[Federal Register Volume 60, Number 113 (Tuesday, June 13, 1995)]
[Notices]
[Pages 31172-31173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14437]



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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-21112; International Series Release No. 818; File No. 812-
9556]


Creditanstalt-Bankverein; Notice of Application

June 7, 1995.
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: Exemption requested under section 6(c) of the 
Act from section 17(f) of the Act.

Summary of Application: Applicant requests an order to permit 
Creditanstalt a.s., in Prague, the Czech Republic (``Creditanstalt 
(Czech Republic)''), Bank Creditanstalt S.A., in Warsaw, Poland 
(``Creditanstalt (Poland)''), Creditanstalt a.s., in Bratislava, 
Slovakia (``Creditanstalt (Slovakia)''), and Banka Creditanstalt d.d., 
in Ljubljana, Slovenia (``Creditanstalt Slovenia)'') (collectively, the 
``Foreign Subsidiaries'') to act as custodians or subcustodians for 
investment company assets.

Filing Date: The application was filed on March 28, 1995, and amended 
on May 11, 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 
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 July 3, 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, D.C. 20549. 
Applicant, Schottengasse 6, A-1010 Vienna, Austria; c/o Bruce E. Clubb, 
Esq., Baker & McKenzie, 815 Connecticut Avenue NW., Washington, D.C. 
20006.

For Further Information Contact: Marilyn Mann, Special Counsel, at 
(202) 942-0582, or Robert A. Robertson, Branch Chief, at (202) 942-0564 
(Division of Investment Management, Office of Investment Company 
Regulation).

Supplmentary 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 that 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 that 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 (Czech Republic) was established in Prague in 
March 1991, having been granted a full banking license by the former 
State Bank of Czechoslovakia on February 5, 1991. It is a wholly-owned 
direct subsidiary of Creditanstalt. It is authorized to engage in the 
business of commercial banking and is supervised by the Czech National 
Bank.\1\ It provides comprehensive banking services to its customers, 
including custody services.

    \1\ The Czeh National Bank is the central bank of the Czech 
Republic and is an agency of the government of that country.
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    3. Creditanstalt (Poland) was established in Warsaw in early 1991, 
following Decision No. 5 of the President of the National Bank of 
Poland dated January 17, 1991. It is a wholly-owned direct subsidiary 
of Creditanstalt. It is authorized to engage in the business of 
commercial banking and is supervised by the National Bank of Poland.\2\ 
It is one of the few foreign-owned banks in Poland to offer a 
comprehensive range of banking services to its customers, including 
custody services.

    \2\ The National Bank of Poland is the central bank of Poland 
and is an agency of the government of that country.
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    4. Prior to the division of the former Czechoslovakia in 1993 into 
the Czech Republic and Slovakia, Creditanstalt operated a number of 
branches in Bratislava, now the capital of the Slovak Republic. In 
1994, Creditanstalt separately incorporated its Bratislava branch into 
Creditanstalt (Slovakia). Creditanstalt (Slovakia) is a wholly-owned 
direct subsidiary of Creditanstalt.
    It is authorized to engage in the business of commercial banking 
and is supervised by the National Bank of Slovakia.\3\ It provides 
comprehensive banking services to its customers, including custody 
services.

    \3\ The National Bank of Slovakia is the central Bank of 
Slovakia and is an agency of the government of that country.
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    5. Creditanstalt (Slovenia) was established in Ljubljana in early 
1990. It is a wholly-owned direct subsidiary of Creditanstalt. It is 
authorized to engage in the business of commercial banking and is 
supervised by the Bank of Slovenia, the Republic Secretariat of 
Finance, and the bank-deposit insurance agency.\4\ It provides 
comprehensive banking services to its customers, including custody 
services. Slovenian law currently prohibits banks in that country from 
providing custody services for customers that are non-residents of that 
country. This prohibition is expected to be lifted, however, as the 
Government of Slovenia adopts measures to encourage foreign investment 
in that country.

