[Federal Register Volume 60, Number 159 (Thursday, August 17, 1995)]
[Notices]
[Pages 42934-42936]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20400]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 21278; International Series Release
No. 838; 812-9666]
Deutsche Bank AG; Notice of Application
August 11, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANT: Deutsche Bank AG (``Deutsche Bank'').
RELEVANT ACT SECTIONS: Order under section 6(c) of the Act for an
exemption from section 17(f) of the Act.
SUMMARY OF APPLICATION: Deutsche Bank requests an order that would
permit United States registered investment companies (a ``U.S.
Investment Company''), other than investment companies registered under
section 7(d), for which Deutsche Bank serves as custodian or
subcustodian, to maintain foreign securities and other assets in
Malaysia with Deutsche Bank (Malaysia) Berhad (``DBM''), a subsidiary
of Deutsche Bank.
FILING DATE: The application was filed on July 14, 1995.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on September 5,
1995, and should be accompanied by proof of service on the applicant,
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 SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicant: Post Box D, 60262 Frankfurt-am-Main, Germany; cc: J.
Eugene Marans, Esq., Cleary, Gottlieb, Steen & Hamilton, 1752 N Street,
N.W., Washington, D.C. 20036.
FOR FURTHER INFORMATION CONTACT:
Marianne H. Khawly, Staff Attorney, at (202) 942-0562, or Robert A.
Robertson,
[[Page 42935]]
Branch Chief, at (202) 942-0564 (Division of Investment Management,
Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch.
Applicant's Representations
1. Deutsche Bank requests an order to permit Deutsche Bank, any
U.S. Investment Company, and any custodian for a U.S. Investment
Company, to maintain foreign securities, cash, and cash equivalents
(collectively, ``Assets'') in Malaysia in the custody of DBM. For the
purposes of this application, ``foreign securities'' includes: (a)
Securities issued and sold primarily outside the United States by a
foreign government, a national of any foreign country, or a corporation
or other organization incorporated or organized under the laws of any
foreign country; and (b) securities issued or guaranteed by the
Government of the United States or by any state or any political
subdivision thereof or by any agency thereof or by any entity organized
under the laws of the United States or of any state thereof which have
been issued and sold primarily outside the United States.
2. Deutsche Bank is a bank organized and existing under the laws of
Germany. Deutsche Bank is regulated in Germany by the Federal Bank
Supervisory Office (Bundesaufsichtamt fur Kreditwesen). Deutsche Bank
is the largest banking institution in Germany and currently provides
worldwide financial services to foreign governments, central banks,
financial institutions, and corporate and retail customers. In the
United States, Deutsche Bank has branch banking operations, and as a
result, is subject to the Bank Holding Company Act of 1956 and the
International Banking Act of 1978.
3. DBM is a subsidiary of Deutsche Bank. DBM is regulated as a
banking institution under Malaysian law by Bank Negara Malaysia, the
central bank of Malaysia. Prior to October 1, 1994, Deutsche Bank
provided custody services for U.S. Investment Companies holding
securities in its branch in Malaysia. The Malaysian Banking and
Financial Institutions Act of 1989 requires banking institutions
operating in Malaysia to be locally incorporated. To comply with this
legislation, on October 1, 1994, Deutsche Bank transferred
substantially all of the assets, liabilities, and personnel of its
Malaysian branch to DBM. Since October 1, 1994, there have been no
contractual agreements by U.S. Investment Companies or their custodians
relating to the assignment of custodial contracts to DBM.
Applicant's Legal Analysis
1. Deutsche Bank requires an order under section 6(c) of the Act
exempting Deutsche Bank, any U.S. Investment Company, and any custodian
for such U.S. Investment Company from section 17(f) of the Act to
permit the deposit and custody of Assets in Malaysia with DBM.
