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Investment Company Act of 1940
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RESPONSE OF THE OFFICE OF INVESTMENT COMPANY REGULATION DIVISION OF INVESTMENT MANAGEMENT |
Our Ref. No. 2003-2-ICR |
Your letter of October 10, 2003 requests our assurance that we would not recommend that the Commission take any enforcement action under the Investment Company Act of 1940 ("Act") if MTB Investment Advisors, Inc. ("MTBIA"), and any existing or future persons controlling, controlled by, or under common control with MTBIA (together with MTBIA, the "MTBIA Control Group"), and MTB Group of Funds ("MTB Funds"), and each existing and future registered open-end management investment company, or series thereof, advised by a member of the MTBIA Control Group, rely on an exemptive order previously issued to ARK Funds and Allied Investment Advisors, Inc. ("AIA")1 and an exemptive order previously issued to ARK Funds, AIA, and Allfirst Trust Company, N.A. ("Allfirst Trust").2
You state that on April 1, 2003, M&TBank Corporation ("M&TCorp.") acquired Allfirst Financial, Inc. ("Acquisition"). AIA and Allfirst Trust were wholly-owned subsidiaries of Allfirst Bank, which was a wholly-owned subsidiary of Allfirst Financial, Inc. At the time of the Acquisition, Allfirst Bank was merged into Manufacturers and Traders Trust Company ("M&TBank"), a wholly-owned subsidiary of M&TCorp. Allfirst Trust was subsequently merged into M&TBank. As a result of these transactions, Allfirst Trust ceased its corporate existence, and AIA became a wholly-owned subsidiary of M&TBank. On August 15, 2003, AIA changed its name to MTBIA.
You state that on August 15 and 22, 2003, ARK Funds was reorganized into VISION Group of Funds ("VISION Funds"), and VISION Funds changed its name to MTB Funds.3 You state that MTBIA will provide investment advisory services to MTB Funds on the same basis and through essentially the same personnel as such services were formerly provided to ARK Funds.
ARK Funds and AIA obtained the Cash Sweep Order from the Commission to permit ARK Funds, and each registered open-end management investment company, or series thereof, that is currently or in the future advised by AIA, or any existing or future persons controlling, controlled by, or under common control with AIA or its successors, to invest uninvested cash and cash collateral in affiliated money market funds. ARK Funds, Allfirst Trust, and AIA obtained the Interfund Lending Order from the Commission to permit ARK Funds and any other existing or future registered open-end management investment company, or series thereof, advised by AIA or any person controlling, controlled by, or under common control with AIA or its successors, to participate in a joint lending and borrowing facility.4
You state that the facts that AIA (renamed MTBIA) is now part of the MTBIA Control Group and that the series of ARK Funds have been reorganized into series of MTB Funds (which also include series of the former VISION Funds) may create some question as to the ability of MTBIA and MTB Funds to rely on the Orders. However, you note that the Orders extend to investment companies advised by AIA or persons in a control relationship with AIA, which would include MTB Funds. You also note that MTB Funds and MTBIA would comply with all terms, representations and conditions contained in the applications for the Orders, and that the Orders grant relief that is routinely granted by the Commission.
Based on the facts and representations made in your letter, we would not recommend enforcement action to the Commission if MTBIA and any existing or future member of the MTBIA Control Group and any existing or future registered open-end management investment company, or series thereof, that is advised by a member of the MTBIA Control Group, rely on the Orders. This response expresses the Division's position on enforcement action only, and does not purport to express any legal conclusions on the questions presented. Facts or conditions different from those presented in your letter might require a different conclusion.
Michael W. Mundt
Senior Special Counsel
Division of Investment Management
October 21, 2003
October 10, 2003
Investment Company Act of 1940 - Section
6(c), 12(d)(1)(J), 17(b) and 17(d); Rule 17d-1
Office of Investment Company Regulation
Division of Investment Management
U.S. Securities and Exchange Commission
Judiciary Plaza, Mail Stop 0504
450 Fifth Street, NW
Washington, DC 20549-0506
Attention: Michael W. Mundt, Esquire
Senior Special Counsel
Dear Mr. Mundt:
We are writing on behalf of MTB Group of Funds ("MTB Funds"), an open-end management investment company registered under the Investment Company Act of 1940 ("1940 Act"), and its investment adviser, MTB Investment Advisors, Inc. ("MTBIA"), registered as an investment adviser under the Investment Advisers Act of 1940 ("Advisers Act"). As noted in more detail below, at the close of business on August 15 and 22, 2003, the following events took place:
VISION Group of Funds (an open-end, management investment company registered under the 1940 Act) ("VISION Funds") acquired all of the assets and liabilities of each series of the ARK Funds (also an open-end, management investment company registered under the 1940 Act) pursuant to an Agreement and Plan of Reorganization that was approved by the respective Boards of Trustees of VISION Funds and ARK Funds ("Boards"), the shareholders of each series of ARK Funds, and the shareholders of each acquired series of VISION Funds ("Acquired VISION Funds").
