[Federal Register: March 18, 2010 (Volume 75, Number 52)]
[Notices]
[Page 13194-13198]
[DOCID:fr18mr10-120]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61683; File No. SR-NYSEArca-2010-10]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to Listing of HTE Global Relative
Value ETF

March 10, 2010.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on February 25, 2010, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. 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\ 15 U.S.C. 78a.
    \3\ 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

    The Exchange proposes to list and trade the following Managed Fund
Shares \4\ (``Shares'') under NYSE Arca Equities Rule 8.600: HTE Global
Relative Value ETF. The text of the proposed rule change is available
at the Exchange, the Commission's Public Reference Room, and http://
www.nyse.com.
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    \4\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a) (``1940 Act'') organized as an
open-end investment company or similar entity that invests in a
portfolio of securities selected by its investment advisor
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Investment Company Units,
listed and traded on the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that correspond
generally to the price and yield performance of a specific foreign
or domestic stock index, fixed income securities index or
combination thereof.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization
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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to list and trade the following Managed Fund
Shares \5\ (``Shares'') under NYSE Arca Equities Rule 8.600: HTE Global
Relative Value ETF (the ``Fund'').\6\ The Shares will be offered by
AdvisorShares Trust (the ``Trust''), a statutory trust organized under
the laws of the State of Delaware and registered with the Commission as
an open-end management investment company.\7\
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    \5\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a) (``1940 Act'') organized as an
open-end investment company or similar entity that invests in a
portfolio of securities selected by its investment advisor
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Investment Company Units,
listed and traded on the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that correspond
generally to the price and yield performance of a specific foreign
or domestic stock index, fixed income securities index or
combination thereof.
    \6\ The Commission previously approved listing and trading on
the Exchange of the following actively managed funds under Rule
8.600. See Securities Exchange Act Release Nos. 57619 (April 4,
2008), 73 FR 19544 (April 10, 2008) (SR-NYSEArca-2008-25) (order
approving Rule 8.600 and Exchange listing and trading of PowerShares
Active AlphaQ Fund, PowerShares Active Alpha Multi-Cap Fund,
PowerShares Active Mega-Cap Portfolio and PowerShares Active Low
Duration Portfolio); 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008)
(SR-NYSEArca-2008-31) (order approving Exchange listing and trading
of twelve actively-managed funds of the WisdomTree Trust); 59826
(April 28, 2009), 74 FR 20512 (May 4, 2009) (SR-NYSEArca-2009-22)
(order approving Exchange listing and trading of Grail American
Beacon Large Cap Value ETF); 60460 (August 7, 2009), 74 FR 41468
(August 17, 2009) (SR-NYSEArca-2009-55) (order approving Exchange
listing and trading of Dent Tactical ETF); 60717 (September 24,
2009), 74 FR 50853 (October 1, 2009) (SR-NYSEArca-2009-74 (order
approving listing of four Grail Advisors RP ETFs); 60975 (November
10, 2009), 74 FR 59590 (November 18, 2009) (SR-NYSEArca-2009-83)
(order approving listing of Grail American Beacon International
Equity ETF); 60981 (November 10, 2009), 74 FR 59594 (November 18,
2009) (SR-NYSEArca-2009-79) (order approving listing of five fixed
income funds of the PIMCO ETF Trust).
    \7\ The Trust is registered under the 1940 Act. On December 29,
2009, the Trust filed with the Commission Post-Effective Amendment
No. 2 to Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a)
relating to the Fund (File Nos. 333-157876 and 811-22110) (the
``Registration Statement''). The description of the operation of the
Trust and the Fund herein is based on the Registration Statement.
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HTE Global Relative Value ETF
    The investment advisor to the Fund is AdvisorShares Investments,
LLC (the ``Advisor''). HTE Asset Management, LLC is the sub-advisor to
the Fund (``Sub-Advisor''). Foreside Fund Services, LLC is the
principal underwriter and distributor of the Fund's Shares. The Bank of
New York Mellon is the administrator, transfer agent and custodian for
the Fund.
    Commentary .07 to Rule 8.600 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.\8\ In
addition, Commentary .07 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
nonpublic information regarding the open-end fund's portfolio. The
Advisor and Sub-Advisor are not affiliated with a broker-dealer.\9\ Any
additional Fund sub-advisers that are affiliated with a broker-dealer
will be required to implement a fire wall with respect to such broker-
dealer regarding access to information concerning the composition and/
or changes to a portfolio.
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    \8\ 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 investment adviser is 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.
    \9\ The Exchange represents that AdvisorShares Investments, LLC,
as the investment adviser of the Funds, and HTE Asset Management,
LLC as the Sub-Advisor, and their respective related personnel, are
subject to Investment Advisers Act Rule 204A-1. This Rule
specifically requires the adoption of a code of ethics by an
investment adviser to include, at a minimum: (i) Standards of
business conduct that reflect the firm's/personnel fiduciary
obligations; (ii) provisions requiring supervised persons to comply
with applicable Federal securities laws; (iii) provisions that
require all access persons to report, and the firm to review, their
personal securities transactions and holdings periodically as
specifically set forth in Rule 204A-1; (iv) provisions requiring
supervised persons to report any violations of the code of ethics
promptly to the chief compliance officer (``CCO'') or, provided the
CCO also receives reports of all violations, to other persons
designated in the code of ethics; and (v) provisions requiring the
investment adviser to provide each of the supervised persons with a
copy of the code of ethics with an acknowledgement by said
supervised persons. 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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    According to the Registration Statement, the investment goal of the
Fund is average annual returns in excess of the total return of the
MSCI World Index (the ``Index''), with comparable volatility and little
to no correlation with the Index.
    The Fund is considered a ``fund-of-funds'' that seeks to achieve
its investment objective by primarily investing in both long and short
positions in other exchange-traded funds \10\ (the ``Underlying ETFs'')
that offer diversified exposure to global regions, countries, styles
(market capitalization, value, growth, etc.) or sectors, and other
exchange-traded products, including but not limited to exchange-traded
notes (``ETNs''), exchange-traded currency trusts and closed-end funds.
In addition, the Fund may use liquid futures contracts tied to broad
market indices (e.g., futures contracts based on the S&P 500 Index, the
MSCI EAFE Index and/or the MSCI Emerging Markets Index) when
establishing net long or net short exposure on top of the core long/
short portfolio.\11\ According to the Registration Statement, the
Underlying ETFs in which the Fund will invest will primarily be index-
based ETFs that hold substantially all of their assets in securities
representing a specific index.
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    \10\ The Fund's investment in Underlying ETFs will be consistent
with the requirements of Section 12(d)(1) of the 1940 Act, or any
rule, regulation or order of the SEC or interpretation thereof. The
Fund will only make such investments in conformity with the
requirements of Section 817 of the Internal Revenue Code of 1986.
    \11\ The Registration Statement states that the Fund may use
futures contracts and related options for bona fide hedging;
attempting to offset changes in the value of securities held or
expected to be acquired or be disposed of; attempting to gain
exposure to a particular market, index or instrument; or other risk
management purposes.
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    The Sub-Advisor seeks to achieve the Fund's investment objective by
taking long positions in the Underlying ETFs that invest in what it
believes to be the most relatively attractive global regions and
countries within those regions, and by establishing an equivalent
dollar amount of short positions in the Underlying ETFs that invest in
what it believes to be the most relatively unattractive global regions
and countries within those regions. By maintaining a core portfolio
construction of equal long and short dollar exposure, the Sub-Advisor
seeks to minimize the influence of directional trends and market
exposure (``beta''), and instead seeks to profit from the relative
performance between long and short positions in global regions,
countries, styles or sectors. From time-to-time, the Sub-Advisor may
also add directional exposure of up to 50% net long or net short
exposure on top of its core long/short portfolio. In doing so, the Sub-
Advisor seeks to generate additional profits for the Fund by being net
long when stock markets are rising and net short when markets are
falling.
    The Fund may invest in futures and options on futures contracts.
The Fund will reduce the risk that it will be unable to close out a
futures contract by only entering into futures contracts that are
traded on a national futures exchange regulated by the Commodity
Futures Trading Commission (``CFTC''). To the extent the Fund uses
futures and/or options on futures, it will do so in accordance with
Rule 4.5 under the Commodity Exchange Act (``CEA''). According to the
Registration Statement, the Trust, on behalf of all of its series,
including the Fund, has filed a notice of eligibility for exclusion
from the definition of the term ``commodity pool operator'' in
accordance with Rule 4.5 and, therefore, the Fund is not subject to
registration or regulation as a commodity pool operator under the CEA.
    According to the Registration Statement, while the Fund does not
anticipate doing so, the Fund may purchase or hold illiquid securities,
including securities that are not readily marketable and securities
that are not registered (``restricted securities'') under the 1933 Act,
but which can be offered and sold to ``qualified institutional buyers''
under Rule 144A under the 1933 Act. The Fund will not invest more than
15% of the Fund's net assets in illiquid securities. If the percentage
of the Fund's net assets invested in illiquid securities exceeds 15%
due to market activity, the Fund will take appropriate measures to
reduce its holdings of illiquid securities. The term ``illiquid
securities'' for this purpose means securities that cannot be disposed
of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued the
securities.\12\
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    \12\ This 15% investment limitation is a non-fundamental policy
of the Fund and may be changed with respect to the Fund by the
Board.
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    The Fund may enter into repurchase agreements with financial
institutions; may enter into reverse repurchase agreements as
referenced in the Registration Statement; \13\ may engage in

