[Federal Register Volume 84, Number 186 (Wednesday, September 25, 2019)]
[Notices]
[Pages 50521-50525]
[FR Doc No: 2019-20710]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87031; File No. SR-NASDAQ-2019-073]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Concerning the Operation of the Nasdaq Opening, Halt and Closing
Crosses

September 19, 2019.
    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 September 5, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'')

the proposed rule change as described in Items I and II 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to clarify its rules concerning the operation
of the Nasdaq Opening, Halt and Closing Crosses, and to make certain
corrective changes to Rules 4702, 4703, 4752, 4753, 4754, and 4763.
    The text of the proposed rule change is available on the Exchange's
website at http://nasdaq.cchwallstreet.com, at the principal office of
the Exchange, 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, the Exchange 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. The Exchange 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 Exchange is proposing to amend Rules 4752, 4753 and 4754,
concerning the operation of the Nasdaq Opening, Halt and Closing
Crosses, respectively, to make them more efficient, and to make
corrective and clarifying changes. The Exchange is also making a
related change to Rule 4763(e)(2) concerning the repricing of short
sale Orders that are Limit-on-Open (``LOO''),\3\ Market-on-Open
(``MOO''),\4\ Limit-on-Close (``LOC''),\5\ or Market-on-Close
(``MOC'').\6\ Last, the Exchange is making corrective changes to Rules
4702(b) and 4703(l).
---------------------------------------------------------------------------

    \3\ See Rule 4752(a)(3).
    \4\ See Rule 4752(a)(4).
    \5\ See Rule 4754(a)(4).
    \6\ See Rule 4754(a)(5).
---------------------------------------------------------------------------

New Rules 4752(d)(2)(G), 4753(b)(2)(E) and 4754(b)(2)(F)
    Rules 4752(d)(2), 4753(b)(2) and 4754(b)(2) describe the steps
followed in establishing the prices in the Nasdaq Opening, Halt and
Closing Crosses, respectively. A Post-Only Order is an Order Type
designed to have its price adjusted as needed to post to the Nasdaq
Book in compliance with Rule 610(d) under Regulation NMS by avoiding
the display of quotations that lock or cross any Protected Quotation
\7\ in a System Security \8\ during Market Hours,\9\ or to execute
against locking or crossing quotations in circumstances where
economically beneficial to the Participant \10\ entering the Post-Only
Order.\11\ A Post-Only Order may participate in the Nasdaq Opening
Cross, Nasdaq Halt Cross and/or the Nasdaq Closing Cross.\12\
---------------------------------------------------------------------------

    \7\ See Rule 4701(j).
    \8\ See Rule 4701(b).
    \9\ See Rule 4701(g).
    \10\ See Rule 4701(c).
    \11\ See Rule 4702(b)(4).
    \12\ See Rule 4702(b)(4)(C). The Exchange is proposing to
eliminate text from the rule that states that only Post-Only Orders
entered through OUCH and FLITE protocols may participate in the
Nasdaq Opening and/or Closing Crosses. This rule text was mistakenly
adopted when amendments were made to the rule. See Securities
Exchange Act Release No. 75252 (June 22, 2015), 80 FR 36865 (June
26, 2015) (SR-NASDAQ-2015-024). Any of the Order entry protocols may
be used to enter Post-Only Orders eligible to participate in the
Nasdaq Opening and/or Closing Crosses.
---------------------------------------------------------------------------

    The Exchange is adopting new rule text under Rules 4752(d)(2)(G),
4753(b)(2)(E) and 4754(b)(2)(F) that describes how the Exchange prices
the Nasdaq Opening, Halt and Closing Crosses when the Cross would
otherwise be priced by a partial execution of an Order deemed to have a
price at one minimum increment away from a Post-Only Order pursuant to
Rule 4703(l). Rule 4703(l) describes the Order Attribute that allows an
Order to participate in the Nasdaq Opening, Halt or Closing
Crosses,\13\ including the process for pricing an Order that is locked
or crossed at its non-displayed price by a Post-Only Order.
Specifically, an Order to buy (sell) that is locked or crossed at its
non-displayed price by a Post-Only Order on the Nasdaq Book shall be
deemed to have a price at one minimum price increment \14\ below
(above) the price of the Post-Only Order for the purposes of the Cross
price calculation.
---------------------------------------------------------------------------

    \13\ The Exchange is proposing to correct Rule 4703(l) by
including the Nasdaq Halt Cross in the rule. As described in the
proposal, the Nasdaq Halt Cross was erroneously omitted from the
rule.
    \14\ See Rule 4701(k).
---------------------------------------------------------------------------

    Currently, if the Opening, Halt \15\ or Closing Cross would
otherwise occur at the ``deemed price'' of an Order that is locked or
crossed at its non-displayed price by a Post-Only Order pursuant to
Rule 4703(l), and that Order would not execute in full during the
Cross, then Cross price is instead adjusted to the price of the Order's
original ranked price. The new rule text clarifies the current approach
to setting the Cross price in situations where there is a partial
execution of an Order that is deemed to have a price at one minimum
price increment away from a Post-Only Order. Consider an example where
the NBBO is $10.00 x $10.01 and resting on the Nasdaq book are Order
#1, a MOC Order to buy 500 shares, Order #2, a MOC Order to sell 300
shares, Order #3, a Non-Displayed Order to sell 100 shares at $10.01,
and Order #4 a Non-Displayed Order to sell 300 shares at $10.00. If
Order #4 is subsequently locked by Order #5, a Post-Only Order to buy
100 shares at $10.00, then for purposes of the Cross price calculation,
Order #4 would be deemed to have a price of $10.01, where it is
presented for execution ahead of Order #3, reflecting its price
priority on the Nasdaq book.\16\ Per Nasdaq's Cross calculation
language,\17\ $10.01 would be selected as the Cross price as it
maximizes paired shares (i.e., Orders #1 and #2 are executed in full
and Order #4 is executed partially). But because Order #4 would not
execute in full at this price, the Cross price is instead adjusted to
$10.00. The Cross would execute 500 shares at a price of $10.00, with
Order #1 and Order #2 receiving full executions, and Order #4 receiving
a partial execution of 200 shares.
---------------------------------------------------------------------------

    \15\ See supra note 13.
    \16\ Order #4 has price priority over Order #3 because Order
#3[sic] is deemed to be $10.01 for purposes of the Cross price
calculation, but for purposes of execution priority it is ranked
behind all orders priced at $10.
    \17\ See Rules 4752(d)(2)(A), 4753(b)(2)(A), and 4754(b)(2)(A).
---------------------------------------------------------------------------

    This approach to setting the Cross price is consistent with Nasdaq
Cross price tiebreaker rules regarding unexecuted shares \18\ and
ensures that

the original ranked price of the Order is reflected, since the
remaining unexecuted shares of the Order are ranked in time priority
behind all orders at the price at which the Order was posted on the
Nasdaq Book and no other interest ranked at a less aggressive price
would execute in the Cross.\19\ Pricing such an Order to its original
ranked price is consistent with the participant's expectations and the
pricing of Nasdaq Crosses,\20\ since the participant would otherwise
perceive that its Order was traded through or not represented in the
Cross. In the example above, a participant would not expect to receive
an execution in the cross at $10.01, while leaving unexecuted shares of
its sell Order on the Nasdaq Book at a more aggressive price of 10.00.
---------------------------------------------------------------------------

    \18\ Rule 4754(b)(2)(C) concerns the tiebreaker criteria for
selecting the Closing Cross price when paired shares are maximized
and imbalance is minimized: ``shall occur at the entered price at
which shares will remain unexecuted in the cross.'' Had Nasdaq
selected a Cross price of $10.01, the participant behind Order #4
would perceive that its Order was traded through or was otherwise
not represented in the Cross, which is inconsistent with the purpose
of the tiebreaker language (i.e., the Cross price is $10.01, but the
shares remaining in the cross are priced is $10.00). The Order
Imbalance Indicator provides the current state of interest in
designated for participation in the Closing Cross, including the
adjusted price of the Cross. See Rule 4754(a)(7)(A). Thus,
adjustment of the Closing Cross price is reflected in the Order
Imbalance Indicator.
    \19\ This occurs because the Order is meant to cede priority to
all other Orders at its original price, but retain priority over all
Orders at a less aggressive price.
    \20\ See supra note 18.
---------------------------------------------------------------------------

