[Federal Register Volume 60, Number 243 (Tuesday, December 19, 1995)]
[Notices]
[Pages 65365-65367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30709]



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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 21593; International Series Release 
No. 901; 812-9816]


First National Bank of Southern Africa Limited; Notice of 
Application

December 12, 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: First National Bank of Southern Africa Limited (``First 
National bank'').

Relevant Act Sections: Order under section 6(c) of the Act for an 
exemption from section 17(f).

Summary of Application: First National 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 First National Bank serves as custodian or 
subcustodian, to maintain foreign securities and other assets in the 
custody of foreign affiliates located in Botswana, Namibia, and 
Zimbabwe.

Filing Date: The application was filed on September 5, 1995 and amended 
on December 12, 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 January 8, 1996, 
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. 

[[Page 65366]]
Applicant: 3 First Place, BankCity, Johannesburg, Republic of South 
Africa; cc: Michael Gruson, Esq., Shearman & Sterling, 599 Lexington 
Avenue, New York, New York 10022.

For Further Information Contact: Marianne H. Khawly, Staff Attorney, at 
(202) 942-0565, 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.

Applicant's Representations

    1. First National Bank requests an order to permit First National 
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 the custody of First National 
Bank of Botswana Limited (``First Botswana''), First National Bank of 
Namibia Limited (``First Namibia''), and First Merchant Bank of 
Zimbabwe Limited (``First Zimbabwe,'' together the ``Foreign 
Affiliates'') located in the countries of Botswana, Namibia, and 
Zimbabwe, respectively. 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. First National Bank, a bank organized under the laws of the 
Republic of South Africa, is regulated in South Africa by the Registrar 
of Banks of South Africa under the banks Act of 1990. First National 
Bank is a wholly-owned subsidiary of First National Bank Holdings 
Limited (``First National Bank Group''), a South African public limited 
company. First National Bank Group is one of the largest financial 
service groups in South Africa and is engaged in a broad range of 
banking and financing services for both individual an corporate 
customers. As of September 30, 1994, First National Bank had 
shareholders' equity of approximately $427,500,000.
    3. First Botswana is an 80 percent owned subsidiary of First 
National Bank Group and is supervised by the Bank of Botswana. First 
Namibia is a wholly-owned subsidiary of First National Bank Group and 
is supervised by the Central Bank of Namibia. First Zimbabwe operates 
under the banking Act of Zimbabwe (Chapter 188, Regulatory Controls). 
First Zimbabwe is appointed as subcustodian by First National Bank but 
is neither a branch nor a subsidiary of First National Bank.

Applicant's Legal Analysis

    1. First National Bank requests an order under section 6(c) of the 
Act exempting First National 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 with the Foreign 
Affiliates in their respective countries.
    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 the 
business 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 United 
States 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 as such by 
that country's government or an agency thereof and that has 
shareholders' equity in excess of $200,000,000 or its equivalent.
    4. First National Bank meets the requirements for an Eligible 
Foreign Custodian under rule 17f-5 because it has shareholders' equity 
in excess 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 South Africa.
    5. The Foreign Affiliates also satisfy the requirements of rule 
17f-5 insofar as each is a banking institution or trust company 
incorporated or organized under the laws of a country other than the 
United States and is regulated as such by such country's government or 
an agency thereof. The Foreign Affiliates, however, do not meet the 
minimum shareholders' equity requirement of the rule. Accordingly, the 
Foreign Affiliates are not Eligible Foreign Custodians under the rule 
and, absent exemptive relief, could not serve as custodians for the 
Assets of U.S. Investment Companies.
    6. Section 6(c) provides, in relevant part, that the SEC may 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. First National 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 regarding the Foreign 
Affiliates satisfy the requirements of rule 17f-5 in all respects other 
than the Foreign Affiliate's level of shareholders' equity.
    2. First National Bank will deposit the Assets in Botswana, 
Namibia, or Zimbabwe, as the case may be, with First Botswana, First 
Namibia, or First Zimbabwe, respectively only in accordance with an 
agreement (the ``Agreement'') required to remain in effect at all times 
during which the Foreign Affiliates fail to satisfy the requirements of 
rule 17f-5. Each Agreement will be a three-party agreement among First 
National Bank, the Foreign Affiliate, and the U.S. Investment Group (or 
its custodian) pursuant to which First National Bank will undertake to 
provide specified custody or subcustody services for a U.S. Investment 
Company or its custodian, and will delegate to the Foreign Affiliate 
such of the duties and 

[[Page 65367]]
obligations of First National Bank as will be necessary to permit First 
Botswana, First Namibia, or First Zimbabwe, as the case may be, to hold 
in custody the U.S. Investment Company's Assets in Botswana, Namibia, 
and Zimbabwe, respectively. The Agreement will further provide that 
First National Bank will be liable for any loss, damage, cost, expense, 
liability, or claim arising out of or in connection with the 
performance by a Foreign Affiliate of its responsibilities under the 
Agreement to the same extent as if First National Bank had been 
required to provide custody services under such agreement.
    3. First National 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. 95-30709 Filed 12-18-95; 8:45 am]
BILLING CODE 8010-01-M