[Federal Register Volume 59, Number 173 (Thursday, September 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-22056]


[[Page Unknown]]

[Federal Register: September 8, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 20519; International Series Release 
No. 707; 812-9124]

 

State Street Bank and Trust Company; Notice of Application

August 31, 1994.
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: State Street Bank and Trust Company.

RELEVANT ACT SECTIONS: Exemption requested under section 6(c) from the 
provisions of section 17(f).

SUMMARY OF APPLICATION: Applicant seeks an order to permit certain 
registered investment companies (other than investment companies 
registered under section 7(d)) (``Investment Companies'') to maintain 
their foreign securities and other assets in Switzerland in the custody 
of Lombard Odier & Cie (``Lombard Odier'').

FILING DATE: The application was filed on July 27, 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 September 26, 
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, 225 Franklin Street, 29th Floor, Boston, Massachusetts 
02110.

FOR FURTHER INFORMATION CONTACT:
James J. Dwyer, Staff Attorney, at (202) 942-0581, or C. David Messman, 
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. Applicant is a wholly-owned subsidiary of State Street Boston 
Corporation, a publicly held bank holding company. Applicant is 
organized as a bank and trust company under Massachusetts law and is a 
member of the Federal Reserve System.
    2. Lombard Odier, a private bank in Switzerland organized as a 
partnership, is authorized under the Swiss Banking Act to carry out all 
banking activities. Lombard Odier concentrates on services related to 
asset management for institutional and private clients worldwide, 
including investment advisory services, investment research, securities 
brokerage and trading, custody, underwriting, foreign exchange and 
money market dealing, tax and corporate services, and personal 
financial planning. As part of its global approach to managing client 
assets, Lombard Odier has provided custody services for over a century, 
and, as of December 31, 1993, was custodian to more than 10,000 clients 
and held over 37 billion Swiss francs of assets in securities, 
currency, and precious metals held in over 30 countries.
    3. Applicant seeks an order under section 6(c) exempting applicant, 
Lombard Odier, and Investment Companies and their custodians from 
section 17(f). The order would let applicant, as custodian or sub-
custodian of cash, cash equivalents, and ``foreign securities,'' as 
defined in rule 17f-5 (collectively, ``Securities''), and Investment 
Companies and their custodians, to deposit, or cause or permit the 
deposit of, Securities with Lombard Odier in Switzerland. If the relief 
is granted, applicant intends to use Lombard Odier as a sub-custodian 
in Switzerland.

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 meeting the 
qualifications set forth in section 26(a)(1) for custodians of the 
assets of registered investment management companies. 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. Applicant is a bank 
under section 2(a)(5) and meets the qualifications set forth in section 
26(a)(1) for custodians of the assets of registered investment 
management companies.
    2. Under section 17(f), the only foreign entities that may serve as 
custodians for registered management investment companies are the 
overseas branches of 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 
shareholder's equity in excess of U.S. $200,000,000.
    3. Applicant asserts that Lombard Odier satisfies all of the 
requirements of rule 17-5 except the shareholder's equity requirement. 
As a partnership, Lombard Odier technically does not have shareholders' 
equity. Absent exemptive relief, Lombard Odier may not serve as a 
custodian for Investment Company assets.
    4. Applicant asserts that Lombard Odier is well qualified to act as 
sub-custodian for Investment Companies assets. Moreover, applicant 
believes that each Investment Company and its shareholders would be 
adequately protected against loss under the agreement described in 
condition 1 below, because applicant would be responsible for the 
performance of custody services by Lombard Odier to the same extent as 
though applicant itself were providing such services. Thus, under the 
agreement, the use of Lombard Odier as sub-custodian of Securities 
would not result in any reduction in the level of protection afforded 
the assets of the Investment Companies.
    5. Section 6(c) in relevant part permits the SEC to exempt any 
person, security, or transaction, or class or classes thereof, from any 
provision of the Act, or of any rule or regulation thereunder, if and 
to the extent that such exemption is necessary or appropriate in the 
public interest, and consistent with the protection of investors and 
the purposes fairly intended by the policy and provisions of the Act. 
Applicant submits that its request satisfies this standard.

Applicant's Conditions

    Applicant agrees that any order of the SEC granting the requested 
relief shall be subject to the following conditions:
    1. Securities will be deposited in Switzerland with Lombard Odier 
only in accordance with an agreement among (a) the Investment Company 
or a custodian of Securities of the Investment Company for which 
applicant acts as sub-custodian, (b) applicant, and (c) Lombard Odier, 
pursuant to the terms of which applicant would act as the custodian or 
sub-custodian, as the case may be, of Securities of the Investment 
Company and Lombard Odier would be delegated such duties and 
obligations of applicant thereunder as would be necessary to permit 
Lombard Odier to hold in custody the Securities of the Investment 
Company in Switzerland. 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 Lombard Odier of its responsibilities under the 
agreement to the same extent as if applicant had been required to 
provide custody services under such agreement.
    2. All provisions of rule 17f-5, other than the shareholders' 
equity requirement, will be complied with in connection with the 
deposit of Securities in Switzerland with Lombard Odier.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-22056 Filed 9-7-94; 8:45 am]
BILLING CODE 8010-01-M