# US 2014/0195404 A1 · Method and system for implementing an investment company that issues a class of conventional shares and a class of exchange-traded shares in the same fund

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- Number: US 2014/0195404 A1
- Document ID: US20140195404A1
- Status: Published application
- Kind: A1
- Application number: 14/147,092
- Filed: 2014-01-03
- Published: 2014-07-10
- Earliest claimed: 2001-03-07
- Assignees: The Vanguard Group, Inc.
- Applicants: The Vanguard Group, Inc.
- Inventors: George U. SAUTER; Walter LENHARD
- Web page: https://patentgrep.com/patent/US20140195404A1

## CPC

- G06Q 40/04: Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
- G06Q 20/042: {characterized in that the payment protocol involves at least one cheque}
- G06Q 20/10: specially adapted for electronic funds transfer [EFT] systems; specially adapted for home banking systems
- G06Q 20/102: {Bill distribution or payments}
- G06Q 20/105: {involving programming of a portable memory device, e.g. IC cards, "electronic purses"}
- G06Q 20/108: {Remote banking, e.g. home banking}
- G06Q 20/1085: {involving automatic teller machines [ATMs]}
- G06Q 20/40: Authorisation, e.g. identification of payer or payee, verification of customer or shop credentials; Review and approval of payers, e.g. check credit lines or negative lists
- G06Q 40/00: Finance; Insurance; Tax strategies; Processing of corporate or income taxes
- G06Q 40/02: Banking, e.g. interest calculation or account maintenance (credit or loans G06Q40/03)
- G06Q 40/03: Credit; Loans; Processing thereof
- G06Q 40/06: Asset management; Financial planning or analysis
- G06Q 40/12: Accounting
- G06Q 40/123: {Tax preparation or submission}
- G06Q 40/128: {Check-book balancing, updating or printing arrangements}
- G06Q: INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR

## Abstract

A method is provided for administering a single investment company that issues one or more classes of shares that are bought from and redeemed with the single investment company at a net asset value and issues one or more classes of shares that are listed for trading on a securities exchange and that are bought and sold at negotiated market prices. One or more computers maintain account data of the outstanding shares. An owner of any share of any share class has an undivided interest in the single investment company.

## Claims

### Claim 1

A method comprising:
(a) issuing, by a first processor, a first class of shares, wherein shares of the first class of shares are bought from and redeemed with a single investment company by one or more shareholders at a net asset value;
(b) maintaining account data in one or more computers at the single investment company representative of the number of shares of the first class of shares held by each of the one or more shareholders;
(c) generating electronic data identifying the names and number of shares of securities that comprise a basket of securities;
(d) receiving, at a second processor, data representing the basket of securities from a first entity that has an equivalent monetary value to a predetermined number of shares of a second class of shares, wherein the predetermined number of shares comprises a Creation Unit, the shares of the second class of shares are listed for trading on a national securities exchange, and the shares of the second class of shares are bought and sold by one or more investors at negotiated market prices through one or more second entities;
(d) issuing, by a third processor, the Creation Unit of shares of the second class of shares in response to receiving the data representing the basket of securities;
(e) electronically sending data representing the Creation Unit of shares of the second class of shares to the first entity; and
(f) maintaining data in one or more computers at the investment company of the total number of outstanding shares of the first class of shares and the second class of shares, wherein an owner of any share of the first class of shares and the second class of shares has an undivided interest in the single investment company.

### Claim 2 (depends on 1)

The method of claim 1, further comprising:
(g) receiving, at a fourth processor, an electronic request from a second entity to convert a designated number or dollar value of shares of the first class of shares that are bought from and redeemed with the single investment company at a net asset value for a monetarily equivalent number of shares of the second class of shares that are listed for trading on a national securities exchange; and
(h) implementing the request received from the second entity, wherein implementing the request comprises:
(i) determining, by the fourth processor, the equivalent number of the second class of shares corresponding to the designated number or dollar value of shares of the first class of shares;
(ii) maintaining, by a computer, a whole number of shares of the second class of shares in an account based on the equivalent number of shares, and
(iii) maintaining, by a computer, a fractional number of shares of the second class of shares in an account based on the equivalent number of shares less the whole number of shares of the second class of shares.

### Claim 3 (depends on 1)

The method of claim 1 wherein the shares of the second class of shares that are bought and sold by the one or more investors at negotiated market prices through the one or more second entities are electronically purchased by the one or more second entities from a first entity using a computer, and wherein the first entity maintains firm bid and offer prices in the second class of shares by automatically buying or selling shares of the second class of shares at publicly quoted prices.

### Claim 4 (depends on 1)

The method of claim 1 wherein each Creation Unit comprises at least 30,000 shares of the second class of shares.

### Claim 5 (depends on 1)

The method of claim 1 wherein the value of each Creation Unit of the second class of shares is at least $1,000,000.

