
[Federal Register Volume 82, Number 200 (Wednesday, October 18, 2017)]
[Notices]
[Pages 48557-48560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22517]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32860; 812-14725]


Steadfast Alcentra Global Credit Fund and Steadfast Investment 
Adviser, LLC

October 12, 2017
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``1940 Act'') for an exemption from sections 
18(a)(2), 18(c) and 18(i) of the 1940 Act, under sections 6(c) and 
23(c) of the 1940 Act for an exemption from rule 23c-3 under the 1940 
Act, and for an order pursuant to section 17(d) of the 1940 Act and 
rule 17d-1 under the 1940 Act.

SUMMARY OF APPLICATION: Applicants request an order to permit certain 
registered closed-end management investment companies to issue multiple 
classes of shares of beneficial interest (``Shares'') with varying 
sales loads, asset-based service and/or distribution fees and early 
withdrawal charges.

APPLICANTS: Steadfast Alcentra Global Credit Fund (the ``Initial 
Fund'') and Steadfast Investment Adviser, LLC (the ``Adviser'').

FILING DATES: The application was filed on December 8, 2016 and amended 
on April 13, 2017, August 18, 2017 and September 28, 2017.

HEARING OR NOTIFICATION OF HEARING: An order granting the requested 
relief will be issued unless the Commission orders

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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 November 6, 2017, and should be accompanied by proof of service on 
the applicants, in the form of an affidavit, or, for lawyers, a 
certificate of service. Pursuant to rule 0-5 under the 1940 Act, 
hearing requests should state the nature of the writer's interest, any 
facts bearing upon the desirability of a hearing on the matter, 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: 18100 Van Karman 
Avenue, Suite 500, Irvine, CA 92612.

FOR FURTHER INFORMATION CONTACT: Rachel Loko, Senior Counsel, at (202) 
551-6883, or Holly Hunter-Ceci, Assistant Chief Counsel, at (202) 551-
6825 (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 for 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 Initial Fund is a Delaware statutory trust that is 
registered under the 1940 Act as a non-diversified, closed-end 
management investment company. The Initial Fund's investment objective 
is to provide current income and capital preservation with the 
potential for capital appreciation. The Initial Fund seeks to achieve 
its investment objective primarily by providing customized financing 
solutions to lower middle market and middle market companies (as 
defined in the Initial Fund's prospectus) in the form of floating and 
fixed rate senior secured loans, second lien loans and subordinated 
debt, which, under normal circumstances will collectively represent at 
least 80% of the Initial Fund's net assets (plus the amount of any 
borrowings for investment purpose).
    2. The Adviser, a Delaware limited liability company, is registered 
as an investment adviser under the Investment Advisers Act of 1940. The 
Adviser serves as investment adviser to the Initial Fund.
    3. The applicants seek an order to permit the Initial Fund to issue 
multiple classes of Shares, that may (but would not necessarily) be 
subject to a front-end sales load, an annual asset-based service and/or 
distribution fee and an early withdrawal charge.
    4. Applicants request that the order also apply to any other 
registered closed-end management investment company that conducts a 
continuous offering of its shares, existing now or in the future, for 
which the Adviser, or any entity controlling, controlled by, or under 
common control with the Adviser, or any successor in interest to any 
such entity,\1\ acts as investment adviser and which operates as an 
interval fund pursuant to rule 23c-3 under the 1940 Act or provides 
periodic liquidity with respect to its Shares pursuant to rule 13e-4 
under the Securities Exchange Act of 1934 (``1934 Act'') (each, a 
``Future Fund'' and together with the Initial Fund, the ``Funds'').\2\
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    \1\ A successor in interest is limited to an entity that results 
from a reorganization into another jurisdiction or a change in the 
type of business organization.
    \2\ Any Fund relying on this relief in the future will do so in 
a manner consistent with the terms and conditions of the 
application. Applicants represent that any person presently 
intending to rely on the requested relief is listed as an Applicant.
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    5. The Initial Fund is currently making a continuous public 
offering of its Shares. Shares of the Funds will not be listed on any 
securities exchange nor traded on an over the counter system such as 
NASDAQ. The Funds do not expect there to be a secondary trading market 
for their Shares.
    6. The Initial Fund currently issues a single class of Shares, 
Class T Shares (the ``Initial Class Shares'') and proposes to offer 
Class A, Class D and Class I Shares (the ``New Classes of Shares''). 
Each of the Initial Class Shares and New Class Shares will have its own 
fee and expense structure. Each New Class Shares would be offered at 
net asset value per Share and may be subject to a front-end sales load, 
an annual asset-based service and/or distribution fee and an early 
withdrawal charge. The Funds may in the future offer additional classes 
of Shares and/or another sales charges structure. Because of the 
different distribution and/or service fees, services and any other 
class expenses that may be attributable to the Initial Class Shares or 
the New Class Shares, the net income attributable to, and the dividends 
payable on, each class of Shares may differ from each other.
    7. Applicants state that, from time to time, the Board of a Fund 
may create and offer additional classes of Shares, or may vary the 
characteristics described above of Initial Class Shares and New Class 
Shares in the following respects: (i) The amount of fees permitted by a 
distribution and/or service plan as to such class; (ii) voting rights 
with respect to a distribution and/or service plan of such class; (iii) 
different class designations; (iv) the impact of any class expenses 
directly attributable to a particular class of Shares allocated on a 
class basis as described in the application; (v) differences in any 
dividends and net asset value per Share resulting from differences in 
fees under a distribution and/or service plan or in class expenses; 
(vi) any sales load structure; and (vii) any conversion features of the 
classes as permitted under the 1940 Act.
    8. Applicants state that Shares of a Fund will be subject to an 
``early withdrawal charge'' or a ``repurchase fee'' of up to 2.0% of 
the shareholder's repurchase proceeds in the event that the shareholder 
tenders his or her Shares for repurchase by such Fund at any time prior 
to the one-year anniversary of the purchase of such Shares. Early 
withdrawal charges will apply equally to all shareholders of the Fund, 
regardless of class, consistent with section 18 of the 1940 Act and 
rule 18f-3 thereunder. To the extent a Fund determines to waive, impose 
scheduled variations of, or eliminate the early withdrawal charge, it 
will do so consistently with the requirements of rule 22d-1 under the 
1940 Act as if the early withdrawal charge were a CDSC (defined below) 
and as if the Fund were an open-end investment company and the Fund's 
waiver of, scheduled variation in, or elimination of, the early 
withdrawal charge will apply uniformly to all shareholders of the Fund 
regardless of class.
    9. Applicants state that the Initial Fund currently intends to 
limit the number of Shares to be repurchased in any calendar year to 
the number of Shares the Initial Fund can repurchase with the proceeds 
it receives from the issuance of Shares under its distribution 
reinvestment plan. In addition, the Initial Fund will limit the number 
of Shares to be repurchased in any calendar year to 10% of the weighted 
average number of Shares outstanding in a prior calendar year or 2.5% 
in each quarter, though the actual number of Shares that the Initial 
Fund offers to purchase may be less. If a Future Fund is structured to 
operate as an interval fund, it will adopt an investment policy and 
make periodic repurchase offers to

