[Federal Register Volume 64, Number 52 (Thursday, March 18, 1999)]
[Notices]
[Pages 13459-13460]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6553]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-23737; 812-111532]


Bankers Trust Company; Temporary Order

March 12, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Temporary order under section 9(c) of the Investment Company 
Act of 1940 (the ``Act'').

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SUMMARY: Applicant Bankers Trust Company has received a temporary order 
exempting it and entities of which it is or becomes an affiliated 
person from section 9(a) of the Act, with respect to a cooperation and 
plea agreement entered into on March 11, 1999 between applicant and the 
U.S. Attorney for the Southern District of New York, until the 
Commission takes final action on an application for a permanent order 
or, if earlier, May 11, 1999.
    Filing Date: The application was filed on March 12, 1999.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, N.W., Washington, D.C. 20549; Applicant, One Bankers Trust 
Plaza, New York, New York 10006.

FOR FURTHER INFORMATION CONTACT: Nadya B. Roytblat, Assistant Director, 
at (202) 942-0693, Division of Investment Management, Office of 
Investment Company Regulation.

SUPPLEMENTARY INFORMATION: The following is a temporary order and a 
summary of the application. The complete application is available for a 
fee from the Commission's Public Reference Branch, 450 Fifth Street, 
N.W., Washington, D.C. 20549 (tel. 202-942-8090).

Applicant's Representations

    1. Applicant, a New York banking corporation, is the principal bank 
subsidiary of Bankers Trust Corporation, a New York corporation that, 
together with its subsidiaries and affiliates, performs a wide range of 
banking and financial services worldwide. Applicant is the investment 
adviser or subadviser to numerous investment companies registered under 
the Act (``funds''). Applicant is exempt from registration under the 
Investment Advisers Act of 1940 (``Advisers Act''). Certain entities of 
which applicant is an affiliated person (``Covered Entities'') and 
which are registered under the Advisers Act also serve as investment 
advisers or subadvisers to funds. \1\ Applicant and Covered Entities 
currently advise or subadvise funds having aggregate net assets in 
excess of $60 billion.
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    \1\ Upon consummation of the pending acquisition of the parent 
company of applicant by Deutsche Bank AG, Covered Entities also 
would include entities of which as a result of the acquisition 
applicant becomes an affiliated person.
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    2. Applicant acts as custodian and transfer agent for certain funds 
advised by it or by the Covered Entities. Applicant also acts as 
custodian (but not transfer agent) for certain other funds. Applicant 
is registered as a transfer agent under the Securities Exchange Act of 
1934.
    3. On March 11, 1999, the U.S. Attorney for the Southern District 
of New York filed a three-count felony information (the 
``Information'') in the U.S. District Court for the Southern District 
of New York alleging violations of 18 U.S.C. 1005. The Information 
charges applicant with making false entries on its books and records as 
a result of the conduct of certain employees in 1994-1996 in 
applicant's processing services businesses. The conduct involved the 
transfer to reserve accounts and to income of aged credit items that 
should have been paid to customers or other third parties, or paid to 
state abandoned property authorities.
    4. On March 11, 1999, applicant entered a plea of guilty to the 
charges in the Information pursuant to a written cooperation and plea 
agreement (``Cooperation and Plea Agreement.'').\2\ In the Cooperation 
and Plea Agreement, applicant agreed to pay a fine of $60 million and 
to place the amount in escrow pending sentencing. The Cooperation and 
Plea Agreement provides that sentencing will be adjourned to on or 
before May 12, 1999.
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    \2\ Applicant has agreed to promptly file a copy of the 
Information and the Cooperation and Plea Agreement as an amendment 
to this application.
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Applicant's Legal Analysis

    1. Section 9(a) of the Act, in relevant part, prohibits a person 
from serving or acting in the capacity of an investment adviser, 
principal underwriter, or depositor for any registered investment 
company if the person has been (i) convicted of any felony or 
misdemeanor arising out of the person's conduct, among other things, as 
an underwriter, broker, dealer, investment adviser, or transfer agent, 
or (ii) enjoined from acting, among other things, as a principal 
underwriter, investment adviser, or transfer agent. Applicant does not 
concede that the Cooperation and Plea Agreement would disqualify it 
under section 9(a) of the Act. In order to resolve any uncertainty, 
however, applicant seeks a temporary order exempting it and the Covered 
Entities from section 9(a) of the Act as it relates to the Cooperation 
and Plea Agreement.
    2. Section 9(c) of the Act provides that the Commission shall grant 
an application for an exemption from the disqualification provisions of 
section 9(a) if it is established that these provisions, as applied to 
the applicant, are unduly or disproportionately severe or that the 
conduct of applicant has been such as not to make it against the public 
interest or the protection of investors to grant the application.
    3. Applicant states that the prohibitions of section 9(a) as 
applied to it and the Covered Entities would be unduly and 
disproportionately severe. Applicant states that, if the exemption were 
not granted, the prohibition of section 9(a) would have a devastating 
impact on the businesses of applicant and the Covered Entities. 
Applicant asserts that those businesses were not involved in the 
matters underlying the Corporation and Plea Agreement.
    4. Applicant believes that the inability of applicant and the 
Covered Entities to provide investment advisory services would disrupt 
services to the funds and

