[Federal Register Volume 75, Number 59 (Monday, March 29, 2010)]
[Notices]
[Pages 15468-15470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-6874]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29179; File No. 812-13685]
Rydex Series Funds, et al.; Notice of Application
March 23, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (``Act'') for an exemption from rule 12d1-2(a)
under the Act.
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Summary of Application: Applicants request an order to permit funds
of funds relying on rule 12d1-2 under the Act to invest in certain
financial instruments.
Applicants: Rydex Series Funds, Rydex Variable Trust (each, a
``Trust'' and together, the ``Trusts''), PADCO Advisors, Inc., PADCO
Advisors II, Inc. (collectively, the ``PADCO Advisers''), and Rydex
Distributors, Inc. (the ``Distributor'').
Filing Dates: The application was filed on August 27, 2009, and
amended on January 14, 2010 and March 22, 2010.
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 April 19, 2010 and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state
[[Page 15469]]
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, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090; Applicants: 9601 Blackwell Road, Suite
500, Rockville, Maryland 20850.
FOR FURTHER INFORMATION CONTACT: Lewis Reich, Senior Counsel, at (202)
551-6919, or Jennifer L. Sawin, Branch Chief, at (202) 551-6821
(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 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. Each Trust is organized as a Delaware statutory trust, and each
is registered with the Commission as an open-end management investment
company. Each of the PADCO Advisers is organized as a Maryland
corporation and is a wholly owned subsidiary of Security Benefit
Corporation. PADCO Advisors, Inc. currently serves as the investment
adviser to the Rydex Series Funds and PADCO Advisors II, Inc. currently
serves as the investment adviser to the Rydex Variable Trust. Each
Adviser is or will be registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and the Distributor is
registered as a broker-dealer under the Securities Exchange Act of
1934, as amended (``Exchange Act'').
2. Applicants request the exemption on behalf of (i) Each Trust and
all existing and future series of each Trust (``Funds''); (ii) any
existing or future registered open-end management investment company or
series thereof that is advised by the PADCO Advisers or any entity
controlling, controlled by or under common control with the PADCO
Advisers (collectively with the PADCO Advisers, the ``Advisers'') and
that is in the same group of investment companies as defined in section
12(d)(1)(G) of the Act, as the Trusts (together with the Funds, the
``Applicant Funds''); and (iii) any entity controlling, controlled by
or under common control with the Advisers or the Distributor that, now
or in the future, acts as principal underwriter with respect to the
transactions described herein. Applicants request the exemption to the
extent necessary to permit any Applicant Fund that may invest in other
registered open-end investment companies including Applicant Funds
(``Underlying Funds'') in reliance on section 12(d)(1)(G) of the Act
(``Fund of Funds'') and that is also eligible to invest in securities
(as defined in section 2(a)(36) of the Act) in reliance on rule 12d1-2
under the Act to also invest, to the extent consistent with its
investment objective, policies, strategies and limitations, in
financial instruments that may not be securities within the meaning of
section 2(a)(36) of the Act (``Other Investments'').\1\
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\1\ Every existing entity that currently intends to rely on the
requested order is named as an applicant. Any existing or future
entity that relies on the order in the future will do so only in
accordance with the terms and condition in the application.
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3. Consistent with its fiduciary obligations under the Act, each
Applicant Fund's board of trustees or directors will review the
advisory fees charged by the Applicant Fund's investment adviser to
ensure that they are based on services provided that are in addition
to, rather than duplicative of, services provided pursuant to the
advisory agreement of any investment company in which the Applicant
Funds may invest.
Applicants' Legal Analysis:
1. Section 12(d)(1)(A) of the Act provides that no registered
investment company (``acquiring company'') may acquire securities of
another investment company (``acquired company'') if such securities
represent more than 3% of the acquired company's outstanding voting
stock or more than 5% of the acquiring company's total assets, or if
such securities, together with the securities of other investment
companies, represent more than 10% of the acquiring company's total
assets. Section 12(d)(1)(B) of the Act provides that no registered
open-end investment company may sell its securities to another
investment company if the sale will cause the acquiring company to own
more than 3% of the acquired company's voting stock, or cause more than
10% of the acquired company's voting stock to be owned by investment
companies and companies controlled by them.
2. Section 12(d)(1)(G) of the Act provides that section 12(d)(1)
will not apply to securities of an acquired company purchased by an
acquiring company if: (i) The acquired company and acquiring company
are part of the same group of investment companies; (ii) the acquiring
company holds only securities of acquired companies that are part of
the same group of investment companies, government securities, and
short-term paper; (iii) the aggregate sales loads and distribution-
related fees of the acquiring company and the acquired company are not
excessive under rules adopted pursuant to section 22(b) or section
22(c) of the Act by a securities association registered under section
15A of the Exchange Act or by the Commission; and (iv) the acquired
company has a policy that prohibits it from acquiring securities of
registered open-end investment companies or registered unit investment
trusts in reliance on section 12(d)(1)(F) or (G) of the Act.
3. Rule 12d1-2 under the Act permits a registered open-end
investment company or a registered unit investment trust that relies on
section 12(d)(1)(G) of the Act to acquire, in addition to securities
issued by another registered investment company in the same group of
investment companies, government securities, and short-term paper: (1)
Securities issued by an investment company that is not in the same
group of investment companies, when the acquisition is in reliance on
section 12(d)(1)(A) or 12(d)(1)(F) of the Act; (2) securities (other
than securities issued by an investment company); and (3) securities
issued by a money market fund, when the investment is in reliance on
rule 12d1-1 under the Act. For the purposes of rule 12d1-2,
``securities'' means any security as defined in section 2(a)(36) of the
Act.
4. Section 6(c) of the Act provides that the Commission may exempt
any person, security, or transaction from any provision of the Act, or
from any rule under the Act, 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 policies and
provisions of the Act.
5. Applicants state that the proposed arrangement would comply with
the provisions of rule 12d1-2 under the Act, but for the fact that the
Funds of Funds may invest a portion of their assets in Other
Investments. Applicants request an order under section 6(c) of the Act
for an exemption from rule 12d1-2(a) to allow the Funds of Funds to
invest in Other Investments while investing in Underlying Funds.
Applicants assert that permitting the Applicant Funds to invest in
Other Investments as described in the application would not raise any
of the concerns that the requirements of section 12(d)(1) were designed
to address.
Applicants' Condition:
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Applicants agree that the order granting the requested relief will
be subject to the following condition:
Applicants will comply with all provisions of rule 12d1-2 under the
Act, except for paragraph (a)(2) to the extent that it restricts any
Fund of Funds from investing in Other Investments as described in the
application.
For the Commission, by the Division of Investment Management,
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6874 Filed 3-26-10; 8:45 am]
BILLING CODE 8011-01-P