Document ID: SEC-2022-1685-0001
Agency: sec
Document Type: Notice
Title: Application: Franklin FTSE Russia ETF, a Series of Franklin Templeton ETF Trust, and Franklin Advisory Services, LLC
Posted Date: 2022-12-29T05:00Z

[Federal Register Volume 87, Number 249 (Thursday, December 29, 2022)]
[Notices]
[Pages 80238-80240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-28384]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34791; File No. 812-15416]

Franklin FTSE Russia ETF, a Series of Franklin Templeton ETF 
Trust, and Franklin Advisory Services, LLC; Notice of Application and 
Temporary Order

December 23, 2022.
Agency: Securities and Exchange Commission (``Commission'').

Action: Notice of application and a temporary order under Section 
22(e)(3) of the Investment Company Act of 1940 (the ``Act'').

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Summary of Application:  Applicants request a temporary order to permit 
Franklin FTSE Russia ETF (the ``Fund''), a series of Franklin Templeton 
ETF Trust (the ``Trust''), to suspend the right of redemption of its 
outstanding redeemable securities and postpone the date of payment of 
redemption proceeds with respect to redemption orders received but not 
yet paid.

Applicants:  The Trust, on behalf of the Fund, and Franklin Advisory 
Services, LLC, the Fund's investment adviser (``Adviser'' and together 
with the Trust, the ``Applicants'').

Filing Date:  The application was filed on December 23, 2022.

Hearing or Notification of Hearing:  Interested persons may request a 
hearing by emailing to the Commission's Secretary at [email protected] and serving Applicants with a copy of the request by 
email, if an email address is listed for the relevant Applicant below, 
or personally or by mail, if a physical address is listed for the 
relevant Applicant below. Hearing requests should be received by the 
Commission by 5:30 p.m. on January 19, 2023, 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 at [email protected].

ADDRESSES: The Commission: [email protected]. Applicants: J. 
Stephen Feinour, Jr., Esq. and Bruce G. Leto, Esq., Stradley Ronon 
Stevens and Young, LLP, 2005 Market Street, Suite 2600, Philadelphia, 
PA 19103-7018, with copies to Navid J. Tofigh, Franklin Templeton 
Investments, One Franklin Parkway, San Mateo, CA 94403-1906.

FOR FURTHER INFORMATION CONTACT: Christopher D. Carlson, Senior 
Counsel, Trace W. Rakestraw, Branch Chief, or Daniele Marchesani, 
Assistant Chief Counsel, at (202) 551-6825 (Division of Investment 
Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: For Applicants' representations, legal 
analysis, and conditions, please refer to Applicants' application, 
dated December 23, 2022, which may be obtained via the Commission's 
website by searching for the file number at the top of this document, 
or for an Applicant using the Company name search field, on the SEC's 
EDGAR system. The SEC's EDGAR system may be searched at https://www.sec.gov/edgar/searchedgar/legacy/companysearch.html. You may also 
call the SEC's Public Reference Room at (202) 551-8090.

Background

    1. The Trust is registered under the Act as an open-end series 
management investment company. Adviser is the investment adviser to the 
Fund, a series of the Trust. Adviser is registered as an investment 
adviser under the Investment Advisers Act of 1940.
    2. The Fund is a non-diversified exchange-traded fund (``ETF'') 
that operates pursuant to Rule 6c-11 under the Act, which provides that 
shares of an ETF can be purchased or redeemed directly from the ETF at 
net asset value solely by authorized participants (``APs'') and only in 
aggregations of a specified number of shares. Shares of the Fund are 
listed on NYSE Arca, Inc. (``NYSE Arca'').
    3. The Fund's investment goal is to seek to provide investment 
results that closely correspond, before fees and expenses, to the 
performance of an index composed of Russian equities (the ``Underlying 
Index''). On March 7, 2022, in light of ongoing issues related to

[[Page 80239]]