short sales transactions; may buy and sell stock index futures
contracts with respect to any stock index traded on a recognized stock
exchange or board of trade; may purchase and write put and call options
on indices and enter into related closing transactions; may enter into
swap agreements, including, but not limited to, equity index swaps and
interest rate swap agreements; may utilize swap agreements in an
attempt to gain exposure to the stocks making up an index of securities
in a market without actually purchasing those stocks, or to hedge a
position; may purchase securities on a when-issued or delayed-delivery
basis; and may invest in U.S. Treasury zero-coupon bonds. The Fund, or
the ETFs in which it invests, may invest in U.S. government securities.
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    \13\ According to the Registration Statement, reverse repurchase
agreements involve sales by the Fund of portfolio assets
concurrently with an agreement by the Fund to repurchase the same
assets at a later date at a fixed price. Generally, the effect of
such a transaction is that the Fund can recover all or most of the
cash invested in the portfolio securities involved during the term
of the reverse repurchase agreement, while the Fund will be able to
keep the interest income associated with those portfolio securities.
Such transactions are advantageous only if the interest cost to the
Fund of the reverse repurchase transaction is less than the cost of
obtaining the cash otherwise.
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    To respond to adverse market, economic, political or other
conditions, the Fund may invest 100% of its total assets, without
limitation, in high-quality short-term debt securities and money market
instruments. The Fund may be invested in these instruments for extended
periods, depending on the Sub-Advisor's assessment of market
conditions. These short-term debt securities and money market
instruments include shares of other mutual funds, commercial paper,
certificates of deposit, bankers' acceptances, U.S. Government
securities and repurchase agreements.
    The Fund is subject to the following investment limitations that
are fundamental policies and may not be changed without the vote of a
majority of the outstanding voting securities of the Fund:
    Diversification. The Fund may not (i) with respect to 75% of its
total assets, purchase securities of any issuer (except securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or shares of investment companies) if, as a result,
more than 5% of its total assets would be invested in the securities of
such issuer; or (ii) acquire more than 10% of the outstanding voting
securities of any one issuer.\14\
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    \14\ This diversification standard is contained in Section
5(b)(1) of the 1940 Act.
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    Concentration. The Fund may not invest 25% or more of its total
assets in the securities of one or more issuers conducting their
principal business activities in the same industry or group of
industries. The Fund will not invest 25% or more of its total assets in
any investment company that so concentrates. This limitation does not
apply to investments in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or shares of investment
companies.
    The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents
that, for initial and/or continued listing, the Fund will be in
compliance with Rule 10A-3 \15\ under the Exchange Act, as provided by
NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares will be
outstanding at the commencement of trading on the Exchange. The
Exchange will obtain a representation from the issuer of the Shares
that the net asset value and the Disclosed Portfolio will be made
available to all market participants at the same time.
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    \15\ 17 CFR 240.10A-3.
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    The Underlying ETFs will be traded on a U.S. national securities
exchange.\16\ Except for Underlying ETFs that may hold non-US issues,
the Fund will not otherwise invest in non-US issues.
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    \16\ See e-mail from Michael Cavalier, Chief Counsel, NYSE
Euronext, to Geoffrey C. Pemble, Special Counsel, Commission, dated
March 10, 2010.
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Creations and Redemptions of Shares
    The Trust issues and sells Shares of the Fund only in Creation
Units of 25,000 Shares on a continuous basis through the Distributor,
at their NAV next determined after receipt, on any Business Day (as
defined in the Registration Statement). The consideration for purchase
of a Creation Unit of the Fund generally consists of an in-kind deposit
of a designated portfolio of securities--the ``Deposit Securities''--
per each Creation Unit constituting a substantial replication, or a
representation, of the securities included in the Fund's portfolio and
an amount of cash--the Cash Component--computed as described in the
Registration Statement. Together, the Deposit Securities and the Cash
Component constitute the ``Fund Deposit,'' which represents the minimum
initial and subsequent investment amount for a Creation Unit of the
Fund. Creations and redemption of Shares may be effected only by
Authorized Participants, as defined in the Registration Statement.\17\
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    \17\ Terms relating to the Trust and the Shares referred to, but
not defined, herein are defined in the Registration Statement.
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    Shares may be redeemed only in Creation Units at their NAV next
determined after receipt of a redemption request in proper form by the
Fund through the Administrator and only on a Business Day. The Trust
will not redeem shares in amounts less than Creation Units.
    Unless cash redemptions are available or specified for the Fund,
the redemption proceeds for a Creation Unit generally consist of Fund
Securities--as announced by the Administrator on the Business Day of
the request for redemption received in proper form--plus cash in an
amount equal to the difference between the NAV of the shares being
redeemed, as next determined after a receipt of a request in proper
form, and the value of the Fund Securities (the ``Cash Redemption
Amount''), less a redemption transaction fee. In the event that the
Fund Securities have a value greater than the NAV of the shares, a
compensating cash payment equal to the differential is required to be
made by or through an Authorized Participant by the redeeming
shareholder.
Availability of Information
    The Fund's Web site (http://www.advisorshares.com), which will be
publicly available prior to the public offering of Shares, will include
a form of the Prospectus for the Fund that may be downloaded. The
Fund's Web site will include additional quantitative information
updated on a daily basis, including, for the Fund, (1) daily trading
volume, the prior business day's reported closing price, NAV and mid-
point of the bid/ask spread at the time of calculation of such NAV (the
``Bid/Ask Price''),\18\ and a calculation of the premium and discount
of the Bid/Ask Price against the NAV, and (2) data in chart format
displaying the frequency distribution of discounts and premiums of the
daily Bid/Ask Price against the NAV, within appropriate ranges, for
each of the four previous calendar quarters. On each business day,
before commencement of trading in Shares in the Core Trading Session on
the Exchange, the Fund will disclose on its Web site the Disclosed
Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2) that will
form the basis for the Fund's calculation of NAV at the end of the
business day.\19\
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    \18\ The Bid/Ask Price of the Fund is determined using the
highest bid and the lowest offer on the Exchange as of the time of
calculation of the Fund's NAV. The records relating to Bid/Ask
Prices will be retained by the Fund and its service providers.
    \19\ Under accounting procedures followed by the Fund, trades
made on the prior business day (``T'') will be booked and reflected
in NAV on the current business day (``T+1''). Accordingly, the Fund
will be able to disclose at the beginning of the business day the
portfolio that will form the basis for the NAV calculation at the
end of the business day.
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    On a daily basis, for each portfolio security of the Fund, the Fund
will

