Document ID: SEC-2016-1139-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq Stock Market, LLC
Posted Date: 2016-07-05T04:00Z

[Federal Register Volume 81, Number 128 (Tuesday, July 5, 2016)]
[Notices]
[Pages 43678-43680]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15761]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78188; File No. SR-NASDAQ-2016-082]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Listing and Trading of the Shares of the AdvisorShares 
Market Adaptive Unconstrained Income ETF of the AdvisorShares Trust

June 28, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 15, 2016, The Nasdaq Stock Market LLC (``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III, below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes a rule change to the investment objective and the 
means of achieving the investment objective with

[[Page 43679]]

respect to the AdvisorShares Market Adaptive Unconstrained Income ETF 
(the ``Fund''), formerly known as the AdvisorShares Sunrise Global 
Multi-Strategy ETF. Shares of the Market Adaptive Unconstrained Income 
ETF are currently listed and traded on the Exchange''). The Fund is a 
series of AdvisorShares Trust (the ``Trust''), under Nasdaq Rule 5735 
(``Managed Fund Shares'').\3\ The shares of the Fund are collectively 
referred to herein as the ``Shares.''
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    \3\ The Commission approved Nasdaq Rule 5735 in Securities 
Exchange Act Release No. 57962 (June 13, 2008) 73 FR 35175 (June 20, 
2008) (SR-NASDAQ-2008-039). There are already multiple actively-
managed funds listed on the Exchange; see Securities Exchange Act 
Release No. 66489 (February 29, 2012), 77 FR 13379 (March 6, 2012) 
(SR-NASDAQ-2012-004) (order approving listing and trading of 
WisdomTree Emerging Markets Corporate Bond Fund). Additionally, the 
Commission has previously approved the listing and trading of a 
number of actively-managed WisdomTree funds on NYSE Arca, Inc. 
pursuant to Rule 8.600 of that exchange. See, e.g., Securities 
Exchange Act Release No. 64643 (June 10, 2011), 76 FR 35062 (June 
15, 2011) (SR-NYSEArca-2011-21) (order approving listing and trading 
of WisdomTree Global Real Return Fund). The Exchange believes the 
proposed rule change raises no significant issues not previously 
addressed in those prior Commission orders.
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    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Nasdaq included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Nasdaq has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Commission has previously approved the listing and trading on 
the Exchange of Shares of the AdvisorShares Market Adaptive 
Unconstrained Income ETF (the ``Fund''), formerly known as the 
AdvisorShares Sunrise Global Multi-Strategy ETF, a series of 
AdvisorShares Trust (the ``Trust''), under Nasdaq Rule 5735 (``Managed 
Fund Shares'').\4\ The shares of the Fund are collectively referred to 
herein as the ``Shares.'' Shares of the Fund are currently listed and 
traded on the Exchange.
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    \4\ See Securities Exchange Act Release No. 72426 (June 18, 
2014), 79 FR 35825 (June 24, 2014) (SR-NASDAQ-2014-035) (order 
approving listing and trading of AdvisorShares Sunrise Global Multi-
Strategy ETF, the ``Prior Release'').
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    The Shares are offered by the Trust, which is registered with the 
Commission as an open-end management investment company. The investment 
advisor to the Fund is AdvisorShares Investments, LLC (the 
``Adviser''). The sub-adviser for the Fund is American Wealth 
Management (the ``Sub-Adviser''). The Adviser is not registered as a 
broker-dealer or affiliated with a broker-dealer. The Sub-advisor is 
registered as a broker dealer, but has implemented a ``fire wall'' 
between the investment adviser and the broker-dealer.
    Paragraph (g) of Rule 5735 provides that if the investment adviser 
to the investment company issuing Managed Fund Shares is affiliated 
with a broker-dealer, such investment adviser shall erect a ``fire 
wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio.\5\ In addition, paragraph 
(g) further requires that personnel who make decisions on the open-end 
fund's portfolio composition must be subject to procedures designed to 
prevent the use and dissemination of material, non-public information 
regarding the open-end fund's portfolio. Rule 5735(g) is similar to 
Nasdaq Rule 5705(b)(5)(A)(i); however, paragraph (g) in connection with 
the establishment of a ``fire wall'' between the investment adviser and 
the broker-dealer reflects the applicable open-end fund's portfolio, 
not an underlying benchmark index, as is the case with index-based 
funds. In the event (a) the Adviser or the Sub-Adviser becomes newly 
affiliated with a broker-dealer or registers as a broker-dealer, or (b) 
any new adviser or sub-adviser is a registered broker-dealer or becomes 
affiliated with a broker-dealer, it will implement a fire wall with 
respect to its relevant personnel and/or such broker-dealer affiliate, 
if applicable, regarding access to information concerning the 
composition and/or changes to the portfolio and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio.
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    \5\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and its related personnel are 
subject to the provisions of Rule 204A-1 under the Advisers Act 
relating to codes of ethics. This rule requires investment advisers 
to adopt a code of ethics that reflects the fiduciary nature of the 
relationship to clients as well as compliance with other applicable 
securities laws. Accordingly, procedures designed to prevent the 
communication and misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violation, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
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    Under normal market conditions,\6\ the Fund will seek to achieve 
its investment objective by investing at least 80% of its net assets in 
the principal investments as discussed below. In this proposed rule 
change, the Exchange proposes to reflect a change to the investment 
objective and the means that the Adviser will utilize to implement the 
Fund's investment objective. The Prior Release stated that the Fund's 
investment objective is to provide long-term total return by investing 
long and short in a variety of asset classes and investment strategies. 
The Adviser intends to revise the investment objective in the Prior 
Release to state that the Fund's investment objective will be to 
provide long-term total return and income with a secondary emphasis on 
capital preservation. The Prior Release further stated that the Fund, 
as part of its principal investments, will invest in exchange-traded 
funds (``ETFs'') and other exchange-traded

