[Federal Register Volume 80, Number 22 (Tuesday, February 3, 2015)]
[Notices]
[Pages 5849-5851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-02019]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31431; 812-13858]
Crow Point Partners, LLC and Northern Lights Fund Trust; Notice
of Application
January 28, 2015.
AGENCY: Securities and Exchange Commission (the ``Commission'').
ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940, as amended (the ``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.
APPLICANT: Crow Point Partners, LLC (``Crow Point'') and Northern
Lights Fund Trust (the ``Trust'').
DATES: Filing Dates: The application was filed on January 12, 2011 and
amended on July 11, 2011, April 4, 2012, July 22, 2014 and January 14,
2015.
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 February 23, 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.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090. Applicants: Crow Point Partners,
LLC, 25 Recreation Park Drive, Suite 110, Hingham, MA 02043-4256 and
Northern Lights Fund Trust c/o Gemini Fund Services, LLC, 80 Arkay
Drive, Suite 110, Hauppauge, New York 11788.
FOR FURTHER INFORMATION CONTACT: Jaea F. Hahn, Senior Counsel, at (202)
551-6870, or David P. Bartels, 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 for 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 a Delaware statutory trust and is
registered under the Act as an open-end management investment company.
The Trust offers shares of approximately 92 individual registered
series, including the EAS Crow Point Alternatives Fund (``Crow Point
Fund''). The Crow Point Fund does not currently employ unaffiliated
investment subadvisers (each, a ``Subadviser''), but anticipates doing
so in the future.\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 Crow Point or any entity controlling,
controlled by, or under common control with Crow Point or its
successors (each an ``Adviser''); (b) uses the manager of managers
structure (the ``Manager of Managers Structure'') described in the
application; and (c) complies with the terms and conditions of the
application (together with the Crow Point Fund, the ``Funds'' and
each, individually, a ``Fund''). The only existing investment
company that currently intends to rely on the requested order is
named as an Applicant, and the Crow Point Fund is the only Fund that
currently intend to rely on the requested order. If the name of any
Fund contains the name of a Subadviser, the name of the Adviser will
precede the name of the Subadviser. For the 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.
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2. Crow Point, a limited liability company organized under the laws
of the State of Delaware, is, and each other Adviser will be,
registered as an investment adviser under the Investment Advisers Act
of 1940, as amended (the ``Advisers Act''). Crow Point serves as the
investment adviser of
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the Crow Point Fund, and an Adviser will serve as investment adviser to
the future Funds. The Crow Point Fund has entered into an investment
advisory agreement with Crow Point (an ``Advisory Agreement''),\2\
approved by the Trust's board of trustees (the ``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
(the ``Independent Trustees''), and by the Crow Point Fund's
shareholders. 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
each future Fund (each future Advisory Agreement included in the
term ``Advisory Agreement'').
\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 Crow Point Fund's
business affairs and selecting investments according to its investment
objectives, policies and restrictions. For the investment management
services that it provides to the Crow Point Fund, the Adviser receives
the fee specified in the Advisory Agreement, based on the Fund's
average daily net assets. 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 the Fund. Pursuant
to this authority under the Advisory Agreement, the Adviser may enter
into investment subadvisory agreements with Subadvisers to provide
investment advisory services to the Funds (each, a ``Subadvisory
Agreement'' and together, the ``Subadvisory Agreements''). Each
Subadviser will be registered as an investment adviser under the
Advisers Act or exempt from registration under the Advisers Act. 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.
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 each Subadvisory Agreement will comply with the
requirements of section 15(a) of the Act. Each Subadvisory Agreement
will be approved by the Trust's Board, including by a majority of the
Independent Trustees, in accordance with section 15(a) and 15(c) of the
Act. 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 (an ``Affiliated Subadviser'').
5. 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; \4\ 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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\4\ 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.
Applicants note that the Advisory Agreement 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
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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.
10. Any new sub-advisory agreement or any amendments to a Fund's
existing Advisory Agreement or sub-advisory agreement that directly or
indirectly results in an increase in the aggregate advisory fee rate
payable by the Fund will be submitted to the Fund's Shareholders for
approval.
For the Commission, by the Division of Investment Management,
under delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-02019 Filed 2-2-15; 8:45 am]
BILLING CODE 8011-01-P