Russia's invasion of Ukraine, FTSE Russell suspended rebalancings/
reconstitutions of the Underlying Index, including application of the 
capping methodology, as well as other index policies until further 
notice.
    4. Applicants state that the request for relief arises from the 
effect of geopolitical affairs on transactions in the Russian equity 
markets and on the relevant markets for Russian equity securities 
generally, and on related clearance and payment systems. As a result of 
these geopolitical affairs, virtually all of the Fund's direct and 
indirect holdings of Russian equity securities have become illiquid and 
are fair valued at zero.
    5. Effective March 1, 2022, the Fund temporarily suspended new 
creations of its shares until further notice due to concerns about 
newly imposed restrictions impacting the ability of U.S. investors to 
transact in securities in the Underlying Index, among other reasons.\1\ 
Prior to market open on March 4, 2022, NYSE Arca halted trading of the 
Fund's shares in light of ongoing issues related to Russia's invasion 
of Ukraine.
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    \1\ See Exchange-Traded Funds, Investment Company Act Release 
Number 33646 (Sept. 25, 2019) (``[A]n ETF generally may suspend the 
issuance of creation units only for a limited time and only due to 
extraordinary circumstances, such as when the markets on which the 
ETF's portfolio holdings are traded are closed for a limited period 
of time.'').
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    6. Applicants anticipate that the Fund's shares will be delisted by 
NYSE Arca on a date 15 days after the requested relief is granted (or 
an earlier date if NYSE Arca determines in its discretion to delist 
shares of the Fund, which may occur even if the requested relief is not 
granted). If shares of the Fund are delisted by NYSE Arca, the Fund 
will not be able to continue to operate as an ETF, pursuant to Rule 6c-
11.
    7. If the order requested in the Application is granted, pursuant 
to the Plan of Liquidation and Dissolution of Series (the ``Plan of 
Liquidation'') approved by the Board of Trustees of the Trust (the 
``Board''), the Fund will distribute in liquidation all of its assets 
to shareholders, less any provision for payment of any liabilities, 
including the costs of the liquidation that would be borne by the Fund, 
prior to its termination. Other than the amount of cash that is 
expected to be included in one or more liquidating distributions, the 
Fund will have no assets of realizable value, and the Fund's positions 
in Russian securities are not transferable by the Fund. If some or all 
of those Russian securities were at some point before the Fund's final 
termination determined to have a greater value, it is possible that 
they would continue not to be transferable at that time. In addition, 
it is possible that even if Russian securities were able to be sold, 
local regulations may not permit the proceeds of any such sale(s) to be 
converted to U.S. dollars which are freely available to the Fund. The 
Fund's Russian equity securities will therefore remain in the Fund 
until they can be sold and converted into U.S. dollars (with the 
proceeds distributed to the Fund's shareholders) or are permanently 
written off, in each case as determined by the Adviser and approved by 
the Board.
    8. Applicants believe the requested relief will permit the Fund to 
liquidate its holdings in the manner described above without the risk 
that it might be required to meet redemption requests submitted when 
the Fund would have no or few assets to meet the redemption requests. 
In addition, applicants state that suspension of redemptions prior to a 
distribution in liquidation will ensure that shareholders submitting 
such redemption requests will participate in the liquidation and also 
will be entitled to share in any liquidating distribution. 
Notwithstanding the present inability to dispose of Russian securities 
held by the Fund, Applicants have determined to seek the requested 
order at this time because Applicants believe that liquidation of the 
Fund is in the best interests of the Fund's shareholders. Without the 
requested relief, the Fund will be required to satisfy redemption 
requests from APs, while other investors would be unable to trade the 
Fund's shares. Although the Fund has received no redemption orders 
since the invasion began, it is possible that redemption orders could 
be received at any time.
    9. In addition, as noted above, the NYSE Arca may determine in its 
discretion to delist shares of the Fund if the requested relief is not 
granted. The Fund will not be eligible to rely on Rule 6c-11 once the 
Fund's shares are delisted by NYSE Arca. As a consequence, to the 
extent that the Fund is obligated to satisfy any individual redemption 
requests received from non-AP shareholders of the Fund, the Fund would 
be unable to accept or process such redemption requests from an 
operational perspective because the Fund and its service providers do 
not have the operational infrastructure to enable the Fund to engage in 
non-AP primary market transactions. The Fund therefore would not, for 
its part, initiate delisting of the Fund's shares with NYSE Arca until 
after the requested relief is granted.\2\
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    \2\ It is not anticipated that NYSE Arca will delist the Fund's 
shares before the Fund's requested relief is granted by the SEC.
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Relief Requested

    1. Applicants request an order pursuant to Section 22(e) of the Act 
to suspend the right of redemption with respect to shares of the Fund 
effective December 23, 2022, and postpone the date of payment of 
redemption proceeds with respect to redemption orders received on or 
after December 21, 2022 but not yet paid as of December 23, 2022, for 
more than seven days after the tender of securities to the Fund, until 
the Fund completes the liquidation of its portfolio and distributes all 
its assets to the shareholders, or until the Commission rescinds the 
order granted herein. Applicants believe that the relief requested is 
appropriate for the protection of shareholders of the Fund.

