
[Federal Register Volume 79, Number 164 (Monday, August 25, 2014)]
[Notices]
[Pages 50716-50718]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-20091]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 31218; 812-14251]


Persimmon Capital Management LP and Northern Lights Fund Trust 
III; Notice of Application

August 19, 2014.

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

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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.

APPLICANTS: Persimmon Capital Management LP (the ``Adviser'') and 
Northern Lights Fund Trust III (the ``Trust'').

FILING DATES: The application was filed on December 16, 2013 and 
amended on April 17, 2014. Applicants have agreed to file an amendment 
during the notice period, the substance of which is reflected in this 
notice.

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 September 15, 2014, 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: The Trust: Northern 
Lights Fund Trust III, 17605 Wright Street, Omaha, NE 68130; The 
Adviser: Persimmon Capital Management LP, 1777 Sentry Parkway West, 
Gwynedd Hall, Suite 102, Blue Bell, PA 19422.

FOR FURTHER INFORMATION CONTACT: Kieran G. Brown, Senior Counsel, at 
(202) 551-6773, or James M. Curtis, Branch Chief, at (202) 551-6712 
(Division of Investment Management, Chief Counsel's Office).

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 is organized as a Delaware statutory trust and is 
registered as an open-end management investment company with multiple 
series. Each series of the Trust has its own investment objective, 
policies and restrictions, and each is managed by various advisers and 
subadvisers.\1\
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    \1\ The Persimmon Long/Short Fund (the ``Persimmon Fund'') is a 
series of the Trust and is the only existing Fund (defined below) 
that currently intends to rely on the requested order. Applicants 
also request relief with respect to any existing or future 
registered open-end management investment company or series thereof 
that (a) is advised by the Adviser, including the Adviser's 
successors and any entity controlling, controlled by or under common 
control with the Adviser (included in the term ``Adviser''); (b) 
uses the manager-of-managers structure (``Manager of Managers 
Structure'') described in the application; and (c) complies with the 
terms and conditions of the application (together with the Persimmon 
Fund, the ``Funds'' and each, individually, a ``Fund''). The only 
existing investment company that currently intends to rely on the 
requested order, the Trust, is named as an applicant. For purposes 
of the requested order, ``successor'' is limited to an entity that 
results from a reorganization into another jurisdiction or a change 
in the type of organization.
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    2. The Adviser is a Delaware limited partnership registered as an 
investment adviser under the Investment Advisers Act of 1940 
(``Advisers Act''). The Adviser serves as the investment adviser of the 
Persimmon Fund. The Adviser provides investment management services to 
the Persimmon Fund pursuant to an investment advisory agreement with 
the Trust (the ``Advisory Agreement'').\2\ The terms of the Advisory 
Agreement comply with section 15(a) of the Act. The Advisory Agreement 
was approved by the board of trustees of the Trust (the ``Board''; the 
term ``Board'' also includes the board of trustees or directors of a 
future Fund), including by a majority of the trustees who are not 
``interested persons'' (as defined in section 2(a)(19) of the Act) of 
the Trust or Adviser (the ``Independent Trustees''), and was approved 
by the initial shareholder of the Persimmon Fund in the manner required 
by sections 15(a) and (c) of the Act and rule 18f-2 thereunder.\3\
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    \2\ The Adviser will enter into substantially similar investment 
advisory agreements to provide investment management services to 
future Funds (``Future Advisory Agreements''). The terms of Future 
Advisory Agreements will comply with Section 15(a) of the Act, and 
Future Advisory Agreements will be approved by shareholders and by 
the Board, including a majority of the Independent Trustees, in the 
manner required by Sections 15(a) and 15(c) of the Act and rule 18f-
2 thereunder. Applicants are not seeking any exemptions with respect 
to Future Advisory Agreements. References to any Advisory Agreement 
or Advisory Agreements include Future Advisory Agreements as they 
pertain to future Funds.
    \3\ Applicants are not seeking any exemptions with respect to 
the Advisory Agreements.
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    3. Under the terms of the Advisory Agreement, the Adviser is 
responsible for the overall management of the Persimmon Fund's business 
affairs and selecting investments in accordance with the Persimmon 
Fund's investment objectives, policies and restrictions. For the 
investment management services that it provides to the Funds, the 
Adviser receives the fee specified in the Advisory Agreements. In 
addition, pursuant to the Advisory Agreement, the Adviser may retain 
one or more subadvisers (each, a ``Subadviser'') for the purpose of 
managing all or a portion of the assets of the Persimmon Fund. Pursuant 
to its authority under the Advisory Agreements, the Adviser intends to 
enter into subadvisory agreements (the ``Subadvisory Agreements'') with 
certain unaffiliated

[[Page 50717]]

