[Federal Register Volume 62, Number 241 (Tuesday, December 16, 1997)]
[Notices]
[Pages 65834-65836]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32751]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-22934; International Series Release No. 1108/812-10646]


Toronto Dominion Holdings, Inc.; Notice of Application

December 10, 1997.
AGENCY: Securities and Exchange Commission (``SEC'').

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

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SUMMARY OF APPLICATION: Applicant Toronto Dominion Holdings (U.S.A.), 
Inc. (``Toronto Dominion'') requests an order that would permit it to 
sell certain debt securities and use the proceeds to finance the 
business activities of its parent company, The Toronto-Dominion Bank 
(``TD'') and other companies controlled by TD.

FILING DATES: The application was filed on May 9, 1997, and amended on 
November 12, 1997. Applicants have agreed to file an amendment to the 
application during the notice period, the substance of which is 
included in this notice.

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

[[Page 65835]]

mail. Hearing requests should be received by the SEC by 5:30 p.m. on 
January 5, 1998 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, 31 West 52nd Street, New York, New York 10019.

FOR FURTHER INFORMATION CONTACT: Joseph B. McDonald, Jr., Senior 
Counsel, at (202) 942-0533, or Nadya B. Roytblat, Assistant Director, 
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, 450 Fifth St., N.W., Washington, 
D.C. 20549 (tel. 202-942-8090).

Applicant's Representations

    1. Toronto Dominion is a Delaware corporation incorporated in 1982. 
All of Toronto Dominion's outstanding voting securities are owned by 
TD. TD, a chartered bank governed by the Bank Act of Canada, offers a 
wide range of financial services to individuals, corporate and 
commercial enterprises, financial institutions and governments 
throughout Canada. In the United States, TD offers a broad range of 
credit and non-credit services to corporations, financial institutions 
and governments, as well as discount brokerage services through 
Waterhouse Investors Services, Inc. (``Waterhouse''). Outside North 
America, TD conducts treasury and wholesale corporate operations in the 
world's major financial centers.
    2. Toronto Dominion's principal subsidiaries, all wholly-owned, are 
TD Securities (USA) Inc., The Toronto-Dominion Bank Trust Company, 
Toronto Dominion (New York), Inc., Toronto-Dominion (Texas), Inc., 
Toronto Dominion Investments, Inc., and Toronto Dominion Capital 
(U.S.A.), Inc. TD Securities (USA) Inc. is a registered broker-dealer 
operating under Section 20 of the Glass-Steagall Act, and is engaged in 
selling, trading and financing U.S. and Canadian government, corporate 
debt, equity and money market securities. It also acts as agent on 
behalf of various TD entities in the distribution and private placement 
of debt securities, swaps and derivatives, in arranging for loan 
products and in trading loans. The Toronto-Dominion Bank Trust Company 
is a New York trust company that provides limited corporate trust 
functions to its affiliates. Toronto Dominion (New York), Inc. and 
Toronto-Dominion (Texas), Inc. are engaged primarily in the loan 
servicing business and participate with unaffiliated companies in 
making loans. Toronto Dominion Investments, Inc. is an investment 
vehicle that holds debt and equity securities as well as limited 
partnership interests pursuant to section 4(c)(7) of the Bank Holding 
Company Act. Toronto Dominion Capital (U.S.A.), Inc. is organized for 
the sole purpose of operating as a specialized financing corporation 
under the Small Business Investment Act of 1958, as amended. It makes 
investments in small business concerns with a capacity for growth. 
Toronto Dominion's subsidiaries other than those described above are 
companies organized to hold real estate that was required in 
satisfaction of debt previously contracted in good faith.
    3. Toronto Dominion was organized to act as a holding company and 
to engage in financing activities and provide funds for TD and 
companies controlled by TD. Toronto Dominion received a previous order 
under section 6(c) of the Act exempting it from all provisions of the 
Act on December 18, 1984.\1\ However, Toronto Dominion may no longer be 
able to rely on the 1984 Order for its exemption from the Act because a 
statement made in the application for the 1984 Order (that Toronto 
Dominion ``and its subsidiaries do not and will not constitute more 
than 10% of [TD's] assets.'') is no longer true.
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    \1\ Investment Company Act Release Nos. 14245 (Nov. 21, 1984) 
(notice) and 14280 (Dec. 18, 1984) (order) (``1984 Order'').
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    4. Toronto Dominion regularly issues commercial paper in the United 
States pursuant to the exemption contained in section 3(a)(3) of the 
Securities Act of 1933 (the ``1933 Act''). Subject to the grant by the 
SEC of the order requested in the application, Toronto Dominion intends 
to obtain additional funds through the offer and sale of its debt 
securities in the United States, Europe and other overseas markets and 
to lend the proceeds to or invest the proceeds in TD and other 
companies that, after giving effect to the exemption requested hereby, 
will be companies controlled by TD within the meaning of rule 3a-5(b).
    5. Any issuance of debt securities by Toronto Dominion will be 
guaranteed unconditionally by TD as to the timely payment of principal, 
interest, and premium, if any (the ``Guarantee''). The Guarantee will 
provide each holder of debt securities issued by Toronto Dominion a 
direct right of action against TD to enforce TD's obligations under the 
Guarantee without first proceeding against Toronto Dominion. The 
Guarantee for a particular issuance may not be modified or amended in 
any manner adverse to the holders except with the consent of each 
holder affected.
    6. Due to the nature of debt markets, Toronto Dominion may from 
time to time borrow amounts in excess of the amounts required by TD and 
companies controlled by TD at any given time. In accordance with rule 
3a-5(a)(5) of the Act, at least 85% of any cash or cash equivalents 
raised by Toronto Dominion will be invested in or loaned to TD and 
subsidiaries of Toronto Dominion and TD and other companies that, after 
giving effect to the exemption requested in the application, will be 
companies controlled by TD within the meaning of rule 3a-5(b) as soon 
as practicable, but in no event later than six months after Toronto 
Dominion's receipt of such cash or cash equivalents. In the event that 
Toronto Dominion borrows amounts in excess of the amounts required TD 
and companies controlled by TD at any given time, Toronto Dominion will 
invest such excess in temporary investments pending investing the money 
in or lending the money to TD and companies controlled by TD. All 
investments by Toronto Dominion, including temporary investments, will 
be made in government securities, securities of TD or subsidiaries of 
Toronto Dominion or TD or other companies that, after giving effect to 
the exemption requested in the application, will be companies 
controlled by TD within the meaning of rule 3a-5(b) (or in the case of 
a partnership or joint ventures, the securities of the partners of 
participants in the joint ventures), debt securities that are exempted 
from the provisions of the 1933 Act by section 3(a)(3) of the 1933 Act, 
or equity securities of unaffiliated companies in an amount that does 
not exceed 4% of Toronto Dominion's assets. Applicant states that 
limited amounts of U.S. equities are acquired either as part of hedging 
activities for equity derivatives transactions or as proprietary 
positions. Were TD to own such securities itself, it would be subject 
to withholding taxes on the dividends it receives on such shares. 
Ownership of such securities by Toronto Dominion prevents the 
imposition of such taxes.

