[Federal Register Volume 79, Number 111 (Tuesday, June 10, 2014)]
[Notices]
[Pages 33227-33229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-13459]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31071; 812-13951]
ValMark Advisers, Inc. and Northern Lights Variable Trust; Notice
of Application
June 4, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order 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 of Application: Applicants request an order that would
permit them to enter into and materially amend subadvisory agreements
without shareholder approval.
Applicants: ValMark Advisers, Inc. (``ValMark Advisers'' or the
``Adviser'') and Northern Lights Variable Trust (the ``Trust'').
Filing Dates: The application was filed on August 30, 2011, and
amended on December 8, 2011, March 30, 2012, and May 9, 2014.
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 June 30, 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 James Ash,
Gemini Fund Services, LLC, 450 Wireless Boulevard, Hauppauge, New York
11788.
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, 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, a Delaware statutory trust, is registered under the
Act as an open-end management investment company and is comprised of
multiple series, including the TOPS Protected Balanced ETF Portfolio,
TOPS Protected Moderate Growth ETF Portfolio, and TOPS Protected Growth
ETF Portfolio (collectively, the ``Protected Portfolios''). Each series
has its own investment objectives, policies and restrictions.\1\
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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 (``Manager of Managers Structure'')
described in the application; and (c) complies with the terms and
conditions of the application (together with the Protected
Portfolios, the ``Funds'' and each individually, a ``Fund''). For
the purposes of the requested order, ``successor'' is limited to any
entity that results from a reorganization into another jurisdiction
or a change in the type of business organization. All existing
investment companies that currently intend to rely on the requested
order are named as applicants, and the Protected Portfolios are the
only Funds that currently intend to rely on the requested order.
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[[Page 33228]]
2. ValMark Advisers, an Ohio corporation, is, and each other
Adviser will be, registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (``Advisers Act''). ValMark
Advisers serves as the investment adviser of the Protected Portfolios,
and an Adviser will serve as investment adviser to the future Funds.
The Protected Portfolios have entered into an investment advisory
agreement with ValMark Advisers (``Advisory Agreement''),\2\ approved
by the Trust's board of trustees (``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 (``Independent
Trustees''), and by the shareholders representing a majority of each of
the Protected Portfolio's shares. The terms of each Advisory Agreement
comply or will comply with section 15(a) of the Act.
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\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 (as
defined below), in the manner required by sections 15(a) and 15(c)
of the Act and rule 18f-2 thereunder. References to any Advisory
Agreement or Advisory Agreements 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.
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3. Under the terms of the Advisory Agreement, the Adviser is
responsible for the overall management of the Protected Portfolios'
business affairs and selecting investments according to each Protected
Portfolio's investment objectives, policies and restrictions. For the
investment management services that it provides to the Protected
Portfolios, 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 each Protected Portfolio. Pursuant to
this authority, the Adviser has entered into an investment subadvisory
agreement with one unaffiliated investment subadviser (``Subadviser'')
to provide investment advisory services to the Protected Portfolios
(``Subadvisory Agreement'') and intends to enter into Subadvisory
Agreements with one or more Subadvisers to provide investment advisory
services to the Funds. The Subadviser is, and each future Subadviser
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,
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\ 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.
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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 comply or will comply fully
with the requirements of section 15(a) of the Act. Each Subadvisory
Agreement has been, or will be, approved by the Board, including by a
majority of the Independent Trustees, in accordance with sections 15(a)
and 15(c) of the Act. Each Fund's prospectus has contained or will
contain, at all times following shareholder 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 of the Funds (``Affiliated Subadviser'').
6. 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\ 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.
[[Page 33229]]
Applicants note that the Advisory Agreements and any Subadvisory
Agreement with an Affiliated Subadviser will remain subject to sections
15(a) and 15(c) 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.
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. 2014-13459 Filed 6-9-14; 8:45 am]
BILLING CODE 8011-01-P