Document ID: SEC-2009-1251-0001
Agency: sec
Document Type: Notice
Title: Rafferty Asset Management, LLC, et al.; Notice of Application
Posted Date: 2009-09-02T04:00Z

[Federal Register: September 2, 2009 (Volume 74, Number 169)]
[Notices]               
[Page 45495-45496]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02se09-92]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28889; File No. 812-13610]

 
Rafferty Asset Management, LLC, et al.; Notice of Application

August 27, 2009.
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'') granting 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, and under sections 6(c) and 17(b) 
of the Act for an exemption from sections 17(a)(1) and 17(a)(2) of the 
Act.

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    Applicants: Rafferty Asset Management, LLC (``Adviser'') and 
Direxion Shares ETF Trust (``Trust'').
    Summary of Application: Applicants request an order to amend a 
prior order that permits: (a) Series of an open-end management 
investment company to issue shares (``ETS'') redeemable in large 
aggregations only (``Creation Units''); (b) secondary market 
transactions in ETS to occur at negotiated prices; (c) dealers to sell 
ETS to purchasers in the secondary market unaccompanied by a 
prospectus, when prospectus delivery is not required by the Securities 
Act of 1933; (d) certain series to pay redemption proceeds, under 
certain circumstances, more than seven days after the tender of ETS for 
redemption; and (e) certain affiliated persons of the series to deposit 
securities into, and receive securities from, the series in connection 
with the purchase and redemption of Creation Units (``Prior 
Order'').\1\ Applicants seek to amend the Prior Order to: (a) Provide 
greater operational flexibility to the existing and future series of 
the Trust (``Funds''); (b) expand the category of Funds designed to 
correspond to the return of an underlying securities index 
(``Underlying Index'' and such Funds, the ``Conventional Funds'') to 
include Funds that seek to match the performance of an Underlying Index 
primarily focused on United States equity securities that apply a 
strategy referred to as 130/30 (``130/30 Funds''); (c) supersede the 
definition of Leveraged Funds and Inverse Funds in the application on 
which the Prior Order was issued (``Prior Application''); (d) delete 
the relief granted in the Prior Order from section 24(d) of the Act and 
revise the Prior Application accordingly; and (e) amend the terms and 
conditions of the Prior Application with respect to certain disclosure 
requirements.
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    \1\ Rafferty Asset Management, LLC, et al., Investment Company 
Act Release Nos. 28379 (Sep. 12, 2008) (notice) and 28434 (Oct. 6, 
2008) (order).
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    Filing Dates: The application was filed on December 17, 2008, and 
amended on February 13, 2009, June 3, 2009 and July 20, 2009.
    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 September 21, 2009, 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 who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090. Applicants, 33 Whitehall Street, 10th 
Floor, New York, New York 10004.

FOR FURTHER INFORMATION CONTACT: Laura L. Solomon, Senior Counsel, at 
(202) 551-6915, or Julia Kim Gilmer, Branch Chief, 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 offers series that operate pursuant to the Prior Order. The 
Adviser, which is registered as an investment adviser under the 
Investment Advisers Act of 1940 (``Advisers Act''), or an entity 
controlled by or under common control with the Adviser will serve as 
investment adviser to each Fund.
    2. Applicants request relief that would provide greater operational 
flexibility to the Funds by permitting: (a) The Funds to enter into 
short positions in the component securities comprising the relevant 
Underlying Index (``Component Securities''); (b) each Conventional Fund 
to invest at least 80% of its total assets (exclusive of collateral 
held for purposes of securities lending) in Component Securities and/or 
investments that have economic characteristics that are substantially 
identical to the economic characteristics of Component Securities; and 
(c) Leveraged Funds (defined below) to determine what percentage, if 
any, of its total assets to invest in Component Securities. Applicants 
state this greater operational flexibility will provide the Funds with 
the ability to pursue more cost-effective techniques in seeking to 
achieve their investment objectives. ``Leveraged Funds'' are Funds that 
seek a specified multiple, up to 300%, of the performance of an 
Underlying Index

[[Page 45496]]

and ``Inverse Funds'' are Funds that seek a specified multiple, up to 
300%, of the inverse performance of an Underlying Index.
    3. Applicants also seek to amend the terms and conditions of the 
Prior Application to provide that all representations and conditions 
contained in the Prior Application that require a Fund to disclose 
particular information in the Fund's prospectus (``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) (``Summary Prospectus Rule''). Applicants state that such 
amendment is warranted because the Commission's amendments to Form N-1A 
with regard to exchange-traded funds as part of the Summary Prospectus 
Rule reflect the Commission's view with respect to the appropriate 
types of prospectus and annual report disclosures for an exchange-
traded fund.
    4. Applicants also seek relief to introduce Conventional Funds that 
will be 130/30 Funds. Applicants state that in general, ``130/30'' 
strategies: (a) establish long positions in securities such that total 
long exposure amounts to approximately 130% of net assets; and (b) 
simultaneously establish short positions in other securities such that 
total short exposure amounts to approximately 30% of net assets. Each 
130/30 Fund will hold at least 80% of its total assets (exclusive of 
collateral held for purposes of securities lending) in the Component 
Securities that are specified for the long positions and could invest 
up to 20% in such Component Securities, cash equivalents or other 
securities. The 130/30 Funds would also enter into financial 
instruments to obtain any remaining 50% long and 30% short positions 
dictated by its Underlying Index. The 130/30 Funds will provide full 
portfolio disclosure so that the intraday value of a 130/30 Fund can 
accurately be calculated, market participants will be able to 
understand the principal investment strategies of the 130/30 Funds, and 
informed trading of 130/30 Funds' ETS may occur. The creation and 
redemption process for the 130/30 Funds will be the same as for the 
existing Leveraged Funds in that Creation Units of 130/30 Funds will 
generally be purchased and redeemed for a basket of in-kind securities 
and cash, or solely cash.
    5. Applicants believe that the requested relief continues to meet 
the necessary exemptive standards.
    Applicants' Legal Analysis:
    1. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction, or any class of persons, 
securities or transactions, from any provision of the Act, if and to 
the extent that 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.
    2. Applicants seek to amend the Prior Order to delete the relief 
granted from section 24(d) of the Act. Applicants state 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 
Rule should supplant any need by a Fund to use a product description 
(``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 Product 
Description including in the conditions, and the deletion of condition 
4 of the Prior Order.
    Applicants' Conditions:
    Applicants agree that any amended order granting the requested 
relief will be subject to the same conditions as those imposed by the 
Prior Order except for condition 4 which will be deleted. All 
representations and conditions contained in the application and the 
Prior Application that require a Fund to disclose particular 
information in the Fund's Prospectus and/or annual report shall remain 
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. E9-21139 Filed 9-1-09; 8:45 am]

BILLING CODE 8010-01-P