[Federal Register Volume 87, Number 204 (Monday, October 24, 2022)]
[Notices]
[Pages 64280-64285]
[FR Doc No: 2022-22989]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96101; File No. 4-762]

Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Notice of Filing and Order Approving and Declaring
Effective an Amended Plan for the Allocation of Regulatory
Responsibilities Between the Financial Industry Regulatory Authority,
Inc. and MEMX LLC

October 18, 2022.
    Notice is hereby given that the Securities and Exchange Commission
(``Commission'') has issued an Order, pursuant to Section 17(d) of the
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring
effective an amendment to the plan for allocating regulatory
responsibility (``Plan'') filed on October 6, 2022, pursuant to Rule
17d-2 of the Act,\2\ by the Financial Industry Regulatory Authority,
Inc. (``FINRA'') and MEMX LLC (``MEMX'') (collectively, ``Participating
Organizations'' or ``parties''). This agreement amends and restates the
agreement entered into between FINRA and MEMX on April 16, 2020,
entitled ``Agreement between Financial Industry Regulatory Authority,
Inc. and MEMX LLC pursuant to Rule 17d-2 under the Securities Exchange
Act of 1934,'' and any subsequent amendments thereafter.
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
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I. Introduction

    Section 19(g)(1) of the Act,\3\ among other things, requires every
self-regulatory organization (``SRO'') registered as either a national
securities exchange or national securities association to examine for,
and enforce compliance by, its members and persons associated with its
members with the Act, the rules and regulations thereunder, and the
SRO's own rules, unless the SRO is relieved of this responsibility
pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of the Act.
Without this relief, the statutory obligation of each individual SRO
could result in a pattern of multiple examinations of broker-dealers
that maintain memberships in more than one SRO (``common members'').
Such regulatory duplication would add unnecessary expenses for common
members and their SROs.
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    \3\ 15 U.S.C. 78s(g)(1).
    \4\ 15 U.S.C. 78q(d).
    \5\ 15 U.S.C. 78s(g)(2).
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    Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\7\ With
respect to a common member, Section 17(d)(1) authorizes the Commission,
by rule or order, to relieve an SRO of the responsibility to receive
regulatory reports, to examine for and enforce compliance with
applicable statutes, rules, and regulations, or to perform other
specified regulatory functions.
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    \6\ 15 U.S.C. 78q(d)(1).
    \7\ See Securities Act Amendments of 1975, Report of the Senate
Committee on Banking, Housing, and Urban Affairs to Accompany S.
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
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    To implement Section 17(d)(1), the Commission adopted two rules:
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the
Commission to name a single SRO as the designated examining authority
(``DEA'') to examine common members for compliance with the financial
responsibility requirements imposed by the Act, or by Commission or SRO
rules.\9\ When an SRO has been named as a common member's DEA, all
other SROs to which the common member belongs are relieved of the
responsibility to examine the firm for compliance with the applicable
financial responsibility rules. On its face, Rule 17d-1 deals only with
an SRO's obligations to enforce member compliance with financial
responsibility requirements. Rule 17d-1 does not relieve an SRO from
its obligation to examine a common member for compliance with its own
rules and provisions of the federal securities laws governing matters
other than financial responsibility, including sales practices and
trading activities and practices.
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    \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
    \9\ See Securities Exchange Act Release No. 12352 (April 20,
1976), 41 FR 18808 (May 7, 1976).
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    To address regulatory duplication in these and other areas, the
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits
SROs to propose joint plans for the allocation of regulatory
responsibilities with respect to their common members. Under paragraph
(c) of Rule 17d-2, the Commission may declare such a plan effective if,
after providing for appropriate notice and opportunity for comment, it
determines that the plan is necessary or appropriate in the public
interest and for the protection of investors, to foster cooperation and
coordination among the SROs, to remove impediments to, and foster the
development of, a national market system and a national clearance and
settlement system, and is in conformity with the factors set forth in
Section 17(d) of the Act. Commission approval of a plan filed pursuant
to Rule 17d-2 relieves an SRO of those regulatory responsibilities
allocated by the plan to another SRO.
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    \10\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976).
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II. The Plan

    On June 17, 2020, the Commission declared effective the Plan
entered into between FINRA and MEMX for allocating regulatory
responsibility pursuant to Rule 17d-2.\11\ The Plan is intended to
reduce regulatory duplication for firms that are common members of
FINRA and MEMX by allocating regulatory responsibility with respect to
certain applicable laws, rules, and regulations that are common among
them. Included in the Plan is an exhibit that lists every MEMX rule for
which FINRA bears responsibility under the Plan for overseeing and
enforcing with respect to MEMX members that are also members of FINRA
and the associated persons therewith (``Certification'').
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    \11\ See Securities Exchange Act Release No. 89084 (June 17,
2020), 85 FR 37701 (June 23, 2020).
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III. Proposed Amendment to the Plan

    On October 6, 2022, the parties submitted a proposed amendment to
the Plan (``Amended Plan''). The primary purpose of the Amended Plan is
to add Securities Exchange Act Rule 14e-4(a)(1)(ii)(D) to the
Certification to accommodate the upcoming launch of MEMX's new options
facility and to reflect updated rule citations. The text of the
proposed Amended Plan is as follows (additions are italicized;
deletions are [bracketed]):
* * * * *

AGREEMENT BETWEEN FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. AND
MEMX LLC PURSUANT TO RULE 17d-2 UNDER THE SECURITIES EXCHANGE ACT OF
1934

