Document ID: SEC-2014-1472-0001
Agency: sec
Document Type: Notice
Title: Applications: Advisors Series Trust and Vivaldi Asset Management, LLC
Posted Date: 2014-09-03T04:00Z

[Federal Register Volume 79, Number 170 (Wednesday, September 3, 2014)]
[Notices]
[Pages 52380-52382]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-20869]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31226; File No. 812-14299]

Advisors Series Trust and Vivaldi Asset Management, LLC; Notice 
of Application

August 27, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (``Act'') for an exemption from section 15(a) of 
the Act and rule 18f-2 under the Act, as well as from certain 
disclosure requirements.

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SUMMARY: Applicants request an order that would permit them to enter 
into and materially amend subadvisory agreements without shareholder 
approval and would grant relief from certain disclosure requirements.

Applicants:  Advisors Series Trust (the ``Trust'') and Vivaldi Asset 
Management, LLC (the ``Advisor'').

DATES: The application was filed on April 10, 2014 and amended on 
August 8, 2014.

Hearing or Notification of Hearing:  An order granting the application 
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 September 22, 2014, and should be accompanied by proof of 
service on the 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 who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. Applicants: Advisors Series 
Trust, 615 East Michigan Street, Milwaukee, WI 53202 and Vivaldi Asset 
Management, LLC, 1622 Willow Road, Suite 101, Northfield, IL 60093.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 551-6876 or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or 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, a Delaware statutory trust, is registered under the 
Act as an open-end management investment company. The Trust offers 
multiple series (each a ``Fund'' and together the ``Funds''), two of 
which will be advised by the Advisor, each with its own investment 
objectives, policies, and restrictions.\1\
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    \1\ Applicants also request relief with respect to any existing 
or future series of the Trust or any other registered open-end 
management investment company that: (a) Is advised by the Advisor, 
or by a person controlling, controlled by or under common control 
with the Advisor or its successor (included in the term 
``Advisor''); (b) uses the manager of managers structure (``Manager 
of Managers Structure'') described in the application; and (c) 
complies with the terms and conditions of the application. The only 
existing registered open-end management investment company that 
currently intends to rely on the requested order is named as an 
applicant. For purposes of the requested order, ``successor'' is 
limited to an entity that results from a reorganization into another 
jurisdiction or a change in the type of business organization. If 
the name of any Fund contains the name of a Sub-Advisor (as defined 
below), the name of the Advisor will precede the name of the Sub-
Advisor.
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    2. The Advisor, a limited liability company organized under 
Delaware law, is registered as an investment adviser under the 
Investment Advisers Act of 1940 (``Advisers Act''). The Advisor will 
serve as investment adviser to the Funds pursuant to an investment 
advisory agreement with the Trust (the ``Advisory Agreement''),\2\ 
approved by the board of trustees of the Trust (each a ``Board''),\3\ 
including a majority of the trustees who are not ``interested 
persons,'' as defined in section 2(a)(19) of the Act, of the Trust, the 
Funds, or the Advisor (the ``Independent Trustees'') and by the 
shareholders of a Fund in the manner required by sections 15(a) and 
15(c) of the Act and rule 18f-2 thereunder. Applicants are not seeking 
any exemptions from the provisions of the Act with respect to any 
Advisory Agreement.\4\
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    \2\ ``Advisory Agreement'' includes advisory agreements with an 
Advisor for the Funds and any future Funds.
    \3\ The board of trustees of any future Fund is included in the 
term ``Board''.
    \4\ Orinda Asset Management, LLC (``Orinda'') is the current 
investment adviser to the Funds. Pursuant to a prior order, In the 
Matter of Advisors Series Trust and Orinda Asset Management, LLC, 
Investment Company Act Release Nos. 30043 (April 23, 2012) (notice) 
and 30065 (May 21, 2012) (order), the Funds currently operate in a 
Manager of Managers Structure. Orinda has indicated its intention to 
resign as investment adviser to the Funds. The Board, including a 
majority of the Independent Trustees, has determined to approve the 
engagement of the Advisor as investment adviser to the Funds, 
effective upon the resignation of Orinda. The Advisor has determined 
not to accept the engagement as investment adviser, and Orinda has 
agreed not to resign as investment adviser, unless and until (i) 
shareholder approval to the engagement of the Advisor as investment 
adviser is obtained, and (ii) the relief requested is granted.
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    3. Under the terms of the Advisory Agreement, the Advisor will 
provide the Funds with overall investment management services and, as 
it deems appropriate, will continuously review, supervise, and 
administer each Fund's investment program, subject to the supervision 
of, and policies established by, the Board. For the investment 
management services it will provide to a Fund, the Advisor will receive 
the fee specified in the Advisory Agreement from that Fund. The 
Advisory Agreement will permit the Advisor to delegate certain 
responsibilities to one or more investment subadvisers (each, a ``Sub-
Advisor''), to manage all or a portion of the assets of each Fund 
pursuant to an investment subadvisory agreement with a Sub-Advisor 
(``Sub-Advisory Agreement''). Each Sub-Advisor is, and any future Sub-
Advisor will be, an ``investment adviser,'' as defined in section 
2(a)(20) of the Act, and registered as an investment adviser under the 
Advisers Act, or not subject to such registration. The Advisor 
evaluates, allocates assets to, and oversees the Sub-Advisors, and make

