65 FR 57 pgs. 15665-15667 - Bankers Trust Company, et al.; Notice of Application
Type: NOTICEVolume: 65Number: 57Pages: 15665 - 15667
Docket number: [Rel. No. IC-24341; 812-12028]
FR document: [FR Doc. 00-7198 Filed 3-22-00; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-24341; 812-12028]
Bankers Trust Company, et al.; Notice of Application
March 17, 2000.
Securities and Exchange Commission ("SEC").
Notice of an application to amend a prior order under section 12(d)(1)(J) of the Investment Company Act of 1940 (the "Act") granting an exemption from section 12(d)(1) of the Act, sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a) and 17(c) of the Act, and under section 17(d) of the Act and rule 17d-1 under the Act permitting certain joint transactions.
SUMMARY OF APPLICATION:
Applicants seek to amend a prior order that permits certain registered management investment companies to participate in a securities lending program and to pay, and Bankers Trust Company ("Bankers Trust") as lending agent to accept, fees based on a share of the revenue generated from the securities lending transactions ("Pror Order").1The amended order ("Amended Order") would permit Deutsche Bank, A.G., and any person controlling, controlled by, or under common control with Deutsche Bank, A.G. ("Deutsche Bank") to rely on the Prior Order. The Amended Order also would modify a condition of the Prior Order.
1 Bankers Trust Company , Investment Company Act Release Nos. 23370 (July 31, 1998) (notice) and 23401 (Aug. 26, 1998) (order).
Applicants: Bankers Trust, Deutsche Bank, BT Investment Portfolios and each of its subsequently created series (each a "Portfolio"), and BT Institutional Funds (the "Trust") and each of its subsequently created series. The Trust, with respect to the Institutional Daily Assets Fund (the "Money Fund"), a series of the Trust, and any subsequently established series of the Trust or other registered open-end management investment companies advised or sub-advised by a BT Entity (as defined below) established in connection with the investment of cash collateral from securities lending transactions are referred to as the "Investment Funds." All applicants, except Deutsche Bank, are the "Original Applicants."
Filing Dates: The application was filed on March 14, 2000.
Hearing or Notification of Hearing: An order granting the requested relief 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 pm on April 11, 2000, and should be accompanied by proof of service on 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 who wish to be notified of a hearing may request notification by writing to the SEC's Secretary.
Secretary, SEC, 450 5th Street, N.W., Washington, DC 20549-0609; Applicants: Deutsche Bank, 31 West 52nd Street, New York, New York 10019; Original Applicants, c/o Bankers Trust, 130 Liberty Street, New York, New York 1006.
FOR FURTHER INFORMATION CONTACT:
J. Amanda Machen, Senior Counsel (202) 942-7120, or Mary Kay Frech, Branch Chief, (202) 942-0564 (Office of Investment Company Regulation, Division of Investment Management).
The following is a summary of the application. The complete application may be obtained for a fee at the SEC's Public Reference Branch, 450 5th Street, NW, Washington, DC 20549-0102 (tel. 202-942-8090).
1. Bankers Trust, a New York banking corporation, serves as investment adviser to investment companies registered under the Act. Bankers Trust also operates one of the largest securities lending programs ("Program") in conjunction with providing institutional custody services. Deutsche Bank is a banking company organized under the laws of the Federal Republic of Germany. On June 4, 1999, Deutsche Bank acquired Bankers Trust. Deutsche Bank serves as securities lending agent to a wide variety of institutional clients.
2. On August 26, 1998, the SEC issued the Prior Order to the Original Applicants under sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a) and 17(e) of the Act, under section 12(d)(1)(J) of the Act granting an exemption from section 12(d)(1) of the Act, and permitting, pursuant to rule 17d-1, certain joint transactions in accordance with section 17(d) of the Act and rule 17d-1 under the Act. The Prior Order permits: (a) any registered investment company advised or sub-advised, or that invests substantially all of its assets in a registered investment company advised or sub-advised by Bankers Trust or an entity controlling, controlled by or under common control with Bankers Trust (a "BT Entity") ("Affiliated Lending Fund") and (b) each other registered management investment company or series thereof that may participate from time to time as a lender in the Program ("Other Lending Fund" and, together with Affiliated Lending Fund, "Lending Funds") to pay, and Bankers Trust to accept, fees based on a share of the revenue generated from securities lending transactions. The Prior Order also permits the Lending Funds to purchase and redeem from the Trust, and the Trust to sell to and to redeem for the Lending Funds, shares in the Investment Funds ("Shares") in connection with the investment of cash collateral from securities lending transactions. Lastly, the Prior Order permits Bankers Trust or any BT Entity to receive fees or commissions from the Other Lending Funds for acting as broker or agent in connection with the purchase or sale of securities for the Other Lending Funds.
3. Deutsche Bank seeks to extend the exemptive relief granted under the Prior Order to permit it to serve as lending agent for Affiliated Lending Funds and as sub-lending agent for Other Lending Funds. Deutsche Bank states that its personnel providing day-to-day lending agency services to Affiliated Lending Funds do not provide investment advisory services to those Funds, or participate in any way in the selection of portfolio securities or other aspects of the management of those Funds.
4. Applicants represent that each Affiliated Lending Fund will adopt the following procedures to ensure that the proposed fee arrangement and the other terms governing the relationship with Bankers Trust and Deutsche Bank, as lending agents, will be fair:
(a) In connection with the approval of Bankers Trust or Deutsche Bank as lending agent for an Affiliated Lending Fund and implementation of the proposed fee arrangement, a majority of the board of trustees of the Affiliated Lending Fund ("Board of Trustees") (including a majority of the trustees who are not "interested persons" of the Affiliated Lending Fund within the meaning of the Act (the "Independent Trustees")) will determine that: (i) The contract with Bankers Trust or Deutsche Bank is in the best interests of the Affiliated Lending Fund and its shareholders; (ii) the services to be performed by Bankers Trust or Deutsche Bank are appropriate for the Affiliated Lending Fund; (iii) the nature and quality of the services provided by Bankers Trust or Deutsche Bank are at least equal to those provided by others offering the same or similar services for similar compensation; and (iv) the fees for Bankers Trust's or Deutsche Bank's services are within the range of, but in any event no higher than, the fees charged by Bankers Trust or Deutsche Bank for services of the same nature and quality provided to unaffiliated parties.
