[Federal Register Volume 81, Number 208 (Thursday, October 27, 2016)]
[Notices]
[Pages 74799-74800]
[FR Doc No: 2016-26020]

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ENVIRONMENTAL PROTECTION AGENCY

[FRL-9954-55-Region 3]

Notice of Tentative Approval and Opportunity for Public Comment
and Public Hearing for Public Water System Supervision Program Revision
for Maryland

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of approval and solicitation of requests for public
hearing.

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SUMMARY: Notice is hereby given that the State of Maryland is revising
its approved Public Water System Supervision Program. Maryland has
adopted drinking water regulations for the Stage 2 Disinfectants and
Disinfection By-Products Rule (Stage2). The U.S. Environmental
Protection Agency (EPA) has determined that Maryland's Stage 2 Rule
meets all minimum federal requirements, and that it is no less
stringent than the corresponding federal regulation. Therefore, EPA has
tentatively decided to approve the State program revisions.

DATES: Comments or a public hearing must be submitted by November 28,
2016. This determination shall become final and effective on November
28, 2016 if no timely and appropriate request for a hearing is
received, and the Regional Administrator does not elect to hold a
hearing on his own motion, and if no comments are received which cause
EPA to modify its tentative approval.

ADDRESSES: Comments or a request for a public hearing must be submitted
to the U.S. Environmental Protection Agency, Region III, 1650 Arch
Street, Philadelphia, PA 19103-2029. All documents relating to this
determination are available for inspection between the hours of 8:00
a.m. and 4:30 p.m., Monday through Friday, at the following offices:
     Drinking Water Branch, Water Protection Division, U.S.
Environmental Protection Agency Region III, 1650 Arch Street,
Philadelphia, PA 19103-2029.

     Water Management Administration, Maryland Department of
the Environment, 1800 Washington Boulevard, Baltimore, Maryland 21230.

FOR FURTHER INFORMATION CONTACT: Anthony Meadows, Drinking Water Branch
(3WP21) at the Philadelphia address given above, or telephone (215)
814-5442 or fax<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: All interested parties are invited to submit
written comments on this determination and may request a hearing. All
comments will be considered, and if necessary EPA will issue a
response. Frivolous or insubstantial requests for a hearing will be
denied by the Regional Administrator. If a substantial request for a
public hearing is made by November 28, 2016, a public hearing will be
held. A request for public hearing shall include the following: (1) The
name, address, and telephone number of the individual, organization, or
other entity requesting a hearing; (2) a brief statement of the
requesting person's interest in the Regional Administrator's
determination and of information that the requesting person intends to
submit at such hearing; and (3) the signature of the individual making
the request; or, if the request is made on behalf of an organization or
other entity, the signature of a responsible official of the
organization or other entity.

    Dated: October 17, 2016.
Shawn M. Garvin,
Regional Administrator.
[FR Doc. 2016-26020 Filed 10-26-16; 8:45 am]
 BILLING CODE 6560-50-P


[Federal Register: March 11, 2008 (Volume 73, Number 48)]
[Notices]
[Page 13058-13060]
[DOCID:fr11mr08-115]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57429; File No. SR-CBOE-2006-36]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Granting Approval of Proposed Rule Change, as
Modified by Amendments No. 1, 2, and 3 Thereto, to Modify the Minimum
Value Size for an Opening Transaction in a Currently-Opened FLEX Equity
Series and to Establish a Pilot Program that Reduces the Minimum Number
of Contracts Required for a FLEX Equity Option Opening Transaction in a
New Series

March 4, 2008.