[[Page 13460]]

could operate significantly to the detriment of the financial interests 
of the funds and their shareholders. Applicant and the Covered Entities 
will make presentations to the boards of directors of the funds they 
advise or subadvise regarding the Cooperation and Plea Agreement and 
the reasons they believe relief pursuant to section 9(c) is 
appropriate. Applicant has undertaken to provide those funds with all 
information concerning the Cooperation and Plea Agreement and its 
application necessary for those funds to fulfill their disclosure and 
other obligations under federal securities laws.
    5. Applicant also asserts that its conduct has been such as not to 
make it against the public interest or the protection of investors to 
grant the exemption from section 9(a). Applicant states that neither 
applicant nor any Covered Entity has ever previously applied for an 
exemption pursuant to section 9(c) of the Act. Applicant also states 
that the matters underlying the Cooperation and Plea Agreement are 
unrelated to applicant's or Covered Entities' investment advisory 
activities.
    6. Applicant states that the Cooperation and Plea Agreement relates 
to books and records violations involving payments by applicant as 
custodian or paying agent or in performing other processing services. 
Applicant states that, although it has been unable to identify all 
persons to whom it improperly failed to make payments, none of the 
identified persons were funds, and none of the relevant payments by 
applicant as paying agent were on behalf of fund issuers. Applicant 
asserts that it has not been able to identify any fund client of 
applicant's custody services or any fund shareholder affected by 
applicant's transfer agent services as having been affected by the 
matters giving rise to the Cooperation and Plea Agreement.
    7. Applicant states that the former employees of applicant who were 
identified by applicant as having been responsible for the matters 
underlying the Cooperation and Plea Agreement (``Identified Former 
Employees'') are no longer employed by applicant or any Covered Entity. 
Applicant also states that, since 1996, applicant has implemented steps 
designed to prevent future violations of applicable laws and 
regulations relating to its handling of payments in its capacity as 
custodian, paying agent, benefit plan agent and similar roles. 
Applicant states that these steps have included an entirely new senior 
management team that assumed responsibility in 1997 for the business 
out of which the Cooperation and Plea Agreement arose; implementation 
by applicant of a formal ``Abandoned Property and Escheatment Policy'' 
and appointment of an Abandoned Property Officer; and an extensive 
effort to research and distribute any moneys involved in the 
transactions to the rightful owner of the proper abandoned property 
authority.

Applicant's Conditions

    Applicant agrees that the requested order will be subject to the 
following conditions:
    1. The application and any exemption issued shall be without 
prejudice to, and shall not limit the Commission's rights in any manner 
with respect to, any Commission investigations or enforcement actions 
pursuant to the Federal securities laws, or the consideration by the 
Commission of any application for exemption from statutory 
requirements, including without limitation, the consideration of 
applicant's contemplated request for a permanent exemption pursuant to 
section 9(c) from the provisions of section 9(a) of the Act, or the 
revocation, removal or extension of this temporary exemption or any 
temporary exemption granted in connection with an application for a 
permanent order.
    2. Neither applicant nor any Covered Entity will employ any of the 
Identified Former Employees, or any persons who are subsequently 
identified as having been responsible for the matters underlying the 
Cooperation and Plea Agreement, in any capacity without first making 
further application to the Commission pursuant to section 9(c).

Temporary Order

    The Division has considered the matter and, without necessarily 
agreeing with all of the facts represented or all of the arguments 
asserted by applicant, finds, in accordance with 17 CFR 200.30-5(a)(7), 
that it appears that (i) the prohibitions of section 9(a), as applied 
to applicant and Covered Entities, may be unduly or disproportionately 
severe, (ii) applicant's conduct has been such as not to make it 
against the public interest or the protection of investors to grant the 
temporary exemption, and (iii) granting the temporary exemption would 
protect the interests of the investment companies served by applicant 
and the Covered Entities by allowing time for the orderly consideration 
of an application for permanent relief.
    Accordingly, it is hereby ordered, under section 9(c), that 
applicant and the Covered Entities are granted a temporary exemption 
from the provisions of section 9(a), effective forthwith, solely with 
respect to the Cooperation and Plea Agreement, subject to the 
conditions in the application, until the Commission takes final action 
on an application for a permanent order or, if earlier, May 11, 1999.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-6553 Filed 3-17-99; 8:45 am]
BILLING CODE 8010-01-M