    This Agreement, by and between the Financial Industry Regulatory
Authority, Inc. (``FINRA'') and MEMX LLC (``MEMX''), is made this
[16th] 6th day of [April, 2020] October, 2022 (the ``Agreement''),
pursuant to Section 17(d) of the Securities Exchange Act

of 1934 (the ``Exchange Act'') and Rule 17d-2 thereunder, which
permits agreements between self-regulatory organizations to allocate
regulatory responsibility to eliminate regulatory duplication. FINRA
and MEMX may be referred to individually as a ``party'' and together
as the ``parties.''
    Whereas, FINRA and MEMX desire to reduce duplication in the
examination and surveillance of their Dual Members (as defined
herein) and in the filing and processing of certain registration and
membership records; and
    Whereas, FINRA and MEMX desire to execute an agreement covering
such subjects pursuant to the provisions of Rule 17d-2 under the
Exchange Act and to file such agreement with the Securities and
Exchange Commission (the ``SEC'' or ``Commission'') for its
approval.
    Now, therefore, in consideration of the mutual covenants
contained hereinafter, FINRA and MEMX hereby agree as follows:
    1. Definitions. Unless otherwise defined in this Agreement or
the context otherwise requires, the terms used in this Agreement
shall have the same meaning as they have under the Exchange Act and
the rules and regulations thereunder. As used in this Agreement, the
following terms shall have the following meanings:
    (a) ``MEMX Rules'' or ``FINRA Rules'' shall mean: (i) the rules
of MEMX, or (ii) the rules of FINRA, respectively, as the rules of
an exchange or association are defined in Exchange Act Section
3(a)(27).
    (b) ``Common Rules'' shall mean MEMX Rules that are
substantially similar to the applicable FINRA Rules and certain
provisions of the Exchange Act and SEC rules set forth on Exhibit 1
in that examination or surveillance for compliance with such
provisions and rules would not require FINRA to develop one or more
new examination or surveillance standards, modules, procedures, or
criteria in order to analyze the application of the provision or
rule, or a Dual Member's activity, conduct, or output in relation to
such provision or rule; provided, however, Common Rules shall not
include the application of the SEC, MEMX or FINRA rules as they
pertain to violations of insider trading activities, which is
covered by a separate 17d-2 Agreement by and among Cboe BZX
Exchange, Inc., Cboe BYX Exchange, Inc., Chicago Stock Exchange,
Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Financial
Industry Regulatory Authority, Inc., MEMX LLC, MIAX PEARL, LLC,
Nasdaq BX, Inc., Nasdaq PHLX LLC, The Nasdaq Stock Market LLC, NYSE
National, Inc., New York Stock Exchange, LLC, NYSE American LLC,
NYSE Arca Inc., and Investors' Exchange LLC and Long-Term Stock
Exchange, Inc. effective [August 1, 2019] September 23, 2020, as may
be amended from time to time. Common Rules shall not include any
provisions regarding (i) notice, reporting or any other filings made
directly to or from MEMX, (ii) incorporation by reference of MEMX
Rules that are not Common Rules, (iii) exercise of discretion in a
manner that differs from FINRA's exercise of discretion including,
but not limited to exercise of exemptive authority, by MEMX, (iv)
prior written approval of MEMX and (v) payment of fees or fines to
MEMX.
    (c) ``Dual Members'' shall mean those MEMX members that are also
members of FINRA and the associated persons therewith.
    (d) ``Effective Date'' shall be the date this Agreement is
approved by the Commission.
    (e) ``Enforcement Responsibilities'' shall mean the conduct of
appropriate proceedings, in accordance with FINRA's Code of
Procedure (the Rule 9000 Series) and other applicable FINRA
procedural rules, to determine whether violations of Common Rules
have occurred, and if such violations are deemed to have occurred,
the imposition of appropriate sanctions as specified under FINRA's
Code of Procedure and sanctions guidelines.
    (f) ``Regulatory Responsibilities'' shall mean the examination
responsibilities, surveillance responsibilities and Enforcement
Responsibilities relating to compliance by the Dual Members with the
Common Rules and the provisions of the Exchange Act and the rules
and regulations thereunder, and other applicable laws, rules and
regulations, each as set forth on Exhibit 1 attached hereto.
    2. Regulatory and Enforcement Responsibilities. FINRA shall
assume Regulatory Responsibilities and Enforcement Responsibilities
for Dual Members. Attached as Exhibit 1 to this Agreement and made
part hereof, MEMX furnished FINRA with a current list of Common
Rules and certified to FINRA that such rules that are MEMX Rules are
substantially similar to the corresponding FINRA Rules (the
``Certification''). FINRA hereby agrees that the rules listed in the
Certification are Common Rules as defined in this Agreement. Each
year following the Effective Date of this Agreement, or more
frequently if required by changes in either the rules of MEMX or
FINRA, MEMX shall submit an updated list of Common Rules to FINRA
for review which shall add MEMX Rules not included in the current
list of Common Rules that qualify as Common Rules as defined in this
Agreement; delete MEMX Rules included in the current list of Common
Rules that no longer qualify as Common Rules as defined in this
Agreement; and confirm that the remaining rules on the current list
of Common Rules continue to be MEMX Rules that qualify as Common
Rules as defined in this Agreement. Within 30 days of receipt of
such updated list, FINRA shall confirm in writing whether the rules
listed in any updated list are Common Rules as defined in this
Agreement. Notwithstanding anything herein to the contrary, it is
explicitly understood that the term ``Regulatory Responsibilities''
does not include, and MEMX shall retain full responsibility for
(unless otherwise addressed by separate agreement or rule)
(collectively, the ``Retained Responsibilities'') the following:
    (a) surveillance, examination, investigation and enforcement
with respect to trading activities or practices involving MEMX's own
marketplace for rules that are not Common Rules;
    (b) registration pursuant to its applicable rules of associated
persons (i.e., registration rules that are not Common Rules);
    (c) discharge of its duties and obligations as a Designated
Examining Authority pursuant to Rule 17d-1 under the Exchange Act;
and
    (d) any MEMX Rules that are not Common Rules, except for MEMX
Rules for any MEMX member that operates as a facility (as defined in
Section 3(a)(2) of the Exchange Act), acts as an outbound router for
the MEMX and is a member of FINRA (``Router Member'') as provided in
paragraph 6. As of the date of this Agreement, MEMX Execution
Services LLC is the only Router Member.
    3. Dual Members. Prior to the Effective Date, MEMX shall furnish
FINRA with a current list of Dual Members, which shall be updated no
less frequently than once each quarter.
    4. No Charge. There shall be no charge to MEMX by FINRA for
performing the Regulatory Responsibilities and Enforcement
Responsibilities under this Agreement except as otherwise agreed by
the parties, either herein or in a separate agreement.
    5. Applicability of Certain Laws, Rules, Regulations or Orders.
Notwithstanding any provision hereof, this Agreement shall be
subject to any statute, or any rule or order of the Commission. To
the extent such statute, rule or order is inconsistent with this
Agreement, the statute, rule or order shall supersede the
provision(s) hereof to the extent necessary for them to be properly
effectuated and the provision(s) hereof in that respect shall be
null and void.
    6. Notification of Violations.
    (a) In the event that FINRA becomes aware of apparent violations
of any MEMX Rules, which are not listed as Common Rules, discovered
pursuant to the performance of the Regulatory Responsibilities
assumed hereunder, FINRA shall notify MEMX of those apparent
violations for such response as MEMX deems appropriate. With respect
to apparent violations of any MEMX Rules by any Router Member, FINRA
shall not make referrals to MEMX pursuant to this paragraph 6. Such
apparent violations shall be processed by, and enforcement
proceedings in respect thereto will be conducted by, FINRA as
provided in this Agreement.
    (b) In the event that MEMX becomes aware of apparent violations
of any Common Rules, discovered pursuant to the performance of the
Retained Responsibilities, MEMX shall notify FINRA of those apparent
violations and such matters shall be handled by FINRA as provided in
this Agreement.
    (c) Apparent violations of Common Rules shall be processed by,
and enforcement proceedings in respect thereto shall be conducted by
FINRA as provided hereinbefore; provided, however, that in the event
a Dual Member is the subject of an investigation relating to a
transaction on MEMX, MEMX may in its discretion assume concurrent
jurisdiction and responsibility.
    (d) Each party agrees to make available promptly all files,
records and witnesses necessary to assist the other in its
investigation or proceedings.
    7. Continued Assistance.
    (a) FINRA shall make available to MEMX all information obtained
by FINRA in the performance by it of the Regulatory Responsibilities
hereunder with respect to the Dual Members subject to this
Agreement. In particular, and not in limitation of the

