[Federal Register Volume 78, Number 135 (Monday, July 15, 2013)]
[Notices]
[Pages 42122-42125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-16855]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30592; 812-14118]
Bridge Builder Trust and Olive Street Investment Advisers, LLC;
Notice of Application
July 9, 2013.
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, as well as from certain
disclosure requirements.
-----------------------------------------------------------------------
SUMMARY OF APPLICATION: Applicants request an order that would permit
them to enter into and materially amend sub-advisory agreements without
shareholder approval and that would grant relief from certain
disclosure requirements.
APPLICANTS: Bridge Builder Trust (the ``Trust'') and Olive Street
Investment Advisers (the ``Adviser'') (collectively, ``Applicants'').
DATES: Filing Dates: The application was filed February 1, 2013, and
amended on June 18, 2013.
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 5, 2013, 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:
The Trust: Joseph C. Neuberger, 2020 East Financial Way, Suite 100,
Glendora, CA 91741; The Adviser: James A. Tricarico, Olive Street
Investment Advisers, LLC, 12555 Manchester Road, St. Louis, MO 63131.
FOR FURTHER INFORMATION CONTACT: Jennifer L. Sawin, Branch Chief, at
(202) 551-6724 (Division of Investment Management, Office of Investment
Company Regulation).
[[Page 42123]]
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. The Trust is
organized as a series trust and currently consists of one series, which
will be advised by the Adviser.\1\ The Adviser is a limited liability
company organized under Missouri law. The Adviser is, and any future
Adviser will be, registered as an investment adviser under the
Investment Advisers Act of 1940 (``Advisers Act''). The Adviser will
serve as the investment adviser to the Funds pursuant to an investment
advisory agreement with the Trust or Fund (the ``Advisory
Agreement'').\2\ Each Advisory Agreement was approved or will be
approved by the Fund's board of trustees (the ``Board''), including a
majority of the trustees who are not ``interested persons,'' as defined
in section 2(a)(19) of the Act, of the Trust, the Fund, or the Adviser
(``Independent Trustees''), and by the Fund's shareholder(s) in the
manner required by sections 15(a) and 15(c) of the Act and rule 18f-2
under the Act. The terms of each Advisory Agreement will comply with
section 15(a) of the Act.
---------------------------------------------------------------------------
\1\ Applicants request relief with respect to any existing and
any future series of the Trust or any other registered open-end
management company that: (a) Is advised by the Adviser or a person
controlling, controlled by, or under common control with the Adviser
or its successor (each, also an ``Adviser''); (b) uses the manager
of managers structure described in the application; and (c) complies
with the terms and conditions of the requested order (any such
series, a ``Fund'' and collectively, 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, and the only series that currently intends to rely on the
requested order as a Fund is the Bridge Builder Bond Fund. For
purposes of the requested order, ``successor'' is limited to an
entity that results from a reorganization into another jurisdiction
or a change in the type of business organization. If the name of any
Fund contains the name of a Sub-Adviser (as defined below), that
name will be preceded by the name of the Adviser.
\2\ ``Advisory Agreement'' includes advisory agreements with an
Adviser for the Bridge Builder Bond Fund and any future Funds.
---------------------------------------------------------------------------
2. Under the terms of each Advisory Agreement, the Adviser will
provide the Funds with overall management services and will
continuously review, supervise and administer each Fund's investment
program, subject to the supervision of, and policies established by the
Board. For the investment management services it will provide to each
Fund the Adviser will receive the fee specified in the Advisory
Agreement from such Fund, based on the average daily net assets of the
Fund. The Advisory Agreement permits the Adviser, subject to the
approval of the Board, to delegate certain responsibilities to one or
more sub-advisers (``Sub-Advisers'') to provide investment advisory
services to the Funds. As of the date of the amended application, the
Adviser had not entered into sub-advisory agreements with any Sub-
Advisers (``Sub-Advisory Agreements''). Each Sub-Adviser will be an
investment adviser as defined in section 2(a)(20) of the Act and, if
required, registered with the Commission as an ``investment adviser''
under the Advisers Act. The Adviser evaluates, allocates assets to and
oversees the Sub-Advisers, and makes recommendations about their
hiring, termination and replacement to the Board, at all times subject
to the authority of the Board. The Adviser will compensate the Sub-
Advisers out of the advisory fee paid by a Fund to the Adviser under
the Advisory Agreement.
