[Federal Register Volume 79, Number 84 (Thursday, May 1, 2014)]
[Notices]
[Pages 24763-24765]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-09927]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31029; 812-14144]
Steben Select Multi-Strategy Fund and Steben & Company, Inc.;
Notice of Application
April 25, 2014.
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 sections 18(c)
and 18(i) of the Act and for an order pursuant to
[[Page 24764]]
section 17(d) of the Act and rule 17d-1 under the Act.
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SUMMARY OF APPLICATION: Applicants request an order to permit certain
registered closed-end management investment companies to issue multiple
classes of shares of beneficial interest (``Shares'') and to impose
asset-based service and/or distribution fees and contingent deferred
sales loads (``CDSCs'').
Applicants: Steben Select Multi-Strategy Fund (the ``Fund'') and Steben
& Company, Inc. (the ``Adviser'').
DATES: Filing Dates: The application was filed on April 5, 2013, and
amended on March 21, 2014 and April 17, 2014.
Hearing or Notification of Hearing: An order granting the requested
relief 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 May 20, 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: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants, c/o Francine J.
Rosenberger, Esq., Steben & Company, Inc., 9711 Washingtonian
Boulevard, Suite 400, Gaithersburg, MD 20878.
FOR FURTHER INFORMATION CONTACT: Mark N. Zaruba, Senior Counsel, at
(202) 551-6878 or Mary Kay Frech, Branch Chief, at (202) 551-6821
(Division of Investment Management, 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 Fund is a continuously offered non-diversified closed-end
management investment company registered under the Act and organized as
a Delaware statutory trust. The Fund operates as a feeder fund in a
master-feeder structure and invests substantially all of its assets in
the Steben Select Multi-Strategy Master Fund (the ``Master Fund''). The
Master Fund invests in non-traditional or ``alternative'' strategies
which may include investment funds commonly referred to as ``hedge
funds.''
2. The Adviser, a Maryland corporation, is registered as an
investment adviser under the Investment Advisers Act of 1940 and will
serve as investment adviser to the Fund. A broker-dealer registered
under the Securities Exchange Act of 1934 (``1934 Act'') will act as
the principal underwriter for the distribution of Shares \1\ of the
Fund (the ``Distributor''). The Adviser, which is a registered broker-
dealer, may serve as the Distributor or the Distributor may be an
affiliated person, as defined in section 2(a)(3) of the Act, of the
Adviser.
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\1\ ``Shares'' includes any other equivalent designation of a
proportionate ownership interest of the Fund (or any other
registered closed-end management investment company relying on the
requested order).
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3. The Fund continuously offers its Shares to the public under the
Securities Act of 1933, as amended. Shares of the Fund are not listed
on any securities exchange and do not trade on an over-the-counter
system such as Nasdaq. Applicants do not expect that any secondary
market will develop for the Shares.
4. The Fund currently offers a single class of Shares at net asset
value per share plus a servicing fee.\2\ The Fund proposes to offer
multiple classes of Shares at net asset value per share that may (but
would not necessarily) be subject to a front-end sales load, an annual
asset-based service and/or distribution fee, a minimum purchase
requirement and/or an Early Withdrawal Fee (defined below), in each
case as set forth in the Fund's prospectus.
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\2\ Before relying on the relief requested in the application,
the Fund will convert the servicing fee currently charged to holders
of its current class of Shares to an asset-based service and/or
distribution fee that complies with rule 12b-1 under the Act.
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5. In order to provide a limited degree of liquidity to
shareholders, the Fund may from time to time offer to repurchase Shares
at their then current net asset value in accordance with rule 13e-4
under the 1934 Act pursuant to written tenders by shareholders.
Repurchases will be made at such times, in such amounts and on such
terms as may be determined by the Fund's board of trustees (``Board''),
in its sole discretion.\3\ The Adviser expects to ordinarily recommend
that the Board authorize the Fund to offer to repurchase Shares from
shareholders quarterly.
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\3\ Shares will be subject to an early withdrawal fee at a rate
of 2% of the aggregate net asset value of the shareholder's Shares
repurchased by the Fund (the ``Early Withdrawal Fee'') if the
interval between the date of purchase of the Shares and the
valuation date with respect to the repurchase of those Shares is
less than one year. The Early Withdrawal Fee will apply equally to
all shareholders of the Fund, regardless of class, consistent with
section 18 of the Act and rule 18f-3 under the Act. To the extent
the Fund determines to waive, impose scheduled variations of, or
eliminate the Early Withdrawal Fee, it will do so consistently with
the requirements of rule 22d-1 under the Act and apply uniformly to
all shareholders of the Fund.
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6. Applicants request that the order also apply to any other
continuously offered registered closed-end management investment
company existing now or in the future for which the Adviser or any
entity controlling, controlled by, or under common control with the
Adviser acts as investment adviser, and which provides periodic
liquidity with respect to its Shares through tender offers conducted in
compliance with rule 13e-4 under the 1934 Act.\4\
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\4\ The Fund and any other investment company relying on the
requested relief will do so in a manner consistent with the terms
and conditions of the application. Applicants represent that any
person presently intending to rely on the requested relief is listed
as an applicant.
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7. Applicants represent that any asset-based service and/or
distribution fees will comply with the provisions of rule 2830(d) of
the Conduct Rules of the National Association of Securities Dealers,
Inc. (``NASD Conduct Rule 2830'') as if that rule applied to the
Fund.\5\ Applicants also represent that the Fund will disclose in its
prospectus, the fees, expenses and other characteristics of each class
of Shares offered for sale by the prospectus as is required for open-
end multiple class funds under Form N-1A. As is required for open-end
funds, the Fund will disclose its expenses in shareholder reports, and
disclose any arrangements that result in breakpoints in or elimination
of sales loads in its prospectus.\6\ The Fund will also comply with any
requirements that may be adopted by the Commission or FINRA regarding
disclosure at the point of sale
[[Page 24765]]
and in transaction confirmations about the costs and conflicts of
interest arising out of the distribution of open-end investment company
shares, and regarding prospectus disclosure of sales loads and revenue
sharing arrangements as if those requirements applied to the Fund.\7\
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\5\ All references to NASD Conduct Rule 2830 include any
successor or replacement rule that may be adopted by the Financial
Industry Regulatory Authority (``FINRA'').
