SEC Division of Investment Management staff letter: Depository Clearing Company

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D.C. 20549
DIVISION OF
INVESTMENT MANAGEMENT
December 19, 1997
Am :rcA
8EOTIoN -----
VIA FACSTh1ILE AND AIR MAIL RULE 175: -, S"
, Mr. Igox: Moryakov, 1st Vice President PUBLIC I ,.., I I Or I 0. '1 Depository Clearing Company AVAILABILITY 1412, BId. 4, Staraya Basmannaya St. Moscow 103064 RUSSIA Dear Mr. Moryakov:
This letter is in response to your letter of October 24, 1997, asking the U.S. Securities and Exchange Commission ("Commission") to consider the Depository Clearing Company ("DCC") to be an eligible foreign custodian for assets of U.S.-registered management investment (:Ompanies ("funds").' In your letter, you explain that nee .seeks to provide market,participants, such as U.S.-registered funds, with clearing and settlement selVices based on delivery-versus￾payment principles. To do so, nec must temporarily hold market participants' securities in DCC's nominee name, and accordjngly, DCC must be an eligible foreign custodian to provide such selVices to U.S.-registered funds.
Section 17(t) of the Investment Company Act of 1940 ("1940 Act") sets forth the
custodial requirements for U~S>registeredfunds, Rule 17f-5 thereunder pe~.funds to maintain their assets with certain categories of eligible foreign custodians. "Amended Rule 17f-5(a)(2)(iii) defineS the term "eligible foreign custodian" to include a "securlties depository .or clearing agency that a~ as a system for the central handling of securities or equivalent book-entries in the countiy that is regulated by a foreign ~cia1 regulatory', authority. II 11 11 Amended Rule 17f-5 no longer requires that the centralized securities depository or clearing agency be the only such system in a country.
Section 3(a)(23)(A) of the Securities Exchange Act' of 1934 defines "clearing agency"
generally as an intermediary that makes payments and/or deliveries in connection with transactions in securities. The term includes any entity,' such as a securities depository, that (1) acts as a custodian of securities in connection with a system for '