[Federal Register Volume 62, Number 4 (Tuesday, January 7, 1997)]
[Notices]
[Pages 1005-1006]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-239]


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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22425; International Series Release No. 1041; 812-10184]


Canadian Imperial Holdings Inc.; Notice of Application

December 31, 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: Canadian Imperial Holdings Inc.

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 requests an order that would permit 
it to sell certain debt securities and use the proceeds to finance the 
business activities of its parent company, Canadian Imperial Bank of 
Commerce (``CIBC''), and certain companies controlled by CIBC.

FILING DATE: The applicant was filed on June 6, 1996 and was amended on 
December 20, 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 January 27, 
1997, 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 who wish to 
be notified of a hearing may request notification by writing to the 
SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicant, 425 Lexington Avenue, 9th Floor, New York, New York 
10017.

FOR FURTHER INFORMATION CONTACT: Sarah A. Buescher, Staff Attorney, at 
(202) 942-0573, or Alison E. Baur, 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 Delaware corporation formed in December, 1981. 
All of applicant's outstanding voting securities are owned by CIBC. 
CIBC, a diversified financial institution governed by the Bank Act 
(Canada), provides, directly and through its subsidiaries, a broad 
range of personal, commercial, investment, and corporate banking 
services for its customers throughout the world. CIBC Inc. (``CI'') is 
a wholly-owned subsidiary of applicant that engages in the business of 
making loans primarily to commercial and industrial companies, real 
estate related loans and lease activities, and loans to depository 
institutions and foreign governments. CIBC Leasing Inc., also a wholly-
owned subsidiary of applicant, engages in commercial leasing 
activities, primarily equipment leases to manufacturing companies.
    2. In addition to owning CI and CIBC Leasing Inc., applicant acts 
as a holding company for CIBC's United States subsidiaries (``U.S. 
Subsidiaries''). Applicant also engages in financing activities and 
provides funds for CIBC, CI, CIBC Leasing Inc., and the U.S. 
Subsidiaries (collectively, the ``CIBC Entities''). Applicant proposes 
to obtain funds through the offer and sale of its debt securities in 
the United States and in overseas markets, and to lend the proceeds to 
the CIBC Entities.
    3. Due to the nature of the debt markets, applicant may borrow in 
amounts exceeding the amounts required by the CIBC Entities at any 
given time. However, at least 85% of the cash or cash equivalents 
raised by applicant through the sale of debt securities will be loaned 
to the CIBC Entities as soon as practicable, but in no event later than 
six months after applicant's receipt of such cash or cash equivalents. 
Amounts that are not loaned to the CIBC Entities will be invested in 
government securities, securities of CIBC, CI or a company controlled 
by CIBC (or, in the case of a partnership or joint venture, the 
securities of the partners or participants in the joint venture), debt 
securities (including repurchase agreements) which are exempted from 
the provisions of the Securities Act of 1933 (the ``Securities Act'') 
by section 3(a)(3) of the Securities Act, or equity securities of 
unaffiliated companies in an amount that does not exceed 4% of 
applicant's assets.
    4. Any issuance of debt securities by applicant will be guaranteed 
unconditionally by CIBC as to the payment of principal, interest, and 
premium on the securities, if any (the ``Guarantee''), in accordance 
with rule 3a-5(a)(1). The Guarantee will provide each holder of 
applicant's debt securities a direct right of action against CIBC to 
enforce CIBC's obligations under the Guarantee without first proceeding 
against applicant.