### Claim 6 (depends on 1)

The method of claim 1 further comprising calculating, by a processor, the net asset value of each share of the first class of shares once per day at the close of a finance market.

### Claim 7 (depends on 1)

The method of claim 1, wherein account data representative of the number of shares of the second class of shares held by each of the one or more investors is maintained in one or more computers at the one or more second entities and not in one or more computers at the investment company.

### Claim 8 (depends on 1)

The method of claim 1 wherein the first entity is an authorized participant and is a member of a clearinghouse and the one or more second entities comprise one or more brokers.

### Claim 9

A system comprising:
(a) one or more first computers configured to:
(i) receive, from one or more investors, data representing purchase or sell orders on a secondary market for a second class of shares issued by a single investment company that are listed for trading on a national securities exchange and that are bought and sold at negotiated market prices, wherein the single investment company has also issued a first class of shares that are bought from and redeemed with the single investment company at a net asset value, and
wherein an owner of any share of the first or second class of shares has an undivided interest in the single investment company,
(ii) maintain account data for each of the one or more investors that reflects the number of shares of the second class of shares held by the investor,
(iii) send the data representing the purchase or sell orders to a second computer, and
(iv) send an electronic request to the single investment company to convert a designated number or dollar value of shares of the first class of shares that are bought from and redeemed with the single investment company at a net asset value for a monetarily equivalent number of shares of the second class of shares that are listed for trading on a national securities exchange to the single investment company; and
(b) one or more second computers in electronic communication with the one or more first computers, the one or more second computers configured to:
(i) maintain firm bid and offer prices in the second class of shares by automatically buying or selling shares of the second class of shares at publicly quoted prices,
(ii) receive data representing the purchase or sell orders from the one or more first computers,
(iii) automatically fulfill the purchase or sell orders by providing data to the one or more broker computers indicating the purchase or sale is complete, and
(iv) generate data representing a basket of securities that has an equivalent monetary value to a predetermined number of shares of the second class of shares; and

### Claim 10 (depends on 9)

The system of claim 9 wherein the one or more first computers comprise one or more broker computers and the one or more second computers comprise one or more market maker computers.

### Claim 11

A system comprising:
(a) a first processor which records a first class of shares issued by the single investment company that are bought from and redeemed with the single investment company at a net asset value;
(b) a second processor which records a second class of shares issued by the single investment company that are listed for trading on a national securities exchange and that are bought and sold at negotiated market prices, wherein the second class of shares are exchange-traded shares, and wherein investors may purchase or sell the exchange-traded shares on the secondary market by sending a request through one or more first computers, and wherein account data for each of investors is maintained at the one or more first computers to reflect the number of shares of the second class of shares held by the investor;
(c) one or more second computers that maintain data of the outstanding shares of the first and second class of shares, wherein an owner of any share of any share class has an undivided interest in the single investment company; and
(d) a third processor configured to:
(i) receive and implement an electronic request for conversion of a designated number or dollar value of shares belonging to the first class of shares that are bought from and redeemed with the single investment company at a net asset value for a monetarily equivalent number of shares of the second class of shares that are exchange-traded shares of the single investment company, and
(ii) update the data in the one or more second computers to reflect the new number of outstanding shares of the first and second class of shares.

### Claim 12 (depends on 11)

The system of claim 11 further comprising:
(e) a third computer in communication with the second processor, wherein the third computer maintains data on all exchange-traded shares issued by the single investment company; and
(f) a fourth computer in communication with the third computer, wherein the fourth computer maintains firm bid and offer prices in the second class of shares by automatically buying or selling shares of the second class of shares at publicly quoted prices, and wherein the fourth computer is further in communication with the one or more first computers which communicate purchase or sell orders of the second class of shares to the fourth computer on behalf of the one or more investors to fulfill the investor's purchase or sell order.

### Claim 13 (depends on 12)

The system of claim 12 further comprising:
(g) a fourth processor configured to:
(i) receive, from the third computer, data representing a basket of securities that has an equivalent monetary value to a predetermined number of shares of the second class of shares, wherein the predetermined number of shares comprises a Creation Unit;
(ii) provide data representing a Creation Unit of shares of the second class of shares to the third computer in response to receiving the data representing the basket of securities, wherein the third computer provides the data representing the Creation Unit to an authorized participant, and
(iii) update the data in the one or more second computers to reflect the newly purchased shares of the second class of shares.

### Claim 14 (depends on 12)

The system of claim 12 wherein the first computer comprises a broker, the third computer comprises a clearinghouse computer, and the fourth computer comprises a market maker computer.

### Claim 15 (depends on 11)

The system of claim 11 wherein the one or more second computers do not maintain account data that reflects the number of shares of the second class of shares held by investors and are located at the single investment company.