Applicant's Legal Analysis

    1. Toronto Dominion requests relief under section 6(c) of the Act 
for an

[[Page 65836]]

exemption from all provisions of the Act. Applicant notes that in the 
release adopting rule 3a-5,\2\ the SEC stated that it may be 
appropriate to grant exemptive relief to the finance subsidiary of a 
section 3(c) issuer, but only on a case-by-case basis so that it can 
have the opportunity to evaluate all of the relevant factors. According 
to the adopting release, the concern was that a company may be 
considered a non-investment company for the purposes of the Act under 
section 3(c) and still be engaged primarily in investment company 
activities.
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    \2\ Rule 3a-5 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.
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    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). Certain of Toronto Dominion's 
subsidiaries do not fit within the technical definition of ``companies 
controlled by the parent company'' because they derive their non-
investment company status from section 3(c) of the Act.
    3. Toronto Dominion states that neither itself and its 
subsidiaries, nor TD and its subsidiaries, engage primarily in 
investment company activities. In addition, if TD were itself to issue 
the securities that are to be issued by Toronto Dominion and use the 
proceeds for its own purposes or advance them to its subsidiaries or 
affiliates, none of TD, Toronto Dominion nor any of their respective 
subsidiaries or affiliates would be subject to regulation under the 
Act. While TD has chosen to use Toronto Dominion as a financing 
vehicle, by virtue of the Guarantee, the holders of the securities 
issued by Toronto Dominion will have direct access to TD's credit.
    4. Under rule 3a-5(a)(6), a finance subsidiary may only invest in 
government securities, securities of its parent company or a company 
controlled by its parent company or debt securities exempt under 
section 3(a)(3) of the 1933 Act. Toronto Dominion will hold equity 
securities of unaffiliated companies in an amount that does not exceed 
4% of its assets. Toronto Dominion will hold such securities due to 
non-U.S. tax constraints applicable to TD. The primary purpose of 
Toronto Dominion, however, will continue to be to finance the business 
operations of TD and companies controlled by TD. Moreover, purchasers 
of Toronto Dominion's debt securities will receive disclosure documents 
that make clear that such purchasers should ultimately look to TD for 
repayment pursuant to the Guarantee. Neither Toronto Dominion's 
structure nor its mode of operation will resemble that of an investment 
company.
    5. Section 6(c) of the Act, in pertinent part, provides that the 
SEC, 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 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. Toronto Dominion submits that its exemptive 
request meet the standards set out in section 6(c) and should therefore 
be granted.

Applicant's Condition

    Toronto Dominion agrees that the order granting the requested 
relief will be subject to the following condition:
    1. Toronto Dominion will comply with all of the provisions of rule 
3a-5 under the Act, except: (1) Toronto Dominion will be permitted to 
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), (6) or (7), provided that any such entity that 
Toronto Dominion invests in or makes loans to that is excluded from the 
definition of investment company pursuant to section 3(c)(1) or section 
3(c)(7) will be 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, and 
provided, further, that any such entity excluded from the definition of 
investment company pursuant to 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; and (2) Toronto 
Dominion will be permitted to invest in, reinvest in, own, hold or 
trade in equity securities of unaffiliated companies with a purchase 
price not in excess of 4% of Toronto Dominion's assets.

    For the SEC, by the Division of Investment Management, pursuant 
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-32751 Filed 12-15-97; 8:45 am]
BILLING CODE 8010-01-M