Applicant's Legal Analysis

    1. Applicant requests relief under section 6(c) of the Act for an 
exemption from all provisions of the Act. The Commission has determined 
that it is appropriate to exempt a finance subsidiary from all 
provisions of the Act where the primary purpose of the finance 
subsidiary is to finance the business operations of its parent or other 
subsidiaries controlled by its parent and where any purchaser of the 
finance subsidiary's securities ultimately looks to the parent for 
repayment and not to the finance subsidiary.\1\
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    \1\ Investment Company Act Release No. 14275 (Dec. 14, 1984) 
(release adopting rule 3a-5 under the Act). Rule 3a-5 provides an 
exemption from the definition of investment company for certain 
companies organized primarily to finance the business operations of 
their parent companies or companies controlled by their parent 
companies.
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    2. Rule 3a-5(b)(3)(i) in relevant part defines a ``company 
controlled by the parent company'' to be a corporation, partnership, or 
joint venture that is not considered an investment company under 
section 3(a) or that is excepted or exempted by order from the 
definition of investment company by section 3(b) or by the rules and 
regulations under section 3(a). Certain of the CIBC Entities do not fit 
within the technical definition of ``companies controlled by the parent 
company'' because they derive their non-investment company status from 
section 3(c) of the Act.
    3. In the release adopting rule 3a-5, the Commission stated that it 
may be appropriate to grant exemptive relief to the finance subsidiary 
of a section 3(c) issuer, but only on a case-by-case basis upon an 
examination of all relevant

[[Page 1006]]

facts. According to the adopting release, the concern was that a 
company may be considered a non-investment company for the purposes of 
the Act under section 3(c) and still be engaged primarily in investment 
company activities. Applicant states that none of the CIBC Entities to 
which applicant may loan money are engaged primarily in investment 
company activities. In addition, if CIBC issued the securities that are 
to be issued by applicant and use the proceeds, none of the CIBC 
Entities would be subject to regulation under the Act. While CIBC has 
chosen instead to use applicant as a financing vehicle, the Guarantee 
ensures that holders of applicant's securities will have direct access 
to CIBC's credit.
    4. Under rule 3a-5(a)(6), a finance subsidiary may only invest in 
government securities, securities of its parent company or a company 
controlled by its parent company, or debt securities exempt under 
section 3(a)(3) of the Securities Act. Applicant intends to invest in 
equity securities of unaffiliated companies in an amount that does not 
exceed 4% of its assets. Applicant will hold such securities due to 
non-U.S. tax constraints applicable to CIBC. Applicant's primary 
purpose, however, will continue to be the financing of the business 
operations of CIBC and companies controlled by CIBC. In addition, 
purchasers of applicant's debt securities will receive disclosure 
documents that make clear that such purchasers should ultimately look 
to CIBC for repayment pursuant to CIBC's guarantee. Thus, applicant 
asserts that, because neither its structure nor its mode of operation 
will resemble that of an investment company, the holders of applicant's 
securities will not rely on applicant's management of securities issued 
by unaffiliated companies.
    5. 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. 
Applicant submits that the relief requested satisfies the section 6(c) 
standard.

Applicant's Condition

    Applicant agrees that any order issued on this application shall be 
subject to the following condition:
    Applicant will comply with all of the provisions of rule 3a-5 under 
the Act, except: (a) applicant will be permitted to invest in or make 
loans to corporations, partnerships, and joint ventures that do not 
meet the portion of the definition of ``company controlled by the 
parent company'' in rule 3a-5(b)(3)(i) solely because they are excluded 
from the definition of investment company by section 3(c) (1), (3), 
(4), (6), or (7), provided that any such entity excluded from the 
definition of investment company pursuant to section 3(c)(1) will only 
engage in lending, leasing or related activities (such as entering into 
credit derivatives to manage that credit risk exposures of its lending 
and leasing activities) and will not be structured solely as a means of 
avoiding regulation under the Act, and provided further, that any such 
entity excluded from the definition of investment company pursuant to 
section 3(c)(6) of the Act will not be engaged primarily, directly or 
indirectly, in one or more of the businesses described in section 
3(c)(5) of the Act; and (b) applicant will be permitted to invest in, 
reinvest in, own, hold, or trade in equity securities of unaffiliated 
companies with a purchase price not in excess of $200 million (or any 
higher amount not in excess of 4% of applicant's assets).

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-239 Filed 1-6-97; 8:45 am]
BILLING CODE 8010-01-M