    \4\ All three of these entities are agencies of the government 
of Slovenia.
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    6. Creditanstalt requests an order under section 6(c) to (a) permit 
Creditanstalt, as custodian or subcustodian for any management 
investment company registered under the Act, other than an investment 
company registered under section 7(d) of the Act (a ``U.S. Investment 
Company''), to deposit, or cause or permit a U.S. Investment Company to 
deposit, its Foreign Securities, cash, and cash equivalents 
(``Assets'') with the Foreign Subsidiaries as delegates for 
Creditanstalt, or (b) permit the Foreign Subsidiaries (as custodians or 
subcustodians) to receive the Assets of a U.S. Investment Company 
directly from the U.S. Investment Company or 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 
[[Page 31173]] 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.
    7. The Foreign Subsidiaries will accept deposits of Assets pursuant 
to a written, three-party agreement between (a) a Foreign Subsidiary, 
(b) Creditanstalt, and (c) a U.S. Investment Company or its custodian. 
The agreement will provide that Creditanstalt will assume liability for 
any loss arising out of or in connection with the performance by the 
Foreign Subsidiary of its responsibilities under the agreement to the 
same extent as if Creditanstalt had itself been required to provide 
custody services under the agreement. There will be no difference in 
the nature or extent of Creditanstalt's liability based on whether such 
services are provided by the Foreign Subsidiaries directly or as 
Creditanstalt's delegates.

Applicant's Legal Analysis

    1. Section 17(f) of the Act requires a registered investment 
company to maintain its securities and similar investments 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. The Foreign Subsidiaries 
do not fall within the definition of ``bank'' as defined in the Act 
and, under section 17(f), may not act as custodians 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. The Foreign Subsidiaries, however, do not 
qualify as eligible foreign custodians because they do not meet the 
minimum shareholders' equity requirement.
    3. The purpose of section 17(f) of the Act is to insure that U.S. 
Investment Companies hold securities in a safe manner that protects the 
interests of their shareholders. The purpose of rule 17f-5 is to 
relieve U.S. Investment Companies of the expense and inconvenience of 
moving assets to a United States bank away from their primary trading 
market, while at the same time reducing to the extent practicable the 
risks inherent in maintaining assets outside the United States. The 
requested exemption is consistent with these purposes and with the 
protection of investors because, under the proposed custody 
arrangements, Creditanstalt will be liable for the performance of 
custody services by each Foreign Subsidiary.

Applicant's Conditions

    Creditanstalt agrees that any order granting the requested relief 
shall be subject to the following conditions:
    1. The foreign custody arrangements proposed regarding each Foreign 
Subsidiary will satisfy the requirements of rule 17f-5 in all respects 
other than the Foreign Subsidiary's level of shareholders' equity.
    2. Creditanstalt, any U.S. Investment Company, and any custodian 
for a U.S. Investment Company, will deposit Assets with a Foreign 
Subsidiary only in accordance with an agreement (the ``Agreement'') 
required to remain in effect at all times during which the Foreign 
Subsidiary fails to satisfy the requirements of rule 17f-5 (and during 
which such Assets remain deposited with the Foreign Subsidiary). Each 
Agreement will be a three-party agreement among Creditanstalt, the 
Foreign Subsidiary, and the U.S. Investment Company or the custodian 
for a U.S. Investment Company pursuant to which Creditanstalt or the 
Foreign Subsidiary, 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 the 
Foreign Subsidiary such of the duties and obligations of Creditanstalt 
as will be necessary to permit the Foreign Subsidiary to hold in 
custody the U.S. Investment Company's Assets. If the Foreign Subsidiary 
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 the Foreign 
Subsidiary 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 loss, a U.S. Investment Company may pursue a claim for 
recovery against Creditanstalt, regardless of whether the Foreign 
Subsidiary 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. 95-14437 Filed 6-12-95; 8:45 am]
BILLING CODE 8010-01-M