Changes to Rule 4763(e)(2)
    Rule 4763 provides the Exchange's rules concerning the Short Sale
Price Test of Rule 201 of Regulation SHO. If the Short Sale Price Test
is triggered, paragraph (e) of Rule 4763 provides the process for re-
pricing of Orders during the Short Sale Period, when the Short Sale
Price Test is in effect. Rule 4703(l) states that, for purposes of the
Nasdaq Opening or Closing Cross,\21\ an Order to buy (sell) that is
locked or crossed at its non-displayed price by a Post-Only Order on
the Nasdaq Book shall be deemed to have a price at one minimum price
increment below (above) the price of the Post-Only Order.
---------------------------------------------------------------------------

    \21\ Rule 4703(l) concerns the Order Attribute that permits an
Order to participate in the Nasdaq Crosses. As described below, the
rule currently only discusses the Nasdaq Opening and Closing
Crosses, however, the rule should also include the Nasdaq Halt
Cross. The Exchange is proposing to correct Rule 4703(l) and to make
related changes to Order Types under Rule 4702(b).
---------------------------------------------------------------------------

    Currently, short sale LOO, MOO, LOC and MOC Orders are re-priced
during the Short Sale Period to the Permitted Price, unless the NBBO
spread is $.01 in which case such orders will be priced to the
midpoint. As a consequence of the Cross price adjustment explained
above, in rare cases short sale LOO, MOO, LOC and MOC Orders re-priced
to the midpoint would be required for completion of the Nasdaq Opening
and Closing Crosses but would not be able to execute at the Cross price
due to the Short Sale Price Test, notwithstanding the fact that it had
been already adjusted to the midpoint (i.e., the short sale LOO, MOO,
LOC and MOC Orders included in the price calculation but would not be
executable at the Cross price). This would occur if, in a security
subject to the Short Sale Price Test and a NBBO one minimum price
increment wide, the Cross price would be adjusted to the National Best
Bid due to the partial execution of a sell Order deemed to have a price
at the National Best Offer pursuant to Rule 4703(l). Consider the same
example given previously with two changes: The security is subject to a
Short Sale Price Test, and Order #2 is now a MOC to sell short. Under
the current rule, Order #2 would be repriced to $10.005, a Cross price
of $10.01 would be selected, and, because Order #4 would receive a
partial execution in the cross, the cross price would be adjusted to
$10.00. The Cross would attempt to execute Order #1, Order #2, and
Order #4 as in above, but because of the Short Sale Price Test, $10.00
is an impermissible execution price for Order #2, notwithstanding the
fact that it had been already adjusted to the midpoint.\22\
---------------------------------------------------------------------------

    \22\ Although Order #2 has been converted to an Order with a
midpoint pegging attribute, the System nevertheless attempts to
execute Order #2 ahead of Order #4 because it remains a MOC Order.
---------------------------------------------------------------------------

    To resolve this issue, Nasdaq is proposing to amend Rule 4763(e)(2)
to add a condition stating that the re-pricing of short sale LOO, MOO,
LOC and MOC Orders to the midpoint in lieu of the Permitted Price will
not occur when a resting non-displayed Order is deemed to have a price
at one minimum increment away from a Post-Only Order pursuant to Rule
4703(l), at the time of the Nasdaq Opening Cross or the Nasdaq Closing
Cross. This change will prevent short sale LOO, MOO, LOC and MOC Orders
subject to the Short Sale Price Test from being presented for execution
at an ineligible price when the Nasdaq Opening and Closing Cross price
is adjusted pursuant to proposed Rules 4752(d)(2)(G), 4753(b)(2)(E) and
4754(b)(2)(F). Thus under the proposed rule, if at the time of the
Nasdaq Opening Cross or the Nasdaq Closing Cross the Short Sale Price
Test is in effect and there is a resting non-displayed Order deemed to
have a price at one minimum increment away from a Post-Only Order,
pursuant to Rule 4703(l), short sale Orders that are LOO, MOO, LOC, or
MOC will be re-priced to the Permitted Price instead of the midpoint.
Re-pricing of short sale Orders in this manner ensures they are ranked
behind \23\ such non-displayed Orders, thereby preventing the inclusion
of ineligible short sale Orders in the event the Cross price is
adjusted,\24\ or in some cases, preventing the adjustment from
occurring at all.\25\ Using the example above, at the time of the
Closing Cross, Order #2 would be repriced to the Permitted Price of
$10.01 instead of the midpoint, where it is now ranked behind Order #4
in execution priority.\26\ As a result of this reordering, Order #4
would now receive a full execution, preventing the Cross price
adjustment clause that would occur with a partial execution. The Cross
would be priced at $10.01, and the System would execute Order #1 in
full for 500 shares, Order #4 in full for 300 shares, and Order #2 for
200 shares.
---------------------------------------------------------------------------

    \23\ The Exchange notes that, although this proposal changes the
ranking of short sale LOO, MOO, LOC and MOC Orders so that such
Orders lose priority as described herein, these Orders are not
disadvantaged in so doing because they would not execute at their
original ranked price.
    \24\ Adjusting the price of these Orders would result in the
short sale LOO, MOO, LOC and MOC Orders to not be included in the
Cross price calculation.
    \25\ The adjustment will not occur at all because either the
non-displayed Order executed in full, or the non-displayed Order
executed in full and the short sale Order received a partial
execution.
    \26\ Even though Order #2 is technically a MOC Order, it will be
ranked behind Order #4 because it is no longer treated as a MOC
Order but rather it is prioritized at the repriced price level.
---------------------------------------------------------------------------

    The Exchange notes that this change in no way allows for execution
of a short sale Order subject to the Short Sale Price Test at an
impermissible price. Moreover, pricing such an Order to the Permitted
Price is consistent with the participant's expectations of short sale
executability and the pricing of Nasdaq Crosses, since the participant
would not expect its short sale Orders to participate in the Cross if
the Cross were to be priced to the National Best Bid during the Short
Sale Price Test.
    Last, the Exchange is correcting a citation in the rule concerning
the description of the Pegging Order Attribute, which was in former
Rule 4751(f)(4) but was moved to Rule 4703(d).\27\
---------------------------------------------------------------------------

    \27\ See Securities Exchange Act Release No. 75252 (June 22,
2015), 80 FR 36865 (June 26, 2015) (SR-NASDAQ-2015-024).
---------------------------------------------------------------------------

Changes to Rules 4752(d)(3)(B), 4753(b)(3) and 4754(b)(3)(B)
    The Exchange is proposing to make a corrective change to Rules
4752(d)(3)(B), 4753(b)(3) and 4754(b)(3)(B), which provide the
processes followed when the Nasdaq Cross price is selected and fewer
than all shares of Cross eligible Orders that are available in the
Nasdaq Market Center would be executed. In 2017, the Exchange clarified
Rules 4752, 4753 and 4754 to specify the execution priority of an Order
that has been locked or crossed at its non-displayed price by a Post-
Only Order and re-priced for

purposes of the Opening, Halt and Closing Crosses.\28\ In making the
clarifying changes, the Exchange amended Rules 4752(d)(3)(B),
4753(b)(3) and 4754(b)(3)(B) to add the following text: \29\ ``An Order
to buy (sell) that is locked or crossed at its non-displayed price by a
Post-Only Order on the Nasdaq Book, and which has been deemed to have a
price at one minimum price increment below (above) the price of the
Post-Only Order, shall be ranked in time priority ahead of all orders
one minimum price increment below (above) the price of the Post-Only
Order but behind all orders at the price at which the Order was posted
to the Nasdaq Book.'' \30\ The text stating ``ahead of all orders one
minimum price increment below (above) the price of the Post-Only
Order'' is incorrect with respect to Orders covered by the Cross
rules,\31\ specifically midpoint Orders when the NBBO is one minimum
price increment wide. In these cases, an Order to buy (sell) that is
locked or crossed at its non-displayed price by a Post-Only Order on
the Nasdaq Book, and which has been deemed to have a price at one
minimum price increment below (above) the price of the Post-Only Order,
is ranked in time priority behind all Orders at the price at which the
Order was posted to the Nasdaq Book, without regard to all Orders that
are one minimum price increment below (above) the price of the Post-
Only Order. This is because the Order is meant to cede priority to all
other Orders at its original price, but retains priority over all
Orders at a less aggressive price. For example, consider a scenario in
which the NBBO is $10.00 x $10.01 and resting on the Nasdaq Book are
Order #1, a midpoint Order to sell at $10.005, and Order #2, a non-
displayed Order to sell at $10.00. If Order #2 were to be subsequently
locked at $10.00 by a Post Only Order to buy, then Order #2 would be
deemed to have a price of $10.01 for the purposes of the Cross price
calculation. However, if a cross price of $10.005 was selected, Order
#2 would be presented for execution at its ranked price of $10.00--not
at its deemed price of $10.01--ahead of the midpoint order ranked
$10.005. Accordingly, the Exchange is deleting the inaccurate text from
Rules 4752(d)(3)(B), 4753(b)(3) and 4754(b)(3)(B), which states that
the locked or crossed Order would be ranked in time priority ahead of
all orders one minimum price increment below (above) the price of the
Post-Only Order but behind all orders at the price at which the Order
was posted to the Nasdaq Book.
---------------------------------------------------------------------------

