HEALTH EFFECTS OF PHMB IN HUMANS PC CODE 111801 CASE 3122 August 4, 2004 Jonathan Chen, Ph. D. Office of Pesticide Programs Antimicrobials Division U. S. Environmental Protection Agency 1200 Pennsylvania Avenue, NW Washington, DC 20460 TABLE OF CONTENTS 0.0 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.0 INCIDENT REPORT DATA ASSOCIATED WITH HEALTH EFFECTS OF PHMB EXPOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 OPP's Incident Data System ( IDS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Poison Control Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.3 California Data  1982 through 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.4 National Pesticide Telecommunications Network ( NPTN) . . . . . . . . . . . . . . . 3 1.5 Incident Reports Associated with Acute Toxic Effects of PHMB Published in Scientific Literature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.0 EPIDEMIOLOGIC STUDIES ASSOCIATED WITH HEALTH EFFECTS OF PHMB IN HUMANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3.0 SUMMARY AND CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 0.0 INTRODUCTION Poly( hexamethylenebiguanide) hydrochloride, also known as PHMB, is a group of polymers been used as an antimicrobial agent in a wide variety of applications including oil in water and water in oil emulsions, industrial reagents, silicone systems, cellulose solutions and oil recovery systems. Now, PHMB is primarily used as a non chlorinated antimicrobial agent used in swimming pool and spa facilities. The purpose of this chapter is to review the evidence of health effects in humans resulting from exposure to PHMB. In particular, the acute and chronic toxicity, teratogenic/ reproductive effects, and carcinogenicity are discussed.

Two approaches are used in this section:

° The potential health effects of PHMB in humans, reported as incident reports from different sources, are summarized.

° A literature search of chronic health effects associated with PHMB exposure, including results of epidemiological studies, is summarized.

This reports summarized the potential health effects of PHMB in humans, reported as incident reports from different sources.

1.0 INCIDENT REPORT DATA ASSOCIATED WITH HEALTH EFFECTS OF PHMB EXPOSURE The following databases have been consulted for the poisoning incident data on the active ingredient PHMB ( PC Code: 11180)

a. OPP Incident Data System ( IDS)  The Incident Data System of The Office of Pesticide Programs ( OPP) of the Environmental Protection Agency ( EPA) contains reports of incidents from various sources, including registrants, other federal and state health and environmental agencies and individual consumers, submitted to OPP since 1992. Reports submitted to the Incident Data System represent anecdotal reports or allegations only, unless otherwise stated. Typically no conclusions can be drawn implicating the pesticide as a cause of any of the reported health effects. Nevertheless, sometimes with enough cases and/ or enough documentation risk mitigation measures may be suggested.

b. Poison Control Centers  As the result of a data purchase by EPA, OPP received Poison Control Center data covering the years 1993 through 1996 for all pesticides. Most of the national Poison Control Centers ( PCCs) participate in a national data collection system, the Toxic Exposure Surveillance System, which obtains data from about 65 70 centers at hospitals and universities. PCCs provide telephone consultation for individuals and health care providers on suspected poisonings, involving drugs, household products, pesticides, etc. 2 c. California Department of Pesticide Regulation  California has collected uniform data on suspected pesticide poisonings since 1982. Physicians are required, by statute, to report to their local health officer all occurrences of illness suspected of being related to exposure to pesticides. The majority of the incidents involve workers. Information on exposure ( worker activity), type of illness ( systemic, eye, skin, eye/ skin and respiratory), likelihood of a causal relationship, and number of days off work and in the hospital is provided.

d. National Pesticide Telecommunications Network ( NPTN)  NPTN is a toll free information service supported by OPP. A ranking of the top 200 active ingredients for which telephone calls were received during calendar years 1984 1991, inclusive, has been prepared. The total number of calls was tabulated for the categories human incidents, animal incidents, calls for information, and others.

e. Published Incident Reports  Some incident reports associated with PHMB related human health hazard are published in the scientific literature.

1.1 OPP's Incident Data System ( IDS)

A total of 118 individual incident cases submitted to the EPA Office of Pesticide Programs involving use of PHMB containing swimming pool products were reviewed to determine the effects of exposure to PHMB ( CAS No. 27083 27 8). All of the incident reports reviewed were for residential use of the products by consumers. In 17 ( i. e., 14%) out of the 118 individual incident cases reviewed, it was determined that the exposure effects were the result of not using the product as intended by the manufacturer. They included not following the instructions on the label, accidental ingestion of the product, or splashing the concentrated product onto the skin or into the eyes.

The reported routes for exposure of the 118 incident cases were dermal ( 58%), ocular ( 30%), ingestion ( 9%), inhalation ( 7%) and unknown (< 1%). In some cases more than one route of exposure applied for a individual incident case ( e. g., both dermal and ocular exposure). The most common symptoms reported for each exposure route are as follows:

° The most common symptoms reported for cases of dermal exposure were skin irritation/ burning ( 80%), rash ( 50%), hives/ welts ( 19%), itching ( 16%), skin discoloration/ redness ( 9%), allergic reaction ( 7%), and blistering ( 7%).

° The most common symptoms reported for cases of ocular exposure were eye irritation/ burning ( 100%), eye pain ( 69%), loss of vision ( 17%), swelling of eyes ( 6%), and allergic reactions ( 6%). ° The most common symptoms reported for cases of exposure via ingestion were vomiting/ nausea/ abdominal pain ( 46%), irritation to the mouth/ throat ( 46%), respiratory irritation including coughing/ choking ( 18%) and diarrhea ( 9%). 3 ° The most common symptoms for cases of exposure via inhalation were respiratory irritation ( 75%) and coughing/ choking ( 38%).

1.2 Poison Control Center All the incidences reported in the Poison Control Center database were included in the OPP's IDS. No additional data were reported in the Poison Control Center database covering the years 1993 through 1996.

