[Federal Register Volume 60, Number 113 (Tuesday, June 13, 1995)]
[Notices]
[Pages 31172-31173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14437]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21112; International Series Release No. 818; File No. 812-
9556]
Creditanstalt-Bankverein; Notice of Application
June 7, 1995.
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: Creditanstalt-Bankverein (``Creditanstalt'').
Relevant Act Sections: Exemption requested under section 6(c) of the
Act from section 17(f) of the Act.
Summary of Application: Applicant requests an order to permit
Creditanstalt a.s., in Prague, the Czech Republic (``Creditanstalt
(Czech Republic)''), Bank Creditanstalt S.A., in Warsaw, Poland
(``Creditanstalt (Poland)''), Creditanstalt a.s., in Bratislava,
Slovakia (``Creditanstalt (Slovakia)''), and Banka Creditanstalt d.d.,
in Ljubljana, Slovenia (``Creditanstalt Slovenia)'') (collectively, the
``Foreign Subsidiaries'') to act as custodians or subcustodians for
investment company assets.
Filing Date: The application was filed on March 28, 1995, and amended
on May 11, 1995.
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 July 3, 1995 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, D.C. 20549.
Applicant, Schottengasse 6, A-1010 Vienna, Austria; c/o Bruce E. Clubb,
Esq., Baker & McKenzie, 815 Connecticut Avenue NW., Washington, D.C.
20006.
For Further Information Contact: Marilyn Mann, Special Counsel, at
(202) 942-0582, or Robert A. Robertson, Branch Chief, at (202) 942-0564
(Division of Investment Management, Office of Investment Company
Regulation).
Supplmentary 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. Creditanstalt is an Austrian commercial bank that provides a
broad range of banking and financial services, including custody
services. Creditanstalt currently holds assets belonging to registered
investment companies. It is regulated in Austria by the Banking
Supervisory Authority, the government authority that regulates banks in
Austria. As of December 31, 1993, Creditanstalt had shareholders'
equity in excess of the equivalent of U.S. $2 billion.
2. Creditanstalt (Czech Republic) was established in Prague in
March 1991, having been granted a full banking license by the former
State Bank of Czechoslovakia on February 5, 1991. It is a wholly-owned
direct subsidiary of Creditanstalt. It is authorized to engage in the
business of commercial banking and is supervised by the Czech National
Bank.\1\ It provides comprehensive banking services to its customers,
including custody services.
\1\ The Czeh National Bank is the central bank of the Czech
Republic and is an agency of the government of that country.
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3. Creditanstalt (Poland) was established in Warsaw in early 1991,
following Decision No. 5 of the President of the National Bank of
Poland dated January 17, 1991. It is a wholly-owned direct subsidiary
of Creditanstalt. It is authorized to engage in the business of
commercial banking and is supervised by the National Bank of Poland.\2\
It is one of the few foreign-owned banks in Poland to offer a
comprehensive range of banking services to its customers, including
custody services.
\2\ The National Bank of Poland is the central bank of Poland
and is an agency of the government of that country.
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4. Prior to the division of the former Czechoslovakia in 1993 into
the Czech Republic and Slovakia, Creditanstalt operated a number of
branches in Bratislava, now the capital of the Slovak Republic. In
1994, Creditanstalt separately incorporated its Bratislava branch into
Creditanstalt (Slovakia). Creditanstalt (Slovakia) is a wholly-owned
direct subsidiary of Creditanstalt.
It is authorized to engage in the business of commercial banking
and is supervised by the National Bank of Slovakia.\3\ It provides
comprehensive banking services to its customers, including custody
services.
\3\ The National Bank of Slovakia is the central Bank of
Slovakia and is an agency of the government of that country.
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5. Creditanstalt (Slovenia) was established in Ljubljana in early
1990. It is a wholly-owned direct subsidiary of Creditanstalt. It is
authorized to engage in the business of commercial banking and is
supervised by the Bank of Slovenia, the Republic Secretariat of
Finance, and the bank-deposit insurance agency.\4\ It provides
comprehensive banking services to its customers, including custody
services. Slovenian law currently prohibits banks in that country from
providing custody services for customers that are non-residents of that
country. This prohibition is expected to be lifted, however, as the
Government of Slovenia adopts measures to encourage foreign investment
in that country.
\4\ All three of these entities are agencies of the government
of Slovenia.
