[Federal Register Volume 76, Number 186 (Monday, September 26, 2011)]
[Notices]
[Pages 59455-59456]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-24590]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29794; File No. 812-13855]
Curian Series Trust and Curian Capital, LLC; Notice of
Application
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 section 15(a)
of the Act and rule 18f-2 under the Act.
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SUMMARY: The requested order would permit certain registered open-end
management investment companies to enter into and materially amend
subadvisory agreements without shareholder approval.
Applicants: Curian Series Trust (``Trust'') and Curian Capital, LLC
(the ``Adviser'').
DATES: Filing Dates: The application was filed on December 30, 2010,
and amended on June 7, 2011 and September 16, 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 October 14, 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 reasons 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, Curian Series
Trust, 7601 Technology Way, Denver, CO 80237.
FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel at (202)
551-6870, or Jennifer L. Sawin, 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 organized as a Massachusetts business trust and is
registered under the Act as an open-end management investment company.
The Trust is currently comprised of three separate series, Curian/PIMCO
Total Return Fund, Curian/PIMCO Income Fund, and Curian/WMC
International Equity Fund (the ``Initial Funds''), each with its own
distinct investment objectives, policies and restrictions.\1\ Each
Initial Fund currently employs an unaffiliated subadviser (each, a
``Subadviser'').
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\1\ Applicants also request relief with respect to future series
of the Trust and any other existing or future registered open-end
management investment company or series thereof that: (a) is advised
by the Adviser or any entity controlling, controlled by, or under
common control with the Adviser or its successors (included in the
term ``Adviser''); (b) uses the manager of managers structure
described in the application (``Manager of Managers Structure'');
and (c) complies with the terms and conditions of the application
(together with the Initial Funds, the ``Funds''). The only existing
registered open-end management investment company that currently
intends to rely on the requested order is named as an applicant. If
the name of any Fund contains the name of a Subadviser (as defined
below), the name of the Adviser will precede the name of the
Subadviser. For purposes of the requested order, ``successor'' is
limited to any entity or entities that result from a reorganization
into another jurisdiction or a change in the type of business
organization.
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2. The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940 (``Advisers Act''). The Adviser serves
as investment adviser to each Initial Fund under an investment advisory
agreement (``Advisory Agreement'') with the Trust. An Adviser will also
serve as the investment adviser to any future Funds. Each Initial
Fund's Advisory Agreement was approved by the Trust's board of trustees
(``Board''), including a majority of trustees who are not ``interested
persons,'' as defined in section 2(a)(19) of the Act, of the Trust, the
Adviser, or the Subadvisers (``Independent Trustees'') and by that
Fund's shareholders.
3. Under the terms of the Advisory Agreement, and subject to the
authority of the Board, the Adviser is responsible for the overall
management of the Initial Funds' business affairs and selecting the
Initial Funds' investments in accordance with each Fund's investment
objectives, policies and restrictions. For the investment advisory
services that it provides to the Initial Funds, the Adviser receives
the fee specified in the Advisory Agreement from each Fund. Under the
Advisory Agreement, the Adviser may retain one or more subadvisers for
the purpose of managing the investment of the assets of the Funds.
Pursuant to this authority, the Adviser has entered into investment
subadvisory agreements (``Subadvisory Agreements'') with two
Subadvisers to provide investment advisory services to the Initial
Funds. Each Subadviser is and each future Subadviser will be registered
as an investment adviser under the Advisers Act. The Adviser will
obtain for the Funds the services of one or more Subadvisers, evaluate
and allocate assets to, and oversee the Subadvisers, and make
recommendations about their hiring, termination and replacement to the
Board, at all times subject to the authority of the Board. The
Subadvisers are expected to be compensated directly by each Fund.\2\
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\2\ It is possible that, in the future, a Subadviser to a Fund
may be compensated by the Adviser out of the advisory fees the
Adviser receives from the Fund.
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4. Applicants request an order to permit the Adviser, subject to
Board approval, to enter into and materially amend Subadvisory
Agreements without obtaining shareholder approval. The requested relief
will not extend to any subadviser that is an affiliated person, as
defined in section 2(a)(3) of the Act, of the Trust, a Fund or the
Adviser (other than by reason of serving as a subadviser to one or more
of the Funds) (``Affiliated Subadviser'').
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 the 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 company affected by a matter must approve such
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 provision of the Act, or
from any rule thereunder, if and
[[Page 59456]]
to the extent that 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 believe that the requested relief meets this standard for
the reasons discussed below.
3. Applicants state that the shareholders rely on the Adviser's
experience to select one or more Subadvisers best suited to achieve the
Fund's investment objectives. Applicants assert that, from the
perspective of the investor, the role of the Subadvisers is
substantially equivalent to that of the individual portfolio managers
employed by the Adviser for Fund assets managed by the Adviser.
Applicants contend that requiring shareholder approval of Subadvisory
Agreements would impose costs and unnecessary delays on the Funds and
may preclude the Adviser and the Board from acting promptly when a
change in Subadvisers would benefit a Fund. Applicants note that each
Advisory Agreement and any subadvisory agreement with an Affiliated
Subadviser will remain subject to the shareholder approval requirements
of section 15(a) and rule 18f-2 under the Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. Before a Fund may rely on the requested order, 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 relying on the requested order will disclose in its
prospectus the existence, substance, and effect of any order granted
pursuant to the application. In addition, each Fund will hold itself
out to the public as utilizing the Manager of Managers Structure. The
prospectus will prominently disclose that the Adviser has the ultimate
responsibility (subject to oversight by the Board) to oversee the
Subadvisers and to recommend their hiring, termination and replacement.
3. Within 90 days of the hiring of a new Subadviser, shareholders
of the affected Fund will be furnished all information about the new
Subadviser that would be included in a proxy statement. To meet this
condition, each affected Fund will provide shareholders with an
information statement meeting the requirements of Regulation 14C,
Schedule 14C and Item 22 of Schedule 14A under the 1934 Act.
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, will make a separate finding, reflected in the
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, including overall supervisory responsibility for the general
management and investment of each Fund's assets, and, subject to the
review and approval by the Board, will: (a) Set each Fund's overall
investment strategies; (b) evaluate, select and recommend Subadvisers
to manage all or part of each Fund's assets; (c) allocate and, when
appropriate, reallocate each Fund's assets among one or more
Subadvisers; (d) monitor and evaluate the performance of Subadvisers;
and (e) implement procedures reasonably designed to ensure that the
Subadvisers comply with each Fund's investment objective, policies and
restrictions.
8. No trustee or officer of the Trust or the 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. For Funds that pay subadvisory fees directly from Fund assets,
any changes to a Subadvisory Agreement that would result in an increase
in the total management and advisory fees payable by a Fund will be
required to be approved by the shareholders of that Fund.
10. In the event that 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.
Dated: September 19, 2011.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-24590 Filed 9-23-11; 8:45 am]
BILLING CODE 8011-01-P