[Federal Register Volume 61, Number 15 (Tuesday, January 23, 1996)]
[Notices]
[Pages 1812-1814]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-839]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 21676; International Series Release
No. 917; 812-9872]
Credit Suisse; Notice of Application
January 16, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption Under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANT: Credit Suisse.
REVELANT ACT SECTIONS: Order under section 6(c) of the Act for an
exemption from section 17(f) of the Act.
SUMMARY OF APPLICATION: Credit Suisse requests an order that would
permit United States registered investment companies other than
investment companies registered under section 7(d) (a ``U.S. Investment
Company''), for which Credit Suisse serves as custodian or
subcustodian, to maintain foreign securities and other assets in Russia
with Credit Suisse (Moscow) Ltd. (``Credit Suisse (Moscow)''), a
wholly-owned subsidiary of Credit Suisse.
FILING DATES: The application was filed on December 6, 1995 and amended
on January 11, 1996.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on February 12,
1996, and should be accompanied by proof of service on the applicant,
in the form of an affidavit or, for lawyers, a certificate of service.
Hearing requests should state the nature of the writer's interest, the
reason for the request, and the issues contested. Persons may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street NW., Washington, DC 20549.
Applicant: Credit Suisse, Paradeplatz 8, CH-8001 Zurich, Switzerland;
cc: Daniel L. Goelzer, Esq., Baker & McKenzie, 815 Connecticut Avenue
NW., Washington, DC, 20006-4078.
FOR FURTHER INFORMATION CONTACT:
Marianne H. Khawly, Staff Attorney, at (202) 942-0562, or Robert A.
Robertson,
[[Page 1813]]
Branch Chief, at (202) 942-0564 (Division of Investment Management,
Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is summary of the application.
The complete application may be obtained for a fee from the SEC's
Public Reference Branch.
Applicant's Representations
1. Credit Suisse requests an order to permit Credit Suisse, Credit
Suisse (Moscow), any U.S. Investment Company, and any custodian for a
U.S. Investment Company to maintain foreign securities, cash, and cash
equivalents (collectively, ``Assets'') in the custody of Credit Suisse
(Moscow). For the purposes of this application, ``foreign securities''
includes: (a) Securities issued and sold primarily outside the United
States by a foreign government, a national of any foreign country, or a
corporation or other organization incorporated or organized under the
laws of any foreign country; and (b) securities issued or guaranteed by
the Government of the United States or by any state or any political
subdivision thereof or by any agency thereof or by any entity organized
under the laws of the United States or by any entity organized under
the laws of the United States or of any state thereof which have been
issued and sold primarily outside the United States.
2. Credit Suisse is a company organized and existing under the laws
of Switzerland. Credit Suisse is regulated in Switzerland by the Swiss
Federal Banking Commission and is subject to the Federal Law on Banks
and Savings Institutions dated November 8, 1934. Credit Suisse is a
99.9% owned direct subsidiary of CS Holding, a Swiss public company,
which, together with Credit Suisse and its other subsidiaries, is one
of the leading financial services institutions in the world and
currently provides a network of worldwide custody services. In the
United States, Credit Suisse has branch banking operations,
representative offices, and as a result, is subject to the Bank Holding
Company Act of 1956 and the International Banking Act of 1978. At
December 31, 1994, Credit Suisse had consolidated shareholders' equity
in excess of the equivalent of $10 billion.
3. Credit Suisse (Moscow) was incorporated in Russia in 1993 and
operates under General License No. 2494. It is a 98% owned direct
subsidiary of Credit Suisse. Credit Suisse (Moscow) is regulated by the
Central Bank of the Russian Federation under the Law on Banks and
Banking Activity of 1991, as amended in 1992 and 1995.
4. Credit Suisse requests relief to permit Credit Suisse, as
custodian or subcustodian for a U.S. Investment Company, when custody
services are required in Russia, to deposit, or cause or permit the
U.S. Investment Company to deposit, its Assets with Credit Suisse
(Moscow) as delegate for Credit Suisse.
Applicant's Legal Analysis
1. Section 17(f) of the Act requires every registered management
investment company to place and maintain its securities and similar
investments in the custody of certain enumerated entities, including a
bank having at all times aggregate capital, surplus, and undivided
profits of at least $500,000. A ``bank'', as that term is defined in
section 2(a)(5) of the Act, includes: (a) A banking institution
organized under the laws of the United States; (b) a member bank of the
Federal Reserve System; and (c) any other banking institution or trust
company, whether incorporated or not, doing business under the laws of
any state or of the United States, a substantial portion of which
consists of receiving deposits or exercising fiduciary powers similar
to those permitted to national banks, which is supervised or examined
by state or federal authority having supervision over banks, and which
is not operated for the purposes of evading the Act.
2. The only entities located outside the United States that section
17(f) authorizes to serve as custodians for registered management
investment companies are the overseas branches of qualified U.S. banks.
Rule 17f-5 expands the group of entities that are permitted to serve as
foreign custodians. The rule defines the term ``Eligible Foreign
Custodian'' to include a banking institution or trust company,
incorporated or organized under the laws of a country other than the
United States, that is regulated as such by that country's government
or an agency thereof and that has shareholders' equity in excess of
$200,000,000 or its equivalent. Credit Suisse is an Eligible Foreign
Custodian under the rule.