foregoing, FINRA shall furnish MEMX any information it obtains about
Dual Members which reflects adversely on their financial condition.
MEMX shall make available to FINRA any information coming to its
attention that reflects adversely on the financial condition of Dual
Members or indicates possible violations of applicable laws, rules
or regulations by such firms.
    (b) The parties agree that documents or information shared shall
be held in confidence, and used only for the purposes of carrying
out their respective regulatory obligations. Neither party shall
assert regulatory or other privileges as against the other with
respect to documents or information that is required to be shared
pursuant to this Agreement.
    (c) The sharing of documents or information between the parties
pursuant to this Agreement shall not be deemed a waiver as against
third parties of regulatory or other privileges relating to the
discovery of documents or information.
    8. Statutory Disqualifications. When FINRA becomes aware of a
statutory disqualification as defined in the Exchange Act with
respect to a Dual Member, FINRA shall determine pursuant to Sections
15A(g) and/or Section 6(c) of the Exchange Act the acceptability or
continued applicability of the person to whom such disqualification
applies and keep MEMX advised of its actions in this regard for such
subsequent proceedings as MEMX may initiate.
    9. Customer Complaints. MEMX shall forward to FINRA copies of
all customer complaints involving Dual Members received by MEMX
relating to FINRA's Regulatory Responsibilities under this
Agreement. It shall be FINRA's responsibility to review and take
appropriate action in respect to such complaints.
    10. Advertising. FINRA shall assume responsibility to review the
advertising of Dual Members subject to the Agreement, provided that
such material is filed with FINRA in accordance with FINRA's filing
procedures and is accompanied with any applicable filing fees set
forth in FINRA Rules.
    11. No Restrictions on Regulatory Action. Nothing contained in
this Agreement shall restrict or in any way encumber the right of
either party to conduct its own independent or concurrent
investigation, examination or enforcement proceeding of or against
Dual Members, as either party, in its sole discretion, shall deem
appropriate or necessary.
    12. Termination. This Agreement may be terminated by MEMX or
FINRA at any time upon the approval of the Commission after six (6)
month's written notice to the other party.
    13. Arbitration. In the event of a dispute between the parties
as to the operation of this Agreement, MEMX and FINRA hereby agree
that any such dispute shall be settled by arbitration in Washington,
DC in accordance with the rules of the American Arbitration
Association then in effect, or such other procedures as the parties
may mutually agree upon. Judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. Each
party acknowledges that the timely and complete performance of its
obligations pursuant to this Agreement is critical to the business
and operations of the other party. In the event of a dispute between
the parties, the parties shall continue to perform their respective
obligations under this Agreement in good faith during the resolution
of such dispute unless and until this Agreement is terminated in
accordance with its provisions. Nothing in this Section 13 shall
interfere with a party's right to terminate this Agreement as set
forth herein.
    14. Notification of Members. MEMX and FINRA shall notify Dual
Members of this Agreement after the Effective Date by means of a
uniform joint notice.
    15. Amendment. This Agreement may be amended in writing duly
approved by each party. All such amendments must be filed with and
approved by the Commission before they become effective.
    16. Limitation of Liability. Neither FINRA nor MEMX nor any of
their respective directors, governors, officers or employees shall
be liable to the other party to this Agreement for any liability,
loss or damage resulting from or claimed to have resulted from any
delays, inaccuracies, errors or omissions with respect to the
provision of Regulatory Responsibilities as provided hereby or for
the failure to provide any such responsibility, except with respect
to such liability, loss or damages as shall have been suffered by
one or the other of FINRA or MEMX and caused by the willful
misconduct of the other party or their respective directors,
governors, officers or employees. No warranties, express or implied,
are made by FINRA or MEMX with respect to any of the
responsibilities to be performed by each of them hereunder.
    17. Relief from Responsibility. Pursuant to Sections 17(d)(1)(A)
and 19(g) of the Exchange Act and Rule 17d-2 thereunder, FINRA and
MEMX join in requesting the Commission, upon its approval of this
Agreement or any part thereof, to relieve MEMX of any and all
responsibilities with respect to matters allocated to FINRA pursuant
to this Agreement; provided, however, that this Agreement shall not
be effective until the Effective Date.
    18. Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction.
    19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and such
counterparts together shall constitute one and the same instrument.
* * * * *

EXHIBIT 1

MEMX CERTIFICATION OF COMMON RULES

    MEMX hereby certifies that the requirements contained in the
rules listed below for MEMX are identical to, or substantially
similar to, the comparable FINRA (NASD) Rules, Exchange Act
provision or SEC rule identified (``Common Rules'').
    # Common Rules shall not include any provisions regarding (i)
notice, reporting or any other filings made directly to or from
MEMX, (ii) incorporation by reference of MEMX Rules that are not
Common Rules, (iii) exercise of discretion in a manner that differs
from FINRA's exercise of discretion including, but not limited to
exercise of exemptive authority, by MEMX, (iv) prior written
approval of MEMX and (v) payment of fees or fines to MEMX.

