Document ID: SEC-2010-1533-0001
Agency: sec
Document Type: Notice
Title: Applications: Van Eck Associates Corp., et al.
Posted Date: 2010-10-07T04:00Z

[Federal Register: October 7, 2010 (Volume 75, Number 194)]
[Notices]               
[Page 62154-62156]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07oc10-87]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29455; 812-13624]

 
Van Eck Associates Corporation, et al.; Notice of Application

October 1, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application to amend a prior order under section 
6(c) of the Investment Company Act of 1940 (``Act'') for an exemption 
from sections 2(a)(32), 5(a)(1), 22(d), 22(e) and 24(d) of the Act and 
rule 22c-1 under the Act, under sections 6(c) and 17(b) of the Act for 
an exemption from sections 17(a)(1) and (a)(2) of the Act, and under 
section 12(d)(1)(J) of the Act granting an exemption from sections 
12(d)(1)(A) and 12(d)(1)(B) of the Act.

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    Summary of Application: Applicants request an order to amend a 
prior order that permits: (a) Series of an open-end management 
investment company (each a ``Fund,'' collectively, the ``Funds'') to 
issue shares that can be redeemed only in large aggregations 
(``Creation Units''); (b) secondary market transactions in shares to 
occur at negotiated prices; (c) dealers to sell such shares to 
secondary market purchasers unaccompanied by a statutory prospectus 
when prospectus delivery is not required by the Securities Act of 1933 
(``Securities Act''); (d) under specified limited circumstances, 
certain Funds to pay redemption proceeds more than seven days after the 
tender of shares; (e) certain registered management investment 
companies and unit investment trusts outside of the same group of 
investment companies as the Funds to acquire shares; and (f) certain 
affiliated persons of the Funds to deposit securities into, and receive 
securities from, the Funds in connection with the purchase and 
redemption of Creation Units of such Funds (``Prior Order'').\1\ 
Applicants seek to amend the Prior Order to: (a) Permit certain Funds 
based on equity and/or fixed income securities indexes for which Van 
Eck Associates Corporation (``Adviser'') or an ``affiliated person'' of 
the Adviser as defined in section 2(a)(3) of the Act, is an index 
provider (each a ``Self Indexing Fund''); (b) delete the relief granted 
from section 24(d) of the Act and revise various disclosure 
requirements in the applications for the Prior Order (``Prior 
Applications''); (c) modify the 80% investment requirement in the Prior 
Applications; (d) revise the discussion of depositary receipts in the 
Prior Applications; and (e) revise the discussion in the Prior 
Applications of the composition of securities deposited with the Fund 
to purchase Creation Units (``Deposit Securities'') and securities 
received in connection with redemption of Creation Units (``Fund 
Securities'').
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    \1\ Van Eck Associates Corporation, et al., Investment Company 
Act Release Nos. 27283 (Apr. 7, 2006) (notice) and 27311 (May 2, 
2006) (order), as subsequently amended by Van Eck Associates 
Corporation, et al., Investment Company Act Release Nos. 27694 (Jan. 
31, 2007) (notice) and 27742 (Feb. 27, 2007) (order), Van Eck 
Associates Corporation, et al., Investment Company Act Release Nos. 
28007 (Sept. 28, 2007) (notice) and 28021 (Oct. 24, 2007) (order), 
Van Eck Associates Corporation, et al., Investment Company Act 
Release Nos. 28349 (July 31, 2008) (notice) and 28365 (August 25, 
2008) (order).
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    Applicants: Adviser, Market Vectors ETF Trust (``Trust''), and Van 
Eck Securities Corporation (``Distributor'').
    Filing Dates: The application was filed on January 23, 2009, and 
amended

[[Page 62155]]

on June 3, 2009, March 12, 2010, June 23, 2010, August 13, 2010, and 
August 25, 2010.
    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 25, 2010, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons may request notification of a hearing by writing to 
the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants, 335 Madison Avenue, 
New York, NY 10017.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 551-6876, or Michael W. Mundt, Assistant Director, at (202) 551-
6821 (Division of Investment Management, Office of Investment Company 
Regulation).