disclose on its Web site the following information: Ticker symbol, name
of security, number of shares held in the portfolio, and percentage
weighting of the security in the portfolio. On a daily basis, the
Advisor will disclose for each portfolio security or other financial
instrument of the Fund the following information: Ticker symbol (if
applicable), name of security or financial instrument, number of shares
or dollar value of financial instruments held in the portfolio, and
percentage weighting of the security or financial instrument in the
portfolio. The Web site information will be publicly available at no
charge.
    In addition, a basket composition file, which includes the security
names and share quantities required to be delivered in exchange for
Fund shares, together with estimates and actual cash components, will
be publicly disseminated daily prior to the opening of the New York
Stock Exchange (``NYSE'') via the National Securities Clearing
Corporation. The basket represents one Creation Unit of the Fund. The
NAV of the Fund will normally be determined as of the close of the
regular trading session on the NYSE (ordinarily 4 p.m. Eastern Time) on
each business day.
    Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder
Reports are available free upon request from the Trust, and those
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or
downloaded from the Commission's Web site at http://www.sec.gov.
Information regarding market price and trading volume of the Shares is
and will be continually available on a real-time basis throughout the
day on brokers' computer screens and other electronic services.
Information regarding the previous day's closing price and trading
volume information will be published daily in the financial section of
newspapers. Quotation and last sale information for the Shares will be
available via the Consolidated Tape Association (``CTA'') high-speed
line. In addition, the Portfolio Indicative Value, as defined in NYSE
Arca Equities Rule 8.600(c)(3), will be disseminated by one or more
major market data vendors at least every 15 seconds during the Core
Trading Session. The dissemination of the Portfolio Indicative Value,
together with the Disclosed Portfolio, will allow investors to
determine the value of the underlying portfolio of the Fund on a daily
basis and to provide a close estimate of that value throughout the
trading day.
    Additional information regarding the Trust and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings disclosure policies, distributions
and taxes is included in the Registration Statement.
Trading Halts
    With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund.\20\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Equities
Rule 7.12 have been reached. Trading also may be halted because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. These may include: (1) The
extent to which trading is not occurring in the securities comprising
the Disclosed Portfolio and/or the financial instruments of the Fund;
or (2) whether other unusual conditions or circumstances detrimental to
the maintenance of a fair and orderly market are present. Trading in
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D),
which sets forth circumstances under which Shares of the Fund may be
halted.
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    \20\ See NYSE Arca Equities Rule 7.12, Commentary .04.
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Trading Rules
    The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late
Trading Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. The minimum
trading increment for Shares on the Exchange will be $0.01.
Surveillance
    The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products (which include Managed
Fund Shares) to monitor trading in the Shares. The Exchange represents
that these procedures are adequate to properly monitor Exchange trading
of the Shares in all trading sessions and to deter and detect
violations of Exchange rules and applicable Federal securities laws.
    The Exchange's current trading surveillance focuses on detecting
securities trading outside their normal patterns. When such situations
are detected, surveillance analysis follows and investigations are
opened, where appropriate, to review the behavior of all relevant
parties for all relevant trading violations.
    The Exchange may obtain information via the Intermarket
Surveillance Group (``ISG'') from other exchanges that are members of
ISG or with which the Exchange has entered into a surveillance sharing
agreement.\21\
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    \21\ For a list of the current members of ISG, see http://
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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    In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit (``ETP'') Holders in an Information Bulletin
(``Bulletin'') of the special characteristics and risks associated with
trading the Shares. Specifically, the Bulletin will discuss the
following: (1) The procedures for purchases and redemptions of Shares
in Creation Unit aggregations (and that Shares are not individually
redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty
of due diligence on its ETP Holders to learn the essential facts
relating to every customer prior to trading the Shares; (3) the risks
involved in trading the Shares during the Opening and Late Trading
Sessions when an updated Portfolio Indicative Value will not be
calculated or publicly disseminated; (4) how information regarding the
Portfolio Indicative Value is disseminated; (5) the requirement that
ETP Holders deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
and (6) trading information.
    In addition, the Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Exchange Act.
The Bulletin will also disclose that the NAV for the Shares will be
calculated after 4 p.m. Eastern Time each trading day.

