[Federal Register Volume 85, Number 211 (Friday, October 30, 2020)]
[Notices]
[Pages 68937-68941]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24015]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34072; 812-15116]


Managed Portfolio Series and Tortoise Index Solutions, LLC

October 26, 2020.
AGENCY: Securities and Exchange Commission (``Commission'').

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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, 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 (``1934 Act''), and sections 6-
07(2)(a), (b), and (c) of Regulation S-X (``Disclosure Requirements'').
    Applicants: Managed Portfolio Series (``Trust''), a Delaware 
statutory trust registered under the Act as an open-end management 
investment company with multiple series (each a ``Fund'') and Tortoise 
Index Solutions, LLC (``Initial Adviser''), a Delaware limited 
liability company registered as an investment adviser under the 
Investment Advisers Act of 1940 (``Advisers Act'') that serves an 
investment adviser to the Funds (collectively with the Trust, the 
``Applicants'').
    Summary of Application: The requested exemption would permit 
Applicants to enter into and materially amend subadvisory agreements 
with subadvisers without shareholder approval and would grant relief 
from the Disclosure Requirements as they relate to fees paid to the 
subadvisers.
    Filing Dates: The application was filed on March 27, 2020, and 
amended on June 2, 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 November 20, 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 at Secretarys-Office@sec.gov.

ADDRESSES: The Commission: Secretarys-Office@sec.gov. Applicants: 
Thomas A. Bausch, Managed Portfolio Series, by email: 
thomas.bausch@usbank.com and Tortoise Index Solutions, LLC, by email: 
jkruske@tortoiseadvisors.com.

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.

I. Requested Exemptive Relief

    1. Applicants request an order to permit the Adviser,\1\ subject to 
the approval of the board of trustees of each Trust (collectively, the 
``Board''),\2\ including a majority of the trustees who are not 
``interested persons'' of the Trust or the Adviser, as defined in 
section 2(a)(19) of the Act (the ``Independent Trustees''), without 
obtaining shareholder approval, to: (i) Select investment subadvisers 
(``Subadvisers'') for all or a portion of the assets of one or more of 
the Funds pursuant to an investment subadvisory agreement with each 
Subadviser (each a ``Subadvisory Agreement''); and (ii) materially 
amend Subadvisory Agreements with the Subadvisers.
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    \1\ The term ``Adviser'' means (i) the Initial Adviser, (ii) its 
successors, and (iii) any entity controlling, controlled by or under 
common control with, the Initial Adviser or its successors that 
serves as the primary adviser to a Subadvised 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. Any future Adviser 
also will be registered with the Commission as an investment adviser 
under the Advisers Act.
    \2\ The term ``Board'' also includes the board of trustees or 
directors of a future Subadvised Fund (as defined below), if 
different from the board of trustees (``Trustees'') of the Trust.
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    2. Applicants also request an order exempting the Subadvised Funds 
(as defined below) from the Disclosure Requirements, which require each 
Fund to disclose fees paid to a Subadviser. Applicants seek relief to 
permit each Subadvised Fund to disclose (as a dollar amount and a 
percentage of the Fund's net assets): (i) The aggregate fees paid to 
the Adviser and any Wholly-Owned Subadvisers; and (ii) the aggregate 
fees paid to Affiliated and Non-Affiliated Subadvisers (``Aggregate Fee 
Disclosure'').\3\ Applicants seek an exemption to permit a Subadvised 
Fund to include only the Aggregate Fee Disclosure.\4\
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    \3\ A ``Wholly-Owned Subadviser'' is any investment adviser that 
is (1) an indirect or direct ``wholly-owned subsidiary'' (as such 
term is defined in the Act) of the Adviser, (2) a ``sister company'' 
of the Adviser that is an indirect or direct ``wholly-owned 
subsidiary'' of the same company that indirectly or directly wholly 
owns the Adviser (the Adviser's ``parent company''), or (3) a parent 
company of the Adviser. An ``Affiliated Subadviser'' is any 
investment subadviser that is not a Wholly-Owned Subadviser, but is 
an ``affiliated person'' (as defined in section 2(a)(3) of the Act) 
of a Subadvised Fund or the Adviser for reasons other than serving 
as investment subadviser to one or more Funds. A ``Non-Affiliated 
Subadviser'' is any investment adviser that is not an ``affiliated 
person'' (as defined in the Act) of a Fund or the Adviser, except to 
the extent that an affiliation arises solely because the Subadviser 
serves as a subadviser to one or more Funds.
    \4\ Applicants note that all other items required by sections 6-
07(2)(a), (b) and (c) of Regulation S-X will be disclosed.
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    3. Applicants request that the relief apply to 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; (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'').\5\
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    \5\ All registered open-end investment companies that currently 
intend to rely on the requested order are named as Applicants. Any 
entity that relies on the requested order will do so only in 
accordance with the terms and conditions contained in the 
application.
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II. Management of the Subadvised Funds

