[Federal Register Volume 79, Number 242 (Wednesday, December 17, 2014)]
[Notices]
[Pages 75192-75194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-29500]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31369; 812-14093]
Morgan Creek Global Equity Long/Short Institutional Fund, et al.;
Notice of Application
December 11, 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 section 17(d) of the
Act and rule 17d-1 under the Act.
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SUMMARY: Applicants request an order to permit certain registered
closed-end management investment companies to issue multiple classes of
shares (``Classes'') with varying sales loads and to impose asset-based
service and/or distribution fees and contingent deferred sales loads
(``CDSCs'').
Applicants: Morgan Creek Global Equity Long/Short Institutional
Fund (the ``Fund''), Morgan Creek Capital Management, LLC (the
``Adviser'') and Town Hall Capital, LLC (the ``Distributor'').
DATES: Filing Dates: The application was filed on November 15, 2012,
and amended on April 18, 2013, April 11, 2014, August 13, 2014 and
November 21, 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 January 5, 2015, and should be accompanied by proof of service on
the applicants, in the form of an affidavit, or, for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, 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.
[[Page 75193]]
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants, c/o David James,
State Street Bank and Trust Company, 4 Copley Place, 5th Floor, Mail
Stop CPH 0326, Boston, MA 02116.
FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel,
at (202) 551-6990 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 Adviser, a North Carolina limited
liability company, is registered as an investment adviser under the
Investment Advisers Act of 1940 and serves as investment adviser to the
Fund. The Distributor, a broker-dealer registered under the Securities
Exchange Act of 1934 (``1934 Act''), acts as principal underwriter of
the Fund. The Distributor is under common control with the Adviser and
is an affiliated person, as defined in section 2(a)(3) of the Act, of
the Adviser.
2. The Fund continuously offers its shares pursuant to its
currently effective registration statement under the Securities Act of
1933. The Fund's shares 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 Fund's
shares.
3. The Fund currently issues a single class of shares (``Initial
Class'') at net asset value per share (``NAV''). The Initial Class is
not currently subject to any sales loads or distribution and/or service
fees. The Fund proposes to offer additional Classes of shares that will
adopt a distribution and service plan in compliance with rules 12b-1
and 17d-3 under the Act as if such rules applied to closed-end
management investment companies (``Distribution and Service Plan'').
Additional Classes may be subject to a sales load, a distribution fee
(``Distribution Fee''), and/or a service fee (``Service Fee''),
pursuant to the Distribution and Service Plan.\1\
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\1\ The Fund will not impose an ``early withdrawal charge'' or
``repurchase fee'' on shareholders who purchase and tender their
shares.
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4. 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 NAV in accordance with rule 13e-4 under the 1934
Act pursuant to written tenders by shareholders. Repurchases of the
Fund's shares are made at such times, in such amounts and on such terms
as may be determined by the board of trustees of the Fund (``Board'')
in its sole discretion. The Adviser ordinarily recommends that the
Board authorize the Fund to offer to repurchase shares from
shareholders quarterly.
5. Applicants request that the order also apply to any
continuously-offered registered closed-end management investment
company existing now or in the future for which the Adviser or the
Distributor, or any entity controlling, controlled by, or under common
control with the Adviser or the Distributor acts as investment adviser
or principal underwriter, and which provides periodic liquidity with
respect to its shares pursuant to rule 13e-4 under the 1934 Act
(collectively with the Fund, the ``Funds'').\2\
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\2\ Any Fund relying on this relief will do so in a manner
consistent with the terms and conditions of the application.
Applicants represent that each investment company presently
intending to rely on the requested order is listed as an applicant.
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6. Applicants represent that any asset-based Distribution and
Service 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'').\3\ Applicants also represent that the
Fund will disclose in its prospectus, the fees, expenses and other
characteristics of each Class offered for sale by the prospectus, as is
required for open-end, multiple class funds under Form N-1A. As if it
were an open-end management investment company, the Fund will disclose
fund expenses in shareholder reports, and disclose in its prospectus
any arrangements that result in breakpoints in, or elimination of,
sales loads.\4\ Applicants will also comply with any requirements that
may be adopted by the Commission or FINRA regarding disclosure at the
point of sale 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 and the Distributor.\5\
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\3\ Any references to NASD Conduct Rule 2830 include any
successor or replacement Financial Industry Regulatory Authority
Rule to NASD Conduct Rule 2830.
\4\ See Shareholder Reports and Quarterly Portfolio Disclosure
of Registered Management Investment Companies, Investment Company
Act Release No. 26372 (Feb. 27, 2004) (adopting release); and
Disclosure of Breakpoint Discounts by Mutual Funds, Investment
Company Act Release No. 26464 (June 7, 2004) (adopting release).
\5\ See 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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7. The Fund will allocate all expenses incurred by it among the
various Classes based on net assets of the Fund attributable to each
such Class, except that the NAV and expenses of each Class will reflect
the expenses associated with the Distribution and Service Plan of that
Class (if any), and any other incremental expenses of that Class
(including transfer agency fees, if any). Expenses of the Fund
allocated to a particular Class of the Fund's 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.
8. In the event the Funds impose a CDSC, 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 the requirements of 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 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 the Fund
may violate section 18(i) of the Act because each Class would be
entitled to
[[Page 75194]]
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.
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 system would permit the Fund to facilitate the
distribution of Classes through diverse distribution channels and would
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 the Fund will comply with the provisions of rule
18f-3 as if it were an open-end investment company.
CDSCs
5. 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 the Fund does not anticipate imposing CDSCs and
would only do so in compliance with rule 6c-10 under the Act as if that
rule were applied to closed-end investment companies. The Fund also
will make all required disclosures in accordance with the requirements
of Form N-1A concerning CDSCs. Applicants further state that, in the
event the Fund imposes CDSCs, the Fund will apply the CDSCs (and any
waivers or scheduled variations of the CDSCs) 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
6. 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 which such registered
company is a joint or a joint and several participant 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.
7. 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 Distribution Fees and/or Service
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
Applicants agree 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. 2014-29500 Filed 12-16-14; 8:45 am]
BILLING CODE 8011-01-P