[Federal Register Volume 61, Number 20 (Tuesday, January 30, 1996)]
[Notices]
[Pages 3063-3065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1638]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21695; International Series Rel. No. 921; 812-9904]


Banque Paribas (Deutschland) OHG et al.; Notice of Application

January 23, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of Application for an Order under the Investment Company 
Act of 1940 (the ``Act'').

-----------------------------------------------------------------------

APPLICANTS: Banque Paribas (Deutschland) OHG (``BPD'') and Banque 
Paribas (``Banque Paribas'').

RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act 
from section 17(f).

SUMMARY OF APPLICATION: Applicants request an order that would permit 
registered management investment companies for which BPD acts as 
foreign custodian or subcustodian (other than investment companies 
registered under section 7(d)) (``Investment Companies'') to maintain 
their foreign securities and other assets in the custody of BPD.

FILING DATES: The application was filed on December 15, 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 February 20, 
1996, and should be accompanied by proof of service on applicants, 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. Applicants, Banque Paribas (Deutschland) OHG, Gruneburgweg 14. 
60322 Frankfurt A.M., Germany, and Banque Paribas, 3 rue d'Antin, 75002 
Paris, France.

FOR FURTHER INFORMATION CONTACT:
James M. Curtis, Senior Counsel, at (202) 942-0563, or Robert A. 
Robertson, Branch Chief, at (202) 942-0564 (Office of Investment 
Company Regulation, Division of Investment Management).


[[Page 3064]]

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.

Applicants' Representations

    1. BPD, a general partnership organized under German law, is 
licensed and regulated as a banking institution under the laws of 
Germany. Banque Paribas, organized under the laws of France as a stock 
corporation, is one of the three general partners of BPD. The other 
general partners of BPD are Paribas Deutschland B.V., organized under 
the laws of The Netherlands as a limited liability corporation, and 
Paribas Verwaltungs-und Beteiligungesellschaft mbH, organized under the 
laws of Germany as a limited liability corporation. Both are 
subsidiaries of Banque Paribas. Under German law, each partner of BPD 
is jointly and severally liable to the creditors of BPD.
    2. According to its partnership agreement (the ``Partnership 
Agreement''), the scope of BPD's permissible business covers all 
segments of the banking business permitted for banking institutions by 
the Bundesaufscichtsamt fur das Kreditwesen (the ``BAK''). BAK has 
specifically authorized BPD to engage in all banking activities 
contemplated by the German Federal Banking Act, including, among 
others, deposit taking, lending, securities activities, guarantee, and 
custodianship activities. BPD currently maintains sizable activities in 
all such areas, including the custody of securities. As of December 31, 
1994, BPD had assets in excess of U.S. $1.1 billion and partners' 
equity of approximately U.S. $69.4 million.
    3. One hundred percent of Banque Paribas's voting rights and 98.5% 
of its equity is owned, directly and indirectly, by Compagnie 
Financiere de Paribas (``Paribas''), a leading French and international 
financial institution. At December 31, 1994, Banque Paribas had total 
consoldiated assets of approximately U.S.$175.7 billion, and 
consolidated shareholders' equity of approximately U.S.$3.4 billion 
(excluding minority interests). At December 31, 1994, Paribas had total 
consolidated assets of approximately U.S.$242.2 billion, and 
consolidated shareholders' equity of approximately U.S.$8.1 billion 
(excluding minority interests).
    4. Banque Paribas recently acquired the custodial services business 
of J.P. Morgan in several European countries, including Germany. As a 
result of this transaction, BPD acquired the systems, the computer 
hardware and software, and the personnel dedicated to J.P. Morgan's 
German custodial services operations.
    5. Applicants request an order under section 6(c) of the Act 
exempting BPD, Banque Paribas, and any Investment Company for which BPD 
acts as custodian or subcustodian, from section 17(f) of the Act. The 
order would permit BPD, as custodian of the securities and other assets 
of an Investment Company (the ``Securities'')\1\ or as subcustodian of 
such Securities, to accept deposits of such Securities in Germany, but 
only under an agreement in which Banque Paribas assumes responsibility 
for certain losses of Securities held by BPD as custodian or 
subcustodian.