2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is
the requirement under Section 6(b)(5) \22\ that an exchange have rules
that are designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, 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
Exchange believes that the proposed rule change will facilitate the
listing and trading of an additional type of actively-managed exchange-
traded product that will enhance competition among market participants,
to the benefit of investors and the marketplace.
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    \22\ 15 U.S.C. 78f(b)(5).
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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.

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

    No written comments were solicited or received with respect to the
proposed rule change.

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

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
    The Exchange has requested accelerated approval of this proposed
rule change prior to the 30th day after the date of publication of
notice in the Federal Register. The Commission is considering granting
accelerated approval of the proposed rule change at the end of a 15-day
comment period.

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 Exchange 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 e-mail to<EMAIL_ADDRESS>Please include
File Number SR-NYSEArca-2010-10 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2010-10. This
file number should be included on the subject line if e-mail 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 a.m. and 3 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-
NYSEArca-2010-10 and should be submitted on or before April 2, 2010.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5908 Filed 3-17-10; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 80, Number 94 (Friday, May 15, 2015)]
[Notices]
[Pages 28027-28031]
[FR Doc No: 2015-11731]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-31598; File No. 812-14368]

Business Development Corporation of America, et al.; Notice of
Application

May 11, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under sections 17(d) and
57(i) of the Investment Company Act of 1940 (the ``Act'') and rule 17d-
1 under the Act to permit certain joint transactions otherwise
prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d-1
under the Act.

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Summary of Application: Applicants request an order to permit business
development companies (``BDCs'') to co-invest in portfolio companies
with each other and with affiliated investment funds.

Applicants: Business Development Corporation of America (``BDCA'');
Business Development Corporation of America II (``BDCA II''); BDCA
Venture, Inc. (``BDCA Venture,'' and BDCA Venture together with BDCA
and BDCA II, the ``BDCA Funds''), BDCA Adviser, LLC (``BDCA Adviser''),
on behalf of itself and its successors; \1\ BDCA Adviser II, LLC
(``BDCA Adviser II''), on behalf of itself and its successors; BDCA
Venture Adviser, LLC, on behalf of itself and its successors (``BDCA
Venture Adviser''); and BDCA Funding I, LLC; BDCA 2L Funding I, LLC;
BDCA-CB Funding, LLC; and 54th Street Equity Holdings, Inc.
(collectively, the ``Existing BDCA Subs'').
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    \1\ The term ``successor,'' as applied to each Adviser, means an
entity that results from a reorganization into another jurisdiction
or change in the type of business organization.

DATES: Filing Dates: The application was filed on October 2, 2014 and
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amended on March 13, 2015.

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 June 8, 2015, 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, U.S. Securities and Exchange Commission, 100 F
St. NE., Washington, DC 20549-1090. Applicants: James A. Tanaka,
General Counsel, RCS Capital, 405 Park Avenue, 14th Floor, New York,
NY, 10022.

FOR FURTHER INFORMATION CONTACT: Michael S. Didiuk, Senior Counsel, at
(202) 551-6839 or Holly Hunter-Ceci, Branch Chief, at<PHONE_NUMBER>
(Chief Counsel's Office, Division of Investment Management).

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 for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling<PHONE_NUMBER>.