------------------------------------------------------------------------
                                         FINRA (NASD) rule, Exchange Act
               MEMX rule                       provision, SEC rule
------------------------------------------------------------------------
Rule 2.5 Restrictions, Interpretation    FINRA Rule 1240[(a)(1)-(4)]
 and Policies .02 Continuing Education    Continuing Education
 Requirements .                          Requirements.
Rule 2.5 Restrictions, Interpretations   FINRA By-Laws of the
 and Polic[y]ies .04 Termination of       Corporation, Article V,
 Employment.                              Section 3 Notification by
                                          Member to the Corporation and
                                          Associated Person of
                                          Termination; Amendments to
                                          Notification; FINRA Rule
                                          1010(e) Electronic Filing
                                          Requirements for Uniform
                                          Forms.
Rule 2.6(b) and (g) Application          FINRA By-Laws of the
 Procedures for Membership or to become   Corporation, Article IV,
 an Associated Person of a Member .      Section 1(c) Application for
                                          Membership and Article V, Sec.
                                          2(c); FINRA Rule 1010(c)
                                          Electronic Filing Requirements
                                          for Uniform Forms.
Rule 3.1 Business Conduct of Members     FINRA Rule 2010 Standards of
 [supcaret].                              Commercial Honor and
                                          Principles of Trade.[supcaret]
Rule 3.2 Violations Prohibited           FINRA Rule 2010 Standards of
 [supcaret] .                            Commercial Honor and
                                          Principles of Trade and FINRA
                                          Rule 3110
                                          Supervision.[supcaret]
Rule 3.3 Use of Fraudulent Devices       FINRA Rule 2020 Use of
 [supcaret].                              Manipulative, Deceptive or
                                          Other Fraudulent
                                          Devices.[supcaret]
Rule 3.5 Communications with the Public  FINRA Rule 2210 Communications
                                          with the Public.

Rule 3.6 Fair Dealing with Customers...  FINRA Rule 2020 Use of
                                          Manipulative, Deceptive or
                                          Other Fraudulent
                                          Devices,[supcaret] 1 FINRA
                                          Rule 2111 Suitability.
Rule 3.7(a) Recommendations to           FINRA Rule 2111(a) and SM .03
 Customers.                               Suitability.
Rule 3.8(a) The Prompt Receipt and       FINRA Rule 11860 COD Orders.
 Delivery of Securities.
Rule 3.8(b) The Prompt Receipt and       SEC Regulation SHO.
 Delivery of Securities.
Rule 3.9 Charges for Services Performed  FINRA Rule 2122 Charges for
                                          Services Performed.
Rule 3.10 Use of Information...........  FINRA Rule 2060 Use of
                                          Information Obtained in
                                          Fiduciary Capacity.
Rule 3.11 Publication of Transactions    FINRA Rule 5210 Publication of
 and Quotations .                        Transactions and Quotations.
Rule 3.12 Offers at Stated Prices......  FINRA Rule 5220 Offers at
                                          Stated Prices.
Rule 3.13 Payments Involving             FINRA Rule 5230 Payments
 Publications that Influence the Market   Involving Publications that
 Price of a Security.                     Influence the Market Price of
                                          a Security.
Rule 3.14 Disclosure on Confirmations..  FINRA Rule 2232(a) Customer
                                          Confirmations and SEC Rule 10b-
                                          10 Confirmation of
                                          Transactions.
Rule 3.15 Disclosure of Control........  FINRA Rule 2262 Disclosure of
                                          Control Relationship With
                                          Issuer.
Rule 3.16 Discretionary Accounts.......  FINRA Rule 3260 Discretionary
                                          Accounts.
Rule 3.17 Customer's Securities or       FINRA Rule 2150(a) Improper Use
 Funds.                                   of Customers' Securities or
                                          Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts--Improper Use
Rule 3.18 Prohibition Against            FINRA Rule 2150(b) Improper Use
 Guarantees.                              of Customers' Securities or
                                          Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts--Prohibition Against
                                          Guarantees.
Rule 3.19 Sharing in Accounts; Extent    FINRA Rule 2150(c)(1) Improper
 Permissible.                             Use of Customers' Securities
                                          or Funds; Prohibition Against
                                          Guarantees and Sharing in
                                          Accounts--Sharing in Accounts;
                                          Extent Permissible.
Rule 3.21 Customer Disclosures.........  FINRA Rule 2265 Extended Hours
                                          Trading Risk Disclosure.
Rule 3.20 Influencing or Rewarding       FINRA Rule 3220 Influencing or
 Employees of Others.                     Rewarding Employees of Others.
Rule 3.22 Telemarketing and              FINRA Rule 3230 Telemarketing.
 Interpretations and Policies .01.
Rule 4.1 Requirements ................  Section 17 of the Exchange Act
                                          and rules thereunder and FINRA
                                          Rule 4511(a) and (c) General
                                          Requirements.2
Rule 4.3 Record of Written Complaints..  FINRA Rule 4513 Records of
                                          Written Customer Complaints.
Rule 5.1 Written Procedures ..........  FINRA Rule 3110(b)(1)
                                          Supervision-Written
                                          Procedures.[supcaret]
Rule 5.2 Responsibility of Members.....  FINRA Rule 3110 (a)(4), (b)(4)
                                          and (b)(7) Supervision--
                                          Supervisory System/Written
                                          Procedures--Review of
                                          Correspondence and Internal
                                          Communications.[supcaret]
Rule 5.3 Records.......................  FINRA Rule 3110
                                          Supervision.[supcaret]
Rule 5.4 Review of Activities..........  FINRA Rule 3110(c) and (d)
                                          Supervision--Internal
                                          Inspections/Transaction Review
                                          and Investigation.[supcaret]
Rule 5.6 Anti-Money Laundering           FINRA Rule 3310 Anti-Money
 Compliance Program .                    Laundering Compliance Program.
Rule 9.3 Predispute Arbitration          FINRA Rule 2268 Requirements
 Agreements.                              When Using Predispute
                                          Arbitration Agreements for
                                          Customer Accounts.
Rule 11.16(e)(3) & (4) Trading Halts     FINRA Rule 6190(a) & (b)
 Due to Extraordinary Market Volatility.  Compliance with Regulation NMS
                                          Plan to Address Extraordinary
                                          Market Volatility.
Rule 11.10(a)(5) Order Execution        FINRA Rule 6182 Trade Reporting
 [supcaret][supcaret].                    of Short
                                          Sales.[supcaret][supcaret]
Rule 11.10(f) Locking Quotation or       FINRA Rule 6240 Prohibition
 Crossing Quotations in NMS Stocks **.    from Locking or Crossing
                                          Quotations in NMS Stocks.**
Rule 12.1 Market Manipulation..........  FINRA Rule 6140(a) Other
                                          Trading Practices.
Rule 12.2 Fictitious Transactions......  FINRA Rule 6140 Other Trading
                                          Practices and FINRA Rule 5210
                                          Supplementary Material .02
                                          Self-Trades.
Rule 12.3 Excessive Sales [B]by [A]a     FINRA Rule 6140(c) Other
 Member.                                  Trading Practices.
Rule 12.4 Manipulative Transactions....  FINRA Rule 6140 Other Trading
                                          Practices.
Rule 12.5 Dissemination of False         FINRA Rule 6140(e) Other
 Information.                             Trading Practices.
Rule 12.6 Prohibition Against Trading    FINRA Rule 5320 Prohibition
 Ahead of Customer Orders  **.           Against Trading Ahead of
                                          Customer Orders.**
Rule 12.9 Trade Shredding..............  FINRA Rule 5290 Order Entry and
                                          Execution Practices.
Rule 12.11 Best Execution **...........  FINRA Rule 5310 Best Execution
                                          and Interpositioning.**
Rule 12.13 Trading Ahead of Research     FINRA Rule 5280 Trading Ahead
 Reports **.                              of Research Reports.**
Rule 12.14 Front Running of Block        FINRA Rule 5270 Front Running
 Transactions **.                         of Block Transactions.**
Rule 13.3(a), (b)(i), (d) and            FINRA Rule 2251 Processing and
 Interpretation and Policy .01            Forwarding of Proxy and Other
 Forwarding of Proxy and Other Issuer-    Issuer-Related Materials.
 Related Materials; Proxy Voting.
Rule 26.11 Restrictions on Pledge and    FINRA Rule 4330 Customer
 Lending of Public Customers'             Protection--Permissible Use of
 Securities.                              Customers' Securities.
------------------------------------------------------------------------
1 FINRA shall not have Regulatory Responsibilities regarding .01 of MEMX
  Rule 3.6.
2 FINRA shall not have Regulatory Responsibilities regarding
  requirements to keep records ``in conformity with . . . Exchange
  Rules;'' responsibility for such requirement remains with MEMX.
In addition, the following provisions shall be part of this 17d-2
  Agreement:
SEA Rules:
 SEA Rule 200 of Regulation SHO--Definition of Short Sales and
  Marking Requirements **
 SEA Rule 201 of Regulation SHO--Circuit Breaker **
 SEA Rule 203 of Regulation SHO--Borrowing and Delivery
  Requirements **
 SEA Rule 204 of Regulation SHO--Close-Out Requirement **
 SEA Rule 101 of Regulation M--Activities by Distribution
  Participants **
 SEA Rule 102 of Regulation M--Activities by Issuers and Selling
  Security Holders During a Distribution **
 SEA Rule 103 of Regulation M--Nasdaq Passive Market Making **
 SEA Rule 104 of Regulation M--Stabilizing and Other Activities
  in Connection with an Offering **
 SEA Rule 105 of Regulation M--Short Selling in Connection With
  a Public Offering **

