[Federal Register Volume 78, Number 245 (Friday, December 20, 2013)]
[Notices]
[Pages 77175-77177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-30272]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30832; 812-14101]
Catalyst Capital Advisors LLC and Mutual Fund Series Trust;
Notice of Application
December 16, 2013.
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: Summary of Application: Applicants request an order that would
permit them to enter into and materially amend subadvisory agreements
without shareholder approval.
APPLICANTS: Catalyst Capital Advisors LLC (``CCA'' or the ``Adviser'')
and Mutual Fund Series Trust (formerly Catalyst Funds) (the ``Trust'').
DATES: Filing Dates: The application was filed on December 7, 2012 and
amended on June 20, 2013 and November 12, 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 January 10, 2014, 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:
Adviser, 22 High Street, Huntington, NY 11743 and the Trust, 4020 South
147th Street, Suite 2, Omaha, Nebraska 68137.
FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202)
551-6970, or Mary Kay Frech, Branch Chief, at (202) 551-6821 (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 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 an Ohio business trust and is
registered as an open-end management investment company with multiple
series. Each series of the Trust has its own investment objective,
policies and restrictions, and each is managed by the Adviser and may
be managed by various subadvisers.\1\
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\1\ Applicants 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 CCA, including any entity controlling,
controlled by or under common control with CCA 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 (each a ``Fund'' and together, the ``Funds''). The only
existing investment company that currently intends to rely on the
requested order is named as an applicant. 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 organization.
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2. CCA is a New York limited liability company registered as an
investment adviser under the Investment Advisers Act of 1940
(``Advisers Act''). CCA provides investment management services to the
Funds under an investment advisory agreement with the Trust (the
``Advisory Agreement'').\2\ The terms of each Advisory Agreement comply
or will comply with section 15(a) of the Act. Each Advisory Agreement
was or will be approved by the board of trustees of the relevant Fund
(the board of trustees of any Fund, a ``Board''), including by a
majority of the trustees who are not ``interested persons'' (as defined
in section 2(a)(19) of the Act) of the Trust or Adviser (the
``Independent Trustees''), and by the shareholders of the respective
Fund in the manner required by sections 15(a) and (c) of the Act and
rule 18f-2 thereunder.\3\
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\2\ CCA or another Adviser will enter into substantially similar
investment advisory agreements to provide investment management
services to each future Fund (each included in the term ``Advisory
Agreement''). Each other Adviser will also be registered as an
investment adviser under the Advisers Act.
\3\ Applicants are not seeking any exemptions with respect to
the Advisory Agreements.
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3. Under the terms of each Advisory Agreement, CCA is responsible
for the overall management of the business affairs of the Funds'
business affairs and selecting investments in accordance with the
Funds' respective investment objectives, policies and restrictions. For
the investment management services that it provides to the Funds, the
Adviser receives the fee specified in the Advisory Agreements. In
addition, pursuant to each Advisory Agreement, CCA may retain one or
more subadvisers for the purpose of managing all or a portion of the
assets of the Funds. Pursuant to this authority, the Adviser intends to
enter into subadvisory agreements with certain unaffiliated subadvisers
(``Subadvisers'', and such agreements, ``Subadvisory Agreements'') to
provide investment advisory services to the Funds. Each Subadviser to a
Fund will be an ``investment adviser'' as defined in section
2(a)(20)(B) of the Act and registered as an investment adviser under
the Advisers Act or not subject to such registration.\4\ The Adviser
will supervise and monitor the Subadvisers, allocate Fund assets to the
Subadvisers and periodically recommend to the
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Board which Subadvisers should be retained or released. The Adviser
will compensate the Subadvisers for a Fund out of the advisory fees
that are paid to the Adviser under the applicable Advisory Agreement.
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\4\ If the name of any Fund contains the name of a Subadviser,
the name of the Adviser will precede the name of the Subadviser.
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4. Applicants request an order to permit the Adviser, subject to
Board approval, to select Subadvisers and enter into and materially
amend Subadvisory Agreements without obtaining shareholder approval.
The terms of the Subadvisory Agreements will comply fully with the
requirements of section 15(a) of the Act and the Subadvisory Agreements
will be approved by the Board, including a majority of the Independent
Trustees as required under section 15(a) and section 15(c) of the Act.
Each Fund's prospectus has contained or will contain, at all times
following the approval of the Manager of Managers Structure, the
disclosure required by condition 2 below.
5. 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 Funds) (``Affiliated Subadviser'').
6. The 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.
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\5\ The ``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 for
the reasons discussed below.
3. Applicants assert that the shareholders are relying on the
Adviser's experience to select one or more Subadvisers best suited to
achieve a Fund's investment objectives. Applicants assert that, from
the perspective of the investor, the role of the Subadvisers is
comparable 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
Agreements and any subadvisory agreement with an Affiliated Subadviser
will remain subject to sections 15(a) and (c) of the Act and rule 18f-2
under the Act.
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
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
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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.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30272 Filed 12-19-13; 8:45 am]
BILLING CODE 8011-01-P