[Federal Register Volume 59, Number 248 (Wednesday, December 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31888]


[Federal Register: December 28, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20791; International Series Release No. 764; File No. 812-
9316]


Creditanstalt-Bankverein; Notice of Application

December 21, 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: Creditanstalt-Bankverein (``Creditanstalt'').

relevant act sections: Order requested under section 6(c) of the Act 
that would exempt applicant from section 17(f) of the Act.

summary of application: Applicant requests an order to permit 
Creditanstalt Rt. (``Creditanstalt (Hungary)'') to act as custodian for 
investment company assets in Hungary.

filing date: The application was filed on November 7, 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 January 17, 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, DC 20549. 
Applicant, Schottengasse 6, A-1010 Vienna, Austria; c/o Bruce E. Clubb, 
Esq., Baker & and McKenzie, 815 Connecticut Avenue, NW., Washington, DC 
20006.

for further information contact: Sarah A. Buescher, Law Clerk, at (202) 
942-0573, or Robert A. Robertson, Branch Chief, at (202) 942-0564 
(Division of Investment Management, Office of Investment Company 
Regulations).

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. Creditanstalt is an Austrian commercial bank which 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 which 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 (Hungary) is a wholly-owned direct subsidiary of 
Creditanstalt. It is authorized to engage in commercial banking and is 
supervised by the State Banking Supervision, the government authority 
which regulates banks in Hungary. It currently provides comprehensive 
banking services, including trust operations and custody services.
    3. Applicant requests an order to (a) permit Creditanstalt as 
custodian or subcustodian for investment companies registered under the 
Act, other than those registered under section 7(b) of the Act (``U.S. 
Investment Companies''), or a U.S. Investment Company, to deposit its 
Foreign Securities, cash, and cash equivalents (``Assets'') with 
Creditanstalt (Hungary) as delegate for Creditanstalt, or (b) permit 
Creditanstalt (Hungary) (as custodian or subcustodian) to receive and 
hold the Assets of a U.S. Investment Company directly from such U.S. 
Investment Company, 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 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.
    4. Creditanstalt (Hungary) would accept deposits of Assets in 
Hungary pursuant to a written, three-party agreement (the 
``Agreement''). The Agreement would be entered into by (a) 
Creditanstalt (Hungary), (b) Creditanstalt, and (c) a U.S. Investment 
Company or its custodian. The Agreement would provide that 
Creditanstalt will assume liability for any loss caused by 
Creditanstalt (Hungary) directly or as Creditanstalt's delegate. There 
will be no difference in the nature or extent of Creditanstalt's 
liability based on whether such services are provided by Creditanstalt 
(Hungary) directly or as Creditanstalt's delegate.

Applicant's 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. Creditanstalt (Hungary) 
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 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. Creditanstalt (Hungary), however, does not 
qualify as an eligible foreign custodian because it does not meet the 
minimum shareholders' equity requirement.
    3. Applicant requests an order under section 6(c) of the Act that 
would exempt it from section 17(f) to the extent necessary for 
Creditanstalt (Hungary) to maintain custody of U.S. Investment Company 
Assets. Applicant believes that the exemption 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 because the Agreement provides U.S. 
Investment Companies with the safety and security of an eligible 
foreign custodian under section 17(f) and rule 17f-5.

Applicant's Conditions:

    Applicant agrees that any order granting the requested relief shall 
be subject to the following conditions:
    1. The foreign custody arrangements proposed regarding 
Creditanstalt (Hungary) will satisfy the requirements of rule 17f-5 in 
all respects, other than Creditanstalt (Hungary)'s level of 
shareholder's equity.
    2. Creditanstalt, any U.S. Investment Company, and any custodian 
for a U.S. Investment Company, will deposit Assets with Creditanstalt 
(Hungary) only in accordance with the Agreement required to remain in 
effect at all times during which Creditanstalt (Hungary) fails to 
satisfy the requirements of rule 17f-5 (and during which such Assets 
remain deposited with Creditanstalt (Hungary)). Each Agreement will be 
a three-party agreement among Creditanstalt, Creditanstalt (Hungary), 
and the U.S. Investment Company or the custodian for a U.S. Investment 
Company pursuant to which Creditanstalt or Creditanstalt (Hungary), 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 Creditanstalt (Hungary) such of 
the duties and obligations of Creditanstalt as will be necessary to 
permit Creditanstalt (Hungary) to hold in custody the U.S. Investment 
Company's Assets. If Creditanstalt (Hungary) 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 Creditanstalt (Hungary) 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 a loss, a U.S. Investment Company may pursue a claim for 
recovery against Creditanstalt, regardless of whether Creditanstalt 
(Hungary) 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. 94-31888 Filed 12-27-94; 8:45 am]
BILLING CODE 8010-01-M