    \28\ See Securities Exchange Act Release No. 80425 (April 11,
2017), 82 FR 18196 (April 17, 2017) (SR-NASDAQ-2017-031).
    \29\ The change to Rule 4752(d)(3)(B) made it clear that the
locking or crossing would occur during Early Market Hours.
    \30\ See supra note 28.
    \31\ Rule 4752(d)(3)(B) concerns LOO orders, Early Market Hours
limit orders, OIO orders, SDAY limit orders, SGTC limit orders, GTMC
limit orders, SHEX limit orders, displayed quotes and reserve
interest priced more aggressively than the Nasdaq Opening Cross
price based on limit price with time as the secondary priority. Rule
4753(b)(3) concerns Eligible Interest, which is any quotation or any
order that has been entered into the system and designated with a
time-in-force that would allow the order to be in force at the time
of the Halt Cross. Rule 4754(b)(3)(B) concerns LOC orders, limit
orders, IO orders, displayed quotes and reserve interest priced more
aggressively than the Nasdaq Closing Cross price based on price with
time as the secondary priority.
---------------------------------------------------------------------------

Changes to Rules 4702(b) and 4703(l)
    As noted above, Rule 4703(l) concerns the Order Attribute that
permits an Order to participate in the Nasdaq Crosses. Currently, the
rule only discusses the Nasdaq Opening and Closing Crosses. This was an
omission occurring when the Exchange adopted the rule in 2015.\32\ Any
resting Order on the Nasdaq Book that may participate in the Nasdaq
Opening and Closing Crosses may also participate in a Nasdaq Halt
Cross.\33\ Accordingly, the Exchange is proposing to correct Rule
4703(l) by including the Nasdaq Halt Cross in the rule. The Exchange is
proposing to make related changes to affected Order Types under Rule
4702(b) to now include participation in the Nasdaq Halt Cross as an
Order Attribute. Last, the Exchange is amending Rule 4702(b)(4)(C) to
correct text in the rule that currently states that the Post-Only Order
may only participate in the Nasdaq Opening and Closing Crosses only if
it is entered through an OUCH or FLITE port. The Exchange has never
limited participation of Post-Only Orders in the Nasdaq Opening and
Closing Crosses if they are entered through OUCH or FLITE ports
---------------------------------------------------------------------------

    \32\ See supra note 12.
    \33\ Thus, MOO, LOO, OIO, MOC, LOC and OI Orders are not
affected, since they are only designated to operate in the Nasdaq
Opening or Closing Cross. See Rule 4702(b).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\34\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\35\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest, by making the Nasdaq Crosses operate more efficiently by
preventing the inclusion of short sale Orders that would be unable to
execute in a Nasdaq Cross, due to the Cross price selected. Moreover,
new Rules 4752(d)(2)(G), 4753(b)(2)(E) and 4754(b)(2)(F) address how
the Exchange sets the Nasdaq Opening, Halt and Closing Cross prices
when there is a partial execution of an Order that is deemed to have a
price at one minimum price increment away from a Post-Only Order, which
is consistent with the Act because it ensures that the original ranked
price of the Order is reflected. As noted above, the remaining
unexecuted shares of the Order is ranked in time priority behind all
Orders at the price at which the Order was posted on the Nasdaq Book
and no other interest would execute at a less aggressive price. Thus,
the new rule text allowing pricing such an Order to its original ranked
price is consistent with Nasdaq Cross price tiebreaker rules regarding
unexecuted shares, as well as the participant's expectations concerning
execution in the Cross, since the participant would otherwise receive
an execution at what would appear to be a partial execution of their
Order at a price inferior to the Cross price. As noted above, such an
execution would appear to the participant as though its Order was
traded through or was otherwise not represented in the Cross.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f(b).
    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposed change to Rule 4763(e)(2) to add a condition stating
that the re-pricing of short sale Orders to the midpoint--in lieu of
the Permitted Price--will not be permitted when a resting non-displayed
Order is locked or crossed at its non-displayed price by a Post-Only
Order on the Nasdaq Book at the time of the Nasdaq Opening Cross or the
Nasdaq Closing Cross is consistent with the Act because it will ensure
such short sale Orders are ranked behind any Orders adjusted pursuant
to Rule 4703(l), which, for the reasons stated above, would remove
impediments to and perfect the mechanism of a free and open market and
a national market system. As noted above, this change is necessary to
ensure that short sale Orders subject to the Short Sale Price Test are
prevented from being included, but unable to be executed, when the
Nasdaq Opening or Closing Cross price is adjusted pursuant to the new
rules being added in Rules 4752(d)(2)(G), 4753(b)(2)(E) and
4754(b)(2)(F). The Exchange notes that this change in no way allows for
execution of a short sale Order subject to the Short Sale Price Test an
impermissible price. Consequently, the proposed change will

promote the efficient operation of the market.
    The proposed changes to Rules 4752(d)(3)(B), 4753(b)(3) and
4754(b)(3)(B) delete inaccurate text from these rules concerning
ranking of Orders in the Crosses that are locked or crossed at their
non-displayed price by a Post-Only Order. The deletions from these
rules reflect the current operation of these rules, which is consistent
with the Act because the crossed or locked Order is meant to cede
priority to all other Orders at its original price. The proposed
changes to Rule 4703(l) corrects the rule to reflect that a member may
also designate an Order to participate in the Nasdaq Halt Cross in
addition to the Nasdaq Opening and Closing Crosses, which will reflect
the current operation of the Exchange as described above. The Exchange
is consequently updating Order Types under Rule 4702(b) that may also
participate in a Nasdaq Halt Cross. The Exchange is also making a
corrective change to Rule 4702(b)(4)(C) to correct text in the rule
that currently states that the Post-Only Order may only participate in
the Nasdaq Opening and Closing Crosses only if it is entered through an
OUCH or FLITE port. The Exchange has never limited participation of
Post-Only Orders in the Nasdaq Opening and Closing Crosses if they are
entered through OUCH or FLITE ports. In sum, the proposed changes
further perfect the operation of the Nasdaq Crosses, and protect
investors by avoiding confusion that may be caused by inaccurate rules.

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 not necessary or appropriate in
furtherance of the purposes of the Act. The proposed changes are not
being done for competitive purposes, but rather to make the processing
of the Nasdaq Opening and Closing Crosses more efficient by preventing
short sale Orders from being included in the Nasdaq Opening and Closing
Crosses, since these Orders may be unable to execute because of the
Cross price selected if included therein. Moreover, the proposed
changes correct inaccuracies in the rules, which do not affect
competition whatsoever.

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

    No written comments were either solicited or 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) of the Act \36\ and Rule 19b-
4(f)(6) thereunder.\37\
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(3)(A).
    \37\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of 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.
---------------------------------------------------------------------------

    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 necessary or
appropriate in the public interest, for the protection of investors, or
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 change 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<EMAIL_ADDRESS>Please include
File Number SR-NASDAQ-2019-073 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-2019-073. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2019-073 and should be submitted
on or before October 16, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
---------------------------------------------------------------------------

    \38\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-20710 Filed 9-24-19; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 86, Number 212 (Friday, November 5, 2021)]
[Notices]
[Pages 61372-61379]
[FR Doc No: 2021-24148]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34412; 812-15135]

Blackstone/GSO Floating Rate Enhanced Income Fund, et al.