[[Page 52381]]

recommendations about their hiring, termination, and replacement to the 
Board, at all times subject to the authority of the Board. The Advisor 
will compensate the Sub-Advisors out of the advisory fee paid by the 
Funds to the Advisor under the Advisory Agreement.
    4. Applicants request an order to permit the Advisor, subject to 
Board approval, to engage Sub-Advisors to manage all or a portion of 
the assets of a Fund pursuant to a Sub-Advisory Agreement and 
materially amend Sub-Advisory Agreements without obtaining shareholder 
approval. The requested relief will not extend to any Sub-Advisor that 
is an ``affiliated person,'' as defined in section 2(a)(3) of the Act, 
of the Trust, a Fund, or the Advisor, other than by reason of serving 
as Sub-Advisor to one or more of the Funds (``Affiliated Sub-
Advisor'').
    5. Applicants also request an order exempting each Fund from 
certain disclosure provisions described below that may require the 
Funds to disclose fees paid by the Advisor to Sub-Advisors. Applicants 
seek an order to permit each Fund to disclose (as both a dollar amount 
and as a percentage of a Fund's net assets) only: (a) The aggregate 
fees paid to the Advisor and any Affiliated Sub-Advisor; and (b) the 
aggregate fees paid to Sub-Advisors other than Affiliated Sub-Advisors 
(collectively, the ``Aggregate Fee Disclosure''). A Fund that employs 
an Affiliated Sub-Advisor will provide separate disclosure of any fees 
paid to the Affiliated Sub-Advisor.
    6. The Funds will inform shareholders of the hiring of a new Sub-
Advisor pursuant to the following procedures (``Modified Notice and 
Access Procedures''): (a) Within 90 days after a new Sub-Advisor is 
hired for a Fund, the Fund will send its shareholders either a Multi-
Manager Notice or a Multi-Manager Notice and Multi-Manager Information 
Statement; \5\ and (b) the Fund will make the Multi-Manager Information 
Statement available on the Web site identified in the Multi-Manager 
Notice no later than when the Multi-Manager Notice (or Multi-Manager 
Notice and Multi-Manager Information Statement) is first sent to 
shareholders, and will maintain it on that Web site for at least 90 
days.
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    \5\ A ``Multi-Manager Notice'' will be modeled on a Notice of 
Internet Availability as defined in rule 14a-16 under the Securities 
Exchange Act of 1934 (``Exchange Act''), and specifically will, 
among other things: (a) Summarize the relevant information regarding 
the new Sub-Advisor; (b) inform shareholders that the Multi-Manager 
Information Statement is available on a Web site; (c) provide the 
Web site address; (d) state the time period during which the Multi-
Manager Information Statement will remain available on that Web 
site; (e) provide instructions for accessing and printing the Multi-
Manager Information Statement; and (f) instruct the shareholder that 
a paper or email copy of the Multi-Manager Information Statement may 
be obtained, without charge, by contacting the Fund. A ``Multi-
Manager Information Statement'' will meet the requirements of 
Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under the 
Exchange Act for an information statement, except as modified by the 
requested order to permit Aggregate Fee Disclosure. Multi-Manager 
Information Statements will be filed electronically with the 
Commission via the EDGAR system.
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Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except pursuant to a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of stock in a series investment company affected by a matter must 
approve that matter if the Act requires shareholder approval.
    2. Form N-1A is the registration statement used by open-end 
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of 
the method and amount of the investment adviser's compensation.
    3. Rule 20a-1 under the Act requires proxies solicited with respect 
to a registered investment company to comply with Schedule 14A under 
the Exchange Act. Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and 
22(c)(9) of Schedule 14A, taken together, require a proxy statement for 
a shareholder meeting at which the advisory contract will be voted upon 
to include the ``rate of compensation of the investment adviser,'' the 
``aggregate amount of the investment adviser's fees,'' a description of 
the ``terms of the contract to be acted upon,'' and, if a change in the 
advisory fee is proposed, the existing and proposed fees and the 
difference between the two fees.
    4. Regulation S-X sets forth the requirements for financial 
statements required to be included as part of a registered investment 
company's registration statement and shareholder reports filed with the 
Commission. Sections 6-07(2)(a), (b) and (c) of Regulation S-X require 
a registered investment company to include in its financial statement 
information about the investment advisory fees.
    5. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provision of the Act, or 
from any rule thereunder, if such exemption is necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act. Applicants state that the requested relief meets this standard for 
the reasons discussed below.
    6. Applicants assert that the shareholders expect each Fund's 
Advisor, subject to the review and approval of the Board, to select 
Sub-Advisors who are best suited to achieve the Fund's investment 
objective. Applicants assert that, from the perspective of the 
shareholder, the role of the Sub-Advisor is substantially equivalent to 
the role of the individual portfolio managers employed by traditional 
investment company advisory firms. Applicants state that requiring 
shareholder approval of each Sub-Advisory Agreement would impose 
unnecessary delays and expenses on the Funds, and may preclude a Fund 
from acting promptly when the applicable Board and Advisor believe that 
a change would benefit the Fund and its shareholders. Applicants note 
that the Advisory Agreements and any sub-advisory agreement with an 
Affiliated Sub-Advisor will continue to be subject to the shareholder 
approval requirements of section 15(a) of the Act and rule 18f-2 under 
the Act.
    7. Applicants assert that the requested disclosure relief would 
benefit shareholders of the Funds because it would improve the 
Advisor's ability to negotiate the fees paid to Sub-Advisors. 
Applicants state that the Advisor may be able to negotiate rates that 
are below a Sub-Advisor's ``posted'' amounts, if the Advisor is not 
required to disclose the Sub-Advisors' fees to the public. Applicants 
submit that the requested relief will encourage Sub-Advisors to 
negotiate lower sub-advisory fees with the Advisor if the lower fees 
are not required to be made public.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Fund may rely on the order requested in the 
application, the operation of the Fund in the manner described in the 
application will be approved by a majority of the Fund's outstanding 
voting securities, as defined in the Act, or, in the case of a Fund 
whose public shareholders purchase shares on the basis of a prospectus 
containing the disclosure contemplated by condition 2 below, by the 
sole initial shareholder before offering the Fund's shares to the 
public.

