Correspondence 0001592900-24-002558 from EA Series Trust (CIK 0001592900)
EA Series Trust (CIK 0001592900)
Date: Dec. 19, 2024 · CIK: 0001592900 · Accession: 0001592900-24-002558
AI Filing Summary & Sentiment
File numbers found in text: 333-195493, 811-22961
Letter
Division of Investment Management Post-Effective Amendment No. 385 to the Registration Statement on Form N-1A (the “Amendment”) File Nos.: 333-195493 and 811-22961 Bastion Energy ETF
RE: EA Series Trust (the “Trust” or the “Registrant”)
Dear Mr. Williamson and Ms. Marquigny:
This correspondence responds to comments to the Trust received by the undersigned from the staff of the U.S. Securities and Exchange Commission (the “Staff” of the “Commission”) with respect to the Amendment relating to the Bastion Energy ETF, a proposed new series of the Trust (the “Fund”). For your convenience, the comments have been reproduced with responses following each comment. Capitalized terms not otherwise defined have the same meaning as in the Amendment.
Comment 1:Please file your responses as correspondence at least five business days prior to filing a 485(b) and reflect any disclosure changes in correspondence or send a redline showing all changes to the Staff. Please apply comments to similar disclosures throughout the document.
Response: The Registrant acknowledges this comment.
Comment 2:Please include a completed fee table and expense example in the response letter. Please confirm if there are any fee waivers, reimbursements or recoupment obligations and if so, please disclose the details in a footnote to the fee table.
Response: The Registrant has provided the completed fee table and expense example as part of this response – See Exhibit A. The Registrant further confirms that there will not be any fee waivers, reimbursements or recoupment related to the Fund.
Comment 3:Please confirm that the Fund’s ticker symbol will be added to the prospectus cover prior to effectiveness.
Response: The Registrant confirms the ticker will be added to the cover page prior the Amendment’s effective date.
Comment 4:In the table of contents, please insert “Principal” in front of “Strategies” in the third line.
Response: The Registrant has made the requested edit.
Comment 5:In the Principal Investment Strategies section, please clarify what “non-diversified” means and expand the risk disclosure to address specific non-diversification risks associated with the Fund’s strategy.
Response: The Registrant has updated the Fund’s summary section of the prospectus to address the comments. See the italicized text below for the changes.
Principal Investment Strategies
The Fund is considered to be non-diversified, which means that it may invest more of its assets in the securities of a single issuer or a smaller number of issuers than if it were a diversified fund.
Principal Investment Risks
Non-Diversification Risk. Because the Fund is non-diversified, it may be more sensitive to economic, business, political or other changes affecting individual issuers or investments than a diversified fund, which may result in greater fluctuation in the value of the Shares and greater risk of loss. This may increase the Fund’s volatility
11300 Tomahawk Creek Pkwy, Suite 310 ● Leawood, KS 66211
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and cause the performance of a relatively smaller number of issuers to have a greater impact on the Fund’s performance.
Comment 6:In the Principal Investment Strategies section, the Fund lists depositary receipts and preferred stocks in its definition of equity securities. Please add risk disclosure associated with each of these equity securities. In addition, if the Fund may invest in unsponsored depositary receipts, please add that to the strategy discussion and add relevant risk information to the principal risks section.
Response: The Registrant has revised the Principal Investment Strategies section to address the comment. In addition, the Registrant has updated the Principal Investment Risks section to address the changes made to the strategies discussion. See the italicized text below for the new disclosure.
Principal Investment Strategies
The Fund is an actively managed non-diversified exchange-traded fund (“ETF”) that seeks to achieve its investment objective by investing in U.S.-listed equity securities of companies engaged in energy-related industries. Equity securities include common and preferred stock, depositary receipts issued on such common stock (including sponsored and unsponsored depositary receipts), and master limited partnerships (“MLPs”). MLPs are partnerships that are publicly traded on a securities exchange. Typical limited partnerships considered for investment by the Fund are in real estate, oil and gas and equipment leasing. The Fund’s ability to make investments in MLPs is limited by the Fund’s intention to qualify as a regulated investment company (RIC), and if the Fund does not appropriately limit such investments, the Fund’s status as a RIC may be jeopardized. As a result, the Fund will invest no more than 25% of the value of its total assets in qualified publicly traded partnerships, including MLPs.
