[Federal Register Volume 67, Number 116 (Monday, June 17, 2002)]
[Notices]
[Pages 41283-41284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15177]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Rel No. IC-25609; 812-12356]
SBM Certificate Company; Notice of Application
June 11, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application under section 28(c) of the Investment
Company Act of 1940 (the ``Act'').
-----------------------------------------------------------------------
Summary of Application: Applicant seeks an order pursuant to section
28(c) of the Act approving certain proposed custodial arrangements.
Applicant: SBM Certificate Company (``SBM'').
Filing Dates: The application was filed on December 7, 2000, and
amended on May 23, 2002 and June 7, 2002.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on July 8, 2002, 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 Commission's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, NW, Washington, DC 20549-0609. Applicant, 5101 River Road,
Suite 101, Bethesda, Maryland, 20816.
FOR FURTHER INFORMATION CONTACT: Julia Kim Gilmer, Senior Counsel, at
(202) 942-0528, or Janet M. Grossnickle, Branch Chief, at (202) 942-
0564 (Division of Investment Management,
[[Page 41284]]
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
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington,
DC 20549-0102 (tel. 202-942-8090).
Applicants Representations
1. Applicant, a Maryland corporation, is a face-amount certificate
company registered under the Act. Applicant currently intends to offer
four face-amount certificates (``Certificates'') registered under the
Securities Act of 1933. In the future, applicant may offer additional
Certificates. The Certificates are fixed income securities that entitle
the holder to receive, at maturity, the face amount of the Certificate
and interest credited thereon, less withdrawals and applicable fees and
charges. To meet its payment obligations, applicant is required to
maintain a minimum amount of reserves in ``qualified investments'' as
defined in section 28(b) of the Act (``Reserves'').
2. Applicant proposes to enter into custodial arrangements with
regard to its Reserves with one or more banks that meet certain
requirements (``Custodians''). Applicant seeks an order approving the
proposed form of custody agreement (``Agreement'') to be entered into
by applicant with each Custodian. Under the requested order, applicant
would be able to select and change Custodians in its discretion.
3. Each Custodian will maintain the Reserves to ensure that
applicant meets its payment obligations under the terms and conditions
of any outstanding Certificate. If applicant were to default on any
obligation under a Certificate, each Custodian would be authorized to
cure the default by liquidating so much of the Reserves held by it as
necessary to discharge the obligation. In addition, each Custodian will
perform the duties and functions typically performed by a custodian,
such as securities registration and delivery, income collection,
periodic reporting, and other safekeeping and processing functions.
Applicants Legal Analysis
1. Section 28(c) of the Act requires a registered face-amount
certificate company to maintain the Reserves with a custodian that
meets the requirements of section 26(a)(1) of the Act and in accordance
with such terms and conditions as the Commission shall prescribe and as
appropriate for the protection of investors. Under section 26(a)(1), a
custodian generally must be a bank that has at all times an aggregate
capital, surplus, and undivided profits of a specified minimum amount
which may not be less than $500,000.
2. Applicant requests an order under section 28(c) of the Act
approving the Agreement. Applicant states that the Agreement contains
provisions to maintain and safeguard the Reserves, including provisions
governing (i) the holding, segregation, registration, depositing, and
delivery of securities, (ii) the payment of monies and maintenance of
bank accounts, and (iii) the management of real estate and real estate
related investments, as well as establishing procedures to cure any
defaults by applicant on its obligations under the Certificates and
procedures for periodic reporting and inspection of the assets.\1\
Applicant represents that it will seek an amended order from the
Commission for any material changes in the substantive provisions of
the Agreement.
---------------------------------------------------------------------------
\1\ Applicant states it will comply with rule 17f-4 under the
Act as if it were a registered management investment company to the
extent an Agreement permits a Custodian to maintain any portion of
the Reserves in a securities depository.
---------------------------------------------------------------------------
3. Applicant states that it may seek to terminate Custodians and
employ new Custodians for many reasons, including: (i) The availability
of superior or specialized services through other Custodians; (ii)
dissatisfaction with the quality of a Custodian's services; (iii) fee
increases or the availability of comparable services from other
Custodians at more competitive rates; (iv) changes in a Custodian's
management, location, financial condition, or methods of operation; (v)
regulatory developments or actions affecting the ability or
qualification of a Custodian to serve as such; or (vi) a determination
by a Custodian to cease offering its services.
4. Applicant will only enter into an Agreement approved by its
board of directors (``Board''), including a majority of directors who
are not interested persons within the meaning of Section 2(a)(19) of
the Act (``Disinterested Directors''). In addition, the continuance of
any Agreement would be subject to annual review by the Board, including
a majority of the Disinterested Directors, to determine whether the
quality of services provided by the Custodian remains satisfactory and
the fees are reasonably competitive. Applicant submits, for all the
reasons stated above, that its request is consistent with the
protection of investors.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-15177 Filed 6-14-02; 8:45 am]
BILLING CODE 8010-01-P