January 20, 2012.
On November 16, 2011, NYSE Arca, Inc. (“Exchange” or “NYSE Arca”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 
and Rule 19b-4 thereunder,
a proposed rule change to list and trade shares (“Shares”) of the Accuvest Global Opportunities ETF (“Fund”) under NYSE Arca Equities Rule 8.600. The proposed rule change was published for comment in the Federal Register on December 7, 2011.
The Commission received no comments on the proposal. This order grants approval of the proposed rule change.
II. Description of the Proposed Rule Change
The Exchange proposes to list and trade the Shares of the Fund pursuant to NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares on the Exchange. The Shares will be offered by AdvisorShares Trust (“Trust”), a statutory trust organized under the laws of the State of Delaware and registered with the Commission as an open-end management investment company.
The investment adviser to the Fund is AdvisorShares Investments, LLC (“Adviser”). Accuvest Global Advisers is the Fund's sub-adviser (“Sub-Adviser”) and provides day-to-day portfolio management of the Fund. Foreside Fund Services, LLC is the principal underwriter and distributor of the Fund's Shares. The Exchange states that neither the Adviser nor the Sub-Adviser is affiliated with a broker-dealer.
Description of the Fund
The Fund will seek long-term capital appreciation in excess of global equity benchmarks such as the MSCI All Country World Index. The Fund will be a “fund-of-funds” that seeks to achieve its investment objective by investing primarily in other U.S.-listed exchange-traded products (“Underlying ETPs”).
The Sub-Adviser will seek to achieve the Fund's investment objective by investing in Underlying ETPs that provide diversified exposure to select economies around the world. The Sub-Adviser will rank countries on a monthly basis using its proprietary country ranking model in order to determine their relative attractiveness. The Sub-Adviser then will endeavor to invest in Underlying ETPs that individually or in combination correspond generally to the price and yield performance of the specific countries (or regions) identified as most attractive by the model. The Fund's portfolio will be invested only in countries with the highest ranking as identified by the Sub-Adviser's proprietary country ranking process.
The Fund intends to invest primarily in the securities of Underlying ETPs consistent with the requirements of Section 12(d)(1) of the 1940 Act, or any rule, regulation or order of the Commission or interpretation thereof. The Fund will only make such investments in conformity with the requirements of Section 817 of the Internal Revenue Code of 1986, as amended (“Code”).
The Fund, through its investment in Underlying ETPs, may invest in equity securities, which represent ownership interests in a company or partnership and consist of common stocks, preferred stocks, warrants to acquire common stock, securities convertible into common stock, investments in master limited partnerships and American Depositary Receipts (“ADRs”), as well as Global Depositary Receipts (“GDRs,” and together with ADRs, collectively, “Depositary Receipts”).
The Fund, through its investment in Underlying ETPs, may invest in closed-end funds, pooled investment vehicles that are registered under the 1940 Act and whose shares are listed and traded on U.S. national securities exchanges. The Fund, through its investment in Underlying ETPs, may invest in shares of real estate investment trusts, which are pooled investment vehicles that invest primarily in real estate or real estate related loans.
The Underlying ETPs in which the Fund will invest will primarily hold substantially all of their assets in securities representing a country (or region) specific index. The Underlying ETPs may invest in complex securities such as equity options, index options, repurchase agreements, foreign currency contracts, swaps, and futures contracts.
Investment Process and Portfolio Construction
The Sub-Adviser has developed its proprietary country ranking model around the premise that in the long run, country-specific effects are the most important drivers of global equity returns. Through its country ranking model, the Sub-Adviser ranks countries on a monthly basis in order to determine their relative merit.
The Sub-Adviser will use a four step process to create its portfolio allocations:
1. Qualify Countries: In order to determine which countries are to be included in the country ranking model, the Sub-Adviser will apply two consistent criteria. All qualified countries (a) must be part of the MSCI All Country World Index and (b) have a liquid Underlying ETP that tracks the performance of its equity market.