In connection with this transaction, these additional events took place:
VISION Group of Funds were renamed MTB Group of Funds.
the investment advisory operations of M&T Asset Management ("MTAM"), which is an investment adviser registered under the Advisers Act that is a separately identifiable department of Manufacturers and Traders Trust Company ("M&TBank"), underwent an internal restructuring and became part of Allied Investment Advisors, Inc. ("AIA"), a wholly-owned subsidiary of M&TBank. AIA also is an investment adviser registered under the Advisers Act. Prior to this event, MTAM served as investment adviser to VISION Funds and AIA served as investment adviser to ARK Funds.
In connection with the adviser restructuring, AIA was renamed MTB Investment Advisors, Inc. and became investment adviser to MTB Funds.
We are writing to respectfully request that the staff of the Division of Investment Management (the "Staff") of the U.S. Securities and Exchange Commission (the "SEC") advise us that it will not recommend to the SEC that it take any enforcement action under the 1940 Act if certain parties rely on the exemptive relief previously granted to AIA, ARK Funds and Allfirst Trust Company, N.A. ("Allfirst Trust"), for the reasons set forth below.
On September 19, 2001, ARK Funds and AIA (AIA and ARK Funds are together referred to as the "2001 Parties") received an exemptive order (the "2001 Order") from the SEC. The 2001 Order was issued under Section 12(d)(1)(J) of the 1940 Act granting an exemption from Sections 12(d)(1)(A) and (B) of the 1940 Act, under Sections 6(c) and 17(b) of the 1940 Act granting an exemption from Section 17(a) of the 1940 Act, and under Section 17(d) of the 1940 Act and Rule 17d-1 thereunder permitting certain joint transactions. Specifically, the 2001 Order permits certain of the series of the ARK Funds that are not money market funds to invest uninvested cash and cash collateral from their securities lending programs into their affiliated money market funds, subject to certain conditions. The 2001 Order also covers "each registered open-end management investment company that is currently or in the future advised by [AIA], or any existing or future persons controlling, controlled by, or under common control with AIA or its successors," as well as any series of these investment companies (collectively referred to in this letter as "Future Funds" and "Future Advisers"). The 2001 Order includes a representation that "'successor' is limited to any entity or entities that result from a reorganization into another jurisdiction or a change in the type of business organization."
On March 3, 2003, ARK, AIA and Allfirst Trust (the "2003 Parties," which along with the 2001 Parties are collectively referred to as the "Original Parties") received an exemptive order (the "2003 Order," together with the 2001 Order, the "Orders") from the SEC. The 2003 Order was issued under Sections 6(c), 12(d)(1)(J), 17(b) and 17(d) of the 1940 Act, and Rule 17d-1 thereunder, granting an exemption from Sections 12(d)(1)(A) and (B), 17(a)(1), 17(a)(3), 18(f) and 21(b) of the 1940 Act. Specifically, the 2003 Order permits series of the ARK Funds to participate in a joint lending and borrowing facility, thereby allowing series of the ARK Funds to borrow and lend money for temporary purposes directly to and from each other through a credit facility, subject to certain conditions. The 2003 Order also covers "any other existing or future registered open-end management investment company or series thereof that is advised by AIA or any person controlling, controlled by, or under common control (within the meaning of Section 2(a)(9) of the [1940] Act) with AIA or its successors." As with the 2001 Order, the scope of the 2003 Order similarly covers Future Funds and Future Advisers, and similarly includes a representation that "'successor' is limited to any entity or entities that result from a reorganization into another jurisdiction or a change in the type of business organization."
On behalf of the MTB Funds, MTBIA and M&TBank, we respectfully request that the Staff confirm that the Orders may be relied upon by MTB Funds, MTBIA, any existing or future persons controlling, controlled by or under common control with MTBIA ("MTBIA Control Group"), and each existing and future registered open-end management investment company or series thereof for which a member of the MTBIA Control Group serves as investment adviser.
The Orders cover ARK Funds, AIA, Allfirst Trust, Future Funds and Future Advisers. At the time of the Orders, AIA and Allfirst Trust were wholly-owned subsidiaries of Allfirst Bank. Allfirst Bank was a wholly-owned subsidiary of Allfirst Financial, Inc., which was a wholly-owned subsidiary of Allied Irish Bank, p.l.c. Also during this time, Allfirst Trust served as transfer agent and administrator and custodian for ARK Funds.
On April 1, 2003, M&T Bank Corporation ("M&T Corp.") acquired Allfirst Financial, Inc. Allfirst Financial, Inc. was simultaneously merged with and into M&T Corp. and Allfirst Bank was merged with and into M&T Bank (the "Bank Merger"), a wholly-owned subsidiary of M&TCorp. As a result, AIA and Allfirst Trust became wholly-owned subsidiaries of M&TBank. On June 13, 2003, Allfirst Trust merged with and into M&TBank and ceased to exist as a separate entity.