I. Introduction

    On April 14, 2006, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or ``Exchange''), filed with the Securities and Exchange
Commission (``Commission'') pursuant to section 19(b)(1) of the
Securities Exchange Actof 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to make changes to the minimum
value size for an opening transaction in a currently-opened FLEX Equity
series and to establish a one-and-a-half-year pilot program that
reduces the minimum number of contracts required for a FLEX Equity
Option opening transaction in a new series (``Pilot Program'').\3\ On
December 24, 2007, CBOE filed Amendments No. 1 and 2 to the proposed
rule change.\4\ The amended proposed rule change was published for
comment in the Federal Register on January 24, 2008.\5\ The Commission
received no comments on the proposal. On March 3, 2008, CBOE filed
Amendment No. 3 to the proposed rule change.\6\ This order approves the
proposed rule change, as modified by Amendments No. 1, 2, and 3.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ CBOE defines the term ``FLEX Equity Option'' to mean an
option on a specified underlying equity security that is subject to
the rules in Chapters 24A and 24B. See CBOE Rule 24A.1(e) and CBOE
Rule 24B.1(f), respectively.
    \4\ Amendment No. 1 replaced and superseded the original filing
in its entirety. Amendment No. 2 replaced and superseded Amendment
No. 1 in its entirety.
    \5\ See Securities Exchange Act Release No. 57161 (January 16,
2008), 73 FR 4293 (January 24, 2008).
    \6\ Amendment No. 3 is a technical amendment that corrects a
typographical error in the proposed rule language and is not subject
to notice and comment.
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II. Description of the Proposal

    CBOE is proposing to reduce the minimum value size for an opening
transaction (other than FLEX Quotes responsive to a FLEX Request for
Quotes) in any FLEX Equity Option \7\ series in which there is no open
interest at the time the Request for Quotes is submitted on a pilot
basis for one-and-a-half years. Currently, the minimum opening
transaction value size in the case of a FLEX Equity Options in a newly
established series is the lesser of (i) 250 contracts or (ii) the
number of contracts overlying $1 million in the underlying
securities.\8\ Under the Pilot Program, the Exchange proposes to reduce
the ``250 contracts'' component to ``150 contracts;'' the $1 million
underlying value component will continue to apply unchanged.\9\ If the
Exchange were to propose an extension, expansion, or permanent
implementation of the Pilot Program, the Exchange would submit, along
with a filing proposing any necessary amendments to the Pilot Program,
a pilot program report. The report would be submitted to the Commission
at least ninety days prior to the expiration date of the one-and-a-half
year Pilot Program.
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    \7\ FLEX Equity Options are flexible exchange-traded options
contracts which overlie equity securities. FLEX Equity Options
provide investors with the ability to customize basic option
features including size, expiration date, exercise style, and
certain exercise prices.
    \8\ Under this formula, an opening transaction in a FLEX Equity
series in a stock priced at $40 or more would reach the $1 million
limit before it would reach the contract size limit, i.e., 250
contracts times the multiplier (100) times the stock price ($40)
equals $1 million in underlying value. For a FLEX Equity series in a
stock priced at less than $40, the 250 contract size limit applies.
    \9\ Under this proposed formula, an opening transaction in a
FLEX Equity series in a stock priced at approximately $66.67 or more
would reach the $1 million limit before it would reach the contract
size limit, i.e., 150 contracts times the multiplier (100) times the
stock price ($66.67) equals just over $1 million in underlying
value. For a FLEX Equity series in a stock priced at less than
$66.67, the 150 contract size limit would apply.
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    Given that FLEX Equity Option transactions can occur in increments
of 100 or more contracts in subsequent opening transactions,\10\ the
Exchange believes it is reasonable to permit the initial series opening
transaction size to