Principal Investment Risks
Depositary Receipts. Depositary receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted. In addition, the underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts, are under no obligation to distribute shareholder communications to the holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities. Depositary receipts that are not sponsored by the issuer may be less liquid and there may be less readily available public information about the issuer. Sponsored depositary receipts are established jointly by a depositary and the underlying issuer, whereas unsponsored depositary receipts may be established by a depositary without participation by the underlying issuer. Holders of an unsponsored depositary receipt generally bear all the costs associated with establishing the unsponsored depositary receipt. In addition, the issuers of the securities underlying unsponsored depositary receipts are not obligated to disclose material information in the United States and, therefore, there may be less information available regarding those issuers and there may not be a correlation between that information and the market value of the depositary receipts.
Preferred Stock Risk. Preferred stock is subject to issuer-specific and overall market risks that are generally applicable to equity securities as a whole; however, there are special risks associated with investing in preferred stock. Preferred stock may be less liquid than many other types of securities, such as common stock, and generally provides no voting rights with respect to the issuer. Preferred stock also faces greater risks of non-payment, as it may be subordinated to bonds or other debt instruments in an issuer’s capital structure, meaning that an issuer’s preferred stock generally pays dividends only after the issuer makes required payments to holders of its bonds and other debt. Because of the subordinated position of preferred stock in an issuer’s capital structure, its quality and value depends heavily on an issuer’s profitability and cash flows rather than on any legal claims to specific assets. Also, in certain circumstances, an issuer of a preferred stock may call or redeem it prior to a specified date or may convert it to common stock, all of which may negatively impact its return.
Comment 7:In the Principal Investment Strategies section, there is a discussion regarding possible investments in master limited partnerships (MLPs). Please explain how the Sub-Adviser manages the Fund’s investments in MLPs to ensure the Fund will qualify as RIC for tax purposes.
Response: See Response 6 for the Registrant’s changes to address this comment.
Comment 8:In the Principal Investment Strategies section, the Registrant defines companies in energy-related industries. In that discussion, the Fund includes companies that develop, construct, manufacture, or distribute technology or capital goods for the generation, consumption, or transition of energy.
Please provide an example of what type of company the Registrant is referring to when it says the “consumption” of energy.
Response: To address the comment, the Registrant has revised the Principal Investment Strategies section as follows (see italicized text):
Companies in energy-related industries are defined as (i) companies that generate a majority of its revenue from one or more of the following business activities: exploration, production, refining, marketing, storage, and transportation of oil, gas, coal, and consumable fuels, and manufacturing and providing oil and gas equipment and services (“Energy Companies”); or (ii) companies principally engaged in development, construction, manufacturing, or distribution of technology or capital goods for the generation, use consumption, or transition of energy. Under normal circumstances, at least 80% of the Fund’s net assets, plus borrowings for investment purposes, will be invested in Energy Companies.
Comment 9:In the Principal Investment Strategies section, the Registrant states that the Sub-Adviser looks for companies that have “competitive advantages with regards to cost structure, technology, and/or proprietary assets”. Explain who these companies are being compared to.
Response: The Registrant has revised the Principal Investment Strategies section as follows (see italicized text):
In addition, the Sub-Adviser looks for companies that, in its assessment, have competitive advantages with regards to cost structure, technology, and/or proprietary assets compared to other companies in the energy or industrials sectors.
Comment 10:In the Principal Investment Strategies section, the Registrant states that the Fund may hold cash and cash equivalents for extended periods of time. Explain what is meant by “extended periods of time”.
Response: The Registrant respectfully declines to make any changes to address this comment. The Registrant believes it has adequately described the Sub-Adviser’s investment and cash management process.
Comment 11:In the Principal Investment Strategies section, the Registrant states that the Fund intends to invest in companies with “the most attractive internal economics and lowest risk-adjusted returns”. How does the Sub-Adviser determine which companies satisfy this criterion?
