[Federal Register Volume 76, Number 153 (Tuesday, August 9, 2011)]
[Notices]
[Pages 48927-48929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20102]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29743; File No. 812-13860]
RidgeWorth Funds and RidgeWorth Capital Management, Inc.; Notice
of Application
August 3, 2011.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (``Act'') for an exemption from section 15(a) of
the Act and rule 18f-2 under the Act.
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Summary of the Application: Applicants request an order that would
permit them to enter into and materially amend subadvisory agreements
without shareholder approval.
Applicants: RidgeWorth Funds (the ``Trust'') and RidgeWorth Capital
Management, Inc. (the ``Adviser'').
DATES: Filing Dates: The application was filed on January 20, 2011 and
amended on June 29, 2011.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by 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 August 29, 2011 and should be accompanied by proof of service
on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, 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, 3333 Piedmont Road,
NE., Suite 1500, Atlanta, GA 30305-1740.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 551-6876, or Dalia Osman Blass, Branch Chief, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
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 an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. The Trust is a Massachusetts business trust registered under the
Act as an open-end management investment company and offers multiple
series (each a ``Fund'').\1\
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\1\ Applicants request that any relief granted pursuant to the
application also apply to (a) All other existing or future open-end
management investment companies or series thereof that (i) are
advised by the Adviser or any entity controlling, controlled by or
under common control with the Adviser or its successors (each such
entity included in the term ``Adviser''), (ii) are registered under
the Act, (iii) use the manager of managers structure (as described
in the application), and (iv) comply with the terms and conditions
in the application (such companies or series included in the term
``Funds''); and (b) the Adviser. Each existing entity that currently
intends to rely on the requested order is named as an Applicant. Any
existing or future entity that relies on the order in the future
will do so only in accordance with the terms and conditions in the
application. If the name of any Fund relying on the requested relief
contains the name of a Subadviser (defined below), the name
``RidgeWorth'' or other name being used by the Adviser will precede
the name of the Subadviser.
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2. The Adviser, a Georgia corporation with its principal office in
Atlanta, serves as investment adviser to the Funds and is registered
under the Investment Advisers Act of 1940 (the ``Advisers Act'')
pursuant to an investment advisory agreement with the Trust (``Advisory
Agreement''). The Adviser is a wholly owned subsidiary of SunTrust
Banks, Inc. The Advisory Agreement was approved by the board of
trustees of the Trust (``Board''),\2\, including a majority of the
trustees who are not ``interested persons'' (as defined in section
2(a)(19) of the Act) of the Trust or the Adviser (the ``Independent
Trustees'') and was approved by the initial shareholder of each Fund in
the manner required by sections 15(a) and (c) of the Act and rule 18f-2
thereunder. With respect to new Funds offered in the future, the
Advisory Agreement will be approved by the initial shareholder of the
Fund in the manner required by sections 15(a) and (c) of the Act and
rule 18f-2 thereunder. Applicants are not seeking any exemptions from
the provisions of the Act with respect to the
[[Page 48928]]
requirements that the Advisory Agreement be approved by the Board and
the shareholders of the relevant Funds.
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\2\ The Board is also the board of each individual Fund.
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3. The Adviser, subject to the oversight and authority of the
Board, is responsible for furnishing the overall investment program for
each Fund and providing continuous investment management for each
Fund's assets pursuant to the Advisory Agreement. For the investment
management services that it provides to each Fund, the Adviser receives
the fee specified in the Advisory Agreement from each Fund based on the
Fund's average daily net assets. The Advisory Agreement permits the
Adviser to retain one or more unaffiliated investment subadvisers (each
a ``Subadviser''), at the Adviser's own expense, subject to the
approval of the Fund's Board, including approval by a majority of its
Independent Trustees, for the purpose of managing the investment of the
assets of one or more Funds.\3\ Each Subadviser will be registered as
an investment adviser under the Advisers Act. Each Subadviser will be
responsible, subject to the supervision of the Adviser and the Board,
for the purchase, retention and sale of securities for the applicable
Fund. The Adviser will establish an investment program for each Fund
and will select, supervise and evaluate the Subadvisers who make the
day-to-day investment decisions for the Fund. The Adviser will evaluate
and recommend Subadvisers to the Board and will monitor and evaluate
each Subadviser's investment programs, performance and compliance. The
Adviser will also recommend to the Board whether investment advisory
agreements with a Subadviser (``Subadvisory Agreements'') should be
renewed, modified or terminated. The Adviser will compensate each
Subadviser out of the fee paid to the Adviser under the relevant Fund's
Advisory Agreement. Neither the Trust nor any Fund will be responsible
for paying subadvisory fees to any subadviser.
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\3\ The Adviser has entered into subadvisory agreements with
subadvisers that are ``affiliated persons'' (as defined in section
2(a)(3) of the Act) of the Trust, a Fund or of the Adviser (other
than by reason of serving as a subadviser to one or more of the
Funds) (``Affiliated Subadvisers'') to assist with monitoring and/or
management of certain markets with which the Affiliated Subadvisers
have expertise. The requested relief does not apply with respect to
existing or future Affiliated Subadvisers.
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4. Applicants request an order to permit the Adviser, subject to
Board approval, including a majority of the Independent Trustees, to
enter into and materially amend Subadvisory Agreements without
shareholder approval.
Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that it is
unlawful for any person to act as an investment adviser to a registered
investment company except pursuant to a written contract that has been
approved by a vote of a majority of the company's outstanding voting
securities. Rule 18f-2 under the Act provides that each series or class
of stock in a series investment company affected by a matter must
approve the matter if the Act requires shareholder approval.
2. 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 provisions of the Act, or
from any rule thereunder, if such exemption is necessary or appropriate
in the public interest and consistent with the protection of investors
and the purposes fairly intended by the policy and provisions of the
Act. Applicants state that the requested relief meets the necessary
standards for the reasons discussed below.
3. Applicants believe that the shareholders expect the Adviser and
the Board to select the portfolio manager or Subadviser for a Fund that
is best suited to achieve the Fund's investment objective. Applicants
assert that, from the perspective of the investor, the role of the
Subadvisers with respect to the Funds utilizing the manager of managers
structure is substantially equivalent to the role of the individual
portfolio managers employed by the traditional investment company
advisory firms. In the absence of exemptive relief from section 15(a)
of the Act, when a new Subadviser is proposed for retention by a Fund
or the Trust on behalf of one or more of the Funds, shareholders would
be required to approve the Subadvisory Agreement with that Subadviser.
Similarly, if an existing Subadvisory Agreement were to be amended in
any material respect (e.g., an increase in the subadvisory fee),
approval by the shareholders of the affected Fund would be required. In
addition, a Fund would be prohibited from continuing to retain an
existing Subadviser whose Subadvisory Agreement had been ``assigned''
as a result of a change of control of the Subadviser unless shareholder
approval had been obtained. Applicants contend that this process would
be time-intensive, costly and slow and, in the case of a poorly
performing Subadviser or one whose management team had left,
potentially harmful to a Fund and its shareholders. Applicants also
note that the Advisory Agreement is and will remain fully subject to
the requirements of section 15(a) of the Act and, where applicable,
rule 18f-2 thereunder, including the requirement for shareholder
voting.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. Before a Fund may rely on the order requested in the
application, the operation of the Fund in the manner described in the
application will be approved by a majority of the Fund's outstanding
voting securities, as defined in the Act or, in the case of a Fund
whose public shareholders purchase shares on the basis of a prospectus
containing the disclosure contemplated by condition 2 below, by the
initial shareholder(s) before offering shares of that Fund to the
public.
2. Each Fund that relies on the order requested in the application
will disclose in its prospectus the existence, substance, and effect of
any order granted pursuant to the application. Each Fund relying on the
order requested in the application will hold itself out to the public
as utilizing the manager of managers structure described in the
application. The prospectus will prominently disclose that the Adviser
has ultimate responsibility (subject to oversight by the Board) to
oversee the Subadvisers and recommend their hiring, termination, and
replacement.
3. Within 90 days of the hiring of a new Subadviser, the affected
Fund shareholders will be furnished all information about the new
Subadviser that would be included in a proxy statement. To meet this
obligation, the Fund will provide shareholders of the affected Fund
within 90 days of hiring a new Subadviser with an information statement
meeting the requirements of Regulation 14C, Schedule 14C, and Item 22
of Schedule 14A under the Securities Exchange Act of 1934, as amended.
4. The Adviser will not enter into a subadvisory agreement with any
Affiliated Subadviser without such agreement, including the
compensation to be paid thereunder, being approved by the shareholders
of the applicable Fund.
5. At all times, at least a majority of the Board will be
Independent Trustees, and the nomination of new or additional
Independent Trustees will be placed within the discretion of the then-
existing Independent Trustees.
6. Whenever a subadviser change is proposed for a Fund with an
Affiliated Subadviser, the Board, including a majority of the
Independent Trustees,
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will make a separate finding, reflected in the applicable Board
minutes, that such change is in the best interests of the Fund and its
shareholders, and does not involve a conflict of interest from which
the Adviser or the Affiliated Subadviser derives an inappropriate
advantage.
7. The Adviser will provide general management services to each
Fund that is subadvised, including overall supervisory responsibility
for the general management and investment of the Fund's assets, and,
subject to review and approval of the Board, will: (i) Set each Fund's
overall investment strategies; (ii) evaluate, select and recommend
Subadvisers to manage all or a part of a Fund's assets; (iii) allocate
and, when appropriate, reallocate a Fund's assets among one or more
Subadvisers; (iv) monitor and evaluate the performance of Subadvisers;
and (v) implement procedures reasonably designed to ensure that the
Subadvisers comply with the relevant Fund's investment objective,
policies, and restrictions.
8. No trustee or officer of the Trust or a Fund, or director,
manager or officer of the Adviser, will own, directly or indirectly
(other than through a pooled investment vehicle that is not controlled
by such person), any interest in a Subadviser, except for (a) ownership
of interests in the Adviser or any entity that controls, is controlled
by, or is under common control with the Adviser, or (b) ownership of
less than 1% of the outstanding securities of any class of equity or
debt of any publicly traded company that is either a Subadviser or an
entity that controls, is controlled by or is under common control with
a Subadviser.
9. In the event the Commission adopts a rule under the Act
providing substantially similar relief to that in the order requested
in the application, the requested order will expire on the effective
date of that rule.
For the Commission, by the Division of Investment Management,
under delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-20102 Filed 8-8-11; 8:45 am]
BILLING CODE 8011-01-P