[Federal Register Volume 60, Number 172 (Wednesday, September 6, 1995)]
[Notices]
[Pages 46324-46326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22065]



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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 21323; International Series Release 
No. 846; 812-9640]


Societe Generale; Notice of Application

August 29, 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: Societe Generale.

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

SUMMARY OF APPLICATION: Societe Generale requests an order that would 
permit United States registered investment companies other than 
investment companies registered under section 7(d) (a ``U.S. Investment 
Company''), for which Societe Generales serve as custodian or 
subcustodian, to maintain foreign securities and other assets in the 
Ivory Coast with Societe General de Banques en Cote d'Ivoire 
(``SGBCI''), in Morocco with Societe Generale Marocaine de Banques 
(``SGMB''), and in South Africa with Societe Generale South Africa 
Limited (``SGSA''), subsidiaries of Societe Generale (collectively, the 
``Foreign Subsidiaries'').

FILING DATES: The application was filed on June 23, 1995 and amended on 
August 28, 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 25, 
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: Societe Generale, Securities Operations, 32, rue du 
Champ de Tir, 44300 Nantes, France; cc: Bruce E. Clubb, Esq., Baker & 
McKenzie, 815 Connecticut Avenue, N.W., Washington, D.C., 20006-4078.

FOR FURTHER INFORMATION CONTACT:
Marianne H. Khawly, Staff Attorney, at (202) 942-0562, 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 may be obtained for a fee from 
the SEC's Public Reference Branch.

Applicant's Representations

    1. Societe Generale requests an order to permit Societe Generale, 
the Foreign Subsidiaries, 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 the custody of 
the Foreign Subsidiaries. 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. Societe Generale is a bank organized and existing under the laws 
of France. Societe Generale is regulated in France by the Ministere de 
l'Economie at des Finances and is subject to law No. 8846 of June 24, 
1984 Relating to the Activities and Regulation of Credit Institutions. 
Societe Generale is one of the leading financial services institutions 
in France and currently 

[[Page 46325]]
provides worldwide custody services that include holding Assets of U.S. 
Investment Companies or their custodians. In the United States, Societe 
Generale has branch banking operations, representative offices, and as 
a result, is subject to the Bank Holding Company Act of 1956 and the 
International Banking Act of 1978. As of December 31, 1994, Societe 
Generale had consolidated shareholders' equity in excess of the 
equivalent of $10,000,000,000.
    3. SGBCI was incorporated in Abidjan in 1962. It is a 37% owned 
direct subsidiary of Societe Generale. Other major shareholders include 
the Ivory Coast government and Credit Suisse. SGBCI is regulated by the 
Ministry of the Economy, Finance and Planning of the Ivory Coast under 
law No. 90-589 of July 25, 1990 Regarding Bank Regulation. The Ivory 
Coast is a member of the West African Monetary Union (``WAMU'') and, as 
a result, SGBCI is supervised by the WAMU central bank.
    4. Societe Generale commenced banking operations in Morocco in 
1913, which operations it incorporated into a subsidiary in 1962. After 
acquiring another bank in 1965, the merged entity was renamed SGMB. 
SGMB is a 35% owned direct subsidiary of Societe Generale. Other major 
shareholders include Societe Marseillaise de Credit and Credit Suisse. 
SGMB is regulated by the Ministry of Finance of Morocco and Bank al-
Maghrib, the Moroccan central bank, under Law No. 93-147 of June 7, 
1993 Relating to the Activities and Regulation of Credit Institutions.
    5. SGSA is a bank incorporated in South Africa in 1981. SGSA was 
acquired by Societe Generale in 1991. It is a wholly owned subsidiary 
of Societe Generale. SGSA is regulated by the Registrar of Banks of 
South Africa and the Reserve Bank of South Africa under Banks Act No. 
94 of 1990.
    6. Societe Generale requests relief to permit Societe Generale, as 
custodian or subcustodian for a U.S. Investment Company, when custody 
services are required in the Ivory Coast, Morocco, or South Africa, to 
deposit, or cause or permit the U.S. Investment Company to deposit, its 
Assets with the appropriate Foreign Subsidiary as delegate for Societe 
Generale.
Applicant's Legal Analysis

