[Federal Register Volume 60, Number 243 (Tuesday, December 19, 1995)]
[Notices]
[Pages 65365-65367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30709]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 21593; International Series Release
No. 901; 812-9816]
First National Bank of Southern Africa Limited; Notice of
Application
December 12, 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: First National Bank of Southern Africa Limited (``First
National bank'').
Relevant Act Sections: Order under section 6(c) of the Act for an
exemption from section 17(f).
Summary of Application: First National 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 First National Bank serves as custodian or
subcustodian, to maintain foreign securities and other assets in the
custody of foreign affiliates located in Botswana, Namibia, and
Zimbabwe.
Filing Date: The application was filed on September 5, 1995 and amended
on December 12, 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 January 8, 1996,
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.
[[Page 65366]]
Applicant: 3 First Place, BankCity, Johannesburg, Republic of South
Africa; cc: Michael Gruson, Esq., Shearman & Sterling, 599 Lexington
Avenue, New York, New York 10022.
For Further Information Contact: Marianne H. Khawly, Staff Attorney, at
(202) 942-0565, 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. First National Bank requests an order to permit First National
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 the custody of First National
Bank of Botswana Limited (``First Botswana''), First National Bank of
Namibia Limited (``First Namibia''), and First Merchant Bank of
Zimbabwe Limited (``First Zimbabwe,'' together the ``Foreign
Affiliates'') located in the countries of Botswana, Namibia, and
Zimbabwe, respectively. 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. First National Bank, a bank organized under the laws of the
Republic of South Africa, is regulated in South Africa by the Registrar
of Banks of South Africa under the banks Act of 1990. First National
Bank is a wholly-owned subsidiary of First National Bank Holdings
Limited (``First National Bank Group''), a South African public limited
company. First National Bank Group is one of the largest financial
service groups in South Africa and is engaged in a broad range of
banking and financing services for both individual an corporate
customers. As of September 30, 1994, First National Bank had
shareholders' equity of approximately $427,500,000.
3. First Botswana is an 80 percent owned subsidiary of First
National Bank Group and is supervised by the Bank of Botswana. First
Namibia is a wholly-owned subsidiary of First National Bank Group and
is supervised by the Central Bank of Namibia. First Zimbabwe operates
under the banking Act of Zimbabwe (Chapter 188, Regulatory Controls).
First Zimbabwe is appointed as subcustodian by First National Bank but
is neither a branch nor a subsidiary of First National Bank.
Applicant's Legal Analysis
1. First National Bank requests an order under section 6(c) of the
Act exempting First National 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 with the Foreign
Affiliates in their respective countries.
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 the
business 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 United
States 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 as such by
that country's government or an agency thereof and that has
shareholders' equity in excess of $200,000,000 or its equivalent.
4. First National Bank meets the requirements for an Eligible
Foreign Custodian under rule 17f-5 because it has shareholders' equity
in excess 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 South Africa.
5. The Foreign Affiliates also satisfy the requirements of rule
17f-5 insofar as each is a banking institution or trust company
incorporated or organized under the laws of a country other than the
United States and is regulated as such by such country's government or
an agency thereof. The Foreign Affiliates, however, do not meet the
minimum shareholders' equity requirement of the rule. Accordingly, the
Foreign Affiliates are not Eligible Foreign Custodians under the rule
and, absent exemptive relief, could not serve as custodians for the
Assets of U.S. Investment Companies.
6. Section 6(c) provides, in relevant part, that the SEC may 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. First National 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 regarding the Foreign
Affiliates satisfy the requirements of rule 17f-5 in all respects other
than the Foreign Affiliate's level of shareholders' equity.
2. First National Bank will deposit the Assets in Botswana,
Namibia, or Zimbabwe, as the case may be, with First Botswana, First
Namibia, or First Zimbabwe, respectively only in accordance with an
agreement (the ``Agreement'') required to remain in effect at all times
during which the Foreign Affiliates fail to satisfy the requirements of
rule 17f-5. Each Agreement will be a three-party agreement among First
National Bank, the Foreign Affiliate, and the U.S. Investment Group (or
its custodian) pursuant to which First National Bank will undertake to
provide specified custody or subcustody services for a U.S. Investment
Company or its custodian, and will delegate to the Foreign Affiliate
such of the duties and
[[Page 65367]]
obligations of First National Bank as will be necessary to permit First
Botswana, First Namibia, or First Zimbabwe, as the case may be, to hold
in custody the U.S. Investment Company's Assets in Botswana, Namibia,
and Zimbabwe, respectively. The Agreement will further provide that
First National Bank will be liable for any loss, damage, cost, expense,
liability, or claim arising out of or in connection with the
performance by a Foreign Affiliate of its responsibilities under the
Agreement to the same extent as if First National Bank had been
required to provide custody services under such agreement.
3. First National 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. 95-30709 Filed 12-18-95; 8:45 am]
BILLING CODE 8010-01-M