[Federal Register Volume 64, Number 52 (Thursday, March 18, 1999)]
[Notices]
[Pages 13459-13460]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6553]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-23737; 812-111532]
Bankers Trust Company; Temporary Order
March 12, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Temporary order under section 9(c) of the Investment Company
Act of 1940 (the ``Act'').
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SUMMARY: Applicant Bankers Trust Company has received a temporary order
exempting it and entities of which it is or becomes an affiliated
person from section 9(a) of the Act, with respect to a cooperation and
plea agreement entered into on March 11, 1999 between applicant and the
U.S. Attorney for the Southern District of New York, until the
Commission takes final action on an application for a permanent order
or, if earlier, May 11, 1999.
Filing Date: The application was filed on March 12, 1999.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549; Applicant, One Bankers Trust
Plaza, New York, New York 10006.
FOR FURTHER INFORMATION CONTACT: Nadya B. Roytblat, Assistant Director,
at (202) 942-0693, Division of Investment Management, Office of
Investment Company Regulation.
SUPPLEMENTARY INFORMATION: The following is a temporary order and a
summary of the application. The complete application is available for a
fee from the Commission's Public Reference Branch, 450 Fifth Street,
N.W., Washington, D.C. 20549 (tel. 202-942-8090).
Applicant's Representations
1. Applicant, a New York banking corporation, is the principal bank
subsidiary of Bankers Trust Corporation, a New York corporation that,
together with its subsidiaries and affiliates, performs a wide range of
banking and financial services worldwide. Applicant is the investment
adviser or subadviser to numerous investment companies registered under
the Act (``funds''). Applicant is exempt from registration under the
Investment Advisers Act of 1940 (``Advisers Act''). Certain entities of
which applicant is an affiliated person (``Covered Entities'') and
which are registered under the Advisers Act also serve as investment
advisers or subadvisers to funds. \1\ Applicant and Covered Entities
currently advise or subadvise funds having aggregate net assets in
excess of $60 billion.
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\1\ Upon consummation of the pending acquisition of the parent
company of applicant by Deutsche Bank AG, Covered Entities also
would include entities of which as a result of the acquisition
applicant becomes an affiliated person.
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2. Applicant acts as custodian and transfer agent for certain funds
advised by it or by the Covered Entities. Applicant also acts as
custodian (but not transfer agent) for certain other funds. Applicant
is registered as a transfer agent under the Securities Exchange Act of
1934.
3. On March 11, 1999, the U.S. Attorney for the Southern District
of New York filed a three-count felony information (the
``Information'') in the U.S. District Court for the Southern District
of New York alleging violations of 18 U.S.C. 1005. The Information
charges applicant with making false entries on its books and records as
a result of the conduct of certain employees in 1994-1996 in
applicant's processing services businesses. The conduct involved the
transfer to reserve accounts and to income of aged credit items that
should have been paid to customers or other third parties, or paid to
state abandoned property authorities.
4. On March 11, 1999, applicant entered a plea of guilty to the
charges in the Information pursuant to a written cooperation and plea
agreement (``Cooperation and Plea Agreement.'').\2\ In the Cooperation
and Plea Agreement, applicant agreed to pay a fine of $60 million and
to place the amount in escrow pending sentencing. The Cooperation and
Plea Agreement provides that sentencing will be adjourned to on or
before May 12, 1999.
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\2\ Applicant has agreed to promptly file a copy of the
Information and the Cooperation and Plea Agreement as an amendment
to this application.
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Applicant's Legal Analysis
1. Section 9(a) of the Act, in relevant part, prohibits a person
from serving or acting in the capacity of an investment adviser,
principal underwriter, or depositor for any registered investment
company if the person has been (i) convicted of any felony or
misdemeanor arising out of the person's conduct, among other things, as
an underwriter, broker, dealer, investment adviser, or transfer agent,
or (ii) enjoined from acting, among other things, as a principal
underwriter, investment adviser, or transfer agent. Applicant does not
concede that the Cooperation and Plea Agreement would disqualify it
under section 9(a) of the Act. In order to resolve any uncertainty,
however, applicant seeks a temporary order exempting it and the Covered
Entities from section 9(a) of the Act as it relates to the Cooperation
and Plea Agreement.
2. Section 9(c) of the Act provides that the Commission shall grant
an application for an exemption from the disqualification provisions of
section 9(a) if it is established that these provisions, as applied to
the applicant, are unduly or disproportionately severe or that the
conduct of applicant has been such as not to make it against the public
interest or the protection of investors to grant the application.
