[Federal Register Volume 65, Number 18 (Thursday, January 27, 2000)]
[Notices]
[Pages 4447-4449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1909]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24258; International Series Release 
No. 1212; 812-11306]


The Toronto-Dominion Bank, et al.; Notice of Application

January 20, 2000.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from all provisions 
of the Act.

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SUMMARY OF APPLICATION: Applicants request an order that would permit 
certain finance subsidiaries of The Toronto-Dominion Bank (``TD'') to 
sell certain debt securities and use the proceeds to finance the 
business activities of their parent company, TD, and certain of its 
subsidiaries. The requested order would supersede an existing order.

APPLICANTS: TD, Toronto-Dominion Holdings (U.S.C.), Inc. (``TD 
Holdings''), and TD Capital Funding L.P. (``TD Capital'').

FILING DATES: The application was filed on September 16, 1998 and 
amended on November 18, 1999. Applicants have 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 Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on February 14, 2000, and

[[Page 4448]]

should be accompanied by proof of service on applicants, 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 
Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW, Washington, DC 20549-0609. Applicants, Attention: Marc L. 
Baum, 31 West 52nd Street, New York, New York 10019.


FOR FURTHER INFORMATION CONTACT:  Lawrence W. Pisto, Senior Counsel, at 
(202) 942-0527, or George J. Zornada, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, 
DC 20549-0102 (tel. (202) 942-8090).

APPLICANTS' REPRESENTATIONS:
    1. TD is a chartered bank governed by the Bank Act of Canada and 
offers a range of financial services to individuals, corporate and 
commercial enterprises, financial institutions and governments in 
Canada. In the United States, TD offers a range of services to 
corporations, financial institutions and governments, as well as 
discount brokerage services through a wholly-owned subsidiary. TD also 
conducts operations outside North America.
    2. TD Holdings, a Delaware corporation, is wholly owned by TD and 
acts as a holding company for most of TD's United States subsidiaries. 
TD Holdings is also a finance subsidiary and engages in funding 
activities for TD and certain of its subsidiaries in reliance on a 
previously-granted Commission order (``Prior Order'').\1\ The requested 
order would supersede the Prior Order.
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    \1\ Investment Company Act Release Nos. 22934 (Dec. 10, 1999) 
(Notice) and 22993 (Jan. 6, 1998) (Order).
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    3. TD Capital is a Delaware limited partnership. TD Capital's 
general partner is TD Capital Group Limited (``TDCG''), a corporation 
organized under the laws of Canada, which holds a one percent general 
partnership interest in TD Capital. TD is the sole limited partner of 
TD Capital and holds a 99% limited partnership interest in TD 
Capital.\2\ TD also owns 100% of the outstanding common stock of TDCG. 
TDCG has no outstanding securities other than the common stock owned by 
TD. TDCG relies on the exclusion from the definition of investment 
company in sections 3(c)(1) and 3(c)(7) of the Act.
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    \2\ Applicants state that TD Capital was structured as a limited 
partnership because this structure would result in a lower after-tax 
cost of funds.
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    4. Applicants also request relief for finance subsidiaries that may 
be created by TD in the future (``Other Finance Subsidiaries,'' and 
together with TD Holdings and TD Capital, the ``Finance 
Subsidiaries''). The Finance Subsidiaries are or will be organized to 
issue debt securities and lend the proceeds to or invest the proceeds 
in TD and other companies that, after giving effect to the requested 
order, will be companies controlled by TD within the meaning of 
paragraph (b) of rule 3a-5 under the Act as discussed below (each a 
``Controlled Company,'' and collectively, ``Controlled
    6. Pursuant to the requested order, TD Capital would be able to 
invest the net proceeds of its offerings in its wholly-owned 
subsidiary, TD (Nova Scotia) Company, a Nova Scotia corporation (``TD 
Nova Scotia''). TD Nova Scotia is a special purpose vehicle relying on 
section 3(e)(7) of the Act and engages in no activities other than 
making equity investments in Controlled Companies. Applicants state 
that this conduit structure exists to clarify Canadian tax treatment of 
distributions to TD Capital. TD Nova Scotia would meet the definition 
of a ``finance subsidiary'' under rule 3a-5 but for the fact that (i) 
its securities are wholly-owned by TD Capital, which does not meet the 
definition of a ``parent company'' or a ``company controlled by its 
parent company,'' because it would be exempted from the Act by the 
requested order and (ii) TD Nova Scotia makes loans to and investments 
in entities that do not meet the definition of ``company controlled by 
the parent company'' solely because they rely on section 3(c) of the 
Act. If the requested order is granted, TD Nova Scotia will use all of 
the moneys it receives from TD Capital to make investments or loans 
within six months after TD Capital receives the proceeds from its 
financing activities.

