[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