[Federal Register Volume 59, Number 51 (Wednesday, March 16, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6113]
[[Page Unknown]]
[Federal Register: March 16, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 20128; 812-8744; International Series
Release No. 640]
Barclays Bank PLC; Notice of Application
March 10, 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: Barclays Bank PLC.
RELEVANT ACT SECTIONS: Exemption requested under section 6(c) from the
provisions of section 17(f).
SUMMARY OF APPLICATION: Applicant seeks a conditional order to permit
registered management investment companies for which it acts as foreign
custodian or subcustodian (other than investment companies registered
under section 7(d)) (``Investment Companies'') to maintain their
foreign securities and other assets in the custody of certain foreign
banks (the ``Foreign Subsidiaries'') each of which is a direct
subsidiary of or associated with applicant.
FILING DATE: The application was filed on January 3, 1994, and amended
on February 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 April 4, 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 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, 54 Lombard Street, London EC3P 3AH, England, or c/o Bruce E.
Clubb, Esq., Baker & McKenzie, 815 Connecticut Avenue, NW., Washington,
DC 20006.
FOR FURTHER INFORMATION CONTACT:Courtney S. Thornton, Senior Attorney,
at (202) 272-5287, or C. David Messman, Branch Chief, at (202) 272-3018
(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. Applicant is a wholly-owned subsidiary of Barclays PLC, an
English public limited company (collectively, with its subsidiaries,
the ``Barclays Group''). The Barclays Group is one of the largest
financial services groups in the United Kingdom, and is engaged in a
broad range of banking and financial services for both individual and
corporate customers.
2. As part of the international services it offers, the Barclays
Group provides a network of custody and subcustody services for
Investment Companies and their custodians at various locations
throughout the world, and it wishes to include in its network the
Foreign Subsidiaries to which this application relates.
3. Applicant seeks an order to permit it, as the custodian or
subcustodian of foreign securities, cash, and cash equivalents of
Investment Companies, to maintain such assets in the custody of the
following Foreign Subsidiaries: Barclays Bank of Botswana Limited,
Banque du Caire Barclays International S.A.E. (``Banque du Caire''),
Barclays Bank of Ghana Limited, Barclays Bank of Kenya Limited,
Barclays Bank of Swaziland Limited, Barclays Bank of Zambia Limited,
Barclays Bank of Zimbabwe Limited. With the exception of Banque du
Caire, which is 49%-owned by applicant, each of the Foreign
Subsidiaries is a majority-owned or wholly-owned direct subsidiary of
applicant.
Applicant's Legal Analysis
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 an
aggregate capital, surplus, and undivided profits of at least $500,000.
As defined in section 2(a)(5), ``bank'' 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, (i) a substantial portion of the business of
which consists of receiving deposits or exercising fiduciary powers
similar to those permitted to national banks, (ii) which is supervised
and examined by state or federal authorities having supervision over
banks, and (iii) which is not operated for the purpose of evading the
Act. Therefore, the only foreign entities that are permitted by section
17(f) to serve as custodians for registered management investment
companies are the overseas branches of U.S. banks.
2. Rule 17f-5 under the Act 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. $200,000,000.
3. Applicant is an eligible foreign custodian in the United Kingdom
under the requirements of rule 17f-5, since it has shareholders' equity
well in excess of the pound sterling equivalent of $200,000,000,\1\ is
organized and existing under the laws of England and Wales, and is
authorized and regulated in the United Kingdom as a bank by the Bank of
England.
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\1\At December 31, 1992, applicant had shareholders' equity of
approximately 5.8 billion pounds sterling (approximately $8.7
billion).
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4. Each of the Foreign Subsidiaries satisfies all but one of the
requirements of rule 17f-5, 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. None of the Foreign Subsidiaries,
however, meets the shareholders' equity requirement of the rule.
Accordingly, the Foreign Subsidiaries are not eligible foreign
custodians under the rule. Absent exemptive relief, none of the Foreign
Subsidiaries could serve as custodians for Investment Company assets.
5. Applicant believes that the protection of investors would be
maintained under the proposed custody arrangements, which are similar
to those employed by other foreign subsidiaries of applicant that have
custody of Investment Company assets.\2\ Under these arrangements,
applicant would remain liable for the performance of custody services
by the Foreign Subsidiaries, including any losses that may result from
the insolvency of a Foreign Subsidiary.
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\2\The relief requested is similar to that previously granted
with regard to certain of applicant's other subsidiaries. See
Investment Company Act Release Nos. 17231 (Nov. 20, 1989) (notice)
and 17268 (Dec. 19, 1989) (order), and 16508 (July 29, 1988)
(notice) and 16536 (Aug. 24, 1988) (order).
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6. Applicant submits that the requested relief is necessary and
appropriate in the public interest, and consistent with the protection
of investors and the purposes fairly intended by the policies and
provisions of the Act.
Applicant's Conditions
Applicant agrees that any order of the SEC granting the requested
relief shall be subject to the following conditions:
1. The foreign custody arrangements regarding the Foreign
Subsidiaries will satisfy the requirements of rule 17f-5 in all
respects other than the Foreign Subsidiaries' level of shareholders'
equity.
2. Applicant will deposit the assets of an Investment Company with
a Foreign Subsidiary only in accordance with an agreement required to
remain in effect at all times during which the Foreign Subsidiary fails
to satisfy the requirements of rule 17f-5. Each agreement will be a
three-party agreement among applicant, the Foreign Subsidiary, and the
Investment Company (or its custodian) under which applicant will
undertake to provide specified custody or subcustody services for an
Investment Company or its custodian, and will delegate to the Foreign
Subsidiary such of applicant's duties and obligations as will be
necessary to permit the Foreign Subsidiary to hold the assets of the
Investment Company in custody in the relevant country. The agreement
will further provide that applicant will be liable for any loss,
damage, cost, expense, liability, or claim arising out of or in
connection with the performance by the Foreign Subsidiary or its
responsibilities under the agreement to the same extent as if applicant
had been required to provide custody services under such agreement.
3. Applicant 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. 94-6113 Filed 3-15-94; 8:45 am]
BILLING CODE 8010-01-M
