[Federal Register Volume 61, Number 33 (Friday, February 16, 1996)]
[Notices]
[Pages 6272-6273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3572]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21740; International Series Release No. 933; File No. 812-
9792]
Banco Santander, S.A.; Notice of Application
February 12, 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: Banco Santander, S.A. (the ``Bank'').
RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act
that would exempt applicant from section 17(f) of the Act.
SUMMARY OF APPLICATION: Applicant requests an order to permit Banco
Santander de Negocios Mexico, S.A. (``BSNM'') to act as custodian for
investment company assets in Mexico, Banco Santander S.A. (``BSA'') to
act as custodian for investment company assets in Argentina, and Banco
Santander de Negocios Portugal, S.A. (``BSNP'') (collectively, the
``Foreign Subsidiaries'') to act as custodian for investment company
assets in Portugal.
FILING DATE: The application was filed on October 3, 1995 and amended
on January 19, 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 March 8, 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 5th Street, NW., Washington, DC 20549.
Applicant, Paseo de la Castellana, 24, 28406 Madrid, Spain; c/o Nora M.
Jordan, Davis Polk & Wardell, 450 Lexington Avenue, New York, New York
10017.
FOR FURTHER INFORMATION CONTACT: David W. Grim, Staff Attorney, at
(202) 942-0571, or Robert A. Robertson, Branch Chief, 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
1. The Bank is a full-service commercial bank organized under the
laws of Spain and regulated in that country by the Bank of Spain. The
Bank, together with its subsidiaries and associated companies (the
``Group''), is engaged in a wide range of banking, financial, and
related activities in Spain and has offices or subsidiaries in 30 other
countries. The Group was, as of December 31, 1994, the largest
commercial banking group in Spain in terms of total assets. As of
December 31, 1994, the Bank had shareholders' equity of Ptas. 437.7
billion (U.S. $3.6 billion, based on the then current exchange rate),
and the Group had shareholders' equity of Ptas. 519.9 billion (U.S.
$4.0 billion, based on the then current exchange rate).
2. BSNM, BSA, and BSNP are wholly-owned indirect subsidiaries of
the Bank. BSNM is incorporated and organized under the laws of Mexico
and is regulated as a banking institution by Comision Nacional
Bancaria, which is the agency of the government of Mexico responsible
for the regulation of banks. BSA is incorporated and organized under
the laws of Argentina and is regulated as a banking institution by
Banco Central de la Republica Argentina, which is the agency of the
government of Argentina responsible for the regulation of banks. BSNP
is incorporated and organized under the laws of Portugal and is
regulated as a banking institution by Banco de Portugal, which is the
agency of the government of Portugal responsible for the regulation of
banks.
3. The Bank requests an order to permit the Bank, any investment
company registered under the Act, other than those registered under
section 7(d) of the Act (``U.S. Investment Companies''), and any
custodian for a U.S. Investment Company, to maintain ``Foreign
Securities,'' as defined below, cash, and cash equivalents
(collectively, ``Securities'') in the custody of BSNM, BSA, and BSNP as
delegates for the Bank in Mexico, Argentina, and Portugal,
respectively. As used herein, ``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 any state thereof which have
been issued and sold primarily outside the United States.
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
[[Page 6273]]
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 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, and which is supervised or examined by state or federal
authority having supervision over banks.
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. Rule 17f-5(c)(2)(i) 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
U.S. $200 million or its equivalent.
3. The Bank qualifies as an Eligible Foreign Custodian under rule
17f-5. BSNM, BSA, and BSNP each satisfy the requirements of rule 17f-5
insofar as each is a banking institution or trust company incorporated
or organized under the laws of a country other than the United States
and is regulated as such by such country's government or an agency
thereof. The Foreign Subsidiaries, however, do not meet the minimum
shareholders' equity requirement of the rule. Accordingly, the Foreign
Subsidiaries are not Eligible Foreign Custodians under the rule and,
absent exemptive relief, could not serve as custodians for the
Securities of U.S. Investment Companies.
4. Section 6(c) provides, in relevant part, that the SEC, by order,
may exempt any person 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. The Bank believes that its request satisfies this standard.
Applicant's Conditions
Applicant agrees that any order granting the requested relief shall
be subject to the following conditions:
1. The foreign custody arrangements proposed with respect to BSNM,
BSA, and BSNP will satisfy the requirements of rule 17f-5 in all
respects, other than with regard to BSNM's, BSA's, or BSNP's level of
shareholders' equity.
2. Securities of a U.S. Investment Company in Mexico, Argentina, or
Portugal, as the case may be, will be maintained in the custody of
BSNM, BSA, or BSNP, respectively, only in accordance with an agreement
(the ``Agreement''), required to remain in effect at all times during
which the Foreign Subsidiaries fail to satisfy the requirements of rule
17f-5 relating to minimum shareholders' equity. Each Agreement will be
a three-party contract among the Bank, the Foreign Subsidiary, and the
U.S. Investment Company or custodian for the U.S. Investment Company
pursuant to which the Bank would undertake to provide specified
custodial or sub-custodial services for the U.S. Investment Company or
custodian for such company and would delegate to the Foreign Subsidiary
such of the Bank's duties and obligations as would be necessary to
permit BSNM, BSA, or BSNP, as the case may be, to hold in custody the
securities of the U.S. Investment Company or custodian in Mexico,
Argentina, and Portugal, respectively. The Agreement would further
provide that the Bank's delegation of duties to the Foreign Subsidiary
would not relieve the Bank of any responsibility to the U.S. Investment
Company or custodian for such company for any loss due to such
delegation except such loss as may result from (i) political risk
(e.g., exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife, or armed hostility) and
(ii) other risks of loss (excluding bankruptcy or insolvency of the
Foreign Subsidiary) for which neither the Bank nor the Foreign
Subsidiary would be liable under rule 17f-5 (e.g., despite the exercise
of reasonable care, loss due to Acts of God, nuclear incident and the
like).
3. The Bank 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,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-3572 Filed 2-15-96; 8:45 am]
BILLING CODE 8010-01-M