November 1, 2021.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

-----------------------------------------------------------------------

    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.

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

Applicants:  Blackstone/GSO Floating Rate Enhanced Income Fund
(``BGFLX''); Blackstone Long-Short Credit Income Fund (``BGX'');
Blackstone Private Credit Fund (``BCRED''); Blackstone Senior Floating
Rate Term Fund (``BSL''); Blackstone Strategic Credit Fund (``BGB'');
Blackstone Secured Lending Fund (``BGSL,'' and together with BGFLX,
BGX, BSL and BGB, the ``Blackstone Credit Regulated Funds'');
Blackstone Liquid Credit Strategies LLC (``BLCS''), the investment
adviser to BGFLX, BGX, BSL and BGB; Blackstone Credit BDC Advisors LLC
(``BCBA''), the investment adviser to BCRED and BGSL; the investment
advisers set forth in Schedule A to the application (together with BLCS
and BCBA, the ``Blackstone Credit Advisers''); and the Existing
Affiliated Funds set forth on Schedule A to the application.\1\
---------------------------------------------------------------------------

    \1\ The Existing Affiliated Funds are entities (i) whose primary
investment adviser or sub-adviser is an Adviser (as defined
below)(when the sub-adviser is an Adviser, the primary adviser is a
Primary Adviser (as defined below)) (ii) that either (A) would be an
investment company but for section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of
the Act or (B) relies on the rule 3a-7 exemption thereunder from
investment company status.

Filing Dates:  The application was filed on June 16, 2020, and amended
---------------------------------------------------------------------------
on February 22, 2021 and July 16, 2021.

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 emailing the Commission's
Secretary [email protected] and serving applicants with a copy
of the request by email. Hearing requests should be received by the
Commission by 5:30 p.m. on November 26, 2021, 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 emailing the
Commission's Secretary at [email protected].

ADDRESSES: The Commission: [email protected]. Applicants: Rajib
Chanda at [email protected] and Christopher Healey at
[email protected].

FOR FURTHER INFORMATION CONTACT: Joseph Toner, Senior Counsel, at (202)
551-7595 or Marc Mehrespand, 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 website 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. BGFLX, BGX, BSL and BGB, each a Delaware statutory trust, are
externally managed, diversified, closed-end management investment
companies. Each of BGFLX's and BGX's investment objective is to provide
current income, with a secondary objective of capital appreciation.
Each of BSL's and BGB's investment objective is to seek high current
income, with a secondary objective to seek preservation of capital,
consistent with its primary goal of high current income. Each of BGFLX,
BGX, BSL and BGB has a five-member Board, of which four members are
Non-Interested Trustees.\2\
---------------------------------------------------------------------------

    \2\ ``Board'' means the board of trustees (or equivalent) of a
Regulated Fund (as defined below).
    ``Non-Interested Trustees'' are not ``interested persons'' as
defined in section 2(a)(19) of the Act.
---------------------------------------------------------------------------

    2. BCRED is a Delaware statutory trust that has elected to be
regulated as a business development company (``BDC'') under the Act.\3\
BCRED's investment objective is to generate current income and, to a
lesser extent, generate long-term capital appreciation. BCRED has a
six-member Board, of which four members are Non-Interested Trustees.
---------------------------------------------------------------------------

    \3\ Section 2(a)(48) of the Act 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. BGSL is a Delaware statutory trust that has elected to be
regulated as a BDC. BGSL's investment objective is to generate current
income and, to a lesser extent, long-term capital appreciation. BGSL
has a seven-member Board, of which four members are Non-Interested
Trustees.
    4. Each of the Advisers \4\ is a subsidiary of The Blackstone
Group, Inc. (``Blackstone''). Blackstone is a leading global
alternative asset manager, whose alternative asset management
businesses include investment entities focused on private equity, real
estate, hedge fund solutions, non-investment grade credit, secondary
private equity funds of funds and multi-asset class strategies.
Blackstone's four business segments are (1) private equity, (2) real
estate, (3) hedge fund solutions and (4) credit.
---------------------------------------------------------------------------

    \4\ The term ``Adviser'' means the Blackstone Credit Advisers
and any future investment adviser that (i) controls, is controlled
by or is under common control with a Blackstone Credit Adviser, (ii)
is registered as an investment adviser under the Advisers Act, and
(iii) that intends to participate in the Co-Investment Program (as
defined below). The term ``Primary Adviser'' means any future or
existing investment adviser that (i) controls, is controlled by or
is under common control with an Adviser, (ii) is registered as an
investment adviser under the Advisers Act, and (iii) is not an
Adviser under the requested order. For the avoidance of doubt, a
Primary Adviser will not be treated as an Adviser under the
requested order, but will be subject to conditions 2(c)(iv) and 15
only. No Primary Adviser will rely on the requested order with
respect to any investment entities it manages other than to the
extent those entities are sub-advised by an Adviser. No Primary
Adviser will be the source of any Potential Co-Investment
Transactions (as defined below) under the requested order.
---------------------------------------------------------------------------

    5. The Blackstone Credit Advisers operate as a self-contained
advisory business within Blackstone's credit group. Each Blackstone
Credit Adviser is under common control with BLCS and BCBA, the Adviser
to each of the Blackstone Credit Regulated Funds, and collectively they
conduct a single advisory business for purposes of the requested order.
The Blackstone Credit Advisers are each either separately registered as
investment advisers with the Commission or are relying advisers that
rely on the registration of another Blackstone Credit Adviser. No
Blackstone Credit Adviser is a relying adviser of any Blackstone-
affiliated investment adviser from outside of the self-contained group.
    6. Applicants seek an order to permit one or more Regulated Funds
\5\ to be able to participate with one or more other Regulated Funds
and/or one or more Affiliated Investors \6\ in the same investment
opportunities through a proposed co-investment program where such
participation would otherwise be prohibited under sections 17(d) and
57(a)(4) of the Act and the rules thereunder (the ``Co-Investment
Program'').
---------------------------------------------------------------------------

    \5\ ``Regulated Fund'' means (i) the Blackstone Credit Regulated
Funds and (ii) and any Future Regulated Fund (as defined below).
``Future Regulated Fund'' means any future closed-end management
investment company (i) that has elected to be regulated as a BDC or
is registered under the Act, (ii) whose investment adviser is an
Adviser and (iii) who intends to participate in the Co-Investment
Program.
    \6\ ``Affiliated Investor'' means (i) the Existing Affiliated
Funds, (ii) any Affiliated Proprietary Account and (iii) any Future
Affiliated Fund (as defined below). Affiliated Investors may include
funds that are ultimately structured as collateralized loan
obligation funds (``CLOs''). Such CLOs would be investment companies
but for the exception in section 3(c)(7) of the Act or their ability
to rely on rule 3a-7 thereunder. During the investment period of a
CLO, the CLO may engage in certain transactions customary in CLO
formations with another Affiliated Investor on a secondary basis at
fair market value. For purposes of the requested order, any
securities that were acquired by an Affiliated Investor in a
particular Co-Investment Transaction that are then transferred in
such customary transactions to an Affiliated Investor that is or
will become a CLO (an ``Affiliated Fund CLO'') will be treated as if
the Affiliated Fund CLO acquired such securities in the Co-
Investment Transaction. For the avoidance of doubt, any such
transfer from an Affiliated Investor to an Affiliated Fund CLO will
be treated as a Disposition (as defined below) and completed
pursuant to the terms and conditions of the application, though the
applicants note that the Regulated Funds would be prohibited from
participating in such Disposition by section 17(a)(2) or section
57(a)(2) of the Act, as applicable. The participation by any
Affiliated Fund CLO in any such Co-Investment Transaction will
remain subject to the requested order.
    ``Future Affiliated Fund'' means an entity (i)(A) whose
investment adviser is an Adviser or (B) whose investment adviser is
a Primary Adviser and whose sub-adviser is an Adviser, (ii) that
either (A) would be an investment company but for an exemption in
section 3(c)(1), 3(c)(5)(C) or 3(c)(7) of the Act or (B) relies on
the rule 3a-7 exemption from investment company status, and (iii)
that intends to participate in the Co-Investment Program.
    ``Affiliated Proprietary Account'' means any account of an
Adviser or its affiliates or any company that is an indirect,
wholly- or majority-owned subsidiary of an Adviser or its
affiliates, which, from time to time, may hold various financial
assets in a principal capacity. For the avoidance of doubt, neither
the Regulated Funds, the Existing Affiliated Funds nor any Future
Affiliated Fund shall be deemed to be Affiliated Proprietary
Accounts for purposes of the application.
---------------------------------------------------------------------------

