[Federal Register Volume 84, Number 249 (Monday, December 30, 2019)]
[Notices]
[Pages 72060-72061]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28050]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Advisers Act Release No. 5420; File No. 803-00248]


Inter-American Development Bank; Notice of Application

December 20, 2019.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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SUMMARY: Notice of application for an exemption under section 
202(a)(11)(H) of the Investment Advisers Act of 1940 (``Advisers 
Act'').
    Applicant: Inter-American Development Bank (``IDB'' or 
``Applicant'').
    Relevant Advisers Act Sections: Exemption requested under section 
202(a)(11)(H) of the Advisers Act from section 202(a)(11) of the 
Advisers Act.
    Summary of Application: The Applicant requests that the Commission 
issue an order declaring it to be a person not within the intent of 
Section 202(a)(11) of the Advisers Act, which defines the term 
``investment adviser.''
    Filing Dates: The application was filed on June 7, 2019, and 
amended on October 1, 2019.
    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 the Applicant with a copy of the request, 
personally or by mail. Hearing requests should be received by the 
Commission by 5:30 p.m. on January 14, 2019, and should be accompanied 
by proof of service on the Applicant, in the form of an affidavit or, 
for lawyers, a certificate of service. Pursuant to Rule 0-5 under the 
Advisers Act, hearing requests should state the nature of the writer's 
interest, any facts bearing upon the desirability of a hearing on the 
matter, 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, Securities and Exchange Commission, 100 F Street 
NE, Washington, DC 20549-1090. Applicant, Inter-American Development 
Bank, 1300 New York Avenue NW Washington, DC 20577.

FOR FURTHER INFORMATION CONTACT: Benjamin Kalish, Senior Counsel, or 
Parisa Haghshenas, Branch Chief, at 202-551-6825 (Division of 
Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website either at http://www.sec.gov/rules/iareleases.shtml or by calling (202) 551-8090.

Applicant's Representations

    1. The IDB was established by international treaty with the 
principal purpose to contribute to the acceleration of the process of 
economic and social development in Latin America and the Caribbean. The 
IDB's principal activities are providing loans and credit guarantees, 
and technical assistance to support development projects in its 
developing member countries. The IDB has operated since 1959 under an 
agreement signed by the governments of its member countries, including 
the U.S., and its member countries own all of its capital stock.
    2. The Applicant provides substantial technical assistance to the 
governments of its member countries as part of or in parallel to a loan 
or guarantee, or independently. The purpose of IDB's technical 
assistance activities is both to improve the operations of the member 
government as they relate to economic and social development and to 
contribute to knowledge transfer and capacity building of developing 
member countries. Technical assistance includes assisting member 
countries to improve their asset and liability management techniques 
and advice for member countries on adopting sound portfolio management 
techniques.
    3. The Applicant seeks to expand its services to meet requests from 
member countries to help them strengthen the management of their 
reserves and to bring their treasury operations in line with current 
capital and financial markets best practices. The Applicant would 
provide these treasury-related services only to IDB member countries, 
their central banks, other governmental institutions of such member 
countries, and other international organizations owned entirely by 
their sovereign nation members, substantially all of which members are 
also members of the IDB (collectively ``Potential Clients''). The 
Applicant would provide its services

[[Page 72061]]

only with respect to government and/or public assets.
    4. Member countries have requested that the Applicant provide them 
with asset management and related services (back office, risk, 
accounting, advisory and other support services) to help them develop 
additional internal capacities. The Applicant would exercise 
discretionary authority with respect to the assets, acting as the agent 
for Potential Clients.
    5. Member countries have also requested advice and instruction 
relating to hedging activities and to capital markets borrowings. The 
Applicant proposes to provide detailed advice on debt management, 
hedging techniques for specific transactions, and capital markets 
borrowings. The Applicant also proposes to provide targeted training 
seminars and courses at the IDB's offices, at Potential Clients' 
locations, or online.
    6. The Applicant expects to charge a fee for the activities/
services it provides that would allow it to recover the associated 
costs.

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. The Applicant proposes to offer asset management and advisory 
services on a regular, recurring basis and to charge recipients a fee 
for these services. Accordingly, the Applicant would be ``in the 
business of'' providing investment advice for compensation and would be 
an ``investment adviser'' for purposes of the Advisers Act.
    3. Section 202(a)(11)(H) of the Advisers Act authorizes the 
Commission to exclude from the definition of ``investment adviser'' 
persons that are not within the intent of section 202(a)(11). The 
Applicant requests that the Commission issue an order under section 
202(a)(11)(H) declaring it to be a person not within the intent of 
section 202(a)(11).
    4. The Applicant argues 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 Potential Clients. The Applicant states 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 the Applicant acknowledges that the 
Advisers Act does not expressly exempt international organizations made 
up solely of sovereign nations, the Applicant argues that the Advisers 
Act seems clearly intended not to apply to such organizations.
    5. The Applicant acknowledges that a foreign individual or 
corporation would reasonably expect the protections of the U.S. 
securities laws to apply when doing business with an investment adviser 
resident in the United States. The Applicant asserts, however, that, 
given the particular nature of the IDB, its unique purposes, and the 
nature of its constituent members, recipients of the proposed 
investment advice would not reasonably expect the Advisers Act to apply 
to those services.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28050 Filed 12-27-19; 8:45 am]
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