[Federal Register Volume 64, Number 22 (Wednesday, February 3, 1999)]
[Rules and Regulations]
[Pages 5156-5157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2531]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 270
[Release Nos. IC-23670; IS-1179; File No. S7-23-95]
RIN 3235-AE98
Custody of Investment Company Assets Outside the United States
AGENCY: Securities and Exchange Commission.
ACTION: Final rule; extension of compliance date.
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SUMMARY: The Commission is extending the compliance date for certain
amendments to the rule under the Investment Company Act that governs
the custody of investment company assets outside the United States.
EFFECTIVE DATES: The effective date of the rule amendments published on
May 16, 1997 (62 FR 26923) remains June 16, 1997. Effective February 1,
1999, the compliance date for the rule amendments, except for the
amended definition of an ``eligible foreign custodian,'' is extended
from February 1, 1999, to May 1, 1999.
FOR FURTHER INFORMATION CONTACT: Thomas M.J. Kerwin, Senior Counsel, or
C. Hunter Jones, Assistant Director, Office of Regulatory Policy, at
(202) 942-0690, in the Division of Investment Management, Mail Stop 5-
6, Securities and Exchange Commission, 450 5th Street, N.W.,
Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION: The Commission is extending the compliance
date for certain amendments to rule 17f-5 [17 CFR 270.17f-5] under the
Investment Company Act of 1940 [15 U.S.C. 80a].
I. Discussion
The Commission adopted amendments to rule 17f-5 under the
Investment Company Act in 1997 (the ``1997 Amendments'').\1\ The
release that adopted the 1997 Amendments provided that the amendments
would become effective on June 16, 1997, and that registered management
investment companies (``funds'') must bring their foreign custody
arrangements into compliance with the amended rule by June 16, 1998.\2\
In May 1998, in anticipation that funds and custodian banks would
recommend additional amendments to the rule, the Commission extended
the compliance date for certain of the 1997 Amendments to February 1,
1999.\3\
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\1\ See Custody of Investment Company Assets Outside the United
States, Investment Company Act Release No. 22658 (May 12, 1997) [62
FR 26923 (May 16, 1997)].
\2\ Id. at text following n.86.
\3\ See Custody of Investment Company Assets Outside the United
States, Investment Company Act Release No. 23201 (May 21, 1998) [63
FR 29345 (May 29, 1998)].
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On June 30, 1998, representatives of funds and of custodian banks
submitted to the Commission a joint proposal to further amend rule 17f-
5.\4\ The Commission's staff has studied the joint proposal and
continues to gather information about related issues. The staff is
preparing recommendations to the Commission on whether to propose
further amendments to rule 17f-5 based on the joint proposal or other
possible approaches. Additional time beyond February 1, 1999 will be
necessary for the staff to complete its analysis and make its
recommendations. The Commission therefore is extending until May 1,
1999 the compliance date for certain of the 1997 Amendments.\5\ In the
interim, a fund may continue to operate its foreign custody
arrangements either under the 1997 Amendments, or under rule 17f-5 as
it existed prior to the 1997 Amendments, but subject to the amended
definition of eligible foreign custodian.\6\
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\4\ See Letter to Barry P. Barbash, Director, Division of
Investment Management, from Amy B.R. Lancellotta, Senior Counsel,
Investment Company Institute and Daniel L. Goelzer, Baker & McKenzie
(June 30, 1998) (placed in File No. S7-23-95).
\5\ The compliance date for the amended definition of an
``eligible foreign custodian'' was June 16, 1998. See Investment
Company Act Release No. 23201, supra note 3, at n.7 and accompanying
text. The extension of the compliance date for the other 1997
Amendments is effective without 30-day advance notice because the
extension ``grants or recognizes an exemption or relieves a
restriction.'' 5 U.S.C. 553(d)(1).
\6\ See Investment Company Act Release No. 23201, supra note 3,
at text preceding n.9. The fund may apply either of these
alternative frameworks separately to each foreign custodian or
subcustodian it uses. The fund's arrangement with a particular
foreign custodian or subcustodian should comply in its entirety
either with old rule 17f-5 (subject to the amended definition of
eligible foreign custodian), or with the rule as amended by all of
the 1997 Amendments.
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II. Certain Findings
The Commission for good cause finds that, based on the reasons
cited above, notice and solicitation of comment regarding the extension
of the compliance date for certain of the 1997 Amendments is
impracticable, unnecessary, and contrary to the public interest.\7\ The
Commission notes that the February 1, 1999 compliance date is imminent,
that many funds may not be in a position to comply with the 1997
Amendments, and that a limited extension will aid the Commission in
considering whether additional amendments are necessary. Fund
representatives have stated that if the compliance date is not
extended, some funds may have to withdraw assets from foreign
custodians or sell foreign assets, which could increase costs for
investors or otherwise harm investors.\8\ The Commission notes that the
1997 Amendments were submitted for public notice and comment, and that
any amendments that may be considered in the future will be submitted
for notice and comment.
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\7\ See section 553(b)(3)(B) of the Administrative Procedure Act
[U.S.C. 553(b)(3)(B)] (an agency may dispense with prior notice and
comment when it finds, for good cause, that notice and comment are
``impracticable, unnecessary, or contrary to the public interest'').
\8\See Investment Company Act Release No. 23201, supra note , at
nn.4-6 and accompanying text.
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In analyzing the costs and benefits of this action, the Commission
believes that the extension of the compliance date for certain of the
1997 Amendments will not impose costs on funds, but will enable funds
to avoid the costs of attempting to comply with certain rule provisions
that they assert may be unworkable. The Commission
[[Page 5157]]
believes that the extension will produce potential benefits by
continuing to permit funds to choose between two alternative ways to
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comply with the rule.
Dated: January 28, 1999.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-2531 Filed 2-2-99; 8:45 am]
BILLING CODE 8010-01-U