Applicants' Legal Analysis

    1. Section 22(e)(1) of the Act provides that a registered 
investment company may not suspend the right of redemption or postpone 
the date of payment or satisfaction upon redemption of any redeemable 
security in accordance with its terms for more than seven days after 
the tender of such security to the company or its designated agent 
except for any period during which the New York Stock Exchange 
(``NYSE'') is closed other than customary week-end and holiday 
closings, or during which trading on the NYSE is restricted.
    2. Section 22(e)(3) of the Act provides that redemptions may be 
suspended by a registered investment company for such other periods as 
the Commission may by order permit for the protection of security 
holders of the registered investment company.
    3. Applicants submit that granting the requested relief would be 
for the protection of the shareholders of the Fund, as provided in 
Section 22(e)(3) of the Act. Applicants assert that, in requesting an 
order by the Commission, the Applicants' goal is to ensure that all of 
the Fund's shareholders will be treated appropriately and fairly in 
view of the otherwise detrimental effect on the Fund of the illiquidity 
of the Fund's investments and the ongoing uncertainty surrounding the 
Russian equity markets. The requested relief is intended to permit an 
orderly liquidation of the Fund's portfolio and ensure that all of the 
Fund's shareholders are protected in the process.

[[Page 80240]]

Applicants' Conditions

    Applicants agree that any order of the Commission granting the 
requested relief will be subject to the following conditions:
    1. The Board, including a majority of the Independent Trustees,\3\ 
will adopt or has adopted the Plan of Liquidation for the orderly 
liquidation of Fund assets and distribution of appropriate payments to 
Fund shareholders.
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    \3\ ``Independent Trustees'' means trustees who are not 
``interested persons'' of the Trust, as such term is defined in 
section 2(a)(19) of the Act.
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    2. Pending liquidating distributions, the Fund will invest proceeds 
of cash dispositions of portfolio securities solely in U.S. government 
securities, money market funds that are registered under the Act and 
comply with the requirements of Rule 2a-7 under the Act, cash 
equivalents, securities eligible for purchase by a registered money 
market fund meeting the requirements of Rule 2a-7 under the Act with 
legal maturities not in excess of 90 days and, if determined to be 
necessary to protect the value of a portfolio position in a rights 
offering or other dilutive transaction, additional securities of the 
affected issuer.
    3. The Fund's assets will be distributed to the Fund's shareholders 
solely in accordance with the Plan of Liquidation.
    4. The Fund and the Adviser will make and keep true, accurate, and 
current all appropriate records, including but not limited to those 
surrounding the events leading to the requested relief, the Plan of 
Liquidation, the sale of Fund portfolio securities, the distribution of 
Fund assets, and communications with shareholders (including any 
complaints from shareholders and responses thereto).
    5. The Fund and the Adviser will promptly make available to 
Commission staff all files, books, records, and personnel, as 
requested, relating to the Fund.
    6. The Fund and the Adviser will provide periodic reporting to 
Commission staff regarding their activities carried out pursuant to the 
Plan of Liquidation.
    7. The Adviser, its affiliates, and its and their associated 
persons will not receive any fee for managing the Fund.
    8. The Fund will be in liquidation and will not be engaged and does 
not propose to engage in any business activities other than those 
necessary for the protection of its assets, the protection of 
shareholders, and the winding-up of its affairs, as contemplated by the 
Plan of Liquidation.
    9. The Fund and the Adviser will appropriately convey accurate and 
timely information to shareholders of the Fund, before or promptly 
following the effective date of the liquidation, with regard to the 
status of the Fund and its liquidation (including posting such 
information on the Fund's website), and will thereafter from time to 
time do so to reflect material developments relating to the Fund or its 
status, including, without limitation, information concerning the dates 
and amounts of distributions, and press releases and periodic reports, 
and will maintain a toll-free number to respond to shareholder 
inquiries.
    10. The Fund and the Adviser shall consult with Commission staff 
prior to making any material amendments to the Plan of Liquidation.

Commission Finding

    Based on the representations and conditions in the application, the 
Commission permits the temporary suspension of the right of redemption 
for the protection of the Fund's shareholders. Under the circumstances 
described in the application, which require immediate action to protect 
the Fund's shareholders, the Commission concludes that it is not 
practicable to give notice or an opportunity to request a hearing 
before issuing the order.
    Accordingly, in the matter of Franklin FTSE Russia ETF, a series of 
Franklin Templeton ETF Trust, and Franklin Advisory Services, LLC (File 
No. 812-15416),
    It is ordered, pursuant to Section 22(e)(3) of the Act, that the 
requested relief from Section 22(e) of the Act is granted with respect 
to the Fund until it has liquidated, or until the Commission rescinds 
the order granted herein. This order shall be in effect as of December 
23, 2022, with suspension of redemption rights as requested by the 
Applicants to be effective as of December 23, 2022 and the postponement 
of payment of redemption proceeds to apply to redemption orders 
received on or after December 21, 2022 but not yet paid as of December 
23, 2022.

    By the Commission.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-28384 Filed 12-28-22; 8:45 am]
BILLING CODE 8011-01-P