[Federal Register Volume 61, Number 121 (Friday, June 21, 1996)]
[Notices]
[Pages 31979-31981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15806]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Rel No. IC-22018; International Series Release No. 994; File No. 812-
10142]
ABN AMRO Bank N.V., and ABN AMRO Global Custody N.V.; Notice of
Application
June 14, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
-----------------------------------------------------------------------
Applicants: ABN AMRO Bank N.V. (``ABN AMRO'') and ABN AMRO Global
Custody N.V. (AAGC'').
Relevant Act Sections: Order requested under section 6(c) of the Act
that would grant an exemption from section 17(f) of the Act.
Summary of Application: Applicants request an order to permit any U.S.
investment company registered under the Act (other than any investment
company registered under section 7(d) of the Act) (a ``U.S. Investment
Company'') and any custodian for a U.S. Investment Company to maintain
securities and other assets in the custody of ABN AMRO (Moscow) Ltd.
(``ABN AMRO (Moscow)''), a direct subsidiary of ABN AMRO in Russia.
Filing Date: The application was filed on May 9, 1996.
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
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on July 9, 1996 and
should be accompanied by proof of service on the 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 SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, D.C.
20549. Applicants: ABN AMRO Bank N.V. and ABN AMRO Global Custody N.V.,
Foppingadreef 22, 1102 BS Amsterdam, The Netherlands.
FOR FURTHER INFORMATION CONTACT:
Mary T. Geffroy, Staff Attorney, at (202) 942-0553, or Robert A.
Robertson, 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.
Applicants' Representations
1. ABN AMRO is a Netherlands banking organization. ABN AMRO Holding
N.V. (``Holding'') is the parent company of ABN AMRO. Holding and ABN
AMRO are regulated in The Netherlands by De Nederlandsche Bank N.V.,
the Dutch Central Bank (``DNB''), on behalf of The Netherlands Minister
of Finance. As of December 31, 1995, Holding held approximately 100% of
the share capital of ABN AMRO, and ABN AMRO accounted for approximately
100% of the total assets of Holding. ABN AMRO provides a variety of
commercial banking and securities services on an international basis.
At December 31, 1995, Holding had consolidated total assets of
approximately U.S. $341 billion and shareholders' equity of
approximately U.S. $12.6 billion.
2. AAGC is a legal entity incorporated by ABN AMRO pursuant to a
system for the administration and safekeeping of bearer securities held
outside the Netherlands and registered securities held inside and
outside The Netherlands. AAGC does not engage in any activity other
than the safekeeping of securities for the benefit of ABN AMRO's
clients and for ABN AMRO itself, effectively serving only as a
``vault'' for the safekeeping of such securities. ABN AMRO provides its
clients with all custody-related services with respect to these
securities.
3. ABN AMRO (Moscow) is a direct subsidiary of ABN AMRO. ABN AMRO
(Moscow) was incorporated in Russia in October 1993, and operates under
General License No. 2549 of the Central Bank of the Russian Federation.
ABN AMRO (Moscow) is authorized to engage in the business of commercial
banking, and is supervised by the Central Bank of the Russian
Federation under the Law on Banks and Banking Activity of 1991, as
amended in 1991, 1992, and 1996. ABN AMRO (Moscow) offers customers a
wide range of retail and wholesale banking services, including
traditional corporate services and trade finance products. It also
operates a custody department to support local and foreign investors
(and their custodians).
4. Applicants were granted an order on April 23, 1996 (the
``Order'') which permitted U.S. investment companies and their
custodians or subcustodians to maintain securities and other assets in
the custody of ABN AMRO
[[Page 31980]]
Effectenbewaarbedrijf N.V. and AAGC, through ABN AMRO Bank N.V., and
MeesPierson N.V., MeesPierson Effectenbewaarbedrijf N.V. and
MeesPierson Global Custody Services N.V., through MeesPierson N.V., in
the Netherlands.
