[Federal Register Volume 63, Number 121 (Wednesday, June 24, 1998)]
[Notices]
[Pages 34496-34499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16753]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23262; 812-10336]
SEI Liquid Asset Trust, et al.; Notice of Application
June 18, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order under section 17(d) of the
Investment Company Act of 1940 (the ``Act'') and rule 17d-1 under the
Act.
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SUMMARY OF APPLICATION: Applicants request an order to permit SEI
Liquid Asset Trust (``SLAT''), SEI Tax Exempt Trust (``STET''), SEI
Daily Income Trust (``SDIT''), SEI Institutional Managed Trust
(``SIMT''), SEI International Trust (``SIT''), SEI Asset Allocation
Trust (``SAAT''), and SEI Institutional Investments Trust (``SIIT'')
(each a ``Trust,'' and together, the ``Trusts'') and certain other
existing or future registered open-end management investment companies
to deposit their daily uninvested cash balances in joint
[[Page 34497]]
accounts investing in short-term repurchase agreements with maturities
of no more than seven days.
APPLICANTS: Trusts, SEI Investments Management Corporation (``SIMC''),
SEI Fund Management (``SEI Management''), SEI Fund Resources (``Fund
Resources''), SEI Investments Distribution Co. (``SIDCo.''), and
Wellington Management Company, LLP (``Wellington Management'').
FILING DATES: The application was filed on September 17, 1996, and
amended on February 12, 1997, July 18, 1997, and June 1, 1998.
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 July 13, 1998,
and should be accompanied by proof of service on the 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 Fifth Street, N.W., Washington, D.C.
20549. Applicants, One Freedom Valley Drive, Oaks, Pennsylvania 19456.
FOR FURTHER INFORMATION CONTACT: Michael W. Mundt, Staff Attorney, at
(202) 942-0578, or Mary Kay Frech, 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 by
writing the SEC's Public Reference Branch at 450 Fifth Street, N.W.,
Washington, D.C. 20549, or by telephone at (202) 942-8090.
Applicants' Representations
1. The Trusts are open-end management investment companies
registered under the Act. Each Trust offers multiple portfolios (the
``Portfolios''), each of which has its own investment adviser and its
own investment objectives and policies. Wellington Management, an
investment adviser registered under the Investment Advisers Act of 1940
(``Advisers Act''), serves as investment adviser for each of the
existing Portfolios of SLAT and SDIT. SIMC, an investment adviser
registered under the Advisers Act, serves as investment adviser for
certain Portfolios of SIT, SIMT, SAAT, SIIT, and STET. For the purposes
of this application, Wellington Management and SIMC are collectively
the ``Advisers,'' and each individually is an ``Adviser.'' SIDCo., a
broker-dealer registered under the Securities Exchange Act of 1934,
serves as principal underwriter and distributor for the Trusts.
2. Applicants request that any relief granted on the application
apply to each Trust, each Portfolio, and any other existing or future
registered open-end management investment company (or series of such
investment company) which is or in the future becomes part of the
Trusts' ``ground of investment companies'' as defined in rule 11a-3
under the Act and for which an Adviser, or a person directly or
indirectly controlling, controlled by, or under common control with an
Adviser, serves as investment adviser (each such investment company,
Trust, and Portfolio, a ``Fund,'' and collectively, the ``Funds'').\1\
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\1\ Each Fund that currently intends to rely on the requested
relief is named as an applicant. Any existing Funds and future Funds
that rely on the requested relief in the future will do so only in
accordance with the terms and conditions of the application.
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3. Each Fund has, or may have, uninvested cash balances at the end
of each trading day. In order to earn additional income, an Adviser
ordinarily would invest such cash balances in short-term investments
authorized by that Fund's investment policies. Such short-term
instruments may include repurchase agreements with an overnight, over-
the-weekend, or over a holiday maturity, and in no event a term of more
than seven days (``Overnight Investments''). The investment policies of
each Fund permit investments in Overnight Investments.
4. Applicants propose that the Funds establish one or more joint
trading accounts or subaccounts (``Joint Accounts'') with one or more
custodians (``Custodians'') to deposit some or all of their uninvested
cash balances for the purpose of investing in Overnight Investments. It
currently is expected that each Trust will establish a single Joint
Account with The Bank of New York as Custodian.