3. Applicants request an order to permit the Adviser, subject to
Board approval, to select certain Sub-Advisers to manage all or a
portion of the assets of a Fund or Funds pursuant to a Sub-Advisory
Agreement and materially amend existing Sub-Advisory Agreements without
obtaining shareholder approval. The requested relief will not extend to
any Sub-Adviser 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 sub-adviser to one or more of the Funds
(``Affiliated Sub-Adviser'').
4. Applicants also request an order exempting the Funds from
certain disclosure provisions described below that may require the
Applicants to disclose fees paid by the Adviser or a Fund to each Sub-
Adviser. Applicants seek an order to permit a Fund to disclose (as both
a dollar amount and a percentage of the Fund's net assets): (a) The
aggregate fees paid to the Adviser and any Affiliated Sub-Adviser; and
(b) the aggregate fees paid to Sub-Advisers other than Affiliated Sub-
Advisers (collectively, ``Aggregate Fee Disclosure''). Any Fund that
employs an Affiliated Sub-Adviser will provide separate disclosure of
any fees paid to the Affiliated Sub-Adviser.
Applicants' Legal Analysis
1. Section 15(a) of the Act provides, in relevant part, that 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 that matter if the Act requires shareholder approval.
2. Form N-1A is the registration statement used by open-end
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of
the method and amount of the investment adviser's compensation.
3. Rule 20a-1 under the Act requires proxies solicited with respect
to a registered investment company to comply with Schedule 14A under
the Securities Exchange Act of 1934 (``1934 Act''). Items 22(c)(1)(ii),
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together,
require a proxy statement for a shareholder meeting at which the
advisory contract will be voted upon to include the ``rate of
compensation of the investment adviser,'' the ``aggregate amount of the
investment adviser's fees,'' a description of the ``terms of the
contract to be acted upon,'' and, if a change in the advisory fee is
proposed, the existing and proposed fees and the difference between the
two fees.
4. Regulation S-X sets forth the requirements for financial
statements required to be included as part of a registered investment
company's registration statement and shareholder reports filed with the
Commission. Sections 6-07(2)(a), (b), and (c) of Regulation S-X require
a registered investment company to include in its financial statement
information about investment advisory fees.
5. 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 for
the reasons discussed below.
6. Applicants assert that the shareholders expect the Adviser,
subject to the review and approval of the Board, to select the Sub-
Advisers who are best
[[Page 42124]]
suited to achieve the Fund's investment objectives. Applicants assert
that, from the perspective of the shareholder, the role of the Sub-
Advisers is substantially equivalent to that of the individual
portfolio managers employed by traditional investment company advisory
firms. Applicants state that requiring shareholder approval of each
Sub-Advisory Agreement would impose unnecessary delays and expenses on
the Funds and may preclude the Funds from acting promptly when the
Adviser and Board consider it appropriate to hire Sub-Advisers or amend
Sub-Advisory Agreements. Applicants note that the Advisory Agreements
and any Sub-Advisory Agreements with Affiliated Sub-Advisers will
remain subject to the shareholder approval requirements of section
15(a) of the Act and rule 18f-2 under the Act.