be 150 contracts (or $1 million in underlying value, whichever is
less). The Exchange believes that the proposed reduction of the minimum
value size for opening a series provides FLEX-participating members
with greater flexibility in structuring the terms of FLEX Equity
Options that best comports with their and their customers' particular
needs. The Exchange notes that the opening size requirement for FLEX
Equity Options was originally put in place to limit participation in
FLEX Equity Options to sophisticated, high net worth investors rather
than retail investors.\11\ According to CBOE, it has recently received
requests from broker-dealers representing institutional clients that
the minimum value size for opening transactions be reduced. In
proposing the reduction of the 250 contract component to 150 contracts,
CBOE stated in its filing that it is cognizant of the desire to
continue to provide both the requisite amount of investor protection
that the minimum opening size requirement was originally designed to
achieve, as well as the need for market participants to have the
flexibility to serve their customers' particular investment needs.
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    \10\ Specifically, the minimum value size for a transaction in
any currently-opened FLEX Equity Option series is 100 contracts in
the case of opening transactions and 25 contracts in the case of
closing transactions (or any lesser amount in a closing transaction
that represents the remaining underlying size, whichever is less).
Additionally, the minimum value size for a FLEX Quote entered in
response to a Request for Quotes in FLEX Equity Options is the
lesser of 25 contracts or the remaining underlying size in a closing
transaction. See Exchange Rules 24A.4(a)(4)(iii)--(iv) and
24B.4(a)(5)(iii)--(iv). A ``FLEX Quote'' refers to (i) FLEX bids and
offers entered by Market-Makers and (ii) orders to purchase and
orders to sell FLEX Options entered by Exchange members other than
Market-Makers, in each case in response to a Request for Quotes. See
CBOE Rules 24A.1(h) and 24B.1(k).
    \11\ The existing customer base for FLEX Options includes both
institutional investors and high net worth individuals.
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    The Exchange also believes that modifying the minimum opening
transaction value size in this way will further broaden the base of
institutional investors that use FLEX Equity Options to manage their
trading and investment risk, including investors that currently trade
in the over-the-counter (``OTC'') market for customized options which
can take on contract characteristics similar to FLEX Options but for
which similar opening size restrictions do not apply. CBOE believes
market participants benefit from being able to trade these customized
options in an exchange environment in several ways, including, but not
limited to, enhanced efficiency in initiating and closing out
positions; increased market transparency; and heightened contra-party
creditworthiness due to the role of The Options Clearing Corporation as
issuer and guarantor of FLEX Equity Options.
    Finally, the Exchange is also proposing to modify the minimum value
size for an opening transaction in a currently-opened FLEX Equity
series (other than FLEX Quotes responsive to a FLEX Request for
Quotes). Presently, the minimum transaction value size for an opening
transaction in a currently-opened series is 100 contracts. The Exchange
is proposing to modify the minimum size formula to the lesser of (i)
100 contracts or (ii) the number of contracts overlying $1 million in
the underlying securities. This change would only impact those FLEX
Equity series in which the underlying stock is trading at more than
$100.\12\
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    \12\ Under this proposed formula, a transaction in a currently-
opened FLEX Equity series in a stock priced at more than $100 would
reach the $1 million limit before it would reach the contract size
limit, i.e., 100 contracts times the multiplier (100) times the
stock price ($100) equals $1 million in underlying value. Telephone
conference between Jennifer Lamie, Assistant General Counsel, CBOE,
and Kristie Diemer, Special Counsel, Division of Trading and
Markets, Commission, on February 28, 2008 clarifying that the
underlying stock price would have to be trading at ``more than
$100'' versus ``$100 or more'' to meet a $1 million limit before the
100 contract size limit. (``February 28 Telephone Conversation.'')
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    The FLEX minimum size requirements for subsequent opening
transactions in a currently-opened series is higher for certain stocks
priced over $100 than the minimum size needed to initially open the
series in similarly priced stocks. The Exchange therefore believes
that, this change is necessaryfor there to be consistency between the
minimum size requirements for new series and currently-opened series
when the underlying stock is trading at more than $100.\13\
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    \13\ For example, a new FLEX Equity series in a stock trading at
$110 could open with an initial transaction size of 91 contracts,
i.e., 91 contracts times the multiplier (100) times the stock price
($110) equals just over $1 million in underlying value. Once the
series is opened, absent the proposed change, any further opening
transactions would require a minimum contract size of 100 contracts,
despite the fact that with the stock price of $110, this would be
valued at $1.1 million, more than the value of the initial opening
transaction.
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III. Discussion and Commission Findings