3. Applicant states that the prohibitions of section 9(a) as
applied to it and the Covered Entities would be unduly and
disproportionately severe. Applicant states that, if the exemption were
not granted, the prohibition of section 9(a) would have a devastating
impact on the businesses of applicant and the Covered Entities.
Applicant asserts that those businesses were not involved in the
matters underlying the Corporation and Plea Agreement.
4. Applicant believes that the inability of applicant and the
Covered Entities to provide investment advisory services would disrupt
services to the funds and
[[Page 13460]]
could operate significantly to the detriment of the financial interests
of the funds and their shareholders. Applicant and the Covered Entities
will make presentations to the boards of directors of the funds they
advise or subadvise regarding the Cooperation and Plea Agreement and
the reasons they believe relief pursuant to section 9(c) is
appropriate. Applicant has undertaken to provide those funds with all
information concerning the Cooperation and Plea Agreement and its
application necessary for those funds to fulfill their disclosure and
other obligations under federal securities laws.
5. Applicant also asserts that its conduct has been such as not to
make it against the public interest or the protection of investors to
grant the exemption from section 9(a). Applicant states that neither
applicant nor any Covered Entity has ever previously applied for an
exemption pursuant to section 9(c) of the Act. Applicant also states
that the matters underlying the Cooperation and Plea Agreement are
unrelated to applicant's or Covered Entities' investment advisory
activities.
6. Applicant states that the Cooperation and Plea Agreement relates
to books and records violations involving payments by applicant as
custodian or paying agent or in performing other processing services.
Applicant states that, although it has been unable to identify all
persons to whom it improperly failed to make payments, none of the
identified persons were funds, and none of the relevant payments by
applicant as paying agent were on behalf of fund issuers. Applicant
asserts that it has not been able to identify any fund client of
applicant's custody services or any fund shareholder affected by
applicant's transfer agent services as having been affected by the
matters giving rise to the Cooperation and Plea Agreement.
7. Applicant states that the former employees of applicant who were
identified by applicant as having been responsible for the matters
underlying the Cooperation and Plea Agreement (``Identified Former
Employees'') are no longer employed by applicant or any Covered Entity.
Applicant also states that, since 1996, applicant has implemented steps
designed to prevent future violations of applicable laws and
regulations relating to its handling of payments in its capacity as
custodian, paying agent, benefit plan agent and similar roles.
Applicant states that these steps have included an entirely new senior
management team that assumed responsibility in 1997 for the business
out of which the Cooperation and Plea Agreement arose; implementation
by applicant of a formal ``Abandoned Property and Escheatment Policy''
and appointment of an Abandoned Property Officer; and an extensive
effort to research and distribute any moneys involved in the
transactions to the rightful owner of the proper abandoned property
authority.
Applicant's Conditions
Applicant agrees that the requested order will be subject to the
following conditions:
1. The application and any exemption issued shall be without
prejudice to, and shall not limit the Commission's rights in any manner
with respect to, any Commission investigations or enforcement actions
pursuant to the Federal securities laws, or the consideration by the
Commission of any application for exemption from statutory
requirements, including without limitation, the consideration of
applicant's contemplated request for a permanent exemption pursuant to
section 9(c) from the provisions of section 9(a) of the Act, or the
revocation, removal or extension of this temporary exemption or any
temporary exemption granted in connection with an application for a
permanent order.
2. Neither applicant nor any Covered Entity will employ any of the
Identified Former Employees, or any persons who are subsequently
identified as having been responsible for the matters underlying the
Cooperation and Plea Agreement, in any capacity without first making
further application to the Commission pursuant to section 9(c).
Temporary Order
The Division has considered the matter and, without necessarily
agreeing with all of the facts represented or all of the arguments
asserted by applicant, finds, in accordance with 17 CFR 200.30-5(a)(7),
that it appears that (i) the prohibitions of section 9(a), as applied
to applicant and Covered Entities, may be unduly or disproportionately
severe, (ii) applicant's conduct has been such as not to make it
against the public interest or the protection of investors to grant the
temporary exemption, and (iii) granting the temporary exemption would
protect the interests of the investment companies served by applicant
and the Covered Entities by allowing time for the orderly consideration
of an application for permanent relief.
Accordingly, it is hereby ordered, under section 9(c), that
applicant and the Covered Entities are granted a temporary exemption
from the provisions of section 9(a), effective forthwith, solely with
respect to the Cooperation and Plea Agreement, subject to the
conditions in the application, until the Commission takes final action
on an application for a permanent order or, if earlier, May 11, 1999.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-6553 Filed 3-17-99; 8:45 am]
BILLING CODE 8010-01-M
