Document ID: SEC-2011-1832-0001
Agency: sec
Document Type: Notice
Title: Applications: Genesis Capital, LLC and Northern Lights Fund Trust
Posted Date: 2011-11-29T05:00Z

[Federal Register Volume 76, Number 229 (Tuesday, November 29, 2011)]
[Notices]
[Pages 73748-73749]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30632]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29867; 812-13935]

Genesis Capital, LLC and Northern Lights Fund Trust; Notice of 
Application

November 21, 2011.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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Summary of Application: Applicants request an order that would permit 
them to enter into and materially amend subadvisory agreements without 
shareholder approval.

Applicants: Genesis Capital, LLC (``Genesis Capital'' or the 
``Adviser'') and Northern Lights Fund Trust (the ``Trust'').

DATES: Filing Dates: The application was filed on August 3, 2011, and 
amended on November 14, 2011.
    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 December 16, 2011, 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: Genesis Capital, 
7191 Wagner Way NW., Suite 302, Gig Harbor, WA 98335; Trust: 4020 South 
147th Street, Omaha, NE 68137.

FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at 
(202) 551-6826, or Dalia Osman Blass, 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, a Delaware statutory trust, is registered under the 
Act as an open-end management investment company and as of November 9, 
2011 was comprised of 123 individual registered series, including the 
SCA Absolute Return Fund and the SCA Directional Fund (the ``Absolute 
Return Fund'' and ``Directional Fund,'' respectively, and together, the 
``SCA Funds''), and 10 additional series that are in registration. The 
SCA Funds do not currently employ unaffiliated investment subadvisers 
(each, a ``Subadviser''), but anticipate doing so in the future.\1\ 
Genesis Capital, a Washington limited liability company, is, and each 
other Adviser will be, registered as an investment adviser under the 
Investment Advisers Act of 1940 (``Advisers Act''). Genesis Capital 
serves as the investment adviser of the Absolute Return Fund and 
Directional Fund, and an Adviser will serve as investment adviser to 
each future Fund, pursuant to investment advisory agreements 
(``Advisory Agreements''). The SCA Funds' Advisory Agreements were 
approved by the Trust's board of trustees (together with the board of 
directors or trustees of any other Fund, the ``Board''), including a 
majority of the trustees who are not ``interested persons,'' as defined 
in section 2(a)(19) of the Act, of the Trust or the Adviser 
(``Independent Trustees'') and will be approved by the initial 
shareholder of the Absolute Return Fund and Directional Fund, 
respectively, upon commencement of each respective Fund's operations.
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    \1\ Applicants also request relief with respect to any existing 
or future series of the Trust and any other existing or future 
registered open-end management investment company or series thereof 
that: (a) Is advised by the Adviser or any entity controlling, 
controlled by, or under common control with the Adviser or its 
successors (included within the term ``Adviser''); (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 (together with the SCA Funds, the 
``Funds'' and each, individually, a ``Fund''). For the purposes of 
the requested order, ``successor'' is limited to those one or more 
entities that would result from a reorganization into another 
jurisdiction or a change in the type of business organization. All 
existing entities that currently intend to rely on the requested 
order are named as applicants, and the Absolute Return Fund and 
Directional Fund are the only series that currently intend to rely 
on the requested order. If the name of any Fund contains the name of 
a Subadviser, the name of the Adviser will precede the name of the 
Subadviser.
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    2. Under the terms of the SCA Funds' Advisory Agreements, the 
Adviser is responsible for the overall management of the Absolute 
Return Fund's and Directional Fund's business affairs and selecting 
investments according to their respective investment objectives, 
policies and restrictions. For the investment management services that 
it provides to those Funds, the Adviser receives the fee specified in 
the Advisory Agreements. The Advisory Agreements also permit the 
Adviser to retain one or more subadvisers for the purpose of managing 
the investments of all or a portion of the assets of the Absolute 
Return Fund and Directional Fund. Pursuant to this authority, the 
Adviser may enter into investment subadvisory agreements with 
Subadvisers to provide investment advisory services to the Absolute 
Return Fund and Directional Fund, respectively (such agreements with 
Subadvisers, ``Subadvisory Agreements''). Each Subadviser will be 
registered as an investment adviser under the Advisers Act. The Adviser 
will supervise, evaluate and allocate assets to the Subadvisers, and 
make recommendations to the Board about their hiring, retention or 
release, at all times subject to the authority of the Board. The 
Adviser will compensate each Subadviser out of the fees paid to the 
Adviser under the Advisory Agreement.
    3. Applicants request an order to permit the Adviser, subject to 
Board approval, to enter into and materially amend Subadvisory 
Agreements without obtaining shareholder approval. The requested relief 
will not extend to any subadviser that is an affiliated person, as 
defined in section 2(a)(3) of the Act, of the Trust, a Fund or the 
Adviser, other than by reason of serving as a subadviser to one or more 
of the Funds (``Affiliated Subadviser'').