    The Commission has carefully reviewed the proposed rule change and
finds that it is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\14\ In particular, the Commission finds that the proposed
rule change is consistent with section 6(b)(5) of the Act,\15\ which,
among other things, requires that the rules of a national securities
exchange be designed to promote just and equitable principles of trade,
to foster cooperation and coordination with persons engaged in
regulating transactions in securities, 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.
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    \14\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change, in reducing
the minimum opening size from 250 contracts to 150 contracts (or an
underlying value of $1 million, whichever is less) in an initial
opening transaction, should allow CBOE to better meet the needs of
investors in the FLEX Equity Options market. The requirements as
proposed, however, should still be significant enough to limit FLEX
Equity Options to institutional and high net worth customers, the
intended customers, rather than retail investors. In addition, the
Commission agrees with the Exchange that the proposal to lower the
opening size may allow more market participants to benefit from trading
customized-type options in the Exchange's FLEX Equity Options market as
opposed to the OTC market. As noted above, some of the benefits of
trading on an exchange may include, among others, enhanced efficiency
in initiating and closing out positions; increased market transparency;
and heightened contra-party creditworthiness due to the role of The
Options Clearing Corporation as issuer and guarantor of FLEX Equity
Options.
    As noted above, the proposal to reduce the minimum number of
contracts required for a FLEX Equity Option in an initial opening
transaction is being approved on a one-and-a-half-year pilot basis. The
Commission has requested that CBOE provide a report to it should CBOE
wish to extend the Pilot Program or implement the change on a permanent
basis. At a minimum, the report must provide (i) data and analysis on
the open interest and trading volume in FLEX Equity Options for which
series were opened with a minimum opening size of 150 to 249 contracts
and less than $1 million in underlying value; and (ii) analysis on the
types of investors that initiated opening FLEX Equity Options
transactions (i.e., institutional, high net worth, or retail, if any).
The report, along with any filing to extend or permanently implement
the Pilot Program,\16\ should be submitted to the Commission at least
ninety days prior to the expiration date of the one-and-a-half-year
Pilot Program.
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    \16\ CBOE agreed to submit any related filing (in addition to
the report) at least ninety days prior to the expiration of the
Pilot Program in the February 28 Telephone Conversation. See supra,
note 12.
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    The report should provide the Commission with information on
whether the intended customers (institutional and high net worth) are
in fact the investors utilizing the lower

opening contract requirement in the FLEX Equity Options market, as well
as whether the lower opening size has increased liquidity in FLEX
Equity Options. Based on the report's information, the Commission
should be able to determine whether the Pilot Program should be
extended or approved on a permanent basis, consistent with the Act.
    The Commission also believes that the aspect of the proposal that
modifies the minimum value size for an opening transaction in a
currently-opened FLEX Equity series (other than FLEX Quotes responsive
to a FLEX Request for Quotes) to the lesser of (i) 100 contracts or
(ii) the number of contracts overlying $1 million in the underlying
securities is also consistent with the Act and the rules and
regulations thereunder. The Commission agrees with the Exchange that
this change will provide consistency between the minimum size
requirements for opening transactions in both new series and currently-
opened series when the underlying stock is trading at more than $100.
The change avoids the result that, for situations where the underlying
stock is priced over $100, the effect of current CBOE rules is to
require a higher opening amount for currently-opened series than for
newly established series.

IV. Conclusion

     It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\17\ that the proposed rule change (SR-CBOE-2006-36), as modified
by Amendments No. 1, 2, and 3, be, and hereby is, approved with respect
to the minimum value size for an opening transaction in a currently-
opened FLEX Equity series (other than FLEX Quotes responsive to a FLEX
Request for Quotes) and to establish a Pilot Program for one-and-a-
half-years with respect to the reduced minimum number of contracts
required for a FLEX Equity Option Opening transaction in a new series.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-4748 Filed 3-10-08; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register Volume 85, Number 249 (Tuesday, December 29, 2020)]
[Notices]
[Pages 85784-85787]
[FR Doc No: 2020-28749]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34147; 812-15096-01]

KKR Registered Advisor LLC and KKR Real Estate Select Trust Inc.

December 22, 2020.
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 (``Act'') for an exemption from section
23(a)(1) of the Act.

Summary of Application:  Applicants request an order to permit certain
registered closed-end management investment companies (``closed-end
funds'') and business development companies (``BDCs'',\1\ and together
with the closed-end funds, ``Funds'') to pay Advisory Fees (defined
below) in shares of their common stock (``Shares'').
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    \1\ The term ``BDC'' means business development company as
defined under Section 2(a)(48) of the Act.

Applicants:  KKR Registered Advisor LLC (the ``Existing Adviser'') and
KKR Real Estate Select Trust Inc. (the ``KREST Fund'' and together with
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the Existing Adviser, the ``Applicants'').

Filing Dates:  The application was filed on February 19, 2020, and
amended on May 28, 2020, September 14, 2020, November 5, 2020, and
December 18, 2020.

Hearing or Notification of Hearing:  An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by emailing the Commission's Secretary at
<EMAIL_ADDRESS>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 January 18, 2021, and should be accompanied by proof of
service on the 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_ADDRESS>
ADDRESSES: Secretary, U.S. Securities and Exchange Commission:
<EMAIL_ADDRESS>Applicants: Lori Hoffman, Esq.,
<EMAIL_ADDRESS>
FOR FURTHER INFORMATION CONTACT: Hae-Sung Lee, Senior Counsel, at (202)
551-7345, or Trace W. Rakestraw, Branch Chief, at<PHONE_NUMBER>
(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 an Applicant
using the ``Company'' name box, at http://www.sec.gov/search/search.htm
or by calling<PHONE_NUMBER>.