5. Applicants request an order exempting: (a) themselves, (b) any
U.S. Investment Company, and (c) any custodian or subcustodian for a
U.S. Investment Company, from the provisions of section 17(f) of the
Act to the extent necessary to permit such entities to maintain
securities and other assets (``Securities'') in the custody of ABN AMRO
(Moscow).\1\
---------------------------------------------------------------------------
\1\ As used herein, the term ``Securities'' does not include
securities issued or guaranteed by: the U.S. Government, any state
or political subdivision thereof, any agency thereof, or by any
entity organized under the laws of the U.S. or any state thereof
(other than certificates of deposit, evidences of indebtedness and
other securities, issued or guaranteed by an entity so organized
which have been issued and sold outside the U.S.).
---------------------------------------------------------------------------
Applicants' Legal Analysis
1. Section 17(f) provides that a registered investment company may
maintain securities and similar assets in the custody of a bank meeting
the requirements of section 26(a) of the Act, a member firm of a
national securities exchange, the investment company itself, or a
system for the central handling of securities established by a national
securities exchange. Section 2(a)(5) of the Act defines ``bank'' to
include banking institutions organized under the laws of the United
States, member banks of the Federal Reserve System, and certain banking
institutions or trust companies doing business under the laws of any
state or of the United States.
2. Rule 17f-5 under the Act permits certain entities located
outside the U.S. to serve as custodians for investment company assets.
Rule 17f-5 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
as such by that country's government or an agency thereof, and that has
shareholders' equity in excess of U.S. $200 million.
3. ABN AMRO is a banking institution organized under the laws of
The Netherlands and is regulated as such by DNB, the Dutch Central
Bank, on behalf of the Netherlands Minister of Finance. At December 31,
1995, ABN AMRO had shareholders' equity in excess of the $200,000,000
minimum required by rule 17f-5. Accordingly, ABN AMRO qualifies as an
``Eligible Foreign Custodian.'' ABN AMRO (Moscow), however, does not
qualify as an ``Eligible Foreign Custodian'' because, although it is a
banking institution organized under the laws of Russia and is regulated
as such by the Central Bank of Russia, it does not have shareholders'
equity in excess of $200 million. Thus, absent exemptive relief, ABN
AMRO (Moscow) may not serve as custodian for the Securities of U.S.
Investment Companies.
4. Applicants believe that the requested order is necessary and
appropriate in the public interest because it would permit U.S.
Investment Companies and their custodians and subcustodians to have
access to the custody services of ABN AMRO in (Moscow). Applicants
represent that the protection afforded the Securities of U.S.
Investment Companies held by ABN AMRO (Moscow) would not be diminished
from the protection afforded by rule 17f-5 since ABN AMRO will remain
liable for the performance of the custody services by ABN AMRO
(Moscow).
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. The foreign custody arrangements involving ABN AMRO (Moscow)
will satisfy the requirements of rule 17f-5 in all respects other than
ABN AMRO (Moscow)'s level of shareholders' equity.
2. A U.S. Investment Company or a custodian or subcustodian for a
U.S. Investment Company will deposit Securities directly with ABN AMRO
(Moscow) only in accordance with a three-party contractual agreement
that will remain in effect at all times during which ABN AMRO (Moscow)
fails to satisfy the requirement of rule 17f-5 relating to minimum
shareholders' equity. Each such agreement will be a three-party
agreement among: (a) ABN AMRO, (b) ABN AMRO (Moscow), and (c) a U.S
Investment Company or custodian or subcustodian of the Securities of
the U.S. Investment Company. Under the agreement, ABN AMRO (Moscow)
will undertake to provide specified custodial or subcustodial services.
The agreement will further provide that ABN AMRO will be liable for any
loss, damage, cost, expense, liability, or claim arising out of or in
connection with the performance by ABN AMRO (Moscow) of its
responsibilities under the agreement to the same extent as if ABN AMRO
had been required to provide custody services under such agreement.
