[Federal Register Volume 61, Number 184 (Friday, September 20, 1996)]
[Notices]
[Pages 49507-49508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24079]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 22222; 812-10112]
Reich & Tang Distributors L.P., et al.; Notice of Application
September 13, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order under the Investment Company
Act of 1940 (the ``Act'').
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APPLICANTS: Reich & Tan Distributors L.P. (``Reich & Tang''); Equity
Securities Trust (Series 1, Signature Series, and subsequent series);
Mortgage Securities Trust (CMO Series 1 and subsequent series);
Municipal Securities Trust (Series 1 and subsequent series) (including
Insured Municipal Securities Trust, Series 1 (and subsequent series)
and 5th Discount Series (and subsequent series)); New York Municipal
Trust (Series 1 and subsequent series); and A Corporate Trust (Series 1
and subsequent series) (collectively, the foregoing trusts are the
``Trusts'').
RELEVANT ACT ACTIONS: Order of exemption requested pursuant to sections
11(a) and (c).
SUMMARY OF APPLICATION: Applicants request an order to permit certain
offers of exchange between the Trusts at a reduced sales charge. The
requested order would supersede three prior orders.
FILING DATES: The application was filed on April 29, 1996, and amended
on July 19, 1996, and September 6, 1996. Applicants have agreed to file
an amendment, the substance of which is incorporated herein, 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 SEC by 5:30 p.m. on October 8, 1996,
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 writers 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, N.W., Washington, D.C.
20549. Applicants, 600 Fifth Avenue, New York, NY 10022.
FOR FUTHER INFORMATION CONTACT: Elaine M. Boggs, Staff Attorney, at
(202) 942-0572, or Alison E. Baur, Branch Chief, at (202) 942-0564
(Division of Investment Management, Office of Investment Company
Information).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch.
Applicants' Representations
1. Reich & Tang, the successor sponsor to the unit investment trust
division of Bear Stearns & Co. Inc., is a sponsor or co-sponsor with
Gruntal & Co. Incorporated (``Gruntal'') of various unit investment
trusts (collectively, Reich & Tang and Gruntal are the ``Sponsors'').
Each Trust is organized under a trust indenture and agreement between
the Trust, the Sponsors, and the Chase Manhattan Bank or Bank of New
York, as trustee, and is registered under the Act.
2. On September 29, 1995, Bear, Stearns & Co. Inc. (``Bear
Stearns'') transferred its unit investment trust business to Reich &
Tang and immediately thereafter Reich & Tang commenced serving as
sponsor for the Trusts. Prior to the transfer, Bear Stearns and the
Trusts had received SEC orders permitting certain offers of
exchange.\1\ At the request of Bear Stearns and Reich & Tang, the SEC's
Division of Investment Management informed Bear Stearns and Reich &
Tang that the Division would not recommend that the SEC take any
enforcement action against them if the Trusts operate under the terms
of the prior orders until the earlier of (a) the date the requested
order is granted or (b) March 13, 1997.\2\ The requested order will
supersede the prior orders.
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\1\ Mortgage Securities Trust, Investment Company Act Release
Nos. 18254 (Aug. 1, 1991) (notice) and 18290 (Aug. 28, 1991)
(order); New York Municipal Trust, Investment Company Act Release
Nos. 11715 (Apr. 1, 1981) (notice) and 11754 (Apr. 29, 1981)
(order); and Bear Stearns & Co., Investment Company Act Release Nos.
11143 (Apr. 29, 1980) (notice) and 11184 (May 23, 1980) (order).
\2\ Reich & Tang Distributors L.P. (pub. avail. March 13, 1996).
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3. The sales charge for initial investment in the Trusts currently
ranges between 3.5% to 5.5% of the public offering price, subject to
discounts for certain volume transactions. The Sponsors maintain a
secondary market for the Trusts and intend to continue to maintain a
secondary market for any new Trusts, although they are not obligated to
do so. Units sold in the secondary market are subject to a sales charge
of up to 5.5% plus net accrued interest.
4. 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''). In addition, applicants propose a conversion
offer (``Conversion Offer'') pursuant to which unitholders may redeem
units of any Trust in which there is no active secondary market
(``Redemption Trust'') and apply the proceeds to the purchase of
available units of one or more series of the Trusts (the ``Conversion
Trusts'').