Applicants' Representations

    1. Applicants seek an order of the Commission under section 6(c) of
the Act, granting an exemption from section 23(a)(1) of the Act to the
extent necessary to allow a Fund \2\ to pay its

Adviser \3\ all or part of the Advisory Fees \4\ earned by the Adviser
in Shares in lieu of paying an equivalent amount in cash.
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    \2\ The term ``Fund'' means (i) the KREST Fund and (ii) any
existing or future closed-end management investment company (A) that
is registered under the Act or has elected to be regulated as a BDC,
(B) whose investment adviser is an Adviser (as defined below) and
(C) that intends to rely the requested order. Each person that
currently intends to rely on the requested order is named as an
Applicant. Any person that relies on the requested order in the
future would do so only in accordance with the terms and conditions
contained in the Application.
    \3\ The term ``Adviser'' means (i) the Existing Adviser, (ii)
any investment adviser that controls, is controlled by or is under
common control with the Existing Adviser and is registered as an
investment adviser under the Investment Advisers Act of 1940, as
amended (the ``Advisers Act'') or (iii) any successor in interest to
any entity described under (i) and (ii) of this definition. For
purposes of the requested order, the term ``successor'' is limited
to an entity that results from a reorganization into another
jurisdiction or a change in the type of business organization.
    \4\ The term ``Advisory Fees'' means the compensation a Fund
agrees to pay its Adviser pursuant to an investment advisory
agreement with its Adviser subject to section 15 of the Act (each,
an ``Advisory Agreement''). Such compensation may include base
management fees, income-based incentive fees, and/or capital gains-
based incentive fees, as applicable and permissible under the
Advisers Act. With respect to the requested relief, the Applicants
do not differentiate among these types of Advisory Fees because, in
each case, an Adviser would receive shares in lieu of a dollar
amount of Advisory Fees.
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    2. The Existing Adviser, a Delaware limited liability company
registered as an investment adviser under the Advisers Act, currently
serves as the investment adviser to the KREST Fund pursuant to its
Advisory Agreement. The Existing Adviser, or another Adviser registered
under the Advisers Act, would serve as investment adviser to each Fund.
    3. The KREST Fund, a Maryland corporation that would register under
the Act as a closed-end management investment company, would
continuously offer its Shares and expects to offer periodic liquidity
with respect to its Shares through tender offers conducted in
compliance with rule 13e-4 under the Securities Exchange Act of 1934
(as amended, the ``Exchange Act'').\5\ The KREST Fund would be non-
listed, and the Shares would not trade on an exchange.\6\ The KREST
Fund expects to invest primarily in illiquid assets.
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    \5\ Other Funds that rely on the requested order in the future
may offer periodic liquidity in compliance with rule 23c-3 under the
Act (``Interval Funds'').
    \6\ If the KREST Fund, or any other Fund, lists its Shares, it
would no longer rely on the requested order.
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    4. As required by section 15 of the Act, the Adviser would manage
the Fund pursuant to an Advisory Agreement that precisely describes the
nature and method of calculation of the Advisory Fees. The Advisory
Agreement would specify that the Adviser may elect to receive payment
of the Advisory Fees it has earned, in whole or in part, in an amount
of Shares equal in value to the dollar figure of the Advisory Fees
owed. Each fund would disclose this mechanism in its registration
statements and proxy statements.
    5. Applicants represent that each fund's advisory agreement would
specify the fee calculation period for Advisory Fees (e.g., annually,
quarterly, monthly, etc.) (such period, the ``Fee Calculation
Period''). At the beginning of each Fee Calculation Period, each Fund's
Adviser would elect to receive its Advisory Fees for such period in
cash, Shares or some combination of both.\7\ In making such an
election, the Adviser must consider the best interests of the Fund and
its shareholders.