    7. For purposes of the requested order, ``Co-Investment
Transaction'' means any transaction in which one or more Regulated
Funds (or one or more Wholly-Owned Investment Subsidiaries, as defined
below) participates together with one or more other Regulated Funds (or
one or more Wholly-Owned Investment Subsidiaries) and/or one or more
Affiliated Investors in reliance on the requested order. ``Potential
Co-Investment Transaction'' means any investment opportunity in which a
Regulated Fund (or its Wholly-Owned Investment Subsidiary, as defined
below) could not participate together with one or more Affiliated
Investors and/or one or more other Regulated Funds without obtaining
and relying on the requested order.\7\ Funds that are advised or sub-
advised by affiliates of Blackstone other than an Adviser or Primary
Adviser will not participate in the Co-Investment Program. No Primary
Adviser will be the source of any Potential Co-Investment Transactions
under the requested order. Potential Co-Investment Transactions will
not be shared outside of the Co-Investment Program.
---------------------------------------------------------------------------

    \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 requested order will
comply with the terms and conditions of the application.
---------------------------------------------------------------------------

    8. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment

Subsidiaries.\8\ A Wholly-Owned Investment Subsidiary would be
prohibited from investing in a Co-Investment Transaction with another
Regulated Fund or any Affiliated Investor because it would be a company
controlled by the applicable Regulated Fund for purposes of sections
17(d) and 57(a)(4) of the Act and rule 17d-1 thereunder. Applicants
request that a Wholly-Owned Investment Subsidiary be permitted to
participate in Co-Investment Transactions in lieu of the applicable
Regulated Fund and that the Wholly-Owned Investment Subsidiary's
participation in any such transaction be treated, for purposes of the
requested order, as though the Regulated Fund were participating
directly.
---------------------------------------------------------------------------

    \8\ ``Wholly-Owned Investment Subsidiary'' means an entity (i)
whose sole business purpose is to hold one or more investments on
behalf of a Regulated Fund (and, in the case of an SBIC Subsidiary
(as defined below), maintain a license under the SBA Act (as defined
below) and issue debentures guaranteed by the SBA (as defined
below)); (ii) that is a wholly-owned subsidiary (as defined in the
Act) of a Regulated Fund (with such Regulated Fund at all times
holding, beneficially and of record, 95% or more of the voting and
economic interests); (iii) with respect to which the Board of the
Regulated Fund has the sole authority to make all determinations
with respect to the Wholly-Owned Investment Subsidiary's
participation under the conditions of the requested order; and (iv)
that is an entity that would be an investment company but for an
exemption in section 3(c)(1) or 3(c)(7) of the Act.
    The term ``SBIC Subsidiary'' means a Wholly-Owned Investment
Subsidiary that is licensed by the Small Business Administration
(the ``SBA'') to operate under the Small Business Investment Act of
1958, as amended, (the ``SBA Act'') as a small business investment
company (a ``SBIC'').
---------------------------------------------------------------------------

    9. When considering Potential Co-Investment Transactions for any
Regulated Fund, an Adviser will consider only the Objectives and
Strategies,\9\ Board-Established Criteria,\10\ investment policies,
investment positions, capital available for investment, and other
pertinent factors applicable to that Regulated Fund. The participation
of a Regulated Fund in a Potential Co-Investment Transaction may only
be approved by a Required Majority, as defined in section 57(o) of the
Act (a ``Required Majority''), of the trustees of the Board eligible to
vote on that Co-Investment Transaction under section 57(o) of the Act
(the ``Eligible Trustees'').\11\ When selecting investments for the
Affiliated Investors, an Adviser will select investments separately for
each Affiliated Investor, considering, in each case, only the
investment objective, investment policies, investment position, capital
available for investment, and other pertinent factors applicable to
that particular Affiliated Investor.
---------------------------------------------------------------------------

    \9\ The term ``Objectives and Strategies'' means a Regulated
Fund's investment objectives and strategies, as described in the
filings made with the Commission by the Regulated Fund under the
Securities Exchange Act of 1934, as amended, the Securities Act of
1933, as amended (the ``1933 Act'') and the Act, and the Regulated
Fund's reports to shareholders.
    \10\ The term ``Board-Established Criteria'' means criteria that
the Board of the applicable Regulated Fund may establish from time
to time to describe the characteristics of Potential Co-Investment
Transactions regarding which an Adviser to the Regulated Fund should
be notified under condition 1 of the requested order. The Board-
Established Criteria will be consistent with the Regulated Fund's
then-current Objectives and Strategies. If no Board-Established
Criteria are in effect, then the Regulated Fund's Adviser will be
notified of all Potential Co-Investment Transactions that fall
within the Regulated Fund's then current Objectives and Strategies.
Board-Established Criteria will be objective and testable, meaning
that they will be based on observable information, such as industry/
sector of the issuer, minimum earnings before interest, taxes,
depreciation, and amortization of the issuer, asset class of the
investment opportunity or required commitment size, and not on
characteristics that involve discretionary assessment. The Adviser
to the Regulated Fund may from time to time recommend criteria for
the applicable Board's consideration, but Board-Established Criteria
will only become effective if approved by a majority of the Non-
Interested Trustees. The Non-Interested Trustees of a Regulated Fund
may at any time rescind, suspend or qualify its approval of any
Board-Established Criteria, though Applicants anticipate that, under
normal circumstances, the Board would not modify these criteria more
often than quarterly.
    \11\ The defined terms Eligible Trustees and Required Majority
apply as if each Regulated Fund were a BDC subject to section 57(o)
of the Act.
---------------------------------------------------------------------------

    10. With respect to participation in a Potential Co-Investment
Transaction by a Regulated Fund, the applicable Adviser will present
each Potential Co-Investment Transaction and the proposed allocation of
each investment opportunity to the Eligible Trustees. The Required
Majority of a Regulated Fund will approve each Co-Investment
Transaction prior to any investment by the Regulated Fund.
    11. Applicants state that the majority of the Blackstone Credit
Advisers' employees work on matters for Close Affiliates \12\ and
information about potential investment opportunities is routinely
disseminated among such Adviser's employees. Other than to satisfy
compliance obligations, information regarding Potential Co-Investment
Transactions will not be shared with Remote Affiliates,\13\ which would
include other investment advisers that operate in other Blackstone
business groups, except in unusual circumstances, as the Blackstone
business groups each generally target different investment strategies
or asset classes and there are information barrier policies in place
between the Blackstone business groups. Applicants further note that
within the Blackstone Credit Advisers, the personnel overlap and
coordination among portfolio management teams ensures that all relevant
investment opportunities will be brought to the attention of each
Regulated Fund managed by the respective Adviser. Applicants submit
that the Blackstone Credit Advisers will receive all information
regarding all investment opportunities that fall within the then-
current Objectives and Strategies and Board-Established Criteria of
each Regulated Fund managed by the respective Adviser, regardless of
whether the Adviser serves as the primary investment adviser or sub-
adviser to the Regulated Fund.
---------------------------------------------------------------------------

    \12\ The term ``Close Affiliate'' means the Advisers, the
Regulated Funds, the Affiliated Investors and any other person
described in section 57(b) of the Act (after giving effect to rule
57b-1 thereunder) in respect of any Regulated Fund (treating any
registered investment company or series thereof as a BDC for this
purpose) except for limited partners included solely by reason of
the reference in section 57(b) to section 2(a)(3)(D) of the Act.
    \13\ The term ``Remote Affiliate'' means any person described in
section 57(e) of the Act in respect of any Regulated Fund (treating
any registered investment company or series thereof as a BDC for
this purpose) and any limited partner holding 5% or more of the
relevant limited partner interests that would be a Close Affiliate
but for the exclusion in that definition.
---------------------------------------------------------------------------