\6\ See Shareholder Reports and Quarterly Portfolio Disclosure
of Registered Management Investment Companies, Investment Company
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring
open-end investment companies to disclose fund expenses in
shareholder reports); and Disclosure of Breakpoint Discounts by
Mutual Funds, Investment Company Act Release No. 26464 (June 7,
2004) (adopting release) (requiring open-end investment companies to
provide prospectus disclosure of certain sales load information).
\7\ See, e.g., Confirmation Requirements and Point of Sale
Disclosure Requirements for Transactions in Certain Mutual Funds and
Other Securities, and Other Confirmation Requirement Amendments, and
Amendments to the Registration Form for Mutual Funds, Investment
Company Act Release No. 26341 (Jan. 29, 2004) (proposing release).
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8. The Fund will allocate all expenses incurred by it among the
various classes of Shares based on the net assets of the Fund
attributable to each class, except that the net asset value and
expenses of each class will reflect distribution fees, service fees,
and any other incremental expenses of that class. Expenses of a Fund
allocated to a particular class of Shares will be borne on a pro rata
basis by each outstanding Share of that class. Applicants state that
the Fund will comply with the provisions of rule 18f-3 under the Act as
if it were an open-end investment company.
9. In the event the Fund imposes a contingent deferred sales charge
(``CDSC''), the applicants will comply with the provisions of rule 6c-
10 under the Act, as if that rule applied to closed-end management
investment companies. With respect to any waiver of, scheduled
variation in, or elimination of the CDSC, the Fund will comply with
rule 22d-1 under the Act as if the Fund were an open-end investment
company.
Applicants' Legal Analysis
Multiple Classes of Shares
1. Section 18(c) of the Act provides, in relevant part, that a
closed-end investment company may not issue or sell any senior security
if, immediately thereafter, the company has outstanding more than one
class of senior security. Applicants state that the creation of
multiple classes of Shares of the Fund may be prohibited by section
18(c).
2. Section 18(i) of the Act provides that each share of stock
issued by a registered management investment company will be a voting
stock and have equal voting rights with every other outstanding voting
stock. Applicants state that permitting multiple classes of Shares of
the Fund may violate section 18(i) of the Act because each class would
be entitled to exclusive voting rights with respect to matters solely
related to that class.
3. 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 under the Act, if and to the extent 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 request an exemption under section
6(c) from sections 18(c) and 18(i) to permit the Fund to issue multiple
classes of Shares.
4. Applicants submit that the proposed allocation of expenses and
voting rights among multiple classes is equitable and will not
discriminate against any group or class of shareholders. Applicants
submit that the proposed arrangements would permit the Fund to
facilitate the distribution of its Shares and provide investors with a
broader choice of shareholder options. Applicants assert that the
proposed closed-end investment company multiple class structure does
not raise the concerns underlying section 18 of the Act to any greater
degree than open-end investment companies' multiple class structures
that are permitted by rule 18f-3 under the Act. Applicants state that
the Fund will comply with the provisions of rule 18f-3 as if it were an
open-end investment company.
CDSCs
1. Applicants believe that the requested relief meets the standards
of section 6(c) of the Act. Rule 6c-10 under the Act permits open-end
investment companies to impose CDSCs, subject to certain conditions.
Applicants state that any CDSC imposed by the Fund will comply with
rule 6c-10 under the Act as if the rule were applicable to closed-end
investment companies. The Fund also will disclose CDSCs in accordance
with the requirements of Form N-1A concerning CDSCs as if the Fund were
an open-end investment company. Applicants further state that the Fund
will apply the CDSC (and any waivers or scheduled variations of the
CDSC) uniformly to all shareholders in a given class and consistently
with the requirements of rule 22d-1 under the Act.
Asset-Based Service and/or Distribution Fees
1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company or an
affiliated person of such person, acting as principal, from
participating in or effecting any transaction in connection with any
joint enterprise or joint arrangement in which the investment company
participates unless the Commission issues an order permitting the
transaction. In reviewing applications submitted under section 17(d)
and rule 17d-1, the Commission considers whether the participation of
the investment company in a joint enterprise or joint arrangement is
consistent with the provisions, policies and purposes of the Act, and
the extent to which the participation is on a basis different from or
less advantageous than that of other participants.
2. Rule 17d-3 under the Act provides an exemption from section
17(d) and rule 17d-1 to permit open-end investment companies to enter
into distribution arrangements pursuant to rule 12b-1 under the Act.
Applicants request an order under section 17(d) and rule 17d-1 under
the Act to permit the Fund to impose asset-based service and/or
distribution fees. Applicants have agreed to comply with rules 12b-1
and 17d-3 as if those rules applied to closed-end investment companies.
Applicants' Condition
The Fund agrees that any order granting the requested relief will
be subject to the following condition:
Applicants will comply with the provisions of rules 6c-10, 12b-1,
17d-3, 18f-3 and 22d-1 under the Act, as amended from time to time or
replaced, as if those rules applied to closed-end management investment
companies, and will comply with the NASD Conduct Rule 2830, as amended
from time to time, as if that rule applied to all closed-end management
investment companies.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-09927 Filed 4-30-14; 8:45 am]
BILLING CODE 8011-01-P