[Federal Register Volume 83, Number 110 (Thursday, June 7, 2018)]
[Notices]
[Pages 26506-26507]
[FR Doc No: 2018-12191]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33112; 812-14871]

Sprott ETF Trust and Sprott Asset Management USA Inc.

June 1, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c-1
under the Act, under sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under
section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and
12(d)(1)(B) of the Act. The requested order would permit (a) actively-
managed series of certain open-end management investment companies
(``Funds'') to issue shares redeemable in large aggregations only
(``Creation Units''); (b) secondary market transactions in Fund shares
to occur at negotiated market prices rather than at net asset value
(``NAV''); (c) certain Funds to pay redemption proceeds, under certain
circumstances, more than seven days after the tender of shares for
redemption; (d) certain affiliated persons of a Fund to deposit
securities into, and receive securities from, the Fund in connection
with the purchase and redemption of Creation Units; (e) certain
registered management investment companies and unit investment trusts
outside of the same group of investment companies as the Funds (``Funds
of Funds'') to acquire shares of the Funds; and (f) certain Funds
(``Feeder Funds'') to create and redeem Creation Units in-kind in a
master-feeder structure.
    Applicants: Sprott ETF Trust (``Trust''), a Delaware statutory
trust that will be registered under the Act as an open-end management
investment company with multiple series, and Sprott Asset Management
USA Inc. (``Initial Adviser''), a California corporation registered as
an investment adviser under the Investment Advisers Act of 1940.
    Filing Dates: The application was filed on January 23, 2018 and
amended on May 22, 2018.
    Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on June 26, 2018, and should be accompanied by proof of
service on applicants, in the form of an affidavit, or for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the
Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street
NE, Washington, DC 20549-1090; Applicants: Bibb L. Strench, Esq.,
Thompson Hine LLP, 1919 M Street NW, Suite 700, Washington, DC 20036-
3537; Thomas W. Ulrich, Esq., Sprott Asset Management USA Inc., 1910
Palomar Point Way, Suite 200, Carlsbad, CA 92008.

FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel,
at<PHONE_NUMBER>, or Andrea Ottomanelli Magovern, Branch Chief, at
(202) 551-6821 (Division of Investment Management, Chief Counsel's
Office).

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>.

Summary of the Application

    1. Applicants request an order that would allow Funds to operate as
actively-managed exchange traded funds (``ETFs'').\1\ Fund shares will
be purchased and redeemed at their NAV in Creation Units only. All
orders to purchase Creation Units and all redemption requests will be
placed by or through an ``Authorized Participant,'' which will have
signed a participant agreement with a broker-dealer registered under
the Securities Exchange Act of 1934 (``Exchange Act'')
(``Distributor''). Shares will be listed and traded individually on a
national securities exchange, where share prices will be based on the
current bid/offer market. Certain Funds may operate as Feeder Funds in
a master-feeder structure. Any order granting the requested relief
would be subject to the terms and conditions stated in the application.
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    \1\ Applicants request that the order apply to the Initial Fund,
as well as to future series of the Trust and any other existing or
future open-end management investment companies or series thereof
(each, included in the term ``Fund''), each of which will operate as
an actively-managed ETF. Any Fund will (a) be advised by the Initial
Adviser or an entity controlling, controlled by, or under common
control with the Initial Adviser (each of the foregoing and any
successor thereto included in the term ``Adviser'') or any successor
thereto, and (b) comply with the terms and conditions of the
application. For purposes of the requested Order, a ``successor'' is
limited to an entity or entities that result from a reorganization
into another jurisdiction or a change in the type of business
organization.
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    2. Each Fund will consist of a portfolio of securities and other
assets and investment positions (``Portfolio Instruments''). Each Fund
will disclose on its website the identities and quantities of the
Portfolio Instruments that will form the basis for the Fund's
calculation of NAV at the end of the day.
    3. Shares will be purchased and redeemed in Creation Units and
generally on an in-kind basis. Except where the purchase or redemption
will include cash under the limited circumstances specified in the
application, purchasers will be required to purchase Creation Units by
depositing specified instruments (``Deposit Instruments''), and
shareholders redeeming their shares will receive specified instruments
(``Redemption Instruments''). The Deposit Instruments and the
Redemption Instruments will each correspond pro rata to the positions
in the Fund's portfolio (including cash positions) except as specified
in the application.
    4. Because shares will not be individually redeemable, applicants
request an exemption from section 5(a)(1) and section 2(a)(32) of the
Act that would permit the Funds to register as open-end management
investment companies and issue shares that are redeemable in Creation
Units only.
    5. Applicants also request an exemption from section 22(d) of the
Act and rule 22c-1 under the Act as secondary market trading in shares
will take place at negotiated prices, not at a current offering price
described in a Fund's prospectus, and not at a price based on NAV.
Applicants state that (a)