    12. Applicants acknowledge that some of the Affiliated Investors
may not be funds advised by an Adviser because they are Affiliated
Proprietary Accounts. Applicants do not believe these Affiliated
Proprietary Accounts should raise issues under the conditions of the
requested order because allocation policies and procedures of the
account owners provide that investment opportunities are offered to
client accounts before they are offered to Affiliated Proprietary
Accounts.
    13. Applicants represent that the Co-Investment Program requires
that the terms, conditions, price, class of securities, settlement
date, and registration rights applicable to a Regulated Fund's purchase
be the same as those applicable to the purchase by the other
participating Regulated Funds and Affiliated Investors. However, the
settlement date for an Affiliated Investor in a Co-Investment
Transaction may occur up to ten business days after the settlement date
for the Regulated Fund, and vice versa. Nevertheless, in all cases (i)
the date on which the commitment of the Affiliated Investors and
Regulated Funds is made will be the same even where the settlement date
is not and (ii) the earliest settlement date and the latest settlement
date of any Affiliated Investor or Regulated Fund participating in the
transaction will occur within ten business days of each other.
    14. Under condition 16, if an Adviser or its principals, or any
person controlling, controlled by, or under

common control with the Adviser or its principal owners, and the
Affiliated Investor (collectively, the ``Holders'') own in the
aggregate more than 25 percent of the outstanding voting shares of a
Regulated Fund (``Shares''), then the Holders will vote such Shares as
required under condition 16.
    15. No Eligible Trustee will have a direct or indirect financial
interest in any Co-Investment Transaction, other than through any
interest such Eligible Trustee may have in securities of a Regulated
Fund.

Applicants' Legal Analysis

    1. 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.
    2. 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) of the Act. Section
57(i) of the Act provides that, until the Commission prescribes rules
under section 57(a)(4) of the Act, 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) of the Act. Because the Commission has not adopted any rules
under section 57(a)(4) of the Act, rule 17d-1 thereunder applies.
    3. Applicants state that certain transactions effected as part of
the Co-Investment Program may be prohibited by sections 17(d) and
57(a)(4) of the Act and rule 17d-1 thereunder without a prior exemptive
order of the Commission to the extent that the Affiliated Investors
fall within the category of persons described by section 17(d) or
section 57(b) of the Act, as modified by rule 57b-1 thereunder with
respect to a Regulated Fund. Applicants believe that the proposed terms
and conditions will ensure would ensure that the conflicts of interest
that section 17(d) and section 57(a)(4) of the Act were designed to
prevent would be addressed and the standards for an order under rule
17d-1 under the Act are met.

Applicants' Conditions

    Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
    1. (a) Each Adviser will establish, maintain and implement policies
and procedures reasonably designed to ensure that each Adviser is
promptly notified, for each Regulated Fund the Adviser manages, of all
Potential Co-Investment Transactions \14\ that (i) an Adviser considers
for any other Regulated Fund or Affiliated Investor and (ii) fall
within the Regulated Fund's then-current Objectives and Strategies and
Board-Established Criteria.
---------------------------------------------------------------------------

    \14\ No Primary Adviser will be the source of any Potential Co-
Investment Transactions under the requested order.
---------------------------------------------------------------------------

    (b) When an Adviser to a Regulated Fund is notified of a Potential
Co-Investment Transaction under condition 1(a), such Adviser will make
an independent determination of the appropriateness of the investment
for the 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 Affiliated
Investors, collectively, in the same transaction, exceeds the amount of
the investment opportunity, then the investment opportunity will be
allocated among them pro rata based on each participant's Available
Capital \15\ up to the amount proposed to be invested by each. The
applicable Adviser will provide the Eligible Trustees of each
participating Regulated Fund with information concerning each
participating party's Available Capital to assist the Eligible Trustees
with their review of the Regulated Fund's investments for compliance
with these allocation procedures.
---------------------------------------------------------------------------

    \15\ ``Available Capital'' means (a) for each Regulated Fund,
the amount of capital available for investment determined based on
the amount of cash on hand, liquidity considerations, existing
commitments and reserves, if any, the targeted leverage level,
targeted asset mix, risk-return and target-return profile, tax
implications, regulatory or contractual restrictions or
consequences, and other investment policies and restrictions set
from time to time by the Board of the applicable Regulated Fund or
imposed by applicable laws, rules, regulations or interpretations,
and (b) for each Affiliated Investor, the amount of capital
available for investment determined based on the amount of cash on
hand, liquidity considerations, existing commitments and reserves,
if any, the targeted leverage level, targeted asset mix, risk-return
and target-return profile, tax implications, regulatory or
contractual restrictions or consequences and other investment
policies and restrictions set from time to time by the Affiliated
Investors' trustees, general partners, or adviser or imposed by
applicable laws, rules, regulations or interpretations.
---------------------------------------------------------------------------

    (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
Affiliated Investor) to the Eligible Trustees 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 Affiliated
Investors 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 Affiliated
Investors 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 Affiliated
Investors; provided that, if any other Regulated Fund or Affiliated
Investor, 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 settlement date for another Regulated Fund or an Affiliated
Investor in a Co-Investment Transaction is later

than the settlement date for the Regulated Fund by no more than ten
business days or earlier than the settlement date for the Regulated
Fund by no more than ten business days, in either case, so long as: (x)
The date on which the commitment of the Affiliated Investors and
Regulated Funds is made is the same; and (y) the earliest settlement
date and the latest settlement date of any Affiliated Investor or
Regulated Fund participating in the transaction will occur within ten
business days of each other;
    (B) the Eligible Trustees will have the right to ratify the
selection of such director or board observer, if any;
    (C) 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
    (D) any fees or other compensation that any Affiliated Investor or
any Regulated Fund or any affiliated person of any Affiliated Investor
or any Regulated Fund receives in connection with the right of an
Affiliated Investor 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 Affiliated Investors (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 Affiliated Investors, the other Regulated Funds or
any Primary Adviser 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 15;
    (B) to the extent permitted by section 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)(D).
    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 Affiliated Investors during the preceding quarter that fell
within the Regulated Fund's then-current Objectives and Strategies and
Board Established Criteria 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 \16\ made in accordance with
condition 9 and 10,\17\ a Regulated Fund will not invest in reliance on
the Order in any issuer in which a Related Party \18\ has an
investment. The Adviser will maintain books and records that
demonstrate compliance with this condition for each Regulated Fund.
---------------------------------------------------------------------------

    \16\ ``Follow-On Investment'' means any additional investment in
an existing portfolio company whose securities were acquired in a
Co-Investment Transaction, including the exercise of warrants,
conversion privileges or other similar rights to acquired additional
securities of the portfolio company.
    \17\ This exception applies only to Follow-On Investments by a
Regulated Fund in issuers in which that Regulated Fund already holds
investments.
    \18\ The term ``Related Party'' means (i) any Close Affiliate
and (ii) in respect of matters as to which any Adviser has
knowledge, any Remote Affiliate.
---------------------------------------------------------------------------

    6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless (i) the terms, conditions, price, class
of securities to be purchased, registration rights and the date on
which the commitment is entered into will be the same for each
participating Regulated Fund and Affiliated Investor and (ii) the
earliest settlement date and the latest settlement date of any
participating Regulated Fund or Affiliated Investor will occur as close
in time as practicable and in no event more than ten business days
apart. The grant to an Affiliated Investor 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)(B), (C), and (D) are met.
    7. Standard Review Dispositions.
    (a) If any Regulated Fund or Affiliated Investor elects to sell,
exchange or otherwise dispose of an interest in a security and one or
more Regulated Funds and Affiliated Investors have previously
participated in a Co-Investment Transaction with respect to the issuer,
then:
    (i) The Adviser to such Regulated Fund or Affiliated Investor will
notify each Regulated Fund that holds an investment in the issuer of
the proposed disposition at the earliest practical time; \19\ and
---------------------------------------------------------------------------