 SEA Rule 604 of Regulation NMS--Display of Customer Limit
  Orders **
 SEA Rule 606 of Regulation NMS--Disclosure of Routing
  Information **
 SEA Rule 610(d) of Regulation NMS--Locking or Crossing
  Quotations **
 SEA Rule 611 of Regulation NMS--Order Protection Rule **
 SEA Rule 10b-5 Employment of Manipulative and Deceptive Devices
  [supcaret]
 SEA Rule 17a-3/17a-4--Records to Be Made by Certain Exchange
  Members, Brokers, and Dealers/Records to Be Preserved by Certain
  Exchange Members, Brokers, and Dealers [supcaret]
 SEA Rule 14e-4--Prohibited Transactions in Connection with
  Partial Tender Offers ++
[supcaret] FINRA shall not have any Regulatory Responsibilities for
  these rules as they pertain to violations of insider trading
  activities, which is covered by a separate 17d-2 Agreement by and
  among Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Chicago Stock
  Exchange, Inc., Cboe EDGA Exchange Inc., Cboe EDGX Exchange Inc.,
  Financial Industry Regulatory Authority, Inc., MEMX LLC, MIAX PEARL,
  LLC, Nasdaq BX, Inc., Nasdaq PHLX LLC, The Nasdaq Stock Market LLC,
  NYSE National, Inc., New York Stock Exchange, LLC, NYSE American LLC,
  NYSE Arca Inc., and Investors' Exchange LLC and [the] Long-Term Stock
  Exchange, Inc. effective [August 1, 2019] September 23, 2020, as may
  be amended from time to time.
** FINRA shall perform the surveillance responsibilities for the double
  star rules. These rules may be cited by FINRA in both the context of
  this Agreement and the Regulatory Services Agreement.
++ FINRA shall perform the surveillance responsibilities for SEA Rule
  14e-4(a)(1)(ii)(D).

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. 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 protected]. Please include
File Number 4-762 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 4-762. This file number
should be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan that are filed with the
Commission, and all written communications relating to the proposed
plan between the Commission and any person, other than those that may
be withheld from the public in accordance with the provisions of 5
U.S.C. 552, will be available for website viewing and printing in the
Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the plan also will be available for inspection and
copying at the principal offices of FINRA and MEMX. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number 4-762 and should be submitted on or before
November 14, 2022.

