[Federal Register Volume 59, Number 207 (Thursday, October 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26640]
[[Page Unknown]]
[Federal Register: October 27, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 20647; International Series Release
No. 734/812-9242]
The Chase Manhattan Bank, N.A.; Notice of Application
October 21, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (``Act'').
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APPLICANT: The Chase Manhattan Bank, N.A. (``Chase'').
RELEVANT ACT SECTIONS: Exemption requested under section 6(c) from the
provisions section 17(f) of the Act.
SUMMARY OF APPLICATION. Chase seeks an order to enable it to maintain
foreign securities and other assets of United States registered
investment companies for which Chase serves as custodian or
subcustodian in the custody of The Chase Manhattan Bank (M) Berhad
(``Chase-Malaysia'').
FILING DATE: The application was filed on September 22, 1994.
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 14,
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
reasons for the request, and the issues contested. Persons who wish to
be notified of a hearing may request such notification by writing to
the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549.
Applicant, c/o Daniel L. Goelzer, Esq., Baker & McKenzie, 815
Connecticut Avenue, NW., Washington, DC 20006.
FOR FURTHER INFORMATION CONTACT: H.R. Hallock, Jr., at (202) 942-0564
or Barry D. Miller, Senior Special Counsel, at (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 from
the SEC's Public Reference Branch.
Applicant's Representations and Legal Analysis
1. Chase requests exemptive relief for itself, any management
investment company registered under the Act, other than an investment
company registered under section 7(d) of the Act (a ``U.S. Investment
Company''), and any custodian for a U.S. Investment Company from
section 17(f) of the Act. The requested exemption would let Chase, such
U.S. Investment Company and such custodian to maintain foreign
securities, cash, and cash equivalents (collectively, ``Assets'') in
the custody of Chase-Malaysia, an indirect subsidiary of Chase located
in Malaysia. For purposes of the application, the term ``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 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. 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. Rules 17f-5
under the Act expands the group of entities located outside the United
States that are permitted to serve as custodians for the Assets of
registered management investment companies. Rule 17f-5 defines the term
``Eligible Foreign Custodian'' to include a majority-owned direct or
indirect subsidiary of a qualified U.S. bank or bank-holding company
that is incorporated or organized under the laws of a country other
than the United States and that has shareholders' equity in excess of
$100,000,000 (U.S. $ equivalent or U.S. $) as of the close of its most
recently completed fiscal year. The rule defines the term ``Qualified
U.S. Bank'' to include a banking institution organized under the laws
of the United States that has an aggregate capital, surplus and
undivided profit of not less than $500,000.
3. Chase is a national banking association and is regulated as such
by the Comptroller of the Currency under the National Bank Act. At
December 31, 1993, Chase had shareholders' equity in excess of $6.4
billion. Thus, Chase is a ``Qualified U.S. Bank'' under the
requirements of Rule 17f-5, since it is a banking institution organized
under the laws of the United States, and it has aggregate capital,
surplus and undivided profit substantially in excess of the $500,000
minimum required by the rule.
4. Chase is a subsidiary of The Chase Manhattan Corporation, a
Delaware company that provides financial services throughout the world.
Through its Global Securities Services division (``GSS''), Chase
provides custody and related services to global institutional
investors, including U.S. mutual funds. GSS currently has over $1,300
trillion in assets under custody at various locations throughout the
world, including its branches and subsidiaries in approximately 50
countries.
5. Chase established a branch in Kuala Lumpur, Malaysia in 1964,
and currently offers custody services in Malaysia through that branch.
However, under the Malaysian Banking and Financial Institutions Act
1989, Chase must now convert its branch to a locally incorporated
entity. To comply with Malaysian law, Chase proposes to transfer all
the activities of the branch, as well as its personnel, to Chase-
Malaysia.
6. Chase-Malaysia will be wholly-owned by Chase Manhattan Overseas
Banking Corporation, a wholly-owned direct subsidiary of Chase. Chase-
Malaysia will assume the assets, liabilities, and business of the Chase
Kuala Lumpur branch and will be subject to the supervision of Bank
Negara Malayasia (the central bank of Malaysia). Chase-Malaysia will
offer the same services as the former Chase Kuala Lumpur branch, and
will become subject to the same capital and reporting requirements as
other domestic banks in Malaysia.
7. Chase-Malaysia will satisfy the requirements of rule 17f-5
insofar as it will be a majority-owned indirect subsidiary of Chase and
will be incorporated and organized under the laws of Malaysia. Chase-
Malaysia will not, however, meet the $100 million minimum shareholder's
equity requirement of rule 17f-5. Accordingly, Chase-Malaysia will not
qualify as an ``Eligible Foreign Custodian'' under the rule and, absent
exemptive relief, could not serve as custodian for the Assets of U.S.
Investment Companies.
8. Where custody services are required in Malaysia, Chase will hold
the Assets of U.S. Investment Companies as custodian or subcustodian,
and will deposit (or cause or permit the deposit of) the Assets with
Chase-Malaysia in accordance with the arrangement described in the
conditions below. Chase-Malaysia will be well-qualified to provide
custody and subcustody services to Chase, U.S. Investment Companies,
and custodians for U.S. Investment Companies, since Chase-Malaysia will
be the successor to the business of Chase's Kuala Lumpur branch, which
is experienced in providing custody services. Under the proposed
foreign custody arrangements, the protection affforded the Assets of
U.S. Investment Companies held by Chase-Malaysia would not be
diminished from the protection afforded by rule 17f-5.
Applicant's Conditions
Chase agrees that any order of the SEC granting the requested
relief may be conditioned upon the following:
1. The foreign custody arrangements proposed regarding Chase-
Malaysia will satisfy the requirements of rule 17f-5 in all respects
other than Chase-Malaysia's level of shareholders' equity.
2. Chase will deposit Assets with Chase-Malaysia only in accordance
with the Custody Agreement and the Subcustody Agreement described in
(a) and (b) below. The Custody and Subcustody Agreements will remain in
effect at all times during which Chase-Malaysia fails to satisfy all
the requirements of the rule.
(a) The Custody Agreement will be between Chase and the U.S.
Investment Company (or its custodian). In that agreement, Chase will
undertake to provide custody or subcustody services, and the U.S.
Investment Company (or its custodian) will authorize Chase to delegate
to Chase-Malaysia such of Chase's duties and obligations as will be
necessary to permit Chase-Malaysia to hold the Assets of U.S.
Investment Companies in custody in Malaysia. The Custody Agreement will
further provide that the delegation by Chase to Chase-Malaysia will not
relieve Chase of any responsibility to the U.S. Investment Company or
its custodian for any loss due to such delegation, and that Chase will
be liable for any loss or claim arising out of or in connection with
the performance by Chase-Malaysia of the custody services to the same
extent as if Chase had itself provided the custody services under the
Custody Agreement.
(b) A Subcustody Agreement will be executed by Chase and Chase-
Malaysia. Pursuant to this agreement, Chase will delegate to Chase-
Malaysia such of Chase's duties and obligations as would be necessary
to permit Chase-Malaysia to hold Assets in custody in Malaysia. The
Subcustody Agreement will explicitly provide that (i) Chase-Malaysia 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 Chase-Malaysia. The Subcustody Agreement will
provide that it will be governed by New York law.
3. Chase currently satisfies and will continue to satisfy the
Qualified U.S. Bank requirement set forth in rule 17f-5(c)(3).
For the Commission, by the Division of Investment Management,
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-26640 Filed 10-26-94; 8:45 am]
BILLING CODE 8010-01-M
