

[Federal Register: October 3, 2007 (Volume 72, Number 191)]
[Notices]               
[Page 56395-56396]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03oc07-101]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28000; 812-13390]

 
Rydex ETF Trust, et al.; Notice of Application

September 27, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application to amend a prior order under section 
6(c) of the Investment Company Act of 1940 (``Act'') for an exemption 
from sections 2(a)(32), 5(a)(1), 22(d) and 24(d) of the Act and rule 
22c-1 under the Act, and under sections 6(c) and 17(b) of the Act for 
an exemption from sections 17(a)(1) and (a)(2) of the Act.

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Applicants:  Rydex ETF Trust (``Trust''), PADCO Advisors II, Inc. 
(``Adviser''), and Rydex Distributors, Inc. (``Distributor'').

Summary of Application:  Applicants request an order to amend a prior 
order that permits: (a) Certain open-end management investment 
companies (``Initial Funds'') to issue shares redeemable in large 
aggregations only (``Shares''); (b) secondary market transactions in 
Shares to occur at negotiated market prices; (c) dealers to sell Shares 
to secondary market purchasers unaccompanied by a prospectus, when 
prospectus delivery is not required by the Securities Act of 1933; and 
(d) certain affiliated persons of the Initial Funds to deposit 
securities into, and receive securities from, the Initial Funds in 
connection with the purchase and redemption of aggregations of Shares 
(``Prior Order'').\1\ Applicants seek an amended order to permit the 
Trust to offer series (``New Inverse Funds'') that seek to achieve the 
inverse performance of certain international equity and fixed income 
securities indices (collectively, ``New Underlying Indices''). The 
amended order also would permit the Trust to offer future series 
(``Future Funds'') that seek to achieve a multiple or the inverse of 
the performance of additional equity and fixed income securities 
indices (the New Inverse Funds and Future Funds are ``New Funds,'' and 
the New Funds and Initial Funds are ``Funds'').
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    \1\ Rydex ETF Trust, et al., Investment Company Act Release Nos. 
27703 (Feb. 20, 2007) (notice) and 27754 (Mar. 20, 2007) (order).

Filing Dates: The application was filed on May 23, 2007, and amended on 
September 21, 2007. Applicants have agreed to file an amendment during 
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the notice period, the substance of which is reflected in this notice.

Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission'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 October 22, 2007, 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 Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants: Rydex ETF Trust; 
Rydex Distributors, Inc.; and PADCO Advisors II, Inc., 9601 Blackwell 
Road, Suite 500, Rockville, MD 20850.

FOR FURTHER INFORMATION CONTACT: Laura L. Solomon, Senior Counsel, at 
(202) 551-6915, or Julia Kim Gilmer, Branch Chief, at (202) 551-6821 
(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 at the 
Commission's Public Reference Desk, 100 F Street, NE., Washington, DC 
20549-0102 (tel. 202-551-5850).

Applicants' Representations

    1. The Trust, a Delaware statutory trust, is an open-end management 
investment company registered under the Act and is organized as a 
series fund with multiple separate Funds. The Adviser, which is 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (``Advisers Act''), serves as investment adviser to each Fund. 
The Adviser may in the future retain one or more sub-advisers (``Sub-
Advisers'') to manage particular Funds' portfolios. Any Sub-Adviser to 
a Fund will be registered under the Advisers Act. The Distributor, a 
broker-dealer registered under the Securities Exchange Act of 1934, 
serves as the principal underwriter and distributor for the Funds.
    2. The Prior Order permits the Initial Funds to seek daily 
investment results, before fees and expenses, that (a) Correspond to 
125%, 150% or 200% of the return of certain equity securities indices, 
or (b) move in the opposite direction of the performance of certain 
equity securities indices in multiples of 100%, 125%, 150% or 200%. 
Applicants seek to amend the Prior Order to permit the Trust to issue 
shares of New Inverse Funds using the New Underlying Indices,\2\ and 
Future Funds using additional securities indices (such additional 
indices, together with the New Underlying Indices and the underlying 
indices for the Initial Funds, the ``Underlying Indices'').
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    \2\ The New Underlying Indices, which are described in the 
application, include 41 international equity indices and 18 fixed 
income indices.
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    3. A New Fund using a fixed income index as its Underlying Index 
will not: (a) Hold restricted securities eligible for resale pursuant 
to Rule 144A under the Securities Act of 1933, or (b) engage in ``to-
be-announced'' transactions when trading mortgage-backed securities. 
Additionally, such New Funds will use the same portfolio investment 
methodology currently used by the Trust except that, where relevant, 
such Funds may also invest in the fixed income equivalents of the 
portfolio investments described in the application for the Prior Order. 
A New Fund that uses an international index as its Underlying Index 
will not hold depositary receipts.

[[Page 56396]]

    4. Applicants state that the New Funds will operate in a manner 
identical to the Initial Funds that were the subject of the Prior 
Order, and be offered pursuant to the same terms and conditions of the 
Prior Order, except as modified by this application. No entity that 
creates, compiles, sponsors, or maintains an Underlying Index (the 
``Underlying Index Provider'') is or will be an affiliated person, as 
defined in section 2(a)(3) of the Act, or an affiliated person of an 
affiliated person, of the Trust, a promoter, the Adviser, any Sub-
Adviser, or the Distributor. Applicants believe that the requested 
relief continues to meet the necessary exemptive standards.

Future Relief

    1. Applicants seek to amend the Prior Order to modify the terms 
under which the Trust may offer Future Funds. The Prior Order is 
currently subject to a condition that does not permit relief for Future 
Funds unless applicants request and receive with respect to such Future 
Fund, either exemptive relief from the Commission or a no-action letter 
from the Division of Investment Management of the Commission.
    2. The order would amend the Prior Order to delete this condition. 
Any Future Fund will: (a) Be advised by the Adviser, or an entity 
controlled by or under common control with the Adviser; (b) use an 
Underlying Index where the Underlying Index Provider is not an 
affiliated person, as defined in section 2(a)(3) of the Act, or an 
affiliated person of an affiliated person, of the Trust, a promoter, 
the Adviser, any Sub-Adviser, or the Distributor; and (c) comply with 
the terms and conditions of the Prior Order, as amended by the present 
application.
    3. Applicants believe that the modification of the future relief 
available under the Prior Order would be consistent with sections 6(c) 
and 17(b) of the Act. Applicants believe that granting the requested 
relief will facilitate the timely creation of Future Funds and the 
commencement of secondary market trading of such Future Funds by 
removing the need to seek additional exemptive relief. Applicants 
submit that the terms and conditions of the Prior Order were 
appropriate for the Initial Funds and would remain appropriate for 
Future Funds.

Applicants' Condition

    Applicants agree that any amended order granting the requested 
relief will be subject to the same conditions as those imposed by the 
Prior Order, except for condition 1 to the Prior Order, which will be 
deleted.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-19538 Filed 10-2-07; 8:45 am]

BILLING CODE 8011-01-P