1.3 California Data  1982 through 1996 There is no incidences report submitted to the California Pesticide Illness Surveillance Program ( 1982 1996) database related to PHMB exposure.

1.4 National Pesticide Telecommunications Network ( NPTN)

There is no incidences reported in the NPTN database related to PHMB exposure.

1.5 Incident Reports Associated with Acute Toxic Effects of PHMB Published in Scientific Literature.

There is no incident report associated with acute toxic effects of PHMB published in scientific literature.

2.0 EPIDEMIOLOGIC STUDIES ASSOCIATED WITH HEALTH EFFECTS OF PHMB IN HUMANS There are no chronic health effects associated with PHMB exposure, including results of epidemiological study are reported in scientific literature.

3.0 SUMMARY AND CONCLUSION There are incidences been reported associated with exposure to end use products containing PHMB. Dermal and ocular are the primary routes of exposure. Most of the incidences are related to irritation and/ or allergic type reaction. There are no chronic health effects associated with PHMB exposure, including results of epidemiological study are reported in scientific literature.


[Federal Register Volume 79, Number 110 (Monday, June 9, 2014)]
[Notices]
[Pages 33024-33032]
[FR Doc No: 2014-13310]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72298; File No. SR-NYSEArca-2014-59]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to the Listing and Trading of Shares
of the AdvisorShares Athena High Dividend ETF Under NYSE Arca Equities
Rule 8.600

June 3, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on May 20, 2014, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to list and trade the shares of the following
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''):
AdvisorShares Athena High Dividend ETF. The text of the proposed rule
change is available on the Exchange's Web site at www.nyse.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 self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the
following under NYSE Arca Equities Rule 8.600, which governs the
listing and trading of Managed Fund Shares: \4\ AdvisorShares Athena
High Dividend ETF (``Fund''). The Shares will be offered by
AdvisorShares Trust (the ``Trust''),\5\ a statutory trust organized
under the laws of the State of Delaware and registered with the
Commission as an open-end management investment company.\6\ The
investment adviser to the Fund will be AdvisorShares Investments, LLC
(the ``Adviser''). AthenaInvest Advisors LLC (``Sub-Adviser'') will be
the Fund's sub-adviser and will provide day-to-day