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 an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Trust is an open-end management investment company 
registered under the Act and organized as a Delaware statutory trust. 
The Trust is organized as a series fund with multiple series. The 
Adviser, an investment adviser registered under the Investment Advisers 
Act of 1940 (``Advisers Act''), will serve as investment adviser to the 
Trust. The Adviser may retain sub-advisers (``Sub-Advisers'') to manage 
the assets of one or more Funds. Any Sub-Adviser will be registered 
under the Advisers Act. The Distributor, a broker-dealer registered 
under the Securities Exchange Act of 1934 (``Exchange Act''), will 
serve as the principal underwriter and distributor of the Trust's 
shares.
    2. The applicants are currently permitted to offer Funds that track 
the performance of equity and fixed income indexes developed by either 
(i) third parties that are not ``affiliated persons'' (as such term is 
defined in section 2(a)(3) of the Act), or affiliated persons of 
affiliated persons, of the Trust, the Adviser, any Sub-Adviser, the 
Distributor or a promoter of a Fund or (ii) by the Adviser to the 
extent the Adviser may be deemed a sponsor of an underlying index due 
to licensing arrangements between the Adviser and S-Network Global 
Indexes, LLC or other similar arrangements. Applicants seek to amend 
the Prior Order to permit Self Indexing Funds. Applicants request that 
the order apply to any Self Indexing Funds offered in the future that 
are advised by the Adviser or an entity controlling, controlled by or 
under common control with the Adviser and operate pursuant to the terms 
and conditions of the Prior Order, as amended. Applicants also seek to 
amend the Prior Order to (a) Delete the relief granted from section 
24(d) of the Act and revise the Prior Applications accordingly; (b) 
modify the Fund's 80% investment requirement; (c) revise the discussion 
of depositary receipts; and (d) revise the discussion of the 
composition of Deposit Securities and Fund Securities.

Self-Indexing Funds

    3. Each underlying index (``Underlying Index'') for a Self Indexing 
Fund is or will be a rules based index comprised of equity and/or fixed 
income securities (including depositary receipts). A wholly owned 
subsidiary of the Adviser currently domiciled in Germany (the ``Index 
Provider'') will create and/or own a proprietary, rules based 
methodology (``Rules-Based Process'') to create indexes for use by the 
Self Indexing Funds and other equity or fixed income investors.\2\ The 
Index Provider intends to license the use of the Underlying Indexes, 
their names and other related intellectual property to the Adviser for 
use in connection with the Trust and the Self Indexing Funds. The 
licenses for the Self Indexing Funds will specifically state that the 
Adviser must provide the use of the Underlying Indexes and related 
intellectual property at no cost to the Trust and the Self Indexing 
Funds.
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    \2\ The Underlying Indexes may be made available to registered 
investment companies, as well as separately managed accounts of 
institutional investors and privately offered funds that are not 
deemed to be ``investment companies'' in reliance on section 3(c)(1) 
or 3(c)(7) of the Act for which the Adviser acts as adviser or 
subadviser (``Affiliated Accounts'') as well as other such 
registered investment companies, separately managed accounts and 
privately offered funds for which it does not act either as adviser 
or subadviser (``Unaffiliated Accounts''). The Affiliated Accounts 
and the Unaffiliated Accounts (collectively referred to herein as 
``Accounts''), like the Funds, would seek to track the performance 
of one or more Underlying Index(es) by investing in the constituents 
of such Underlying Index(es) or a representative sample of such 
constituents of the Underlying Index. Consistent with the relief 
requested from section 17(a), the Affiliated Accounts will not 
engage in Creation Unit transactions with a Fund.
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    4. Applicants contend that any potential conflicts of interest 
arising from the fact that the Index Provider will be an ``affiliated 
person'' of the Adviser will not have any impact on the operation of 
the Self Indexing Funds because the Underlying Indexes will maintain 
transparency, the Self Indexing Funds' portfolios will be transparent, 
and the Index Provider, the Adviser, any Sub-Adviser and the Self 
Indexing Funds each will adopt policies and procedures to address any 
potential conflicts of interest (``Policies and Procedures''). The 
Index Provider will publish in the public domain, including on its Web 
site and/or the Self Indexing Funds' Web site (``Web site''), the rules 
that govern the construction and maintenance of each of its Underlying 
Indexes. Applicants believe that this will prevent the Adviser from 
possessing any advantage over other market participants by virtue of 
its affiliation with the Index Provider. Applicants note that the 
identity and weightings of the component securities of an Underlying 
Index (``Component Securities'') for a Self Indexing Fund will be 
readily ascertainable by anyone, since the Rules-Based Process will be 
publicly available.
    5. While the Index Provider does not presently contemplate specific 
changes to the Rules-Based Process, it could be modified, for example, 
to reflect changes in the underlying market tracked by an Underlying 
Index, the way in which the Rules-Based Process takes into account 
market events or to change the way a corporate action, such as a stock 
split, is handled. Such changes would not take effect until the 
employees of the Index Provider (``Index Group'') have given (a) the 
Calculation Agent (defined below) reasonable prior written notice of 
such rule changes, and (b) the investing public at least sixty (60) 
days published notice that such changes will be implemented. Each 
Underlying Index for a Self Indexing Fund will be reconstituted or 
rebalanced on at least an annual basis, but no more frequently than 
monthly.
    6. As owner of the Underlying Indexes, the Index Provider will 
enter into an agreement (``Calculation Agent Agreement'') with a third 
party to act as ``Calculation Agent.'' The Calculation Agent will be 
solely responsible for the calculation and maintenance of each 
Underlying Index, as well as the dissemination of the values of each