2. Analyze Factor Data: The Sub-Adviser will collect and analyze monthly factor data on every qualified country in the model. Currently, the Sub-Adviser uses nearly 40 factors that are classified within fundamental (e.g., short-term earnings growth), momentum (e.g., 3 month local price momentum), risk (e.g., change in 30-day standard deviation), and valuation (e.g., earnings growth) factor groups.
3. Rank Countries: Each month the Sub-Adviser will use the weighted individual factor scores for each country in the model to assign each country a relative attractiveness score. This monthly score will be used to rank countries from most attractive to least attractive.
4. Create Portfolio: The Sub-Adviser will create the portfolio based on the underlying attractiveness score of each country in the model. The most attractive five to six countries will receive allocations in the portfolio, and the Sub-Adviser will purchase single country Underlying ETPs that represent investments in those countries' equity markets. No single country Underlying ETP may receive more than a 25% allocation at purchase price.
To respond to adverse market, economic, political, or other conditions,
the Fund may invest 100% of its total assets, without limitation, in high-quality, short-term debt securities and money market instruments. The Fund may be invested in these instruments for extended periods, depending on the Sub-Adviser's assessment of market conditions. These short-term debt securities and money market instruments include shares of other mutual funds, commercial paper, certificates of deposit, bankers' acceptances, U.S. Government securities, repurchase agreements,
and bonds that are BBB or higher. The Fund may also invest a substantial portion of its assets in such instruments at any time to maintain liquidity or pending selection of investments in accordance with its policies.
While under normal market conditions the Fund will primarily invest in Underlying ETPs, the Fund may, to a limited extent, invest directly in other investments. The Fund, or the Underlying ETPs in which it invests, may invest in U.S. government securities. The Fund may invest in exchange-traded notes (“ETNs”).
The Fund, or the Underlying ETPs in which it invests, may invest in U.S. Treasury zero-coupon bonds.
The Fund will seek to qualify for treatment as a regulated investment company under Subchapter M of the Code. The Fund may not (i) with respect to 75% of its total assets, purchase securities of any issuer (except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities or shares of investment companies) if, as a result, more than 5% of its total assets would be invested in the securities of such issuer, or (ii) acquire more than 10% of the outstanding voting securities of any one issuer. In addition, the Fund may not invest 25% or more of its total assets in the securities of one or more issuers conducting their principal business activities in the same industry or group of industries (this limitation does not apply to investments in securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, or shares of investment companies). The Fund will not invest 25% or more of its total assets in any investment company that so concentrates.
The Fund will not purchase illiquid securities, including Rule 144A securities and loan participation interests. Further, in accordance with the Exemptive Order, the Fund will not invest in options contracts, futures contracts, or swap agreements. The Fund's investments will be consistent with the Fund's investment objective and will not be used to enhance leverage. Except for Underlying ETPs that may hold non-U.S. issues, the Fund will not otherwise invest in non-U.S. issues.
Additional information regarding the Trust, Fund, Shares, Fund's investment strategies, risks, creation and redemption procedures, fees, portfolio holdings and disclosure policies, distributions and taxes, availability of information, trading rules and halts, and surveillance procedures, among other things, can be found in the Notice and the Registration Statement, as applicable.
III. Discussion and Commission's Findings
The Commission has carefully reviewed the proposed rule change and finds that it is consistent with the requirements of Section 6 of the Act and the rules and regulations thereunder applicable to a national securities exchange.
In particular, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,
which requires, among other things, that the Exchange's rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission notes that the Fund and the Shares must comply with the requirements of NYSE Arca Equities Rule 8.600 to be listed and traded on the Exchange.
The Commission finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Act,
which sets forth Congress' finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure the availability to brokers, dealers, and investors of information with respect to quotations for, and transactions in, securities. Quotation and last-sale information for the Shares will be available via the Consolidated Tape Association (“CTA”) high-speed line, and for the Underlying ETPs, will be available from the national securities exchanges on which they are listed. In addition, the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule 8.600(c)(3), will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Exchange's Core Trading Session.
