[Federal Register Volume 61, Number 90 (Wednesday, May 8, 1996)]
[Notices]
[Pages 20867-20869]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-11405]



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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-21934; International Series Release No. 974; 812-9880]


Corporacion Financiera Nacional Y Suramericana S.A.

May 2, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').


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

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APPLICANT: Corporacion Financiera Nacional Y Suramericana S.A.

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

SUMMARY OF APPLICATION: Applicant, a Colombian finance corporation, 
requests an order exempting it from all provisions of the Act. 
Applicant proposes to establish a sponsored American Depositary Receipt 
program and other programs to issue and sell its securities in the 
United States.

FILING DATE: The application was filed on December 8, 1995, and amended 
on April 4, 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 May 28, 1996 and 
should be accompanied by proof of service on 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 N.W., Washington, D.C. 20549. 
Applicant, Carrera 43A No. 3-101, Medellin, Colombia.

FOR FURTHER INFORMATION CONTACT: Sarah A. Buescher, Staff Attorney, at 
(202) 942-0573, 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 at the 
SEC's Public Reference Branch.

Applicant's Representations

    1. Applicant is a limited liability stock corporation and is 
classified as a finance corporation under Colombian law. Corporacion 
Financiera Nacional S.A. was founded in 1959 and in 1993 it merged with 
and absorbed Corporacion Financiera Suramericana S.A. Applicant has its 
headquarters in Medellin and has offices throughout Colombia.
    2. As a finance corporation, applicant performs most of the 
activities conducted by Colombian banks. However, finance corporations 
may not offer checking accounts. Therefore, applicant functions in most 
respects as a commercial bank but not as a retail banking institution. 
Unlike Colombian banks, finance corporations may act as underwriters 
for the issuance and placement of securities and may invest in equity 
securities. Colombian finance corporations are regulated in a similar 
manner as Colombian banks and often compete with Colombian banks for 
the same depositors and commercial borrowers. Because applicant may be 
considered an investment company, it requests an exemption from all 
provisions of the Act.
    3. Applicant's principal business involves securing deposits from 
the public in the form of demand deposits, term deposits with a 
maturity of one month or greater, and general guaranty bonds with a 
maturity of one year or greater, and providing long- and short-term 
commercial credit through loans and other financing services. Like 
Colombian banks, applicant uses its deposits to extend credit. 
Applicant generally holds its loans to maturity. In addition, applicant 
may negotiate commercial paper and act as a foreign exchange 
intermediary by issuing letters of credit or granting loans in foreign 
currency. These activities are also performed by Colombian banks. As of 
June 30, 1995, applicant had total assets of Ps 995 billion (U.S. $1.13 
billion). Applicant's shareholders' equity as of June 20, 1995 was Ps 
325 billion (U.S. $370 million).
    4. Finance corporations, such as applicant, and Colombian banks are 
both categorized as ``credit establishments'' under Colombian law and 
are regulated in a similar manner. The principal entities regulating 
the Colombian financial system are the Congress of Colombia, the 
Government (acting through the Ministry of Finance), the Banking 
Superintendency, and the Central Bank. In addition, applicant, like 
Colombian banks, is required to pay insurance premiums to the Financial 
Institutions Guaranty Fund. The regulations applicable to applicant 
include licensing and approval, minimum capital, capital adequacy, 
reserve, accounting and reporting, and foreign currency position 
requirements, regulations concerning related party transactions, 
restrictions on lending activities, and limits on business activities.
    5. The Securities Superintendency also supervises and regulates 
certain aspects of applicant's operations because applicant's 
securities are registered on Colombian stock exchanges. All companies 
that issue publicly traded securities must register with the Securities 
Superintendency, and the offering of equity securities abroad by 
Colombian companies is subject to the securities having an established 
market in Colombia.
    6. Applicant proposes to issue and sell its securities in the 
United States. Applicant may make one or more registered public 
offerings, or it may structure private transactions that comply with 
the exemptions from registration afforded by section 4(2) of the 
Securities Act of 1933 (``Securities Act''), or Regulation D 
thereunder.
    7. Applicant initially proposes to establish a sponsored ADR 
facility. Morgan Guaranty Trust Company of New York would act as 
depositary for any shares of applicant's common stock deposited under 
such facility and would issue the ADRs representing the shares. The 
American Depositary Shares (``ADSs'') represented by the ADRs would be 
registered under the Securities Act. In connection with any future 
offer and sale of common stock in the United States, applicant intends 
to issue its common stock in the form of ADSs. Applicant anticipates 
that it may issue and sell between 20% and 25% of its outstanding stock 
in this manner, after giving effect to the transaction. Applicant 
contemplates initially offering in the United States up to U.S. $75 
million of equity securities or up to U.S. $100 million of debt 
securities, or a combination thereof. Applicant also proposes issuing 
and selling additional equity or debt securities in the United States 
in public or private transactions in compliance with applicable law. 
Applicant will use the proceeds from the offerings of its securities to 
fund increases in its lending operations.

