[Federal Register Volume 60, Number 159 (Thursday, August 17, 1995)]
[Notices]
[Pages 42934-42936]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20400]



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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 21278; International Series Release 
No. 838; 812-9666]


Deutsche Bank AG; Notice of Application

August 11, 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: Deutsche Bank AG (``Deutsche Bank'').

RELEVANT ACT SECTIONS: Order under section 6(c) of the Act for an 
exemption from section 17(f) of the Act.

SUMMARY OF APPLICATION: Deutsche Bank requests an order that would 
permit United States registered investment companies (a ``U.S. 
Investment Company''), other than investment companies registered under 
section 7(d), for which Deutsche Bank serves as custodian or 
subcustodian, to maintain foreign securities and other assets in 
Malaysia with Deutsche Bank (Malaysia) Berhad (``DBM''), a subsidiary 
of Deutsche Bank.

FILING DATE: The application was filed on July 14, 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 September 5, 
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 Fifth Street, N.W., Washington, D.C. 
20549. Applicant: Post Box D, 60262 Frankfurt-am-Main, Germany; cc: J. 
Eugene Marans, Esq., Cleary, Gottlieb, Steen & Hamilton, 1752 N Street, 
N.W., Washington, D.C. 20036.

FOR FURTHER INFORMATION CONTACT:
Marianne H. Khawly, Staff Attorney, at (202) 942-0562, or Robert A. 
Robertson, 

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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. Deutsche Bank requests an order to permit Deutsche Bank, any 
U.S. Investment Company, and any custodian for a U.S. Investment 
Company, to maintain foreign securities, cash, and cash equivalents 
(collectively, ``Assets'') in Malaysia in the custody of DBM. For the 
purposes of this application, ``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 of any state thereof which have 
been issued and sold primarily outside the United States.
    2. Deutsche Bank is a bank organized and existing under the laws of 
Germany. Deutsche Bank is regulated in Germany by the Federal Bank 
Supervisory Office (Bundesaufsichtamt fur Kreditwesen). Deutsche Bank 
is the largest banking institution in Germany and currently provides 
worldwide financial services to foreign governments, central banks, 
financial institutions, and corporate and retail customers. In the 
United States, Deutsche Bank has branch banking operations, and as a 
result, is subject to the Bank Holding Company Act of 1956 and the 
International Banking Act of 1978.
    3. DBM is a subsidiary of Deutsche Bank. DBM is regulated as a 
banking institution under Malaysian law by Bank Negara Malaysia, the 
central bank of Malaysia. Prior to October 1, 1994, Deutsche Bank 
provided custody services for U.S. Investment Companies holding 
securities in its branch in Malaysia. The Malaysian Banking and 
Financial Institutions Act of 1989 requires banking institutions 
operating in Malaysia to be locally incorporated. To comply with this 
legislation, on October 1, 1994, Deutsche Bank transferred 
substantially all of the assets, liabilities, and personnel of its 
Malaysian branch to DBM. Since October 1, 1994, there have been no 
contractual agreements by U.S. Investment Companies or their custodians 
relating to the assignment of custodial contracts to DBM.

Applicant's Legal Analysis

    1. Deutsche Bank requires an order under section 6(c) of the Act 
exempting Deutsche Bank, any U.S. Investment Company, and any custodian 
for such U.S. Investment Company from section 17(f) of the Act to 
permit the deposit and custody of Assets in Malaysia with DBM.
    2. Section 17(f) of the Act requires every registered management 
investment company to place and maintain its securities and similar 
investments in the custody of certain enumerated entities, including a 
bank having at all times aggregate capital, surplus, and undivided 
profits of at least $500,000. A ``bank'', as that term is defined in 
section 2(a)(5) of the Act, 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, whether incorporated or not, doing business under the laws of 
any state or of the United States, a substantial portion of which 
consists of receiving deposits or exercising fiduciary powers similar 
to those permitted to national banks under the authority of the 
Comptroller of the Currency, and which is supervised or examined by 
state or federal authority having supervision over banks, and which is 
not operated for the purposes of evading the Act.
    3. The only entities located outside the United States that section 
17(f) authorizes to serve as custodians for registered management 
investment companies are the overseas branches of qualified 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 by that country's government or an 
agency thereof and that has shareholders' equity in excess of 
$200,000,000 or its equivalent.
    4. Deutsche Bank meets the requirements for an Eligible Foreign 
Custodian under the rule since it has shareholders' equity well in 
excess of the equivalent of $200,000,000, is organized and existing 
under the laws of a country other than the United States, and is 
regulated as a bank under the laws of Germany.
    5. DBM also satisfies the requirements of rule 17f-5 insofar as it 
is a banking institution incorporated or organized under the laws of a 
country other than the United States and is regulated as such by that 
country's government or an agency thereof. DBM, however, does not meet 
the minimum shareholders' equity requirement of rule 17f-5. 
Accordingly, DBM is not an Eligible Foreign Custodian and, absent 
exemptive relief, could not serve as a custodian and, absent exemptive 
relief, could not serve as a custodian for U.S. Investment Company 
Assets.
    6. Section 6(c) provides, in relevant part, that the SEC may, 
conditionally or unconditionally, by order, exempt any person or class 
of persons from any provision of the Act or from any rule thereunder, 
if such exemption is necessary or appropriate in the public interest, 
consistent with the protection of investors, and consistent with the 
purposes fairly intended by the policy and provisions of the Act. 
Deutsche Bank 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. The foreign custody arrangements proposed with respect to DBM 
will satisfy the requirements of rule 17f-5 in all respects other than 
with regard to the shareholders' equity of DBM.
    2. Assets held in custody for U.S. Investment Companies or their 
custodians will be maintained in DBM only in accordance with an 
agreement (a ``Delegation Agreement'') required to remain in effect at 
all times during which DBM fails to satisfy all the requirements of 
rule 17f-5 pursuant to which Deutsche Bank would undertake to provide 
specified custodial or subcustodial services and delegate to DBM such 
of Deutsche Bank's duties and obligations as would be necessary to 
permit DBM to hold in custody in Malaysia Assets of U.S. Investment 
Companies. The Delegation Agreement among Deutsche Bank, DBM and a U.S. 
Investment Company or its custodian would further provide that Deutsche 
Bank's delegation of duties to DBM would not relieve Deutsche Bank of 
any responsibility to a U.S. Investment Company for which Deutsche Bank 
services as custodian or to a custodian for which Deutsche Bank serves 
as a subcustodian for any loss due to such delegation, except such loss 
as may result from political risk (e.g., exchange control restrictions, 
confiscation, expropriation, nationalization, insurrection, civil 
strife, or armed hostilities) or other risks of loss (excluding 
bankruptcy or insolvency of 

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DBM) for which neither Deutsche Bank nor DBM would be liable under rule 
17f-5 (e.g., despite the exercise of reasonable care, acts of God, and 
the like).
    3. Deutsche Bank currently satisfies and will continue to satisfy 
the minimum shareholders' equity requirement set forth in rule 17f-
5(c)(2)(i).

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-20400 Filed 8-16-95; 8:45 am]
BILLING CODE 8010-01-M