[Federal Register Volume 60, Number 117 (Monday, June 19, 1995)]
[Notices]
[Pages 32038-32040]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14849]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21129; 812-9562]
First Trust Special Situations Trust, Series 69
June 12, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANT: First Trust Special Situations Trust, Series 69.
RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act
that would exempt applicant from section 12(d)(3) of the Act.
SUMMARY OF APPLICATION: Applicant requests an order on behalf of itself
and certain subsequent series (collectively, the ``Series'') to permit
each Series to invest up to twenty percent of its total assets in
securities of issuers that derived more than fifteen percent of their
gross revenues in their most recent fiscal year from securities related
activities.
FILING DATE: The application was filed on March 31, 1995 and amended on
June 8, 1995.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on July 7, 1995 and
should be accompanied by proof of service on the applicant, 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 may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, D.C.
20549. [[Page 32039]] Applicant, c/o Nike Securities, L.P., 1001
Warrenville Road, Lisle, Illinois 60532.
FOR FURTHER INFORMATION CONTACT:
Sarah A. Buescher, Staff Attorney, at (202) 942-0573, or Robert A.
Robertson, Branch Chief, at (202) 942-0564 (Division of Investment
Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch.
Applicant's Representations
1. Nike Securities, L.P. is applicant's depositor (the
``Sponsor''). Each Series will invest approximately 20%, but in no
event more than 20.5%,\1\ of the value of its total assets in each of
the five lowest dollar price per share stocks of the ten common stocks
in the Dow Jones Industrial Average (``DJIA'') having the highest
dividend yields no more than two business days prior to the States'
initial date of deposit, and hold those stocks for approximately one
year.
\1\ The Sponsor will attempt to purchase equal values of each of
the five common stocks in a Series' portfolio. However, it is more
efficient if securities are purchased in 100 share lots and 50 share
lots. As a result, applicant may choose to purchase securities of a
securities related issuer which represent over 20%, but in no event
more than 20.5% percent, of a Series' assets on the initial date of
deposit to the extent necessary to enable the Sponsor to meet its
purchase requirements and to obtain the best price for the
securities.
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2. The DJIA comprises 30 common stocks chosen by the editors of The
Wall Street Journal. The DJIA is the property of Dow Jones & Company,
Inc., which is not affiliated with any Series or the Sponsor and does
not participate in any way in the creation of any Series or the
selection of its stocks.
3. The securities deposited in each Series will be chosen solely
according to the formula described above, and will not necessarily
reflect the research opinions or buy or sell recommendations of the
Sponsor. The Sponsor is authorized to determine the date of deposit, to
purchase securities for deposit in the Series, and to supervise each
Series' portfolio. The Sponsor will have no discretion as to which
securities are purchased. Securities deposited in a Series may include
securities of issuers that derived more than fifteen percent of their
gross revenues in their most recent fiscal year from securities related
activities.
4. During the 90-day period following the initial date of deposit,
the Sponsor may deposit additional securities while maintaining to the
extent practicable the original proportionate relationship among the
number of shares of each stock in the portfolio. Deposits made after
this 90-day period must replicate exactly (subject to certain limited
exceptions) the proportionate relationship among the face amounts of
the securities comprising the portfolio at the end of the initial 90-
day period, whether or not a stock continues to be among the five
lowest price per share stocks of the ten highest dividend yielding
stocks.
5. The Series' portfolios will not be actively managed. Sales of
portfolio securities will be made in connection with redemptions of
units issued by a Series and at termination of the Series. The Sponsor
has no discretion as to when securities will be sold except that it is
authorized to sell securities in extremely limited circumstances, such
as a public tender, merger or acquisition affecting the security, a
default in the payment of a declared dividend or other outstanding
obligation, any action or proceeding restraining the payment of
dividends, any legal question or impediment affecting the security, a
breach by the issuer of a covenant which would affect the payment of a
dividend, circumstances which would impair the investment character of
the security, a decrease in the price of the security or other credit
factors so that in the opinion of the Sponsor, the retention of the
securities would be detrimental to the Series. The adverse financial
condition of an issuer will not necessarily require the sale of its
securities from a Series' portfolio.
Applicant's Legal Analysis
1. Section 12(d)(3) of the Act, with limited exceptions, prohibits
an investment company from acquiring any security issued by any person
who is a broker, dealer, underwriter, or investment adviser. Rule 12d3-
1 under the Act exempts the purchase of securities of an issuer that
derived more than fifteen percent of its gross revenues in its most
recent fiscal year from securities related activities, provided that,
among other things, immediately after such acquisition, the acquiring
company has invested not more than five percent of the value of its
total assets in securities of the issuer. Notwithstanding the above,
rule 12d3-1 prohibits any registered investment company from acquiring
any security issued by the company's investment adviser, promoter, or
principal underwriter or any affiliated person of such investment
adviser, promoter, or principal underwriter that is a securities
related business, with certain limited exceptions.
2. Applicant requests an exemption under section 6(c) from section
12(d)(3) to permit a Series to invest up to approximately 20%, but in
no event more than 20.5%, of the value of its total assets in
securities of an issuer that derives more than fifteen percent of its
gross revenues from securities related activities.
3. Section 12(d)(3) was intended to prevent investment companies
from exposing their assets to the entrepreneurial risks of securities
related businesses, to prevent potential conflicts of interest, and to
eliminate certain reciprocal practices between investment companies and
securities related businesses. One potential conflict could occur if an
investment company purchased securities or other interests in a broker-
dealer to reward that broker-dealer for selling fund shares, rather
than solely on investment merit. Applicant believes that this concern
does not arise in connection with its application because neither
applicant nor the Sponsor has discretion in choosing the portfolio
securities or amount purchased. The security must first be included in
the DJIA, which is unaffiliated with the Sponsor and applicant, and
must also qualify as one of the five lowest dollar price per share
stocks of the ten highest dividend yielding stocks.
4. Applicant also believes that the effect of a Series' purchase on
the stock of parents of broker-dealers would be de minimis. Applicant
asserts that the common stocks of securities related issuers
represented in the DJIA are widely held, have active markets, and that
potential purchases by any Series would represent an insignificant
amount of the outstanding common stock and the trading volume of any of
these issues. Accordingly, applicant believes that it is highly
unlikely that purchases of these securities by a Series would have any
significant impact on the securities' market value.
5. Another potential conflict of interest could occur if an
investment company directed the brokerage to a broker-dealer in which
the company has invested to enhance the broker-dealer's profitability
or to assist it during financial difficulty, even though that broker-
dealer may not offer the best price and execution. To preclude this
type of conflict, applicant and each Series agree, as a condition of
this application, that no company held in the portfolio of a Series nor
any affiliate thereof will act as a broker for any Series in the
purchase or sale of any security for its portfolio. In light of the
above, applicant believes that its [[Page 32040]] proposal meets the
section 6(c) standards.
Condition
Applicant agrees that the requested exemptive order may be
conditioned upon no company held in the Series' portfolio, nor any
affiliate thereof, acting as broker for any Series in the purchase or
sale of any security for the Series' portfolio.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-14849 Filed 6-16-95; 8:45 am]
BILLING CODE 8010-01-M