Applicant's Legal Analysis

    1. Section 3(a)(3) of the Act defines an investment company to 
include any issuer engaged in the business of investing, reinvesting, 
owning, holding, or trading in securities, and that owns or proposes to 
acquire investment securities having a value exceeding 40% of the 
issuer's total assets. The majority of applicant's assets consist of 
loans that could be deemed to be ``investment securities'' within the 
meaning of section 3(a)(3). As a result, applicant may be deemed to be 
an investment company under the Act.
    2. Section 6(c) of the Act provides that the SEC may exempt any 
person or transaction from any provision of the Act or any rule 
thereunder to the extent that such exemption is necessary or

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appropriate in the public interest and consistent with the protection 
of investors and the purposes fairly intended by the policy and 
provisions of the Act. Applicant requests an order under section 6(c) 
exempting it from all provisions of the Act.
    3. Rule 3a-6 under the Act exempts foreign banks from the 
definition of investment company for all purposes of the Act. A 
``foreign bank'' is defined to include a banking institution that is 
regulated as such by that country's government. Although applicant 
conducts several of the activities associated with traditional 
commercial banks, Colombian law distinguishes between banks and finance 
corporations with respect to checking accounts and equity investments 
and underwriting of securities. Therefore applicant may not be eligible 
for the exemption provided by rule 3a-6.
    4. Colombian finance corporations are credit establishments subject 
to extensive regulation by the Banking Superintendency, essentially the 
same regulation that applies to Colombian banks. Applicant derives the 
majority of its business from extending commercial credit and similar 
banking activities. In all material respects, Colombian finance 
corporations are distinguished from Colombian banks in Colombia's 
regulatory regime only because the latter may not make equity 
investments and the former may not offer checking accounts. Otherwise, 
the virtually identical regulation of both types of credit 
establishments recognizes that their businesses are very similar in 
nature, that they compete in the same markets for the same customers, 
and that their security holders and customers require virtually 
identical regulatory protections. In the case of applicant, the same 
regulatory regime that applies to Colombian banks applies to applicant, 
and such regulations afford the same substantial protection to U.S. 
investors regardless of whether the issuer of securities is classified 
as a ``bank'' or as a ``finance corporation'' under the Colombian 
regulatory regime.
    5. Applicant also believes that the rationale of Congress and the 
SEC in promulgating rules under the Act in exempting foreign financial 
institutions applies to applicant. Applicant represents that its 
activities do not lend themselves to the abuses against which the Act 
is directed, and it believes that it satisfies the standards of relief 
under section 6(c).

Applicant's Condition

    Applicant agrees that the order granting the requested relief shall 
be subject to the following condition:
    In connection with any offering of securities in the United States, 
applicant will appoint an agent in the United States to accept any 
process which may be served on it in any action based on such 
securities and instituted in the Supreme Court of the State of New York 
or the United States District Court for the Southern District of New 
York by any holder of any such securities. Applicant will expressly 
consent to the jurisdiction of the Supreme Court of the State of New 
York or the United States District Court for the Southern District of 
New York in respect of any such action. Applicant also will waive the 
defense of an inconvenient forum to the maintenance of any such action 
or proceeding. Such appointment of an agent to accept service and such 
consent to jurisdiction shall be irrevocable until all amounts due and 
to become due in respect of such securities have been paid. No such 
submission to jurisdiction or appointment of agent for service of 
process will affect the right of a holder of any such security to bring 
suit in any court which shall have jurisdiction over applicant by 
virtue of the offer and sale of such securities or otherwise.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-11405 Filed 5-7-96; 8:45 am]
BILLING CODE 8010-01-M