portfolio management of the Fund. Foreside Fund Services, LLC (the
``Distributor'') will be the principal underwriter and distributor of
the Fund's Shares. The Bank of New York Mellon (the ``Administrator'')
will serve as the administrator, custodian, transfer agent and
accounting agent for the Fund.
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    \4\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an
open-end investment company or similar entity that invests in a
portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Investment Company Units,
listed and traded on the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that correspond
generally to the price and yield performance of a specific foreign
or domestic stock index, fixed income securities index or
combination thereof.
    \5\ The Trust is registered under the 1940 Act. On February 18,
2014, the Trust filed with the Commission an amendment to its
registration statement on Form N-1A under the Securities Act of 1933
(15 U.S.C. 77a) (``Securities Act''), and under the 1940 Act
relating to the Fund (File Nos. 333-157876 and 811-22110)
(``Registration Statement''). The description of the operation of
the Trust and the Fund herein is based, in part, on the Registration
Statement. In addition, the Commission has issued an order granting
certain exemptive relief to the Trust under the 1940 Act. See
Investment Company Act Release No. 29291 (May 28, 2010) (File No.
812-13677) (``Exemptive Order'').
    \6\ The Commission has approved listing and trading on the
Exchange of shares of a number of actively managed funds under Rule
8.600. See, e.g., Securities Exchange Act Release Nos. 63076
(October 12, 2010), 75 FR 63874 (October 18, 2010) (SR-NYSEArca-
2010-79) (order approving Exchange listing and trading of Cambria
Global Tactical ETF); 63802 (January 31, 2011), 76 FR 6503 (February
4, 2011) (SR-NYSEArca-2010-118) (order approving Exchange listing
and trading of the SiM Dynamic Allocation Diversified Income ETF and
SiM Dynamic Allocation Growth Income ETF); and 65468 (October 3,
2011), 76 FR 62873 (October 11, 2011) (SR-NYSEArca-2011-51) (order
approving Exchange listing and trading of TrimTabs Float Shrink
ETF).
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    Commentary .06 to Rule 8.600 provides that, if the investment
adviser to the investment company issuing Managed Fund Shares is
affiliated with a broker-dealer, such investment adviser shall erect a
``fire wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such investment company portfolio. In addition, Commentary
.06 further requires that personnel who make decisions on the open-end
fund's portfolio composition must be subject to procedures designed to
prevent the use and dissemination of material nonpublic information
regarding the open-end fund's portfolio. \7\ Commentary .06 to Rule
8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the
establishment of a ``fire wall'' between the investment adviser and the
broker-dealer reflects the applicable open-end fund's portfolio, not an
underlying benchmark index, as is the case with index-based funds.
Neither the Adviser nor the Sub-Adviser is registered as a broker-
dealer or is affiliated with a broker-dealer. In the event (a) the
Adviser or the Sub-Adviser becomes a registered broker-dealer or
becomes newly affiliated with a broker-dealer, or (b) any new adviser
or sub-adviser is a registered broker-dealer or becomes affiliated with
a broker-dealer, it will implement a fire wall with respect to its
relevant personnel or its broker-dealer affiliate regarding access to
information concerning the composition and/or changes to the portfolio,
and will be subject to procedures designed to prevent the use and
dissemination of material non-public information regarding such
portfolio.
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    \7\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser and Sub-Adviser and their related
personnel are subject to the provisions of Rule 204A-1 under the
Advisers Act relating to codes of ethics. This Rule requires
investment advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as well as
compliance with other applicable securities laws. Accordingly,
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under
the Advisers Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such investment adviser
has (i) adopted and implemented written policies and procedures
reasonably designed to prevent violation, by the investment adviser
and its supervised persons, of the Advisers Act and the Commission
rules adopted thereunder; (ii) implemented, at a minimum, an annual
review regarding the adequacy of the policies and procedures
established pursuant to subparagraph (i) above and the effectiveness
of their implementation; and (iii) designated an individual (who is
a supervised person) responsible for administering the policies and
procedures adopted under subparagraph (i) above.
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Principal Investments
    According to the Registration Statement, the Fund will seek long-
term capital appreciation.
    Under normal market conditions,\8\ the Fund will seek to achieve
its investment objective by investing substantially all of the Fund's
assets in (1) U.S. and foreign common stock of issuers of any
capitalization range, and (2) American Depositary Receipts (``ADRs''),
Global Depositary Receipts (``GDRs''), European Depositary Receipts
(``EDRs'') and International Depository Receipts (``IDRs'', and
together with ADRs, GDRs, and EDRs, ``Depositary Receipts'') that
provide investment exposure to global equity markets.\9\ Other than
unsponsored ADRs, all U.S. and foreign common stocks and Depositary
Receipts in which the Fund will invest will be exchange-traded.
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    \8\ The term ``under normal market conditions'' means, without
limitation, the absence of extreme volatility or trading halts in
the equity markets or the financial markets generally; operational
issues causing dissemination of inaccurate market information; or
force majeure type events such as systems failure, natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption or any similar intervening circumstance.
    \9\ ADRs are U.S. dollar denominated receipts typically issued
by U.S. banks and trust companies that evidence ownership of
underlying securities issued by a foreign issuer. The underlying
securities may not necessarily be denominated in the same currency
as the securities into which they may be converted. The underlying
securities are held in trust by a custodian bank or similar
financial institution in the issuer's home country. The depositary
bank may not have physical custody of the underlying securities at
all times and may charge fees for various services, including
forwarding dividends and interest and corporate actions. Generally,
ADRs in registered form are equity securities designed for use in
domestic securities markets and are traded on exchanges or over-the-
counter in the U.S. GDRs, EDRs, and IDRs are similar to ADRs in that
they are certificates evidencing ownership of shares of a foreign
issuer; however, GDRs, EDRs, and IDRs may be issued in bearer form
and denominated in other currencies, and are generally designed for
use in specific or multiple securities markets outside the U.S.
EDRs, for example, are designed for use in European securities
markets while GDRs are designed for use throughout the world. ADRs
may be purchased with and sold for U.S. dollars. ADRs may be
sponsored or unsponsored, but unsponsored ADRs will not exceed 10%
of the Fund's net assets. Not more than 10% of the net assets of the
Fund in the aggregate shall consist of equity securities whose
principal market is not a member of the Intermarket Surveillance
Group (``ISG'') or is a market with which the Exchange does not have
a comprehensive surveillance sharing agreement. See note 30 [sic],
infra.
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    The Sub-Adviser will manage the Fund's portfolio based on its
patented Behavioral Portfolio Management methodology. The Sub-Adviser
will start by applying a quantitative behavioral screen that narrows
the equity universe to securities held in large part by mutual funds
the Sub-Adviser believes to be most consistently pursuing their
investment strategy. The Sub-Adviser then will narrow this universe by
a high dividend yield criteria and select positions for the portfolio
based on the highest combined ranking of the two dimensions.
Other Fund Investments
    While the Fund, under normal market conditions, will invest
substantially all of the Fund's assets [sic] in exchange-traded U.S.
and foreign common stocks as well as Depositary Receipts, the Fund may
invest in other securities and financial instruments, as described
below.
    The Fund may purchase equity securities (other than U.S. and
foreign common stocks and Depositary Receipts) traded in the U.S. on
registered exchanges. Such other equity securities in which the Fund
may invest include preferred stock, rights, warrants, convertible
securities,\10\ master limited partnerships (``MLPs''),\11\ real estate
investment trusts (``REITs''),\12\ and closed-end funds.\13\ The Fund
may invest in affiliated and unaffiliated exchange-traded funds
(``ETFs''),\14\, and