[[Page 52382]]

    2. The prospectus for each Fund will disclose the existence, 
substance and effect of any order granted pursuant to the application. 
Each Fund will hold itself out to the public as employing the Manager 
of Managers Structure described in the application. The prospectus will 
prominently disclose that the Advisor has ultimate responsibility 
(subject to oversight by the Board) to oversee the Sub-Advisors and 
recommend their hiring, termination and replacement.
    3. The Funds will inform shareholders of the hiring of a new Sub-
Advisor within 90 days after the hiring of that new Sub-Advisor 
pursuant to the Modified Notice and Access Procedures.
    4. The Advisor will not enter into a Sub-Advisory Agreement with 
any Affiliated Sub-Advisor without that agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    5. At all times, at least a majority of the Board will be 
Independent Trustees, and the nomination and selection of new or 
additional Independent Trustees will be placed within the discretion of 
the then-existing Independent Trustees.
    6. When a Sub-Advisor change is proposed for a Fund with an 
Affiliated Sub-Advisor, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
applicable Board minutes, that such change is in the best interests of 
the Fund and its shareholders and does not involve a conflict of 
interest from which the Advisor or the Affiliated Sub-Advisor derives 
an inappropriate advantage.
    7. Independent legal counsel, as defined in rule 0-1(a)(6) under 
the Act, will be engaged to represent the Independent Trustees. The 
selection of such counsel will be within the discretion of the then 
existing Independent Trustees.
    8. Each Advisor will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Advisor on a 
per-Fund basis. The information will reflect the impact on 
profitability of the hiring or termination of any Sub-Advisor during 
the applicable quarter.
    9. Whenever a Sub-Advisor is hired or terminated, the Advisor will 
provide the Board with information showing the expected impact on the 
profitability of the Advisor.
    10. The Advisor will provide general management services to a Fund, 
including overall supervisory responsibility for the general management 
and investment of a Fund's assets and, subject to review and approval 
of the Board, will (i) set a Fund's overall investment strategies; (ii) 
evaluate, select and recommend Sub-Advisors to manage all or part of a 
Fund's assets; (iii) when appropriate, allocate and reallocate a Fund's 
assets among multiple Sub-Advisors; (iv) monitor and evaluate the 
performance of Sub-Advisors; and (v) implement procedures reasonably 
designed to ensure that the Sub-Advisors comply with a Fund's 
investment objective, policies and restrictions.
    11. No trustee or officer of the Trust or of a Fund, or director, 
manager or officer of the Advisor, will own directly or indirectly 
(other than through a pooled investment vehicle that is not controlled 
by such person) any interest in a Sub-Advisor, except for (i) ownership 
of interests in the Advisor or any entity that controls, is controlled 
by or is under common control with the Advisor; or (ii) ownership of 
less than 1% of the outstanding securities of any class of equity or 
debt of a publicly traded company that is either a Sub-Advisor or an 
entity that controls, is controlled by or is under common control with 
a Sub-Advisor.
    12. Each Fund will disclose in its registration statement the 
Aggregate Fee Disclosure.
    13. Any new Sub-Advisory Agreement or any amendment to an existing 
Advisory Agreement or Sub-Advisory Agreement that directly or 
indirectly results in an increase in the aggregate advisory fee rate 
payable by a Fund will be submitted to the Fund's shareholders for 
approval.
    14. In the event the Commission adopts a rule under the Act 
providing substantially similar relief to that in the order requested 
in the application, the requested order will expire on the effective 
date of that rule.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-20869 Filed 9-2-14; 8:45 am]
BILLING CODE 8011-01-P