
[Federal Register Volume 84, Number 28 (Monday, February 11, 2019)]
[Notices]
[Pages 3269-3270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01890]



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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33369; 812-14986]


Victory Capital Management Inc. et al.

February 6, 2019.
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 (``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 in rule 20a-1 under the Act, Item 19(a)(3) of 
Form N-1A, Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and 22(c)(9) of 
Schedule 14A under the Securities Exchange Act of 1934, and Sections 6-
07(2)(a), (b), and (c) of Regulation S-X (``Disclosure Requirements''). 
The requested exemption would permit an investment adviser to hire and 
replace certain sub-advisers without shareholder approval and grant 
relief from the Disclosure Requirements as they relate to fees paid to 
the sub-advisers.

Applicants:  Victory Portfolios and Victory Portfolios II (each, a 
``Victory Investment Company'' and together, the ``Victory Investment 
Companies'' with multiple series (each, a ``Fund'')); Victory Capital 
Management Inc. (``VCM'') (the ``Adviser''); Victory Capital Advisers, 
Inc. (``VCA'') and Foreside Fund Services, LLC (``Foreside''), 
collectively, the ``Applicants''. Each Victory Investment Company is 
organized as a Delaware statutory trust and is registered with the 
Commission as an open-end management investment company under the Act.

Filing Dates:  The application was filed on December 10, 2018, and 
amended on February 1, 2019.

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 March 4, 2019, 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 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: c/o James G. Silk, 
Esq., Willkie Farr & Gallagher LLP, 1875 K Street NW, Washington, DC 
20006 and Jay G. Baris, Shearman & Sterling LLP, 599 Lexington Avenue, 
New York, NY 10022.

FOR FURTHER INFORMATION CONTACT:  Laura L. Solomon, Senior Counsel, at 
(202) 551-6915, or Kaitlin C. Bottock, Branch Chief, at (202) 551-6821 
(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 website 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.

