[Federal Register Volume 59, Number 67 (Thursday, April 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8286]
[[Page Unknown]]
[Federal Register: April 7, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20183; 812-8738]
Regis Fund, Inc., et al.; Application
March 31, 1994.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: The Regis Fund, Inc. (the ``Fund''); United Asset
Management Corporation (``UAM''); Acadian Asset Management, Inc., Cooke
& Bieler, Inc., Dewey Square Investors Corp., Fiduciary Management
Associates, Inc., Investment Counselors of Maryland, Inc., Sirach
Capital Management, Inc., Spectrum Asset Management, Inc., Sterling
Capital Management Company, Thompson, Siegel & Walmsley, Inc., any
future investment adviser or subadviser to the Fund or a future Fund
(as defined below) which is directly or indirectly controlling,
controlled by or under common control with UAM (the ``Investment
Advisers''); Regis Retirement Plan Services, Inc., any future
distributor of the Fund or a future Fund (as defined below) which is
directly or indirectly controlling, controlled by or under common
control with UAM (the ``Distributor''); and any other future investment
company advised by the Investment Advisers, or whose principal
underwriter is the Distributor, and that are in the same ``group of
investment companies'' as defined in rule 11a-3 under the Act (``future
Funds`').
RELEVANT ACT SECTIONS: Exemption requested pursuant to section 6(c)
from sections 18(f), 18(g), and 18(i).
SUMMARY OF APPLICATION: Applicants seek an order to permit the Funds to
issue and sell multiple classes of securities representing interests in
the same investment portfolio.
FILING DATE: The application was filed on December 21, 1993. By letters
dated February 8, 1994 and March 28, 1994, applicants' counsel stated
that an amendment, the substance of which is incorporated herein, will
be filed during the notice period.
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
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
25, 1994 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 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 Fifth Street, NW., Washington, DC 20549.
Applicants, One International Place, 44th Floor, Boston, MA 02110.
FOR FURTHER INFORMATION CONTACT:
James M. Curtis, Senior Counsel, at (202) 504-2406, or Barry D. Miller,
Senior Special Counsel, at (202) 272-3018 (Office of Investment Company
Regulation, Division of Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch.
Applicants' Representations
1. The Fund is a Maryland corporation registered as an open-end
management investment company. The Fund currently consists of twenty-
five series of shares (each, together with any series subsequently
established or otherwise acquired is referred to as the ``Portfolio'').
Each of the existing Investment Advisers is a wholly-owned subsidiary
of UAM, which is a holding company incorporated in Delaware for the
purpose of acquiring and owning firms engaged primarily in
institutional investment management. The Fund's shares are distributed
through the RFI Distributors division of the Distributor. The
Distributor of the Fund is a wholly-owned subsidiary of UAM.
2. Existing shares of each Portfolio (``Existing Shares'') are no
load, are not offered in connection with a rule 12b-1 distribution
plan, and are designed primarily for investment by high net worth
individuals and tax-exempt fiduciary investors who are entrusted with
the responsibility of investing assets held for the benefit of others.
3. Applicants propose that the Fund issue additional, separate
classes of shares (``New Shares'') designed for a particular market.
Each class of New Shares would be identical in all respects to the
Existing Shares except for its class designation, the allocation of
certain expenses, voting rights, and exchange privileges.\1\
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\1\The Fund may institute a sales charge or a contingent
deferred sales charge in the future with respect to the New Shares.
Prior to the implementation of any CDSL, applicants will obtain a
Commission order allowing the imposition of the CDSL, unless the
Commission has adopted a rule allowing its imposition.
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4. In addition to the current class of Existing Shares, the Fund
may offer several classes of New Shares: (1) In connection with a
distribution plan adopted pursuant to rule 12b-1 (a ``Distribution
Plan'') and/or (2) in connection with a non-rule 12b-1 shareholder
services plan (``Shareholder Services Plan''). Shares offered subject
to the Distribution Plan are referred to as the ``Distribution
Shares.'' The Distribution Plan and the Shareholder Services Plan are
collectively referred to herein as ``Plans.'' The Fund may offer an
unlimited number of classes of shares, either in connection with a
Plan, with more than one Plan, or without any of the Plans. All classes
of shares issued by the Fund in connection with any order granted in
response to the application will comply with all representations and
conditions contained herein.