[[Page 62156]]

Underlying Index. The Calculation Agent is not, and will not be, an 
affiliated person, as such term is defined in the Act, or an affiliated 
person of an affiliated person, of the Self Indexing Funds, the 
Adviser, any Sub-Adviser, any promoter or the Distributor.
    7. The Adviser and the Index Provider will adopt and implement 
Policies and Procedures to minimize or eliminate any potential 
conflicts of interest. Among other things, the Policies and Procedures 
will be designed to limit or prohibit communication with respect to 
issues/information related to the maintenance, calculation and 
reconstitution of the Underlying Indexes between the ``Index 
Administrator,'' the Index Group and the employees of the Adviser. As 
employees of the Index Provider, the Index Administrator and members of 
the Index Group (i) Will not have any responsibility for the management 
of the Self Indexing Funds or the Affiliated Accounts, (ii) will be 
expressly prohibited from sharing this information with any employees 
of the Adviser or those of any Sub-Adviser, including those persons 
that have responsibility for the management of the Self Indexing Funds 
or the Affiliated Accounts until such information is publicly 
announced, and (iii) will be expressly prohibited from sharing or using 
this non-public information in any way except in connection with the 
performance of their respective duties. In addition, the Adviser and 
any Sub-Adviser have adopted or will adopt, pursuant to Rule 206(4)-7 
under the Advisers Act, written policies and procedures designed to 
prevent violations of the Advisers Act and the rules under the Advisers 
Act. Also, the Adviser has adopted a Code of Ethics pursuant to rule 
17j-1 under the Act and rule 204A-1 under the Advisers Act.