(b) Each Affiliated Lending Fund's contract with Bankers Trust or Deutsche Bank for lending agent services will be reviewed annually and will be approved for continuation only if a majority of the Board of Trustees (including a majority of the Independent Trustees) makes the findings referred to in paragraph (a) above.
(c) In connection with the initial implementation of an arrangement whereby Bankers Trust or Deutsche Bank will be compensated as lending agent based on a percentage of the revenue generated by an Affiliated Lending Fund's participation in the Program, the Board of Trustees shall secure a certificate from Bankers Trust or Deutsche Bank attesting to the factual accuracy of clause (iv) in paragraph (a) above. In addition, the Board of Trustees will request and evaluate, and Bankers Trust or Deutsche Bank shall furnish, such information and materials as the Trustees, with and upon the advice of agents, consultants or counsel, determine to be appropriate in making the findings referred to in paragraph (a) above. Such information shall include, in any event, information concerning the fees charged by Bankers Trust or Deutsche Bank to other institutional investors for providing similar services.
(d) The Board of Trustees, including a majority of the Independent Trustees, will (i) at each regular quarterly meeting determine, on the basis of reports submitted by Bankers Trust or Deutsche Bank, that the loan transactions during the prior quarter were conducted in compliance with the conditions and procedures set forth herein and (ii) will review no less frequently than annually the conditions and procedures set forth herein for continuing appropriateness.
(e) Each Affiliated Lending Fund will (i) maintain and preserve permanently in an easily accessible place a written copy of the procedures and conditions (and modifications thereto) described herein or otherwise followed in connection with lending securities pursuant to the Program and (ii) maintain and preserve for a period of not less than six years from the end of the fiscal year in which any loan transaction pursuant to the Program occurred, the first two years in an easily accessible place, a written record of each loan transaction setting forth a description of the security loaned, the identify of the person on the other side of the loan transaction, and the terms of the loan transaction. In addition, each Affiliated Lending Fund will maintain all information or materials upon which a determination was made in accordance with the procedures set forth above and the conditions to the application.
5. Deutsche Bank consents to the conditions set forth below and agrees to be bound by the terms and provisions of the Prior Order to the same extent as the Original Applicants.
6. Condition 7 in the Prior Order provides that an Investment Fund will not acquire securities of any investment company in excess of the limits contained in section 12(d)(1)(A) of the Act. Applicants seek to modify condition 7 to permit an Investment Fund to be structured as a feeder fund in a master-feeder arrangement, so that an Investment Fund would acquire shares of a registered open-end management investment company advised by a BT entity in excess of the limits contained in section 12(d)(1)(A) of the Act, but only to the extent permitted by section 12(d)(1)(E) of the Act. Applicants represent that an Investment Fund organized in a master-feeder structure will comply with all of the provisions of section 12(d)(1)(E).
Applicant(s) agree that the order granting the requested relief will be subject to the following conditions:
1. The securities lending program of each Lending Fund will comply with present and future applicable SEC and staff positions regarding securities lending arrangements.
2. The approval of the Affiliated Lending Fund's Board of Trustees, including a majority of the Independent Trustees, shall be required for the initial and subsequent approvals of Bankers Trust's or Deutsche Bank's service as lending agent for the Affiliated Lending Fund pursuant to the Program, for the institution of all procedures relating to the Program as it relates to the Affiliated Lending Fund, and for any periodic review of loan transactions for which Bankers Trust or Deutsche Bank acted as lending agent pursuant to the Program.
3. A majority of the Board of Trustees of each Affiliated Lending Fund (including a majority of the Independent Trustees of such Affiliated Lending Fund) will initially and at least annually thereunder determine that the investment of securities lending cash collateral in Shares of the Trust is in the best interest of the shareholders of the Lending Fund.
4. Investment in Shares of an Investment Fund by a particular Lending Fund will be consistent with such Lending Fund's objectives and policies. A Lending Fund that complies with rule 2a-7 under the Act will not invest in its cash collateral in an Investment Fund that does not comply with rule 2a-7.
5. Investment in Shares of an Investment Fund by a particular Lending Fund will be in accordance with the guidelines regarding the investment of securities lending cash collateral specified by the Lending Fund in the securities lending agreement. A Lending Fund's cash collateral will be invested in a particular Investment Fund only if that Investment Fund has been approved for investment by the Lending Fund and if that Investment Fund invests in the types of instruments that the Lending Fund has authorized for the investment of its cash collateral.
6. The Shares of an Investment Fund and any investment company in which an Investment Fund may invest pursuant to condition 7 below will not be subject to a sales load, redemption fee, any asset-based sales charge, or service fee (as defined in Rule 2830(b)(9) of the Conduct Rules of the National Association of Securities Dealers).
7. An Investment Fund will not acquire securities of any investment company in excess of the limits contained in section 12(d)(1)(A) of the Act, except securities of a registered open-end management company advised by a BT Entity to the extent otherwise permitted by section 12(d)(1)(E) of the Act.
For the SEC, by the Division of Investment Management, under delegated authority.
Margaret H. McFarland,
[FR Doc. 00-7198 Filed 3-22-00; 8:45 am]
BILLING CODE 8010-01-M