    4. The Adviser serves or will serve as the investment adviser to 
each Subadvised Fund pursuant to an investment advisory agreement with 
the Fund (each an ``Investment Advisory Agreement''). Each Investment 
Advisory Agreement has been or will be approved by the Board, including 
a majority of the Independent Trustees, and by the shareholders of the 
relevant Subadvised Fund in the manner required by sections 15(a) and 
15(c) of the Act. The terms of these Investment Advisory Agreements 
comply or will comply with section 15(a) of the Act. Applicants are not 
seeking an exemption from the Act with respect to the Investment 
Advisory Agreements. Pursuant to the terms of each Investment Advisory 
Agreement, the Adviser, subject to the oversight of the Board, will 
provide continuous investment management for each Fund. For its 
services to each Fund, the Adviser receives or will receive an 
investment advisory fee from that Fund as specified in the applicable 
Investment Advisory Agreement.
    5. Consistent with the terms of each Investment Advisory Agreement, 
the

[[Page 68939]]

Adviser may, subject to the approval of the Board, including a majority 
of the Independent Trustees, and the shareholders of the applicable 
Subadvised Fund (if required by applicable law), delegate portfolio 
management responsibilities of all or a portion of the assets of a 
Subadvised Fund to a Subadviser. The Adviser will retain overall 
responsibility for the management and investment of the assets of each 
Subadvised Fund. This responsibility includes recommending the removal 
or replacement of Subadvisers, allocating the portion of that 
Subadvised Fund's assets to any given Subadviser and reallocating those 
assets as necessary from time to time.\6\ The Subadvisers will be 
``investment advisers'' to the Subadvised Funds within the meaning of 
Section 2(a)(20) of the Act and will provide investment management 
services to the Funds subject to, without limitation, the requirements 
of Sections 15(c) and 36(b) of the Act.\7\ The Subadvisers, subject to 
the oversight of the Adviser and the Board, will determine the 
securities and other investments to be purchased, sold or entered into 
by a Subadvised Fund's portfolio or a portion thereof, and will place 
orders with brokers or dealers that they select.\8\
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    \6\ Applicants represent that if the name of any Subadvised Fund 
contains the name of a subadviser, the name of the Adviser that 
serves as the primary adviser to the Fund, or a trademark or trade 
name that is owned by or publicly used to identify the Adviser, will 
precede the name of the subadviser.
    \7\ The Subadvisers will be registered with the Commission as an 
investment adviser under the Advisers Act or not subject to such 
registration.
    \8\ A ``Subadviser'' also includes an investment subadviser that 
will provide the Adviser with a model portfolio reflecting a 
specific strategy, style or focus with respect to the investment of 
all or a portion of a Subadvised Fund's assets. The Adviser may use 
the model portfolio to determine the securities and other 
instruments to be purchased, sold or entered into by a Subadvised 
Fund's portfolio or a portion thereof, and place orders with brokers 
or dealers that it selects.
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    6. The Subadvisory Agreements will be approved by the Board, 
including a majority of the Independent Trustees, in accordance with 
sections 15(a) and 15(c) of the Act. In addition, the terms of each 
Subadvisory Agreement will comply fully with the requirements of 
section 15(a) of the Act. The Adviser may compensate the Subadvisers or 
the Subadvised Funds may compensate the Subadvisers directly.
    7. Subadvised 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 Subadvised Fund, that Fund will send its shareholders 
either a Multi-manager Notice or a Multi-manager Notice and Multi-
manager Information Statement; \9\ and (b) the Subadvised Fund will 
make the Multi-manager Information Statement available on the website 
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 
website for at least 90 days.\10\
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    \9\ A ``Multi-manager Notice'' will be modeled on a Notice of 
internet Availability as defined in Rule 14a-16 under the 1934 Act, 
and specifically will, among other things: (a) Summarize the 
relevant information regarding the new Subadviser (except as 
modified to permit Aggregate Fee Disclosure); (b) inform 
shareholders that the Multi-manager Information Statement is 
available on a website; (c) provide the website address; (d) state 
the time period during which the Multi-manager Information Statement 
will remain available on that website; (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 Subadvised Fund. A ``Multi-manager Information 
Statement'' will meet the requirements of Regulation 14C, Schedule 
14C and Item 22 of Schedule 14A under the 1934 Act for an 
information statement, except as modified by the requested order to 
permit Aggregate Fee Disclosure. Multi-manager Information 
Statements will be filed with the Commission via the EDGAR system.
    \10\ In addition, Applicants represent that whenever a 
Subadviser is hired or terminated, or a Subadvisory Agreement is 
materially amended, the Subadvised Fund's prospectus and statement 
of additional information will be supplemented promptly pursuant to 
rule 497(e) under the Securities Act of 1933.
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III. Applicable Law

