SEC Company Response from Innovator ETFs Trust (CIK 0001415726) — Feb 25, 2020
Innovator ETFs Trust (CIK 0001415726)
Date: Feb. 25, 2020 · CIK: 0001415726 · Accession: 0001437749-20-003514
AI Filing Summary & Sentiment
File numbers found in text: 333-146827, 811-22135
Letter
VIA EDGAR CORRESPONDENCE United States Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: Innovator ETFs Trust File Nos. 333-146827; 811-22135
Dear Ms. Browning
This letter responds to your comments, provided by telephone regarding the registration statement filed on Form N-1A for Innovator ETFs Trust (the “Trust”) with the Securities and Exchange Commission (the “Commission”) on December 13, 2019 (the “Registration Statement”). The Registration Statement relates to the Innovator S&P 500 Buffer ETFTM – March, Innovator S&P 500 Power Buffer ETFTM – March and Innovator S&P 500 Ultra Buffer ETFTM – March (each a “Fund” and collectively, the “Funds”), each a series of the Trust. Capitalized terms used herein, but not otherwise defined, have the meanings ascribed to them in the Registration Statement.
Comment 1 – General
The Staff requests confirmation that the Funds’ next filing will consist of a full registration statement, including all required exhibits (for example a legality opinion), and that the legality opinion will be in compliance with Staff Legal Bulletin No. 19 (CF) and the requirements of Rule 485 of the Securities Act of 1933, as amended (the “1933 Act”).
Response to Comment 1
Pursuant to the Staff’s request, each Fund so confirms.
Comment 2 – General
The Staff requests confirmation that, with the exception of the revised name and defined outcome (i.e. the cap and the buffer), there are no other material changes between this filing and previous filings of this strategy.
Response to Comment 2
Pursuant to the Staff’s request, each Fund so confirms.
Comment 3 – General
Please confirm that the Funds will file an amended registration statement disclosing the final Cap within two days of the registration statement becoming effective. In addition, please confirm that no shares of the Funds will be sold prior to disclosure of the final Caps. Finally, in supplemental correspondence provide why a definitive cap is not available at the time of effectiveness.
Response to Comment 3
Pursuant to Rule 485A of the 1933 Act, the Registration Statement was set to go automatically effective on February 26, 2020. Prior to the effectiveness of the Registration Statement, the Funds filed an amended registration statement that discloses the Funds’ expected Cap ranges on February 21, 2020, scheduled to go effective on February 27, 2020 to comply with the Staff’s request that the Funds will not go effective more than two business days prior to the expected final Cap filing. The Funds note that each Fund’s Cap is not available until the market closes on the day prior to the Funds’ launch, February 28, 2020. Accordingly, the Funds intend to file an amended registration statement disclosing each Funds’ Cap after 5:30 pm E.S.T. on February 28, 2020. Each Fund confirms that no sale of its Shares will take place prior to the filing of the registration statement.
Comment 4 – General
The Staff notes that certain service providers of the Funds (such as transfer agent and the custodian) are contracting with the Funds under the Trust to pay for these services. Explain in supplemental correspondence whether the Funds can be held liable for those expenses in the event of a default by the Adviser. If the Funds can be held accountable, the Staff requests an explanation for the accounting for those services.
Response to Comment 4
The Trust, on behalf of the Funds, pays the compensation of the Funds’ service providers by way of payment of a unitary fee to the Adviser. The Adviser, on behalf of the Funds, pays the Funds’ ordinary operating expenses, including amounts due to the Funds’ service providers (such as the administrator, custodian and auditor). In essence, the Adviser facilitates payment of the Funds’ ordinary operating expenses, while the Funds accrue and bear those expenses in an amount equal to the unitary fee. The Adviser would only directly bear the Funds’ ordinary operating expenses if the assets of the Funds, and therefore the amount of the unitary fee, were too small to cover the aggregate amount of the Funds’ ordinary operating expenses in a year. In this way, the unitary fee arrangement is economically equivalent to an expense cap, which involves an investment adviser agreeing to waive all or a portion of its advisory fee and/or reimburse a fund for ordinary operating expenses that exceed an agreed-upon level. In both instances, a fund bears its own ordinary operating expenses, but only to the extent of a specified amount.