exchange-traded notes (``ETNs'').\15\ The Fund also may invest in the
securities of exchange-traded pooled investment vehicles (together with
ETFs, and ETNs, ``exchange-traded products'' or ``ETPs) that are not
investment companies and, thus, not required to comply with the
provisions of the 1940 Act. These pooled vehicles typically hold
commodities, such as gold or oil, currency, or other property that is
itself not a security.\16\
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    \10\ Convertible securities are bonds, debentures, notes,
preferred stocks or other securities that may be converted or
exchanged (by the holder or by the issuer) into shares of the
underlying common stock (or cash or securities of equivalent value)
at a stated exchange ratio.
    \11\ MLPs are limited partnerships in which the ownership units
are publicly traded.
    \12\ REITs are pooled investment vehicles which invest primarily
in real estate or real estate related loans. REITs are generally
classified as equity REITs, mortgage REITs or a combination of
equity and mortgage REITs.
    \13\ A closed-end fund is a pooled investment vehicle that is
registered under the 1940 Act and whose shares are listed and traded
on U.S. national securities exchanges.
    \14\ For purposes of this filing, ETFs include Investment
Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3));
Portfolio Depositary Receipts (as described in NYSE Arca Equities
Rule 8.100); and Managed Fund Shares (as described in NYSE Arca
Equities Rule 8.600). The ETFs in which the Fund will invest all
will be listed and traded on national securities exchanges. The Fund
will invest in the securities of ETFs registered under the 1940 Act
consistent with the requirements of Section 12(d)(1) of the 1940
Act, or any rule, regulation or order of the Commission or
interpretation thereof. The Fund will only make such investments in
conformity with the requirements of Regulation M of the Internal
Revenue Code of 1986, as amended (the ``Internal Revenue Code'').
While the Fund may invest in inverse ETFs, the Fund will not invest
in leveraged or inverse leveraged (e.g., 2X, -2X, 3X or -3X) ETFs.
    \15\ ETNs are securities listed and traded on the Exchange under
NYSE Arca Equities Rule 5.2(j)(6) (``Index-Linked Securities'').
ETNs are senior, unsecured unsubordinated debt securities issued by
an underwriting bank that are designed to provide returns that are
linked to a particular benchmark less investor fees. ETNs have a
maturity date and, generally, are backed only by the
creditworthiness of the issuer.
    \16\ Pooled investment vehicles include Trust Issued Receipts
(as described in NYSE Arca Equities Rule 8.200); Commodity-Based
Trust Shares (as described in NYSE Arca Equities Rule 8.201);
Currency Trust Shares (as described in NYSE Arca Equities Rule
8.202); Commodity Index Trust Shares (as described in NYSE Arca
Equities Rule 8.203); and Trust Units (as described in NYSE Arca
Equities Rule 8.500).
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    On a day-to-day basis, the Fund may hold money market instruments,
cash, other cash equivalents, and ETPs that invest in these and other
highly liquid instruments.
    The Fund may invest in the securities of other investment
companies, including mutual funds and business development companies
(``BDCs''),\17\ to the extent that such an investment would be
consistent with the requirements of Section 12(d)(1) of the 1940 Act,
or any rule, regulation or order of the Commission or interpretation
thereof. The Fund will only make such investments in conformity with
the requirements of Subchapter M of the Internal Revenue Code.\18\
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    \17\ A BDC is a less common type of exchange-traded closed-end
investment company that more closely resembles an operating company
than a typical investment company. BDCs generally focus on investing
in, and providing managerial assistance to, small, developing,
financially troubled, private companies or other companies that may
have value that can be realized over time and with management
assistance.
    \18\ 26 U.S.C. 851.
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    The Fund may invest in variable and floating rate instruments,
which involve certain obligations that may carry variable or floating
rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not
fixed, but which vary with changes in specified market rates or
indices. The interest rates on these securities may be reset daily,
weekly, quarterly, or some other reset period, and may have a set floor
or ceiling on interest rate changes. A demand instrument with a demand
notice exceeding seven days may be considered illiquid if there is no
secondary market for such security.
    The Fund may invest in bank obligations, which will include
certificates of deposit, bankers' acceptances, and fixed time deposits.
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts
or bills of exchange, normally drawn by an importer or exporter to pay
for specific merchandise, which are ``accepted'' by a bank, meaning, in
effect, that the bank unconditionally agrees to pay the face value of
the instrument on maturity. Fixed time deposits are bank obligations
payable at a stated maturity date and bearing interest at a fixed rate.
    The Fund may invest in municipal securities.
    The Fund may seek to invest in corporate debt securities.\19\ The
broad category of corporate debt securities in which the Fund may
invest includes debt issued by domestic or foreign companies of all
kinds, including those with small-, mid- and large-capitalizations. The
Fund also may invest in corporate debt securities representative of one
or more high yield bond or credit derivative indices, which may change
from time to time. Selection will generally be dependent on independent
credit analysis or fundamental analysis performed by the Sub-Adviser.
The Fund may invest in all grades of corporate debt securities
including below investment grade, and such debt may carry variable or
floating rates of interest. The Fund also may invest in unrated
corporate debt securities.
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    \19\ According to the Registration Statement, corporate debt
securities are typically fixed-income securities issued by
businesses to finance their operations. Notes, bonds, debentures and
commercial paper are the most common types of corporate debt
securities. The primary differences between the different types of
corporate debt securities are their maturities and secured or
unsecured status. Commercial paper has the shortest term and is
usually unsecured. Commercial paper is a short-term obligation with
a maturity ranging from one to 270 days issued by banks,
corporations and other borrowers. Such investments are unsecured and
usually discounted. The Fund may invest in commercial paper rated A-
1 or A-2 by Standard and Poor's Ratings Services (``S&P'') or Prime-
1 or Prime-2 by Moody's Investors Service, Inc. (``Moody's'').
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    The Fund may invest in non-investment-grade debt securities. Non-
investment-grade securities, also referred to as ``high yield
securities'' or ``junk bonds,'' are debt securities that are rated
lower than the four highest rating categories by a nationally
recognized statistical rating organization (for example, lower than
Baa3 by Moody's Investors Service, Inc. or lower than BBB-by Standard &
Poor's) or are determined to be of comparable quality by the Fund's
Sub-Adviser.
    The Fund may invest in unrated debt securities. The
creditworthiness of the issuer, as well as any financial institution or
other party responsible for payments on the security, will be analyzed
to determine whether to purchase unrated bonds.
    The Fund may invest up to 10% of net assets in asset-backed and
commercial mortgaged-backed securities. Asset-backed securities are
securities backed by installment contracts, credit-card receivables or
other assets. Commercial mortgage-backed securities are securities
backed by commercial real estate properties. Both asset-backed and
commercial mortgage-backed securities represent interests in ``pools''
of assets in which payments of both interest and principal on the
securities are made on a regular basis.
    The Fund may invest in inflation-indexed bonds, which are fixed
income securities whose principal value is periodically adjusted
according to the rate of inflation.
    The Fund may invest in U.S. government securities. Securities
issued or guaranteed by the U.S. government or its agencies or
instrumentalities include U.S. Treasury securities, which are backed by
the full faith and credit of the U.S. Treasury and which differ only in
their interest rates, maturities, and times of issuance.
    The Fund may also invest in separately traded principal and
interest components of securities guaranteed or issued by the U.S.
government or its agencies, instrumentalities or sponsored enterprises
if such components trade independently under the Separate Trading of
Registered Interest and Principal of Securities program (``STRIPS'') or
any similar program sponsored by the U.S. government. STRIPS may be
sold as zero coupon securities.
    The Fund may invest in U.S. Treasury zero-coupon bonds. These
securities are U.S. Treasury bonds which have been stripped of their
unmatured interest coupons, the coupons themselves, and receipts or
certificates representing interests in such stripped debt obligations
and coupons. Interest is not paid in cash during the term of these

