Notice2022-17001
iShares MSCI Russia ETF, a Series of iShares Inc., and BlackRock Fund Advisors; Notice of Application and Temporary Order
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 9, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 152 (Tuesday, August 9, 2022)</title>
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[Federal Register Volume 87, Number 152 (Tuesday, August 9, 2022)]
[Notices]
[Pages 48521-48523]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-17001]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 34661; File No. 812-15377]
iShares MSCI Russia ETF, a Series of iShares Inc., and BlackRock
Fund Advisors; Notice of Application and Temporary Order
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application and a temporary order under section
22(e)(3) of the Investment Company Act of 1940 (the ``Act'').
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Summary of Application: Applicants request a temporary order to
permit iShares MSCI Russia ETF (the ``Fund''), a series of iShares Inc.
(the ``Company''), to suspend the right of redemption of its
outstanding redeemable securities and postpone the date of payment of
redemption proceeds with respect to redemption orders received but not
yet paid.
Applicants: The Company, on behalf of the Fund, and BlackRock Fund
Advisors, the Fund's investment adviser (``Adviser'' and together with
the Company, the ``Applicants'').
Filing Date: The application was filed on August 3, 2022.
Hearing or Notification of Hearing: Interested persons may request
a hearing by emailing to the Commission's Secretary at <a href="/cdn-cgi/l/email-protection#d182b4b2a3b4a5b0a3a8a2fc9eb7b7b8b2b491a2b4b2ffb6bea7"><span class="__cf_email__" data-cfemail="7221171100170613000b015f3d14141b1117320117115c151d04">[email protected]</span></a> and serving Applicants with a copy of the request by
email, if an email address is listed for the relevant Applicant below,
or personally or by mail, if a physical address is listed for the
relevant Applicant below. Hearing requests should be received by the
Commission by 5:30 p.m. on August 29, 2022, and should be accompanied
by proof of service on 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 at <a href="/cdn-cgi/l/email-protection#4417212736213025363d37690b22222d2721043721276a232b32"><span class="__cf_email__" data-cfemail="5e0d3b3d2c3b2a3f2c272d73113838373d3b1e2d3b3d70393128">[email protected]</span></a>.
ADDRESSES: The Commission: <a href="/cdn-cgi/l/email-protection#590a3c3a2b3c2d382b202a74163f3f303a3c192a3c3a773e362f"><span class="__cf_email__" data-cfemail="2a794f49584f5e4b58535907654c4c43494f6a594f49044d455c">[email protected]</span></a>. Applicants:
Benjamin J. Haskin, Esq. and Anne C. Choe, Esq., Willkie Farr &
Gallagher LLP, 1875 K Street NW, Washington, DC 20006-1238, with copies
to Marisa Rolland, Esq., BlackRock Fund Advisors, 400 Howard Street,
San Francisco, CA 94105.
FOR FURTHER INFORMATION CONTACT: Christopher D. Carlson, Senior
Counsel, Trace W. Rakestraw, Branch Chief, or Daniele Marchesani,
Assistant Chief Counsel, at (202) 551-6825 (Division of Investment
Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: For Applicants' representations, legal
analysis, and conditions, please refer to Applicants' application,
dated August 3, 2022, which may be obtained via the
[[Page 48522]]
Commission's website by searching for the file number at the top of
this document, or for an Applicant using the Company name search field,
on the SEC's EDGAR system. The SEC's EDGAR system may be searched at
<a href="https://www.sec.gov/edgar/searchedgar/legacy/companysearch.html">https://www.sec.gov/edgar/searchedgar/legacy/companysearch.html</a>. You
may also call the SEC's Public Reference Room at (202) 551-8090.
Background
1. The Company is registered under the Act as an open-end series
management investment company. Adviser is the investment adviser to the
Fund, a series of the Company. Adviser is registered as an investment
adviser under the Investment Advisers Act of 1940.
2. The Fund is a non-diversified exchange-traded fund (``ETF'')
that operates pursuant to Rule 6c-11 under the Act, which provides that
shares of an ETF can be purchased or redeemed directly from the ETF at
net asset value solely by authorized participants (``APs'') and only in
aggregations of a specified number of shares. Shares of the Fund are
listed on NYSE Arca, Inc. (``NYSE Arca'').
3. Prior to the events described in the Application, the Fund was
managed by Adviser according to an investment objective of seeking to
track the investment results of an index composed of Russian equities.
MSCI, Inc. discontinued the Fund's underlying index (the ``Underlying
Index'') on June 1, 2022.
4. Applicants state that the request for relief arises from the
effect of geopolitical affairs on transactions in the Russian equity
markets and on the relevant markets for Russian equity securities
generally, and on related clearance and payment systems. As a result of
these geopolitical affairs, virtually all of the Fund's direct and
indirect holdings of Russian equity securities have become illiquid and
are fair valued at or near zero.
