[Federal Register Volume 61, Number 123 (Tuesday, June 25, 1996)]
[Notices]
[Pages 32864-32866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16164]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 22032; International Series Release
No. 997; 812-10172]
Commonwealth Bank of Australia; Notice of Application
June 19, 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: Commonwealth Bank of Australia (``CBA'').
Relevant Act Sections: Order under section 6(c) of the Act for an
exemption from section 17(f) of the Act.
Summary of Application: CBA requests an order that would permit
registered investment companies other than investment companies
registered under section 7(d) (a ``U.S. Investment Company''), for
which CBA serves as custodian or subcustodian, to maintain foreign
securities and other assets in Australia with CBA Nominees Limited
(``CBA Nominees Ltd.''), a wholly-owned subsidiary of CBA.
Filing Date: The application was filed on May 30, 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 July 15, 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 Fifth Street, N.W., Washington, D.C.
20549. Applicant: 48 Martin Place, Sydney, New South Wales, 2000,
Australia; cc: Thomas J. Rice, Esq., Coudert Brothers, 1114 Avenue of
the Americas, New York, NY 10036-7703.
For Further Information Contact: Marianne H. Khawly, Staff Attorney, at
(202) 942-0562, or Alison E. Baur, 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. CBA is a bank organized and existing under the laws of
Australia. CBA is authorized and regulated in Australia by the Reserve
Bank of Australia, an agency of the Commonwealth Government, under the
Banking Act of 1959. CBA carries out a
[[Page 32865]]
wide range of banking, financial, and related activities in Australia
and internationally. CBA offers trustee and custodial services in
Australia through CBA Nominees Ltd. because the Reserve Bank of
Australia's prudential guidelines provide that such activities be kept
separate from CBA in its capacity as a bank. CBA is the second largest
bank in Australia in terms of total domestic assets. At June 30, 1995,
CBA had consolidated shareholders' equity in excess of $5 billion.
2. CBA Nominees Ltd., a wholly-owned subsidiary of CBA, was
organized in 1965 and exists under the laws of New South Wales,
Australia. CBA Nominees Ltd. does not have any employees, rather, its
work is carried out by CBA employees.
3. CBA requests an order to permit CBA, CBA Nominees Ltd., any U.S.
Investment Company, and any custodian for a U.S. Investment Company to
maintain foreign securities, cash, and cash equivalents (collectively,
``Assets'') in the custody of CBA Nominees Ltd. as delegate for CBA.
For the purposes of this application, ``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 of 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 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, whether incorporated or not, doing business under the laws of
any state or of the United States, a substantial portion of which
consists of receiving deposits or exercising fiduciary powers similar
to those permitted to national banks, which is supervised or examined
by state or federal authority having supervision over banks, and which
is not operated for the purposes of evading the Act.
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, however, expands the group of entities that are permitted
to serve as foreign custodians. The rule 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
$200,000,000 or its equivalent. CBA is an Eligible Foreign Custodian
under the rule.
3. CBA Nominees Ltd. is not an Eligible Foreign Custodian under
rule 17f-5 because it is not a banking institution or trust company
incorporated or organized under the laws of a country other than the
United States and does not have shareholders' equity in excess of
$200,000,000. Absent exemptive relief, therefore, it could not serve as
a custodian for U.S. Investment Company Assets.
4. Section 6(c) provides, in relevant part, that the SEC may,
conditionally or unconditionally, by order, exempt any person or class
of persons 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. CBA
believes that its request satisfies this standard.
Applicant's Conditions
Applicant agrees that any SEC order granting the requested relief
shall be subject to the following conditions:
1. The foreign custody arrangements proposed with respect to CBA
Nominees Ltd. will satisfy the requirements of rule 17f-5 in all
respects, except insofar as CBA Nominees Ltd.: (a) is not a banking
institution or trust company incorporated or organized under the laws
of a country other than the United States; and (b) does not have
shareholders' equity in excess of $200,000,000.
2. CBA, when providing custody services to a U.S. Investment
Company, will deposit Assets with CBA Nominees Ltd. only in accordance
with one of the two contractual arrangements described below, which
arrangement will remain in effect at all times during which CBA
Nominees Ltd. fails to satisfy the criteria of an Eligible Foreign
Custodian in rule 17f-5.
a. The Three-Party Agreement Arrangement. Under this arrangement,
the agreement will be a three-party agreement (the ``Agreement'') among
(i) CBA, (ii) CBA Nominees Ltd., and (iii) the U.S. Investment Company,
or the custodian for a U.S. Investment Company pursuant to which CBA
will undertake to provide specified custody or subcustody services, and
will delegate to CBA Nominees Ltd. such of the duties and obligations
of CBA as will be necessary to permit CBA Nominees Ltd. to hold in
custody the U.S. Investment Company's Assets. The Agreement further
will provide that CBA will be liable for any loss, damage, cost,
expense, liability, or claim arising out of or in connection with the
performance by CBA Nominees Ltd. of it responsibilities under the
Agreement to the same extent as if CBA had itself been required to
provide custody services under the Agreement, except for such loss,
damage, cost, expense, liability, or claim as may result from political
risk and those as may result from other risks of loss (excluding
bankruptcy or insolvency of CBA Nominees Ltd.) for which neither CBA
nor CBA Nominees Ltd. would be liable under rule 17f-5.
b. The Custody Agreement/Subcustody Agreement Arrangement. Under
this arrangement, Assets will be deposited with CBA Nominees Ltd. in
accordance with the Custody Agreement and Subcustody Agreement defined
below.
i. The Custody Agreement will be between CBA and the U.S.
Investment Company or any custodian for a U.S. Investment Company. In
that agreement, CBA will undertake to provide specified custody or
subcustody services, and the U.S. Investment Company (or its custodian)
will authorize CBA to delegate to CBA Nominees Ltd. such of CBA's
duties and obligations as will be necessary to permit CBA Nominees Ltd.
to hold in custody the U.S. Investment Company's Assets. The Custody
Agreement further will provide that CBA will be liable for any loss,
damage, cost, expense, liability, or claim arising out of or in
connection with the performance by CBA Nominees Ltd. of its
responsibilities to the same extent as if CBA had itself been required
to provide custody services under the Custody Agreement, except for
such loss, damage, cost, expense, liability, or claim as may result
from political risk and those as may result from other risks of loss
(excluding bankruptcy or insolvency of CBA Nominees Ltd.) for
[[Page 32866]]
which neither CBA nor CBA Nominees Ltd. would be liable under rule 17f-
5.
ii. A Subcustody Agreement will be executed by CBA and CBA Nominees
Ltd. Pursuant to this agreement, CBA will delegate to CBA Nominees Ltd.
such of CBA's duties and obligations as will be necessary to permit CBA
Nominees Ltd. to hold Assets in custody in Australia. The Subcustody
Agreement will explicitly provide that (i) CBA Nominees Ltd. 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 CBA Nominees Ltd. The Subcustody Agreement will be
governed by the law of Australia and CBA shall obtain an opinion of
counsel in Australia opining as to the enforceability of the rights of
a third party beneficiary under the laws of that country.
3. CBA currently satisfies and will continue to satisfy the
requirements set forth in rule 17f-5(c)(2).
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-16164 Filed 6-24-96; 8:45 am]
BILLING CODE 8010-01-M