Applicants' Representations

    1. BDCA, BDCA II and BDCA Venture are Maryland corporations
organized as closed-end management investment companies that have
elected to be regulated as BDCs under Section 54(a) of the Act.\2\
BDCA's Objectives and Strategies \3\ are to generate both current
income and to a lesser extent long-term capital appreciation through
debt and equity investments. BDCA invests primarily in first and second
lien senior loans and mezzanine debt issued by middle market companies.
BDCA II's Objectives and Strategies are to generate both current income
and, to a lesser extent, capital appreciation through its investments.
BDCA II intends to achieve this objective by investing in a portfolio
composed primarily of leveraged loans. BDCA Venture's Objectives and
Strategies are to maximize total return by generating current income
from debt investments and, to a lesser extent, capital appreciation
from equity and equity-related investments. BDCA Venture seeks to
accomplish its total return objective by primarily lending with
warrants to emerging growth

companies that are typically backed by venture capital firms.
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    \2\ Section 2(a)(48) defines a BDC to be any closed-end
investment company that operates for the purpose of making
investments in securities described in sections 55(a)(1) through
55(a)(3) of the Act and makes available significant managerial
assistance with respect to the issuers of such securities.
    \3\ ``Objectives and Strategies'' means a Regulated Fund's
investment objectives and strategies, as described in the Regulated
Fund's registration statement on Form N-2, other filings the
Regulated Fund has made with the Commission under the Securities Act
of 1933 (the ``Securities Act''), or under the Securities Exchange
Act of 1934 and the Regulated Fund's reports to shareholders.
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    2. The board of directors of BDCA (the ``BDCA Board'') is comprised
of five directors, three of whom are not ``interested persons,'' within
the meaning of Section 2(a)(19) of the 1940 Act (the ``Non-Interested
Directors''), of BDCA. The board of directors of BDCA II (the ``BDCA II
Board'') is comprised of five directors, three of whom are Non-
Interested Directors of BDCA II. The board of directors of BDCA Venture
(the ``BDCA Venture Board,'' and collectively with the BDCA Board and
the BDCA II Board, and any board of directors of a Future Regulated
Fund, the ``Boards'' and each a ``Board,'' as applicable) consists of
five directors, four of whom are Non-Interested Directors of BDCA
Venture.
    3. BDCA Adviser is a Delaware limited liability company that is
registered as an investment adviser under the Investment Advisers Act
of 1940 (the ``Advisers Act''). BDCA Adviser serves as investment
adviser to BDCA. BDCA Adviser II is a Delaware limited liability
company that is registered as an investment adviser under the Advisers
Act. BDCA Adviser II serves as investment adviser to BDCA II. BDCA
Venture Adviser is a Delaware limited liability company that is
registered as an investment adviser under the Advisers Act. BDCA
Venture Adviser serves as investment adviser to BDCA Venture.
    4. Applicants seek an order (``Order'') to permit a Regulated Fund
\4\ and one or more Regulated Funds and/or one or more Future
Affiliated Funds \5\ to participate in the same investment
opportunities through a proposed co-investment program (the ``Co-
Investment Program'') where such participation would otherwise be
prohibited under section 57(a)(4) and rule 17d-1 by (a) co-investing
with each other in securities issued by issuers in private placement
transactions in which an Adviser negotiates terms in addition to price;
\6\ and (b) making additional investments in securities of such
issuers, including through the exercise of warrants, conversion
privileges, and other rights to purchase securities of the issuers
(``Follow-On Investments''). ``Co-Investment Transaction'' means any
transaction in which a Regulated Fund (or its Wholly-Owned Investment
Sub, as defined below) participated together with one or more other
Regulated Funds and/or one or more Future Affiliated Funds in reliance
on the requested Order. ``Potential Co-Investment Transaction'' means
any investment opportunity in which a Regulated Fund (or its Wholly-
Owned Investment Sub, as defined below) could not participate together
with one or more Future Affiliated Funds and/or one or more other
Regulated Funds without obtaining and relying on the Order.\7\
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    \4\ ``Regulated Fund'' means any of the BDCA Funds and any
Future Regulated Fund. ``Future Regulated Fund'' means any closed-
end management investment company (a) that is registered under the
Act or has elected to be regulated as a BDC, (b) whose investment
adviser is an Adviser, and (c) that intends to participate in the
Co-Investment Program. The term ``Adviser'' means (a) BDCA Adviser,
BDCA Adviser II, and BDCA Venture Adviser and (b) any future
investment adviser that controls, is controlled by or is under
common control with AR Capital, LLC and is registered as an
investment adviser under the Advisers Act.
    \5\ ``Future Affiliated Fund'' means any entity (a) whose
investment adviser is an Adviser, (b) that would be an investment
company but for section 3(c)(1) or 3(c)(7) of the Act, and (c) that
intends to participate in the Co-Investment Program.
    \6\ The term ``private placement transactions'' means
transactions in which the offer and sale of securities by the issuer
are exempt from registration under the Securities Act.
    \7\ All existing entities that currently intend to rely upon the
requested Order have been named as applicants. Any other existing or
future entity that subsequently relies on the Order will comply with
the terms and conditions of the application.
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    5. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subs.\8\ Such a subsidiary
would be prohibited from investing in a Co-Investment Transaction with
any Future Affiliated Fund or Regulated Fund because it would be a
company controlled by its parent Regulated Fund for purposes of section
57(a)(4) and rule 17d-1. Applicants request that each Wholly-Owned
Investment Sub be permitted to participate in Co-Investment
Transactions in lieu of its parent Regulated Fund and that the Wholly-
Owned Investment Sub's participation in any such transaction be
treated, for purposes of the requested Order, as though the parent
Regulated Fund were participating directly. Applicants represent that
this treatment is justified because a Wholly-Owned Investment Sub would
have no purpose other than serving as a holding vehicle for the
Regulated Fund's investments and, therefore, no conflicts of interest
could arise between the Regulated Fund and the Wholly-Owned Investment
Sub. The Regulated Fund's Board would make all relevant determinations
under the conditions with regard to a Wholly-Owned Investment Sub's
participation in a Co-Investment Transaction, and the Regulated Fund's
Board would be informed of, and take into consideration, any proposed
use of a Wholly-Owned Investment Sub in the Regulated Fund's place. If
the Regulated Fund proposes to participate in the same Co-Investment
Transaction with any of its Wholly-Owned Investment Subs, the Board
will also be informed of, and take into consideration, the relative
participation of the Regulated Fund and the Wholly-Owned Investment
Sub.
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    \8\ The term ``Wholly-Owned Investment Sub'' means an entity (i)
that is wholly-owned by a Regulated Fund (with the Regulated Fund at
all times holding, beneficially and of record, 100% of the voting
and economic interests); (ii) whose sole business purpose is to hold
one or more investments on behalf of the Regulated Fund; (iii) with
respect to which the Regulated Fund's Board has the sole authority
to make all determinations with respect to the entity's
participation under the conditions of the Application; and (iv) that
would be an investment company but for section 3(c)(1) or 3(c)(7) of
the Act.
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    6. When considering Potential Co-Investment Transactions for any
Regulated Fund, the applicable Adviser will consider only the
Objectives and Strategies, investment policies, investment positions,
capital available for investment, and other pertinent factors
applicable to that Regulated Fund. The Regulated Funds' Advisers expect
that any portfolio company that is an appropriate investment for a
Regulated Fund should also be an appropriate investment for one or more
other Regulated Funds and/or one or more Future Affiliated Funds, with
certain exceptions based on available capital or diversification.\9\
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    \9\ The Regulated Funds, however, will not be obligated to
invest, or co-invest, when investment opportunities are referred to
them.
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    7. Other than pro rata dispositions and Follow-On Investments as
provided in conditions 7 and 8, and after making the determinations
required in conditions 1 and 2(a), the Adviser will present each
Potential Co-Investment Transaction and the proposed allocation to the
directors of the Board eligible to vote under section 57(o) of the Act
(``Eligible Directors''), and the ``required majority,'' as defined in
section 57(o) of the Act (``Required Majority'') \10\ will approve each
Co-Investment Transaction prior to any investment by the participating
Regulated Fund.
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    \10\ In the case of a Regulated Fund that is a registered
closed-end fund, the Board members that make up the Required
Majority will be determined as if the Regulated Fund were a BDC
subject to Section 57(o).
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    8. With respect to the pro rata dispositions and Follow-On
Investments provided in conditions 7 and 8, a Regulated Fund may
participate in a pro rata disposition or Follow-On Investment without
obtaining prior approval of the Required Majority if, among other
things: (i) The proposed participation of each Regulated Fund and
Future Affiliated Fund in such disposition is proportionate to its

