[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