5. All investments in Overnight Investments through the Joint
Accounts will be effected only compliance with (a) standards and
procedures established by the board of trustees or directors
(``Board'') of each Fund with respect to Overnight Investments, and (b)
guidelines set forth in Investment Company Act Release No. 13005
(February 2, 1983) and any other existing and future positions taken by
the SEC or its staff by rule, release, letter, or otherwise, relating
to joint Overnight Investment transactions.
6. Each list of approved repurchase agreement counterparites
(``Approved Counterparties'') for a Fund is monitored by its Adviser on
an ongoing basis and reviewed by the relevant Board on a quarterly
basis. Each of the Custodians may be an Approved Counterparty, but a
Fund will only enter into ``hold-in-custody'' repurchase agreement with
that Custodian if cash is received late in the day and would otherwise
be unavailable for investment.
7. The Advisers will be responsible for investing amounts in the
Joint Accounts, establishing accounting and control procedures, and
ensuring the equal treatment of each participating Fund. While the
Advisers will be entitled to their advisory fees on assets invested by
the Funds in the Joint Accounts, they will have no monetary
participation in the Joint Accounts and will receive no additional fee
for administering the Joint Accounts.
Applicants' Legal Analysis
1. Section 17(d) of the Act and rule 17d-1 under the Act make it
unlawful for a affiliated person of a registered investment company,
acting as principal, to participate in, or effect any transaction in
connection with, any joint arrangement in which the registered
investment company is a joint or a joint and several participant unless
an application regarding the joint arrangement has been filed with an
approved by the SEC. In passing on such applications, the SEC must
consider whether the participation of the registered investment company
in the joint arrangement, as proposed, is consistent with the
provisions, policies, and purposes of the Act and the extent to which
such participation is on a basis different from or less advantageous
than that of other participants.
2. Under section 2(a)(3) of the Act, any two or more Funds may be
deemed ``affiliated persons'' from time to time under a variety of
circumstances. Funds with a common Adviser may be deemed to be
``affiliated persons'' of one another because they may be deemed to be
under the common control of the Adviser. Each Fund, by participating in
a Joint Account, and the Adviser, by managing the Joint Account, could
be deemed to be a ``joint or a joint and several participant'' in a
transaction within the meaning of section 17(d). In addition, the
proposed Joint Accounts could be deemed to be a ``[j]oint
[[Page 34498]]
enterprise or other joint arrangement'' within the meaning of rule 17d-
1.
3. Applicants believe that no participating Fund will receive fewer
relative benefits from effecting its transaction through the proposed
Joint Accounts than any other participating Fund. Applicants also
believe that the proposed method of operating the Joint Accounts will
not result in any conflicts of interest between any of the Funds or
between any Fund and an Adviser. Each Fund's liability on any Overnight
Investment invested in by the Joint Accounts will be limited to its own
interest in such Overnight Investment.
4. Applicants believe the Joint Accounts could result in certain
benefits to the Funds. The Funds may earn a higher return on Overnight
Investments through the Joint Accounts relative to the returns they
could earn individually. Under normal market conditions, it is possible
to negotiate a higher rate of return on larger Overnight Investments
than can be negotiated for small Overnight Investments. In addition,
the Funds would collectively save significant transactions fees and
expenses by reducing the number of transactions that would be engaged
in, as contrasted with the number engaged in through separate accounts
for each Fund individually.
5. Under the circumstances and for the reasons set forth above
applicants submit that the proposed Joint Accounts meet the criteria of
rule 17d-1 for issuance of an order.
Applicants' Conditions
Applicants will comply with the following procedures as express
conditions to any order granting the requested relief:
1. The Joint Accounts will be established as one or more separate
cash accounts on behalf of the Funds at a custodian bank. Each Fund may
deposit daily all or a portion of its uninvested cash balances into the
Joint Accounts. Each Fund whose regular Custodian is a custodian other
than the bank at which a proposed Joint Account would be maintained,
and that wishes to participate in the Joint Account, would appoint the
latter bank as a sub-custodian for the limited purposes of: (1)
receiving and disbursing cash; (2) holding any Overnight Investments;
and (3) holding any collateral received from a transaction effected
through the Joint Account. All Funds that appoint such sub-custodians
will have taken all necessary actions to authorize such bank as their
legal custodian, including all actions required under the Act.