[[Page 43680]]

products, as well as U.S. treasuries, stock index futures, single stock 
futures, fixed income futures, currencies and currency futures.
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    \6\ The term ``under normal market conditions'' as used herein 
includes, but is not limited to, the absence of adverse market, 
economic, political or other conditions, including extreme 
volatility or trading halts in the securities markets or the 
financial markets generally; operational issues causing 
dissemination of inaccurate market information; or force majeure 
type events such as systems failure, natural or man-made disaster, 
act of God, armed conflict, act of terrorism, riot or labor 
disruption or any similar intervening circumstance. On a temporary 
basis, including for defensive purposes, during the initial invest-
up period and during periods of high cash inflows or outflows, the 
Fund may depart from its principal investment strategies; for 
example, it may hold a higher than normal proportion of its assets 
in cash. During such periods, the Fund may not be able to achieve 
its investment objective. The Fund may adopt a defensive strategy 
when the Adviser and/or the Sub-Adviser believes securities in which 
the Fund normally invests have elevated risks due to political or 
economic factors and in other extraordinary circumstances.
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    The Adviser proposes to revise the representations as stated in the 
Prior Release to now state that the Fund, as part of its principal 
investments, will invest in exchange-traded funds and other exchange-
traded products including but not limited to, exchange-traded notes 
(``ETNs''), and closed-end funds (together with ETFs, ``ETPs''). The 
Adviser also proposes to revise the representations in the Prior 
Release and state that the Fund may now only invest in U.S. treasuries, 
stock index futures, single stock futures, fixed income futures, 
currencies, and currency futures as ``other investments,'' up to a 
maximum of 20% of the Fund's net assets, and no longer as part of the 
principal investment strategy.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act, in general, and Section 6(b)(5) of the Act, in particular, 
in that it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and in general, to protect 
investors and the public interest. The Fund will continue to comply 
with all the initial and continued listing requirements under Nasdaq 
Rule 5735.
    The Exchange proposes that the Fund be permitted to amend its 
investment objective to state that the Fund will invest in ETPs, which 
will better-define the objective of the Fund. The Adviser represents 
that U.S. treasuries, stock index futures, single stock futures, fixed 
income futures, currencies, and currency futures will no longer be part 
of the principal investment strategy, and will only be permitted as 
``other investments,'' up to a maximum of 20% of the Fund's net assets. 
Except for the changes noted above, all other representations made in 
the Prior Release remain unchanged.
    For the above reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes the 
proposed rule change will accommodate continued listing and trading of 
Managed Fund Shares and will permit the Adviser additional flexibility 
in achieving the Fund's investment objectives.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \7\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2016-082 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2016-082. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2016-082 and should 
be submitted on or before July 26, 2016.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-15761 Filed 7-1-16; 8:45 am]
 BILLING CODE 8011-01-P