[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