Response: The Registrant respectfully declines to make any changes to address this comment. The Registrant believes it has adequately described the Sub-Adviser’s process for selecting investments. Please see the fourth paragraph of the Principal Investment Strategies section, where the Registrant describes the Sub-Adviser’s fundamental value investing approach and provides examples of the types of qualitative and quantitative factors its considers when selecting investments for the Fund.
Comment 12:In the Principal Investment Strategies section, the Registrant states “Generally, the Fund’s portfolio is weighted most heavily towards those stocks that are priced at the largest discount to the Sub-Adviser’s assessment of value.” Explain what this sentence means in Plain English.
Response: The Registrant has revised the sentence as follows (see italicized text):
Generally, the Fund’s portfolio is weighted most heavily towards those stocks that are priced at the largest discount to the Sub-Adviser’s assessment of value. Companies the Sub-Adviser views as the most undervalued (i.e., have the largest discount to the Sub-Adviser’s assessment of a company’s value) typically receive a larger weighting within the Fund’s portfolio.
Comment 13:In the Principal Investment Strategies section, please add disclosure explaining why “concentration” is an important part of the Fund’s strategy. In addition, supplementally confirm that the Fund will only be concentrated in Energy Companies.
Response: The Registrant has added the italicized text to the Principal Investment Strategies section. In addition, the Registrant confirms that Energy Companies will be the only companies the Fund will concentrate in.
The Fund concentrates its investments (i.e., invests more than 25% of its total assets) in the equity securities of Energy Companies. This means the Fund’s performance will largely depend—for better or for worse—on the overall condition of the energy sector.
Comment 14:Please consider reordering the Fund’s principal investment risks to ensure the most materials risks are listed at the beginning.
Response: The Registrant has moved Sector Risk and Industry Concentration Risk to the beginning of the Principal Investment Risks section of the prospectus.
Comment 15:Please remove “risks similar to those of investing in any fund holding equity securities” from its Equity Investing Risk.
Response: The Registrant has elected not to remove the noted text. The Registrant believes the disclosure is accurate as written.
Comment 16:The Staff notes that the Registrant has included “Industrial Sector Risk” as a principal risk of the Fund. If that is accurate, please add discussion to the Fund’s Principal Investment Strategies section regarding its investment in industrial companies or remove the disclosure from the Principal Investment Risks section.
Response: The Registrant has added the italicized text to the Principal Investment Strategies section.
Companies in energy-related industries are defined as (i) companies that generate a majority of its revenue from one or more of the following business activities: exploration, production, refining, marketing, storage, and transportation of oil, gas, coal, and consumable fuels, and manufacturing and providing oil and gas equipment and services (“Energy Companies”); or (ii) companies principally engaged in development, construction, manufacturing, or distribution of technology or capital goods for the generation, efficient use, or transition of energy. Under normal circumstances, at least 80% of the Fund’s net assets, plus borrowings for investment purposes, will be invested in Energy Companies. The Fund expects to have significant exposure to the energy and industrials sectors, although such exposure may vary.
Comment 17:The Staff notes that any changes made to the Fund’s Item 4 disclosure should be made to its Item 9 disclosure. In addition, please consider adding the amount of advance notice the Fund will provide prior to making a change to investment objective. Lastly, please include the information required by Item 9(b) of Form N-1A.
Response: The Registrant confirms that it will update its Item 9 disclosures to address any changes made to its Item 4 disclosure. In addition, the Registrant has added disclosure indicating that investors will be provided with 60 days’ advance written notice prior to a change in its investment objective. As it relates to Item 9(b), the Registrant notes that General Instruction 3(a) to Form N-1A states that “[i]nformation that is included in response to Items 2 through 8 need not be repeated elsewhere in the prospectus.” In the prospectus, information related to the Fund’s principal investment strategies has been included in response to Item 4(a) of Form N-1A, and therefore, consistent with Form N-1A instructions, such information has not been repeated in response to Item 9.
Comment 18:Please consider revising the Fund’s Geopolitical/Natural Disaster Risks to address the war between Russia and Ukraine along with the recent events within the Middle East.