V. Discussion

    The Commission finds that the proposed Amended Plan is consistent
with the factors set forth in Section 17(d) of the Act \12\ and Rule
17d-2(c) thereunder \13\ in that the proposed Amended Plan is necessary
or appropriate in the public interest and for the protection of
investors, fosters cooperation and coordination among SROs, and removes
impediments to and fosters the development of the national market
system. In particular, the Commission believes that the proposed
Amended Plan should reduce unnecessary regulatory duplication by
allocating to FINRA certain examination and enforcement
responsibilities for Dual Members that would otherwise be performed by
FINRA and MEMX. Accordingly, the proposed Amended Plan promotes
efficiency by reducing costs to Dual Members. Furthermore, because MEMX
and FINRA will coordinate their regulatory functions in accordance with
the Amended Plan, the Amended Plan should promote investor protection.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78q(d).
    \13\ 17 CFR 240.17d-2(c).
---------------------------------------------------------------------------

    The Commission notes that, under the Amended Plan, MEMX and FINRA
have allocated regulatory responsibility for those MEMX rules, set
forth in the Certification, that are substantially similar to the
applicable FINRA rules in that examination for compliance with such
provisions and rules would not require FINRA to develop one or more new
examination standards, modules, procedures, or criteria in order to
analyze the application of the rule, or a Dual Member's activity,
conduct, or output in relation to such rule. In addition, under the
Amended Plan, FINRA would assume regulatory responsibility for certain
provisions of the federal securities laws and the rules and regulations
thereunder that are set forth in the Certification. The Common Rules
covered by the Amended Plan are specifically listed in the
Certification, as may be amended by the Parties from time to time.
    According to the Amended Plan, MEMX will review the Certification
at least annually, or more frequently if required by changes in either
the rules of MEMX or FINRA, and, if necessary, submit to FINRA an
updated list of Common Rules to add MEMX rules not included on the
then-current list of Common Rules that are substantially similar to
FINRA rules; delete MEMX rules included in the then-current list of
Common Rules that no longer qualify as common rules; and confirm that
the remaining rules on the list of Common Rules continue to be MEMX
rules that qualify as common rules.\14\ FINRA will then confirm in
writing whether the rules listed in any updated list are Common Rules
as defined in the Amended Plan. The Commission believes that these
provisions are designed to provide for continuing communication between
the Parties to ensure the continued accuracy of the scope of the
proposed allocation of regulatory responsibility.
---------------------------------------------------------------------------

    \14\ See paragraph 2 of the Amended Plan.
---------------------------------------------------------------------------

    The Commission is hereby declaring effective an Amended Plan that,
among other things, allocates regulatory responsibility to FINRA for
the oversight and enforcement of all MEMX rules that are substantially
similar to the rules of FINRA for Dual Members of MEMX and FINRA.
Therefore, modifications to the Certification need not be filed with
the Commission as an amendment to the Amended Plan, provided that the
Parties are only adding to, deleting from, or confirming changes to
MEMX rules in the Certification in conformance with the definition of
Common Rules provided in the Amended Plan. However, should the

Parties decide to add an MEMX rule to the Certification that is not
substantially similar to a FINRA rule; delete an MEMX rule from the
Certification that is substantially similar to a FINRA rule; or leave
on the Certification an MEMX rule that is no longer substantially
similar to a FINRA rule, then such a change would constitute an
amendment to the Amended Plan, which must be filed with the Commission
pursuant to Rule 17d-2 under the Act.\15\
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    \15\ The addition to or deletion from the Certification of any
federal securities laws, rules, and regulations for which FINRA
would bear responsibility under the Amended Plan for examining, and
enforcing compliance by, Dual Members, also would constitute an
amendment to the Amended Plan.
---------------------------------------------------------------------------

    Under paragraph (c) of Rule 17d-2, the Commission may, after
appropriate notice and comment, declare a plan, or any part of a plan,
effective. In this instance, the Commission believes that appropriate
notice and comment can take place after the proposed amendment is
effective. The primary purpose of the Amended Plan is to add Securities
Exchange Act Rule 14e-4(a)(1)(ii)(D) to the Certification. The
Commission notes that the prior version of this plan immediately prior
to this proposed amendment was published for comment and the Commission
did not receive any comments thereon.\16\ Furthermore, the Commission
does not believe that the amendment to the plan raises any new
regulatory issues that the Commission has not previously considered.
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 88981 (May 20,
2020), 85 FR 34690 (June 5, 2020).
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VI. Conclusion

    This order gives effect to the Amended Plan filed with the
Commission in File No. 4-762. The Parties shall notify all members
affected by the Amended Plan of their rights and obligations under the
Amended Plan.
    It is therefore ordered, pursuant to Section 17(d) of the Act, that
the Amended Plan in File No. 4-762, between the FINRA and MEMX, filed
pursuant to Rule 17d-2 under the Act, hereby is approved and declared
effective.
    It is further ordered that MEMX is relieved of those
responsibilities allocated to FINRA under the Amended Plan in File No.
4-762.
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(34).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22989 Filed 10-21-22; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 81 (Wednesday, April 27, 2016)]
[Notices]
[Pages 24916-24919]
[FR Doc No: 2016-09715]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32090; File No. 812-14587]

ABS Long/Short Strategies Fund and ABS Investment Management LLC;
Notice of Application

April 21, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from sections 18(c)
and 18(i) of the Act, under sections 6(c) and 23(c)(3) of the Act for
an exemption

from rule 23c-3 under the Act, and for an order pursuant to section
17(d) of the Act and rule 17d-1 under the Act.

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

Summary of Application:  Applicants request an order to permit certain
registered closed-end management investment companies to issue multiple
classes of shares and to impose asset-based distribution fees and early
withdrawal charges (``EWCs'').

Applicants:  ABS Long/Short Strategies Fund (the ``Fund'') and ABS
Investment Management LLC (the ``Adviser'').

Filing Dates:  The application was filed on December 10, 2015 and
amended April 1, 2016.

Hearing or Notification of Hearing:  An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on May 17, 2016, 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 writing to the
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants: ABS Long/Short
Strategies Fund and ABS Investment Management LLC, c/o Edward C.
Lawrence, Esq., Bernstein Shur, 100 Middle Street NW., Portland, ME
04104-5029.

FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at
(202) 551-8811, or Daniele Marchesani, 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 Web site by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling<PHONE_NUMBER>.

