[Federal Register Volume 85, Number 131 (Wednesday, July 8, 2020)]
[Notices]
[Pages 41073-41075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14633]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33917; 812-15073]


Keystone Private Income Fund and Keystone National Group, LLC

July 1, 2020.
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 ``Act'') for an exemption from sections 
18(a)(2), 18(c) and 18(i) of the Act, and for an order pursuant to 
section 17(d) of the Act and rule 17d-1 under the 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 with varying sales loads and 
to impose asset-based distribution and/or service fees.

Applicants:  Keystone Private Income Fund (the ``Initial Fund'') and 
Keystone National Group, LLC (the ``Adviser'').

Filing Dates:  The application was filed on October 7, 2019, and 
amended on January 13, 2020, and April 23, 2020.

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 emailing the Commission's 
Secretary at Secretarys-Office@sec.gov and serving Applicants with a 
copy of the request by email. Hearing requests should be received by 
the Commission by 5:30 p.m. on July 27, 2020, 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 emailing the 
Commission's Secretary.

ADDRESSES: The Commission: Secretarys-Office@sec.gov. Applicants: c/o 
Joshua Deringer, by email to joshua.deringer@faegredrinker.com; 
Adviser, c/o Brad Allen, by email to ballen@keystonenational.net.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 551-6871, or Daniele Marchesani, Assistant Chief 
Counsel, 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 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 Act as a non-diversified, closed-end management 
investment company. The Initial Fund's primary investment objective 
will be to produce current income by investing in a wide range of 
private credit-oriented or other cash flow producing investments, 
including corporate loans and credit facilities, equipment leasing 
transactions, real estate backed loans, corporate and consumer 
receivables, and other specialty finance opportunities or income-
producing assets.
    2. The Adviser, a Delaware limited liability company, is registered 
as an investment adviser under the Investment Advisers Act of 1940, as 
amended (the ``Advisers Act''). The Adviser will serve as investment 
adviser to the Initial Fund.
    3. Applicants seek an order to permit the Initial Fund to issue 
multiple classes of shares of beneficial interest with varying sales 
loads and to impose asset-based distribution and/or service fees and 
early repurchase fees.
    4. Applicants request that the order also apply to any continuously 
offered registered closed-end management investment company that has 
been previously organized or that may be organized 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 provides periodic 
liquidity with respect to its shares pursuant to rule 13e-4 under the 
Securities Exchange Act of 1934 (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 
compliance with the terms and conditions of the application. 
Applicants represent that each entity presently intending to rely on 
the requested relief is listed as an applicant.
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    5. The Initial Fund initially will register with five initial 
classes of shares, Class I Shares, Class A Shares, Class D Shares, 
Class Y Shares, and Class Z Shares, each with its own fee and expense 
structure. Additional offerings by any Fund relying on the order may be 
on a private placement or public offering basis. The Initial Fund will 
only offer one class of shares, Class Y Shares, until receipt of the 
requested relief. Shares of the Initial Fund will be sold only to 
persons who are ``accredited investors,'' as defined in Regulation D 
under the Securities Act of 1933, and ``qualified clients,'' as defined 
in the Advisers Act. The Funds will offer their Shares continuously at 
a price based on net asset value. Shares of the Funds will not be 
listed on any securities exchange nor quoted on any quotation medium. 
The Funds do not expect there to be a secondary trading market for 
their shares.
    6. Applicants state that, from time to time, the Initial Fund may 
create additional classes of shares, the terms of which may differ 
between Class I Shares, Class A Shares, Class D Shares, Class Y Shares, 
and Class Z Shares pursuant to and in compliance with rule 18f-3 under 
the Act.
    7. Applicants state that shares of a Fund may be subject to an 
early repurchase fee (``Early Repurchase Fee'') at a rate of no greater 
than 2% of the shareholder's repurchase proceeds if the interval 
between the date of purchase of the shares and the valuation date with 
respect to the repurchase of those shares is less than one year.\3\ Any 
Early Repurchase Fee will apply equally to all classes of shares of a 
Fund, in compliance with section 18 of the Act and rule 18f-3 
thereunder. To the extent a Fund determines to waive, impose scheduled 
variations of, or eliminate any Early Repurchase Fee, it will do so in 
compliance with the requirements of rule 22d-1 under the Act as if the 
Early

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Repurchase Fee were a CDSL and as if the Fund were an open-end 
investment company and the Fund's waiver of, scheduled variation in, or 
elimination of, any such Early Repurchase Fee will apply uniformly to 
all shareholders of the Fund regardless of class. Applicants state that 
the Initial Fund intends to impose an Early Repurchase Fee of 2%.
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    \3\ Applicants state that an Early Repurchase Fee charged by a 
Fund is not the same as a contingent deferred sales load (``CDSL'') 
assessed by an open-end fund pursuant to rule 6c-10 under the Act, 
as CDSLs are distribution-related charges payable to a distributor, 
whereas the Early Repurchase Fee is payable to the Fund to 
compensate long-term shareholders for the expenses related to 
shorter term investors, in light of the Fund's generally longer-term 
investment horizons and investment operations.
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    8. Applicants represent that any asset-based service and/or 
distribution fees for each class of shares of the Funds will comply 
with the provisions of the FINRA Rule 2341(d) (``FINRA Sales Charge 
Rule'').\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 under Form N-1A. As is required for open-
end funds, each Fund will disclose its expenses in shareholder reports, 
and describe any arrangements that result in breakpoints in or 
elimination of 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 Sales Charge Rule includes any 
successor or replacement to the FINRA Sales Charge Rule.
    \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 Act.
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    9. 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.

Applicants' Legal Analysis: 

Multiple Classes of Shares

    1. Section 18(a)(2) of the 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 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 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 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 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 Act, or from any 
rule or regulation under the 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 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 securities 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 Act to any greater degree than open-end investment companies' 
multiple class structures that are permitted by rule 18f-3 under the 
Act. Applicants state that each Fund will comply with the provisions of 
rule 18f-3 as if it were an open-end investment company.

Asset-Based Distribution and/or Service Fees

    1. Section 17(d) of the Act and rule 17d-1 under the 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 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 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 Act. 
Applicants request an order under section 17(d) and rule 17d-1 under 
the Act to the extent necessary to permit the Fund to impose asset-
based distribution and/or 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 Act. Applicants also state that the Funds' imposition of asset-
based distribution and/or service fees is consistent with the 
provisions, policies and purposes of the Act and does not involve 
participation on a basis different from or less advantageous than that 
of other participants.

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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 Act, as amended from time to time, as if those rules applied 
to closed-end management investment companies, and will comply with the 
FINRA Sales Charge Rule, 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.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-14633 Filed 7-7-20; 8:45 am]
BILLING CODE 8011-01-P