5. Under each of the Distribution Plan and the Shareholder Services
Plan, either the Fund or the Distributor enters into servicing
agreements (``Service Agreements'') with banks, broker-dealers, or
other institutions, including the Distributor if the Fund so elects
(``Service Organizations''), concerning the provision of certain
account administration services to the customers (``Customers'') of the
Service Organizations. Service Agreements under the Distribution Plan
also contemplate an asset-based sales charge to compensate Service
Organizations for the distribution of Distribution Shares and the
provision of certain additional shareholder liaison services to
Customers, which services arguably could be considered to be
distribution-related. The Shareholder Services Plan would be used with
respect to Service Organizations authorized to provide only personal
and account maintenance services under a Shareholder Services Plan, and
the Distribution Plan would be used with respect to the Service
Organizations authorized to provide the distribution and distribution-
related and liaison services under the Distribution Plan.
6. Under each Plan, depending on whether either the Fund or the
Distributor was a party to a Service Agreement with a Service
Organization, the Fund or the Distributor (which would be reimbursed by
the Fund) would pay a Service Organization for its services and
assistance in accordance with the terms of the relevant Plan and the
particular Service Agreement (``Service Payments''). Service Payments
with respect to a Shareholder Services Plan are ``service fees,'' and
Service Payments with respect to a Distribution Plan are ``service
fees'' or ``asset-based sales charges'' or both, as defined in Article
III, section 26 of the National Association of Securities Dealers, Inc.
Rules of Fair Practice.\2\
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\2\Any front-end load, asset-based sales charge, service fee, or
contingent deferred sales load will comply with section 26(d),
Article III of the Rules of Fair Practice of the NASD.
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7. In the event that a Distribution Plan and a Shareholder Services
Plan are adopted with respect to a single class of shares, the
Directors will apply the analysis required under rule 12b-1(d) to the
aggregate amount paid under such Plans in order to assure that, to the
extent that the Plans may be deemed to overlap in some respects,
compensation shall not be duplicative as a result of the use of both
Plans.
8. Under the proposed arrangement, each New Share or Existing Share
in a particular Portfolio, regardless of class, would represent an
interest in the same portfolio of investments and would have identical
voting, dividend, liquidation and other rights, preferences, powers,
restrictions, limitations, qualifications, designations and terms and
conditions, except that: (a) Each class of New Shares would have a
different class designation; (b) each class of New Shares offered in
connection with a Plan (or Plans) would bear the expense of the Service
Payments that would be made under the Service Agreements that are
entered into with respect to such class; (c) each class of shares could
also bear certain expenses described in condition 1 below (the ``Class
Expenses'') that are directly attributable only to the class; (d) only
the holders of the shares of the class or classes involved would be
entitled to vote on matters pertaining to a Plan and any related
agreements relating to such class or classes (for example, the
adoption, amendment or termination of a Plan in accordance with the
provisions of rule 12b-1 or the terms of the Plan); and (e) each class
would have different exchange privileges.
9. Certain expenses may be attributable to a particular Portfolio,
but not a particular class. All such expenses will be allocated to each
class of shares in a Portfolio on the basis of the relative net asset
values of the classes of that Portfolio.
10. Except as noted below, each class of shares may be exchanged
only for shares of the same class in another Portfolio and in all
events will be limited to within the same ``group of investment
companies'' as that term is defined in rule 11a-3 of the Act. Exchanges
will be permitted among classes should a shareholder cease to be
eligible to purchase shares of the original class by reason of a change
in the shareholder's status. Exchanges among classes may be made when a
shareholder of a class becomes eligible to purchase shares of another
class and ineligible to purchase shares of the class originally held.
This situation might occur, for example, when an investor who
beneficially owned shares held by an institution becomes the holder of
legal title by reason of a distribution from the institutional account.
Such distributions may be occasioned by a termination of a trust and
distribution of the corpus of the trust to beneficiaries. An individual
would become the holder of shares designed for institutions, and the
individual may desire the services offered by Service Organizations in
substitution of the services formerly provided by the trustee of such
trust. In such a case, an exchange may occur upon the request of the
shareholder.
Applicants' Legal Analysis
1. The proposed issuance and sale of certain classes of securities
representing interests in the Fund's or future Funds' investment
portfolios, including the allocation of voting rights thereto and the
payment of dividends thereon in the manner described below, might be
deemed to result in a ``senior security'' within the meaning of Section
18(g) and to be prohibited by section 18(f)(1) and also to violate the
requirement in Section 18(i) that every share of stock issued by a
registered management investment company shall have equal voting rights
with every other share of outstanding voting stock.
2. Applicants believe that the proposed allocation of expenses and
voting rights relating to the Plans in the manner described is
equitable and would not discriminate against any group of shareholders.