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6. Creditanstalt requests an order under section 6(c) to (a) permit
Creditanstalt, as custodian or subcustodian for 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''), to deposit, or cause or permit a U.S. Investment Company to
deposit, its Foreign Securities, cash, and cash equivalents
(``Assets'') with the Foreign Subsidiaries as delegates for
Creditanstalt, or (b) permit the Foreign Subsidiaries (as custodians or
subcustodians) to receive the Assets of a U.S. Investment Company
directly from the U.S. Investment Company or its custodian or
subcustodian (other than Creditanstalt). 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
[[Page 31173]] 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.
7. The Foreign Subsidiaries will accept deposits of Assets pursuant
to a written, three-party agreement between (a) a Foreign Subsidiary,
(b) Creditanstalt, and (c) a U.S. Investment Company or its custodian.
The agreement will provide that Creditanstalt will assume liability for
any loss arising out of or in connection with the performance by the
Foreign Subsidiary of its responsibilities under the agreement to the
same extent as if Creditanstalt had itself been required to provide
custody services under the agreement. There will be no difference in
the nature or extent of Creditanstalt's liability based on whether such
services are provided by the Foreign Subsidiaries directly or as
Creditanstalt's delegates.
Applicant's Legal Analysis
1. Section 17(f) of the Act requires a registered investment
company to maintain its securities and similar investments in the
custody of a bank meeting the requirements of section 26(a) of the Act,
a member firm of a national securities exchange, the investment company
itself, or a system for the central handling of securities established
by a national securities exchange. Section 2(a)(5) of the Act defines
``bank'' to include banking institutions organized under the laws of
the United States, member banks of the Federal Reserve System, and
certain banking institutions or trust companies doing business under
the laws of any state or of the United States. The Foreign Subsidiaries
do not fall within the definition of ``bank'' as defined in the Act
and, under section 17(f), may not act as custodians for registered
investment companies.
2. Rule 17f-5 under the Act permits certain entities located
outside the United States to serve as custodians for investment company
assets. One such entity is a banking institution or trust company that
is 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. Creditanstalt qualifies as an eligible foreign
custodian under rule 17f-5. The Foreign Subsidiaries, however, do not
qualify as eligible foreign custodians because they do not meet the
minimum shareholders' equity requirement.
3. The purpose of section 17(f) of the Act is to insure that U.S.
Investment Companies hold securities in a safe manner that protects the
interests of their shareholders. The purpose of rule 17f-5 is to
relieve U.S. Investment Companies of the expense and inconvenience of
moving assets to a United States bank away from their primary trading
market, while at the same time reducing to the extent practicable the
risks inherent in maintaining assets outside the United States. The
requested exemption is consistent with these purposes and with the
protection of investors because, under the proposed custody
arrangements, Creditanstalt will be liable for the performance of
custody services by each Foreign Subsidiary.
Applicant's Conditions
Creditanstalt agrees that any order granting the requested relief
shall be subject to the following conditions:
1. The foreign custody arrangements proposed regarding each Foreign
Subsidiary will satisfy the requirements of rule 17f-5 in all respects
other than the Foreign Subsidiary's level of shareholders' equity.
2. Creditanstalt, any U.S. Investment Company, and any custodian
for a U.S. Investment Company, will deposit Assets with a Foreign
Subsidiary only in accordance with an agreement (the ``Agreement'')
required to remain in effect at all times during which the Foreign
Subsidiary fails to satisfy the requirements of rule 17f-5 (and during
which such Assets remain deposited with the Foreign Subsidiary). Each
Agreement will be a three-party agreement among Creditanstalt, the
Foreign Subsidiary, and the U.S. Investment Company or the custodian
for a U.S. Investment Company pursuant to which Creditanstalt or the
Foreign Subsidiary, as the case may be, will undertake to provide
specified custody services. If Creditanstalt is to provide such
services, the Agreement will authorize Creditanstalt to delegate to the
Foreign Subsidiary such of the duties and obligations of Creditanstalt
as will be necessary to permit the Foreign Subsidiary to hold in
custody the U.S. Investment Company's Assets. If the Foreign Subsidiary
is to provide services directly, no such delegation will be necessary.
However, in either case, the Agreement will provide that Creditanstalt
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 of its responsibilities under the Agreement to the same
extent as if Creditanstalt had itself been required to provide custody
services under the Agreement. Further, the Agreement will provide that,
in the event of loss, a U.S. Investment Company may pursue a claim for
recovery against Creditanstalt, regardless of whether the Foreign
Subsidiary acted as Creditanstalt's delegate or as direct custodian or
subcustodian.
3. Creditanstalt 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. 95-14437 Filed 6-12-95; 8:45 am]
BILLING CODE 8010-01-M
