[Federal Register Volume 63, Number 113 (Friday, June 12, 1998)]
[Notices]
[Pages 32259-32260]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15706]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-23245; 812-11150]


1st Atlantic Guaranty Corporation; Notice of Application

June 8, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application pursuant to section 28(c) of the 
Investment Company Act of 1940 (``Act'').

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SUMMARY OF APPLICATION: Applicant, 1st Atlantic Guaranty Corporation, 
seeks an order pursuant to Section 28(c) of the Act approving certain 
proposed custodial arrangements.

FILING DATES: The application was filed on May 22, 1998. Applicant has 
agreed to file an amendment during the notice period, the substance of 
which is reflected in this notice.

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 June 30, 1998, 
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, NW., Washington, DC 20549. 
Applicant, 4847 Cordell Avenue, Suite 200, Bethesda, Maryland 20818, 
Attn: John J. Lawbaugh.

FOR FURTHER INFORMATION CONTACT:
Edward P. Macdonald, Branch Chief, at (202) 942-0564 (Office of 
Investment Company Regulation, Division of Investment Management).

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, 450 Fifth Street, NW, Washington, DC 
20549 (tel. 202-942-8090).

Applicant's Representations

    1. Applicant, a Maryland corporation, is a face-amount certificate 
company registered under the Act. Applicant currently intends to offer 
four face-amount certificates (``Certificates'') registered under the 
Securities Act of 1933. In the future, applicant may offer additional 
Certificates. The Certificates are unsecured debt instruments. To meet 
its debt obligations, applicant is required to maintain a minimum 
amount of reserves in ``qualified investments'' as defined in the Act 
(``Reserves'').
    2. Applicant proposes to enter into custodial arrangements with 
regard to its Reserves with one or more banks that meet certain 
requirements (``Custodians''). Applicant seeks an order approving the 
proposed form of custody agreement (``Agreement'') to be entered into 
by applicant with each Custodian. Under the requested order, applicant 
would be able to select and change Custodians in its discretion.
    3. Each Custodian will maintain the Reserves to ensure that 
applicant meets its payment obligations under the terms and conditions 
of any outstanding Certificate. If applicant were to default on any 
obligation under a Certificate, each Custodian would be authorized to 
cure the default by liquidating so much of the Reserves held by it as 
necessary to discharge the obligation. In addition, each Custodian will 
perform the duties and functions typically performed by a custodian, 
such as securities registration and delivery, income collection, 
periodic reporting, and other safekeeping and processing functions.

Applicant's Legal Analysis

    1. Section 28(c) of the Act requires a registered face-amount 
certificate company to maintain the Reserves with a custodian that 
meets the requirements of section 26(a)(1) of the Act and in accordance 
with such terms and conditions as the SEC shall prescribe and as 
appropriate for the protection of investors. Under section 26(a)(1), a 
custodian generally must be a bank that has at all times an aggregate 
capital, surplus, and undivided profits of a specified minimum amount 
which may not be less than $500,000.
    2. Applicant requests an order under section 28(c) of the Act 
approving the Agreement. Applicant states that the Agreement contains 
provisions to maintain and safeguard the Reserves, including provisions 
governing the (i) holding, segregation, registration, depositing, and 
delivery of securities, (ii) the payment of monies and maintenance of 
bank accounts, and (iii) the management of real estate and real estate 
related investments, as well as establishing procedures to cure any 
defaults by applicant on its obligations under the Certificates and 
procedures for periodic reporting and inspection of the assets.\1\ 
Applicant represents that it will seek an amended order from the SEC 
for any material changes in the substantive provisions of the 
Agreement.
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    \1\ Applicant states it will comply with rule 17f-4 under the 
Act as if it were a registered management investment company if an 
Agreement permits a Custodian to maintain any portion of the 
Reserves in a securities depository.
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    3. Applicant states that it may seek to terminate Custodians and 
employ new

[[Page 32260]]

Custodians for the following reasons: (i) the availability of superior 
or specialized services through other Custodians; (ii) dissatisfaction 
with the quality of a Custodian's services; (iii) fee increases or the 
availability of comparable services from other Custodians at more 
competitive rates; (iv) changes in a Custodian's management, location, 
financial condition, or methods of operation; (v) regulatory 
developments or actions affecting the ability or qualification of a 
Custodian to serve as such; or (vi) a determination by a Custodian to 
cease offering its services.
    4. Applicant will only enter into an Agreement approved by its 
board of directors (``Board''), including a majority of directors who 
are not interested persons within the meaning of Section 2(a)(19) of 
the Act (``Disinterested Directors''). In addition, the continuance of 
any Agreement would be subject to annual review by the Board, including 
a majority of the Disinterested Directors, to determine whether the 
quality of services provided by the Custodian remains satisfactory and 
the fees are reasonably competitive. Applicant submits, for all the 
reasons stated above, that its request is consistent with the 
protection of investors.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-15706 Filed 6-11-98; 8:45 am]
BILLING CODE 8010-01-M