securities, but is accrued and paid at maturity.
    The Fund may enter into repurchase agreements with financial
institutions, which may be deemed to be loans. The Fund will follow
certain procedures designed to minimize the risks inherent in such
agreements. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial
institutions whose condition will be continually monitored by the Sub-
Adviser. In addition, the value of the collateral underlying the
repurchase agreement will always be at least equal to the repurchase
price, including any accrued interest earned on the repurchase
agreement. It is the current policy of the Fund not to invest in
repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund,
amount to more than 15% of the Fund's net assets.
    The Fund may enter into reverse repurchase agreements as part of
the Fund's investment strategy. Reverse repurchase agreements involve
sales by the Fund of portfolio assets concurrently with an agreement by
the Fund to repurchase the same assets at a later date at a fixed
price.
Investment Restrictions
    According to the Registration Statement, the Fund may not
    (i) With respect to 75% of its total assets, purchase securities of
any issuer (except securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or shares of investment
companies) if, as a result, more than 5% of its total assets would be
invested in the securities of such issuer; or (ii) acquire more than
10% of the outstanding voting securities of any one issuer. For
purposes of this policy, the issuer of the underlying security will be
deemed to be the issuer of any respective depositary receipt; \20\ or
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    \20\ The diversification standard is set forth in Section
5(b)(1) of the 1940 Act. See note 8 [sic], supra, regarding
Depositary Receipts that the Fund may hold.
---------------------------------------------------------------------------

    (ii) Invest 25% or more of its total assets in the securities of
one or more issuers conducting their principal business activities in
the same industry or group of industries. This limitation does not
apply to investments in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or shares of investment
companies. The Fund will not invest 25% or more of its total assets in
any investment company that so concentrates.\21\
---------------------------------------------------------------------------

    \21\ See Form N-1A, Item 9. The Commission has taken the
position that a fund is concentrated if it invests more than 25% of
the value of its total assets in any one industry. See, e.g.,
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR
54241 (November 21, 1975).
---------------------------------------------------------------------------

    The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A securities deemed illiquid by the Adviser or Sub-
Adviser,\22\ in accordance with Commission guidance. The Fund will
monitor its portfolio liquidity on an ongoing basis to determine
whether, in light of current circumstances, an adequate level of
liquidity is being maintained, and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets, or other circumstances, more than 15% of the Fund's
net assets are held in illiquid assets. Illiquid assets include
securities subject to contractual or other restrictions on resale and
other instruments that lack readily available markets as determined in
accordance with Commission staff guidance.\23\
---------------------------------------------------------------------------

    \22\ In reaching liquidity decisions, the Adviser or Sub-Adviser
may consider the following factors: The frequency of trades and
quotes for the security; the number of dealers wishing to purchase
or sell the security and the number of other potential purchasers;
dealer undertakings to make a market in the security; and the nature
of the security and the nature of the marketplace in which it trades
(e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer).
    \23\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also, Investment Company
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31,
1970) (Statement Regarding ``Restricted Securities''); Investment
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio
security is illiquid if it cannot be disposed of in the ordinary
course of business within seven days at approximately the value
ascribed to it by the fund. See Investment Company Act Release No.
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990)
(adopting Rule 144A under the Securities Act).
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund will seek to
qualify for treatment as a Regulated Investment Company (``RIC'') under
the Internal Revenue Code.\24\
---------------------------------------------------------------------------

    \24\ 26 U.S.C. 851.
---------------------------------------------------------------------------

    The Fund will not invest in options, futures, swaps or other
derivatives.
    The Fund's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage.
Creation and Redemption of Shares
    The Trust will issue and sell Shares of the Fund in aggregations of
25,000 Shares or more (``Creation Units'') on a continuous basis
through the Distributor, at their net asset value (``NAV'') next
determined after receipt, on any business day. The consideration for
purchase of a Creation Unit of the Fund generally will consist of an
in-kind deposit of a designated portfolio of securities--the ``Deposit
Securities''--per each Creation Unit constituting a substantial
replication, or a representation, of the securities included in the
Fund's portfolio and an amount of cash--the ``Cash Component''--
computed as described below. Together, the Deposit Securities and the
Cash Component constitute the ``Fund Deposit,'' which represents the
minimum initial and subsequent investment amount for a Creation Unit of
the Fund. The Cash Component is an amount equal to the difference
between the NAV of the Shares (per Creation Unit) and the market value
of the Deposit Securities. If the Cash Component is a positive number
(i.e., the NAV per Creation Unit exceeds the market value of the
Deposit Securities), the Cash Component shall be such positive amount.
If the Cash Component is a negative number (i.e., the NAV per Creation
Unit is less than the market value of the Deposit Securities), the Cash
Component shall be such negative amount and the creator will be
entitled to receive cash from the Fund in an amount equal to the Cash
Component. The Cash Component serves the function of compensating for
any differences between the NAV per Creation Unit and the market value
of the Deposit Securities.
    The Administrator, through the National Securities Clearing
Corporation (``NSCC''), will make available on each business day,
immediately prior to the opening of business on the Exchange (currently
9:30 a.m., Eastern Time), the list of the names and the required
quantity or number of shares of each Deposit Security to be included in
the current Fund Deposit (based on information at the end of the
previous business day) for the Fund. Such Fund Deposit will be
applicable, subject to any adjustments as described below, in order to
effect creations of Creation Units of the Fund until such time as the
next-announced composition of the Deposit Securities is made available.
    The identity and number of shares or quantity of the Deposit
Securities required for a Fund Deposit for the Fund may change as
rebalancing adjustments and corporate action events

