[Federal Register Volume 84, Number 249 (Monday, December 30, 2019)]
[Notices]
[Pages 72060-72061]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28050]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Advisers Act Release No. 5420; File No. 803-00248]
Inter-American Development Bank; Notice of Application
December 20, 2019.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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SUMMARY: Notice of application for an exemption under section
202(a)(11)(H) of the Investment Advisers Act of 1940 (``Advisers
Act'').
Applicant: Inter-American Development Bank (``IDB'' or
``Applicant'').
Relevant Advisers Act Sections: Exemption requested under section
202(a)(11)(H) of the Advisers Act from section 202(a)(11) of the
Advisers Act.
Summary of Application: The Applicant requests that the Commission
issue an order declaring it to be a person not within the intent of
Section 202(a)(11) of the Advisers Act, which defines the term
``investment adviser.''
Filing Dates: The application was filed on June 7, 2019, and
amended on October 1, 2019.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving the Applicant with a copy of the request,
personally or by mail. Hearing requests should be received by the
Commission by 5:30 p.m. on January 14, 2019, and should be accompanied
by proof of service on the Applicant, in the form of an affidavit or,
for lawyers, a certificate of service. Pursuant to Rule 0-5 under the
Advisers Act, hearing requests should state the nature of the writer's
interest, any facts bearing upon the desirability of a hearing on the
matter, the reason for the request, and the issues contested. Persons
may request notification of a hearing by writing to the Commission's
Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street
NE, Washington, DC 20549-1090. Applicant, Inter-American Development
Bank, 1300 New York Avenue NW Washington, DC 20577.
FOR FURTHER INFORMATION CONTACT: Benjamin Kalish, Senior Counsel, or
Parisa Haghshenas, Branch Chief, at 202-551-6825 (Division of
Investment Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's website either at http://www.sec.gov/rules/iareleases.shtml or by calling (202) 551-8090.
Applicant's Representations
1. The IDB was established by international treaty with the
principal purpose to contribute to the acceleration of the process of
economic and social development in Latin America and the Caribbean. The
IDB's principal activities are providing loans and credit guarantees,
and technical assistance to support development projects in its
developing member countries. The IDB has operated since 1959 under an
agreement signed by the governments of its member countries, including
the U.S., and its member countries own all of its capital stock.
2. The Applicant provides substantial technical assistance to the
governments of its member countries as part of or in parallel to a loan
or guarantee, or independently. The purpose of IDB's technical
assistance activities is both to improve the operations of the member
government as they relate to economic and social development and to
contribute to knowledge transfer and capacity building of developing
member countries. Technical assistance includes assisting member
countries to improve their asset and liability management techniques
and advice for member countries on adopting sound portfolio management
techniques.
3. The Applicant seeks to expand its services to meet requests from
member countries to help them strengthen the management of their
reserves and to bring their treasury operations in line with current
capital and financial markets best practices. The Applicant would
provide these treasury-related services only to IDB member countries,
their central banks, other governmental institutions of such member
countries, and other international organizations owned entirely by
their sovereign nation members, substantially all of which members are
also members of the IDB (collectively ``Potential Clients''). The
Applicant would provide its services
[[Page 72061]]
only with respect to government and/or public assets.
4. Member countries have requested that the Applicant provide them
with asset management and related services (back office, risk,
accounting, advisory and other support services) to help them develop
additional internal capacities. The Applicant would exercise
discretionary authority with respect to the assets, acting as the agent
for Potential Clients.
5. Member countries have also requested advice and instruction
relating to hedging activities and to capital markets borrowings. The
Applicant proposes to provide detailed advice on debt management,
hedging techniques for specific transactions, and capital markets
borrowings. The Applicant also proposes to provide targeted training
seminars and courses at the IDB's offices, at Potential Clients'
locations, or online.
6. The Applicant expects to charge a fee for the activities/
services it provides that would allow it to recover the associated
costs.
Applicants' Legal Analysis
1. Section 202(a)(11) of the Advisers Act defines ``investment
adviser'' to mean ``any person who, for compensation, engages in the
business of advising others . . . as to the value of securities or as
to the advisability of investing in, purchasing, or selling securities,
or who, for compensation and as a part of a regular business, issues or
promulgates analyses or reports concerning securities . . . .''
2. The Applicant proposes to offer asset management and advisory
services on a regular, recurring basis and to charge recipients a fee
for these services. Accordingly, the Applicant would be ``in the
business of'' providing investment advice for compensation and would be
an ``investment adviser'' for purposes of the Advisers Act.
3. Section 202(a)(11)(H) of the Advisers Act authorizes the
Commission to exclude from the definition of ``investment adviser''
persons that are not within the intent of section 202(a)(11). The
Applicant requests that the Commission issue an order under section
202(a)(11)(H) declaring it to be a person not within the intent of
section 202(a)(11).
4. The Applicant argues that the Advisers Act contemplates the
regulation of private sector entities and was not intended to regulate
an entity that is an organization of sovereign nations providing
investment advice to Potential Clients. The Applicant states that
section 202(b) of the Advisers Act provides that the Advisers Act is
not applicable to the ``United States, a State, or any political
subdivision of a State, or any agency, authority, or instrumentality of
any one or more of the foregoing, or any corporation which is wholly
owned directly or indirectly by any one or more of the foregoing, or
any officer, agent, or employee of any of the foregoing acting as such
in the course of his official duty, unless such provision makes
specific reference thereto.'' While the Applicant acknowledges that the
Advisers Act does not expressly exempt international organizations made
up solely of sovereign nations, the Applicant argues that the Advisers
Act seems clearly intended not to apply to such organizations.
5. The Applicant acknowledges that a foreign individual or
corporation would reasonably expect the protections of the U.S.
securities laws to apply when doing business with an investment adviser
resident in the United States. The Applicant asserts, however, that,
given the particular nature of the IDB, its unique purposes, and the
nature of its constituent members, recipients of the proposed
investment advice would not reasonably expect the Advisers Act to apply
to those services.
For the Commission, by the Division of Investment Management,
under delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28050 Filed 12-27-19; 8:45 am]
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