5. Effective March 1, 2022, the Fund temporarily suspended new
creations of its shares until further notice due to concerns about
newly imposed restrictions impacting the ability of U.S. investors to
transact in securities in the Underlying Index, among other reasons.\1\
Prior to market open on March 4, 2022, NYSE Arca halted trading of the
Fund's shares in light of ongoing issues related to Russia's invasion
of Ukraine.
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\1\ See Exchange-Traded Funds, Investment Company Act Release
Number 33646 (Sept. 25, 2019) (``[A]n ETF generally may suspend the
issuance of creation units only for a limited time and only due to
extraordinary circumstances, such as when the markets on which the
ETF's portfolio holdings are traded are closed for a limited period
of time.'').
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6. Applicants anticipate that the Fund's shares will be delisted by
NYSE Arca on a date 15 days after the requested relief is granted and
coinciding with the payment of the initial liquidating distribution by
the Fund (or an earlier date if NYSE Arca determines in its discretion
to delist shares of the Fund, which may occur even if the requested
relief is not granted). If shares of the Fund are delisted by NYSE
Arca, the Fund will not be able to continue to operate as an ETF,
pursuant to Rule 6c-11.
7. If the order requested in the Application is granted, pursuant
to the Plan of Liquidation and Dissolution of Series (the ``Plan of
Liquidation'') approved by the Board of Directors of the Company (the
``Board''), the Fund will distribute in liquidation all of its liquid
assets to shareholders, less a reserve in an amount estimated to meet
the costs of the liquidation that would be borne by the Fund. Following
that distribution, the Fund will have no assets of realizable value
(other than the amount so held in reserve), and the Fund's positions in
Russian securities will not be transferable by the Fund. If some or all
of those Russian securities were at some point before the Fund's final
termination determined to have a greater value, it is possible that
they would continue not to be transferable at that time. In addition,
it is possible that even if Russian securities were able to be sold,
local regulations may not permit the proceeds of any such sale(s) to be
converted to U.S. dollars which are freely available to the Fund. The
Fund's remaining portfolio assets--the Russian equity securities--will
therefore remain in the Fund until they can be sold and converted into
U.S. dollars (with the proceeds distributed to the Fund's shareholders)
or are permanently written off, in each case as determined by the
Adviser and approved by the Board of Directors of the Company (the
``Board'').
8. Applicants believe the requested relief will permit the Fund to
liquidate its holdings in the manner described above without the risk
that it might be required to meet redemption requests submitted
potentially out of the reserve or otherwise when the Fund would have no
or few assets to meet the redemption requests. In addition, applicants
state that suspension of redemptions prior to the initial distribution
in liquidation will ensure that shareholders submitting such redemption
requests will participate in the liquidation and also will be entitled
to share both in the August 2022 liquidating distribution and any
subsequent liquidating distribution. Notwithstanding the present
inability to dispose of Russian securities held by the Fund, Applicants
have determined to seek the requested order at this time because
Applicants believe that liquidation of the Fund is in the best
interests of the Fund's shareholders. Without the requested relief, the
Fund will be required to satisfy redemption requests from APs, while
other investors would be unable to trade the Fund's shares. Although
the Fund has received no redemption orders since the invasion began, it
is possible that redemption orders could be received at any time.
9. In addition, as noted above, the NYSE Arca may determine in its
discretion to delist shares of the Fund if the requested relief is not
granted. The Fund will not be eligible to rely on Rule 6c-11 once the
Fund's shares are delisted by NYSE Arca. As a consequence, to the
extent that the Fund is obligated to satisfy any individual redemption
requests received from non-AP shareholders of the Fund, the Fund would
be unable to accept or process such redemption requests from an
operational perspective because the Fund and its service providers do
not have the operational infrastructure to enable the Fund to engage in
non-AP primary market transactions. The Fund therefore would not, for
its part, initiate delisting of the Fund's shares with NYSE Arca until
after the requested relief is granted.\2\
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\2\ It is not anticipated that NYSE Arca will delist the Fund's
shares before the Fund's requested relief is granted by the SEC.
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Relief Requested
1. Applicants request an order pursuant to Section 22(e) of the Act
to suspend the right of redemption with respect to shares of the Fund
effective August 3, 2022, and postpone the date of payment of
redemption proceeds with respect to redemption orders received on or
after August 1, 2022 but not yet paid as of August 3, 2022, for more
than seven days after the tender of securities to the Fund, until the
Fund completes the liquidation of its portfolio and distributes all its
assets to the shareholders, or until the Commission rescinds the order
granted herein. Applicants believe that the relief requested is
appropriate for the protection of shareholders of the Fund.