occur from time to time. In addition, the Trust reserves the right to
permit or require the substitution of an amount of cash--i.e., a ``cash
in lieu'' amount--to be added to the Cash Component to replace any
Deposit Security which may not be available in sufficient quantity for
delivery or which may not be eligible for transfer (as discussed in the
Registration Statement), or which may not be eligible for trading by an
Authorized Participant or the investor for which it is acting. The
Trust also reserves the right to offer an ``all cash'' option for
creations of Creation Units for the Fund. The Adviser represents that,
to the extent the Trust effects the creation of Shares in cash, such
transactions will be effected in the same manner for all Authorized
Participants.
    In addition to the list of names and numbers of securities
constituting the current Deposit Securities of a Fund Deposit, the
Administrator, through the NSCC, also will make available on each
business day, the estimated Cash Component, effective through and
including the previous business day, per outstanding Creation Unit of
the Fund.
    Shares may be redeemed only in Creation Units at their NAV next
determined after receipt of a redemption request in proper form by the
Fund through the Administrator and only on a business day. The Trust
will not redeem Shares in amounts less than Creation Units. Beneficial
owners must accumulate enough Shares in the secondary market to
constitute a Creation Unit in order to have such Shares redeemed by the
Trust.
    With respect to the Fund, the Administrator, through the NSCC, will
make available immediately prior to the opening of business on the
Exchange (currently 9:30 a.m., Eastern Time) on each business day, the
``Fund Securities'' that will be applicable (subject to possible
amendment or correction) to redemption requests received in proper form
on that day. Fund Securities received on redemption may not be
identical to Deposit Securities which are applicable to creations of
Creation Units.
    For the Fund, unless cash redemptions are available or specified
for the Fund, the redemption proceeds for a Creation Unit generally
will consist of Fund Securities--as announced by the Administrator on
the business day of the request for redemption received in proper
form--plus cash in an amount equal to the difference between the NAV of
the Shares being redeemed, as next determined after receipt of a
request in proper form, and the value of the Fund Securities (the
``Cash Redemption Amount''), less a redemption transaction fee
described in the Registration Statement. In the event that the Fund
Securities have a value greater than the NAV of the Shares, a
compensating cash payment equal to the differential is required to be
made by or through an Authorized Participant by the redeeming
shareholder.
    If it is not possible to effect deliveries of the Fund Securities,
the Trust may in its discretion exercise its option to redeem such
Shares in cash, and the redeeming beneficial owner will be required to
receive its redemption proceeds in cash. In addition, an investor may
request a redemption in cash which the Fund may, in its sole
discretion, permit. In either case, the investor will receive a cash
payment equal to the NAV of its Shares based on the NAV of Shares of
the Fund next determined after the redemption request is received in
proper form (minus a redemption transaction fee and additional charge
for requested cash redemptions specified above, to offset the Trust's
brokerage and other transaction costs associated with the disposition
of Fund Securities). The Fund may also, in its sole discretion, upon
request of a shareholder, provide such redeemer a portfolio of
securities which differs from the exact composition of the Fund
Securities but does not differ in NAV.
    The Trust also reserves the right to offer an ``all cash'' option
for redemptions of Creation Units for the Fund. The Adviser represents
that, to the extent the Trust effects the redemption of Shares in cash,
such transactions will be effected in the same manner for all
Authorized Participants.
Net Asset Value
    The NAV per Share of the Fund will be computed by dividing the
value of the net assets of the Fund (i.e., the value of its total
assets less total liabilities) by the total number of Shares of the
Fund outstanding, rounded to the nearest cent. Expenses and fees,
including without limitation, the management, administration and
distribution fees, will be accrued daily and taken into account for
purposes of determining NAV per Share.
    In calculating NAV, the Fund will generally value its portfolio
investments at market prices. In computing the Fund's NAV, the Fund's
securities holdings will be valued based on their last readily
available market price. Price information on exchange-listed
securities, including common stocks, ETFs, ETNs, closed-end funds,
exchange-traded pooled investment vehicles, Depositary Receipts, MLPs,
REITs, warrants, rights, preferred stocks, BDCs and convertible
securities will be valued at market value, which will generally be
determined using the last reported official closing or last trading
price on the exchange or market on which the security is primarily
traded at the time of valuation or, if no sale has occurred, at the
last quoted bid price on the primary market or exchange on which they
are traded. Other portfolio securities and assets for which market
quotations are not readily available or determined to not represent the
current fair value will be valued based on fair value as determined in
good faith in accordance with procedures adopted by the Trust's Board
of Trustees and in accordance with the 1940 Act.
    The Fund will have an approved pricing matrix at the time of
launch. The matrix will be based on pre-determined rules for pricing
logic (such as mean) and valuation point (such as market close). Third
party pricing sources will be used.
    Unsponsored ADRs will be valued on the basis of the market closing
price on the exchange where the stock of the foreign issuer that
underlies the ADR is listed. Investment company securities, other than
ETFs and BDCs, (including mutual funds), will be valued at NAV.
    Domestic and foreign fixed income securities, including U.S.
government securities, repurchase agreements, reverse repurchase
agreement, variable and floating rate securities, bank obligations,
corporate debt securities, zero-coupon bonds, commercial paper,
inflation-indexes bonds, mortgage-backed securities and asset-backed
securities generally trade in the over-the-counter market rather than
on a securities exchange. The Fund will generally value these portfolio
securities by relying on independent pricing services. The Fund's
pricing services will use valuation models or matrix pricing to
determine current value. In general, pricing services use information
with respect to comparable bond and note transactions, quotations from
bond dealers or by reference to other securities that are considered
comparable in such characteristics as rating, interest rate, maturity
date, option adjusted spread models, prepayment projections, interest
rate spreads and yield curves. Matrix price is an estimated price or
value for a fixed-income security. Matrix pricing is considered a form
of fair value pricing.
    The Administrator will calculate NAV and NAV per Share once each
business day as of the regularly scheduled close of normal trading on
the New York Stock Exchange, LLC (the ``NYSE'') (normally, 4:00 p.m.,
Eastern Time).