5. To exercise the Exchange or Rollover Privilege, a unitholder
must notify the Sponsor. In order to exercise the Conversion Offer, a
unitholder must notify his or her retail broker. The Conversion Offer
will be handled entirely through the unitholder's retail broker and the
retail broker must tender the units to the trustee of the Redemption
Trust for redemption and then apply the proceeds toward the purchase of
units of a Conversion Trust. Exercise of the Exchange or Rollover
Privilege is subject to the following conditions: (a) The Sponsors must
be maintaining a secondary market in units of the available Exchange or
Rollover Trust, (b) at the time of the unitholder's election to
participate, there must be units of the Exchange or Rollover to be
acquired available for sale, either under
[[Page 49508]]
the initial primary distribution or in the Sponsors' secondary market,
(c) exchanges will be in whole units only, and (d) for certain Trusts,
units may be obtained in blocks of certain sizes only. Exercise of the
Conversion Offer is subject to the following conditions: (a) The
Conversion Offer is open only to unitholders of a Redemption Trust, (b)
at the time of the unitholder's election to participate, there must be
available units of a Conversion Trust, either under a primary
distribution or in the Sponsors' secondary market, (c) exchanges will
be in whole units only, and (d) for certain Trusts, units may be
obtained in blocks of certain sizes only.
6. Unitholders who wish to exchange units under the Exchange or
Rollover Privileges or Conversion Offer 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 applicable Trust, would equal the sales charge applicable
to the direct purchase of the newly acquired units, determined as of
the date of purchase.
7. Applicants request that the relief be extended to all
subsequently issued series of unit investment trusts sponsored by Reich
& Tang or a sponsor controlled by or under common control with Reich &
Tang and each unit investment trust registered under the Securities Act
of 1933 and the Act (each is also a ``Trust'').
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
trust for the securities of any other investment company, irrespective
of the basis of exchange.
2. Applicants state that the Exchange and Rollover Privileges
provide investors with a convenient means of transferring their
interests at a reduced sales charge into series of the Exchange and
Rollover Trusts which suit their current investment objectives.
Further, applicants state that the Conversion Offer provides
unitholders of a Trust in which there is no active secondary market a
means to redeem those units and invest the proceeds at a reduced sales
charge into units of the Conversion Trusts which maintain an active
secondary market. Applicants state that absent the Exchange and
Rollover privilege and the Conversion Offer, unitholders would be
required to dispose of their units, either in the secondary market (in
the case of the Exchange and Rollover Privileges) or through
redemption, and to reinvest, at the then fully applicable sales charge,
into the chosen Trusts.
3. Applicants represent that unitholders will not be induced or
encouraged to participate in the Exchange or Rollover Privileges or
Conversion Offer through an active advertising or sales campaign. The
Sponsor 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 or Rollover Privilege
or the Conversion Offer. Applicants state that the reduced sales charge
will fairly and adequately compensate the Sponsor and the participating
underwriters and brokers for their services and expenses in connection
with the administration of the programs. Applicants further believe
that the Exchange and Rollover Privileges and the Conversion Offer 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.
Applicants' Conditions
Applicants agree, as a condition to the grant of the requested
order, to the following conditions:
1. The prospectus for each Trust and any sales literature or
advertisement that mentions the existence of the Exchange Privilege,
Conversion Offer, or Rollover Privilege will disclose that they are
subject to termination and that their terms are subject to change and
that such changes or termination may be made in the circumstances
specified in condition 2.
2. Whenever the Exchange Privilege, Conversion Offer, or Rollover
Privilege are to be terminated or their terms are to be amended
materially, any holder of a security subject to the 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 or a new Trust,
eligible for the Exchange Privilege, Conversion Offer, or Rollover
Privilege, or to delete a series or Trust 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, Conversion Trust, or Rollover Trust under section 22(e)
of the Act and the rules and regulations thereunder, or (ii) an
Exchange Trust, Conversion Trust, or 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 Privilege,
Conversion Offer, or Rollover Privilege will pay a lower 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.
Jonathan G. Katz,
Secretary.
[FR Doc. 96-24079 Filed 9-19-96; 8:45 am]
BILLING CODE 8010-01-M
