[Federal Register Volume 61, Number 15 (Tuesday, January 23, 1996)]
[Notices]
[Pages 1812-1814]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-839]



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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 21676; International Series Release 
No. 917; 812-9872]


Credit Suisse; Notice of Application

January 16, 1996.
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: Credit Suisse.

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

SUMMARY OF APPLICATION: Credit Suisse 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 Credit Suisse serves as custodian or 
subcustodian, to maintain foreign securities and other assets in Russia 
with Credit Suisse (Moscow) Ltd. (``Credit Suisse (Moscow)''), a 
wholly-owned subsidiary of Credit Suisse.

FILING DATES: The application was filed on December 6, 1995 and amended 
on January 11, 1996.

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 February 12, 
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 NW., Washington, DC 20549. 
Applicant: Credit Suisse, Paradeplatz 8, CH-8001 Zurich, Switzerland; 
cc: Daniel L. Goelzer, Esq., Baker & McKenzie, 815 Connecticut Avenue 
NW., Washington, DC, 20006-4078.

FOR FURTHER INFORMATION CONTACT:
Marianne H. Khawly, Staff Attorney, at (202) 942-0562, or Robert A. 
Robertson, 

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Branch Chief, at (202) 942-0564 (Division of Investment Management, 
Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is summary of the application. 
The complete application may be obtained for a fee from the SEC's 
Public Reference Branch.

Applicant's Representations

    1. Credit Suisse requests an order to permit Credit Suisse, Credit 
Suisse (Moscow), 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 Credit Suisse 
(Moscow). 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 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. Credit Suisse is a company organized and existing under the laws 
of Switzerland. Credit Suisse is regulated in Switzerland by the Swiss 
Federal Banking Commission and is subject to the Federal Law on Banks 
and Savings Institutions dated November 8, 1934. Credit Suisse is a 
99.9% owned direct subsidiary of CS Holding, a Swiss public company, 
which, together with Credit Suisse and its other subsidiaries, is one 
of the leading financial services institutions in the world and 
currently provides a network of worldwide custody services. In the 
United States, Credit Suisse 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. At 
December 31, 1994, Credit Suisse had consolidated shareholders' equity 
in excess of the equivalent of $10 billion.
    3. Credit Suisse (Moscow) was incorporated in Russia in 1993 and 
operates under General License No. 2494. It is a 98% owned direct 
subsidiary of Credit Suisse. Credit Suisse (Moscow) is regulated by the 
Central Bank of the Russian Federation under the Law on Banks and 
Banking Activity of 1991, as amended in 1992 and 1995.
    4. Credit Suisse requests relief to permit Credit Suisse, as 
custodian or subcustodian for a U.S. Investment Company, when custody 
services are required in Russia, to deposit, or cause or permit the 
U.S. Investment Company to deposit, its Assets with Credit Suisse 
(Moscow) as delegate for Credit Suisse.

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. The rule 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. Credit Suisse is an Eligible Foreign 
Custodian under the rule.
    3. Credit Suisse (Moscow) satisfies the requirements of rule 17f-5, 
except it does not meet the minimum shareholders' equity requirement. 
Accordingly, it is not an Eligible Foreign Custodian and, absent 
exemptive relief, could not serve as a custodian for U.S. Investment 
Company Assets.\1\

    \1\ Russian clearing and custody procedures differ substantially 
from the procedures generally employed elsewhere. Other than the 
requested exemption to permit Credit Suisse (Moscow) to qualify as 
an ``eligible foreign custodian,'' applicant is not requesting an 
exemption from section 17(f) or rule 17f-5 for any other aspect of 
the custody or clearing procedures employed in Russia. Moreover, 
applicant acknowledges that any SEC order will not constitute a 
determination by the SEC that the Russian clearing and custody 
procedures comply with section 17(f) or the rules thereunder.
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    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. 
Credit Suisse believes that its request satisfies this standard.

Applicant's Conditions

    Applicant agrees that any SEC order granting the requested relief 
shall be subject to the following conditions:
    1. The foreign custody arrangements proposed regarding Credit 
Suisse (Moscow) satisfy the requirements of rule 17f-5 in all respects 
other than Credit Suisse (Moscow)'s level of shareholder's equity.
    2. Credit Suisse, when providing custody services to a U.S. 
Investment Company, will deposit Assets with Credit Suisse (Moscow) 
only in accordance with one of the two contractual arrangements 
described below, which arrangement will remain in effect at all times 
during which Credit Suisse (Moscow) fails to satisfy the shareholders' 
equity requirement of rule 17f-5.
    a. The Three-Party Agreement Arrangement. Under this arrangement, 
the agreement will be a three-party agreement (the ``Agreement'') among 
(i) Credit Suisse, (ii) Credit Suisse (Moscow) and (iii) the U.S. 
Investment Company, or the custodian for a U.S. Investment Company 
pursuant to which Credit Suisse will undertake to provide specified 
custody services, and will delegate to Credit Suisse (Moscow) such of 
the duties and obligations of Credit Suisse as will be necessary to 
permit Credit Suisse (Moscow) to hold in custody the U.S. Investment 
Company's Assets. The Agreement further will provide that Credit Suisse 
will be liable for any loss, damage, cost, expense, liability, or claim 
arising out of or in connection with the performance by Credit Suisse 
(Moscow) of its responsibilities under the Agreement to the same extent 
as if Credit Suisse had itself been required to provide custody 
services under the Agreement.

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    b. The Custody Agreement/Subcustody Agreement Arrangement. Under 
this arrangement, Assets will be deposited with Credit Suisse (Moscow) 
in accordance with the Custody Agreement and Subcustody Agreement 
described below.
    i. The Custody Agreement will be between Credit Suisse and the U.S. 
Investment Company or any custodian for a U.S. Investment Company. In 
that agreement, Credit Suisse will undertake to provide specified 
custody or subcustody services, and the U.S. Investment Company (or its 
custodian) will authorize Credit Suisse to delegate to Credit Suisse 
(Moscow) such of Credit Suisse's duties and obligations as will be 
necessary to permit Credit Suisse (Moscow) to hold in custody the U.S. 
Investment Company's Assets. The Custody Agreement further will provide 
that Credit Suisse will be liable for any loss, damage, cost, expense, 
liability, or claim arising out of or in connection with the 
performance by Credit Suisse (Moscow) of its responsibilities to the 
same extent as if Credit Suisse had itself been required to provide 
custody services under the Custody Agreement.
    ii. A Subcustody Agreement will be executed by Credit Suisse and 
Credit Suisse (Moscow). Pursuant to this agreement, Credit Suisse will 
delegate to Credit Suisse (Moscow) such of Credit Suisse's duties and 
obligations as will be necessary to permit Credit Suisse (Moscow) to 
hold Assets in custody in Russia. The Subcustody Agreement will 
explicitly provide that (i) Credit Suisse (Moscow) 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 
Credit Suisse (Moscow). Further, the Subcustody Agreement will be 
governed either by the law of the state of New York, the law of 
Switzerland or the law of England. If it is governed by the law of 
Switzerland or the law of England, Credit Suisse shall obtain an 
opinion of counsel in Switzerland or England, as the case may be, 
opining as to the enforceability of the rights of a third party 
beneficiary under the laws of that country.
    3. Credit Suisse 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. 96-839 Filed 1-22-96; 8:45 am]
BILLING CODE 8010-01-M