[Federal Register Volume 60, Number 90 (Wednesday, May 10, 1995)]
[Notices]
[Pages 24952-24953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11514]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21041; International Series Release No. 807; 812-9340]


Bayerische Vereinsbank Aktiengesellschaft, et al.

May 4, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').

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

-----------------------------------------------------------------------

APPLICANTS: Bayerische Vereinsbank Aktiengesellschaft (``BV'') and 
Vereinsbank Finance (Delaware) Inc. (``Issuer'').

RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act 
that would exempt applicants from subparagraphs (a)(1) and (a)(3) of 
rule 3a-5 under the Act.

SUMMARY OF APPLICATION: Applicants request an order to permit Issuer, a 
wholly-owned BV subsidiary, to sell its commercial paper in the United 
States to raise funds for the business operations of BV without 
registering as an investment company.

FILING DATE: The application was filed on December 5, 1994, and amended 
on March 23, 1995.

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 May 30, 1995, 
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 5th Street N.W., Washington, D.C. 20549. 
Applicants: 335 Madison Avenue, New York, NY 10017.

FOR FURTHER INFORMATION CONTACT:
Sarah A. Buescher, Staff Attorney, at (202) 942-0573, or Robert A. 
Robertson, Branch Chief, at (202) 942-0546 (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 at the 
SEC's Public Reference Branch.

Applicants' Representations

    1. BV is a bank organized under the laws of the Federal Republic of 
Germany (``Germany'') with its headquarters in Munich. It is a publicly 
held corporation with limited liability (Aktiengesellschaft), the 
shares of which are quoted on all German stock exchanges. BV and its 
subsidiaries are active in the mortgage business, commercial banking, 
leasing, and funds management/financial advisory products. BV is 
subject to supervision by the Federal Banking Supervisory Office of 
Germany, an independent federal authority, and by the Deutsche 
Bundesbank, the German Central Bank. Applicants represent that 
regulation by German banking authorities is comparable in many respects 
to the supervision of United States commercial banks.
    2. Issuer, a Delaware corporation, is a wholly-owned subsidiary of 
BV. Initially, Issuer proposes to issue and sell in the United States 
short-term negotiable promissory notes of the type exempt from the 
registration requirements of the Securities Act of 1933 by virtue of 
section 3(a)(3) thereof and generally referred to as commercial paper 
(the ``Notes''). The Notes would be offered publicly, only to the types 
of sophisticated and largely institutional investors that ordinarily 
participate in the United States commercial paper market. The proceeds 
from the sale of the Notes would be used to finance the business 
activities of BV. Issuer may in the future issue and sell other debt 
securities.
    3. Applicants require exemptive relief from subparagraphs (a)(1) 
and (a)(3) of rule 3a-5, since BV will not unconditionally guarantee 
the obligations of Issuer to pay the Notes, as required by the rule. BV 
will provide a functional equivalent of a guarantee. BV requires the 
proposed structure for tax reasons and because the German Federal 
Banking Law and the German Federal Supervisory Office could require BV 
to maintain additional funds if BV provided an unconditional guarantee 
or letter of credit.
    4. Issuer would deposit the net proceeds from the sale of the Notes 
(the ``Deposits'') at BV's Cayman Islands branch (the ``Branch'') 
pursuant to a deposit agreement (the ``Deposit Agreement'') to be 
entered into by Issuer, the Branch, and BV. Substantially all of 
Issuer's assets would consist of a single evidence of indebtedness of 
the Branch issued to Issuer evidencing Issuer's deposits. The Branch 
unconditionally agrees to repay to Issuer each Deposit made by Issuer 
at the Branch, including accrued interest, on the maturity date of the 
Deposit. Noteholders would be assigned as security and granted a 
security interest in the Deposits and accrued interest corresponding to 
their Notes. If Issuer fails to pay a Note according to its terms, the 
Deposit Agreement entitles the Noteholder to receive payments by the 
Branch of the Deposit and accrued interest.
    5. Under German law and pursuant to the Deposit Agreement, the 
repayment obligation of the Branch in respect of the Deposits is an 
obligation of BV. BV's obligations regarding its liabilities to Issuer 
will rank at least pari passu among themselves and with all other 
unsecured and unsubortinated indebtedness, including deposit 
liabilities, of BV and will be superior to rights of shareholders.
    6. To assure that the proceeds from the sale of the Notes will be 
deposited with the Branch, Issuer and the Branch will enter into an 
agreement (``Issuing and Paying Agency Agreement'') with a commercial 
bank pursuant to which the Branch would have an operating account with 
the commercial bank. The [[Page 24953]] payments of the proceeds of the 
sale of the Notes to the Branch would be made to this account, and the 
payments by Issuer or the Branch to the Noteholders would be made from 
this account by appropriate debits or credits, respectively. The 
Issuing and Paying Agency Agreement states that the Branch will have 
exclusive control over the account, and the sole right of withdrawal of 
funds therefrom. At the moment the proceeds from the sale of the Notes 
are deposited in the Branch's account at a commercial bank, the 
Noteholder would have a right of action against BV under his or her 
security interest in the Deposit and, therefore, the Noteholder's 
security interest in the Deposit would attach.
    7. BV, in connection with the offering of the Notes, would submit 
to the jurisdiction of any state or federal court in the Borough of 
Manhattan in the City of New York, and would appoint Issuer as agent to 
accept any process which may be served in any suit, action, or 
proceeding brought against BV based upon its obligations to Issuer. 
Such consent to jurisdiction and such appointment of an authorized 
agent to accept service of process would be irrevocable until all 
amounts due and to become due with respect to outstanding Deposits and 
all outstanding obligations of BV to Issuer have been paid.

Applicants' Legal Analysis

    1. Without exemptive relief, Issuer may be an investment company, 
as defined in section 3(a) of the Act. Rule 3a-5 states that a finance 
subsidiary will not be considered an investment company under section 
3(a), provided the subsidiary meets certain requirements. Applicants 
believe that Issuer would meet the requirements of rule 3a-5, except 
that the Notes and any other debt securities and non-voting preferred 
stock which Issuer may issue in the future would not be guaranteed in a 
technical sense by BV, as required by subparagraphs (a)(1) and (a)(3) 
of the rule. Instead, BV would provide the functional equivalent of a 
guarantee. Applicants believe that the entitlement of the Noteholders 
to receive payment by the Branch of the Deposit corresponding to the 
Notes in case of failure of Issuer to pay the Notes upon maturity would 
be the substantial equivalent of a guarantee. Applicants represent that 
the business and fiscal considerations behind BV's desire to use Issuer 
as a financing vehicle to sell the Notes in the United States in no way 
impinge upon the public policy concerns, such as investor protection, 
that underlie the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief shall 
be subject to the following conditions:
    1. BV will state expressly in the Deposit Agreement that the 
obligations of the Branch to the Issuer and the Noteholders are BV's 
own obligations.
    2. If the Issuer fails to pay a Note in accordance with its terms, 
the Deposit Agreement will entitle the Noteholder to receive payment 
from the Branch. Noteholders will have a direct cause of action against 
BV in the event of any default in payment of the Notes.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-11514 Filed 5-9-95; 8:45 am]
BILLING CODE 8010-01-M