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its shareholders in compliance with rule 23c-3 or will provide periodic 
liquidity with respect to its shares pursuant to rule 13e-4 under the 
Exchange Act.\3\ Any repurchase offers made by a Fund will be made to 
all holders of shares of each such Fund.
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    \3\ Applicants submit that rule 23c-3 and Regulation M under the 
1934 Act permit an interval fund to make repurchase offers to 
repurchase its shares while engaging in a continuous offering of its 
shares pursuant to Rule 415 under the Securities Act of 1933.
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    10. Applicants represent that any asset-based distribution and 
service fees will comply with the provisions of the Financial Industry 
Regulatory Authority (``FINRA'') Rule 2341 (``FINRA Rule 2341'').\4\ 
Applicants also represent that each Fund will disclose in its 
prospectus the fees, expenses and other characteristics of each class 
of shares offered for sale by the prospectus, as is required for open-
end multiple class funds. As if it were an open-end management 
investment company, each Fund will disclose its expenses in shareholder 
reports, and describe any arrangements that result in breakpoints in 
sales loads in its prospectus.\5\ In addition, applicants will comply 
with applicable enhanced fee disclosure requirements for fund of funds, 
including registered funds of hedge funds.\6\
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    \4\ Any reference to the FINRA Rule 2341 includes FINRA Rule 
2342 as such rule may be amended or any successor thereto.
    \5\ See Shareholder Reports and Quarterly Portfolio Disclosure 
of Registered Management Investment Companies, Investment Company 
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring 
open-end investment companies to disclose fund expenses in 
shareholder reports); and Disclosure of Breakpoint Discounts by 
Mutual Funds, Investment Company Act Release No. 26464 (June 7, 
2004) (adopting release) (requiring open-end investment companies to 
provide prospectus disclosure of certain sales load information).
    \6\ Fund of Funds Investments, Investment Company Act Rel. Nos. 
26198 (Oct. 1, 2003) (proposing release) and 27399 (Jun. 20, 2006) 
(adopting release). See also Rules 12d1-1, et seq. of the 1940 Act.
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    11. Each of the Funds will comply with any requirements that the 
Commission or FINRA may adopt regarding disclosure at the point of sale 
and in transaction confirmations about the costs and conflicts of 
interest arising out of the distribution of open-end investment company 
shares, and regarding prospectus disclosure of sales loads and revenue 
sharing arrangements, as if those requirements applied to the Fund. In 
addition, each Fund will contractually require that any distributor of 
the Fund's Shares comply with such requirements in connection with the 
distribution of such Fund's shares.
    12. Each Fund will allocate all expenses incurred by it among the 
various classes of Shares based on the net assets of that Fund 
attributable to each class, except that the net asset value and 
expenses of each class will reflect the expenses associated with the 
distribution and/or service plan of that class, shareholder service 
fees, and any other incremental expenses of that class. Expenses of a 
Fund allocated to a particular class of the Fund's Shares will be borne 
on a pro rata basis by each outstanding Share of that class. Applicants 
state that each Fund will comply with the provisions of rule 18f-3 
under the 1940 Act as if it were an open-end investment company.
    13. Applicants state that each Future Fund may impose an early 
withdrawal charge on Shares submitted for repurchase that have been 
held less than a specified period and may waive the early withdrawal 
charge on repurchases in connection with certain categories of 
shareholders or transactions to be established from time to time. 
Applicants state that each Future Fund will apply the early withdrawal 
charge (and any waivers or scheduled variations of the early withdrawal 
charge) uniformly to all shareholders in a given class and consistently 
with the requirements of rule 22d-1 under the 1940 Act as if the Future 
Funds were open-end investment companies.
    14. If a Future Fund is structured to operate as an interval fund, 
it will adopt a fundamental investment policy in compliance with Rule 
23c-3 and make periodic repurchase offers to its shareholders, or 
provide periodic liquidity with respect to its Shares. To the extent 
the Fund determines to waive, impose scheduled variations of, or 
eliminate, the early withdrawal charge, the Fund will do so 
consistently with the requirements of Rule 22d-1 under the 1940 Act as 
if the early withdrawal charge were a CDSC (as defined below) and as if 
the Fund were an open-end investment company and the Fund's waiver of, 
scheduled variation in, or elimination of, the early withdrawal charge 
will apply uniformly to all shareholders. Contingent deferred sales 
charges (``CDSC'') are distribution-related charges payable to a 
distributor and assessed by an open-end investment company pursuant to 
Rule 6c-10 under the 1940 Act.

