[Federal Register Volume 66, Number 149 (Thursday, August 2, 2001)]
[Notices]
[Pages 40301-40302]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-19315]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IA-1955/803-164]


International Bank for Reconstruction and Development and 
International Development Association; Notice of Application

July 27, 2001.
AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of application for exemption under the investment 
advisers act of 1940 (``Advisers Act'').

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    Applicants: International Bank for Reconstruction and Development 
(``IBRD'') and International Development Association (``IDA'').
    Relevant Advisers Act Sections: Exemption requested under section 
202(a)(11)(F) from section 202(a)(11).
SUMMARY OF APPLICATION: Applicants request an order declaring them to 
be persons not within the intent of section 202(a)(11), which defines 
the term ``investment adviser.''
    Filing Dates: The application was filed on June 22, 2001.
    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 August 31, 2001, and 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 may request notification of a hearing by writing to 
the Commission's Secretary.

ADDRESSES: Secretary: SEC, 450 Fifth Street, NW., Washington, DC 20549-
0609. Applicants: International Bank for Reconstruction and Development 
and International Development Association, 1818 H Street, NW., 
Washington, DC 20433.

[[Page 40302]]


FOR FURTHER INFORMATION CONTACT: Marilyn D. Barker, Senior Counsel, 
(202) 942-0719, or Jennifer L. Swain, Assistant Director, at (202) 942-
0719 (Division of Investment Management, Office of Investment Adviser 
Regulation).

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.

Applicant's Representations

    1. IBRD was established by international treaty and its principal 
purpose is reducing poverty by promoting the economic development of 
member countries. IBRD has operated since 1946 under Articles of 
Agreement signed by the governments of its member countries, and its 
member countries own all of its capital stock.
    2. IDA is an affiliated international organization, and membership 
in IDA is open only to members of IBRD. IDA was established in 1960, 
and its main goal is reducing poverty by promoting the economic 
development of its less developed member countries. IDA's members own 
all of its capital stock.
    3. IBRD and IDA have the same staff. Applicants represent that 
since 1990, they have regularly offered multi-country technical 
assistance on reserves asset management to central banks of member 
countries, to other government institutions of member countries, and to 
other international organizations owned entirely by their sovereign 
nation members substantially all of which are also members of 
Applicants (``Sovereign Organizations''). Applicants represent this 
program's objectives is to assist central banks in adopting portfolio 
management techniques.
    4. Applicants represent that they seek to expand their reserve 
assets technical assistance program to meet requests for more sustained 
services and requests for asset management. Applicants would provide 
the expanded services to member countries, central banks of member 
countries, other government institutions of member countries, and 
Sovereign Organizations. Applicants represent that they would manage 
only government or other public assets.
    5. Applicants represent that they have also hosted financial 
assistance seminars for member countries, and that these courses have 
included asset and liability management, capital markets and 
derivatives activities, and middle and back office operations. 
Applicants represent that they now seek to provide detailed advice on 
debt management, hedging techniques for specific transactions (e.g., 
derivatives), and capital market borrowing.
    6. Applicants represent that they plan to charge a fee for the 
expanded services, to recover the costs associated with the expanded 
services, including the incremental costs of additional assets under 
management.

Applicants' Legal Analysis

    1. Section 202(a)(11) of the Advisers Act defines ``investment 
adviser'' to mean ``any person who, for compensation, engages in the 
business of advising others * * * as to the value of securities or as 
to the advisability of investing in, purchasing, or selling securities, 
or who, for compensation and as a part of a regular business, issues or 
promulgates analyses or reports concerning securities * * *.''
    2. Applicants propose to offer asset management and other advisory 
services on a regular, recurring basis and to charge recipients a fee 
for these services. Accordingly, Applicants would be ``in the business 
of'' providing investment advice for compensation and would be 
``investment advisers'' for purposes of the Advisers Act.
    3. Section 202(a)(11)(F) of the Adviser Act authorizes the 
Commission to exclude from the definition of ``investment adviser'' 
person that are not within the intent of section 202(a)(ii). Applicants 
request that the Commission issue an order under section 202(a)(11)(F) 
declaring them to be persons not within the intent of section 
202(a)(11).
    4. Applicants argue that the Advisers Act contemplates the 
regulation of private sector entities and was not intended to regulate 
an entity that is an organization of sovereign nations providing 
investment advice to its sovereign nation members, their central banks 
and other government institutions, and Sovereign Organizations. 
Applicants state that section 202(b) of the Advisers Act provides that 
the Advisers Act is not applicable to the ``United States, a State, or 
any political subdivision of a State, or any agency, authority, or 
instrumentality of any one or more of the foregoing, or any corporation 
which is wholly owned directly or indirectly by any one or more of the 
foregoing, or any officer, agent, or employee of any of the foregoing 
acting as such in the course of his official duty, unless such 
provision makes specific reference thereto.'' While Applicants 
acknowledge that the Advisers Act does not expressly exempt 
international organizations made up solely of sovereign nations, 
Applicants argue that the Advisers Act seems clearly intended not to 
apply to such organizations.
    5. Applicants acknowledge that a foreign individual or corporate 
investor would expect the protections of the United States securities 
laws to apply when doing business with an investment adviser resident 
in the United States. Applicants assert, however, that, given the 
particular nature of IBRD and IDA, their unique purposes, and the 
nature of their constituent members, recipients of the proposed 
investment advice would not reasonably expect the Advisers Act to 
apply.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-19315 Filed 8-1-01; 8:45 am]
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