
[Federal Register Volume 76, Number 181 (Monday, September 19, 2011)]
[Notices]
[Pages 58059-58061]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-23982]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29787; 812-13891]


Investment Managers Series Trust, et al.; Notice of Application

 September 13, 2011.

AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (``Act'') for an exemption from section 15(a) of 
the Act and rule 18f-2 under the Act, as well as from certain 
disclosure requirements.

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    Summary of Application: Applicants request an order that would 
permit them to enter into and materially amend subadvisory agreements 
without shareholder approval and would grant relief from certain 
disclosure requirements.
    Applicants: Investment Managers Series Trust (the ``Trust'') and 
Palmer Square Capital Management LLC (``Palmer Square'').

DATES: Filing Dates: The application was filed on April 8, 2011, and 
amended on June 8, 2011 and August 15, 2011.
    Hearing or Notification of Hearing: An order granting the 
application 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 11, 2011, 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 Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants: c\o Laurie A. Dee, 
Esq., Bingham McCutchen LLP, Plaza Tower, 18th Floor, 600 Anton 
Boulevard, Costa Mesa, CA 92626.

FOR FURTHER INFORMATION CONTACT: Keith A. Gregory, Senior Counsel, at 
(202) 551-6815, or Mary Kay Frech, 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 via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Trust, a Delaware statutory trust, is registered under the 
Act as an open-end management investment company and is comprised of 35 
series, including the Palmer Square Absolute Return Fund (``PS 
Fund'').\1\ Palmer

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Square is registered as an investment adviser under the Investment 
Advisers Act of 1940 (``Advisers Act'') and serves as the investment 
adviser to the PS Fund. Any other Adviser will be registered as an 
investment adviser under the Advisers Act. An Adviser will serve as the 
investment adviser to each Fund pursuant to an investment advisory 
agreement (the ``Advisory Agreement'') with the Fund. Each Advisory 
Agreement will be approved by the board of trustees of the Trust 
(``Board''), \2\ including a majority of the trustees who are not 
``interested persons,'' as defined in section 2(a)(19) of the Act, of 
the Trust or the Adviser (``Independent Trustees'') and by the initial 
shareholder of the Fund.
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    \1\ Applicants also request relief with respect to existing and 
future series of the Trust and any other existing or future 
registered open-end management investment company or series thereof 
that: (a) Is advised by Palmer Square or any entity controlling, 
controlled by or under common control with Palmer Square or its 
successors (any such entity, together with Palmer Square, an 
``Adviser''); (b) uses the manager of managers structure described 
in the application (the ``Manager of Managers Structure'') and (c) 
complies with the terms and conditions of the application (together 
with the PS Fund, the ``Funds'' and each, individually, a ``Fund''). 
For the purposes of the requested order, ``successor'' is limited to 
an entity or entities that result from a reorganization into another 
jurisdiction or a change in the type of business organization. All 
entities that currently intend to rely on the requested relief are 
named as applicants. If the name of any Fund contains the name of a 
Subadviser (as defined below), the name of the Adviser that serves 
as the primary adviser to the Fund will precede the name of the 
Subadviser.
    \2\ The term ``Board'' also includes the board of trustees or 
directors of a future Fund.
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    2. Under the terms of each Advisory Agreement, the Adviser, subject 
to the oversight of the Board, will be responsible for the overall 
management of each Fund's business affairs and selecting the Funds' 
investments in accordance with its investment objectives, policies and 
restrictions. For the investment management services that it provides 
to the Fund, an Adviser will receive the fee specified in the Advisory 
Agreement. The Advisory Agreement also permits the Adviser to retain 
one or more subadvisers, at its own cost and expense, for the purpose 
of managing the investment of all or a portion of the assets of a Fund. 
Pursuant to this authority, the Adviser will enter into investment 
subadvisory agreements (``Subadvisory Agreements'') with certain 
unaffiliated subadvisers (each, a ``Subadviser'') to provide investment 
advisory services to the Funds. Palmer Square currently employs seven 
Subadvisers for the PS Fund. Each Subadviser is and each future 
Subadviser will be registered as an investment adviser under the 
Advisers Act. The Adviser will supervise, evaluate and allocate assets 
to the Subadvisers, and make recommendations to the Board about their 
hiring, retention or termination, at all times subject to the authority 
of the Board.
    3. Applicants request an order to permit the Adviser, subject to 
Board approval, to enter into and materially amend Subadvisory 
Agreements without obtaining shareholder approval. The requested relief 
will not extend to any subadviser that is an affiliated person, as 
defined in section 2(a)(3) of the Act, of the Trust, a Fund or the 
Adviser, other than by reason of serving as a subadviser to the Fund 
(``Affiliated Subadviser'').
    4. Applicants also request an exemption from the various disclosure 
provisions described below that may require the Funds to disclose fees 
paid by the Adviser to the Subadvisers. An exemption is requested to 
permit each Fund to disclose (as both a dollar amount and as a 
percentage of the respective Fund's net assets): (a) The aggregate fees 
paid to the Adviser and any Affiliated Subadvisers; and (b) the 
aggregate fees paid to Subadvisers (collectively, ``Aggregate Fee 
Disclosure''). Any Fund that employs an Affiliated Subadviser also will 
provide separate disclosure of any fees paid to any Affiliated 
Subadviser.

Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except pursuant to a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of stock in a series investment company affected by a matter must 
approve that matter if the Act requires shareholder approval.
    2. Form N-1A is the registration statement used by open-end 
investment companies. Item 19(a)(3) of Form N-1A requires disclosure of 
the method and amount of the investment adviser's compensation.
    3. Rule 20a-1 under the Act requires proxies solicited with respect 
to an investment company to comply with Schedule 14A under the 
Securities Exchange Act of 1934 (``1934 Act''). Items 22(c)(1)(ii), 
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together, 
require a proxy statement for a shareholder meeting at which the 
advisory contract will be voted upon to include the ``rate of 
compensation of the investment adviser,'' the ``aggregate amount of the 
investment adviser's fees,'' a description of the ``terms of the 
contract to be acted upon,'' and, if a change in the advisory fee is 
proposed, the existing and proposed fees and the difference between the 
two fees.
    4. Regulation S-X sets forth the requirements for financial 
statements required to be included as part of investment company 
registration statements and shareholder reports filed with the 
Commission. Sections 6-07(2)(a), (b) and (c) of Regulation S-X require 
that investment companies include in their financial statements 
information about investment advisory fees.
    5. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provisions of the Act, or 
from any rule thereunder, if 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 state that the requested relief meets this standard for 
the reasons discussed below.
    6. Applicants assert that the shareholders are relying on the 
Adviser's expertise to select one or more Subadvisers best suited to 
achieve a Fund's investment objectives. Applicants assert that, from 
the perspective of the shareholder, the role of the Subadvisers is 
substantially equivalent to that of the individual portfolio managers 
employed by traditional advisory firms. Applicants state that requiring 
shareholder approval of each Subadvisory Agreement would subject a Fund 
to expenses and delays and may preclude the Adviser from acting 
promptly. Applicants note that the Advisory Agreement and any 
subadvisory agreement with an Affiliated Subadviser will remain subject 
to section 15(a) of the Act and rule 18f-2 under the Act.
    7. Applicants assert that Subadvisers use a ``posted'' rate 
schedule to set their fees. Applicants state that, while Subadvisers 
are willing to negotiate fees lower than those posted in the schedule, 
they are reluctant to do so where the fees are disclosed to the public 
and other Subadvisers. Applicants submit that the requested relief will 
allow the Adviser to negotiate more effectively with Subadvisers.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Fund may rely on the requested order, the operation of 
the Fund in the manner described in the application will be approved by 
a majority of the Fund's outstanding

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voting securities, as defined in the Act, or in the case of a Fund 
whose public shareholders purchase shares on the basis of a prospectus 
containing the disclosure contemplated by condition 2 below, by the 
initial shareholder(s) before offering shares of that Fund to the 
public.
    2. Each Fund relying on the requested order will disclose in its 
prospectus the existence, substance, and effect of any order granted 
pursuant to the application. Each Fund will hold itself out to the 
public as utilizing the Manager of Managers Structure. The prospectus 
will prominently disclose that the Adviser has ultimate responsibility 
(subject to oversight by the Board) to oversee the Subadvisers and 
recommend their hiring, termination, and replacement.
    3. Within 90 days of the hiring of a new Subadviser, Fund 
shareholders will be furnished all information about the new Subadviser 
that would be included in a proxy statement, except as modified to 
permit Aggregate Fee Disclosure. This information will include 
Aggregate Fee Disclosure and any change in disclosure caused by the 
addition of the new Subadviser. To meet this obligation, each Fund will 
provide shareholders, within 90 days of the hiring of a new Subadviser, 
an information statement meeting the requirements of Regulation 14C, 
Schedule 14C and Item 22 of Schedule 14A under the 1934 Act, except as 
modified by the order to permit Aggregate Fee Disclosure.
    4. An Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser without such agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    5. At all times, at least a majority of the Board will be 
Independent Trustees, and the nomination of new or additional 
Independent Trustees will be placed within the discretion of the then-
existing Independent Trustees.
    6. Whenever a subadviser change is proposed for a Fund with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
applicable Board minutes, that such change is in the best interests of 
the Fund and its shareholders, and does not involve a conflict of 
interest from which the Adviser or the Affiliated Subadviser derives an 
inappropriate advantage.
    7. Independent legal counsel, as defined in rule 0-1(a)(6) under 
the Act, will be engaged to represent the Independent Trustees. The 
selection of such counsel will be within the discretion of the then-
existing Independent Trustees.
    8. Each Adviser will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Adviser on a 
per-Fund basis. The information will reflect the impact on 
profitability of the hiring or termination of any Subadviser during the 
applicable quarter.
    9. Whenever a Subadviser is hired or terminated, the Adviser will 
provide the Board with information showing the expected impact on the 
profitability of the Adviser.
    10. An Adviser will provide general management services to each 
Fund, including overall supervisory responsibility for the general 
management and investment of each Fund's assets and, subject to review 
and approval of the Board, will: (a) Set each Fund's overall investment 
strategies; (b) evaluate, select and recommend Subadvisers to manage 
all or a part of each Fund's assets; (c) allocate and, when 
appropriate, reallocate each Fund's assets among one or more 
Subadvisers; (d) monitor and evaluate the performance of Subadvisers; 
and (e) implement procedures reasonably designed to ensure that the 
Subadvisers comply with each Fund's investment objective, policies and 
restrictions.
    11. No Trustee or officer of the Trust or a Fund, or director, 
manager, or officer of an Adviser, will own directly or indirectly 
(other than through a pooled investment vehicle that is not controlled 
by such person), any interest in a Subadviser, except for (a) ownership 
of interests in the Adviser or any entity that controls, is controlled 
by, or is under common control with the Adviser or (b) ownership of 
less than 1% of the outstanding securities of any class of equity or 
debt of any publicly traded company that is either a Subadviser or an 
entity that controls, is controlled by, or is under common control with 
a Subadviser.
    12. Each Fund will disclose in its registration statement the 
Aggregate Fee Disclosure.
    13. In the event the Commission adopts a rule under the Act 
providing substantially similar relief to that in the order requested 
in the application, the requested order will expire on the effective 
date of that rule.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-23982 Filed 9-16-11; 8:45 am]
BILLING CODE 8011-01-P