On each business day, before commencement of trading in Shares in the Core Trading Session on the Exchange, the Fund will disclose on its Web site the Disclosed Portfolio, as defined in NYSE Arca Equities Rule 8.600(c)(2), that will form the basis for the Fund's calculation of the net asset value (“NAV”) at the end of the business day.
The Fund will calculate NAV once each business day as of the regularly scheduled close of trading on the New York Stock Exchange (normally 4 p.m. Eastern Time). In addition, information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers' computer screens and other electronic services, and the previous day's closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. The Fund's Web site will also include a form of the prospectus for the Fund, information relating to NAV, and other quantitative and trading information. Moreover, a basket composition file, which includes the security names and share quantities required to be delivered in exchange for Fund Shares, together with estimates and actual cash components, will be publicly disseminated daily prior to the opening of the NYSE via the National Securities Clearing Corporation.
The Commission further believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. The Commission notes that the Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time.
In addition, the Exchange will halt trading in the Shares under the specific circumstances set forth in NYSE Arca Equities Rule 8.600(d)(2)(D), and may halt trading in the Shares if trading is not occurring in the securities and/or the financial instruments comprising the Disclosed Portfolio of the Fund, or if other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present.
The Exchange will consider the suspension of trading in or removal from listing of the Shares if the Portfolio Indicative Value is no longer calculated or available or the Disclosed Portfolio is not made available to all market participants at the same time.
The Exchange represents that neither the Adviser nor the Sub-Adviser is affiliated with a broker-dealer.
Further, the Commission notes that the Reporting Authority that provides the Disclosed Portfolio must implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material non-public information regarding the actual components of the portfolio.
The Exchange states that it has a general policy prohibiting the distribution of material, non-public information by its employees. The Commission also notes that the Exchange is able to obtain information with respect to the Underlying ETPs from the U.S. exchanges, which are members of the Intermarket Surveillance Group, listing and trading such Underlying ETPs.
The Exchange further represents that the Shares are deemed to be equity securities, thus rendering trading in the Shares subject to the Exchange's existing rules governing the trading of equity securities. In support of this proposal, the Exchange has made representations, including:
(1) The Shares will conform to the initial and continued listing criteria under NYSE Arca Equities Rule 8.600.
(2) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions.
(3) The Exchange's surveillance procedures applicable to derivative products, which include Managed Fund Shares, are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. All Underlying ETPs will be listed on national securities exchanges, all of which are members of the Intermarket Surveillance Group.
(4) Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit (“ETP”) Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Specifically, the Information Bulletin will discuss the following: (a) The procedures for purchases and redemptions of Shares in Creation Unit aggregations (and that Shares are not individually redeemable); (b) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (c) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated Portfolio Indicative Value will not be calculated or publicly disseminated; (d) how information regarding the Portfolio Indicative Value is disseminated; (e) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (f) trading information.
(5) For initial and/or continued listing, the Fund will be in compliance with Rule 10A-3 under the Act,
as provided by NYSE Arca Equities Rule 5.3.
(6) The Fund will not: (a) Purchase illiquid securities, including Rule 144A securities and loan participation agreements; (b) pursuant to the terms of the Exemptive Order, invest in options contracts, futures contracts, or swap agreements; and (c) except for Underlying ETPs that may hold non-U.S. issues, otherwise invest in non-U.S. issues.
(7) The Fund's investments will be consistent with the Fund's investment objective and will not be used to enhance leverage.
(8) A minimum of 100,000 Shares of the Fund will be outstanding at the commencement of trading on the Exchange.
This approval order is based on the Exchange's representations.
For the foregoing reasons, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act 
and the rules and regulations thereunder applicable to a national securities exchange.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-NYSEArca-2011-86) be, and it hereby is, approved.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Kevin M. O'Neill,
[FR Doc. 2012-1582 Filed 1-25-12; 8:45 am]
BILLING CODE 8011-01-P