In connection with the Bank Merger, AIA and M&T Bank proposed, and the Boards and the shareholders of each series of the ARK Funds and the Acquired VISION Funds approved, the tax-free reorganizations of these series into certain corresponding series of VISION Funds (the "Fund Reorganizations"). These Adviser Restructuring were consummated in two stages on the close of business on August 15 and 22, 2003, thereby resulting in thirty-four series.
The thirty series of ARK Funds were reorganized as follows:
sixteen of the series were reorganized into, and continue their current operations as the "accounting survivors" in, newly created series of VISION Funds; the assets and liabilities of six series were acquired by the newly created series of VISION Funds for which ARK Funds were the "accounting survivors"; the assets and liabilities of eight series were acquired by preexisting series of VISION Funds.
ARK Funds is winding up its affairs and intends to file a Form N-8F to deregister as an investment company.
Of the twenty-one series of VISION Funds, the assets and liabilities of three series of VISION Funds (previously defined as the Acquired VISION Funds) were acquired by the newly created series of VISION Funds for which ARK Funds were the "accounting survivors," five series acquired the assets and liabilities of certain series of the ARK Funds, and the remaining thirteen series were not involved in the Fund Reorganizations.
VISION Group of Funds was renamed MTB Group of Funds, and Allied Investment Advisors, Inc. was renamed MTB Investment Advisors, Inc. Both of these changes were made effective at the close of business on August 15, 2003.
On the close of business on August 22, 2003, MTAM's investment advisory business was internally restructured and became part of MTBIA (the "Adviser Restructuring"). AIA did not merge with another entity, change its form of business organization or cease its corporate existence. Rather, M&TBank transferred the mutual fund advisory business of MTAM and contributed the business assets of MTAM to AIA. MTAM has ceased operations and intends to withdraw its investment adviser registration. The primary reason for the Adviser Restructuring was to consolidate the entire mutual fund advisory business under the corporate umbrella of M&TCorp. into a single entity (MTBIA). MTBIA continues to provide investment advisory services to the thirty-four series of MTB Funds on the same basis and through essentially the same personnel (with the addition of those personnel from MTAM who are involved with the investment management of the VISION Funds) as such services were formerly provided by AIA and MTAM to the respective series of ARK Funds and VISION Funds.
Notwithstanding the Fund Reorganizations and Adviser Restructuring, MTB Funds and MTBIA desire to continue to engage in the transactions currently permitted under the Orders.
The reasons for and factors supporting this request are the same as those set forth in the applications for the Orders, which reasons and factors apply equally in the case of the VISION Funds, the ARK Funds, the MTB Funds, AIA and MTBIA. Because the MTB Funds will engage in the transactions contemplated by the Orders only in compliance with all terms, representations and conditions set forth in the applications for the Orders, the standards set forth in Sections 6(c), 17(b) and 12(d)(1)(J) of the 1940 Act and Rule 17d-1 under the 1940 Act will continue to be met.
While the Orders extend to Future Funds and Future Advisers, we note that the Fund Reorganizations and the Adviser Restructuring may create some question as to the ability of MTBIA and MTB Funds to rely on the Orders. In particular, we note that AIA continues as MTBIA and a member of the MTBIA Control Group, which is not the same control group that was in existence at the time of the Orders (i.e., Allied Irish Bank, p.l.c.). Similarly, we note that some, but not all, series of ARK Funds survive as successors-in-interest in the form of new series of MTB Funds, and are advised by MTBIA. However, MTB Funds also includes series of the VISION Funds, which was not an Original Party to the Orders, but each of those series is also advised by MTBIA.
In that regard, we believe that the public policy approach implicit in the expansive nature of the definition of Future Funds and Future Advisers, and the literal application of the language of the Orders, should result in the Staff's concurrence with our position that the MTB Funds and MTBIA are within the inclusive description of the applicants, namely any "existing or future registered open-end management investment company or series thereof that is advised by AIA or any person controlling, controlled by, or under common control with AIA or its successors." We note that the MTB Funds and MTBIA will comply with all of the terms, representations and conditions set forth in the applications for the Orders. We also note that the Orders grant relief that is routinely granted by the SEC.
In compliance with the procedures set forth in Release Nos. 6269 (December 5, 1980) and 5127 (January 25, 1971) under the Securities Act of 1933, as amended, seven copies of this letter are submitted herewith, and the specific subsections of the particular statutes to which this letter relates are indicated in the upper right hand corner of the first page of this letter and each copy. Please acknowledge receipt of this letter by date-stamping the enclosed receipt copy.
Should you or any member of the Staff have any questions concerning the foregoing request or require any additional information or clarification, please contact the undersigned at 412-288-1432 or, in my absence, C. Grant Anderson at 412-288-8160. We greatly appreciate the assistance from your office in this matter.
Victor R. Siclari
Enclosures
cc: |
C. Grant Anderson, Esq., Reed Smith LLP (w/enc.) |
http://www.sec.gov/divisions/investment/noaction/mtb102103.htm
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