Response: The Registrant has removed Geopolitical/Natural Disaster Risks from Item 4 and Item 9. The Registrant has revised Investment Risk in Item 9 to refer to geopolitical and other risks, public health crises, and environmental disasters (see italicized text below). The Registrant notes the geopolitical and other risk
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CORRESP 1 filename1.htm Document December 19, 2024 Mr. Jay Williamson and Ms. Rebecca Ament Marquigny Division of Investment Management U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 RE: EA Series Trust (the “Trust” or the “Registrant”) Post-Effective Amendment No. 385 to the Registration Statement on Form N-1A (the “Amendment”) File Nos.: 333-195493 and 811-22961 Bastion Energy ETF Dear Mr. Williamson and Ms. Marquigny: This correspondence responds to comments to the Trust received by the undersigned from the staff of the U.S. Securities and Exchange Commission (the “Staff” of the “Commission”) with respect to the Amendment relating to the Bastion Energy ETF, a proposed new series of the Trust (the “Fund”). For your convenience, the comments have been reproduced with responses following each comment. Capitalized terms not otherwise defined have the same meaning as in the Amendment. Comment 1:Please file your responses as correspondence at least five business days prior to filing a 485(b) and reflect any disclosure changes in correspondence or send a redline showing all changes to the Staff. Please apply comments to similar disclosures throughout the document. Response: The Registrant acknowledges this comment. Comment 2:Please include a completed fee table and expense example in the response letter. Please confirm if there are any fee waivers, reimbursements or recoupment obligations and if so, please disclose the details in a footnote to the fee table. Response: The Registrant has provided the completed fee table and expense example as part of this response – See Exhibit A. The Registrant further confirms that there will not be any fee waivers, reimbursements or recoupment related to the Fund. Comment 3:Please confirm that the Fund’s ticker symbol will be added to the prospectus cover prior to effectiveness. Response: The Registrant confirms the ticker will be added to the cover page prior the Amendment’s effective date. Comment 4:In the table of contents, please insert “Principal” in front of “Strategies” in the third line. Response: The Registrant has made the requested edit. Comment 5:In the Principal Investment Strategies section, please clarify what “non-diversified” means and expand the risk disclosure to address specific non-diversification risks associated with the Fund’s strategy. Response: The Registrant has updated the Fund’s summary section of the prospectus to address the comments. See the italicized text below for the changes. Principal Investment Strategies The Fund is considered to be non-diversified, which means that it may invest more of its assets in the securities of a single issuer or a smaller number of issuers than if it were a diversified fund. Principal Investment Risks Non-Diversification Risk. Because the Fund is non-diversified, it may be more sensitive to economic, business, political or other changes affecting individual issuers or investments than a diversified fund, which may result in greater fluctuation in the value of the Shares and greater risk of loss. This may increase the Fund’s volatility 11300 Tomahawk Creek Pkwy, Suite 310 ● Leawood, KS 66211 Practus, LLP ● Practus.com and cause the performance of a relatively smaller number of issuers to have a greater impact on the Fund’s performance. Comment 6:In the Principal Investment Strategies section, the Fund lists depositary receipts and preferred stocks in its definition of equity securities. Please add risk disclosure associated with each of these equity securities. In addition, if the Fund may invest in unsponsored depositary receipts, please add that to the strategy discussion and add relevant risk information to the principal risks section. Response: The Registrant has revised the Principal Investment Strategies section to address the comment. In addition, the Registrant has updated the Principal Investment Risks section to address the changes made to the strategies discussion. See the italicized text below for the new disclosure. Principal Investment Strategies The Fund is an actively managed non-diversified exchange-traded fund (“ETF”) that seeks to achieve its investment objective by investing in U.S.-listed equity securities of companies engaged in energy-related industries. Equity securities include common and preferred stock, depositary receipts issued on such common stock (including sponsored and unsponsored depositary receipts), and master limited partnerships (“MLPs”). MLPs are partnerships that are publicly traded on a securities exchange. Typical limited partnerships considered for investment by the Fund are in real estate, oil and gas and equipment leasing. The Fund’s ability to make investments in MLPs is limited by the Fund’s intention to qualify as a regulated investment company (RIC), and if the Fund does not appropriately limit such investments, the Fund’s status as a RIC may be jeopardized. As a result, the Fund will invest no more than 25% of the value of its total assets in qualified