[Federal Register Volume 59, Number 199 (Monday, October 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25558]
[[Page Unknown]]
[Federal Register: October 17, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 20607; International Series Release
No. 728; 812-9194]
Chung Khiaw Bank, Ltd.; Notice of Application
October 7, 1994.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANT: Chung Khiaw Bank, Ltd. (``CKB'').
RELEVANT 1940 ACT SECTION: Exemption requested under section 6(c) from
the provisions of section 17(f).
SUMMARY OF APPLICATION: CKB seeks an order exempting (i) CKB, (ii) any
management investment company registered under the Act other than an
investment company registered under section 7(d) of the Act
(``Investment Company''), and (iii) any custodian for such Investment
Company, from the provisions of section 17(f) of the Act to the extent
necessary to permit such Investment Companies or their custodians, and
CKB, as custodian or subcustodian, to maintain foreign securities,
cash, and cash equivalents with Chung Khiaw Bank (Malaysia) Bhd.
(``CKB-Malaysia'').
FILING DATE: The application was filed on August 22, 1994 and amended
on September 26, 1994. By supplemental letter dated October 7, 1994,
counsel, on behalf of CKB, agreed to file an amendment during the
notice period to make certain technical changes. This notice reflects
the changes that will be made in the amendment.
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 November 1,
1994, and should be accompanied by proof of service on 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 5th Street, N.W., Washington, D.C.
20549. CKB, 80 Raffles Place #04-00, UOB Plaza, Singapore 0104.
FOR FURTHER INFORMATION CONTACT:
Marilyn Mann, Special Counsel, (202) 942-0582, or Barry D. Miller,
Senior Special Counsel, (202) 942-0564 (Division of Investment
Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch.
Applicant's Representations
1. CKB is a company organized and existing under the laws of
Singapore, and regulated as a banking institution by the Monetary
Authority of Singapore. At December 31, 1993, it had shareholders'
equity in the approximate amount of U.S. $369,567,000.
2. CKB-Malaysia is a subsidiary of CKB. Until recently, CKB
provided custody services for Investment Companies holding Malaysian
securities in its branches in Malaysia. A recently adopted Malaysian
law requires banking institutions operating in Malaysia to be locally
incorporated. To comply with this legislation, CKB transferred
substantially all of the assets, liabilities, and personnel of its
Malaysian branches to CKB-Malaysia. CKB-Malaysia is regulated as a
banking institution under Malaysian law by Bank Negara Malaysia, the
Central Bank of Malaysia. As of June 1, 1994, the shareholders' equity
of CKB-Malaysia was approximately U.S. $100 million.
Applicant's Legal Conclusions
1. Section 17(f) requires every registered management investment
company to place and maintain its securities and similar investments in
the custody of certain enumerated entities, including ``banks'' having
at all times an aggregate capital, surplus and undivided profits of at
least $500,000. Section 2(a)(5) defines ``bank'' to include (i) A
banking institution organized under the laws of the United States, (ii)
a member bank of the Federal Reserve System, and (iii) 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 the business of which consists of receiving
deposits or exercising fiduciary powers similar to those permitted to
national banks under the authority of the Comptroller of the Currency,
and which is supervised and examined by state or federal authority
having supervision over banks, and which is not operated for the
purpose of evading the provisions of the Act.
2. Rule 17f-5 provides that an Investment Company may place and
maintain in the care of an ``eligible foreign custodian'' the
Investment Company's foreign securities, cash, and cash equivalents in
amounts reasonably necessary to effect the Investment Company's foreign
securities transactions. The term ``eligible foreign custodian'' is
defined in rule 17f-5(c)(2) to include a foreign bank that is regulated
as such by the government (or an agency thereof) of the country where
the bank is organized and that has shareholders' equity in excess of
U.S. $200,000,000.
3. CKB meets the requirements for Eligible Foreign Custodian since
it has shareholders' equity well in excess of U.S. $200,000,000, is
organized and existing under the laws of a country other than the
United States (Singapore) and is regulated as a bank under the laws of
Singapore.
4. CKB-Malaysia also satisfies the requirements of rule 17f-5
insofar as it is a banking institution incorporated or organized under
the laws of a country other than the United States and is regulated as
such by that country's government or an agency thereof. CKB-Malaysia,
with shareholder's equity of approximately $100 million, however, does
not meet the minimum shareholders' equity requirement of rule 17f-5.
5. CKB seeks an order under section 6(c) exempting (i) CKB, (ii)
any Investment Company and (iii) any custodian for such Investment
Company from the provisions of section 17(f) of the Act to permit the
deposit and custody of Foreign Securities (as defined below), cash, and
cash equivalents in Malaysia with CKB-Malaysia. ``Foreign Securities''
includes (i) 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 (ii) 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 of any state thereof which have
been issued and sold primarily outside the United States. Foreign
Securities, cash, and cash equivalents are defined collectively as
``Assets.''
6. CKB represents that CKB-Malaysia is well-qualified to provide
custodial services for Investment Company Assets. As the successor to
the business of CKB's Malaysia branches, CKB-Malaysia subsumed the
personnel and functions of those branches. CKB represents that, under
the foreign custody arrangements proposed above, the protection
afforded the assets of Investment Companies held by CKB-Malaysia would
not be diminished from the protection afforded by rule 17f-5 if the
assets were held in the direct custody of CKB.
Applicant's Conditions
CKB agrees that the order of the Commission granting the requested
relief shall be subject to the following conditions:
1. The foreign custody arrangements proposed with respect to CKB-
Malaysia will satisfy the requirements of rule 17f-5 in all respects
other than with regard to the shareholders' equity of CKB-Malaysia.
2. Assets held in custody for U.S. management investment companies
or their custodians will be maintained in CBK-Malaysia only in
accordance with an agreement (``Delegation Agreement'') required to
remain in effect at all times during which CKB-Malaysia fails to
satisfy all the requirements of rule 17f-5 pursuant to which CKB would
undertake to provide specified custodial or subcustodial services and
delegate to CKB-Malaysia such of CKB's duties and obligations as would
be necessary to permit CKB-Malaysia to hold in custody in Malaysia
Assets of U.S. investment companies. The Delegation Agreement among
CKB, CKB-Malaysia, and a U.S. investment company or its custodian would
further provide that CKB's delegation of duties to CKB-Malaysia would
not relieve CKB of any responsibility to a U.S. investment company for
which CKB serves as custodian or to a custodian for which CKB serves as
a subcustodian for any loss due to such delegation, except such loss as
may result from political risk (e.g., exchange control restrictions,
confiscation, expropriation, nationalization, insurrection, civil
strife, or armed hostilities) or other risks of loss (excluding
bankruptcy or insolvency of CKB-Malaysia) for which neither CKB nor
CKB-Malaysia would be liable under rule 17f-5 (e.g., despite the
exercise of reasonable care, acts of God, and the like).
3. CKB currently satisfies and will continue to satisfy the minimum
shareholders' equity requirement set forth in rule 17f-5(c)(2)(i).
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-25558 Filed 10-14-94; 8:45 am]
BILLING CODE 8010-01-M