    \1\As used herein, the term ``Securities'' shall not include 
securities issued by the government of the United States or by any 
State or any political subdivision thereof or by any agency thereof 
or any securities issued by any entity organized under the laws of 
the United States or any State thereof (other than certificates of 
deposit, evidence of indebtedness and other securities, issued or 
guaranteed by an entity so organized which have been issued and sold 
outside the United States).
---------------------------------------------------------------------------

Applicants' Legal Analysis

    1. Section 17(f) of the Act provides that an Investment Company may 
place and maintain its securities and similar assets in the custody of 
(a) a bank or banks meeting the requirements of section 26(a) of the 
Act, (b) a member firm of a national securities exchange, (c) the 
Investment Company itself, or (d) a system for the central handling of 
securities established by a national securities exchange or national 
securities association registered with the SEC. BPD does not fall 
within the definition of ``bank'' as that term is defined in the 
Act.\2\

    \2\Section 2(a)(5) of the Act defines a ``bank'' to include a 
banking institution organized under the laws of the United States, a 
member bank of the Federal Reserve System, and any other banking 
institution or trust company, whether incorporated or not, doing 
business under the laws of any State of the United States, a 
substantial portion of the business of which consists of receiving 
deposits or exercising fiduciary powers similar to those permitted 
for national banks under the authority of the Comptroller of the 
Currency, and which is supervised and examined by State or Federal 
authority having supervision over banks, and which is not operated 
for purposes of evading the provisions of the Act.
---------------------------------------------------------------------------

    2. Rule 17f-5 permits an Investment Company to deposit Securities 
with an ``eligible foreign custodian,'' as defined therein. Such 
custodian, includes among other institutions, 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 and that has shareholders' equity in excess of 
U.S. $200,000,000 (or equivalent). Banque Paribas qualifies as an 
``eligible foreign custodian'' under rule 17f-5. BPD, however, does not 
currently quality as an ``eligible foreign custodian'' because it does 
not meet the minimum shareholders' equity requirement.
    3. Section 6(c) of the Act provides that the SEC may exempt any 
person from the provisions of the Act or any rules thereunder if and to 
the extent 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.
    4. Applicants believe that the proposed arrangements meet the 
section 6(c) standard. BPD and Banque Paribas believe that the Paribas 
Agreement would provide Investment Companies which deposit Securities 
with BPD in Germany with the safety and security of an eligible foreign 
custodian under section 17(f) and rule 17f-5.

Applicants' Conditions

    The requested exemption would be subject to the following 
conditions:
    1. The foreign custody arrangements with BPD will comply with the 
provisions of rule 17f-5 in all respects, except those relating to the 
minimum shareholders' equity requirements of eligible foreign 
custodians.
    2. Banque Paribas currently satisfies and will continue to satisfy 
the minimum shareholders' equity requirement set forth in rule 17f-
5(c)(2)(i).
    3. An Investment Company or a custodian for an Investment Company 
will deposit Securities with BPD only in accordance with a three-party 
contractual agreement that will remain in effect at all times during 
which BPD fails to meet the requirement of rule 17f-5 relating to 
minimum shareholders' equity. Each agreement will be a three-party 
agreement among (a) Banque Paribas, (b) BPD, and (c) the Investment 
Company or custodian of the Securities of the Investment Company. Under 
the agreement, BPD will undertake to provide specified custodial or 
subcustodial services. The agreement will further provide that Banque 
Paribas will be liable for any loss, damage, cost, expense, liability, 
or claim arising out of or in connection with the performance by BPD of 
its responsibilities under the agreement to the same extent as if 
Banque Paribas had been required to provide custody services under such 
agreement.

 
[[Page 3065]]

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-1638 Filed 1-29-96; 8:45 am]
BILLING CODE 8010-01-M