regulated Fund’s 

compliance with the terms and 

Conditions of the application and the 

procedures established to achieve such 

compliance. 

(d) The Independent Directors will 

consider at least annually whether 

continued participation in new and 

existing Co-Investment Transactions is 

in the Regulated Fund’s best interests. 

11. Record Keeping. Each Regulated 

Fund will maintain the records required 

by Section 57(f)(3) of the Act as if each 

of the Regulated Funds were a BDC and 

each of the investments permitted under 

these Conditions were approved by the 

Required Majority under Section 57(f). 

12. Director Independence. No 

Independent Director of a Regulated 

Fund will also be a director, general 

partner, managing member or principal, 

or otherwise be an ‘‘affiliated person’’ 

(as defined in the Act) of any Affiliated 

Fund. 

13. Expenses. The expenses, if any, 

associated with acquiring, holding or 

disposing of any securities acquired in 

a Co-Investment Transaction (including, 

without limitation, the expenses of the 

distribution of any such securities 

registered for sale under the Securities 

Act) will, to the extent not payable by 

the Advisers under their respective 

Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 45339 

29Applicants are not requesting and the 

Commission is not providing any relief for 

transaction fees received in connection with any 

Co-Investment Transaction. 

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

2 17 CFR 240.19b–4. 

3Commission Delegated Regulation (EU) No. 153/ 

2013 dated 23 February 2013. 

4Regulation (EU) No. 648/2012 of the European 

Parliament and of the Council of 4 July 2012 on 

OTC derivatives, central counterparties and trade 

repositories. 

5Section 3.1.2.C of the ESMA Opinion On 

Portfolio Margining Requirements under Article 27 

of Commission Delegated Regulation (EU) No. 153/ 

2013 dated 10 April 2017 (the ‘‘ESMA Opinion’’). 

advisory agreements with the Regulated 

Funds and the Affiliated Funds, be 

shared by the Regulated Funds and the 

participating Affiliated Funds in 

proportion to the relative amounts of the 

securities held or being acquired or 

disposed of, as the case may be. 

14. Transaction Fees.29 Any 

transaction fee (including break-up, 

structuring, monitoring or commitment 

fees but excluding brokerage or 

underwriting compensation permitted 

by Section 17(e) or 57(k)) received in 

connection with any Co-Investment 

Transaction will be distributed to the 

participants on a pro rata basis based on 

the amounts they invested or 

committed, as the case may be, in such 

Co-Investment Transaction. If any 

transaction fee is to be held by an 

Adviser pending consummation of the 

transaction, the fee will be deposited 

into an account maintained by the 

Adviser at a bank or banks having the 

qualifications prescribed in Section 

26(a)(1), and the account will earn a 

competitive rate of interest that will also 

be divided pro rata among the 

participants. None of the Advisers, the 

Affiliated Funds, the other Regulated 

Funds or any affiliated person of the 

Affiliated Funds or the Regulated Funds 

will receive any additional 

compensation or remuneration of any 

kind as a result of or in connection with 

a Co-Investment Transaction other than 

(i) in the case of the Regulated Funds 

and the Affiliated Funds, the pro rata 

transaction fees described above and 

fees or other compensation described in 

Condition 2(c)(iii)(B)(z), (ii) brokerage or 

underwriting compensation permitted 

by Section 17(e) or 57(k) or (iii) in the 

case of the Advisers, investment 

advisory compensation paid in 

accordance with investment advisory 

agreements between the applicable 

Regulated Fund(s) or Affiliated Fund(s) 

and its Adviser. 

15. Independence. If the Holders own 

in the aggregate more than 25 percent of 

the Shares of a Regulated Fund, then the 

Holders will vote such Shares as 

directed by an independent third party 

when voting on (1) the election of 

directors; (2) the removal of one or more 

directors; or (3) any other matter under 

either the Act or applicable State law 

affecting the Board’s composition, size 

or manner of election. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–20757 Filed 9–27–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81680; File No. SR–ICEEU– 

2017–010] 

Self-Regulatory Organizations; ICE 

Clear Europe Limited; Notice of Filing 

and Order Granting Accelerated 

Approval of a Proposed Rule Change 

Relating to Amendments to the ICE 

Clear Europe CDS Risk Policy 

September 22, 2017. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on 

September 15, 2017, ICE Clear Europe 

Limited (‘‘ICE Clear Europe’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule changes described in 

Items I, II, and III below, which Items 

have been prepared by ICE Clear 

Europe. The Commission is publishing 

this notice and order to solicit 

comments on the proposed rule change 

from interested persons and to approve 

the proposed rule change on an 

accelerated basis. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The principal purpose of the 

proposed rule change is to amend ICE 

Clear Europe’s CDS Risk Policy relating 

to portfolio margining, as described 

below, to comply with Article 27 of 

Commission Delegated Regulation (EU) 

No. 153/2013 3 (the ‘‘Portfolio Margining 

Limitation’’). 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, ICE 

Clear Europe 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 III below. ICE 

Clear Europe has prepared summaries, 

set forth in sections (A), (B), and (C) 

below, of the most significant aspects of 

such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

(a) Purpose 

ICE Clear Europe proposes to adopt 

amendments to the CDS Risk Policy 

relating to portfolio margining. The 

changes discussed herein apply to all 

cleared credit default swap (‘‘CDS’’) 

products. 

The amendments are intended to 

comply with the Portfolio Margining 

Limitation implementing the European 

Market Infrastructure Regulation 

(‘‘EMIR’’),4 which requires that where 

portfolio margining covers multiple 

different instruments, the amount of 

margin reduction that the clearing house 

may offer can be no greater than 80% of 

the difference between the sum of the 

margins for each product calculated on 

an individual basis and the margin 

calculated based on a estimation of the 

exposure for the combined portfolio. By 

contrast, where the margin reduction 

relates to positions in the same 

instrument, the clearing house may 

apply a margin reduction of up to 100% 

of that difference. The European 

Securities and Markets Authority 

(‘‘ESMA’’), the competent authority 

with respect to this requirement under 

EMIR, has issued an opinion 

interpreting this requirement in the 

context of CDS to provide 5 that (i) 

credit derivatives on different 

underlying names or indexes (including 

two series of the same index) should be 

considered different products; and (ii) 

credit derivatives on the same 

underlying name or index with different 

maturities or coupons may be 

considered as the same product. 

According to ICE Clear Europe, the 

effect of this is to require that credit 

derivatives on different index series of 

the same index family be considered 

different instruments under the 

Portfolio Margining Limitation and that 

therefore portfolio margining for such 

instruments must be limited to 80% of 

the gross margins. 

To implement the Portfolio Margining 

Limitation, ICE Clear Europe is 

amending its CDS Risk Policy such that 

when calculating the spread response 

charge (which provides portfolio margin