Applicants' Representations

    1. The Fund is a Delaware statutory trust that is registered under
the Act as a non-diversified, closed-end management investment company.
The Fund's investment objective is to seek capital appreciation over a
full market cycle while maintaining a lower level of volatility when
compared to the global equity markets.
    2. The Adviser is a Delaware limited liability company and is
registered as an investment adviser under the Investment Advisers Act
of 1940. The Adviser serves as investment adviser to the Fund.
    3. The applicants seek an order to permit the Fund to issue
multiple classes of shares, each having its own fee and expense
structure, and to impose asset-based distribution fees and EWCs.
    4. Applicants request that the order also apply to any
continuously-offered registered closed-end management investment
company that may be organized in the future for which the Adviser or
any entity controlling, controlled by, or under common control with the
Adviser, or any successor in interest to any such entity,\1\ acts as
investment adviser and which operates as an interval fund pursuant to
rule 23c-3 under the Act or provides periodic liquidity with respect to
its shares pursuant to rule 13e-4 under the Securities Exchange Act of
1934 (``Exchange Act'') (each, a ``Future Fund'' and together with the
Fund, the ``Funds'').\2\
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    \1\ A successor in interest is limited to an entity that results
from a reorganization into another jurisdiction or a change in the
type of business organization.
    \2\ Any Fund relying on this relief in the future will do so in
a manner consistent with the terms and conditions of the
application. Applicants represent that each entity presently
intending to rely on the requested relief is listed as an applicant.
---------------------------------------------------------------------------

    5. The Fund is currently making a continuous public offering of its
common shares (``Founders' Shares''). Applicants state that additional
offerings by any Fund relying on the order may be on a private
placement or public offering basis. Shares of the Funds will not be
listed on any securities exchange, nor quoted on any quotation medium.
The Funds do not expect there to be a secondary trading market for
their shares.
    6. If the requested relief is granted, the Fund intends to
continuously offer at least one additional class of shares
(``Institutional Shares'') and may also offer additional classes of
shares in the future. Because of the different distribution fees,
services and any other class expenses that may be attributable to a
class of a Fund's shares, the net income attributable to, and the
dividends payable on, each class of shares may differ from each other.
    7. Applicants state that, from time to time, the Fund may create
additional classes of shares, the terms of which may differ from the
Founders' Shares and Institutional Shares in the following respects:
(i) The amount of fees permitted by different distribution plans or
different service fee arrangements; (ii) voting rights with respect to
a distribution plan of a class; (iii) different class designations;
(iv) the impact of any class expenses directly attributable to a
particular class of shares allocated on a class basis as described in
the application; (v) any differences in dividends and net asset value
resulting from differences in fees under a distribution plan or in
class expenses; (vi) any EWC or other sales load structure; and (vii)
exchange or conversion privileges of the classes as permitted under the
Act.
    8. Applicants state that the Fund may provide periodic liquidity
with respect to its shares pursuant to rule 13e-4 under the Exchange
Act.\3\ A Future Fund may adopt a fundamental investment policy to
repurchase a specified percentage of its shares in compliance with rule
23c-3 and make quarterly repurchase offers to its shareholders or
provide periodic liquidity with respect to its shares pursuant to rule
13e-4 under the Exchange Act. Any repurchase offers made by the Funds
will be made to all holders of shares of each such Fund.
---------------------------------------------------------------------------

    \3\ Applicants submit that rule 23c-3 and Regulation M under the
Exchange Act permit an interval fund to make repurchase offers to
repurchase its shares while engaging in a continuous offering of its
shares pursuant to Rule 415 under the Securities Act of 1933.
---------------------------------------------------------------------------

    9. Applicants represent that any asset-based service and
distribution fees for each class of shares will comply with the
provisions of NASD Rule 2830(d) (``NASD Sales Charge Rule'').\4\
Applicants also represent that each Fund will disclose in its
prospectus the fees, expenses and other characteristics of each class
of shares offered for sale by the prospectus, as is required for open-
end multiple class funds under Form N-1A. As is required for open-end
funds, each Fund will disclose its expenses in shareholder reports, and
describe any arrangements that result in breakpoints in or elimination
of sales loads in its prospectus.\5\ In addition,

applicants will comply with applicable enhanced fee disclosure
requirements for fund of funds, including registered funds of hedge
funds.\6\
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    \4\ Any reference to the NASD Sales Charge Rule includes any
successor or replacement rule that may be adopted by the Financial
Industry Regulatory Authority (``FINRA'').
    \5\ See Shareholder Reports and Quarterly Portfolio Disclosure
of Registered Management Investment Companies, Investment Company
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring
open-end investment companies to disclose fund expenses in
shareholder reports); and Disclosure of Breakpoint Discounts by
Mutual Funds, Investment Company Act Release No. 26464 (June 7,
2004) (adopting release) (requiring open-end investment companies to
provide prospectus disclosure of certain sales load information).
    \6\ Fund of Funds Investments, Investment Company Act Rel. Nos.
26198 (Oct. 1, 2003) (proposing release) and 27399 (Jun. 20, 2006)
(adopting release). See also Rules 12d1-1, et seq. of the Act.
---------------------------------------------------------------------------

    10. Each of the Funds will comply with any requirements that the
Commission or FINRA may adopt regarding disclosure at the point of sale
and in transaction confirmations about the costs and conflicts of
interest arising out of the distribution of open-end investment company
shares, and regarding prospectus disclosure of sales loads and revenue
sharing arrangements, as if those requirements applied to the Fund. In
addition, each Fund will contractually require that any distributor of
the Fund's shares comply with such requirements in connection with the
distribution of such Fund's shares.
    11. Each Fund will allocate all expenses incurred by it among the
various classes of shares based on the net assets of the Fund
attributable to each class, except that the net asset value and
expenses of each class will reflect distribution fees, service fees,
and any other incremental expenses of that class. Expenses of the Fund
allocated to a particular class of shares will be borne on a pro rata
basis by each outstanding share of that class. Applicants state that
each Fund will comply with the provisions of rule 18f-3 under the Act
as if it were an open-end investment company.
    12. Applicants state that each Fund may impose an EWC on shares
submitted for repurchase that have been held less than a specified
period and may waive the EWC for certain categories of shareholders or
transactions to be established from time to time. Applicants state that
each of the Funds will apply the EWC (and any waivers, scheduled
variations, or eliminations of the EWC) uniformly to all shareholders
in a given class and consistently with the requirements of rule 22d-1
under the Act as if the Funds were open-end investment companies.
    13. Each Fund operating as an interval fund pursuant to rule 23c-3
under the Act may offer its shareholders an exchange feature under
which the shareholders of the Fund may, in connection with the Fund's
periodic repurchase offers, exchange their shares of the Fund for
shares of the same class of (i) registered open-end investment
companies or (ii) other registered closed-end investment companies that
comply with rule 23c-3 under the Act and continuously offer their
shares at net asset value, that are in the Fund's group of investment
companies (collectively, ``Other Funds''). Shares of a Fund operating
pursuant to rule 23c-3 that are exchanged for shares of Other Funds
will be included as part of the amount of the repurchase offer amount
for such Fund as specified in rule 23c-3 under the Act. Any exchange
option will comply with rule 11a-3 under the Act, as if the Fund were
an open-end investment company subject to rule 11a-3. In complying with
rule 11a-3, each Fund will treat an EWC as if it were a contingent
deferred sales load (``CDSL'').