secondary market trading in shares does not involve a Fund as a party
and will not result in dilution of an investment in shares, and (b) to
the extent different prices exist during a given trading day, or from
day to day, such variances occur as a result of third-party market
forces, such as supply and demand. Therefore, applicants assert that
secondary market transactions in shares will not lead to discrimination
or preferential treatment among purchasers. Finally, applicants
represent that share market prices will be disciplined by arbitrage
opportunities, which should prevent shares from trading at a material
discount or premium from NAV.
    6. With respect to Funds that hold non-U.S. Portfolio Instruments
and that effect creations and redemptions of Creation Units in kind,
applicants request relief from the requirement imposed by section 22(e)
in order to allow such Funds to pay redemption proceeds within fifteen
calendar days following the tender of Creation Units for redemption.
Applicants assert that the requested relief would not be inconsistent
with the spirit and intent of section 22(e) to prevent unreasonable,
undisclosed or unforeseen delays in the actual payment of redemption
proceeds.
    7. Applicants request an exemption to permit Funds of Funds to
acquire Fund shares beyond the limits of section 12(d)(1)(A) of the
Act; and the Funds, and any principal underwriter for the Funds, and/or
any broker or dealer registered under the Exchange Act, to sell shares
to Funds of Funds beyond the limits of section 12(d)(1)(B) of the Act.
The application's terms and conditions are designed to, among other
things, help prevent any potential (i) undue influence over a Fund
through control or voting power, or in connection with certain
services, transactions, and underwritings, (ii) excessive layering of
fees, and (iii) overly complex fund structures, which are the concerns
underlying the limits in sections 12(d)(1)(A) and (B) of the Act.
    8. Applicants request an exemption from sections 17(a)(1) and
17(a)(2) of the Act to permit a person who is an affiliated person, as
defined in section 2(a)(3) of the Act (``Affiliated Person''), or an
affiliated person of an Affiliated Person (``Second-Tier Affiliate''),
of the Funds, solely by virtue of certain ownership interests, to
effectuate purchases and redemptions in-kind. The deposit procedures
for in-kind purchases of Creation Units and the redemption procedures
for in-kind redemptions of Creation Units will be the same for all
purchases and redemptions and Deposit Instruments and Redemption
Instruments will be valued in the same manner as those Portfolio
Instruments currently held by the Funds. Applicants also seek relief
from the prohibitions on affiliated transactions in section 17(a) to
permit a Fund to sell its shares to and redeem its shares from a Fund
of Funds, and to engage in the accompanying in-kind transactions with
the Fund of Funds.\2\ The purchase of Creation Units by a Fund of Funds
directly from a Fund will be accomplished in accordance with the
policies of the Fund of Funds and will be based on the NAVs of the
Funds.
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    \2\ The requested relief would apply to direct sales of shares
in Creation Units by a Fund to a Fund of Funds and redemptions of
those shares. Applicants, moreover, are not seeking relief from
section 17(a) for, and the requested relief will not apply to,
transactions where a Fund could be deemed an Affiliated Person, or a
Second-Tier Affiliate, of a Fund of Funds because an investment
adviser to the Funds is also an investment adviser to a Fund of
Funds.
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    9. Applicants also request relief to permit a Feeder Fund to
acquire shares of another registered investment company managed by the
Adviser having substantially the same investment objectives as the
Feeder Fund (``Master Fund'') beyond the limitations in section
12(d)(1)(A) and permit the Master Fund, and any principal underwriter
for the Master Fund, to sell shares of the Master Fund to the Feeder
Fund beyond the limitations in section 12(d)(1)(B).
    10. Section 6(c) of the Act permits the Commission to exempt any
persons or transactions from any provision of the Act if such exemption
is necessary or appropriate in the public interest and consistent with
the protection of investors and the purposes fairly intended by the
policy and provisions of the Act. Section 12(d)(1)(J) of the Act
provides that the Commission may exempt any person, security, or
transaction, or any class or classes of persons, securities, or
transactions, from any provision of section 12(d)(1) if the exemption
is consistent with the public interest and the protection of investors.
Section 17(b) of the Act authorizes the Commission to grant an order
permitting a transaction otherwise prohibited by section 17(a) if it
finds that (a) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (b) the proposed transaction is consistent with the policies
of each registered investment company involved; and (c) the proposed
transaction is consistent with the general purposes of the Act.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12191 Filed 6-6-18; 8:45 am]
 BILLING CODE 8011-01-P