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    \7\ If an Adviser elects to receive its Advisory Fees in a
combination of cash and shares of common stock, it would also choose
at the beginning of the Fee Calculation Period what portion of
Advisory Fees it would receive in Shares.
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    6. The number of Shares the Adviser would receive would be
calculated by dividing the earned Advisory Fees elected by the Adviser
for payment in Shares by the greater of (i) the current net asset value
(``NAV'') per share of the class of Shares the Adviser would receive,
as determined by or under the supervision of the Fund's board of
directors in accordance with the Act and (ii) the current offering
price of the class of Shares the Adviser would receive. For example, if
an Adviser earned Advisory Fees amounting to $200,000 for a given Fee
Calculation Period and the Fund's NAV per share and offering price per
share was $25 at the time of issuance to the Adviser, the Fund would
issue 8,000 Shares to the Adviser if the Adviser had elected to receive
its entire Advisory Fee in Shares for that Fee Calculation Period.
    7. A Fund would only rely on the requested relief to issue Shares
of a class that is otherwise available for purchase, and reasonably
expected to be purchased, by other similarly eligible investors.
Furthermore, the Adviser would receive Shares at the same price as such
other investors acquiring the same class of Shares. Such class of
Shares would not exist solely for investment by the Adviser and/or its
affiliates. The Fund's Advisory Agreement would detail the specific
class of Shares that the Fund may issue to the Adviser as compensation
in lieu of a cash payment.
    8. For any Fee Calculation Period during which the Adviser has
elected to receive all or a portion of its Advisory Fees in Shares, the
Fund would post a notice to that effect on the Fund's website. The Fund
would also maintain and make publicly available on its website a
historical record of how the Adviser was compensated for each Fee
Calculation Period during the Fund's last three fiscal years. The Fund
would include, in response to any item on the applicable form for
registration of securities requiring a description of the Adviser's
compensation (currently Item 9 of Form N-2), a cross-reference noting
the availability of such historical information on the Fund's website.
    9. Any Shares received by the Adviser in lieu of cash would be
subject to the same fees and expenses applicable to the Fund's other
shareholders in the relevant class, would not receive preferential
voting, dividend or liquidity rights with respect to its Shares, and
would otherwise have the same rights and obligations as Shares of the
same class issued to other investors in the Fund, except that an
Adviser would ``mirror vote'' any Shares received in lieu of a cash
payment for Advisory Fees.
    10. Each Adviser would have the same opportunity and rights to
liquidate Shares of a fund it received in lieu of cash payment of
Advisory Fees as other shareholders of that fund. As required by
section 30(h) of the Act, each Adviser and its affiliated persons would
make public filings with the Commission disclosing any transactions in
a Fund's Shares as required by Section 16 of the Exchange Act.
    11. An Adviser that elects to receive payment in Shares, however,
would commit to not selling those Shares for at least 12 months from
the date of issuance, except in exceptional circumstances such as if it
no longer serves as the investment adviser of the Fund. In such a case,
the Adviser would keep a record of the reason for selling the Shares
within 12 months and the records would be maintained and preserved in
accordance with rule 204-2(e)(1) under the Advisers Act. Applicants
state that this commitment would provide further assurances that an
Adviser bears the long-term benefits and risks of an investment in a
Fund's Shares and decreases the likelihood of any potential over-
reaching by the Adviser. Each fund would publicly disclose the
Adviser's commitment in the Fund's registration statement.
    12. Consistent with fiduciary obligations under the Act, on an
annual basis, the Independent Directors (defined below) of each Fund
will review such Fund's Advisory Agreement in accordance with section
15(c) and subject to section 36 of the Act, including those provisions
allowing for payment of Advisory Fees