Applicants' Legal Analysis
1. Section 22(e)(1) of the Act provides that a registered
investment company may not suspend the right of redemption or postpone
the date of
[[Page 48523]]
payment or satisfaction upon redemption of any redeemable security in
accordance with its terms for more than seven days after the tender of
such security to the company or its designated agent except for any
period during which the New York Stock Exchange (``NYSE'') is closed
other than customary week-end and holiday closings, or during which
trading on the NYSE is restricted.
2. Section 22(e)(3) of the Act provides that redemptions may be
suspended by a registered investment company for such other periods as
the Commission may by order permit for the protection of security
holders of the registered investment company.
3. Applicants submit that granting the requested relief would be
for the protection of the shareholders of the Fund, as provided in
Section 22(e)(3) of the Act. Applicants assert that, in requesting an
order by the Commission, the Applicants' goal is to ensure that all of
the Fund's shareholders will be treated appropriately and fairly in
view of the otherwise detrimental effect on the Fund of the illiquidity
of the Fund's investments and the ongoing uncertainty surrounding the
Russian equity markets. The requested relief is intended to permit an
orderly liquidation of the Fund's portfolio and ensure that all of the
Fund's shareholders are protected in the process.
Applicants' Conditions
Applicants agree that any order of the Commission granting the
requested relief will be subject to the following conditions:
1. The Board, including a majority of the Independent Directors,\3\
will adopt or has adopted the Plan of Liquidation for the orderly
liquidation of Fund assets and distribution of appropriate payments to
Fund shareholders.
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\3\ ``Independent Directors'' means directors who are not
``interested persons'' of the Company, as such term is defined in
Section 2(a)(19) of the Act.
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2. Pending liquidating distributions, the Fund will invest proceeds
of cash dispositions of portfolio securities solely in U.S. government
securities, money market funds that are registered under the Act and
comply with the requirements of Rule 2a-7 under that Act, cash
equivalents, securities eligible for purchase by a registered money
market fund meeting the requirements of Rule 2a-7 under the Act with
legal maturities not in excess of 90 days and, if determined to be
necessary to protect the value of a portfolio position in a rights
offering or other dilutive transaction, additional securities of the
affected issuer.
3. The Fund's assets will be distributed to the Fund's shareholders
solely in accordance with the Plan of Liquidation.
4. The Fund and the Adviser will make and keep true, accurate and
current all appropriate records, including but not limited to those
surrounding the events leading to the requested relief, the Plan of
Liquidation, the sale of Fund portfolio securities, the distribution of
Fund assets, and communications with shareholders (including any
complaints from shareholders and responses thereto).
5. The Fund and the Adviser will promptly make available to
Commission staff all files, books, records and personnel, as requested,
relating to the Fund.
6. The Fund and the Adviser will provide periodic reporting to
Commission staff regarding their activities carried out pursuant to the
Plan of Liquidation.
7. The Adviser, its affiliates, and its and their associated
persons will not receive any fee for managing the Fund.
8. The Fund will be in liquidation and will not be engaged and does
not propose to engage in any business activities other than those
necessary for the protection of its assets, the protection of
shareholders and the winding-up of its affairs, as contemplated by the
Plan of Liquidation.
9. The Fund and the Adviser will appropriately convey accurate and
timely information to shareholders of the Fund, before or promptly
following the effective date of the liquidation, with regard to the
status of the Fund and its liquidation (including posting such
information on the Fund's website), and will thereafter from time to
time do so to reflect material developments relating to the Fund or its
status, including, without limitation, information concerning the dates
and amounts of distributions, and press releases and periodic reports,
and will maintain a toll-free number to respond to shareholder
inquiries.
10. The Fund and the Adviser shall consult with Commission staff
prior to making any material amendments to the Plan of Liquidation.
Commission Finding
Based on the representations and conditions in the application, the
Commission permits the temporary suspension of the right of redemption
for the protection of the Fund's shareholders. Under the circumstances
described in the application, which require immediate action to protect
the Fund's shareholders, the Commission concludes that it is not
practicable to give notice or an opportunity to request a hearing
before issuing the order.
Accordingly, in the matter of iShares MSCI Russia ETF, a series of
iShares Inc., and BlackRock Fund Advisors (File No. 812-15377),
It is ordered, pursuant to Section 22(e)(3) of the Act, that the
requested relief from Section 22(e) of the Act is granted with respect
to the Fund until it has liquidated, or until the Commission rescinds
the order granted herein. This order shall be in effect as of August 3,
2022, with suspension of redemption rights as requested by the
Applicants to be effective as of August 3, 2022 and the postponement of
payment of redemption proceeds to apply to redemption orders received
on or after August 1, 2022 but not yet paid as of August 3, 2022.
By the Commission.
Dated: August 3, 2022.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-17001 Filed 8-8-22; 8:45 am]
BILLING CODE 8011-01-P
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