outstanding investments in the issuer immediately preceding the
disposition or Follow-On Investment, as the case may be; and (ii) the
Board of the Regulated Fund has approved that Regulated Fund's
participation in pro rata dispositions and Follow-On Investments as
being in the best interests of the Regulated Fund. If the Board does
not so approve, any such disposition or Follow-On Investment will be
submitted to the Regulated Fund's Eligible Directors. The Board of any
Regulated Fund may at any time rescind, suspend or qualify its approval
of pro rata dispositions and Follow-On Investments with the result that
all dispositions and/or Follow-On Investments must be submitted to the
Eligible Directors.
    9. No Non-Interested Director of a Regulated Fund will have a
financial interest in any Co-Investment Transaction, other than through
share ownership in one of the Regulated Funds.

Applicants' Legal Analysis

    1. Section 57(a)(4) of the Act prohibits certain affiliated persons
of a BDC from participating in joint transactions with the BDC or a
company controlled by a BDC in contravention of rules as prescribed by
the Commission. Under section 57(b)(2) of the Act, any person who is
directly or indirectly controlling, controlled by, or under common
control with a BDC is subject to section 57(a)(4). Applicants submit
that each of the Regulated Funds and Future Affiliated Funds be deemed
to be a person related to each Regulated Fund in a manner described by
section 57(b) by virtue of being under common control. Section 57(i) of
the Act provides that, until the Commission prescribes rules under
section 57(a)(4), the Commission's rules under section 17(d) of the Act
applicable to registered closed-end investment companies will be deemed
to apply to transactions subject to section 57(a)(4). Because the
Commission has not adopted any rules under section 57(a)(4), rule 17d-1
also applies to joint transactions with Regulated Funds that are BDCs.
Section 17(d) of the Act and rule 17d-1 under the Act are applicable to
Regulated Funds that are registered closed-end investment companies.
    2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
affiliated persons of a registered investment company from
participating in joint transactions with the company unless the
Commission has granted an order permitting such transactions. In
passing upon applications under rule 17d-1, the Commission considers
whether the company's participation in the joint transaction is
consistent with the provisions, policies, and purposes of the Act and
the extent to which such participation is on a basis different from or
less advantageous than that of other participants.
    3. Applicants state that in the absence of the requested relief,
the Regulated Funds would be, in some circumstances, limited in their
ability to participate in attractive and appropriate investment
opportunities. Applicants believe that the proposed terms and
conditions will ensure that the Co-Investment Transactions are
consistent with the protection of each Regulated Fund's shareholders
and with the purposes intended by the policies and provisions of the
Act. Applicants state that the Regulated Funds' participation in the
Co-Investment Transactions will be consistent with the provisions,
policies, and purposes of the Act and on a basis that is not different
from or less advantageous than that of other participants.
    4. Under condition 14, if the Advisers, the Principals, any person
controlling, controlled by, or under common control with the Advisers
or the Principals, and the Affiliated Funds (collectively, the
``Holders'') own in the aggregate more than 25% of the outstanding
voting securities of a Regulated Fund (``Shares''), then the Holders
will vote such Shares as directed by an independent third party when
voting on matters specified in the condition. Applicants believe that
this condition will ensure that the Non-Interested Directors will act
independently in evaluating the Co-Investment Program, because the
ability of the Advisers or the Principals to influence the Non-
Interested Directors by a suggestion, explicit or implied, that the
Non-Interested Directors can be removed will be limited significantly.
Applicants represent that the Non-Interested Directors will evaluate
and approve any such voting trust or proxy adviser, taking into
accounts its qualifications, reputation for independence, cost to the
shareholders, and other factors that they deem relevant.