in Shares. To the extent an Adviser receives any fallout benefits from
receiving compensation in Shares rather than in cash, the Adviser would
disclose such benefits to the Independent Directors.
    13. The Adviser would have the ability to assign its right to
receive payment of any Advisory Fees to an entity it controls, is
controlled by or with which it is under common control (a ``control
affiliate''); provided that such an assignment may not disadvantage the
fund. Any Shares issued to a control affiliate of an Adviser would be
subject to the same conditions of the requested relief as if the Shares
were issued to and held by the Adviser directly and an Adviser's
obligations to a Fund under the Advisory Agreement would remain
unchanged. To the extent an Adviser receives any fallout benefits from
an assignment to a control affiliate, the Adviser would disclose such
benefits to the Independent Directors \8\ of the applicable Fund in
connection with their annual review of such Fund's Advisory Agreement
in accordance with section 15(c) of the Act.
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    \8\ The term ``Independent Directors'' means members of the
Fund's board of directors who are not ``interested persons'' of the
Fund within the meaning of section 2(a)(19) of the Act.
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Applicants' Legal Analysis

    14. Section 23(a)(1) of the Act prohibits a registered closed-end
investment company from issuing any of its securities in exchange for
services. Section 63 of the Act makes the prohibition in section
23(a)(1) applicable to BDCs.
    15. Section 6(c) of the Act provides that an exemptive order may be
granted if and to the extent that such an 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.
    16. Applicants assert that the concerns underlying section 23(a)(1)
of the Act do not exist under the requested relief. These concerns
include: (i) Preferential treatment of investment company insiders and
the use of options and other rights by insiders to obtain control of
the investment company; (ii) complication of the investment company's
structure that made it difficult to determine the value of the
company's shares; and (iii) dilution of stockholders' equity in the
investment company.\9\
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    \9\ See H.R. Rep. No. 76-2639, at 8 (1940) and S. Rep. No. 76-
1775, at 7 (1940).
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    17. In particular, section 23(a)(1) of the Act was enacted in
response to a then-common practice of funds paying insiders a definite
number of shares of the fund at a future date for their services
(rather than assigning a fixed dollar value to the services).\10\ If
the value of the fund's shares appreciated by the time the shares were
payable by the fund, the compensation paid to the insiders exceeded the
original cash value of the services provided. As a result, the fund
treated insiders on a basis more favorable than other shareholders by
allowing them to acquire fund shares at less than the net asset value
of the shares. The insiders received a ``windfall'' that diluted the
value of the shares held by other shareholders. Applicants maintain
that the proposed arrangement addresses this concern because the value
of the Shares an investment adviser would receive would be equal to a
fixed-dollar amount as calculated under the fund's investment advisory
agreement.
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    \10\ Investment Trusts and Investment Companies: Hearings on
H.R. 10065 Before the House Subcomm, on Interstate and Foreign
Commerce, 76th Cong., 3d Sess. 109 (1940) (statement of David
Schenker, Chief Counsel, Investment Trust Study, SEC).
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    18. Applicants assert that the requested relief does not raise
otherwise concerns about preferential treatment of Applicant's insiders
because an Adviser would receive a class of Shares that is available
for purchase by similarly qualified investors and that would be issued
at the same price per share available to other investors in the Fund at
the time of issuance to the Adviser. No Adviser would receive any
preferential voting, dividend or liquidity rights with respect to
Shares. The Shares would be subject to the same fees and expenses
applicable to other shareholders in the relevant class. Furthermore,
the Adviser and any control affiliate would mirror vote any Shares
received in lieu of cash for Advisory Fees. Thus, Applicants state that
the requested relief would not become a means for insiders to obtain
control of any Fund.
    19. The Funds would not modify their capital structure as a result
of the requested relief. The Fund's registration statements and proxy
statements would include ``plain English'' disclosure on the existence
of the relief, a statement that the Adviser may be compensated in
Shares in lieu of cash and any potential risks associated with relying
on the relief. Such risk disclosure may explain that third party
shareholders would not have priority over the Adviser or its affiliates
with respect to receiving liquidity during any periodic tender or
repurchase offers and that may have the effect of diluting third party
shareholders with respect to any such offers.
    20. Applicants believe the proposed arrangement does not raise
dilution concerns associated with other forms of equity-based
compensation, such as stock options. The Fund would issue Shares to the
Adviser at the greater of their current NAV per share and their current
offering price, and the Fund would increase its assets in direct
proportion to the Shares issued to the Adviser, forestalling any
dilutive effect.
    21. Applicants believe the requested relief is appropriate and in
the interest of the Funds' shareholders because when an Adviser elects
to receive its Advisory Fees in Shares, it would increase fund assets
available for investment purposes and create better alignment of
interests between the Fund and the Adviser. Absent the requested
relief, a fund would be required to hold a greater amount of investable
assets in cash for payment of Advisory Fees or could be forced to
liquidate assets at unfavorable times or prices to pay Advisory Fees in
cash, which could be problematic for a fund that invests primarily in
illiquid assets. For any Fee Calculation Period where the Adviser
elects payment in Shares, the advance notice provided by the Adviser's
election would allow the Fund to deploy the cash that would otherwise
need to be held for payment of Advisory Fees, reducing cash ``drag''
and opportunity costs for the Fund.
    22. Applicants assert that the requested relief further aligns the
interests of an Adviser with those of Fund shareholders because the
Adviser has more so-called ``skin in the game.'' As opposed to payment
in cash, an Adviser would invest in the Fund alongside, and at the same
price as, other investors. This would further align the interests of
Fund shareholders and the Fund's Adviser because the Adviser's
realizable compensation for any past payment is tied to maintaining or
increasing the NAV per share price until the Adviser liquidates such
Shares.
    23. Applicants state that the Commission has previously provided
exemptive relief to allow internally managed closed-end funds and BDCs
to issue restricted stock, and in some cases, stock options, as part of
a compensation package for employees, officers, and directors.
Applicants believe the rationale for such relief is similar to the
requested relief because both would provide for investment strategy
alignment while allowing the funds to maximize cash available to
investments.

