[Federal Register Volume 59, Number 211 (Wednesday, November 2, 1994)]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-27162]

[[Page Unknown]]

[Federal Register: November 2, 1994]


[Rel. No. IC-20663; International Series Release No. 737; File No. 812-


Banque Paribas and Ottoman Bank, A.S.; Notice of Application 
October 27, 1994.

AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for exemption under the Investment 
Company Act of 1940 (the ``Act'').


APPLICANTS: Banque Paribas and Ottoman Bank, A.S.

RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act 
that would exempt applicants from section 17(f) of the Act.

SUMMARY OF APPLICATION: Applicants request an order permitting Ottoman 
Bank to act as custodian in the Republic of Turkey for registered 
investment companies.

FILING DATE: The application was filed on June 30, 1994, and amended on 
September 16, 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 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on November 21, 
1994, and should be accompanied by proof of service on applicants, 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. Applicants, Ottoman Bank, A.S., Bankalar Cad. No.: 35-37, 80000 
Karakoy--Istanbul/Turkey; Banque Paribas, 3, rue d'Antin, 75002 Paris, 
France; c/o Anthony F. Essaye, Rogers & Wells, 607 14th Street NW., 
Washington, D.C. 20005.

Bradley W. Paulson, Staff Attorney, at (202) 942-0147 or Robert A. 
Robertson, 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 is available for a fee from the 
SEC's Public Reference Branch.

Applicants' Representations

    1. Banque Paribas is a French banking institution that provides a 
complete range of banking services. It is regulated by the Comite de la 
Reglementation Bancaire (the Bank Regulation Committee), the Comite des 
Etablissments de Credit (the Credit Establishment Committee), and the 
Commission Bancaire (the Banking Commission), all of which are agencies 
of the French Government. As of December 31, 1993, Banque Paribas had 
consolidated shareholders' equity of U.S. $2.7 billion (excluding 
minority interests).
    2. Ottoman Bank is a Turkish banking organization. It is regulated 
by the Turkish Treasury and Turkish Central Bank, both of which are 
agencies of the Turkish Government.\1\ As of December 31, 1993, Ottoman 
Bank had shareholders' equity of approximately U.S. $45 million. Banque 
Paribas owns a 49.9% interest in Compagnie Financiere Ottomane, S.A., a 
Luxembourg holding company, which, in turn, owns a 99.9% interest in 
Ottoman Bank.

    \1\Under a prior SEC order, Ottoman Bank has been acting as a 
subcustodian of investment company assets for which Bankers Trust 
Company, N.A. acts as custodian. In the Matter of Bankers Trust 
Company, N.A., Investment Company Act Release Nos. 18046 (April 9, 
1991) (notice) and 18085 (April 9, 1991) (order).

    3. Applicants request on order to permit Ottoman Bank to maintain 
custody of assets (``Assets'') of investment companies registered under 
the Act other than those registered under section 7(b) of the Act 
(``Investment Companies''). As used herein, the term ``Assets'' does 
not include securities issued by the United States Government, any 
state or political subdivision thereof, or any agency thereof, and does 
not include securities issued by any entity organized under the laws of 
the United States or any state thereof (other than certificates of 
deposit, evidence of indebtedness, or other securities issued or 
guaranteed by such an entity that have been issued and sold outside the 
United States).
    4. Ottoman Bank would accept deposits of Assets in Turkey pursuant 
to a written, three-party agreement (the ``Agreement''). The Agreement 
would be entered into by (a) Ottoman Bank, (b) Banque Paribas, and (c) 
an Investment Company or its custodian. The Agreement would provide 
that Ottoman Bank would act as custodian or subcustodian, and Banque 
Paribas would be liable for any loss to the same extent as if Banque 
Paribas had been required to provide custody services under such 
agreement. Banque Paribas would not be liable for losses resulting from 
political risk (e.g., exchange control restrictions, confiscation, 
expropriation, nationalization, insurrection, civil strife, or armed 
hostilities) and other risks of loss (excluding bankruptcy or 
insolvency of Ottoman Bank) for which neither Banque Paribas nor 
Ottoman Bank would be liable (e.g., loss despite the exercise of 
reasonable care, due to an act of God, or resulting from a nuclear 

Applicants' Legal Analysis

    1. Section 17(f) of the Act provides that a registered investment 
company may maintain securities and similar assets 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. Ottoman Bank does not 
fall within the definition of ``bank'' as defined in the Act and, under 
section 17(f), may not act as custodian for registered investment 
    2. Rule 17f-5 under the Act permits certain entities located 
outside the United States to serve as custodian for investment company 
assets. One such entity is a banking institution or trust company that 
is incoroprated or organized under the laws of a country other than the 
United States, that is regulated as such by the country's government or 
an agency thereof, and that has shareholders' equity in excess of 
U.S.$200 million. Banque Paribas qualifies as an eligible foreign 
custodian under rule 17f-5. Ottoman Bank, however, does not qualify as 
an eligible foreign custodian because it does not meet the minimum 
shareholders' equity requirement.
    3. Applicants request an order under section 6(c) of the Act that 
would exempt them from the provisions of section 17(f) to the extent 
necessary for Ottoman Bank to maintain custody of Investment Company 
Assets. Applicants believe that the exemption should be granted because 
it is necessary and appropriate in the public interest and is 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Act. Applicants believe 
that the Agreement provides Investment Companies with the safety and 
security of an eligible foreign custodian under section 17(f) and rule 

Applicants' Conditions

    1. The foreign custody arrangements with Ottoman Bank will comply 
with the provisions of rule 17f-5 in all respects, except those 
provisions relating to the minimum shareholders' equity requirement for 
eligible foreign custodians.
    2. Banque Paribas currently satisfies and will continue to satisfy 
the minimum shareholders' equity requirement set forth in rule 17f-
    3. An Investment Company or a custodian for an Investment Company 
will deposit Securities with Ottoman Bank only in accordance with a 
three-party contractual agreement that will remain in effect at all 
times during which Ottoman Bank fails to meet the requirement of rule 
17f-5 relating to minimum shareholders' equity. Each agreement will be 
a three-party agreement among (a) Banque Paribas, (b) Ottoman Bank, and 
(c) the Investment Company or custodian of the Securities of the 
Investment Company. Under the agreement, Ottoman Bank will undertake to 
provide specified custodial or sub-custodial services. The agreement 
will further provide that Banque Paribas will be liable for any loss, 
damage, cost, expense, liability, or claim arising out of or in 
connection with the performance by Ottoman Bank of its responsibilities 
under the agreement to the same extent as if Banque Paribas had been 
required to provide custody services under such agreement.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Jonathan G. Katz,
[FR Doc. 94-27162 Filed 11-1-94; 8:45 am]