[Federal Register Volume 60, Number 139 (Thursday, July 20, 1995)]
[Notices]
[Pages 37485-37487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17859]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21203; 812-9118]
SunAmerica Series Trust, et al.; Notice of Application
July 14, 1995.
AGENCY: Securities and Exchange Commission (the ``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
-----------------------------------------------------------------------
Applicants: SunAmerica Series Trust, Anchor Series Trust, SunAmerica
Equity Funds, SunAmerica Income Funds, and SunAmerica Money Market
Funds, Inc.
RELEVANT ACT SECTIONS: Conditional order requested under section 6(c)
granting an exemption from section 17(e) and rule 17e-1.
SUMMARY OF APPLICATION: Applicants seek an exemption to permit each
``Fund,'' as defined below, to use certain affiliated persons of
affiliated persons (``second-tier affiliates'') of the Fund as brokers
in connection with certain principal transactions, and to pay
commission, fees, or other remuneration to such brokers without
complying with the monitoring and recordkeeping requirements set forth
in rule 17e-1. Each broker would be a second-tier affiliate of the Fund
solely by reason of subadvisory relationships with other Funds.
FILING DATES: The application was filed on July 13, 1994, and amended
on February 8, 1995, April 24, 1995, and July 12, 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 August 8, 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 Fifth Street, N.W., Washington, D.C.
20549. Applicants, 733 Third Avenue, New York, New York 10017.
FOR FURTHER INFORMATION CONTACT: James J. Dwyer, Staff Attorney, at
(202) 942-0581, or C. David Messman, Branch Chief, at (202) 942-0564
(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. Applicants are Massachusetts business trusts or Maryland
corporations and are registered under the Act as open-end management
investment companies. Applicants offer securities in one or more
series. A ``Fund'' is a present or future portfolio of applicants or of
any other registered investment company that in the future (a) is in
the same ``group of investment companies,'' as defined in rule 11a-3,
and (b) either (i) is advised by SunAmerica Asset Management Corp.
[[Page 37486]]
(``SAAMCo'') or an entity controlling, controlled by, or under common
control with SAAMCo, or (ii) has its shares distributed by SunAmerica
Capital Services, Inc. (``SACS'') or an entity controlling, controlled
by, or under common control with SACS. SAAMCo serves as investment
adviser of each Fund.
2. Shares of SunAmerica Series Trust are not offered directly to
the public but rather are issued and redeemed only in connection with
investments in and payments under certain variable annuity contracts
issued by Anchor National Life Insurance Company (``Anchor National''),
a California stock life insurance company and a wholly-owned subsidiary
of Sun Life Insurance Company. The following serve as subadvisers of
the series of SunAmerica Series Trust: Alliance Capital Management
L.P., Goldman Sachs Asset Management (``GSAM''), Goldman Sachs Asset
Management International (``GSAM International''), Phoenix Investment
Counsel, Inc., Provident Investment Counsel, Morgan Stanley Asset
Management, Inc., and Selected/Venture Advisers, L.P.
3. Shares of Anchor Series Trust also are not offered directly to
the public but rather are issued and redeemed only in connection with
investments in and payments under certain variable annuity contracts
issued by Anchor National, Phoenix Home Life Mutual Insurance Company,
First SunAmerica Life Insurance Company, and Presidential Life
Insurance Company. Wellington Management Company serves as subadviser
to all of the series of Anchor Series Trust.
4. Shares of the other applicants are offered to the public on a
continuous basis through SACS, an indirect wholly-owned subsidiary of
Anchor National and an affiliated person of SAAMCo. GSAM International,
AIG Asset Management, Inc., and SAAMCo serve as subadviser to distinct
components of SunAmerica Global Balances Fund, a series of SunAmerica
Equity Funds.
5. Applicants request an exemption that would permit each Fund to
use an ``Eligible Broker,'' as defined below, as broker in connection
with the sale of securities to or by such Fund on a securities
exchange. An Eligible Broker is a subadviser of one or more Funds that
are not parties to the transactions, conducts advisory and brokerage
operations through the same legal entity, and is a second-tier
affiliate of the Fund engaging in the transaction solely because it
subadvisers one or more other Funds. An Eligible broker is not an
affiliated person of the Fund engaging in the transactions, or a
second-tier affiliate of the Fund engaging in the transactions other
than by reason of subadvising one or more of the other Funds. The
requested relief would permit the Fund engaging in the transaction to
pay commissions, fees, or other remuneration to the Eligible Broker
without complying with the requirements set forth in rules 17e-1(b)(3)
and 17e-1(c).
