[Federal Register Volume 60, Number 73 (Monday, April 17, 1995)]
[Notices]
[Pages 19315-19317]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9399]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-20992; International Series Release No. 801; 812-9414]


Banco de Comercio Exterior de Colombia S.A.; Notice of 
Application

April 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: Banco de Comercio Exterior de Colombia S.A.

RELEVANT ACT SECTION: Order requested under section 6(c) for an 
exemption from all provisions of the Act.

SUMMARY OF THE APPLICATION: Applicant seeks an exemption under section 
6(c) from all provisions of the Act. Applicant is a commercial bank 
owned and controlled by the Republic of Colombia. Applicant provides 
long- and short-term financing and specialized financial products to 
financial intermediaries. Applicant discounts loans that such financial 
intermediaries have made to finance Colombian exports and foreign 
trade-related activities. Applicant is in the process of establishing a 
global program for the issuance of debt securities.

FILING DATES: The application was filed on January 5, 1995 and amended 
on March 15, 1995 and April 11, 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 May 4, 1995, and 
should be accompanied by proof of service on 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 who wish to be 
notified of a hearing may request notification by writing to the SEC's 
Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street NW., Washington, D.C. 
20549; Applicant, c/o Thomas A. Curtis, Cleary, Gottlieb, Steen & 
Hamilton, One Liberty Plaza, New York, NY 10006.

FOR FURTHER INFORMATION CONTACT: Marc Duffy, Senior Attorney, (202) 
942-0565, or Barry D. Miller, Senior Special Counsel, (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 at the 
SEC's Public Reference Branch.

Applicant's Representations

    1. Applicant is a commercial bank owned and controlled by the 
Republic of Colombia (``Colombia,'' or the ``Republic''). Applicant 
provides long- and short-term financing and specialized financial 
products to support Colombian exports and foreign trade-related 
activities. Applicant was incorporated as the successor to the Export 
Promotion Fund, a fund formed in 1967 by the government of Colombia 
(the ``Government'') to promote Colombian exports.
    2. The Republic owns 99.7% of applicant's share capital and 
controls the applicant within the meaning of section 2(a)(9) of the 
Act.\1\ Applicant's Board of Directors consists of Government 
representatives, a representative of the private sector appointed by 
the President of the Republic, and a representative of the private 
sector appointed by the exporters' associations registered with the 
Ministry of Foreign Trade.

    \1\The Government recently offered shares in applicant 
representing 11% of applicant's outstanding share capital to 
applicant's employees, pension funds, cooperatives, unemployment 
funds and other institutions. As a result of such offering, 0.28% of 
the Bank's outstanding share capital were purchased by such 
employees and institutions. The shares that were not subscribed for 
in such offering will eventually be offered by the Government to the 
public in Colombia. The Government does not intend to offer such 
shares in the United States. Even after such sale, the Government 
would continue to control applicant's operations within the meaning 
of section 2(a)(9) of the Act.
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    3. Applicant is authorized to operate under the same legal regime 
as a private commercial bank, without any limitation on the type of 
commercial banking activities in which it may engage. Applicant's 
activities, like those of other Colombian banks, are subject to 
extensive regulation by the principal [[Page 19316]] entities governing 
the Colombian banking and financial system. These entities include the 
Congress of Colombia, the National Council for Economic and Social 
Policy, the Central Bank, and the Banking Superintendency. The 
regulations applicable to applicant include licensing, capital 
adequacy, foreign currency position requirements, and restrictions on 
lending activities and related-party transactions.
    4. At September 30, 1994, applicant had assets of Ps1,085,338 
million (U.S. $1,290.7 million) and shareholders' equity of Ps403,768 
million (U.S. $480.2 million).
    5. Applicant operates primarily as a second-tier bank, extending 
loans to other commercial banks and finance companies in Colombia and 
abroad (collectively, ``Financial Intermediaries'') by discounting 
loans that such Financial Intermediaries have made to finance Colombian 
exporters and foreign trade-related activities as well as foreign 
buyers of Colombian goods and services. Applicant works together with 
the relevant Financial Intermediary in originating each discounted 
loan, both to ensure that the loan meets applicant's lending criteria 
and that the necessary funding will be available to the Financial 
Intermediary to make the loan. Applicant also takes physical possession 
of the promissory note for each loan, which is endorsed to applicant, 
to ensure recourse against the ultimate borrower in the event of a 
default by the Financial Intermediary.
    6. Applicant does not purchase discounted loans from entities other 
than the loan originator, nor does it sell or otherwise trade in 
discounted loans. At September 30, 1994, approximately 99% of 
applicant's outstanding loans were discounted loans, with 62 Financial 
Intermediaries as obligors. Over 90% of these Financial Intermediaries 
are Colombian commercial banks and finance companies regulated in a 
manner substantially similar to applicant.
    7. Applicant traditionally has relied on its shareholders' equity 
as the primary source of peso-denominated funds. Although applicant has 
the power under its charter to take deposits, it has not done so to 
date because most of applicant's loans are made in United States 
dollars, and funding such loans with peso deposits would be 
prohibitively expensive. To the extent applicant lends in pesos, its 
shareholders' equity provides a sufficient source of funds at a 
considerably lower cost than would be the case with deposits.
    8. Applicant proposes a global program (the ``Program'') to issue 
and sell debt securities (the ``Notes''), the net proceeds of which 
will be used to expand applicant's foreign trade-related financing 
activities and for other general corporate purposes. The principal 
amount of Notes outstanding at any time will not exceed in the 
aggregate United States $300,000,000 (or its equivalent in other 
currencies at the date of issue), subject to future increases in the 
size of the Program. The Notes will not be obligations of, or 
guaranteed by, or otherwise backed by the credit of, the Republic of 
Colombia.
    9. The Notes have not been and will not be registered under the 
Securities Act of 1933, as amended (the ``Securities Act'').\2\

