[Federal Register Volume 61, Number 33 (Friday, February 16, 1996)]
[Notices]
[Pages 6272-6273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3572]




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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21740; International Series Release No. 933; File No. 812-
9792]


Banco Santander, S.A.; Notice of Application

February 12, 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: Banco Santander, S.A. (the ``Bank'').

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

SUMMARY OF APPLICATION: Applicant requests an order to permit Banco 
Santander de Negocios Mexico, S.A. (``BSNM'') to act as custodian for 
investment company assets in Mexico, Banco Santander S.A. (``BSA'') to 
act as custodian for investment company assets in Argentina, and Banco 
Santander de Negocios Portugal, S.A. (``BSNP'') (collectively, the 
``Foreign Subsidiaries'') to act as custodian for investment company 
assets in Portugal.

FILING DATE: The application was filed on October 3, 1995 and amended 
on January 19, 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 March 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 5th Street, NW., Washington, DC 20549. 
Applicant, Paseo de la Castellana, 24, 28406 Madrid, Spain; c/o Nora M. 
Jordan, Davis Polk & Wardell, 450 Lexington Avenue, New York, New York 
10017.

FOR FURTHER INFORMATION CONTACT: David W. Grim, Staff Attorney, at 
(202) 942-0571, 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. The Bank is a full-service commercial bank organized under the 
laws of Spain and regulated in that country by the Bank of Spain. The 
Bank, together with its subsidiaries and associated companies (the 
``Group''), is engaged in a wide range of banking, financial, and 
related activities in Spain and has offices or subsidiaries in 30 other 
countries. The Group was, as of December 31, 1994, the largest 
commercial banking group in Spain in terms of total assets. As of 
December 31, 1994, the Bank had shareholders' equity of Ptas. 437.7 
billion (U.S. $3.6 billion, based on the then current exchange rate), 
and the Group had shareholders' equity of Ptas. 519.9 billion (U.S. 
$4.0 billion, based on the then current exchange rate).
    2. BSNM, BSA, and BSNP are wholly-owned indirect subsidiaries of 
the Bank. BSNM is incorporated and organized under the laws of Mexico 
and is regulated as a banking institution by Comision Nacional 
Bancaria, which is the agency of the government of Mexico responsible 
for the regulation of banks. BSA is incorporated and organized under 
the laws of Argentina and is regulated as a banking institution by 
Banco Central de la Republica Argentina, which is the agency of the 
government of Argentina responsible for the regulation of banks. BSNP 
is incorporated and organized under the laws of Portugal and is 
regulated as a banking institution by Banco de Portugal, which is the 
agency of the government of Portugal responsible for the regulation of 
banks.
    3. The Bank requests an order to permit the Bank, any investment 
company registered under the Act, other than those registered under 
section 7(d) of the Act (``U.S. Investment Companies''), and any 
custodian for a U.S. Investment Company, to maintain ``Foreign 
Securities,'' as defined below, cash, and cash equivalents 
(collectively, ``Securities'') in the custody of BSNM, BSA, and BSNP as 
delegates for the Bank in Mexico, Argentina, and Portugal, 
respectively. As used herein, ``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 any state thereof which have 
been issued and sold primarily outside the United States.

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 

[[Page 6273]]
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 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, and which is supervised or examined by state or federal 
authority having supervision over banks.
    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. 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 
U.S. $200 million or its equivalent.
    3. The Bank qualifies as an Eligible Foreign Custodian under rule 
17f-5. BSNM, BSA, and BSNP each 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 Subsidiaries, however, do not meet the minimum 
shareholders' equity requirement of the rule. Accordingly, the Foreign 
Subsidiaries are not Eligible Foreign Custodians under the rule and, 
absent exemptive relief, could not serve as custodians for the 
Securities of U.S. Investment Companies.
    4. Section 6(c) provides, in relevant part, that the SEC, by order, 
may exempt any person 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. The Bank believes that its request satisfies this standard.

Applicant's Conditions

    Applicant agrees that any order granting the requested relief shall 
be subject to the following conditions:
    1. The foreign custody arrangements proposed with respect to BSNM, 
BSA, and BSNP will satisfy the requirements of rule 17f-5 in all 
respects, other than with regard to BSNM's, BSA's, or BSNP's level of 
shareholders' equity.
    2. Securities of a U.S. Investment Company in Mexico, Argentina, or 
Portugal, as the case may be, will be maintained in the custody of 
BSNM, BSA, or BSNP, respectively, only in accordance with an agreement 
(the ``Agreement''), required to remain in effect at all times during 
which the Foreign Subsidiaries fail to satisfy the requirements of rule 
17f-5 relating to minimum shareholders' equity. Each Agreement will be 
a three-party contract among the Bank, the Foreign Subsidiary, and the 
U.S. Investment Company or custodian for the U.S. Investment Company 
pursuant to which the Bank would undertake to provide specified 
custodial or sub-custodial services for the U.S. Investment Company or 
custodian for such company and would delegate to the Foreign Subsidiary 
such of the Bank's duties and obligations as would be necessary to 
permit BSNM, BSA, or BSNP, as the case may be, to hold in custody the 
securities of the U.S. Investment Company or custodian in Mexico, 
Argentina, and Portugal, respectively. The Agreement would further 
provide that the Bank's delegation of duties to the Foreign Subsidiary 
would not relieve the Bank of any responsibility to the U.S. Investment 
Company or custodian for such company for any loss due to such 
delegation except such loss as may result from (i) political risk 
(e.g., exchange control restrictions, confiscation, expropriation, 
nationalization, insurrection, civil strife, or armed hostility) and 
(ii) other risks of loss (excluding bankruptcy or insolvency of the 
Foreign Subsidiary) for which neither the Bank nor the Foreign 
Subsidiary would be liable under rule 17f-5 (e.g., despite the exercise 
of reasonable care, loss due to Acts of God, nuclear incident and the 
like).
    3. The Bank currently satisfies and will continue to satisfy the 
minimum 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. 96-3572 Filed 2-15-96; 8:45 am]
BILLING CODE 8010-01-M