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(a)(2) of the 1940 Act provides that a closed-end 
investment company may not issue or sell a senior security that is a 
stock unless certain requirements are met. Applicants state that the 
creation of multiple classes of shares of the Funds may violate section 
18(a)(2) because the Funds may not meet such requirements with respect 
to a class of shares that may be a senior security.
    2. Section 18(c) of the 1940 Act provides, in relevant part, that a 
closed-end investment company may not issue or sell any senior security 
if, immediately thereafter, the company has outstanding more than one 
class of senior security. Applicants state that the creation of 
multiple classes of Shares of the Funds may be prohibited by section 
18(c), as a class may have priority over another class as to payment of 
dividends because shareholders of different classes would pay different 
fees and expenses.
    3. Section 18(i) of the 1940 Act provides that each share of stock 
issued by a registered management investment company will be a voting 
stock and have equal voting rights with every other outstanding voting 
stock. Applicants state that multiple classes of Shares of the Funds 
may violate section 18(i) of the 1940 Act because each class would be 
entitled to exclusive voting rights with respect to matters solely 
related to that class.
    4. Section 6(c) of the 1940 Act provides that the Commission may 
exempt any person, security or transaction or any class or classes of 
persons, securities or transactions from any provision of the 1940 Act, 
or from any rule or regulation under the 1940 Act, if and to the extent 
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 1940 Act. Applicants 
request an exemption under section 6(c) from sections 18(a)(2), 18(c) 
and 18(i) to permit the Funds to issue multiple classes of Shares.
    5. Applicants submit that the proposed allocation of expenses 
relating to distribution and voting rights among multiple classes is 
equitable and will not discriminate against any group or class of 
shareholders. Applicants submit that the proposed arrangements would 
permit a Fund to facilitate the distribution of its Shares and provide 
investors with a broader choice of shareholder services. Applicants 
assert that the proposed closed-end investment company multiple class 
structure does not raise the concerns underlying section 18 of the 1940 
Act to any greater degree than open-end investment companies' multiple 
class structures that are permitted by rule 18f-3 under the 1940 Act. 
Applicants state that each Fund will comply with

[[Page 48560]]

the provisions of rule 18f-3 as if it were an open-end investment 
company.