    \19\ Any Affiliated Proprietary Account that is not advised by
an adviser is itself deemed to be an Adviser for purposes of
conditions 7(a)(i), 8(a)(i), 9(a)(i) and 10(a)(i).
---------------------------------------------------------------------------

    (ii) the Adviser to each Regulated Fund that holds an investment in
the issuer will formulate a recommendation as to participation by such
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 Affiliated Investors
and any other Regulated Fund.
    (c) A Regulated Fund may participate in such a disposition without
obtaining prior approval of the Required Majority if: (i) (A) The
participation of each Regulated Fund and Affiliated Investor in such
disposition is proportionate to its then-current holding of the
security (or securities) of the issuer that is (or are) the subject of
the disposition; \20\ (B) 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 (C) the Board of the Regulated
Fund is provided on a quarterly basis with a list of all dispositions
made in accordance with this condition; or (ii) each security is a
Tradable Security \21\ and (A) the disposition is not to the issuer or
any affiliated person of the issuer and (B) the security is sold for
cash in a transaction in which the only term

negotiated by or on behalf of the participating Regulated Funds and
Affiliated Investors is price.
---------------------------------------------------------------------------

    \20\ In the case of any disposition, proportionality will be
measured by each participating Regulated Fund's and Affiliated
Investor's outstanding investment in the security in question
immediately preceding the disposition.
    \21\ The term ``Tradable Security'' means a security that (i)
trades on a national securities exchange or designated offshore
securities market as defined in rule 902(b) under the 1933 Act; (ii)
is not subject to restrictive agreements with the issuer or other
security holders; and (iii) trades with sufficient volume and
liquidity (findings as to which are documented by the Advisers to
any Regulated Funds holding investments in the issuer and retained
for the life of the Regulated Fund) to allow each Regulated Fund to
dispose of its entire position remaining after the proposed
disposition within a short period of time not exceeding 30 days at
approximately the value (as defined by section 2(a)(41) of the Act)
at which the Regulated Fund has valued the investment.
---------------------------------------------------------------------------

    (d) In all other cases, the Adviser will provide its written
recommendation as to the Regulated Fund's participation to the Eligible
Trustees, 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. Each Affiliated Investor and each
Regulated Fund will bear its own expenses in connection with any such
disposition.
    8. Enhanced Review Dispositions.
    (a) If any Regulated Fund or Affiliated Investor elects to sell,
exchange or otherwise dispose of a Pre-Boarding Investment \22\ in a
Potential Co-Investment Transaction and the Regulated Funds and
Affiliated Investors have not previously participated in a Co-
Investment Transaction with respect to the issuer:
---------------------------------------------------------------------------

    \22\ The term ``Pre-Boarding Investments'' means any investment
in an issuer that is (i) held by a Regulated Fund as well as one or
more Affiliated Investors and/or one or more other Regulated Funds,
(ii) acquired prior to participating in any Co-Investment
Transaction, and (iii) acquired (A) in a transaction in which the
only term negotiated by or on behalf of such funds was price in
reliance on one of the Joint Transaction No-Action Letters; or (B)
in transactions occurring at least 90 days apart and without
coordination between the Regulated Fund and any Affiliated Investor
or other Regulated Fund. The ``Joint Transaction No-Action Letters''
are SMC Capital, Inc., SEC Staff No-Action Letter (Sept. 5, 1995)
and Massachusetts Mutual Life Insurance Company, SEC Staff No-Action
Letter (June 7, 2000).
---------------------------------------------------------------------------

    (i) The Adviser to such Regulated Fund or Affiliated Investor will
notify each Regulated Fund that holds an investment in the issuer of
the proposed disposition at the earliest practical time;
    (ii) the Adviser to each Regulated Fund that holds an investment in
the issuer will formulate a recommendation as to participation by such
Regulated Fund in the disposition; and
    (iii) the Advisers will provide to the Board of each Regulated Fund
that holds an investment in the issuer all information relating to the
existing investments in the issuer of the Regulated Funds and
Affiliated Investors, including the terms of such investments and how
they were made, that is necessary for the Required Majority to make the
findings required by this condition.
    (b) The Adviser will provide its written recommendation as to the
Regulated Fund's participation to the Eligible Trustees, and the
Regulated Fund will participate in such disposition solely to the
extent that a Required Majority determines that:
    (i) The disposition complies with condition 2(c)(i), (ii), (iii)(A)
and (iv); and
    (ii) the making and holding of the Pre-Boarding Investments were
not prohibited by section 57 or rule 17d-1, as applicable, and records
the basis for the finding in the Board minutes.
    (c) The disposition may only be completed in reliance on the order
if:
    (i) Each Regulated Fund has 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 Affiliated Investors and
any other Regulated Fund.
    (ii) All of the Affiliated Investors' and Regulated Funds'
investments in the issuer are Pre-Boarding Investments;
    (iii) Independent counsel to the Board advises that the making and
holding of the investments in the Pre-Boarding Investments were not
prohibited by section 57 (as modified by rule 57b-1) or rule 17d-1, as
applicable;
    (iv) all Regulated Funds and Affiliated Investors that hold Pre-
Boarding Investments in the issuer immediately before the time of
completion of the Co-Investment Transaction hold the same security or
securities of the issuer. For the purpose of determining whether the
Regulated Funds and Affiliated Investors hold the same security or
securities, they may disregard any security held by some but not all of
them if, prior to relying on the Order, the Required Majority is
presented with all information necessary to make a finding, and finds,
that: (A) Any Regulated Fund's or Affiliated Investor's holding of a
different class of securities (including for this purpose a security
with a different maturity date) is immaterial \23\ in amount, including
immaterial relative to the size of the issuer; and (B) the Board
records the basis for any such finding in its minutes. In addition,
securities that differ only in respect of issuance date, currency, or
denominations may be treated as the same security; and
---------------------------------------------------------------------------

    \23\ In determining whether a holding is ``immaterial'' for
purposes of the requested order, the Required Majority will consider
whether the nature and extent of the interest in the transaction or
arrangement is sufficiently small that a reasonable person would not
believe that the interest affect the determination of whether to
enter into the transaction or arrangement or the terms of the
transaction or arrangement.
---------------------------------------------------------------------------

    (d) The Affiliated Investors, the other Regulated Funds and their
affiliated persons (within the meaning of section 2(a)(3)(C) of the
Act), individually or in the aggregate, do not control the issuer of
the securities (within the meaning of section 2(a)(9) of the Act).
    9. Standard Review Follow-Ons.
    (a) If any Regulated Fund or Affiliated Investor desires to make a
Follow-On Investment in an issuer and the Regulated Funds and
Affiliated Investors holding investments in the issuer previously
participated in a Co-Investment Transaction with respect to the issuer:
    (i) The Adviser to each such Regulated Fund or Affiliated Investor
will notify each Regulated Fund that holds securities of the portfolio
company of the proposed transaction at the earliest practical time; and
    (ii) the Adviser to each Regulated Fund that holds an investment in
the issuer will formulate a recommendation as to the proposed
participation, including the amount of the proposed investment, by such
Regulated Fund.
    (b) A Regulated Fund may participate in the Follow-On Investment
without obtaining prior approval of the Required Majority if: (i)(A)
The proposed participation of each Regulated Fund and each Affiliated
Investor in such investment is proportionate to its outstanding
investments in the issuer or the security at issue, as appropriate,\24\
immediately preceding the Follow-On Investment; and (B) 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); or
(ii) it is a Non-Negotiated Follow-On Investment.\25\
---------------------------------------------------------------------------

    \24\ To the extent that a Follow-On Investment opportunity is in
a security or arises in respect of a security held by the
participating Regulated Funds and Affiliated Investors,
proportionality will be measured by each participating Regulated
Fund's and Affiliated Investor's outstanding investment in the
security in question immediately preceding the Follow-On Investment
using the most recent available valuation thereof. To the extent
that a Follow-On Investment opportunity relates to an opportunity to
invest in a security that is not in respect of any security held by
any of the participating Regulated Funds or Affiliated Investors,
proportionality will be measured by each participating Regulated
Fund's and Affiliated Investor's outstanding investment in the
issuer immediately preceding the Follow-On Investment using the most
recent available valuation thereof.
    \25\ The term ``Non-Negotiated Follow-On Investment'' means a
Follow-On Investment in which a Regulated Fund participates together
with one or more Affiliated Investors and/or one or more other
Regulated Funds (i) in which the only term negotiated by or on
behalf of the funds is price and (ii) with respect to which, if the
transaction were considered on its own, the funds would be entitled
to rely on SEC guidance under either of the Joint Transaction No-
Action Letters.
---------------------------------------------------------------------------