6. GSAM, a subadviser to one or more of the Funds, is a separate
operating division of Goldman Sachs & Co. (``Goldman Sachs''), a
general partnership that is a registered broker-dealer. Thus, GSAM is
not a separate legal entity from the brokerage operations of Goldman
Sachs. As the only subadviser that conducts advisory and brokerage
operations through the same legal entity, Goldman Sachs is currently
the only entity that satisfies the definition of an Eligible Broker.
Applicants' Legal Analysis
1. Section 17(e)(2)(A) provides in relevant part that it shall be
unlawful for any affiliated person of a registered investment company,
or an affiliated person of such a person, acting as broker in
connection with the sale of securities to or by such company, to
receive from any source a commission, fee, or other remuneration for
effecting such transaction which exceeds the usual and customary
broker's commission if the sale is effected on a securities exchange.
2. Section 2(a)(3) defines ``affiliated person'' of another person
as including a person controlling, controlled by, or under common
control with such other person, and when such other person is an
investment company, the investment adviser thereof. Applicants assert
that the Funds may be affiliated persons of each other by reason of
being under the common control of SAAMCo. A subadviser is an affiliated
person of the Fund or Funds that it subadvises, and a second-tier
affiliate of each other Fund. When such a subadviser conducts brokerage
operations via the same legal entity, the brokerage component also is a
second-tier affiliate of the Funds not subadvised by the subadviser.
Consequently, transactions involving a Fund that are brokered by an
Eligible Broker are subject to section 17(e)(2).
3. Rule 17e-1 provides that, for purposes of section 17(e)(2)(A), a
commission, fee, or other remuneration shall be deemed as not exceeding
the usual and customary broker's commission, if certain specified
procedures are followed. These procedures include the requirement in
rule 17e-1(b)(3) that a registered investment company's board of
directors, including a majority of disinterested directors, determines,
no less frequently than quarterly, that all transactions effected
pursuant to the rule comply with procedures reasonably designed to
provide that the brokerage commission is consistent with the standards
set forth in the rule. The procedures also include the requirement in
rule 17e-1(c) that the investment company maintain and preserve certain
written records about each transaction effected pursuant to the rule.
4. Applicants submit that section 17(e) was designed to address the
concern raised in section 1(b)(2), where Congress determined that the
national public interest and the interests of investors are adversely
affected when investment companies are organized, operated, managed, or
their portfolio securities are selected, in the interest of brokers.
Applicants further submit that Congress in fashioning section 17(e)(2)
intended that a broker affiliated with an investment company receive
only the ordinary stock exchange brokerage commission, and that
Congress sought to eliminate any risk of self-dealing.
5. Applicants assert that the contemplated transactions raise no
possibility of self-dealing or any concern that the Funds would be
managed in the interest of the Eligible Brokers. A subadviser who
recommends that an Eligible Broker act as broker to a particular
transaction would neither lose nor gain financially on the basis of
whether or not the transaction benefits the Eligible Broker, because
the subadviser's only pecuniary interest in the transaction is its
advisory fee, which is based on net assets under management. In
addition, a subadviser has a fiduciary obligation to execute securities
transactions for the Fund in such a manner that the Fund's total cost
or proceeds in each transaction is the most favorable under the
circumstances. Accordingly, the subadviser would have no interest in
benefitting Goldman Sachs or any future Eligible Broker at the expense
of the Funds or Funds it subadvises.
6. Applicants submit that under the circumstances the monitoring
and recordkeeping provisions of rule 17e-1 would be unduly burdensome
to the Funds if each subadviser must monitor brokerage transactions
with a broker-dealer that has no affiliation with such subadviser. They
further submit that Funds might elect not to select Goldman Sachs as
broker in order to avoid the rule's requirements. Applicants believe
that the situations contemplated by the relief are similar to the arms-
length bargaining that normally prevails when an investment adviser
acts on behalf of an investment company, and that it
[[Page 37487]]
would not be imprudent to trust the subadviser's judgment in these
situations.
7. Section 6(c) provides that the SEC may exempt any person,
security, or transaction, or any class or classes of persons,
securities, or transactions, from any provisions of the Act or of any
rule thereunder, if and to the extent that such exemption is necessary
or 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. Applicants believe that the proposed
transactions meet these standards.
Applicants' Condition
Applicants agree that the requested order is subject to the
condition that, with respect to any brokerage transactions conducted in
reliance on the requested order, Applicants will comply with all of the
provisions of rule 17e-1 except those of rule 17e-1 (b)(3) and (c).
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-17859 Filed 7-19-95; 8:45 am]
BILLING CODE 8010-01-M