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(c) of the Act provides, in relevant part, that a
closed-end investment company may not issue or sell any senior security
if, immediately thereafter, the company has outstanding more than one
class of senior security. Applicants state that the creation of
multiple classes of shares of the Funds may be prohibited by section
18(c), as a class may have priority over another class as to payment of
dividends because shareholders of different classes would pay different
fees and expenses.
    2. Section 18(i) of the Act provides that each share of stock
issued by a registered management investment company will be a voting
stock and have equal voting rights with every other outstanding voting
stock. Applicants state that multiple classes of shares of the Funds
may violate section 18(i) of the Act because each class would be
entitled to exclusive voting rights with respect to matters solely
related to that class.
    3. Section 6(c) of the Act provides that the Commission may exempt
any person, security or transaction or any class or classes of persons,
securities or transactions from any provision of the Act, or from any
rule or regulation under the Act, if and to the extent such exemption
is necessary or appropriate in the public interest and consistent with
the protection of investors and the purposes fairly intended by the
policy and provisions of the Act. Applicants request an exemption under
section 6(c) from sections 18(c) and 18(i) to permit the Funds to issue
multiple classes of shares.
    4. Applicants submit that the proposed allocation of expenses
relating to distribution and voting rights among multiple classes is
equitable and will not discriminate against any group or class of
shareholders. Applicants submit that the proposed arrangements would
permit a Fund to facilitate the distribution of its shares and provide
investors with a broader choice of shareholder services. Applicants
assert that the proposed closed-end investment company multiple class
structure does not raise the concerns underlying section 18 of the Act
to any greater degree than open-end investment companies' multiple
class structures that are permitted by rule 18f-3 under the Act.
Applicants state that each Fund will comply with the provisions of rule
18f-3 as if it were an open-end investment company.

Early Withdrawal Charges

    1. Section 23(c) of the Act provides, in relevant part, that no
registered closed-end investment company shall purchase securities of
which it is the issuer, except: (a) On a securities exchange or other
open market; (b) pursuant to tenders, after reasonable opportunity to
submit tenders given to all holders of securities of the class to be
purchased; or (c) under other circumstances as the Commission may
permit by rules and regulations or orders for the protection of
investors.
    2. Rule 23c-3 under the Act permits a registered closed-end
investment company (an ``interval fund'') to make repurchase offers of
between five and twenty-five percent of its outstanding shares at net
asset value at periodic intervals pursuant to a fundamental policy of
the interval fund. Rule 23c-3(b)(1) under the Act permits an interval
fund to deduct from repurchase proceeds only a repurchase fee, not to
exceed two percent of the proceeds, that is paid to the interval fund
and is reasonably intended to compensate the fund for expenses directly
related to the repurchase.
    3. Section 23(c)(3) provides that the Commission may issue an order
that would permit a closed-end investment company to repurchase its
shares in circumstances in which the repurchase is made in a manner or
on a basis that does not unfairly discriminate against any holders of
the class or classes of securities to be purchased.
    4. Applicants request relief under section 6(c), discussed above,
and section 23(c)(3) from rule 23c-3 to the extent necessary for the
Funds to impose EWCs on shares of the Funds submitted for repurchase
that have been held for less than a specified period.
    5. Applicants state that the EWCs they intend to impose are
functionally similar to CDSLs imposed by open-end investment companies
under rule 6c-10

under the Act. Rule 6c-10 permits open-end investment companies to
impose CDSLs, subject to certain conditions. Applicants note that rule
6c-10 is grounded in policy considerations supporting the employment of
CDSLs where there are adequate safeguards for the investor and state
that the same policy considerations support imposition of EWCs in the
interval fund context. In addition, applicants state that EWCs may be
necessary for the distributor to recover distribution costs. Applicants
represent that any EWC imposed by the Funds will comply with rule 6c-10
under the Act as if the rule were applicable to closed-end investment
companies. The Funds will disclose EWCs in accordance with the
requirements of Form N-1A concerning CDSLs.

Asset-Based Distribution Fees

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company, or an
affiliated person of such person, acting as principal, from
participating in or effecting any transaction in connection with any
joint enterprise or joint arrangement in which the investment company
participates unless the Commission issues an order permitting the
transaction. In reviewing applications submitted under section 17(d)
and rule 17d-1, the Commission considers whether the participation of
the investment company in a joint enterprise or joint arrangement is
consistent with the provisions, policies and purposes of the Act, and
the extent to which the participation is on a basis different from or
less advantageous than that of other participants.
    2. Rule 17d-3 under the Act provides an exemption from section
17(d) and rule 17d-1 to permit open-end investment companies to enter
into distribution arrangements pursuant to rule 12b-1 under the Act.
Applicants request an order under section 17(d) and rule 17d-1 under
the Act to the extent necessary to permit the Funds to impose asset-
based distribution fees. Applicants have agreed to comply with rules
12b-1 and 17d-3 as if those rules applied to closed-end investment
companies, which they believe will resolve any concerns that might
arise in connection with a Fund financing the distribution of its
shares through asset-based distribution fees.
    3. For the reasons stated above, applicants submit that the
exemptions requested under section 6(c) are necessary and appropriate
in the public interest and are consistent with the protection of
investors and the purposes fairly intended by the policy and provisions
of the Act. Applicants further submit that the relief requested
pursuant to section 23(c)(3) will be consistent with the protection of
investors and will insure that applicants do not unfairly discriminate
against any holders of the class of securities to be purchased.
Finally, applicants state that the Funds' imposition of asset-based
distribution fees is consistent with the provisions, policies and
purposes of the Act and does not involve participation on a basis
different from or less advantageous than that of other participants.

Applicants' Condition

    Applicants agree that any order granting the requested relief will
be subject to the following condition:
    Each Fund relying on the order will comply with the provisions of
rules 6c-10, 12b-1, 17d-3, 18f-3, 22d-1, and, where applicable, 11a-3
under the Act, as amended from time to time, as if those rules applied
to closed-end management investment companies, and will comply with the
NASD Sales Charge Rule, as amended from time to time, as if that rule
applied to all closed-end management investment companies.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2016-09715 Filed 4-26-16; 8:45 am]
BILLING CODE 8011-01-P