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 securities in a series investment company affected by a

[[Page 73749]]

matter must approve that matter if the Act requires shareholder 
approval.
    2. 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 provisions 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.
    3. Applicants assert that the shareholders expect the Adviser and 
the Board to select the Subadvisers for the Funds that are best suited 
to achieve each Fund's investment objective. Applicants assert that, 
from the perspective of the investor, the role of the Subadvisers is 
substantially equivalent to that of the individual portfolio managers 
employed by the Adviser. Applicants state that requiring shareholder 
approval of each Subadvisory Agreement would impose costs and 
unnecessary delays on the Funds, and may preclude the Adviser from 
acting promptly in a manner considered advisable by the Board. 
Applicants note that the Advisory Agreements and any Subadvisory 
Agreement with an Affiliated Subadviser will remain subject to section 
15(a) of the Act and rule 18f-2 under the Act, including the 
requirement for shareholder voting.

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 requested order, 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 initial shareholder(s) before 
offering shares of that Fund to the public.
    2. Each Fund relying on the requested order will disclose in its 
prospectus the existence, substance, and effect of any order granted 
pursuant to this application. Each Fund will hold itself out to the 
public as utilizing the Manager of Managers Structure. The prospectus 
will prominently disclose that the Adviser has ultimate responsibility 
(subject to oversight by the Board) to oversee the Subadvisers and 
recommend their hiring, termination, and replacement.
    3. Within 90 days of the hiring of a new Subadviser, shareholders 
of the affected Fund will be furnished all information about the new 
Subadviser that would be included in a proxy statement. To meet this 
obligation, each Fund will provide shareholders within 90 days of the 
hiring of a new Subadviser an information statement meeting the 
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 
14A under the Securities Exchange Act of 1934.
    4. The Adviser will not enter into a subadvisory agreement with any 
Affiliated Subadviser without such 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 of new or additional 
Independent Trustees will be placed within the discretion of the then-
existing Independent Trustees.
    6. Whenever a subadviser change is proposed for a Fund with an 
Affiliated Subadviser, 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 Adviser or the Affiliated Subadviser derives an 
inappropriate advantage.
    7. The Adviser will provide general management services to each 
Fund, including overall supervisory responsibility for the general 
management and investment of each Fund's assets and, subject to review 
and approval of the Board, will: (a) Set each Fund's overall investment 
strategies; (b) evaluate, select and recommend Subadvisers to manage 
all or a part of each Fund's assets; (c) allocate and, when 
appropriate, reallocate each Fund's assets among one or more 
Subadvisers; (d) monitor and evaluate the performance of Subadvisers; 
and (e) implement procedures reasonably designed to ensure that the 
Subadvisers comply with each Fund's investment objective, policies and 
restrictions.
    8. No trustee or officer of the Trust or a Fund, or director, 
manager, or officer of the Adviser, will own directly or indirectly 
(other than through a pooled investment vehicle that is not controlled 
by such person), any interest in a Subadviser, except for (a) Ownership 
of interests in the Adviser or any entity that controls, is controlled 
by, or is under common control with the Adviser, or (b) ownership of 
less than 1% of the outstanding securities of any class of equity or 
debt of any publicly traded company that is either a Subadviser or an 
entity that controls, is controlled by, or is under common control with 
a Subadviser.
    9. 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. 2011-30632 Filed 11-28-11; 8:45 am]
BILLING CODE 8011-01-P