[Federal Register Volume 60, Number 210 (Tuesday, October 31, 1995)]
[Notices]
[Pages 55389-55390]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26935]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 21448/International Series Release
No. 876; 812-9714]
Internationale Nederlanden Bank N.V., et al.; Notice of
Application
October 24, 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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APPLICANTS: Internationale Nederlanden Bank N.V. (``ING Bank'') and
Internationale Nederlanden Bank (Hungary) Rt. (``ING Bank Hungary'').
RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act to
exempt applicants from section 17(f).
SUMMARY OF APPLICATION: Applicants request an order to permit ING Bank
Hungary to act as custodian in Hungary for certain U.S. registered
investment companies.
FILING DATES: The application was filed on August 7 1995 and amended on
October 10, 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 November 20,
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 request should state the nature of the writer's interest, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request notification by writing to the
SEC's Secretary.
ADDRESSES: Secretary: SEC, 450 Fifth Street, N.W., Washington, DC
20549. Applicants: ING Bank, Strawinskylaan 2631, 1077 ZZ Amsterdam,
the Netherlands; and ING Band Hungary, Andrassy ut 9, H-1061 Budapest,
Hungary.
FOR FURTHER INFORMATION CONTACT:
Elaine M. Boggs, Staff Attorney (202) 942-0572, or C. David Messman,
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 is available for a fee at the
SEC's Public Reference Branch.
Applicants' Representations
1. ING Bank is a Dutch banking institution and is part of
Internationale Nederlanden Groep N.V., a major European financial
institution. ING Bank is regulated in the Netherlands by the Dutch
Ministry of Finance and the Dutch Central Bank. As of December 31,
1994, ING Bank had shareholders' equity in excess of U.S. $5.4 billion.
2. ING Bank Hungary is a Hungarian banking organization. ING Bank
Hungary is supervised by the National Bank of Hungary, the Hungarian
Ministry of Finance, and the State Banking Supervision. ING Bank
Hungary is a wholly-owned direct subsidiary of ING Bank. As of December
31, 1994, ING Bank Hungary had shareholders' equity of U.S. $10.3
million.
3. Applicants request an order to permit ING Bank Hungary to
maintain custody of assets (``Assets'') of investment companies
registered under the Act, other than those registered under section
7(d) of the Act, (``Investment Companies''). As used herein, ``Assets''
includes cash; cash equivalents; 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 securities issued
or guaranteed by the government of the United States or by any State,
political subdivision, or agency thereof, or entity organized under the
laws of the United States or any State thereof that have been issued
and sold primarily outside the United States.
4. ING Bank, as custodian or subcustodian for a U.S. Investment
Company, would deposit assets of a U.S. Investment Company with ING
Bank Hungary or, alternatively, ING Bank Hungary would receive and hold
the Assets of a U.S. Investment Company directly from such U.S.
Investment Company. In either case, ING Bank will assume liability for
any loss, damage, cost, expense, liability, or claim arising out of or
in connection with the performance by ING Bank Hungary of its duties
and obligations as custodian to the same extent as if ING Bank itself
had provided such custody services. ING Bank would not be responsible
for losses that may result from political risk (e.g., exchange control
restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife, or armed hostilities) and other risk of
loss (excluding bankruptcy or insolvency of ING Bank Hungary), for
which neither ING Bank nor ING Bank Hungary would be liable (e.g.,
despite the exercise of reasonable care, loss due to Acts of God,
nuclear incidents, and the like).
5. Applicants request that the order extend to: (a) any U.S.
Investment Company for which ING Bank or ING Bank Hungary acts as
foreign custodian or subcustodian; and (b) any custodian or
subcustodian for such U.S. Investment Company.
Applicants' Legal Analysis
1. Section 17(f) of the Act provides that a registered investment
company may maintain securities and similar assets 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. ING Bank
[[Page 55390]]
Hungary does not fall within the definition of ``bank'' as defined in
the Act and, under section 17(f), may not act as custodian 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 the country's government or
an agency thereof, and that has shareholders' equity in excess of U.S.
$200 million. ING Bank qualifies as an eligible foreign custodian under
rule 17f-5. ING Bank Hungary, however, does not qualify as an eligible
foreign custodian solely because it does not meet the minimum
shareholders' equity requirement.
3. In support of the requested relief, applicants state that ING
Bank Hungary is one of only a small number of banks in Hungary
currently offering custody services. In addition, prior to permitting
ING Bank Hungary to act as custodian for the Assets of a U.S.
Investment Company, ING Bank will ensure that ING Bank Hungary is
capable and well-qualified to provide such custody services.
4. Applicants request an order under section 6(c) of the Act that
would exempt them from the provisions of section 17(f) to the extent
necessary for ING Bank Hungary to maintain custody of U.S. Investment
Company Assets. Section 6(c) permits the SEC to exempt any person or
transaction from any provision of the Act, if such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
of the Act. Applicants believe that the requested order meets the
section 6(c) standards.
Applicants' Conditions
Applicants agree that any order of the Commission granting the
requested relief will be subject to the following conditions:
1. At all times, the foreign custody arrangements proposed
regarding ING Bank Hungary will satisfy all of the requirements of rule
17f-5, except for the shareholders' equity requirement.
2. ING Bank, any U.S. Investment Company, and any custodian for
such U.S. Investment Company will deposit Assets with ING Bank Hungary
only in accordance with an agreement required to remain in effect at
all times during which ING Bank Hungary fails to satisfy the
requirements of rule 17f-5 (and during which time such Assets remain
deposited with ING Bank Hungary) (the ``Agreement''). Each such
Agreement will be a three-party agreement among ING Bank, ING Bank
Hungary, and a U.S. Investment Company or a custodian for such U.S.
Investment Company. Pursuant to such Agreement, ING Bank or ING Bank
Hungary, as the case may be, will undertake to provide specified
custody or subcustody services on behalf of a U.S. Investment Company.
If ING Bank is to provide services, the Agreement will authorize ING
Bank to delegate to ING Bank Hungary such of the duties and obligations
of ING Bank as will be necessary to permit ING Bank Hungary to hold in
custody Assets of a U.S. Investment Company. If, instead, under such
Agreement, ING Bank Hungary is to provide such services directly, no
such delegation will be necessary. In either case, however, the
Agreement will provide that ING Bank will be liable for any loss,
damage, cost, expense, liability, or claim arising out of or in
connection with the performance by ING Bank Hungary of its
responsibilities under the Agreement to the same extent as if ING Bank
had itself been required to provide custody or subcustody services
under the Agreement. Further, the Agreement will provide that, in the
event of a loss, a U.S. Investment Company may pursue a claim for
recovery against ING Bank, regardless of whether ING Bank Hungary acted
as ING Bank's delegate or as direct custodian or subcustodian.
3. ING Bank currently satisfies and will continue to satisfy the
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. 95-26935 Filed 10-30-95; 8:45 am]
BILLING CODE 8010-01-M