    8. Section 15(a) of the Act states, in 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, which 
contract, whether with such registered company or with an investment 
adviser of such registered company, has been approved by the vote of a 
majority of the outstanding voting securities of such registered 
company.''
    9. Form N-1A is the registration statement used by open-end 
investment companies. Item 19(a)(3) of Form N-1A requires a registered 
investment company to disclose in its statement of additional 
information the method of computing the ``advisory fee payable'' by the 
investment company with respect to each investment adviser, including 
the total dollar amounts that the investment company ``paid to the 
adviser (aggregated with amounts paid to affiliated advisers, if any), 
and any advisers who are not affiliated persons of the adviser, under 
the investment advisory contract for the last three fiscal years.''
    10. Rule 20a-1 under the Act requires proxies solicited with 
respect to a registered investment company to comply with Schedule 14A 
under the 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 fee,'' 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.
    11. Regulation S-X sets forth the requirements for financial 
statements required to be included as part of a registered investment 
company's registration statement and shareholder reports filed with the 
Commission. Sections 6-07(2)(a), (b), and (c) of Regulation S-X require 
a registered investment company to include in its financial statements 
information about investment advisory fees.
    12. 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 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.

IV. Arguments in Support of the Requested Relief

    13. Applicants assert that, from the perspective of the 
shareholder, the role of the Subadvisers is substantially equivalent to 
the limited role of the individual portfolio managers employed by an 
investment adviser to a traditional investment company. Applicants also 
assert that the shareholders expect the Adviser, subject to review and 
approval of the Board, to select a Subadviser who is in the best 
position to achieve the Subadvised Fund's investment objective. 
Applicants believe that permitting the Adviser to perform the duties 
for which the shareholders of the Subadvised Fund are paying the 
Adviser--the selection, oversight and evaluation of the Subadviser--
without incurring unnecessary delays or expenses of convening special 
meetings of shareholders is appropriate and in the interest of the 
Fund's shareholders, and will allow such Fund to operate more