Early Withdrawal Charges

    1. Section 23(c) of the 1940 Act provides, in relevant part, that 
no registered closed-end investment company shall purchase securities 
of which it is the issuer, except: (a) On a securities exchange or 
other open market; (b) pursuant to tenders, after reasonable 
opportunity to submit tenders given to all holders of securities of the 
class to be purchased; or (c) under other circumstances as the 
Commission may permit by rules and regulations or orders for the 
protection of investors.
    2. Rule 23c-3 under the 1940 Act permits an ``interval fund'' to 
make repurchase offers of between five and twenty-five percent of its 
outstanding shares at net asset value at periodic intervals pursuant to 
a fundamental policy of the interval fund. Rule 23c-3(b)(1) under the 
1940 Act permits an interval fund to deduct from repurchase proceeds 
only a repurchase fee, not to exceed two percent of the proceeds, that 
is paid to the interval fund and is reasonably intended to compensate 
the fund for expenses directly related to the repurchase.
    3. Section 23(c)(3) provides that the Commission may issue an order 
that would permit a closed-end investment company to repurchase its 
shares in circumstances in which the repurchase is made in a manner or 
on a basis that does not unfairly discriminate against any holders of 
the class or classes of securities to be purchased.
    4. Applicants request relief under section 6(c), discussed above, 
and section 23(c)(3) from rule 23c-3 to the extent necessary for the 
Future Funds to impose early withdrawal charges, which are 
distribution-related fees payable to the distributor, on Shares of the 
Funds submitted for repurchase that have been held for less than a 
specified period.
    5. Applicants state that the early withdrawal charges they intend 
to impose are functionally similar to CDSCs imposed by open-end 
investment companies under rule 6c-10 under the 1940 Act. Rule 6c-10 
permits open-end investment companies to impose CDSCs, subject to 
certain conditions. Applicants note that rule 6c-10 is grounded in 
policy considerations supporting the employment of CDSCs where there 
are adequate safeguards for the investor and state that the same policy 
considerations support imposition of early withdrawal charges in the 
interval fund context. In addition, applicants state that early 
withdrawal charges may be necessary for the distributor to recover 
distribution costs. Applicants represent that any early withdrawal 
charge imposed by the Funds will comply with rule 6c-10 under the 1940 
Act as if the rule were applicable to closed-end investment companies. 
Each Future Fund will disclose early withdrawal charges in accordance 
with the requirements of Form N-1A concerning CDSCs.

Asset-Based Distribution and/or Service Fees

    1. Section 17(d) of the 1940 Act and rule 17d-1 under the 1940 Act 
prohibit an affiliated person of a registered investment company, or an 
affiliated person of such person, acting as principal, from 
participating in or effecting any transaction in connection with any 
joint enterprise or joint arrangement in which the investment company 
participates unless the Commission issues an order permitting the 
transaction. In reviewing applications submitted under section 17(d) 
and rule 17d-1, the Commission considers whether the participation of 
the investment company in a joint enterprise or joint arrangement is 
consistent with the provisions, policies and purposes of the 1940 Act, 
and the extent to which the participation is on a basis different from 
or less advantageous than that of other participants.
    2. Rule 17d-3 under the 1940 Act provides an exemption from section 
17(d) and rule 17d-1 to permit open-end investment companies to enter 
into distribution arrangements pursuant to rule 12b-1 under the 1940 
Act. Applicants request an order under section 17(d) and rule 17d-1 
under the 1940 Act to the extent necessary to permit the Fund to impose 
asset-based distribution and service fees. Applicants have agreed to 
comply with rules 12b-1 and 17d-3 as if those rules applied to closed-
end investment companies, which they believe will resolve any concerns 
that might arise in connection with a Fund financing the distribution 
of its Shares through asset-based distribution fees.
    3. For the reasons stated above, applicants submit that the 
exemptions requested under section 6(c) are necessary and appropriate 
in the public interest and are consistent with the protection of 
investors and the purposes fairly intended by the policy and provisions 
of the 1940 Act. Applicants further submit that the relief requested 
pursuant to section 23(c)(3) will be consistent with the protection of 
investors and will insure that applicants do not unfairly discriminate 
against any holders of the class of securities to be purchased. 
Finally, applicants state that the Funds' imposition of asset-based 
distribution and/or service fees is consistent with the provisions, 
policies and purposes of the 1940 Act and does not involve 
participation on a basis different from or less advantageous than that 
of other participants.

Applicants' Condition

    Applicants agree that any order granting the requested relief will 
be subject to the following condition:
    Each Fund relying on the order will comply with the provisions of 
rules 6c-10, 12b-1, 17d-3, 18f-3, 22d-1, and, where applicable, 11a-3 
under the 1940 Act, as amended from time to time, as if those rules 
applied to closed-end management investment companies, and will comply 
with the FINRA Rule 2341, as amended from time to time, as if that rule 
applied to all closed-end management investment companies.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22517 Filed 10-17-17; 8:45 am]
BILLING CODE 8011-01-P