Summary of the Application

    1. The Adviser will serve as the investment adviser to the 
Subadvised Funds pursuant to an investment advisory agreement with the 
Victory Investment Companies (each, an ``Investment Management 
Agreement'').\1\ The Adviser will provide the Subadvised Funds with 
continuous and comprehensive investment management services subject to 
the supervision of, and policies established by, each Subadvised Funds' 
board of directors or trustees (the ``Board'').\2\ Each Investment 
Management Agreement permits the Adviser, subject to the approval of 
the Board, to delegate to one or more Sub-Advisers the responsibility 
to provide the day-to-day portfolio investment management of each 
Subadvised Fund, subject to the supervision and direction of the 
Adviser.\3\ The primary responsibility for managing the Subadvised 
Funds will remain vested in the Adviser. The Adviser will hire, 
evaluate, allocate assets to and oversee the Sub-Advisers, including 
determining whether a Sub-Adviser should be terminated, at all times 
subject to the authority of the Board.
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    \1\ Applicants request that the relief apply to the named 
Applicants, as well as to any future Fund and any other existing or 
future registered open-end management investment company or series 
thereof that intends to rely on the requested order in the future 
and that (i) is advised by the Adviser, its successors, and any 
entity controlling, controlled by or under common control with the 
Adviser or its successors (included in the term ``Adviser''), (ii) 
uses the multi-manager structure described in the application, and 
(iii) complies with the terms and conditions of the application 
(each, a ``Subadvised Fund''). For the purposes of the requested 
order, ``successor'' is limited to an entity resulting from a 
reorganization into another jurisdiction or a change in the type of 
business organization.
    \2\ The term ``Board'' includes the board of trustees or 
directors of a future Subadvised Fund.
    \3\ A ``Sub-Adviser'' for a Fund is (1) an indirect or direct 
``wholly-owned subsidiary'' (as such term is defined in the Act) of 
the Adviser for that Fund, or (2) a sister company of the Adviser 
for that Fund that is an indirect or direct ``wholly-owned 
subsidiary'' (as such term is defined in the Act) of the same 
company that, indirectly or directly, wholly owns the Adviser, or 
(3) a company of which the Adviser for that Fund is an indirect or 
direct ``wholly-owned subsidiary'' (as such term is defined in the 
1940 Act) (each of (1), (2) and (3) a ``Wholly-Owned Sub-Adviser'' 
and collectively, the ``Wholly-Owned Sub-Advisers''), or (4) an 
investment sub-adviser for that Fund that is not an ``affiliated 
person'' (as such term is defined in Section 2(a)(3) of the Act) of 
the Fund, any Feeder Fund, (as defined below) invested in a Master 
Fund (as defined below), the Funds, or the Adviser, except to the 
extent that an affiliation arises solely because the Sub-Adviser 
serves as a sub-adviser to one or more Funds (each a ``Non-
Affiliated Sub-Adviser'' and collectively, the ``Non-Affiliated Sub-
Advisers'').
     In the future, a Fund may operate in a master-feeder structure 
pursuant to Section 12(d)(1)(E) of the Act. In such a structure, 
certain Funds (each, a ``Feeder Fund'') may invest substantially all 
of their assets in a Fund (a ``Master Fund'') pursuant to Section 
12(d)(1)(E) of the Act. No Feeder Fund will engage any sub-advisers 
other than through approving the engagement of one or more of the 
Master Fund's sub-advisers.
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    2. Applicants request an exemption to permit the Adviser, subject 
to Board approval, to hire a Non-Affiliated Sub-Adviser or a Wholly-
Owned Sub-Adviser, pursuant to Sub-Advisory Agreements and materially 
amend Sub-Advisory Agreements with Non-Affiliated Sub-Advisers and 
Wholly-Owned Sub-Advisers without obtaining the shareholder approval 
required under section 15(a) of the Act and rule 18f-2 under the 
Act.\4\ Applicants also seek an exemption from the Disclosure 
Requirements to permit a Subadvised Fund to disclose (as both a dollar 
amount and a percentage of the Subadvised Fund's net assets): (a) The 
aggregate fees paid to the Adviser and any Wholly-Owned Sub-Advisers; 
(b) the aggregate fees paid to Non-Affiliated Sub-Advisers; and (c) the 
fee paid to each Affiliated Sub-Adviser.
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    \4\ The requested relief will not extend to any sub-adviser, 
other than a Wholly-Owned Sub-Adviser, who is an affiliated person, 
as defined in section 2(a)(3) of the Act, of the Subadvised Fund, of 
any Feeder Fund or of the Adviser, other than by reason of serving 
as a sub-adviser to one or more of the Subadvised Funds 
(``Affiliated Sub-Adviser'').
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    3. Applicants agree that any order granting the requested relief 
will be subject to the terms and conditions stated in the application. 
Such terms and conditions provide for, among other

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safeguards, appropriate disclosure to Subadvised Funds' shareholders 
and notification about sub-advisory changes and enhanced Board 
oversight to protect the interests of the Subadvised Funds' 
shareholders.
    4. 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 
any rule thereunder, if such relief is necessary or appropriate in the 
public interest and consistent with the protection of investors and 
purposes fairly intended by the policy and provisions of the Act. 
Applicants believe that the requested relief meets this standard 
because, as further explained in the application, the Investment 
Management Agreement will remain subject to shareholder approval, while 
the role of the Sub-Advisers is substantially equivalent to that of 
individual portfolio managers, so that requiring shareholder approval 
of Sub-Advisory Agreements would impose unnecessary delays and expenses 
on the Subadvised Funds. Applicants believe that the requested relief 
from the Disclosure Requirements meets this standard because it will 
improve the Adviser's ability to negotiate fees paid to the Sub-
Advisers that are more advantageous for the Subadvised Funds.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-01890 Filed 2-8-19; 8:45 am]
 BILLING CODE 8011-01-P