Applicants' Conditions

    Applicants agree that the Order will be subject to the following
conditions:
    1. Each time an Adviser considers a Potential Co-Investment
Transaction for a Future Affiliated Fund or another Regulated Fund that
falls within a Regulated Fund's then-current Objectives and Strategies,
the Regulated Fund's Adviser will make an independent determination of
the appropriateness of the investment for such Regulated Fund in light
of the Regulated Fund's then-current circumstances.
    2. (a) If the Adviser deems a Regulated Fund's participation in any
Potential Co-Investment Transaction to be appropriate for the Regulated
Fund, it will then determine an appropriate level of investment for the
Regulated Fund.
    (b) If the aggregate amount recommended by the applicable Adviser
to be invested by the applicable Regulated Fund in the Potential Co-
Investment Transaction, together with the amount proposed to be
invested by the other participating Regulated Funds and Future
Affiliated Funds, collectively, in the same transaction, exceeds the
amount of the investment opportunity, the investment opportunity will
be allocated among them pro rata based on each participating party's
capital available for investment in the asset class being allocated, up
to the amount proposed to be invested by each. The applicable Adviser
will provide the Eligible Directors of each participating Regulated
Fund with information concerning each participating party's available
capital to assist the Eligible Directors with their review of the
Regulated Fund's investments for compliance with these allocation
procedures.
    (c) After making the determinations required in conditions 1 and
2(a), the applicable Adviser will distribute written information
concerning the Potential Co-Investment Transaction (including the
amount proposed to be invested by each participating Regulated Fund and
Future Affiliated Fund) to the Eligible Directors of each participating
Regulated Fund for their consideration. A Regulated Fund will co-invest
with one or more other Regulated Funds and/or one or more Future
Affiliated Funds only if, prior to the Regulated Fund's participation
in the Potential Co-Investment Transaction, a Required Majority
concludes that:
    (i) The terms of the Potential Co-Investment Transaction, including
the consideration to be paid, are reasonable and fair to the Regulated
Fund and its shareholders and do not involve overreaching in respect of
the Regulated Fund or its shareholders on the part of any person
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (A) The interests of the shareholders of the Regulated Fund; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Funds or Future
Affiliated Funds would not disadvantage the Regulated Fund, and
participation by

the Regulated Fund would not be on a basis different from or less
advantageous than that of other Regulated Funds or Future Affiliated
Funds; provided that, if any other Regulated Fund or Future Affiliated
Fund, but not the Regulated Fund itself, gains the right to nominate a
director for election to a portfolio company's board of directors or
the right to have a board observer or any similar right to participate
in the governance or management of the portfolio company, such event
shall not be interpreted to prohibit the Required Majority from
reaching the conclusions required by this condition 2(c)(iii), if:
    (A) The Eligible Directors will have the right to ratify the
selection of such director or board observer, if any;
    (B) the applicable Adviser agrees to, and does, provide periodic
reports to the Regulated Fund's Board with respect to the actions of
such director or the information received by such board observer or
obtained through the exercise of any similar right to participate in
the governance or management of the portfolio company; and
    (C) any fees or other compensation that any Future Affiliated Fund
or any Regulated Fund or any affiliated person of any Future Affiliated
Fund or any Regulated Fund receives in connection with the right of an
Future Affiliated Fund or a Regulated Fund to nominate a director or
appoint a board observer or otherwise to participate in the governance
or management of the portfolio company will be shared proportionately
among the participating Future Affiliated Funds (who each may, in turn,
share its portion with its affiliated persons) and the participating
Regulated Funds in accordance with the amount of each party's
investment; and
    (iv) the proposed investment by the Regulated Fund will not benefit
the Advisers, the Future Affiliated Funds or the other Regulated Funds
or any affiliated person of any of them (other than the parties to the
Co-Investment Transaction), except (A) to the extent permitted by
condition 13, (B) to the extent permitted by sections 17(e) or 57(k) of
the Act, as applicable, (C) indirectly, as a result of an interest in
the securities issued by one of the parties to the Co-Investment
Transaction, or (D) in the case of fees or other compensation described
in condition 2(c)(iii)(C).
    3. Each Regulated Fund has the right to decline to participate in
any Potential Co-Investment Transaction or to invest less than the
amount proposed.
    4. The applicable Adviser will present to the Board of each
Regulated Fund, on a quarterly basis, a record of all investments in
Potential Co-Investment Transactions made by any of the other Regulated
Funds or Future Affiliated Funds during the preceding quarter that fell
within the Regulated Fund's then-current Objectives and Strategies that
were not made available to the Regulated Fund, and an explanation of
why the investment opportunities were not offered to the Regulated
Fund. All information presented to the Board pursuant to this condition
will be kept for the life of the Regulated Fund and at least two years
thereafter, and will be subject to examination by the Commission and
its staff.
    5. Except for Follow-On Investments made in accordance with
condition 8,\11\ a Regulated Fund will not invest in reliance on the
Order in any issuer in which another Regulated Fund, Future Affiliated
Fund, or any affiliated person of another Regulated Fund or Future
Affiliated Fund is an existing investor.
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    \11\ This exception applies only to Follow-On Investments by a
Regulated Fund in issuers in which that Regulated Fund already holds
investments.
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    6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of
securities to be purchased, settlement date, and registration rights
will be the same for each participating Regulated Fund and Future
Affiliated Fund. The grant to a Future Affiliated Fund or another
Regulated Fund, but not the Regulated Fund, of the right to nominate a
director for election to a portfolio company's board of directors, the
right to have an observer on the board of directors or similar rights
to participate in the governance or management of the portfolio company
will not be interpreted so as to violate this condition 6, if
conditions 2(c)(iii)(A), (B) and (C) are met.
    7. (a) If any Future Affiliated Fund or any Regulated Fund elects
to sell, exchange or otherwise dispose of an interest in a security
that was acquired in a Co-Investment Transaction, the applicable
Advisers will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed disposition at the earliest
practical time; and
    (ii) formulate a recommendation as to participation by each
Regulated Fund in the disposition.
    (b) Each Regulated Fund will have the right to participate in such
disposition on a proportionate basis, at the same price and on the same
terms and conditions as those applicable to the participating Future
Affiliated Funds and Regulated Funds.
    (c) A Regulated Fund may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of each Regulated Fund and each Future Affiliated Fund in
such disposition is proportionate to its outstanding investments in the
issuer immediately preceding the disposition; (ii) the Board of the
Regulated Fund has approved as being in the best interests of the
Regulated Fund the ability to participate in such dispositions on a pro
rata basis (as described in greater detail in the application); and
(iii) the Board of the Regulated Fund is provided on a quarterly basis
with a list of all dispositions made in accordance with this condition.
In all other cases, the Adviser will provide its written recommendation
as to the Regulated Fund's participation to the Eligible Directors, and
the Regulated Fund will participate in such disposition solely to the
extent that a Required Majority determines that it is in the Regulated
Fund's best interests.
    (d) Each Future Affiliated Fund and each Regulated Fund will bear
its own expenses in connection with any such disposition.
    8. (a) If any Future Affiliated Fund or any Regulated Fund desires
to make a Follow-On Investment in a portfolio company whose securities
were acquired in a Co-Investment Transaction, the applicable Advisers
will:
    (i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed transaction at the earliest
practical time; and
    (ii) formulate a recommendation as to the proposed participation,
including the amount of the proposed Follow-On Investment, by each
Regulated Fund.
    (b) A Regulated Fund may participate in such Follow-On Investment
without obtaining prior approval of the Required Majority if: (i) The
proposed participation of each Regulated Fund and each Future
Affiliated Fund in such investment is proportionate to its outstanding
investments in the issuer immediately preceding the Follow-On
Investment; and (ii) the Board of the Regulated Fund has approved as
being in the best interests of the Regulated Fund the ability to
participate in Follow-On Investments on a pro rata basis (as described
in greater detail in the application). In all other cases, the Adviser
will provide its written recommendation as to the Regulated Fund's
participation to the Eligible Directors, and the Regulated Fund will
participate in such Follow-On Investment solely to the extent that a

