Notice2022-28538
VanEck Russia ETF and VanEck Russia Small-Cap ETF, Series of VanEck ETF Trust, and Van Eck Associates Corporation; 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
January 4, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 88 Issue 2 (Wednesday, January 4, 2023)</title>
</head>
<body><pre>
[Federal Register Volume 88, Number 2 (Wednesday, January 4, 2023)]
[Notices]
[Pages 393-396]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-28538]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 34793; File No. 812-15420]
VanEck Russia ETF and VanEck Russia Small-Cap ETF, Series of
VanEck ETF Trust, and Van Eck Associates Corporation; Notice of
Application and Temporary Order
December 28, 2022.
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'').
-----------------------------------------------------------------------
Summary of Application: Applicants request a temporary order to permit
each of VanEck Russia ETF and VanEck Russia Small-Cap ETF (each, a
``Fund,'' and collectively, the ``Funds''), series of VanEck ETF Trust
(the ``Trust''), 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 Trust, on behalf of the Funds, and Van Eck Associates
Corporation, the Funds' investment adviser (``Adviser'' and together
with the Trust, the ``Applicants'').
Filing Date: The application was filed on December 28, 2022.
Hearing or Notification of Hearing: Interested persons may request a
[[Page 394]]
hearing by emailing to the Commission's Secretary at <a href="/cdn-cgi/l/email-protection#f3a0969081968792818a80debc95959a9096b3809690dd949c85"><span class="__cf_email__" data-cfemail="ecbf898f9e89988d9e959fc1a38a8a858f89ac9f898fc28b839a">[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 January 24, 2023, 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#5605333524332237242f257b1930303f35331625333578313920"><span class="__cf_email__" data-cfemail="f0a3959382958491828983ddbf9696999395b0839593de979f86">[email protected]</span></a>.
ADDRESSES: The Commission: <a href="/cdn-cgi/l/email-protection#2d7e484e5f48594c5f545e00624b4b444e486d5e484e034a425b"><span class="__cf_email__" data-cfemail="88dbedebfaedfce9faf1fba5c7eeeee1ebedc8fbedeba6efe7fe">[email protected]</span></a>. Applicants:
Allison M. Fumai, Esq., Dechert LLP, 1095 Avenue of the Americas, New
York, New York 10036-6797, with copies to Jonathan R. Simon, Esq.,
VanEck ETF Trust, 666 Third Avenue, 9th Floor, New York, New York
10017.
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 December 28, 2022, which may be obtained via the 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 Trust is registered under the Act as an open-end series
management investment company. Adviser is the investment adviser to the
Funds, each of which is a series of the Trust. Adviser is registered as
an investment adviser under the Investment Advisers Act of 1940.
2. Each 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 each Fund are
listed on Cboe BZX Exchange, Inc. (``Cboe'').
3. VanEck Russia ETF's investment objective is to seek to replicate
as closely as possible, before fees and expenses, the price and yield
performance of the MVIS[supreg] Russia Index (the ``Russia Index'').
VanEck Russia Small-Cap ETF's investment objective is to seek to
replicate as closely as possible, before fees and expenses, the price
and yield performance of the MVIS[supreg] Russia Small-Cap Index
(together with the Russia Index, the ``Underlying Indexes'').
MarketVector Indexes GmbH suspended future rebalances of the Underlying
Indexes on March 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 each Fund's direct and
indirect holdings of Russian equity securities have become illiquid and
are fair valued at or near zero.
5. Effective March 3, 2022 and March 2, 2022, RSX and RSXJ,
respectively, temporarily suspended new creations of their shares until
further notice due to concerns about newly imposed restrictions
impacting the ability of U.S. investors to transact in securities in
the applicable Underlying Index, among other reasons.\1\ Prior to
market open on March 4, 2022, Cboe halted trading of each Fund's shares
in light of ongoing issues related to Russia's invasion of Ukraine.
---------------------------------------------------------------------------
\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.'').
---------------------------------------------------------------------------
6. Applicants anticipate that each Fund's shares will be delisted
by Cboe 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 Cboe determines in its discretion to
delist shares of the Fund, which may occur even if the requested relief
is not granted). If shares of a Fund are delisted by Cboe, 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 Termination of Series (the ``Plan of
Liquidation'') approved by the Board of Trustees of the Trust (the
``Board''), each Fund will distribute in liquidation all of its assets
to shareholders, less a reserve in an amount estimated to meet the
Fund's outstanding liabilities, the costs of the liquidation, taking
into account the political and market uncertainties impacting the sale
of Russian securities, and the expenses necessary for the continued
limited operation of the Fund through its final termination. Following
that distribution, each 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 each 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 a Fund. Each
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.
8. Applicants believe the requested relief will permit each 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 January 2023 liquidating distribution and any
subsequent liquidating distributions. Notwithstanding the present
inability to dispose of Russian securities held by each 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,
each Fund will be required to satisfy redemption requests
[[Page 395]]
from APs, while other investors would be unable to trade the Fund's
shares. Although the Funds have 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 Cboe may determine in its
discretion to delist shares of the Funds if the requested relief is not
granted. A Fund will not be eligible to rely on Rule 6c-11 once the
Fund's shares are delisted by Cboe. As a consequence, to the extent
that a 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. Each Fund therefore would not, for its
part, initiate delisting of the Fund's shares with Cboe until after the
requested relief is granted.\2\
---------------------------------------------------------------------------
\2\ It is not anticipated that Cboe will delist a Fund's shares
before the Fund's requested relief is granted by the SEC.
---------------------------------------------------------------------------
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 each Fund
effective December 28, 2022, and postpone the date of payment of
redemption proceeds with respect to redemption orders received on or
after December 23, 2022 but not yet paid as of December 28, 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 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 each 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
each 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 each 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 Trustees,\3\
will adopt or has adopted the Plan of Liquidation for the orderly
liquidation of each Fund's assets and distribution of appropriate
payments to the Fund's shareholders.
---------------------------------------------------------------------------
\3\ ``Independent Trustees'' means trustees who are not
``interested persons'' of the Trust, as such term is defined in
section 2(a)(19) of the Act.
---------------------------------------------------------------------------
2. Pending liquidating distributions, each 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. Each Fund's assets will be distributed to the Fund's
shareholders solely in accordance with the Plan of Liquidation.
4. Each 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. Each Fund and the Adviser will promptly make available to
Commission staff all files, books, records and personnel, as requested,
relating to the Fund.
6. Each 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 Funds.
8. Each 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. Each 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. Each 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 each Fund's shareholders. Under the circumstances
described in the application, which require immediate action to protect
the Funds' 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 VanEck Russia ETF and VanEck Russia
Small-Cap ETF, series of VanEck ETF Trust, and Van Eck Associates
Corporation (File No. 812-15420),
It is ordered, pursuant to section 22(e)(3) of the Act, that the
requested
[[Page 396]]
relief from section 22(e) of the Act is granted with respect to each
Fund until it has liquidated, or until the Commission rescinds the
order granted herein. This order shall be in effect as of December 28,
2022, with suspension of redemption rights as requested by the
Applicants to be effective as of December 28, 2022 and the postponement
of payment of redemption proceeds to apply to redemption orders
received on or after December 23, 2022 but not yet paid as of December
28, 2022.
By the Commission.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-28538 Filed 1-3-23; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on January 4, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.