7. If a new Sub-Adviser is retained in reliance on the requested
order, the applicable Fund will inform its shareholders of the hiring
of a new Sub-Adviser pursuant to the following procedures (``Modified
Notice and Access Procedures''): (a) Within 90 days after a new Sub-
Adviser is hired for the Fund, the Fund will send its shareholders
either a Multi-manager Notice or a Multi-manager Notice and Multi-
manager Information Statement; \3\ 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. Applicants assert that a proxy
solicitation to approve the appointment of new Sub-Advisers would
provide no more meaningful information to shareholders than the
proposed Multi-manager Information Statement. Moreover, as indicated
above, the applicable Board would comply with the requirements of
sections 15(a) and 15(c) of the Act before entering into or amending
Sub-Advisory Agreements.
---------------------------------------------------------------------------
\3\ A ``Multi-manager Notice'' will be modeled on a Notice of
Internet Availability as defined in rule 14a-16 under the Exchange
Act, and specifically will, among other things: (a) Summarize the
relevant information regarding the new Sub-Adviser; (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 Fund.
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, except as
modified by the requested order to permit Aggregate Fee Disclosure.
Multi-manager Information Statements will be filed electronically
with the Commission via the EDGAR system.
---------------------------------------------------------------------------
8. Applicants assert that the requested disclosure relief will
benefit shareholders of the Funds because it will improve the Adviser's
ability to negotiate the fees paid to Sub-Advisers. Applicants state
that the Adviser may be able to negotiate rates that are below a Sub-
Adviser's ``posted'' amounts if the Adviser is not required to disclose
the Sub-Advisers' fees to the public.
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
sole initial shareholder before offering the Fund's shares to the
public.
2. The prospectus for each Fund will disclose the existence,
substance, and effect of any order granted pursuant to the application.
Each Fund will hold itself out to the public as employing 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 Sub-Advisers and
recommend their hiring, termination, and replacement.
3. Funds will inform shareholders of the hiring of a new Sub-
Adviser (other than an Affiliated Sub-Adviser) within 90 days after the
hiring of that new Sub-Adviser pursuant to the Modified Notice and
Access Procedures.
4. The Adviser will not enter into a Sub-Advisory Agreement with
any Affiliated Sub-Adviser without that 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 and selection of new or
additional Independent Trustees will be placed within the discretion of
the then-existing Independent Trustees.
6. When a Sub-Adviser change is proposed for a Fund with an
Affiliated Sub-Adviser, 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 Sub-Adviser derives
an inappropriate advantage.
7. Independent legal counsel, as defined in rule 0-1(a)(6) under
the Act, will be engaged to represent the Independent Trustees. The
selection of such counsel will be within the discretion of the then
existing Independent Trustees.
8. Each Adviser will provide the Board, no less frequently than
quarterly, with information about the profitability of the Adviser on a
per-Fund basis. The information will reflect the impact on
profitability of the hiring or termination of any Sub-Adviser during
the applicable quarter.
9. Whenever a Sub-Adviser is hired or terminated, the Adviser will
provide the Board with information showing the expected impact on the
profitability of the Adviser.
10. The Adviser will provide general management services to a Fund,
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 a Fund's overall investment strategies; (ii)
evaluate, select and recommend Sub-Advisers to manage all or part of a
Fund's assets; (iii) when appropriate, allocate and reallocate a Fund's
assets among multiple Sub-Advisers; (iv) monitor and evaluate the
performance of Sub-Advisers; and (v) implement procedures reasonably
designed to ensure that the Sub-Advisers comply with a Fund's
investment objective, policies and restrictions.
11. No trustee or officer of the Trust, or of a Fund, or director
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 Sub-Adviser, except for (i) ownership of
interests in the Adviser or any entity that controls, is controlled by,
or is under common control with the Adviser; or (ii) ownership of less
than 1% of the outstanding securities of any class of equity or debt of
a publicly traded company that is either a Sub-Adviser or an entity
that controls, is controlled by, or is under common control with a Sub-
Adviser.
12. Each Fund will disclose in its registration statement the
Aggregate Fee Disclosure.
[[Page 42125]]
13. 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. 2013-16855 Filed 7-12-13; 8:45 am]
BILLING CODE 8011-01-P