Required Majority determines that it is in the Regulated Fund's best
interests.
    (c) If, with respect to any Follow-On Investment:
    (i) The amount of the opportunity is not based on the Regulated
Funds' and the Future Affiliated Funds' outstanding investments
immediately preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the Adviser to be invested
by each Regulated Fund in the Follow-On Investment, together with the
amount proposed to be invested by the participating Future Affiliated
Funds in the same transaction, exceeds the amount of the opportunity;
then the amount invested by each such party will be allocated among
them pro rata based on each participating party's capital available for
investment in the asset class being allocated, up to the amount
proposed to be invested by each.
    (d) The acquisition of Follow-On Investments as permitted by this
condition will be considered a Co-Investment Transaction for all
purposes and subject to the other conditions set forth in the
application.
    9. The Non-Interested Directors of each Regulated Fund will be
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including
investments made by other Regulated Funds or Future Affiliated Funds
that the Regulated Fund considered but declined to participate in, so
that the Non-Interested Directors may determine whether all investments
made during the preceding quarter, including those investments that the
Regulated Fund considered but declined to participate in, comply with
the conditions of the Order. In addition, the Non-Interested Directors
will consider at least annually the continued appropriateness for the
Regulated Fund of participating in new and existing Co-Investment
Transactions.
    10. Each Regulated Fund will maintain the records required by
section 57(f)(3) of the Act as if each of the Regulated Funds were a
BDC and each of the investments permitted under these conditions were
approved by the Required Majority under section 57(f) of the Act.
    11. No Non-Interested Director of a Regulated Fund will also be a
director, general partner, managing member or principal, or otherwise
an ``affiliated person'' (as defined in the Act), of a Future
Affiliated Fund.
    12. The expenses, if any, associated with acquiring, holding or
disposing of any securities acquired in a Co-Investment Transaction
(including, without limitation, the expenses of the distribution of any
such securities registered for sale under the Securities Act) will, to
the extent not payable by the Advisers under their respective
investment advisory agreements with Future Affiliated Funds and the
Regulated Funds, be shared by the Regulated Funds and the Future
Affiliated Funds in proportion to the relative amounts of the
securities held or to be acquired or disposed of, as the case may be.
    13. Any transaction fee \12\ (including break-up or commitment fees
but excluding broker's fees contemplated by section 17(e) or 57(k) of
the Act, as applicable) received in connection with a Co-Investment
Transaction will be distributed to the participating Regulated Funds
and Future Affiliated Funds on a pro rata basis based on the amounts
they invested or committed, as the case may be, in such Co-Investment
Transaction. If any transaction fee is to be held by an Adviser pending
consummation of the transaction, the fee will be deposited into an
account maintained by such Adviser at a bank or banks having the
qualifications prescribed in section 26(a)(1) of the Act, and the
account will earn a competitive rate of interest that will also be
divided pro rata among the participating Regulated Funds and Future
Affiliated Funds based on the amounts they invest in such Co-Investment
Transaction. None of the Future Affiliated Funds, the Advisers, the
other Regulated Funds or any affiliated person of the Regulated Funds
or Future Affiliated Funds will receive additional compensation or
remuneration of any kind as a result of or in connection with a Co-
Investment Transaction (other than (a) in the case of the Regulated
Funds and the Future Affiliated Funds, the pro rata transaction fees
described above and fees or other compensation described in condition
2(c)(iii)(C); and (b) in the case of an Adviser, investment advisory
fees paid in accordance with the agreement between the Adviser and the
Regulated Fund or Future Affiliated Fund.
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    \12\ Applicants are not requesting and the staff is not
providing any relief for transaction fees received in connection
with any Co-Investment Transaction.
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    14. If the Holders own in the aggregate more than 25% of the
outstanding Shares, then the Holders will vote such Shares as directed
by an independent third party (such as the trustee of a voting trust or
a proxy adviser) when voting on (1) the election of directors; (2) the
removal of one or more directors; or (3) any matters requiring approval
by the vote of a majority of the outstanding voting securities, as
defined in Section 2(a)(42) of the Act.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-11731 Filed 5-14-15; 8:45 am]
 BILLING CODE 8011-01-P