[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'').
[[Page 20868]]
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
[[Page 20869]]
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