[Federal Register Volume 60, Number 99 (Tuesday, May 23, 1995)]
[Notices]
[Pages 27365-27366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12597]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21079; 812-9496]
Quest for Value Distributors, et al.; Notice of Application
May 17, 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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APPLICANTS: Quest for Value's Unit Investment Laddered Trust Series
(``Quilts'') and Quest for Value Distributors (``Quest Distributors''
or the ``Sponsor'').
RELEVANT ACT SECTIONS: Order requested under sections 11(a) and 11(c).
SUMMARY OF APPLICATION: Applicants request an order to permit certain
offers of exchange between unit investment trusts.
FILING DATES: The application was filed on February 23, 1995, and
amended on April 12, 1995 and May 5, 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
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on June 12, 1995,
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 who wish to be
notified of a hearing may request notification by writing to the SEC's
Secretary.
ADDRESSES: Secretary: SEC, 450 5th Street NW, Washington, DC 20549.
Applicants: Two World Trade Center, 225 Liberty Street, New York, New
York 10080-6116.
FOR FURTHER INFORMATION CONTACT: Elaine M. Boggs, Staff Attorney (202)
942-0572, or C. David Messman, 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 is available for a fee at the
SEC's Public Reference Branch.
Applicants' Representations
1. Quilts is a series of unit investment trusts registered under
the Act and is sponsored by Quest Distributors. Quilts consists of
Quilts Monthly Income--U.S. Treasury Series 1, Quilts Asset Builder--
U.S. Series 3, Quilts Income--Corporate Series 1, and Quilts Municipal
Insured Series 1. Applicants also request relief for future series of
Quilts and subsequently issued unit investment trusts sponsored by the
Sponsor or a sponsor controlled by or under common control with the
Sponsor and registered (or to be registered) under the Securities Act
of 1933 and the Act (collectively with Quilts, the ``Trusts'').
2. The sales charge for initial investment in the Trusts currently
ranges between .85% to 4.5% of the public offering price, subject to
discounts for certain volume transactions. Quest Distributors intends
to maintain a secondary market for the units of each series, although
it is not obligated to do so. The sales charge upon units sold in the
secondary market ranges from .85% to 4.5% plus net accrued interest.
3. Applicants propose to offer an exchange privilege to unitholders
of the Trusts at a reduced sales charge (the ``Exchange Privilege'').
Unitholders would be able to exchange any of their units for units in
one or more available series of the Trusts (the ``Exchange Trust'').
Applicants also propose to offer a rollover privilege to unitholders of
the Trusts at a reduced sales charge (the ``Rollover Privilege'').
Unitholders would be able to ``roll over'' their units in a series
which is terminating for units of one or more new series of the Trusts
(the ``Rollover Trust'').
4. To exercise the Exchange or Rollover Privilege, a unitholder
must notify the Sponsor. Exercise of the Exchange or Rollover Privilege
is subject to the following conditions: (a) The Sponsor must be
maintaining a secondary market in units of the Trust held by the
unitholder and units of the Trust to be acquired in the exchange, (b)
at the time of the exchange, there must be units of the Exchange or
Rollover Trust to be acquired available for sale, and (c) exchanges
will be in whole units only.
5. Unitholders who wish to exchange units under the Exchange or
Rollover Privileges within the first five months of purchase will not
be eligible for the reduced sales charge. Such unitholders will be
charged a sales load equal to the greater of (a) the reduced sales load
or (b) an amount which, when added to the sales charge paid by the
unitholder upon his or her original purchase of units of the Trusts,
would equal the sales charge applicable to the direct purchase of the
newly acquired units, determined as of the date of exchange.
Applicants' Legal Analysis
1. Section 11(a) requires SEC approval of an offer to exchange
securities between open-end investment companies if the exchange occurs
on any basis other than the relative net asset values of the securities
to be exchanged. Section 11(c) makes section 11(a) applicable to any
type of exchange offer of securities of registered unit investment
trusts for the securities of any other investment company, irrespective
of the basis of exchange.
2. Applicants represent that unitholders will not be induced or
encouraged to participate in the exchange privilege through an active
advertising or sales campaign. Quest Distributors recognizes its
responsibility to its customers against generating excessive
commissions through churning and asserts that the sales charge
collected will not be a significant economic incentive to salesmen to
promote inappropriately the exchange privilege. Applicants further
believe that the Exchange and Rollover Privileges are 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.
[[Page 27366]]
Applicant's Conditions
If the requested order is granted, applicants agree to the
following conditions:
1. The prospectus for each series and any sales literature or
advertising that mentions the existence of the Exchange Privilege or
the Rollover Privilege will disclose that the Exchange and the Rollover
Privilege are subject to termination and that their terms are subject
to change.
2. Whenever the Exchange Privilege or the Rollover Privilege is to
be terminated or its terms are to be amended materially, any holder of
a security subject to that privilege will be given prominent notice of
the impending termination or amendment at least 60 days prior to the
date of termination or the effective date of the amendment, provided
that:
a. No such notice need be given if the only material effect of an
amendment is to reduce or eliminate the sales charge payable at the
time of an exchange, to add one or more new series eligible for the
Exchange Privilege or the Rollover Privilege, or to delete a series
which has terminated; and
b. No notice need be given if, under extraordinary circumstances,
either
i. There is a suspension of the redemption of units of an Exchange
Trust or a Rollover Trust under section 22(e) of the Act and the rules
and regulations thereunder, or
ii. An Exchange Trust or a Rollover Trust temporarily delays or
ceases the sale of its units because it is unable to invest amounts
effectively in accordance with applicable investment objectives,
policies and restrictions.
3. An investor who purchases units under the Exchange or Rollover
Privilege will pay a lower aggregate sales charge than that which would
be paid for the units by a new investor.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margatet H. McFarland,
Deputy Secretary.
[FR Doc. 95-12597 Filed 5-22-95; 8:45 am]
BILLING CODE 8010-01-M