Subadvisers to provide investment advisory services to the Funds. Each 
Subadvisory Agreement will be approved by the Board, including by a 
majority of the Independent Trustees in accordance with Sections 15(a) 
and 15(c) of the Act. In addition, the Subadvisory Agreements will 
comply fully with the requirements of Sections 15(a) and 15(c) of the 
Act other than the shareholder approval required under Section 15(a). 
Each Subadviser to a Fund will be an ``investment adviser,'' as defined 
in section 2(a)(20)(B) of the Act, and registered as an investment 
adviser under the Advisers Act or will not be subject to registration 
under such Act.\4\
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    \4\ If the name of any Fund contains the name of a Subadviser, 
the name of the Adviser will precede the name of the Subadviser.
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    4. The Adviser will supervise the management and investment 
programs and operations of the Funds and evaluate the abilities and 
performance of other money management firms in order to identify 
appropriate Subadvisers for the Fund's investment strategy. After a 
Subadviser is selected, the Adviser will continuously supervise and 
monitor the Subadviser's performance and periodically recommend to the 
Board which Subadvisers should be retained or released. Neither the 
Trust nor the Funds will be responsible for paying subadvisory fees to 
any Subadviser. The Adviser will compensate the Subadvisers for a Fund 
out of the advisory fees that are paid to the Adviser under the 
applicable Advisory Agreement.
    5. Applicants request an order to permit the Adviser, subject to 
the approval of the Board), to do the following without obtaining 
shareholder approval: (a) Select certain unaffiliated Subadvisers to 
manage all or a portion of the assets of the Persimmon Fund or future 
Funds pursuant to Subadvisory Agreements, and (b) materially amend 
Subadvisory Agreements with the Subadvisers. Each Fund's prospectus has 
contained or will contain, at all times following the approval of the 
Manager of Managers Structure, the disclosure required by condition 2 
below.
    6. 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 one or more Funds) (``Affiliated Subadviser'').
    7. The Funds will inform shareholders of the hiring of a new 
Subadviser pursuant to the following procedures (``Modified Notice and 
Access Procedures''): (a) Within 90 days after a new Subadviser is 
hired for any Fund, that Fund will send its shareholders either a 
Multi-manager Notice or a Multi-manager Notice and Multi-manager 
Information Statement, as applicable; \5\ and (b) the Fund will make 
the Multi-manager Information Statement available on the Web site 
identified in the Multi-manager Notice no later than when the Multi-
manager Notice (or Multi-manager Notice and Multi-manager Information 
Statement) is first sent to shareholders, and will maintain it on that 
Web site for at least 90 days.
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    \5\ The ``Multi-manager Notice'' will be modeled on a Notice of 
Internet Availability as defined in rule 14a-16 under the Securities 
Exchange Act of 1934 (``Exchange Act''), and specifically will, 
among other things: (a) Summarize the relevant information regarding 
the new Subadviser; (b) inform shareholders that the Multi-manager 
Information Statement is available on a Web site; (c) provide the 
Web site address; (d) state the time period during which the Multi-
manager Information Statement will remain available on that Web 
site; (e) provide instructions for accessing and printing the Multi-
manager Information Statement; and (f) instruct the shareholder that 
a paper or email copy of the Multi manager Information Statement may 
be obtained, without charge, by contacting the Funds. A ``Multi-
manager Information Statement'' will meet the requirements of 
Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under the 
Exchange Act for an information statement. Multi-manager Information 
Statements will be filed electronically with the Commission via the 
EDGAR system.
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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 securities in a series investment company affected by a matter must 
approve that matter if the Act requires shareholder approval.
    2. 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.
    3. Applicants assert that the requested relief is consistent with 
the protection of investors. Primary responsibility for management of 
the Funds, including the selection and supervision of the Subadvisers, 
is vested in the Adviser, subject to the oversight of the Board. 
Applicants state that from the perspective of the investor, the role of 
the Subadvisers with respect to the Funds is substantially equivalent 
to the role of the individual portfolio managers employed by the 
Adviser for a Fund's assets managed by the Adviser. Both the portfolio 
managers and the Subadvisers are concerned principally with the 
selection of portfolio investments in accordance with each Fund's 
respective investment objectives and policies and have no significant 
supervisory, management or administrative responsibilities with respect 
to the Funds. Applicants state that requiring shareholder approval of 
each Subadvisory Agreement would impose costs and unnecessary delays on 
the Funds, and may preclude the Adviser from acting promptly in a 
manner considered advisable by the Board. Applicants note that the 
Advisory Agreements and any subadvisory agreement with an Affiliated 
Subadviser will remain subject to sections 15(a) and (c) of the Act and 
rule 18f-2 thereunder.

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 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. Funds will inform shareholders of the hiring of a new Subadviser 
within 90 days after the hiring of the new Subadviser pursuant to the 
Modified Notice and Access Procedures.
    4. The Adviser will not enter into a subadvisory agreement with any

[[Page 50718]]

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 
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. The 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.
    8. No trustee or officer of the Trust or a Fund, or director, 
manager, or officer of the 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.
    9. Any new Subadvisory Agreement or any amendment to an existing 
Advisory Agreement or Subadvisory Agreement that directly or indirectly 
results in an increase in the aggregate advisory fee rate payable by 
the Fund will be submitted to the Fund's shareholders for approval.
    10. 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.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-20091 Filed 8-22-14; 8:45 am]
BILLING CODE 8011-01-P