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Comment 5 – Performance Information
In supplemental correspondence to the Staff, explain how the performance information required by Form N-1A (specifically, Item 4) will be disclosed during the annual update. The Staff requests that in connection with this disclosure, the Funds ensure that an appropriate broad-based index is disclosed as required by For N-1A (specifically Item 4(b)(2)(iii) and Instruction 5 to Item 27(b)(7)).
Response to Comment 5
Each Fund will report its respective performance information in accordance with the requirements of Form N-1A. Each Fund (and all ETFs in the Defined Outcome ETF suite) has a fiscal year end of October 31, meaning that the annual update to the Registration Statement will take place within 120 days of October 31. It is anticipated that this filing will made on the 120th day (on or about February 28). Therefore, in accordance with the requirements of Form N-1A, the performance information required by Item 4 of Form N-1A (and the instructions thereunder) will be provided as of the end of the most recent calendar year, and the Funds acknowledge that an appropriate broad-based index will be used as required under Form N-1A. The Funds will use the S&P 500 Price Return Index as their broad-based market index so that investors may compare the returns of each Fund against the index upon which the intended defined outcomes are based. Pursuant to the requirements of Item 13 of Form N-1A, the Funds will disclose audited financial highlights information as of the end of the fiscal year.
Comment 6 – Concentration Policy
The Staff notes that each Fund’s Statement of Additional Information contains a policy not to concentrate more than 25% of its net assets in the securities of issuers in any industry or group of industries. In supplemental correspondence to the Staff, please explain why there is no corresponding disclosure in Item 4 of each Funds’ prospectus disclosing such concentration policy.
Response to Comment 6
The Funds do not expect such a concentration to occur and will continuously monitor the index’s industry exposure. Each Fund and commits to revising the disclosure in the future to reflect any significant exposures to any industry that would warrant Item 4 disclosure in its prospectus.
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Please call me at (312) 845-3484 if you have any questions or issues you would like to discuss regarding these matters.
Sincerely yours,
Chapman and Cutler llp
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CORRESP 1 filename1.htm inetfs20200225_corresp.htm [Chapman and Cutler LLP Letterhead] February 25, 2020 VIA EDGAR CORRESPONDENCE Kimberly Browning United States Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: Innovator ETFs Trust File Nos. 333-146827; 811-22135 Dear Ms. Browning This letter responds to your comments, provided by telephone regarding the registration statement filed on Form N-1A for Innovator ETFs Trust (the “Trust”) with the Securities and Exchange Commission (the “Commission”) on December 13, 2019 (the “Registration Statement”). The Registration Statement relates to the Innovator S&P 500 Buffer ETFTM – March, Innovator S&P 500 Power Buffer ETFTM – March and Innovator S&P 500 Ultra Buffer ETFTM – March (each a “Fund” and collectively, the “Funds”), each a series of the Trust. Capitalized terms used herein, but not otherwise defined, have the meanings ascribed to them in the Registration Statement. Comment 1 – General The Staff requests confirmation that the Funds’ next filing will consist of a full registration statement, including all required exhibits (for example a legality opinion), and that the legality opinion will be in compliance with Staff Legal Bulletin No. 19 (CF) and the requirements of Rule 485 of the Securities Act of 1933, as amended (the “1933 Act”). Response to Comment 1 Pursuant to the Staff’s request, each Fund so confirms. Comment 2 – General The Staff requests confirmation that, with the exception of the revised name and defined outcome (i.e. the cap and the buffer), there are no other material changes between this filing and previous filings of this strategy. Response to Comment 2 Pursuant to the Staff’s request, each Fund so confirms. Comment 3 – General Please confirm that the Funds will file an amended registration statement disclosing the final Cap within two days of the registration statement becoming effective. In addition, please confirm that no shares of the Funds will be sold prior to disclosure of the final Caps. Finally, in supplemental correspondence provide why a definitive cap is not available at the time of effectiveness. Response to Comment 3 Pursuant to Rule 485A of the 1933 Act, the Registration Statement was set to go automatically effective on February 26, 2020. Prior