Although investors purchasing shares offered in connection with a Plan
would bear the costs associated with the related services, they would
also enjoy the benefits of those services and, in the case of
Distribution Shares, exclusive shareholder voting rights with respect
to matters affecting such Plans. Conversely, investors purchasing
shares that are not covered by a Plan would not be burdened with such
expenses or enjoy such voting rights. Moreover, because with respect to
any Portfolio the rights and privileges of shares would be
substantially identical, the possibility that the interests of the
various classes of shareholders would ever conflict would be remote.
The interests of each class of shareholders would be adequately
protected since the Plan, the Service Agreements and the Service
Payments would conform to the requirements of rule 12b-1 or the
protection described in the application, including the requirement that
they be approved by the Board of Directors of the Fund.
3. The abuses that section 18 of the Act are intended to redress
are set forth in section 1(b) of the Act which declares that the
interests of investors are adversely affected when investment companies
by excessive borrowing and the issuance of excessive amounts of senior
securities increase the speculative character of the other securities,
or when investment companies operate without adequate reserves. The
proposed arrangement does not involve borrowings and does not affect
the Fund's existing assets or reserves. Nor will the proposed
arrangement increase the speculative character of the shares in a
Portfolio, since each class of shares in a Portfolio will participate
in all of such Portfolio's appreciation (if any), income and expenses
(with the exception of the proposed Service Payments and Class
Expenses) on the basis of the applicable net assets of such class.
Applicants' Conditions
Applicants agree that the order of the Commission granting the
requested relief shall be subject to the following conditions.
1. Each class of shares of a Portfolio will represent interests in
the same portfolio of investments and be identical in all respects,
except as set forth below. The only differences among the classes of
shares of a Portfolio will relate solely to one or more of the
following: (a) The differences in certain Class Expenses, which are
limited to any or all of the following: (i) Transfer agent fees
identified by applicants as being attributable to a specific class of
shares; (ii) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and
proxy statements to current shareholders of a specific class; (iii)
Commission and Blue Sky registration fees incurred by a class of
shares; (iv) the expense of administrative personnel and services as
required to support the shareholders of a specific class; (v)
Directors' fees or expenses incurred as a result of issues relating to
one class of shares; (vi) accounting expenses relating solely to one
class of shares; and (vii) legal expenses relating to a specific class
of shares; (b) expenses assessed to a class pursuant to a Shareholder
Services Plan and/or 12b-1 Plan with respect to such class; (c) the
fact that the classes will vote separately with respect to the Fund's
Shareholder Services Plan and/or any 12b-1 Plan; (d) the different
exchange privileges of the classes of shares; and (e) the designation
of each class of shares of the Fund. Any additional incremental
expenses not specifically identified above which are subsequently
identified and determined to be properly allocated to one class of
shares shall not be so allocated unless and until approved by the
Commission pursuant to an amended order.
2. The Directors of the Fund, including a majority of the
independent Directors, who are not interested persons as defined in
section 2(a)(19) of the Act (``Independent Directors''), will approve
the offering of additional classes of New Shares (the ``Multi-Class
System''). The minutes of the meetings of the Directors regarding the
deliberations of the directors with respect to the approvals necessary
to implement the Multi-Class System will reflect in detail the reasons
for the Directors' determination that the proposed Multi-Class System
is in the best interest of both the Fund and its shareholders.
3. The initial determination of the Class Expenses that will be
allocated to a particular class and any subsequent changes thereto will
be reviewed and approved by a vote of the Board of Directors including
a majority of the Independent Directors. Any person authorized to
direct the allocation and disposition of monies paid or payable by the
Fund to meet Class Expenses shall provide to the Board of Directors,
and the Directors shall review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures
were made.
4. On an ongoing basis, the Directors of the Fund, pursuant to
their fiduciary responsibilities under the Act and otherwise, will
monitor the Fund for the existence of any material conflicts among the
interests of the classes of shares. The Directors, including a majority
of the Independent Directors, shall take such action as is reasonably
necessary to eliminate any such conflicts that may develop. The
distributor and the investment advisers will be responsible for
reporting any potential or existing conflicts to the Directors. If a
conflict arises, the distributor and the investment advisers, at their
own cost, will remedy such conflict up to and including establishing a
new registered management investment company.
5. The Distributor will adopt compliance standards as to when each
class of shares may be sold to particular investors. Applicants will
require all persons selling shares of the Fund to agree to conform to
such standards.
6. The Shareholder Services Plans will be adopted and operated in
accordance with the procedures set forth in rule 12b-1 (b) through (f)
as if the expenditures made thereunder were subject to rule 12b-1,
except that shareholders need not enjoy the voting rights specified in
rule 12b-1.