2. Cash in the Joint Accounts will be invested solely in Overnight
Investments that are ``collateralized fully,'' as defined in rule 2a-7
under the Act, and that comply with the investment policies of all
Funds participating in that Overnight Investment.
3. All Overnight Investments invested in through the Joint Accounts
would be valued on an amortized costs basis to the extent permitted by
applicable SEC releases, rules, letters, or orders. Each Fund that
relies on 2a-7 under the Act would use the dollar-weighted average
maturity of a Joint Account's Overnight Investments for the purpose of
computing that Fund's average portfolio maturity with respect to the
portion of its assets held in that Joint Account on that day.
4. To assure that there will be no opportunity for one Fund to use
any part of a balance of any Joint Account credited to another Fund, no
Fund will be allowed to create a negative balance in any Joint Account
for any reason, although each Fund will be permitted to draw down its
pro rata share of the entire balance at any time. Each Fund's decision
to invest through the Joint Accounts shall be solely at the option of
that Fund and its Adviser, and no Fund will, in any way, be obligated
to invest through, or to maintain any minimum balance in, the Joint
Accounts. In addition, each Fund will retain the sole rights of
ownership of any of its assets, including interest payable on such
assets, invested through the Joint Accounts. Each Fund's investments
effected through the Joint Accounts will be documented daily on the
books of that Fund as well as on the books of the Custodian. Each Fund,
through the Adviser and/or Custodian, will maintain records (in
conformity with section 31 of the Act and the rules thereunder)
documenting for any given day, the Fund's aggregate investment in a
Joint Account and its pro rata share of each Overnight Investment made
through such Joint Account.
5. Each Fund will participate in and own its proportionate share of
an Overnight Investment, and receive the income earned on or accrued in
such Overnight Investment, based upon the percentage of such investment
purchased with amounts contributed by such Fund, and each Fund will
participate in a Joint Account on the same basis as every other Fund in
conformity with its respective fundamental investment objectives,
policies, restrictions. Any future Funds that participate in a Joint
Account would do so on the same terms and conditions as the existing
Funds.
6. The Advisers will administer, manage, and invest the cash
balances in the Joint Accounts in accordance with the terms of their
management contracts with the Funds, and will not collect any
additional or separate fee for the administration of the Joint
Accounts.
7. The administration of the Joint Account will be within the
fidelity bond coverage required by section 17(g) of the Act and rule
17g-1 thereunder.
8. The Board for each Fund investing in Overnight Investments
through the Joint Accounts will adopt procedures pursuant to which the
Joint Accounts will operate, which procedures will be reasonably
designed to provide that the requirements of the applications will be
met. The Board will make and approve such changes that they deem
necessary to ensure that such procedures are followed. In addition, not
less frequently than annually, the Boards will evaluate the Joint
Account arrangements, determine whether the Joint Accounts have been
operated in accordance with the adopted procedures, and authorize a
Fund's continued participation in the Joint Accounts only if there is a
reasonable likelihood that such continued participation would benefit
that Fund and its shareholders.
9. The Joint Accounts will not be distinguishable from any other
accounts maintained by a Fund with a custodian bank, except that monies
from various Funds will be deposited in the Joint Accounts on a
commingled basis. The Joint Accounts will not have a separate existence
with indicia of a separate legal entity. The sole function of the Joint
Accounts will be to provide a convenient way to aggregating individual
transactions that would otherwise require daily management and
investment by each Fund of its uninvested cash balances.
10. Investments held in a Joint Account generally will not be sold
prior to maturity except: (a) if the Adviser believes that the
investment no longer presents minimal credit risk; (b) if, as a result
of a credit downgrading of otherwise, the investment no longer
satisfies the investment criteria of all Funds participating in the
investment; or (c) if the counterparty defaults. A Fund may, however,
sell its fractional portion of an investment in a Joint Account prior
to the maturity of the investment in such Joint Account if the cost of
such transaction will be borne solely by the selling Fund and the
transaction would not adversely affect the other Funds participating in
that Joint Account. In no case would an early termination by less than
all participating Funds be permitted if it would reduce the principal
amount or yield received by other Funds
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participating in a particular Joint Account or otherwise adversely
affect the other participating Funds. Each Fund participating in such
Joint Account will be deemed to have consented to such sale and
partition of the investment in such Joint Account.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-16753 Filed 6-23-98; 8:45 am]
BILLING CODE 8010-01-M
