[Federal Register Volume 77, Number 222 (Friday, November 16, 2012)]
[Notices]
[Pages 68854-68856]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27875]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30259; 812-14006]
Highland Associates, Inc. and Financial Investors Trust; Notice
of Application
November 9, 2012.
AGENCY: Securities and Exchange Commission (the ``Commission'').
ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940, as amended (the ``Act''), for an
exemption from section 15(a) of the Act and rule 18f-2 under the Act.
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SUMMARY: Summary of Application: Applicants request an order that would
permit them to enter into and materially amend subadvisory agreements
without shareholder approval.
Applicants: Highland Associates, Inc. (the ``Adviser'') and Financial
Investors Trust (the ``Trust''), on behalf of the Redmont Resolute Fund
I and Redmont Resolute Fund II (the ``Redmont Funds'').
DATES: Filing Dates: The application was filed on February 2, 2012, and
amended on July 17, 2012, and October 16, 2012.
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 December 4, 2012, and should be accompanied by proof of service
on the 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants: c/
o JoAnn Strasser, Thompson Hine LLP, 41 South High Street, 17th Floor,
Columbus OH 43215.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 551-6876, or Mary Kay Frech, 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, a Delaware statutory trust, is registered under the
Act as an open-end management investment company and is comprised of
individual series, including the Redmont Funds, each with its own
investment objective, policies and restrictions.\1\ The Adviser, an
Alabama corporation, is, and each other Adviser will be, registered as
an investment adviser under the Investment Advisers Act of 1940, as
amended (the ``Advisers Act''). The Adviser serves as the investment
adviser of the Redmont Funds and will serve as investment adviser to
the future Funds. The Redmont Funds have entered into an investment
advisory agreement with the Adviser (the ``Advisory Agreement''),\2\
approved by the Trust's board of trustees (the ``Board''),\3\ 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 by shareholders representing a
majority of each Redmont Fund's shares.
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\1\ Applicants also request relief with respect to any existing
or 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 within the term ``Adviser''); (b) uses the
manager of managers structure (the ``Manager of Managers
Structure'') described in the application; and (c) complies with the
terms and conditions of the application (together with the Redmont
Funds, the ``Funds'' and each, individually, a ``Fund''). For
purposes of the requested order, ``successor'' is limited to any
entity or entities that result from a reorganization of the Adviser
into another jurisdiction or a change in the type of business
organization. The only existing registered open-end investment
company that currently intends to rely on the order is named as an
applicant. The Redmont Funds are the only Funds that currently
intend to rely on the requested order. 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.
\2\ The Adviser will enter into substantially similar investment
advisory agreements to provide investment management services to
future Funds (``Future Advisory Agreements''). The terms of Future
Advisory Agreements will comply with section 15(a) of the Act and
Future Advisory Agreements will be approved by shareholders and by
the Board, including a majority of the Independent Trustees, in the
manner required by sections 15(a) and 15(c) of the Act and rule 18f-
2 thereunder. References to any Advisory Agreement include Future
Advisory Agreements as they pertain to future Funds.
\3\ The term ``Board'' also includes the board of trustees or
directors of a future Fund, if different.
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2. Under the terms of the Advisory Agreement, the Adviser is
responsible for the overall management of each Redmont Fund's business
affairs and selecting investments according to their respective
investment objectives, policies and restrictions. For the investment
management services that it provides to a Redmont Fund, the Adviser
receives the fee specified in the Advisory Agreement. The Advisory
Agreement also permits the Adviser to retain one or more subadvisers
for the purpose of managing the investments of all or a portion of the
assets of the Redmont Funds. Pursuant to this authority, the Adviser
may enter into investment subadvisory agreements with unaffiliated
investment subadvisers (``Subadvisers'') to provide investment advisory
services to the Redmont Funds (each, a ``Subadvisory Agreement'' and
together, the ``Subadvisory Agreements'').\4\ Each Subadviser will be
registered as an investment adviser under the Advisers Act. The Adviser
will supervise, evaluate and allocate assets to the Subadvisers, and
make recommendations to the Board about their hiring, retention or
release, at all times subject to the authority of the Board. The
Adviser will compensate each Subadviser out of the fees paid to the
Adviser under the Advisory Agreement.
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\4\ The Redmont Funds do not currently employ Subadvisers, but
each anticipates doing so in the future.
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3. Applicants request an order to permit the Adviser, subject to
Board approval, to enter into and materially amend Subadvisory
Agreements without obtaining shareholder approval.
[[Page 68855]]
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 (an ``Affiliated Subadviser'').
4. Funds will inform shareholders of the hiring of a new Subadviser
pursuant to the following procedures (``Modified Notice and Access
Procedures''): (a) Within 90 days after a new Subadviser is hired for
any Fund, that Fund will send its shareholders either a Multi-manager
Notice or a Multi-manager Notice and Multi-manager Information
Statement; \5\ and (b) the Fund will make the Multi-manager Information
Statement available on the Web site identified in the Multi-manager
Notice no later than when the Multi-manager Notice (or Multi-manager
Notice and Multi-manager Information Statement) is first sent to
shareholders, and will maintain it on that Web site for at least 90
days. In the circumstances described in the application, a proxy
solicitation to approve the appointment of new Subadvisers provides no
more meaningful information to shareholders than the proposed Multi-
manager Information Statement. Moreover, as indicated above, the Board
would comply with the requirements of sections 15(a) and 15(c) of the
Act before entering into or amending Subadvisory Agreements.
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\5\ A ``Multi-manager Notice'' will be modeled on a Notice of
Internet Availability as defined in rule 14a-16 under the Securities
Exchange Act of 1934 (``Exchange Act''), and specifically will,
among other things: (a) Summarize the relevant information regarding
the new Subadviser; (b) inform shareholders that the Multi-manager
Information Statement is available on a Web site; (c) provide the
Web site address; (d) state the time period during which the Multi-
manager Information Statement will remain available on that Web
site; (e) provide instructions for accessing and printing the Multi-
manager Information Statement; and (f) instruct the shareholder that
a paper or email copy of the Multi-manager Information Statement may
be obtained, without charge, by contacting the Funds.
A ``Multi-manager Information Statement'' will meet the
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule
14A under the Exchange Act for an information statement. Multi-
manager Information Statements will be filed electronically with the
Commission via the EDGAR system.
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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 securities in a series investment company affected by a matter must
approve that 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 this standard.
3. Applicants assert that the shareholders expect the Adviser and
the Board to select the Subadvisers for the Funds that are best suited
to achieve each Fund's investment objective. 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. Applicants state that requiring shareholder
approval of each Subadvisory Agreement would impose costs and
unnecessary delays on the Funds, and may preclude the Adviser from
acting promptly in a manner considered advisable by the Board.
Applicants note that the Advisory Agreement and any Subadvisory
Agreement with an Affiliated Subadviser will remain subject to section
15(a) of the Act and rule 18f-2 under the Act, 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 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. 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 ultimate responsibility
(subject to oversight by the Board) to oversee the Subadvisers and
recommend their hiring, termination, and replacement.
3. Funds will inform shareholders of the hiring of a new Subadviser
within 90 days after the hiring of the new Subadviser pursuant to the
Modified Notice and Access Procedures.
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
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, including overall supervisory responsibility for the general
management and investment of each Fund's assets and, subject to review
and approval of the Board, will: (a) Set each Fund's overall investment
strategies; (b) evaluate, select and recommend Subadvisers to manage
all or a 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 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.
[[Page 68856]]
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.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27875 Filed 11-15-12; 8:45 am]
BILLING CODE 8011-01-P