7. The Directors will receive quarterly and annual statements
concerning the amounts expended under the Shareholder Services Plans
and any Distribution Plans complying with paragraph (b)(3)(ii) of rule
12b-1, as it may be amended from time to time. In the statements, only
expenditures properly attributable to the sale or servicing of a
particular class of shares will be used to justify any distribution or
servicing fee charged to that class. Expenditures not related to the
sale or servicing of a particular class will not be presented to the
Directors to justify any fee attributable to that class. The
statements, including the allocations upon which they are based, will
be subject to the review and approval of the Independent Directors in
the exercise of their fiduciary duties.
8. Dividends paid by the Fund with respect to each class of its
shares, to the extent any dividends are paid, will be calculated in the
same manner, at the same time, on the same day, and will be in the same
amount per outstanding share, except that Service Payments made by a
class under a Plan and any Class Expenses will be borne exclusively by
that class.
9. The methodology and procedures for calculating the net asset
value and dividends and distributions of the classes and the proper
allocation of expenses among the classes have been reviewed by an
expert (the ``Expert'') who has rendered a report to the Applicants,
which has been provided to the Commission, that such methodology and
procedures are adequate to ensure that such calculations and
allocations would be made in an appropriate manner. On an ongoing
basis, the Expert, or an appropriate substitute Expert, will monitor
the manner in which the calculations and allocations are being made
and, based upon such review, will render at least annually a report to
the Fund that the calculations and allocations are being made properly.
The reports of the Expert will be filed as part of the periodic reports
filed with the Commission pursuant to sections 30(a) and 30(b)(1) of
the Act. The work papers of the Expert with respect to such reports,
following request by the Fund (which the Fund agrees to provide), will
be available for inspection by the Commission staff upon written
request to the Fund for such work papers by a senior member of the
Division of Investment Management or a regional officer of the
Commission. Authorized staff members would be limited to the Director,
an Associate Director, the Chief Accountant, the Chief Financial
Analyst, an Assistant Director, and any Regional Administrator or
Associate or Assistant Administrators. The initial report of the Expert
is a report on policies and procedures placed in operation, and the
ongoing reports will be ``reports on policies and procedures placed in
operation and tests of operating effectiveness'' as defined and
described in SAS No. 70 of the AICPA, as it may be amended from time to
time, or in similar auditing standards as may be adopted by the AICPA
from time to time.
10. The Applicants have adequate facilities in place to ensure
implementation of the methodology and procedures for calculating the
net asset value and dividends and distributions of the classes of
shares and the proper allocation of expenses among the classes of
shares and this representation has been concurred with by the Expert in
the initial report referred to in condition (9) above and will be
concurred with by the Expert, or an appropriate substitute Expert, on
an ongoing basis at least annually in the ongoing reports referred to
in condition (9) above. Applicants will take immediate corrective
action if this representation is not concurred in by the Expert or
appropriate substitute Expert.
11. The prospectuses of each class of shares will contain a
statement to the effect that a salesperson and any other person
entitled to receive different compensation for selling or servicing
Fund Shares may receive different compensation with respect to one
particular class of shares over another in the Fund.
12. The conditions pursuant to which the exemptive order is granted
and the duties and responsibilities of the Directors with respect to
the Multi-Class System will be set forth in guidelines which will be
furnished to the Directors.
13. The Fund will disclose the respective expenses, performance
data, distribution arrangements, services, fees, sales loads, deferred
sales loads, and exchange privileges applicable to each class of shares
in every prospectus, regardless of whether all classes of shares are
offered through each prospectus. The Fund will disclose the respective
expenses and performance data applicable to all classes of shares in
every shareholder report. The shareholder reports will contain, in the
statement of assets and liabilities and statement of operations,
information related to the Fund as a whole generally and not on a per
class basis. Each Fund's per share data, however, will be prepared on a
per class basis with respect to all classes of shares of such Fund. To
the extent that any advertisement or sales literature describes the
expenses or performance data applicable to any class of shares of a
Portfolio, it will also disclose the respective expenses and/or
performance data applicable to all classes of shares of such Portfolio.
The information provided by Applicants for publication in any newspaper
or similar listing of the Fund's net asset value or public offering
price will present each class of shares separately.
14. Applicants acknowledge that the grant of the exemptive order
requested by the application will not imply Commission approval,
authorization of or acquiescence in any particular level of payments
that the Fund may make pursuant to its Distribution Plan or Shareholder
Services Plan in reliance on the exemptive order.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-8286 filed 4-6-94; 8:45 am]
BILLING CODE 8010-01-M