Applicants' Legal Analysis

    1. Applicants request an order under section 6(e) of the Act for an 
exemption from all provisions of the Act, Rule 3a-5 under the Act 
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.
    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). TD Capital and Other Finance 
Subsidiaries may not meet the definitions of a finance subsidiary under 
the rule.
    3. TDCG does not meet the definition of a company controlled by the 
parent company under rule 3a-5(b)(3)(i) because it is excluded from the 
definition of investment company by either section 3(c)(1) or 3(c)(7) 
of the Act. Since TDCG holds a one percent general partnership interest 
in TD Capital, applicants state that not all of the outstanding 
securities of TD Capital are owned by its parent company or a company 
controlled by the parent company as required by rule 3a-5(b)(3)(i). 
Applicants state that this ownership structure does not raise the 
concerns that the requirement in rule 3a-5(b)(3)(i) was designed to 
address.
    4. To the extent a Finance Subsidiary invests in or makes loans to 
a direct or indirect subsidiary of TD that relies on the exclusion from 
the definition of investment company under section 3(c) of the Act, 
that Finance Subsidiary would not meet the definition of a finance 
subsidiary under the rule because it is financing an entity that does 
not meet the definition of a company controlled by the parent company 
in rule 3a-5(b)(3)(i) because it is excluded from the definition of 
investment company by section 3(c) of the Act. Applicants state that 
neither TD, the Controlled Companies nor the Finance Subsidiaries 
engage primarily in investment company activities.
    5. Pursuant to the requested order, a Finance Subsidiary may also 
invest in equity securities of unaffiliated companies in an amount that 
does not exceed four percent of the Finance Subsidiary's assets. 
Applicants state that ownership of such shares by a Finance Subsidiary 
prevents the imposition of withholding taxes on the dividends received 
on such shares, as the ability of a U.S. subsidiary of a non-U.S. 
entity to hold equity securities free of U.S. withholding taxes is 
well-established as a matter of tax law. Applicants further state that 
these holdings will be immaterial to the Finance Subsidiary.
    6. Section 6(c) of the Act, in pertinent part, provides that the 
Commission, by order upon application, may conditionally or 
unconditionally exempt any person, security or transaction, or any 
class or classes of persons, securities or transactions, from

[[Page 4449]]

any provision or provisions of the Act to the extent that such 
exemption is necessary or 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. Applicants submit 
that the requested relief meets the standards set out in section 6(c) 
of the Act.

Applicants' Condition

    Applicants agree that the order granting the requested relief will 
be subject to the following condition:
    Applicants will comply with all of the provisions of rule 3a-5 
under the Act, except:
    (1) a one percent general partnership interest in a Finance 
Subsidiary may be owned by a wholly-owned subsidiary of TD that does 
not meet the definition of ``company controlled by the parent company'' 
in rule 3a-5(b)(3)(i) solely because it is excluded from the definition 
of investment company by section 3(c) of the Act;
    (2) a Finance Subsidiary may 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), (2), (3), (4), 
(5), (6) or (7) of the Act, provided that any such entity that relies 
on the exclusion from the definition of investment company;
    (a) under section 3(c)(1) or section 3(c)(7) will be either:
    (i) engaged solely in lending, leasing or related activities (such 
as entering into credit derivatives to manage the credit risk exposures 
of its lending and leasing activities) and will not be structured as a 
means of avoiding regulation under the Act, or
    (ii) a special purpose vehicle directly or indirectly wholly owned 
by TD that complies with the requirements of rule 3a-5 for finance 
subsidiaries to the same extent as permitted by the order for TD 
Capital;
    (b) under section 3(c)(5) of the Act will fall within section 
3(c)(5)(A) or 3(c)(5)(B) solely by reason of its holding of accounts 
receivable of either its own customers or of the customers of other TD 
subsidiaries, or by reason of loans made by it to such subsidiaries or 
customers; and
    (c) under 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 (except as permitted in (b) above); and
    (3) a Finance Subsidiary may be invest in, reinvest in, own, hold 
or trade in equity securities of unaffiliated companies with an 
aggregate purchase price not in excess of four percent of the Finance 
Subsidiary's assets.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-1909 Filed 1-26-00; 8:45 am]
BILLING CODE 8010-01-M