    (c) In all other cases, the Adviser will provide its written
recommendation as to the Regulated Fund's participation to the Eligible
Trustees, and the Regulated Fund will participate in such Follow-On
Investment solely to the extent that a Required Majority makes the

determinations set forth in condition 2(c). If the only previous Co-
Investment Transaction with respect to the issuer was an Enhanced
Review Disposition the Eligible Trustees must complete this review of
the proposed Follow-On Investment both on a stand-alone basis and
together with the Pre-Boarding Investments in relation to the total
economic exposure and other terms of the investment.
    (d) If, with respect to any such Follow-On Investment:
    (i) The amount of the opportunity proposed to be made available to
any Regulated Fund is not based on the Regulated Funds' and the
Affiliated Investors' outstanding investments in the issuer or the
security at issue, as appropriate, immediately preceding the Follow-On
Investment; and
    (ii) 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 Affiliated
Investors, collectively, in the same transaction, exceeds the amount of
the investment opportunity; then the Follow-On Investment Opportunity
will be allocated among them pro rata based on Available Capital (as
described in greater detail in the application), up to the amount
proposed to be invested by each.
    (e) 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.
    10. Enhanced Review Follow-Ons.
    (a) If any Regulated Fund or Affiliated Investor desires to make a
Follow-On Investment in an issuer that is a Potential Co-Investment
Transaction and the Regulated Funds and Affiliated Investor holding
investments in the issuer have not previously participated in a Co-
Investment Transaction with respect to the issuer:
    (i) The Adviser to each such Regulated Fund or Affiliated Investor
will notify each Regulated Fund that holds securities of the portfolio
company of the proposed transaction at the earliest practical time;
    (ii) the Adviser to each Regulated Fund that holds an investment in
the issuer will formulate a recommendation as to the proposed
participation, including the amount of the proposed investment, by such
Regulated Fund; and
    (iii) the Advisers will provide to the Board of each Regulated Fund
that holds an investment in the issuer all information relating to the
existing investments in the issuer of the Regulated Funds and
Affiliated Investors, including the terms of such investments and how
they were made, that is necessary for the Required Majority to make the
findings required by this condition.
    (b) The applicable Adviser will provide its written recommendation
as to a Regulated Fund's participation to the Eligible Trustees, and
the Regulated Fund will participate in such Follow-On Investment solely
to the extent that a Required Majority reviews the proposed Follow-On
Investment both on a stand-alone basis and together with the Pre-
Boarding Investments in relation to the total economic exposure and
other terms and makes the determinations set forth in condition 2(c).
In addition, the Follow-On Investment may only be completed in reliance
on the order if the Required Majority of each participating Regulated
Fund determines that the making and holding of the Pre-Boarding
Investments were not prohibited by section 57 (as modified by rule 57b-
1) or rule 17d-1, as applicable. The basis for the Board's findings
will be recorded in its minutes.
    (c) The Follow-On Investment may only be completed in reliance on
the order if:
    (i) All of the Affiliated Investors' and Regulated Funds'
investments in the issuer are Pre-Boarding Investments;
    (ii) Independent counsel to the Board of each Regulated Fund that
holds an investment in the issuer advises that the making and holding
of the investments in the Pre-Boarding Investments were not prohibited
by section 57 (as modified by rule 57b-1) or rule 17d-1, as applicable;
    (iii) All Regulated Funds and Affiliated Investors that hold Pre-
Boarding Investments in the issuer immediately before the time of
completion of the Co-Investment Transaction hold the same security or
securities of the issuer. For the purpose of determining whether the
Regulated Funds and Affiliated Investors hold the same security or
securities, they may disregard any security held by some but not all of
them if, prior to relying on the order, the Required Majority is
presented with all information necessary to make a finding, and finds,
that: (A) Any Regulated Fund's or Affiliated Investor's holding of a
different class of securities (including for this purpose a security
with a different maturity date) is immaterial in amount, including
immaterial relative to the size of the issuer; and (B) the Board
records the basis for any such finding in its minutes. In addition,
securities that differ only in respect of issuance date, currency or
denominations may be treated as the same security; and
    (iv) The Affiliated Investors, the other Regulated Funds and their
affiliated persons (within the meaning of section 2(a)(3)(C) of the
Act), individually or in the aggregate, do not control the issuer of
the securities (within the meaning of section 2(a)(9) of the Act).
    (d) If, with respect to any such Follow-On Investment:
    (i) The amount of the opportunity proposed to be made available to
any Regulated Fund is not based on the Regulated Funds' and the
Affiliated Investors' outstanding investments in the issuer or the
security at issue, as appropriate, immediately preceding the Follow-On
Investment; and
    (ii) the aggregate amount recommended by the Advisers to be
invested in the Follow-On Investment by the participating Regulated
Funds and any participating Affiliated Investors, collectively, exceeds
the amount of the investment opportunity, then the Follow-On Investment
opportunity will be allocated among them pro rata based on Available
Capital (as described in greater detail in the application).
    (e) Other Conditions. 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.
    11. The Non-Interested Trustees of each Regulated Fund will be
provided quarterly for review all information concerning Potential Co-
Investment Transactions that fell within the Regulated Fund's then-
current Objectives and Strategies and Board-Established Criteria,
including investments in Potential Co-Investment Transactions made by
other Regulated Funds or Affiliated Investors that the Regulated Fund
considered but declined to participate in, and concerning Co-Investment
Transactions in which the Regulated Fund participated, so that the Non-
Interested Trustees may determine whether all Potential Co-Investment
Transactions and Co-Investment Transactions during the preceding
quarter, including those Potential Co-Investment Transactions which the
Regulated Fund considered but declined to participate in, comply with
the conditions of the order. In addition, the Non-Interested Trustees
will consider at least annually: (a) The continued appropriateness for
the Regulated Fund of participating in new and existing Co-Investment
Transactions, and (b) the continued appropriateness of any Board-
Established Criteria.

    12. 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.
    13. No Non-Interested Trustee 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 any of the
Affiliated Investors.
    14. 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 1933 Act) will, to the
extent not payable by the Advisers under their respective investment
advisory agreements with Affiliated Investors and the Regulated Funds,
be shared by the Regulated Funds and the Affiliated Investors in
proportion to the relative amounts of the securities held or to be
acquired or disposed of, as the case may be.
    15. Any transaction fee \26\ (including break-up, structuring,
monitoring 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 Affiliated Investors 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 the 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 Affiliated Investors based on the amount they invest in such Co-
Investment Transaction. None of the Advisers, the Primary Advisers, the
Affiliated Investors, the other Regulated Funds nor any affiliated
person of the Regulated Funds or Affiliated Investors 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 Affiliated Investors, the pro rata
transaction fees described above and fees or other compensation
described in condition 2(c)(iii)(D), and (b) in the case of an Adviser
or Primary Adviser, investment advisory fees paid in accordance with
their respective agreements between the Advisers and the Regulated Fund
or Affiliated Investor).
---------------------------------------------------------------------------

    \26\ Applicants are not requesting and the staff is not
providing any relief for transaction fees received in connection
with any Co-Investment Transaction.
---------------------------------------------------------------------------

    16. If the Holders own in the aggregate more than 25% of the
Shares, then the Holders will vote such Shares in the same percentages
as the Regulated Fund's other shareholders (not including the Holders)
when voting on (1) the election of trustees; (2) the removal of one or
more trustees; or (3) all other matters under either the Act or
applicable state law affecting the Board's composition, size or manner
of election.
    17. Each Regulated Fund's chief compliance officer, as defined in
rule 38a-1(a)(4) under the Act, will prepare an annual report for its
Board each year that evaluates (and documents the basis of that
evaluation) the Regulated Fund's compliance with the terms and
conditions of the application and the procedures established to achieve
such compliance.

    For the Commission, by the Division of Investment Management,
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-24148 Filed 11-4-21; 8:45 am]
BILLING CODE 8011-01-P