[[Page 68940]]

efficiently. Applicants state that each Investment Advisory Agreement 
will continue to be fully subject to section 15(a) of the Act and 
approved by the relevant Board, including a majority of the Independent 
Trustees, in the manner required by section 15(a) and 15(c) of the Act.
    14. Applicants submit that the requested relief meets the standards 
for relief under section 6(c) of the Act. Applicants state that the 
operation of the Subadvised Fund in the manner described in the 
Application must be approved by shareholders of that Fund before it may 
rely on the requested relief. Applicants also state that the proposed 
conditions to the requested relief are designed to address any 
potential conflicts of interest or economic incentives, and provide 
that shareholders are informed when new Subadvisers are hired.
    15. Applicants contend that, in the circumstances described in the 
application, a proxy solicitation to approve the appointment of new 
Subadvisers provides no more meaningful information to shareholders 
than the proposed Multi-manager Information Statement. Applicants state 
that, accordingly, they believe the requested relief 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.
    16. With respect to the relief permitting Aggregate Fee Disclosure, 
Applicants assert that disclosure of the individual fees paid to the 
Subadvisers does not serve any meaningful purpose. Applicants contend 
that the primary reasons for requiring disclosure of individual fees 
paid to Subadvisers are to inform shareholders of expenses to be 
charged by a particular Subadvised Fund and to enable shareholders to 
compare the fees to those of other comparable investment companies. 
Applicants believe that the requested relief satisfies these objectives 
because the Subadvised Fund's overall advisory fee will be fully 
disclosed and, therefore, shareholders will know what the Subadvised 
Fund's fees and expenses are and will be able to compare the advisory 
fees a Subadvised Fund is charged to those of other investment 
companies. In addition, Applicants assert that the requested relief 
would benefit shareholders of the Subadvised Fund because it would 
improve the Adviser's ability to negotiate the fees paid to 
Subadvisers. In particular, Applicants state that if the Adviser is not 
required to disclose the Subadvisers' fees to the public, the Adviser 
may be able to negotiate rates that are below a Subadviser's ``posted'' 
amounts. Applicants assert that the relief will also encourage 
Subadvisers to negotiate lower subadvisory fees with the Adviser if the 
lower fees are not required to be made public.

V. Relief for Affiliated Subadvisers

    17. The Commission has granted the requested relief with respect to 
Wholly-Owned and Non-Affiliated Subadvisers through numerous exemptive 
orders. The Commission also has extended the requested relief to 
Affiliated Subadvisers.\11\ Applicants state that although the 
Adviser's judgment in recommending a Subadviser can be affected by 
certain conflicts, they do not warrant denying the extension of the 
requested relief to Affiliated Subadvisers. Specifically, the Adviser 
faces those conflicts in allocating fund assets between itself and a 
Subadviser, and across Subadvisers, as it has an interest in 
considering the benefit it will receive, directly or indirectly, from 
the fee the Subadvised Fund pays for the management of those assets. 
Applicants also state that to the extent the Adviser has a conflict of 
interest with respect to the selection of an Affiliated Subadviser, the 
proposed conditions are protective of shareholder interests by ensuring 
the Board's independence and providing the Board with the appropriate 
resources and information to monitor and address conflicts.
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    \11\ Carillon Series Trust, et al., Investment Co. Act Rel. Nos. 
33464 (May 2, 2019) (notice) and 33494 (May 29, 2019) (order).
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    18. With respect to the relief permitting Aggregate Fee Disclosure, 
Applicants assert that it is appropriate to disclose only aggregate 
fees paid to Affiliated Subadvisers for the same reasons that similar 
relief has been granted previously with respect to Wholly-Owned and 
Non-Affiliated Subadvisers.