3. Credit Suisse (Moscow) satisfies the requirements of rule 17f-5,
except it does not meet the minimum shareholders' equity requirement.
Accordingly, it is not an Eligible Foreign Custodian and, absent
exemptive relief, could not serve as a custodian for U.S. Investment
Company Assets.\1\
\1\ Russian clearing and custody procedures differ substantially
from the procedures generally employed elsewhere. Other than the
requested exemption to permit Credit Suisse (Moscow) to qualify as
an ``eligible foreign custodian,'' applicant is not requesting an
exemption from section 17(f) or rule 17f-5 for any other aspect of
the custody or clearing procedures employed in Russia. Moreover,
applicant acknowledges that any SEC order will not constitute a
determination by the SEC that the Russian clearing and custody
procedures comply with section 17(f) or the rules thereunder.
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4. Section 6(c) provides, in relevant part, that the SEC may,
conditionally or unconditionally, by order, exempt any person or class
of persons from any provision of the Act or from any rule thereunder,
if such exemption is necessary or appropriate in the public interest,
consistent with the protection of investors, and consistent with the
purposes fairly intended by the policy and provisions of the Act.
Credit Suisse believes that its request satisfies this standard.
Applicant's Conditions
Applicant agrees that any SEC order granting the requested relief
shall be subject to the following conditions:
1. The foreign custody arrangements proposed regarding Credit
Suisse (Moscow) satisfy the requirements of rule 17f-5 in all respects
other than Credit Suisse (Moscow)'s level of shareholder's equity.
2. Credit Suisse, when providing custody services to a U.S.
Investment Company, will deposit Assets with Credit Suisse (Moscow)
only in accordance with one of the two contractual arrangements
described below, which arrangement will remain in effect at all times
during which Credit Suisse (Moscow) fails to satisfy the shareholders'
equity requirement of rule 17f-5.
a. The Three-Party Agreement Arrangement. Under this arrangement,
the agreement will be a three-party agreement (the ``Agreement'') among
(i) Credit Suisse, (ii) Credit Suisse (Moscow) and (iii) the U.S.
Investment Company, or the custodian for a U.S. Investment Company
pursuant to which Credit Suisse will undertake to provide specified
custody services, and will delegate to Credit Suisse (Moscow) such of
the duties and obligations of Credit Suisse as will be necessary to
permit Credit Suisse (Moscow) to hold in custody the U.S. Investment
Company's Assets. The Agreement further will provide that Credit Suisse
will be liable for any loss, damage, cost, expense, liability, or claim
arising out of or in connection with the performance by Credit Suisse
(Moscow) of its responsibilities under the Agreement to the same extent
as if Credit Suisse had itself been required to provide custody
services under the Agreement.
[[Page 1814]]
b. The Custody Agreement/Subcustody Agreement Arrangement. Under
this arrangement, Assets will be deposited with Credit Suisse (Moscow)
in accordance with the Custody Agreement and Subcustody Agreement
described below.
i. The Custody Agreement will be between Credit Suisse and the U.S.
Investment Company or any custodian for a U.S. Investment Company. In
that agreement, Credit Suisse will undertake to provide specified
custody or subcustody services, and the U.S. Investment Company (or its
custodian) will authorize Credit Suisse to delegate to Credit Suisse
(Moscow) such of Credit Suisse's duties and obligations as will be
necessary to permit Credit Suisse (Moscow) to hold in custody the U.S.
Investment Company's Assets. The Custody Agreement further will provide
that Credit Suisse will be liable for any loss, damage, cost, expense,
liability, or claim arising out of or in connection with the
performance by Credit Suisse (Moscow) of its responsibilities to the
same extent as if Credit Suisse had itself been required to provide
custody services under the Custody Agreement.
ii. A Subcustody Agreement will be executed by Credit Suisse and
Credit Suisse (Moscow). Pursuant to this agreement, Credit Suisse will
delegate to Credit Suisse (Moscow) such of Credit Suisse's duties and
obligations as will be necessary to permit Credit Suisse (Moscow) to
hold Assets in custody in Russia. The Subcustody Agreement will
explicitly provide that (i) Credit Suisse (Moscow) is acting as a
foreign custodian for Assets that belong to a U.S. Investment Company
pursuant to the terms of an exemptive order issued by the SEC and (ii)
the U.S. Investment Company or its custodian (as the case may be) that
has entered into a Custody Agreement will be entitled to enforce the
terms of the Subcustody Agreement and can seek relief directly against
Credit Suisse (Moscow). Further, the Subcustody Agreement will be
governed either by the law of the state of New York, the law of
Switzerland or the law of England. If it is governed by the law of
Switzerland or the law of England, Credit Suisse shall obtain an
opinion of counsel in Switzerland or England, as the case may be,
opining as to the enforceability of the rights of a third party
beneficiary under the laws of that country.
3. Credit Suisse currently satisfies and will continue to satisfy
the minimum shareholders' equity requirement set forth in rule 17f-
5(c)(2)(i).
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-839 Filed 1-22-96; 8:45 am]
BILLING CODE 8010-01-M