3. ABN AMRO and AAGC, when providing custody or subcustody services
to a U.S. Investment Company, will deposit Securities with ABN AMRO
(Moscow) only in accordance with one of the following contractual
arrangements, which arrangement will remain in effect at all times
during which ABN AMRO (Moscow) fails to satisfy the requirement of the
rule relating to minimum shareholders' equity:
(a) The Four-Party Agreement Arrangement. Under this arrangement,
the agreement will be a four-party agreement among ABN AMRO, AAGC, ABN
AMRO (Moscow), and a U.S. Investment Company or the custodian or
subcustodian for a U.S. Investment Company pursuant to which ABN AMRO
and AAGC will undertake to provide specified custody or subcustody
services, and will delegate to ABN AMRO (Moscow) such of the duties and
obligations of ABN AMRO and AAGC as will be necessary to permit ABN
AMRO (Moscow) to hold in custody the Securities of the U.S. Investment
Company. The agreement will further provide that ABN AMRO will be
liable for any loss, damage, cost, expense, liability, or claim arising
out of or in connection with the performance by ABN AMRO (Moscow) of
its responsibilities under the agreement to the same extent as if ABN
AMRO had itself been required to provide custody services under such
agreement. This agreement will be governed either by the law of the
State of New York or The Netherlands.
(b) The Custody Agreement/Subcustody Agreement Arrangement. Under
this arrangement, Securities will be deposited with ABN AMRO (Moscow)
in accordance with a three-party custody agreement and a three-party
subcustody agreement described below:
(i) The three-party custody agreement will be among ABN AMRO, AAGC,
and a U.S. Investment Company or any custodian or subcustodian for a
U.S. Investment Company. In that agreement, ABN AMRO and AAGC will
undertake to provide specified custody or subcustody services, and the
U.S. Investment Company (or its custodian or subcustodian) will
authorize ABN AMRO and AAGC to delegate to ABN AMRO (Moscow) such of
ABN AMRO and AAGC's duties and obligations as will be necessary to
permit ABN AMRO (Moscow) to hold in custody the Securities of the U.S.
Investment Company. The agreement will further provide that ABN AMRO
will be liable for any loss, damage, cost, expense, liability, or claim
arising out of or in
[[Page 31981]]
connection with the performance by ABN AMRO (Moscow) of its
responsibilities under the agreement to the same extent as if ABN AMRO
had itself been required to provide custody services under such
agreement.
(ii) A three-party subcustody agreement will be executed by ABN
AMRO, AAGC, and ABN AMRO (Moscow). Pursuant to this agreement, ABN AMRO
and AAGC will delegate to ABN AMRO (Moscow) such of ABN AMRO and AAGC's
duties and obligations as will be necessary to permit ABN AMRO (Moscow)
to hold Securities in custody in Russia. The subcustody agreement will
explicitly provide that: (x) ABN AMRO (Moscow) is acting as a foreign
custodian for Securities that belong to a U.S. Investment Company
pursuant to the terms of an exemptive order issued by the SEC, and (y)
the U.S. Investment Company or its custodian or subcustodian that has
entered into a custody agreement will be entitled to enforce the terms
of the subcustody agreement and can seek relief directly against ABN
AMRO (Moscow). Further, the subcustody agreement will be governed
either by the law of the State of New York or The Netherlands. If the
subcustody agreement is governed by the laws of The Netherlands, ABM
AMRO shall obtain an opinion of counsel in The Netherlands, opining as
to the enforceability of the rights of a third party beneficiary under
the laws of The Netherlands.
4. Under any of the agreements described in conditions 2 or 3 of
this Application, neither ABM AMRO (Moscow), ABM AMRO, nor AAGC would
be liable for any losses that result from: (i) political risk (e.g.,
exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities, and
(ii) other risks of loss (excluding the bankruptcy or insolvency of ABM
AMRO (Moscow)) for which ABM AMRO (Moscow) would not be liable under
the rule (e.g., despite the exercise of reasonable care, loss due to
acts of God, nuclear incident and the like).
5. ABM AMRO currently satisfies, and will continue to satisfy, the
minimum shareholders' equity requirement set forth in subsection rule
17f-5(c)(2)(i).
6. At all times during which a custody arrangement described in
condition 3 shall be in effect, AAGC shall be the subject of the Order,
which permits any U.S. Investment Company and any custodian or
subcustodian for a U.S. Investment Company to maintain Securities in
the custody of AAGC.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 96-15806 Filed 6-20-96; 8:45 am]
BILLING CODE 8010-01-M