to the effectiveness of the Registration Statement, the Funds filed an amended registration statement that discloses the Funds’ expected Cap ranges on February 21, 2020, scheduled to go effective on February 27, 2020 to comply with the Staff’s request that the Funds will not go effective more than two business days prior to the expected final Cap filing. The Funds note that each Fund’s Cap is not available until the market closes on the day prior to the Funds’ launch, February 28, 2020. Accordingly, the Funds intend to file an amended registration statement disclosing each Funds’ Cap after 5:30 pm E.S.T. on February 28, 2020. Each Fund confirms that no sale of its Shares will take place prior to the filing of the registration statement. Comment 4 – General The Staff notes that certain service providers of the Funds (such as transfer agent and the custodian) are contracting with the Funds under the Trust to pay for these services. Explain in supplemental correspondence whether the Funds can be held liable for those expenses in the event of a default by the Adviser. If the Funds can be held accountable, the Staff requests an explanation for the accounting for those services. Response to Comment 4 The Trust, on behalf of the Funds, pays the compensation of the Funds’ service providers by way of payment of a unitary fee to the Adviser. The Adviser, on behalf of the Funds, pays the Funds’ ordinary operating expenses, including amounts due to the Funds’ service providers (such as the administrator, custodian and auditor). In essence, the Adviser facilitates payment of the Funds’ ordinary operating expenses, while the Funds accrue and bear those expenses in an amount equal to the unitary fee. The Adviser would only directly bear the Funds’ ordinary operating expenses if the assets of the Funds, and therefore the amount of the unitary fee, were too small to cover the aggregate amount of the Funds’ ordinary operating expenses in a year. In this way, the unitary fee arrangement is economically equivalent to an expense cap, which involves an investment adviser agreeing to waive all or a portion of its advisory fee and/or reimburse a fund for ordinary operating expenses that exceed an agreed-upon level. In both instances, a fund bears its own ordinary operating expenses, but only to the extent of a specified amount. - 2 - Comment 5 – Performance Information In supplemental correspondence to the Staff, explain how the performance information required by Form N-1A (specifically, Item 4) will be disclosed during the annual update. The Staff requests that in connection with this disclosure, the Funds ensure that an appropriate broad-based index is disclosed as required by For N-1A (specifically Item 4(b)(2)(iii) and Instruction 5 to Item 27(b)(7)). Response to Comment 5 Each Fund will report its respective performance information in accordance with the requirements of Form N-1A. Each Fund (and all ETFs in the Defined Outcome ETF suite) has a fiscal year end of October 31, meaning that the annual update to the Registration Statement will take place within 120 days of October 31. It is anticipated that this filing will made on the 120th day (on or about February 28). Therefore, in accordance with the requirements of Form N-1A, the performance information required by Item 4 of Form N-1A (and the instructions thereunder) will be provided as of the end of the most recent calendar year, and the Funds acknowledge that an appropriate broad-based index will be used as required under Form N-1A. The Funds will use the S&P 500 Price Return Index as their broad-based market index so that investors may compare the returns of each Fund against the index upon which the intended defined outcomes are based. Pursuant to the requirements of Item 13 of Form N-1A, the Funds will disclose audited financial highlights information as of the end of the fiscal year. Comment 6 – Concentration Policy The Staff notes that each Fund’s Statement of Additional Information contains a policy not to concentrate more than 25% of its net assets in the securities of issuers in any industry or group of industries. In supplemental correspondence to the Staff, please explain why there is no corresponding disclosure in Item 4 of each Funds’ prospectus disclosing such concentration policy. Response to Comment 6 The Funds do not expect such a concentration to occur and will continuously monitor the index’s industry exposure. Each Fund and commits to revising the disclosure in the future to reflect any significant exposures to any industry that would warrant Item 4 disclosure in its prospectus. * * * * * * * * - 3 - Please call me at (312) 845-3484 if you have any questions or issues you would like to discuss regarding these matters. Sincerely yours, Chapman and Cutler llp By: /s/ Morrison C. Warren Morrison C. Warren - 4 -