publicly traded partnerships, including MLPs. Principal Investment Risks Depositary Receipts. Depositary receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted. In addition, the underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts, are under no obligation to distribute shareholder communications to the holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities. Depositary receipts that are not sponsored by the issuer may be less liquid and there may be less readily available public information about the issuer. Sponsored depositary receipts are established jointly by a depositary and the underlying issuer, whereas unsponsored depositary receipts may be established by a depositary without participation by the underlying issuer. Holders of an unsponsored depositary receipt generally bear all the costs associated with establishing the unsponsored depositary receipt. In addition, the issuers of the securities underlying unsponsored depositary receipts are not obligated to disclose material information in the United States and, therefore, there may be less information available regarding those issuers and there may not be a correlation between that information and the market value of the depositary receipts. Preferred Stock Risk. Preferred stock is subject to issuer-specific and overall market risks that are generally applicable to equity securities as a whole; however, there are special risks associated with investing in preferred stock. Preferred stock may be less liquid than many other types of securities, such as common stock, and generally provides no voting rights with respect to the issuer. Preferred stock also faces greater risks of non-payment, as it may be subordinated to bonds or other debt instruments in an issuer’s capital structure, meaning that an issuer’s preferred stock generally pays dividends only after the issuer makes required payments to holders of its bonds and other debt. Because of the subordinated position of preferred stock in an issuer’s capital structure, its quality and value depends heavily on an issuer’s profitability and cash flows rather than on any legal claims to specific assets. Also, in certain circumstances, an issuer of a preferred stock may call or redeem it prior to a specified date or may convert it to common stock, all of which may negatively impact its return. Comment 7:In the Principal Investment Strategies section, there is a discussion regarding possible investments in master limited partnerships (MLPs). Please explain how the Sub-Adviser manages the Fund’s investments in MLPs to ensure the Fund will qualify as RIC for tax purposes. Response: See Response 6 for the Registrant’s changes to address this comment. Comment 8:In the Principal Investment Strategies section, the Registrant defines companies in energy-related industries. In that discussion, the Fund includes companies that develop, construct, manufacture, or distribute technology or capital goods for the generation, consumption, or transition of energy. 2 Please provide an example of what type of company the Registrant is referring to when it says the “consumption” of energy. Response: To address the comment, the Registrant has revised the Principal Investment Strategies section as follows (see italicized text): Companies in energy-related industries are defined as (i) companies that generate a majority of its revenue from one or more of the following business activities: exploration, production, refining, marketing, storage, and transportation of oil, gas, coal, and consumable fuels, and manufacturing and providing oil and gas equipment and services (“Energy Companies”); or (ii) companies principally engaged in development, construction, manufacturing, or distribution of technology or capital goods for the generation, use consumption, or transition of energy. Under normal circumstances, at least 80% of the Fund’s net assets, plus borrowings for investment purposes, will be invested in Energy Companies. Comment 9:In the Principal Investment Strategies section, the Registrant states that the Sub-Adviser looks for companies that have “competitive advantages with regards to cost structure, technology, and/or proprietary assets”. Explain who these companies are being compared to. Response: The Registrant has revised the Principal Investment Strategies section as follows (see italicized text): In addition, the Sub-Adviser looks for companies that, in its assessment, have competitive advantages with regards to cost structure, technology, and/or proprietary assets compared to other companies in the energy or industrials sectors. Comment 10:In the Principal Investment Strategies section, the Registrant states that the Fund may hold cash and cash equivalents for extended periods of time. Explain what is meant by “extended periods of time”. Response: The Registrant respectfully declines to make any changes to address this comment. The Registrant believes it has adequately described the Sub-Adviser’s investment and cash management process. Comment 11:In the Principal Investment Strategies section, the Registrant states that the Fund intends to invest in companies with “the most attractive internal economics and lowest risk-adjusted returns”. How does the Sub-Adviser determine which companies satisfy this criterion? Response: The Registrant respectfully declines