Availability of Information
    The Fund's Web site (www.advisorshares.com), which will be publicly
available prior to the public offering of Shares, will include a form
of the prospectus for the Fund that may be downloaded. The Fund's Web
site will include additional quantitative information updated on a
daily basis, including, for the Fund, (1) daily trading volume, the
prior business day's reported closing price, NAV and mid-point of the
bid/ask spread at the time of calculation of such NAV (the ``Bid/Ask
Price''),\25\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV, and (2) data in chart format displaying the
frequency distribution of discounts and premiums of the daily Bid/Ask
Price against the NAV, within appropriate ranges, for each of the four
previous calendar quarters. On each business day, before commencement
of trading in Shares in the Core Trading Session on the Exchange, the
Fund will disclose on its Web site the Disclosed Portfolio that will
form the basis for the Fund's calculation of NAV at the end of the
business day.\26\
---------------------------------------------------------------------------

    \25\ The Bid/Ask Price of Shares of the Fund will be determined
using the mid-point of the highest bid and the lowest offer on the
Exchange as of the time of calculation of the Fund's NAV. The
records relating to Bid/Ask Prices will be retained by the Fund and
its service providers.
    \26\ Under accounting procedures followed by the Fund, trades
made on the prior business day (``T'') will be booked and reflected
in NAV on the current business day (``T+1''). Accordingly, the Fund
will be able to disclose at the beginning of the business day the
portfolio that will form the basis for the NAV calculation at the
end of the business day.
---------------------------------------------------------------------------

    On a daily basis, the Adviser will disclose on behalf of the Fund
on the Fund's Web site each portfolio security and other financial
instrument of the Fund the following information: Ticker symbol (if
applicable), name of security and financial instrument, number of
shares, if applicable, and dollar value of securities and financial
instruments held in the portfolio, and percentage weighting of the
security and financial instrument in the portfolio. The Web site
information will be publicly available at no charge.
    In addition, a basket composition file, which includes the security
names and share quantities (as applicable) required to be delivered in
exchange for Fund Shares, together with estimates and actual cash
components, will be publicly disseminated daily prior to the opening of
the NYSE via the NSCC. The basket will represent one Creation Unit of
the Fund.
    Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder
Reports will be available free upon request from the Trust, and those
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or
downloaded from the Commission's Web site at www.sec.gov. Information
regarding market price and trading volume of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers. Quotation and last sale information for the
Shares and U.S. exchange-listed equity securities, including common
stocks, ETPs, closed-end funds, exchange-traded pooled investment
vehicles, Depositary Receipts, MLPs, REITs, warrants, rights, preferred
stocks, BDCs and convertible securities will be available via the
Consolidated Tape Association (``CTA'') high-speed line, and will be
available from the national securities exchange on which they are
listed. Information regarding unsponsored ADRs will be available from
major market data vendors. Intra-day and closing price information
relating to the fixed income investments of the Fund will be available
from major market data vendors. Price information regarding investment
company securities will be available from on-line sources and from the
Web site for the applicable investment company securities. In addition,
the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule
8.600(c)(3), based on current information regarding the value of the
securities and other assets in the Disclosed Portfolio, will be widely
disseminated at least every 15 seconds during the Core Trading Session
by one or more major market data vendors.\27\ The dissemination of the
Portfolio Indicative Value, together with the Disclosed Portfolio, will
allow investors to determine the value of the underlying portfolio of
the Fund on a daily basis and will provide a close estimate of that
value throughout the trading day. The Portfolio Indicative Value should
not be viewed as a ``real-time'' update of the NAV per Share of the
Fund, which will be calculated once per day.
---------------------------------------------------------------------------

    \27\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available
Portfolio Indicative Values taken from CTA or other data feeds.
---------------------------------------------------------------------------

    Additional information regarding the Trust and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings disclosure policies, distributions
and taxes is included in the Registration Statement. All terms relating
to the Fund that are referred to, but not defined in, this proposed
rule change are defined in the Registration Statement.
Trading Halts
    With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund.\28\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Equities
Rule 7.12 have been reached. Trading also may be halted because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. These may include: (1) The
extent to which trading is not occurring in the securities and/or the
financial instruments comprising the Disclosed Portfolio of the Fund;
or (2) whether other unusual conditions or circumstances detrimental to
the maintenance of a fair and orderly market are present. Trading in
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D),
which sets forth circumstances under which Shares of the Fund may be
halted.
---------------------------------------------------------------------------

    \28\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

Trading Rules
    The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late
Trading Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. As provided in
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price
variation (``MPV'') for quoting and entry of orders in equity
securities traded on the NYSE Arca Marketplace is $0.01, with the
exception of securities that are priced less than $1.00 for which the
MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents
that, for initial and/or continued listing, the Fund will be in
compliance with Rule 10A-3 \29\ under the Act, as provided by NYSE Arca
Equities Rule 5.3. A minimum of 100,000 Shares will be outstanding at

the commencement of trading on the Exchange. The Exchange will obtain a
representation from the issuer of the Shares that the NAV and the
Disclosed Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2)
will be made available to all market participants at the same time.
---------------------------------------------------------------------------

    \29\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\30\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules and federal securities laws applicable to trading on
the Exchange.
---------------------------------------------------------------------------

    \30\ FINRA surveils trading on the Exchange pursuant to a
regulatory services agreement. The Exchange is responsible for
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares, and underlying exchange-traded equity
securities (including, without limitation, common stocks, ETPs, closed-
end funds, exchange-traded pooled investment vehicles, Depositary
Receipts, MLPs, REITs, warrants, rights, preferred stocks, BDCs and
convertible securities with other markets and other entities that are
members of the ISG, and FINRA, on behalf of the Exchange, may obtain
trading information regarding trading in the Shares and underlying
exchange-traded equity securities from such markets and other entities.
In addition, the Exchange may obtain information regarding trading in
the Shares and underlying exchange-traded equity securities (including,
without limitation, common stocks, ETPs, closed-end funds, exchange-
traded pooled investment vehicles, Depositary Receipts, MLPs, REITs,
warrants, rights, preferred stocks, BDCs and convertible securities)
from markets and other entities that are members of ISG or with which
the Exchange has in place a comprehensive surveillance sharing
agreement.\31\ In addition, FINRA, on behalf of the Exchange, is able
to access, as needed, trade information for certain fixed income
securities held by the Fund reported to FINRA's Trade Reporting and
Compliance Engine (``TRACE'').
---------------------------------------------------------------------------