2. Section 17(f) of the Act requires every registered management
investment company to place and maintain its securities and similar
investments in the custody of certain enumerated entities, including a
bank having at all times aggregate capital, surplus, and undivided
profits of at least $500,000. A ``bank'', as that term is defined in
section 2(a)(5) of the Act, includes: (a) A banking institution
organized under the laws of the United States; (b) a member bank of the
Federal Reserve System; and (c) any other banking institution or trust
company, whether incorporated or not, doing business under the laws of
any state or of the United States, a substantial portion of which
consists of receiving deposits or exercising fiduciary powers similar
to those permitted to national banks under the authority of the
Comptroller of the Currency, and which is supervised or examined by
state or federal authority having supervision over banks, and which is
not operated for the purposes of evading the Act.
3. The only entities located outside the United States that section
17(f) authorizes to serve as custodians for registered management
investment companies are the overseas branches of qualified U.S. banks.
Rule 17f-5 expands the group of entities that are permitted to serve as
foreign custodians. Rule 17f-5(c)(2)(i) defines the term ``Eligible
Foreign Custodian'' to include a banking institution or trust company,
incorporated or organized under the laws of a country other than the
United States, that is regulated by that country's government or an
agency thereof and that has shareholders' equity in excess of
$200,000,000 or its equivalent.
4. Deutsche Bank meets the requirements for an Eligible Foreign
Custodian under the rule since it has shareholders' equity well in
excess of the equivalent of $200,000,000, is organized and existing
under the laws of a country other than the United States, and is
regulated as a bank under the laws of Germany.
5. DBM also satisfies the requirements of rule 17f-5 insofar as it
is a banking institution incorporated or organized under the laws of a
country other than the United States and is regulated as such by that
country's government or an agency thereof. DBM, however, does not meet
the minimum shareholders' equity requirement of rule 17f-5.
Accordingly, DBM is not an Eligible Foreign Custodian and, absent
exemptive relief, could not serve as a custodian and, absent exemptive
relief, could not serve as a custodian for U.S. Investment Company
Assets.
6. Section 6(c) provides, in relevant part, that the SEC may,
conditionally or unconditionally, by order, exempt any person or class
of persons from any provision of the Act or from any rule thereunder,
if such exemption is necessary or appropriate in the public interest,
consistent with the protection of investors, and consistent with the
purposes fairly intended by the policy and provisions of the Act.
Deutsche Bank submits that its request satisfies this standard.
Applicant's Conditions
Applicant agrees that any order of the SEC granting the requested
relief shall be subject to the following conditions:
1. The foreign custody arrangements proposed with respect to DBM
will satisfy the requirements of rule 17f-5 in all respects other than
with regard to the shareholders' equity of DBM.
2. Assets held in custody for U.S. Investment Companies or their
custodians will be maintained in DBM only in accordance with an
agreement (a ``Delegation Agreement'') required to remain in effect at
all times during which DBM fails to satisfy all the requirements of
rule 17f-5 pursuant to which Deutsche Bank would undertake to provide
specified custodial or subcustodial services and delegate to DBM such
of Deutsche Bank's duties and obligations as would be necessary to
permit DBM to hold in custody in Malaysia Assets of U.S. Investment
Companies. The Delegation Agreement among Deutsche Bank, DBM and a U.S.
Investment Company or its custodian would further provide that Deutsche
Bank's delegation of duties to DBM would not relieve Deutsche Bank of
any responsibility to a U.S. Investment Company for which Deutsche Bank
services as custodian or to a custodian for which Deutsche Bank serves
as a subcustodian for any loss due to such delegation, except such loss
as may result from political risk (e.g., exchange control restrictions,
confiscation, expropriation, nationalization, insurrection, civil
strife, or armed hostilities) or other risks of loss (excluding
bankruptcy or insolvency of
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DBM) for which neither Deutsche Bank nor DBM would be liable under rule
17f-5 (e.g., despite the exercise of reasonable care, acts of God, and
the like).
3. Deutsche Bank currently satisfies and will continue to satisfy
the minimum shareholders' equity requirement set forth in rule 17f-
5(c)(2)(i).
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-20400 Filed 8-16-95; 8:45 am]
BILLING CODE 8010-01-M