Applicants' Conditions

    Applicants agree that any order granting the requested relief would
be subject to the following conditions:
    1. Each Fund will adopt an Advisory Agreement that specifies that
its Adviser may opt to receive Shares in lieu of cash payment of
Advisory Fees. Such Advisory Agreement will contain:
    a. A precise formula for determining the number of Shares to be
issued as compensation to the Adviser for each applicable Fee
Calculation Period, including the date upon which the calculation shall
be performed, stating that the number of Shares that an Adviser will
receive will be equal to the quotient of (x) the sum of Advisory Fees
elected by the Adviser for payment in Shares and (y) the greater of (i)
the current NAV per share of the class of Shares the Adviser will
receive, as determined by or under the supervision of the Fund's board
of directors in accordance with section 23(b) of the Act and (ii) the
current offering price of the class of Shares the Adviser will receive.
    b. A provision ensuring that such Adviser must elect in advance of
each Fee Calculation Period whether the Advisory Fees for that Fee
Calculation Period will be payable in cash, Shares of the Fund, or some
combination of cash and Shares of the Fund, and if a combination of
cash and Shares, what the breakdown will be.
    2. Any Shares received by an Adviser in lieu of cash payment of
Advisory Fees will have the same rights and obligations as Shares of
the same class issued to other investors in the Fund, except that an
Adviser will mirror vote any Shares received in lieu of cash payment of
Advisory Fees in the same proportion as the vote of all other
shareholders that are not (i) an Adviser or its control affiliates, and
(ii) to the Adviser's knowledge, affiliates of the Adviser (excluding
control affiliates), for so long as the Adviser serves as the
investment adviser to the Fund. The Adviser will not receive
preferential voting, dividend or liquidity rights with respect to its
Shares and will be subject to the same fees and expenses applicable to
the Fund's other shareholders in the relevant class.
    3. Each Fund will disclose in its registration statements and proxy
statements (i) that its Adviser may be compensated in Shares in lieu of
cash payments in reliance on the relief, (ii) that its Adviser will
commit not to sell any Shares received in lieu of a cash payment of
Advisory Fees for at least 12 months from the date of issuance, except
in exceptional circumstances (in such a case, the Adviser will keep a
record of the reason for selling the Shares within 12 months and the
records will be maintained and preserved in accordance with rule 204-
2(e)(1) under the Advisers Act), and (iii) any potential risks related
to relying on the relief. For any Fee Calculation Period during which
the Adviser has elected to receive all or a portion of its Advisory
Fees in Shares, the Fund will post a notice to that effect on the
Fund's website. The Fund will maintain and make publicly available on
the Fund's website a historical record of how the Adviser was
compensated for each Fee Calculation Period during the Fund's last
three fiscal years. The Fund will include, in response to any item on
the applicable form for registration of securities requiring a
description of the Adviser's compensation (currently Item 9 of Form N-
2), a cross-reference noting the availability of such historical
information on the Fund's website.
    4. The requested relief will expire on the effective date of any
Commission rule under the Act that provides relief addressing the
ability of closed-end investment companies to pay their investment
advisers their advisory fees in shares in lieu of paying an equivalent
amount in cash.

    By the Commission.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2020-28749 Filed 12-28-20; 8:45 am]
BILLING CODE 8011-01-P