    \31\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    Not more than 10% of the net assets of the Fund in the aggregate
shall consist of equity securities whose principal market is not a
member of ISG or is a market with which the Exchange does not have a
comprehensive surveillance sharing agreement.
    In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'')
of the special characteristics and risks associated with trading the
Shares. Specifically, the Bulletin will discuss the following: (1) The
procedures for purchases and redemptions of Shares in Creation Unit
aggregations (and that Shares are not individually redeemable); (2)
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence
on its Equity Trading Permit Holders to learn the essential facts
relating to every customer prior to trading the Shares; (3) the risks
involved in trading the Shares during the Opening and Late Trading
Sessions when an updated Portfolio Indicative Value will not be
calculated or publicly disseminated; (4) how information regarding the
Portfolio Indicative Value is disseminated; (5) the requirement that
Equity Trading Permit Holders deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; and (6) trading information.
    In addition, the Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Act. The
Bulletin will also disclose that the NAV for the Shares will be
calculated after 4:00 p.m. Eastern Time each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \32\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Equities Rule
8.600. The Exchange has in place surveillance procedures that are
adequate to properly monitor trading in the Shares in all trading
sessions and to deter and detect violations of Exchange rules and
applicable federal securities laws. FINRA, on behalf of the Exchange,
will communicate as needed regarding trading in the Shares and
underlying exchange-traded equity securities (including, without
limitation, common stocks, ETPs, closed-end funds, exchange-traded
pooled investment vehicles, Depositary Receipts, MLPs, REITs, warrants,
rights, preferred stocks, BDCs and convertible securities) with other
markets and other entities that are members of the ISG, and FINRA, on
behalf of the Exchange, may obtain trading information regarding
trading in the Shares and underlying exchange-traded equity securities
from such markets and other entities. In addition, the Exchange may
obtain information regarding trading in the Shares and underlying
exchange-traded equity securities (including, without limitation,
common stocks, ETPs, closed-end funds, exchange-traded pooled
investment vehicles, Depositary Receipts, MLPs, REITs, warrants,
rights, preferred stocks, BDCs and convertible securities) from other
markets and other entities that are members of the ISG or with which
the Exchange has in place a comprehensive surveillance sharing
agreement. In addition, FINRA, on behalf of the Exchange, is able to
access, as needed, trade information for certain fixed income
securities held by the Fund reported to FINRA's TRACE. Not more than
10% of the net assets of the Fund in the aggregate shall consist of
equity securities whose principal market is not a member of ISG or is a
market with which the Exchange does not have a comprehensive
surveillance

sharing agreement. Neither the Adviser nor the Sub-Adviser is
registered as a broker-dealer or is affiliated with a broker-dealer.
The Fund may invest up to 10% of net assets in asset-backed and
commercial mortgaged-backed securities. The Fund may hold up to an
aggregate amount of 15% of its net assets in illiquid securities,
including Rule 144A securities deemed illiquid by the Adviser. The Fund
will not invest in leveraged or inverse leveraged (e.g., 2X, -2X, 3X or
-3X) ETFs. The Fund will not invest in options, futures, swaps or other
derivatives. The Fund's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage.
    The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation from the issuer of the
Shares that the NAV per Share will be calculated daily and that the NAV
and the Disclosed Portfolio will be made available to all market
participants at the same time. In addition, a large amount of
information is publicly available regarding the Fund and the Shares,
thereby promoting market transparency. Quotation and last sale
information for the Shares will be available via the CTA high-speed
line. In addition, the Portfolio Indicative Value will be widely
disseminated by the Exchange at least every 15 seconds during the Core
Trading Session. The Fund's Web site will include a form of the
prospectus for the Fund that may be downloaded, as well as additional
quantitative information updated on a daily basis. On a daily basis,
the Adviser will disclose on behalf of the Fund each portfolio security
and other financial instrument of the Fund the following information:
Ticker symbol (if applicable), name of security and financial
instrument, number of shares, if applicable, and dollar value of
securities and financial instruments held in the portfolio, and
percentage weighting of the security and financial instrument in the
portfolio. The Web site information will be publicly available at no
charge [sic] Moreover, prior to the commencement of trading, the
Exchange will inform its Equity Trading Permit Holders in an
Information Bulletin of the special characteristics and risks
associated with trading the Shares. Trading in Shares of the Fund will
be halted if the circuit breaker parameters in NYSE Arca Equities Rule
7.12 have been reached or because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable. Trading in the Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under
which Shares of the Fund may be halted. In addition, as noted above,
investors will have ready access to information regarding the Fund's
holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and
quotation and last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, the Exchange has in
place surveillance procedures that are adequate to properly monitor
trading in the Shares in all trading sessions and to deter and detect
violations of Exchange rules and applicable federal securities laws. In
addition, as noted above, investors will have ready access to
information regarding the Fund's holdings, the Portfolio Indicative
Value, the Disclosed Portfolio, and quotation and last sale information
for the Shares.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of an
additional type of actively-managed exchange-traded product that
primarily holds equity securities and that will enhance competition
among market participants, to the benefit of investors and the
marketplace.

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

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

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be 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-NYSEArca-2014-59 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-NYSEArca-2014-59. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2014-59 and should
be submitted on or before June 30, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13310 Filed 6-6-14; 8:45 am]
BILLING CODE 8011-01-P