VI. Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Subadvised Fund may rely on the order requested in the 
Application, the operation of the Subadvised Fund in the manner 
described in the Application will be, or has been, approved by a 
majority of the Subadvised Fund's outstanding voting securities as 
defined in the Act, or, in the case of a Subadvised Fund whose public 
shareholders purchase shares on the basis of a prospectus containing 
the disclosure contemplated by condition 2 below, by the initial 
shareholder before such Subadvised Fund's shares are offered to the 
public.
    2. The prospectus for each Subadvised Fund will disclose the 
existence, substance and effect of any order granted pursuant to the 
Application. In addition, each Subadvised Fund will hold itself out to 
the public as employing the multi-manager structure described in the 
Application. The prospectus will prominently disclose that the Adviser 
has the ultimate responsibility, subject to oversight by the Board, to 
oversee the Subadvisers and recommend their hiring, termination, and 
replacement.
    3. The Adviser will provide general management services to each 
Subadvised Fund, including overall supervisory responsibility for the 
general management and investment of the Subadvised Fund's assets, and 
subject to review and oversight of the Board, will (i) set the 
Subadvised Fund's overall investment strategies, (ii) evaluate, select, 
and recommend Subadvisers for all or a portion of the Subadvised Fund's 
assets, (iii) allocate and, when appropriate, reallocate the Subadvised 
Fund's assets among Subadvisers, (iv) monitor and evaluate the 
Subadvisers' performance, and (v) implement procedures reasonably 
designed to ensure that Subadvisers comply with the Subadvised Fund's 
investment objective, policies and restrictions.
    4. Subadvised 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.
    5. At all times, at least a majority of the Board will be 
Independent Trustees, and the selection and nomination of new or 
additional Independent Trustees will be placed within the discretion of 
the then-existing Independent Trustees.
    6. 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.
    7. 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.
    8. The Board must evaluate any material conflicts that may be 
present in a subadvisory arrangement. Specifically, whenever a 
subadviser change is proposed for a Subadvised Fund (``Subadviser 
Change'') or the Board considers an existing Subadvisory

[[Page 68941]]

Agreement as part of its annual review process (``Subadviser Review''):
    (a) The Adviser will provide the Board, to the extent not already 
being provided pursuant to section 15(c) of the Act, with all relevant 
information concerning:
    (i) Any material interest in the proposed new Subadviser, in the 
case of a Subadviser Change, or the Subadviser in the case of a 
Subadviser Review, held directly or indirectly by the Adviser or a 
parent or sister company of the Adviser, and any material impact the 
proposed Subadvisory Agreement may have on that interest;
    (ii) any arrangement or understanding in which the Adviser or any 
parent or sister company of the Adviser is a participant that (A) may 
have had a material effect on the proposed Subadviser Change or 
Subadviser Review, or (B) may be materially affected by the proposed 
Subadviser Change or Subadviser Review;
    (iii) any material interest in a Subadviser held directly or 
indirectly by an officer or Trustee of the Subadvised Fund, or an 
officer or board member of the Adviser (other than through a pooled 
investment vehicle not controlled by such person); and
    (iv) any other information that may be relevant to the Board in 
evaluating any potential material conflicts of interest in the proposed 
Subadviser Change or Subadviser Review.
    (b) the Board, including a majority of the Independent Trustees, 
will make a separate finding, reflected in the Board minutes, that the 
Subadviser Change or continuation after Subadviser Review is in the 
best interests of the Subadvised Fund and its shareholders and, based 
on the information provided to the Board, does not involve a conflict 
of interest from which the Adviser, a Subadviser, any officer or 
Trustee of the Subadvised Fund, or any officer or board member of the 
Adviser derives an inappropriate advantage.
    9. Each Subadvised Fund will disclose in its registration statement 
the Aggregate Fee Disclosure.
    10. In the event that 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.
    11. Any new Subadvisory Agreement or any amendment to an existing 
Investment Advisory Agreement or Subadvisory Agreement that directly or 
indirectly results in an increase in the aggregate advisory fee rate 
payable by the Subadvised Fund will be submitted to the Subadvised 
Fund's shareholders for approval.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-24015 Filed 10-29-20; 8:45 am]
BILLING CODE 8011-01-P