    \2\Applicant does not hereby seek, and has not obtained, any 
assurance from the SEC regarding applicant's status prior to the 
issuance of any exemptive order on this application, nor has 
applicant received any assurance regarding the Notes' status under 
the Securities Act.
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    All or a portion of a series of Notes may be offered for sale in 
the United States to ``qualified institutional buyers,'' as defined in 
Rule 144A under the Securities Act, in reliance on Rule 144A, or to 
institutional ``accredited investors,'' as defined in Rule 501(a) (1), 
(2), (3), and (7) under the Securities Act, that are not also qualified 
institutional buyers. All or a portion of a series of Notes also may be 
offered for sale in offshore transactions outside the United States in 
reliance on Regulation S under the Securities Act.
    10. Applicant's intention is not to offer any Notes under the 
Program until the exemptive order sought hereby has been granted. 
Nevertheless, market conditions and applicant's funding needs may make 
it necessary to proceed with the first issuance under the Program prior 
to the granting of such order. In that case, applicant would offer an 
initial series of Notes (the ``Initial Notes'') to investors in the 
United States and abroad. In order to permit such offering to proceed 
while the present application for exemptive relief was being 
considered, applicant would impose special offering and resale 
restrictions on the Initial Notes (in addition to those required to 
comply with the Securities Act), including a limit on the number of 
U.S. resident holders that could hold the Initial Notes at any given 
time. Upon the granting of the exemptive order, such restrictions would 
be removed and resales of the Initial Notes, and any other Notes 
subject to such restrictions, would thereafter be subject only to the 
Securities Act restrictions applicable to the Program generally.

Applicant's Legal Analysis

    1. Section 3(a)(3) of the Act defines an investment company to 
include any issuer engaged in the business of investing, reinvesting, 
owning, holding, or trading in securities, and that owns or proposes to 
acquire investment securities having a value exceeding 40% of the 
issuer's total assets, exclusive of Government securities and cash 
items on an unconsolidated basis. Substantially all of applicant's 
assets consist of discounted loans. Such loans could be deemed to be 
investment securities within the meaning of section 3(a)(3). As a 
result, applicant recognizes, for purposes of this application only, 
that it could be deemed to be an investment company.
    2. Rule 3a-6 exempts foreign banks from the definition of 
investment company for all purposes under the Act. A foreign bank is 
defined to include a banking institution engaged substantially in 
``commercial banking activity,'' which, in turn, is defined to include 
``accepting demand and other types of deposits.'' Although applicant is 
authorized to accept demand and other types of deposits, as a matter of 
policy it has chosen not to do so, and for this reason does not fall 
squarely within the terms of the exemption provided by rule 3a-6. 
Therefore, applicant may not be able to rely on rule 3a-6.
    3. In adopting rule 3a-6, the SEC recognized that other financial 
entities might merit treatment similar to that afforded by the rule. 
The SEC indicated that such entities could file an application for 
individual exemptive relief under section 6(c) of the Act.<SUP>3 
Applicant believes that the exemptive relief contemplated by the 
Adopting Release is appropriate in the present case. Applicant is an 
``export-import bank'' and is similar in function to U.S. banks and 
other exempted entities. Applicant is licensed as a commercial bank in 
Colombia and is subject to extensive regulation by the Colombian 
authorities. Such regulation affords substantial protection to 
investors. In addition, applicant is controlled by the Government of 
Colombia.

    \3\See Investment Company Act Release No. 18381 (Oct. 29, 1991), 
note 15 and accompanying text (the ``Adopting Release'').
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    4. Section 3(c)(5)(B) of the Act exempts from the definition of 
``investment company'' any person that is not engaged in the business 
of issuing certain specified securities and that is primarily engaged 
in the business of ``making loans to manufacturers, wholesalers, and 
retailers of, and to prospective purchasers of, specified 
[[Page 19317]] merchandise, insurance, and services.'' Although other 
government-controlled export financing entities have obtained no-action 
relief under section 3(c)(5)(B), their lending activities were 
described as primarily sales financing; that is, the making of loans to 
either exporters or foreign buyers to finance particular sales 
transactions. Applicant was created to serve the same purpose as these 
other entities.
    Applicant's loans can be described as indirect sales financing 
(goods cannot be exported unless they are first produced). The bulk of 
the loans extended by applicant, however, are ``preshipment'' loans, 
which finance the working capital needs of Colombian exporters, and are 
unlike the sales financing described in the no-action letters.
    5. Applicant seeks an exemption under section 6(c) from all 
provisions of the Act. Applicant believes that it meets the standards 
for relief.

Applicant's Condition

    Applicant agrees that the order granting the requested relief shall 
be subject to the following condition:
    In connection with any offering of its securities in the United 
States, applicant will appoint an agent to accept any process which may 
be served on it in any action based on such securities and instituted 
in the Supreme Court of the State of New York or the United States 
District Court for the Sourthern District of New York by any holder of 
any such securities. Applicant further undertakes that it will 
expressly consent to the jurisdiction of the Supreme Court of the State 
of New York and the United States District Court for the Southern 
District of New York in respect of any such action. Applicant also will 
waive the defense of an inconvenient forum to the maintenance of any 
such action or proceeding. Such appointment of an agent to accept 
service of process and such consent to jurisdiction will be irrevocable 
until all amounts due and to become due in respect of such securities 
have been paid. Applicant explicitly waives any immunity it may have 
from jurisdiction and from execution or attachment or any process in 
the nature thereof in respect of any suit, action or proceeding arising 
out of or relating to such securities.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-9399 Filed 4-14-95; 8:45 am]
BILLING CODE 8010-01-M