to make any changes to address this comment. The Registrant believes it has adequately described the Sub-Adviser’s process for selecting investments. Please see the fourth paragraph of the Principal Investment Strategies section, where the Registrant describes the Sub-Adviser’s fundamental value investing approach and provides examples of the types of qualitative and quantitative factors its considers when selecting investments for the Fund. Comment 12:In the Principal Investment Strategies section, the Registrant states “Generally, the Fund’s portfolio is weighted most heavily towards those stocks that are priced at the largest discount to the Sub-Adviser’s assessment of value.” Explain what this sentence means in Plain English. Response: The Registrant has revised the sentence as follows (see italicized text): Generally, the Fund’s portfolio is weighted most heavily towards those stocks that are priced at the largest discount to the Sub-Adviser’s assessment of value. Companies the Sub-Adviser views as the most undervalued (i.e., have the largest discount to the Sub-Adviser’s assessment of a company’s value) typically receive a larger weighting within the Fund’s portfolio. Comment 13:In the Principal Investment Strategies section, please add disclosure explaining why “concentration” is an important part of the Fund’s strategy. In addition, supplementally confirm that the Fund will only be concentrated in Energy Companies. Response: The Registrant has added the italicized text to the Principal Investment Strategies section. In addition, the Registrant confirms that Energy Companies will be the only companies the Fund will concentrate in. 3 The Fund concentrates its investments (i.e., invests more than 25% of its total assets) in the equity securities of Energy Companies. This means the Fund’s performance will largely depend—for better or for worse—on the overall condition of the energy sector. Comment 14:Please consider reordering the Fund’s principal investment risks to ensure the most materials risks are listed at the beginning. Response: The Registrant has moved Sector Risk and Industry Concentration Risk to the beginning of the Principal Investment Risks section of the prospectus. Comment 15:Please remove “risks similar to those of investing in any fund holding equity securities” from its Equity Investing Risk. Response: The Registrant has elected not to remove the noted text. The Registrant believes the disclosure is accurate as written. Comment 16:The Staff notes that the Registrant has included “Industrial Sector Risk” as a principal risk of the Fund. If that is accurate, please add discussion to the Fund’s Principal Investment Strategies section regarding its investment in industrial companies or remove the disclosure from the Principal Investment Risks section. Response: The Registrant has added the italicized text to the Principal Investment Strategies section. Companies in energy-related industries are defined as (i) companies that generate a majority of its revenue from one or more of the following business activities: exploration, production, refining, marketing, storage, and transportation of oil, gas, coal, and consumable fuels, and manufacturing and providing oil and gas equipment and services (“Energy Companies”); or (ii) companies principally engaged in development, construction, manufacturing, or distribution of technology or capital goods for the generation, efficient use, or transition of energy. Under normal circumstances, at least 80% of the Fund’s net assets, plus borrowings for investment purposes, will be invested in Energy Companies. The Fund expects to have significant exposure to the energy and industrials sectors, although such exposure may vary. Comment 17:The Staff notes that any changes made to the Fund’s Item 4 disclosure should be made to its Item 9 disclosure. In addition, please consider adding the amount of advance notice the Fund will provide prior to making a change to investment objective. Lastly, please include the information required by Item 9(b) of Form N-1A. Response: The Registrant confirms that it will update its Item 9 disclosures to address any changes made to its Item 4 disclosure. In addition, the Registrant has added disclosure indicating that investors will be provided with 60 days’ advance written notice prior to a change in its investment objective. As it relates to Item 9(b), the Registrant notes that General Instruction 3(a) to Form N-1A states that “[i]nformation that is included in response to Items 2 through 8 need not be repeated elsewhere in the prospectus.” In the prospectus, information related to the Fund’s principal investment strategies has been included in response to Item 4(a) of Form N-1A, and therefore, consistent with Form N-1A instructions, such information has not been repeated in response to Item 9. Comment 18:Please consider revising the Fund’s Geopolitical/Natural Disaster Risks to address the war between Russia and Ukraine along with the recent events within the Middle East. Response: The Registrant has removed Geopolitical/Natural Disaster Risks from Item 4 and Item 9. The Registrant has revised Investment Risk in Item 9 to refer to geopolitical and other risks, public health crises, and environmental disasters (see italicized text below). The Registrant notes the geopolitical and other risk