    1. 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, 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.
    2. 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. Societe Generale is an Eligible Foreign 
Custodian under the rule.
    3. The Foreign Subsidiaries satisfy the requirements of rule 17f-5, 
with the exception of meeting the minimum shareholders' equity 
requirement. Accordingly, they are not Eligible Foreign Custodians and, 
absent exemptive relief, could not serve as a custodian for U.S. 
Investment Company Assets.
    4. 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. 
Societe Generale 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 regarding each Foreign 
Subsidiary satisfy the requirements of rule 17f-5 in all respects other 
than the Foreign Subsidiary's level of shareholder equity.
    2. Societe Generale, 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 one of the two contractual 
arrangements described below, which arrangement will 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).
    a. The Three-Party Agreement Arrangement. Under this arrangement, 
the agreement will be a three-party agreement (the ``Three-Party 
Agreement'') among (i) Societe Generale, (ii) the Foreign Subsidiary 
and (iii) the U.S. Investment Company, or the custodian for a U.S. 
Investment Company pursuant to which Societe Generale will undertake to 
provide specified custody services, and will delegate to the Foreign 
Subsidiary such of the duties and obligations of Societe Generale as 
will be necessary to permit the Foreign Subsidiary to hold in custody 
the U.S. Investment Company's Assets. The Three-Party Agreement further 
will provide that Societe Generale 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 Three-Party Agreement to the same extent as if Societe Generale had 
itself been required to provide custody services under the Three-Party 
Agreement.
    b. The Custody Agreement/Subcustody Agreement Arrangement. Societe 
Generale will deposit Assets with a Foreign Subsidiary in accordance 
with the Custody Agreement and Subcustody Agreement described below.
    i. The Custody Agreement will be between Societe Generale and the 
U.S. Investment Company or any custodian for a U.S. Investment Company. 
In that agreement, Societe Generale will undertake to provide specified 
custody or subcustody services, and the U.S. Investment Company (or its 
custodian) will authorize Societe Generale to delegate to the Foreign 
Subsidiary such of Societe Generale's duties and obligations as will be 
necessary to permit the Foreign Subsidiary to hold in custody the 
assets of U.S. Investment Companies. The Custody Agreement further will 
provide that Societe Generale 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 

[[Page 46326]]
of its responsibilities to the same extent as if Societe Generale had 
itself been required to provide custody services under the Custody 
Agreement.
    ii. A Subcustody Agreement will be executed by Societe Generale and 
the Foreign Subsidiary. Pursuant to this agreement, Societe Generale 
will delegate to the Foreign Subsidiary such of Societe Generale's 
duties and obligations as will be necessary to permit the Foreign 
Subsidiary to hold Assets in custody in the country in which it 
operates. The Subcustody Agreement will explicitly provide that (i) the 
Foreign Subsidiary is acting as a foreign custodian for Assets that 
belong to a U.S. Investment Company pursuant to the terms of an 
exemptive order issued by the SEC and (ii) the U.S. Investment Company 
or its custodian (as the case may be) that has entered into a Custody 
Agreement will be entitled to enforce the terms of the Subcustody 
Agreement and can seek relief directly against the Foreign Subsidiary. 
Further, the Subcustody Agreement will be governed either by New York 
law or French law, or by Ivory Coast law for SGBCI, Moroccan law for 
SGMB, or South African law for SGSA. If it is governed by French, Ivory 
Coast, Moroccan, or South African law, Societe Generale shall obtain an 
opinion of counsel in France, the Ivory Coast, Morocco, or South 
Africa, as the case may be, opining as to the enforceability of the 
rights of a third party beneficiary under the laws of such country.
    3. Societe Generale 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. 95-22065 Filed 9-5-95; 8:45 am]
BILLING CODE 8010-01-M