Additional Changes to Prior Order

    8. Applicants also seek to amend the Prior Order to delete the 
relief granted from the requirements of section 24(d) of the Act. 
Applicants believe that the deletion of the exemption from section 
24(d) that was granted in the Prior Order is warranted because the 
adoption of the summary prospectus under Investment Company Act Release 
No. 28584 (Jan. 13, 2009) (the ``Summary Prospectus Rule'') should make 
unnecessary any need by a Fund to use a product description (``Product 
Description''). Applicants also note that, to date, no Fund has 
utilized a Product Description. The deletion of the relief granted with 
respect to section 24(d) of the Act from the Prior Order will also 
result in the deletion of related discussions in the Prior Application, 
revision of the Prior Application to delete references to the Product 
Descriptions including in the conditions, and the deletion of condition 
7 to the Prior Order.\3\
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    \3\ Condition 7 states ``Before an Index Fund may rely on this 
order, the Commission will have approved, pursuant to rule 19b-4 
under the Exchange Act, an Exchange rule requiring Exchange members 
and member organizations effecting transactions in Shares to deliver 
a Product Description to purchasers of Shares.''
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    9. The application for the Prior Order states that a Fund will 
hold, in the aggregate, at least 80% of its total assets in Component 
Securities of its Underlying Index and investments that have economic 
characteristics that are substantially identical to the economic 
characteristics of the Component Securities of its Underlying Index. 
Applicants seek to amend the Prior Order to require a Fund to hold at 
least 80% of its total assets in Component Securities of its Underlying 
Index or in Depositary Receipts (defined below) or to-be-announced 
transactions (``TBAs'') representing Component Securities.
    10. The application for the Prior Order states, among other things, 
that the Fund will invest only in Depositary Receipts listed on a 
national securities exchange, as defined in section 2(a)(26) of the Act 
(``Exchange''), and that all Depositary Receipts in which the Funds 
invest will be sponsored by the issuers of the underlying security, 
except for certain specified exceptions. Applicants seek to amend the 
application for the Prior Order by revising the discussion of 
Depositary Receipts to note that ``Depositary Receipts'' include 
American Depositary Receipts (``ADRs'') and Global Depositary Receipts 
(``GDRs''). With respect to ADRs, the depositary is typically a U.S. 
financial institution and the underlying securities are issued by a 
foreign issuer. The ADR is registered under the Securities Act on Form 
F-6. ADR trades occur either on an Exchange or off-exchange. FINRA Rule 
6620 requires all off-exchange transactions in ADRs to be reported 
within 90 seconds and ADR trade reports to be disseminated on a real-
time basis. With respect to GDRs, the depositary may be foreign or a 
U.S. entity, and the underlying securities may have a foreign or a U.S. 
issuer. All GDRs are sponsored and trade on a foreign exchange. No 
affiliated persons of applicants will serve as the depositary for any 
Depositary Receipts held by a Fund. A Fund will not invest in any 
Depositary Receipts that the Adviser deems to be illiquid or for which 
pricing information is not readily available.
    11. The Prior Order provides that Deposit Securities and Fund 
Securities generally will correspond pro rata, to the extent 
practicable, to the portfolio securities of a Fund (``Portfolio 
Securities''). Applicants seek to amend this discussion of the 
composition of Deposit Securities and Fund Securities to state that 
Deposit Securities and Fund Securities either (a) will correspond pro 
rata to the Portfolio Securities of a Fund, or (b) will not correspond 
pro rata to the Portfolio Securities, provided that the Deposit 
Securities and Fund Securities (1) consist of the same representative 
sample of Portfolio Securities designed to generate performance that is 
highly correlated to the performance of the Portfolio Securities, (2) 
consist only of securities that are already included among the existing 
Portfolio Securities, and (3) are the same for all Authorized 
Participants on a given Business Day. In either case, the Deposit 
Securities and Fund Securities may differ from each other (and from the 
Portfolio Securities) (a) to reflect minor differences when it is not 
possible to break up bonds beyond certain minimum sizes needed for 
transfer and settlement, or (b) for temporary periods to effect changes 
in the Portfolio Securities as a result of the rebalancing of an 
Underlying Index.
    12. The Self Indexing Funds, except as otherwise noted herein, will 
operate in a manner identical to the operation of the other Funds. 
Applicants agree that any order of the Commission granting the 
requested relief will be subject to all of the conditions in the Prior 
Order, except that condition 7 will be deleted.\4\ Applicants believe 
that the requested relief continues to meet the necessary exemptive 
standards.
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    \4\ All representations and conditions contained in the 
Application that require a Fund to disclose particular information 
in its Prospectus and/or annual report shall be effective with 
respect to the Fund until the time that the Fund complies with the 
disclosure requirements adopted by the Commission in Investment 
Company Act Release No. 28584 (Jan. 13, 2009).

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-25294 Filed 10-6-10; 8:45 am]
BILLING CODE 8010-01-P